FIGS Inc (FIGS) Reports Mixed 2023 Financial Results Amidst CFO Transition
Net Revenues: $545.6 million in 2023, up 7.9% year-over-year.
Gross Margin: Decreased by 100 basis points to 69.1% in 2023.
Operating Expenses: Increased by 8.2% to $342.9 million in 2023.
Net Income: Grew to $22.6 million, with a net income margin of 4.1%.
Adjusted EBITDA: $86.0 million, representing a margin of 15.8%.
Active Customers: Increased by 13.0% to 2.6 million as of December 31, 2023.
Free Cash Flow: Reported at $84.6 million for the full year.
On February 28, 2024, FIGS Inc (NYSE:FIGS), a healthcare apparel company known for its proprietary fabric FIONx, released its 8-K filing, disclosing its fourth quarter and full-year financial results for 2023. The company, which offers performance-oriented scrubs for healthcare professionals, reported a net revenue increase of 7.9% year-over-year to $545.6 million, driven by growth in orders from both new and existing customers.
Financial Performance and Challenges
Despite the revenue growth, FIGS faced challenges in 2023, including a flat year-over-year revenue in the fourth quarter and a decrease in gross margin by 100 basis points to 69.1%. The company attributed the margin decline primarily to a product mix shift and higher promotional sales, partially offset by lower freight costs. Operating expenses increased by 8.2% to $342.9 million due to higher general and administrative costs, though marketing and selling expenses were lower.
Net income for the year was $22.6 million, with a net income margin of 4.1%, slightly down from 4.2% in the previous year. Adjusted EBITDA was $86.0 million, or 15.8% of net revenues, compared to 17.2% in the prior year. The company's active customer base grew by 13.0% to 2.6 million, but net revenues per active customer decreased by 5.0% year-over-year.
Financial Achievements and Importance
FIGS Inc's financial achievements, such as the generation of $100 million in cash flow from operations and a reduction in inventory levels by 33%, underscore the company's operational efficiency and ability to manage capital effectively. These achievements are particularly important for a company in the Manufacturing - Apparel & Accessories industry, where inventory management and cash flow are critical for sustaining growth and navigating economic fluctuations.
Executive Commentary and CFO Transition
CEO Trina Spear highlighted the company's strong growth and profitability in 2023, despite the challenges faced. She noted, "Looking ahead to 2024, we expect demand to be impacted by macroeconomic factors," and emphasized the company's commitment to strategic initiatives to unlock long-term potential.
"We are taking swift action to rebuild momentum and reignite the word of mouth flywheel that has driven our success as a digital brand. We are confident that our strategic initiatives, supported by our robust balance sheet will unlock the long term potential of FIGS," said Spear.
The company also announced the resignation of CFO Daniella Turenshine, who will step down on April 12, 2024, to assume a CFO role at another company. Kevin Fosty, VP, Corporate Controller, will serve as Interim CFO. Spear expressed gratitude for Turenshine's contributions and confidence in Fosty's ability to lead during the transition.
2024 Financial Outlook
For 2024, FIGS anticipates a mid-single-digit to flat net revenue growth compared to 2023 and an adjusted EBITDA margin of 11% to 12%. The company remains confident in its long-term prospects, citing its leadership in healthcare apparel and competitive advantages in product innovation and brand loyalty.
In conclusion, FIGS Inc (NYSE:FIGS) demonstrated resilience in its 2023 financial performance, with notable increases in net income and active customers. However, the company faces ongoing macroeconomic challenges and a transition in its CFO role. Investors and stakeholders will be watching closely to see how FIGS navigates these challenges and capitalizes on its strategic initiatives in the coming year.
Explore the complete 8-K earnings release (here) from FIGS Inc for further details.
This article first appeared on GuruFocus.
