10-Q 1 figs-20220930.htm 10-Q figs-20220930
000184657612-312022Q3false00018465762022-01-012022-09-300001846576us-gaap:CommonClassAMember2022-10-31xbrli:shares0001846576us-gaap:CommonClassBMember2022-10-3100018465762022-09-30iso4217:USD00018465762021-12-310001846576us-gaap:CommonClassAMember2021-12-31iso4217:USDxbrli:shares0001846576us-gaap:CommonClassAMember2022-09-300001846576us-gaap:CommonClassBMember2022-09-300001846576us-gaap:CommonClassBMember2021-12-3100018465762022-07-012022-09-3000018465762021-07-012021-09-3000018465762021-01-012021-09-300001846576us-gaap:CommonStockMember2020-12-310001846576us-gaap:CommonStockMemberus-gaap:CommonClassAMember2020-12-310001846576us-gaap:CommonStockMemberus-gaap:CommonClassBMember2020-12-310001846576us-gaap:AdditionalPaidInCapitalMember2020-12-310001846576us-gaap:RetainedEarningsMember2020-12-3100018465762020-12-310001846576us-gaap:AdditionalPaidInCapitalMember2021-01-012021-03-3100018465762021-01-012021-03-310001846576us-gaap:CommonStockMember2021-01-012021-03-310001846576us-gaap:RetainedEarningsMember2021-01-012021-03-310001846576us-gaap:CommonStockMember2021-03-310001846576us-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-03-310001846576us-gaap:CommonStockMemberus-gaap:CommonClassBMember2021-03-310001846576us-gaap:AdditionalPaidInCapitalMember2021-03-310001846576us-gaap:RetainedEarningsMember2021-03-3100018465762021-03-310001846576figs:IssuanceOfClassACommonStockUponExchangeOfCommonStockMemberus-gaap:CommonStockMember2021-04-012021-06-300001846576figs:IssuanceOfClassACommonStockUponExchangeOfCommonStockMemberus-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-04-012021-06-300001846576figs:IssuanceOfClassACommonStockUponExchangeOfCommonStockMember2021-04-012021-06-300001846576us-gaap:CommonStockMemberfigs:IssuanceOfClassBCommonStockUponExchangeOfCommonStockMember2021-04-012021-06-300001846576figs:IssuanceOfClassBCommonStockUponExchangeOfCommonStockMemberus-gaap:CommonStockMemberus-gaap:CommonClassBMember2021-04-012021-06-300001846576figs:IssuanceOfClassBCommonStockUponExchangeOfCommonStockMember2021-04-012021-06-300001846576us-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-04-012021-06-300001846576us-gaap:AdditionalPaidInCapitalMember2021-04-012021-06-3000018465762021-04-012021-06-300001846576us-gaap:CommonStockMemberus-gaap:CommonClassAMemberfigs:IssuanceOfClassBCommonStockUponExchangeOfClassACommonStockMember2021-04-012021-06-300001846576us-gaap:CommonStockMemberus-gaap:CommonClassBMemberfigs:IssuanceOfClassBCommonStockUponExchangeOfClassACommonStockMember2021-04-012021-06-300001846576us-gaap:CommonStockMember2021-04-012021-06-300001846576us-gaap:RetainedEarningsMember2021-04-012021-06-300001846576us-gaap:CommonStockMember2021-06-300001846576us-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-06-300001846576us-gaap:CommonStockMemberus-gaap:CommonClassBMember2021-06-300001846576us-gaap:AdditionalPaidInCapitalMember2021-06-300001846576us-gaap:RetainedEarningsMember2021-06-3000018465762021-06-300001846576us-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-07-012021-09-300001846576figs:IssuanceOfClassACommonStockUponExchangeOfCommonStockMemberus-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-07-012021-09-300001846576figs:IssuanceOfClassACommonStockUponExchangeOfCommonStockMemberus-gaap:CommonStockMemberus-gaap:CommonClassBMember2021-07-012021-09-300001846576us-gaap:AdditionalPaidInCapitalMember2021-07-012021-09-300001846576us-gaap:CommonStockMember2021-07-012021-09-300001846576us-gaap:RetainedEarningsMember2021-07-012021-09-300001846576us-gaap:CommonStockMember2021-09-300001846576us-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-09-300001846576us-gaap:CommonStockMemberus-gaap:CommonClassBMember2021-09-300001846576us-gaap:AdditionalPaidInCapitalMember2021-09-300001846576us-gaap:RetainedEarningsMember2021-09-3000018465762021-09-300001846576us-gaap:CommonStockMember2021-12-310001846576us-gaap:CommonStockMemberus-gaap:CommonClassAMember2021-12-310001846576us-gaap:CommonStockMemberus-gaap:CommonClassBMember2021-12-310001846576us-gaap:AdditionalPaidInCapitalMember2021-12-310001846576us-gaap:RetainedEarningsMember2021-12-310001846576us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-01-012022-03-310001846576us-gaap:CommonStockMemberus-gaap:CommonClassAMemberfigs:IssuanceOfClassBCommonStockUponExchangeOfClassACommonStockMember2022-01-012022-03-310001846576us-gaap:CommonStockMemberus-gaap:CommonClassBMemberfigs:IssuanceOfClassBCommonStockUponExchangeOfClassACommonStockMember2022-01-012022-03-310001846576figs:IssuanceOfClassACommonStockUponExchangeOfClassBCommonStockMemberus-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-01-012022-03-310001846576figs:IssuanceOfClassACommonStockUponExchangeOfClassBCommonStockMemberus-gaap:CommonStockMemberus-gaap:CommonClassBMember2022-01-012022-03-310001846576us-gaap:AdditionalPaidInCapitalMember2022-01-012022-03-3100018465762022-01-012022-03-310001846576us-gaap:RetainedEarningsMember2022-01-012022-03-310001846576us-gaap:CommonStockMember2022-03-310001846576us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-03-310001846576us-gaap:CommonStockMemberus-gaap:CommonClassBMember2022-03-310001846576us-gaap:AdditionalPaidInCapitalMember2022-03-310001846576us-gaap:RetainedEarningsMember2022-03-3100018465762022-03-310001846576us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-04-012022-06-300001846576us-gaap:CommonStockMemberus-gaap:CommonClassAMemberfigs:IssuanceOfClassBCommonStockUponExchangeOfClassACommonStockMember2022-04-012022-06-300001846576us-gaap:CommonStockMemberus-gaap:CommonClassBMemberfigs:IssuanceOfClassBCommonStockUponExchangeOfClassACommonStockMember2022-04-012022-06-300001846576us-gaap:AdditionalPaidInCapitalMember2022-04-012022-06-3000018465762022-04-012022-06-300001846576us-gaap:RetainedEarningsMember2022-04-012022-06-300001846576us-gaap:CommonStockMember2022-06-300001846576us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-06-300001846576us-gaap:CommonStockMemberus-gaap:CommonClassBMember2022-06-300001846576us-gaap:AdditionalPaidInCapitalMember2022-06-300001846576us-gaap:RetainedEarningsMember2022-06-3000018465762022-06-300001846576us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-07-012022-09-300001846576us-gaap:CommonStockMemberus-gaap:CommonClassAMemberfigs:IssuanceOfClassBCommonStockUponExchangeOfClassACommonStockMember2022-07-012022-09-300001846576us-gaap:CommonStockMemberus-gaap:CommonClassBMemberfigs:IssuanceOfClassBCommonStockUponExchangeOfClassACommonStockMember2022-07-012022-09-300001846576us-gaap:AdditionalPaidInCapitalMember2022-07-012022-09-300001846576us-gaap:RetainedEarningsMember2022-07-012022-09-300001846576us-gaap:CommonStockMember2022-09-300001846576us-gaap:CommonStockMemberus-gaap:CommonClassAMember2022-09-300001846576us-gaap:CommonStockMemberus-gaap:CommonClassBMember2022-09-300001846576us-gaap:AdditionalPaidInCapitalMember2022-09-300001846576us-gaap:RetainedEarningsMember2022-09-3000018465762021-05-192021-05-19xbrli:pure00018465762021-01-012021-12-310001846576country:US2022-07-012022-09-300001846576country:US2021-07-012021-09-300001846576country:US2022-01-012022-09-300001846576country:US2021-01-012021-09-300001846576us-gaap:NonUsMember2022-07-012022-09-300001846576us-gaap:NonUsMember2021-07-012021-09-300001846576us-gaap:NonUsMember2022-01-012022-09-300001846576us-gaap:NonUsMember2021-01-012021-09-300001846576figs:ScrubwearMember2022-07-012022-09-300001846576figs:ScrubwearMember2021-07-012021-09-300001846576figs:ScrubwearMember2022-01-012022-09-300001846576figs:ScrubwearMember2021-01-012021-09-300001846576figs:NonScrubwearLifestyleMember2022-07-012022-09-300001846576figs:NonScrubwearLifestyleMember2021-07-012021-09-300001846576figs:NonScrubwearLifestyleMember2022-01-012022-09-300001846576figs:NonScrubwearLifestyleMember2021-01-012021-09-300001846576us-gaap:AccountingStandardsUpdate201602Member2022-01-010001846576us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Member2022-09-300001846576us-gaap:FairValueInputsLevel2Memberus-gaap:MoneyMarketFundsMember2022-09-300001846576us-gaap:FairValueInputsLevel3Memberus-gaap:MoneyMarketFundsMember2022-09-300001846576us-gaap:MoneyMarketFundsMember2022-09-300001846576us-gaap:MoneyMarketFundsMemberus-gaap:FairValueInputsLevel1Member2021-12-310001846576us-gaap:FairValueInputsLevel2Memberus-gaap:MoneyMarketFundsMember2021-12-310001846576us-gaap:FairValueInputsLevel3Memberus-gaap:MoneyMarketFundsMember2021-12-310001846576us-gaap:MoneyMarketFundsMember2021-12-310001846576us-gaap:FairValueInputsLevel3Member2022-09-300001846576us-gaap:FurnitureAndFixturesMember2022-09-300001846576us-gaap:FurnitureAndFixturesMember2021-12-310001846576us-gaap:OfficeEquipmentMember2022-09-300001846576us-gaap:OfficeEquipmentMember2021-12-310001846576us-gaap:MachineryAndEquipmentMember2022-09-300001846576us-gaap:MachineryAndEquipmentMember2021-12-310001846576us-gaap:ComputerEquipmentMember2022-09-300001846576us-gaap:ComputerEquipmentMember2021-12-310001846576figs:SoftwareAndWebsiteDesignMember2022-09-300001846576figs:SoftwareAndWebsiteDesignMember2021-12-310001846576us-gaap:LeaseholdImprovementsMember2022-09-300001846576us-gaap:LeaseholdImprovementsMember2021-12-310001846576figs:CapitalProjectsInProgressMember2022-09-300001846576figs:CapitalProjectsInProgressMember2021-12-310001846576us-gaap:RevolvingCreditFacilityMemberfigs:JPMorganChaseBankExistingCreditFacilityMember2020-12-020001846576us-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:RevolvingCreditFacilityMemberfigs:JPMorganChaseBankExistingCreditFacilityMember2020-12-020001846576us-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:RevolvingCreditFacilityMemberfigs:JPMorganChaseBankExistingCreditFacilityMember2020-12-022020-12-020001846576us-gaap:RevolvingCreditFacilityMemberfigs:JPMorganChaseBankExistingCreditFacilityMember2022-07-012022-09-300001846576us-gaap:LetterOfCreditMemberfigs:JPMorganChaseBankExistingCreditFacilityMember2021-09-070001846576us-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:LetterOfCreditMemberfigs:JPMorganChaseBankExistingCreditFacilityMember2021-09-070001846576us-gaap:RevolvingCreditFacilityMemberfigs:JPMorganChaseBankExistingCreditFacilityMember2021-10-280001846576us-gaap:LetterOfCreditMemberfigs:JPMorganChaseBankExistingCreditFacilityMember2021-12-310001846576us-gaap:RevolvingCreditFacilityMemberfigs:JPMorganChaseBankExistingCreditFacilityMember2021-12-310001846576us-gaap:LondonInterbankOfferedRateLIBORMemberus-gaap:RevolvingCreditFacilityMemberfigs:JPMorganChaseBankExistingCreditFacilityMember2021-12-310001846576us-gaap:RevolvingCreditFacilityMemberfigs:BankOfAmericaNAMember2021-09-070001846576us-gaap:LetterOfCreditMemberfigs:BankOfAmericaNAMember2022-09-300001846576us-gaap:RevolvingCreditFacilityMemberfigs:BankOfAmericaNAMember2022-09-300001846576us-gaap:RevolvingCreditFacilityMemberfigs:BankOfAmericaNAMember2022-07-012022-09-300001846576us-gaap:RevolvingCreditFacilityMemberus-gaap:BaseRateMemberfigs:BankOfAmericaNAMember2022-07-012022-09-300001846576figs:ExecutiveChairMember2022-08-092022-08-090001846576figs:ExecutiveChairMemberus-gaap:RestrictedStockUnitsRSUMember2022-08-092022-08-090001846576us-gaap:RestrictedStockUnitsRSUMember2022-08-09figs:installment0001846576us-gaap:EmployeeStockOptionMember2022-08-09figs:vote0001846576us-gaap:EmployeeStockOptionMember2022-07-012022-09-300001846576us-gaap:EmployeeStockOptionMember2021-07-012021-09-300001846576us-gaap:EmployeeStockOptionMember2022-01-012022-09-300001846576us-gaap:EmployeeStockOptionMember2021-01-012021-09-300001846576us-gaap:RestrictedStockMember2022-07-012022-09-300001846576us-gaap:RestrictedStockMember2021-07-012021-09-300001846576us-gaap:RestrictedStockMember2022-01-012022-09-300001846576us-gaap:RestrictedStockMember2021-01-012021-09-300001846576us-gaap:EmployeeStockOptionMember2022-07-012022-09-300001846576us-gaap:EmployeeStockOptionMember2021-07-012021-09-300001846576us-gaap:EmployeeStockOptionMember2022-01-012022-09-300001846576us-gaap:EmployeeStockOptionMember2021-01-012021-09-300001846576us-gaap:RestrictedStockUnitsRSUMember2022-07-012022-09-300001846576us-gaap:RestrictedStockUnitsRSUMember2021-07-012021-09-300001846576us-gaap:RestrictedStockUnitsRSUMember2022-01-012022-09-300001846576us-gaap:RestrictedStockUnitsRSUMember2021-01-012021-09-300001846576figs:ReimbursementOfIPOProfessionalFeesMemberus-gaap:InvestorMember2021-07-012021-09-30
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
xQUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 2022
OR
oTRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ___________________ to ___________________
Commission File Number: 001-40448
figs-20220930_g1.jpg
FIGS, Inc.
(Exact Name of Registrant as Specified in its Charter)
Delaware46-2005653
(State or other jurisdiction of incorporation or organization)(I.R.S. Employer Identification No.)
2834 Colorado Avenue, Suite 100 Santa Monica, CA
90404
(Address of principal executive offices)(Zip Code)
(424) 300-8330
(Registrant’s telephone number, including area code)
N/A
(Former name, former address and former fiscal year, if changed since last report)
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A common stock, $0.0001 par value per shareFIGSNew York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated fileroAccelerated filero
Non-accelerated filerxSmaller reporting companyo
Emerging growth companyx
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o No x
As of October 31, 2022, there were 159,090,193 shares of the registrant’s Class A common stock, par value $0.0001 per share, outstanding and 6,872,643 shares of the registrant’s Class B common stock, $0.0001 par value per share, outstanding.


TABLE OF CONTENTS
2

FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1955, as amended. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential”, “strategy”, “strive” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, without limitation, statements regarding our future results of operations and financial position, industry, business, and macroeconomic trends, the impact of the COVID-19 pandemic and macroeconomic pressures, our use of ocean and air freight, our expectation that we will continue to contend with elevated ocean and air freight rates, our plans for addressing increased inventory on hand, our product and color launch calendar, equity compensation, our business strategy, plans, market growth and our objectives for future operations.
The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the important factors discussed in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. The forward-looking statements in this Quarterly Report on Form 10-Q are based upon information available to us as of the date of this Quarterly Report on Form 10-Q, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed as exhibits to this Quarterly Report on Form 10-Q with the understanding that our actual future results, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report on Form 10-Q. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report on Form 10-Q, whether as a result of any new information, future events or otherwise.
3

SUMMARY RISK FACTORS
Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our Class A common stock. The principal risks and uncertainties affecting our business include the following:
Our recent rapid growth may not be sustainable or indicative of future growth, and we expect our growth rate to ultimately slow over time.
If we fail to manage our growth effectively, our business, financial condition and results of operations may be adversely affected.
We have not always been profitable and may not be profitable in the future.
Our success depends on our ability to maintain the value and reputation of our brand.
If we fail to attract new customers, retain existing customers, or fail to maintain or increase sales to those customers, our business, financial condition, results of operations and growth prospects will be harmed.
If our marketing efforts are not successful, our business, financial condition and results of operations could be harmed.
Our business depends on our ability to maintain a strong community of engaged customers and ambassadors, including through the use of social media. We may not be able to maintain and enhance our brand if we experience negative publicity related to our marketing efforts or use of social media, fail to maintain and grow our network of ambassadors or otherwise fail to meet our customers’ expectations.
If we do not continue to successfully develop and introduce new, innovative and updated products, we may not be able to maintain or increase our sales and profitability.
The market for healthcare apparel is highly competitive.
Our future success depends on the continuing efforts of our key employees and our ability to attract and retain highly skilled team members.
We plan to expand into additional international markets, which will expose us to new and significant risks.
Shipping is a critical part of our business and changes in, or disruptions to, our shipping arrangements have in the past and may in the future adversely affect our business, financial condition and results of operations.
If we are unable to accurately forecast customer demand, manage our inventory and plan for future expenses, our results of operations could be adversely affected.
Consumer confidence, shopping behavior and spending have been and may continue to be negatively impacted by factors beyond our control, including the COVID-19 pandemic and related economic impacts, supply chain disruptions, inflation, fear of recession or entry into a recession and geopolitical events, which may adversely affect our business, financial condition and results of operations.
Our business may be subject to uncertainty as a result of the COVID-19 pandemic.
Our reliance on a limited number of third-party suppliers to provide materials for and produce our products could cause problems in our supply chain and subject us to additional risks.
The dual-class structure of our common stock and voting agreement among us and our co-founders, Heather Hasson and Trina Spear, Tulco, LLC and Thomas Tull and certain related persons and trusts have the effect of concentrating voting control with Ms. Hasson, Ms. Spear and Mr. Tull, who together hold the majority of the voting power of our outstanding capital stock, which may limit or preclude your ability to influence corporate matters, including the election of directors and the approval of any change of control transaction.
We are a “controlled company” within the meaning of the rules of the New York Stock Exchange and, as a result, qualify for, and rely on, exemptions from certain corporate governance requirements. You do not have the same protections afforded to stockholders of companies that are subject to such requirements.
4

PART IFINANCIAL INFORMATION
Item 1. Financial Statements.
FIGS, INC.
CONDENSED BALANCE SHEETS
(In thousands, except share and per share data)
As of
September 30,
2022
December 31,
2021
Assets(Unaudited)
Current assets
Cash and cash equivalents$155,582 $195,374 
Restricted cash 2,056 
Accounts receivable8,368 2,441 
Inventory, net168,088 86,068 
Prepaid expenses and other current assets13,870 7,400 
Total current assets345,908 293,339 
Non-current assets
Property and equipment, net10,823 7,613 
Operating lease right-of-use assets15,974 — 
Deferred tax assets11,215 10,239 
Other assets1,738 560 
Total non-current assets39,750 18,412 
Total assets$385,658 $311,751 
Liabilities and stockholders’ equity
Current liabilities
Accounts payable$21,162 $14,604 
Operating lease liabilities3,379  
Accrued expenses32,365 24,677 
Accrued compensation and benefits5,216 6,464 
Sales tax payable3,703 3,728 
Gift card liability5,993 5,590 
Deferred revenue1,236 596 
Returns reserve3,424 2,761 
Income tax payable 3,973 
Total current liabilities76,478 62,393 
Non-current liabilities
Operating lease liabilities, non-current16,520 — 
Deferred rent and lease incentive— 3,542 
Other non-current liabilities215 243 
Total liabilities$93,213 66,178 
Commitments and contingencies (Note 9)
Stockholders’ equity
Class A Common stock — par value $0.0001 per share, 1,000,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 159,025,697 and 152,098,257 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
15 15 
Class B Common stock — par value $0.0001 per share, 150,000,000 shares authorized as of September 30, 2022 and December 31, 2021; 6,872,643 and 12,158,187 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively
1 1 
Preferred stock — par value $0.0001 per share, 100,000,000 shares authorized as of September 30, 2022 and December 31, 2021; zero shares issued and outstanding as of September 30, 2022 and December 31, 2021
  
Additional paid-in capital256,703 227,626 
Retained earnings35,726 17,931 
Total stockholders’ equity292,445 245,573 
Total liabilities and stockholders’ equity$385,658 $311,751 
The accompanying notes are an integral part of these unaudited condensed financial statements.
5

FIGS, INC.
CONDENSED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(In thousands, except share and per share data)
(Unaudited)
Three months ended September 30,Nine months ended September 30,
2022202120222021
Net revenues$128,589 $102,696 $360,937 $290,892 
Cost of goods sold37,756 27,991 105,325 79,674 
Gross profit90,833 74,705 255,612 211,218 
Operating expenses
Selling31,940 19,945 80,801 56,282 
Marketing20,031 15,779 56,263 42,107 
General and administrative27,652 28,430 84,142 118,280 
Total operating expenses79,623 64,154 221,206 216,669 
Net income (loss) from operations11,210 10,551 34,406 (5,451)
Other income (loss), net
Interest income (expense)604 (110)683 (176)
Other income (expense)1 (823) (825)
Total other income (loss), net605 (933)683 (1,001)
Net income (loss) before provision for income taxes11,815 9,618 35,089 (6,452)
Provision for income taxes7,771 2,664 17,294 15,700 
Net income (loss) and comprehensive income (loss)$4,044 $6,954 $17,795 $(22,152)
Earnings (loss) attributable to Class A and Class B common stockholders
Basic earnings (loss) per share$0.02 $0.04 $0.11 $(0.14)
Diluted earnings (loss) per share$0.02 $0.03 $0.09 $(0.14)
Weighted-average shares outstanding—basic165,543,067 161,348,021 164,960,561 157,620,573 
Weighted-average shares outstanding—diluted186,991,769 199,385,061 189,762,364 157,620,573 
The accompanying notes are an integral part of these unaudited condensed financial statements.
6

FIGS, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
(Unaudited)
Common StockClass A Common StockClass B Common StockAdditional
Paid-in Capital
(Accumulated Deficit)
Retained Earnings
Total Stockholders’
Equity
SharesAmountShares AmountShares Amount
December 31, 2020154,444,851 $15  $  $ $70,175 $27,487 $97,677 
Stock-based compensation— — — — — — 5,015 — 5,015 
Stock option exercises204,309 — — — — — 123 — 123 
Net income— — — — — — — 11,440 11,440 
March 31, 2021154,649,160 $15  $  $ $75,313 $38,927 $114,255 
Issuance of Class A Common Stock upon exchange of Common Stock(142,851,852)(14)142,851,852 14 — — — —  
Issuance of Class B Common Stock upon exchange of Common Stock(12,148,029)(1)— — 12,148,029 1 — —  
Issuance of Class A Common Stock upon initial public offering, net of offering costs and related tax impacts— — 4,636,364 1 — — 95,100 — 95,101 
Issuance of Class A Common Stock upon vesting of Restricted Stock, net of tax withholdings— — 1,166,538 — — — — — — 
Issuance of Class B Common Stock upon exchange of Class A Common Stock— — (1,116,030)— 1,116,030 — — — — 
Restricted Stock surrendered for employees’ tax liability— — — — — — (21,556)— (21,556)
Stock-based compensation— — — — — — 56,012 — 56,012 
Stock option exercises350,721 — 94,810 — — — 449 — 449 
Net loss— — — — — — — (40,546)(40,546)
June 30, 2021 $ 147,633,534 $15 13,264,059 $1 $205,318 $(1,619)$203,715 
Issuance of Class A Common Stock upon vesting of Restricted Stock, net of tax withholdings  1,427 — — — — — — 
Issuance of Class A Common Stock upon exchange of Class B Common Stock  1,468,324 — (1,468,324)— — — — 
Capital contribution  — — — — 1,301 — 1,301 
Stock-based compensation  — — — — 7,253 — 7,253 
Stock option exercises  2,548,502 — — — 76 — 76 
Net income  — — — — — 6,954 6,954 
September 30, 2021 $ 151,651,787 $15 11,795,735 $1 213,948 5,335 219,299 
The accompanying notes are an integral part of these unaudited condensed financial statements.
7

FIGS, INC.
CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY
(In thousands, except share data)
(Unaudited)

Common StockClass A Common StockClass B Common StockAdditional
Paid-in Capital
Retained Earnings
Total Stockholders’
Equity
SharesAmountShares AmountShares Amount
December 31, 2021 $ 152,098,257 $15 12,158,187 $1 $227,626 $17,931 $245,573 
Issuance of Class A Common Stock upon vesting of Restricted Stock— — 381,973 — — — — — — 
Issuance of Class B Common Stock upon exchange of Class A Common Stock— — (338,152)— 338,152 — — — — 
Issuance of Class A Common Stock upon exchange of Class B Common Stock— — 6,300,000 — (6,300,000)— — — — 
Stock-based compensation— — — — — — 8,477 — 8,477 
Stock option exercises— — 88,610 — — — 352 — 352 
Net income— — — — — — — 8,899 8,899 
March 31, 2022 $ 158,530,688 $15 6,196,339 $1 $236,455 $26,830 $263,301 
Issuance of Class A Common Stock upon vesting of Restricted Stock— — 432,901 — — — — — — 
Issuance of Class B Common Stock upon exchange of Class A Common Stock— — (338,152)— 338,152 — — — — 
Capital contribution— — — — — — 479 — 479 
Stock-based compensation— — — — — — 8,777 — 8,777 
Stock option exercises and employee stock purchases— — 102,730 — — — 721 — 721 
Net income— — — — — — — 4,852 4,852 
June 30, 2022 $ 158,728,167 $15 6,534,491 $1 $246,432 $31,682 $278,130 
Issuance of Class A Common Stock upon vesting of Restricted Stock— — 443,843 — — — — — — 
Issuance of Class B Common Stock upon exchange of Class A Common Stock— — (338,152)— 338,152 — — — — 
Stock-based compensation— — — — — — 9,034 — 9,034 
Stock option exercises— — 191,839 — — — 1,237 — 1,237 
Net income— — — — — — — 4,044 4,044 
September 30, 2022 $ 159,025,697 $15 6,872,643 $1 $256,703 $35,726 $292,445 
The accompanying notes are an integral part of these unaudited condensed financial statements.
8

FIGS, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
Nine months ended
September 30,
20222021
Cash flows from operating activities:
Net income (loss)$17,795 $(22,152)
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization expense1,287 1,021 
Deferred income taxes(976)(1,450)
Non-cash operating lease cost1,719 — 
Stock-based compensation26,288 68,280 
Changes in operating assets and liabilities:
Accounts receivable(5,927)1,015 
Due from related party (501)
Inventory(82,020)(19,621)
Prepaid expenses and other current assets(6,470)(3,380)
Other assets(678)91 
Accounts payable6,421 2,196 
Accrued expenses7,584 15,070 
Deferred revenue640 2,699 
Accrued compensation and benefits(1,248)1,902 
Returns reserve663 1,523 
Sales tax payable(25)2,359 
Income tax payable(3,973)2,961 
Gift card liability403 568 
Deferred rent and lease incentive— (77)
Operating lease liabilities(1,336)— 
Other non-current liabilities(28) 
Net cash (used in) provided by operating activities(39,881)52,504 
Cash flows from investing activities:
Purchases of property and equipment(4,256)(2,008)
Purchases of held-to-maturity securities(500) 
Net cash used in investing activities(4,756)(2,008)
Cash flows from financing activities:
Proceeds from issuance of Class A common stock in initial public offering, net of underwriting discounts 95,881 
Payments of initial public offering issuance costs, net of reimbursements (780)
Proceeds from stock option exercises and employee stock purchases2,310 648 
Tax payments related to net share settlements on restricted stock units (21,556)
Payments of debt issuance costs (169)
Capital contributions479 1,301 
Net cash provided by financing activities2,789 75,325 
Net (decrease) increase in cash, cash equivalents, and restricted cash(41,848)125,821 
Cash, cash equivalents, and restricted cash, beginning of period197,430 58,133 
Cash, cash equivalents, and restricted cash, end of period$155,582 $183,954 
Supplemental disclosures:
Property and equipment included in accounts payable and accrued expenses$273 $83 
Deferred offering costs included in accounts payable and accrued expenses$ $780 
The accompanying notes are an integral part of these unaudited condensed financial statements.
9

FIGS, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(Unaudited)
1.    DESCRIPTION OF BUSINESS
FIGS, Inc. (the “Company”), a Delaware corporation, was founded in 2013 and is a founder-led, direct-to-consumer healthcare apparel and lifestyle brand company. The Company designs and sells scrubwear, and other non-scrub offerings, such as lab coats, underscrubs, outerwear, activewear, loungewear, compression socks and footwear. The Company markets and sells its products primarily in the United States. Sales are primarily generated through the Company’s digital platforms.
Impact of COVID-19
The ongoing COVID-19 pandemic has caused significant disruption in the international and United States economies and financial markets. The spread of COVID-19 has caused illness, quarantines, cancellation of events and travel, business and school shutdowns, reduction in business activity and financial transactions, labor shortages, global supply chain interruptions and overall economic and financial market instability.
In response to public health directives and orders, and to help minimize the risk of the virus to employees, the Company has taken precautionary measures, including implementing work from home policies for certain employees. The COVID-19 pandemic has negatively impacted global supply chains and caused challenges to logistics, including causing ocean freight reliability and capacity issues, increased volatility in ocean freight transit times, port congestion, elevated ocean and air freight rates, and labor shortages, and has impacted the Company’s manufacturing supply chain, distribution, logistics and other services. The COVID-19 pandemic has also led to adverse macroeconomic conditions, including a reduction in consumer spending, which has and could continue to negatively impact the Company’s business and results of operations.
The COVID-19 pandemic may continue to adversely affect workforces, supply chains, economies and financial markets globally, and may result in an inability for the Company’s suppliers, vendors or other parties with whom it does business to meet their contractual obligations, which could negatively impact the Company’s business and results of operations.
2.    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed financial statements are prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial information. The Company’s fiscal year ends on December 31. Certain information and footnote disclosures normally included in the Company’s annual audited financial statements and accompanying notes have been condensed or omitted in these accompanying interim condensed financial statements and footnotes. Certain reclassifications have been made to prior-year amounts to conform to the current period presentation. These unaudited condensed financial statements should be read in conjunction with the audited financial statements and related notes for the year ended December 31, 2021, included in the Company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 10, 2022.
In the opinion of management, the unaudited condensed financial statements include all adjustments of a normal recurring nature necessary for the fair presentation of the Company’s financial position, results of operations, and cash flows. The results of operations for the three and nine months ended September 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022.
Stock Split
On May 19, 2021, the Company effected a nine-for-one forward stock split of its issued and outstanding common stock, stock options and restricted stock units. Accordingly, all share and per share information has been retroactively adjusted to reflect the stock split for all periods presented.
10

Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods presented. Significant estimates include, but are not limited to, the valuation of the net realizable value of inventory, reserves for sales returns, allowances for doubtful accounts, stock-based compensation, contingent sales tax liability, and the useful lives and recoverability of long-lived assets. Actual results could differ from those estimates.
Restricted Cash
Restricted cash consists of cash collateral amounts pledged to secure the Company’s reimbursement obligations under its outstanding letters of credit.
The following table provides a reconciliation of cash and cash equivalents, and restricted cash reported on the accompanying condensed balance sheets that sum to the total of the same such amounts shown in the condensed statements of cash flows (in thousands):
September 30,
2022
December 31,
2021
Cash and cash equivalents$155,582 $195,374 
Restricted cash 2,056 
Total cash, cash equivalents, and restricted cash$155,582 $197,430 
Inventory, Net
Inventory consists of finished goods and is accounted for using an average cost method. Inventory is valued at the lower of cost or net realizable value. The Company records a provision for excess and obsolete inventory to adjust the carrying value of inventory based on assumptions regarding future demand for the Company’s products.
Lower of cost or net realizable value is evaluated by considering obsolescence, excessive levels of inventory, deterioration, and other factors. Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess, obsolescence, or impaired inventory. Excess and obsolete inventory is charged to cost of goods sold.
The Company’s allowance to write down inventory to the lower of cost or net realizable value was $0.3 million and $0.4 million as of September 30, 2022 and December 31, 2021, respectively.
Revenue Recognition
The Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”). Revenue is recognized in an amount that reflects the consideration expected to be received in exchange for products. To determine revenue recognition for contracts with customers within the scope of ASC 606, the Company recognizes revenue from the commercial sales of products and contracts by applying the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations of the contract(s); (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract(s); and (v) recognize revenue when (or as) the Company satisfies the performance obligations.
The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the good or services it transfers to the customer. The Company recognizes revenue at a point in time when it satisfies a performance obligation and transfers control of the products to the respective customers, which occurs when the goods are transferred to a common carrier. Shipping and handling costs associated with outbound freight incurred to transfer a product to a customer are treated as a fulfillment activity, and as a result, any fees received from customers are included in the transaction price for the performance obligation of providing goods to the customer.
The Company generally provides refunds for goods returned within 30 days from the original purchase date. A returns reserve is recorded by the Company based on the historical refund pattern. The returns reserve on the condensed balance sheets was $3.4 million and $2.8 million as of September 30, 2022 and December 31, 2021, respectively.
11

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. The Company records deferred revenue when it receives payments in advance of the transfer of the goods to a common carrier. The amounts recorded are expected to be recognized as revenue within the 12 months following the balance sheet date and, therefore, are classified as current liabilities on the Company’s condensed balance sheets.
The Company does not have significant contract balances other than deferred revenue, the allowance for sales returns and liabilities related to its gift cards. The Company recognized revenues of $2.1 million during the nine months ended September 30, 2022 related to redemptions from the gift card liability balance that existed at December 31, 2021. The Company does not have significant contract acquisition costs.
The following table presents the disaggregation of the Company’s net revenues for the three and nine months ended September 30, 2022 and 2021 as follows (in thousands):
Three months ended
September 30,
Nine months ended
September 30,
2022202120222021
By geography:
United States$118,316 $95,804 $332,564 $270,532 
Rest of the world10,273 6,892 28,373 20,360 
$128,589 $102,696 $360,937 $290,892 
By product:
Scrubwear$106,876 $89,529 $301,230 $256,059 
Non-Scrubwear/Lifestyle21,713 13,167 59,707 34,833 
$128,589 $102,696 $360,937 $290,892 
Recently Adopted Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), as subsequently amended, which sets out the principles for the recognition, measurement, presentation and disclosure of leases for both parties to a contract (i.e., lessees and lessors), and replaces the existing guidance in ASC 840, Leases. The new standard requires lessees to recognize operating and finance lease liabilities and corresponding right-of-use assets on the balance sheet and to provide enhanced disclosures surrounding the amount, timing and uncertainty of cash flows arising from leasing arrangements. In July 2018, the FASB issued ASU 2018-11, Leases (Topic 842): Targeted Improvements. ASU 2018-11 provides entities another option for transition, allowing entities to not apply the new standard in the comparative periods they present in their financial statements in the year of adoption. Effective January 1, 2022, the Company adopted ASU 2016-02 using the optional transition method provided by ASU 2018-11. The Company elected certain practical expedients permitted under the transition guidance, including the election to carryforward historical lease classification and the short-term lease practical expedient. In addition, the Company elected the lease and non-lease components practical expedient, which allowed it to calculate the present value of fixed payments without performing an allocation of lease and non-lease components. Adoption of the new standard resulted in the recognition of operating lease right-of-use assets and operating lease liabilities of approximately $12.9 million and $16.5 million, respectively, on the Company’s balance sheet as of January 1, 2022. The standard did not have a material impact to the Company’s condensed statements of operations and comprehensive income or the Company’s condensed statements of cash flows. Refer to Note 10 for the Company’s expanded disclosures on leases.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses: Measurement of Credit Losses on Financial Instruments (Topic 326) (“ASU 2016-13”). ASU 2016-13 requires measurement and recognition of expected credit losses for financial assets. In April 2019, the FASB issued clarification to ASU 2016-13 within ASU No. 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. These updates are effective for entities other than public business entities, including emerging growth companies that elected to defer compliance with new or revised financial accounting standards until a company that is not an issuer is required to comply with such standards, for annual reporting periods beginning after December 15, 2021. The Company adopted these updates on January 1, 2022 and noted no material effect to its financial statements and related disclosures.
12

In December 2019, the FASB issued ASU 2019-12, Simplifying the Accounting for Income Taxes (“ASU 2019-12”). ASU 2019-12 eliminates certain exceptions related to the approach for intra-period tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. It also clarifies and simplifies other aspects of the accounting for income taxes. This update is effective for entities other than public business entities, including emerging growth companies that elected to defer compliance with new or revised financial accounting standards until a company that is not an issuer is required to comply with such standards, for annual reporting periods beginning after December 15, 2021, and interim periods within annual periods beginning after December 15, 2022. The Company adopted ASU 2019-12 on January 1, 2022 and noted no material effect to its financial statements and related disclosures.
3.    FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES
As of September 30, 2022, and December 31, 2021, the Company’s cash equivalents consisted of money market funds, classified as Level 1 financial assets, as these assets are valued using quoted market prices in active markets without any valuation adjustment. The following table summarizes the Company’s financial assets measured at fair value on a recurring basis (in thousands):
Fair Value Measurement as of
September 30, 2022
Level 1Level 2Level 3Total
Assets
Money market funds$121,977 $ $ $121,977 
$121,977 $ $ $121,977 
Fair Value Measurement as of
December 31, 2021
Level 1Level 2Level 3Total
Assets
Money market funds$141,104 $ $ $141,104 
$141,104 $ $ $141,104 
There were no transfers of assets between fair value levels during the periods presented. The carrying values of other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.
The Company purchased securities classified as held-to-maturity during the second quarter of 2022. As of September 30, 2022, the carrying value and fair value of held-to-maturity investments was $0.5 million, which are included in “Other assets” on the unaudited condensed balance sheet. These securities are held in a privately held company and are recorded at fair value on a non-recurring basis. The estimation of fair value requires the use of significant unobservable inputs, and as a result, these assets are classified as Level 3 financial instruments within the fair value measurement framework.
4.    ACCOUNTS RECEIVABLE
Accounts receivable consisted of the following (in thousands):
September 30,
2022
December 31,
2021
Trade$2,730 $1,653 
Other5,638 788 
$8,368 $2,441 
13

5.    PREPAID EXPENSES AND OTHER CURRENT ASSETS
Prepaid expenses and other current assets consisted of the following (in thousands):
September 30,
2022
December 31,
2021
Inventory deposits$1,883 $798 
Prepaid expenses11,011 5,440 
Other976 1,162 
$13,870 $7,400 
6.    PROPERTY AND EQUIPMENT, NET
Property and equipment, net consisted of the following (in thousands):
September 30,
2022
December 31,
2021
Furniture and fixtures$1,031 $855 
Office equipment927 809 
Machinery and equipment1,569 1,348 
Computer equipment1,435 953 
Software and website design3,559 2,997 
Leasehold improvements3,083 3,083 
Capital projects in progress3,369 431 
Total property and equipment14,973 10,476 
Less: accumulated depreciation and amortization(4,150)(2,863)
Property and equipment, net$10,823 $7,613 
Depreciation and amortization expense of property and equipment for the three and nine months ended September 30, 2022 was $0.5 million and $1.3 million, respectively. Depreciation and amortization expense of property and equipment for the three and nine months ended September 30, 2021 was $0.4 million and $1.0 million, respectively.
7.    ACCRUED EXPENSES
Accrued expenses consisted of the following (in thousands):
September 30,
2022
December 31,
2021
Accrued inventory$11,479 $16,243 
Accrued shipping2,417 1,077 
Accrued selling expenses10,034 4,832 
Accrued legal expenses3,142 588 
Accrued marketing expenses2,536 923 
Other accrued expenses2,757 1,014 
$32,365 $24,677 
8.    FINANCING ARRANGEMENTS
On December 2, 2020, the Company, as borrower, entered into a credit agreement with JPMorgan Chase Bank, N.A. for an initial $50.0 million revolving credit facility, including capacity to issue letters of credit (the “2020 Facility”). The 2020 Facility had a maturity date of December 2, 2025 (“2020 Facility Maturity Date”). Subject to certain conditions, the 2020 Facility also provided for an additional $25.0 million of capacity. Borrowings under the 2020 Facility were payable on the 2020 Facility Maturity Date and bore interest at LIBOR (with a 0.5% floor) plus 1.75%. The interest rate for
14

undrawn amounts was 0.25%. On September 7, 2021, the Company terminated the 2020 Facility. Upon the termination of the 2020 Facility, letters of credit with an aggregate face amount of approximately $3.2 million were outstanding but the reimbursement obligations of the Company were secured by cash collateral pledged by the Company to JPMorgan Chase Bank, N.A. in the amount of approximately $3.3 million or 105% of the amounts outstanding. On October 28, 2021, the Company cancelled letters of credit with an aggregate face amount of $1.3 million. As of December 31, 2021, letters of credit with an aggregate face amount of $1.9 million remained outstanding. As of December 31, 2021, the reimbursement obligations of the Company were secured by cash collateral pledged by the Company to JPMorgan Chase Bank, N.A. in the amount of approximately $2.1 million or 105% of the amounts outstanding. On March 10, 2022, the Company cancelled all outstanding letters of credit under the 2020 Facility.
On September 7, 2021, the Company, as borrower, entered into a credit agreement with Bank of America, N.A. for a $100.0 million revolving credit facility, including capacity to issue letters of credit (the “2021 Facility”). The 2021 Facility is secured by substantially all assets of the Company and its material subsidiaries, subject to customary exceptions. The 2021 Facility has a maturity date of September 7, 2026 (“2021 Facility Maturity Date”). As of September 30, 2022, the Company had letters of credit aggregating to $4.4 million outstanding under the 2021 Facility and available borrowings of $95.6 million. As of September 30, 2022, the Company had no outstanding borrowings under the 2021 Facility. Borrowings under the 2021 Facility are payable on the 2021 Facility Maturity Date. Borrowings bear interest at either (a) the Eurodollar Rate (as defined in the 2021 Facility) plus 1.125% or (b) the Base Rate (as defined in the 2021 Facility) plus 0.125%. The interest rate for undrawn amounts is 0.175%. Costs associated with entering into the 2021 Facility were not material.
9.    COMMITMENTS AND CONTINGENCIES
Taxes on Remote Sellers
The Company is subject to state laws or administrative practices with respect to the taxes on remote sellers. In accordance with ASC 450, Contingencies, the Company recorded $1.6 million within sales tax payable on the Company’s condensed balance sheets as of September 30, 2022, and December 31, 2021, as an estimate of contingent sales tax payable.
Inventory Purchase Obligations
Inventory purchase obligations as of September 30, 2022 were $61.3 million. These inventory purchase obligations can be impacted by various factors, including the timing of issuing orders and the timing of the shipment of orders.
Legal Contingencies
Legal claims may arise from time to time in the normal course of business, the results of which may have a material effect on the Company’s accompanying unaudited condensed financial statements.
The Company currently has legal actions against it with respect to its litigation with Strategic Partners, Inc., Miracle Ventures I, LP, and a putative securities class action against the Company and certain of its executive officers and directors.
The Company believes these claims are without basis or merit, and intends to vigorously defend against such claims. Accordingly, an accrual for any potential liability has not been recorded.
10.    LEASES
The Company leases office space under operating leases for its corporate headquarters. The Company determines whether an arrangement is a lease at inception of the agreement and reassesses that conclusion if the agreement is modified. Right-of-use assets and lease liabilities are established on the balance sheets for leases with an expected term greater than one year. Leases with an initial term of 12 months or less are not recorded on the balance sheets. The Company does not allocate consideration between lease and non-lease components.
The Company has an operating lease agreement for office space with an initial term expiring in 2030 (the “Lease”). The Lease terms provide for an option to extend or terminate the Lease, with extension terms that extend the lease term by five years. The Lease includes escalating rent payment provisions.
On March 17, 2022, the Company entered into a sublease agreement (“the Sublease”) for additional office space with an initial term expiring in 2026. The Sublease includes an option to extend the agreement, at the Company’s
15

discretion, if the Sublandlord declines to terminate its master lease. The Sublease includes a rent abatement period of three months and escalating rent payment provisions.
The operating lease agreements included in the measurement of lease liabilities do not reflect options to extend or terminate, as the Company does not consider the exercise of these options to be reasonably certain. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants.
The Company recognizes operating lease expense on a straight-line basis over the lease term. Operating lease expense for the three and nine months ended September 30, 2022 was $0.8 million and $2.0 million, respectively. Short-term lease expense for the three and nine months ended September 30, 2022 was $0.9 million and $2.0 million, respectively.
As the rates implicit in the Company’s outstanding leases are not determinable, the Company uses its incremental borrowing rate based on information available on the lease commencement date to determine the present value of lease payments.
The weighted-average remaining lease term and weighted-average discount rate related to the Company’s operating leases at September 30, 2022 were as follows:
Weighted-average remaining lease term 6.4 years
Weighted-average discount rate2.4 %
Future undiscounted lease payments, and a reconciliation of these payments to the Company’s operating lease liabilities at September 30, 2022, were as follows (in thousands):
Remainder of 2022$848 
20233,458 
20243,578 
20253,703 
20262,346 
Thereafter7,418 
Total lease payments$21,351 
Less: Imputed interest1,452 
Total lease liabilities$19,899 
Other Information
Cash payments included in the measurement of the operating lease liabilities were $1.7 million for the nine months ended September 30, 2022. Right of use assets obtained in exchange for operating lease liabilities were $4.7 million for the nine months ended September 30, 2022.
11.    STOCK-BASED COMPENSATION
On August 9, 2022, in connection with Heather Hasson’s appointment as the Company’s Executive Chair, the Company’s Board of Directors granted equity awards to Ms. Hasson with an aggregate grant date fair value equal to $24.9 million. The equity awards were granted under the Company’s 2021 Equity Incentive Award Plan and consisted of restricted stock units with a total grant date fair value of $11.3 million (the “RSU Award”) and nonqualified stock options with a total grant date fair value of $13.6 million (the “Option Award”). The RSU Award will vest in 10 substantially equal quarterly installments with the final installment vesting on December 31, 2024. The Option Award will vest and become exercisable in 29 substantially equal installments with the final installment vesting on December 31, 2024. The vesting of the RSU Award and the Option Award are, in each case, subject to Ms. Hasson’s continued service through each applicable vesting date. The Company measures and recognizes the grant date fair value of the RSU Award and Option Award based on its existing stock-based compensation policy.
16

12.    INCOME TAXES
The tax provision for interim periods is determined using an estimate of the Company’s annual effective tax rate, adjusted for discrete items arising during interim periods.
For the three months ended September 30, 2022 and 2021, the Company’s effective tax rate was 65.8% and 27.7%, respectively. The Company’s effective tax rate differed from the U.S. statutory tax rate primarily due to state taxes and officer excess compensation limitations.
For the three months ended September 30, 2022 and 2021, the Company recorded income tax expense of $7.8 million and $2.7 million, respectively.
For the nine months ended September 30, 2022 and 2021, the Company’s effective tax rate was 49.3% and (243.3)%, respectively. The Company’s effective tax rate differed from the U.S. statutory tax rate primarily due to state taxes and officer excess compensation limitations.
For the nine months ended September 30, 2022 and 2021, the Company recorded income tax expense of $17.3 million and $15.7 million, respectively.
On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (“IRA”), which, among other things, implements a 15% alternative minimum tax on corporations with book income in excess of $1 billion, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy. The effective date of these provisions is January 1, 2023. The Company will continue to monitor for updates to the Company’s business along with guidance issued with respect to the IRA to determine whether any adjustments are needed to the Company’s tax provision in future periods.
13.    EARNINGS (LOSS) PER SHARE
Basic earnings (loss) per share (“basic EPS”) and diluted earnings (loss) per share (“diluted EPS”) attributable to common stockholders is calculated in conformity with the two-class method required for participating securities: Class A and Class B common stock. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting, conversion, and transfer rights. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to twenty votes per share. Each share of Class B common stock is convertible at any time at the option of the stockholder into one share of Class A common stock.
Basic EPS attributable to common stockholders is computed by dividing net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period. For the calculation of diluted EPS, net income (loss) attributable to common stockholders for basic EPS is adjusted by the effect of dilutive securities. Diluted EPS attributable to common stockholders is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding, including all potentially dilutive common shares.
As the economic rights of Class A and Class B common stock are identical, undistributed earnings are allocated on a proportionate basis and presented on a combined basis. The following table sets forth the computation of basic and diluted
17

EPS and a reconciliation of the weighted average number of common and common equivalent shares outstanding for the three and nine months ended September 30, 2022 and 2021 (in thousands, except share and per share amounts):
Three months ended September 30,Nine months ended September 30,
2022202120222021
Numerator:
Net income (loss)$4,044 $6,954 $17,795 $(22,152)
Denominator:
Weighted-average shares—basic165,543,067 161,348,021 164,960,561 157,620,573 
Effect of dilutive stock options19,676,684 34,843,956 22,723,439  
Effect of dilutive restricted stock1,772,017 3,193,084 2,078,364  
Weighted-average shares—diluted186,991,769 199,385,061 189,762,364 157,620,573 
Earnings (loss) per share:
Basic earnings (loss) per share$0.02 $0.04 $0.11 $(0.14)
Effect of dilutive stock options and restricted stock (0.01)(0.02) 
Diluted earnings (loss) per share$0.02 $0.03 $0.09 $(0.14)
The Company excluded the following weighted average common equivalent shares from the computation of diluted earnings per share for the three and nine months ended September 30, 2022 and the three and nine months ended September 30, 2021 because including them would have had an anti-dilutive effect:
Three months ended September 30,Nine months ended September 30,
2022202120222021
Stock options to purchase common stock6,616,871 38,121 4,391,646 40,577,427 
Restricted stock units1,641,630  1,130,795 4,601,922 
14.    RELATED PARTY TRANSACTIONS
Tulco, LLC, a former stockholder, reimbursed the Company for certain of the Company’s professional fees in connection with the Company’s initial public offering. These reimbursements totaled $4.9 million and the Company received payment of the reimbursements during the third quarter of 2021.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following discussion and analysis of our financial condition and results of operations together with our condensed financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the Securities and Exchange Commission (“SEC”) on March 10, 2022 (the “2021 Annual Report on Form 10-K”). This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Part II, Item 1A. “Risk Factors” and other factors set forth in other parts of this Quarterly Report on Form 10-Q.
Our mission is to celebrate, empower and serve those who serve others.
We are a founder-led, direct-to-consumer healthcare apparel and lifestyle brand that seeks to celebrate, empower and serve current and future generations of healthcare professionals. We are committed to helping this growing, global community of professionals, whom we refer to as Awesome Humans, look, feel and perform at their best—24/7, 365 days a year. We create technically advanced apparel and products that feature an unmatched combination of comfort, durability, function and style, all at an affordable price. In doing so, we have redefined what scrubs are—giving rise to our tag-line: why wear scrubs, when you can #wearFIGS?
18

We have revolutionized the large and fragmented healthcare apparel market. We branded a previously unbranded industry and de-commoditized a previously commoditized product—elevating scrubs and creating premium products for healthcare professionals. Most importantly, we built a community and lifestyle around a profession. As a result, we have become the industry’s category-defining healthcare apparel and lifestyle brand.
We generate revenue by selling technically advanced apparel for the modern healthcare professional. Our offerings include scrubwear, as well as lifestyle apparel and other non-scrub offerings, such as lab coats, underscrubs, outerwear, loungewear, compression socks and footwear. We design all of our products in-house, leverage third-party suppliers and manufacturers to produce our raw materials and finished products, and utilize generally shallow initial buys and data-driven repurchasing decisions to test new products. We directly and actively manage every step of our product development and production process to ensure that our extremely high quality standards are met. We also have an efficient merchandising model—due to the largely non-discretionary, replenish