10-Q 1 figs-20210930.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2021

OR

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ___________________ to ___________________

Commission File Number: 001-39549

 

img39585729_0.jpg 

 

 

FIGS, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

46-2005653

(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 class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Class A common stock, $0.0001 par value per share

 

FIGS

 

New 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 ☒ No ☐

 

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 ☒ No ☐

 

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 filer

 

Accelerated filer

Non-accelerated filer

 

Smaller reporting company

Emerging growth company

 

 

 

 

 

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.

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

 

As of October 31, 2021, there were 151,661,709 shares of the registrant’s Class A common stock, par value $0.0001, outstanding and 11,795,735 shares of the registrant’s Class B common stock, $0.0001 par value per share, outstanding, respectively.

 

 


 

Table of Contents

 

 

Page

PART I

 FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

 

 

Balance Sheets

5

 

Statements of Operations and Comprehensive Income (Loss)

6

 

Statements of Stockholders’ Equity

7

 

Statements of Cash Flows

8

 

Notes to Financial Statements

9

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

19

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

30

Item 4.

Controls and Procedures

30

 

 

 

PART II

OTHER INFORMATION

 

Item 1.

Legal Proceedings

32

Item 1A.

Risk Factors

32

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

63

Item 3.

Defaults Upon Senior Securities

64

Item 4.

Mine Safety Disclosures

65

Item 5.

Other Information

66

Item 6.

Exhibits

67

Signatures

 

68

 

 

2


 

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. 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” 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, but are not limited to statements regarding our future results of operations and financial position, industry and business trends, equity compensation, 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 for the quarter ended September 30, 2021. 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 only recently achieved profitability 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 personnel and senior management.

 

We plan to expand into additional international markets, which will expose us to new risks.

 

Shipping is a critical part of our business and any changes in, or disruptions to, our shipping arrangements could 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.

 

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 the Class B stockholders has the effect of concentrating control with our co-founders and co-Chief Executive Officers, and Tulco, LLC.

 

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.

 

BALANCE SHEETS

(In thousands, except share and per share data)

 

 

 

As of

 

 

 

September 30,
2021

 

 

December 31,
2020

 

Assets

 

(Unaudited)

 

 

 

 

Current assets

 

 

 

 

 

 

Cash and cash equivalents

 

$

180,648

 

 

$

58,133

 

Restricted cash

 

 

3,306

 

 

 

 

Accounts receivable

 

 

4,765

 

 

 

5,780

 

Due from related party

 

 

501

 

 

 

 

Inventory, net

 

 

69,356

 

 

 

49,735

 

Prepaid expenses and other current assets

 

 

10,045

 

 

 

6,665

 

Total current assets

 

 

268,621

 

 

 

120,313

 

Non-current assets

 

 

 

 

 

 

Property and equipment, net

 

 

7,363

 

 

 

6,529

 

Deferred tax assets

 

 

7,957

 

 

 

6,507

 

Other assets

 

 

584

 

 

 

506

 

Total non-current assets

 

 

15,904

 

 

 

13,542

 

Total assets

 

$

284,525

 

 

$

133,855

 

Liabilities and stockholders’ equity

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

Accounts payable

 

$

13,977

 

 

$

11,965

 

Accrued expenses

 

 

21,783

 

 

 

6,682

 

Accrued compensation and benefits

 

 

6,116

 

 

 

4,214

 

Sales tax payable

 

 

5,435

 

 

 

3,076

 

Gift card liability

 

 

3,587

 

 

 

3,019

 

Deferred revenue

 

 

4,480

 

 

 

1,781

 

Returns reserve

 

 

3,200

 

 

 

1,677

 

Income tax payable

 

 

3,066

 

 

 

105

 

Total current liabilities

 

 

61,644

 

 

 

32,519

 

Non-current liabilities

 

 

 

 

 

 

Deferred rent and lease incentive

 

 

3,582

 

 

 

3,659

 

Total liabilities

 

 

65,226

 

 

 

36,178

 

Commitments and contingencies

 

 

 

 

 

 

Stockholders’ equity

 

 

 

 

 

 

Common stock — par value $0.0001 per share, zero and 207,000,000 shares
   authorized as of September 30, 2021 and December 31, 2020, respectively;
   
zero and 154,444,851 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

 

 

 

 

 

15

 

Class A Common stock — par value $0.0001 per share, 1,000,000,000 and zero shares
   authorized as of September 30, 2021 and December 31, 2020, respectively;
   
151,651,787 and zero shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

 

 

15

 

 

 

 

Class B Common stock — par value $0.0001 per share, 150,000,000 and zero shares
   authorized as of September 30, 2021 and December 31, 2020, respectively;
   
11,795,735 and zero shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively

 

 

1

 

 

 

 

Preferred stock — par value $0.0001 per share, 100,000,000 and zero shares
   authorized as of September 30, 2021 and December 31, 2020, respectively;
   
zero shares issued and outstanding as of September 30, 2021 and December 31, 2020

 

 

 

 

 

 

Additional paid-in capital

 

 

213,948

 

 

 

70,175

 

Retained earnings

 

 

5,335

 

 

 

27,487

 

Total stockholders’ equity

 

 

219,299

 

 

 

97,677

 

Total liabilities and stockholders’ equity

 

$

284,525

 

 

$

133,855

 

 

The accompanying notes are an integral part of these unaudited financial statements

5


 

FIGS, INC.

 

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,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

Net revenues

 

$

102,696

 

 

$

76,809

 

 

$

290,892

 

 

$

172,919

 

Cost of goods sold

 

 

27,991

 

 

 

20,176

 

 

 

79,674

 

 

 

46,754

 

Gross profit

 

 

74,705

 

 

 

56,633

 

 

 

211,218

 

 

 

126,165

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Selling

 

 

19,945

 

 

 

13,998

 

 

 

56,282

 

 

 

33,642

 

Marketing

 

 

15,779

 

 

 

9,655

 

 

 

42,107

 

 

 

25,797

 

General and administrative

 

 

28,430

 

 

 

8,407

 

 

 

118,280

 

 

 

21,557

 

Total operating expenses

 

 

64,154

 

 

 

32,060

 

 

 

216,669

 

 

 

80,996

 

Net income (loss) from operations

 

 

10,551

 

 

 

24,573

 

 

 

(5,451

)

 

 

45,169

 

Other income (loss), net

 

 

 

 

 

 

 

 

 

 

 

 

Interest income (expense)

 

 

(110

)

 

 

12

 

 

 

(176

)

 

 

129

 

Other expense

 

 

(823

)

 

 

 

 

 

(825

)

 

 

(1

)

Total other income (loss), net

 

 

(933

)

 

 

12

 

 

 

(1,001

)

 

 

128

 

Net income (loss) before provision for income taxes

 

 

9,618

 

 

 

24,585

 

 

 

(6,452

)

 

 

45,297

 

Provision for income taxes

 

 

2,664

 

 

 

5,262

 

 

 

15,700

 

 

 

7,665

 

Net income (loss) and comprehensive income (loss)

 

$

6,954

 

 

$

19,323

 

 

$

(22,152

)

 

$

37,632

 

Earnings (loss) attributable to Class A and Class B common stockholders

 

 

 

 

 

 

 

 

 

 

 

 

Basic earnings (loss) per share

 

$

0.04

 

 

$

0.13

 

 

$

(0.14

)

 

$

0.25

 

Diluted earnings (loss) per share

 

$

0.03

 

 

$

0.12

 

 

$

(0.14

)

 

$

0.24

 

Weighted-average shares outstanding—basic

 

 

161,348,021

 

 

 

153,065,124

 

 

 

157,620,573

 

 

 

153,057,059

 

Weighted-average shares outstanding—diluted

 

 

199,385,061

 

 

 

164,863,973

 

 

 

157,620,573

 

 

 

157,399,956

 

 

The accompanying notes are an integral part of these unaudited financial statements.

6


 

FIGS, INC.

 

STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share data)

(Unaudited)

 

 

 

Common Stock

 

 

Class A Common Stock

 

 

Class B Common Stock

 

 

Additional

 

 

(Accumulated Deficit)

 

 

Total Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Retained Earnings

 

 

Equity

 

December 31, 2019

 

 

153,052,983

 

 

$

15

 

 

 

 

 

$

 

 

 

 

 

$

 

 

$

61,070

 

 

$

(22,271

)

 

$

38,814

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

50

 

 

 

 

 

 

50

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,134

 

 

 

4,134

 

March 31, 2020

 

 

153,052,983

 

 

$

15

 

 

 

 

 

$

 

 

 

 

 

$

 

 

$

61,120

 

 

$

(18,137

)

 

$

42,998

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

236

 

 

 

 

 

 

236

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

14,175

 

 

 

14,175

 

June 30, 2020

 

 

153,052,983

 

 

$

15

 

 

 

 

 

$

 

 

 

 

 

$

 

 

$

61,356

 

 

$

(3,962

)

 

$

57,409

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

693

 

 

 

 

 

 

693

 

Stock option exercises

 

 

76,482

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

35

 

 

 

 

 

 

35

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,323

 

 

 

19,323

 

September 30, 2020

 

 

153,129,465

 

 

$

15

 

 

 

 

 

$

 

 

 

 

 

$

 

 

$

62,084

 

 

$

15,361

 

 

$

77,460

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Class A Common Stock

 

 

Class B Common Stock

 

 

Additional

 

 

(Accumulated Deficit)

 

 

Total Stockholders'

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

Paid-in Capital

 

 

Retained Earnings

 

 

Equity

 

December 31, 2020

 

 

154,444,851

 

 

$

15

 

 

 

 

 

$

 

 

 

 

 

$

 

 

$

70,175

 

 

$

27,487

 

 

$

97,677

 

Stock-based compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,015

 

 

 

 

 

 

5,015

 

Stock option exercises

 

 

204,309

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

123

 

 

 

 

 

 

123

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,440

 

 

 

11,440

 

March 31, 2021

 

 

154,649,160

 

 

$

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

 

 

 

 

 

 

 

 

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 exercises

 

 

350,721

 

 

 

 

 

 

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