Good afternoon, and thank you for standing by. Welcome to the FIGS' Fourth Quarter 2021 Earnings C onference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session, and instructions will follow at that time. Please be advised that reproduction of this call in whole or in part is not permitted without written authorization from FIGS. As a reminder, this call is being recorded. I would now like to introduce your host for today's call, Carrie Gillard, Vice President of Investor Relations. Ms. Gillard, please go ahead.
Good afternoon, and thank you for joining today's call to discuss FIGS fourth quarter and full year 2021 results, which we released this afternoon and can be found in our earnings release and shareholder letter on the FIGS Investor Relations website at ir.wearfigs.com. Presenting on today's call will be Heather Hasson and Trina Spear, our Co-Chief Executive Officers, and Daniella Turenshine, our Chief Financial Officer. As a reminder, remarks on this call that do not concern past events should be considered forward-looking statements. These may include predictions, expectations, or estimates, including about our future financial performance, market opportunity, business plans, and operational capacity. Forward-looking statements involve substantial risks and uncertainties, and actual results could differ materially from those mentioned. These risks, among others, are discussed in our shareholder letter and SEC filings, which we encourage you to review.
You should not place undue reliance on any forward-looking statements which speak only as of today and which undertake no obligation to update or revise. Finally, this call will contain certain non-GAAP metrics, which we believe are useful supplemental measures for understanding our business. Reconciliations of these non-GAAP measures to their most comparable GAAP measures are included in the shareholder letter we released today on the investor relations portion of our website. Now, I'd like to turn the call over to Heather Hasson, Co-Chief Executive Officer of FIGS.
Thanks, Carrie. Good afternoon, everyone. We appreciate you joining us for our fourth quarter and full year 2021 conference call. Before we get started, I just wanna say how honored we are to serve our healthcare community every day. They are why we exist. Now, for our results. Our financial performance demonstrates the incredible power of our business model as we delivered an exceptional combination of revenue growth, profitability, and free cash flow. In the fourth quarter, our net revenues were up 43% to $129 million, which was larger than our entire business in 2019. This is an amazing achievement that underscores the rapid growth and scale that we have accomplished in the past two years.
For the full year, our net revenues increased to $420 million, up 62% on an adjusted basis, driven by both strong acquisition of new customers and increasing annual spend from our existing customers. Across our key metrics, our active customer base grew 46% to $1.9 million. Net revenues per active customer increased $22 year over year and $39 over two years. We delivered a 12% increase in our AOV to $105. We increased our repeat customer revenues to 68%, up from 62% in 2020. Our nascent international business tripled. We achieved this growth by also generating $105 million in adjusted EBITDA, a 25% adjusted EBITDA margin.
We delivered this outstanding performance through product innovation, disciplined execution, and by leveraging our deep understanding of what our customers want and need from the 10 years of engaging with them every day. Our accomplishments are also a result of building a management team over the past 10 years that is not only committed to our community, but is world-class at running a high-growth business. From product design and innovation, supply chain, marketing, or any other aspect of our company, we are a team that delivers extraordinary results year after year. That's driven by a clear mission to celebrate, empower, and serve those who serve others. It is through this mission that we will continue to enrich the lives of healthcare professionals for years to come. I truly believe we are just getting started. What we are creating is more than just product.
It's a movement within the healthcare profession. We have a long runway of growth ahead, and we're so grateful to be afforded the opportunity to inspire and create the world our awesome humans want to live in. With that, I will hand it over to Trina.
Thanks, Heather. In 2021, we delivered $420 million in net revenue, over 60% adjusted revenue growth, over 70% gross margin, $105 million in adjusted EBITDA, a 25% adjusted EBITDA margin, and $64 million of positive free cash flow, all at the same time, which speaks volumes about the strength of our business and our maniacal focus on operational excellence. We're able to consistently perform at such a high level because we flipped the entire paradigm of this industry on its head from our products to the experience to our community, and we've gained even greater momentum in 2021 as we further disrupted the industry. Let's start with product. We brought performance fabric to scrubs to create an unmatched combination of comfort, durability, function, and style with technical attributes like four-way stretch, moisture wicking, and breathability.
This did not exist before FIGS. We changed the game and set the new standard. With over 80% of our business in 13 core styles, innovating on the core remains paramount to our long-term success. That's why in 2021, we've invested heavily into building out our product innovation and design capabilities. To ensure we have the best team in place to continue to push boundaries and shape the future. One of the many ways we're growing our scrubs business is by creating franchises around our 13 core styles. In 2021, we introduced the high-waisted Zamora and Yola pants for women, as well as the Tansen slim pant for men. These variations on our fan favorites provided new opportunities for us to meet the unique needs and preferences of our growing customer base. Our customers, both new and repeat, love these iterations on our core.
For example, the high-waisted version made up about 40% of our Zamora sales in the second half of the year. As you've heard us say before, healthcare professionals wear more than just a scrubs top and pants, so we have built products that go far beyond scrubs, driving innovation across our layering system from base layer to outer layer to find new ways to address the evolving needs and changing environments of our healthcare community. This holistic approach, coupled with our almost weekly product drops, has completely upended how healthcare professionals engage with their uniform. Completely different from the typical scrubs company, we launched over 100 new styles across all categories in 2021, with strategically shallow buys to create hype and drive traffic.
Our healthcare professionals stay up until midnight to see our latest release and buy it before it sells out, a behavior that was never associated with scrub wear before FIGS. This merchandising strategy drives higher AOV and revenue per customer as our healthcare professionals come back over and over to replenish, try new styles, and layer on our lifestyle offerings. This dynamic is impossible to replicate. Our healthcare professionals' work is physical. Their shifts are long, and their time is valuable. That's why we transform the shopping experience, eliminating the friction and inconvenience of the outdated distribution model by going direct to them online. As e-commerce continues to accelerate and demand shifts online, we are in the best position to capitalize on this momentum as the largest direct-to-consumer company in our space.
There is no one else in our industry who has the digital scale, speed, and data to understand the needs of the healthcare professional, and that's because the vast majority operate through a wholesale model where they don't have any connection to the end customer. As for the few D2C players, our next largest competitor is a small fraction of our size. As a result, our data network is much more comprehensive than our competitors and gives us the opportunity to drive greater loyalty through more precise targeting, personalization, and engagement. As we grow in scale, our data set gets bigger and smarter. For example, in the fourth quarter, we made updates to our site to feature more tailored and personalized content.
Using the immense amount of data we get from our customers, we are able to segment the site so that Kelly, a nurse in Houston, saw completely different imagery, content, and product offerings than Jacob, an oncology resident in Boston. As a result, our conversion in the fourth quarter on these personalized experiences was almost double its previous rate. Now, let's discuss operational excellence. I want to make it clear that our ability to consistently deliver results did not happen by accident. It's a function of our incredible focus and discipline and the strength of our team. Our Chief Operating Officer, Devon Duff Gago, who has been with our company for six years, together with her team, has executed in the most unprecedented environment to rapidly scale our business to more than four times its size in just the past two years.
Our unique business model has several key differentiators that enabled us to better withstand the macro supply chain challenges. Nearly 90% of our product is made from a single fabrication, which provides our manufacturing partners with high volumes of consistent capacity. Additionally, almost half of our revenues are generated by 13 core styles in core colors. The fact that half of our revenues are seasonless enables us to produce large volumes farther in advance and hold greater quantities in our warehouse with almost no inventory risk compared to traditional apparel companies. These differentiators are incredibly important because as transit times fluctuate, freight rates rise, and labor shortages persist, our business model is able to endure these near-term pressures and still deliver best-in-class annual growth margins above 70%. Most importantly, we get the products to our healthcare professionals that they need to do their jobs.
All of it, our amazing products, our superior experience, our operational execution, has enabled us to build a deeply loyal and passionate community. We changed the way healthcare professionals engage, shop, and feel about their uniforms, and this is reflected in our loyalty metrics. For new customers, about half of them come back and buy from us a second time within one year. Customers who are active in their second year are with us for life, as we see over 95% retention from year two to year three. As they come back to us again and again to replenish their scrubs, their brand affinity grows, as does their overall spend and LTV. Our business is unique. It's nondiscretionary and replenishment driven, meaning greater predictability and consistency.
This is a critical advantage for us compared to other consumer brands, as almost 75% of our revenue is retained in the next year, providing a solid base for us to build upon as we grow. As we acquire more customers and turn them into repeat purchasers, this dynamic compounds. As I reflect on our outstanding 2021 and everything we've accomplished over the past 10 years, I am increasingly confident in our roadmap and our ability to transform and grow the $12 billion U.S. market, a figure backed by research and survey work from a top independent consulting firm that we engaged as part of our IPO. The healthcare industry has incredibly compelling fundamentals. Our industry is mandated, non-discretionary, recession-resistant, has strong replenishment dynamics as healthcare professionals need to wear their uniform every day.
Even with the burden our community has endured over the past two years, U.S. healthcare jobs are expected to be the fastest-growing job segment over the next decade, adding nearly 2.6 million new jobs. Additionally, we ended the year with a record 1.9 million active customers, which represents less than 10% of the over 20 million healthcare professionals in the United States, and less than 2% of the over 115 million healthcare professionals around the world. There's a significant growth opportunity for years to come as we continue to add more awesome humans to our community. We've barely gotten started. Let's break down the $12 billion number a bit more from a spend perspective. In the study, the $12 billion is comprised of scrub wear, lab coats, medical shoes, scrub caps, and compression socks.
It's estimated that healthcare professionals spend approximately $570 annually across these categories, of which about $330 is spent on scrub wear. Our data shows that the average customer that comes back to FIGS spends almost 10% more than that $330 figure in their first year, and they continue to spend more with us over time. Our top decile spends almost 2.5 times that $330 just on their scrubs. As we continue to turn first-time customers into brand evangelists, our premium pricing, our highly effective merchandising model, and our commitment to innovation allows us to drive this number even higher.
As it relates to the categories outside of scrubs, lab coats, medical shoes, scrub caps, and compression socks, what we offer is, just like with scrubs, totally revolutionizing what these categories traditionally represent. We are still significantly underpenetrated in them today. We are changing that because these products, like scrubs, have been overlooked, undervalued, and created without the end customer in mind, and no one is better positioned than FIGS to do that. Not only are we innovating in these select categories, we're also completely changing the game on everything outside of this $12 billion industry. The majority of our lifestyle products, from under scrubs to outerwear, never existed for healthcare professionals before FIGS. They are clearly resonating with our community as our lifestyle grew to almost 17% of revenue in 2024.
We are redefining the very definition of a uniform while expanding and growing the market in the process. Let me be crystal clear. We believe FIGS is in a very strong position to continue to take market share. But more importantly, we are creating the market as we innovate on our products, improve the experience, and provide our community with what they want and what they need, and in many cases, what they didn't know they wanted or needed. 2021 was an incredible year for us. In our first year as a public company, we delivered on what we set out to accomplish and exceeded all of our expectations. We are excited to build on that success in 2022. We will continue to invest behind what we do best.
We are doubling down on innovation, growing brand awareness, adding new awesome humans to our base, deepening our relationships within our community to drive further loyalty, and expanding on our nascent international and lifestyle businesses. Let's dive deep into international for a moment. We tripled our international business in 2021, affirming that healthcare professionals around the world are similarly underserved and want a better product and a better experience. We also proved that we could expand and grow beyond the U.S. with the same strong fundamentals we see domestically, maintaining our robust AOV, our retention, and our gross profit profile in Canada, Australia, and the U.K. In 2022, we are going to continue to build on this international expansion.
We plan to enter new markets this year, and we're gonna use the same disciplined approach to market selection, utilizing our site traffic and strategic understanding of market dynamics to determine where we launch next. With international comprising only 7% of our business in 2021, we have an enormous runway of growth ahead of us, and we cannot wait to get even more awesome humans into FIGS. In closing, we have never been more confident in our ability to reach annual net revenue of $1 billion by 2025. We have just scratched the surface in terms of what we are capable of, and we'll continue to grow and scale by remaining focused on our purpose for existing, to serve our healthcare community. With that, I will hand the call over to our CFO, Daniella Turenshine, who joined FIGS in 2018.
Daniella knows our company inside and out, and in the year she's been at FIGS, Daniella has been as responsible as anyone for the unique combination of revenue growth and profitability that we've achieved. In terms of what FIGS needs in a CFO, there's simply no one better positioned than Daniella. Her deep knowledge and passion for the brand, combined with her deeply analytical and data-driven approach, is what helped FIGS go from less than $55 million in revenue when she joined to over $400 million today. We are so excited to have her as our CFO, and I have no doubt she will continue to lead us forward in delivering on our long-term targets and growth ambitions. Daniella?
Thank you, Trina, and good afternoon, everyone. I wanna first say thank you to Heather, Trina, and the board for the opportunity to serve as FIGS's Chief Financial Officer. It has been an honor to help grow and scale this inspirational brand over the last several years, and I could not be more excited to continue to serve our community of awesome humans in my new role. FIGS's full-year financial results exceeded our expectations, driven by continued robust demand for the brand across both new and repeat customers, the strength of our lifestyle expansion across categories and strong holiday sales. We delivered an outstanding Black Friday/Cyber Monday week that grew 54% year-over-year on top of an incredibly strong 2020 season, while concurrently being less promotional.
Looking at Q4, we successfully executed against our pricing strategy, selling more products at full price with almost no impact to our demand. This strategy resulted in almost 300 basis points of discount rate improvement year-over-year, and was a big contributor to our exceptional growth and profitability for the quarter. As a result of the strong demand that we saw, our net revenues for the quarter exceeded our previous guidance by $10 million. Now let's dive into the financial results. Net revenues for Q4 were up 42.7% to $128.7 million compared to Q4 last year. Our performance was driven primarily by strong order growth from both new and existing customers. We acquired more new customers in Q4 than ever before, growing our active customer base to almost 1.9 million.
Despite the exceptional growth in new customers, almost 70% of our revenues in the quarter were still from repeat customers. Net revenues also benefited from a 15% increase in average order value to $113 in the quarter, compared to $98 in Q4 2020. We drove record lifestyle adoption, partly driven by expanding the breadth of our outerwear offerings, including our new sweater knit and puffer jackets. This strategy helped drive higher AOV in the quarter through higher price points and increased units per transaction as customers wanted to complete the full layering system. Perhaps more importantly, it provides a clear indicator of the greater demand for our brand beyond our core scrub wear and our ability to further grow our existing categories by building depth within our collections.
Finally, in addition to the improvement in AOV for both the quarter and full year, net revenues per active customer increased to $224 in Q4, up $22 or over 11% year-over-year. This is an important metric that we are focused on because it shows us how much our customers are spending with us, not just in one transaction, but over the course of an entire year. As that number continues to grow, it means our customers are more engaged and spending more with us over time. Gross margin for Q4 decreased 110 basis points to 69.9% compared to Q4 2020. This change was primarily due to higher use of air freight as well as higher freight rates, offset in part by better product costing.
Gross margin was considerably better than expected, primarily due to our strategic decision to reduce discounts during the quarter. As a result, we were able to use this pricing power to help offset our elevated air freight spend. Additionally, while air freight expenditures were still elevated compared to the prior year, our actual spend came in much lower than expected, approximately $6 million in the quarter versus our previous expectation of $8 million-$10 million. Moving to operating expenses. Selling expense for Q4 was $25.6 million, representing 19.9% of net revenues, compared to 20.2% in Q4 2020. We experienced increases in shipping rates from our carriers and higher fulfillment expenses in the quarter. However, we were able to offset these headwinds primarily due to the solid increase that we drove in AOV.
Marketing expense for Q4 was $16.6 million spend and lower than planned for brand spend. On the digital marketing side, we continue to see efficiency and return on advertising spend as the proportion of net revenues driven by repeat customers grows over time. As we think about building our brand for the long term, we will continue to invest these gains back into growing brand awareness through top of the funnel marketing initiatives. General and administrative expense for Q4 was $31.3 million, representing 24.3% of net revenues compared to 22.2% in Q4 2020. This increase was primarily driven by non-cash stock-based compensation, the incremental capabilities we have built over the past year in key areas such as product innovation and merchandising, and increased costs from being a public company.
To and beyond, we will look to balance investments into key capabilities across product innovation while scaling our operating expenses to continue to drive profitable, sustainable long-term growth. Taking this to the bottom line, our net income was $12.6 million or $0.06 in diluted EPS for the quarter. Adjusted net income was $18.6 million and diluted EPS as adjusted was $0.09 in Q4 compared to $0.08 in Q4 2020. The increase in diluted EPS as adjusted was primarily driven by the increase in adjusted net income year-over-year as our operations grew and we scaled efficiently, partly offset by increased dilution.
Finally, our adjusted EBITDA for Q4 was $31.9 million and adjusted EBITDA margin was 24.8% for Q4 compared to 23.8%. Gross margin was primarily driven by efficiencies in marketing and selling as we have scaled, offset by lower gross margin due to freight and investments in talent. Most importantly, we are incredibly proud of our huge milestone of delivering over $105 million of adjusted EBITDA for the full year. The discipline and execution required to deliver exceptional top line growth paired with profitability. Position at quarter end was strong with cash and cash equivalents of $195.4 million. For the full year, we generated free cash flow of $63.7 million, up from $19.5 million in 2020.
The 227% increase in free cash flow year-over-year demonstrates our ability to significantly scale our net cash from operating activities through high top-line growth coupled with best-in-class execution. Moving on to our outlook. Following an exceptional financial performance in 2021, we are incredibly excited to continue to deliver strong top-line growth and are confident in our strategic roadmap for 2022 and the years ahead. Based on our current visibility, we expect 2022 net revenues to be approximately $550 million-$560 million, representing growth of 31%-33% compared to 2021. From a quarterly flow perspective, we expect our growth rates to be relatively consistent throughout the quarters. From a gross margin perspective, we are monitoring the dynamic macro volatility being experienced by every company.
While we continue to navigate these challenges effectively, we are not immune to them. As a result, we expect 2022 full-year gross margin to be down slightly year-over-year. This is a result of higher freight rates coupled with the use of air freight to combat increasingly unpredictable transit times on the water. The pressure from elevated freight end costs in the near term is more than offsetting the continued benefits we are seeing in our business from lower discounts and improvements in product costing. We feel confident that we will continue to navigate these short-term pressures with best in class execution and over the long run, be able to realize efficiencies in margin as we scale. As a high growth company, we will continue to make the necessary investments to support our strategic roadmap and long-term expectations.
We remain confident in our ability to deliver a 2022 full year adjusted EBITDA margin rate in line with our long-term target of +20%, which is truly amazing for a company of our size and scale with our growth expectations. When looking at the factors that drive our adjusted EBITDA expectations for 2022, first, as I mentioned above, we do expect some pressure from gross margin. Within operating expenses, selling is expected to de-lever slightly from increasing shipping rates due to COVID-19. Marketing and G&A is expected to stay relatively consistent as a percentage of net revenues compared to 2021 as we continue to grow our brands and make critical investments in technology, systems, and innovation to support our long-term growth.
For the first half of 2022, we will also be comping a period with no public company costs, which have a material impact to our G&A. Our business model, coupled with a best in class team, have enabled us to deliver a unique financial profile where we can continue to invest in our business to support our high growth expectations while still delivering 20%+ adjusted EBITDA margin. As we say here at FIGS, if it was easy, everyone would do it. It is not easy to deliver this level of performance, and we will continue to push ourselves to do so. We see tremendous opportunity ahead of us on top of our strong results today. We are under-penetrated in the U.S., our lifestyle business is just getting started, and our international opportunity is essentially untapped.
It's been an incredible journey so far, and I look forward to building on our momentum into 2022 and beyond. With that, I will turn it over to the operator to kick off our Q&A session first with our analyst community. After addressing their questions, we will then answer a handful of questions received from our shareholders through Say platform. Operator?
Our first question is from the line of Adrienne Yih with Barclays. Please go ahead.
Good afternoon. You know, good job navigating what is just an extraordinarily difficult backdrop. A question for each of you. Heather, can you talk about the attachment rate of non-core products via product extensions to the core purchases that you've been seeing lately? For Trina, can you talk about February month to date trends? And Daniella gave color on kind of a equally measured growth rate over the four quarters. But just how are you thinking about were you impacted by stimulus? You know, and how you're thinking about that. And then, for Daniella, can you talk about inventory purchases?
I know you're not doing as much air, but give us a little bit more help in Q1 and Q2, the impact of kind of ongoing supply chain, over $100 oil, those types of new developments since we last heard from you on January 10th, and what have you embedded into both the demand forecast and the cost forecast? Thank you so much.
Thank you, Adrienne. It's great to hear your voice. Okay, so from the first question around our lifestyle offering, you know, it's been incredibly amazing to see how our healthcare professionals are really utilizing the complete layering system. Right? Our lifestyle business is 17% of our business in Q4. If you look at the attach rate, our customers, 30% of our customers, own a product outside of scrubs, own a lifestyle product, which is really incredible to see. In terms of our February trends, you know, can't share too much, but we really aren't seeing any drop off due to what's going on in the world, and really feel strongly about our year going forward.
Daniella gave you some commentary around our outlook, but we're really excited about the momentum we're seeing in our business, and 2022 is gonna be another record year for us. As it relates to inventory, I'll pass it over to Daniella.
Thank you, Trina. As it relates to supply chain, you know, we are navigating some very fluid and evolving dynamics as it relates to inbound. As we said in our prepared remarks, we do expect it to impact us in 2022. We're seeing rates, both for ocean and air are going to be higher, and that increase in transit times and the lack of reliability that we're seeing in the ocean freight market is resulting in the need for continued air freight. We're able to offset some of this near term pressure, through driving more sales at full price, but also continued product costing benefits as we scale. I think most importantly, we believe we can continue to deliver on our best in class growth margin of +70% despite these near term challenges. We feel very confident in our ability to achieve the revenue guidance that we provided.
Great. Thank you very much, and best of luck.
Thanks, Adrienne.
Thank you, Ms. Yih. Our next question comes from the line of John Kernan with Cowen. Please go ahead.
Excellent. Thanks for taking my question. Good afternoon, Trina, Heather, and Daniella. Daniella, congrats on a real nice quarter right out of the gate.
Thanks, John.
You know, the revenue guidance is obviously very robust. I'm just wondering if you could provide a little bit more detail on the leverage on the operating expense line. I can understand the EBITDA margin outlook for the year, but just curious if you could give us a little bit more detail given the level of top line growth, how we should think about G&A and OpEx in general and the dollar growth there. Thank you.
John, as we mentioned, we are expecting the G&A line to remain relatively consistent as a percent of sales year-over-year. As we said in our guidance, you know, our adjusted EBITDA margin floor is 20%. I think it's really amazing that our floor is a place where other companies in our space have probably never contemplated reaching, especially in the near term. As you think about 2022, you can expect us to do what we've always done, which is effectively deploy capital in strategic ways and smart investments to really deliver on our long-term growth plan. You're gonna see us continue to do that across marketing, product innovation, within G&A and technology and talent, to ensure that we're continuing to build a strong foundation for us to grow.
As you've always seen, we've invested in our business with great returns, and we're gonna continue to do so. I think it's really rare, right? There's few companies that can do this, to invest meaningfully in their business while simultaneously sustaining a best in class adjusted EBITDA margin profile and growing at 30%. The one thing I would highlight is in G&A, we had a significant amount of stock-based compensation that was not ordinary associated with our IPO. I wouldn't expect that to reoccur in 2022, and it was about $56 million.
Got it. That's very helpful. Thanks. Maybe a follow-up for either Heather or Trina. You both sounded extremely confident in the addressable market and particularly it sounds like diversification beyond scrubs in the core. I think you talked about half of revenues are core styles and colors. What does the margin profile look like in lifestyle, which I think you mentioned is now 17% of revenue. Just scrubs business. Thank you.
Sure. Thanks, John. You know, I think what we've seen is that all of our metrics are pointing to a sustainable runway of growth and the ability to penetrate. Well, not only penetrate the $12 billion market, but actually capture all this additional white space well beyond that number. You know, as I mentioned on the call, you know, our customers are spending about 10% higher than the average customer in the industry, 10% above that $330 number on their scrub wear. You know, our top decile is spending up to 2.5 times as much on just their scrubs.
Then in terms of the lifestyle, to your point, you know, that's a massive opportunity that we feel like we've barely scratched the surface, and it's already 17% of our sales. From our, you know, our under scrubs, our under layers, our outer wear, our sweater knits, our puffers, some of which have been brand new to what we're doing in Q4, to our compression socks, to our scrub caps, to all of these different products, we really are seeing the layering system resonating with our community in a major way. You know, as much as we're selling into TAM, we're also creating TAM. We like to say here, you know, lazy companies sell into TAM, and innovative companies create it. That's what we're really looking to do, create the market every day.
Got it. Thank you. Best of luck.
Thank you, Mr. Kernan. Our next question comes from the line of Bob Drbul with Guggenheim. Please go ahead.
Hey, guys. Good evening. Just a couple of questions for me. First, on active customers, when you think about the growth that you've had, can you just give us an idea what, you know, your assumption in 2022, and then repeat customer growth went from 62% to 68% of sales. Can you just talk about the drivers there and sort of the initiatives and where you think you can take that number? Thanks.
Thanks, Bob. In terms of active customers, we're really excited to continue to see this grow, and we plan to expand it even further in 2022. We can't get into the specifics, but in 2022, we are planning to acquire more new customers than we did and expand that from 62% to 68% in 2021. You know, we're gonna continue to drive that with the same model that we've been doing, right? Really focusing on engaging with our community in thoughtful and meaningful ways, on exciting product innovation and also really building out our lifestyle and continuing to drive really higher attach rates there.
Great. Just a follow-up question. On the replenishment side, are you seeing any change in behavior of your customers' timelines, you know, the status of the, you know, replenishment purchases?
You know, looking at our cohort dynamics, we've seen it remain really steady over time. I think you can see in our net revenues per active customer. That's a metric that we're really focused on because it shows us not just our customers, you know, how often they're coming back or how much they're spending, but really how much they spend over the course of an entire year. We're excited to see that increase $22 to $224, and we're continuing to drive the same strategies to increase it even further.
Thank you.
Thank you, Mr. Drbul. Our next question comes from the line of Brian Nagel with Oppenheimer. Please go ahead.
Hi. Good afternoon. Nice quarter. Congratulations.
Thanks, Brian.
The questions I have, just with regards to. I know we talked about supply chain and, you know, these ongoing pressures. You also mentioned some of the offsets you have here to sort of say, maintain gross margins despite these pressures. You know, as you look at these pressures and, you know, assuming that they may continue for some time and especially with the new challenges out there, is there a consideration in lifting prices on the product so as to, you know, offset more permanently these higher supply chain costs?
You know, as of right now, we don't see any need to increase our prices. You know, our goal, as you know, is to really ensure our prices are affordable and accessible for every customer, every healthcare professional. And we do feel like we're offering a great value for the product that we make. And our, you know, our margins have been relatively intact, right? There's really no need right now, and we don't have any plans to increase our prices due to the dynamics at play. But, you know, when we have increased our price in the past, we really haven't seen a drop off in the demand. And so, we do have. We believe our brand strength enables us to do that if we see that we need to.
That's kind of how we're thinking about, you know, some of the dynamics across the industry.
That's per-
Yeah, I mean, I think one of the amazing things about how we've navigated the supply chain is that we get our products, we get them into our warehouse, and we get them to our customers. You've seen that over the past two years. I don't know another company that's navigated the supply chain, you know, challenge better than FIGS. You see that in the numbers, and it's a testament to this incredible team that we have here. You know, every now and then, things shift a bit, right? Seven days here or a week there, and we're able to move our calendar because we are a direct-to-consumer company. That's one of the big benefits we have. We're not waiting on a PO from some retailer.
We're able to move our calendar around, launch an amazing campaign every time we launch over 100 new styles, new products last year. We're gonna continue to surprise, delight, engage our community in the most unexpected and incredible ways. We do have flexibility around that because of the business model that we are in.
Thank you. Congrats again.
Thank you, Mr. Nagel.
Thank you.
The next question comes from the line of Michael Binetti with Credit Suisse. Please go ahead.
Hey, everyone. Thanks for taking our questions here. Congrats on great quarter. I guess just a quick one on the model. Is there any way you could help us with any numericals to size the benefit you saw on the gross margin that came from the reduced promotions and the product sourcing efficiencies that you pointed to? Just trying to think through, you know, the ability to hold on to that next year, how much of that's in your plan for next year. Obviously not knowing where the industry is gonna go, but just what you guys are thinking about. I guess now with the benefit of, you know, two full years of financials as a scaled up company, EBITDA has been pretty consistently in the mid-20.
watch carefully is the ability to keep the gross margins above 70% as we move beyond the really high margin core of the business and scrubs. You've answered some questions today about your confidence there. It sounds pretty good. If the grosses are gonna stay in that, you know, in that range above 70%. What in your mind are the inputs or investments that we should think about in a scenario that would take you into the lower 20s on EBITDA? I guess the same question on the upside, you know, there's industry pressures on the margins right now, but what could go better than planned that could help you put up another year in the mid-20s?
Thank you, Mike. That was a long question. Looking at the growth margin, we're not gonna get into, you know, exactly the specifics, but there were several things that really drove it to be higher than anticipated. The first of which, as you called out, is strategically selling more product at full price. That was a big driver of the success that we saw, and it's something that we're continuing in 2022 and plan to see the benefits, you know, going on through the year. Better than expected as we negotiated better rates and were conservative in forecasting. Those are the main puts and takes, and a lot of those we expect to see continue in the year ahead.
Just wanna reiterate, though, that this is a fluid situation that's highly dynamic, so we'll be sure to keep everyone up to date as things change and continue throughout the year. Going into your second question, we're seeing a lot of headwinds. Still feel really confident in our ability to be above +70%. As that flows through to adjusted EBITDA, we're really focused on continuing to make investments, particularly into operating expenses, so that we can ensure that we're really building this company the right way, and continuing to build the infrastructure to really support our long-term growth.
I think we walked through, you know, each of the segments in the call, but we are really gonna continue to do the same things that you've seen from us before, which is invest back into the business at really amazing returns.
If I could sneak one more in. Is there any evidence on the lifestyle categories? You build it out, and you look at it a little more closely. How much of that is going to healthcare workers versus non-healthcare workers?
You know, the vast majority, 98% plus, is going to healthcare professionals that are really. It's not just, oh, it's a fleece. This is an on-shift fleece that's been made to be worn indoors because hospitals are freezing that has a pocket for your stethoscope as you're running around on your shift for 12 hours, 16 hours getting to your patients. You know, all of our products, and that's just one example, right? All of our products are made for healthcare professionals to be worn to work, at work, from work, on shift, off shift, head to toe. You know, we changed the game, right? We changed the game, bringing a real layering system to every healthcare professional, so they can look good, feel good, and perform at their best, and that's what it's all about. We're gonna continue to do that and build out these categories even further.
Great. Thanks a lot, guys. Congrats again.
Thank you, Mr. Binetti. The next question comes from the line of Lorraine Hutchinson with Bank of America. Please go ahead.
Hi. Hi, this is Alice Xiao on for Lorraine. Thanks for taking our question. You mentioned entering new international markets, this year. Can you elaborate on that opportunity a little bit? Maybe which geographies you're targeting? Will there be elevated marketing or region-specific launches or any investments in distribution capabilities?
Thank you, Alice. Great to connect. I think, you know, as we said, international is a massive opportunity, right? Only 7% of our business in 2021 is from the three countries that we're in today, Canada, U.K., Australia. We're gonna be launching a number of new markets this year. Can't say exactly which ones yet, but we're excited. What we've seen in the countries that we're already in is that the financial profile is very much in line with our U.S. business. We look forward to, you know, seeing that continue in new markets. That being said, it's kind of like what we've done in the U.S., right? Where we gain efficiency, as we evolve and our markets mature, and then we're able to put those gains into newer markets.
Similarly in the new markets we're entering, you know, we'll be, you know, investing more. Investing more behind obviously people and marketing and building out those businesses, with the goal of reaching tipping points within those markets, so we can continue to evolve and grow into other markets. We couldn't be more excited. We are building a long-term global brand for the next 100 years. You know, the truth is like, you know, whether you're a healthcare professional in Kentucky or in Munich or in Istanbul or in Mexico City, you have a pretty similarly horrible experience prior to FIGS. You know, they want a better product, they want a better experience, and we are here to give it to them.
Thank you.
Thank you, Ms. Hutchinson. The next question comes from the line of Matthew Egger with Piper Sandler. Please go ahead.
Yeah, just one quick one from me. Given that y'all are a digital business, can you expand upon what y'all have done or what y'all are doing to mitigate your outbound shipping costs?
Yeah.
Go ahead, Daniella. Definitely. What we've seen over the past year, so in 2021, we've seen higher rates due to COVID-19. The way that we've mitigated it to date is by continuing to comp, you know, 2021. Thank you, Mr. Egger. From Brooke Roach with Goldman Sachs. Please go ahead.
Good afternoon, and thank you so much for taking our question. Trina, Heather, I'd love to hear a little bit more about your efforts to take that first time FIGS customer and recapture them to turn them into a long-term brand loyalist. What efforts are you implementing to improve that recapture rate to well above 50%?
Sure. I mean, what we've seen over the past few years is that our revenue per customer, which we are, you know, really focusing the investment community on, has increased by, you know, over $50 over the past 2.5 years. I think what we've seen is that once our customers buy from us, they come back. They come back over and over and over again to replenish their uniforms. You know, a lot of that is just because the product is so amazing and it speaks for itself. Once you try FIGS, there's no reason to buy anything else. You know, we don't have, like, a massive amount of retention marketing that even needs to happen. That being said, we, you know, we do reengage and engage our community through new product drops.
We have product drops weekly here at FIGS. We're engaging across our social channels in real life, in events, and through all the work that our brand team and our teams across the company are doing. Really, when you build a great product that people love, they come back for it, and that's what we've done here at FIGS.
Thank you. If I could just ask a follow-up on that. You know, AOV has been a great contributor to growth as you've built out that lifestyle business this year. Do you anticipate the growth momentum in AOV will continue at the same double-digit pace of contribution into 2022 that you saw in 2021?
We're incredibly happy with our ability to drive AOV over $100. However, as Trina said, I'd really encourage you to look at net revenue per active customer because that shows us what our customers are spending over the course of an entire year, not just in one transaction. Our ability to really grow this key metric is a better reflection of how engaged our customers are and our ability to get them to spend more with us over time. Going back to AOV, though, we've been executing on our strategies that have drove it higher, and we're gonna continue to do so. The first of which is the continued adoption of our layering system, as we've discussed. Driving higher average unit retail through higher price points, but also increasing the units per transaction per customer as they really wanna shop the full look.
We're adding more personalization and features to our e-commerce experience, and we're driving customers to purchase more through smart bundling opportunities like Kits. Finally, we're gonna plan to drive more sales at full price, which will help further increase AOV.
Thank you so much. I'll pass it on.
Thank you, Ms. Roach. Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Please go ahead.
Hi, guys. Nice to see the progress and congratulations, Daniella. You've done a lot of new product initiatives this year in terms of the holiday gift shop, the Kits. How are those taking hold in driving either repeat purchasers or what new innovations should we look for this year to continue to drive AOV? And lastly, how are you planning the discounts going forward? What was typically the timeline of discounts and the cadence as you went through the year and the reduced discounts in the fourth quarter, do you see that occurring go forward? Thank you.
Thanks, Dana. Yeah, I mean, I think, you know, our number one job here at FIGS is to innovate on the product side. What we do is we create functional, high quality products to outfit our healthcare professionals from head to toe. We did that in 2021 in spades, right? 100 new styles. I think our product innovation velocity is unlike many other companies, and we're continuing to build on that in 2022. You saw that, right? You saw that with lifestyle, how we really build that out. We're gonna continue to do so, building out these categories, right? Within outerwear, within our under scrubs, within our compression sock business. These are all businesses that, you know, will be incredibly large over time.
You know, don't forget, I wouldn't sleep on the scrubs business, right? Over 80% of our business is core scrubs. You know, building out these franchises is also a really important part of what we're doing with our high-waisted, you know, styles, with our yoga waistband styles, with our double drawcords, all of these different iterations of the styles that people know and love is a big part of what we're doing going forward. You know, men's is continuing to be a massive opportunity. We are under-penetrated on that front, and we are continuing to innovate on that front. Inclusivity, right, on the sizing.
We are going to continue to bring more sizes, cuts, different fits to really be able to serve a broader range of our amazing healthcare professionals around the world. We have a lot to do. We are excited. We wake up every morning feeling like we're the luckiest people in the world, that we are able to do this and create the most amazing products for the most amazing people. That's what we're gonna do. As it relates to the discounts, Daniella.
Yeah. I'll take the discount question.
Items related to our discounts in Q4 and how we're thinking about them going forward. The first of which is more Q4 specific. We really changed our Black Friday, Cyber Monday strategy to have more dynamic pricing and give us better control over the inventory that we sold, and that resulted in a lower discount. We're probably not gonna see that benefit into the next quarter. However, we also drove lower discount usage in non-promotional times, and we're expecting to continue that strategy and continue to drive that in 2022 and see those benefits.
Thank you.
Thank you, Ms. Hutchinson. There are no additional questions waiting at this time, so I'll pass the conference over to Co-CEO Trina Spear.
Thank you. Before ending our call today, we would like to take some time to answer a few of the most upvoted questions from our shareholders through the Say platform. You know, we received quite a few questions around me and Heather selling shares, so we're gonna start there. First off, no one is more committed to this company than Heather and me. After having built the company for almost a decade and after not selling any shares in the IPO, we sold a small percentage of our shares in our September follow-on. Heather sold about 13% of her holdings, and I sold 5%. Virtually every founder sells some shares after their company goes public, so this is very standard.
We do remain two of the biggest holders of FIGS' stock with a tremendous amount of stake at stake, which is just as it should be. You know, we just wanna say how committed we are to this business. We are so confident and excited about the future, and we look forward to getting on more calls and showing that we will continue to deliver. Next. We got a question from John H. around the stock price movement, and he asked a really great question which was, for potential investors out there, why choose FIGS? You know, we've seen that too. In the short run, and I'm sure you've heard this, the stock market is a voting machine, but in the long run, it's a weighing machine.
The whole stock market, I'm sure everyone knows, is extremely volatile right now, and it's really due to macro factors that have nothing to do with us. In our view, that's creating these stock price, you know, movements that don't reflect at all the fundamentals of our business. Let's talk about why you should choose FIGS. First, in terms of our fundamentals, it's extremely rare to find any company with our financial profile. This rare combination of both revenue growth and coupled with our free cash flow is truly unique. You know, it's one of the reasons. There's a few reasons why being able to create this unique financial profile. You know, we are in an industry that is recession resistant. It's nondiscretionary. Healthcare professionals must wear their uniforms to go to work every day.
They need these products to go to work and do their jobs, and we help them look good, feel good, and perform at their best. Our business is replenishment driven with high repeat purchase rates. You know, almost 70% of our business is repeat customers at this point. We create the most innovative products and have a diehard community that is coming back over and over and over again for them every day. Healthcare as a segment as a job segment is expected to be the fastest-growing job segment over the next decade. The market is massive. It's $12 billion in the US. It's $79 billion. We feel as though we're creating market share every single day beyond those numbers. Creating TAM every day, that's what we do at FIGS.
We have huge growth opportunities in front of us across all parts of our business, and our operational execution is best in class. We've delivered and will continue to deliver outstanding margins even in the most challenging of macro environments. We have an extraordinary team and a clear vision. We wake up every day and get the job done. Finally, I think we all know the best companies are authentic, purpose-driven, and we have that in spades. With that, thank you all so much. We're really excited to share our results, and I hope you have a great rest of your day.
That concludes the FIGS' fourth quarter 2021 earnings conference call. I hope you all enjoy the rest of your day. You may now disconnect your lines.