Thank you and good morning, everyone. I'm Rick Patel, Research Analyst at Raymond James covering soft lines, retail, digital commerce, and global brands. I'm thrilled to be hosting FIGS. FIGS is a digitally native company and medical scrub brand that sells product globally through their own website and an emerging retail footprint. We're thrilled to be hosting Trina Spear, who is Co-founder and CEO, as well as Chief Financial Officer Sarah Oughtred. Thank you guys so much for being here. Maybe for new investors, to help kick things off, Trina, would you be able to talk about why you founded FIGS and what you saw as the opportunity in the medical scrubs market?
Sure. Thank you so much for having us. We're super excited to be here. Thank you all for joining us. FIGS, about 12 or 13 years ago, my co-founder, Heather Hasson, was sitting with a friend of hers who's a nurse. She's a nurse practitioner at Cedars-Sinai, and she was wearing these big, baggy, boxy, ill-fitting, awful scrubs. Heather said to her friend, "What are you wearing? Those are really bad. You usually look really great." She said, "These are my scrubs. This is what we wear to work." Long story short, she went out to where scrubs were sold in these strip malls where there was a rack of black and a rack of navy, and they were selling bedpans and knee braces.
She’s like, "Not only is the product bad, but the experience was awful." We set out about 12 years ago to change the game, bringing comfort and function and design and fit to an industry that did not have it. Really started with scrubs, and now we have a whole host of other categories that we will talk about. It is a mandated industry. It is about an $80 billion industry globally that is really lacking. It is a replenishment-driven industry. Healthcare professionals need their uniforms to go to work and do their jobs well. Our whole goal at FIGS is to help you look good, feel good, and perform your best. That is our job. We do that not only within scrubwear, but within all these other categories. We are really focused on not just serving the healthcare community in the U.S. We are serving globally.
International is a huge opportunity for us. Serving institutions through what we call our TEAMS business is a massive opportunity, as well as opening stores. We are the largest digital brand with only two stores. We have one in Los Angeles and one in Philly. Really excited about bringing what we call community hubs around the U.S. and around the world. Excited about the future and excited about where we're headed.
You're a global business today, but let's double-click on the U.S. It's roughly 85% of the business. You've been in this market for a while. As you sit here today, what do you see as the biggest long-term drivers from here?
Sure. I mean, like I said, it's a massive industry. We're a bit over $500,000,000 in sales and have a small-ish percent of the U.S. market and a really small percent of the overall market. We're in 32 countries outside the U.S. The majority of those have been launched in the last year or so. A lot to do in terms of localizing market by market. Like I said, teams is a massive opportunity. It's an even bigger opportunity where people are buying for their institutions, so B2B. That's an even bigger opportunity around the world as many countries aren't as D2C focused, like you mentioned. Stores. I think healthcare professionals are underserved, right? We often say they're unserved. No one had come in and given this community an incredible product that they felt attached to.
We are the leading brand in the space. We have the number one product in the space. There is a large moat between us and everybody else. Our goal as we continue on is to continue to widen that moat. How are we doing that? We are doing that with product innovation. Not just within scrubs, but within underscrubs, in outerwear. What are healthcare professionals wearing to work, at work, from work, on shift, off shift, head to toe? We now have an incredible line of compression socks. We have underscrubs. We have jackets and fleeces and sweater knits. We have an amazing partnership with New Balance. We have an amazing partnership with Echo, which is a digital stethoscope company. There is so much more to do within product.
Within marketing, we have built a really love brand for this community where we have this authentic connection that we've built over a decade with the healthcare community. Is anyone in this room a healthcare professional? No? Okay. Call all your friends that are in the medical segment and ask them what FIGS means to them. What you'll get is a diatribe of what this brand is to this community. Oftentimes it's a little bit trickier because you don't wear our product. Doing that research is super important. Finally, I think we have a ton of data, right? We are a digitally native company. We get a lot of feedback from our community. We take those insights, we take that data, and we're able to make this brand better. That data at our scale compounds over time.
Going forward, it just becomes harder and harder for others to do what we do, just given our scale, given that level of insight that we have, and that authentic connection with the community.
Help us think about the U.S. growth algorithm. As we think about the building blocks of growth, whether it's new customer acquisition, frequency, maybe basket size, what do you see as the biggest drivers from here?
I'll take that . Yeah, I can take that. I mean, what we're setting out to do is three pillars of how we're going to grow the business. First is really continuing to lead with product innovation. That includes our upcoming fit transition, continuing to build out categories, and continuing to build out in fabric expansion. Pillar two is really going deeper with our connection with healthcare professionals. We really succeed when the timing of all of our campaigns come together really aligned with events that support healthcare workers. Continuing to go after marketing to drive into that and really building our moat around customization and personalization. The third pillar is really expanding our distribution channels. Trina's mentioned some of those, but opportunity for us to continue to grow in teams as well as in our retail hubs. We think those pieces together will really help to drive the U.S. business forward.
Let's also talk about international. I've always found it impressive just how many countries you're in right now, given how early you are in your life cycle. Talk to us about the journey to growing in international markets, where you are today, and how that will change in the future.
Sure. There are 140 million healthcare professionals around the world. Similar to what we saw in the U.S., whether you live in Kentucky or Mumbai or Paris, you had a horrible experience buying your uniform to go to work as a doctor, as a nurse, as any type of medical professional. Our goal is to be everywhere eventually. We're in 32 countries outside the U.S. What we've seen that really works well, and there's so much more to do on this, is localization. How are we localizing that product to the market? How are we localizing that message to the region of how people will interact with us? What we're seeing is that a lot of the same things that work in the U.S. are working internationally. We have built, we say we invented the medical influencer.
Our ambassador program is a big part of this. We have ambassadors now around the world that are obsessed with FIGS and are telling their colleagues about what we do. Every FIGS customer is a walking billboard acquiring that next customer for us. Our biggest customer acquisition channel is word of mouth. Word of mouth is free. There is no CAC on somebody telling their friend about FIGS. That is amazing because when you are in a healthcare institution, you are in a really densely populated environment. Everyone, whether you are in the lobby in the Starbucks getting your coffee, you are walking to your next patient, you are in the break room saying, "What did FIGS just launch? This is incredible. Did you get their latest color?" Anyone know about our color drops? No? Okay. That is a thing. All right. Everyone is talking about it.
That word of mouth is really powerful. It's really powerful. That's happening now internationally. Obviously, we had to get that word of mouth going with our ambassador community. We also got it going with digital marketing. As a digitally native company, we're at the forefront of digital marketing and utilizing data in really increasingly smarter and smarter ways. Now you layer on top of that top of funnel. Who saw our Olympics campaign? All right. This is a brand new audience. This is awesome. Okay. We partnered with the Olympics last year. We outfitted Team USA's medical team for the first time ever. Any country's medical team had been outfitted, it was us, FIGS. We outfitted them. That is what we call a top of funnel campaign. We did a commercial. It was amazing. Check it out. Doing more of that, right?
Internationally, whether it is through stores or billboards or commercials, that is a great way to fill back that funnel and get people really excited about the brand and then bring them down the funnel from awareness to consideration to conversion. That is what we do. We have done that in the U.S., and we are doing that internationally. The biggest thing that is so important, I talked about word of mouth. The second thing that differentiates brands from everybody else is repeat. We are not selling mattresses. Mattresses, what do you come back? How many times do you change your mattress? Once in every, what, 10 years? I do not know. Long time. Change your scrubs every few months. Your replenishment cycle is really fast. Our healthcare professionals are coming back over and over and over again to replenish their uniform.
What we saw, and if you guys have looked at our numbers, what we saw during COVID is this huge acceleration. We sold scrubs during a pandemic. We had this huge acceleration in the business. The last two years, we've been in what we call a COVID overhang. Now we're starting to see a normalization in the industry. That's a tailwind going forward because at the end of the day, healthcare professionals are not going anywhere. They are around the world. They're the backbone of any functioning society, and we need them. Going forward, there's going to be a natural replenishment cycle of healthcare professionals needing their uniforms. That's what we saw prior to COVID. We're excited to see what that will be over the next few years.
It's hard to talk to any global company without talking about the importance of Asia. Can you remind everyone where you are in your journey in Asia
Sure
and really how attractive this could be over the long run?
There are a lot of people in Asia. I do not know if we know that. There are a lot of people in Asia, and we are barely in Asia. We are in the Philippines. We are in Singapore. I have seen incredible success in those two countries. We will be launching Japan and Korea this year. Really exciting. Japan, for instance, has 5 million healthcare professionals. They are really focused, as you all know, on design and technical products and an aesthetic that very much aligns with what we do at FIGS. What we have been able to do is really combine two worlds that no one had done for our industry. When you think about technical products, maybe you think about your hiking gear, your ski gear, really technical, but maybe not very comfortable.
You think about the comfortable side of things where maybe your favorite T-shirt that you wear to sleep, it's super soft. What we've been able to do is combine those two worlds and bring the technical side of things, functional, wrinkle resistance, stain repellence, four-way stretch with comfort and hand feel and that soft hand feel. Bringing those two worlds together is where we play and really how we change the game. Asia, very much that world aligns with the Asian market. We have a global fit, so we'll be able to align that with different parts of the Asian market. China is the big one. We haven't announced when we're going there yet, but it's exciting, and we will hopefully get there soon. Excited about the future. It's pretty incredible that international is already 15% of the business, and we're not even really in Asia.
You have international outperforming. It's gaining in the revenue mix every year. Help us think about international consumers. I guess when we think about revenue growth and margin improvement that you're seeing in international markets, to what degree is it similar or different than what you saw in the U.S. when it was coming up in its cycle?
Yeah, I can take that one. What we do see as being similar to the U.S. is that when people learn about FIGS and learn what we stand for, which is serving those who serve others, that resonates so well with healthcare professionals worldwide. There is a great brand resonance that happens really quickly. That word of mouth pattern that we saw in the U.S. also happens internationally. We have really seen some of that take off, which is great. What is different about different countries is how their healthcare systems work, what that means for healthcare professionals buying their own scrubs. There are different things to navigate there. That is still an opportunity for us in terms of the B2B market internationally. We are looking to build that out a little bit further.
As it pertains to economics and margins, the international business is going to carry a different profile. We are incurring duties. There is farther shipping for us to ship from our distribution center in Arizona. All of our international markets are profitable. There is definitely opportunity to scale that in the future as we think about our longer-term roadmap for distribution, which will change the profile of both duties and shipping for us.
You started as a pure play medical scrubs company, but you're making a good amount of progress in lifestyle products, so off shift, if you will. Can you talk to us about the progress you're making there and what you see as the opportunity going forward?
Sure. We always say lazy companies sell into TAM. Innovative companies create TAM. That is what we aim to do, right? Because at the end of the day, outerwear for healthcare professionals or underscrubs, long sleeve shirts for healthcare professionals, compression socks that are purely for this community, that did not exist. That was actually not even in the TAM. Really thinking beyond, why are you wearing Patagonia? No offense to anyone, sorry, anyone wearing Patagonia. I know it is like every finance person loves the Patagonia vest. Okay. Why are you wearing Patagonia that is made to go hiking, that is made to be worn to investor conferences? Why are you wearing that in a hospital? You should not be. You should be wearing a FIGS fleece. You should be wearing a FIGS vest.
You should be wearing products that are antimicrobial that help you perform in that environment. As a healthcare professional, you're meeting with patients. You're doing rounds. You're in a surgery. You're in different microclimates. Hospitals are freezing. You're running out to get a coffee, meeting your friend. You're coming back, right? You're in and out of all these different microclimates. We build our layer, what we call our layering system, around all these different microclimates and around all the activities that healthcare professionals do in a day. We talk about on-shift products, off-shift products. We talk about under-under, which is under-under your scrubs, under scrubs, scrubs, and then your outer layers all the way to our packable puffer, which is probably the most better than Patagonia. It's the most kind of on the furthest end of the spectrum.
This layering system is really exciting because take our Salta, which is our underscrub. We've had one style. We just started building that out. We have our rib now and our waffle. There's so much opportunity there. This could be a multi-hundred, if not billion-dollar business one day. Outerwear. We have our fleece, our sweater knit. We have our packable puffer. We just launched Float. All of these are for different climates and different microclimates within an institution. A lot to be excited about and a lot more to build.
You touched on the importance of having the right kind of fabric because it's so important in that hospital setting. Can you talk to us about fabric innovation? What's worked in the past? How should we think about innovation that's coming for fabric that maybe could drive a replenishment cycle?
Sure. Our proprietary fabrication that we invented is called FIONEX. That changed the industry. That is what we're famous for. That is what we're known for. FIONEX makes up 85% of our business. That's a beautiful thing, right? Because you get scale on that. You get leverage. On top of that, about 13, 14 styles make up close to 80% of the business as well. That's the beauty of being a uniform business, right? Because you're able to get that's why our gross margins are so high. That's really incredible. What it also means is that we need to build out from there. How do we build the next proprietary fabrication that changes the game? We did it. It's called FormX, and we just launched it. FormX is FIONEX a bit more it's about 5X stretchier.
You could argue more stretch equals more comfort. It is for different environments. It is really professional, modern, sophisticated silhouettes that are made in that fabrication. We are really excited about it. There are other fabrications on the spectrum if you were to say, okay, FormX is lower impact activities, FIONEX is medium impact, and then fabrications like what we launched last year, which is called our indestructible fabric, which takes like 50,000 abrasions.
I think it's even more for that one because FormX was 50,000.
FormX is 50,000. Indestructible must be 5 billion, something like that. It's an incredible fabrication made for high impact environments. We did a lot around on-shift outside. Think about the paramedics world, about healthcare professionals that are in search and rescue in extreme environments. We dug into that last year in a number of campaigns. Really building these worlds to align with who these people are, what they're doing every day, and the types of activities that they're performing, whether you're a dentist, a gynecologist, a dermatologist. I think concierge medicine is super exciting. There are all these private equity-backed companies in the concierge world. That's expected to double from $15 billion to $30 billion over the next 10 years. What is happening in concierge medicine and aesthetics? I mean, I don't know.
I see I live in Los Angeles, but it's not just Los Angeles where there's Botox bars in every corner at this point, right? Fertility. Fertility has blown up. I don't know if you guys know a company called Kindbody. You have the veterinary space. We're partnered with a group called Veg. They're adding 25 new hospitals a year. We're outfitting. They have 10,000 employees. They're adding another 2,500 every year. This is exciting, right? This is how medicine is changing. Medicine is becoming more and more personalized. You want your medical records, your blood stuff. I don't even know my blood type. I got to figure that out. You want it on your phone, right?
You want to be able to say, "Okay, I don't need to wait for this doctor to send it to that doctor." You want it on your phone, at your fingertips, go around the corner, and do everything you need to do. That is the future. All of these companies want to align with a company that's helping them brand and standardize their teams. They are coming to FIGS and saying, "Hey, can you help us brand our institution?" We've even helped people with their logos and say, "Can we do a social media campaign with you? Can you help us build out this aspect of what we do?" That is our team's opportunity, which today is really small, but a really exciting opportunity going forward.
You just reported earnings last Thursday. Can you give us a quick recap of the year, both top line and profitability? What do you think worked well and where do you see room for improvement?
Yeah, definitely. On Thursday, we announced Q4. We finished the quarter $151.8 million top side. It was 5% growth. That was ahead of the guidance. That was really driven by great tailwinds that we're seeing in frequency and our lapsed customer coming back. We also saw really good success with our product innovation. A lot more success with our color launches. We also launched various new underscrubs, so waffle, ribbed, and seeing really good results from our continued support for product innovation. As we go down the P&L to Adjusted EBITDA, we were at 13.9%. That was also ahead of what we guided to. That was really supported by our higher top line and disciplined expense management. For the year, we were $555.6 million in revenue, and that was up 2% year over year.
We finished our Adjusted EBITDA at 9.3%, and that was ahead of our expectations as well. We do have a lower Adjusted EBITDA profile this year as we made two very significant investments. One, we incurred several million in transitory costs related to a new distribution center that we have set up in Arizona that will help us to scale to a billion. Trina mentioned our Olympics campaign. We made an outsized investment in marketing this year for the Olympics campaign. Yeah, really excited with some of those things there. Some of the things that really worked for us was, again, that product innovation piece and seeing the strength there. International has also been a great growth driver for us. Now at 15% of the business, and it grew at 31% this year. That was really great for us.
Where we have opportunity to improve is within our U.S. business. I have spoken to before all the pieces that we are going to go after: product innovation, deeper connection with our healthcare professionals, as well as our distribution channel expansion opportunities. We feel great about how we are teeing that up for the future to continue to grow topside and expand that EBITDA margin.
Sorry, the only thing I would add to that is that the uniform businesses generally are highly Cash flow generative, right? If you look at the industry, private equity companies kind of buy and sell these companies multiple times over. We are a highly Cash flow generative business. We generated $82 million of cash last year. We have $245 million of cash on our balance sheet. We announced a $50 million buyback last quarter, and we just announced another $50 million. We generate a ton of cash. We're taking that money. We're investing in the business to grow in the future. That, I think, is unique versus other companies in, I don't know, retail, consumer. I would say that's kind of how we're different and why it is so exciting. It's a highly leverageable financial profile.
Can you just quickly expand on your expectations for this year, both across top line and margins? I know you're increasingly focused on the quality of sales. How do we think about that, and where do you see opportunity on the margin side as well?
Yeah, for sure. Our guide for 2025 on revenue is we would be down low single digits. What is implied there and what we are accounting for is we are taking a strategic shift in how we are looking at promotions. That is really an evolution of where we have been to where we want to be and how we want to support the brand longer term. We have really been in the effort to bring down that inventory balance coming out of COVID. That did require us to take a very transactional approach using promo to clear it. Our inventory is in a much better position, and we are seeing really great strength in our business-as-usual non-promo days. I want to give space for that business to continue to flourish. We have reflected that in our earnings, our revenue outlook.
For bottom line, we are guiding to 9.3% Adjusted EBITDA. That is flat year- over- year. What we've really outlined is we're looking to make major investments to shift the business and to really build into those growth opportunities for the future. We're intending to make some shift changes here in how we're marketing the business and how we're continuing to build foundation for all of the growth levers ahead of us. Really excited to build out those opportunities this year.
Last question. Trina, you touched on the company's financial profile being very strong. It's a Free cash flow machine. What's the priorities for capital allocation?
I think that's a little bit of a CFO question. Let me just kick it off, and then you can... I think at the end of the day, we have to invest in the business, right? We are small, right? We have big goals. Our goals are to reach a billion in sales, and we have big aspirations to go well beyond that. Investing in product, investing in connection with our community, investing in new channels, new geographies is all a part of how we see our future. It's ours to take. The gap between us and the next closest competitor, Copycat, is wide, right? We need to keep leading the way and keep changing the game and changing the industry.
Yeah, I can add on to that. I mean, you mentioned some of them before, but just to iterate, the cash position that we have going into the year is $245 million. That was essentially flat with the year prior, which meant that we were able to self-fund over $90 million of share buyback, our investment into our AUG investment, as well as build out our new distribution center. There was over $17 million of capital this year, all self-funded. As we go into 2025, the way we're thinking about cash deployment and investment is first within the business. We're not going to have as big of capital expenditures this year, but we are going to do $5 million of CapEx. We're going to continue to invest cash into the business.
We've talked about some of those investments and how that's reflected in the financial profile for next year. Yeah, the board has approved another $50 million repurchase authorization. We will look to deploy that throughout the year and just be opportunistic on that. Even after that, we will still have a very significant cash balance for future growth as well.
Excellent. Thank you so much for the insights, and thank you all for joining us.
Thanks, everyone.
Thanks, Rick. Appreciate it.