FIGS, Inc. 2025 Annual Report (10-K) Summary
Business Context and Reporting Period
Company: FIGS, Inc.
Filing Type: Form 10-K (Annual Report)
Reporting Period: Fiscal year ended December 31, 2025
Business Overview: FIGS is a founder-led, direct-to-consumer (DTC) healthcare apparel and lifestyle brand. It designs and sells scrubwear and non-scrubwear (e.g., outerwear, footwear, loungewear) primarily through its digital platform and B2B "TEAMS" channel, supplemented by five physical "Community Hub" retail stores. As of December 31, 2025, the company reported approximately 2.9 million active customers.
Key Financial Metrics
| Metric (in millions, except margins) | 2025 | 2024 | Change |
|---|---|---|---|
| Net Revenues | $631.1 | $555.6 | +13.6% |
| Gross Profit | $419.8 | $375.6 | +11.8% |
| Gross Margin | 66.5% | 67.6% | -110 bps |
| Net Income | $34.3 | $2.7 | +1,169% |
| Net Income Margin | 5.4% | 0.5% | +490 bps |
| Adjusted EBITDA | $74.5 | $51.8 | +43.8% |
| Adjusted EBITDA Margin | 11.8% | 9.3% | +250 bps |
| Operating Cash Flow | $61.2 | $81.2 | -24.6% |
| Free Cash Flow | $53.0 | $64.1 | -17.3% |
| Cash & Equivalents (Year End) | $82.0 | $85.6 | -4.2% |
| Debt | $0.0 (Outstanding) | $0.0 (Outstanding) | N/A |
Note: The company has a $100.0 million revolving credit facility with $91.6 million available as of December 31, 2025. No borrowings were outstanding.
Material Changes vs. Prior Period
- Revenue Growth: Net revenues increased 13.6% driven by higher order volumes from new and existing customers and an increase in Average Order Value (AOV) from $113 to $120.
- Profitability Surge: Net income jumped from $2.7 million to $34.3 million, primarily due to a significant reduction in stock-based compensation expense (from $42.7 million in 2024 to $26.9 million in 2025) and operating leverage.
- Gross Margin Pressure: Gross margin decreased 1.1 percentage points. This was primarily due to the impact of tariffs (approx. 120 basis points negative impact) and inventory write-offs of $5.6 million recorded in Q4 2025 for aged and obsolete inventory.
- Cash Flow Decline: Operating cash flow decreased by $20.0 million, largely due to the timing of cash payments for accrued expenses ($55.2 million impact) and higher inventory purchases ($15.5 million impact).
Guidance, Outlook, and Risks
Management Commentary & Outlook:
- Tariff Impact: Management estimates that tariffs will negatively impact gross margin for 2026 by approximately 400 basis points without mitigation. The company is adjusting sourcing countries and renegotiating supplier terms.
- Share Repurchases: The board authorized a total of $100.0 million for share repurchases. As of year-end, approximately $52.0 million remains available.
- Strategic Focus: Continued investment in brand marketing, expansion of the TEAMS B2B channel, and international growth.
Key Risks & Contingencies:
- Trade Policy: Significant uncertainty regarding U.S. tariffs following a February 2026 Supreme Court ruling invalidating IEEPA-based tariffs, followed by the Administration invoking alternative mechanisms for a 10% global tariff (potentially rising to 15%).
- Supply Chain: Reliance on third-party suppliers in Vietnam and Jordan (nearly all production). Risks include shipping disruptions, port strikes, and raw material cost fluctuations.
- Legal Proceedings: A securities class action lawsuit was dismissed with prejudice in February 2025, but plaintiffs have appealed. Related derivative suits remain pending.
- Inventory Management: Risk of excess inventory due to demand forecasting errors or macroeconomic shifts, evidenced by the $5.6 million write-off in 2025.
Investor Verification Checklist
- Tariff Mitigation Effectiveness: Verify the company's ability to offset the projected 400 basis point gross margin hit in 2026 through pricing power or supply chain restructuring.
- Inventory Health: Monitor inventory turnover ratios and future write-off risks given the $5.6 million charge in 2025 and the $128 million inventory balance.
- Stock-Based Compensation Trend: Assess whether the 2025 reduction in stock-based compensation ($15.8 million decrease) is a one-time anomaly or a sustainable trend affecting future net income comparisons.
- Operating Cash Flow Drivers: Investigate the timing of accrued expense payments that drove the $20 million decline in operating cash flow to ensure it does not signal liquidity stress.
- Legal Appeal Status: Track the progress of the appeal regarding the dismissed securities class action lawsuit.