Good afternoon. Thank you for attending the FIGS Fourth Quarter Fiscal 2025 Earnings Conference Call. My name is Cameron, and I'll be your moderator for today. [Operator Instructions] I would now like to pass the conference over to your host, Tom Shaw, Senior Vice President of FIGS. You may proceed.

Good afternoon, and thank you for joining us to discuss FIGS' fourth quarter and full year 2025 results, which we released this afternoon and can be found in our earnings press release and in the shareholder presentation posted to our Investor Relations website at ir.wearfigs.com. Presenting on today's call are Trina Spear, our Co-Founder and Chief Executive Officer; and Sarah Oughtred, our Chief Financial Officer. As a reminder, remarks on this call that do not concern past events are forward-looking statements. These may include predictions, expectations or estimates, including about future financial performance, market opportunity or business plans. Forward-looking statements involve risks and uncertainties, and actual results could differ materially. These and other risks are discussed in our SEC filings, including in our 10-K we filed today. Do not place undue reliance on forward-looking statements, which speak only as of today and which we undertake no obligation to update. Finally, we will discuss certain non-GAAP metrics and key performance indicators, which we believe are useful supplemental measures for understanding our business. Definitions and reconciliations of these non-GAAP measures to the most comparable GAAP measures are included in our shareholder presentation. Now I'd like to turn the call over to Trina.

Thanks, Tom. Good afternoon, everyone, and thank you for joining us today. We are incredibly excited to have closed out 2025 with such a strong quarter, the culmination of clear strategic focus and disciplined execution that gained momentum throughout the year. Our vision is to be the leading premium healthcare uniform provider in the world by winning the hearts and minds of healthcare professionals. And we have never had greater conviction in the impact our brand can drive. FIGS reinvented scrubs and after 13 years, our product engine continues to lead and define the healthcare apparel category. In 2025, we delivered improvements across our product engine from function and fit to category expansion and merchandising, and we delivered even more wins through how we inspire our community beyond products. Over the past year, we created the most powerful combination of messaging, connection, and action in our company's history. This progress reflects the collective effort of an extraordinary team, one that we have fortified with exceptional talent, perspective, and heart. Simply put, I've never been prouder of or more energized by our tremendous leaders and partners. As we look closer at our results, our Q4 performance was nothing short of remarkable. We knew we had an incredible foundation for success coming into the quarter with strong brand heat and operational momentum. We telegraphed these early trends during our prior earnings call, supported by the carryover success of our late Q3 breast cancer awareness campaign and continuing through our business as usual days ahead of the holiday season. Our growing success during these core selling days is one of the best signs of our overall health. For holiday, we fueled even more success through strong inventory positioning, newness across color and style and impactful marketing, combining for results that dramatically exceeded expectations…

Thanks, Trina. Our strong fourth quarter outperformance demonstrated both the sustainable power of our brand and the increased sophistication in how we deliver greater impact to more healthcare professionals. We believe the important foundation work we have undertaken across the business positions us to unlock stronger growth and profitability in the years ahead. Diving into our Q4 details, net revenues increased 33% year-over-year to $201.9 million, significantly ahead of our outlook. We were positioned for a strong Q4 as the culmination of our extensive efforts and execution across product and marketing drove tremendous brand momentum into the quarter. Adding fuel to this momentum, our Black Friday, Cyber Monday strategy helped generate substantial upside in our business, and we carried this momentum through the balance of the quarter as we moved past the holiday promotional period. Importantly, our performance in Q4 came despite our deliberate plan to pull back on overall promotions, including a reduction in the number of promotional days and a lower discount rate for the period. From a measurement standpoint, average order value increased 9% to $126, primarily driven by increases in both average unit retail and units per transaction. Active customer growth accelerated to 9% year-over-year after posting consistent 4% growth in prior quarters. This drove our active customer count to a company record of over 2.9 million. Encouragingly, we saw meaningful improvements across our customer cohorts, including accelerated growth in new customers and resurrected customers as well as a meaningful increase in retention. Our trailing 12-month measure for net revenues per active customer strengthened, posting 4% growth in the period to $216. By category, scrubwear surged 35%, representing 77% of net revenues for the period. Growth was strong and well rounded, continuing to benefit from many of our recent merchandising efforts and strategic inventory investments. Color…

[Operator Instructions] The first question comes from the line of Dana Telsey with Telsey Group.

Congratulations on a tremendous fourth quarter and year. Very good to see the progress. Can you talk a little bit about the flow-through from the just completed Olympics, what you learned there? How did the product do? And then also the strength of the community hubs, how many you're planning to open this year and how you're thinking of that contribution to top line and margin?

Sure. I can kick it off. Thank you so much, Dana. It was definitely a great quarter, a great year. So yes, I was just actually in Milan and Cortina for our Winter Olympics. We were super excited to support an outfit Team USA's medical team during the Winter Olympics. And it was a great way -- it was great for how we showed up and how we supported the team. I think you probably saw it but our campaign really centered around Lindsey Vonn and her medical team. And I think we really illustrated the extraordinary journey that she's been on and how she came back coming out of retirement to come back and compete. I think we're even bigger -- the bigger story that we were looking to highlight was the story around Dr. Hackett and Lindsey's full medical team and what they did in terms of the heart that they brought to rebuild her body to go out and break records. And she broke a lot of records this past season. And so we're super proud to be a part of her, her story, Dr. Hackett, the entire medical team story. The product that we brought forth was really incredibly technical. We launched an entirely new fabrication, FIBREx, which was an amazing fabric that's super durable. It works in a variety of different environments, both on shift inside, outside, on top of mountain, which is what you saw with the Olympics. So really incredible product. It was incredibly successful, and we're really excited about continuing to show up in these large ways, top-of-funnel marketing is the story that we've been talking about quarter after quarter over the past year plus now, and you're seeing that investment pay off. You're seeing the investment we've made in product, the investment we made in marketing. You're seeing those -- all of our efforts starting to pay off, and we're really excited about the future. In terms of Community Hubs, I know you asked about, so we're opening 4 Community Hubs this year. And so I'll let Sarah speak to some of the economics behind that, but we have seen amazing strength in our 5 Community Hubs that we now have. Century City, Philly, Chicago, Houston, New York and a lot of learnings, mostly that they're too small, which is a great problem to have. We call them champagne problems, but I'll pass it over to Sarah.

Yes. So we opened our 3 Community Hubs in the quarter. All of them are exceeding our top line expectations, which is a great way to open with those. We are going to be moving to some larger square footage stores targeting around 2,500 square feet. Really happy with the payback that we're seeing, looking to target those next 4 in 24 or fewer months payback. And we'll also set up our economics that these Community Hubs will be profitable in year 1, accretive to both operating margin and adjusted EBITDA. The 4 stores that we will open in 2026 are expected to open in the back half of the year closer to Q4. So we'll get the run rate of these 3 new stores, the growth of the 2 existing. And then there will only be a smaller revenue impact given that the 4 stores will open more towards Q4 of 2026.

The next question comes from the line of Matt Koranda with ROTH Partners.

It's Joseph on for Matt. Congratulations on a good quarter. Just want to see if you guys can give us a little bit of color on the progression of 4Q and into January. Anything you guys want to highlight in terms of continuation of growth in your international markets or specific pockets within certain products that you guys are seeing?

Sure. Yes, I mean, I think we're continuing to see strong momentum, and it's really exciting. We're building this business the right way, the hard way for the long run. And so a lot of the things we've been discussing with you all, like I mentioned, around our product, around our assortment, around our cadence of launch, around how we are connecting with our community. We're really connecting on deep levels, both online and off in our Community Hubs. And so it's -- and then international, it's just been incredible to see how our healthcare professionals are engaging with our brand in Mexico, Canada, all across Europe, Australia, our go deep, go broad strategies are working, and we are doubling down on them. And we didn't just see it in Q4, right? We're seeing it through Q1 and you're seeing that in the incredibly strong guide that we're giving you for Q1. And so leading indicators are really important at FIGS, engagement, organic traffic, direct traffic, all of these are incredibly powerful indicators of what our long-term growth will be, and they are strong and positive across the board.

Then just if I could squeeze in a follow-up. Just your orders per active, look like they're growing very nicely, up in the mid-teens. Can you guys talk about what's driving the more frequent purchase behavior?

Yes. So I would say that across Q4, we were really pleased with both growing our average customer base that really came from growth in new customers, growth in our resurrected customers and also a decline in our churn or an improvement in our retention. We also saw really great growth in AOV. And then on top of that, we also saw a really strong improvement in orders per customer. And I think it's really reflecting everything that we laid out for Q4, which was really at the forefront with our product and our marketing. We provided excellent marketing campaigns that really resonated with our customers, and we had a really strong product assortment. And we saw the strength really throughout the quarter. Really great to see that overall broad-based improvement across all metrics.

The next question comes from the line of Brian Nagel with Oppenheimer.

Congratulations. Great quarter. Great year. The question I want to ask, clearly, sales momentum built throughout '25 and then culminate here in the fourth quarter with a significant inflection stronger. So Trina, in your prepared comments, you talked about like kind of the post-pandemic dynamic and some of those pressures easing. So as you look at the sales acceleration, how much is it do you think with the specific efforts that FIGS has taken on the product side, the marketing side versus maybe some easing of those sector pressures?

It's both. I think, first and foremost, it comes down to execution. We have an incredible team, and we've been working hard to really invest across the business. And like I said, we're doing it the hard way, the right way. We've dug deep on creating an incredible assortment that aligns with our community. We've put together some of the most incredible campaigns, what you just saw with the Olympics, but also what we -- the work that we did with Noah Wyle for the Emmy's, I don't know if you saw that, what we -- our breast cancer awareness campaign, Nurses Week, International Women's Day. Then to your point, it's great to have this tailwind where the COVID overhang is now behind us. We are operating in a more normalized environment. And the strong fundamentals of this industry are really shining. This is a replenishment-driven industry. It's nondiscretionary. It's nonseasonal. It's noncyclical. And so all of that is really a tailwind behind our execution. And it is -- and you saw that even in the recent jobs report, I mentioned in the prepared remarks, all of the employment gains in the market are coming from healthcare. And the demand for healthcare professionals has never been higher given the significant staffing shortages. So I think it's all of the above. It's execution, product, marketing and a normalization in the industry.

Then my follow-up question, I guess, maybe more for Sarah, on the gross margin side. So clearly, there was some disruption here in Q4, then you have this wildcard with new tariffs and FIGS potential mitigation efforts against those tariffs. But as you think about -- how should we be thinking about the underlying -- where gross margins for FIGS should get to? What's the -- I guess, the normalized gross margin for FIGS now taking all this in consideration?

Yes, I mean, as it pertains to tariffs, obviously, a very fluid dynamic that we're going to continue to monitor in the months ahead. I would say if there was no change in tariffs from where we're at today, we are getting more clear on what that longer-term margin looks like. I would say that we've talked about how we continue to expand into non-scrubwear, how we continue to innovate with product and with fabric. And we do think that, that will have a negative impact on margin going forward, but we feel very confident that we can more than offset that through continued improvements in G&A. And you've seen a lot of those efforts this year, and we think that there's still opportunity ahead. So as we think about the longer-term algo, we expect sales to continue to grow, and we are setting it up so that our earnings will grow at a faster rate than sales growth.

The next question comes from the line of Bob Drbul with BTIG.

Let me add my congratulations on an incredible finish to the year. I guess, the two questions that I have, I think the first one is on the international front, you added, I think it was it China and Korea in Q4, and you have some big plans for '26. What have you learned on the new country launches? What have you learned? What will you change this year as you keep adding countries? And I guess, any big surprises so far in the international piece? Then I guess the second question, if I could just throw it in there is around like customer receptivity to the price adjustments that you're making. Have you seen any pushback? Or is there any concerns around that?

Yes, I mean, I think international has been an incredible bright spot. We grew 55% in the quarter. And the vast, vast majority of that was the markets, existing markets that we're already in. And what's really paying off here is our go deep, go broad strategy. And so it's been great to continue to invest in storytelling, in top-of-funnel brand initiatives, in deep localization in markets like Canada, Mexico, the U.K., and Australia. And some of the newer markets, you mentioned Japan and Korea and China, we're really excited to see the results so far. It's been -- they've exceeded our expectations. The brand is resonating. We've seen incredible success. Even we launched in China in December and we're already seeing -- we're emerging as the top brand for our industry there, which is great to see. Japan and Korea, really excited about how our product is resonating. I think these are markets that have healthcare professionals that really care about technical functional product, and we could not be more aligned with how we are going to market there. And we're really investing in driving awareness to reach new healthcare professionals across Asia Pacific. Much more to do. It's early days. But like I said, we're exceeding our expectations, and that's great to see.

Yes. And then I think your other question, just in terms of customer response on pricing. So we did take pricing in January on the vast majority of our core products. Without any meaningful history of measuring price changes, we wanted to be prudent with our assumptions. We did indicate that top line impact of pricing would be slightly positive for 2026. And it's still very early days in terms of measurement and observation for that. But we are seeing some demand inelasticity in these early stages, and that's what we've incorporated into our outlook.

The next question comes from the line of Rick Patel with Raymond James.

I'll add my congrats on the amazing execution as well. So can you dig deeper on customer acquisition, particularly in the U.S.? It's a market that stagnated in recent years, but it's growing again. I guess how much of the growth is due to new customers that are completely new to the brand versus those that may be reactivated customers? And then can you also unpack your expectations around new customer growth in 2026 a little bit more?

Sure. So as I sort of said before, the growth in our active customer base broadly came from all 3 components. So we saw growth in new customer acquisition. We saw growth in our reactivation, our largest growth rate of the year. And then we also saw an increase in our retention rate. So very broad-based. I would say in terms of acquisition within the U.S., in particular, we've seen acceleration throughout the year, which has been really great to see, all a testament to both our upper funnel marketing that is continuing to work as well as our continued improvement within lower funnel. We've done lots of work to really improve those areas, and we're seeing the fruits of those efforts. So really happy to see all of those trends. But overall, it's very broad-based. It's not just one of the components. It's all of them coming together, and we're really happy with what we're seeing there. We do expect that to continue into '26 with really growth being driven across all components of our business in the same way that we've been seeing the trends here in 2025.

Can you also talk about margins for international markets? How did '25 shape up versus the prior year? And what are your expectations going forward given you're still expanding in some newer markets, but still seeing strong growth in the existing ones?

I mean, for our international markets, I think it's really important to know that all of our international markets are profitable other than just the markets that we entered this year, given outsized investment. But after year 1, they will be profitable. So we're really happy with the economic profile of our international markets. We do have some higher selling costs and higher marketing costs just given the geographic impact and the higher proportion of new customers. And we expect over time, there's opportunity to bring down those selling costs as we expand our distribution network and strategies around that. And expect that we will see leverage in marketing costs over time as we shift into a higher portion of that being a returning customer base.

The next question comes from the line of Brooke Roach with Goldman Sachs.

Trina, Sarah, can you elaborate on the drivers of the sequential acceleration in U.S. growth momentum that you delivered in the quarter? Did you see a proportional step-up in each of your direct TEAMS and Community Hub businesses? Or was one of these businesses driving an outsized portion of the momentum? Specifically within your U.S. customer, are you seeing any shift towards a different demographic, whether that's household income, age, gender or even healthcare professional type?

I would say it's all balanced growth in the U.S. When we look at it across our different customer cohorts, we're seeing very consistent trends. When we look at our customer cohorts across occupation, we're seeing relatively steady performance across healthcare occupations. We do see a slight step-up in students, which is the building blocks for future growth. So we like that. When we look across our spend levels, we saw growth spend across our quartiles. We didn't see any trade down. We're seeing growth across all of the quintiles, which is really great. And same at income levels, good growth across each of the different income slices we look at, which we think speaks to both the value proposition and the strength of the brand. And then when we look specifically at our new customers, the customer value remains strong. And even when we look at that over several months after they've entered the brand, we're seeing really good LTV dynamics. So again, all very balanced growth even within the U.S. business. Specific to your question on TEAMS and Hubs, keep in mind, these are still relatively small businesses that will deliver in the long term, but really the growth is being driven by that U.S. e-com business within the core pieces of that business, which is really great to see.

Great. And then just a follow-up for you, Sarah, on the selling expense. You saw some nice leverage on that line item in the last few quarters, and it sounds like you're guiding for some additional efficiency opportunities here. How should we be thinking about the opportunity for that selling expense line item, both in '26 and on a multiyear basis?

Yes. So we have guided that we'll have full year leverage in 2026, and that will be driven by continued improvements in shipping costs and at our fulfillment center. I think as you look at each quarter, we would expect year-over-year bps improvement each quarter. I'm happy to share that we expect the annual rate will be lower than our 2022 and 2023 rates, which was before we transitioned to our new DC, even with an increase in the higher cost international shipping. So great milestone there earlier than what we had anticipated. So exciting progress there. So I think over the longer term, there will be continued opportunity to see leverage in that line item. We will make investments into expanding our distribution network at a later time. But overall, we're going to continue to find opportunities to bring that cost down.

The next question comes from the line of Adrienne Yih with Barclays.

Really nice to see the acceleration and the surprise to the upside. Trina, I was wondering, can you talk about just the composition of marketing as you enter into new international markets, how do you think about marrying sort of top of funnel marketing to get the brand awareness versus some of the more performance marketing? So that's kind of my first question. Then kind of a follow-on just to that is kind of using and investing in all these AI tools. How do you think about that? It seems like you're perfectly primed with all of the data that you have. How are you primed to think about that over the next 1 to 3 years?

So I think what we've seen has been our story from a marketing perspective in the U.S. is kind of what's playing out internationally as well. And so we really built this company and grew our brand awareness from a digital marketing perspective. And as we grew and scaled, we invested more deeply into top of funnel and storytelling. And only the best brands in the world can really invest in brand and storytelling the way we do. And I actually don't know another brand that does it exactly and uniquely the way we do in terms of really connecting on a deep, deep level with our community. And so the word-of-mouth dynamics are strong. As you learn about the brand and you work in a hospital or any healthcare institution, you're in a densely populated environment and you're talking about FIGS and you're talking about our products and you're talking about our campaigns. And that's actually what the largest driver of acquisition is this word-of-mouth dynamic. And so then people come to the site and they engage and then we drop a new product, we drop a new color. And then once again, they're talking about us in the break room or on their way to their next patient. And that's once again acquiring that next customer for us, because FIGS is a walking billboard around every healthcare institution, not just in the U.S. but around the world now. And so those dynamics where we're able to take the gains, right? We see these tipping points in markets where we're more mature. CACs fall dramatically in those markets and we're able to take those gains and invest in the next market. And then we scale and we get really efficient on marketing and then we take those gains again…

Fantastic. Sarah, my last question for you is, can you just help us out with kind of sourcing diversification, where you are in that journey? And then for me, just a tariff clarification on what you said. So if is the change in sort of like guidance or what we should be thinking about is the movement from the Southeast Asian nations would have assuming would have been around 20%. So are we now assuming that they're 15%? Or just some clarification there.

Sure. So we source from Vietnam and from Jordan and the tariff rates that were previously in effect were 20% for Vietnam and 15% for Jordan. And so as of today, we know the 10% level is in effect and the 15% level has been pledged. We think it's appropriate to take the more conservative assumption here at 15%. And so we've reflected a 15% rate for the rest of the year. Obviously, that will be very fluid in the weeks and the months ahead, and we will continue to monitor that. But we remain confident that our full year guide regarding top and bottom line are just going to continue our sharp execution and stay on top of any changes that happen.

The next question comes from the line of Ashley Owens with KeyBanc.

It's Victoria on for Ashley. And I add my congrats on a strong finish to the year. So I wanted to start off on mix. Scrubwear was up 35% and non-scrubwear up 26% in Q4. Can you talk about the puts and takes inside non-scrubs, whether it's underscrubs, outerwear, socks and footwear? What carried the quarter and which of those you expect to be sustained contributors into 2026?

So in the prepared remarks, we did talk about non-scrubwear benefit. So we're seeing improvement and great growth in our non-scrubwear, that's our Salta, Mercado, and our Grid styles that we're really pleased with the performance that we're seeing there. Within outerwear, that's being driven by our high pile bombers, and we are continuing to have category expansion into outerwear, which we're excited about for 2026. We've also introduced bags, our new Archtek compression socks and other accessories that are all performing well, and we're excited about the continued momentum there as we expand category and outfit the full closet of the healthcare professional.

Then my next question was just on TEAMS. What is the 2026 pipeline visibility? And how should we model teens as a percent of revenue and its gross margin versus OpEx profile?

So TEAMS today is still single-digit penetration to total revenue. I'm really pleased with how we're continuing to grow that business. So just keep in mind, it is still small today and the economic profile of TEAMS, it does have a slightly lower gross margin just due to the wholesale pricing with a discount there, but we more than make up for that with it being a higher profitability overall with lower OpEx costs. And yes, really excited about the strategy going forward and the plans. We've just launched our new TEAMS Store and lots of exciting progress and upcoming for our TEAMS.

There are no further questions waiting at this time. I would now like to pass the conference back over to Trina Spear for any closing remarks.

Thank you so much. What I want to just end this with is that it's been a long road to get to this point, but you've now seen that we've stacked great quarter after great quarter, and it's super exciting. But it pales in comparison to the opportunity ahead, and we're so excited to go after that. So I just want to thank you all for joining us today. More to come.

That concludes today's call. Thank you for your participation, and enjoy the rest of your day.