FIGS (FIGS) Q4 2025 Earnings Call Transcript

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DATE

Thursday, Feb. 26, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• Co-Founder & Chief Executive Officer — Trina Spear
• Chief Financial Officer — Sarah Oughtred

TAKEAWAYS

• Net Revenues -- $201.9 million, up 33% year over year, marking the highest quarterly growth in over four years and surpassing $200 million for the first time.
• Active Customers -- Record 2.9 million, representing 5% sequential and 9% annual growth, with acceleration in both new and returning customer segments.
• Average Order Value (AOV) -- Increased 9% to $126, driven by higher average unit retail and units per transaction.
• Scrubwear Revenue -- Rose 35%, representing 77% of net revenues and crossing $500 million annualized for the first time.
• International Net Revenues -- Up 55% to $37.7 million, the highest growth in over two years, with significant gains from Canada, Mexico, and Europe; new markets such as China and South Korea launched in fiscal Q4 2025.
• Gross Margin -- Decreased 440 basis points to 62.9%, attributed to increased tariffs, the absence of prior duty drawback, and a $5.6 million inventory write-off; partly offset by lower returns and improved freight costs.
• Selling Expenses -- $42.9 million or 21.2% of net revenue, reflecting continued expense leverage in fulfillment and outbound freight improvements.
• Marketing Expenses -- $28.3 million or 14% of net revenue, up 1 percentage point due to Olympic campaign and strategic digital marketing, but remained below internal forecasts due to customer acquisition cost (CAC) efficiencies.
• Adjusted EBITDA -- $20.7 million with a 13.2% margin, compared to 13.9% in the prior year period.
• Net Income -- $18.5 million or $0.10 diluted EPS, versus $1.9 million and $0.10 diluted EPS in the prior year.
• Year-End Net Cash & Investments -- $300.8 million, a company record.
• Inventory -- Increased 11% to $128 million, driven by investments in product launches and normalized in-transit levels, with an aging-related $5.6 million write-off.
• International Expansion -- Nearly doubled total market reach in fiscal 2025 to 58 countries; targeting entry into more than 80 markets in fiscal 2026, focusing on Europe and Asia Pacific.
• Community Hubs -- Expanded to five retail locations, with all new stores exceeding top-line expectations; plans to open four additional sites in fiscal 2026, targeting 24-month or shorter payback and first-year profitability.
• 2026 Guidance -- Net revenues expected up 10%-12%; adjusted EBITDA margin targeted at 12.7%-12.9%; operating margin projected at 7.6%-7.9%, the highest since becoming a public company.
• Gross Margin Outlook -- Full-year margin expected modestly higher than fiscal 2025’s 66.5%, despite a planned incremental 280 basis points headwind from new 15% global tariffs.
• Teams/B2B Business -- Remains single-digit percentage of revenues; new Team Store platform launched with higher overall profitability despite slightly lower gross margin than DTC business.
• Capital Expenditures -- Fiscal 2025 capex was $8.2 million, primarily for new retail hubs; planned increase to approximately $17 million for fiscal 2026, allocated to community hubs, technology, and headquarters improvements.
• Share Repurchase Program -- $52 million remaining authorization; no shares repurchased in the reported quarter.
• Tariff Exposure -- Sourcing diversification concentrated in Vietnam and Jordan; planning assumptions incorporate a 15% global tariff rate based on U.S. policy announcements.

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RISKS

• Sarah Oughtred said, "Gross margin for Q4 contracted 440 basis points to 62.9%," due to tariff increases, lack of duty drawback benefit, and the $5.6 million inventory write-off.
• Sarah Oughtred added, "the planned unmitigated tariff impact of approximately 280 basis points on top of the 120 basis point impact incurred in fiscal 2025" will be a headwind to fiscal 2026 gross margins.
• Sarah Oughtred stated, "Marketing expense for Q4 was $28.3 million, representing 14% of net revenues, up from 13% last year," primarily to support the Olympic campaign and market expansion.
• Sarah Oughtred noted, "we did not repurchase shares this period."

SUMMARY

Management reported that FIGS (NYSE:FIGS) achieved its highest-ever quarterly net revenues and active customer growth, marking a pivotal moment in its direct-to-consumer execution. The company’s international strategy contributed strongly, with China and South Korea launches adding to robust gains in existing key markets and supporting a near doubling of country reach. Capital discipline enabled record cash and investments on the balance sheet despite stepped-up investment in inventory, retail hubs, and key marketing campaigns. Profitability metrics remained positive, although gross margin headwinds from tariffs and inventory write-downs were explicit, with fiscal 2026 performance targeted at further improvement despite ongoing tariff uncertainties. The outlook emphasizes maintaining adjusted EBITDA margin gains, executing further global expansion, leveraging digital personalization through AI, and expanding higher-margin lines like retail hubs and Teams, though all with careful monitoring of consumer response to recent price actions and shifting expense profiles.

• Management indicated all international markets, except newly entered ones, are profitable in their second year despite elevated marketing and distribution costs and expect leverage as customer bases mature.
• CEO Trina Spear said, "we plan to expand our presence by opening our next four locations in 2026," clarifying that most new community hubs will not materially impact top-line until late in the year.
• Management’s guidance for fiscal Q1 2026 calls for low-20% revenue growth year over year, with Q1 expected to show the highest quarterly gross margin for the year despite tariff escalation.
• Trina Spear stated, "We are also excited to keep evolving the FIGS app, which we are positioning as our most elevated digital experience," underscoring a priority for further customer engagement and data-driven repeat purchases.
• Teams and B2B strategy is positioned for long-term scale, with the launch of an enhanced Team Store platform and planned international expansion to unlock new revenue streams and margin leverage.

INDUSTRY GLOSSARY

• AOV (Average Order Value): The average amount spent each time a customer places an order.
• AUR (Average Unit Retail): The average selling price per unit sold, reflecting pricing and mix shifts.
• UPT (Units Per Transaction): Number of items purchased per customer transaction, a measure of basket size or cross-selling success.
• Community hubs: FIGS' branded physical retail locations designed to drive direct engagement and higher customer lifetime value through in-person experiences and activation.
• Teams: FIGS' B2B platform targeting health care organizations with bulk uniform purchasing and administrative solutions.

Full Conference Call Transcript

Trina Spear: 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 health care uniform provider in the world by winning the hearts and minds of health care professionals, and we have never had greater conviction in the impact our brand can drive. FIGS, Inc. reinvented scrubs, and after 13 years, our product engine continues to lead and define the health care 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 win 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 have 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 for the Black Friday Cyber Monday period. And we are excited to keep this strong momentum going for the balance of the quarter as we sharpened our focus on full-price selling.

All told, Q4 net revenues grew at our strongest quarterly rate in more than four years, surging 33% and surpassing $200,000,000 in a quarter for the first time in our history. This growth was driven by an impressive acceleration in active customers, jumping 5% sequentially and 9% year over year. At the same time, we experienced strong productivity gains across nearly every selling occasion, as well as record AOVs driven by healthy trends in AUR and UPT. A superlative quarter all around. Our Q4 performance punctuated full-year net revenue growth that returned to double digits for the first time since 2022 and exceeded our initial outlook by nearly $90,000,000.

We also had two other big milestones with scrubwear crossing the half $1,000,000,000 mark for the first time and our international business surpassing $100,000,000. Our success was not limited to the top line. Showing the power of our model, we paired soaring net revenue growth with strong profitability, overdelivering our original full-year adjusted EBITDA margin target by over 200 basis points. And we did this even while absorbing the impacts of tariffs and our Q4 action to write off pockets of older inventory. Finally, we built a record net cash and investment position of just over $300,000,000, even as we stayed on the offense with key investments across the company.

It is important to reflect for a moment on how we reached this critical inflection point. The COVID pandemic created a truly unique environment where health care professionals were stretched beyond their limit, the need for scrubs was paramount, and demand spiked. Once the pandemic eased, closets were stocked, which we believe led to an overhang impacting demand. At FIGS, Inc., we navigated through these changes by calibrating our operational framework while doubling down on the game-changing product and brand connection that we knew health care professionals loved and that we were truly uniquely positioned to deliver.

And with the COVID overhang now behind us, we are thrilled to see our strategies pay off and position us for even larger opportunities ahead. The structural advantages we see in health care remain firmly intact with the growing needs of an aging population, an ongoing focus on wellness and aesthetics, and an industry in need of support so that it can keep up with the outsized demands of both patients and the labor force. This dynamic was on full display with the January jobs report, where the health care and social assistance industry powered nearly all the gains in the labor market with 130,000 jobs added. This all bodes well for strong sustained demand for FIGS, Inc.

Looking back, it is clear that we have expanded our leadership position, capitalizing on the opportunity to widen the moat and better unlock the powerful dynamics that have been there all along. We believe the onus is on us to sustain and extend this edge. Our strategic health framework governs how we operate our business and expand on our mission. Our success is measured against three strategic priorities: product innovation, community engagement, and market expansion. A year ago on this call, we outlined a similar set of priorities designed to better serve our community. This continuity is intentional. It is shining through in our performance, and it reflects conviction that we remain on the right path forward.

Let us now go deeper into these priorities and how we plan to measure progress in 2026. Starting with product innovation. Our efforts in 2025 focused on building a repeatable and scalable product foundation. In practical terms, that meant adding discipline and focus across all facets of the product engine, delivering impactful newness, shortening development cycles, driving calendar rigor, and improving fit. We are excited to see wins across the board in all of these areas. In 2026, we plan to leverage that strong framework to up our game even more. First, we are elevating our core through fabric innovation. This year, we plan to have three fabric solutions in scrubwear to address a range of needs.

This starts with our hallmark FIONx fabrication, designed as our versatile everyday solution. We also added FORMx in 2025 to emphasize stretch and comfort, and have been encouraged by the growing love our community has shown for it. And in conjunction with the Winter Olympics, we introduced FiberX to emphasize structure and durability, and we are excited to expand this line as we move deeper into the year. Second, we are continuing to build out the layering system. We have seen success in moving beyond scrubwear with head-to-toe solutions, on shift and off, and you will see expanded efforts this year in areas like underscrubs, outerwear, lab coats, compression socks, and loungewear.

Finally, with a sharper strategic focus on long-term product planning, we are developing new categories for beyond 2026. We are excited with our team's efforts to develop a more robust integrated development process that is actively looking at several categories that can expand on our existing work to serve health care professionals in new and differentiated ways. Now on to community and engagement. Building real connection with health care professionals has always been at the heart of FIGS, Inc. It is why we exist and it is why we continue to lead this industry. In 2025, we created some of our most meaningful and memorable top-of-funnel moments to date.

From our viral International Women's Day and Nurses Week campaigns to our collaborations with Noah Wyle in Washington and at the Emmys, to our breast cancer awareness campaign, all of which resonated deeply within our community. I highly encourage you to check out the sizzle reel linked in the shareholder presentation we issued today to experience the incredible energy we have built across the brand throughout the year. We expect that momentum to continue in 2026 as we expand our reach and deepen the connections that matter most to our community.

We are proud to begin the year by continuing our support of the Team USA medical team at the Winter Olympics, renewing our belief that it takes heart to build bodies that break records. We celebrated the awesome humans behind Lindsey Vonn's return to the world stage, seven years in the making. Her journey reflected unmatched courage, grit, and perseverance—something the world saw firsthand—and served as a powerful reminder that no athlete ever stands alone. In moments of both triumph and challenge, it is the medical community that shows up with expertise, care, and heart. That is the community we are honored to stand alongside. That same perseverance lives in health care every single day.

Health care professionals show up with purpose and humanity regardless of the outcome, through wins and losses, progress and setbacks. Their commitment to putting others first does not change, even when the work is hard or unseen. This truth anchors our upcoming Never Change campaign, which will guide our storytelling through 2026. We see Never Change as a natural evolution of our Where Do You Wear FIGS campaign in 2025, which resonated deeply by capturing both the breadth of health care and the deeply personal journeys within it. Moving forward, we have designed our platform with greater flexibility so we can show up across more moments throughout the year that truly matter to our community.

The first Never Change campaign focusing on women in medicine is scheduled to launch next week, ahead of International Women's Day, and we could not be more excited. We are also continuing to expand how we activate and support our community. When we center the world on the impact made by care professionals and tell their story, we strengthen the long-term impact of our brand. You will see FIGS, Inc. continue to show up across key moments in health care, and be a leading force in advocating for them. Finally, we are investing in how we serve our customers more personally and meaningfully.

Our DTC model has always kept us close to our community, and we will continue to test, learn, and refine our personalization efforts this year to create more relevant and thoughtful experiences. We are also excited to keep evolving the FIGS, Inc. app, which we are positioning as our most elevated digital experience built to drive the ultimate engagement within our health care community. Our third strategic priority centers around market expansion. We are proud to have reached a record 2,900,000 active customers globally in 2025, but know that is still just a fraction of the global health care community.

As we drove the bulk of last year's success in our core businesses, we were also making important strides in our three market expansion opportunities: international, our Teams B2B business, and community hubs. Starting with international, where we continue to execute our go deep and go broad strategy for market development. This framework prioritizes how and where we invest in areas like community engagement and localization, while also leveraging technology for more efficient market expansion. And the success of this strategy was on full display in Q4, with international net revenue growth accelerating to the highest level in more than two years at 55% year over year.

With our go deep markets, our strategy spans some of our more established markets as well as those with higher market potential. Key markets like Canada, Australia, Mexico, and the UK are further along the journey as we look to match the incredible brand experience established in the United States. Other countries with high potential are earlier in development, and we are investing strategically there to build awareness and consideration. Examples include South Korea and China, both of which we were excited to enter in Q4. And while we are taking a longer-term view of success, we are encouraged by the early signs across the broader Asia Pacific region.

With our go broad markets, we are leveraging newly developed e-commerce functionality to accelerate market entry strategy. These improved capabilities are designed to drive efficiency and localization at a regional level, opening untapped opportunities to serve more markets and redefine expectations. These efforts were instrumental in nearly doubling our total market reach in 2025 to 58 countries, highlighted by new launches across the Middle East and Africa, as well as Latin America. As we look to 2026, we expect to surpass 80 total markets, led by a deeper focus across Europe and Asia Pacific, planned in the first half of the year. Moving on to Teams.

In 2025, we took a great foundation and positioned it for scale through new leadership, investments in our team, and the development of our go-forward strategy. This strategy centers on building deeper relationships with health care organizations and operating as an even more embedded partner to help them invest in their teams. We are prioritizing higher impact growth accounts and, with more resources and focus, are seeing early success. In 2026, we are excited to roll out the next evolution of our Team Store experience. This platform is designed to give organizations greater flexibility and functionality to purchase in ways that work best for their team, delivering a seamless, self-serve experience for administrators and employees.

Importantly, this functionality will also expand access to the FIGS, Inc. assortment and support our international Teams customers, which we expect will unlock meaningful new growth opportunities over time. Finally, on community hubs. We ended 2025 with a flurry, expanding our small fleet of retail locations to five, following openings in New York, Houston, and Chicago in Q4. As we strive to meet health care professionals where they are, we continue to see hubs having early impact in reaching new customers, driving higher LTV, and expanding the impact of our ecosystem. Our first focus this year is to continue optimizing our five existing hubs.

These efforts include further refining assortments, store flow and fixtures, standardizing in-store operations, and driving thoughtful community activation. We are also implementing a store development engine to help drive how we strategically map out, design, and build our future community hubs. Leveraging these dynamics, we plan to expand our presence by opening our next four locations in 2026. Overall, we are in a powerful position to harness our brand's momentum, build on our strengthened executional foundation, and confidently pursue the opportunities that lie ahead. These actions position us to approach $700,000,000 in revenue this year, a great stepping stone to our $1,000,000,000 aspiration and beyond. We also plan to continue rebuilding our bottom line while continuing to invest.

This means at least holding our adjusted EBITDA rate in 2026, even adjusting for last year's inventory write-off, inclusive of this year's Olympic spend and assuming tariff impacts remain in effect. Importantly, this margin target is substantially higher than the commitment indicated on our last call. And finally, our capital allocation plans will continue to prioritize growth opportunities across the business while leveraging our ongoing share buyback program to be opportunistic and help offset stock dilution. In closing, we enter 2026 with a clear sense of direction and purpose.

Confident in the progress we have made and the foundation we have built, we remain deeply grateful for the opportunity to serve a community that continues to inspire our work every day. I will now turn the call over to Sarah to review our results and our 2026 financial plan.

Sarah Oughtred: 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 health care 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 $201,900,000, 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 plans 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 2,900,000. 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 continues to play an important role, and we drove impactful seasonal palettes and optimally aligned launches with key calendar moments.

Both carryover and new limited-edition color offerings resonated well while also contributing to strong growth with our core offering. Across styles, we continue to see success with our investments in our wider leg options, including core styles like the Isabelle as well as new limited-edition offerings. We are also pleased with the growing momentum of our FORMx fabrication since its early 2025 debut. Non-scrubwear increased 26%, representing 23% of net revenue. Underscrubs continue to be a great opportunity, and we remain encouraged with our recent expansion across our Salta, Makoto, and rib styles. Outerwear posted strong growth, led by our high pile bombers, and we are even more excited with how this category is planned to evolve later this year.

Category expansion and strength was also apparent across a number of emerging opportunities, including bags, loungewear, and our Archtech compression socks. By geography, US net revenues increased 29% to $164,200,000, while international net revenues increased 55% to $37,700,000. Encouragingly, both US and international growth were supported by balanced performance across new and returning customers. On the international side, while we added key long-term markets like China and South Korea during the period, a majority of growth came from existing markets, including a sharp return to growth in Canada, triple-digit growth in Mexico, and ongoing success in the existing markets across the Middle East, Latin America, and Europe.

Better illustrating the strength of existing markets, our entry into new markets in 2025 impacted our Q4 international net revenue growth by only 500 basis points. Gross margin for Q4 contracted 440 basis points to 62.9%. As expected, we had two planned headwinds for the period, including sequentially higher tariff pressure and the lapping of a sizable one-time benefit from duty drawback claims in the year-ago period. Partially offsetting these pressures, we experienced a lower returns rate as well as favorable freight costs. While these net impacts were generally in line with expectations, we made the decision to take a $5,600,000 inventory write-off during the period, which I will detail shortly.

Our selling expense for Q4 was $42,900,000, representing 21.2% of net revenues compared to 25% last year. Our optimization efforts continue to yield meaningful expense leverage at our fulfillment center, while our team continues to be effective in driving outbound freight mix and rate improvements. Marketing expense for Q4 was $28,300,000, representing 14% of net revenues, up from 13% last year. A higher marketing rate was planned to support production costs for our Winter Olympic campaign, while we also increased investments across digital marketing, international, and other strategic initiatives. However, with build leverage and CAC efficiencies, the overall marketing rate was lower than planned. G&A for Q4 was $37,000,000, representing 18.3% of net revenues compared to 23.4% last year.

Consistent with prior quarters, the lower G&A expense rate was primarily due to meaningful net revenue leverage and lower stock-based compensation expense. In total, our adjusted EBITDA for Q4 was $20,700,000 with an adjusted EBITDA margin of 13.2% compared to 13.9% last year. Net income for the quarter was $18,500,000 or diluted EPS of $0.10 compared to net income of $1,900,000 last year or diluted EPS of $0.10. Recapping the full year, net revenues reached a record $631,100,000, an increase of 14% year over year. Gross margin contracted 110 basis points to 66.5%, largely due to the 120 basis point headwind from tariffs. Operating expenses leveraged to 60.5% of net revenues compared to 67.2% in the prior year.

This sharp expense rate reduction primarily reflected the $616,000,000 year-over-year decline in stock-based compensation as well as improved fulfillment efficiencies in our selling lines. Adjusted EBITDA margin was 11.8% as compared to 9.3% in the same period last year. On our balance sheet, we finished the year with a record net cash, cash equivalents, and short-term investment position of $300,800,000. Inventory increased 11% year over year to $128,000,000, or up 7% on a unit basis, with two important dynamics. First, our investments to support product introductions and go deeper into key styles and colors were key to supporting the strong upside we generated in Q4.

We also normalized the higher level of in-transit inventory experienced at the end of Q3, even as the impact of tariffs increased quarter over quarter. Second, and separate from these actions, we took a $5,600,000 write-off during the period related to broken and aged inventory that had accumulated over a number of years. This action, along with our improved rigor around our supply and demand processes, puts us in the best inventory position we have been in from an aging and quality perspective. Overall, we expect to make additional inventory management progress throughout 2026 and position inventory days closer to 200 days.

On the capital allocation side, we did not repurchase shares this period and have $52,000,000 available for future repurchase under our current share repurchase program. Capital expenditures for the year were $8,200,000, primarily related to the addition of three new community hubs. Now turning to our outlook. Our overall approach to our outlook balances our ongoing enthusiasm across the business with a desire to remain prudent in this consumer environment. Additionally, with an evolving tariff environment, we are incorporating the US latest announcements that call for 15% global tariffs and are not contemplating any relief from previously paid tariffs.

While the tariff environment likely remains fluid, we are adamant that the strategic changes we have made across our business are appropriate and durable as we look at our long-term opportunity. Now on to fiscal 2026 details, where we expect net revenues for fiscal 2026 to be up 10% to 12% year over year as we build upon our product roadmap and marketing engagement efforts from 2025. We expect sustained active customer momentum to be a significant driver of our growth in 2026. We also wanted to frame up the expected impacts of pricing and promotion.

Considering our pricing action implemented in early January and informed by our early elasticity read, our full-year outlook assumes only a modest net revenue benefit on pricing. We expect pricing to result in higher AURs, though largely offset across UPTs and order frequency. Finally, given our efforts last year to reset our promotional cadence, we expect relatively consistent year-over-year positioning in 2026. As you think about the cadence of the year, we expect strong first-half net revenues growth, particularly with strong demand trends continuing year to date. As such, we are planning for Q1 growth to be up in the low 20% range year over year.

Comparisons will build in the second half, though we still see the opportunity for driving growth against the strong Q4 performance from 2025. On to gross margins, we expect full-year gross margins to be up modestly year over year from the 66.5% level in fiscal 2025 inclusive of 15% global tariffs. The largest factor weighing on results is the planned unmitigated tariff impact of approximately 280 basis points on top of the 120 basis point impact incurred in fiscal 2025. Offsetting this pressure, we expect to see the benefit of pricing, improved product costing, and favorable returns. Additionally, we expect some full-year benefit as we lap last year's inventory write-off in Q4.

For Q1, we also expect a modest year-over-year increase in gross margin from last year's 67% performance. Notably, with the negative impact of tariffs continuing to build to start the year, we expect Q1 gross margin to be the highest quarterly rate of the year. Looking at expenses, we expect total SG&A leverage for the full year, reaching the lowest percentage of net revenues in the past six years. In selling expenses, we expect full-year leverage will be driven by continued efficiency efforts with shipping costs and at our fulfillment center.

In marketing expenses, we expect the Q1 Olympics investment as well as support of our market expansion strategic priority will drive a moderately higher expense rate for the full year. In G&A, we expect some expense leverage given a more modest reduction in stock-based compensation to approximately $25,000,000. Overall, we expect full-year 2026 operating margin of between 7.6%–7.9% compared to 6% in 2025. We believe it is important to begin highlighting this GAAP measure as our stock-based compensation impact continues to normalize. Importantly, this would be our best operating margin performance during our time as a public company. Our full-year 2026 adjusted EBITDA margin is expected to be between 12.7%–12.9% compared to 11.8% in 2025.

For Q1, we expect adjusted EBITDA margins of approximately 7%, largely reflecting the outsized marketing expenses for the period. Below the operating line, we expect the effective tax rate to be approximately 25%, down from 27.4% last year, as we continue to drive improved pretax income combined with an additional reduction in nondeductible stock-based comp. Looking deeper at our capital allocation plan, we enter 2026 in an incredibly strong financial position. We do anticipate a step-up in capital expenditures this year to approximately $17,000,000 as we invest across community hubs, system upgrades, and at our headquarters. Outside of investments, we plan to use our share repurchase program to be opportunistic in the market and help offset stock dilution.

Before we open the call for Q&A, I want to reiterate what an exceptional year this has been. Our disciplined execution across the organization enabled us to accelerate growth while delivering meaningfully stronger profitability. Just as important, the actions we have taken position us for durable long-term success in a growing and important industry. We believe the brand has never been stronger, and we look forward to updating you on our continued progress throughout 2026. We will now open for questions. Operator?

Operator: Thank you. We will now begin the Q&A session. If you would like to remove your question, press star followed by 2. Again, to ask a question, press star 1. And as a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. We will pause here briefly as questions are registered. The first question comes from the line of Dana Telsey with Telsey Group. You may proceed.

Dana Telsey: Hello, Trina and Sarah. Congratulations on a tremendous fourth quarter and year. Very good to see the progress. Can you talk a little bit about 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 are planning to open this year, and how you are thinking of that contribution to top line and margin.

Sarah Oughtred: Thank you.

Trina Spear: Sure. I can kick it off. Thank you so much, Dana. It was definitely a great quarter, a great year. So, yeah, I was just actually in Milan Cortina for our Winter Olympics. We were super excited to support and outfit Team USA's medical team during the Winter Olympics. And it was a great way—you know, 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 has been on and how she came back, coming out of retirement to come back and compete.

But I think 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 are super proud to be a part of her story, Dr. Hackett's story, the entire medical team's story. The product that we brought forth was really incredibly technical. We launched an entirely new fabrication, FiberX, which was amazing fabric that is super durable.

It works in a variety of different environments—so it is on shift, inside, outside, on top of mountains, which is what you see with the Olympics. So really incredible product. It was incredibly successful. And we are really excited about continuing to show up in these large ways. Top-of-funnel marketing is the story that we have been talking about quarter after quarter over the past year plus now, and you are seeing that investment pay off. You are seeing the investment we have made in product, the investment we made in marketing—you are seeing all of our efforts starting to pay off, and we are really excited about the future.

In terms of community hubs, I know you asked about—so we are opening four community hubs this year. And so I will let Sarah speak to some of the economics behind that, but we have seen amazing strength in our five community hubs that we now have: Century City, Philly, Chicago, Houston, New York, and, you know, a lot of learnings—mostly that they are too small, which is a great problem to have. We call them champagne problems, but I will pass it over to Sarah.

Sarah Oughtred: So we opened our three 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 are seeing. Looking to target those next four in 24 or fewer months payback. And we will also set up our economics that these community hubs will be profitable in year one, accretive to both operating margin and adjusted EBITDA.

The four stores that we will open in 2026 are expected to open in the back half of the year, closer to Q4, so we will get the run rate of the three new stores, the growth of the two existing, and then there will only be, you know, a smaller revenue impact given that the four stores will open more towards 2026.

Operator: The next question comes from the line of Matt Koranda with Roth Partners. You may proceed.

Joseph (for Matt Koranda): Hey, guys. It is 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?

Trina Spear: Yeah. I mean, I think we are continuing to see strong momentum, and it is really exciting. You know, we are building this business the right way, the hard way, for the long run. And so a lot of the things we have 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 are really connecting on deep levels, both online and off in our community hubs. And so it is—and then international, it has just been incredible to see how our health care 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 did not just see it in Q4, right? We are seeing it through Q1, and you are seeing that in the incredibly strong guide that we are giving you for Q1. And so, you know, leading indicators are really important at FIGS, Inc. 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.

Joseph (for Matt Koranda): Got it. Thank you. And then just if I could squeeze in a follow-up. Just your orders per active look like they are growing very nicely, up in the mid-teens. Can you guys talk about what is driving the more frequent purchase behavior?

Sarah Oughtred: Yeah. 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 is really 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 community, 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 net metrics.

Operator: The next question comes from the line of Brian Nagel with Oppenheimer. You may proceed.

Brian Nagel: Congratulations. Great quarter. Great year. The question I want to ask, you know, look, clearly, sales momentum built throughout 2025 and then culminated here in the fourth quarter with a significant inflection stronger. So Trina, in your prepared comments, you talked about, like, how 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, Inc. has taken on the product side, the marketing side, versus maybe some easing of those sector pressures?

Trina Spear: It is both. You know? I think, first and foremost, it comes down to execution. You know? We have an incredible team. And we have been, you know, working hard to really invest across the business. And like I said, we are doing it the hard way, the right way. We have dug deep on creating an incredible assortment that aligns with our community. We have put together some of the most incredible campaigns—what you just saw with the Olympics, but also the work that we did with Noah Wyle for the Emmys. I do not know if you saw that. What we—you know—our breast cancer awareness campaign, Nurses Week, International Women's Day.

And then to your point, you know, it is great to have this tailwind where the COVID overhang is now behind us. We are operating in a more normalized environment. And the, you know, the strong fundamentals of this industry are really shining. This is a replenishment-driven industry. It is nondiscretionary. It is nonseasonal. It is noncyclical. And so all of that is, you know, really a tailwind behind our execution. And it is—you know—and you saw that even in the recent jobs report I mentioned in the prepared remarks, you know, all of the employment gains in the market are coming from health care.

And the demand for health care professionals has never been higher, given the significant staffing shortages. So, you know, I think it is all of the above. It is execution, product, marketing, and a normalization in the industry.

Brian Nagel: That is helpful. 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 tariffs and FIGS, Inc., you know, potential mitigation efforts against those tariffs. But as you think about how—what—how should we be thinking about the underlying—where gross margins for FIGS, Inc. should get to? What is the—I guess, you should say the normalized gross margin for FIGS, Inc. now, taking all this into consideration?

Sarah Oughtred: Thanks, Brian. Yeah. I mean, as it pertains to tariffs, obviously a very fluid dynamic that we are going to continue to monitor in the months ahead. I would say if there was no change in tariffs from where we are at today, we are getting more clear on what that longer-term margin looks like. I would say that, you know, we have 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 will have a, you know, negative impact on margin going forward. But we feel very confident that we can more than offset that through continued improvement in G&A.

And you have seen a lot of those efforts this year. We think that there is still opportunity ahead. So as we think about the longer-term algo, you know, we expect sales to continue to grow, and we, you know, are setting it up so that our earnings will grow at a faster rate than sales growth.

Brian Nagel: I appreciate all the color. Congrats again. Thank you.

Operator: Next question comes from the line of Robert Drbul with BTIG. You may proceed.

Robert Drbul: Hi. Let me add my congratulations on an incredible finish to the year. The two questions that I have, I think, the first one is, you know, on the international front, you added, I think, 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? And then I guess the second question, if I could just throw it in there, is around customer receptivity to the price adjustments that you are making.

Have you seen any pushback, or is there any concerns around that?

Trina Spear: Yeah. I mean, I think international, you know, it has been an incredible bright spot. We grew 55% in the quarter. And the vast, vast majority of that was, you know, the markets—the existing markets that we are already in. And what is really paying off here is our go deep, go broad strategy. And so, you know, it has been great to continue to invest in storytelling, in brand, in top-of-funnel brand initiatives, in deep localization, in markets like Canada, Mexico, UK, and Australia. And some of the newer markets you mentioned, you know, Japan and Korea and China—we are really excited to see the results so far. It has been—you know, they have exceeded our expectations.

The brand is resonating. You know, we have seen incredible success. Even—we launched in China in December, and we are already seeing—we are 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. You know, I think these are markets that have health care professionals that really care about technical, functional products, and we could not be more aligned with how we are going to market there. And we are really investing in driving awareness to reach new health care professionals across Asia Pacific. Much more to do.

It is early days, but like I said, we are exceeding our expectations, and that is great to see.

Sarah Oughtred: Yeah. 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. You know, without any meaningful history of measuring price changes, you know, we wanted to be prudent with our assumptions. We did indicate that top-line impact of pricing would be slightly positive for 2026. You know, and it is still very early days in terms of measurement for that. But, you know, we are seeing some demand inelasticity in these early stages, and that is what we have incorporated into our outlook.

Robert Drbul: Great. Thank you very much. Best of luck this year.

Tom Shaw: Thank you.

Operator: The next question comes from the line of Rick Patel with Raymond James. You may proceed.

Rick Patel: Thanks. Good afternoon, and I will add my congrats on the amazing execution as well. So can you dig deeper on customer acquisition, particularly in the US? It is a market that stagnated in recent years, but it is 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? And 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 are still expanding in some newer markets but still seeing strong growth in existing ones?

Sarah Oughtred: Sure. So as I had sort of said before, the growth in our active customer base broadly came from all three components. So we saw growth in new 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 US in particular, we have seen acceleration throughout the year, which has been really great to see, all a testament to, you know, both our upper-funnel marketing that is continuing to work as well as, you know, our continued improvement within lower funnel.

We have done lots of work to really improve those areas, and we are seeing the fruits of those efforts. So really happy to see all of those trends that, you know, overall, it is very broad based. It is not just one of the components. It is all of them coming together, and we are really happy with what we are seeing there. We do expect that to continue into '26, you know, with really growth being driven across all components of our business in the same way that we have been seeing the trends here in 2025.

And for our international markets, I think it is really important to know that all of our international markets are profitable, you know, other than just the markets that we entered this year, given our investment. But, you know, after year one, they will be profitable. So we are 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 expect, over time, there is 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 a higher portion of, you know, that being a returning customer base.

Rick Patel: Thanks very much.

Operator: The next question comes from the line of Brooke Roach with Goldman Sachs. You may proceed.

Brooke Roach: Good afternoon, and thank you for taking our question. Trina, Sarah, can you elaborate on the drivers of the sequential acceleration in US growth momentum that you delivered in the quarter? Did you see proportional step-up in each of your direct, Teams, and community hub businesses? Was one of these businesses driving an outsized portion of the momentum? Specifically within your US customer, are you seeing any shift towards a different demographic, whether that is household income, age, gender, or even health care professional type? And as a follow-up, can you talk about the selling expense line—where you saw leverage in the quarter and how to think about the opportunity in '26 and beyond?

Sarah Oughtred: I would say, you know, it is all balanced growth in the US. When we look at it across our different customer cohorts, we are seeing very consistent trends. When we look at our customer cohorts across occupation, we are seeing relatively steady performance across health care occupations. We do see a slight step-up in students, which is the building block for future growth. So we like that. When we look across our spend levels, we saw growth in spend, you know, across our quartiles. And we did not see any trade down. We are 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 have entered the brand, we are seeing really good LTV dynamics. So, again, all very balanced growth even within the US 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 US e-comm business within the core pieces of that business, which is really great to see. On selling expenses, we have guided that we will have full-year leverage in 2026, and that will be driven by continued improvement 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.

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, progress there. 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 are going to continue to find opportunities to bring that cost down.

Brooke Roach: Great. Thanks so much. I will pass it on.

Operator: The next question comes from the line of Adrian Yuk with Barclays. You may proceed.

Adrian Yuk: Great. Thank you very much. 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 top-of-funnel marketing to get the brand awareness versus some of the more performance marketing? And then, kind of a follow-on to that—how are you thinking about using and investing in AI tools over the next one to three years, given all the data you have?

Trina Spear: Thank you so much. So I think, you know, what we have seen and has been our story from a marketing perspective in the US is kind of what is playing out internationally as well. And so, you know, we really built this company and grew up 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 do not 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, you know, the word-of-mouth dynamics are strong. As you learn about the brand, and you work in a hospital or any health care institution, in a densely populated environment, and you are talking about FIGS, Inc., and you are talking about our products, and you are talking about our campaigns. And that is actually 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 are talking about us in the break room or on their way to their next patient.

And that is once again acquiring that next customer for us because FIGS, Inc. is a walking billboard around every health care institution, not just in the US, but around the world now. And so those dynamics where we are able to take the gains—right—we see these tipping points in markets where we are more mature. CACs fall dramatically in those markets. We are able to take those gains and invest in the next market. And then, you know, we scale, and we get really efficient on marketing, and then we take those gains again, and we invest in the next market. So we are seeing that now.

Those word-of-mouth dynamics, those customer acquisition tipping points across institutions around the globe—we are seeing that dynamic work on a global level, and it is really, really exciting. From an AI perspective, you know, you are right. We have an incredible amount of data—probably more data than others—because of when we started this company and how we are a DTC brand. And so we are utilizing this data. We are utilizing the AI tools at our disposal to become more and more personalized with our community. And that is why the retention—you know, our repeat frequency—has come back incredibly, and not just in the quarter, right? You saw it throughout last year.

Health care professionals are coming back over and over again, not just to replenish their uniforms. They are coming back to see what is new, to see what is interesting, to build out their uniform. Uniform builders has become a big category, and that is going to be a huge driver in the future.

And so it is very exciting to be able to have this incredible base of millions of health care professionals that we are interacting with on a daily basis, and now to be able to layer on top of that all of these different AI tools and utilize, you know, a lot of our insights around the differences between health care professionals across our community, and personalize on such a detailed level that we know exactly who you are and where you work and what you do and what you bought before and what you are most likely to buy again. And that is really powerful. And that is the future. We are at the forefront of this.

We are at the forefront of this personalization wave, and we are really excited about how it is going to generate even further gains for us in the future.

Adrian Yuk: Fantastic. Super helpful. My last question for you is on sourcing diversification and tariffs—where are you in that journey, and can you clarify the rates we should be thinking about this year given the move from country-specific rates to a potential global rate?

Sarah Oughtred: 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 is appropriate to take the more conservative assumption here at 15%. And so we have 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 outlook regarding top and bottom line is appropriate as we continue our sharp execution and stay on top of any changes that happen.

Adrian Yuk: Great. Very helpful. Best of luck. Congrats.

Trina Spear: Thank you so much.

Operator: The next question comes from the line of Ashley Owens with KeyBanc. You may proceed.

Victoria (for Ashley Owens): Hi. It is Victoria on for Ash. Thanks for taking my question, 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 is underscrubs, outerwear, socks, footwear? What carried the quarter and which of those you expect to be some sustained contributors into 2026? And then on Teams, what is the 2026 pipeline visibility? And how should we model Teams as a percent of revenue and its gross margin versus OpEx profile?

Sarah Oughtred: Yeah. So in the prepared remarks, we did talk about non-scrubwear benefit. So we are seeing improvement and great growth in our non-scrubwear—that is our Salta, Makoto, and our rib styles—that we are really pleased with the performance that we are seeing there. Within outerwear, that is being driven by our high pile bombers. And we are continuing to have category expansion into outerwear, which we are excited about for 2026. You know, we have also introduced bags, our new Archtech compression socks, and other accessories that are all performing well, and we are excited about the continued momentum there as we expand category and outfit the full closet of the health care professional.

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

Victoria (for Ashley Owens): Great. Thanks, and congrats again.

Operator: 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.

Trina Spear: Thank you so much. You know, what I want to just end this with is that it has been a long road to get to this point. But you have now seen that we have stacked great quarter after great quarter, and it is super exciting. But it pales in comparison to the opportunity ahead. We are so excited to go after that. So I just want to thank you all for joining us today. More to come.

Operator: And that concludes today's call. Thank you for your participation, and enjoy the rest of your day.

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