FIGS, Inc. (FIGS)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q, as well as our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the Securities and Exchange Commission (“SEC”) on February 26, 2026 (the “2025 Annual Report on Form 10-K”). This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Part II, Item 1A. “Risk Factors” and other factors set forth in other parts of this Quarterly Report on Form 10-Q. Unless the context requires otherwise, references in this Quarterly Report on Form 10-Q to “FIGS,” the “Company,” “we,” “our” or “us” refer to FIGS, Inc. and its consolidated subsidiaries.

Overview

Our mission is to celebrate, empower and serve those who serve others.

We are a founder-led, direct-to-consumer healthcare apparel and lifestyle brand that seeks to celebrate, empower and serve current and future generations of healthcare professionals. We are committed to helping this growing, global community of professionals, whom we refer to as Awesome Humans, look, feel and perform at their best—24/7, 365 days a year. We create technically advanced apparel and products that feature an unmatched combination of comfort, durability, function and style, all at an affordable price. In doing so, we have redefined what scrubs are—giving rise to our tag-line: why wear scrubs, when you can #wearFIGS?

By elevating scrubs and creating premium products for healthcare professionals that support them on and off-shift, we revolutionized the large and fragmented healthcare apparel market, branded a previously unbranded industry and de-commoditized a previously commoditized product. Most importantly, we built a community and lifestyle around a profession. As a result, we have become the industry’s category-defining healthcare apparel and lifestyle brand.

We sell products purposefully designed to serve the particular needs of healthcare professionals primarily through our direct-to-consumer (“DTC”) digital platform, consisting of our website, mobile app and B2B business (“TEAMS”). We also operate physical retail stores, which we call Community Hubs, and which represent a first-of-its-kind retail experience for healthcare professionals.

Our offerings include scrubwear and non-scrubwear, such as outerwear, underscrubs, footwear, compression socks, lab coats, loungewear and other apparel. We primarily design all of our products in-house, leverage third-party suppliers and manufacturers to produce our product components and finished products, and generally utilize shallow initial buys and data-driven repurchasing decisions to test new products. We directly and actively coordinate with our suppliers on every step of our product development and production process to ensure that our extremely high quality standards are met. We also have a dynamic merchandising model with lessened inventory risk, as a result of the largely non-discretionary, replenishment-driven nature of scrubwear and a focus on our core scrubs offerings.

At June 30, 2026, we had approximately 3.1 million active customers. Our customers come to us through word of mouth referrals, as well as through our data-driven brand and performance marketing efforts. See the section titled “Key Operating Metrics and Non-GAAP Financial Measures” for a definition of active customers.

In the three and six months ended June 30, 2026, we had the following results compared to the comparable period in 2025:

◦Expanded our community of active customers by 13.2% from approximately 2.7 million at June 30, 2025 to approximately 3.1 million at June 30, 2026;

◦Net revenues increased from $152.6 million to $196.6 million, or 28.8%, in the three months ended June 30, 2026, and increased from $277.5 million to $356.5 million, or 28.5%, in the six months ended June 30, 2026;

◦Gross margin increased 8.2 percentage points from 67.0% to 75.2% in the three months ended June 30, 2026, and increased 4.5 percentage points from 67.3% to 71.8% in the six months ended June 30, 2026;

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◦Net income increased from $7.1 million to $28.4 million in the three months ended June 30, 2026, and increased from $7.0 million to $34.7 million in the six months ended June 30, 2026;

◦Net income margin increased from 4.7% to 14.4% in the three months ended June 30, 2026, and increased from 2.5% to 9.7% in the six months ended June 30, 2026;

◦Adjusted EBITDA increased from $19.7 million to $36.6 million in the three months ended June 30, 2026, and increased from $28.9 million to $50.5 million in the six months ended June 30, 2026, representing an adjusted EBITDA margin of 18.6% and 14.2%, respectively;

◦Cash flows from operating activities increased from $(3.2) million to $43.7 million in the six months ended June 30, 2026; and

◦Free cash flow increased from $(5.6) million to $38.6 million in the six months ended June 30, 2026.

See the section titled “Key Operating Metrics and Non-GAAP Financial Measures” for information regarding adjusted EBITDA, adjusted EBITDA margin and free cash flow, including reconciliations to the most directly comparable financial measures prepared in accordance with U.S. generally accepted accounting principles (“GAAP”).

Recent Developments

Global Trade Policy

We continue to monitor changes in policy impacting global trade, including tariffs, which have been dynamic, unpredictable and subject to ongoing modification. In February 2026, the United States Supreme Court ruled that the use of the International Emergency Economic Powers Act (“IEEPA”) to impose tariffs was not permitted, invalidating a significant portion of U.S. tariffs that had been in effect since April 2025. The Administration responded by invoking a 10.0% global tariff pursuant to Section 122 of the Trade Act of 1974 (the “Trade Act”), effective on February 24, 2026, which expired on July 24, 2026. On July 23, 2026, the Administration imposed new tariffs ranging from 10.0%-12.5% pursuant to Section 301 of the Trade Act, effective July 24, 2026. These tariffs are intended to replace the Section 122 tariffs and affect imports from approximately 60 countries and territories, including those where our suppliers are located. The ruling and the Administration’s subsequent actions have created substantial uncertainty regarding the tariff environment, including with respect to (i) the scope and duration of the new tariffs imposed under Section 301 and any new or higher tariffs that may be imposed and (ii) the outcome of pending legal challenges to the Section 122 tariffs and the potential for further legal challenges to those, the Section 301 tariffs and any future tariffs.

Tariffs have increased our product costs, negatively impacting gross margin for the three months ended June 30, 2026. We have implemented, and plan to continue to implement as needed, various mitigation strategies, which have included, and may in the future again include, adjusting the countries from which we source our products and renegotiating terms with suppliers, but we cannot be certain how effective they will be over the long term. Without taking into account mitigation efforts and based on the information available to us today, we believe that tariffs will continue to negatively impact gross margin for 2026, although to a lesser extent than we previously disclosed in our 2025 Annual Report on Form 10-K. This estimate and actual impact may change materially as conditions evolve and new information becomes available.

Additionally, tariffs and other trade barriers, including those imposed by other countries on the United States, could adversely impact demand for our products domestically and in international markets. We cannot predict additional near-term changes in global trade policy, and additional tariffs or other trade barriers could further increase our costs or otherwise adversely affect our business, financial condition and results of operations.

IEEPA Tariff Refunds

Following the February 2026 United States Supreme Court's ruling invalidating the IEEPA Tariffs, U.S. Customs and Border Protection (“CBP”) began processing refunds of the IEEPA tariffs. We estimate we previously paid a total of approximately $20.6 million of tariffs imposed under IEEPA. CBP accepted our Phase I refund claims in the aggregate amount of $20.5 million, including associated interest. As of June 30, 2026, we had received approximately $4.5 million of the accepted claims and recorded a receivable of approximately $16.0 million for the remaining accepted claims on our condensed consolidated balance sheet as of June 30, 2026. We do not expect to apply for any refunds under Phase II of the process and there is still uncertainty regarding the timing, process and applicable criteria for future phases of the refund process. See Note 16 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information regarding our IEEPA refund claims.

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CBP Withhold Release Order

On June 23, 2026, CBP issued a withhold release order (“WRO”) against certain garments produced by our Jordanian manufacturing partner. That manufacturer accounted for approximately one-third of our finished goods production during the three months ended June 30, 2026. As a result of the WRO, our products produced by this partner may not currently be imported into the United States, and we may ultimately be unable or choose not to sell recently finished product from this partner. We have instituted various strategies to mitigate the impact of the WRO, including transitioning raw materials and future production to our other manufacturing partners. Overall, we expect the WRO will adversely impact our net revenues, gross margin and inventory levels in the second half of 2026. See Item 1A. “Risk Factors—Risks Related to Our Business—Our reliance on a limited number of third-party suppliers to provide materials for and produce our products could cause problems in our supply chain and subject us to additional risks” and “—Our ability to source and distribute our products, including our ability to do so profitably, is impacted by global trade policy.”

Key Factors Affecting Our Performance

We believe that our performance and future success depend on a number of factors that present significant opportunities for us. There have been no material changes to such factors from those described in our 2025 Annual Report on Form 10-K under the heading “Key Factors Affecting Our Performance.” Those factors also pose risks and challenges, including those discussed in Part II, Item 1A. “Risk Factors” of this Quarterly Report on Form 10-Q.

Components of Our Results of Operations

Net Revenues

Net revenues consist of sales of healthcare apparel, footwear and other products primarily through our digital platform. We recognize product sales at the time control is transferred to the customer, which is when the product is shipped to the customer. Net revenues represent the sale of these items and shipping revenue, net of estimated returns and discounts. Net revenues are primarily driven by the number of active customers, the frequency with which customers purchase and the average order value (“AOV”). See the section titled “—Key Operating Metrics and Non-GAAP Financial Measures” for a definition of average order value.

Cost of Goods Sold

Cost of goods sold consists principa

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and related notes included elsewhere in this Annual Report on Form 10-K. This discussion contains forward-looking statements based upon current plans, expectations and beliefs involving risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in Part I, Item 1A. “Risk Factors” and other factors set forth in other parts of this Annual Report on Form 10-K. A discussion of the year ended December 31, 2024 compared to the year ended December 31, 2023 has been reported previously in our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on February 27, 2025, under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”

Overview

Our mission is to celebrate, empower and serve those who serve others.

We are a founder-led, direct-to-consumer healthcare apparel and lifestyle brand that seeks to celebrate, empower and serve current and future generations of healthcare professionals. We are committed to helping this growing, global community of professionals, whom we refer to as Awesome Humans, look, feel and perform at their best—24/7, 365 days a year. We create technically advanced apparel and products that feature an unmatched combination of comfort, durability, function and style, all at an affordable price. In doing so, we have redefined what scrubs are—giving rise to our tag-line: why wear scrubs, when you can #wearFIGS?

By elevating scrubs and creating premium products for healthcare professionals that support them on and off-shift, we revolutionized the large and fragmented healthcare apparel market, branded a previously unbranded industry and de-commoditized a previously commoditized product. Most importantly, we built a community and lifestyle around a profession. As a result, we have become the industry’s category-defining healthcare apparel and lifestyle brand.

We sell products purposefully designed to serve the particular needs of healthcare professionals primarily through our direct-to-consumer (“DTC”) digital platform, consisting of our website, mobile app and B2B business (“TEAMS”). We also operate physical retail stores, which we call Community Hubs, and which represent a first-of-its-kind retail experience for healthcare professionals.

Our offerings include scrubwear and non-scrubwear, such as outerwear, underscrubs, footwear, compression socks, lab coats, loungewear and other apparel. We primarily design all of our products in-house, leverage third-party suppliers and manufacturers to produce our product components and finished products, and generally utilize shallow initial buys and data-driven repurchasing decisions to test new products. We directly and actively coordinate with our suppliers on every step of our product development and production process to ensure that our extremely high quality standards are met. We also have a dynamic merchandising model with lessened inventory risk, as a result of the largely non-discretionary, replenishment-driven nature of scrubwear and a focus on our core scrubs offerings.

At December 31, 2025, we had approximately 2.9 million active customers. Our customers come to us through word of mouth referrals, as well as through our data-driven brand and performance marketing efforts. See the section titled “Key Operating Metrics and Non-GAAP Financial Measures” for a definition of active customers.

In the year ended December 31, 2025, we had the following results compared to the comparable periods in 2024:

◦Expanded our community of active customers by 9.4% from approximately 2.7 million at December 31, 2024 to approximately 2.9 million at December 31, 2025;

◦Net revenues increased from $555.6 million to $631.1 million in the year ended December 31, 2025 representing 13.6% year-over-year growth;

◦Gross margin decreased 1.1 percentage points from 67.6% to 66.5% in the year ended December 31, 2025;

◦Net income increased from $2.7 million to $34.3 million in the year ended December 31, 2025;

◦Net income margin increased from 0.5% to 5.4% in the year ended December 31, 2025;

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◦Adjusted EBITDA increased from $51.8 million to $74.5 million in the year ended December 31, 2025, representing an adjusted EBITDA margin of 11.8%;

◦Cash flows from operating activities decreased from $81.2 million to $61.2 million in the year ended December 31, 2025; and

◦Free cash flow decreased from $64.1 million to $53.0 million in the year ended December 31, 2025.

See the section titled “Key Operating Metrics and Non-GAAP Financial Measures” for information regarding adjusted EBITDA, adjusted EBITDA margin and free cash flow, including a reconciliation to the most directly comparable financial measures prepared in accordance with GAAP.

Recent Developments

Global Trade Policy

We continue to monitor changes in policy impacting global trade, including tariffs, which have been dynamic, unpredictable and subject to ongoing modification. In April 2025, the United States announced a baseline tariff of 10% on all imports, in addition to country-specific tariffs applicable to certain trading partners, including Vietnam and Jordan, which together account for nearly all of our production of finished goods. The rates and effective dates of these additional tariffs were adjusted on several occasions since they were announced in early 2025. In February 2026, the United States Supreme Court ruled that the use of the International Emergency Economic Powers Act (“IEEPA”) to impose tariffs was not permitted, invalidating a significant portion of tariffs that had been in effect since April 2025. The Administration responded by invoking alternative mechanisms to impose a 10% global tariff and by expressing an intention to subsequently raise such tariff to 15%. The Administration also initiated trade investigations that could result in additional future tariffs. The ruling, and the Administration’s subsequent actions, have created substantial uncertainty regarding the tariff environment, including with respect to (i) whether and to what extent refunds will be issued for tariffs previously collected under IEEPA, (ii) the timing and scope of any new tariffs that may be imposed under alternative mechanisms and (iii) the potential for further legal challenges to any such tariffs.

The tariffs in place prior to the February 2026 Supreme Court decision have increased our product costs, negatively impacting gross margin for the three months and year ended December 31, 2025 by 260 basis points and 120 basis points, respectively. We have implemented, and plan to continue to implement as needed, various mitigation strategies, which have included, and may in the future again include, adjusting the countries from which we source our products and renegotiating terms with suppliers, but we cannot be certain how effective they will be over the long term. Without taking into account mitigation efforts, we estimate, based on the information available to us today, that tariffs will negatively impact gross margin for 2026 by approximately 400 basis points. This estimate and actual impact may change materially as conditions evolve and new information becomes available.

Additionally, tariffs and other trade barriers, including those imposed by other countries on the United States, could adversely impact demand for our products domestically and in international markets. We cannot predict additional near-term changes in global trade policy, and additional tariffs or other trade barriers could further increase our costs or otherwise adversely affect our business, financial condition and results of operations.

Key Factors Affecting Our Performance

We believe that our performance and future success depend on a number of factors that present significant opportunities for us. These factors also pose risks and challenges, including those discussed in Part I, Item 1A. “Risk Factors” of this Annual Report on Form 10-K.

Brand Awareness and Loyalty

Our ability to promote and maintain brand awareness and loyalty is critical to our success. We have a significant opportunity to continue to grow our brand awareness and loyalty through word of mouth, brand marketing and performance marketing. We have made significant investments to strengthen the FIGS brand through our marketing strategy, which includes brand marketing campaigns across platforms, including email, digital, display, site, direct-mail, commercials, social media and ambassadors, as well as performance marketing efforts, including retargeting, paid search and product listing advertisements, paid social media advertisements, search engine optimization, personalized email and

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mobile push notifications through our app. We plan to continue to invest in our brand and performance marketing to help drive our future growth.

Net Revenues per Active Customer

We believe net revenues per active customer is important to understanding our engagement and retention of our customers, and as such demonstrating the value we provide for our customer base. We calculate net revenues per active customer as the total net revenues for a specified time period divided by the number of active customers during that same time period. Through our differentiated core products, limited edition color and style releases and non-scrubwear products, we have repeatedly drawn customers back to our digital platform. As we continue to expand our products to fully outfit the medical professional, we believe we have a significant opportunity to continue to expand our share of both the uniform and lifestyle wardrobe of our customers and to increase our net revenues per active customer over time. Our future growth will depend in part on our ability to increase our net revenues per active customer.

Customer Retention and Engagement

Our continued success depends in part on our ability to retain, and drive repeat purchases from, our existing customers. We monitor retention across our entire customer base. Our goal is to attract and convert visitors into active customers and foster relationships that drive repeat purchases. As of December 31, 2025, we had approximately 2.9 million active customers, up from approximately 2.7 million active customers as of December 31, 2024.

Inventory Management

We leverage our technology to buy and manage our inventory, including product assortment and fulfillment center optimization. We generally make shallow initial inventory buys and then use data-driven repurchasing decisions to test new products, which allows us to manage inventory risk. To ensure sufficient availability of merchandise, we generally purchase inventory in advance and, because the vast majority of our production utilizes our main scrubwear fabric technology FIONx, and a substantial amount of our revenue is generated by our core scrubwear styles in core colors, which are in demand year-round, we can hold greater inventory without significant risk of obsolescence or exposure to seasonality.

Nevertheless, we are still vulnerable to demand and pricing shifts and to suboptimal selection and timing of merchandise purchases. For example, we previously experienced elevated inventory on hand, as a result of improvements in ocean transit times, following our decision to increase weeks of supply during periods of ocean transit time volatility, and softer sales trends due to adverse macroeconomic factors. We were successful in our efforts to address previous periods of excess inventory, but future inefficiencies in the timing of merchandise purchases and efforts to right-size invento

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