Good afternoon, and thank you for joining us to discuss FIGS first quarter twenty twenty five results. Which we released this afternoon. It can be found in our earnings press release in the shareholder presentation posted to our Investor Relations website at ir.wherefigs.com. Presenting on today's call are Tria Spear, our cofounder and chief executive officer Sarah Altred, 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 results could differ materially. These and other risks are discussed in our SEC filings including in the 10 Q we filed today. Do not place undue reliance on forward looking statements. Which speak only as of today 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 the shareholder presentation we issued today. With that, I would now like to turn the call over to Trina.

Thanks, Tom. Afternoon, everyone, and thanks for joining us.

FIGS is off to a great start this year with q one revenues up 5% year over year. And outperforming our expectations. As we indicated on our late February earnings call, started the quarter on a positive note and we were able to sustain this momentum later in the period. While we are clearly in a dynamic macro environment, what is most important for FIGS is that we saw continued signs that scrubber trends are starting to normalize from the COVID overhang the past couple of years. This included a number of encouraging trends during the period. We were particularly pleased to see strong gains during our normal full price days while also performing better than planned during our reduced set of promotional days. AOB growth shifted positive for the period and reached a record level for the company. At the same time, we saw ongoing momentum in our reactivation. Bringing back customers who had not bought from our brand in over a year. These measures supported a return to positive growth in The US which is pivotal for driving sustained growth. Bottom line performance also exceeded expectations. Driven in large part by our top line improvement. Adjusted EBITDA margin of 7.2% came in above our 5.5% to 6% target.

Even as we heightened our focus on making strategic investments across the business. Our conviction in these investments is unchanged given the opportunities we see to accelerate growth and drive greater contributions in key areas like international, our b two b teams business, and retail. Adding to these results, we continue to be fortified by our strong balance sheet, We believe our cash balance cash flow generation, and debt free structure give us the ability stay on offense with our strategies while also solidifying our financial position against the macro uncertainties that have grown across the overall market. As we look ahead to those uncertainties and how we plan to operate, we think it is incredibly important to highlight what makes the FIGS story and brand different. At the highest level, the health care industry backdrop remains compelling and resilient. Supported by its essential nature in our economy. US health care jobs are the backbone of our society and our expected to grow nearly three x the rate of the overall job market over the next decade. We have seen similar pacing in recent months, including in April where the broader health care sector added nearly 60,000 jobs during the month, representing nearly one third of all jobs added.

At the same time, wages have begun to improve following strong gains during the pandemic in the more recent period of underperformance. Within health care, uniform of the community is scrubs, a replenishment category that centers around a tight range of highly productive styles. As we have discussed, we believe health care professionals stocked up during COVID, creating an overhang that contributed to slower growth the past two years. But as we would expect in replenishment business, those same health care professionals need to keep buying their uniforms, ultimately leading to a normalization of consumption. This is all part of the FIGS story. We changed the game in the scrubs market in 2013, breaking through an industry of ill fitting, commoditized, nontechnical goods to become the brand that is synonymous with quality, durability, style, and comfort. Our category leadership begins at the yarn level and how we differentiate across both fabric and construction to create products that are consistently superior and premium in the market. Ultimately redefining expectations. Changing the game also requires ongoing thought leadership in the space, While copycat's concentrate efforts on playing the fast follower game the color drop game, we are focused on driving new innovation, like our recently introduced Form x fabric.

Exceeding our own high bar on superior fit bringing on trend silhouettes to the market like scrub leggings and wide leg scrub pants, and ultimately building a uniform layering system never seen before the health care apparel industry. Importantly, this is much more than just an opportunity to take share. It's about the opportunity to create and redefine the market. And perhaps what differentiates us the most is how we celebrate, empower, and serve our community. We have opportunities to elevate the important work and needs of health care in ways that have real and lasting impact. Our year long focus on where do you wear FIGS is a great example. Including our impactful work during International Women's Month showing how much our message resonated within our community and beyond, our Women's Month film went viral. Our film and campaign captured the experience of female health care professionals in ways that truly made them feel seen, leading the campaign to have an astonishing 100,000,000 impressions. Collectively, this is not easy work. But it is what defines brand leadership in this community and drives our passionate following. No one else does this with this kind of scale and this kind of impact.

Ultimately, it gives us the opportunity to bring new health care professionals into our community, build more connections, and create more reasons to choose FIGS. Measuring our recent impact and progress, I would like to spend some time on our recent customer engagement as well as our efforts to expand our reach to more customers. The past few months have been an incredible stretch of the year for our community. Each March, graduating medical students learn which residency programs they will be with. Match day provides a great example of how FIGS is on the ground and in person during monumental moments for young health care professionals. We plan to extend the range of student experiences across celebrations in schools, in the years to come. This is truly an authentic way to drive engagement and create a long term pathway into the brand, at such an important moment at the start of their medical career. Next up is our scrubs that don't suck campaign. The goal is simple. Allow healthcare professionals to get rid of their old, itchy, scratchy, ill fitting scrubs and up to FIGS. Aka scrubs that don't suck. This is not only a huge opportunity to acquire new customers, it allows us to do so responsibly.

By recycling those old scrubs into products that are far more useful. Following a successful test last year, we are excited to now make this program permanent. We think this is another powerful differentiator for our brand, we're encouraged with our recent activation in Houston, which tripled the volume of donations seen at last year's corresponding event in Philly. I'll have more on Houston in a moment. Finally, we are in the midst of one of our most important events of the year, nurses week. This week long event puts our nursing community in the spotlight. To celebrate their immeasurable contribution to society. We've always gone big for nurses week, but this year, we're setting a new bar. We are excited to extend our where do you wear FIGS campaign with a new film focused on nurses that has quickly become viral itself. Like our women's day film, it's our goal to have every nurse watch it and feels truly seen and valued. We then elevate this campaign by featuring it across a range of outlets connected TV to premium out of home placements so everyone gets the message. That it's nurses, not just athletes and celebrities who should be inspiring the generation.

And this is just the start. We have many other surprises that will be playing out over the next week. Having impacts like these are amplified by evolving how and where we go to market. Last call, we highlighted the need to accelerate our investments to better reach new and existing customers. And we are well underway. On these efforts. Let's start with our vast international opportunity. Over 80% of global health care professionals are, yet they represented only 15% of our net revenue in 2024. To date, we have taken an efficient centralized approach to our global expansion. Which has served us well given our ecommerce focus and ability to leverage a common digital platform. We have then been able to analyze these markets to prioritize and calibrate further investments and drive outsized impact across localization, awareness, and engagement. Our fundamental approach here is unchanged in 2025, though you will see us harness technology to expand our regional approach to new markets while also investing heavier across our localized efforts in our more seasoned markets. Later this quarter, we also plan to officially debut FIGS in Japan. The Japanese market is highly attractive with over 5,000,000 health care workers.

A highly concentrated population in urban markets, and a consumer focus towards products that offer both fashion and function. Given the complexities of entering this market, we're investing heavier out of the gate with a goal to support more meaningful growth in 2026 and beyond. Similar to The US, we believe we can differentiate the brand and win by supporting the health care community in unprecedented ways. Though these are actions that will take time to scale. In addition to these foundational investments, we're also on track to enter the South Korean market in the second half of this year.

Next up is the Teams business.

We have indicated, we estimate 15% of the scrubs industry has been driven by institutions, buying for their teams. At the same time, we have seen a broad commercialization of healthcare, meaning new pockets of opportunity are rising within concierge medicine. Med spas, and other similarly modern ways to be cared for. Think about some of the clinics you may interact with. Dermatology, veterinary, cryotherapy, fertility, etcetera, all addressing specific needs in new ways. These are fast growing spaces that are increasingly looking to drive premium experiences both for employees and for patients. While these are obvious opportunities, also see the ability to out sales reps who work side by side with health care professionals. Large institutions that are right for modernization in international where we are just beginning and we believe the mix could be even higher. Commanding well under 10% of our business today, we are evolving our team's approach that so we can actively go after these pockets of opportunity many of which require relationships and solutions that cater to individual needs. We previously announced the hiring of a dedicated leader for this business in January, she has been actively calibrating the business for growth. This includes the hiring of our first outbound team members during q one, and we're excited to have already booked our first outbound orders with one of the largest health care companies in the world.

It also includes more tactical initiatives, including tech investments to drive simplicity and [indiscernible] marketing investments to develop team's assets and drive awareness, and inventory investments to meet a wider range of buying needs Most importantly, this is a business that we own, and that positions us to expand our competitive moat in the market. Finally, we remain bullish on the role our community hubs can play. Our work shows that over 60% of health care professionals want try or feel a product before purchase, which means that having a physical presence is critical. As a barometer of impact from our first two stores, we continue to see nearly 40% of our customers at these locations are new to FIGS. And that includes our home market in LA, where we already have the highest brand penetration. Additionally, 30% of acquired customers from these locations go on to become omnichannel purchase We remain committed to testing and investing in this nascent channel. This includes efforts that are very much aligned with our brand in terms of building community engagement. We've already hosted a range of events year to date, including match day, wellness sessions during nurses week. That extend our larger effort to have a local feel and impact As we hinted earlier, we are excited with our Houston during the quarter and are thrilled to announce our next community hub location there at Rice, Village.

This location puts us just blocks away from the Texas Medical Center, the world's largest medical complex With over a hundred thousand employees across 61 institutions, the center supports more than 10,000,000 patient encounters during the year. And includes some of the nation's top rated facilities like the MD Anderson Cancer Center, We are also working to finalize details for two additional locations we plan to open by the end of the year. Before handing the call over to Sarah, I would like to provide some color on how we are navigating this evolving operating environment. Starting with Harris and some perspective on our supplier base. The majority of our production today comes from Jordan followed by Vietnam, then very small contributions from China and Peru. The recently imposed tariffs create risk for us, and given the speed at which global trade policy is evolving, it's important to pinpoint where they will ultimately land and how much they will increase our cost over time. That said, we believe we're uniquely positioned with suppliers for three reasons. First, the majority of our assortment is nonseasonal. Second, our products are replenishment driven. And third, our mix is centered around high volume, low SKU count core scrub wear.

This is how we've managed to be so nimble in making meaningful production moves in recent years, effectively giving us cross source capabilities with a strong set of partners. So even though we're not immune from cost pressure as a result of tariffs, we do have in advantages as we weigh our future actions. Finally, as we work to mitigate the impact of tariffs, it's important to emphasize that we'll never compromise on the key to FIGS success. We are a product company, first and foremost, and the quality of our product is a big driver of what truly sets us apart. Before FIGS, our community had to settle for bad products and a bad experience. We changed all that. And regardless of any short term trade uncertainty, we're gonna keep moving forward. We have put ourselves in a position to invest in our growth and to serve our community at the highest level. And we're going to take advantage of that strength because that's what our community deserves. Full stop. So in terms of our long term prospects, we remain extremely confident. In terms of how the tariffs will impact us over the short term, as Sarah will outline, the financial impacts are challenging to forecast.

So we're laying out what we think is a reasonable set of assumptions and outcomes based on what we see today. Ultimately, this impacts our expected range of adjusted EBITDA margin outcomes for the year gives us a framework to make thoughtful brand decisions that allow us to continue to strengthen our position. We entered the year with a clear focus on how we will continue to serve our community, and an understanding of what we needed to lean into from an investment perspective. This will require added discipline as we adjust to a range of outcomes. But remain instrumental in our approach. We are fortunate that with our category leadership, our competitive advantage and a strong financial profile, we are in a position to both take and create share to widen our competitive moat. Great brands are able to uniquely harness macro challenges and we will continue to boldly lead and define this industry. Going forward. With that, I'll turn it over to Sarah to review the quarter and our updated financial plan.

Thanks, Trina.

FIGS first quarter results underscored some of the optimism we had coming into the year executing well across our range of sales channels, product and color launches and calendar events.

Net revenues increased 5% to $104,900,000 above our outlook of approximately flat performance for the period. We saw strong customer reception to new color and product during the quarter, and we're even more encouraged with how we performed during what we call our full price business as usual days. And while the planned reduction of promotions did have an adverse impact, revenue performance exceeded our expectations during those events. AOV increased 3% to $119 a new high for the brand. Primarily driven by a higher rate of full price sales and higher average unit retail due to product mix. From a customer perspective, we saw encouraging overall results despite the promotional changes. Our customer composition was supported by our successful ongoing efforts to bring lapsed customers back to the brand along with better stabilization of both acquisition and churn metrics. Overall, our active customers for the trailing twelve month period increased 4% year over year to $2,700,000 while net revenues per active customer eased less than 1% to $2.00 $8 Looking at revenues by category, scrub wear increased 5% representing 80% of net revenues for the period. We continue to see traction with our limited edition styles as well as a good balance color performance between new launches and core offerings.

Non scrub wear increased 4% representing 20% of net revenues Reported growth was particularly impacted by the change in our promotional strategy, giving the heavier inventory positioning last year, as well as efforts to work down inventory in certain categories for future reinvention. Despite these headwinds, we continue to see strong double digit overall growth in footwear and underscrubs which have both been areas of high demand and opportunity for the brand. By geography, US sales increased 3% to a hundred and $6,000,000. This is the best domestic performance we have seen in the past six quarters with particular strength from repeat customers. International sales increased 16% While this was a step down from the growth rate in Q4, that period included an outsized favorable year over year benefit from a duty reclassification. We remain pleased overall with several key measures, including strong traffic, stable conversion, and like The US, strength during non promo days. Gross margin for Q1 contracted 130 bps points to 67.6% trending in range with the past three quarters. Results were roughly in line with expectations that do reflect higher promotional performance than anticipated. Compared to last year, mix continues to be a headwind as the expected, primarily driven by the mix within our scrub work category, including the impact of limited edition styles.

Additionally, we incurred higher freight expenses given our action to mitigate shipping issues in the Red Sea. Partially offsetting these pressures, we saw the overall of fewer promotions during the period. Our selling expense for Q1 was $32,700,000 representing 26.2% of net revenues compared to 23.9% last year. We continue to see the impact of higher cost of our new fulfillment center which we are actively optimizing and scaling. We also incurred higher outbound shipping expenses given our investments to improve domestic shipping time and due to our higher international sales mix. Marketing expense for q one was $200,000 representing 14.5% of net revenues, which was unchanged from the prior year. G and A for Q1 was $33,800,000 representing 27.1% of net revenues compared to 30.2% last year. The decrease in G and A expense rate was due to meaningfully lower stock based compensation expense partially offset by higher depreciation related to assets purchased for the fulfillment center. Combining these items, our adjusted EBITDA for Q1 was $9,000,000 with an adjusted EBITDA margin of 7.2% compared to 10.9% last year. Notably, this margin performance came in ahead of our Q1 outlook of 5.5% to 6%. Net loss for the quarter was $100,000 or diluted EPS of $0.00 0 compared to net income of $1,400,000 last year or diluted EPS of $0.1 Onto our balance sheet, we finished the first quarter with net cash cash equivalents and short term investments of $251,200,000 While slightly down year over year, it reflects $48,000,000 of share repurchases our equity investment in AUG, and last year's higher rate of CapEx associated with our new fulfillment center.

Inventory increased 1% year over year to $131,600,000 that was down 27% from our peak level in Q1 of twenty twenty three. Our current overall position is healthy as we now focus on optimizing further as we progress through 2025. This includes our continued effort to work through smaller pockets of inventory, including older fit profiles and select categories slated for future reinvention. Looking ahead, we do anticipate the possibility of a higher inventory growth rate in Q2 given some of the uncertainties in the trade environment? On the capital allocation side, we repurchased approximately $2,700,000 worth of shares during the quarter at a weighted average price of $4.73 per share with $52,000,000 available for future repurchases. Capital expenditures for the quarter were $1,300,000 and we remain on track with our full year plan of approximately $5 Finally, we delivered free cash flow of $7,900,000 for the period. Now turning to our planning for the balance of the year. While we are encouraged with this start to the year, we, like the rest of the broader industry, are confronted with new uncertainty of how macroeconomic and consumer pressures will unfold. As we discuss the financial implications, believe the best approach is to look at where trading policies stand today, make clear distinctions of what we are doing in a assuming in this environment, and just as importantly, distinguish what is still undecided.

This process will require us to be nimble and continuously evolve our thinking all intended to be in the best interest of all FIGS stakeholders including the healthcare professionals, who we serve. First, to reiterate, our original full year outlook outlined a plan that we felt good executing against reflecting our belief that industry demand is stabilizing and our merchandise and channel efforts gaining momentum. It also included our decision to reinvest our margin headwinds from 2024 to accelerate investments in key areas like international, teams and retail. As Q1 demonstrated, we track very well on those parameters. The ongoing changes in global trade policy have created more uncertainty. We are already subject to the recent baseline 10% tariff and just at those new levels, we expect to see a meaningful increase in our cost of goods sold. Both this year and into 2026. It requires us to scenario plan a range of trading and mitigation steps all of which will remain fluid in the months ahead. With all of this in mind, our full year 2025 net revenue outlook is unchanged. Including the Q1 beat, we still remain within our prior net revenue guidance range of down low single digits and retain our prudently cautious outlook for the balance of the year.

For our full year adjusted EBITDA outlook, we are now projecting a range of 7.58.5%. Our outlook assumes the current 10% baseline and reciprocal tariffs on China remain in effect for the balance of the year without the currently paused reciprocal tariffs being added in. The low end of our range includes an unmitigated tariff impact of approximately 150 basis points. The high end reflects strong execution of our cost mitigation strategies and thus includes a reduced tariff impact of approximately 100 basis points. The additional consideration here is how our average inventory costing will impact the timing and degree in which the tariffs flow through the P and L. We expect the tariff impact will not materially flow through the P and L the second half of the year and will still be phased in with lower cost goods already in inventory during those periods. Now let me provide some further details starting with our supplier base. As Trina highlighted, the majority of our production comes from Jordan today and a large percentage comes from Vietnam. Related to our very small exposure to China, we are exploring various mitigation strategies including canceling certain orders and resourcing We do expect our advantaged product mix will remain an asset as we look to stay nimble in calibrating and diversifying our supplier base.

On the cost mitigation side, we are looking at a range of options across the supply chain and further expense management. Notably, even with this planned expense diligence, we remain committed to the actions we outlined last quarter playing offense with investments to accelerate our key growth drivers of international teams and retail. The other potential mitigation lever is pricing.

To be clear, we have not made a definitive decision on pricing and no pricing action is included in our updated outlook range. We understand the pressures that many of our healthcare customers face and will be strategic in how we think about the implementation of any pricing action. Now looking at the specifics of our updated 2025 outlook. As I mentioned, we continue to expect net revenues for 2025 to be down in the low single digit range year over year. While we were pleased with our performance across a range of events in Q1, we are taking a prudently cautious approach in future periods given both the change to our promotional planning and the uncertainties around consumer demand. For the second quarter, we are planning for net revenues growth to be approximately flat. We have started the quarter with positive year over year performance and remain mindful of more difficult comparisons and a relatively lighter new product calendar. For the second half of the year, we are factoring in a greater sequential headwind from the reduction of promotional periods as well as added uncertainty around consumer behavior. On the margin side, while we plan to be less granular in our line item disclosure here, there are a few considerations.

First on gross margin. Our current tariff assumptions would have little incremental impact on Q2 performance where we expect gross margins to be within range of the prior year. We then would expect incrementally higher impact in Q3 and Q4 as more of these goods work through the balance sheet and onto our P and L. To help offset this pressure in gross margin, our mitigation work is primarily focused on the selling line and other G and A opportunities though we will remain thoughtful across the full expense structure. Selling expenses overall will continue to reflect the lapping of last year's transitory fulfillment center expenses with some offset from ongoing inefficiencies as we work to scale our logistics efforts The marketing expense rate is planned lower given the Olympics comparison. But we will continue to incrementally support our channel growth efforts and G and A will include what is now planned to be a 16,000,000 production in stock based comp year over year partially offset by higher planned people costs. As a reminder, our adjusted EBITDA results exclude the impact of stock based compensation expense. Within the full year adjusted EBITDA margin range of 7.5% to 8.5%, we expect Q2 margin to be above the prior year mark of 9%.

Margin in the second half would best carry the greatest variability, and we remind you of the outsized expense comparison from last year in Q3. On the capital allocation front, we plan to continue to prioritize investments in our business while also preserving our balance sheet strength. At the same time, we expect to be more conservative with other uses of capital in the near term until we have better clarity how the macro environment will play out. The months ahead will require ongoing vigilance in our approach and thoughtfulness in our actions, and we believe we are well positioned to navigate this environment. We have a fortress balance sheet, operational discipline, an experienced and energized leadership team, and a clear focus on priorities to grow. Most importantly, by sticking to our mission of serving those who serve others, we know that the work we do is not only extremely meaningful, it's sets us up for continued success as a business. We look forward to sharing more details on our progress in subsequent calls, and I will now turn the call back over to the operator for Q and A. Operator?

As a reminder, if you're using a speakerphone, please remember to pick up your As a quick reminder, all questions are limited Our first question comes from Matt Koranda with the company Roth Capital. Matt, your line is now open.

Hey, guys. Thanks for taking the question. Just wanted to see if maybe and by the way, thanks for all the the detail there, Sarah, around tariff mitigation. Wanted to see if we could focus on that just for a second. I guess the message is we have savings we can go out and get via supply chain efficiencies and and vendor negotiations. To to sort of limit a lot of the exposure, but there's about $7,000,000 in sort of downdraft at the midpoint in terms of the dollar impact. Why not take price or why not build price into the outlook? And maybe just talk about sort of what levers you have on the pricing front to offset that seven Sure. So I'll I'll I answer your first part, and then Trina can add on in some of the pricing. So, yes, you're thinking about that exactly in the right way. So we do some opportunity to take some cost mitigation. I mean, like, we set out in 2025 to really optimize and scale our fulfillment center and our supply chain and now we're just being, you know, even more rigorous with that approach. So there's opportunities for us to continue to look at inbound and outbound shipping efficiencies.

We're continuing to work with our suppliers to reduce costs, [indiscernible] you know, throughout the p and l, we can make some decisions around people cost. You know, we're gonna continue to be scrutinizing the roles really looking at the timing of hiring, and, you know, we'll continue to be very disciplined around g and a.

So that's what we're setting out to deliver on as part of our cost mitigation at this point.

Don't you Yeah. And I think, you know, we're really mindful of who we serve. Right? We serve health care professionals. Two thirds of our customers make less $100,000 a year. Right now, we're in the midst of nurses week. Right? Nurses make up a big part of our of our customers, and we're really proud of our ability to serve them with great product. That is both affordable and accessible, and it needs to be. Right? These are uniforms that they're gonna work every day to do their job. And so, you know, then we think also they value this price consistency that we've had, especially in our core scrub wear. Over the years. And so, you know, we're focused on doing everything we can to offset the impact of the tariffs. And have a lot of in mitigation strategies in place in addition to working with our suppliers across our you know, our supply chain, to offset the cost. I mean, that is what we are doing. And, you know, price you know, I think is the last thing, that we'll look at, to offset this as we do think we have a lot more work to do internally.

And that's where we're focused.

Okay. Understood. And then maybe just on the demand normalization, you get this is been a theme, it seems like, the last, call it, six months or so, maybe a little bit less. Terms of you guys calling out better engagement with the brand and and maybe some normalization in purchasing behavior. Curious if you're you're still seeing that quarter to date. Was there any impact I guess, from some of the volatility that's been followed up by so many people in the consumer space in April? That that changes the trajectory of the way that you think about health care professionals normalizing their purchase bed? Patterns?

I think can start, and then I'll jump in. I think, you know, we feel really good about coming out of this COVID overhang and entering and moving into period of more normalization. We've talked about that a lot, and we've really seen it. The start of the year. You know, q two repeat frequency is up. US business is up.

Scrubware is up. Non scrubber is up. We had a record quarter of AOV at a hundred and $19. That really just shows our brand strength. Active customer is up 4%. And so the underlying demand and the fundamentals of the business are strong. We saw that as well going into two. And, Sarah, I don't know if you have anything to add on that.

Yeah. I mean, we've not seen any notable shift in the consumer behavior. We delivered 5% in q one. That was consistent with q four. And we've entered q two with positive growth as well. I would note that we do see some softening demand from our Canadian customers. That's very much impacted by the tariff situation. Our social media comments tell us that, you know, Canadians wanna be supporting Canadian businesses right now. And I think there's some worry that the 25% Canadian tariff on US goods that came into effect mid March would apply to FIGS goods. It doesn't, but that is an added hurdle to the purchase journey. Those are trends that, you know, we we are seeing being consistent with commentary from other brands. And and other industry reports.

Okay. Appreciate all the color, guys. I'll, leave it there.

Our next question comes from Brooke Roach with the company Goldman Sachs. Brook, your line is now open.

Good afternoon and thank you for taking my question. Trina, I'm curious, does the recent volatility in supply chain and tariffs have any impact on your fit initiative that you're looking improve customer experience into the back half?

No. Not at all. Our fit our fit transition is on track.

For the year, and, we're working with the same set of suppliers even as as we shift some near term capacity to offset the tariffs that our fit initiative will not be impacted by these ships.

Great. And then just a follow-up for Sarah. Can you give us a little bit more color on the optimization of your selling expenses, particularly some of those inefficiencies in the DC from last year? How should we be thinking about the cost savings opportunity for selling that might be applied as a tariff mitigation effort versus what you think the opportunity is over a multiyear basis, maybe next one, two, three years for that as a percent of sales? Yeah. I think that there is opportunity us to continue to scale with volume. K? So we built this facility have capacity for a billion dollars in revenue, and we're, you know, almost half capacity there. So as the bills start to come, we will naturally see some improvements that come there. In addition to that, we're still young in our journey here. So the opportunities that we're looking at really within selling costs is you know, multi carrier opportunities, continuing to negotiate with our vendors. And there's just different opportunities that we're looking to optimize. John Tam, our new COO, is actively built a road map that we're gonna continue to go after. This is just us being more, you know, accelerating our efforts there to drive into the savings.

Our next question comes from Rick Patel with the company, Raymond James. Rick, your line is now open.

Thank you. Good afternoon. Double click on international performance? When we put aside some of the quarterly variability around the one offs, what does the rate of growth look like there? And guidance implies a slowing of trends in the back half. I'm just curious, how we should consider The U. S. Market versus international markets in the back half?

Sure. Thanks for the question. Yeah. So our international business grew at 16% for the quarter. That is down from the growth rate that we saw in Q4. So just to keep in mind that the growth rate in Q4 was positively impacted by the duty reclass adjustment from the year prior. Another piece to consider is that our promotional cadence shift did create a negative impact on the growth rate. And then there's also some impact from FX. But underneath that, we're really pleased with the trends that we're seeing. We're seeing great growth in being driven from the Mexico business, from our Europe business as well as The Middle East, and that broadly coming from both new and returning customers. And across traffic and conversion. So really well balanced performance and some really great things that we're excited about. So you know, underneath, you know, some of those pieces there, the underlying demand is really healthy and positive. Trinh, do you want to speak about your Australia trip and how we're incorporating some some learnings there?

Sure. Yeah. I mean, I had a chance to travel to Australia with our team, in the first quarter, and we it was during Australian health care week in Sydney, and it was pretty awesome. Be able to be there with our community and looking to inspire the next generation of health care workers Australia is an incredible market. We really saw a ton of community engagement. In that's really important as we look to understand local culture, the market, different behavior, different preferences to The US. And so we're continuing to really localize market by market, Australia being a great example. And like Sarah mentioned, Mexico is performing well. Europe, broader Europe is doing great as well as The Middle East. So continuing to build out our international presence, we are in 32 countries outside The US. Japan is coming shortly with South South Korea later this year. So really excited about what we're gonna be able to do on a global scale as we continue to enter new markets.

And then I can just answer the second part of your question, which was on the the slowing trend the back half of the year. That's broadly related to our shift in promos. So where we're pulling back on promos will have a larger impact in the back half of the year than the front half the year. And so that's driving the shift in trends from one h to two h.

Well, based on the pricing side of things, can you talk about what you're seeing in the scrubber category more broadly? And if prices do go up in a category, how would that change your philosophy on your own pricing?

Yeah. So, you know, Scrubware grew 5%, in the quarter. It was really great to see. We're seeing a lot of the growth coming from our limited edition styles, and that's both across you know, core colors and new colors. And, you know, just in terms of pricing, there's, you know, Trina's really touched on a lot of those. We do have different prices for limited editions versus our core scrub wear. And so we will just need to really think strategically and surgically about what pricing opportunities we would take across our core scrub wear or our limited edition scrub wear. Or whether that comes in through some of our newer styles. And so there's just lots for us to still think through about what what would be the right way to do pricing if and when we decide to do that.

Our next question comes from Brian Lagel with the company Oppenheimer. Brian, your line is now open.

Hi, good afternoon. Thanks for taking my questions.

So I do want to focus at least initially on tariffs. And so the question I have, mean, look, recognizing that what we're seeing develop here is much more much more broad based than anything we've seen historically and also recognizing FIGS is a young company. But is there any as you look back at your history, do you have any precedent for having to deal with, you know, with with trade issues like this and how you did it?

Sure. I mean, COVID is a great example. Right, Brian? And we managed through a pretty tough supplier environment during COVID. As you mentioned, we are a young and nimble company, and we have a really flexible supply chain. And you saw that in our history. And so I think the the big benefit that FIGS has is that we have a nonseasonal business. Right? And so, you know, whether it's holiday or spring or summer, we are keeping the launch of our manufacturing partners running all year round. The second thing that's really important that's truly unique is that we have a replenishment driven business. Health care professionals are coming back over and over and over again to replenish their scrubs. And so once again, that's a really great thing from a manufacturing perspective. The third thing is that we have a high volume, low SKU count business. Of really productive styles. So our partners are able to understand, what we're making. And that is running year in and year out. Our core scrubber business is the vast majority of what we do. And so those are all benefits, and it enables us to make production moves in the past.

It enables us to cross source across our partners. It has enabled us to continue to be an incredibly growing profitable business year after year. And so you know, we're gonna use this opportunity and this and use this tariff situation to cement our leadership position. We're gonna use it to widen the moat, to be opportunistic with our cash, I know you know we have a fortress balance sheet. And so that enables us to be opportunistic and really build our growth levers and double down on our community as they come out of this COVID overhang.

That's very helpful, Trina. Appreciate all appreciate that. The second question I want to and you may have covered this already, I apologize if it's repetitive. But look, if you look at the, I guess, the sales algo [indiscernible] AOV is, you know, is is is was again stronger here here in in q one. What's driving that? What are the drivers behind the higher year on year AOV?

Yeah. So our AOV was up 3% year over year and hit a hundred and $19, which is the strongest in the brand's history. So really great to see. Primary drivers behind that are a reduction in discounts and that's attached to our pullback of promo. The other piece in there is also just product mix shift. Those are the two main components driving that growth.

And I would just say on this point of AOV, the number one indicator of brand strength is AOV. You know, having a record AOV in q one is a really important indicator of where we're going. And that our health care professionals, are that what we're doing is really resonating with our community. And so really great to see that. And I think in the first question I mentioned Q2, all the metrics I was referring to was Q1 of twenty twenty five.

Thank you very much. I appreciate it.

Thanks, Brian.

Our next question comes from Dana Telsey with the company Telsey Group. Dana, your line is now open. Thank you. Good afternoon, everyone. Just want to ask a near term and a long term question. If you think about the near term, planning for inventory going forward, I think, Sarah, you mentioned higher inventory growth in Q2. Anything of the magnitude and then planning for back half as you're thinking about it? And then, Trina, the b to b business seems the opportunities and now with the sales team that you're building, seems to has the potential to grow pretty fast. How are you thinking about that growth How are you thinking about where you go and what the opportunities are going forward?

Thank you. Hi, Dana. Thanks for the question. So just in terms of I mean, we're finishing q one with inventory at 1% year over year. And as we go into Q2, our Q2 ends in June, close to when the ninety day expiration happens. And so we're just evaluating opportunities of if we should be pulling in inventory before that expiration date. And so we're just continuing to monitor that. We think there is the opportunity to strategically pull a few things forward. And so that would bring an increase in our inventory balance year over year. Also, our inventory balance last year, in q two, you know, just from timing of in transit did was pretty low. So overall, we would be up year over year, and we just think that, you know, we have the opportunity to get ahead of potential increases, And there's less risk to us because we are a uniform business. We're we're not necessarily trend based, or have products that would expire quickly. So we feel comfortable with where inventory is at. There's still continued opportunities for us to be balancing but we are working through our fit transition this year. We've also been bringing in inventory related to format there's just a few pieces there that are bringing up our balance.

But ultimately, we've set out this year to be buying with conviction, really to support our growth momentum.

And as it relates to Teams, Teams is an incredibly exciting opportunity, one that we've talked a lot about with you 15% of the market is health care professionals. That that don't buy their own scrubs. Right? Their employee their employer their administrators, their, you know, the head position or at the office is buying on behalf of their team. And on top of that, we're seeing this huge trend within concierge medicine. Where, you know, these businesses are looking to brand and professionalize their teams.

And they're turning to FIGS to help them do that, which is super exciting. And so this outbound team that we built, the timing is really optimal. And we're and we're not just leaning into going out and bringing on large institutions. Although we did bring on one of the largest health care companies in the world, during the quarter, can't yet say the name, but that's coming soon. But we've also really simplified the process and the technology, and it's it's first of its kind. Our team's technology is really simple. You're able to go on there, order for your hundreds, thousands of sets of scrubs for your team, jackets, fleeces, scrub jackets, compression socks, whatever you need, so that your whole team could look unified and go to work and do that job. And so really exciting early wins, from an outbound sales perspective. More to come here, but we're excited.

Thank you.

Our next question comes from Nathan Fether with the company Morgan Stanley. Nathan, your line is now open.

Hey, everyone. Congrats on the strong quarter. I wanted to dig a little bit more into some of the cohort data you talked about.

Help us figure out what have been the primary component to drive this reactivation anything kind of separate from the core business? And do you see difference in consumer behavior once you reactivate a customer versus if they had churned in the first place? Thank you.

Hi, Nathan. Thanks for the question. Yeah. I mean, in terms of reactivation, I think we're just giving our health care professionals more reason to come back. And that ultimately starts with products and having really great products, and that's supported by a ramp up in our marketing efforts. And so those two pieces, you know, are, you know, bringing back that customer at increasing pieces that's really helping to increase that active customer growth. And so, know, we've been really working to evolve our marketing to a full funnel approach making investments across the funnel to really amp our brand messaging. We've been really happy with our campaign that we've launched, which is where do you wear FIGS. And that will continue to run throughout the year. And that campaign is just you know, really resonates with health care providers and, you know, really, you know, makes them, you know, feel like they are being seen and heard. And I think that really important. You know? And we're continuing to speak to them in ways that they wanna continue to engage with us. And so I think those are all of the drivers for what is helping to improve some of our active customer growth.

Yeah. And the last thing I would just say on the reactivations, you know, whether you're coming to us in month three or month 10 or month 13, like that, the community loves FIGS. Right? And so, you know, this active customer period of twelve months is kind of a, like a an arbitrary, formula. But I do think the behavior of our community in that reactivation number is is really a sign a really big sign of coming out of this overhang and into a more period of normalization. And so that's a really great thing to see, and we're and we look forward to seeing kind of that repeat frequency continue to improve over time.

Great. Okay. Good stuff. Thanks, everyone.

Thanks, Nathan. Our next question comes from Lorraine Hutchinson with the company Bank of America. Lorraine, your line is now open. Thank you. Good afternoon. With the offset of tariffs, you actually seeing any early changes to pricing from your competitors? Have you done any research on where they're sourcing and if you have an advantage position? And can you go on the offensive to take market share during this volatile environment?

Hi, Larek.

Go ahead. Was gonna say hi to Lorraine. You go.

Mean, that's what we're doing, Lorraine. I think we are really using this situation to continue to take share You know, I do think we have a real advantage from a scale perspective, from a brand perspective, from a supply chain perspective and the the companies that are, you know, that are in that fell scrub that we don't really call them competitors. But, those companies that do that are are, this is this is gonna be a challenge for them. And so we're using this opportunity to widen the moat. To lead this industry, boldly define the future of what this industry will be. And and use as an opportunity to be to get better and better.

Thank you.

Specifically on the pricing, around other companies, I think a few companies we've seen increased price, but, [indiscernible] very small company.

Next question comes from Ashley Owens with the company KeyBanc Capital Markets. Ashley, your line is now open.

Hey, this is Chris Braco on for Ashley. Thanks for taking our question.

So you guys mentioned launching in Japan and Korea later this year.

And so I was kind of curious, given the uncertainty and, you know, lack of visibility in The U. S, in the near term, does the roadmap or plan in Asia accelerate at all, or is there any callouts to changes there?

Sorry. Cut out for a second. Sorry. Can you just repeat the last part of that?

Oh, yes. So I was just wondering if the road map in Asia, if accelerates or changes given the uncertainty in The US.

Oh, no. No. We we've had these plans in place. We really feel good about how we're approaching the market. Japan, South Korea, and Asia more broadly. And so nothing about the current situation changes our plans or how we're going to market.

Okay. And then just a follow-up on, like, kind of the flip side of that. I mean, you know, given that maybe some domestic companies would be pulling back in this time, I'm wondering how you guys view maybe like opportunistically investing or if there's any areas of focus that you'd look to there. [indiscernible] Mean, we are opportunistically continuing to invest in our growth levers. Right? International, is know, we look to be an iconic global brand for the next hundred years, and we're only in 32 countries outside The United States. And there's a lot more to do to localize the countries in which we are already in. And so we're really excited about the strides we've made, but more to do. On Teams, we talked about that a bit. We're in the early, early stages of our outbound efforts in getting every large healthcare institution in FIGS, we're on our way. And finally, community hubs. We have two stores, and we're opening Houston. We're so excited. And two more this year and much more to come. And so, you know, the best brands in the world have retail. We our community, we know, wants to feel and touch and experience our products.

They want to, figure out their fit and then buy every color under the sun and then outfit really get the whole layering system from head to toe. To work, at work, from work, on shift, off shift. And so massive opportunity have a physical presence in every city, and that's what we're looking to do. And so we're investing in our future. We're investing in our growth levers. We are doubling down on our community. That is coming out of this COVID overhang. We are showing up and serving them in more and more ways. If you haven't seen our nurses' week film, I would check it out. It's gone viral. It has, I don't know, over 10,000,000 views across platforms. Maybe more than that might team is going to get mad at me for underrepresenting what it's doing. But I think that's where we're focused. We're focused on the things we can control. We're focused on showing up for our community and doing what we do best, which is making the best product connecting with this community in meaningful ways.

Awesome. Thanks, guys.

At this time, I'd like to pass the conference back over to the CEO and Co Founder Trina Spear. Trina, you may proceed.

Thank you all for joining our first quarter twenty twenty five earnings call. We will see you next time.

That will conclude today's conference call. Thank you for your participation. Enjoy the rest of your day.