Yahoo Finance Figs (NYSE:FIGS) Beats Q1 Sales Targets But Stock Drops
Healthcare apparel company Figs (NYSE:FIGS) reported Q1 CY2024 results topping analysts' expectations , with revenue flat year on year at $119.3 million. It made a non-GAAP profit of $0.01 per share, down from its profit of $0.01 per share in the same quarter last year.
Is now the time to buy Figs? Find out in our full research report.
Figs (FIGS) Q1 CY2024 Highlights:
Revenue: $119.3 million vs analyst estimates of $117.4 million (1.6% beat)
EPS (non-GAAP): $0.01 vs analyst estimates of $0 ($0.01 beat)
Gross Margin (GAAP): 68.9%, down from 71.3% in the same quarter last year
Free Cash Flow of $11.12 million, down 18.5% from the previous quarter
Active Customers: 2.6 million
Market Capitalization: $876.3 million
“Net revenues came in at the upper end of our expectations with adjusted EBITDA margin(1) exceeding our guidance. Importantly, we saw improved momentum in our business, particularly in repeat frequency trends, toward the end of the first quarter and into the second. This recent performance reflects strong engagement with our new product innovation and powerful storytelling campaigns as we returned to our roots,” said Trina Spear, Chief Executive Officer and Co-Founder.
Rising to fame via TikTok and founded in 2013 by Heather Hasson and Trina Spear, Figs (NYSE:FIGS) is a healthcare apparel company known for its stylish approach to medical attire and uniforms.
Apparel, Accessories and Luxury Goods
Within apparel and accessories, not only do styles change more frequently today than decades past as fads travel through social media and the internet but consumers are also shifting the way they buy their goods, favoring omnichannel and e-commerce experiences. Some apparel, accessories, and luxury goods companies have made concerted efforts to adapt while those who are slower to move may fall behind.
Sales Growth
A company’s long-term performance can give signals about its business quality. Any business can put up a good quarter or two, but many enduring ones muster years of growth. Figs's annualized revenue growth rate of 47.6% over the last four years was incredible for a consumer discretionary business.
Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. Figs's recent history shows its momentum has slowed as its annualized revenue growth of 10.9% over the last two years is below its four-year trend.
We can better understand the company's revenue dynamics by analyzing its number of active customers, which reached 2.6 million in the latest quarter. Over the last two years, Figs's active customers averaged 19.6% year-on-year growth. Because this number is higher than its revenue growth during the same period, we can see the company's monetization of its consumers has fallen.
This quarter, Figs's $119.3 million of revenue was flat year on year but beat Wall Street's estimates by 1.6%. Looking ahead, Wall Street expects revenue to decline 1.7% over the next 12 months, a deceleration from this quarter.
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Cash Is King
If you've followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can't use accounting profits to pay the bills.
Over the last two years, Figs has shown mediocre cash profitability, putting it in a pinch as it gives the company limited opportunities to reinvest, pay down debt, or return capital to shareholders. Its free cash flow margin has averaged 6%, subpar for a consumer discretionary business.
Figs's free cash flow came in at $11.12 million in Q1, equivalent to a 9.3% margin. This result was great for the business as it flipped from cash flow negative in the same quarter last year to cash flow positive this quarter. Over the next year, analysts predict Figs's cash profitability will fall. Their consensus estimates imply its LTM free cash flow margin of 18.2% will decrease to 2.5%.
Key Takeaways from Figs's Q1 Results
It was great to see Figs beat analysts' revenue, operating margin, and EPS expectations this quarter. We were also glad it raised its full-year revenue guidance, though that came at the price of a downgraded EBITDA margin outlook. Zooming out, we think this was an impressive quarter, but the EBITDA forecast likely upset the market. The stock is down 8.5% after reporting and currently trades at $5.15 per share.
So should you invest in Figs right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
