Healthcare apparel company Figs (NYSE:FIGS) reported Q2 CY2024 results beating Wall Street analysts' expectations, with revenue up 4.4% year on year to $144.2 million. It made a non-GAAP profit of $0.01 per share, down from its profit of $0.02 per share in the same quarter last year.
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Figs (FIGS) Q2 CY2024 Highlights:
- Revenue: $144.2 million vs analyst estimates of $142.3 million (1.4% beat)
- EPS (non-GAAP): $0.01 vs analyst estimates of $0 ($0.01 beat)
- Gross Margin (GAAP): 67.4%, down from 69.5% in the same quarter last year
- EBITDA Margin: 9%, down from 13.7% in the same quarter last year
- Free Cash Flow of $7.55 million, down 32.2% from the previous quarter
- Active Customers: 2.63 million, up 152,000 year on year
- Market Capitalization: $941.4 million
“Our strong second quarter performance shows that our investments are paying off,” 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
Examining a company's long-term performance can provide clues about its business quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul. Luckily, Figs's sales grew at an incredible 36.7% compounded annual growth rate over the last five years. This shows it expanded quickly, a useful starting point for our analysis. 
Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Figs's recent history shows its demand slowed significantly as its annualized revenue growth of 9% over the last two years is well below its five-year trend.
Figs also discloses its number of active customers, which reached 2.63 million in the latest quarter. Over the last two years, Figs's active customers averaged 17% year-on-year growth. Because this number is higher than its revenue growth during the same period, we can see the company's monetization has fallen. 
This quarter, Figs reported reasonable year-on-year revenue growth of 4.4%, and its $144.2 million of revenue topped Wall Street's estimates by 1.4%. Looking ahead, Wall Street expects revenue to remain flat over the next 12 months, a deceleration from this quarter.
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Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Figs has shown mediocre cash profitability over the last two years, giving the company limited opportunities to return capital to shareholders. Its free cash flow margin averaged 8.4%, subpar for a consumer discretionary business.
Figs's free cash flow clocked in at $7.55 million in Q2, equivalent to a 5.2% margin. The company's cash profitability regressed as it was 15.4 percentage points lower than in the same quarter last year, prompting us to pay closer attention. Short-term fluctuations typically aren't a big deal because investment needs can be seasonal, but we'll be watching to see if the trend extrapolates into future quarters.
Key Takeaways from Figs's Q2 Results
We were impressed by how significantly Figs blew past analysts' EPS expectations this quarter. We were also happy its revenue narrowly outperformed Wall Street's estimates. On the other hand, its number of active customers unfortunately missed. Overall, we think this was a solid quarter with some key areas of upside. The stock remained flat at $5.75 immediately after reporting.
Figs may have had a good quarter, but does that mean you should invest 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.