FIGS Inc.

08/07/2025 | Press release | Distributed by Public on 08/07/2025 15:15

Quarterly Report for Quarter Ending June 30, 2025 (Form 10-Q)

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, 2024, filed with the Securities and Exchange Commission ("SEC") on February 27, 2025 (the "2024 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, 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, 2025, we had approximately 2.7 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, 2025, we had the following results compared to the comparable periods in 2024:
◦Expanded our community of active customers by 4.1% from approximately 2.6 million at June 30, 2024 to approximately 2.7 million at June 30, 2025;
◦Net revenues increased from $144.2 million to $152.6 million, or 5.8%, for the three months ended June 30, 2025, and increased from $263.5 million to $277.5 million, or 5.3%, for the six months ended June 30, 2025;
◦Gross margin decreased 0.4 percentage points from 67.4% to 67.0% for the three months ended June 30, 2025, and decreased 0.8% percentage points from 68.1% to 67.3% for the six months ended June 30, 2025;
◦Net income increased from $1.1 million to $7.1 million for the three months ended June 30, 2025, and increased from $2.5 million to $7.0 million for the six months ended June 30, 2025;
◦Net income margin increased from 0.8% to 4.7% for the three months ended June 30, 2025, and increased from 1.0% to 2.5% for the six months ended June 30, 2025;
◦Adjusted EBITDA increased from $12.9 million to $19.7 million for the three months ended June 30, 2025, and increased from $25.9 million to $28.9 million for the six months ended June 30, 2025, representing an adjusted EBITDA margin of 12.9% and 10.4%, respectively;
◦Cash flows from operating activities decreased from $28.2 million to $(3.2) million for the six months ended June 30, 2025; and
◦Free cash flow decreased from $18.7 million to $(5.6) million for the six months ended June 30, 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 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 and unpredictable. On April 2, 2025, the United States announced a new universal baseline tariff of 10% on all U.S. imports, plus an additional country-specific tariff for select trading partners, including Vietnam, Jordan and China. The rates and effective dates of these additional tariffs have been adjusted on several occasions since the initial announcement, and certain of these tariffs are subject to legal and other challenges, the outcome of which could further change tariff rates and effective dates.
As of June 30, 2025, the production of our finished goods is divided approximately evenly between Vietnam and Jordan, and limited production also occurs in China and Peru. The 10% baseline tariffs have increased our product costs, and to the extent the additional tariffs on goods manufactured in Vietnam and Jordan remain in effect, we expect to see a significant additional increase in our product costs. We are implementing various mitigation strategies, including adjusting the countries from which we source our products and renegotiating terms with suppliers, but cannot be certain whether they will be effective.
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.
Logistics
As a result of ongoing conflict in the Middle East, from time to time there have been disruptions in commercial shipping transiting the Red Sea and surrounding waterways. Global ocean freight traffic has also been impacted by the conflict and shifts in global trade policy, resulting in shipping delays, and volatility in freight costs, capacity and transit times. Although we did not experience a material disruption to our supply chain or a material increase in shipping costs during the three months ended June 30, 2025 as a result, we continue to proactively seek alternative ways to ship raw materials and receive inventory, including selecting new vessel routes and ports, pre-negotiating ocean freight shipping rates and adjusting our product launch schedule to account for delays that have occurred from time to time. If there are continued or increased hostilities in the Middle East or continued uncertainty surrounding global trade policy or volatility as a result of the imposition of tariffs or other trade barriers, there could be continued increases in shipping times and ocean and air freight rates, as well as other impacts to our supply chain, which could adversely affect our financial condition and results of operations. See Item 1A. "Risk Factors-Risks Related To Our Business-Shipping is a critical part of our business and changes in, or disruptions to, our shipping arrangements have in the past and may in the future adversely affect our business, financial condition and results of operations" and "-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."
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 2024 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 principally of the cost of purchased merchandise and includes import duties, tariffs and other taxes, freight-in, defective merchandise returned by customers, inventory write-offs and other miscellaneous shrinkage. Our cost of goods sold has and may continue to fluctuate with the cost of the raw materials used in our products and freight costs and the impact of changes to applicable import duties and tariffs.
Gross Profit and Gross Margin
We define gross profit as net revenues less cost of goods sold. Gross margin is gross profit expressed as a percentage of net revenues. Our gross margin has fluctuated historically and may continue to fluctuate from period to period based on a number of factors, including the timing and mix of the product offerings we sell as well as our ability to reduce costs, in any given period.
Operating Expenses
Our operating expenses consist of selling, marketing and general and administrative expenses.
Selling
Selling expenses represent the costs incurred for fulfillment, selling and distribution. Fulfillment expenses consist of costs incurred in operating and staffing a third-party fulfillment center, including costs associated with inspecting and warehousing inventories and picking, packaging and preparing customer orders for shipment. Selling and distribution expenses consist primarily of shipping and other transportation costs incurred in delivering merchandise to customers and from customers returning merchandise, merchant processing fees and packaging. We expect fulfillment, selling and distribution costs to increase in absolute dollars as we increase our net revenues.
Marketing
Marketing expenses consist primarily of online performance marketing costs, such as retargeting, paid search and product listing advertisements, paid social media advertisements, search engine optimization, personalized email and mobile push notifications through our app. Marketing expenses also include our spend on brand marketing channels, including billboards, podcasts, commercials, photo and video shoot development, expenses associated with our Ambassador Program and other forms of online and offline marketing. We expect our marketing expenses to increase in absolute dollars as we continue to grow our business.
General and Administrative
General and administrative expenses consist primarily of employee-related costs, including salaries, bonuses, benefits, stock-based compensation, other related costs and other general overhead, including certain third-party consulting
and contractor expenses, certain facilities costs, software expenses, legal expenses, recruiting fees and in-kind donations. We expect our general and administrative expenses to increase in absolute dollars as we continue to grow our business.
Other Income, Net
Other income, net consists of interest income, interest expense, amortization of debt issuance costs, as well as gain or loss on foreign currency, primarily driven by payment to vendors for amounts not denominated in U.S. dollars.
Provision for Income Taxes
Our provision for income taxes consists of an estimate of federal, state and foreign income taxes based on enacted federal, state, and foreign tax rates, as adjusted for allowable credits, deductions and uncertain tax positions.
Seasonality
Unlike the traditional apparel industry, the healthcare apparel industry is generally not seasonal in nature. However, due to our general historical pattern of sequential growth, as well as our decision to conduct select promotions during the holiday season, we historically have generated a higher proportion of net revenues, and incurred higher selling and marketing expenses, during the fourth quarter of the year compared to other quarters, and these trends could continue.
Results of Operations
Three Months Ended June 30, 2025 Compared to Three Months Ended June 30, 2024
The following table sets forth information comparing the components of our results of operations for the periods indicated and our results of operations as a percentage of net revenues for the periods presented.
Three months ended
June 30, 		Three months ended
June 30,
2025 2024 2025 2024
(in thousands) (as a percentage of net revenues)
Net revenues $ 152,640 $ 144,225 100.0 % 100.0 %
Cost of goods sold 50,394 46,961 33.0 32.6
Gross profit 102,246 97,264 67.0 67.4
Operating expenses
Selling 34,433 36,934 22.6 25.6
Marketing 23,151 23,003 15.2 15.9
General and administrative(1)
34,747 35,774 22.8 24.8
Total operating expenses 92,331 95,711 60.5 66.4
Net income from operations 9,915 1,553 6.5 1.1
Other income, net 2,116 2,830 1.4 2.0
Net income before provision for income taxes 12,031 4,383 7.9 3.0
Provision for income taxes 4,932 3,283 3.2 2.3
Net income $ 7,099 $ 1,100 4.7 % 0.8 %
(1)Includes stock-based compensation expense of $7.6 million and $10.2 million for the three months ended June 30, 2025 and 2024, respectively.
Net Revenues
Three months ended
June 30, 		Change
2025 2024 %
(in thousands)
Net revenues $ 152,640 $ 144,225 5.8 %
Net revenues increased by $8.4 million, or 5.8%, for the three months ended June 30, 2025, compared to the prior year period. The increase in net revenues was primarily driven by an increase in orders from new and existing customers and an increase in AOV.
Cost of Goods Sold
Three months ended
June 30, 		Change
2025 2024
%
(in thousands, except margin)
Cost of goods sold $ 50,394 $ 46,961 7.3 %
Gross profit 102,246 97,264 5.1 %
Gross margin 67.0 % 67.4 % (0.4) %
Gross margin decreased 0.4 percentage points for the three months ended June 30, 2025, compared to the same period last year. The decrease in gross margin was driven by higher inventory reserves and tariffs, partially offset by higher duty drawback and a lower return rate.
Operating Expenses
Three months ended
June 30, 		Change
2025 2024 %
(in thousands)
Operating expenses:
Selling $ 34,433 $ 36,934 (6.8) %
Marketing 23,151 23,003 0.6 %
General and administrative 34,747 35,774 (2.9) %
Total operating expenses 92,331 95,711 (3.5) %
Operating expenses decreased by $3.4 million, or 3.5%, for the three months ended June 30, 2025, compared to the same period last year and, as a percentage of net revenues, decreased by 5.9 percentage points, primarily driven by decrease in selling expense, general and administrative expense, and marketing expense as a percentage of net revenues.
Selling expense decreased by $2.5 million, or 6.8%, for the three months ended June 30, 2025, compared to the same period last year and, as a percentage of net revenues, decreased by 3.0 percentage points. The decrease in selling expense as a percentage of net revenues was primarily driven by lower fulfillment and shipping expenses.
Marketing expense increased by $0.1 million, or 0.6%, for the three months ended June 30, 2025, compared to the same period last year and, as a percentage of net revenues, decreased by 0.7 percentage points. The decrease in marketing expense as a percentage of net revenues was primarily driven by greater efficiency in our digital marketing spend and lapping of prior year expenses related to our 2024 Olympics campaign.
General and administrative expense decreased by $1.0 million, or 2.9%, for the three months ended June 30, 2025, compared to the same period last year and, as a percentage of net revenues, decreased 2.0 percentage points. The decrease
in general and administrative expense as a percentage of net revenues was primarily due to lower stock-based compensation expense, partially offset by higher depreciation and increased investment in people.
Other Income, Net
Three months ended
June 30, 		Change
2025 2024 %
(in thousands)
Other income, net $ 2,116 $ 2,830 (25.2) %
Other income, net decreased for the three months ended June 30, 2025, compared to the same period last year, primarily due to a decrease in interest income driven by lower interest rates.
Provision for Income Taxes
Three months ended
June 30, 		Change
2025 2024 %
(in thousands)
Provision for income taxes $ 4,932 $ 3,283 50.2 %
Provision for income taxes increased by $1.6 million, or 50.2%, for the three months ended June 30, 2025, compared to the same period last year, primarily due to an increase in pre-tax income.
On July 4, 2025, the One Big Beautiful Bill Act ("OBBBA") was enacted in the U.S. The OBBBA includes significant provisions, such as the permanent extension of certain expiring provisions of the Tax Cuts and Jobs Act, modifications to the international tax framework and the restoration of favorable tax treatment for certain business provisions. The legislation has multiple effective dates, with certain provisions effective in 2025 and others implemented through 2027. We are currently assessing its impact on our condensed consolidated financial statements.
Results of Operations
Six Months Ended June 30, 2025 Compared to Six Months Ended June 30, 2024
The following table sets forth information comparing the components of our results of operations for the periods indicated and our results of operations as a percentage of net revenues for the periods presented.
Six months ended
June 30, 		Six months ended
June 30,
2025 2024 2025 2024
(in thousands) (as a percentage of net revenues)
Net revenues $ 277,541 $ 263,518 100.0 % 100.0 %
Cost of goods sold 90,836 84,118 32.7 31.9
Gross profit 186,705 179,400 67.3 68.1
Operating expenses
Selling 67,111 65,393 24.2 24.8
Marketing 41,307 40,248 14.9 15.3
General and administrative(1)
68,583 71,763 24.7 27.2
Total operating expenses 177,001 177,404 63.8 67.3
Net income from operations 9,704 1,996 3.5 0.8
Other income, net 4,191 5,667 1.5 2.2
Net income before provision for income taxes 13,895 7,663 5.0 2.9
Provision for income taxes 6,898 5,128 2.5 1.9
Net income $ 6,997 $ 2,535 2.5 % 1.0 %
(1)Includes stock-based compensation expense of $14.9 million and $22.1 million for the six months ended June 30, 2025 and 2024, respectively.
Net Revenues
Six months ended
June 30, 		Change
2025 2024 %
(in thousands)
Net revenues $ 277,541 $ 263,518 5.3 %
Net revenues increased by $14.0 million, or 5.3%, for the six months ended June 30, 2025, compared to the prior year period. The increase in net revenues was primarily driven by an increase in orders from new and existing customers and an increase in AOV.
Cost of Goods Sold
Six months ended
June 30, 		Change
2025 2024
%
(in thousands, except margin)
Cost of goods sold $ 90,836 $ 84,118 8.0 %
Gross profit 186,705 179,400 4.1 %
Gross margin 67.3 % 68.1 % (0.8) %
Gross margin decreased 0.8% percentage points for the six months ended June 30, 2025, compared to the same period last year. The decrease in gross margin was primarily related to higher inventory reserves and higher freight expense.
Operating Expenses
Six months ended
June 30, 		Change
2025 2024 %
(in thousands)
Operating expenses:
Selling $ 67,111 $ 65,393 2.6 %
Marketing 41,307 40,248 2.6 %
General and administrative 68,583 71,763 (4.4) %
Total operating expenses 177,001 177,404 (0.2) %
Operating expenses decreased by $0.4 million, or 0.2%, for the six months ended June 30, 2025, compared to the same period last year and, as a percentage of net revenues, decreased by 3.5 percentage points, primarily driven by a decrease in selling expense, marketing expense, and general and administrative expense as a percentage of net revenues.
Selling expense increased by $1.7 million, or 2.6%, for the six months ended June 30, 2025, compared to the same period last year and, as a percentage of net revenues, decreased by 0.6 percentage points. The decrease in selling expense as a percentage of net revenues was primarily due to higher fulfillment expenses in the same period last year following our transition to a new facility.
Marketing expense increased by $1.1 million, or 2.6%, for the six months ended June 30, 2025, compared to the same period last year and, as a percentage of net revenues, decreased 0.4 percentage points. The decrease in marketing expense as a percentage of net revenues was primarily driven by greater efficiency in our digital marketing.
General and administrative expense decreased by $3.2 million, or 4.4%, for the six months ended June 30, 2025, compared to the same period last year and, as a percentage of net revenues, decreased 2.5 percentage points. The decrease in general and administrative expense as a percentage of net revenues was primarily due to lower stock-based compensation expense, partially offset by higher depreciation and increased investment in people.
Other Income, Net
Six months ended
June 30, 		Change
2025 2024 %
(in thousands)
Other income, net $ 4,191 $ 5,667 (26.0) %
Other income, net decreased for the six months ended June 30, 2025, compared to the same period last year, primarily due to a decrease in interest income driven by lower interest rates.
Provision for Income Taxes
Six months ended
June 30, 		Change
2025 2024 %
(in thousands)
Provision for income taxes $ 6,898 $ 5,128 34.5 %
Provision for income taxes increased by $1.8 million, or 34.5%, for the six months ended June 30, 2025, compared to the same period last year, primarily due to an increase in pre-tax income.
Key Operating Metrics and Non-GAAP Financial Measures
We report our financial results in accordance with GAAP. In addition to the measures presented in our condensed consolidated financial statements, we use the following key operational and business metrics to evaluate our business, measure our performance, develop financial forecasts and make strategic decisions. We believe the non-GAAP financial measures, adjusted EBITDA, adjusted EBITDA margin and free cash flow, are useful in evaluating our performance. Our non-GAAP financial measures should not be considered in isolation from, or as substitutes for, financial information prepared in accordance with GAAP.
Active Customers, Net Revenues per Active Customer, and Average Order Value
We believe the number of active customers is an important indicator of our growth as it reflects the reach of our digital platform, our brand awareness and overall value proposition. We define an active customer as a unique customer account that has made at least one purchase in the preceding 12-month period. In any particular period, we determine our number of active customers by counting the total number of customers who have made at least one purchase in the preceding 12-month period, measured from the last date of such period. Active customers as of June 30, 2025 and 2024, respectively, are presented in the following table:
As of June 30,
2025 2024
(in thousands)
Active customers 2,736 2,628
We believe measuring net revenues per active customer is important to understanding our engagement and retention of customers, and as such, our value proposition for our customer base. We define net revenues per active customer as the sum of total net revenues in the preceding 12-month period divided by the current period active customers. Net revenues per active customer as of June 30, 2025 and 2024, respectively, are presented in the following table:
As of June 30,
2025 2024
Net revenues per active customer $ 208 $ 210
We define AOV as the sum of the total net revenues in a given period divided by the total orders placed in that period. Total orders are the summation of all completed individual purchase transactions in a given period. We believe our relatively high average order value demonstrates the premium nature of our product. As we expand into and increase our presence in additional product categories, price points and international markets, AOV may fluctuate. AOV for the three and six months ended June 30, 2025 and 2024, respectively, are presented in the following table:
Three months ended
June 30, 		Six months ended
June 30,
2025 2024 2025 2024
Average order value $ 117 $ 113 $ 118 $ 115
Adjusted EBITDA and Adjusted EBITDA Margin
We calculate adjusted EBITDA as net income adjusted to exclude: other income, net; gain/loss on disposal of assets; provision for income taxes; depreciation and amortization expense; stock-based compensation and related expense; transaction costs; and expenses related to non-ordinary course disputes. Adjusted EBITDA margin is calculated by dividing adjusted EBITDA by net revenues.
Management believes that excluding certain non-cash items and items that may vary substantially in frequency and magnitude period-to-period from net income provides useful supplemental measures that assist in evaluating our ability to generate earnings, provide consistency and comparability with our past financial performance and facilitate period-to-period comparisons of our core operating results as well as the results of our peer companies.
There are several limitations related to the use of adjusted EBITDA and adjusted EBITDA margin as analytical tools, including:
•other companies may calculate adjusted EBITDA and adjusted EBITDA margin differently, which reduces their usefulness as a comparative measure;
•adjusted EBITDA and adjusted EBITDA margin do not reflect other income, net;
•adjusted EBITDA and adjusted EBITDA margin do not reflect any gain or loss on disposal of assets;
•adjusted EBITDA and adjusted EBITDA margin do not reflect our tax provision, which reduces cash available to us;
•adjusted EBITDA and adjusted EBITDA margin do not reflect recurring, non-cash expenses of depreciation and amortization of property and equipment and, although these are non-cash expenses, the assets being depreciated and amortized may have to be replaced in the future;
•adjusted EBITDA and adjusted EBITDA margin do not reflect the impact of stock-based compensation and related expense;
•adjusted EBITDA and adjusted EBITDA margin do not reflect transaction costs; and
•adjusted EBITDA and adjusted EBITDA margin do not reflect expenses related to non-ordinary course disputes.
The following table reflects a reconciliation of adjusted EBITDA to net income, the most directly comparable financial measure prepared in accordance with GAAP and presents adjusted EBITDA margin with net income margin, the most directly comparable financial measure prepared in accordance with GAAP:
Three months ended
June 30, 		Six months ended
June 30,
2025 2024 2025 2024
(in thousands, except margin)
Net income $ 7,099 $ 1,100 $ 6,997 $ 2,535
Add (deduct):
Other income, net (2,116) (2,830) (4,191) (5,667)
Provision for income taxes 4,932 3,283 6,898 5,128
Depreciation and amortization expense(1)
2,153 1,113 4,152 1,963
Stock-based compensation and related expense(2)
7,659 10,266 15,046 21,963
Adjusted EBITDA(3)
$ 19,727 $ 12,932 $ 28,902 $ 25,922
Net revenues $ 152,640 $ 144,225 $ 277,541 $ 263,518
Net income margin(4)
4.7 % 0.8 % 2.5 % 1.0 %
Adjusted EBITDA Margin 12.9 % 9.0 % 10.4 % 9.8 %
(1)Excludes amortization of debt issuance costs included in "Other income, net."
(2)Includes stock-based compensation expense, payroll taxes and costs related to equity award activity.
(3)For the six months ended June 30, 2025, reflects $171,000 of stock-based compensation expense and payroll taxes inadvertently not reflected in our previously disclosed Adjusted EBITDA results for the three months ended March 31, 2025.
(4)Net income margin represents net income as a percentage of net revenues.
Free Cash Flow
We calculate free cash flow as net cash (used in) provided by operating activities reduced by capital expenditures, including purchases of property and equipment and capitalized software development costs. We believe free cash flow is a
useful supplemental measure of liquidity and an additional basis for assessing our ability to generate cash. There are limitations related to the use of free cash flow as an analytical tool, including that other companies may calculate free cash flow differently, which reduces its usefulness as a comparative measure, and free cash flow does not reflect our future contractual commitments, nor does it represent the total residual cash flow for a given period.
The following table presents a reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable financial measure calculated in accordance with GAAP.
Six months ended
June 30,
2025 2024
(in thousands)
Net cash (used in) provided by operating activities $ (3,195) $ 28,158
Less: capital expenditures (2,399) (9,489)
Free cash flow $ (5,594) $ 18,669
Liquidity and Capital Resources
As of June 30, 2025 and December 31, 2024, we had $50.8 million and $85.6 million of cash and cash equivalents, respectively. Since inception, we have financed operations primarily through cash flows from operating activities, the sale of our capital stock and borrowings under credit facilities.
In September 2021, we entered into a credit agreement with Bank of America, N.A. providing for a revolving credit facility in an amount of up to $100.0 million (as amended, the "2021 Facility"). The 2021 Facility will mature in September 2026. As of June 30, 2025, we had no outstanding borrowings under the 2021 Facility (other than $4.9 million of outstanding letters of credit) and available borrowings of $95.1 million.
See Note 9 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for more information regarding the 2021 Facility.
In August 2024, our board of directors authorized a share repurchase program for up to $50.0 million of our outstanding Class A common stock, with no expiration date. On February 27, 2025, our board of directors authorized an increase of $50.0 million to the share repurchase program, bringing the total authorization for repurchases under the program to up to $100.0 million of our outstanding Class A common stock. During the three months ended June 30, 2025, we did not repurchase any shares of Class A common stock under the share repurchase program. As of June 30, 2025, we had approximately $52.0 million available for future repurchases under the share repurchase program.
Our cash requirements have primarily been for working capital and capital expenditures. We believe that existing cash and cash equivalents, cash flows from operations and available borrowings under our 2021 Facility, if needed, will be sufficient to support our working capital and capital expenditure requirements for at least the next 12 months.
Our future capital requirements may vary materially from those currently planned and will depend on many factors, including our rate of revenue growth, the timing and extent of international expansion efforts and other growth initiatives, the expansion of our marketing activities and overall economic conditions. To the extent that current and anticipated future sources of liquidity are insufficient to fund our future business activities and cash requirements, we may be required to seek additional equity or debt financing. The sale of additional equity would result in additional dilution to our stockholders. The incurrence of additional debt financing would result in debt service obligations and the instruments governing such debt could provide for operating and financing covenants that would restrict our operations. There can be no assurances that we will be able to raise additional capital when needed or on terms acceptable to us. The inability to raise capital if needed would adversely affect our ability to achieve our business objectives.
Historical Cash Flows
The following table summarizes our cash flows for the periods presented:
Six months ended
June 30,
2025 2024
(in thousands)
Cash flows from operating activities $ (3,195) $ 28,158
Cash flows from investing activities (29,098) (40,784)
Cash flows from financing activities (2,503) 264
Net change in cash and cash equivalents $ (34,796) $ (12,362)
Operating Activities
Cash flows from operating activities consist primarily of net income adjusted for certain items including depreciation and amortization, stock-based compensation expense and the effect of changes in operating assets and liabilities.
Cash flows from operating activities decreased by $31.4 million for the six months ended June 30, 2025, compared to the same period last year. The decrease in operating cash flows was a result of the timing of payments against accrued expenses of $30.9 million and higher inventory purchases of $19.5 million. The decrease in operating cash flows was partly offset by higher cash flows due to the timing of payments of prepaid expenses and other current assets of $9.1 million, the timing of cash payments related to accounts payable of $4.9 million, and the timing of payments of accrued compensation and benefits of $4.9 million.
Investing Activities
Cash flows from investing activities consist of capital expenditures and purchases of investments.
Cash flows from investing activities increased by $11.7 million for the six months ended June 30, 2025, compared to the same period last year. The increase in cash flows from investing activities was primarily due to a decrease in purchases of property and equipment of $7.1 million, an increase in maturities of available-for-sale securities of $3.5 million, and a decrease in purchases of available-for-sale securities of $1.3 million.
Capital expenditures during the six months ended June 30, 2025 were primarily related to capitalized software development costs and purchases of computer equipment.
Financing Activities
Cash flows from financing activities consist primarily of proceeds and payments related to transactions involving our common stock, borrowings, and fees associated with our existing line of credit.
Cash flows from financing activities were $(2.5) million for the six months ended June 30, 2025. Cash flows from financing activities decreased by $2.8 million as compared to the same period last year primarily due to repurchases of our Class A common stock in the current year with no comparable activity in the prior year.
Contractual Obligations and Commitments
There have been no material changes to our contractual obligations from those described in our 2024 Annual Report on Form 10-K.
Refer to Note 10 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for commitments entered into during the six months ended June 30, 2025.
Critical Accounting Policies and Estimates
Our condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of our financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, costs, expenses, and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected.
Our critical accounting policies are described under the heading "Management's Discussion and Analysis of Financial Condition and Results of Operations-Critical Accounting Policies and Estimates" in our 2024 Annual Report on Form 10-K. There have been no material changes to our critical accounting policies since December 31, 2024. See Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q for a description of our other significant accounting policies.
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