FIGS, Inc.

1. DESCRIPTION OF BUSINESS

FIGS, Inc., a Delaware corporation (together with its wholly-owned subsidiaries FIGS Canada, Inc. and FIGS Community Hubs, LLC, unless the context requires otherwise, the “Company”), was founded in 2013 and is a founder-led, direct-to-consumer healthcare apparel and lifestyle brand company. The Company designs and sells scrubwear and non-scrubwear, such as outerwear, underscrubs, footwear, compression socks, lab coats, loungewear and other apparel. The Company markets and sells its products primarily in the United States. Sales are primarily generated through the Company’s digital platforms.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company has prepared the accompanying consolidated financial statements in accordance with generally accepted accounting principles in the United States of America (“GAAP”). Our consolidated financial statements include the accounts of FIGS, Inc. and our wholly-owned subsidiaries, FIGS Canada, Inc. and FIGS Community Hubs, LLC. All intercompany transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the consolidated financial statements, and the reported amounts of revenues and expenses during the reporting periods presented. Key estimates relate primarily to the valuation of stock-based compensation. Actual results could differ from those estimates.

Loss Contingencies

The Company may be involved in legal proceedings, claims and regulatory, tax or government inquiries and investigations that arise in the ordinary course of business resulting in loss contingencies. Loss contingencies are accrued for when losses become probable and are reasonably estimable. If the reasonable estimate of the loss is a range and no amount within the range is a better estimate, the minimum amount of the range is recorded as a liability. The Company does not accrue for contingent losses that, in its judgment, are considered to be reasonably possible, but not probable; however, the range of such reasonably possible losses would be disclosed. Loss contingencies considered remote are generally not disclosed.

Investment in Equity Securities

The Company holds an investment in equity securities in a privately held company, consisting of equity securities without readily determinable fair values. This investment is recorded at its carrying value, which is cost less impairment, if any, adjusted to fair value upon observable orderly transactions for identical or similar investments of the same issuer. The investment is reviewed periodically for impairment. Any adjustment to the carrying value of this investment, including gains and losses, is recorded in other income, net in the Company’s consolidated statements of operations. Gains and losses on investments in equity securities will be included as an adjustment to reconcile net income to net cash provided by operating activities in the Company’s consolidated statements of cash flows.

Variable Interest Entities

The Company determines at the inception of each arrangement whether an entity in which it has made an investment in, or which it has other variable interests in, is considered a variable interest entity (“VIE”). The Company will consolidate VIEs when it determines that it is the primary beneficiary. A primary beneficiary of a VIE has the power to direct activities that most significantly affect the economic performance of the VIE, and has the obligation to absorb the majority of their losses or benefits. If the Company is not the primary beneficiary of a VIE, the Company accounts for the investment or other variable interests in a VIE in accordance with other applicable GAAP. Periodically, the Company assesses whether any changes in interest or relationship with a VIE affects the determination of whether the entity is a VIE and, if so, whether the Company is the primary beneficiary. The Company has no investments or other variable interests for which it is the primary beneficiary.

Fair Value of Financial Instruments

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Company uses valuation techniques that are based upon observable and unobservable inputs. Observable inputs are developed using market data such as publicly available information and reflect the assumptions market participants would use, while unobservable inputs are developed using the best information available about the assumptions market participants would use. Assets and liabilities are classified in the fair value hierarchy based on the lowest level input that is significant to the fair value measurement:

Level 1: Unadjusted quoted prices in active markets for identical assets or liabilities.

Level 2: Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets; quoted prices for identical or similar assets and liabilities in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.

Level 3: Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. This includes certain pricing models, discounted cash flow methodologies, and similar techniques that use significant unobservable inputs.

To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised by the Company in determining fair value is greatest for instruments categorized in Level 3. A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.

Short-term Investments

The Company holds short-term investments in U.S. government debt securities and corporate debt securities. The Company’s short-term investments mature within 12-months or less and are classified as current assets on the Company’s consolidated balance sheets and have been classified and accounted for as available-for-sale securities. The Company determines the appropriate classification of its investments at the time of purchase and reevaluates their classification at each balance sheet date.

The Company’s available-for-sale investments in debt securities are carried at fair value with unrealized gains and losses, net of taxes, reported within accumulated other comprehensive income in stockholders’ equity. Available-for-sale debt securities with an amortized cost basis in excess of estimated fair value are assessed to determine what amount of that difference, if any, is caused by expected credit losses, with any allowance for credit losses recognized as a charge in other expense on the Company’s consolidated statements of operations. The Company did not record any credit losses on its available-for-sale debt securities in any of the periods presented. The Company determines gains or losses on the sale or maturities of short-term investments using the specific identification method and gains or losses are recorded in other income (expense) on the Company’s consolidated statements of operations.

Concentrations of Credit Risk

Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash and cash equivalents and short-term investments.

The Company’s cash and cash equivalents and short-term investments are held with creditworthy financial institutions. Although the Company’s deposits held with banks may exceed the amount of federal insurance provided on such deposits, the Company has not experienced any losses in such accounts.

The Company is exposed to credit risk in the event of a default by the financial institutions holding its cash and cash equivalents and short-term investments for the amounts reflected on the consolidated balance sheets.

Cash and Cash Equivalents

The Company considers highly liquid investments with original maturities of three months or less to be cash equivalents.

Accounts Receivable

Accounts receivable consists of trade accounts receivables relating primarily to the credit card receivables arising from the sale of products to customers through the Company’s digital platforms. Trade accounts receivable is reported net of an allowance for credit losses, which waszero as of December 31, 2025 and 2024. Other receivables generally relate to amounts due to the Company that result from activities that are not related to the direct sale of the Company’s products.

Inventory, Net

Inventory consists of finished goods and is accounted for using an average cost method. Inventory is valued at the lower of cost or net realizable value. The Company records a provision for excess and obsolete inventory to adjust the carrying value of inventory based on assumptions regarding future demand for the Company’s products.

Lower of cost or net realizable value is evaluated by considering obsolescence, excessive levels of inventory, deterioration, and other factors. Adjustments to reduce the cost of inventory to its net realizable value, if required, are made for estimated excess, obsolescence, or impaired inventory. Excess and obsolete inventory is charged to cost of goods sold.

The Company’s allowance to write down inventory to the lower of cost or net realizable value was $6.3 million as of December 31, 2025 andnot material as of December 31, 2024.

Property and Equipment, Net

Property and equipment are recorded at cost, net of accumulated depreciation and amortization. The Company depreciates property and equipment using the straight-line method over the estimated useful lives of the assets, which range from three years toten years.

Upon the sale or disposal of property and equipment, the cost and related accumulated depreciation and amortization are removed from the consolidated balance sheets, and the resulting gain or loss is reflected in general and administrative expense in the consolidated statements of operations. Maintenance and repairs are charged to the general and administrative expenses in the consolidated statements of operations as incurred, while expenditures for major renewals and betterments that extend the useful life of an asset or provide additional utility are capitalized.

The Company has incurred costs related to the development of the Company’s websites. The Company capitalizes these website development costs, as applicable, in accordance with ASC Subtopic 350-50, Intangibles—Goodwill and Other—Website Development Costs (“ASC 350-50”). ASC 350-50 requires that costs incurred during the website development stage be capitalized. Capitalized website costs include salary and benefit costs for Company employees and contractors that develop the website. When the development phase is substantially complete and the website is ready for its intended purpose, capitalized costs are amortized using the straight-line method over thefive-year useful life.

Cloud Computing Costs

The Company also capitalizes software license fees and implementation costs associated with cloud hosting arrangements that are service contracts. These amounts are included in prepaid expenses and other current assets and other assets in the accompanying consolidated balance sheets. Amortization of the software license fees is calculated using the straight-line method over the term of the service contract. Amortization of the implementation costs is calculated using the straight-line method based on the term of the service contract or based on the expected utilization of the asset and commences once the module or component is ready for its intended use.

Impairment of Long-Lived Assets

The Company tests its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset or group of assets to the future undiscounted cash flows expected to be generated by the asset or asset group. If the evaluation of the forecasted cash flows indicates that the carrying value of the assets is not recoverable, the assets are written down to their fair value. No such impairments were recognized for the years ended December 31, 2025, 2024, and 2023.

Leases

The Company determines whether an arrangement is a lease at inception of the agreement and reassesses that conclusion if the agreement is modified. At lease commencement, which is generally when the Company takes possession of the asset, the Company records a lease liability and corresponding right-of-use asset. Lease liabilities represent the present value of minimum lease payments over the expected lease term, which includes options to extend or terminate the lease when it is reasonably certain those options will be exercised. The present value of the lease liability is determined using the Company’s incremental borrowing rate at the lease commencement date. Right-of-use assets and lease liabilities are established on the consolidated balance sheets for leases with an expected term greater than one year. Leases with an initial term of 12 months or less are not recorded on the consolidated balance sheets. The Company does not allocate consideration between lease and non-lease components.

Right-of-use assets represent the right to control the use of the leased asset during the lease and are initially recognized in an amount equal to the lease liability. Beginning on the lease commencement date, expense is recognized on a straight-line basis over the term. Right-of-use assets are tested for impairment whenever events or changes in circumstances indicate that the carrying value of an asset or asset group may not be recoverable.

Sales Tax

Based on the 2018 Supreme Court decision in South Dakota v. Wayfair Inc., an increasing number of states have considered or adopted laws or administrative practices, with or without notice, that impose new taxes on remote sellers to collect transaction taxes such as sales, consumption, or similar taxes. The Company follows the guidelines of ASC 450, Contingencies, and its consolidated financial statements reflect the current impact of such legislation.

Share Repurchases

Shares repurchased pursuant to the Company’s share repurchase program are retired and reflected as a reduction of the par value of Class A common stock within stockholders’ equity on the Company’s consolidated balance sheets.

Direct costs incurred on share repurchases are recorded as part of the cost basis of each repurchase. The excess of cost basis over the par value of shares repurchased is recorded as a reduction to additional paid-in capital.

Revenue Recognition

The Company recognizes revenues in accordance with Financial Accounting Standards Board (“FASB”) ASU 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASC 606”). Revenue is recognized in an amount that reflects the consideration expected to be received in exchange for products. To determine revenue recognition for contracts with customers within the scope of ASC 606, the Company recognizes revenue from the commercial sales of products and contracts by applying the following five steps (i) identify the contract(s) with a customer; (ii) identify the performance obligations of the contract(s); (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract(s); and (v) recognize revenue when (or as) the Company satisfies the performance obligations.

The Company only applies the five-step model to contracts when it is probable that the Company will collect the consideration it is entitled to in exchange for the good or services it transfers to the customer. The Company recognizes revenue at a point in time when it satisfies a performance obligation and transfers control of the products to the respective customers, which occurs when the goods are transferred to a common carrier. Shipping and handling costs associated with outbound freight incurred to transfer a product to a customer are treated as a fulfillment activity, and as a result, any fees received from customers are included in the transaction price for the performance obligation of providing goods to the customer.

The Company generally provides refunds for goods returned within 30 days from the original purchase date. A returns reserve is recorded by the Company based on the historical refund pattern. The returns reserve in the consolidated balance sheets was $4.2 million and $3.9 million as of December 31, 2025 and 2024, respectively.

Taxes assessed by a governmental authority that are both imposed on and concurrent with a specific revenue-producing transaction, that are collected by the Company from a customer, are excluded from revenue. The Company records deferred revenue when it receives payments in advance of the transfer of the goods to a common carrier. The amounts recorded are expected to be recognized as revenue within the 12 months following the balance sheet date and, therefore, are classified as current liabilities in the consolidated balance sheets.

The Company does not have significant contract balances other than deferred revenue, the allowance for sales returns and liabilities related to its gift cards. The Company recognized revenues of $4.6 million during the year ended December 31, 2025 related to the deferred revenue balance that existed at December 31, 2024. The Company recognized revenues of $3.1 million during the year ended December 31, 2025 related to redemptions from the gift card liability balance that existed at December 31, 2024. The Company recognizes estimated gift card breakage revenues under the redemption recognition method in proportion to actual gift card redemptions, over the period that remaining gift card values are redeemed. The Company does not have significant contract acquisition costs.

The following table presents the disaggregation of the Company’s net revenues for the years ended December 31, 2025, 2024, and 2023 (in thousands):

Cost of Goods Sold

Cost of goods sold consists primarily of the cost of purchased merchandise and includes import duties and other taxes, freight-in, defective merchandise returned by customers, inventory write-offs and other miscellaneous shrinkage as well as compensation and benefits related to embroidery personnel.

Selling Expenses

Selling expenses primarily include the cost of shipping and handling, fulfillment and credit card sales processing. Shipping and handling costs are associated with outbound freight after control over a product has transferred to a customer and, as such, are included in selling expenses.

Marketing Expenses

Marketing expenses primarily consist of digital and brand advertising. The Company’s marketing costs are primarily comprised of digital advertising through search engines and social media and are expensed as incurred.

General and Administrative Expenses

General and administrative expenses consist primarily of employee-related costs, including salaries, bonuses, benefits and stock-based compensation, charitable contributions, including the cost of product donations, other related costs, including certain third-party consulting and contractor expenses, certain facilities costs, software expenses, legal expenses and recruiting fees, and overhead.

Stock-Based Compensation

The Company measures and recognizes stock-based compensation expense for all stock option awards granted to employees and non-employees based on their estimated fair values as of the grant date using the Black-Scholes option-pricing model. The Company’s use of the Black-Scholes option-pricing model to estimate the fair value of stock options granted requires the input of various assumptions which are as follows:

Risk-free interest rate—determined by reference to the U.S. Treasury yield curve in effect at the time of grant of the award for time periods approximately equal to the expected term of the award.

Expected volatility— the Company derives its volatility from the average historical stock volatilities of several peer public companies over a period equivalent to the expected term of the awards. The Company expects to continue to do so until such time as it has adequate historical data regarding the volatility of its own traded stock price.

Expected dividend yield—the Company has not paid, and does not currently anticipate paying, cash dividends on its common stock; therefore, the expected dividend yield is assumed to bezero.

Expected term—the expected term of the Company’s stock options granted to employees has been determined utilizing the “simplified” method for awards that qualify as “plain-vanilla” options, which calculates the expected term as the average of the time-to-vesting and the contractual life of options, as the Company does not have enough historical data to estimate the expected term.

Fair value of common stock—the fair value of the Company’s common stock is the closing stock price of the Company’s Class A common stock as reported on the New York Stock Exchange.

The Company measures the fair value of RSUs granted to employees and non-employees based on the fair value of its Class A common stock on the grant date. The Company’s RSU grants vest upon the satisfaction of either a service condition or both a service condition and a performance condition. The service condition is generally satisfied ratably over four years. The performance condition related to the Company’s outstanding performance-based awards was satisfied in connection with the Company’s initial public offering (“IPO”).

For employee and non-employee awards that vest upon the satisfaction of a service condition, the Company recognizes compensation expense based on the grant date fair value of the award over the requisite service period on a straight-line basis, which is generally the vesting period of the respective award based on the grant date fair value of the award. The Company accounts for forfeitures as they occur.

The Company classifies stock-based compensation expense in its consolidated statements of operations and comprehensive income in the same manner in which the award recipient’s cash compensation costs are classified. For the years ended December 31, 2025, 2024, and 2023 the Company recorded stock-based compensation expense of $26.9 million, $42.7 million, and $45.8 million, respectively, which are all recorded in general and administrative expense on the consolidated statements of operations.

Income Taxes

The Company accounts for income taxes under the asset and liability method. This approach requires the recognition of deferred tax assets and liabilities for the expected future tax consequences attributed to temporary differences between the financial reporting basis and the respective tax basis of these assets and liabilities. Deferred tax assets and liabilities are measured using the enacted tax rates expected to apply to taxable income in the years in which the differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in the tax rates is recognized in income in the period that includes the enactment date.

A valuation allowance is recorded for carryforwards and other deferred tax assets when it is more likely than not that some or all of the deferred tax assets will not be realized. Based on its facts, the Company considered all available evidence, both positive and negative, including historical levels of taxable income, expectations, and risks associated with estimates of future taxable income, and ongoing prudent and feasible tax planning strategies in assessing the need for a valuation allowance.

The Company uses a two-step approach to recognizing and measuring uncertain tax positions. The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates that it is more likely than not that the position will be sustained on audit, including resolution of related appeals and litigation processes, if any. The second step is to measure the largest amount of tax benefit as the largest amount that is more likely than not to be realized upon settlement.

Changes in recognition or measurement are reflected in the period in which the change in judgment occurs.

Comprehensive Income

Comprehensive income includes net income, other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders, unrealized gains and losses, net of taxes, related to the Company's available-for-sale investments in debt securities, as well as foreign currency translation adjustments.

Earnings per Share

The Company computes earnings per share using the two-class method required for multiple classes of common stock and participating securities. Basic earnings per share (“Basic EPS”) is calculated by dividing net income by the weighted-average number of common shares outstanding during the year. Diluted earnings per share (“Diluted EPS”) is calculated by dividing net income by the weighted-average number of common and common equivalent shares outstanding during the year. Common equivalent shares are calculated using the treasury stock method and are excluded from the computation of diluted earnings per share in periods for which they have an anti-dilutive effect.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Disaggregation of Income Statement Expenses. ASU 2024-03 requires disclosure on an annual and interim basis, in the notes to the consolidated financial statements, of disaggregated information about specific categories underlying certain income statement expense line items. This ASU is effective for public companies with annual periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, with early adoption permitted. The amendments in this update should be applied either on a prospective basis or a retrospective basis. The Company is currently evaluating the effects adoption of this guidance will have on its consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, Targeted Improvements to the Accounting for Internal-Use Software. ASU 2025-06 eliminates project stages and requires capitalizing software costs to begin when (1) management has authorized and committed to funding the software project and (2) it is probable that the project will be completed and the software will be used to perform the function intended. This ASU is effective for public companies with annual periods beginning after December 15, 2027, and interim reporting periods within those annual periods. Early adoption is permitted as of the beginning of the annual reporting period. The Company is currently evaluating the effects adoption of this guidance will have on its consolidated financial statements.

Recently Adopted Accounting Pronouncement

In December 2023, the FASB issued ASU 2023-09, Improvements to Income Tax Disclosures, which requires disclosure of disaggregated information about a reporting entity’s effective tax rate reconciliation as well as information on income taxes paid. We adopted this ASU for our 2025 annual period on a prospective basis, and the additional disclosures did not have a material impact on the Company's consolidated financial statements or the Company's consolidated financial position, results of operations, or cash flows. Refer to Note 12 to our consolidated financial statements.

3. FAIR VALUE OF FINANCIAL ASSETS AND LIABILITIES

The Company’s cash equivalents consist of money market funds and highly liquid investments with original maturities of 90 days or less from the date of purchase. The Company classifies cash equivalents and short-term investments within Level 1 or Level 2 of the fair value hierarchy.

The following tables present the Company’s cash equivalents and short-term investments by significant investment category and fair value level as of December 31, 2025 and 2024 (in thousands):

There have been no transfers of assets between fair value levels during the periods presented. The carrying values of other current assets, accounts payable and accrued expenses approximate their fair values due to the short-term nature of these assets and liabilities.

4. INVESTMENT IN EQUITY SECURITIES

The Company holds an investment in equity securities of a privately held company (the “Investment”). The Investment is considered a VIE in which the Company is not the primary beneficiary, as the governance structure of this entity does not allow the Company to direct the activities that would significantly affect the economic performance of the Investment. There are currently no future funding commitments to the Investment. The Investment is recorded at fair value on a non-recurring basis and evaluated for impairment at each reporting period. The estimation of fair value for the Investment requires the use of significant unobservable inputs, such as the issuance of new equity, and as a result, the Company deems these assets as Level 3 financial instruments within the fair value measurement framework.

There have beenno cumulative upward adjustments or cumulative downward adjustments to the Investment, including impairment, as of December 31, 2025 and 2024. There wereno gains and losses on sale recognized during the years ended December 31, 2025 and 2024. The Investment is accounted for using the measurement alternative; the carrying value of this investment as of December 31, 2025 and 2024 was $27.7 million and $27.5 million, respectively, inclusive of transaction costs.

5. ACCOUNTS RECEIVABLE

Accounts receivable consisted of the following (in thousands):

6. PREPAID EXPENSES AND OTHER CURRENT ASSETS

Prepaid expenses and other current assets consisted of the following (in thousands):

7. PROPERTY AND EQUIPMENT, NET

Property and equipment, net consisted of the following (in thousands):

Depreciation and amortization expense for the years ended December 31, 2025, 2024, and 2023 on property and equipment was $9.0 million, $6.7 million, and $2.9 million, respectively.

8. ACCRUED EXPENSES

Accrued expenses consisted of the following (in thousands):

9. FINANCING ARRANGEMENTS

On September 7, 2021, the Company, as borrower, entered into a credit agreement with Bank of America, N.A. (as amended, from time to time, the “Credit Agreement”) for a $100.0 million revolving credit facility, including capacity to issue letters of credit (the “2021 Facility”). The 2021 Facility is secured by substantially all assets of the Company and its material subsidiaries, subject to customary exceptions.

On February 27, 2023, the Company entered into a first amendment (the “First Amendment”) to the Credit Agreement. The First Amendment amends the Credit Agreement to replace the London interbank offered rate (“LIBOR”) with a term rate based on the Secured Overnight Financing Rate, together with certain administrative changes to facilitate such replacement.

On November 3, 2025, the Company entered into a second amendment (the “Second Amendment”) to the Credit Agreement. The Second Amendment further amends the Credit Agreement to, among other things, extend the maturity date of the 2021 Facility from September 7, 2026 to November 3, 2030 (as amended, the “2021 Facility Maturity Date”) and reduce the annual commitment fee to 0.15% of the unused Revolving Facility (as defined in the Credit Agreement). Except as amended by the First Amendment and Second Amendment, the remaining material terms of the Credit Agreement remain in full force and effect.

As of December 31, 2025, the Company had letters of credit aggregating to $8.4 million outstanding under the 2021 Facility and available borrowings of $91.6 million. As of December 31, 2025, the Company hadno outstanding borrowings under the 2021 Facility. Borrowings under the 2021 Facility are payable on the 2021 Facility Maturity Date. Borrowings bear interest at either (a) Term SOFR (as defined in the Credit Agreement) plus 1.125% or (b) the Base Rate (as defined in the Credit Agreement) plus 0.125%. The annual interest rate for undrawn amounts of the Revolving Facility (as defined in the Credit Agreement) is 0.175% through November 2, 2025 and, upon entry into the Second Amendment, is 0.15% thereafter. Costs associated with entering into the 2021 Facility were not material.

10. COMMITMENTS AND CONTINGENCIES

Taxes on Remote Sellers

The Company is subject to state laws or administrative practices with respect to the taxes on remote sellers. In accordance with ASC 450, Contingencies, the Company recorded $1.5 million within sales tax payable on the Company’s consolidated balance sheets as of December 31, 2025 and 2024, respectively, as an estimate of contingent sales tax payable.

Inventory Purchase Obligations

Inventory purchase obligations as of December 31, 2025 were approximately $73.4 million. These inventory purchase obligations can be impacted by various factors, including the timing of issuing orders and the timing of the shipment of orders.

Legal Contingencies

Legal claims may arise from time to time in the normal course of business, the results of which may have a material effect on the Company’s accompanying consolidated financial statements.

The putative securities class action filed in November 2022 against the Company and certain of its executive officers and directors in the United States District Court for the Central District of California was dismissed with prejudice by the court in January 2025 with judgment against the plaintiffs entered by the court on February 13, 2025. Plaintiffs have filed a notice of appeal from that dismissal and briefing in the appeal is complete. The related derivative suits against the Company and certain of its executive officers and directors are currently pending.

The Company intends to vigorously defend against such claims. The Company has determined that any potential loss is neither probable nor reasonably estimable and an accrual has not been recorded.

11. LEASES

The Company has operating lease agreements for its office space, retail stores, fulfillment center and fulfillment center equipment. The Company’s lease agreements have initial terms that expire between 2028 and 2035. Certain of the Company’s lease agreements include rent abatement periods, escalating rent payment provisions, and provide for an option to extend or terminate the lease.

On December 9, 2025, the Company entered into a first amendment (the “First Lease Amendment”) to the lease of its headquarters in Santa Monica, California (the “Building”), dated as of November 26, 2018, which was originally expected to expire by its terms on January 31, 2030. The First Lease Amendment provides, among other things, that the Company will relocate from the ground floor and into a different office space on the fourth floor of the Building and for an extension of the lease term as described therein. The Company accounted for the First Lease Amendment as a lease modification under ASC 842.

The Company had a sublease agreement classified as an operating lease for additional office space, which expired in January 2026.

The operating lease and sublease agreements included in the measurement of lease liabilities do not reflect options to extend or terminate, as the Company does not consider the exercise of these options to be reasonably certain. The Company’s lease and sublease agreements do not contain any material residual value guarantees or material restrictive covenants.

The Company recognizes operating lease expense on a straight-line basis over the lease term. Operating lease expense for the years ended December 31, 2025, 2024, and 2023 was $13.4 million, $11.6 million, and $4.2 million, respectively. Short-term lease expense for the years ended December 31, 2025 and 2024, and 2023 was $2.3 million, $6.4 million, and $9.2 million, respectively.

Cash payments included in the measurement of operating lease liabilities were $12.7 million for the year ended December 31, 2025. Right of use assets obtained in exchange for operating lease liabilities were $16.6 million for the year ended December 31, 2025.

As the rates implicit in the Company’s outstanding leases are not determinable, the Company uses its incremental borrowing rate based on information available on the lease commencement date to determine the present value of lease payments.

The weighted-average remaining lease term and weighted-average discount rate related to the Company’s operating leases at December 31, 2025 were as follows:

Future undiscounted lease payments, and a reconciliation of these payments to the Company’s operating lease liabilities at December 31, 2025, were as follows (in thousands):

12. INCOME TAXES

Net income before provision for income taxes were as follows (in thousands):

The components of the Company’s provision for income taxes were as follows (in thousands):

On August 16, 2022, the U.S. government enacted the Inflation Reduction Act of 2022 (“IRA”), which, among other things, implements a 15% alternative minimum tax on corporations with book income in excess of $1 billion, a 1% excise tax on net stock repurchases and several tax incentives to promote clean energy. The effective date of these provisions was January 1, 2023. During 2025, the Company repurchased shares of its Class A common stock in the amount of $2.7 million. The Company has reviewed the provisions of the law and determined that they did not have a material impact on its consolidated financial statements.

On June 27, 2024, California Senate Bill 167 (“SB 167”) was signed into California law. The tax bill suspends the net operating loss (“NOL”) deduction for tax years beginning on or after January 1, 2024, and before January 1, 2027. The suspension applies to taxpayers with greater than $1 million in net income for the tax year. To the extent that an NOL deduction is denied as a result of this suspension, the allowable carryforward period for the NOL is extended. The Company is not able to offset its net income with NOL in the year ended December 31, 2025.

The following is a reconciliation of the U.S. statutory federal income tax rate to the annual tax rate to our effective tax rate. The Company adopted ASU 2023-09 prospectively for the year ended December 31, 2025. Prior period disclosures have not been retrospectively adjusted and may not be comparable to the current period presentation under the new standard.

(1)State taxes in California, New York State and New York City, New Jersey, and Texas contributed to the majority (greater than 50%) of the tax effect in this category.

A reconciliation of the U.S. statutory federal income tax rate to the Company's annual tax rates for the years ended December 31, 2024 and 2023 were as follows:

The Company’s effective tax rate for the years ended December 31, 2025, 2024, and 2023 was 27.4%,81.0%, and 44.5%, respectively. The Company’s effective tax rate in each of 2025, 2024, and 2023 is higher than the federal statutory tax rate mainly due to state tax expense and permanent disallowance of certain stock-based compensation for tax purposes.

A summary of cash paid for income taxes, net of refunds, was as follows (in thousands):

Significant components of deferred tax balances were as follows (in thousands):

As of December 31, 2025, the Company had available federal NOL carryforwards of approximately $1.0 million, which begin to expire in 2035. The Company also had available California NOL carryforwards of approximately $1.1 million as of December 31, 2025, which begin to expire in 2035. The usage of the Company’s federal and California NOL carryforwards is subject to the limitations imposed by Section 382 of the Internal Revenue Code. Further, the Company’s California NOL was suspended in 2021. The tax years ending December 31, 2022, through December 31, 2024 remain open and subject to audit by the Internal Revenue Service. The tax years ended December 31, 2021, through December 31, 2024, remain open and subject to audit by state tax authorities.

As of December 31, 2025 and 2024, the Company had $0.2 million and $0.1 million of uncertain tax positions, respectively, excluding interest and penalties. The Company’s policy is to recognize interest and penalties accrued on uncertain tax positions as income tax expense. During the years ended December 31, 2025, 2024, and 2023 interest and penalties were immaterial.

The following table summarizes the activity related to our uncertain tax positions during the years ended December 31, 2025 and 2024 (in thousands):

Uncertain tax positions were not material in the year ended December 31, 2023.

13. STOCK-BASED COMPENSATION

Amended 2016 Equity Incentive Plan

In 2016, the Company adopted the 2016 Equity Incentive Plan (as amended, the “2016 Plan”). The 2016 Plan provided for the issuance of restricted stock awards (“RSAs”), RSUs, stock appreciation rights (“SARs”), incentive stock options, non-qualified stock options and other stock-based awards to employees and consultants of the Company and its affiliates and members of the Board of Directors of the Company (the “Board”). Prior to its termination, the number of shares of Class A common stock authorized for issuance under the 2016 Plan was 51,716,934. Only incentive stock options, non-qualified stock options and RSUs were granted under the 2016 Plan.

On May 18, 2021, the Board approved the termination of the 2016 Plan. Any remaining shares of common stock available for issuance under the 2016 Plan as of such date were added to the shares of our Class A common stock reserved for issuance under the Company’s 2021 Equity Incentive Award Plan (the “2021 Plan”). Additionally, any shares of common stock subject to awards granted under the 2016 Plan that expire, lapse or are terminated, exchanged for or settled in cash, surrendered, repurchased, canceled without having been fully exercised, or forfeited following the effective date of the 2021 Plan will become available for issuance under the 2021 Plan.

2021 Equity Incentive Award Plan and 2021 Employee Stock Purchase Plan

On May 18, 2021, the Board adopted and the stockholders of the Company approved the 2021 Plan and the 2021 Employee Stock Purchase Plan (the “ESPP”).

The number of shares reserved for issuance under the 2021 Plan increases automatically on the first day of each calendar year beginning on January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (A) a number of shares of Class A common stock such that the aggregate number of Shares available for grant under the 2021 Plan immediately following such increase shall equal 5% of the aggregate number of shares of Class A common stock and Class B common stock outstanding on the final day of the immediately preceding calendar year, and (B) such lesser number of shares of Class A common stock as determined by our Board. The 2021 Plan authorizes the granting of RSAs, RSUs, SARs, incentive stock options, non-qualified stock options, dividend equivalents, and other stock or cash awards to employees and consultants of the Company and its subsidiaries and members of the Board.

The number of shares of the Company’s Class A common stock that will be available for issuance and sale to eligible employees under the ESPP increases automatically on the first day of each calendar year beginning on January 1, 2022 and ending on and including January 1, 2031, equal to the lesser of (A)1% of the shares of Class A common stock and Class B common stock outstanding as of the last day of the immediately preceding fiscal year and (B) such lesser number of shares of Class A common stock as determined by our Board. The ESPP permits eligible employees to purchase shares of the Company’s Class A common stock at a purchase price per share equal to 85% of the lesser of (i) the fair market value of the Company’s Class A common stock on the first trading day of an applicable offering period or (ii) the last trading day of a purchase period in an applicable offering period.

All options and SARs granted under the 2021 Plan will generally expireten years from the date of grant if not exercised. In the event of a termination of employment, any unvested portion of an option will generally be forfeited immediately. Any vested options may generally be exercised within three months, except for (i) instances of termination due to death or disability whereby any vested options may be exercised within one year and (ii) instances of termination “with cause” whereby any vested options are forfeited immediately.

Shares that expire, lapse or are terminated, exchanged for or settled in cash, surrendered, repurchased, canceled without having been fully exercised, or forfeited will become available for future awards under the 2021 Plan. In addition, shares of Class A common stock that are tendered to the Company by a participant to satisfy the applicable exercise or purchase price of an award and/or to satisfy any applicable tax withholding obligation with respect to an award will be added to the number of shares of Class A common stock available for future awards. Additionally, any shares of Class A common stock subject to awards granted under the 2016 Plan that expire, lapse or are terminated, exchanged for or settled in cash, surrendered, repurchased, canceled without having been fully exercised, or forfeited following the effective date of the 2021 Plan will become available for issuance under the 2021 Plan. The 2021 Plan is administered by the Board with respect to awards to non-employee directors and by the Compensation Committee of the Board with respect to other participants.

As of December 31, 2025, the number of shares available for issuance under the 2021 Plan and ESPP were 6,229,832 and 3,034,713, respectively.

Stock Option Valuation

The assumptions that the Company used to determine the grant date fair value of stock options granted were as follows, presented on a weighted-average basis:

A summary of stock option activity under the 2016 Plan and 2021 Plan, is as follows:

During the year ended December 31, 2025, the Company repriced, on a one-for-one basis, certain fully vested outstanding stock options to purchase shares of the Company’s Class A common stock (the “Repricings”). The Repricings were accounted for as modifications under ASC 718 and the resulting incremental stock-based compensation expense was not material for the year ended December 31, 2025.

The aggregate intrinsic value of stock options is calculated as the difference between the exercise price of the stock options and the fair value of the Company’s Class A common stock for those stock options that had exercise prices lower than the fair value of the Class A common stock as of the end of the period. The aggregate intrinsic value of stock options exercised during the years ended December 31, 2025, 2024, and 2023 was $0.5 million, $0.6 million, and $5.6 million, respectively.

The weighted-average grant date fair values per share of the Company’s stock options granted during the years ended December 31, 2025, 2024, and 2023 was $0.77, $2.89, and $3.35, respectively. The grant date fair value of stock options vested during the years ended December 31, 2025, 2024 and 2023 was $7.9 million, $22.5 million, and $27.3 million, respectively.

As of December 31, 2025, total unrecognized compensation cost related to unvested stock option awards was $3.7 million, to be recognized over a weighted-average period of 2.7 years.

Restricted Stock Units

The fair value of RSUs that vested during the years ended December 31, 2025, 2024, and 2023 were $27.5 million, $9.2 million, and $17.4 million respectively.

As of December 31, 2025, total unrecognized compensation cost related to unvested RSUs was $38.5 million, to be recognized over a weighted-average period of 2.6 years.

A summary of RSU activity under the 2016 Plan and 2021 Plan is as follows:

14. EARNINGS PER SHARE

Basic EPS and Diluted EPS attributable to common stockholders is calculated in conformity with the two-class method required for participating securities: Class A and Class B common stock. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting, conversion, and transfer rights. Each share of Class A common stock is entitled toone vote per share and each share of Class B common stock is entitled totwenty votes per share. Each share of Class B common stock is convertible at any time at the option of the stockholder intoone share of Class A common stock.

As the economic rights of Class A and Class B common stock are identical, undistributed earnings are allocated on a proportionate basis and presented on a combined basis. The following table sets forth the computation of Basic EPS and Diluted EPS and a reconciliation of the weighted average number of common and common equivalent shares outstanding for the years ended December 31, 2025, 2024, and 2023 (in thousands, except share and per share amounts).

The Company excluded the following weighted average common equivalent shares from the computation of Diluted EPS for the years ended December 31, 2025, 2024, and 2023 because including them would have had an anti-dilutive effect:

15. SEGMENT REPORTING

Operating segments are defined as components of an entity for which separate financial information is available and that is regularly reviewed by the CODM, in deciding how to allocate resources to an individual segment and in assessing performance. The Company's CODM is its Chief Executive Officer. The CODM manages the Company’s operations as a single segment based on financial data presented on a consolidated basis for the purposes of assessing performance and making operating and resource allocation decisions.

The CODM assesses performance for the single reportable segment and decides how to allocate resources based on net income as reported on the consolidated statements of operations. The measure of segment assets is reported on the consolidated balance sheets as total assets. The CODM uses net income to evaluate income generated from segment assets (return on assets) in deciding whether to reinvest profits into the single reportable segment for marketing, selling, and general and administrative expenses or to invest in other strategies, such as for acquisitions. The Company currently derives revenue primarily in the United States, and manages its business activities on a consolidated basis.

Significant segment expenses regularly reviewed by the CODM are those included on the Company's consolidated statements of operations, including selling, marketing, and general and administrative expenses.

16. RELATED PARTY TRANSACTIONS

In November 2024, the Company purchased 27,454,727 shares of OOG, Inc.’s (“OOG”) Series A-1 Preferred Stock for an aggregate price of $25.0 million in cash, representing a minority interest in OOG. Heather Hasson, Executive Chairman of the Board, is founder and Chief Executive Officer of OOG. The Company agreed to work in good faith to consummate a commercial agreement between the parties at a future date memorializing certain commercial rights and benefits.

In November 2024, the Company entered into a Purchase Order Agreement with Baron Capital Management, Inc. (“BCM”), a subsidiary of Baron Capital Group, Inc. (“BCG”), pursuant to which BCM purchased from the Company certain FIGS products in connection with BCG’s 2024 annual conference, for an aggregate purchase price of $1.0 million. BCG is a beneficial owner of greater than 5% of the Company's outstanding Class A common stock.

In January 2025, the Company entered into a binding term sheet with BCM and BAMCO, Inc., a subsidiary of BCG (“BAMCO” and, together with BCM, “Baron”), pursuant to which the Company and Baron memorialized certain terms to be set forth in a stockholders agreement, relating to the purchase, transfer, registration and voting rights of certain of the Company's securities owned by Baron and its affiliates. In February 2025, the Company entered into the stockholders agreement with Baron. Baron and its affiliates are beneficial owners of greater than 5% of the Company's outstanding Class A common stock.

In March 2025, the Company entered into a License Agreement with OOG, pursuant to which FIGS licensed to OOG for nominal consideration approximately 2,200 square feet of unused office space currently leased by the Company.

In February 2025, the Company established the FIGS Awesome Humans Foundation (the “Foundation”), a 501(c)(3) public charity. In the year ended December 31, 2025, the Company donated $0.3 million to the Foundation, the amounts of which are included in general and administrative expenses for the year ended December 31, 2025.

In November 2025, the Company entered into a Purchase Order Agreement with BAMCO, pursuant to which BAMCO purchased from the Company certain FIGS products in connection with BCG’s 2025 annual conference, for an aggregate purchase price of $0.9 million. In the year ended December 31, 2025, the Company sold a total of $1.0 million of certain FIGS products to affiliates of BCG, the amounts of which are included in net revenues for the year ended December 31, 2025.

17. SHARE REPURCHASE PROGRAM

On August 8, 2024, the Board authorized a share repurchase program for up to $50.0 million of the Company’s outstanding Class A common stock, with no expiration date. Repurchases under the share repurchase program may be made from time to time through, without limitation, open market purchases or through privately negotiated transactions and/or structured repurchase agreements with third parties, block purchases or derivative contracts, and/or pursuant to Rule 10b5-1 trading plans, subject to market conditions, applicable securities laws and other legal requirements and relevant factors. Open market repurchases have been and will be structured to occur in accordance with applicable federal securities law, including within the pricing and volume requirements of Rule 10b-18 under the Exchange Act. The share repurchase program does not obligate the Company to acquire any particular amount of Class A common stock, and may be modified, suspended or terminated at any time, without prior notice. The timing, manner, price and amount of any repurchases have been and will be determined at the Company’s discretion, subject to business, economic and market conditions and other factors. Repurchases under the program have been and are expected to be funded from existing cash and cash equivalents. All repurchased shares under the share repurchase program have been and will be retired.

On February 27, 2025, the Board 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 the Company’s outstanding Class A common stock.

During the year ended December 31, 2025, share repurchases totaled 567,607 shares of Class A common stock for approximately $2.7 million. As of December 31, 2025, the Company had approximately $52.0 million available for future repurchases of its Class A common stock under the share repurchase program.