FIGS (FIGS) risk factors, FY2025 10-K

Risks Related To Our Business

1. 01Our historical growth may not be sustainable or indicative of future results
2. 02If we fail to manage the expansion of our business effectively, our financial condition and results of operations may be adversely affected
3. 03We have not always been profitable and may not be profitable in the future21% rewritten
4. 04Our success depends on our ability to maintain the value and reputation of our brand
5. 05If we fail to attract new customers, retain existing customers, or fail to maintain or increase sales to those customers, our business, financial condition, results of operations and growth prospects will be harmed
6. 06If our marketing efforts are not successful, our business, financial condition and results of operations could be harmed88% rewritten
7. 07If our marketing efforts are not successful in promoting awareness of our products, driving customer engagement or attracting new customers, or if we are not able to cost-effectively manage our marketing expenses, our results of operations could be adversely affected
8. 08If we do not continue to successfully develop and introduce new, innovative and updated products, we may not be able to maintain or increase our sales and profitability
9. 09The market for healthcare apparel is highly competitive70% rewritten
10. 10established sales, manufacturing and distribution infrastructure that choose to expand into the production and marketing of healthcare apparelNew
11. 11Our future success depends on the continuing efforts of our key employees and our ability to attract and retain highly skilled team members
12. 12We are subject to international business uncertaintiesNew
13. 13Shipping 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 operations27% rewritten
14. 14If we experience problems with our distribution center’s operational infrastructure, our ability to meet customer expectations, manage inventory, complete sales and achieve objectives for operating efficiencies could be harmed
15. 15If we are unable to accurately forecast customer demand, manage our inventory and plan for future expenses, our results of operations could be adversely affected67% rewritten
16. 16demand and delays in the delivery of our products to our customers could result in reputational harm and damaged customer relationships and have an adverse effect on our business, financial condition and results of operationsNew
17. 17Our 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 risks33% rewritten
18. 18Our ability to source and distribute our products, including our ability to do so profitably, is impacted by global trade policyNew
19. 19Merchandise returns could harm our business
20. 20The fluctuating cost and availability of raw materials could cause our business, financial condition and results of operations to suffer
21. 21The operations of many of our suppliers and manufacturers are subject to additional risks that are beyond our control and that could harm our business, financial condition and results of operations
22. 22Any failure by us or our suppliers or manufacturers to comply with product safety, labor or other laws, provide safe conditions for our or their workers or use or be transparent about ethical business practices may damage our reputation and brand and harm our business23% rewritten
23. 23We conduct business in China, which exposes us to risks inherent in doing business there49% rewritten
24. 24We may be unable to execute on our B2B growth strategy21% rewritten
25. 25We may be unable to execute on our retail growth strategy
26. 26Increases in labor costs, including wages, could adversely affect our business, financial condition and results of operations27% rewritten
27. 27Our sales and profitability may decline if product costs increase or selling prices decrease
28. 28If we do not successfully optimize, operate and manage the expansion of the capacity of our fulfillment operations, our business, financial condition and results of operations could be harmed26% rewritten
29. 29If we cannot maintain our culture as we grow, we could lose the innovation, teamwork and passion that we believe contribute to our success and our business may be harmed
30. 30Our credit agreement contains restrictive covenants that may limit our operating flexibility
31. 31A downturn in the economy may adversely affect our business83% rewritten
32. 32Certain of our key operating metrics are subject to inherent challenges in measurement, and any real or perceived inaccuracies in our metrics or the underlying data may cause a loss of investor confidence in such metrics and the market price of our Class A common stock may decline
33. 33We may incur losses from fraud52% rewritten
34. 34Our business may be affected by seasonality

Risks Related to Information Technology, Cybersecurity and Data Privacy

1. 35System interruptions that impair customer access to our website or other performance failures in our or our third-party vendors’ technology infrastructure could damage our business, reputation and brand and substantially harm our business, financial condition and results of operations
2. 36We must continue to expand and scale our IT Systems, including our security systems, and our failure to do so could adversely affect our business, financial condition and results of operations
3. 37Our business may be adversely affected if we are unable to provide our customers a cost-effective shopping platform that is able to respond and adapt to rapid changes in technology
4. 38Our customer engagement on mobile devices depends upon effective operation with mobile operating systems, networks, and standards that we do not control
5. 39If proprietary, confidential or sensitive information or personal data about our customers is disclosed, or if we or our third-party providers are subject to real or perceived cyberattacks, our customers may curtail use of our website or mobile app, we may be exposed to liability and our reputation could suffer37% rewritten
6. 40or the enactment of new laws and regulations relating to data privacy, data protection, cybersecurity and consumer protection, could adversely affect our business and our financial conditionNew
7. 41government enforcement actions, damages and penalties, which could adversely affect our business, financial condition and results of operationsNew
8. 42the consumer (such as with regard to title and fitness for purpose) and with regard to the information that must be provided to a consumer, and also create product liability regimes that may lead to claims against us (including for personal injury)New
9. 43Government regulation of the internet and eCommerce is evolving, and unfavorable changes or failure by us to comply with these regulations could substantially harm our business, financial condition and results of operations
10. 44Some of our software and IT Systems contain open source software, which may pose particular risks to our proprietary applications
11. 45The use of artificial intelligence could adversely affect our business88% rewritten
12. 46services could disrupt our operations or solutions, damage our reputation, cause a loss of confidence in our solutions, or result in legal claims or proceedings, for which we may be unable to recover damages from the affected providerNew

Risks Related to Intellectual Property

1. 47Any failure or inability to protect or enforce our intellectual property rights could diminish the value of our brand, weaken our competitive position and harm our business, financial condition and results of operations
2. 48Our fabrics and manufacturing technology may be imitated by our competitors
3. 49We may incur costs to defend against, face liability for or be vulnerable to intellectual property infringement claims brought against us by others
4. 50The inability to acquire, use or maintain our marks and domain names for our websites could substantially harm our business, financial condition and results of operations

Risks Related to Other Legal, Regulatory and Tax Matters

1. 51We may face exposure to foreign currency exchange rate fluctuations72% rewritten
2. 52expensive relative to that of competition in those markets and the general purchasing power of customers in foreign countries could be weakened, each of which may adversely affect our demandNew
3. 53Any failure to comply with trade, anti-corruption and other regulations could lead to investigations or actions by government regulators and negative publicity
4. 54If our employees, contractors and agents, and companies to which we outsource certain of our business operations were to take actions in violation of our policies or applicable law, there could be an adverse effect on our reputation, business, financial condition and results of operations
5. 55Changes in tax laws may adversely impact our future financial position and results of operations. Our effective income tax rate could also change as a result of various evolving factors, including changes in the scope of our operations55% rewritten
6. 56We could be required to collect additional sales taxes that may increase the costs our customers would have to pay for our products and adversely affect our results of operations
7. 57Our ability to use our net operating loss carryforwards may be limited

Risks Related to the Ownership of Our Class A Common Stock

1. 58Our stock price has been volatile and may decline regardless of our operating performance, resulting in substantial losses for investors
2. 59Sales, directly or indirectly, of a substantial amount of our Class A common stock in the public markets by our existing security holders may cause the price of our Class A common stock to decline
3. 60The dual-class structure of our common stock may adversely affect the trading market for our Class A common stock60% rewritten
4. 61If securities or industry analysts do not publish research, or publish inaccurate or unfavorable research, about our business, the price of our Class A common stock and trading volume could decline
5. 62We do not currently intend to pay dividends for the foreseeable future
6. 63Delaware law and provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make a merger, tender offer or proxy contest more difficult, limit attempts by our stockholders to replace or remove our current management and depress the market price of our Class A common stock
7. 64We cannot guarantee that our share repurchase program will be fully consummated or that it will enhance long-term stockholder value. Share repurchases could also increase the volatility of the trading price of our stock and could diminish our cash reserves
8. 65Our estimates of market opportunity and forecasts of market growth may prove to be inaccurate, and even if the markets in which we compete achieve the forecasted growth, our business could fail to grow at similar rates, or at all
9. 66Our results of operations could be adversely affected by natural disasters, public health crises, political crises or other catastrophic events28% rewritten
10. 67We are subject to periodic disputes, claims and litigation that could result in unexpected expenses and could ultimately be resolved against us
11. 68Our insurance may not provide adequate coverage against claims
12. 69We incur significant costs as a result of being a public company, and our management is required to devote substantial time to compliance with our public company responsibilities and corporate governance practices61% rewritten
13. 70If our estimates or judgments relating to our critical accounting policies are based on assumptions that change or prove to be incorrect, our results of operations could fall below the expectations of our investors and securities analysts, resulting in a decline in the trading price of our Class A common stock
14. 71Our reported financial results may be negatively impacted by changes in GAAP89% rewritten
15. 72and may even affect the reporting of transactions completed before the announcement or effectiveness of a change. It is difficult to predict the impact of future changes to accounting principles or our accounting policies, any of which could negatively affect our reported results of operationsNew
16. 73Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud
17. 74We may require additional capital to support business growth, and this capital might not be available or may be available only by diluting existing stockholders
18. 75Failure to effectively and efficiently address environmental, sustainability, social and governance matters could adversely impact us22% rewritten