Q3 2023 Figs Inc Earnings Call

Speaker 1: Good afternoon. Thank you for attending today's FEGS third quarter fiscal 2023 earnings conference call. My name is Cole and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers.

Good afternoon. Thank you for attending todays <unk> third quarter fiscal 2023 earnings Conference call. My name is cole and I'll be the moderator for todays call all lines will be muted during the presentation portion of the call with an opportune.

For questions and answers at the end if you'd like to ask a question. Please press star one on your telephone keypad I would now like to pass the conference over to our host Jean Fontana. Please go ahead.

Speaker 1: If you would like to ask a question, please press star 1 on your telephone keypad. I would now like to pass the conference over to our host, Gene Fontana. Please go ahead.

Thank you good afternoon, and thank you for joining today's call to discuss <unk> third quarter 2023 results, which we released this afternoon and can be found in our earnings press release and stockholder presentation posted to our Investor Relations website at IR <unk> com presenting on today's call are Trina sphere, our co founder and Chief Executive Officer.

Speaker 2: Thank you. Good afternoon and thank you for joining today's call to discuss Figs' third quarter 2023 results, which we released this afternoon and can be found in our earnings press release and in the stockholder presentation posted to our investor relations website at ir.wherefigs.com. Presenting on today's call are Trina Speer, our co-founder and chief executive officer, and Daniela Turnstine, our chief financial officer.

And Daniel <unk>, our Chief Financial Officer, as a reminder, our remarks on this call that do not concern past events are forward looking statements. These may include predictions expectations or estimates, including about future financial performance market opportunity.

Speaker 2: As a reminder, remarks on this call that do not concern past events are forward-looking statements.

Speaker 2: These may include predictions, expectations, or estimates, including about future financial performance, market opportunity, or business.

This plan forward looking statements involve risks and uncertainties and actual results could differ materially.

Speaker 2: Forward-looking statements involve risks and uncertainties, and actual results could differ materially. These and other risks are discussed in our SEC filings, including in the 10Q we filed today, which we encourage you to review. Do not place undue reliance on forward-looking statements, which speak only as of today, in which we undertake no obligation to update.

Other risks are discussed in our SEC filings, including in the 10-Q, we filed today, which we encourage you to review do not place undue reliance on forward looking statements, which speak only as of today and which we undertake no obligation to update finally, we will discuss certain non-GAAP metrics and key performance indicators, which we believe are useful supplemental measures for understanding our business definitions and.

Speaker 2: Finally, we will discuss certain non-gap metrics and keep performance indicators to be believed are useful supplemental measures for understanding our business. Definitions and reconciliations of these non- GAAP measures to their most comparable GAAP measures are included in the stockholder presentation we should today. Now, I'd like to turn the call over to Trina Spear to the second officer of-

<unk> of these non-GAAP measures to their most comparable GAAP measures are included in the stockholder presentation. We issued today now I would like to turn the call over to Trina sphere, Chief Executive Officer Vic. Thanks.

Speaker 3: Thanks, Gene. Good afternoon, everyone. Thank you for joining us for a third quarter, 2023 conference call. We were very pleased to have delivered better than expected net revenues in the Justice Debits on Margin for the third quarter. I would like to thank our entire 16 for their hard work as well as their devotion to our healthcare community.

Thanks, Jean Good afternoon, everyone. Thank you for joining us for our third quarter 2023 conference call.

We are very pleased to have delivered better than expected net revenues and adjusted EBITDA margin for the third quarter.

I would like to thank our entire <unk> for their hard work as well as their devotion to our health care community.

Speaker 3: Touching on some highlights from the quarter, net revenues grew 11% compared to the prior year period, driven primarily by nearly 20% growth in active customers, with another record number of new customers added in the third quarter.

Touching on some highlights from the quarter net revenues grew 11% compared to the prior year period, driven primarily by nearly 20% growth in active customers with another record number of new customers added in the third quarter.

Speaker 3: Beyond the market share gains we are driving the United States, we are building demand internationally with record growth of 81%.

And the market share gains we are driving in the United States. We are building demand internationally with record growth of 81% we.

Speaker 3: We are replicating the powerful word of mouth dynamics that we feel in the US over the last decade.

We are replicating the powerful word of mouth dynamics that we fueled in the U S over the last decade.

Speaker 3: Within Teams, our B2B business, we saw strong performance with a growing number of institutions coming to FIGS to professionalize their organizations.

Within teams or <unk> business, we saw strong performance with a growing number of institutions coming to fix to professionalize the organization.

Speaker 3: We also continue to make meaningful progress in normalizing inventory levels, which to climb 15% compared to the third quarter of last year. Looking at profitability, we delivered an adjusted Ebitom margin of 17.2%. Ahead of our expectations, and generated free cash flow of $46 million of third quarter.

We also continued to make meaningful progress in normalizing inventory levels, which declined 15% compared to the third quarter of last year looking at profitability. We delivered an adjusted EBITDA margin of 17, 2% ahead of our expectations and generated free cash flow of $46 million for the third quarter.

Speaker 3: Our third quarter performance underscores our ability to deliver on our objective and other results. We are raising our full-year net revenue and adjusted with the margin guidance, which Danielle will speak to shortly.

Our third quarter performance underscores our ability to deliver on our objectives and as a result, we are raising our full year net revenue and adjusted EBITDA margin guidance, which Daniela will speak to shortly.

Speaker 3: Torning to our business highlights, as we execute our strategic priorities, we remain committed to our mission of serving those who serve others. Everything we do is centered around the healthcare community from the product innovation we bring to bear to our compelling marketing campaigns to inspire and invest it as we partner with to our work around advocacy.

Turning to our business highlights as we execute our strategic priorities, we remain committed to our mission of serving those who serve others.

Everything we do is centered around the health care community from the product innovation, we bring to bear to our compelling marketing campaigns to an inspiring ambassadors, we partner with to our work around advocacy.

Speaker 3: Product innovation for FIGs is above all about solving real world problems for the healthcare community with premium products that offer supreme functionality, comfort and style.

Product innovation for figures above all about solving real world problems for the health care community with premium products that offer Supreme functionality comfort and style.

Speaker 3: Our customer first approach to product attracts new healthcare professionals to our brand and drives loyalty amongst our existing customers, demonstrated by the fact that repeat customers continue to generate roughly 70% of our net revenue.

Our customer first approach to product attracts new health care professionals to our brand and drive loyalty amongst our existing customers demonstrated by the fact that repeat customers continued to generate roughly 70% of our net revenues.

Speaker 3: Our merchandising strategy is to build a product of sort that not only stands alone, but can be matched fact to our core scrubs offering to create a complete layering system. We leverage customer insights to bring new product across our categories. Limited, these are limited edition styles that create a flywheel effect that drives both excitement and traffic whereby customers buy these new styles in addition to replenishing their core.

Our merchandising strategy is to build a product assortment that not only stands alone but can be matched back to our core scrubs offerings to create a complete layering system.

We leverage customer insights to bring new product across our categories Limited. These are limited edition styles that create a flywheel effect that drives both excitement and traffic whereby customers by these new styles. In addition to replenishing their core.

Speaker 3: During the third quarter, for example, we introduce our Natal scrub top and massage scrub jogger with a feminine twist while maintaining maximum movement.

During the third quarter for example, we introduced our Natal scrubbed topped massage scrub jogger with a feminine twist.

While maintaining maximum movement and utility.

Speaker 3: We also launched our first wide leg pant, the high-waisted Yendi Card-Ghost Scrub Pant. The success of these limited edition style drops matched back with our core scrub styles and reflects our ability to deliver a consistent stream of newness that our customers want.

We also launched our first widely pan the high waisted E&E cargo scrub pants the.

The success of these limited edition style drops match back with our core scrub styles and reflects our ability to deliver a consistent stream of newness that our customers want.

Another area of strength is in collaborations we seek partnerships with brands that are leaders in their industries have similar values to fig and complement our own core capabilities.

Speaker 3: Another area of strength is in collaboration. We seek partnerships with brands that are leaders in their industries, have similar values to FIGs, and complement our own core capabilities.

Speaker 3: We have talked in the past about our new balance partnership, where we continue to teach tremendous growth and footwear intentionally designed for healthcare professionals.

We have talked in the past about our new balance partnership where we continue to see tremendous growth in footwear intentionally designed for health care professionals.

Speaker 3: Both recently we collaborated with Echo, a leading digital health company that is advancing how healthcare professionals detect and monitor heart and lung disease. We launched the co-branded Core 500 Digital Statistical that was supported by our campaign, innovation, you can hear, which exemplified how we create powerful storytelling that captures the attention of our community. Turning to building and deepening engaged

Most recently, we collaborated with Echo a leading digital health company that is advancing how health care professionals.

Health care professionals detect and monitor heart and lung disease, we launched the co branded core 500 digital stuff. The scope that was supported by our campaign innovation you can here, which exemplified how we create powerful storytelling that captures the attention of our community.

Turning to building and deepening engagement with our community.

Speaker 3: Our marketing strategy reflects a combination of engaging campaigns with creative storytelling, segmentation strategies that align our content to our channels, to our audience, and personalized messaging based on our deep understanding of our customers. The efficiency of our marketing engine enables us to reinvest dollars into top-of-funnel strategies, which helps to drive another record number of new customers in the third quarter.

Our marketing strategy reflects a combination of engaging campaigns with creative storytelling segmentation strategies that align our content to our channels to our audience and personalized messaging based on our deep understanding of our customers the.

The efficiency of our marketing engine enables us to reinvest dollars into top of funnel strategy, which helped to drive another record number of new customers in the third quarter.

Speaker 3: As part of our new customer acquisition efforts, we are engaging students who have long purchase cycles as they are just entering their 30 plus year career. We are creating local on-campus experiences with customized products for each school, with colors and embroidery. We are also leveraging the team's platform in order to become the exclusive provider to universities and associations.

As part of our new customer acquisition efforts, we are engaging students who have long purchase cycles as they are just entering the 30 plus year career.

We are creating local on campus experiences with customized products for each school with colors and embroidery. We're also leveraging the teams platform in order to become the exclusive provider to universities and association.

Speaker 3: These efforts led to a new partnership with Veterinary Business Management Association, a student organization spanning 38 universities.

These efforts led to a new partnership with Veterinary business Management Association, a student organization spanning 38 University.

Speaker 3: We also maintain a strong connection with our community by delivering campaigns that highlight awesome humans, new technical innovation, and cultural moments that drive heightened excitement and a call to action.

We also maintain a strong connection with our community by delivering campaigns that highlight awesome human new technical innovation and cultural moments that drive heightened excitement and a call to action.

Speaker 3: For breast cancer awareness month, we teamed up with F Cancer on a mission to prevent, detect, and unite.

For breast cancer awareness month, we teamed up with F cancer on a mission to prevent detect and unite.

Speaker 3: He donated $50,000 to this organization to advance health equity through education, community clinics, and screening.

We donated $50000 to this organization to advance health equity through education community clinics and screening.

Speaker 3: Some of our greatest moments with the health care community come through our advocacy. Beyond the products we deliver, the way we utilize our platform to stand up for their rights and their well-being without hesitation is what generates such intense loyalty to our brand.

Some of our greatest moments with the health care community come through our advocacy.

Beyond the products, we deliver the way we utilize our platform to stand up for their rights and their wellbeing without hesitation.

But generate such intense loyalty to our brand.

Speaker 3: This quarter, during the largest strike of healthcare workers in US history, we spoke out in support of higher pay, safe working conditions and sustainable patient loads, all core tenants of our Austin's Human Felt.

This quarter during the largest strike of health care workers in U S history, we spoke out in support of higher pay safe working conditions and sustainable patient load all core tenants of our Austin humans Bill.

Speaker 3: Our Instagram post generated some of our highest engagement over the past year and letters to Congress sent through our advocacy hubs, spiked. To date, our community has sent almost 3,000 letters to Congress through our advocacy hubs.

Our Instagram posts generated some of our highest engagement over the past year and letters to Congress sent through our advocacy advocacy hub spiked to.

To date, our community has sent almost 3000 letters to Congress through our advocacy hub.

Looking at our performance outside the U S.

Speaker 3: We are thrilled to see the growing affinity for the big brand across continent. International delivered record net revenue growth of 81%. Reflective of strong performance across countries, including our longest standing markets, Canada, UK, and Australia.

We are thrilled to see the growing affinity for the fixed brand across continents International delivered record net revenue growth of 81% reflective of strong performance across countries, including our longest standing market, Canada, UK and Australia.

Speaker 3: We added seven new countries, including Poland, Kuwait, and Singapore during the quarter. And similar to Mexico and the Philippines, our entrance into these new regions arose from strong grassroots demand, signaling the growing recognition of figs worldwide.

We added seven new countries, including Poland, Kuwait, and Singapore during the quarter and similar to Mexico, and the Philippines. Our entrance into these new regions arose from strong grassroots demand signaling the growing recognition of <unk> worldwide.

Turning to our <unk> business.

Speaker 3: Teams delivered exceptional net revenue growth year over year with orders from best-in-class healthcare organizations such as the American Student Dental Association, AYA Healthcare, and Veterinary Emergency Group, VEJ, a fast-growing emergency care organization with over 60 locations.

<unk> delivered exceptional net revenue growth year over year with orders from best in class healthcare organizations, such as the American student Dental Association I of health care and veterinary Emergency group Veg, a fast growing emergency care organization with over 60 locations.

Speaker 3: Inbound demand is growing as more institutions are looking to FIGS to help them professionalize their staff with premium uniforms. FIGS is best positioned to support these institutions with the best in class technology platform and products that help their professionals look good, feel good, and perform at their best.

Inbound demand is growing as more institutions are looking to fix to help them professionalize their stock with premium uniforms.

Fixed is best positioned to support these institutions with a best in class technology platform and products that helped our professionals look good feel good and perform at their best.

Turning to retail.

Speaker 3: I am super excited to share that we will officially be opening our first permanent retail store, which we refer to as a community hub on November 3rd, which is tomorrow in Century City Mall. We are incredibly proud of this achievement, not only because this is our first branded permanent retail location, it's really the first of its kind, a space that was created and is purely dedicated to healthcare professionals.

I'm Super excited to share that we will officially be opening our first permanent retail store, which we refer to as a community hub on November 3rd which is tomorrow and century City mall. We are incredibly proud of this achievement not only because this is our first branded permanent retail location. That's really the first of its kind of space that was created.

No it's purely dedicated to health care professionals.

Speaker 3: In addition to enabling healthcare professionals to feel, try on, and become educated about our products, our community hubs will serve healthcare professionals through purposeful programming and events on topics that they really care about.

And then in addition to enabling health care professionals to feel try on and become educated about our products. Our community hubs will serve health care professionals through purposeful programming and events on topics that they really care about.

Speaker 3: In closing, while we are proud of what we have accomplished to date, we have so much untapped potential, which I will speak to following Daniela's review of our financial results.

In closing, while we are proud of what we've accomplished to date, we have so much untapped potential which I will speak to you following Daniela <unk> review of our financial results.

Speaker 4: Thanks, Trina, and good afternoon, everyone. I will begin my discussion with a review of our third quarter financial performance, followed by our revised 2023 outlook. Overall, we are pleased to have exceeded our net revenues and adjusted EBITDA guidance, and to be once again raising our full year guidance. We did this while making significant progress toward our strategic priorities, normalizing inventory, and generating strong free cash flow.

Trina and good afternoon, everyone I will begin my discussion with a review of our third quarter financial performance followed by our revised 2023 outlook. Overall, we are pleased to have exceeded our net revenues and adjusted EBITDA guidance and to be once again, raising our full year guidance. We did this while making significant progress toward our strategic.

Priorities normalizing inventory and generating strong free cash flow.

Speaker 4: For the third quarter, net revenues grew 10.7% to 142.4 million, compared to 128.6 million in Q3 last year, primarily due to an increase in orders from existing and new customers, as well as higher AOB.

For the third quarter net revenues grew 10, 7% to $142 4 million compared to $128 6 million in Q3 last year, primarily due to an increase in orders from existing and new customers as well as higher <unk>.

Speaker 4: We were pleased to deliver a 19.6% increase in active customers, fueled by ongoing initiatives to drive brand awareness globally and strong reactivation rates among last customers. As Trina stated, we reached another third quarter record in new customers.

We were pleased to deliver a 19, 6% increase in active customers fueled by ongoing initiatives to drive brand awareness globally and strong reactivation rates among lapsed customers.

As <unk> stated, we reached another third quarter record and new customers.

Speaker 4: AOV increased nearly 2% versus last year's Q3, led by higher units per transaction, or UPT, and to a lesser degree by an increase in average unit retail, or AUR.

<unk> increased nearly 2% versus last year's Q3 led by higher units per transaction or <unk> and to a lesser degree by an increase in average unit retail or AUR.

Speaker 4: AOV continues to benefit from the product-mix shift driven largely by the strength in footwear and outerwear. This was partially offset by a higher mix of sales occurring during our planned sample sale in September .

<unk> continues to benefit from the product mix shift driven largely by the strength in footwear and outerwear. This was partially offset by a higher mix of sales occurring during our planned sample sale in September.

Gross margin for Q3 was 68, 4% compared to 76% in Q3 2022.

Speaker 4: Gross margin for Q3 was 68.4% compared to 70.6% in Q3 2022. The 220 basis point decline compared to Q3 last year was primarily due to product mix shift. We saw strong growth in non-scrubber categories including footwear as well as in certain limited edition styles.

The 220 basis point decline compared to Q3 last year was primarily due to product mix shift we saw strong growth in non scrubber categories, including footwear as well as in certain limited edition styles.

Speaker 4: Non-scrubware grew 26.4% to 19.3% of net revenues in the third quarter versus 16.9% in the same period last year.

Non scrubber grew 26, 4% to 19, 3% of net revenues in the third quarter versus 16, 9% in the same period last year.

Speaker 4: To a lesser degree, gross margin was impacted by a higher mix of promotions as well as higher duties. This was partially offset by lower air freight utilization and better freight costs.

To a lesser degree gross margin was impacted by a higher mix of promotions as well as higher duties.

This was partially offset by lower airfreight utilization and better freight costs.

Moving to operating expenses.

Speaker 4: Selling expense for Q3 was $32.2 million, representing 22.6% of net revenues, compared to 24.8% in Q3 2022.

Selling expense for Q3 was $32 2 million, representing 22, 6% of net revenues compared to 24, 8% in Q3 2022.

Speaker 4: The 220 basis point decline was a result of lower fulfillment expenses as we lost elevated storage costs last year, and to a lesser extent, leverage within shipping expense due to higher AOVs.

The 220 basis point decline was a result of lower fulfillment expenses as we lapped elevated storage costs last year and to a lesser extent leverage within shipping expense due to higher <unk>.

Speaker 4: This is partially offset by higher duties related to the increased mix of international sales and a higher mix of promotional sales.

This was partially offset by higher duties related to the increased mix of international sales and a higher mix of promotional sales.

Speaker 4: Marketing expense for Q3 was $19 million, representing 13.4% of net revenues compared to 15.6% in Q3 2022, reflecting digital marketing efficiency.

Marketing expense for Q3 was $19 million, representing 13, 4% of net revenues compared to 15, 6% in Q3, 2022, reflecting digital marketing efficiencies.

Speaker 4: We continue to flex our marketing spend to optimize our return and maintain a disciplined approach to balancing investments and top-of-funnel marketing and maintaining first-order profitability.

We continue to flex our marketing spend to optimize our return and maintain a disciplined approach to balance balancing investments in top of funnel marketing and maintaining first order profitability.

Speaker 4: G&A expense for Q3 was $36.2 million, representing 25.5% of net revenues, compared to 21.5% in Q3 2022.

G&A expense for Q3 was $36 2 million, representing 25, 5% of net revenues compared to 21, 5% in Q3 2022.

Speaker 4: The increase in GNA as a percentage of sales is due to higher investment in people, including salaries, bonus, payroll tax, and stock-based compensation expense, partially offset by lower professional fees.

The increase in G&A as a percentage of sales is due to higher investment in people, including salaries bonus payroll tax and stock based compensation expense, partially offset by lower professional fees.

Speaker 4: In addition, as you may recall, last year we saw an 190 basis point benefit due to a change in our accrual methodology for charitable donations.

In addition, as you may recall last year, we saw in 190 basis point benefit due to a change in our accrual methodology for charitable donations.

Speaker 4: Taking this to the bottom line, our net income was 6.1 million or three cents and deluded EPS for the quarter.

Taking this to the bottom line, our net income was $6 1 million or <unk> <unk> in diluted EPS for the quarter.

Speaker 4: This compares to net income of $4 million and diluted EPS of $0.02 per share in Q3 2022.

This compares to net income of 4 million and diluted EPS of <unk> <unk> per share in Q3 2022.

Speaker 4: Adjusted net income was $6.3 million and diluted EPS as adjusted was $0.03 in Q3 2023 as compared to adjusted net income of $4.1 million and diluted EPS of $0.02 in Q3 2022.

Adjusted net income of $6 3 million and diluted EPS as adjusted was <unk> <unk> in Q3 2023 as compared to adjusted net income of $4 1 million and diluted EPS of <unk> in Q3 2022.

Speaker 4: Finally, our adjusted EBITDA for Q3 was $24.4 million for an adjusted EBITDA margin of 17.2% compared to 16.4% in Q3 2022.

Finally, our adjusted EBITDA for Q3 was $24 4 million for an adjusted EBITDA margin of 17, 2% compared to 16, 4% in Q3 2022.

Speaker 4: Turning to our balance sheet, we finished the quarter with cash, cash equivalents and short-term investments of $232 million.

Turning to our balance sheet, we finished the quarter with cash cash equivalents and short term investments of $232 million inventory.

Speaker 4: Inventory declined 15% to $143 million at the end of the third quarter compared to $168 million in the third quarter last year. We made significant progress moving towards more normalized levels and expect inventory to decline again in Q4. Lastly, free cash flow was $46 million.

Inventory declined 15% to $143 million at the end of the third quarter compared to $168 million in the third quarter last year.

We made significant progress moving towards more normalized levels and expect inventory to decline again in Q4.

Lastly, free cash flow was $46 million in the quarter.

Speaker 4: Moving to our outlook, starting with the top line. We expect fourth quarter net revenue growth to be up low single digits, reflecting ongoing macro uncertainty, and recognizing that there may have been some pull forward of demand given the outperformance of the third quarter.

Moving to our outlook starting with the topline.

We expect fourth quarter net revenue growth to be up low single digits, reflecting ongoing macro uncertainty and recognizing that there may have been some pull forward of demand given the outperformance of the third quarter.

Speaker 4: We expect the macro environment to continue to weigh on the consumer at least into the first half of next year.

We expect the macro environment to continue to weigh on the consumer at least into the first half of next year.

Speaker 4: moving to gross margin for the fourth quarter. We expect better freight costing to be offset by a shift in product and promotional mix.

Moving to gross margin for the fourth quarter, we expect better freight costing to be offset by a shift in product and promotional mix.

Speaker 4: Looking at selling expense, we expect to incur approximately 2 million in initial startup costs for our Fulfillment Enhancement Project. These elevated costs are expected to extend into the first 3 quarters of 2024.

Looking at selling expense, we expect to incur approximately $2 million in initial startup costs for our fulfillment enhancement project. These elevated costs are expected to extend into the first three quarters of 2024.

Speaker 4: In addition, we expect selling expense to be impacted by higher relative growth in our international business, which carries both duties as well as higher shipping expense given that we currently distribute all products from our California facility.

In addition, we expect selling expense to be impacted by higher relative growth in our international business, which carries both duties as well as higher shipping expense given that we currently distribute all products from our California facility.

Speaker 4: As a result of these factors, we expect fourth quarter adjusted EBITDA margin of between 11 and 12 percent.

As a result of these factors, we expect fourth quarter adjusted EBITDA margin of between 11 and 12%.

Based on our better than expected third quarter performance and outlook for Q4, we now expect 2023 net revenue growth of approximately eight 5% and adjusted EBITDA of approximately 14%.

Speaker 4: Based on our better than expected third quarter performance and outlook for Q4, we now expect 2023 net revenue growth of approximately 8.5% and adjusted EBITDA of approximately 14%.

Speaker 4: This is up from our previous expectation of 5.5 to 7.5% net revenues growth and 12.5 to 13.5% adjusted EBITDA margin.

This is up from our previous expectation of five 5% to seven 5% net revenues growth and 12, 5% to 13, 5% adjusted EBITDA margin.

Speaker 4: Overall, we are really proud of what we have delivered in this uncertain macro environment. And we remain excited about the long-term growth potential of our business as we continue to advance our leadership position within the healthcare apparel industry.

Overall, we are really proud of what we have delivered in this uncertain macro environment and we remain excited about the long term growth potential of our business as we continue to advance our leadership position within the health care apparel industry.

Speaker 4: We have an incredibly healthy balance sheet with ample cash and no debt, and our business model generates strong cash flow. We are making the investments today that we believe will drive accelerated future performance as we move past near-term macro challenges. I will turn it back to Trina to discuss where we are investing in our business for the long term.

We have an incredibly healthy balance sheet with ample cash and no debt and our business model generates strong cash flow, we are making the investments today that we believe will drive accelerated future performance as we move past near term macro challenges.

I will turn it back to Trina to discuss where we are investing in our business for the long term.

Speaker 3: Thanks, Daniella. We believe that the growth and evolution of the healthcare industry combined with our leadership position in healthcare apparel and strong balance sheet creates significant long-term opportunity for FIGS. As Daniella stated, we will leverage our strong cash flow conversion dynamics and scale to lay the groundwork for multi-year growth.

Thanks, Daniela, we believe that the growth and evolution of the healthcare industry combined with our leadership position in health care apparel and strong balance sheet creates significant long term opportunity for Biggs as Daniela stated, we will leverage our strong cash flow conversion dynamics in scale to lay the groundwork for multi year growth.

Speaker 3: These investments stand across several areas of our business. I will begin with products, the light flood of things.

These investments span across several areas of our business.

I will begin with product the lifeblood of fixed we.

Speaker 3: We are evolving our sourcing strategies to deliver the most innovative and high quality products health care professionals have ever experienced. We are finding our supplier based with best in class partners. We are working to optimize lead times to bring more flexibility to our supply chain. And finally, we are diversifying geographically to mitigate risks.

We are evolving our sourcing strategy to deliver the most innovative and high quality products health care professionals have ever experienced we are refining our supplier base with best in class partners. We are working to optimize lead times to bring more flexibility to our supply chain and finally, we are diversifying geographically to mitigate risk.

Speaker 3: We are confident that this is the right direction for our company as we widen the moat around our business and advance our leadership position.

We are confident that this is the right direction for our company as we widen the moat around our business and to advance our leadership position.

Speaker 3: Second, we will continue to invest in driving international growth to become the global leader in healthcare peril. We are building our localization capabilities, expanding our ambassador network, and deploying brand initiatives in existing and in new markets.

Second we will continue to invest in driving international growth to become the global leader in health care apparel, we are building our localization capabilities, expanding our ambassador network and deploying brand initiatives in existing and in new market.

Speaker 3: Third, we are building our Go-to-market strategy for our team's business to capture the growing trend in more specialized and consumerized medicine. We see a huge opportunity to capture Sharon in an area of the healthcare industry where innovation is lacking.

Third we are building our go to market strategy for our teams business to capture the growing trend in more specialized in consumer is medicine, we see a huge opportunity to capture share in an area of the health care industry industry, where innovation is locking.

Speaker 3: To capture this opportunity, we are upgrading the technology behind our team's platform to create a seamless experience for administrators, saving them time and resources when procuring the uniforms their staff's need to do their job.

To capture this opportunity we are upgrading the technology behind our team's platform to create a seamless experience for administrators saving them time and resources when procuring the uniforms their staff for SaaS need to do their job. The next generation of this platform is on track and to be and will launch later this year.

Speaker 3: The next generation of this platform is on track, and we'll launch later this year.

Speaker 3: Finally, we are just one community hub in on our retail strategy. We are going to learn from our early experience and ensure we have the right talent in place to successfully and profitably build out our retail presence.

Finally, we are just one community hub in on our retail strategy.

We're going to learn from our early experience and ensure we have the right talent in place to successfully and profitably build out our retail presence.

Speaker 3: As we build for the future, we are setting the foundation for a global distribution network. Our fulfillment enhancement project is on track for 2024, and we plan to open a Canadian DC in 2025.

As we build for the future we are setting the foundation for a global distribution network. Our fulfillment enhancement project is on track for 2024, and we plan to open a Canadian D. C. In 2025.

Speaker 3: In conclusion, we see tremendous opportunity to leverage our authenticity, industry-leading product innovation, strong balance sheet, and scale to capitalize on the tailwinds in the growing healthcare industry. Healthcare professionals are at the heart of everything we do, and serving them is what guides our company, from how we approach product innovation, how we engage with our community, and how we show up through our advocacy.

In conclusion, we see tremendous opportunity to leverage our authenticity industry, leading product innovation strong balance sheet and scale to capitalize on the tailwind in the growing health care industry health care professionals are at the heart of everything we do and serving them is what guides our company from how we approach product innovation, how we engage with our community and how we show.

Through our advocacy.

Speaker 3: These are the values that will keep our company on track to serve healthcare professionals like no other brand and to deliver long term profitable growth for our community, our employees and our shareholders. With that, I will turn it over to the operator to take your question.

These are the values that will keep our company on track to.

Our health care professionals like no other brand and to deliver long term profitable growth for our community our employees and our shareholders with that I will turn it over to the operator to take your questions.

Speaker 1: Thank you. We will now begin the Q and a session. If you'd like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason, you'd like to remove that question, please press star followed by 2 again to Q for question. Please press star 1. we'll pause here briefly as questions are registered.

Thank you we will now begin the Q&A session, if you'd like to ask a question. Please press star followed by one on your telephone keypad.

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Speaker 1: Our first question is from Edward Urumma with Piper Sandler. Your line is now open.

Our first question is from Edward <unk> with Piper Sandler Your line is now open.

Speaker 5: Take it afternoon. Thanks for taking the question and congrats on the result. I guess first, I would love to click down a little bit more on the driver of Gross Margin. I know you talked a little bit about mixed shift and non scrub. Would like to maybe go a little further there. If you talk about the performances, some of your newer products, like the under underscrabbed lab codes, things that are more evergreen in this format versus something like footwear. And then as a follow up, we've got a lot of questions on the distribution center investment cadence. If you wouldn't just mind me be giving us a quick update on how we should think about that over there.

Hey, good afternoon. Thanks for taking the question congrats on the results I guess first I would love to click down a little bit more on the drivers of gross margin I know you talked a little bit about mix shift to non scrubber I'd like to maybe go a little further there could you talk about the performance of some of your newer products.

Like the under under Scrubbed lab coats things that are more evergreen assortment versus something like footwear and then as a follow up we've got a lot of questions on the distribution center investment cadence. If you wouldn't mind, maybe giving us a quick update on how we should think about that over the coming quarters. Thank you.

Speaker 4: Sure, I can start talking about the drivers of Gross Margin. So the biggest driver year of year was product mixed shift, both into non scrub wear as we saw, you know, big acceleration in footwear, but also into our limited edition scrub wear. To a smaller extent, it was...

Sure I can start talking about the drivers of gross margin. So the biggest driver year over year was product mix shift.

Both into non scrubbed, whereas we saw a big acceleration in footwear, but also into our limited edition scrubber to a smaller extent it was mixed shifts promotional mix, we did see some outperformance in our sample sale.

Speaker 4: makeshift promotional mix. We did see some outperformance in our sample sale and also higher duties. And again, that was offset by better than expected, by better freight, both ocean and air freight.

Also higher duties and again that was offset by.

Better than expected by better freight both ocean and air freight.

And in terms of product innovation, we continue to see our layering system resonate with our community and so we saw that with our underwear, which we launched in the quarter with our outerwear.

Speaker 3: And in terms of product innovation, you know, we continue to see our layering system resonate with our community. And so we saw that with our underwear, which we launched in the quarter with our outerwear. Our shirt buzzer actually doing really well. Our footwear collaboration with new balance. And so, you know, non-trust as a percent of total, it was almost 20% of our business.

Our <unk> are actually doing really well, our footwear collaboration with new balance and so.

Non scruggs as a percent of total is almost 20% of our business and as we continue to build out these categories, we'll get leverage from a costing perspective, but.

Speaker 3: And as we continue to build out these categories, we'll get leverage from the crossing perspective, but they need to grow out and that's what we're really focused on. And you see, we talked a little bit about how these drops, whether it's within scrubs or outside of scrubs, across our underscrubs, across our outerwear and our footwear, how we're able to match that back to the core and really, we're seeing our healthcare professionals.

They need to grow our build out and Thats what were really focused on and you see.

A little bit about how these drops whether it's within scribes or outside describes across our under scribes across our outerwear and our footwear, how we're able to match that back to the core and really.

We're seeing our health care professionals engage with these new styles as well as the core and kind of replenishing our core and those two things are working really well together.

Speaker 3: engage with these new styles as well as the core and kind of replenishing our core and those two things are working really well together.

Speaker 4: And on your last question on investments for our fulfillment enhancement project, so we're expecting about 2 million of startup costs in the fourth quarter. Looking into 2024, we're still expecting total kind of project costs to be 16 to 18 million, so 14 to 16 million of that taking place in 2024. As a result of that, we are expecting some pressure in selling as a result of this fulfillment enhancement initiative, but do believe that it's going to enable us

And on your last question on investments for our fulfillment enhancement project. So we're expecting about $2 million of startup costs in the fourth quarter looking into 2024, we're still expecting total kind of project cost to be $16 million to $18 million, so 14% to $16 million of that taking place in 2020.

Four as a result of that we are expecting some pressure in selling as a result of this fulfillment enhancement initiatives, but do believe that it's going to enable us to drive.

Speaker 4: better efficiency, better reliability, a better customer experience over the long term. And we're still expecting about 20 million of capital expenses in 2023 with the majority of that taking place in the fourth quarter.

Better efficiency better reliability better customer experience over the long term and we're still expecting about $20 million of capital expenses in 2023 with the majority of that taking place in the fourth quarter.

Thanks, so much.

Speaker 1: Our next question is from Brooke Roach with Goldman. Your line is now open.

Our next question is from Brooke Roach with Goldman Your line is now open.

Good afternoon, and thank you for taking our question Trina I was hoping you could elaborate on any changes or trends, you're seeing in consumer behavior that you've seen.

He moved through the third quarter and into fourth quarter to date have you seen any changes in price elasticity of demand or any.

Friends or changes.

How consumers are engaging with the brand as student loan repayments resume and as we see some changes in the macro and aggregate.

Speaker 3: Thanks, Brooke. Yeah, I think, you know, we're seeing kind of two dynamics going on. The first one is...

Thanks Brook, Yeah, I think there is.

We're seeing kind of two dynamics going on the first one is there was a lot of stocking up during the pandemic and there was obviously an heightened these prescribed during that time there were stimulus interest rates were super low and we are experiencing the hangover effect of that and we see that mainly in our frequency rates.

Speaker 3: You know, there was a lot of stocking up during the pandemic and there was obviously an heightened need for scrub during that time. There were stimulus, interest rates were super low and we are experiencing the hangover effect of that and we see that mainly in our frequency rates. And so we do believe that we at this point have abnormally low repeat frequency.

And so we do believe that we at this point have abnormally low repeat frequency and we believe we will see that normalize over time, and we'll see going into next year and beyond what a more normalized cadence will look like.

Speaker 3: And we believe we'll see that normalized over time and we'll see going into next year and beyond what a more normalized cadence will look like from our healthcare professionals.

Our health care professionals, but as you know health care professionals. They are buying about prepayment of at 4% to six a year. They are spending about $550 a year.

Speaker 3: But as you know, health care professionals, you know, they're buying about, you know, pre pandemic four to six sets a year. They're spending about five hundred and fifty dollars a year. And so with us, they're buying more like two to three sets a year and spending about two hundred and twelve dollars. So this is a huge opportunity going forward.

And so with us they are buying more like two to three such a year and spending about $212. So this is a huge opportunity going forward.

Speaker 3: The second piece that we think is happening is the macro environment. There's still a lot of uncertainty. And as you mentioned with student loans and other dynamics, that we think will be a short term headwind. But we do believe we're able to offset some of this repeat frequency with new customer ads, and you've seen that in the last quarter.

The second piece that we think is happening is the macro environment. There is still a lot of uncertainty and as you mentioned with student loans and other dynamics that we think will be a short term headwind.

But we.

We do believe we're able to offset some of this repeat frequency with new customer ads and you've seen that in the last quarter.

Very clear. Thank you so much for that Daniela can you comment on inventory rationalization are you still targeting 25 weeks of supply by the end of the year and how should we be thinking about further cadency of inventory draw down over the next few quarters.

Speaker 4: So we're still on track to deliver approximately 25 weeks of supply at your end. As a reminder, this is slightly above our normalize level of 16 to 20 weeks, which we expect to be able to get back to in 2024.

So we're still on track to deliver approximately two five weeks of supply at year end.

As a reminder, this is slightly above our normalized level of 16 to 20 weeks, which we expect to be able to get back to in 2024.

Speaker 4: Important to note, you know, still about 50% of our inventory is in core styles and classic colors. So sell all year round. Never goes out of stock. Never goes out of style. And as you saw, you know, we made progress in the 2nd quarter and the 3rd quarter on moving inventory receipts lower and we're going to expect to make further progress there in the 4th quarter with minimal plan receipts.

Important to note still about 50% of our inventories in core styles and classic colors. So sell all year round never goes out of stock never goes out of style.

And as you saw we made progress in the second quarter in the third quarter on moving inventory receipts lower and we're going to expect to make further progress there in the fourth quarter with minimal planned receipts.

Speaker 4: You know, I think we continue to be really focused on maintaining the integrity of our brand with a really disciplined promotional strategy with so much growth ahead of us. And we're going to continue to work through our inventory at the right rate and pace for our business.

I think we continue to be really focused on maintaining the integrity of our brand with a really disciplined promotional strategy with so much growth ahead of us and we're going to continue to work through our inventory at the right rate and pace for our business looking into 2024 of them are back at that kind of 16 to 20 weeks of supply.

Speaker 4: looking into 2024, when we're back at that kind of 16 to 20 weeks of supply, we would expect to grow inventory in line with sales going forward.

We would expect to grow inventory in line with sales going forward.

Thank you so much I'll pass it on.

Speaker 1: Our next question is from Dana Telsey with Telsey Advisory Group.

Our next question is from Dana Telsey with Telsey Advisory group.

Your line is now open.

Speaker 6: Hi everyone, congratulations and nice to see the progress. Tina, you mentioned sourcing diversification opportunity. What are you doing exactly where you're going and what do you see as the opportunity and lead time so that I would think that could also be a gross margin driver. And then just secondly on the more efficient marketing spend in digital marketing, how do you planning marketing going forward? Thank you.

Hi, everyone, congratulations and nice to see the progress China, you mentioned the sourcing diversification opportunity what are you doing exactly where you're going and what do you see as the opportunity in lead times as I would think that could also be a gross margin driver and then just secondly on the more efficient marketing spend and.

Little marketing, how do you planning marketing going forward. Thank you.

Thanks Dana.

Speaker 3: Okay, so from a sourcing strategy perspective, you know, we're developing new supplier relationships. And really leveraging their capabilities to help us continuously up our game and continuously execute on new ideas. And that comes in the form of fabrication styles, you know, details that our healthcare professional need to do their jobs. And it really comes from the lens of, you know, bringing product that's all.

Okay. So from a sourcing strategy perspective, we're developing new supplier relationships.

It really leveraging their capabilities to help us continuously up our game in <unk>.

Continuously execute on new ideas and that comes in the form of.

Fabrication styles.

Details that our health care professionals need to do their job.

It really comes from the lens.

Yes, bringing.

Bringing product that solves problems for people.

Speaker 3: And so that's where we're focused. It's your point about lead times. We do believe the optimization of lead times will help us, you know, it's going to create a lot more flexibility, being able to deliver and respond to what we're seeing with our community and what they want and what they need and deliver that in a more timely way, so we're excited about that as well.

And so that's where we're focused is to your point about lead times.

Do you believe the optimization of lead times will help US you know it is going to create a lot more flexibility as you can.

Able to deliver and respond to what we're seeing with our with our community and what they want and what they need and deliver that.

More timely.

In a more timely way so we're excited about that as well.

Speaker 3: And we're also aligning with sourcing partners across geography.

And we're also aligning with sourcing partners across geographies.

Speaker 3: from Asia to the Middle East to L.I.M. and yes, to diversify and get better lead times for sure, but also to access the besting class.

In Asia, the Middle East Lat am.

And yes to diversify and get better lead times for sure, but also to access the best in class manufacturing talent and to mitigate risk through geographic diversity.

Speaker 3: manufacturing talent and to mitigate risk through geographic diversity. So we're really excited about the shifts that we're making. Our ethos around growth margin is unchanged. And so as the strategy unfolds, we're going to be focused on leveraging our five margin quarter to drive more innovation while maintaining an extremely strong margin rate.

And so we're really excited about the shifts that we're making our ethos around gross margin is unchanged.

And so as this strategy unfolds.

And be focused on.

Leveraging our high margin core to drive more innovation, while maintaining an extremely strong royalty rate.

As it relates to marketing.

We're continuing to.

Execute on our strategy of driving bottom of the funnel tax gains and taking those gains and investing in top of the funnel.

Speaker 3: And so, you know, as we reached stepping points in city across the US, and now in some of our international markets as well, we see work of now driving our cash down. And so we ever had to take those gains and invest in top of the funnel, a driving brand awareness, driving more healthcare professionals who've listed family. And so that's why, you know, are we able to maintain our efficiency and do we see that quarter after quarter?

So as we reached tipping points in cities across the U S and now in some of our international markets as well, we see where it is now driving our CAC down and so we are ready to take those gains and invest in top of the funnel driving brand awareness driving more health care professionals, the fix family and so that's.

Why.

Are we are able to maintain our efficiency and you've seen that quarter after quarter.

Okay.

Thank you.

Okay.

Our next question is from John Kernan with TD Cowen. Your line is now open.

Speaker 1: Our next question is from John Kernan with TD Cohen. Your line is now open. Good afternoon.

Good afternoon, and thanks for taking my question.

Yeah.

Speaker 7: How should we think about the long-term origin structure of the business? Growth margins have been very stable in, fairly volatile macroids. I guess when we think about GNA and selling expenses, what are the opportunities long-term to see some leverage on these lines? It sounds like selling has some, alsoald surgeons?

How should we think about the long term margin structure of the business.

Gross margin has been very stable and fairly volatile macro.

Yes, when we think about G&A and selling expenses what are the opportunities long term to see some leverage on these line items. It sounds like selling had some expense had some.

Speaker 7: expenses coming on for next year for distribution. I'm just curious, how do we think about both those expense line items going forward? Thank you.

Expenses coming on for next year for distribution was just curious.

How do we think about both of those expense line items going forward. Thank you.

Thanks, John So we continue to believe that we will get to a high teens adjusted EBITDA margin I think it's helpful to think about kind of the different components of what needs to happen. You spoke to are really strong gross margin rate I think we're going to continue to deliver that very strong gross margin.

Speaker 4: So, you know, we continue to believe that we, you know, we'll get you a high-teen suggested EBITDA margin. I think it's helpful to think about kind of the different components of what needs to happen. You spoke to, you know, our really strong growth margin rate. I think we're going to continue to deliver that very strong growth margin. Trina spoke about evolving our supply chain to drive greater innovation and quality. We're also expanding our layering system.

Trina spoke about evolving our supply chain to drive greater innovation and quality.

We're also expanding our layering system.

Speaker 4: And so both of these items, we might see some short-term fluctuations, but really we're positioning the business.

So both of these items, we might see some short term fluctuations.

But really we're positioning the business for the longer term and we have a lot of confidence that these changes that we're making are really going to enable us to be better positioned three to five years from now and also gain a lot of efficiency over time as we scale.

Speaker 4: for the longer term. And we have a lot of confidence that these changes that we're making are really going to enable us to be better positioned three to five years from now and also gain a lot of efficiency over time as we scale. Particularly to selling. So we do.

Particularly to selling so we do expect 2024 to be burdened with fulfillment project costs, but we are expecting to move past that in 2025 and the near term we may see a higher cost per order as we invest behind customer experience, but we're going to plan to leverage that as we scale.

Speaker 4: 2024 to be burdened with the film and project costs, but we are expecting to move past that in 2025. And then near term, you know, we may see.

Speaker 4: as we invest behind customer experience, but we're gonna plan to leverage that as we scale. In addition in selling, we do expect to see a higher penetration of international, which does carry duties and higher shipping costs, and that's gonna have a short-term impact on selling expense. But once we open a Canadian DC in 2025, we should be able to drive significant cost savings related to duty and shipping expenses.

In addition in selling we do expect to see a higher penetration of international which does carry duties and higher shipping costs and thats going to have a short term impact on selling expense, but once we open our Canadian D. C. In 2025, we should be able to drive significant cost savings related to duty and shipping expenses.

Speaker 4: And over time, we believe we can leverage GNA and continue to remain really efficient in our marketing as we always have been.

And over time, we believe we can leverage G&A and continue to remain really efficient in our marketing as we always have been I think just taking a step back right. We have a strong balance sheet strong cash flow generation to really invest in our future growth now and so we really want to take advantage of our leadership position.

Speaker 4: I think just taking a step back, right? We have a strong balance sheet, strong cash flow generation to really invest in our future growth now. And so we really want to take advantage of our leadership position to capture the opportunities across global health care.

To capture the opportunities across global health care.

Speaker 7: Understood and thanks for the very thorough answer. Just maybe one quick follow up on the previous English books question on inventory

Understood and thanks for the.

A thorough answers just maybe one quick follow up on the previous spending was Brooks question on inventory.

Speaker 7: Do you expect inventory to grow in line with sales next year? Or should we be still be cycling down year over year in inventory?

You expect inventory to grow in line with sales next year should we be you'll be cycling down year over year in inventory.

Speaker 4: In the first half, we'll still be working to get to that 16 to 20 weeks of supply. Looking into the back half of 2024 is when we would expect to see inventory grow more in line with sales once we're in that normalized place.

I think in the first half will still be working to get to that 16% to 20 weeks of supply looking into the back half of 2024 is when we would expect to see inventory grow more in line with sales once we're in that normalized place.

Got it.

Thank you.

Okay.

Yeah.

Speaker 1: Our next question is from Alice Sal with Thank of America. Your line is now open.

Our next question is from Alex <unk> with Bank of America. Your line is now open.

Speaker 4: Hi, thank you for taking my question. I'm hoping to get more detail about Teams and International since those are the two areas driving your new customer acquisition.

Hi, Thank you for taking my question I'm, hoping to get more detail about teams and international those are the two areas driving new customer acquisition.

Speaker 4: How big is each as a person who fails now? What are the long-term impacts to AOV as both these categories grow? IE does teams provide an AOV benefit given the bulk orders and then does international AOV tends to be higher or lower than domestic?

How big is each as a percentage of sales now what are the long term impacts to <unk> in both of these categories grow Aida teams provide an <unk> benefit given the full quarter's end and then does international <unk> tends to be higher or lower than domestic and then lastly to summarize all of that if you could touch upon.

Speaker 4: And then, you know, lastly, to summarize all that, if you could touch upon the contribution margin for both of these categories as well. Thank.

Contribution margin for both of these categories as well thank you.

Speaker 4: So looking at our teams and international businesses, so speaking to the AOV that we see in each of those, teams does carry a higher AOV as these are generally larger orders. It also has a higher contribution margin. So growth margin is...

Oh.

So looking at our teams and international businesses. So speaking to the <unk> that we see in each of those.

Teams does carry a higher <unk> as these are generally larger orders. It also has a higher contribution margin. So gross margin is pretty similar we do see some offset and higher discounts for these bulk orders, but generally they are buying more of our core product, which helps to keep gross margin relatively stable.

Speaker 4: Pretty similar. We do see some offset in higher discounts for these bulk orders, but generally they're buying more of our core product, which helps to keep gross margin relatively stable. And then we got a lot of benefits below gross margin, looking at efficiencies in outbound shipping, and also today it's entirely inbound, so no marketing expense. So teams really accretive from a contribution margin standpoint.

And then we got a lot of benefits below gross margin looking at efficiencies and outbound shipping and also today, it's entirely inbound so no marketing expense so teams.

Accretive from a contribution margin standpoint.

Speaker 4: International. Today carries a slightly lower AOV, but we see a lot of opportunity to drive that higher over time. From a contribution margin perspective today, we're really focused on keeping the experience similar for our international customers. And so to do that, we're subsidizing a lot of the shipping and duty expenses as we sell from our distribution center in California.

International today carries a slightly lower <unk>, but we see a lot of opportunity to drive that higher over time.

From a contribution margin perspective today, we're really focused on keeping the experience similar for our international customers and so to do that we're subsidizing a lot of the shipping and duty expenses as we sell from.

Our distribution center in California.

Speaker 4: from a marketing perspective, as Trina mentioned, we're really efficient. And so as we expand our distribution network, as we open a Canadian DC in 2025, like we spoke to, we see a lot of opportunity to drive better profitability and international over the long term because of the strong fundamentals that we have today.

From a marketing perspective, as Gina mentioned, we're really efficient and so as we expand our distribution network as we open our Canadian D. C. In 2025 like we spoke to you we see a lot of opportunity to drive better profitability in international over the long term because of the strong fundamentals that we have today.

Thank you.

Speaker 1: Our next question is from Adrian Yee with Barquay. Your line is now open.

Our next question is from Adrienne <unk> with Barclays. Your line is now open.

Speaker 2: Great, thank you. Good afternoon. My my 1 question. My 1st question is on the community hub that you press release to this afternoon.

Great. Thank you good afternoon.

Hi, My one question. My first question is on the community hub that you press released.

Afternoon.

You talked about.

Speaker 2: door. If you have any metrics at all and I know it's.

Kind of the door.

If you have any metrics at all and I know, it's kind of the the first stores, but really kind of the intention behind it is intended to be more of a showroom environment.

Speaker 2: but really kind of the intention behind it is it intended to be more of a showroom environment or is it a kind of fully standalone box with depth.

Or is it a kind of fully standalone box with depth and breadth of inventory and then my second question for Daniela is on the supply chain. It sounds like you are sort of back to normal supply, but it doesn't sound like there's a ton of inbound manufacturing when would you.

Speaker 2: And then my second question for Danielle is on the supply chain. It sounds like you're sort of back to normal supply, but it doesn't.

Speaker 2: of inbound manufacturing, when would you think that the kind of when we do restart up kind of at the vantage.

I think that the kind of when we do restart up kind of manufacturing and how much of the new products that you would be kind of manufacturing is going to be new versus core. Thank you.

Speaker 2: and how much of the new product that you would be kind of manufacturing is going to be new versus core. Thank you.

Thank you so in terms of the store community hubs.

We couldnt be more excited about it it's the first solely branded health care apparel store in the World, which is crazy to say because this is a dream that we had about 11 years ago.

Speaker 3: solely branded healthcare apparel store in the world, which is crazy to say, because this was a dream that we had about 11 years ago. And since then, there's really been no place for healthcare professionals to go and not only get their uniform so they can do their job, but also connect with each other. And we're really excited about that providing that. And so that's why we're so excited about the programming we're going to have and the way in which we're going to engage with our community. I think our community is going to be able to learn more about our products. They're going to be able to try it on, really understand their size and all the different styles, our different allocations. And I mean, we couldn't be more excited. I think, you know, the largest, most iconic brands have stores and our plan is to be a very large, very iconic brand for a long, long time. It's not a showroom. So, you know, we're going to be able to do a lot of things, we carry a inventory and so you can get what you need and you can leave the store with the uniform that you need. You might have to go to work the next day and you want to wear your new things and we want to provide that opportunity. And so we're officially opening tomorrow.

Since then there has really been.

No place for health care professionals to go and not only get their uniform. So they can do their job, but also connect with each other.

And we're really excited about that.

Providing that and so that's why we're so excited about the programming we're going to have an.

The way in which we're going to engage with our community.

Our communities can be able to learn more about our products are going to able to try it on really understand their size and.

All of the different styles or different fabrications.

We couldnt be more excited I think the largest most iconic brands have stores and our plan is to be a very large very iconic brand for a long long time.

Not a showroom so we carry inventory and so you can get what you need and you can leave the store with the uniform that you need you might have to go to work. The next day and you want to wear your new things and we want to provide that opportunity.

Speaker 3: And so we're officially opening tomorrow, so we will be providing you with all the detail in the future, but if you are in LA, please come by.

And so we're officially opening tomorrow. So we will be providing you with all of the.

The detail in the future.

But if you are in L. A please come by.

Well congrats on that.

Thank you.

Speaker 4: on your question on inventory. So we're really proud to be working down our inventory balance while sustaining.

On your question on inventory.

So we're really proud to be working down our inventory balance while sustaining such.

Speaker 4: such a strong growth margin rate. We have...

Such a strong gross margin rate.

We have worked to bring inventory down by lowering receipts in the fourth quarter, but I think it's important to note that we're still bringing in new products just in shallow or buys it's not going to feel very different to our customers and it's still going to enable us to drive excitement and engagement, we're going to continue to play.

Speaker 4: work to bring inventory down by lowering receipts in the fourth quarter. But I think it's important to note that we're still bringing in new products, just in shallower buys. It's not going to feel very different to our customers, and it's still going to enable us to drive excitement and engagement. We're going to continue to plan lower core orders to bring our inventory balance down while still bringing newness and innovation going into 2024.

Lower core orders to bring our inventory balance down while still bringing newness and innovation going into 2024.

Great. Thank you very much.

Good luck.

Thank you.

Speaker 1: Our next question is from Rick Patel with Raymond James. Your line is now open.

Our next question is from Rick Patel with Raymond James Your line is now open.

Speaker 8: Thank you, good afternoon. I'm hoping you could dig deeper into the international business. So you've launched in a lot of new markets.

Thank you and good afternoon.

I'm, hoping you could dig deeper into the international business that you've launched in a lot of new markets within the past couple of years, what have you learned about what works what doesn't.

Speaker 8: couple of years. What have you learned about what works, what doesn't? And then as we think about the next year, do you have more countries in the pipeline that you expect to launch in or are you going to focus more on your existing markets?

Then as we think about the next year do you have more countries in the pipeline that you expect to launch in or are you going to focus more on your existing markets.

Speaker 3: Thanks, Eric. Okay, so I think from an international perspective, what we've learned is that our localization strategies are really working.

Thanks, Eric.

So I think from an international perspective, what we've learned is that our localization strategies are really working.

Speaker 3: When we're localizing our messaging, our communications, even our products, and what we're showing on our site at any given time, obviously our currency being able to check out and pay and local currency is really important. So localization is really going well. I think the other thing that is working well is how we're being opportunistic, right? We're seeing the demand organically from a number of countries, and we're opening them up, and we're not even really spending on marketing, and we're seeing that demand, and we're seeing that build in markets that maybe we weren't even planning over a year or so ago to open that market, and that's been really exciting.

When we're localizing our messaging our communications, even our products and what we're showing on our site at any given time.

Obviously, our currency being able to checkout.

And pay in local currency.

Really important so localization is really going well I think the other thing that is working well is how.

How were being opportunistic right, we're seeing the demand organically from a number of countries and we're opening them up and we're not even really spending on marketing.

We're seeing that demand and we're seeing that.

Built in markets that.

Maybe we werent, even planning over a year or so ago to open that market and that's been really exciting.

Speaker 9: So

No.

Speaker 3: And I think the other thing that's been really great to see is the word of mouth dynamics. They are very similar to what we've seen in the United States. That we're seeing different markets in these tipping points around how people are coming back and engaging with the brand over time, how referrals and people are telling their friends or colleagues about things and that's been really great to see.

And I think the other thing that's been really great to see is the word of mouth dynamics. They are very similar to what we've seen in the United States.

We're seeing different markets and these tipping points around.

How people are coming back and engaging with the brand over time how.

Referrals and people are telling their friends or colleagues about fixed and thats been really great to see.

Speaker 3: And so going into next year and beyond, I think we're going to continue to be opportunistic. We're obviously going to invest in our existing markets and ensure that we continue to build the brand. And as we see the brand of brand of Brannis grow, we're going to continue to invest behind that. But we're also going to be opportunistic as we open up new markets next year.

And so going into next year and beyond I think we're going to continue to be opportunistic, we're obviously going to invest in our existing markets and ensure that we continue to build the brand.

And.

As we see the brand awareness grow we're going to continue to invest behind that but we're also going to be opportunistic as we opened up new markets.

Next year.

Speaker 8: Can you also touch on the outlook for promotional events in the fourth quarter? I'm curious if you expect a similar cadence to last year, or if you have different activations in.

Can you also touch on the outlook for promotional events in the fourth quarter I'm curious if you expect a similar cadence to last year.

Sure.

Different activations in mind.

So our guidance assumes that we continue to maintain discipline around our promotional events. As you know we don't typically do kind of like for like events every quarter and we think that's really important to ensure that our customer isn't waiting for the next event and we also just have more flexibility as it.

Speaker 4: So our guidance assumes that we continue to maintain, you know, discipline around our promotional events.

Speaker 4: As you know, we don't typically do kind of like for like events every quarter. And we think that's really important to ensure that our customer isn't waiting for the next event. And we also just have more flexibility as a DDC-only company to be really nimble in our strategies and adjust based on our inventory position, based on the volume, based on what we're seeing in the customer kind of...

<unk> only company to be really nimble in our strategies and adjust based on our inventory position based on the volume based on what we're seeing.

And the customer kind of spend so we're always going to focus first and foremost on protecting our brand, but we also recognize that customers have been leaning into promotions. During this difficult time, so we're going to plan to respond accordingly, depending on the environment.

Speaker 4: So, we're always going to focus first and foremost on protecting our brand, but we also recognize that customers have been leaning into promotions during this difficult time. So, you know, we're going to plan to respond accordingly, depending on the environment.

Thanks very much.

Okay.

Okay.

Speaker 1: Our next question is from Bob Dribble with Guggenheim. Your line is now open.

Our next.

<unk> is from Bob <unk> with Guggenheim. Your line is now open.

Hi, Good evening this is <unk>.

Speaker 10: Hi, good evening. This is Ari and Resife for Bob Durable. I wanted to follow up on Adrian's question about the community hub.

For vulnerable.

I wanted to follow up on Adrianne next question about the community hubs.

Speaker 10: way finding meaningful digital halo effects or any uptick in the area that you're implying because I'm pretty sure the area is very is very heavy on healthcare

Keith finding meaningful digital halo effects or any uptick in the area that you're implying.

I'm pretty sure the area.

Sure Yes.

This is a very heavy on the health care community. So I just wanted to understand.

What was behind that.

Relocation and also I wanted to ask about the competition.

Speaker 10: Any updates on the competitive environment, other promotions driven by new players or promotions?

Any updates on the competitive environment or the promotion is driven by new players or promotions solely by macro.

Thank you.

Speaker 3: Sure, so as it relates to our community hub in Century City, it's really central. It's central to health care clinics that are actually located in Century City Mall.

Sure so as it relates to our community hub in century city.

It's really central to central to health care clinics that are actually located in century City mall like one medical lifetime body and others and there is also a number of hospitals within a few miles of.

Speaker 3: like one medical, like kind body and others. And there's also a number of hospitals within a few miles.

Speaker 3: of from Century City Mall so we did a lot of analysis around and as you know as a DDC company we have so much data around our customers and where they live and where they work and so utilizing that to figure out where to put our community hub and that will be our strategy going forward to you know.

From century City I'm also we did a lot of analysis around and as you know as the DTC company, we have so much data around our customers and where they live and where they work and so utilizing that to figure out where to put our community hub and that will be our strategy going forward too.

Speaker 3: you know, that will help us decide where to go next and where to put our store. So, and to your point, I think the digital halo is really important.

That will help us decide where to go next and where to put our stores so and to your point I think the digital Halo is really important.

Speaker 3: stores in many ways are profitable billboards and they are able to drive you know our digital business as well. You try on your uniform in the store, you figure out your size, you and then you can kind of shop the next time online after understanding that. And so there's a lot of benefits. Other retailers have seen.

Stores in many ways, our profitable billboards and they are able to drive.

Our digital business as well.

By on your uniform in the story you figure out your side too and then you can kind of shop. The next time online after understanding that and so there's a lot of benefits other retailers have seen.

Speaker 3: AOVs much higher than what they see online. There's also a lot of different, you know, metrics out there around other retailers and what they see as it relates to omni-channel and how the repeat effect of having an omni-channel business across both online and off. And so we look to see that over time as well.

It will be much higher than what they see online. There's also a lot of different metrics out there around other retailers and what they see as it relates to Omnichannel and how.

The repeat effect of having an omnichannel business across both online and off until we look to see that over time as well.

Speaker 3: As it relates to the competitive landscape, we really haven't seen much change since we talked about this last time. From our perspective, we're adding new customers at a record rate. We're continuing to widen the moat between us and everybody else. The next closest competitor continues to be about one tenth our size, and how are we widening the moat? We're doing it with new products.

As it relates as it relates to the competitive landscape, we really haven't seen much change since we talked about this last time.

From our perspective, we're adding new customers at a record rate, we're continuing to widen the moat.

Between us and everybody else to the next closest competitor continues to be about 110th of our size and.

And Howard widening the moat, we're doing it with new product.

Speaker 3: innovation, elevated quality, we're engaging our customers, we're advocating for them, and so, you know, we do remain the leader in the space, and we're going to continue to invest.

On innovation elevated quality, we're engaging our customers we're advocating for them and so we do remain the leader in this space and we're going to continue to invest in widening the moat between us and everybody else.

Speaker 3: in widening the moat between us and everybody else.

Speaker 3: And during this, you know, given this environment, I think a lot of companies are pulling back and they are standing still. And what we're doing is given we have two hundred and thirty two million dollars of cash, we have no debt. We're generating cash. We're making investments.

During the given this environment I think a lot of companies are pulling back.

And they are standing still and what we're doing is given we have $232 million of cash we have no debt, we're generating cash, we're making investments really smart investments. So that over time, we are widening in that mode.

Speaker 3: really smart investment so that over time, we are widening that mode between us and everybody else and continuing to show up in the most authentic in the most...

<unk> us and everybody else in.

And continuing to show up in the most authentic and the most.

Speaker 3: you know, the most meaningful way and purpose-driven way for our community.

The most meaningful way and purpose driven way for our community.

Okay. Thank you good luck.

Thank you.

Speaker 1: Our next question is from Matt Karanda with Roth MKM. Your line is now open.

Our next question is from Matt Koranda with Roth and Kim Your line is now open.

Hi, everybody. Thanks for taking my questions just on the new customer adds in the quarter.

Speaker 8: Everybody, thanks for taking the questions. Just on the new customer ads in the quarter, is there any specific breakdown of how many came from international versus sort of the core domestic market and then on the new cohorts that you've been acquiring? Any notable differences there versus your course?

Any specific breakdown.

Breakdown of how many cans.

International versus sort of the core domestic market and then on the new cohorts that you've been acquiring any notable differences there versus your core consumer just in terms of.

Speaker 11: product mix, full price versus off price, propensity, AOBs, etc.

Product mix full price versus off price propensity et.

Et cetera.

Speaker 4: So looking at our new customer ads, international were really pleased with the growth that we saw in the quarter, but it's also great to see that domestic is continuing to add more new customers year over year. And I think that really just speaks to the opportunity that we have within the US to continue to penetrate and grow our brand awareness. So we continue to see.

So looking at our new customer adds international we're really pleased with the growth that we saw in the quarter, but it's also great to see that domestic is continuing to add more new customers year over year, and I think that really just speaks to the.

The opportunity that we have within the U S to continue to penetrate and grow our brand awareness. So we continue to see a healthy mix between the tail.

Speaker 4: a healthy mix between the two. We're not seeing a lot of difference in the new customers that we're adding today. We're seeing similar occupations. Obviously, we've spoken about

Not seeing a lot of difference in the new customers that we're adding today, we're seeing similar.

Occupations, obviously, we've spoken about.

Speaker 4: Some of what you've seen on the spending patterns in terms of higher AOV offset by lower frequency, we're seeing that across the board on our new customers and our repeat. Otherwise, yeah, they look pretty similar to the customers that we've been acquiring.

Some of what you've seen on the spending patterns in terms of higher <unk>.

Offset by lower frequency, we're seeing that across the board on our new customers in our repeat other.

Otherwise, yes, they look pretty similar to the customers that we've been acquiring.

Speaker 11: And then just on the store strategy, I think it's been asked in different ways. I just wanted to put a finer point on the question. Are stores in your view at this point a growth driver with sort of four wall ROI metrics that you would expect to sort of achieve or are these kind of more of a brand beacon? How should we be thinking about sort of the store strategy? And I know obviously with the understanding that it's early just given me the first one, but just wanted to ask specifically on.

Okay, Great and then just on the store strategy I think it's been asked in different ways, but I just wanted to put a finer point on the question.

Our stores in your view at this point a growth driver with sort of four wall ROI metrics that you would expect to sort of achieve or are these kind of more of a brand.

How should we be thinking about sort of the store strategy and I know, obviously with the understanding that it's early.

First one just wanted to ask specifically on that.

Speaker 3: Yeah, I mean, community hubs retail is definitely a growth driver.

Yes, I mean community hubs retail is definitely a growth driver.

Speaker 3: with four-wall EBITDA profitability, they will also be a brand identifier. We look to be an institution within cities across the United States. And I also think that what we're doing in person with our community is gonna unlock a lot of what we're doing digitally. And I think there's a lot of synergy.

With four wall EBITDA profitability, but it will also be a brand.

<unk> fire.

Look to be an institution within cities across the United States and I also think that what we're doing in person with our community is going to unlock a lot of what we're doing digitally and I think theres a lot of synergies between what we're doing within our community hubs and that's why we're calling them community hubs and it's not just about that transaction is about much more.

Speaker 3: between what we're doing within our community hubs. And that's why we're calling them community hubs. And it's not just about that transaction. It's about much more. It's about that connection.

Got that connection to about.

Speaker 3: about having events and programming that aligns with what our community cares about.

Having events and programming that aligns with what our community cares about and that alignment in that.

Speaker 3: and that alignment, and that, you know, we have this diehard fanatical community, and every time we show up in person, whether it's our pop-up shop, whether it's our activations, whether it's our mobile experiences, they want more of us. They're in, you know, five-hour lines waiting for figs, and so this is only going to continue to drive the business.

We have this diehard fanatical community and every time, we show up in person, whether it's our pop up shop, whether it's our activations, whether it's our mobile experiences they want more of us there.

Five hour lines waiting for <unk> and so this is only going to continue to drive the business.

Speaker 3: and not just what we're doing with our community health. It's also going to drive teams. As teams are going to walk in that store and say, hey, how do I get fixed for my team? It's going to drive what we do with digital. And then you know, you.

And not just what we're doing with our community hubs. It's also going to drive teams as teams, we're going to walk in that store and say Hey, how do I guess, thanks for my team is going to drive what we do with digital and then you shop online and return in the store et cetera, Theres a lot of dynamics there that are going to be really beneficial over time and so we're really excited to see.

Speaker 3: shop online, you return in the store, et cetera. There's a lot of dynamics there that are gonna be really beneficial over time. And so we're really excited to see how we continue to roll this out. And we're really excited to see how our community continues to engage with us in terms.

<unk>.

How.

We continue to roll this out.

Excited to see how our community continues to engage with us in person.

Speaker 1: Our next question is from Brian Nagel with OpenHiver. Your line is now open. Oh, this is William Dusted on to Brian .

Our next question is from Brian Nagel with Oppenheimer.

Your line is now open.

Hi, This is William Dossett Entre Brian Nagel.

Good afternoon, and nice quarter.

Thank you.

Speaker 12: So, excuse me for going back to the quarter, but just to ask about your term sales guidance and understand this better, you indicated there may have been a pull forward in Q4 or Q3.

So excuse me, if we're going back to the quarter, but just to.

Ask you about near term sales guidance and understand it's better.

You indicated there may have been a pull forward in Q4 or Q3.

Speaker 12: Could you elaborate on what you may have seen that caused that and to what degree?

Could you elaborate on what you may have may have seen that caused that and to what degree.

Speaker 12: may have affected the quarter. And also any idea that you can give us on how demand tracks throughout the game.

For the quarter.

And also any idea if you could give us on how demand trucks throughout the quarter.

Okay.

Speaker 13: So, related to kind of the third quarter and what we saw with the outperformance. So, you know, as we discussed, our plan sample sale outperformed our expectations. We do believe there was potentially some pull forward associated with that. But we're really proud to pass through the majority of the beat and raise full your guidance for the second time this year in a really uncertain macro environment.

So related to kind of the third quarter and what we saw with the outperformance so.

As we discussed our plan sample sale outperformed our expectations. We do believe there was potentially some pull forward associated with that but.

We're really proud to pass through the majority of the beat and raised full year guidance for the second time this year.

And a really uncertain macro environment.

Can you repeat your second question.

Just yes, well thank you for the first part and yes.

Just any idea for how that tracked throughout the quarter.

Yes. Thank you.

Speaker 13: So looking at the fourth quarter, I think is what you're asking. And, you know, I think...

So looking at the fourth quarter I think is what you're asking.

<unk>.

I think.

Speaker 13: The Q4 guidance is not necessarily reflective of what we're seeing.

The Q4 guidance is not necessarily reflective of what we're seeing.

Speaker 13: for our growth rate quarter to date. It's really more of an expectation of what we expect to see in the quarter for aggregate. You know, as a reminder, we don't do like for like events. We change our launch calendar, so it's hard to extrapolate kind of what's happening in our quarter to the full period. I also think just given we have a lot of volume in front of us with our upcoming Black Friday Cyber Monday event, we just want to be cognizant as we're guiding

For our growth rate quarter to date, it's really more of an expectation of what we expect to see in the quarter for aggregate as a reminder, we don't do like for like events, we changed our launch calendar. So it's hard to extrapolate kind of what's happening in our quarter to the full period.

I also think just given we have a lot of volume in front of us with our upcoming Black Friday Cyber Monday event, we just want to be cognizant as we're guiding that.

Speaker 13: there's a lot left in the period and that our consumer, especially at our income level, can be strained. And so we're taking all of that into account in addition to the pull forward potential that we discussed when thinking about our Q4 outlook.

There's a lot left in the period and that our consumer, especially at our income level.

Can be strained and so we're taking all of that into account. In addition to the pull forward potential that we discussed when thinking about our Q4 outlook.

Perfect that's very helpful.

My next question was on gross margin as a follow up to a previous question on gross margins.

Speaker 12: My next question is a follow-up to a previous question on growth margin.

Speaker 12: Just the product mix shift, how did it change since you last laid out expectations in August ?

Just the product mix shift how did it change since you west laid out expectations in August.

Is this temporary or more sustainable shift.

Speaker 12: temporary or more sustainable shift, and then looking to Q4.

And then looking to Q4.

Speaker 12: You all noted that better freight would be offset by a shift in products mix.

You all noted that better freight would be offset by.

Shifting product mix and.

Promotional mix.

Speaker 12: So just wondering if you could size the quantity of those impacts to gross margin.

I'm just wondering if you could size it.

Quantity of those impacts to gross margin.

At least directionally.

Yeah.

Speaker 13: So looking at our growth margin for the third quarter, we did cite product next shift as the biggest impact year over year.

So looking at our gross margin for the third quarter, we did cite product mix shift as the biggest impact year over year.

<unk>.

Speaker 13: mostly driven by mixed shift into non scrub wear. We spoke about the strong performance in both outerwear and footwear, which are categories that generally contain a lower growth margin rate. And also mixed shift into more of our limited edition scrub wear. That was really within our expectations from August . I'd say what did...

Mostly driven by mix shift into non scrub, where we spoke about the strong performance in both outerwear and footwear, which are categories that generally contain a lower gross margin rate.

Also mix shift into more of our limited edition scrubbed, where that was really within our expectations from August I would say what did.

Speaker 13: was a little different from what we expected was some of the outperformance of the sample sale, which had a bit of an impact on gross margin. I think related to that, you know, we're really focused on how we continue to move through our inventory while simultaneously protecting the brand with all non-core products. And, you know, we're going to continue to move through inventory at the right rate and pace and deliver a really strong gross margin rate.

It was a little different from what we expected was some of the outperformance of the sample sale, which had a bit of an impact on gross margin I think related to that we're really focused on how we continue to move through our inventory while simultaneously protecting the brand was all noncore product.

And we're going to continue to move through inventory at the right rate and pace and deliver really strong gross margin rate looking at the fourth quarter similar to the dynamics, we're expecting and what we saw in the third quarter.

Speaker 13: Looking at the fourth quarter, similar to dynamics, we're expecting to what we saw in the third quarter with.

With product mix as we continue to shift into more non scrubber and also our limited edition not limited edition scrubber.

Speaker 13: product mix as we continue to shift into more non-scrubware, and also our limited-edition scrubware, offset by better freight and promotional mix. Product mix will be the biggest impact, followed by promotional mix.

Offset by better freight and promotional mix product mix will be the biggest impact.

Followed by promotional mix.

Speaker 12: Thank you. And then one last housekeeping item, if I may, just, uh, can you discuss how to look at a share based compensation within your expense structure longer term?

Thank you and then one last housekeeping item if I may just.

Can you discuss how.

How to look at share based compensation within your expense structure longer term.

If theres any changes.

Yeah.

Speaker 13: Definitely. So within our stock-based compensation today, we have some portion of it that's really non-recurring. And so looking longer term, a portion of our executive stock-based compensation is going to roll off at the end of 2024. And then we'll have another portion roll off at the end of 2025. So we will start to see a more normalized stock-based comp as a percentage of sales by Q4 2025, which we expect to be about half of our current rate as a percent of sales.

Definitely so within our stock based compensation today, we have.

Some portion of it that's really nonrecurring and so looking longer term a portion of our executive stock based compensation, that's going to roll off at the end of 2024, and then we'll have another portion roll off at the end of 2025. So we will start to see a more normalized stock based comp as a percentage of sales by <unk>.

Q4, 2025, which we expect to be about half of our current rate as a percent of sales.

Speaker 12: Thank you very much. Good luck.

Thank you very much good luck.

Thank you.

Speaker 1: There are no further questions in the queue at this time, so I'll pass the conference back to the management team for any closing remarks.

There are no further questions in the queue at this time, so I'll pass the conference back to the management team for any closing remarks.

Oh.

Speaker 3: Thank you so much for joining us and we look forward to seeing you again soon.

Thank you so much for joining us and we look forward to seeing you again soon.

Okay.

Speaker 1: That concludes today's conference call. Thank you for your participation. You may now disconnect your line.

That concludes today's conference call. Thank you for your participation you may now disconnect your lines.