Good afternoon. Thank you for attending today's FIGS fourth quarter and full year fiscal 2022 earnings conference call. My name is Megan. I'll be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to our host, Jean Fontana with FIGS. Jean, please go ahead. Thank you. Good afternoon, everyone, thank you for joining today's call to discuss FIGS fourth quarter and full year 2022 results, which we released this afternoon and can be found in our earnings press release and in the stockholder slide deck on our investor relations website at ir.wearfigs.com. Presenting on today's call are Trina Spear, our Co-founder and Chief Executive Officer, and Daniella Turenshine, our Chief Financial Officer. As a reminder, remarks on this call that do not concern past events are forward-looking statements. This may include predictions, expectations, or estimates, including about future financial performance, market opportunity, or business plans. Forward-looking statements involve risks and uncertainties. Actual results could differ materially. These and other risks are discussed in our SEC filings, including in the 10-K we filed today, which we encourage you to review. Do not place undue reliance on our forward-looking statements, which speak only as of today in which we undertake no obligation to update. Finally, we will discuss certain non-GAAP metrics, which we believe are useful supplemental measures for understanding our business. Reconciliations of these non-GAAP measures to their most comparable GAAP measures are included in the earnings release and shareholders deck we issued today. Now I'd like to turn the call over to Trina Spear, Chief Executive Officer of FIGS. Thank you, Jean. Good afternoon, everyone. Thank you for joining us today for a discussion of our fourth quarter results and an update on the progress we are making across our strategic priorities. For 2022, our first full year as a public company, we delivered net revenue growth of over 20%. We saw strong performance in our non-scrubs business, which increased 59%. Additionally, international sales grew 50%, resulting from increased brand awareness and repeat purchases. Teams, our B2B business, grew 41%. With respect to profitability, Adjusted EBITDA margin for the year was 17.2%. For the fourth quarter, results were ahead of our expectations with net revenues up 13%. We achieved a record number of new customer additions, leading to a 23% increase in active customers. On an LTM basis, net revenue per customer was down 1% to $221 due to lower frequency rates, partially offset by higher AOV. Fourth quarter Adjusted EBITDA margin of 13.6% reflects better than anticipated gross margin, as well as disciplined expense management. While our fourth quarter results exceeded our expectations, extending our market share gains, a number of interrelated factors that we discussed last quarter led to decelerated growth from previous quarters. These include macro headwinds, lower frequency trends, and color launches that did not perform to the elevated levels we saw last year. While we cannot control the macro headwinds, we recognize that there are areas of our business where we can and will do better. We remain confident in our long-term outlook, and therefore, we will continue to invest in our business as the investments we make today will position us as an even stronger company in the future. We have identified opportunities and have initiatives underway that we believe will drive accelerated growth in 2024 and beyond. In the near term, we plan to remain prudent in managing our promotional activity while moving through current inventory and managing expense headwinds. Before I speak to our strategic priorities, I want to briefly discuss some of the highlights from the fourth quarter. Starting with product, we continued to deliver innovation in our non-scrub wear assortment, which grew 39% to reach 21% of net revenues. Orders that include non-scrub wear delivered a 14% higher UPT than scrub wear only orders. We saw strength across several categories, including lab coats, FIGSPRO, footwear, outerwear, and underscrubs. In our scrubs business, we saw a deceleration in our sales trends with color launches continuing to fall short of our expectations, which we will speak to shortly. On a positive note, we are very pleased with the launch of our extended sizes. Following extensive work behind our fit and product construction, we added 3XL to 6XL to our extended size offering in a selection of core styles. Since our launch, these products drove 5% of new customers and 2XL through 6XL reached double-digit sales penetration within the same selection of core scrubs offerings. We were overwhelmed to see the joy of our healthcare professionals experience by having access to the comfort, functionality, and style that FIGS has to offer. Turning to marketing, we are highly encouraged by our growing brand awareness as we continue to support product innovation through our data powered, targeted marketing engine. While word of mouth remains our biggest source of customer acquisition, we supplement this with best in class digital marketing and in-house creative to efficiently drive healthy new customer growth and retention. We invested in multiple digital and out of home channels to share brand moments and educate healthcare professionals about our mission and our purpose. For the holiday season, we kicked off our hashtag GiftFIGS campaign, inviting our community, family, friends, neighbors, siblings, and strangers to join us in giving the healthcare community the best gifts ever, FIGS. We had over 50 ambassadors, influencers, and celebrities help seed this sentiment globally. Moving to international, we saw 76% growth for the quarter and 50% for the year. Performance was led by strong results in Canada and in the U.K. In Q4, we localized our marketing strategies to optimize each market according to its customer needs and preferences. These strategies, coupled with the impact of duty subsidies and other efforts to reduce barriers to purchase resulted in significant acceleration in sales driven by both repeat and new customers while seeing continued improvement in marketing efficiency. Before I speak to our strategic priorities, I wanna take a moment to recognize our 10-year anniversary. Throughout the last decade, we remained steadfast in executing across the core tenets of our business, maintaining a deep connection with the healthcare community, leveraging our authentic category-defining brand, and delivering industry-leading product innovation. As we advance our business to $1 billion in net revenue, we remain hyper-focused on executing solutions-based product innovation and building and deepening our connection with the healthcare community. Beyond these strategic priorities, we are embracing our more nascent growth areas to expand our presence and engage with more healthcare professionals through our international business, our teams business, and by building out our retail strategy. While remaining confident in our long-term potential, we see 2023 as a year of foundational focus as we move through inventory and deploy strategies to accelerate growth. Starting with products, we are putting more firepower behind our innovation by embedding greater technical features and functionality into our products across our layering system to further differentiate FIGS as a leading and premium scrub wear brand. Within our scrubs business, we are optimizing design, standardizing features such as trims and waistbands, and determining how we can maximize productivity with the optimal breadth of styles in our offerings. In addition, we will continue to inject limited edition styles which generate strong engagement and evaluate which of these styles should be added to our core offering based on sell-through performance. The Rafaela scrub jumpsuit is a great example of a limited edition style that we transitioned to core. Color remains a key driver of excitement, and we are leveraging our data to fine-tune our launch strategy to drive greater frequency. Turning to non-scrubs, we intend to build upon proven categories including outerwear, footwear, and performance under scrubs with a greater level of technical innovation. We will expand newer categories such as our FIGSPRO offering, which is a healthcare office-ready collection that provides premium style and functionality. As part of our commitment to quality innovation, we are making our supply chain even stronger. We are working with existing partners while developing new partnerships with best in class manufacturers to enhance design capabilities to improve consistency across fit, construction, and speed to market. Ultimately, our goal is to create an even higher standard within the healthcare apparel industry. Today, we believe there is no close second to the quality we deliver. Tomorrow, I am confident all this work will further widen that gap. Turning to marketing, we remain focused on developing deeper engagement with our community through a diversified strategy. For our 10-year anniversary, we kicked off 2023 with our FIGS10: Iconic Series. 10 weeks, 10 iconic colors, 10 years of FIGS. It was very gratifying to see the very positive feedback we received as we brought back our fan favorites. Our 360 degree mask campaign, We Are Not Done Being the First, highlights FIGS as always the first brand to create products that redefine everything we know about the healthcare professional's uniform. Our campaign messaging will always have a fun and unexpected brand voice, and as we raise the stakes on product innovation, we will also inform customers about product functionality, technical features, and use cases to emphasize the value in our premium product. As we address the trends we've seen around frequency, we are focused on driving more consistent and personalized engagement within the healthcare community. As such, we are supplementing our launch campaigns with more evergreen strategies to drive higher frequency by speaking to different subsegments of our community. We will also continue to optimize our existing media channels while strategically investing in new channels to meet our customers where they are spending time. We have been more intentional in our communication, aligning our messaging with specific audiences across our diverse set of digital and out of home channels. With respect to our more nascent growth opportunities, we will start with international expansion. We believe there's a significant opportunity to grow our brand globally. As we expand into non-English speaking countries, localization in our international markets will be supported by translation across emails, social, and our website beginning in the second quarter. We are also localizing around regional holidays and in our messaging and channel engagement. To fuel further discovery, we are building out our ambassador network with a focus on highly influential healthcare professionals who will not only stimulate brand awareness, but act as boots on the ground to learn about individual needs and preferences within these communities. We are committed to delivering growth internationally in a profitable way, just as we have grown the rest of our business. We are expanding our presence through our teams business. We are seeing a growing number of concierge clinics, med spas, fertility clinics, and other healthcare institutions wanting to elevate their teams uniforms. We can serve these institutions by helping to standardize and professionalize their employee base with FIGS. To support this initiative, we are creating a more robust technology platform to expand our product offerings, streamline the ordering experience, and offer additional payment and reporting capabilities. Turning to retail. Based on the overwhelming engagement we saw at our previous market activations and past pop-up shops, we have learned that healthcare professionals really want to experience FIGS in person. We will test store formats. Identify locations where we see the biggest opportunity. Our first location will be a store in Century City in Los Angeles, which is scheduled to open this fall. True to FIGS, this location will provide a customer experience unlike anything our healthcare professionals have seen before. Our stores will serve as community hubs where healthcare professionals can connect and build relationships. Importantly, we will take a measured approach to our retail strategies and how we test store formats and develop store economic targets and site criteria. As we continue to build our business for the future, we are adding talent to our teams. We recently hired Steve Berube as our new Chief Operating Officer. He will be responsible for overseeing distribution and logistics in addition to inventory planning and customer experience. Steve brings over 30 years of experience with some of the best brands, including Lululemon and Nike. In his most recent role at Levi's, he helped to scale the company's infrastructure for long-term growth. With Steve joining, Devon Duff Gago now serves as Chief Business Development Officer. In Devon's new role, she will be responsible for overseeing our international and teams businesses as well as developing our retail opportunities. Her strategic thinking, operational experience, and deep understanding of the FIGS community make her the ideal fit to lead the growth of these businesses. I wanna take a moment to discuss our ongoing commitment to support our healthcare professionals. A leading priority in advocacy for 2023 will be advancing our awesome human bill, focused on, among other things, providing fair pay, mental health support, workplace safety and training. We have also partnered with the Lorna Breen Foundation, a leading organization promoting mental health services specifically for healthcare professionals, and we will be working directly with them to advance our policy goals. This includes advocating in Washington, D.C., where we aim to spearhead new legislation to further combat these challenges. In closing, throughout the last decade, we have remained committed to helping the global community of healthcare professionals look, feel, and perform at their best, 24/7, 365 days a year. We branded a previously unbranded industry and decommoditized a previously commoditized product, elevating scrubs and creating premium products for healthcare professionals. Most importantly, we built a community and lifestyle around a profession. We are very proud of what we have accomplished to date. We have so much opportunity in front of us. We have identified areas in which we can get even better, and we have an action plan in place to be better at the level of innovation we deliver, better at delivering consistent product, better at connecting with our community to keep them coming back, and better at operational excellence. Our strong business model is underscored by product innovation, community connection, and advocacy, and there is no close second. We have the scale and balance sheet to take our business to the next level. As we continue to grow and expand, we remain committed to investing in our business. We have seen tremendous growth over the last 4 years, and we believe now is the right time to make the investments necessary to double our revenue once again. With that, I will turn the call over to Daniella. Good afternoon, everyone. We are pleased to have exceeded our expectations in the fourth quarter, although recognize these results are below what we believe is sustainable for our business longer term. As Trina outlined, we believe that the actions and investments we are making today will set us up to achieve our growth potential in the future. I will begin my discussion with a review of our fourth quarter financial results, followed by our outlook for the first quarter in 2023. Beginning with the top line, for the fourth quarter, net revenues grew 12.6% to $144.9 million, compared to $128.7 million in Q4 last year due to an increase in orders from new and existing customers. We were pleased with the strong sales for Black Friday/Cyber Monday, with promotional levels better than what we saw in 2020. Active customer growth of 23% was fueled by ongoing initiatives to expand brand awareness globally, which led to the highest number of new customer adds in our company's history. We also continue to see record reactivation rates among lapsed customers as we see purchase cycles elongate. For the quarter, AOV across the business was down 1% to $112 due to lower AUR. As Trina noted, we continue to see a year-over-year decrease in purchase frequency in the quarter, we are taking actions by both increasing intention behind our product innovation and refining our strategies focused on existing customers. Gross margin for Q4 was above our expectations at 68.2%, compared to 69.9% in Q4 2021. The 170 basis point decline compared to Q4 last year was primarily due to the higher mix of promotions as well as product mix and higher ocean freight expense due to the sell-through of previously shipped inventory. This was partially offset by lower air freight utilization. Moving to operating expenses. Selling expense for Q4 was $37.6 million, representing 26% of net revenues, compared to 19.9% in Q4 2021. This 610 basis point increase was primarily due to higher costs within fulfillment, largely due to warehouse storage necessary to house inventory we pulled forward. To a lesser degree, selling expense was impacted by higher shipping rates and duty subsidies compared to Q4 last year. Marketing expense for Q4 was $21.4 million, representing 14.8% of net revenues, compared to 12.9% in Q4 2021. This 190 basis point increase was primarily due to increased investment in brand marketing initiatives, including commercials and our Gift FIGS campaign. Last year, we saw lower brand spend due to the timing of marketing initiatives. We continue to drive efficiency and spend on both new customer acquisition and retention, maintaining our focus on positive first order contribution margin with marketing spend on an annual basis, roughly consistent at 15% of net revenues. G&A expense for Q4 was $36.5 million, representing 25.2% of net revenues compared to 24.3% in Q4 2021. The 90 basis point increase was due to legal fees, accrual for inventory donations, and costs associated with the implementation of Sarbanes-Oxley Section 404. Last year's inventory accrual was essentially nonexistent due to the high full price sell-through and low inventory related to supply chain disruptions. These higher costs were partially offset by reduced bonuses and lower stock-based compensation expense. Our net income was $3.4 million, or $0.02 in diluted EPS for the fourth quarter. Adjusted net income was $8.2 million and diluted EPS as adjusted was $0.05 in Q4. This compares to adjusted net income and diluted EPS as adjusted of $18.6 million and $0.09 per share in Q4 2021, respectively. Finally, our Adjusted EBITDA for Q4 remained strong at $19.8 million for an Adjusted EBITDA margin of 13.6% compared to 24.8% in Q4 2021. Briefly touching on the full year. Net revenues were $505.8 million, an increase of 20.6% year-over-year. Gross margin was 70.1%, a decrease of 170 basis points year-over-year, primarily due to a higher mix of promotional sales and to a lesser extent, an increase in freight and costs related to elevated ocean freight costs and product mix shift. Operating expenses were $316.8 million, an increase of 9.1% year-over-year. As a percentage of net revenues, operating expenses decreased to 62.6% from 69.2% in the prior year period. Adjusted EBITDA margin was 17.2% as compared to 25.1% in the same period last year. Touching on our balance sheet, we finished the quarter with cash and cash equivalents of $159.8 million. Inventory totaled $178 million at the end of the fourth quarter. As a reminder, earlier this year, we made the decision to increase weeks of supply of our core styles to ensure we could adequately fulfill customer demand. We also decided to bring in limited edition colors and styles earlier to support the planned launches. This, combined with lower than expected demand for our color launches, led to heightened inventory levels. Breaking down inventory on hand, over 60% is in core styles and classic colors, which we sell all year round and remained always in stock, leading to low risk of obsolescence. An additional 15% of our inventory balance is in upcoming styles and colors that we brought in earlier. We will continue to work towards getting inventory aligned with sales growth as the year progresses. However, due to the aforementioned factors, we expect inventory to peak in the first quarter before getting closer to more normalized weeks of supply by the end of the year. We will continue to take measures to move through product. However, we'll maintain discipline around the level of discounts we offer, given the replenishment nature of the assortment. We have also updated our core purchase orders to bring down our weeks of supply over time and have taken steps to improve processes and controls to manage the quantity and flow of inventory in the future. A key priority is to maintain healthy inventory levels to optimally manage our working capital and maintain our strong balance sheet. Before turning to our guidance, we would like to provide some of the assumptions incorporated into our outlook. First, we assume that the macro environment remains challenging throughout the remainder of 2023. Second, as we continue to work through inventory, we expect to deploy more promotional strategies as compared to last year. However, with the discipline we have consistently employed in the past. Third, as we discussed, we have a plan in place to drive increased frequency and deepen customer engagement, but the impact of these changes are expected to be more evident in 2024 and beyond. Looking at profitability, we will continue to make investments, including fulfillment enhancements that will enable us to scale our business for long-term growth. In addition to this, we will be working through certain temporary cost headwinds, in part due to macro and supply chain challenges we faced early last year. Moving to guidance. As a result of the factors I just talked about for 2023, we expect net revenues to increase in the mid-single digits. We expect growth in our active customer base to moderate, given the lapping of the strong growth we have seen over the last several years. We expect frequency rates to continue to be impacted by macro uncertainty and high inflation rates, and we expect AOV to be flat to slightly up for the year after a down Q1. We expect UPT to continue to increase, largely offset by lower AUR, as we expect to see a higher mix of promotional sales as we move through inventory. Keep in mind, AOV increased 18% since 2020, so we are coming up against meaningful growth. Gross margin for the year is expected to be similar to our Q4 2022 gross margin rate as we move through inventory and navigate what we anticipate will be a more promotional environment. The second and fourth quarters are expected to see more pressure due to the timing of promotional events around Nurses Week and holiday. Despite tailwinds in inbound freight costing we are seeing, we are factoring in higher ocean freight expense due to the sell-through of previously shipped inventory. Turning to selling expense, we expect some pressure as a result of incremental storage facility costs to house additional inventory. We are assuming greater impact in each the first and second quarter of approximately 250 basis points and 180 basis points, respectively, with a smaller impact in Q3. We plan to invest in our fulfillment capabilities to increase reliability, flexibility, and efficiency, as well as improve order delivery times as we scale our business for growth. These investments will enable us to gain leverage within selling expense over time. The costs associated with the implementation and execution of this initiative are currently expected to range between $16 million and $18 million, with about half falling into 2023, mostly in Q4, and half in the first quarter of next year. We are in the process of finalizing our project plan, and we'll provide any updates to expected cost and timing once we have completed our plan. We expect marketing expense to be approximately 15% of net revenues, with fluctuations from quarter to quarter due to timing of events. G&A is expected to deleverage for the full year, in part due to investments in software, personnel, and resources associated with growing our international and teams businesses, as well as in product innovation. We also expect an increase in stock-based compensation and our accrual for future inventory donations, partially offset by lower legal expenses and professional fees. As a result, Adjusted EBITDA margin for the full year 2023 is expected to be between 11% and 12%. This reflects approximately 300 basis points of cost headwind from the storage of excess inventory and fulfillment enhancements. To the extent that our projections for the fulfillment project changes, we will adjust our outlook accordingly. In terms of Q1 2023 outlook, we expect net revenue growth to be in the low single digits. We expect new customer growth will be partially offset by the continued softening of frequency trends as well as a decrease in AOV. Last year's AOV of $116 reflected an elevated mix of non-scrub wear associated with one of our largest New Balance shoe launches, as well as supply chain disruptions causing out of stocks on our core scrubs product. In addition, promotions are planned higher in 2023 versus 2022, given the macro environment and our efforts to move through inventory. We expect gross margin to decrease in Q1 due to the proportion of promotions and product mix, as well as higher ocean freight expense due to the sell-through of previously shipped inventory. We expect these headwinds to be partially offset by lower air freight utilization year-over-year. Looking at operating expenses, we discussed selling expense earlier. Moving to G&A, we expect more deleveraging than in other quarters due to the increase in stock-based compensation costs being more heavily weighted in the first half of the year, an increase in our accrual for inventory donations, and the continuation of SOX implementation costs. As a result, we expect first quarter Adjusted EBITDA margin to be between 9% and 10%. In conclusion, our growth outlook for 2023 is not representative of the growth we believe we can achieve longer term. That is why we plan to continue to invest while managing our business prudently through near-term macro and cost challenges. We remain a distant leader in healthcare apparel, and we believe that we will deliver accelerated growth and Adjusted EBITDA margin expansion in the future. With that, I will turn it over to the operator to kick off our Q&A session. Operator? Thank you. If you would like to ask a question, please press star followed by 1 on your telephone keypad. If for any reason you would like to remove that question, please press star followed by 2. Again, to ask a question, press star 1. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question. We will pause here briefly as questions are registered. Our first question comes from the line of Michael Binetti with Credit Suisse. Your line is now open. Hey, guys. Thanks for taking our question. I guess the first thing that comes to mind is just maybe you could help us connect to the longer term EBITDA margin targets that we've discussed over the last few years within the context of the 11%-12% that you just gave. Daniella, maybe, you know, or I guess jump all between you. How do we think about the path back to, you know, like, a 20% type margin that I think we were targeting long term, if that's still the right margin? I guess just on a maybe on a near-term basis, when do you feel like the freight, the ocean freight flips to a good guy based on how the inventories are capitalized on the balance sheet today? Thanks, Michael. For your first question on EBITDA margin, based on what we see today, we believe we have the opportunity to drive EBITDA margin expansion beyond 2023. In 2023, we're seeing some margin pressure from a few factors, about 300 basis points from excess storage fees combined with fulfillment enhancement costs. Secondly, in 2023, we're gonna be impacted by higher promotions, 200 basis points, when we flow that through the P&L. Just adding those back gets us to high teens in 2023. Looking to the future, as we re-accelerate growth, we do expect G&A to leverage from where it is today. We're really focused on setting the right expectations for the go forward. If we deliver high teens Adjusted EBITDA, we are still very profitable. We do believe we have a path back to 20%, but our goal is to ensure we're making the right decisions for the long-term health of the business, and we're gonna continue to do that. Yeah, I would just add, you know, we really wanna grow our business in a healthy way like we always have. We've really focused on growth, not for growth sake, but for doing it in a disciplined and profitable way, that's never gonna change. Our goal right now is investing strategically to support our scale in resources, in people, in technology, systems, really to make us stronger for the future. We have no debt. We have a really strong balance sheet. We are excited to make these investments, plant the seed today so that we can bear fruit in the future. Just circling back to your question on ocean freight. In 2023, net net freight is likely to be neutral to a slight tailwind as we continue to sell through previously purchased inventory at higher ocean freight rates, and that's gonna be offset by less usage of air freight. Looking into 2024, we should start to see a benefit, a tailwind from the ocean freight as well. Okay. Thanks a lot, guys. Thank you. Our next question comes from the line of Edward Yruma with Piper Sandler. Your line is now open. Hey, good afternoon, guys. Thanks for taking the questions. I guess, first, a short-term question. Do you think that the lack of or the dampened interest in some of the new color drops has been a function of just the colors being off, or is it more symbolic of maybe some saturation within your core customer's closet for the core scrub? I guess, you know, you've outlined a number of investments you're making around innovation. How much of the innovative product is kinda baked into this year's guide, and kinda how should we think about how that layers in both this year and next? Thank you. Thanks, Ed. You know, I think, as it relates to our color drops, right? We saw extraordinary demand in our colors over the last few years, and we really responded to that, kind of meeting our customers where they are. I think, you know, our healthcare professionals have evolved and are shifting, and we are evolving with them, as we're leaning out of color and leaning more into technical features and functionality that's tied to use cases. In many ways, we're getting back to our roots, of providing essential foundational pieces that healthcare professionals need in their jobs to perform, and that's where we're focused. There is gonna be a bit of a transition as we right-size the business and the launch, and kind of right-size our launch cadence. Right now, we're being mindful of our inventory balance and our commitment to providing our customers with fresh, innovative, and exciting products. What you're gonna see this year is new, awesome products, of course, but with more, you know, shallower buys on that front. Something that's distinct about our business is that we're able to kind of launch this newness but tie it back to our core scrubs and also seamlessly layer it with what's in our inventory today, and that is a unique thing about FIGS. You know, this year we are not exactly focused on expanding our assortment. We're tapering back. We're simplifying and bringing in sure bet moments of newness that will drive revenue across multiple categories. You know, as we get to 2024 in more of an ideal state where we can hit the ground running, we're really focused on this foundational year. Thank you. Thank you. Our next question comes from the line of Lauren Schenk with Morgan Stanley. Your line is now open. Great. Thanks. I wanted to ask one on inventory, up 107% year-over-year. I guess, you know, we sort of saw slowing demand trends in the fourth quarter, we knew that things were getting a little bit tougher from a macro perspective. Maybe why weren't you a little bit more aggressive in cutting back orders for the back half of the year, and why not now be a little bit more aggressive on promotions in order to clear through that? Thank you. In hindsight, we recognize that there are things we could have done differently. You know, first, we did start to build inventory levels to avoid air freight with longer lead times. Second, as visibility in supply chain started to get a bit more nebulous, we built more inventory. That, coupled with a lower sales outlook, it created an inventory build, especially around our color launches, and this was coming off a year of really elevated demand for color. It is a priority for us to get our inventory levels back in line from here. As a reminder, 60% of our inventory is in core, so we are able to reduce future purchase orders to right size, and we're gonna move through the remainder at a higher promotional rate but still reflecting the discipline that we always do to protect the brand over the long term. Going forward, we've put processes in place to increase flexibility and be more disciplined around our inventory buys, and we, you know, we're gonna return to a more normalized inventory position by the end of this year. Can I just follow up? I mean, when you say normalized inventory, where would you expect inventory to be growing year-over-year, by the end of the year? Thanks. Our ideal state is around 16-20 weeks of supply, and we're expecting at the end of the year to be around 25 weeks of supply. Okay. Thank you. Thank you. Our next question comes from the line of Brian Nagel with Oppenheimer. Your line is now open. Hi. Good afternoon. I guess my question, questions, just with respect to sales and sales growth. You know, clearly we saw a decelerating pace here, Q3 to Q4. You know, given the guidance you gave for Q1, again in Q1 or presumed Q1. Is if you think about your sales algo and the various inputs into that, is declining frequency the primary driver of this now weaker sales growth? The second question on that is, have you? Is there a? Or can you elaborate further on the trend in frequency? Has it bottomed? Does it continue to get worse? Yeah. We're assuming that the macro remains challenged in 2023 with the potential to get worse from where we are today. We're incorporating that into our assumptions around frequency trends. We are taking steps through our marketing strategies to drive higher engagement through personalized messaging by tailoring our content to our channel, to our customer. However, you know, we're still early in these initiatives. Just given the uncertain macro environment, we're remaining cautious about what we bake into the guide. We do expect AOV to be flat to slightly up for the full year. Again, AOV increased 18% from 2020. We've seen a lot of growth here. We have the opportunity to drive AOV higher over the long term as we're continuing to see UPT increase. We're recognizing that in 2023, there is gonna be pressure from higher promotions. That's weighing on AUR in the short term. We're also lapping 20% growth in active customers. We're being prudent in our growth outlook. Daniella, how we talked a bit about, you know, in response to some of the questions in your prepared comments. You talked about promotions and your efforts to clear the inventory. How is your consumer reacting to your promotions? Does that help to improve the dynamic, the underlying sales dynamic? Sorry. I think we're continuing to be really disciplined in our promotional strategies. While I think just given the macro environment, we are seeing more of a reaction to our promotions, we're really focused on protecting the long term of the brand. Could sales be higher if we leaned into promotions more? Potentially. We're really focused on doing this the right way over the long term. Okay. Thanks. Thank you. Our next question comes from the line of Brooke Roach with Goldman Sachs. Your line is now open. Good afternoon. Thank you so much for taking our question. Trina, I was hoping that you could elaborate a little bit more on the growth of the Teams business that you're seeing today. Then maybe for Daniella, as you contemplate the mid-single digit growth outlook for the year, can you contextualize the growth contribution that you expect between international, the Teams business, and the non-scrubs business relative to your core scrubs business that's sold to individual customers? Thank you. Thanks, Brooke. You know, I think the Teams opportunity is an incredibly exciting one that we've discussed a bit. As we move forward, you know, this is an area that is about 15% of the market, but is a lot smaller as a% of our total business. What is Teams? Teams is our B2B platform where healthcare institutions wanna outfit their employee base, right? They're looking to standardize and professionalize their teams in kinda working with FIGS to do that. Right now we have a small team dedicated to this. We have a big opportunity in front of us. You know, this is a primarily inbound, you know, sales process today, where people are coming to us 'cause they're learning about us in other ways, and they're reaching out to us to outfit their teams. Right now, we're looking to build a bigger platform to enable them to get access to more of our assortment. We're looking to create more features to have the process be as easy as possible to order, you know, hundreds of sets, thousands of sets of scrubs for your team and make the process super easy as it relates to embroidery, putting your logo, putting your name so that you can show the world who you are and what you do, which is a big part of why people choose FIGS. Super excited about Teams. It's really early days. The other piece I'll just mention is, you know, we launched 3 XL to 6 XL, so our extended offering really gives us an ability to partner with some of the largest institutions who said, "You know, we have a number of people within our institution that can't wear FIGS today." I think we're one of few companies that, you know, if we can't outfit 10, 15, 20 people, we'll lose, you know, $1 million, if not more, in terms of contracts. This is a big opportunity. We're really excited about it, and we're just getting started. To address your second question, Brooke, you know, we're not providing targets, but we do expect international teams and non-scrub wear to continue to grow at an accelerated pace of the business and make up a larger proportion of our net revenues looking into 2023. I think as a result of that, you know, we are anticipating lower frequency to impact our scrubs business. There's a lot that we're focused on today to drive that higher in the future. More intentional product innovation, which we discussed. You know, the impact will likely be more felt in 2024 and beyond. Also our marketing strategies and really focusing on retention, focusing on evergreen messaging, and really setting the stage for accelerated growth in 2024. Great. Thank you. If I could just ask one more. As you contemplate that answer, I was wondering if you could help us understand what needs to happen, whether that's a change in the macro environment or just actions against your initiatives to re-accelerate your top line growth towards your long-term outlook. Yeah. I mean, I think, you know, a lot of people are talking about the macro environment, at FIGS, I think the best brands don't use the macro to cover their sins. We're focused on what's in our control. We're focused on what we can do from a product standpoint, from a messaging standpoint, from an advocacy standpoint. You know, our healthcare professionals have been through a lot over the last few years as they led us through this pandemic, they're dealing with the same macro issues as well. Their behaviors are evolving, I think we're in a really interesting spot, just given the scale, given all this information and data that we have on our healthcare professionals to understand them in a really unique way. We're utilizing that information and evolving with them to re-accelerate as we move forward in 2024 and beyond. It comes down to these three areas, in addition to others, but innovation of product, messaging, and really being segmented in our messaging and personalizing to people's needs, and advocacy, showing up for them and having their backs. Thank you. Our next question comes from the line of Lorraine Hutchinson with Bank of America. Your line is now open. Hi, it's Alice Chao on for Lorraine Hutchinson. Thanks for taking our question. Can you elaborate a little bit more on the higher promotions you're going to plan in 2023? What types of promotions can we expect? Like, will it be more days of promotions, or site-wide percentage offs or, you know, categories that are on sale? I have one quick follow-up. It's not necessarily that we're going to do a greater number of promotions or even at a higher discount rate, but what we are seeing is that in this macro environment, we are seeing customers react more to our promotional times. While our schedule and our cadence may look similar, a lot of this is just mix shift in our consumer base. Outside of that, we are moving through inventory by having more evergreen promotional strategies like our Awesome Today, Gone Tomorrow, which has been really effective in helping us tailor to different customer segments and really meet the consumer where they are. Thank you. I have a quick follow-up on the mid-single-digit sales guide components. It sounds like between all the customer metrics, you think AOV can be the area of opportunity for maybe growth to accelerate higher than that. Was there anything else? We're expecting AOV to be flat to slightly up over the course of the year. We're also expecting to continue to grow our active customer base. We're just being mindful that we're coming off of 20% growth in 2022, but that's still an area that we expect to grow over 2023. That'll be offset by, you know, lower frequency rates. Okay. Thank you. Thank you. Our next question comes from the line of Dana Telsey with Telsey Group. Your line is now open. Hi, good afternoon, everyone. As you think about the investment spend that you're doing and obviously the hiring of Steve Berube, given the growth of the business that you're looking for go forward, what enhancements to operations or processes are you looking for that you're making that we should see whether it's in better inventory management or how you're thinking about expenses or marketing? How do you think about that dynamic as we go through 2023 into 2024? Thank you. Thanks, Dana. I think, you know, first off, we're really excited about bringing on Steve Berube. He's has 30 years of distribution and logistics experience and is really here to help us build out our infrastructure. He's been a strong leader at some of the best brands in the world, Nike, Lululemon, and Levi's. We're really excited about having him on board. We're looking forward to making the investments required to scale to a $1 billion plus in net revenue. As it relates to enhancements, this is related to our fulfillment network and building that out. We're bringing on different technology and systems to help us automate our processes and work more efficiently. Although we are making these investments, as you know, Dana, we're super focused on building in a disciplined way and being very mindful of our expenses and managing our expenses in a deliberate and sustainable way. You mentioned inventory management. As, as you know, this is a focus. Getting back to a more ideal state is a focus of ours, and we look to do that by the end of this year. Thank you. Thank you. Our next question comes from the line of Robert Drbul with Guggenheim. I do apologize. It got disconnected. Give me just a moment. Your line is now open, Bob. Thanks. Hi, good afternoon. Just a couple questions from me. I guess when you think about the long-term outlook, you know, has your view at all changed on the size of the market or size of the category? Is your top line, is it contemplating any real changes in the competitive environment or the competitive set? Yeah. I think in terms of the market, you know, it continues to be what we've discussed in the past. I think from a competitive standpoint, we've seen a number of copycats, and, you know, that's to be expected given when you have a successful business, people do come after you, and they try to copy you. You know, where we are is that, you know, there's one original, right? It's FIGS, and we are focused on delivering product innovation and continuing to connect with our community. From a TAM perspective, we're really focused on continuing to create the market, right, as the original, continuing to bring and expand the categories that we're in and enter new categories to really enhance the layering system that we have today. Thanks. I guess just on the international markets, when you look at some of the early markets that you're in, are those markets sort of behaving as the North American market when you first started the business? I guess when you look at what you're seeing there versus, you know, the last 10 years, I just wondering if you could maybe give us a few insights into really what you're seeing some of those early days of these, you know, the other international markets that you're expanding into. Thanks. Yeah. In some of our kind of later stage markets like Canada, we are seeing really similar behavior to the US. They're engaging with our layering system, they want new styles and colors. It's really interesting to see that those markets are really similar. I think we're in really early stage in some of our newer markets, there we're really about building the brand and growing the customer base, and we're excited to see where it evolves from here. Thank you. Thank you. Our next question comes from the line of John Kernan with Cowen. Your line is now open. Good afternoon. This is Krista Zuber excuse me, on for John. Just one question for us. Just from a cash flow perspective, kind of with the efforts you're making to rightsize your inventory position this year, you know, there's the assumption that working capital metrics should improve at some point. How are you thinking about your cash flow generation in 2023 versus your CapEx needs? Thank you. Following the first quarter, we do expect to generate cash for the remainder of the year, and this is largely a function of reduced inventory buys and also sell through of our current inventory. Thank you. Thank you. Our next question comes from the line of Rakesh Patel with Raymond James. Your line is now open. Thank you. Good afternoon, everyone. Question on what's embedded in first quarter guidance. Just given the magnitude of upside in the fourth quarter relative to your guidance for that quarter, can you speak to what you might be seeing in the first couple of months of the year that would drive a low single digit revenue increase? I'm just curious to what extent we should think about macro uncertainty versus an element of conservatism. Yeah. The, the first quarter guidance is not necessarily reflective of our growth rate quarter to date, but it's an expectation of our quarter in aggregate. The biggest driver of the deceleration from Q four is AOV. We're expecting AOV to be down more than it was in the fourth quarter, for a couple factors, mainly lapping the higher penetration of non-scrubs in Q one of last year, that generally carries a higher AUR and UPT. We're lapping a really strong New Balance shoe launch, which boosted AOV through higher AUR. Also as a reminder, last year we were out of stock on some of our core scrub wear due to supply chain challenges, which boosted our non-scrub wear proportion. Frequency trends expected to remain challenged similar to what we're seeing in Q4, in part due to macro, but that's what's incorporated into our first quarter assumption. Can you also provide color on the new customer adds? Like do the new customers coming in to buy FIGS have a similar profile as the ones you acquired during the height of the pandemic? I'm just curious if you're seeing changes in terms of demographics or geographic region as we think about where the new customers are coming from. We're not seeing a lot of changes in terms of demographics or geography. We are continuing to add a lot of new customers to the FIGS fold, which is great to see. We've spoken about, you know, recent cohorts just having a little bit of different purchasing trends, where they're elongating their purchase cycles and buying more when they do come back. Other than that, they look, you know, really similar to other customer cohorts. Thanks very much. Thank you. Our last question comes from the line of Noah Zatzkin with KeyBanc Capital Markets. Your line is now open. Hi. Thanks for taking my question. you know, forgive me if I, if I missed here, but I think you mentioned there's an L.A. store, slated to open in the fall. If you could just, you know, provide any color on how you're thinking about a potential, you know, omni-channel approach, to the business with kind of a physical footprint or just how you think about, an omni-channel approach, to the business presently would be helpful. Thank you. Thank you so much for the question. We love talking about this. You know, we've had activations in the past. We've had our pop-up shops, and what we've learned from these experiences is that healthcare professionals, you know, they want to experience FIGS in person. They want to touch and feel our products. They wanna speak with us about the technical functionality that we provide, and so, we're very excited about our first store. It's gonna be in Century City this fall. We're gonna be, you know, really moving forward on the retail opportunity and identifying, you know, evaluating store formats, identifying the right locations, being really measured about how we expand from a retail perspective. This is really exciting. This is gonna be the first of many. You know, that's from a retail perspective. As it relates to the other channels, you know, we talked a bit about teams as well. Between teams, international, retail, these three growth levers, they really are, gonna be serving each other. You know, there's not one channel in a vacuum. As it relates to omni-channel as we move forward and have, more channels beyond digital, you know, word of mouth is gonna continue, to be driven not just by what we're doing digitally, but also what we're gonna be doing offline. There's no one channel operates in a vacuum. They're all gonna be serving each other, and so we're excited to have these different parts of our business and have them be working in tandem to support the growth long term. Thank you. Thank you. There are no additional questions waiting at this time, so I'll pass the conference back over to Trina Spear for closing remarks. Thank you all for joining us, and we look forward to speaking again soon. That concludes the FIGS fourth quarter and full year fiscal 2022 earnings conference call. Thank you for your participation. I hope you have a wonderful day.