Healthcare apparel company Figs expects to complete its public offering this week. The company will trade under the ticker FIGS on the New York Stock Exchange.
Figs has grown at a fantastic rate, and unlike many companies completing initial public offerings (IPOs) in the last year, it actually generates free cash flow.
The Figs stock offering will be one of the very first where IPO shares can be bought through the online brokerage platform Robinhood. Robinhood is rolling out its new IPO Access feature, a tool that lets its users attempt to buy shares of IPOs that would otherwise be impossible for them to buy.
Robinhood will have a limited number of shares. But the company assured investors that everyone who applies for shares would get an equal chance at getting shares regardless of how big their account is at the firm.
Now, let's talk about whether or not you should actually think about requesting some Figs shares.
Figs Scrubs Matters Now More Than Ever
The Figs IPO comes after a year when demand for its product reached an all-time high. This company makes high-quality scrubs for healthcare workers. Not only that, but Figs is one of the first healthcare apparel vendors to do online orders.
It was founded back in 2013 by Heather Hasson and Trina Spear. Heather Hasson had what the company calls the "ah-ha" moment when she realized that her friend who worked as a nurse was wearing scratchy scrubs that didn't fit very well.
No one focused on delivering technically advanced apparel and products for the healthcare market. While big outlets were routinely developing new types of clothing for athletes, weekend gym warriors, and causal runners, no one was using the same technology to give front-line healthcare workers the same comfortable fit.
So, Hasson used her background in fashion to begin designing scrubs for healthcare professionals.
Most scrubs are typically made of cotton, which absorbs liquids and retains odors. When working in a front-line medical facility, the last thing you want is clothing that brings hospital odors and fluids home after work.
To help change that, Figs developed a proprietary fabric technology called FIONx that offers four-way stretch, anti-odor, anti-wrinkle, and moisture-wicking properties. All of its scrubs feature easy-to-access zippered pockets for professional and personal items such as stethoscopes, scissors, smartphones, and ID badges.
Later, Hasson was introduced to Trina Spear, who had worked on a private equity deal in the medical apparel markets and was familiar with the business.
Spear helped get an initial funding round, and Figs was born.
The two have gone from selling scrubs out of the back of a car to running a company that sold $263 million worth of healthcare apparel last year.
Figs doesn't sell through traditional outlets for healthcare apparel. Ninety-eight percent of its sales in the past year were online orders.
As a result, it has built the largest direct-to-consumer healthcare apparel platform. And it is starting to challenge the old-school approach that forced healthcare workers to go to a brick-and-mortar store.
Check out how this company has grown...
Should You Get Figs IPO Shares?
Healthcare is still one of the largest industries in the United States, with over 20 million people employed in 2020. According to the Bureau of Labor Statistics, that number should grow by 15% annually between 2019 and 2029.
Before Figs was founded, the healthcare apparel markets had basically been the same for over 100 years. Legacy companies continued selling baggy, ill-fitting clothing, and healthcare workers did not have many options.
Figs, of course, came to change things. And the business model is working.
In 2020, revenue increased from $110.5 million to $263.1 million, or 138% for the year. Cash flow from operations grew from $6.5 million to $21.7 million, and free cash flow jumped from $1.8 million to $19.5 million. Active users of the Figs website went from 600,000 to over 1.3 million.
Figs is offering 5,875,000 shares of Class A common stock, and Tulco LLC, Figs' largest stockholder, is offering 16,625,000 shares of Class A common stock. The total offering will be 22.5 million shares. Goldman Sachs (GS), Morgan Stanley (MS), Barclays Capital (BCS), and Credit Suisse Securities (CS) will act as lead book-running managers.
While Figs won't get any of the proceeds from the shares sold by Tulco, the money received from the 5.875 million shares it sells will be used for research and development and marketing activities, general and administrative matters, and capital expenditures.
Figs has an enormous opportunity to grow this company. So far, it has 1.3 million users, and the marketplace consists of 20 million people and growing.
A combination of positive word of mouth and data-driven digital markets could continue to drive high revenue and profit growth rates for FIGS.
Ultimately, Figs could become the Lululemon of healthcare apparel and deliver outstanding returns for early investors. That means, if you can get in at the IPO through Robinhood, you have a growth opportunity.
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