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Revolve Group Inc

Revolve Group Announces Third Quarter 2024 Financial Results

LOS ANGELES , Nov. 5, 2024 /PRNewswire/ -- Revolve Group, Inc. (NYSE: RVLV), the next-generation fashion retailer for Millennial and Generation Z consumers, today announced financial results for the third quarter ended September 30, 2024.

 Third Quarter 2024 Financial Summary

Three Months Ended September 30,



2024



2023



YoY Change



(in thousands, except percentages)

Net sales


$

283,146



$

257,603



10 %

Gross profit


$

144,867



$

133,232



9 %

Gross margin



51.2

%



51.7

%



Net income


$

10,751



$

3,178



238 %

Adjusted EBITDA (non-GAAP financial measure)


$

17,503



$

9,484



85 %

Net cash provided by operating activities


$

9,052



$

12,486



(28 %)

Free cash flow (non-GAAP financial measure)


$

6,171



$

11,492



(46 %)

Operational Metrics



Three Months Ended September 30,



2024



2023



YoY Change



(in thousands, except average order value and percentages)

Active customers (trailing 12 months)



2,628




2,510



5 %

Total orders placed



2,200




2,133



3 %

Average order value


$

303



$

299



1 %

Co-Founder and Co-CEO Commentary

"We delivered exceptional results in the third quarter, highlighted by double-digit top-line growth, significant expansion of net income, and 85% growth in Adjusted EBITDA year-over-year," said co-founder and co-CEO Mike Karanikolas. "Key contributors to our increased profitability were meaningfully improved efficiency in our logistics costs, continued improvement in our return rate, and increased marketing efficiency year-over-year."    

"Our strong quarter is a result of our execution on key growth and efficiency initiatives, which have helped us continue our net sales momentum into the first month of the fourth quarter of 2024," said co-founder and co-CEO Michael Mente. "We achieved these strong financial results while continuing to invest in initiatives that we believe set us up well for market share gains over the long-term, including international expansion, leveraging AI technology for merchandising and marketing enhancements, expansion into physical retail, and broadening our owned brand capabilities."    

Additional Third Quarter 2024 Metrics and Results Commentary

  • Trailing 12-month Active customers grew to 2,628,000 as of September 30, 2024, an increase of 5% year-over-year. 
  • Net sales were $283.1 million, a year-over-year increase of 10%. 
  • Gross profit was $144.9 million, a year-over-year increase of 9%. 
  • Gross margin was 51.2%, a decrease of 56 basis points year-over-year that primarily reflects deeper markdowns within our markdown inventory, a higher mix of third-party brand sales, higher inventory valuation adjustments, and increased shipping rates for inbound  merchandise from vendors.     
  • Fulfillment costs were $9.3 million, or 3.3% of net sales, compared to $9.2 million, or 3.6% of net sales, in the third quarter of 2023. The increased fulfillment efficiency year-over-year as a percentage of net sales primarily reflects a lower proportion of returned purchases and an increase in average order value.
  • Selling and distribution costs were $47.9 million, or 16.9% of net sales, compared to $48.9 million, or 19.0% of net sales, in the third quarter of 2023. The increased efficiency year-over-year as a percentage of net sales primarily reflects lower shipping rates, a lower proportion of returned purchases, and higher average order value year-over-year, partially offset by higher merchant processing fees.
  • Marketing costs were $39.5 million, or 14.0% of net sales, compared to $39.6 million, or 15.4% of net sales, in the third quarter of 2023. The increased marketing efficiency year-over-year as a percentage of net sales primarily reflects efficiencies in our brand marketing and performance marketing investments. 
  • Net income was $10.8 million, an increase from $3.2 million in the third quarter of 2023. Net income in the prior-year period included $6.6 million in non-routine costs ($5.0 million, net of taxes) related to an accrual and a charge for a settled legal matter.       
  • Adjusted EBITDA was $17.5 million, a year-over-year increase of 85% that primarily reflects a year-over-year increase in net sales and gross profit combined with increased year-over-year efficiency in our selling and distribution costs, marketing investment and fulfillment costs.     
  • Diluted earnings per share (EPS) was $0.15, an increase from $0.04 in the third quarter of 2023.                           

Additional Net Sales Commentary

  • REVOLVE segment net sales were $243.4 million, a year-over-year increase of 12%.
  • FWRD segment net sales were $39.7 million, essentially flat year-over-year.   
  • Domestic net sales were $222.7 million, a year-over-year increase of 7%.
  • International net sales were $60.5 million, a year-over-year increase of 20%, driven by growth in all major regions.  

Cash Flow and Balance Sheet

  • Net cash provided by operating activities was $9.1 million in the third quarter and $22.8 million in the nine-month year-to-date period ended September 30, 2024 and free cash flow was $6.2 million in the third quarter and $16.2 million in the nine-month year-to-date period. The reduced cash flow provided by operating activities year-over-year for the nine-month year-to-date period in 2024 primarily reflects growth in our inventory balance compared to a declining inventory balance in the first nine months of 2023, partially offset by higher net income and changes in working capital excluding inventory.        
  • Stock repurchases were $1.9 million for the third quarter ended September 30, 2024, exclusive of broker fees and excise taxes. The company repurchased 118,193 shares of its Class A common stock during the third quarter at an average cost of $15.67 per share. $57.6 million remained available under the company's $100 million stock repurchase program as of September 30, 2024.
  • Cash and cash equivalents were $252.8 million as of September 30, 2024, an increase of $8.1 million, or 3%, from $244.7 million as of June 30, 2024. Our balance sheet as of September 30, 2024 remains debt free. The year-over-year decrease in cash and cash equivalents compared to September 30, 2023 primarily reflects our cash flow generated from operations that was more than offset by $29.8 million in stock repurchases during the past four quarters. 
  • Inventory as of September 30, 2024 was $240.0 million, an increase of $37.2 million, or 18%, from September 30, 2023.            

Additional trend information regarding Revolve Group's third quarter of 2024 financial results and operating metrics is available in the Q3 2024 Financial Highlights presentation available on our investor relations website:  https://investors.revolve.com/events-and-presentations/default.aspx 

Results Since the End of the Third Quarter of 2024

Net sales in October 2024 increased by a low-double digit percentage year-over-year, a sequential improvement compared to the year-over-year trend reported for the third quarter of 2024.

2024 Business Outlook

Based on information available to us as of November 5, 2024, we are providing the following guidance for the full year ending December 31, 2024 and the fourth quarter ending December 31, 2024.        

Updated FY 2024 Outlook

Prior FY 2024 Outlook

Gross margin

52.2 %

52.5% to 53.0%

Fulfillment expenses

3.3% of net sales

3.3% to 3.5% of net sales

Selling and distribution expenses

17.5% of net sales

17.8% to 18.0% of net sales

Marketing expenses

15.1% of net sales

15.3% to 15.5% of net sales

General and administrative expenses

$136.0 million

$135 million to $138 million

Effective tax rate

26 %

25% to 26%





Fourth Quarter 2024 Outlook


Gross margin

51.2% to 51.5%


Fulfillment expenses

3.4% of net sales


Selling and distribution expenses

17.3% of net sales


Marketing expenses

15.9% of net sales


General and administrative expenses

$35.6 million


Conference Call Information

Revolve Group management will host a call today at 4:30 pm ET / 1:30 pm PT to discuss today's results in more detail.  To participate, please dial (888) 596-4144 within the United States or (646) 968-2525 outside the United States approximately 10 minutes before the scheduled start of the call. The conference ID for the call is 2756104. The conference call will also be accessible, live via audio broadcast, on the Investor Relations section of the Revolve Group website at investors.revolve.com. A replay of the conference call will be available online at investors.revolve.com. In addition, an audio replay of the call will be available for one week following the call and can be accessed by dialing (800) 770-2030 within the United States or (609) 800-9909 outside the United States. The replay conference ID is 2756104.

Forward-Looking Statements

This press release contains ''forward-looking statements'' within the meaning of the safe harbor provisions of the U.S.  Private Securities Litigation Reform Act of 1995. All statements other than statements of historical or current fact included in this press release are forward-looking statements, including but not limited to statements regarding our  growth prospects and outlook for the fourth quarter and full year of 2024. Forward-looking statements include statements containing words such as "expect," "anticipate," "believe," "project," "will" and similar expressions intended to identify forward-looking statements. These forward-looking statements are based on our current expectations. Forward-looking statements involve risks and uncertainties. Our actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks related to changing economic conditions and their impact on consumer demand and our business, operating results and financial condition; demand for our products; supply chain challenges; inflationary pressures; wars and conflicts in  Ukraine/Russia, Israel/Gaza and the Middle East; other geopolitical tensions; our fluctuating operating results; seasonality in our business; our ability to acquire products on reasonable terms; our e-commerce business model; our ability to attract customers in a cost effective manner; the strength of our brand; competition; fraud; system interruptions; our ability to fulfill orders; the impact of public health crises on our business, operations and financial results; the effect of claims, lawsuits, government investigations, other legal or regulatory proceedings or commercial or contractual disputes; and other risks and uncertainties included under the caption "Risk Factors" and elsewhere in our filings with the Securities and Exchange Commission, or SEC, including, without limitation, our Annual Report on Form 10-K for the year ended December 31, 2023 and our subsequent Quarterly Reports on Form 10-Q, including for the quarter ended September 30, 2024, which we expect to file with the SEC on November 5, 2024. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement, and we undertake no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date hereof.

Use of Non-GAAP Financial Measures and Other Operating Metrics

To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles in the United States of America (GAAP), we reference in this press release and the accompanying tables the following non-GAAP financial measures: Adjusted EBITDA and free cash flow.    

The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and our non-GAAP measures may be different from non-GAAP measures used by other companies.

We use these non-GAAP financial measures to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses that may not be indicative of our ongoing core operating performance. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when analyzing historical performance and liquidity and when planning, forecasting, and analyzing future periods.

For a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP measures, please see the tables captioned "Reconciliation of Non-GAAP Financial Measures" included at the end of this release. We encourage reviewing the reconciliation in conjunction with the presentation of the non-GAAP financial measures for each of the periods presented. In future periods, we may exclude similar items, may incur income and expenses similar to these excluded items and may include other expenses, costs and non-recurring items.

Definitions of our non-GAAP financial measures and other operating metrics are presented below. 

Adjusted EBITDA

Adjusted EBITDA is a non-GAAP financial measure that we calculate as net income before other (income) expense, net; taxes; and depreciation and amortization; adjusted to exclude the effects of equity-based compensation expense, certain transaction costs and certain non-routine items. Adjusted EBITDA is a key measure used by management to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis and, in the case of exclusion of the impact of equity-based compensation, excludes an item that we do not consider to be indicative of our core operating performance.

Free Cash Flow

Free cash flow is a non-GAAP financial measure that we calculate as net cash provided by operating activities less cash used in purchases of property and equipment, and purchases of rental product. We view free cash flow as an important indicator of our liquidity because it measures the amount of cash we generate. Free cash flow also reflects changes in working capital.

Active Customers

We define an active customer as a unique customer account from which a purchase was made across our platform at least once in the preceding 12-month period. In any particular period, we determine our number of active customers by counting the total number of customers who have made at least one purchase in the preceding 12-month period, measured from the last date of such period. We view the number of active customers as a key indicator of our growth, the reach of our sites, the value proposition and consumer awareness of our brand, the continued use of our sites by our customers and their desire to purchase our products.

Total Orders Placed

We define total orders placed as the total number of orders placed by our customers, prior to product returns, across our platform in any given period.  We view total orders placed as a key indicator of the velocity of our business and an indication of the desirability of our products and sites to our customers. Total orders placed, together with average order value, is an indicator of the net sales we expect to recognize in a given period.

Average Order Value

We define average order value as the sum of the total gross sales from our sites in a given period, prior to product returns, divided by the total orders placed in that period. We believe our high average order value demonstrates the premium nature of our product assortment. Average order value varies depending on the site through which we sell merchandise, the mix of product categories sold, the number of units in each order, the percentage of sales at full price, and for sales at less than full price, the level of markdowns.

About Revolve Group, Inc.

Revolve Group, Inc. (NYSE: RVLV) is the next-generation fashion retailer for Millennial and Generation Z consumers. As a trusted premium lifestyle brand and a go-to online source for discovery and inspiration, we deliver an engaging customer experience from a vast yet curated offering of apparel, footwear, accessories, beauty and home products. Our dynamic platform connects a deeply engaged community of millions of consumers, thousands of global fashion influencers and more than 1,000 emerging, established and owned brands.

We were founded in 2003 by our co-CEOs, Michael Mente and Mike Karanikolas. We sell merchandise through two complementary segments, REVOLVE and FWRD, that leverage one platform. Through REVOLVE, we offer an assortment of premium apparel, footwear, accessories and beauty products from emerging, established and owned brands. Through FWRD, we offer an assortment of curated and elevated iconic and emerging luxury brands.  For more information, visit www.revolve.com.

Contacts:

Investors:

Erik Randerson, CFA
562.677.9513
IR@revolve.com

Media:
Jennifer Walker
revolve@walkerdrawas.com 

 

REVOLVE GROUP, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF INCOME


(Unaudited)


(In thousands, except per share data)






Three Months Ended
September 30,



Nine Months Ended
September 30,




2024



2023



2024



2023


Net sales


$

283,146



$

257,603



$

836,183



$

810,941


Cost of sales



138,279




124,371




397,208




390,791


Gross profit



144,867




133,232




438,975




420,150


Operating expenses:













Fulfillment



9,268




9,185




27,933




27,657


Selling and distribution



47,930




48,925




146,810




151,276


Marketing



39,510




39,581




123,850




129,421


General and administrative



33,906




35,217




100,366




91,861


Total operating expenses



130,614




132,908




398,959




400,215


Income from operations



14,253




324




40,016




19,935


Other income, net



(192)




(3,984)




(9,784)




(12,950)


Income before income taxes



14,445




4,308




49,800




32,885


Provision for income taxes



3,694




1,130




12,799




8,232


Net income



10,751




3,178




37,001




24,653


Less: Net loss attributable to non-controlling interest



220




—




220




—


Net income attributable to Revolve Group, Inc. stockholders


$

10,971



$

3,178



$

37,221



$

24,653


Earnings per share of Class A and Class B
   common stock:













Basic


$

0.16



$

0.04



$

0.53



$

0.34


Diluted


$

0.15



$

0.04



$

0.52



$

0.33


Weighted average number of shares of Class A and
   Class B common stock outstanding:













Basic



70,673




73,262




70,802




73,358


Diluted



71,523




73,716




71,524




74,058


 

REVOLVE GROUP, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED BALANCE SHEETS


(Unaudited)


 (In thousands, except share and per share data)






September 30,



December 31,




2024



2023


Assets







Current assets:







Cash and cash equivalents


$

252,841



$

245,449


Accounts receivable, net



11,527




12,405


Inventory



240,040




203,587


Income taxes receivable



4,058




1,625


Prepaid expenses and other current assets



76,529




65,523


Total current assets



584,995




528,589


Property and equipment (net of accumulated depreciation of $21,362 and $17,994 as of
   September 30, 2024 and December 31, 2023, respectively)



8,005




7,763


Right-of-use lease assets



38,567




36,440


Intangible assets, net



2,323




1,875


Goodwill



2,042




2,042


Other assets



4,996




2,172


Deferred income taxes



30,005




30,005


Total assets


$

670,933



$

608,886


Liabilities and Stockholders' Equity







Current liabilities:







Accounts payable


$

60,388



$

47,821


Income taxes payable



674




—


Accrued expenses



38,208




40,714


Returns reserve



76,187




63,780


Current lease liabilities



8,359




6,863


Other current liabilities



32,141




30,442


Total current liabilities



215,957




189,620


Non-current lease liabilities



34,165




34,126


Total liabilities



250,122




223,746


Stockholders' equity:







Class A common stock, $0.001 par value; 1,000,000,000 shares authorized as of
   September 30, 2024 and December 31, 2023; 38,122,782 and 38,693,589 shares
   issued and outstanding as of September 30, 2024 and December 31, 2023,
   respectively



38




39


Class B common stock, $0.001 par value; 125,000,000 shares authorized as of
   September 30, 2024 and December 31, 2023; 32,590,170 and 32,597,119 shares
   issued and outstanding as of September 30, 2024 and December 31, 2023,
   respectively



33




33


Additional paid-in capital



123,883




116,713


Retained earnings



296,332




268,355


Non-controlling interest



525




—


Total stockholders' equity



420,811




385,140


Total liabilities and stockholders' equity


$

670,933



$

608,886


 

REVOLVE GROUP, INC. AND SUBSIDIARIES


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS


(Unaudited)


(In thousands)






Nine Months Ended September 30,




2024



2023


Operating activities:







Net income


$

37,001



$

24,653


Adjustments to reconcile net income to net cash provided by operating
   activities:







Depreciation and amortization



3,501




3,752


Rental product depreciation



416




—


Equity-based compensation



6,751




4,229


Bargain purchase gain



(1,883)




—


Changes in operating assets and liabilities:







Accounts receivable



878




(7,193)


Inventories



(33,704)




12,347


Income taxes receivable



(2,433)




(4,581)


Prepaid expenses and other current assets



(11,006)




(3,704)


Other assets



(459)




(434)


Accounts payable



12,567




(6,310)


Income taxes payable



674




1,206


Accrued expenses



(2,506)




4,373


Returns reserve



12,407




8,756


Right-of-use lease assets and current and non-current
   lease liabilities



(592)




2,236


Other current liabilities



1,162




7,888


Net cash provided by operating activities



22,774




47,218


Investing activities:







Purchases of property and equipment



(3,819)




(3,114)


Purchases of rental product



(2,781)




—


Cash paid for acquisition



(427)




—


Net cash used in investing activities



(7,027)




(3,114)


Financing activities:







Proceeds from the exercise of stock options, net of
   tax withholdings on share-based payment awards



890




486


Repurchases of Class A common stock



(11,876)




(12,584)


Net cash used in financing activities



(10,986)




(12,098)


Effect of exchange rate changes on cash and cash equivalents



2,631




169


Net increase in cash and cash equivalents



7,392




32,175


Cash and cash equivalents, beginning of period



245,449




234,724


Cash and cash equivalents, end of period


$

252,841



$

266,899


Supplemental disclosure of cash flow information:







Cash paid during the period for:







Income taxes, net of refund


$

14,339



$

11,580


Operating leases


$

7,185



$

5,649


Supplemental disclosure of non-cash activities:







Lease assets obtained in exchange for new operating lease liabilities


$

7,180



$

20,452


 

REVOLVE GROUP, INC. AND SUBSIDIARIES


SEGMENT INFORMATION


(Unaudited)




The following table summarizes our net sales and gross profit for each of our reportable segments (in thousands):






Three Months Ended September 30,



Nine Months Ended September 30,


Net sales


2024



2023



2024



2023


REVOLVE


$

243,421



$

217,698



$

718,545



$

684,500


FWRD



39,725




39,905




117,638




126,441


Total


$

283,146



$

257,603



$

836,183



$

810,941















Gross profit













REVOLVE


$

131,476



$

119,003



$

397,043



$

370,474


FWRD



13,391




14,229




41,932




49,676


Total


$

144,867



$

133,232



$

438,975



$

420,150




The following table lists net sales by geographic area (in thousands):






Three Months Ended September 30,



Nine Months Ended September 30,




2024



2023



2024



2023


United States


$

222,650



$

207,171



$

666,840



$

656,747


Rest of the world



60,496




50,432




169,343




154,194


Total


$

283,146



$

257,603



$

836,183



$

810,941


 

REVOLVE GROUP, INC. AND SUBSIDIARIES


KEY OPERATING AND FINANCIAL METRICS


(Unaudited)






Three Months Ended September 30,



Nine Months Ended September 30,




2024



2023



2024



2023




(in thousands, except average order value and percentages)


Gross margin



51.2

%



51.7

%



52.5

%



51.8

%

Adjusted EBITDA


$

17,503



$

9,484



$

51,244



$

34,871


Free cash flow


$

6,171



$

11,492



$

16,174



$

44,104


Active customers



2,628




2,510




2,628




2,510


Total orders placed



2,200




2,133




6,694




6,679


Average order value


$

303



$

299



$

303



$

296


 

REVOLVE GROUP, INC. AND SUBSIDIARIES


RECONCILIATION OF NON-GAAP FINANCIAL MEASURES


(Unaudited)




A reconciliation of non-GAAP Adjusted EBITDA to net income for the three and nine months ended September 30, 2024 and 2023 is as follows:






Three Months Ended September 30,

Nine Months Ended September 30,




2024



2023



2024



2023




(in thousands)


Net income


$

10,751



$

3,178



$

37,001



$

24,653


Excluding:













Other income, net



(192)




(3,984)




(9,784)




(12,950)


Provision for income taxes



3,694




1,130




12,799




8,232


Depreciation and amortization



983




1,293




3,501




3,752


Equity-based compensation



2,098




1,228




6,751




4,229


Transaction costs



169




—




494




—


Non-routine items(1)



—




6,639




482




6,955


Adjusted EBITDA


$

17,503



$

9,484



$

51,244



$

34,871


(1)

Non-routine items in the nine months ended September 30, 2024 represent an accrual and a charge for a previously disclosed and now settled matter related to non-routine import and export fees. Non-routine items in the three and nine months ended September 30, 2023 represent an accrual and a charge related to a separate settled legal matter.

 

A reconciliation of non-GAAP free cash flow to net cash provided by operating activities for the three and nine months ended September 30, 2024 and 2023 is as follows:






Three Months Ended September 30,



Nine Months Ended September 30,




2024



2023



2024



2023




(in thousands)


Net cash provided by operating activities


$

9,052



$

12,486



$

22,774



$

47,218


Purchases of property and equipment



(1,037)




(994)




(3,819)




(3,114)


Purchases of rental product



(1,844)




—




(2,781)




—


Free cash flow


$

6,171



$

11,492



$

16,174



$

44,104


Net cash used in investing activities


$

(2,881)



$

(994)



$

(7,027)



$

(3,114)


Net cash used in financing activities


$

(936)



$

(12,508)



$

(10,986)



$

(12,098)


 

 

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SOURCE Revolve Group, Inc.