Revolve Group Inc

Previous wording

Additional factors that could cause actual results to differ materially from our forward-looking statements are set forth in this report, including under the headings “Risk Factors” and “Management’s Discussion and Analysis of

Current wording

Additional factors that could cause actual results to differ materially from our forward-looking statements are set forth in this report, including under the headings “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in our condensed consolidated financial statements and the related notes thereto.

Previous wording

REVOLVE 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 exceptional service and an engaging customer experience with a vast yet curated offering totaling over 100,000 apparel and footwear styles, as well as beauty, accessories and home products. Our dynamic platform connects a deeply engaged community of millions of consumers, thousands of global fashion influencers and over 1,200 emerging, established and owned brands. Through more than 20 years of continued investment in technology, data analytics and innovative marketing and merchandising strategies, we have built a powerful platform and brand that we believe is connecting with the next generation of consumers and is redefining fashion retail for the 21st century.

Current wording

REVOLVE is the next-generation fashion retailer for Millennial and Generation Z consumers. As a trusted premium lifestyle brand and a go-to source for discovery and inspiration, we deliver exceptional service and an engaging customer experience with a vast yet curated offering totaling over 100,000 apparel and footwear styles, as well as beauty, accessories and home products. Our dynamic platform connects a deeply engaged community of millions of consumers, thousands of global fashion influencers and over 1,200 emerging, established and owned brands. Through more than 20 years of continued investment in technology, data analytics and innovative marketing and merchandising strategies, we have built a powerful platform and brand that we believe is connecting with the next generation of consumers and is redefining fashion retail for the 21st century.

Previous wording

We have invested in our robust and scalable internally-developed technology platform to meet the specific needs of our business and to support our customers’ experience. We use proprietary algorithms and more than 20 years of data to efficiently manage our merchandising, marketing, product development, sourcing and pricing decisions. Our platform works seamlessly across devices and analyzes browsing and purchasing patterns and preferences to help us make purchasing decisions, which when combined with the small initial orders for new products, allows us to manage inventory and fashion risk. We have also invested in our creative capabilities to produce high-quality visual merchandising that caters to our customers by focusing on style with a distinct point of view rather than on individual products. The combination of our online sales platform and our in-house creative photography allows us to showcase brands in a distinctive and compelling manner.

Current wording

We have invested in our robust and scalable internally-developed technology platform to meet the specific needs of our business and to support our customers’ experience. We use proprietary algorithms and more than 20 years of data to efficiently manage our merchandising, marketing, product development, sourcing and pricing decisions. Our platform works seamlessly across devices and analyzes browsing and purchasing patterns and preferences to help us make purchasing decisions, which when combined with the small initial orders for new products, allows us to manage inventory and fashion risk. We have also invested in our creative capabilities to produce high-quality visual merchandising that caters to our customers by focusing on style with a distinct point of view rather than on individual products. The combination of our sales platform and our in-house creative photography allows us to showcase brands in a distinctive and compelling manner.

Previous wording

To date, we have successfully expanded internationally with limited investment and physical presence. Our ongoing initiative to elevate the international service levels and customer experience has been a key contributor to our growth, enabling us to offer express shipping and hassle-free returns at no cost (for international orders valued at $100 or more) in most of our major international regions. We also offer REVOLVE products on two large international marketplaces, Tmall Global in China and Nykaa Fashion in India, to expand our distribution reach in these key geographies. We intend to continue to invest in and develop international markets while maintaining our focus on the core U.S. market.

Current wording

To date, we have successfully expanded internationally with limited investment and physical presence. Our ongoing initiative to elevate the international service levels and customer experience has been a key contributor to our growth, enabling us to offer express shipping and hassle-free returns at no cost (for international orders valued at $100 or more) in most of our major international regions. We also offer REVOLVE products on large international marketplaces such as Tmall Global, RED and Douyin in China and Nykaa Fashion in India, to expand our distribution reach in these key geographies. We intend to continue to invest in and develop international markets while maintaining our focus on the core U.S. market.

Previous wording

To provide investors with additional information regarding our financial results, we have disclosed in the table above and elsewhere in this report Adjusted EBITDA, a non-GAAP financial measure that we calculate as net income before other income, net; taxes; and depreciation and amortization; adjusted to exclude the effects of equity-based compensation expense and certain non-routine items. We have provided below a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure.

Current wording

To provide investors with additional information regarding our financial results, we have disclosed in the table above and elsewhere in this report Adjusted EBITDA, a non-GAAP financial measure that we calculate as net income before other income, net; taxes; and depreciation and amortization; adjusted to exclude the effects of equity-based compensation expense, certain transaction costs and certain non-routine items. We have provided below a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure.

Previous wording

A reconciliation of Adjusted EBITDA to net income for the three months ended March 31, 2024 and 2023 is as follows:

Current wording

A reconciliation of Adjusted EBITDA to net income for the three and six months ended June 30, 2024 and 2023 is as follows:

Previous wording

To provide investors with additional information regarding our financial results, we have also disclosed in the table above and elsewhere in this report free cash flow, a non-GAAP financial measure that we calculate as net cash provided by operating activities less cash used in purchases of property and equipment. We have provided below a reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable GAAP financial measure.

Current wording

To provide investors with additional information regarding our financial results, we have also disclosed in the table above and elsewhere in this report free cash flow, 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 have provided below a reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable GAAP financial measure.

Previous wording

12-month basis given the volatility that can be observed when calculating it on the basis of shorter periods that may not be reflective of longer-term trends; however, such a methodology may not be indicative of other short-term trends, such as changes in new customers. 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 brands, the continued use of our sites by our customers and their desire to purchase our products. We believe the number of active customers is a measure that is useful to investors and management in understanding our growth, brand awareness and market opportunity. Our number of active customers drives both net sales and our appeal to brands and partners.

Current wording

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. We calculate the number of active customers on a trailing 12-month basis given the volatility that can be observed when calculating it on the basis of shorter periods that may not be reflective of longer-term trends; however, such a methodology may not be indicative of other short-term trends, such as changes in new customers. 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 brands, the continued use of our sites by our customers and their desire to purchase our products. We believe the number of active customers is a measure that is useful to investors and management in understanding our growth, brand awareness and market opportunity. Our number of active customers drives both net sales and our appeal to brands and partners.

Previous wording

Active customers increased during the three months ended March 31, 2024 compared to the same period in 2023 primarily due to our ability to engage with our existing customers and acquire new customers through our sales and marketing efforts.

Current wording

Active customers increased during the period ended June 30, 2024 compared to the same period in 2023 primarily due to our ability to engage with our existing customers and acquire new customers through our sales and marketing efforts.

Previous wording

Total orders placed decreased slightly in the three months ended March 31, 2024 compared to the same period in 2023 primarily due to decreased promotional activity, partially offset by a higher number of orders at full price.

Current wording

Total orders placed were flat in the three months ended June 30, 2024 compared to the same period in 2023. Total orders placed decreased slightly in the six months ended June 30, 2024 compared to the same period in 2023 primarily due to decreased promotional activity, partially offset by a higher number of orders at full price.

Previous wording

Average order value increased in the three months ended March 31, 2024 relative to the same period in 2023 primarily due to a higher percentage of full price sales.

Current wording

Average order value increased in the three and six months ended June 30, 2024 relative to the same periods in 2023 primarily due to a higher percentage of sales at full price.

Previous wording

If our marketing efforts do not connect with our customer or fail to cost-effectively promote our brand or convert impressions into new customers, our net sales growth and profitability will be adversely affected. Competition for social media and influencer-based marketing channels continues to increase, making it more difficult to differentiate ourselves and cost-effectively acquire customers. Furthermore, changes in the user experience on social media platforms, including a shift towards video and the level of recommended content as well as changes in privacy practices by third parties, may make it more difficult to gain customer awareness and cost effectively acquire and retain customers. Apple Inc. has imposed requirements for consumer disclosures regarding privacy practices, and has implemented an application tracking transparency framework that requires opt-in consent for certain types of tracking. This transparency framework was launched in April 2021 and has made it more difficult and costly to acquire and retain customers. Additionally, in June 2023, Apple announced new software development kit, or SDK, privacy controls that it has integrated into iOS 17, which was released in September 2023, including new protections designed to limit tracking or identification of user devices. In February 2022, Google announced its Privacy Sandbox initiative for Android, a multi-year effort expected to restrict tracking activity and limit advertisers’ ability to collect app and user data across Android devices.

Current wording

If our marketing efforts do not connect with our customer or fail to cost-effectively promote our brand or convert impressions into new customers, our net sales growth and profitability will be adversely affected. Competition for social media and influencer-based marketing channels continues to increase, making it more difficult to differentiate ourselves and cost-effectively acquire customers. Furthermore, changes in the user experience on social media platforms, including a shift towards video and the level of recommended content as well as changes in privacy practices by third parties, may make it more difficult to gain customer awareness and cost effectively acquire and retain customers. Apple Inc. has imposed requirements for consumer disclosures regarding privacy practices, and has implemented an application tracking transparency framework that requires opt-in consent for certain types of tracking. This transparency framework was launched in April 2021 and has made it more difficult and costly to acquire and retain customers. Additionally, in June 2023, Apple announced new software development kit, or SDK, privacy controls that it has integrated into iOS 17, which was released in September 2023, including new protections designed to limit tracking or identification of user devices. In February 2022, Google announced its Privacy Sandbox initiative for Android, a multi-year effort expected to restrict tracking activity and limit advertisers’ ability to collect app and user data across Android devices, and in July 2024, announced its change from a previously-announced plan to stop supporting third-party cookies in its Google Chrome browser as a part of this initiative

Previous wording

The REVOLVE segment contributes to a majority of our net sales, representing 84.9% and 82.8% of our net sales for the three months ended March 31, 2024 and 2023, respectively. During the three months ended March 31, 2024 and 2023, REVOLVE generated $229.6 million and $231.7 million in net sales, respectively, representing a decrease of 0.9%. The net sales decrease in the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to a decrease in the number of orders shipped.

Current wording

The REVOLVE segment contributes to a majority of our net sales, representing 86.9% and 85.9% of our net sales for the three months ended June 30, 2024 and 2023, respectively, and 85.9% and 84.4% of our net sales for the six months ended June 30, 2024 and 2023, respectively. During the three months ended June 30, 2024 and 2023, REVOLVE generated $245.5 million and $235.1 million in net sales, respectively, representing an increase of 4.4%. During the six months ended June 30, 2024 and 2023, REVOLVE generated $475.1 million and $466.8 million in net sales, respectively, representing an increase of 1.8%. The net sales increase in the three months ended June 30, 2024, as compared to the same period in 2023, was primarily due to an increase in average order value combined with a lower proportion of returned purchases and a slight increase in the number of orders shipped. The net sales increase in the six months ended June 30, 2024, as compared to the same period in 2023, was primarily due to an increase in average order value.

Previous wording

The FWRD segment contributes to a smaller portion of our overall net sales, representing 15.1% and 17.2% of our net sales for the three months ended March 31, 2024 and 2023, respectively. During the three months ended March 31, 2024 and 2023, FWRD generated $41.0 million and $48.0 million in net sales, respectively, representing a decrease of 14.5%. The net sales decrease in the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to a decrease in the number of orders shipped and the average order value.

Current wording

The FWRD segment contributes to a smaller portion of our overall net sales, representing 13.1% and 14.1% of our net sales for the three months ended June 30, 2024 and 2023, respectively, and 14.1% and 15.6% of our net sales for the six months ended June 30, 2024 and 2023, respectively. During the three months ended June 30, 2024 and 2023, FWRD generated $36.9 million and $38.6 million in net sales, respectively, representing a decrease of 4.3%. During the six months ended June 30, 2024 and 2023, FWRD generated $77.9 million and $86.5 million in net sales, respectively, representing a decrease of 10.0%. The net sales decrease in the three and six months ended June 30, 2024, as compared to the same periods in 2023, was primarily due to a decrease in the number of orders shipped.

Previous wording

Net sales to customers outside of the United States contributed to 19.0% and 18.9% of our net sales for the three months ended March 31, 2024 and 2023, respectively. During the three months ended March 31, 2024 and 2023, net sales to customers outside of the United States were $51.4 million and $52.9 million, respectively, representing a decrease of 2.7%.

Current wording

Net sales to customers outside of the United States contributed to 20.3% and 18.6% of our net sales for the three months ended June 30, 2024 and 2023, respectively, and 19.7% and 18.8% of our net sales for the six months ended June 30, 2024 and 2023, respectively. During the three months ended June 30, 2024 and 2023, net sales to customers outside of the United States were $57.4 million and $50.9 million, respectively, representing an increase of 12.8%. During the six months ended June 30, 2024 and 2023, net sales to customers outside of the United States were $108.8 million and $103.8 million, respectively, representing an increase of 4.9%.

Previous wording

Net sales to customers outside of the United States are impacted by various factors including import and export taxes, currency fluctuations and other macroeconomic conditions described in “—Overall Economic Trends” above. In addition, any weakening of a local currency versus the U.S. dollar results in our products becoming more expensive in that local currency, which has had, and may continue to have, a negative impact on demand for our products in the geographies that use such currency.

Current wording

Net sales to customers outside of the United States are impacted by various factors including import and export taxes, currency fluctuations and other macroeconomic conditions described in “—Overall Economic Trends” above. In addition, any weakening of a local currency versus the U.S. dollar results in our products becoming more expensive in that local currency, which has in the past had, and may in the future have, a negative impact on demand for our products in the geographies that use such currency.

Previous wording

Seasonality in our business has not historically followed that of traditional retailers which typically experience concentration of net sales in the fourth quarter in connection with the holidays. We historically experienced increased sales in the spring and summer months that have resulted in peak sales during the second quarter of each fiscal year. We also historically experienced lower activity in the first quarter of each year. Our operating income has also been affected by these historical trends because many of our expenses are relatively fixed in the short term. If our growth rates moderate over the long-term, the impact of these seasonality trends on our results of operations may become more pronounced. Our seasonality trends have also been impacted by macroeconomic conditions described in “—Overall Economic Trends” above.

Current wording

Seasonality in our business has not historically followed that of traditional retailers which typically experience concentration of net sales in the fourth quarter in connection with the holidays. In the past and prior to the COVID-19 pandemic, we experienced increased sales in the spring and summer months that have resulted in peak sales during the second quarter of each fiscal year and lower activity in the first quarter of each fiscal year. This historical pattern was impacted by the COVID-19 pandemic in 2020 and 2021 and subsequent to the COVID-19 pandemic our quarterly sales patterns have been more consistent across each fiscal year. Our operating income is affected by these seasonal trends because many of our expenses are relatively fixed in the short term. If our growth rates moderate over the long-term, or if there is a shift in the seasonality of sales, the impact on our results of operations may become more pronounced.

Previous wording

Other income, net consists primarily of interest income on our money market funds, partially offset by fees associated with our line of credit. For the three months ended March 31, 2024 and 2023, other income, net also includes $2.8 million and $5.1 million, respectively, of insurance proceeds related to legal matters.

Current wording

Other income, net consists primarily of interest income on our money market funds, partially offset by fees associated with our line of credit. During the three and six months ended June 30, 2024, we recorded a bargain purchase gain of $1.9 million resulting from a business acquisition within other income, net. For the six months ended June 30, 2024, other income, net also includes $2.8 million of insurance proceeds related to a legal matter. For the six months ended June 30, 2023, other income, net includes $5.1 million of insurance proceeds related to a legal matter.

Previous wording

Net sales in the REVOLVE segment decreased 0.9% to $229.6 million in the three months ended March 31, 2024 compared to net sales of $231.7 million in the same period in 2023. Net sales in the FWRD segment decreased 14.5% to $41.0 million in the three months ended March 31, 2024 as compared to net sales of $48.0 million in the same period in 2023.

Current wording

Net sales in the REVOLVE segment increased 4.4% to $245.5 million in the three months ended June 30, 2024 compared to net sales of $235.1 million in the same period in 2023. Net sales in the FWRD segment decreased 4.3% to $36.9 million in the three months ended June 30, 2024 as compared to net sales of $38.6 million in the same period in 2023.

Previous wording

$0.7 million and merchant processing fees increased $0.7 million for the three months ended March 31, 2024 as compared to the same period in 2023. The decrease in selling and distribution expenses as a percentage of net sales was primarily due to lower shipping rates as compared to the comparative period in the prior year, partially offset by a higher proportion of returned purchases.

Current wording

The decrease in selling and distribution expenses for the three months ended June 30, 2024, as compared to the same period in 2023, was primarily due to a $2.1 million decrease in shipping and handling costs, partially offset by a $1.6 million increase in merchant processing fees. The decrease in selling and distribution expenses as a percentage of net sales was primarily due to lower shipping rates and lower proportion of returned purchases as compared to the same period in the prior year, partially offset by higher merchant processing fees.

Previous wording

The decrease in net sales for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to a higher proportion of returned purchases combined with a 2.4% decrease in the number of orders shipped, partially offset by a 3.8% increase in the average order value.

Current wording

The slight decrease in net sales for the six months ended June 30, 2024, as compared to the same period in 2023, was primarily due to a 1.1% decrease in the number of orders shipped combined with a higher proportion of returned purchases, partially offset by a 2.7% increase in the average order value.

Previous wording

The decrease in cost of sales for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to a decrease in the volume of merchandise sold and a decrease in inventory valuation adjustments. The decrease in cost of sales as a percentage of net sales was primarily due to a higher percentage of full price sales and a decrease in inventory valuation adjustments.

Current wording

The decrease in cost of sales for the six months ended June 30, 2024, as compared to the same period in 2023, was primarily due to a decrease in the volume of merchandise sold and a decrease in inventory valuation adjustments, partially offset by increased inbound shipping expenses. The decrease in cost of sales as a percentage of net sales was primarily due to a higher percentage of full price sales and a decrease in inventory valuation adjustments, partially offset by a higher mix of third-party brand sales and increased inbound shipping rates.

Previous wording

Fulfillment expenses for the three months ended March 31, 2024 were higher as compared to the same period in 2023, primarily due to higher wages for fulfillment staff and increased occupancy costs. The increase in fulfillment expenses as a percentage of net sales was primarily due to customers returning a higher proportion of their purchases combined with higher wages for fulfillment staff and increased occupancy costs.

Current wording

Fulfillment expenses for the six months ended June 30, 2024 were higher as compared to the same period in 2023, primarily due to higher wages for fulfillment staff and increased occupancy costs, partially offset by efficiencies gained from successful expansion and optimization of our fulfillment network. The increase in fulfillment expenses as a percentage of net sales was primarily due to customers returning a higher proportion of their purchases combined with higher wages for fulfillment staff and increased occupancy costs.

Previous wording

The decrease in selling and distribution expenses for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to a decrease in the number of orders shipped combined with lower shipping rates. Shipping and handling costs decreased $3.0 million, commissions and other selling expenses decreased

Current wording

The decrease in selling and distribution expenses for the six months ended June 30, 2024, as compared to the same period in 2023, was primarily due to lower shipping rates combined with a decrease in the number of orders shipped. Shipping and handling costs decreased $5.1 million, commissions, and other selling expenses decreased $0.7 million and merchant processing fees increased $2.3 million for the six months ended June 30, 2024 as compared to the same period in 2023. The decrease in selling and distribution expenses as a percentage of net sales was primarily due to lower shipping rates as compared to the same period in the prior year, partially offset by higher merchant processing fees.

Previous wording

The increase in marketing expenses for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to increased investment in brand marketing activities, partially offset by reduced investment in performance marketing campaigns. As a result, we experienced an increase of $3.7 million in brand marketing expense, offset by a decrease of $0.7 million in performance marketing expense.

Current wording

The decrease in marketing expenses for the six months ended June 30, 2024, as compared to the same period in 2023, was primarily due to increased efficiencies in our brand marketing and performance marketing investments. As a result, we experienced a decrease of $3.8 million in brand marketing expense and a decrease of $1.7 million in performance marketing expense.

Previous wording

The increase in general and administrative expenses for the three months ended March 31, 2024, as compared to the same period in 2023, was due to a $1.5 million increase related to professional services and other occupancy costs, a $1.3 million increase in equity-based compensation expense, a $1.1 million increase in salaries and related benefits and a $1.0 million increase in other operating expenses. The increase in general and administrative expenses as a percentage of net sales was driven by growth in general and administrative expenses combined with the slight decline in net sales.

Current wording

The increase in general and administrative expenses for the six months ended June 30, 2024, as compared to the same period in 2023, was due to a $2.9 million increase related to professional services and other occupancy costs, a $2.8 million increase in salaries and related benefits, a $1.7 million increase in equity-based compensation expense and a $2.4 million increase in other operating expenses. The increase in general and administrative expenses as a percentage of net sales was driven by growth in general and administrative expenses combined with the slight decline in net sales.

Previous wording

For the three months ended March 31, 2024, we generated $38.4 million of operating cash flow as compared to $48.8 million for the same period in 2023. The decrease in our operating cash flow was primarily due to negative impact from changes in working capital combined with lower net income adjusted for certain non-cash items.

Current wording

For the six months ended June 30, 2024, we generated $13.7 million of operating cash flow as compared to $34.7 million for the same period in 2023. The decrease in our operating cash flow was primarily due to negative impact from changes in working capital, partially offset by higher net income adjusted for certain non-cash items.

Previous wording

Our primary investing activities have consisted of purchases of property and equipment to support our fulfillment centers and our overall business growth and internally developed software for the continued development of our proprietary technology infrastructure. Purchases of property and equipment may vary from period-to-period depending on the timing and extent of the expansion of our operations.

Current wording

Our primary investing activities have consisted of purchases of property and equipment to support our fulfillment centers and our overall business growth and internally developed software for the continued development of our proprietary technology infrastructure. In addition, for the six months ended June 30, 2024, our investing activities included purchases of rental product and cash paid for an acquisition. Purchases of property and equipment may vary from period-to-period depending on the timing and extent of the expansion of our operations.

Previous wording

Net cash used in financing activities was $8.3 million for the three months ended March 31, 2024 and was primarily attributable to repurchases of shares of our Class A common stock under our stock repurchase program. Net cash provided by financing activities was $0.2 million for the three months ended March 31, 2023 and was attributable to cash proceeds from the exercise of stock options.

Current wording

Net cash used in financing activities was $10.0 million for the six months ended June 30, 2024 and was primarily attributable to repurchases of shares of our Class A common stock under our stock repurchase program. Net cash provided by financing activities was $0.4 million for the six months ended June 30, 2023 and was attributable to cash proceeds from the exercise of stock options.