Revolve Group Inc

Previous wording

our ability to expand our operations in an efficient and cost-effective manner;

Current wording

our ability to expand our operations and physical store presence in an efficient and cost-effective 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 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.

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. We also offer REVOLVE products on 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, 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.

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. 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.

Previous wording

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

Current wording

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

Previous 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.

Current wording

Active customers increased during the period ended September 30, 2024 compared to the same period in 2023 primarily due to our increased engagement with our existing customers and acquisition of new customers through our sales and marketing efforts.

Previous 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.

Current wording

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

Previous wording

We seek to engage with our customers and build awareness of our brands through delivering unique events and experiences, as well as short-term pop-up retail experiences. We plan to continue to conduct in-person events at varying levels of scale in the future and make opportunistic investments in marketing initiatives that could increase marketing as a percentage of net sales to levels in excess of historical levels for certain quarters or periods of time in the future. This incremental investment may not deliver a meaningful return in the short term and may adversely impact our operating income in the short term.

Current wording

We seek to engage with our customers and build awareness of our brands through delivering unique events and experiences, including short-term pop-up retail experiences. We also recently opened our first permanent brick-and-mortar store and we may be opening additional physical stores in the future. We plan to continue to conduct in-person events at varying levels of scale in the future and make opportunistic investments in marketing initiatives that could increase marketing as a percentage of net sales to levels in excess of historical levels for certain quarters or periods of time in the future. This incremental investment may not deliver a meaningful return in the short term and may adversely impact our operating income in the short term.

Previous wording

We offer merchandise across a variety of product types, brands and price points. The brands we sell on our platform consist of a mix of emerging third-party, established third-party (including iconic luxury brands) and owned brands. Our product mix consists primarily of apparel, footwear, beauty and accessories products.

Current wording

We offer merchandise across a variety of product types, brands and price points. The brands we sell on our platform consist of a mix of emerging third-party, established third-party (including iconic luxury brands) and owned brands. Our product mix consists primarily of apparel, footwear, beauty, accessories and home products.

Previous 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.

Current wording

The REVOLVE segment contributes to a majority of our net sales, representing 86.0% and 84.5% of our net sales for the three months ended September 30, 2024 and 2023, respectively, and 85.9% and 84.4% of our net sales for the nine months ended September 30, 2024 and 2023, respectively. During the three months ended September 30, 2024 and 2023, REVOLVE generated $243.4 million and $217.7 million in net sales, respectively, representing an increase of 11.8%. The net sales increase in the three months ended September 30, 2024, as compared to the same period in 2023, was primarily due to a lower proportion of returned purchases combined with an increase in the number of orders shipped and an increase in average order value. During the nine months ended September 30, 2024 and 2023, REVOLVE generated $718.5 million and $684.5 million in net sales, respectively, representing an increase of 5.0%. The net sales increase in the nine months ended September 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.

Previous 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.

Current wording

The FWRD segment contributes to a smaller portion of our overall net sales, representing 14.0% and 15.5% of our net sales for the three months ended September 30, 2024 and 2023, respectively, and 14.1% and 15.6% of our net sales for the nine months ended September 30, 2024 and 2023, respectively. During the three months ended September 30, 2024 and 2023, FWRD generated $39.7 million and $39.9 million in net sales, respectively, representing a decrease of 0.5%. The net sales decrease in the three months ended September 30, 2024, as compared to the same periods in 2023, was primarily due to a decrease in average order value. During the nine months ended September 30, 2024 and 2023, FWRD generated $117.6 million and $126.4 million in net sales, respectively, representing a decrease of 7.0%. The net sales decrease in the nine months ended September 30, 2024, as compared to the same periods in 2023, was primarily due to a decrease in the number of orders shipped combined with a decrease in average order value.

Previous 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%.

Current wording

Net sales to customers outside of the United States contributed to 21.4% and 19.6% of our net sales for the three months ended September 30, 2024 and 2023, respectively, and 20.3% and 19.0% of our net sales for the nine months ended September 30, 2024 and 2023, respectively. During the three months ended September 30, 2024 and 2023, net sales to customers outside of the United States were $60.5 million and $50.4 million, respectively, representing an increase of 20.0%. During the nine months ended September 30, 2024 and 2023, net sales to customers outside of the United States were $169.3 million and $154.2 million, respectively, representing an increase of 9.8%.

Previous wording

Net sales consist primarily of sales of women’s apparel, footwear, beauty, accessories and home products. We recognize product sales at the time control is transferred to the customer, which is when the product is shipped. Net sales represent the sales of these items and shipping revenue when applicable, net of estimated returns and promotional discounts. Net sales are primarily driven by growth in the number of our customers, the frequency with which customers purchase and average order value.

Current wording

Net sales consist primarily of sales of women’s apparel, footwear, beauty, accessories and home products. We recognize product sales at the time control is transferred to the customer, which is when the product is shipped. Net sales represent the sales of these items and shipping revenue when applicable, net of estimated returns and promotional discounts. Net sales are primarily driven by growth in the number of our customers, the frequency with which customers purchase, the amount of returned merchandise and average order value.

Previous wording

Fulfillment expenses represent those costs incurred in operating and staffing our fulfillment centers, including costs attributed to inspecting and warehousing inventories and picking, packaging and preparing customer orders for shipment. Fulfillment expenses also include the cost of warehousing facilities. We expect fulfillment expenses to fluctuate as a percentage of net sales due to pressure from increased costs such as wages and other input cost pressure, expansion of our fulfillment network footprint and capacity, and our customers’ propensity to return merchandise, to be partially offset by operating efficiencies from increased scale as well as automation of the fulfillment center workflow.

Current wording

Fulfillment expenses represent those costs incurred in operating and staffing our fulfillment centers, including costs attributed to inspecting and warehousing inventories and picking, packaging and preparing customer orders for shipment. Fulfillment expenses also include the cost of warehousing facilities. We expect fulfillment expenses to fluctuate as a percentage of net sales due to pressure from increased costs such as wages and other input cost pressure, expansion of our fulfillment network footprint and capacity, and our customers’ propensity to return merchandise. Longer term, we expect operating efficiencies from increased scale as well as automation of the fulfillment center workflow.

Previous wording

Selling and distribution expenses consist primarily of shipping and other transportation costs incurred delivering merchandise to customers and from customers returning merchandise, merchant processing fees, and customer service. We expect selling and distribution expenses to fluctuate as a percentage of net sales reflecting input cost pressures, particularly freight charges and fuel surcharges, from elevated return rates due to consumer behavior, investments in international markets to offer hassle-free returns, partially offset by efficiencies realized from optimized shipping methods.

Current wording

Selling and distribution expenses consist primarily of shipping and other transportation costs incurred delivering merchandise to customers and from customers returning merchandise, merchant processing fees, and customer service. We expect selling and distribution expenses to fluctuate as a percentage of net sales reflecting changes to input costs, particularly freight charges and fuel surcharges, from changes in our return rates due to consumer behavior, investments in international markets to offer hassle-free returns and efficiencies realized from optimized shipping methods.

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. 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.

Current wording

Other income, net consists primarily of interest income on our money market funds, partially offset by foreign currency exchange gains and losses and fees associated with our line of credit. For the nine months ended September 30, 2024, other income, net also includes $2.8 million of insurance proceeds related to a legal matter and a bargain purchase gain of $1.9 million resulting from a business acquisition. For the nine months ended September 30, 2023, other income, net includes $5.1 million of insurance proceeds related to a legal matter.

Previous wording

The increase in net sales for the three months ended June 30, 2024, as compared to the same period in 2023, was primarily due to a 1.7% increase in the average order value combined with a lower proportion of returned purchases.

Current wording

The increase in net sales for the three months ended September 30, 2024, as compared to the same period in 2023, was primarily due to a lower proportion of returned purchases combined with a 3.2% increase in the number of orders shipped and a 1.3% increase in the average order value.

Previous 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.

Current wording

Net sales in the REVOLVE segment increased 11.8% to $243.4 million in the three months ended September 30, 2024 compared to net sales of $217.7 million in the same period in 2023. Net sales in the FWRD segment decreased 0.5% to $39.7 million in the three months ended September 30, 2024 as compared to net sales of $39.9 million in the same period in 2023.

Previous 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.

Current wording

The increase in cost of sales for the three months ended September 30, 2024, as compared to the same period in 2023, was primarily due to an increase in net sales. The increase in cost of sales as a percentage of net sales was primarily due to deeper markdowns within our markdown inventory, a higher mix of third-party brand sales, higher inventory valuation adjustments and increased inbound shipping rates.

Previous 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.

Current wording

The decrease in selling and distribution expenses for the three months ended September 30, 2024, as compared to the same period in 2023, was due to a $2.4 million decrease in shipping and handling costs and a $0.3 million decrease in other shipping expenses, partially offset by a $1.7 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, a lower proportion of returned purchases and higher average order value as compared to the same period in the prior year, partially offset by higher merchant processing fees.

Previous wording

The decrease in marketing expenses for the three 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 $7.5 million in brand marketing expense and a decrease of $1.0 million in performance marketing expense. The increased brand marketing efficiency was driven primarily by REVOLVE Festival, which delivered greater marketing impact in a more cost-efficient, one-day format in 2024 than achieved over an entire weekend for the 2023 event.

Current wording

Marketing expenses for the three months ended September 30, 2024 were relatively flat compared to the same period in 2023, as a $1.8 million decrease in brand marketing expense was partially offset by a $1.7 million increase in performance marketing expense. The decrease in marketing expenses as a percentage of net sales was due to efficiencies in our brand marketing and performance marketing investments.

Previous 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.

Current wording

The decrease in general and administrative expenses for the three months ended September 30, 2024, as compared to the same period in 2023, was primarily due to a $6.6 million decrease in non-routine expenses, partially offset by a $1.8 million increase in salaries and related benefits, a $0.8 million increase related to professional services and other occupancy costs, a $0.9 million increase in equity-based compensation expense and a $1.8 million increase in other operating expenses. The decrease in general and administrative expenses as a percentage of net sales was primarily due to a $6.6 million accrual for a legal matter recorded during the three months ended September 30, 2023.

Previous wording

The increase in the effective tax rate for the six months ended June 30, 2024, as compared to the same period in 2023, was primarily due to an increase in state income taxes.

Current wording

The decrease in the effective tax rate for the three months ended September 30, 2024, as compared to the same period in 2023, was primarily due to an increase in excess tax benefits related to the exercise of non-qualified stock options.

Previous 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.

Current wording

The increase in net sales for the nine months ended September 30, 2024, as compared to the same period in 2023, was primarily due to a 2.4% increase in the average order value combined with a slight increase in the number of orders shipped and a slightly lower proportion of returned purchases.

Previous wording

Net sales in the REVOLVE segment increased 1.8% to $475.1 million in the six months ended June 30, 2024 compared to net sales of $466.8 million in the same period in 2023. Net sales in the FWRD segment decreased 10.0% to $77.9 million in the six months ended June 30, 2024 as compared to net sales of $86.5 million in the same period in 2023.

Current wording

Net sales in the REVOLVE segment increased 5.0% to $718.5 million in the nine months ended September 30, 2024 compared to net sales of $684.5 million in the same period in 2023. Net sales in the FWRD segment decreased 7.0% to $117.6 million in the nine months ended September 30, 2024 as compared to net sales of $126.4 million in the same period in 2023.

Previous wording

The increase in cost of sales for the three months ended June 30, 2024, as compared to the same period in 2023, was primarily due to an increase in net sales. Cost of sales as a percentage of net sales was flat for the three months ended June 30, 2024, as compared to the same period in 2023, as a higher percentage of full price sales was offset by a higher mix of third-party brand sales and increased inbound shipping rates.

Current wording

The increase in cost of sales for the nine months ended September 30, 2024, as compared to the same period in 2023, was primarily due to an increase in net sales and an increase in inbound shipping expenses to receive product merchandise from vendors. The decrease in cost of sales as a percentage of net sales was primarily due to a higher percentage of full price sales, partially offset by increased inbound shipping rates and a higher mix of third-party brand sales.

Previous wording

Fulfillment expenses for the three months ended June 30, 2024 were lower as compared to the same period in 2023, primarily due to efficiencies gained from successful expansion and optimization of our fulfillment network. The decrease in fulfillment expenses as a percentage of net sales was primarily due to an increase in average order value and lower proportion of returned purchases.

Current wording

Fulfillment expenses for the nine months ended September 30, 2024 were slightly higher as compared to the same period in 2023, primarily due to increased occupancy costs, partially offset by efficiencies gained from successful expansion and optimization of our fulfillment network. The decrease in fulfillment expenses as a percentage of net sales was primarily due to an increase in average order value and a lower proportion of returned purchases.

Previous 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.

Current wording

The decrease in selling and distribution expenses for the nine months ended September 30, 2024, as compared to the same period in 2023, was primarily due to a $7.5 million decrease in shipping and handling costs, a $1.0 million decrease in commissions and other selling expenses, partially offset by a $4.0 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 higher average order value as compared to the same period in the prior year, partially offset by higher merchant processing fees.

Previous 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.

Current wording

The decrease in marketing expenses for the nine months ended September 30, 2024, as compared to the same period in 2023, was primarily due to increased efficiencies in our brand marketing investments. As a result, we experienced a decrease of $5.6 million in brand marketing expense. The decrease in marketing expenses as a percentage of net sales was due to efficiencies in our brand marketing and performance marketing investments.

Previous wording

The increase in general and administrative expenses for the three months ended June 30, 2024, as compared to the same period in 2023, was due to a $1.8 million increase in salaries and related benefits, a $1.4 million increase related to professional services and other occupancy costs, a $0.4 million increase in equity-based compensation expense and a $1.3 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 outpacing growth in net sales.

Current wording

The increase in general and administrative expenses for the nine months ended September 30, 2024, as compared to the same period in 2023, was due to a $4.7 million increase in salaries and related benefits, a $3.7 million increase related to professional services and other occupancy costs, a $2.5 million increase in equity-based compensation expense and a $4.1 million increase in other operating expenses and transaction costs, partially offset by a $6.5 million decrease in non-routine expenses. The increase in general and administrative expenses as a percentage of net sales was driven by growth in general and administrative expenses outpacing growth in net sales.

Previous wording

The increase in the effective tax rate for the three months ended June 30, 2024, as compared to the same period in 2023, was primarily due to an increase in state income taxes.

Current wording

The increase in the effective tax rate for the nine months ended September 30, 2024, as compared to the same period in 2023, was primarily due to an increase in state income taxes.

Previous 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.

Current wording

For the nine months ended September 30, 2024, we generated $22.8 million of operating cash flow as compared to $47.2 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. 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.

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 nine months ended September 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 $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.

Current wording

Net cash used in financing activities was $11.0 million and $12.1 million for the nine months ended September 30, 2024 and 2023, respectively, and was primarily attributable to repurchases of shares of our Class A common stock under our stock repurchase program.