Revolve Group Inc

Previous wording

our ability to respond to changing consumer demand, spending and tastes, and our ability to accurately and effectively engage in predictive analytics;

Current wording

our ability to respond to changing consumer demand, spending habits and customer preferences, and our ability to accurately and effectively engage in predictive analytics;

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 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 online source for discovery and inspiration, we deliver exceptional service and an engaging customer experience with a vast yet curated offering totaling over 110,000 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 1,400 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 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 online sales platform and our in-house creative photography allows us to showcase brands in a distinctive and compelling manner.

Previous wording

We use social channels and cultural events designed to deliver authentic and aspirational, yet attainable, experiences to attract and retain next-generation consumers, and these efforts have historically led to higher earned media value than competitors. We complement our social media efforts through a variety of brand marketing campaigns and events, which generate a constant flow of authentic and inspiring content. Our social media and brand marketing strategy is combined with robust and sophisticated digital performance marketing activities and our proprietary brand ambassador program. Once we have attracted potential new customers to our sites, our goal is to convert them into active customers and then encourage repeat purchases. We acquire and retain customers through paid search/product listing ads, affiliate marketing, our brand ambassador program, paid social, retargeting, personalized email marketing and mobile “push” communications through our mobile applications.

Current wording

We use social channels and cultural events designed to deliver authentic and aspirational, yet attainable, experiences to attract and retain next-generation consumers, and these efforts have historically led to higher earned media value than competitors. We complement our social media efforts through a variety of brand marketing campaigns and events, which generate a constant flow of authentic and inspiring content. Our social media and brand marketing strategy is combined with robust and sophisticated digital performance marketing activities and our proprietary brand ambassador program. Once we have attracted potential new customers to our sites, our goal is to convert them into active customers and then encourage repeat purchases. We acquire and retain customers through a variety of free and paid marketing channels, including paid search/product listing ads, affiliate marketing, our brand ambassador program, paid social, retargeting, organic search, personalized email and SMS marketing, and mobile “push” communications through our mobile applications.

Previous wording

We review our inventory levels on an ongoing basis to identify slow-moving merchandise and use product markdowns to efficiently sell these products. We have maintained a high percentage of sales that occur at full price, which we believe reflects our data-driven merchandising strategy, customer acceptance of our merchandise and the sense of urgency we create through frequent product introductions in limited quantities. Gross margin is impacted by the mix of sales at full price and markdowns, as well as the level of markdowns.

Current wording

We review our inventory levels on an ongoing basis to identify slow-moving merchandise and use product markdowns to efficiently sell these products. We have maintained a high percentage of sales that occur at full price, which we believe reflects our data-driven merchandising strategy, our focus on emerging and owned brands that minimizes our assortment overlap with other retailers, customer acceptance of our merchandise and the sense of urgency we create through frequent product introductions in limited quantities. Gross margin is impacted by the mix of sales at full price and markdowns, as well as the level of markdowns.

Previous wording

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

Current wording

A reconciliation of Adjusted EBITDA to net income for the three months ended March 31, 2025 and 2024 is as follows:

Previous wording

We have included free cash flow in this report because it is a key measure used by our management and board of directors, and we believe free cash flow is an important indicator of our liquidity because it measures the amount of cash we generate. Free cash flow also reflects changes in working capital. Our working capital fluctuates over time primarily as a result of the timing of our inventory purchases to support growth, our effective tax rate and the timing of tax payments, and changes in the level of merchandise that is returned by our customers, which in turn impacts our return reserve. Accordingly, we believe that free cash flow provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Current wording

We have included free cash flow in this report because it is a key measure used by our management and board of directors, which we believe is an important indicator of our liquidity because it measures the amount of cash we generate. Free cash flow also reflects changes in working capital. Our working capital fluctuates over time primarily as a result of the timing of our inventory purchases to support growth, our effective tax rate and the timing of tax payments, and changes in the level of merchandise that is returned by our customers, which in turn impacts our return reserve. Accordingly, we believe that free cash flow provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Previous 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.

Current wording

Active customers increased during the period ended March 31, 2025 compared to the same period in 2024 primarily due to our increased engagement with our existing customers and acquisition of new customers through our sales and marketing efforts. Although the impact, if any, is uncertain, customer behavior may be adversely affected by changes in trade policies and other macroeconomic factors. See the section titled “—Factors Affecting Our Performance—Overall Economic Trends.”

Previous wording

Total orders placed increased in the three months 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. Total orders placed were relatively flat in the nine months ended September 30, 2024 compared to the same period in 2023.

Current wording

Total orders placed increased in the three months ended March 31, 2025 compared to the same period in 2024, primarily due to our increased engagement with our existing customers and acquisition of new customers through our sales and marketing efforts. Although the impact, if any, is uncertain, customer behavior may be adversely affected by changes in trade policies and other macroeconomic factors. See the section titled “—Factors Affecting Our Performance—Overall Economic Trends.”

Previous wording

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. We believe that average order value is a measure that is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends. Average order value varies depending on the site through which we sell merchandise, the percentage of sales at full price, and for sales at less than full price, the level of markdowns on these products, product mix, and the number of units per order.

Current wording

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. We believe that average order value is a measure that is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends. Average order value varies depending on the site through which we sell merchandise, the percentage of sales at full price, and for sales at less than full price, the level of markdowns on these products, product mix, and the number of units per order. Average order value can be adversely impacted by negative consumer sentiment, including as a result of tariffs. In the near-term, we expect average order value to decrease year-over-year given the challenging macroeconomic environment, as customers seek to purchase products at more accessible price points. We expect this decrease to be partially offset by potential price increases as a result of the actual or anticipated effects of tariffs, though any long-term impact remains unclear. The impact of tariffs may also impair comparability of average order value with prior periods. See the section titled “—Factors Affecting Our Performance—Overall Economic Trends.”

Previous 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.

Current wording

Average order value decreased in the three months ended March 31, 2025, relative to the same period in 2024, primarily due to a lower percentage of sales at full price.

Previous wording

The overall economic environment and related changes in consumer behavior have a significant impact on our business. In general, positive conditions in the broader economy promote customer spending on our sites, while economic weakness, which generally results in a reduction of customer spending, may have a more pronounced negative effect on spending on our sites. Macro factors that can affect consumer confidence, shopping behavior and spending patterns, and thereby our near-term and long-term results of operations, include inflation levels, employment rates, business conditions, changes in the housing market, changes in the stock market, adverse developments affecting the financial services industry, the availability of credit, resumption of student loan payments, U.S. government stimulus payments, interest rates, foreign currency exchange rates, fuel, energy and raw material costs, supply chain challenges, and wars and geopolitical tensions. In addition, during periods of low unemployment, we generally experience higher labor costs.

Current wording

The overall economic environment and related changes in consumer behavior have a significant impact on our business. In general, positive conditions in the broader economy promote customer spending on our sites, while economic weakness, which generally results in a reduction of customer spending, may have a more pronounced negative effect on spending on our sites. Macro factors that can affect consumer confidence, shopping behavior and spending patterns, and thereby our near-term and long-term results of operations, include tariffs imposed by the U.S. or foreign governments or a global trade war, inflation levels, employment rates, business conditions, , changes in the housing market, changes in the stock market, adverse developments affecting the financial services industry, the availability of credit, resumption of student loan payments, interest rates, foreign currency exchange rates, fuel, energy and raw material costs, supply chain challenges, and wars and geopolitical tensions. In addition, during periods of low unemployment, we generally experience higher labor costs.

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, 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.

Current wording

If our marketing efforts do not connect with our customer or fail to cost-effectively promote our brands 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

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.

Current wording

We seek to engage with our customers and build awareness of our brands through delivering unique events and experiences, as well as select retail experiences. We plan to continue to conduct 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 leverage our platform and technology to buy and manage our inventory, including merchandise assortment and fulfillment center optimization. We utilize a data-driven “read and react” buying process to merchandise and curate the latest on-trend fashion. We generally make shallow initial inventory buys and then use our proprietary technology tools to identify and re-order best sellers, taking into account customer feedback across a variety of key metrics, which allows us to manage inventory and fashion risk. To ensure sufficient availability of merchandise, we generally purchase inventory in advance and frequently before apparel trends are confirmed. As a result, we are vulnerable to demand and pricing shifts and to suboptimal selection and timing of merchandise purchases. In the normal course of business, we incur inventory valuation adjustments, which impacts our gross margin. Moreover, our inventory investments will fluctuate with the needs of our business. For example, entering new categories will require additional investments in inventory. Shifts in inventory levels may result in fluctuations in the percentage of full price sales, levels of markdowns, merchandise mix, as well as gross margin.

Current wording

We leverage our platform and technology to buy and manage our inventory, including merchandise assortment and fulfillment center optimization. We utilize a data-driven “read and react” buying process to merchandise and curate the latest on-trend fashion. We generally make shallow initial inventory buys and then use our proprietary technology tools to identify and re-order best sellers, taking into account customer feedback across a variety of key metrics, which allows us to manage inventory and fashion risk. To ensure sufficient availability of merchandise, we generally purchase inventory in advance and frequently before apparel trends are confirmed. As a result, we are vulnerable to demand and pricing shifts and to suboptimal selection and timing of merchandise purchases. In the normal course of business, we incur inventory valuation adjustments, which impacts our gross margin. Moreover, our inventory investments will fluctuate with the needs of our business. For example, entering new categories will require additional investments in inventory. In addition, increased tariffs and global trade instability could also negatively impact customer demand, our supply chain and cost to source from China and other countries, which in turn could adversely impact our ability to manage our inventory at appropriate levels. Shifts in inventory levels may result in fluctuations in the percentage of full price sales, levels of markdowns, merchandise mix, as well as gross margin.

Previous 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.

Current wording

The REVOLVE segment contributes to a majority of our net sales, representing 85.7% and 84.9% of our net sales for the three months ended March 31, 2025 and 2024, respectively. During the three months ended March 31, 2025 and 2024, REVOLVE generated $254.4 million and $229.6 million in net sales, respectively, representing an increase of 10.8%. The net sales increase in the three months ended March 31, 2025, as compared to the same period in 2024, was primarily due to a lower proportion of returned purchases and an increase in the number of orders shipped.

Previous 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.

Current wording

The FWRD segment contributes to a smaller portion of our overall net sales, representing 14.3% and 15.1% of our net sales for the three months ended March 31, 2025 and 2024, respectively. During the three months ended March 31, 2025 and 2024, FWRD generated $42.4 million and $41.0 million in net sales, respectively, representing an increase of 3.3%. The net sales increase in the three months ended March 31, 2025, as compared to the same period in 2024, was primarily due to a lower proportion of returned purchases and an increase in the number of orders shipped, partially offset by a decrease in average order value.

Previous wording

Net sales to customers in the United States contributed to 78.6% and 80.4% of our net sales for the three months ended September 30, 2024 and 2023, respectively, and 79.7% and 81.0% 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 in the United States were $222.7 million and $207.2 million, respectively, representing an increase of 7.5%. During the nine months ended September 30, 2024 and 2023, net sales to customers in the United States were $666.8 million and $656.7 million, respectively, representing an increase of 1.5%.

Current wording

Net sales to customers in the United States contributed to 80.6% and 81.0% of our net sales for the three months ended March 31, 2025 and 2024, respectively. During the three months ended March 31, 2025 and 2024, net sales to customers in the United States were $239.2 million and $219.1 million, respectively, representing an increase of 9.2%.

Previous 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%.

Current wording

Net sales to customers outside of the United States contributed to 19.4% and 19.0% of our net sales for the three months ended March 31, 2025 and 2024, respectively. During the three months ended March 31, 2025 and 2024, net sales to customers outside of the United States were $57.5 million and $51.4 million, respectively, representing an increase of 11.7%.

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 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.

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 the section titled “—Overall Economic Trends.” 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. 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.

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. Prior to 2020, we experienced increased sales in the spring and summer months that had resulted in peak sales during the second quarter of each fiscal year and lower activity in the first quarter of each fiscal year. However, in recent years, our operating results have remained relatively consistent across all quarters. As such, we do not consider our business to be materially impacted by seasonal trends at this time. Our operating results are also impacted by macroeconomic conditions described in the section titled “—Overall Economic Trends.”

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, the amount of returned merchandise and average order value.

Current wording

Net sales consist primarily of sales of 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 proportion of returned merchandise and average order value. Net sales may be impacted by tariffs and other changes to trade policy, particularly in the near term. See the section titled “—Factors Affecting Our Performance—Overall Economic Trends.”

Previous wording

Cost of sales consists of our purchase price for merchandise sold to customers and includes import duties, net of drawback claims, and other taxes, inbound freight costs, receiving costs, defective merchandise returned from customers, inventory valuation adjustments, and other miscellaneous shrinkage. Cost of sales is primarily driven by the cost of the product, the number of total orders placed by customers, the mix of the product available for sale on our sites and transportation costs related to inventory receipts from our vendors. We expect our cost of sales to fluctuate as a percentage of net sales primarily due to how we manage our inventory and merchandise mix. We have recently experienced and may continue to experience an increase in the cost of goods due to an increase in the cost of materials.

Current wording

Cost of sales consists of our purchase price for merchandise sold to customers and includes import duties, net of drawback claims, and other taxes, inbound freight costs, receiving costs, defective merchandise returned from customers, inventory valuation adjustments, and other miscellaneous shrinkage. Cost of sales is primarily driven by the cost of the product, the number of total orders placed by customers, the mix of the product available for sale on our sites and transportation costs related to inventory receipts from our vendors. We expect our cost of sales to fluctuate as a percentage of net sales primarily due to how we manage our inventory and merchandise mix. We have recently experienced and may continue to experience an increase in the cost of goods due to an increase in the cost of materials. In the near-term, we expect cost of sales as a percentage of net sales to increase as a result of increased tariffs, particularly on products with a China origin.

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 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.

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, investments in international markets to offer hassle-free returns and efficiencies realized from optimized shipping methods.

Previous wording

Marketing expenses consist primarily of targeted online performance marketing costs, such as paid search/product listing ads, affiliate marketing, paid social, retargeting, search engine optimization, personalized email marketing and mobile “push” communications through our mobile applications. Marketing expenses also consist of investment in brand marketing channels, including events, payments to influencers and other forms of online and offline marketing. Marketing expenses are primarily related to growing and retaining our customer base and building the REVOLVE and FWRD brands. Over the long term, we expect marketing expenses to increase in absolute dollars as we continue to scale our business, and may fluctuate as a percentage of sales depending on net sales volume, the level of marketing investment in a particular period and the competitive environment. We may make opportunistic investments in marketing initiatives that may 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.

Current wording

Marketing expenses consist primarily of targeted online performance marketing costs, such as paid search/product listing ads, affiliate marketing, paid social, retargeting, search engine optimization, personalized email and SMS marketing, and mobile “push” communications through our mobile applications. Marketing expenses also consist of investment in brand marketing channels, including events, payments to influencers and other forms of online and offline marketing. Marketing expenses are primarily related to growing and retaining our customer base and building the REVOLVE and FWRD brands. Over the long term, we expect marketing expenses to increase in absolute dollars as we continue to scale our business, and may fluctuate as a percentage of sales depending on net sales volume, the level of marketing investment in a particular period and the competitive environment. We may make opportunistic investments in marketing initiatives that may 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.

Previous wording

General and administrative expenses consist primarily of payroll and related benefit costs and equity-based compensation expense for our employees involved in general corporate functions, as well as costs associated with the use by these functions of facilities and equipment, such as depreciation, rent and other occupancy expenses. Over the long-term, we expect general and administrative expenses to continue to increase in absolute dollars to support business growth with general and administrative expenses as a percentage of net sales declining over the long-term as we leverage our investments and as our business scales.

Current wording

General and administrative expenses consist primarily of payroll and related benefit costs and equity-based compensation expense for our employees involved in general corporate functions, as well as costs associated with the use by these functions of facilities and equipment, such as depreciation, rent and other occupancy expenses. Over the long-term, we expect general and administrative expenses to continue to increase in absolute dollars to support business growth with general and administrative expenses as a percentage of net sales declining over the long-term as we leverage our investments and as our business scales. General and administrative expenses as a percentage of net sales may also increase if we are unable to adjust our cost structure for changes in customer demand and net sales.

Previous 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.

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 three months ended March 31, 2024, other income, net also includes $2.8 million of insurance proceeds related to a settled legal matter.

Previous 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.

Current wording

The increase in net sales for the three months ended March 31, 2025, as compared to the same period in 2024, was primarily due to a lower proportion of returned purchases combined with a 3.8% increase in the number of orders shipped, partially offset by a 1.3% decrease in the average order value.

Previous 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.

Current wording

Net sales in the REVOLVE segment increased 10.8% to $254.4 million in the three months ended March 31, 2025 compared to net sales of $229.6 million in the same period in 2024. Net sales in the FWRD segment increased 3.3% to $42.4 million in the three months ended March 31, 2025 as compared to net sales of $41.0 million in the same period in 2024.

Previous 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.

Current wording

The increase in cost of sales for the three months ended March 31, 2025, as compared to the same period in 2024, 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 a lower percentage of full price sales and deeper markdowns on markdown sales, partially offset by a lower mix of third-party brand sales. Third-party brand sales generally carry lower gross margins than that of owned brand sales.

Previous wording

Fulfillment expenses for the three months ended September 30, 2024 were relatively flat as compared to the same period in 2023. The decrease in fulfillment expenses as a percentage of net sales was primarily due to a lower proportion of returned purchases and an increase in average order value.

Current wording

Fulfillment expenses for the three months ended March 31, 2025 were relatively flat as compared to the same period in 2024. The decrease in fulfillment expenses as a percentage of net sales was primarily due to a lower proportion of returned purchases.

Previous 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.

Current wording

The increase in selling and distribution expenses for the three months ended March 31, 2025, as compared to the same period in 2024, was due to a $0.6 million increase in merchant processing fees, a $0.5 million increase in customer service expenses and a $0.4 million increase in other shipping expenses. The decrease in selling and distribution expenses as a percentage of net sales was primarily due to lower shipping rates and a lower proportion of returned purchases as compared to the same period in the prior year, partially offset by a decrease in average order value.

Previous 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.

Current wording

The increase in marketing expenses for the three months ended March 31, 2025, as compared to the same period in 2024, was due to a $4.4 million increase in performance marketing expense, partially offset by a $3.3 million decrease in brand marketing expense. The decrease in marketing expenses as a percentage of net sales was primarily due to efficiencies in our brand marketing investments.

Previous 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.

Current wording

The increase in general and administrative expenses for the three months ended March 31, 2025, as compared to the same period in 2024, was primarily due to a $1.8 million increase related to professional services and other occupancy costs, a $1.6 million increase in salaries and related benefits, a $0.2 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.

Previous 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.

Current wording

The increase in the effective tax rate for the three months ended March 31, 2025, as compared to the same period in 2024, was primarily due to an increase in valuation allowance against deferred income tax assets, partially offset by an increase in excess tax benefits related to the exercise of non-qualified stock options.

Previous 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.

Current wording

For the three months ended March 31, 2025, we generated $45.1 million of operating cash flow as compared to $38.4 million for the same period in 2024. The increase in our operating cash flow was primarily due to favorable impact from changes in working capital and 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 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.

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 and purchases of rental product. 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

Our financing activities primarily consist of repurchases of our Class A common stock, proceeds from the exercise of stock options and borrowings and repayments related to the existing line of credit, when applicable.

Current wording

Our financing activities primarily consist of repurchases of our Class A common stock, proceeds from the exercise of stock options, tax withholdings on share-based payment awards and borrowings and repayments related to the existing line of credit, when applicable.

Previous 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.

Current wording

Net cash used in financing activities was $0.5 million for the three months ended March 31, 2025, and was primarily attributable to tax withholdings on share-based payment awards, partially offset by proceeds from the exercise of stock options. 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.