[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The company's financial statements show significant asset growth post-IPO, increased sales, and a net loss to common stockholders due to a one-time stock repurchase [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) The balance sheet reflects substantial growth in assets and equity following the company's IPO - Total assets increased from **$162.1 million** to **$215.6 million**, driven by a cash increase to **$44.8 million** post-IPO[10](index=10&type=chunk) - Total liabilities grew from **$82.3 million** to **$104.3 million**, reflecting business expansion[10](index=10&type=chunk) - Stockholders' equity increased from **$79.8 million** to **$111.3 million** following the IPO and corporate conversion[10](index=10&type=chunk) Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2018 | June 30, 2019 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $16,369 | $44,845 | | Inventory | $102,220 | $102,533 | | Total current assets | $139,153 | $182,267 | | Total assets | $162,074 | $215,564 | | **Liabilities & Equity** | | | | Total current liabilities | $82,256 | $104,301 | | Total members'/stockholders' equity | $79,818 | $111,263 | | Total liabilities and members'/stockholders' equity | $162,074 | $215,564 | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) The income statement shows higher net sales and operating income but a net loss for common stockholders due to a large stock repurchase - Net income increased to **$12.7 million** for Q2 2019 from $10.5 million in Q2 2018; however, a **$40.8 million** stock repurchase led to a net loss attributable to common stockholders of **$28.1 million**[12](index=12&type=chunk) Key Income Statement Data (in thousands, except per share data) | Metric | Q2 2018 | Q2 2019 | H1 2018 | H1 2019 | | :--- | :--- | :--- | :--- | :--- | | Net sales | $131,802 | $161,897 | $245,107 | $299,240 | | Gross profit | $73,332 | $90,418 | $129,765 | $161,172 | | Income from operations | $14,094 | $17,728 | $21,599 | $24,629 | | Net income | $10,467 | $12,741 | $15,799 | $17,703 | | Net income (loss) attributable to common stockholders | $10,467 | $(28,075) | $15,846 | $(23,113) | | Diluted EPS | $0.15 | $(0.57) | $0.23 | $(0.51) | [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Cash flows reflect strong operating performance, increased investment in assets, and significant financing activity from the IPO and stock repurchase - Net cash from operating activities was **$22.7 million** for H1 2019, a slight decrease from the prior year due to working capital changes[18](index=18&type=chunk) - Net cash used in investing activities increased significantly to **$9.8 million** from $1.1 million, driven by property and equipment purchases[18](index=18&type=chunk) - Net cash from financing activities was **$15.5 million**, primarily from **$57.1 million** in IPO proceeds offset by a **$40.8 million** stock repurchase[18](index=18&type=chunk) [Notes to the Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20the%20Condensed%20Consolidated%20Financial%20Statements) The notes detail the company's IPO, corporate conversion, adoption of ASC 606, and segment performance - The company completed its IPO in June 2019, raising approximately **$53.3 million** in net proceeds after costs and a share repurchase[32](index=32&type=chunk)[33](index=33&type=chunk) - **$40.8 million** of IPO proceeds were used to repurchase 2,400,960 shares of Class B common stock[32](index=32&type=chunk) - The adoption of revenue standard ASC 606 on January 1, 2019, resulted in a net increase of **$0.3 million** to beginning retained earnings[40](index=40&type=chunk) Segment Net Sales (in thousands) | Segment | Q2 2018 | Q2 2019 | H1 2018 | H1 2019 | | :--- | :--- | :--- | :--- | :--- | | REVOLVE | $116,102 | $143,944 | $213,115 | $266,595 | | FORWARD | $15,700 | $17,953 | $31,992 | $32,645 | | **Total** | **$131,802** | **$161,897** | **$245,107** | **$299,240** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=20&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes sales growth to customer and order increases, while noting improved gross margins and higher operating expenses from expansion - The increase in net sales was primarily driven by a **36.2%** increase in active customers and a **30.8%** increase in orders placed[138](index=138&type=chunk) - Fulfillment expenses increased **62.5%** year-over-year for the quarter, attributed to higher unit volume and fulfillment center expansion[141](index=141&type=chunk) - The company's liquidity was strong with **$44.8 million** in cash and no debt outstanding on its **$75.0 million** line of credit as of June 30, 2019[156](index=156&type=chunk)[160](index=160&type=chunk) Key Operating Metrics | Metric | Q2 2018 | Q2 2019 | | :--- | :--- | :--- | | Active customers (thousands) | 998 | 1,359 | | Total orders placed (thousands) | 989 | 1,294 | | Average order value | $281 | $275 | Q2 2019 vs Q2 2018 Performance (in thousands) | Metric | Q2 2018 | Q2 2019 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Net Sales | $131,802 | $161,897 | $30,095 | 22.8% | | Gross Profit | $73,332 | $90,418 | $17,086 | 23.3% | | Income from Operations | $14,094 | $17,728 | $3,634 | 25.8% | [Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to market risks from foreign currency, interest rates, and inflation, though current impact is not material - The company's primary market risks include foreign currency fluctuations, interest rate changes, and inflation[178](index=178&type=chunk) - Foreign currency risk is limited as most sales are in U.S. dollars, but some operating expenses are subject to exchange rate fluctuations[180](index=180&type=chunk) - Interest rate risk is considered low due to short-term cash equivalents and no outstanding floating-rate debt[179](index=179&type=chunk) [Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of the end of the quarter - Management concluded that as of June 30, 2019, the company's disclosure controls and procedures were effective[183](index=183&type=chunk) - No material changes in internal control over financial reporting occurred during the quarter[184](index=184&type=chunk) [PART II. OTHER INFORMATION](index=37&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently a party to any material legal proceedings but may be involved in ordinary course matters in the future - The company is not currently party to any material legal proceedings[187](index=187&type=chunk) - The company may become involved in various legal proceedings arising from the ordinary course of business in the future[187](index=187&type=chunk) [Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks related to business growth, competition, supply chain dependencies, cybersecurity, and its dual-class stock structure - Key business risks include managing growth, anticipating fashion trends, and maintaining its community of brands, customers, and influencers[189](index=189&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk) - The company is vulnerable to cybersecurity attacks and must comply with complex data privacy regulations like **GDPR** and **CCPA**[251](index=251&type=chunk)[256](index=256&type=chunk) - A significant portion of manufacturing in China exposes the company to risks from trade tariffs, rising labor costs, and political instability[303](index=303&type=chunk)[307](index=307&type=chunk) - The **dual-class stock structure** concentrates approximately **98%** of voting power with pre-IPO stockholders, limiting the influence of Class A stockholders[326](index=326&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=69&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details Q2 stock option grants and the use of IPO proceeds for a significant Class B common stock repurchase - In Q2 2019, the company granted stock options to purchase **67,232 shares** of Class B common stock to employees[350](index=350&type=chunk) - The IPO generated net proceeds of approximately **$53.3 million** after expenses[351](index=351&type=chunk) - The company used **$40.8 million** of the net IPO proceeds to repurchase 2,400,960 shares of Class B common stock[351](index=351&type=chunk) [Other Information](index=70&type=section&id=Item%205.%20Other%20Information) The board granted Restricted Stock Units to a non-employee director in lieu of a 2019 annual meeting award - The board granted RSUs valued at **$100,000** to non-employee director Marc Stolzman on August 13, 2019[356](index=356&type=chunk) - This grant was made in place of a typical annual meeting grant, as no annual meeting will be held in 2019 following the IPO[356](index=356&type=chunk) [Exhibits](index=71&type=section&id=Item%206.%20Exhibits) This section provides an index of exhibits filed with the Form 10-Q, including key corporate and governance documents - The Exhibit Index lists key corporate documents, including the Certificate of Incorporation, Bylaws, and forms of various agreements and plans[359](index=359&type=chunk) - Certifications by the Principal Executive Officer and Principal Financial Officer pursuant to the Sarbanes-Oxley Act are included as exhibits[359](index=359&type=chunk)