Revolve(RVLV) - 2024 Q3 - Quarterly Results

Revolve Group Third Quarter 2024 Financial Results Third Quarter 2024 Financial & Operational Highlights Revolve Group achieved strong Q3 2024 results with a 10% net sales increase to $283.1 million and a 238% rise in net income, driven by improved operational efficiency and strategic investments Q3 2024 Financial Summary (vs. Q3 2023) | Financial Metric | Q3 2024 | Q3 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Net sales | $283.1 million | $257.6 million | 10% | | Gross profit | $144.9 million | $133.2 million | 9% | | Gross margin | 51.2% | 51.7% | -50 bps | | Net income | $10.8 million | $3.2 million | 238% | | Adjusted EBITDA | $17.5 million | $9.5 million | 85% | | Free Cash Flow | $6.2 million | $11.5 million | (46%) | Q3 2024 Operational Metrics (vs. Q3 2023) | Operational Metric | Q3 2024 | Q3 2023 | YoY Change | | :--- | :--- | :--- | :--- | | Active customers (TTM) | 2,628,000 | 2,510,000 | 5% | | Total orders placed | 2,200,000 | 2,133,000 | 3% | | Average order value | $303 | $299 | 1% | - Increased profitability was driven by improved efficiency in logistics costs, a lower return rate, and more efficient marketing spend year-over-year[4] - The company is continuing to invest in long-term growth initiatives, including international expansion, leveraging AI for merchandising and marketing, expanding into physical retail, and broadening owned brand capabilities[4] Detailed Financial Analysis Q3 2024 net sales grew 10% to $283.1 million, driven by REVOLVE and international sales, with improved operational leverage despite a slight gross margin decline - Gross margin decreased to 51.2% from 51.7% YoY, primarily due to deeper markdowns, a higher mix of third-party brand sales, increased inventory valuation adjustments, and higher inbound shipping rates[5] Operating Expenses as a Percentage of Net Sales | Expense Category | Q3 2024 (% of Net Sales) | Q3 2023 (% of Net Sales) | | :--- | :--- | :--- | | Fulfillment costs | 3.3% | 3.6% | | Selling and distribution costs | 16.9% | 19.0% | | Marketing costs | 14.0% | 15.4% | Net Sales Breakdown (YoY) | Category | Q3 2024 Net Sales | YoY Change | | :--- | :--- | :--- | | By Segment | | | | REVOLVE | $243.4 million | +12% | | FWRD | $39.7 million | Flat | | By Geography | | | | Domestic | $222.7 million | +7% | | International | $60.5 million | +20% | Cash Flow and Balance Sheet As of September 30, 2024, Revolve Group maintained a debt-free balance sheet with $252.8 million in cash, while inventory increased and stock repurchases continued - The company's balance sheet remains debt-free as of September 30, 2024[7] Key Balance Sheet and Cash Flow Items | Metric | As of Sep 30, 2024 | YoY Change | | :--- | :--- | :--- | | Cash and cash equivalents | $252.8 million | -5.3% | | Inventory | $240.0 million | +18% | | For Q3 2024 | | | | Net cash from operating activities | $9.1 million | -28% | | Free cash flow | $6.2 million | -46% | - The company repurchased 118,193 shares for $1.9 million in Q3 2024. $57.6 million remains available under the $100 million stock repurchase program[7] 2024 Business Outlook Revolve Group observed sequential sales improvement in October 2024 and updated its full-year 2024 guidance, adjusting gross margin while improving expense outlooks - Post-quarter performance shows continued momentum, with net sales in October 2024 increasing by a low-double-digit percentage year-over-year[8] Updated Full Year 2024 Outlook | Metric (% of net sales) | Updated FY 2024 Outlook | Prior FY 2024 Outlook | | :--- | :--- | :--- | | Gross margin | 52.2% | 52.5% to 53.0% | | Fulfillment expenses | 3.3% | 3.3% to 3.5% | | Selling and distribution | 17.5% | 17.8% to 18.0% | | Marketing expenses | 15.1% | 15.3% to 15.5% | Fourth Quarter 2024 Outlook | Metric | Q4 2024 Outlook | | :--- | :--- | | Gross margin | 51.2% to 51.5% | | Fulfillment expenses | 3.4% of net sales | | Selling and distribution | 17.3% of net sales | | Marketing expenses | 15.9% of net sales | | General and administrative | $35.6 million | Appendix: Financial Statements and Reconciliations Condensed Consolidated Financial Statements This section presents Revolve Group's unaudited condensed consolidated financial statements, including Statements of Operations, Balance Sheets, and Cash Flows, for periods ended September 30, 2024 Statements of Operations Condensed Consolidated Statements of Operations (in thousands) | Line Item | Three Months Ended Sep 30, 2024 (in thousands) | Three Months Ended Sep 30, 2023 (in thousands) | Nine Months Ended Sep 30, 2024 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | | :--- | :--- | :--- | :--- | :--- | | Net sales | $283,146 | $257,603 | $836,183 | $810,941 | | Gross profit | $144,867 | $133,232 | $438,975 | $420,150 | | Income from operations | $14,253 | $324 | $40,016 | $19,935 | | Net income | $10,751 | $3,178 | $37,001 | $24,653 | | Diluted EPS | $0.15 | $0.04 | $0.52 | $0.33 | Balance Sheets Condensed Consolidated Balance Sheets (in thousands) | Line Item | Sep 30, 2024 (in thousands) | Dec 31, 2023 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $252,841 | $245,449 | | Inventory | $240,040 | $203,587 | | Total current assets | $584,995 | $528,589 | | Total assets | $670,933 | $608,886 | | Liabilities & Equity | | | | Total current liabilities | $215,957 | $189,620 | | Total liabilities | $250,122 | $223,746 | | Total stockholders' equity | $420,811 | $385,140 | | Total liabilities and equity | $670,933 | $608,886 | Statements of Cash Flows Condensed Consolidated Statements of Cash Flows (in thousands) | Line Item | Nine Months Ended Sep 30, 2024 (in thousands) | Nine Months Ended Sep 30, 2023 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $22,774 | $47,218 | | Net cash used in investing activities | ($7,027) | ($3,114) | | Net cash used in financing activities | ($10,986) | ($12,098) | | Net increase in cash and cash equivalents | $7,392 | $32,175 | | Cash and cash equivalents, end of period | $252,841 | $266,899 | Segment and Geographic Information This section details net sales and gross profit by REVOLVE and FWRD segments, alongside a geographic breakdown of net sales for periods ended September 30, 2024 Net Sales and Gross Profit by Segment (Q3 2024, in thousands) | Segment | Net Sales (in thousands) | Gross Profit (in thousands) | | :--- | :--- | :--- | | REVOLVE | $243,421 | $131,476 | | FWRD | $39,725 | $13,391 | | Total | $283,146 | $144,867 | Net Sales by Geographic Area (Q3 2024, in thousands) | Geography | Net Sales (in thousands) | | :--- | :--- | | United States | $222,650 | | Rest of the world | $60,496 | | Total | $283,146 | Non-GAAP Reconciliations and Definitions This section defines and reconciles non-GAAP measures, Adjusted EBITDA and free cash flow, to their GAAP equivalents, providing insights into operating performance - Adjusted EBITDA is defined as net income adjusted for other income/expense, taxes, D&A, equity-based compensation, and other non-routine items[18] - Free cash flow is defined as net cash provided by operating activities less purchases of property and equipment and rental product[19] Reconciliation of Net Income to Adjusted EBITDA (Q3 2024, in thousands) | Line Item | Amount (in thousands) | | :--- | :--- | | Net income | $10,751 | | Other income, net | ($192) | | Provision for income taxes | $3,694 | | Depreciation and amortization | $983 | | Equity-based compensation | $2,098 | | Transaction costs | $169 | | Adjusted EBITDA | $17,503 | Reconciliation of Operating Cash Flow to Free Cash Flow (Q3 2024, in thousands) | Line Item | Amount (in thousands) | | :--- | :--- | | Net cash provided by operating activities | $9,052 | | Purchases of property and equipment | ($1,037) | | Purchases of rental product | ($1,844) | | Free cash flow | $6,171 |