Revolve(US:RVLV)2020-05-14 20:10Financial Performance - Gross margin decreased to 48.6% in Q1 2020 from 51.5% in Q1 2019[101] - Adjusted EBITDA for Q1 2020 was $5,609,000, down from $8,549,000 in Q1 2019[110] - Free cash flow decreased to $7,530,000 in Q1 2020 from $10,937,000 in Q1 2019[101] - Adjusted EBITDA was negatively impacted by lower gross margins and higher marketing costs as a percentage of net sales in Q1 2020[111] - Free cash flow for the three months ended March 31, 2020, was $7.53 million, down from $10.94 million in the same period in 2019, reflecting a decrease of 31.9%[112] - Net income for the three months ended March 31, 2020, was $4.156 million, compared to $4.962 million in the same period in 2019[147] - Operating cash flow for the three months ended March 31, 2020, was $8.1 million, a decrease of 49.3% compared to $15.9 million for the same period in 2019[166] Customer Metrics - Active customers increased to 1,528,000 in Q1 2020, up from 1,262,000 in Q1 2019[101] - Active customers are defined as unique customer accounts making at least one purchase in the preceding 12 months, serving as a key growth indicator for the company[113] - Total orders placed in Q1 2020 were 1,172,000, compared to 1,135,000 in Q1 2019[101] - Total orders placed decreased in growth rate for the three months ended March 31, 2020, compared to the same period in 2019, with expectations of further declines due to the COVID-19 pandemic[115] - The increase in net sales was primarily driven by a 3.3% increase in the number of orders placed by customers[149] Sales and Revenue - The REVOLVE segment generated $124.5 million in net sales for the three months ended March 31, 2020, a 1.5% increase from $122.7 million in 2019, primarily driven by an increase in orders placed[132] - The FORWARD segment saw a significant increase in net sales, reaching $21.6 million for the three months ended March 31, 2020, up 47.0% from $14.7 million in 2019[133] - Net sales to customers outside the United States contributed 17.6% of total net sales for the three months ended March 31, 2020, amounting to $25.7 million, an increase of 17.4% from $21.9 million in 2019[135] - Net sales for the three months ended March 31, 2020, increased by $8.732 million, or 6.4%, to $146.075 million compared to $137.343 million in the same period in 2019[148] Impact of COVID-19 - The COVID-19 pandemic led to a significant decline in net sales after a 20% year-over-year increase in January and February 2020[95] - The COVID-19 pandemic has materially impacted the company's operations, with expectations of continued adverse effects on net sales, earnings, and cash flows throughout 2020[119] - The company reduced executive salaries by over 99% to $1 and senior management salaries by 35% to 45% in response to the pandemic[96] - The company has incurred $30 million in revolver borrowings under its credit facility to manage liquidity during the COVID-19 pandemic[120] - The merchandise mix and inventory management strategies are expected to fluctuate due to changes in customer demand and the impact of COVID-19, affecting gross margins in the near term[129] Expenses and Costs - Cost of sales rose by $8.536 million, or 12.8%, to $75.125 million, with the cost of sales as a percentage of net sales increasing to 51.4% from 48.5%[151] - Gross profit for the three months ended March 31, 2020, was $70.950 million, representing 48.6% of net sales, down from 51.5% in the same period in 2019[147] - Fulfillment expenses remained relatively stable at $4.493 million, with a slight decrease in percentage of net sales to 3.1% from 3.3%[152] - Selling and distribution expenses increased by $1.188 million, or 5.8%, to $21.779 million, with the percentage of net sales slightly decreasing to 14.9%[153] - Marketing expenses rose by $2.452 million, or 12.6%, to $21.950 million, with the percentage of net sales increasing to 15.0% from 14.2%[154] - General and administrative expenses decreased by $0.395 million, or 2.0%, to $18.874 million, with the percentage of net sales declining to 12.9% from 14.0%[155] Cash and Liquidity - As of March 31, 2020, cash and cash equivalents increased to $103.6 million from $65.4 million as of December 31, 2019, representing a 58.2% increase[159] - The company drew down $30 million from its line of credit in March 2020 due to the uncertainty caused by the COVID-19 pandemic[159] - As of March 31, 2020, the company had $30 million outstanding on its line of credit, with a weighted-average interest rate of 2.3%[162] - The company believes existing cash and cash equivalents will be sufficient to meet anticipated cash needs for at least the next 12 months[161] - The company has raised a total of $68.3 million from the sale of equity units since inception, net of costs and expenses[160] - The company has no material off-balance sheet arrangements as of March 31, 2020[173] - The company is in compliance with all covenants under its credit agreement as of March 31, 2020[163] Infrastructure and Expansion - The logistics infrastructure supports free express shipping and returns, with a new centralized warehouse facility expected to support growth beyond 2023[93] - The company is gradually increasing investment in international expansion, focusing on Europe, Australia, Canada, and Asia Pacific[94]