Revolve(US:RVLV)2020-11-12 21:31Financial Performance - Gross margin for Q3 2020 was 55.3%, an increase from 53.6% in Q3 2019[107] - Adjusted EBITDA for Q3 2020 was $24.025 million, compared to $14.438 million in Q3 2019, reflecting a significant year-over-year increase[107] - Free cash flow for Q3 2020 was $13.877 million, up from $7.448 million in Q3 2019[107] - Net sales for the three months ended September 30, 2020, decreased by 2.0% to $151.036 million compared to $154.197 million in the same period in 2019[159] - For the nine months ended September 30, 2020, net sales decreased by 3.0% to $439.895 million compared to $453.437 million in 2019[169] - Net income for the three months ended September 30, 2020, increased to $19.438 million, compared to $9.559 million in the same period in 2019[168] Customer Metrics - Active customers reached 1.504 million in Q3 2020, an increase from 1.438 million in Q3 2019[107] - Active customers decreased sequentially in the third quarter of 2020 compared to the second quarter of 2020 due to a decline in new customers[123] - Existing customers account for a greater share of active customers over time, emphasizing the importance of customer retention[136] Sales and Orders - Total orders placed in Q3 2020 were 1,141, slightly down from 1,194 in Q3 2019[107] - Total orders placed decreased in the three and nine months ended September 30, 2020 compared to the same periods in 2019, attributed to reduced demand from the COVID-19 pandemic[125] - Average order value decreased to $232 in Q3 2020 from $275 in Q3 2019[107] - The average order value decreased to $232 from $275, and the number of orders placed by customers decreased by 4.4%[159] Impact of COVID-19 - The COVID-19 pandemic has negatively impacted net sales, with significant declines starting in mid-March 2020[99] - The company implemented cost-cutting measures in response to the pandemic, including reducing payroll costs and deferring non-essential capital expenditures[99] - The contribution of owned brands to net sales is expected to be adversely affected for at least the remainder of 2020 due to work restrictions impacting design and development[113] - The company experienced a decline in discretionary consumer spending for apparel merchandise due to the pandemic's impact on disposable income and consumer confidence[131] - The overall economic environment and changes in consumer behavior significantly impact the company's business operations and results[130] Cost Management - The company is focused on preserving liquidity and managing cash flow while adjusting its cost structure to align with top-line demand[130] - The company has reduced capital expenditures in response to the COVID-19 pandemic, impacting long-term growth strategies[141] - Marketing expenses have been reduced due to the impact of COVID-19, but the company plans to return to historical investment levels in the near future[153] - General and administrative expenses were reduced during the pandemic but are expected to increase as a percentage of net sales if restrictions are reimposed[154] Inventory and Merchandise - Inventory purchases were sequentially increased in response to improving consumer demand trends during the second and third quarters of 2020[101] - Inventory management strategies include shallow initial buys and data-driven re-ordering to mitigate fashion risk[140] - The merchandise mix shift due to COVID-19 is expected to adversely impact overall gross margin in the near term[138] Segment Performance - REVOLVE segment net sales decreased by 3.6% to $130.6 million for the three months ended September 30, 2020, compared to $135.4 million in the same period of 2019[143] - FORWARD segment net sales increased by 9.0% to $20.5 million for the three months ended September 30, 2020, compared to $18.8 million in the same period of 2019[144] - Net sales to customers outside the United States increased by 17.8% to $30.6 million for the three months ended September 30, 2020, compared to $26.0 million in the same period of 2019[146] Cash Flow and Liquidity - Net cash provided by operating activities increased to $76.2 million for the nine months ended September 30, 2020, compared to $31.8 million in 2019, primarily due to favorable changes in working capital and increased net income[188] - Cash and cash equivalents increased to $158.7 million as of September 30, 2020, compared to $65.4 million as of December 31, 2019[179] - Working capital increased to $142.9 million as of September 30, 2020, compared to $97.8 million as of December 31, 2019[179] - The company had $15.0 million outstanding on its line of credit as of September 30, 2020, with a weighted-average interest rate of 1.5%[183] Inflation and Economic Conditions - The company does not believe inflation has materially affected its business or financial condition[203] - The company continues to monitor inflation impacts to minimize effects through pricing strategies, productivity improvements, and cost reductions[203] - There is a risk that significant inflationary pressures could harm the company's financial condition and results of operations if costs cannot be offset by price increases[203]