Revolve(RVLV)2021-11-04 12:31Financial Performance - Gross margin for Q3 2021 was 55.1%, slightly down from 55.3% in Q3 2020, while the nine-month gross margin was 55.0%, up from 51.5% in the same period last year[100]. - Adjusted EBITDA for Q3 2021 was $21.666 million, down from $24.025 million in Q3 2020, with a nine-month total of $80.409 million compared to $50.511 million in the previous year[100]. - Free cash flow for the three months ended September 30, 2021, was $1,340,000, down from $13,877,000 in the same period of 2020, indicating a significant decline of 90.3%[115]. - Net income for the three months ended September 30, 2021, was $16.7 million, down from $19.4 million in the same period in 2020, with an effective tax rate increase to 13.9% from 9.8%[160]. - For the nine months ended September 30, 2021, net sales increased by 48.1% to $651.6 million, driven by a 40.4% increase in orders and a 13.4% increase in average order value[161]. Customer Metrics - Active customers increased to 1.678 million in Q3 2021, up from 1.504 million in Q3 2020, while total orders placed rose to 1.830 million from 1.141 million year-over-year[100]. - Active customers increased during the period ended September 30, 2021, compared to the same period in 2020, driven by increased demand due to easing restrictions and government stimulus payments[118]. - Total orders placed increased in the three and nine months ended September 30, 2021, relative to the same periods in 2020, attributed to heightened demand from easing restrictions and stimulus payments[120]. Sales and Revenue - Net sales for the three months ended September 30, 2021, increased by 61.6% to $244.1 million compared to $151.0 million in the same period in 2020, driven by a 60.4% increase in the number of orders and a 19.0% increase in average order value[152]. - REVOLVE segment net sales increased by 56.4% to $204.2 million for the three months ended September 30, 2021, compared to $130.6 million in the same period of 2020[137]. - FWRD segment net sales increased by 94.8% to $39.9 million for the three months ended September 30, 2021, compared to $20.5 million in the same period of 2020[138]. - Net sales to customers outside of the United States increased by 49.0% to $45.6 million for the three months ended September 30, 2021, compared to $30.6 million in the same period of 2020[139]. Marketing and Expenses - The company plans to increase marketing investments to capture consumer demand as economies reopen, which may lead to higher marketing costs as a percentage of net sales[129]. - Marketing expenses increased by 148.4% to $47.0 million, representing 19.2% of net sales, driven by higher investments in customer acquisition and brand marketing initiatives[157]. - Selling and distribution expenses surged by 83.8% to $38.4 million, accounting for 15.7% of net sales, attributed to increased shipping and handling fees and a higher return rate[156]. - General and administrative expenses are expected to increase in the near term as the company plans to invest in its team to support future growth[147]. Inventory and Fulfillment - The company reduced inventory receipts significantly in 2020 due to COVID-19, impacting sales demand, but has since increased inventory purchases to meet recovering demand[134]. - The company expects fulfillment expenses to fluctuate in the short term due to increased return rates and input cost pressures[143]. - Fulfillment expenses for the three months ended September 30, 2021, were $5.8 million, a 38.9% increase, but decreased as a percentage of net sales to 2.4% from 2.8% in 2020 due to automation efficiencies[155]. Economic Impact and Future Outlook - The COVID-19 pandemic initially caused a significant decline in net sales starting in March 2020, but sales returned to growth in 2021 due to easing restrictions and government stimulus[94]. - The overall economic environment and consumer behavior significantly impact the company's business, with macroeconomic factors influencing customer spending patterns[125]. - The COVID-19 pandemic continues to pose risks to net sales and gross margins, with unpredictable long-term impacts[137]. - The company plans to use existing cash and cash equivalents to meet anticipated cash needs for at least the next 12 months, although liquidity assumptions may prove incorrect[172][175].