Revolve(US:RVLV)2022-08-03 21:01Financial Performance - Gross margin for Q2 2022 was 55.9%, compared to 55.6% in Q2 2021, and 55.2% for the first half of 2022, up from 54.9% in the same period of 2021[90]. - Adjusted EBITDA for Q2 2022 was $26.878 million, down from $35.403 million in Q2 2021, while for the first half of 2022, it was $58.421 million compared to $58.743 million in the first half of 2021[90]. - Net income for the three months ended June 30, 2022, was $16,273,000, a decrease of 48.3% compared to $31,538,000 in the same period of 2021[100]. - Adjusted EBITDA for the six months ended June 30, 2022, was $58,421,000, slightly down from $58,743,000 in the same period of 2021[100]. - Free cash flow for the three months ended June 30, 2022, was $(30,798,000), compared to $32,830,000 in the same period of 2021[105]. - Total net sales for the three months ended June 30, 2022, were $290.1 million, a 26.9% increase from $228.6 million in the same period in 2021[144]. - Net sales for the six months ended June 30, 2022, increased by $166.0 million (40.7%) to $573.6 million, driven by a 44.2% increase in the number of orders and a 16.1% increase in average order value[154]. Customer Metrics - Active customers reached 2.165 million in Q2 2022, an increase from 1.554 million in Q2 2021[90]. - Active customers increased during the period ended June 30, 2022, compared to the same period in 2021, driven by sales and marketing efforts and easing of restrictions[107]. - Total orders placed in Q2 2022 were 2.243 million, up from 1.769 million in Q2 2021, and 4.399 million for the first half of 2022 compared to 3.051 million in the same period of 2021[90]. - Average order value increased to $303 in Q2 2022 from $255 in Q2 2021, and $296 in the first half of 2022 compared to $255 in the same period of 2021[90]. - Average order value increased by 18.8% for the three months ended June 30, 2022, compared to the same period in 2021[145]. Operational Challenges - The impact of COVID-19 continues to create uncertainty, affecting demand and operational results, with potential supply chain disruptions and changes in consumer behavior[84]. - Inventory levels increased significantly in the second quarter of 2022 due to a downturn in consumer demand, impacting operating results[124]. - Rising inflation has impacted the company, leading to increased costs in merchandise, labor, and shipping[179]. Marketing and Sales Strategy - The company focuses on increasing the percentage of net sales from owned brands, which typically have higher gross margins compared to third-party brands[92]. - The company has invested in technology and data analytics to optimize inventory management and enhance customer experience[79]. - The company plans to continue hosting in-person events to enhance customer engagement and brand awareness[119]. Segment Performance - REVOLVE segment net sales increased by 29.6% to $244.7 million for the three months ended June 30, 2022, compared to $188.8 million in the same period in 2021[127]. - FWRD segment net sales increased by 13.8% to $45.3 million for the three months ended June 30, 2022, compared to $39.8 million in the same period in 2021[128]. - The REVOLVE segment's net sales increased by 41.5% to $482.5 million for the six months ended June 30, 2022, while the FWRD segment's net sales rose by 36.8% to $91.1 million[155]. Financial Position and Cash Flow - As of June 30, 2022, cash and cash equivalents were $237.9 million, up from $218.5 million at the end of 2021, with working capital increasing to $318.2 million from $279.6 million[163]. - The company believes that existing cash and cash equivalents, along with cash flows from operations, will be sufficient to meet anticipated cash needs for at least the next 12 months[164]. - The company amended its credit agreement to extend the expiration date to March 23, 2026, with a line of credit providing up to $75.0 million in borrowings[167]. - As of June 30, 2022, the company had no outstanding borrowings under the credit agreement[167]. - For the six months ended June 30, 2022, the company generated $24.4 million in operating cash flow, a decrease of 63.3% compared to $66.6 million for the same period in 2021[172]. - Net cash used in investing activities was $2.5 million for the six months ended June 30, 2022, compared to $1.3 million in 2021[175]. - Net cash provided by financing activities was $0.4 million for the six months ended June 30, 2022, a significant decrease from $8.2 million in 2021[176]. - The company is currently in compliance with all financial covenants as of June 30, 2022[168]. Cost Structure - Total operating expenses for the three months ended June 30, 2022, were $143.0 million, representing 49.2% of net sales, compared to 41.3% in the same period in 2021[143]. - Fulfillment expenses increased to 2.7% of net sales for the three months ended June 30, 2022, compared to 2.3% in the same period in 2021[143]. - Marketing expenses increased to 17.9% of net sales for the three months ended June 30, 2022, compared to 15.3% in the same period in 2021[143]. - Selling and distribution expenses increased by $19.8 million (61.7%) to $52.0 million for the three months ended June 30, 2022, with these expenses as a percentage of net sales rising to 17.9% from 14.1%[149]. - Cost of sales increased by $26.4 million (26.1%) to $127.8 million compared to $101.4 million in the same period of 2021, with cost of sales as a percentage of net sales decreasing slightly to 44.1% from 44.4%[147].