Revolve Group Announces First Quarter 2024 Financial Results
Revolve Group, Inc. (NYSE: RVLV) reported financial results for Q1 2024, with significant gross margin expansion and year-over-year efficiency gains. Despite a 3% drop in net sales, the company saw a 2% increase in gross profit. However, net income decreased by 23%, and adjusted EBITDA also saw a 12% decline. Trailing 12-month active customers grew by 5%, while total orders placed decreased by 2%. The company repurchased $8.0 million worth of shares, with $61.4 million remaining in the stock repurchase program. Cash and cash equivalents increased by 11% to $273.4 million, and inventory rose by 6% to $201.8 million. The company provided guidance for the full year and Q2 2024, with positive outlooks for gross margin and expenses.
Significant expansion of gross margin and efficiency gains in variable logistics costs in Q1 2024.
Trailing 12-month active customers grew by 5% year-over-year.
Cash and cash equivalents increased by 11% to $273.4 million.
Positive outlook provided for gross margin and expenses for FY 2024 and Q2 2024.
3% decrease in net sales in Q1 2024.
23% decrease in net income year-over-year.
12% decline in adjusted EBITDA compared to the previous year.
Total orders placed decreased by 2% in Q1 2024.
Inventory increased by 6% to $201.8 million.
Insights
"We delivered significant expansion of our gross margin and year-over-year efficiency in our variable logistics costs in the first quarter of 2024, which contributed to strong profitability and cash flow generation that further strengthened our balance sheet," said co-founder and co-CEO Mike Karanikolas. "I am also encouraged that we returned to positive growth in net sales year-over-year during the final month of our first quarter of 2024 as well as during the first month of our second quarter of 2024."
"I am excited by our progress on key initiatives that further improves our foundation for profitable growth," said co-founder and co-CEO Michael Mente. "In recent months, we have delivered great progress on drivers of future growth and efficiency including product category expansion, elevating service levels in international markets, leveraging AI technology, further enhancing our digital merchandising, and efficiently investing in our brands to further strengthen our connection with the next-generation consumer."
First Quarter 2024 Financial Summary
Three Months Ended March 31, | ||||||||||
2024 | 2023 | YoY Change | ||||||||
(in thousands, except percentages) | ||||||||||
Net sales | $ | 270,581 | $ | 279,609 | (3 %) | |||||
Gross profit | $ | 141,502 | $ | 139,220 | 2 % | |||||
Gross margin | 52.3 | % | 49.8 | % | ||||||
Net income | $ | 10,873 | $ | 14,172 | (23 %) | |||||
Adjusted EBITDA (non-GAAP financial measure) | $ | 13,267 | $ | 15,010 | (12 %) | |||||
Net cash provided by operating activities | $ | 38,391 | $ | 48,829 | (21 %) | |||||
Free cash flow (non-GAAP financial measure) | $ | 36,656 | $ | 47,681 | (23 %) | |||||
Operational Metrics
Three Months Ended March 31, | ||||||||||
2024 | 2023 | YoY Change | ||||||||
(in thousands, except average order value and percentages) | ||||||||||
Active customers (trailing 12 months) | 2,551 | 2,424 | 5 % | |||||||
Total orders placed | 2,223 | 2,278 | (2 %) | |||||||
Average order value | $ | 299 | $ | 288 | 4 % | |||||
Additional First Quarter 2024 Metrics and Results Commentary
- Trailing 12-month Active customers grew to 2,551,000 as of March 31, 2024, an increase of
5% year-over-year. - Net sales were
$270.6 million 3% , which reflects increased net sales at full price in the first quarter of 2024 that were more than offset by lower net sales at a markdown year-over-year. - Gross profit was
$141.5 million 2% . - Gross margin was
52.3% , a year-over-year increase of 250 basis points that was driven by margin expansion in the REVOLVE segment. The increased gross margin primarily reflects a higher mix of net sales at full price in the first quarter of 2024 and lower inventory valuation adjustments as compared to the first quarter of 2023. - Net income was
$10.9 million 23% , and included an insurance recovery of$2.8 million $2.1 million - Adjusted EBITDA was
$13.3 million 12% that primarily reflects higher general and administrative expenses in the first quarter of 2024 and increased marketing investment due to a shift in the timing of brand marketing investments year-over-year, partially offset by increased gross profit and efficiencies in selling and distribution costs year-over-year. - Diluted earnings per share (EPS) was
$0.15 21% . EPS for the first quarter of 2024 included the insurance recovery mentioned above equivalent to approximately$0.03
Additional Net Sales Commentary
- REVOLVE segment net sales were
$229.6 million 1% . - FWRD segment net sales were
$41.0 million 15% . - Domestic net sales were
$219.1 million 3% . - International net sales were
$51.5 million 3% .
Cash Flow and Balance Sheet
- Net cash provided by operating activities was
$38.4 million $36.7 million 21% and23% , respectively, versus the first quarter of 2023, when our cash flow benefited meaningfully from favorable working capital movements including a large reduction in inventory during the prior-year period. - Stock repurchases were
$8.0 million $15.17 $61.4 million $100 million - Cash and cash equivalents: The strong cash flow generation has further strengthened our balance sheet and liquidity. Cash and cash equivalents as of March 31, 2024 were
$273.4 million $28.0 million 11% , from$245.4 million $38.6 million $100 million - Inventory as of March 31, 2024 was
$201.8 million $11.7 million 6% , from March 31, 2023.
Additional trend information regarding Revolve Group's first quarter of 2024 financial results and operating metrics is available in the Q1 2024 Financial Highlights presentation available on our investor relations website: https://investors.revolve.com/events-and-presentations/default.aspx
Results Since the End of the First Quarter of 2024
Net sales in April 2024 increased by a low single digit percentage year-over-year, a sequential improvement compared to the year-over-year trend reported for the first quarter of 2024.
2024 Business Outlook
Based on information available to us as of May 7, 2024, we are providing the following guidance for the full year ending December 31, 2024 and the second quarter ending June 30, 2024.
Updated FY 2024 Outlook | Prior FY 2024 Outlook | |
Gross margin | ||
Fulfillment expenses | ||
Selling and distribution expenses | ||
Marketing expenses | ||
General and administrative expenses | ||
Effective tax rate | ||
Second Quarter 2024 Outlook | ||
Gross margin | ||
Fulfillment expenses | ||
Selling and distribution expenses | ||
Marketing expenses | ||
General and administrative expenses |
Conference Call Information
Revolve Group management will host a call today at 4:30 pm ET / 1:30 pm PT to discuss today's results in more detail. To participate, please dial (888) 596-4144 within
Forward-Looking Statements
This press release contains ''forward-looking statements'' within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. All statements other than statements of historical or current fact included in this press release are forward-looking statements, including but not limited to statements regarding our outlook for the second quarter and full year of 2024. Forward-looking statements include statements containing words such as "expect," "anticipate," "believe," "project," "will" and similar expressions intended to identify forward-looking statements. These forward-looking statements are based on our current expectations. Forward-looking statements involve risks and uncertainties. Our actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of these risks and uncertainties, which include, without limitation, risks related to changing economic conditions and their impact on consumer demand and our business, operating results and financial condition; demand for our products; supply chain challenges; inflationary pressures; wars and conflicts in
Use of Non-GAAP Financial Measures and Other Operating Metrics
To supplement our condensed consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles in
The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and our non-GAAP measures may be different from non-GAAP measures used by other companies.
We use these non-GAAP financial measures to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses that may not be indicative of our ongoing core operating performance. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when analyzing historical performance and liquidity and when planning, forecasting, and analyzing future periods.
For a reconciliation of these non-GAAP financial measures to GAAP measures, please see the tables captioned "Reconciliation of Non-GAAP Financial Measures" included at the end of this release.
Definitions of our non-GAAP financial measures and other operating metrics are presented below.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that we calculate as net income before other (income) expense, net; taxes; and depreciation and amortization; adjusted to exclude the effects of equity-based compensation expense and certain non-routine items. Adjusted EBITDA is a key measure used by management to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. In particular, the exclusion of certain expenses in calculating Adjusted EBITDA facilitates operating performance comparisons on a period-to-period basis and, in the case of exclusion of the impact of equity-based compensation, excludes an item that we do not consider to be indicative of our core operating performance.
Free Cash Flow
Free cash flow is a non-GAAP financial measure that we calculate as net cash provided by operating activities less cash used in purchases of property and equipment. We view free cash flow as an important indicator of our liquidity because it measures the amount of cash we generate. Free cash flow also reflects changes in working capital.
Active Customers
We define an active customer as a unique customer account from which a purchase was made across our platform at least once in the preceding 12-month period. In any particular period, we determine our number of active customers by counting the total number of customers who have made at least one purchase in the preceding 12-month period, measured from the last date of such period. We view the number of active customers as a key indicator of our growth, the reach of our sites, the value proposition and consumer awareness of our brand, the continued use of our sites by our customers and their desire to purchase our products.
Total Orders Placed
We define total orders placed as the total number of orders placed by our customers, prior to product returns, across our platform in any given period. We view total orders placed as a key indicator of the velocity of our business and an indication of the desirability of our products and sites to our customers. Total orders placed, together with average order value, is an indicator of the net sales we expect to recognize in a given period.
Average Order Value
We define average order value as the sum of the total gross sales from our sites in a given period, prior to product returns, divided by the total orders placed in that period. We believe our high average order value demonstrates the premium nature of our product assortment. Average order value varies depending on the site through which we sell merchandise, the mix of product categories sold, the number of units in each order, the percentage of sales at full price, and for sales at less than full price, the level of markdowns.
About Revolve Group, Inc.
Revolve Group, Inc. (NYSE: RVLV) is the next-generation fashion retailer for Millennial and Generation Z consumers. As a trusted premium lifestyle brand and a go-to online source for discovery and inspiration, we deliver an engaging customer experience from a vast yet curated offering of apparel, footwear, accessories, beauty and home products. Our dynamic platform connects a deeply engaged community of millions of consumers, thousands of global fashion influencers and more than 1,000 emerging, established and owned brands.
We were founded in 2003 by our co-CEOs, Michael Mente and Mike Karanikolas. We sell merchandise through two complementary segments, REVOLVE and FWRD, that leverage one platform. Through REVOLVE, we offer an assortment of premium apparel, footwear, accessories and beauty products from emerging, established and owned brands. Through FWRD, we offer an assortment of curated and elevated iconic and emerging luxury brands. For more information, visit www.revolve.com.
Contacts:
Investors:
Erik Randerson, CFA
562.677.9513
IR@revolve.com
Media:
Jennifer Walker
revolve@walkerdrawas.com
REVOLVE GROUP, INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME | ||||||||
(Unaudited) | ||||||||
(In thousands, except per share data) | ||||||||
Three Months Ended March 31, | ||||||||
2024 | 2023 | |||||||
Net sales | $ | 270,581 | $ | 279,609 | ||||
Cost of sales | 129,079 | 140,389 | ||||||
Gross profit | 141,502 | 139,220 | ||||||
Operating expenses: | ||||||||
Fulfillment | 9,393 | 9,071 | ||||||
Selling and distribution | 48,438 | 51,458 | ||||||
Marketing | 41,379 | 38,343 | ||||||
General and administrative | 32,964 | 28,092 | ||||||
Total operating expenses | 132,174 | 126,964 | ||||||
Income from operations | 9,328 | 12,256 | ||||||
Other income, net | (5,321) | (6,585) | ||||||
Income before income taxes | 14,649 | 18,841 | ||||||
Provision for income taxes | 3,776 | 4,669 | ||||||
Net income | $ | 10,873 | $ | 14,172 | ||||
Earnings per share of Class A and Class B | ||||||||
Basic | $ | 0.15 | $ | 0.19 | ||||
Diluted | $ | 0.15 | $ | 0.19 | ||||
Weighted average number of shares of Class A and | ||||||||
Basic | 70,919 | 73,370 | ||||||
Diluted | 71,523 | 74,379 | ||||||
REVOLVE GROUP, INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
(Unaudited) | ||||||||
(In thousands, except share and per share data) | ||||||||
March 31, | December 31, | |||||||
2024 | 2023 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 273,416 | $ | 245,449 | ||||
Accounts receivable, net | 14,929 | 12,405 | ||||||
Inventory | 201,839 | 203,587 | ||||||
Income taxes receivable | — | 1,625 | ||||||
Prepaid expenses and other current assets | 78,555 | 65,523 | ||||||
Total current assets | 568,739 | 528,589 | ||||||
Property and equipment (net of accumulated depreciation of | 8,151 | 7,763 | ||||||
Right-of-use lease assets | 36,819 | 36,440 | ||||||
Intangible assets, net | 1,879 | 1,875 | ||||||
Goodwill | 2,042 | 2,042 | ||||||
Other assets | 2,398 | 2,172 | ||||||
Deferred income taxes | 30,005 | 30,005 | ||||||
Total assets | $ | 650,033 | $ | 608,886 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 56,000 | $ | 47,821 | ||||
Income taxes payable | 1,248 | — | ||||||
Accrued expenses | 48,479 | 40,714 | ||||||
Returns reserve | 84,396 | 63,780 | ||||||
Current lease liabilities | 7,417 | 6,863 | ||||||
Other current liabilities | 28,787 | 30,442 | ||||||
Total current liabilities | 226,327 | 189,620 | ||||||
Non-current lease liabilities | 33,823 | 34,126 | ||||||
Total liabilities | 260,150 | 223,746 | ||||||
Stockholders' equity: | ||||||||
Class A common stock, | 38 | 39 | ||||||
Class B common stock, | 33 | 33 | ||||||
Additional paid-in capital | 119,127 | 116,713 | ||||||
Retained earnings | 270,685 | 268,355 | ||||||
Total stockholders' equity | 389,883 | 385,140 | ||||||
Total liabilities and stockholders' equity | $ | 650,033 | $ | 608,886 | ||||
REVOLVE GROUP, INC. AND SUBSIDIARIES | ||||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | ||||||||
(Unaudited) | ||||||||
(In thousands) | ||||||||
Three Months Ended March 31, | ||||||||
2024 | 2023 | |||||||
Operating activities: | ||||||||
Net income | $ | 10,873 | $ | 14,172 | ||||
Adjustments to reconcile net income to net cash provided by operating | ||||||||
Depreciation and amortization | 1,343 | 1,218 | ||||||
Equity-based compensation | 2,559 | 1,278 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (2,524) | (2,659) | ||||||
Inventories | 1,748 | 25,072 | ||||||
Income taxes receivable | 1,625 | 1,996 | ||||||
Prepaid expenses and other current assets | (13,032) | (4,925) | ||||||
Other assets | (226) | (442) | ||||||
Accounts payable | 8,179 | (1,690) | ||||||
Income taxes payable | 1,248 | 2,368 | ||||||
Accrued expenses | 7,765 | (2,747) | ||||||
Returns reserve | 20,616 | 10,544 | ||||||
Right-of-use lease assets and current and non-current | (128) | 534 | ||||||
Other current liabilities | (1,655) | 4,110 | ||||||
Net cash provided by operating activities | 38,391 | 48,829 | ||||||
Investing activities: | ||||||||
Purchases of property and equipment | (1,735) | (1,148) | ||||||
Net cash used in investing activities | (1,735) | (1,148) | ||||||
Financing activities: | ||||||||
Proceeds from the exercise of stock options, net of | (145) | 161 | ||||||
Repurchases of Class A common stock | (8,119) | — | ||||||
Net cash (used in) provided by financing activities | (8,264) | 161 | ||||||
Effect of exchange rate changes on cash and cash equivalents | (425) | 755 | ||||||
Net increase in cash and cash equivalents | 27,967 | 48,597 | ||||||
Cash and cash equivalents, beginning of period | 245,449 | 234,724 | ||||||
Cash and cash equivalents, end of period | $ | 273,416 | $ | 283,321 | ||||
Supplemental disclosure of cash flow information: | ||||||||
Cash paid during the period for: | ||||||||
Income taxes, net of refund | $ | 1,599 | $ | 255 | ||||
Operating leases | $ | 2,254 | $ | 1,795 | ||||
Supplemental disclosure of non-cash activities: | ||||||||
Lease assets obtained in exchange for new operating lease liabilities | $ | 1,994 | $ | 20,452 | ||||
REVOLVE GROUP, INC. AND SUBSIDIARIES | ||||||||
SEGMENT INFORMATION | ||||||||
(Unaudited) | ||||||||
The following table summarizes our net sales and gross profit for each of our reportable segments (in thousands): | ||||||||
Three Months Ended March 31, | ||||||||
Net sales | 2024 | 2023 | ||||||
REVOLVE | $ | 229,589 | $ | 231,653 | ||||
FWRD | 40,992 | 47,956 | ||||||
Total | $ | 270,581 | $ | 279,609 | ||||
Gross profit | ||||||||
REVOLVE | $ | 127,672 | $ | 120,236 | ||||
FWRD | 13,830 | 18,984 | ||||||
Total | $ | 141,502 | $ | 139,220 | ||||
The following table lists net sales by geographic area (in thousands): | ||||||||
Three Months Ended March 31, | ||||||||
2024 | 2023 | |||||||
$ | 219,133 | $ | 226,716 | |||||
Rest of the world | 51,448 | 52,893 | ||||||
Total | $ | 270,581 | $ | 279,609 | ||||
REVOLVE GROUP, INC. AND SUBSIDIARIES | ||||||||
KEY OPERATING AND FINANCIAL METRICS | ||||||||
(Unaudited) | ||||||||
Three Months Ended March 31, | ||||||||
2024 | 2023 | |||||||
(in thousands, except average order value and percentages) | ||||||||
Gross margin | 52.3 | % | 49.8 | % | ||||
Adjusted EBITDA | $ | 13,267 | $ | 15,010 | ||||
Free cash flow | $ | 36,656 | $ | 47,681 | ||||
Active customers | 2,551 | 2,424 | ||||||
Total orders placed | 2,223 | 2,278 | ||||||
Average order value | $ | 299 | $ | 288 | ||||
REVOLVE GROUP, INC. AND SUBSIDIARIES | ||||||||
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES | ||||||||
(Unaudited) | ||||||||
A reconciliation of non-GAAP Adjusted EBITDA to net income for the three months ended March 31, 2024 and 2023 is as follows: | ||||||||
Three Months Ended March 31, | ||||||||
2024 | 2023 | |||||||
(in thousands) | ||||||||
Net income | $ | 10,873 | $ | 14,172 | ||||
Excluding: | ||||||||
Other income, net | (5,321) | (6,585) | ||||||
Provision for income taxes | 3,776 | 4,669 | ||||||
Depreciation and amortization | 1,343 | 1,218 | ||||||
Equity-based compensation | 2,559 | 1,278 | ||||||
Non-routine items(1) | 37 | 258 | ||||||
Adjusted EBITDA | $ | 13,267 | $ | 15,010 | ||||
(1) | Non-routine items in the three months ended March 31, 2024 and 2023 represent accruals and fees related to two separate legal matters. |
A reconciliation of non-GAAP free cash flow to net cash provided by operating activities for the three months ended March 31, 2024 and 2023 is as follows: | ||||||||
Three Months Ended March 31, | ||||||||
2024 | 2023 | |||||||
(in thousands) | ||||||||
Net cash provided by operating activities | $ | 38,391 | $ | 48,829 | ||||
Purchases of property and equipment | (1,735) | $ | (1,148) | |||||
Free cash flow | $ | 36,656 | $ | 47,681 | ||||
Net cash used in investing activities | $ | (1,735) | $ | (1,148) | ||||
Net cash (used in) provided by financing activities | $ | (8,264) | $ | 161 | ||||
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SOURCE Revolve Group, Inc.
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