Revolve Group Announces First Quarter 2023 Financial Results

LOS ANGELES, May 3, 2023 /PRNewswire/ -- Revolve Group, Inc. (NYSE: RVLV), the next-generation fashion retailer for Millennial and Generation Z consumers, today announced financial results for the first quarter ended March 31, 2023.

"We achieved excellent progress on rebalancing our inventory position and generated exceptional cash flow in the first quarter, despite a macroeconomic environment that became increasingly challenging as the quarter progressed, leading to deceleration in our net sales momentum," said co-founder and co-CEO Mike Karanikolas.

"Supported by our strong profitability and cash flow that truly stand out within the fashion e-commerce sector, we are continuing to innovate and leverage new technologies while executing on several important growth, brand-building and efficiency initiatives that we believe will further strengthen our foundation for profitable growth over the long term," said co-founder and co-CEO Michael Mente. 

Additional First Quarter 2023 Metrics and Results Commentary

• Active customers increased by 84,000 during the first quarter of 2023, growing to 2,424,000 as of March 31, 2023, an increase of 19% year-over-year.
• Net sales were $279.6 million, a year-over-year decrease of 1% against a very difficult prior-year comparison yet representing a four-year compound annual growth rate of 19% since the first quarter of 2019.
• Gross profit was $139.2 million, a year-over-year decrease of 10%.
• Gross margin was 49.8%, a year-over-year decrease of 468 basis points, primarily reflecting a lower mix of net sales at full price in the first quarter of 2023 as compared to the first quarter of 2022.
• Net income was $14.2 million, a year-over-year decrease of 37%, a comparison that was impacted by the lower gross margin and an increase in operating expenses year-over-year, partially offset by an increase in other income due primarily to an insurance reimbursement.
• Adjusted EBITDA was $15.0 million, a year-over-year decrease of 52%.
• Diluted earnings per share (EPS) was $0.19, a year-over-year decrease of 37%.

Additional Net Sales Commentary

• REVOLVE segment net sales were $231.7 million, a year-over-year decrease of 3%.
• FWRD segment net sales were $48.0 million, a year-over-year increase of 5%.
• Domestic net sales decreased 5% year-over-year and international net sales increased 16% year-over-year.

Cash Flow and Balance Sheet

• Net cash provided by operating activities was $48.8 million and free cash flow was $47.7 million. Our strong cash flow generation benefitted from favorable working capital movements, including a meaningful decrease in inventory during the first quarter. The cash flow metrics were our second highest for any first quarter, yet trailed the record first quarter cash flow from the prior-year period primarily due to lower net income year-over-year.
• 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, 2023 were $283.3 million, an increase of $48.6 million, or 21%, from December 31, 2022 and an increase of $12.7 million, or 5%, from $270.6 million as of March 31, 2022. Our balance sheet as of March 31, 2023 remains debt free.
• Inventory as of March 31, 2023 was $190.2 million, a decrease of $25.1 million, or 12%, from December 31, 2022, and an increase of $10.9 million year-over-year, or 6%, from the inventory balance of $179.2 million as of March 31, 2022. We believe we are making continued progress in our efforts to balance our inventory, highlighted by a meaningful reduction in the spread between our inventory growth rate year-over-year and our net sales decline year-over-year in the first quarter of 2023 on a sequential quarter basis when compared to the fourth quarter of 2022.

Additional trend information regarding Revolve Group's first quarter of 2023 financial results and operating metrics is available in the Q1 2023 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 2023

Net sales in April 2023 decreased approximately 7% year-over-year against a difficult prior-year comparison and amidst an increasingly uncertain macroeconomic environment highlighted by consumer inflationary pressures, U.S. Department of Commerce reports of decelerating consumer spending on apparel in recent months and continued foreign exchange headwinds year-over-year. 

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) 330-2454 within the United States or (240) 789-2714 outside the United States approximately 10 minutes before the scheduled start of the call. The conference ID for the call is 3102771. The conference call will also be accessible, live via audio broadcast, on the Investor Relations section of the Revolve Group website at investors.revolve.com. A replay of the conference call will be available online at investors.revolve.com. In addition, an audio replay of the call will be available for one week following the call and can be accessed by dialing (800) 770-2030 within the United States or (647) 362-9199 outside the United States. The replay conference ID is 3102771.

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 inventory balance and macroeconomic uncertainties, and our future growth and profitability. 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; the impact of the COVID-19 pandemic and other health crises on our business, operations and financial results; demand for our products; supply chain challenges; inflation; Russia's war against Ukraine; our fluctuating operating results; seasonality in our business; our ability to acquire products on reasonable terms; our e-commerce business model; our ability to attract customers in a cost effective manner; the strength of our brand; competition; fraud; system interruptions; our ability to fulfill orders; and other risks and uncertainties included under the caption "Risk Factors" and elsewhere in our filings with the Securities and Exchange Commission, or SEC, including, without limitation, our Annual Report on Form 10-K for the year ended December 31, 2022 and our subsequent Quarterly Reports on Form 10-Q, including for the quarter ended March 31, 2023, which we expect to file with the SEC on May 3, 2023. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this press release. All forward-looking statements are qualified in their entirety by this cautionary statement, and we undertake no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date hereof.

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 United States of America (GAAP), we reference in this press release and the accompanying tables the following non-GAAP financial measures: Adjusted EBITDA and free cash flow.    

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
[email protected]

Media:

Jennifer Walker
[email protected]

SOURCE Revolve Group, Inc.