Revolve Group Announces Second Quarter 2023 Financial Results

LOS ANGELES, Aug. 2, 2023 /PRNewswire/ -- Revolve Group, Inc. (NYSE: RVLV), the next-generation fashion retailer for Millennial and Generation Z consumers, today announced financial results for the second quarter ended June 30, 2023.

"Aspirational consumer discretionary spending remains challenging, particularly on goods in the U.S. for our younger customer demographic, which is evident in our second quarter financial results," said co-founder and co-CEO Mike Karanikolas. "Regardless of macroeconomic challenges, we remain on offense and our team continues to deliver great progress on several important growth and efficiency initiatives that we believe will further strengthen our foundation for market share gains and profitable growth over the long term."

"I'm excited and energized by the momentum in our growth initiatives, and my confidence in the long-term is underscored by our $100 million stock repurchase program announced today," said co-founder and co-CEO Michael Mente. "As REVOLVE's largest stockholders holding nearly 45% of the outstanding common stock, Mike and I continue to see a significant runway for growth in the years to come."        

Additional Second Quarter 2023 Metrics and Results Commentary

• Trailing 12-month Active customers increased by 34,000 during the second quarter of 2023, growing to 2,458,000 as of June 30, 2023, an increase of 14% year-over-year.
• Net sales were $273.7 million, a year-over-year decrease of 6%.
• Gross profit was $147.7 million, a year-over-year decrease of 9%.
• Gross margin was 54.0%, a year-over-year decrease of 198 basis points, primarily reflecting a lower mix of net sales at full price in the second quarter of 2023 as compared to the second quarter of 2022.
• Net income was $7.3 million, a year-over-year decrease of 55%, primarily due to the decline in net sales, reduction in gross profit year-over-year and continued pressure on certain operating expenses.
• Adjusted EBITDA was $10.4 million, a year-over-year decrease of 61%.
• Diluted earnings per share (EPS) was $0.10, a year-over-year decrease of 55%.

Additional Net Sales Commentary

• REVOLVE segment net sales were $235.1 million, a year-over-year decrease of 4%.
• FWRD segment net sales were $38.6 million, a year-over-year decrease of 15%.
• Domestic net sales were $222.9 million, a year-over-year decrease of 7%.
• International net sales were $50.9 million, a year-over-year increase of 4%.

Cash Flow and Balance Sheet

• Net cash provided by (used in) operating activities improved year-over-year to $(14.1) million in the second quarter and $34.7 million in the six-month year-to-date period, while free cash flow was $(15.1) million in the second quarter and $32.6 million in the six-month year-to-date period.
• Cash and cash equivalents as of June 30, 2023 were $269.3 million, an increase of $31.5 million, or 13%, from June 30, 2022 and a decrease of $14.0 million, or 5%, from $283.3 million as of March 31, 2023. Our balance sheet as of June 30, 2023 remains debt free.
• Inventory as of June 30, 2023 was $205.3 million, a decrease of $3.2 million, or 2%, from $208.5 million as of June 30, 2022.

Additional trend information regarding Revolve Group's second quarter of 2023 financial results and operating metrics is available in the Q2 2023 Financial Highlights presentation available on our investor relations website: https://investors.revolve.com/financials/quarterly-results/default.aspx

Results Since the End of the Second Quarter of 2023

Net sales in July 2023 decreased by a mid-single digit percentage year-over-year amidst continued soft trends in the U.S., where spending on consumer discretionary products remains relatively suppressed, particularly among our customer demographic.

2023 Business Outlook

Based on information available to us as of August 2, 2023, we are providing the following guidance for the full year ending December 31, 2023 and the third quarter ending September 30, 2023. 

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 our expectations regarding our financial performance for the third quarter and full year of 2023 and statements regarding macroeconomic conditions, market share gains and profitable growth. 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; 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; the impact of the COVID-19 pandemic and other health crises on our business, operations and financial results; 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 June 30, 2023, which we expect to file with the SEC on August 2, 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] 

The following table lists net sales by geographic area (in thousands):

SOURCE Revolve Group, Inc.