LOS ANGELES, Nov. 2, 2022 /PRNewswire/ -- Revolve Group, Inc. (NYSE: RVLV), the next-generation fashion retailer for Millennial and Generation Z consumers, today announced financial results for the third quarter ended September 30, 2022.
"We delivered another profitable quarter with double-digit growth in net sales in the third quarter of 2022, despite the increasingly challenged macro environment," said co-founder and co-CEO Mike Karanikolas. "Furthermore, we generated meaningful growth in cash flow year-over-year, further bolstering our already strong balance sheet."
"With our profitable business model and strong balance sheet, we are excited about our continued investments in our brand and technology that we believe will enable us to further capture market share in pursuit of our very large global market opportunity," said co-founder and co-CEO Michael Mente.
Third Quarter 2022 Financial Summary |
||||||||||
Three Months Ended September 30, |
||||||||||
2022 |
2021 |
YoY Change |
||||||||
(in thousands, except percentages) |
||||||||||
Net sales |
$ |
268,711 |
$ |
244,064 |
10 % |
|||||
Gross profit |
$ |
142,382 |
$ |
134,476 |
6 % |
|||||
Gross margin |
53.0 |
% |
55.1 |
% |
||||||
Net income |
$ |
11,988 |
$ |
16,668 |
(28 %) |
|||||
Adjusted EBITDA (non-GAAP financial measure) |
$ |
17,676 |
$ |
21,666 |
(18 %) |
|||||
Net cash provided by operating activities |
$ |
10,006 |
$ |
1,855 |
439 % |
|||||
Free cash flow (non-GAAP financial measure) |
$ |
8,618 |
$ |
1,340 |
543 % |
Operational Metrics |
||||||||||
Three Months Ended September 30, |
||||||||||
2022 |
2021 |
YoY Change |
||||||||
(in thousands, except average order value and percentages) |
||||||||||
Active customers (trailing 12 months) |
2,249 |
1,678 |
34 % |
|||||||
Total orders placed |
1,951 |
1,830 |
7 % |
|||||||
Average order value |
$ |
320 |
$ |
276 |
16 % |
- Active customers increased by 84,000 during the third quarter of 2022, growing to 2,249,000 as of September 30, 2022, an increase of 34% year-over-year.
- Total net sales were $268.7 million, an increase of 10% year-over-year.
- Gross profit was $142.4 million, an increase of 6% year-over-year.
- Gross margin was 53.0%, a decrease of 211 basis points year-over-year that primarily reflects a lower mix of net sales at full price in the third quarter of 2022.
- Our effective tax rate for the prior-year comparable period in the third quarter of 2021 was an unusually low 14%, primarily due to excess tax benefits realized as a result of the exercise of non-qualified stock options. Absent such discrete tax items in future quarters, we expect our effective tax rate to be around 25%.
- Net income was $12.0 million, a year-over-year decrease of 28%, a comparison that was impacted by the meaningful differences in our effective tax rate, the lower gross margin referenced above and an increase in operating expenses that slightly outpaced sales growth year-over-year.
- Adjusted EBITDA was $17.7 million, a year-over-year decrease of 18%.
- Diluted earnings per share (EPS) was $0.16, a year-over-year decrease of 27%.
- REVOLVE segment net sales were $222.1 million, an increase of 9% year-over-year.
- FWRD segment net sales were $46.6 million, an increase of 17% year-over-year.
- Domestic net sales increased 10% year-over-year and international net sales increased 12% year-over-year.
- Net cash provided by operating activities was $10.0 million for the third quarter and $34.5 million for the nine-month year-to-date period. Free cash flow was $8.6 million for the third quarter and $30.5 million for the nine-month year-to-date period. Net cash provided by operating activities and free cash flow increased significantly year-over-year in the third quarter of 2022, but trailed the prior-year comparison for the nine-month year-to-date period ended September 30, 2021, primarily due to lower net income year-over-year and our increased investment in inventory in 2022 (especially in the first half of 2022).
- Cash and cash equivalents as of September 30, 2022 grew to $244.0 million, an increase of $22.4 million, or 10%, from September 30, 2021, and an increase of $6.2 million, or 3%, from June 30, 2022. Our balance sheet as of September 30, 2022 remains debt free.
- Inventory as of September 30, 2022 was $213.3 million, an increase of $4.8 million, or 2%, from June 30, 2022, and an increase of $71.6 million year-over-year, or 50%, from the inventory balance of $141.8 million as of September 30, 2021. We have taken swift action to balance our inventory levels given the moderation of consumer discretionary spending in the current economic climate.
Additional trend information regarding Revolve Group's third quarter of 2022 financial results and operating metrics is available in the Q3 2022 Financial Highlights presentation available on the company's investor relations website: https://investors.revolve.com/events-and-presentations/default.aspx
Net sales in October 2022 increased approximately 3% year-over-year amidst an increasingly uncertain macroenvironment highlighted by meaningful inflationary pressures and foreign exchange headwinds due to significant appreciation of the U.S. dollar against foreign currencies in recent months, and against a more elevated prior-year comparison than we faced in the first nine months of 2022.
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.
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 ability to capture market share and our expected future effective tax rate. 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 economic conditions and their impact on consumer demand and our business, operating results and financial condition; the impact of the COVID-19 pandemic 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, 2021 and our subsequent Quarterly Reports on Form 10-Q, including for the quarter ended September 30, 2022, which we expect to file with the SEC on November 2, 2022. 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.
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 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 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.
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.
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.
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.
Revolve Group, Inc. (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:
Meghan Murray-Merriman
[email protected]
REVOLVE GROUP, INC. AND SUBSIDIARIES |
||||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||
2022 |
2021 |
2022 |
2021 |
|||||||||||||
Net sales |
$ |
268,711 |
$ |
244,064 |
$ |
842,263 |
$ |
651,585 |
||||||||
Cost of sales |
126,329 |
109,588 |
383,228 |
293,226 |
||||||||||||
Gross profit |
142,382 |
134,476 |
459,035 |
358,359 |
||||||||||||
Operating expenses: |
||||||||||||||||
Fulfillment |
8,072 |
5,776 |
23,272 |
15,452 |
||||||||||||
Selling and distribution |
46,477 |
38,354 |
145,030 |
95,470 |
||||||||||||
Marketing |
44,584 |
46,955 |
141,755 |
108,054 |
||||||||||||
General and administrative |
28,498 |
24,180 |
86,497 |
66,028 |
||||||||||||
Total operating expenses |
127,631 |
115,265 |
396,554 |
285,004 |
||||||||||||
Income from operations |
14,751 |
19,211 |
62,481 |
73,355 |
||||||||||||
Other (income) expense, net |
(1,440) |
(158) |
(3,769) |
339 |
||||||||||||
Income before income taxes |
16,191 |
19,369 |
66,250 |
73,016 |
||||||||||||
Provision for income taxes |
4,203 |
2,701 |
15,421 |
2,558 |
||||||||||||
Net income |
$ |
11,988 |
$ |
16,668 |
$ |
50,829 |
$ |
70,458 |
||||||||
Earnings per share of Class A and Class B |
||||||||||||||||
Basic |
$ |
0.16 |
$ |
0.23 |
$ |
0.69 |
$ |
0.97 |
||||||||
Diluted |
$ |
0.16 |
$ |
0.22 |
$ |
0.68 |
$ |
0.95 |
||||||||
Weighted average number of shares of Class A and |
||||||||||||||||
Basic |
73,328 |
72,810 |
73,302 |
72,330 |
||||||||||||
Diluted |
74,354 |
74,881 |
74,598 |
74,449 |
REVOLVE GROUP, INC. AND SUBSIDIARIES |
||||||||
September 30, |
December 31, |
|||||||
2022 |
2021 |
|||||||
Assets |
||||||||
Current assets: |
||||||||
Cash and cash equivalents |
$ |
244,046 |
$ |
218,455 |
||||
Accounts receivable, net |
6,720 |
4,639 |
||||||
Inventory |
213,328 |
171,259 |
||||||
Income taxes receivable |
4,133 |
3,375 |
||||||
Prepaid expenses and other current assets |
59,103 |
42,114 |
||||||
Total current assets |
527,330 |
439,842 |
||||||
Property and equipment (net of accumulated depreciation of $12,771 and $9,347 |
9,158 |
8,946 |
||||||
Right-of-use lease assets |
24,646 |
6,566 |
||||||
Intangible assets, net |
1,385 |
1,212 |
||||||
Goodwill |
2,042 |
2,042 |
||||||
Other assets |
3,095 |
2,746 |
||||||
Deferred income taxes |
19,059 |
19,059 |
||||||
Total assets |
$ |
586,715 |
$ |
480,413 |
||||
Liabilities and Stockholders' Equity |
||||||||
Current liabilities: |
||||||||
Accounts payable |
$ |
53,189 |
$ |
54,345 |
||||
Income taxes payable |
439 |
— |
||||||
Accrued expenses |
44,491 |
33,899 |
||||||
Returns reserve |
72,311 |
49,296 |
||||||
Current lease liabilities |
5,769 |
3,766 |
||||||
Other current liabilities |
23,140 |
18,916 |
||||||
Total current liabilities |
199,339 |
160,222 |
||||||
Non-current lease liabilities |
20,079 |
3,177 |
||||||
Total liabilities |
219,418 |
163,399 |
||||||
Stockholders' equity: |
||||||||
Class A common stock, $0.001 par value; 1,000,000,000 shares |
41 |
40 |
||||||
Class B common stock, $0.001 par value; 125,000,000 shares authorized |
33 |
33 |
||||||
Additional paid-in capital |
108,495 |
103,590 |
||||||
Retained earnings |
258,728 |
213,351 |
||||||
Total stockholders' equity |
367,297 |
317,014 |
||||||
Total liabilities and stockholders' equity |
$ |
586,715 |
$ |
480,413 |
REVOLVE GROUP, INC. AND SUBSIDIARIES |
||||||||
Nine Months Ended September 30, |
||||||||
2022 |
2021 |
|||||||
Operating activities: |
||||||||
Net income |
$ |
50,829 |
$ |
70,458 |
||||
Adjustments to reconcile net income to net cash provided by operating |
||||||||
Depreciation and amortization |
3,519 |
3,390 |
||||||
Equity-based compensation |
4,410 |
3,664 |
||||||
Changes in operating assets and liabilities: |
||||||||
Accounts receivable |
(2,081) |
(2,094) |
||||||
Inventories |
(42,069) |
(46,496) |
||||||
Income taxes receivable |
(758) |
246 |
||||||
Prepaid expenses and other current assets |
(16,989) |
(19,021) |
||||||
Other assets |
(349) |
(2,260) |
||||||
Accounts payable |
(1,156) |
15,576 |
||||||
Income taxes payable |
439 |
800 |
||||||
Accrued expenses |
10,592 |
13,005 |
||||||
Returns reserve |
23,015 |
25,240 |
||||||
Right-of-use lease assets and current and non-current |
825 |
(472) |
||||||
Other current liabilities |
4,224 |
6,375 |
||||||
Net cash provided by operating activities |
34,451 |
68,411 |
||||||
Investing activities: |
||||||||
Purchases of property and equipment |
(3,904) |
(1,768) |
||||||
Net cash used in investing activities |
(3,904) |
(1,768) |
||||||
Financing activities: |
||||||||
Proceeds from the exercise of stock options, net |
496 |
9,448 |
||||||
Net cash provided by financing activities |
496 |
9,448 |
||||||
Effect of exchange rate changes on cash and cash equivalents |
(5,452) |
(499) |
||||||
Net increase in cash and cash equivalents |
25,591 |
75,592 |
||||||
Cash and cash equivalents, beginning of period |
218,455 |
146,013 |
||||||
Cash and cash equivalents, end of period |
$ |
244,046 |
$ |
221,605 |
||||
Supplemental disclosure of cash flow information: |
||||||||
Cash paid during the period for: |
||||||||
Income taxes, net of refund |
$ |
15,909 |
$ |
1,511 |
||||
Operating leases |
$ |
4,033 |
$ |
4,029 |
||||
Supplemental disclosure of non-cash activities: |
||||||||
Lease assets obtained in exchange for new operating lease liabilities |
$ |
21,938 |
$ |
1,440 |
REVOLVE GROUP, INC. AND SUBSIDIARIES |
||||||||||||||||
The following table summarizes our net sales and gross profit for each of our reportable segments (in thousands): |
||||||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
Net sales |
2022 |
2021 |
2022 |
2021 |
||||||||||||
REVOLVE |
$ |
222,069 |
$ |
204,207 |
$ |
704,538 |
$ |
545,155 |
||||||||
FWRD |
46,642 |
39,857 |
137,725 |
106,430 |
||||||||||||
Total |
$ |
268,711 |
$ |
244,064 |
$ |
842,263 |
$ |
651,585 |
||||||||
Gross profit |
||||||||||||||||
REVOLVE |
$ |
123,622 |
$ |
115,098 |
$ |
398,140 |
$ |
306,842 |
||||||||
FWRD |
18,760 |
19,378 |
60,895 |
51,517 |
||||||||||||
Total |
$ |
142,382 |
$ |
134,476 |
$ |
459,035 |
$ |
358,359 |
||||||||
The following table lists net sales by geographic area (in thousands): |
||||||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2022 |
2021 |
2022 |
2021 |
|||||||||||||
United States |
$ |
217,591 |
$ |
198,506 |
$ |
696,375 |
$ |
527,171 |
||||||||
Rest of the world |
51,120 |
45,558 |
145,888 |
124,414 |
||||||||||||
Total |
$ |
268,711 |
$ |
244,064 |
$ |
842,263 |
$ |
651,585 |
REVOLVE GROUP, INC. AND SUBSIDIARIES |
||||||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2022 |
2021 |
2022 |
2021 |
|||||||||||||
(in thousands, except average order value and percentages) |
||||||||||||||||
Gross margin |
53.0 |
% |
55.1 |
% |
54.5 |
% |
55.0 |
% |
||||||||
Adjusted EBITDA |
$ |
17,676 |
$ |
21,666 |
$ |
76,097 |
$ |
80,409 |
||||||||
Free cash flow |
$ |
8,618 |
$ |
1,340 |
$ |
30,547 |
$ |
66,643 |
||||||||
Active customers |
2,249 |
1,678 |
2,249 |
1,678 |
||||||||||||
Total orders placed |
1,951 |
1,830 |
6,350 |
4,881 |
||||||||||||
Average order value |
$ |
320 |
$ |
276 |
$ |
303 |
$ |
263 |
REVOLVE GROUP, INC. AND SUBSIDIARIES |
||||||||||||||||
A reconciliation of non-GAAP Adjusted EBITDA to net income for the three and nine months ended September 30, 2022 and 2021 is as follows: |
||||||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2022 |
2021 |
2022 |
2021 |
|||||||||||||
(in thousands) |
||||||||||||||||
Net income |
$ |
11,988 |
$ |
16,668 |
$ |
50,829 |
$ |
70,458 |
||||||||
Excluding: |
||||||||||||||||
Other (income) expense, net |
(1,440) |
(158) |
(3,769) |
339 |
||||||||||||
Provision for income taxes |
4,203 |
2,701 |
15,421 |
2,558 |
||||||||||||
Depreciation and amortization |
1,214 |
1,119 |
3,519 |
3,390 |
||||||||||||
Equity-based compensation |
1,524 |
1,336 |
4,410 |
3,664 |
||||||||||||
Non-routine items(1) |
187 |
— |
5,687 |
— |
||||||||||||
Adjusted EBITDA |
$ |
17,676 |
$ |
21,666 |
$ |
76,097 |
$ |
80,409 |
(1) Non-routine items in the three and nine months ended September 30, 2022 relate to an accrual for a pending legal matter. |
A reconciliation of non-GAAP free cash flow to net cash provided by operating activities for the three and nine months ended September 30, 2022 and 2021 is as follows: |
||||||||||||||||
Three Months Ended September 30, |
Nine Months Ended September 30, |
|||||||||||||||
2022 |
2021 |
2022 |
2021 |
|||||||||||||
(in thousands) |
||||||||||||||||
Net cash provided by operating activities |
$ |
10,006 |
$ |
1,855 |
$ |
34,451 |
$ |
68,411 |
||||||||
Purchases of property and equipment |
(1,388) |
$ |
(515) |
(3,904) |
(1,768) |
|||||||||||
Free cash flow |
$ |
8,618 |
$ |
1,340 |
$ |
30,547 |
$ |
66,643 |
||||||||
Net cash used in investing activities |
$ |
(1,388) |
$ |
(515) |
$ |
(3,904) |
$ |
(1,768) |
||||||||
Net cash provided by financing activities |
$ |
128 |
$ |
1,231 |
$ |
496 |
$ |
9,448 |
SOURCE Revolve Group, Inc.
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