Net Sales Increased 23% to $161.9
million
Net Income Increased 22% to $12.7
million
Revolve Group, Inc. (NYSE: RVLV), the next-generation fashion
retailer for Millennial and Generation Z customers, today announced
financial results for the second quarter ended June 30, 2019.
“We are pleased to announce record revenue and profit for our
first quarter as a public company,” said co-founder and co-CEO
Michael Mente. “We continue to execute with operational excellence,
delivering robust sales, gross margin expansion and an increase of
nearly 22% in net income all while making significant investments
in our infrastructure and customer experience,” added co-founder
and co-CEO Mike Karanikolas.
Second Quarter Financial Highlights:
- Net sales of $161.9 million, a year-over-year increase of 22.8%
- Revolve segment net sales of $143.9 million, a year-over-year
increase of 24.0%
- Forward segment net sales of $18.0 million, a year-over-year
increase of 14.4%
- Gross profit of $90.4 million, a year-over-year increase of
23.3%
- Gross margin of 55.8%, a year-over-year increase of 21 basis
points
- Income from operations of $17.7 million, a year over year
increase of 25.8%
- Net income was $12.7 million, a year-over-year increase of
21.7%
- Adjusted EBITDA (a non-GAAP financial measure) of $19.0
million, a year-over-year increase of 21.5%
Other Highlights:
- 1,359,000 active customers, a year-over-year increase of
36.2%
- 1,294,000 orders placed, a year-over-year increase of
30.8%
“Through our unique events and curated premium product offering,
we continue to build our customer base and deepen the relationship
with our already very loyal customer,” said Michael Mente. “This
was highlighted in the quarter with our fifth annual
#REVOLVEfestival and the launch of two new influencer brand
collaborations – Song of Style with Aimee Song and the Camila
Coelho Collection.”
Outlook
Expectations for the full fiscal year ending December 31,
2019:
Net Sales
$598 - $608 million
20% - 22% growth
Adjusted EBITDA
$51 - $56 million
10% - 20% growth 8.5% - 9.2%
margin
We have not reconciled our adjusted EBITDA outlook to GAAP net
income because we do not provide an outlook for GAAP net income due
to the uncertainty and potential variability of other expense, net,
and provision for income taxes and one-time expenses, net, which
are reconciling items between adjusted EBITDA and GAAP net income.
Because such items cannot be reasonably predicted, we are unable to
provide a reconciliation of the non-GAAP financial measure outlook
to the corresponding GAAP measure. However, such items could have a
significant impact on GAAP net income.
Key Operating and Financial Metrics
We use the following metrics to assess the progress of our
business, make decisions on where to allocate capital, time and
technology investments and assess the near-term and long-term
performance of our business.
Three Months Ended June
30,
Six Months Ended June
30,
2018
2019
2018
2019
(in thousands, except average
order value and percentages)
Gross margin
55.6
%
55.8
%
52.9
%
53.9
%
Adjusted EBITDA
$
15,610
$
18,968
$
24,307
$
27,517
Free cash flow
$
12,834
$
1,991
$
24,550
$
12,928
Active customers
998
1,359
998
1,359
Total orders placed
989
1,294
1,807
2,429
Average order value
$
281
$
275
$
281
$
268
Adjusted EBITDA and free cash
flow are non-GAAP measures. See the section titled “Adjusted EBITDA” and
“Free Cash Flow” below for information regarding our use of
Adjusted EBITDA and free cash flow and their reconciliation to net
income and net cash provided by operating activities,
respectively.
Gross Margin
Gross profit is equal to our net sales less cost of sales. Gross
profit as a percentage of our net sales is referred to as gross
margin. Cost of sales consists of the purchase price of merchandise
sold to customers and includes import duties and other taxes,
freight in, defective merchandise returned from customers,
receiving costs, inventory write-offs, and other miscellaneous
shrinkage. Certain of our competitors and other retailers report
cost of sales differently than we do. As a result, the reporting of
our gross profit and gross margin may not be comparable to other
companies.
Adjusted EBITDA
Adjusted EBITDA is a non-GAAP financial measure that we
calculate as net income before other expense, net, taxes,
depreciation and amortization, adjusted to exclude the effects of
equity-based compensation expense and certain one-time expenses.
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 (used in) operating activities less net
cash used in capital expenditures. 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.
Adjusted Diluted Earnings per Share
Adjusted diluted earnings per share is a non-GAAP financial
measure that we calculate as diluted earnings (net loss) per share
adjusted to exclude the per share impact of the issuance and
repurchase of Class B common stock as part of our initial public
offering.
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. Our number of
active customers drives both net sales and our appeal to
vendors.
Total Orders Placed
We define total orders placed as the total number of customer
orders placed by our customers across our platform in any 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. Total orders placed and total orders
shipped in any given period may differ slightly due to orders that
are in process at the end of any particular period.
Average Order Value
We define average order value as the sum of the total gross
sales from our sites in a given period divided by the total orders
placed in that period. We believe our high average order value
demonstrates the premium nature of our product. Average order value
varies depending on the site through which we sell merchandise.
Forward-Looking Statements
This press release contains ‘‘forward-looking statements’’
within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934 and the 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 future growth and our financial outlook
for the full fiscal year 2019. 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 upon 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
general economic conditions, our fluctuating operating results,
seasonality in our business, our ability to acquire products on
reasonable terms, our online business model, demand for our
products, 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, including, without limitation, the final prospectus
related to our initial public offering filed with the SEC on June
7, 2019 and the Quarterly Report on Form 10-Q for the quarter ended
June 30, 2019, which we expect to file with the SEC on or before
August 14, 2019. 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 Revolve Group,
Inc. undertakes 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
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,
free cash flow and adjusted diluted earnings per share. Adjusted
EBITDA is net income before other expense, net, taxes, depreciation
and amortization, adjusted to exclude the effects of equity-based
compensation expense, and certain one-time expenses. Free cash flow
is net cash provided by (used in) operating activities less net
cash used in capital expenditures. Adjusted diluted earnings per
share is diluted earnings (net loss) per share adjusted to exclude
the per share impact of the issuance and repurchase of Class B
common stock as part of our initial public offering.
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.
Conference call information
Revolve Group management will host a call today at 5 pm ET/2 pm
PT to discuss today’s results in more detail. To participate,
please dial (866) 393-4306 within the United States or (734)
385-2616 outside the United States approximately 10 minutes before
the scheduled start of the call. The conference ID for the call is
1299819. 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 (855)
859-2506 within the United States or (404) 537-3406 outside the
United States. The replay ID is 1299819.
About Revolve Group, Inc.
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 and
beauty styles. Our dynamic platform connects a deeply engaged
community of millions of consumers, thousands of global fashion
influencers, and hundreds of emerging, established and owned
brands.
We were founded in 2003 by our co-CEOs, Michael Mente and Mike
Karanikolas. We sell merchandise through two differentiated
segments, REVOLVE and FORWARD, that leverage one platform. Through
REVOLVE we offer a highly curated assortment of full-price premium
apparel and footwear, accessories and beauty products from
emerging, established and owned brands. Through FORWARD we offer an
assortment of iconic and emerging luxury brands. For more
information, visit www.revolve.com.
REVOLVE GROUP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In thousands, except unit, share
and per share data)
December 31,
June 30,
2018
2019
Assets
Current assets:
Cash and cash equivalents
$
16,369
$
44,845
Accounts receivable, net
5,337
8,373
Inventory
102,220
102,533
Income taxes receivable
—
1,142
Prepaid expenses and other current
assets
15,227
25,374
Total current assets
139,153
182,267
Property and equipment, net
5,907
14,239
Intangible assets, net
564
403
Goodwill
2,042
2,042
Other assets
731
695
Deferred income taxes
13,677
15,918
Total assets
$
162,074
$
215,564
Liabilities and Members'/Stockholders'
Equity
Current liabilities:
Accounts payable
$
20,219
$
29,687
Income taxes payable
917
881
Accrued expenses
18,398
22,138
Returns reserve
29,184
36,355
Other current liabilities
13,538
15,240
Total current liabilities
82,256
104,301
Members' equity:
Class T Preferred Units, no par
value—23,551,834 and zero units authorized, issued and outstanding
as of December 31, 2018 and June 30, 2019, respectively.
15,000
—
Class A Common Units, no par
value—41,936,219 and zero units authorized, issued and outstanding
as of December 31, 2018 and June 30, 2019, respectively.
3,548
—
Stockholders' equity:
Class A common stock, $0.001 par value;
zero and 1,000,000,000 shares authorized as of December 31, 2018
and June 30, 2019, respectively; zero and 13,529,411 shares issued
and outstanding as of December 31, 2018 and June 30, 2019,
respectively.
—
14
Class B common stock, $0.001 par value;
zero and 125,000,000 shares authorized as of December 31, 2018 and
June 30, 2019, respectively; zero and 55,340,994 shares issued and
outstanding as of December 31, 2018 and June 30, 2019,
respectively.
—
55
Accumulated members' equity
61,270
—
Additional paid-in capital
—
72,736
Retained earnings
—
38,458
Total members'/stockholders' equity
79,818
111,263
Total liabilities and
members’/stockholders’ equity
$
162,074
$
215,564
REVOLVE GROUP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share
data)
Three Months Ended June
30,
Six Months Ended June
30,
2018
2019
2018
2019
Net sales
$
131,802
$
161,897
$
245,107
$
299,240
Cost of sales
58,470
71,479
115,342
138,068
Gross profit
73,332
90,418
129,765
161,172
Operating expenses:
Fulfillment
3,263
5,301
6,045
9,796
Selling and distribution
18,669
23,639
34,522
44,230
Marketing
21,161
24,914
36,514
44,412
General and administrative
16,145
18,836
31,085
38,105
Total operating expenses
59,238
72,690
108,166
136,543
Income from operations
14,094
17,728
21,599
24,629
Other expense, net
123
444
320
660
Income before income taxes
13,971
17,284
21,279
23,969
Provision for income tax
3,504
4,543
5,480
6,266
Net income
10,467
12,741
15,799
17,703
Less: Net loss attributable to
non-controlling interest
—
—
47
—
Net income attributable to Revolve Group,
Inc.
10,467
12,741
15,846
17,703
Less: Repurchase of Class B common stock
upon corporate conversion
—
(40,816
)
—
(40,816
)
Net income (loss) attributable to common
stockholders
$
10,467
$
(28,075
)
$
15,846
$
(23,113
)
Earnings (net loss) per share of Class A
and Class B common stock:
Basic
$
0.16
$
(0.57
)
$
0.24
$
(0.51
)
Diluted
$
0.15
$
(0.57
)
$
0.23
$
(0.51
)
Weighted average Class A and Class B
common shares
outstanding:
Basic
41,936
49,025
41,936
45,481
Diluted
44,394
49,025
44,289
45,481
REVOLVE GROUP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Six Months Ended June
30,
2018
2019
Operating activities:
Net income
$
15,799
$
17,703
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
1,459
1,584
Equity-based compensation
512
1,032
Deferred income taxes
1,410
(2,241
)
Changes in operating assets and
liabilities:
Accounts receivable
(278
)
(3,036
)
Inventories
(6,061
)
(13,184
)
Income taxes receivable
3,590
(1,142
)
Prepaid expenses and other current
assets
(704
)
(271
)
Other assets
(107
)
36
Accounts payable
(3,971
)
9,468
Income taxes payable
—
(36
)
Accrued expenses
4,215
3,137
Returns reserve
9,314
7,171
Other current liabilities
449
2,462
Net cash provided by operating
activities
25,627
22,683
Investing activities:
Purchases of property and equipment
(1,077
)
(9,755
)
Net cash used in investing activities
(1,077
)
(9,755
)
Financing activities:
Proceeds from initial public offering, net
of underwriting discounts
paid
—
57,077
Repurchase of Class B common stock upon
corporate conversion
—
(40,816
)
Repayment of line of credit
(15,100
)
—
Payment of deferred offering costs
—
(726
)
Net cash (used in) provided by financing
activities
(15,100
)
15,535
Effect of exchange rate changes on cash
and cash equivalents
(35
)
13
Net increase in cash and cash
equivalents
9,415
28,476
Cash and cash equivalents, beginning of
period
10,588
16,369
Cash and cash equivalents, end of
period
$
20,003
$
44,845
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest
$
87
$
—
Income taxes, net of refund
$
355
$
9,674
Supplemental disclosure of non-cash
activities:
Deferred offering costs accrued,
unpaid
$
—
$
603
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 and six months ended June 30, 2018 and 2019 is as follows
(in thousands):
Three Months Ended June
30,
Six Months Ended June
30,
2018
2019
2018
2019
Net income
$
10,467
$
12,741
$
15,799
$
17,703
Excluding:
Other expense, net
123
444
320
660
Provision for income tax
3,504
4,543
5,480
6,266
Depreciation and amortization
730
889
1,459
1,584
Equity-based compensation
403
521
512
1,032
One-time expenses, net(1)
383
(170
)
737
272
Adjusted EBITDA
$
15,610
$
18,968
$
24,307
$
27,517
__________________ (1)
One-time expenses, net in the three and
six months ended June 30, 2018 primarily relate to our entity
restructuring and our initial public offering. One-time expenses,
net in the three and six months ended June 30, 2019 primarily
relate to legal settlements.
A reconciliation of non-GAAP free cash flow to cash provided by
operating activities for the three and six months ended June 30,
2018 and 2019 is as follows (in thousands):
Three Months Ended June
30,
Six Months Ended June
30,
2018
2019
2018
2019
Net cash provided by operating
activities
$
13,471
$
6,759
$
25,627
$
22,683
Purchases of property and equipment
(637
)
(4,768
)
(1,077
)
(9,755
)
Free cash flow
$
12,834
$
1,991
$
24,550
$
12,928
Net cash used in investing activities
$
(637
)
$
(4,768
)
$
(1,077
)
$
(9,755
)
Net cash provided by (used in) financing
activities
$
—
$
15,783
$
(15,100
)
$
15,535
A reconciliation of non-GAAP adjusted diluted earnings per share
to diluted earnings (net loss) per share for the three and six
months ended June 30, 2018 and 2019 is as follows (in dollars):
Three Months Ended June
30,
Six Months Ended June
30,
2018
2019
2018
2019
Class B
Class A
Class B
Class B
Class A
Class B
Earnings (net loss) per share —
diluted
$
0.15
$
(0.57
)
$
(0.57
)
$
0.23
$
(0.51
)
$
(0.51
)
Repurchase of Class B common stock,
net
—
0.75
0.75
—
0.76
0.76
Adjusted earnings per share — diluted
$
0.15
$
0.18
$
0.18
$
0.23
$
0.25
$
0.25
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version on businesswire.com: https://www.businesswire.com/news/home/20190808005690/en/
Investors: 562-282-4990 IR@revolve.com
or
Media: Kendall Sargeant kendall.sargeant@revolve.com
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