Net Sales Increased 22% to $154.2
million Net Income Increased 34% to $9.6 million
Adjusted EBITDA Increased 40% to $14.4 million
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,
2019.
“We delivered strong growth in net sales, profitability and cash
flows in Q3, while continuing to invest in the large market
opportunity ahead of us,” said co-founder and co-CEO Mike
Karanikolas. “Our ability to drive profitable growth at scale
illustrates our unique business model and the deep relationship we
have established with our growing customer base,” added co-founder
and co-CEO Michael Mente.
Third Quarter Financial Highlights
Three Months Ended September
30,
2019(1)
2018
YoY Change
(in thousands)
Net sales
$
154,197
$
125,909
22.5
%
Gross profit
$
82,678
$
66,385
24.5
%
Gross margin
53.6
%
52.7
%
Net income
$
9,559
$
7,140
33.9
%
Adjusted EBITDA (non-GAAP financial
measure)
$
14,438
$
10,312
40.0
%
Net cash provided by operating
activities
$
9,150
$
2,410
279.7
%
Free cash flow (non-GAAP financial
measure)
$
7,448
$
1,822
308.8
%
(1) Third quarter 2019 financial results
reflect $1.5 million in net sales realized as a result of a change
in estimate related to store credit breakage.
Operational Metrics
Active customers
1,438
1,080
33.1
%
Orders placed
1,194
950
25.7
%
- Total net sales of $154.2 million, a year-over-year increase of
22.5%
- Revolve segment net sales of $135.4 million, a year-over-year
increase of 23.7%
- Forward segment net sales of $18.8 million, a year-over-year
increase of 14.2%
- Gross profit of $82.7 million, a year-over-year increase of
24.5%
- Gross margin of 53.6%, a year-over-year increase of 89 basis
points
- Net income of $9.6 million, a year-over-year increase of
33.9%
- Adjusted EBITDA (a non-GAAP financial measure) of $14.4
million, a year-over-year increase of 40.0%
- Net cash generated by operating activities of $9.2 million, a
year-over-year increase of 279.7%
- Free cash flow of $7.4 million, a year-over-year increase of
308.8%
- Cash and cash equivalents of $51.1 million, an increase of 14%
from June 30, 2019, and no debt
- 1,438,000 active customers in the trailing 12 months, a
year-over-year increase of 33.1%
- 1,194,000 orders placed, a year-over-year increase of
25.7%
- Average order value (AOV) of $275, a year-over-year decrease of
1.8%
Outlook
Based on information available as of November 7, 2019, we are
providing the following outlook for the full fiscal year ending
December 31, 2019:
Net Sales
$598 - $606 million
20% - 22% growth
Adjusted EBITDA
$51 - $55 million
10% - 18% growth
8.5% - 9.1% 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.
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 (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 8975837. 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)
859-2056 within the United States or (404) 537-3406 outside the
United States. The replay ID is 8975837.
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
September 30, 2019, which we expect to file with the SEC on or
before November 12, 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 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,
free cash flow and adjusted diluted earnings per share.
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 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.
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.
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.
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
STATEMENTS OF INCOME
(Unaudited)
(In thousands, except per share
data)
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Net sales
$
154,197
$
125,909
$
453,437
$
371,016
Cost of sales
71,519
59,524
209,587
174,866
Gross profit
82,678
66,385
243,850
196,150
Operating expenses:
Fulfillment
5,118
3,327
14,914
9,372
Selling and distribution
22,581
18,305
66,811
52,827
Marketing
23,127
18,956
67,539
55,470
General and administrative
19,019
16,280
57,124
47,365
Total operating expenses
69,845
56,868
206,388
165,034
Income from operations
12,833
9,517
37,462
31,116
Other (income) expense, net
(7
)
155
653
475
Income before income taxes
12,840
9,362
36,809
30,641
Provision for income tax
3,281
2,222
9,547
7,702
Net income
9,559
7,140
27,262
22,939
Less: Net loss attributable to
non-controlling interest
—
—
—
47
Net income attributable to Revolve Group,
Inc.
9,559
7,140
27,262
22,986
Less: Repurchase of Class B common stock
upon
corporate conversion
—
—
(40,816
)
—
Net income (loss) attributable to
common
stockholders
$
9,559
$
7,140
$
(13,554
)
$
22,986
Earnings (net loss) per share of Class A
and Class B
common stock:
Basic
$
0.14
$
0.11
$
(0.25
)
$
0.35
Diluted
$
0.13
$
0.10
$
(0.25
)
$
0.33
Weighted average Class A and Class B
common shares
outstanding:
Basic
68,871
41,936
53,376
41,936
Diluted
72,658
44,798
53,376
44,458
REVOLVE GROUP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In thousands, except unit, share
and per share data)
September 30,
December 31,
2019
2018
Assets
Current assets:
Cash and cash equivalents
$
51,145
$
16,369
Accounts receivable, net
5,600
5,337
Inventory
103,744
102,220
Income taxes receivable
13
—
Prepaid expenses and other current
assets
26,213
15,227
Total current assets
186,715
139,153
Property and equipment, net
14,890
5,907
Intangible assets, net
322
564
Goodwill
2,042
2,042
Other assets
669
731
Deferred income taxes
17,093
13,677
Total assets
$
221,731
$
162,074
Liabilities and Members'/Stockholders'
Equity
Current liabilities:
Accounts payable
$
25,812
$
20,219
Income taxes payable
506
917
Accrued expenses
21,106
18,398
Returns reserve
37,469
29,184
Other current liabilities
16,048
13,538
Total current liabilities
100,941
82,256
Members' equity:
Class T Preferred Units, no par value—zero
and 23,551,834 units authorized,
issued and outstanding as of September 30,
2019 and December 31, 2018,
respectively.
—
15,000
Class A Common Units, no par value—zero
and 41,936,219 units authorized,
issued and outstanding as of September 30,
2019 and December 31, 2018,
respectively.
—
3,548
Stockholders' equity:
Class A common stock, $0.001 par value;
1,000,000,000 and zero shares
authorized as of September 30, 2019 and
December 31, 2018, respectively;
13,529,603 and zero shares issued and
outstanding as of September 30, 2019
and December 31, 2018, respectively.
14
—
Class B common stock, $0.001 par value;
125,000,000 and zero shares authorized
as of September 30, 2019 and December 31,
2018, respectively; 55,340,994 and
zero shares issued and outstanding as of
September 30, 2019 and December 31,
2018, respectively.
55
—
Accumulated members' equity
—
61,270
Additional paid-in capital
72,884
—
Retained earnings
47,837
—
Total members'/stockholders' equity
120,790
79,818
Total liabilities and
members’/stockholders’ equity
$
221,731
$
162,074
REVOLVE GROUP, INC. AND
SUBSIDIARIES
CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
Nine Months Ended September
30,
2019
2018
Operating activities:
Net income
$
27,262
$
22,939
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
2,716
2,209
Equity-based compensation
1,545
864
Deferred income taxes
(3,416
)
1,982
Changes in operating assets and
liabilities:
Accounts receivable
(263
)
(1,196
)
Inventories
(15,540
)
(13,601
)
Income taxes receivable
(13
)
(1,648
)
Prepaid expenses and other current
assets
34
(1,621
)
Other assets
62
(372
)
Accounts payable
5,593
806
Income taxes payable
(411
)
—
Accrued expenses
2,708
4,504
Returns reserve
8,285
11,596
Other current liabilities
3,271
1,575
Net cash provided by operating
activities
31,833
28,037
Investing activities:
Purchases of property and equipment
(11,457
)
(1,665
)
Net cash used in investing activities
(11,457
)
(1,665
)
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
(1,697
)
(1,780
)
Proceeds from the exercise of stock
options, net
3
—
Net cash provided by (used in) financing
activities
14,567
(16,880
)
Effect of exchange rate changes on cash
and cash equivalents
(167
)
(80
)
Net increase in cash and cash
equivalents
34,776
9,412
Cash and cash equivalents, beginning of
period
16,369
10,588
Cash and cash equivalents, end of
period
$
51,145
$
20,000
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest
$
—
$
87
Income taxes, net of refund
$
13,388
$
7,368
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 September
30,
Nine Months Ended September
30,
Net sales
2019
2018
2019
2018
REVOLVE
$
135,426
$
109,473
$
402,021
$
322,588
FORWARD
18,771
16,436
51,416
48,428
Total
$
154,197
$
125,909
$
453,437
$
371,016
Gross profit
REVOLVE
$
74,991
$
61,236
$
223,091
$
178,336
FORWARD
7,687
5,149
20,759
17,814
Total
$
82,678
$
66,385
$
243,850
$
196,150
The following table lists net sales by
geographic area (in thousands):
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
United States
$
128,234
$
103,280
$
379,694
$
301,506
Rest of the world
25,963
22,629
73,743
69,510
Total
$
154,197
$
125,909
$
453,437
$
371,016
REVOLVE GROUP, INC. AND
SUBSIDIARIES
KEY OPERATING AND FINANCIAL
METRICS
(Unaudited)
(In thousands, except average
order value and percentages)
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
(in thousands, except average
order value and percentages)
Gross margin
53.6
%
52.7
%
53.8
%
52.9
%
Adjusted EBITDA
$
14,438
$
10,312
$
41,955
$
34,619
Free cash flow
$
7,448
$
1,822
$
20,376
$
26,372
Active customers
1,438
1,080
1,438
1,080
Total orders placed
1,194
950
3,623
2,756
Average order value
$
275
$
280
$
270
$
281
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 nine months ended September
30, 2019 and 2018 is as follows (in thousands):
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
(in thousands)
Net income
$
9,559
$
7,140
$
27,262
$
22,939
Excluding:
Other (income) expense, net
(7
)
155
653
475
Provision for income tax
3,281
2,222
9,547
7,702
Depreciation and amortization
1,132
750
2,716
2,209
Equity-based compensation
513
352
1,545
864
One-time expenses, net(1)
(40
)
(307
)
232
430
Adjusted EBITDA
$
14,438
$
10,312
$
41,955
$
34,619
(1)
One-time expenses, net in the
nine months ended September 30, 2019 primarily relate to legal
settlements. One time-expenses, net in the three and nine months
ended September 30, 2018 primarily relate to our entity
restructuring and our initial public offering.
A reconciliation of non-GAAP free cash
flow to cash provided by operating activities for the three and
nine months ended September 30, 2019 and 2018 is as follows (in
thousands):
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
(in thousands)
Net cash provided by operating
activities
$
9,150
$
2,410
$
31,833
$
28,037
Purchases of property and equipment
(1,702
)
(588
)
(11,457
)
(1,665
)
Free cash flow
$
7,448
$
1,822
$
20,376
$
26,372
Net cash used in investing activities
$
(1,702
)
$
(588
)
$
(11,457
)
$
(1,665
)
Net cash (used in) provided by financing
activities
$
(968
)
$
(1,780
)
$
14,567
$
(16,880
)
A reconciliation of non-GAAP adjusted
diluted earnings per share to diluted earnings (net loss) per share
for the three and nine months ended September 30, 2019 and 2018 is
as follows (in dollars):
Three Months Ended September
30,
Nine Months Ended September
30,
2019
2018
2019
2018
Class A
Class B
Class B
Class A
Class B
Class B
Earnings (net loss) per share —
diluted
$
0.13
$
0.13
$
0.10
$
(0.25
)
$
(0.25
)
$
0.33
Repurchase of Class B common stock,
net
—
—
—
0.63
0.63
—
Adjusted earnings per share — diluted
$
0.13
$
0.13
$
0.10
$
0.38
$
0.38
$
0.33
View source
version on businesswire.com: https://www.businesswire.com/news/home/20191107005962/en/
Investors:
Erik Randerson, CFA 562.677.9513 IR@revolve.com
or
Media:
Kendall Sargeant kendall.sargeant@revolve.com
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