Revolve Group, Inc. (NYSE: RVLV), the next-generation fashion
retailer for Millennial and Generation Z consumers, today announced
financial results for the fourth quarter and full year ended
December 31, 2019.
“We are proud to extend our long track record of achieving
top-line growth and profitability, delivering net sales growth of
over 20%, continued growth in profitability and exceptional cash
flow in 2019,” said co-founder and co-CEO Michael Mente. “We are
excited about our 2020 initiatives to continue building on the
recent momentum in the Forward segment and International markets,
while further investing in the core REVOLVE segment, including
enhancing the owned brands platform and continuing to innovate in
marketing, technology and customer experience,” added co-founder
and co-CEO Mike Karanikolas.
Fourth Quarter and Full Year 2019
Financial Summary
Three Months Ended December
31,
Twelve Months Ended December
31,
2019
2018
% Change
2019
2018
% Change
(in thousands)
Net sales
$
147,556
$
127,723
16%
$
600,993
$
498,739
21%
Gross profit
$
78,103
$
69,156
13%
$
321,953
$
265,306
21%
Gross margin
52.9%
54.1%
53.6%
53.2%
Net income
$
8,405
$
7,699
9%
$
35,667
$
30,638
16%
Adjusted EBITDA (non-GAAP financial
measure)
$
13,650
$
11,876
15%
$
55,605
$
46,495
20%
Net cash provided by (used in) operating
activities
$
14,224
$
(1,382)
N/A
$
46,057
$
26,655
73%
Free cash flow (non-GAAP financial
measure)
$
13,226
$
(2,762)
N/A
$
33,602
$
23,610
42%
Operational Metrics
Three Months Ended December
31,
Twelve Months Ended December
31,
2019
2018
% Change
2019
2018
% Change
(in thousands, except average
order value)
Active customers
1,488
1,175
27%
1,488
1,175
27%
Orders placed
1,092
954
14%
4,715
3,710
27%
Average order value
$
282
$
274
3%
$
275
$
279
(1)%
Full Year 2019 Highlights
- Total net sales of $601.0 million, a year-over-year (YoY)
increase of 21%
- Gross margin of 53.6%, a YoY increase of 37 basis points
- Net income of $35.7 million, a YoY increase of 16%
- Adjusted EBITDA (a non-GAAP financial measure) of $55.6
million, a YoY increase of 20%
- Net cash generated by operating activities of $46.1 million, a
YoY increase of 73%
- Free cash flow (a non-GAAP financial measure) of $33.6 million,
a YoY increase of 42%
- Cash and cash equivalents of $65.4 million, an increase of
$14.3 million, or 28%, from September 30, 2019, and no debt
Segment Revenue Highlights
- Revolve segment net sales of $527.3 million in FY 2019 and
$125.2 million in Q4 2019, YoY increases of 22% and 13%,
respectively
- Forward segment net sales of $73.7 million in FY 2019 and $22.3
million in Q4 2019, YoY increases of 13% and 33%, respectively
2020 Outlook
Based on information available as of February 25, 2020, we are
providing the following outlook for the full fiscal year ending
December 31, 2020:
Net Sales
$679 - $703 million
13% - 17% growth
Adjusted EBITDA
$56 - $61 million
1% - 10% growth
8.2% - 8.7% margin
Additional Full Year 2020 Outlook Assumptions
- The net sales outlook factors in an estimated 1 to 3 point
negative impact to the FY 2020 net sales growth rate as a result of
the coronavirus outbreak, due primarily to supply constraints for
our owned brand products and, to a lesser extent, supply
constraints for third party brands that source from China, as well
as reduced consumer demand in the greater China region. The
situation remains fluid and uncertain, so estimates of the negative
impact are subject to change.
- Gross margin is expected to be below the 52.9% gross margin
reported for Q4 2019.
- Effective tax rate is expected to be approximately 25%.
- Weighted average diluted shares are expected to be
approximately 72 million.
- Capital expenditures are expected to be approximately $5
million.
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,
the provision for income taxes and non-routine items, 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 8389657. 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 8389657.
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 2020. 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 Annual Report on Form 10-K for the year ended
December 31, 2019, which we expect to file with the SEC on or
before February 26, 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 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 (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
CONSOLIDATED STATEMENTS OF
INCOME
(Unaudited)
(In thousands, except per share
data)
Three Months Ended December
31,
Years Ended December
31,
2019
2018
2019
2018
Net sales
$
147,556
$
127,723
$
600,993
$
498,739
Cost of sales
69,453
58,567
279,040
233,433
Gross profit
78,103
69,156
321,953
265,306
Operating expenses:
Fulfillment
4,499
3,920
19,413
13,292
Selling and distribution
20,895
17,794
87,706
70,621
Marketing
21,602
18,924
89,141
74,394
General and administrative
20,471
17,836
77,595
65,201
Total operating expenses
67,467
58,474
273,855
223,508
Income from operations
10,636
10,682
48,098
41,798
Other expense, net
278
156
931
631
Income before income taxes
10,358
10,526
47,167
41,167
Provision for income tax
1,953
2,827
11,500
10,529
Net income
8,405
7,699
35,667
30,638
Less: Net loss attributable to
non-controlling interest
—
—
—
47
Net income attributable to Revolve Group,
Inc.
8,405
7,699
35,667
30,685
Less: Repurchase of Class B common stock
upon corporate conversion
—
—
(40,816
)
—
Net income (loss) attributable to common
stockholders
$
8,405
$
7,699
$
(5,149
)
$
30,685
Earnings (net loss) per share of Class A
and Class B common stock:
Basic
$
0.12
$
0.12
$
(0.09
)
$
0.47
Diluted
$
0.12
$
0.11
$
(0.09
)
$
0.44
Weighted average Class A and Class B
common shares outstanding:
Basic
68,921
41,936
57,294
41,936
Diluted
71,947
44,810
57,294
44,584
REVOLVE GROUP, INC. AND
SUBSIDIARIES
CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(In thousands, except unit, share
and per share data)
December 31,
2019
2018
Assets
Current assets:
Cash and cash equivalents
$
65,418
$
16,369
Accounts receivable, net
4,751
5,337
Inventory
104,257
102,220
Income taxes receivable
761
—
Prepaid expenses and other current
assets
24,155
15,227
Total current assets
199,342
139,153
Property and equipment, net
14,734
5,907
Intangible assets, net
240
564
Goodwill
2,042
2,042
Other assets
642
731
Deferred income taxes, net
15,290
13,677
Total assets
$
232,290
$
162,074
Liabilities and Members'/Stockholders'
Equity
Current liabilities:
Accounts payable
$
29,813
$
20,219
Income taxes payable
470
917
Accrued expenses
19,399
18,398
Returns reserve
35,104
29,184
Other current liabilities
16,740
13,538
Total current liabilities
101,526
82,256
Members' equity:
Class T Preferred Units, no par value—zero
and 23,551,834 units authorized, issued and outstanding as of
December 31, 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
December 31, 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 December 31, 2019
and December 31, 2018, respectively; 14,009,859 and zero shares
issued and outstanding as of December 31, 2019 and December 31,
2018, respectively.
14
—
Class B common stock, $0.001 par value;
125,000,000 and zero shares authorized as of December 31, 2019 and
December 31, 2018, respectively; 55,069,124 and zero shares issued
and outstanding as of December 31, 2019 and December 31, 2018,
respectively.
55
—
Accumulated members' equity
—
61,270
Additional paid-in capital
74,018
—
Retained earnings
56,677
—
Total members'/stockholders' equity
130,764
79,818
Total liabilities and
members’/stockholders’ equity
$
232,290
$
162,074
REVOLVE GROUP, INC. AND
SUBSIDIARIES
CONSOLIDATED STATEMENTS OF
CASH FLOWS
(Unaudited)
(In thousands)
Year Ended December
31,
2019
2018
Operating activities:
Net income
$35,667
$30,638
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization
3,952
2,867
Equity-based compensation
2,067
1,400
Deferred income taxes, net
(1,613)
(3,768)
Changes in operating assets and
liabilities:
Accounts receivable
586
361
Inventories
(15,623)
(26,046)
Income taxes receivable
(761)
3,708
Prepaid expenses and other current
assets
1,662
(3,356)
Other assets
89
(517)
Accounts payable
9,594
2,365
Income taxes payable
(447)
917
Accrued expenses
1,001
5,579
Returns reserve
5,920
10,179
Other current liabilities
3,963
2,328
Net cash provided by operating
activities
46,057
26,655
Investing activities:
Purchases of property and equipment
(12,455)
(3,045)
Net cash used in investing activities
(12,455)
(3,045)
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
(1,834)
(2,521)
Proceeds from the exercise of stock
options, net
752
—
Net cash provided by (used in) financing
activities
15,179
(17,621)
Effect of exchange rate changes on cash
and cash equivalents
268
(208)
Net increase in cash and cash
equivalents
49,049
5,781
Cash and cash equivalents, beginning of
period
16,369
10,588
Cash and cash equivalents, end of
period
$65,418
$16,369
Supplemental disclosure of cash flow
information:
Cash paid during the period for:
Interest
$ —
$87
Income taxes, net of refund
$14,324
$9,673
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 December
31,
Twelve Months Ended December
31,
Net sales
2019
2018
2019
2018
REVOLVE
$
125,230
$
110,960
$
527,251
$
433,548
FORWARD
22,326
16,763
73,742
65,191
Total
$
147,556
$
127,723
$
600,993
$
498,739
Gross profit
REVOLVE
$
68,951
$
62,725
$
292,042
$
241,061
FORWARD
9,152
6,431
29,911
24,245
Total
$
78,103
$
69,156
$
321,953
$
265,306
The following table lists net sales by
geographic area (in thousands):
Three Months Ended December
31,
Twelve Months Ended December
31,
2019
2018
2019
2018
United States
$
123,188
$
107,814
$
502,882
$
409,320
Rest of the world
24,368
19,909
98,111
89,419
Total
$
147,556
$
127,723
$
600,993
$
498,739
REVOLVE GROUP, INC. AND
SUBSIDIARIES
KEY OPERATING AND FINANCIAL
METRICS
(Unaudited)
(In thousands, except average
order value and percentages)
Three Months Ended December
31,
Twelve Months Ended December
31,
2019
2018
2019
2018
(in thousands, except average
order value and percentages)
Gross margin
52.9
%
54.1
%
53.6
%
53.2
%
Adjusted EBITDA
$
13,650
$
11,876
$
55,605
$
46,495
Free cash flow
$
13,226
$
(2,762
)
$
33,602
$
23,610
Active customers
1,488
1,175
1,488
1,175
Total orders placed
1,092
954
4,715
3,710
Average order value
$
282
$
274
$
275
$
279
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 twelve months ended December 31, 2019 and 2018 is as
follows (in thousands):
Three Months Ended December
31,
Twelve Months Ended December
31,
2019
2018
2019
2018
(in thousands)
Net income
$
8,405
$
7,699
$
35,667
$
30,638
Excluding:
Other expense, net
278
156
931
631
Provision for income tax
1,953
2,827
11,500
10,529
Depreciation and amortization
1,236
658
3,952
2,867
Equity-based compensation
522
536
2,067
1,400
Non-routine items (1)
1,256
—
1,488
430
Adjusted EBITDA
$
13,650
$
11,876
$
55,605
$
46,495
(1)
Non-routine items in the three and twelve
months ended December 31, 2019 primarily relate to legal
settlements. Non-routine items in the twelve months ended December
31, 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 twelve months ended December
31, 2019 and 2018 is as follows (in thousands):
Three Months Ended December
31,
Twelve Months Ended December
31,
2019
2018
2019
2018
(in thousands)
Net cash provided by (used in) operating
activities
$
14,224
$
(1,382
)
$
46,057
$
26,655
Purchases of property and equipment
(998
)
(1,380
)
(12,455
)
(3,045
)
Free cash flow
$
13,226
$
(2,762
)
$
33,602
$
23,610
Net cash used in investing activities
$
(998
)
$
(1,380
)
(12,455
)
(3,045
)
Net cash provided by (used in) financing
activities
$
612
$
(741
)
15,179
(17,621
)
A reconciliation of non-GAAP adjusted diluted earnings per share
to diluted earnings (net loss) per share for the three and twelve
months ended December 31, 2019 and 2018 is as follows (in
dollars):
Three Months Ended December
31,
Twelve Months Ended December
31,
2019
2018
2019
2018
Class A
Class B
Class B
Class A
Class B
Class B
Earnings (net loss) per share —
diluted
$
0.12
$
0.12
$
0.11
$
(0.09
)
$
(0.09
)
$
0.44
Repurchase of Class B common stock,
net
—
—
—
0.59
0.59
—
Adjusted earnings per share — diluted
$
0.12
$
0.12
$
0.11
$
0.50
$
0.50
$
0.44
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200225005949/en/
Investors: Erik Randerson, CFA 562.677.9513 IR@revolve.com
or
Media: Kendall Sargeant kendall.sargeant@revolve.com
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