Revolve Group’s Q3 Profits Surge On 10 Percent Sales Growth

“Our strong quarter is a result of our execution on key growth and efficiency initiatives, which have helped us continue our net sales momentum into the first month of the fourth quarter of 2024,” said Co-founder and Co-CEO Michael Mente. “We achieved these strong financial results while continuing to invest in initiatives that we believe set us up well for market share gains over the long-term, including international expansion, leveraging AI technology for merchandising and marketing enhancements, expansion into physical retail, and broadening our owned brand capabilities.”    

Additional Third Quarter 2024 Metrics and Results Commentary

• Trailing 12-month Active customers grew to 2,628,000 as of September 30, 2024, an increase of 5 percent year-over-year. 
• Net sales were $283.1 million, a year-over-year increase of 10 percent. 
• Gross profit was $144.9 million, a year-over-year increase of 9 percent. 
• Gross margin was 51.2 percent, a decrease of 56 basis points year-over-year that primarily reflects deeper markdowns within our markdown inventory, a higher mix of third-party brand sales, higher inventory valuation adjustments, and increased shipping rates for inbound  merchandise from vendors.     
• Fulfillment costs were $9.3 million, or 3.3 percent of net sales, compared to $9.2 million, or 3.6 percent of net sales, in the third quarter of 2023. The increased fulfillment efficiency year-over-year as a percentage of net sales primarily reflects a lower proportion of returned purchases and an increase in average order value.
• Selling and distribution costs were $47.9 million, or 16.9 percent of net sales, compared to $48.9 million, or 19.0 percent of net sales, in the third quarter of 2023. The increased efficiency year-over-year as a percentage of net sales primarily reflects lower shipping rates, a lower proportion of returned purchases, and higher average order value year-over-year, partially offset by higher merchant processing fees.
• Marketing costs were $39.5 million, or 14.0 percent of net sales, compared to $39.6 million, or 15.4 percent of net sales, in the third quarter of 2023. The increased marketing efficiency year-over-year as a percentage of net sales primarily reflects efficiencies in our brand marketing and performance marketing investments. 
• Net income was $10.8 million, an increase from $3.2 million in the third quarter of 2023. Net income in the prior-year period included $6.6 million in non-routine costs ($5.0 million, net of taxes) related to an accrual and a charge for a settled legal matter.       
• Adjusted EBITDA was $17.5 million, a year-over-year increase of 85 percent that primarily reflects a year-over-year increase in net sales and gross profit combined with increased year-over-year efficiency in our selling and distribution costs, marketing investment and fulfillment costs.     
• Diluted earnings per share (EPS) was $0.15, an increase from $0.04 in the third quarter of 2023.                           

Additional Net Sales Commentary

• Revolve segment net sales were $243.4 million, a year-over-year increase of 12 percent.
• FWRD segment net sales were $39.7 million, essentially flat year-over-year.   
• Domestic net sales were $222.7 million, a year-over-year increase of 7 percent.
• International net sales were $60.5 million, a year-over-year increase of 20 percent, driven by growth in all major regions.  

Cash Flow and Balance Sheet

• Net cash provided by operating activities was $9.1 million in the third quarter and $22.8 million in the nine-month year-to-date period ended September 30, 2024 and free cash flow was $6.2 million in the third quarter and $16.2 million in the nine-month year-to-date period. The reduced cash flow provided by operating activities year-over-year for the nine-month year-to-date period in 2024 primarily reflects growth in our inventory balance compared to a declining inventory balance in the first nine months of 2023, partially offset by higher net income and changes in working capital excluding inventory.        
• Stock repurchases were $1.9 million for the third quarter ended September 30, 2024, exclusive of broker fees and excise taxes. The company repurchased 118,193 shares of its Class A common stock during the third quarter at an average cost of $15.67 per share. $57.6 million remained available under the company’s $100 million stock repurchase program as of September 30, 2024.
• Cash and cash equivalents were $252.8 million as of September 30, 2024, an increase of $8.1 million, or 3 percent, from $244.7 million as of June 30, 2024. Our balance sheet as of September 30, 2024 remains debt free. The year-over-year decrease in cash and cash equivalents compared to September 30, 2023 primarily reflects our cash flow generated from operations that was more than offset by $29.8 million in stock repurchases during the past four quarters. 
• Inventory as of September 30, 2024 was $240.0 million, an increase of $37.2 million, or 18 percent, from September 30, 2023.            

Results Since the End of the Third Quarter of 2024
Net sales in October 2024 increased by a low-double digit percentage year-over-year, a sequential improvement compared to the year-over-year trend reported for the third quarter of 2024.

2024 Business Outlook
Based on information available to us as of November 5, 2024, we are providing the following guidance for the full year ending December 31, 2024 and the fourth quarter ending December 31, 2024.  

   Charts courtesy Revolve Group