Q4 2023 Revolve Group Inc Earnings Call

Operator: Good afternoon. My name is Rob, and I will be your conference operator today. At this time, I would like to welcome everyone to Revolve's fourth quarter and full year 2023 results conference call. All lines have been placed on mute to prevent any background noise.

Good afternoon, My name is Rob and I'll be your conference operator today at this time I would like to welcome everyone to the revolve fourth quarter and full year 2023 results conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during <unk>.

Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press the star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. At this time, I'd like to turn the conference over to Eric Randerson, Vice President of Investor Relations at Revolve. Thank you.

This time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question again prestige star one.

At this time I'd like to turn the conference over to Erik Randerson, Vice President of Investor Relations at revolve. Thank you you may begin.

Eric Randerson: You may begin. Good afternoon, everyone, and thanks for joining us to discuss Revolve's fourth quarter and full year 2023 results. Before we begin, I'd like to mention that we have posted a presentation containing Q4 and full-year financial highlights on our investor relations website, located at investors.revolve.com. I would also like to remind you that this conference call will include forward-looking statements, including statements related to our future growth, our inventory balance, our key priorities for 2024, including related investments, product category expansion, cost-saving measures, international expansion, and technology enhancements, our marketing events, our partnerships, and our outlook for net sales, gross margin, operating expenses, and effective tax rates. These statements are subject to various risks, uncertainties, and assumptions that could cause our actual results to differ materially from these statements, including the risks mentioned in this afternoon's press release, as well as other risks and uncertainties disclosed under the caption, Risk Factors and Elsewhere in our filings with the Securities and Exchange Commission, including, without limitation, our quarterly report on Form 10-Q for the quarter ended September 30, 2023, and our annual report on Form 10-K for We undertake no obligation to revise or update any forward-looking statements or information except as required by law.

Erik Randerson: Good afternoon, everyone and thanks for joining us to discuss <unk> fourth quarter and full year 2023 results before we begin I'd like to mention that we have posted a presentation containing Q4 and full year financial highlights to our Investor Relations website located at investors revolve Dot Com I would also like to remind you that this conference call will include forward looking statements, including statements really.

Erik Randerson: To our future growth our inventory balance our key priorities for 2024, including related investments product category expansion cost saving measures international expansion and technology enhancements and marketing events, our partnerships and our outlook for net sales gross margin operating expenses and effective tax rate.

Erik Randerson: These statements are subject to various risks uncertainties and assumptions that could cause our actual results to differ materially from these statements, including the risks mentioned in this afternoon's press release as well as other risks and uncertainties disclosed under the caption risk factors and elsewhere in our filings with the Securities and Exchange Commission, including without limitation, our quarterly report on Form 10-Q for the quarter.

Erik Randerson: Ended September 32023.

Erik Randerson: Our annual report on Form 10-K for the year ended December 31, 2023, which we expect to file with the SEC on February 27, 2024, all of which can be found on our website at investors thought revolve dot com, we undertake no obligation to revise or update any forward looking statements or information, except as required by law.

Eric Randerson: During our call today, we'll also reference certain non-GAAP financial information, including adjusted EBITDA and free cash flow. We use non-GAAP measures in some of our financial discussions as we believe they provide valuable insights into our operational performance and underlying operating results. 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.

During our call today, we will also reference certain non-GAAP financial information, including adjusted EBITDA and free cash flow, we use non-GAAP measures in some of our financial discussions as we believe they provide valuable insights on our operational performance and underlying operating results. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for.

Erik Randerson: Or superior to 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 reconciliations of non-GAAP measures to GAAP measures as well as the definitions of each measure their limitations and our rationale for using them can be found in this afternoon's press release and in our SEC filings.

Eric Randerson: And our non-GAAP measures may be different from non-GAAP measures used by other companies. Reconciliations of non-GAAP measures to GAAP measures, as well as the definitions of each measure, its limitations, and our rationale for using them, can be found in this afternoon's press release and in our SEC filing. Joining me on the call today are co-founders and co-CEOs Mike Karanikolas and Michael Mente, as well as Jesse Timmermans, our CFO. Following our prepared remarks, we'll open the call to your questions. With that, I'll turn it over to Mike.

Erik Randerson: Joining me on the call today are our co founders and co Ceos, Mike carrier Nikolas, Michael Mente, as well as Jesse <unk> our CFO.

Erik Randerson: Following our prepared remarks, we'll open the call for your questions with that I'll turn it over to Mike.

Mike Karanikolas: Hello everyone, and thanks for joining us today. We ended a challenging year in 2023 with a solid fourth quarter, highlighted by a return to growth in the Revolve segment, a year-over-year increase in our consolidated gross margin, and encouraging early progress in our efforts to drive efficiencies in our global logistics operations. I'll start by briefly discussing highlights from our fourth quarter results before shifting to the full year 2023 and closing with our key priorities for 2024. Net sales were $258 million in the fourth quarter, a decrease of 1% year-over-year and a slight improvement from the 4% decline in the third quarter of 2023. U.S. net sales decreased 2% and were outpaced by international net sales increasing 7% year-over-year.

Michael Binetti: Hello, everyone and thanks for joining US today, we ended the challenging year in 2023 with a solid fourth quarter highlighted by a return to growth in the revolve segment our year over year increase in our consolidated gross margin.

Michael Binetti: Encouraging early progress in our efforts to drive efficiencies in our global logistics operations.

Michael Binetti: I'll start by briefly discussing the highlights for our fourth quarter results before shifting to the full year 2023, and closing with our key priorities for 2024.

Michael Binetti: Net sales were $258 million in the fourth quarter, a decrease of 1% year over year and a slight improvement from the 4% decline in the third quarter of 2023.

Michael Binetti: U S net sales decreased 2% and were outpaced by international net sales, increasing 7% year over year.

Mike Karanikolas: Our international gains were highlighted by exceptional growth in Mexico and improved year-over-year growth in Europe and the U.K., partially offset by declining sales in China and the Middle East. By segment, RevolveNet sales increased 1% year-over-year in the fourth quarter, its first year-over-year increase in four quarters. Forward net sales decreased 10% year-over-year, consistent with external reports from the luxury sector.

Michael Binetti: Our international gains were highlighted by exceptional growth in Mexico, and improved year over year growth in Europe, and the UK, partially offset by declining sales in China and the middle East.

Michael Binetti: By segment revolve net sales increased 1% year over year in the fourth quarter, our first year over year increase in the four quarters.

Michael Binetti: Forward net sales decreased 10% year over year consistent with external reports from the luxury sector.

Mike Karanikolas: As a relevant benchmark, Ernest Analytics reported that its credit card data reflects a 10% year-over-year decrease in luxury apparel spending by U.S. consumers during the holiday season. Now, moving below the revenue line. As a testament to our progress in rebalancing our inventory, our gross margin expanded to 52% in the fourth quarter, representing our first year-over-year increase in gross margin for six quarters. And with our inventory dynamics now in a very good place, in early 2024, we are back to year-over-year growth in receipts of new inventory for the Revolve segment. Net income for the fourth quarter was $3.5 million, or $0.05 per diluted share, and adjusted EBITDA was $9 million. As expected, both profitability measures declined year over year.

Michael Binetti: As a relevant benchmark earnest analytics reported that its credit card data reflects a 10% year over year decrease in luxury apparel spending by U S consumers during the holiday season.

Michael Binetti: Now moving below the revenue line is a testament to our progress in rebalancing our inventory our gross margin expanded to 52% in the fourth quarter, representing our first year over year increase in gross margin in six quarters.

Michael Binetti: With our inventory dynamics now in a very good place in early 2024 were back to year over year growth in receipts of new inventory for the revolve segment.

Michael Binetti: Net income for the fourth quarter was $3 5 million or <unk> <unk> per diluted share and adjusted EBITDA was $9 million as expected both profitability measures declined year over year.

Mike Karanikolas: I will now shift to a review of our performance and accomplishments for the full year 2023 before briefly touching on our key areas of focus for the coming year. From day one, Michael and I have approached the business with the customer at the center of everything we do. Even through a very challenging year, we continue to deliver an exceptional experience to our customer base of 2.5 million active customers, increasing our already exceptional customer satisfaction scores by more than a full point year over year. Our active customers grew 9% year over year, and we see a huge opportunity for further expansion in the U.S. and overseas. And importantly, we drove a year-over-year decrease in our average cost to acquire customers in 2020.

Michael Binetti: I will now shift to a review of our performance and accomplishments for the full year 2023 before briefly touching on our key areas of focus for the coming year.

Michael Binetti: From day, one Michael and I have approached the business with the customer at the center of everything we do.

Michael Binetti: Even through a very challenging year, we continued to deliver an exceptional experience to our customer base of $2 5 million active customers, increasing our already exceptional customer satisfaction scores by more than a full point year over year.

Michael Binetti: Our active customers grew 9% year over year, and we see a huge opportunity for further expansion in the U S and overseas.

And importantly, we drove a year over year decrease in our average cost to acquire customers in 2023.

Mike Karanikolas: We believe the reduced CAC illustrates the strength of our brand and execution by our team in optimizing spend across channels and audiences within a competitive environment. Now, shifting to our top-line results, net sales in 2023 were $1.1 billion, a decline of 3% year-over-year, despite the healthy growth in active customers.

We believe the reduced CAC illustrates the strength of our brand and execution by our team in optimizing spend across channels and audiences within a competitive environment.

Michael Binetti: Now shifting to our topline results.

Michael Binetti: Net sales in 2023 were $1 1 billion, a decline of 3% year over year, despite the healthy growth in active customers.

Mike Karanikolas: Our customer demographic faced increased macro pressures in 2023, which we believe contributed to the normalization of spending levels from the significant apparel spending in 2021 and 2022 coming out of the COVID lockdown. The normalization of purchases by our customers in 2023 is also evident in a key net sales retention. Recall that once a year, we disclose revenue retention from our prior year cohorts, defined as the revenue retention rate from the previous year for all existing customers who had purchased from us in a prior year. Since this retention metric has experienced significant variability in the past four years for obvious reasons, we believe it's important to look past the peaks and valleys.

Michael Binetti: Our customer demographic faced increased macro pressures in 2023, which we believe contributed to the normalization of spending levels from the significant apparel spending in 2021, and 2022 coming out of the Covid Lockdowns.

Michael Binetti: The normalization of purchases by our customers in 2023 is also evident in our key net sales retention metric recall that once a year, we disclosed the revenue retention from our prior year cohorts defined as the revenue retention rate from the previous year for all existing customers, who had purchased from us in the prior year.

Michael Binetti: This retention metric has experienced significant variability in the past four years for obvious reasons. We believe it's important to look past the peaks and valleys.

Mike Karanikolas: In 2023, active customers placed an average of 3.42 orders, which is 8% higher than in 2019. Also importantly, the average of our cohort net sales retention rates reported over the past four years is 92%, which is higher than our 89% net sales retention rate reported in 2019. Looking at the category performance, while the net sales of dresses, our largest category, were pressured in 2023 after increasing nearly 50% in 2022 and expanding at an even faster rate in 2021, I'm excited by our progress in the immersion category. Our emerging areas of beauty, men's, and home collectively increased by more than 20% in 2023, further validating our opportunity to expand our share of wallet in helping to offset the 5% decline in net sales from dresses We executed very well on a primary goal we set for 2023 to rebalance our inventory for growth and efficiency. The successful execution of this initiative helped drive a meaningfully higher mix of net sales at full price in the second half of 2023 when compared to how we started the year. This sets us up well for entering 2024.

Michael Binetti: In 2023 active customers placed an average of $3 42 orders, which is 8% higher than in 2019.

Michael Binetti: Also importantly, the average of our cohort net sales retention rates reported over the past four years is 92%, which is higher than our <unk>, 89% net sales retention rate reported in 2019.

Michael Binetti: Looking at the category performance, while the net sales of dresses our largest category was pressured in 2023 after increasing nearly 50% in 2022 and expanding at an even faster rate in 2021, I'm excited by our progress in emerging categories.

Michael Binetti: Our emerging areas of beauty men's and home collectively increased by more than 20% in 2023 further validating our opportunity to expand our share of wallet and helping to offset the 5% decline in net sales from dresses.

Michael Binetti: We executed very well on our primary goal, we set for 2023 to rebalance our inventory for growth and efficiency successful execution of this initiatives helped to drive a meaningfully higher mix of net sales at full price in the second half of 2023, when compared to how we started the year.

Michael Binetti: This sets us up well entering 2024.

Mike Karanikolas: And we continue to operate profitably and generate significant cash flow. While we are not satisfied with our adjusted EBITDA margin in 2023, our profitable and cash-generative business remains a key competitive advantage. In 2023, we generated $43 million in operating cash flow and $39 million in free cash flow, an increase of 85% and 114%, respectively. Our consistent cash flow generation gives us the capacity to invest throughout the cycle at a time when many peers have no choice but to significantly reduce investment.

Michael Binetti: And we continue to operate profitably and generate significant cash flow. While we are not satisfied with our adjusted EBITDA margin in 2023 are profitable and cash generative business remains a key competitive advantage in 2023, we generated $43 million in operating cash flow and $39 million in free cash flow an increase of 85.

Michael Binetti: <unk> and 114%, respectively, our consistent cash flow generation gives us the capacity to invest throughout the cycle at a time when many peers have no choice, but to significantly reduce investment.

Mike Karanikolas: Our strong cash flow has further strengthened our balance sheet with $245 million in cash at year-end 2023, even while investing $31 million in stock repurchases during the year to enhance shareholder value. Our cash position has increased by nearly 4x compared to the $65 million cash on our balance sheet at year-end 2019. Finally, we've meaningfully advanced our technology and personalization capabilities in 2023, further elevating the customer experience. Leveraging AI, we significantly improved the recommendation of similar items using visual images, expanding conversion opportunities, and further elevating our navigation per customer.

Michael Binetti: Our strong cash flow has further strengthened our balance sheet with $245 million in cash at year end 2023, even while investing $31 million in stock repurchases during the year to enhance shareholder value.

Michael Binetti: Our cash position has increased by nearly four X compared to the $65 million in cash on our balance sheet at year end 2019.

Michael Binetti: Finally, we meaningfully advanced our technology and personalization capabilities during 2023.

Michael Binetti: Elevating the customer experience.

Michael Binetti: Leveraging AI, we significantly improved the recommendation of similar items using visual images expanding conversion opportunities and further elevating our navigation for customers driving continuous improvement in personalization and site navigation is particularly important since we offer a broad assortment of more than 100000 styles at any given time.

Mike Karanikolas: Driving continuous improvement in personalization and site navigation is particularly important since we offer a broad assortment of more than 100,000 styles at any given time. I will wrap up with a discussion of our key priorities for 2024, which are aligned with our focus on maximizing value over the long term. First, we will continue to efficiently invest to expand our brand awareness, grow our customer base, and strengthen the connection with the next generation consumer. Michael will talk about our brand building initiatives in his remarks.

Michael Binetti: I will wrap up with a discussion of our key priorities for 2024, which are aligned with our focus on maximizing value over the long term.

Michael Binetti: First we will continue to efficiently invest to expand our brand awareness grow our customer base and strengthen the connection with the next generation consumer.

Michael Binetti: Michael will talk about our brand building initiatives in his remarks.

Mike Karanikolas: Second, we will continue to build on the successful expansion of our assortment into adjacent product categories. We have earned our customers' trust through the strength of our brands, platform, product curation, and our excellent customer experience. The impressive growth of our beauty and men's businesses in 2023 validates our ability to tap into customer loyalty and trust to drive adoption in emerging categories. Third, we remain extremely committed to driving cost efficiencies within our global shipping and logistics operations while maintaining a laser focus on our outstanding customer experience. In 2023, we successfully ramped up our newer East Coast Fulfillment Center that brings us closer to many of our customers, which we believe will enable us to realize further cost savings and elevate service levels through shorter shipping.

Michael Binetti: Second we will continue to build on the successful expansion of our assortment into adjacent product categories. We've earned our customers' trust to the strength of our brands platform product curation and our excellent customer experience.

Michael Binetti: <unk> growth of our beauty and men's businesses in 2023 validates our ability to tap into this customer loyalty and trust to drive adoption in emerging categories.

Michael Binetti: Third we remain extremely committed to driving cost efficiencies within our global shipping and logistics operations, while maintaining a laser focus on our outstanding customer experience in 2023, we successfully ramped our newer east coast fulfillment center that brings us closer to many of our customers, which we believe will enable us to realize further cost savings and elevated <unk>.

Michael Binetti: Service levels through shorter shipping distances.

Mike Karanikolas: Supported by a new AI technology application that strategically optimizes inventory rebalancing between our fulfillment centers to match consumer demand, among many other initiatives, I'm confident in 2024, we will begin to drive efficiencies in our logistics costs year over year. Fourth, we will further expand our international presence, where we see exciting opportunities to invest in our customer acquisition and in further elevating service levels to drive growth. We recently launched a new marketing communications channel in Mexico that has helped to increase consumer engagement and drive even faster new customer growth in what is now our third largest market outside of the U.S. Finally, we will further enhance our technology stack and leverage AI and other technologies across the business to drive growth and efficiency. Michael and I are huge believers in the power of AI.

Michael Binetti: <unk> by a new AI technology application that strategically optimizes inventory rebalancing between our fulfillment centers to match consumer demand among many other initiatives I am confident in 2024, we will begin to drive efficiencies in our logistics costs year over year.

Michael Binetti: Fourth we will further expand our international presence, where we see exciting opportunities to invest in our customer acquisition and in further elevating our service levels to drive growth. We recently launched a new marketing communications channel in Mexico that has helped to increase consumer engagement and drive even faster new customer growth in what is now our third largest market.

Michael Binetti: Outside of the U S.

Michael Binetti: Finally, we will further enhance our technology stack and leverage AI and other technologies across the business to drive growth and efficiency.

Michael Binetti: Michael and I are huge believers in the power of AI since day, one we have leveraged our own proprietary technology to run nearly all aspects of our business delivering capital efficiency that is highlighted by our capital expenditures, averaging only 0.6% of our net sales since 2016.

Mike Karanikolas: Since day one, we have leveraged our own proprietary technology to run nearly all aspects of our business, delivering capital efficiency that is highlighted by our capital expenditures averaging only 0.6% of our net sales since 2016. We believe our data-driven mindset and culture of technological innovation position us well to continue to expand the use of AI technology throughout the organization to drive results. To summarize, we have an unwavering focus on driving profitable growth and market share capture in the years ahead. Like many companies, we continue to face a host of challenges in the current environment, and we have a lot of work to do. But in contrast to most fashion e-commerce peers, we have a profitable and cash-generative business, proven financial discipline, and key competitive advantages that together enable us to confidently invest in the large opportunity ahead of us. I would like to thank our talented and passionate team for their incredible efforts, persistence, and innovation, which reinforces my confidence in our future. Now, over to Michael.

Michael Binetti: We believe our data driven mindset and culture of technology innovation positions us well to continue to expand the use of AI technology throughout the organization to drive results.

Michael Binetti: To summarize we have an unwavering focus on driving profitable growth and market share capture in the years ahead like many companies. We continue to face a host of challenges in the current environment and we have a lot of work to do but in contrast to most fashion E. Commerce peers, we have a profitable and cash generative business proven financial discipline and <unk>.

Michael Binetti: Key competitive advantages that together enable us to constantly invest in the large opportunity ahead of us I would like to thank our talented and passionate team for their incredible efforts persistence and innovation that reinforces my confidence in our future now over to Michel.

Michel: Thanks, Mike and Hello, everyone.

Michael Binetti: Thanks, Mike, and hello, everyone. As I reflect on 2023, I am proud of our team for overcoming a variety of headwinds to deliver profitability and significant cash flow that further strengthen our balance sheet. We continue to build our brands through innovative and impactful marketing strategies in the U.S. and overseas. These marketing efforts helped us to increase our active customer base by 9% in 2023, while even further raising the bar on our video service levels. And customer trust in our brands and delight in our shopping experience helped us successfully expand into emerging product categories and exciting long-term opportunities. Most important is that we continue to invest and innovate throughout the company to strengthen our foundation for future growth, which we remain very confident in.

Michel: 2023, I am proud of a team for overcoming a variety of headwinds or profitability and significant cash flow that further strengthened our balance sheet.

Michel: We continue to build our brands through innovative and impactful marketing strategies in the U S and overseas.

Michel: These marketing efforts helped us to increase our active customer base by 9% in 2023, while even further raising the bar videos outstanding service levels.

Michel: Customer checking their brands and delight nice shopping experience helped us definitely expand into emerging product category and exciting long term opportunity.

Michel: Most important is that we continue to invest and innovate throughout the company to strengthen our foundation for future growth, which we remain very confident and I am excited to continue the momentum in these areas this year.

Michel: Shifting to the industry landscape since our third quarter earnings call in November there has been a lot happening in our space, particularly in luxury e-commerce peers.

Michel: Two of the largest luxury e-commerce retailers were recently acquired and just buy outs and there was another large luxury e-commerce competitor.

Michael Binetti: I'm excited to continue the momentum in these areas this year. Shifting to the industry landscape, since our third-quarter earnings call in November, there has been a lot happening in our space, particularly among luxury e-commerce peers. Two of the larger luxury e-commerce retailers were recently acquired in stress buyouts. There is another large luxury e-commerce competitor listed as a continued operation by its parent company. As reported by the Wall Street Journal, Business of Fashion, and WWD, there have also been reports of luxury retailers not paying their suppliers on time.

Michel: Continued operation by its parent company <unk>.

Michel: As reported by the Wall Street Journal business of fashion and WWE <unk>. They have also been reports of luxury retailers not paid at that time.

Michel: While these recent industry headlines may weigh some investors were excited about the opportunities for us to benefit from industry turmoil.

Michel: A major luxury Vancouver has already announced they will no longer sell their products in one of the e-commerce as I referred to.

Michel: As a profitable company with consistent cash flow generation and focus on creating value over the long term. We believe we are well positioned to emerge as an EBIT showing up here.

Michael Binetti: While these recent industry headlines may worry some investors, we are excited about the opportunity for us to benefit from industry turmoil. For instance, a major luxury brand group has already announced that it will no longer sell its products through one of the e-commerce peers I referred to. As a profitable company with consistent cash flow generation and focused on creating value over the long term, we believe we are well positioned to emerge as an even stronger player. Our 20-year history has taught us that periods of market disruption can be a great time for us to invest when some others in this space are forced to return. With that as a backdrop, I will focus my remarks on our strategy to leverage our financial strength and position in the market to invest in our brand, acquire customers, and gain market share over the long term.

Michel: Our 20 year history has taught us that periods of market disruption can be a great time for us to invest well some others in the space of Western Retrench.

Michel: With that as a backdrop I'll focus my remarks on our strategy to leverage our financial strength and positioning the market to invest in our brand.

Michel: Customers and gained market share over the long term.

Michel: What the large market opportunity. We believe lies ahead of us continuing to invest in our core domestic customer remains our number one priority.

Michel: A highlight of our fourth quarter was the opening of a brand elevating revolve and forward pop up shopping experience and asking just in time for the holidays.

Michel: Launch with a private event hosted by our Florida Creative Director Kendall Jenner, we have created something truly special and the aspirational tell with a high concentration of wealth.

Michael Binetti: While the large market opportunity we believe lies ahead of us, continuing to invest in our core domestic customer remains our number one priority. A highlight of our fourth quarter was the opening of our brand-elevating Revolve and Forward pop-up shopping experience in Aspen, just in time for the holidays. Launched with a private event hosted by our forward creative director, Kendall Jenner, we have created something truly special in an aspirational town with a high concentration of wealth. Aspen is also a celebrity hot spot and nightlife fashion playground where everyone dresses to impress.

Michel: Aspen is also a celebrity hotspot fast will take over everyone dresses geographically.

Michel: The revolve and forward pop up was primarily featured evokes ranking of the top five is that a pop ups to this venture the only multi brand retailer featured among iconic luxury brands like Rubicon.

Michel: And people are visiting and spending while they are there.

For the first two months of operation has been impressive high by comparison to some areas, including Liana right Kerry.

Michel: Harvey Alessandra Ambrosio stellar Maxwell brand partner and still bullish on light and featuring experiential events caused by coveted brand partners, including New Charlotte Tilbury Jonathan's.

Michael Binetti: The Revolve and Ford pop-up was featured in Vogue's ranking of the top five designer pop-ups for business this winter. It is the only multi-brand retailer featured among iconic luxury brands like Louis Vuitton, and people are visiting and spending while they are there. Put Traffic for the first two months of operation has been impressive, highlighted by appearances from A-listers including Rihanna, Mariah Carey, Lori Harvey, Alessandra Ambrosio, Stella Maximo, Brand Partner and Spillboarder, Sean White, and featuring experiential events co-hosted by coveted brand partners including YouMew, Charlotte Tilbury, Jonathan Simkhai, Rude, Etern, and Nor In addition to the brand integration that is consistent with our growth strategy, consumer demand at the pop-up is highlighting our opportunity to further expand into adjacent seasonal categories where our brands are not top of mind, such as outerwear, and across a broader range of price points, from beauty products at $25 to handbags of nearly $100,000.

Rude eastern and northern border.

Michel: Also exciting is that the pop up as our first true integration of our highly complementary segments revolve and forward under the St. Louis.

Michel: In addition to the brand integration that is consistent with our growth strategy consumer demand at the top of its highlighting our opportunity to further expand into adjacent seasonal categories, where our brands are that top line, such as auto and across a broader range of price points from GE products at $25 to handbags of nearly $100000.

Michel: Most compelling is the customer engagement and are asked to pop up more than half of all customers had a pop up are entirely new customers to our brands. We are going to question the opportunity to grow our customer base.

Michel: Existing customers and fans have been drilled to experience and interact with our fans and realized customers are spending significantly more print transaction that pop up and they typically do online while they're turning products had a very small fraction of our typical that generate for products purchased online.

Michel: So we are very pleased with our learnings from the public so far if youre, an aspen, becoming lease please stop by and see us.

Michel: As we look ahead, we have some very exciting plans for further investment in our beds and 2024 and Couldnt get a fresh take on an expansion like live events that we are known for and so lots of impactful partnerships in the works that we will be able to share more details on in the coming months.

Michael Binetti: Most compelling is the customer engagement in our Ask and Pop-Up. More than half of all customers at the pop-up are entirely new customers to our brands, reinforcing our opportunity to grow our customer base. And our existing customers and fans have been thrilled to experience and interact with our brands in real life. Customers are spending significantly more per transaction in the Ask and Pop-Up than they typically do online, while returning products at a very small fraction of our typical return rate for products purchased online. We are very pleased with the feedback from the public so far. If you are in Aspen in the coming weeks, please stop by and see us.

Michel: In addition to the large domestic opportunity we continue to see a very large opportunity to further expand our share in international markets. In recent months, we have been incredibly active in elevating our bands with aspirational lifestyle events around the globe in key regions, including Tokyo, Singapore, and the Netherlands, creating brand heat and excitement on social media and press channels coinciding with.

Michel: A solid quarter for international net sales growth in Q4.

Michel: One reason, we chose to activate in Asia. During the fourth quarter is that Asia has our largest social media following outside of the U S.

Michael Binetti: As we look ahead, we have some very exciting plans for further investment in our brands in 2024, including a fresh take on our experiential marketing events that we are known for, as well as some impactful partnerships in the works that we will be able to share more details on in the coming months. In addition to the large domestic opportunity, we continue to see a very large opportunity to further expand our share in international markets. In recent months, we have been incredibly active in elevating our brands with aspirational lifestyle events around the globe in key regions, including Tokyo, Singapore, and the Netherlands, creating brand heat and excitement on social media and press channels, coinciding with a solid quarter for international net sales growth in Q4. One reason we chose to activate in Asia during the fourth quarter is that Asia has our largest social media following outside of the U.S.

Michel: It's a true testament to the strength of our brands globally, especially considering that we have not yet made significant investments in that region.

Michel: <unk> has the details by country, China had our second largest social media following after the U S.

Michel: Our opportunity for future growth in Asia.

Michel: So our recent marketing events in Singapore, and Tokyo content creators would be an excited to work with us and international markets collectively delivering more content than we expected of them contributing to a large success. So far has its largest ever marketing event in Asia.

Michel: Influencers enthusiastically telephone, China, Taiwan, India, Korea, Australia, Vietnam, Malaysia, Philippines, Europe, Canada, and the U S to participate in our events.

Michel: Collect our social following exceeds 100 million followers on Instagram on a combined basis.

Of note nearly half of the hundreds of millions of social media impressions generated by a single pump market, where our native Chinese social media platforms, including billion Red Weibo and Wechat.

Michael Binetti: It's a true testament to the strength of our brands globally, especially considering that we have not yet made significant investments in the region. Drilling into the details by country, China has our second largest social media following after the U.S., underscoring our opportunity for future growth in Asia. For our recent marketing events in Singapore and Tokyo, content creators were excited to work with us in international markets, collectively delivering more content than we expected of them and contributing to the great success of our largest ever marketing event in Asia. Influencers enthusiastically travel from China, Taiwan, India, Korea, Australia, Vietnam, Malaysia, Philippines, Europe, Canada, and the U.S. to participate in our events. Their collective social following exceeds 100 million followers on Instagram on a combined basis.

Michel: In fact, three of our top Chinese Influencers and generated 30 million user going in alone and.

Michel: That's become a very important part of our international strategy to expand our presence and awareness on these channels social media and E. Commerce platforms to have a very powerful influence on Asia and seamless I couldnt be more pleased with how well our Singapore event delivered against this objective.

Michel: I'll close with a discussion of our investment in original product categories, an area, where we see a great deal of opportunity to both acquire new customers and capture more share of our existing customers' wallet.

Michel: <unk> net sales increased 49% year over year in the fourth quarter expanded to 5% of net sales from 3% in the fourth quarter of 2022.

Michel: With such gains year over year, 5% net sales remains well below the double digit penetration for beauty net sales that is typical among opinion department stores.

Michael Binetti: Of note, nearly half of the hundreds of millions of social media impressions generated by our Singapore marketing event were on native Chinese social media platforms, including Douyin, Red, Weibo, and WeChat. In fact, three of our top Chinese influencers generated 30 million views on Douyin alone. It has become a very important part of our international strategy to expand our presence and awareness on these Chinese social media and e-commerce platforms that have a very powerful influence on Asian consumers. I couldn't be more pleased with how well our Singapore event delivered on this objective. I'll close with a discussion of our investment in emerging product categories, an area where we see a great deal of opportunity to both acquire new customers and capture more share of our existing customers' wallets.

Michel: Shifting to our incredible beauty results with a very effective merchandising with the addition of several high impact can you beat events.

Michel: Beauty momentum has remained strong with recent launches of beauty PRASM cool type cosmetics, all flight beauty and dentist beauty.

Michel: I'm also excited about our fast growing men's business supported by an increased marketing focus and merchandise assortment.

Michel: <unk> has performed extremely well in some key international markets contributing to our impressive growth in Mexico throughout 2023.

While relatively small today the scale of these areas of business are growing at an attractive rate.

Beauty generated 42 million in net sales in 2023 up from just 11 million in 2019.

Michel: We are targeting the emerging offerings of beauty men's and home to contribute more than $100 million in 2024 on a combined basis.

Michael Binetti: Beauty net sales increased 49% year-over-year in the fourth quarter, expanding to 5% of net sales from 3% in the fourth quarter of 2022. Even with such gains year-over-year, 5% of net sales remains well below the double-digit penetration for beauty net sales that is typical among premium department stores, contributing to our incredible beauty results with very effective merchandising and the addition of several high-impact new beauty brands. Our beauty momentum has remained strong with recent launches of beauty brands, including Tarte Cosmetics, Off-White Beauty, and Dundas Beauty.

Michel: And this expectation does not include contributions from our plan to expand into additional apparel categories. This year to further solidify us as the destination for more aspects of our customers' lives supported by marketing initiatives to increasingly emphasize newer categories, where you see opportunity.

Michel: In closing with the strength of our brand our strong financial position, our fast paced and nimble operating structure and our innovative entrepreneur mindset. We believe we are well positioned to take market share in the years ahead and build a larger and more powerful collection of brands that we have today <unk>.

Michel: We remain incredibly excited about what lies ahead of us this year and for many years beyond now I'll turn it over to Jesse for a discussion of the financials.

Michael Binetti: I'm also excited about our fast-growing men's business, supported by an increased marketing focus and merchandise assortment. Men's has performed extremely well in some key international markets, contributing to our impressive growth in Mexico throughout 2023. While relatively small today, the scale of these areas of business is growing at an attractive rate.

Jesse: Thanks, Michael and Hello, everyone I'll start by Recapping, our fourth quarter results and then close with updates on recent trends in the business and commentary on our cost structure for 2024.

Jesse: Starting with the fourth quarter results net sales were $258 million a year over year decrease of 1%.

Michael Binetti: Beauty generated $42 million in net sales in 2023, up from just $11 million in 2019. We are targeting the emerging offerings of beauty, men's, and home to contribute more than $100 billion in 2024 on a combined basis. And this expectation does not include contributions from our plan to expand it to additional apparel categories this year to further solidify us as a destination for more aspects of our customers' lives, supported by marketing initiatives to increasingly emphasize newer categories where we see opportunity. In closing, with the strength of our brand, our strong financial position, our fast-paced and nimble operating structure, and our innovative entrepreneurial mindset, we believe we are well-positioned to take market share in the years ahead We remain incredibly excited about what lies ahead of us this year and for many years beyond. Now, I'll turn it over to Jesse for a discussion on the financials. Thanks, Michael, and hello everyone.

Jesse: A three point improvement from our comparison in the third quarter of 2023, as we continue to navigate a challenging environment for consumer discretionary spending, particularly in our luxury segment.

Jesse: Revolve segment net sales increased 1% and foreign segment net sales decreased 10% year over year in the fourth quarter.

Jesse: By territory domestic net sales decreased 2% and international net sales increased 7% year over year.

Jesse: Active customers, which is a trailing 12 month measure increased by 33000 customers during the fourth quarter.

Jesse: This growth expanded our active customer count to $2 5 million, an increase of 9% year over year.

Jesse: Our customers place 2 million orders in the fourth quarter, an increase of 3% year over year.

Jesse: The increase in orders placed was offset by a decrease in average order value or <unk> of 1% year over year to $303 as well as the year over year increase in return rates.

Jesse: Shifting to gross profit consolidated gross margin was 52% at the high end of our guidance range.

Jesse: Increase of 57 basis points year over year, primarily reflects a higher mix of net sales at full price and an increased mix of net sales from the higher margin revolve segment, partially offset by a lower mix of owned brand net sales within our revolve segment compared to the fourth quarter of 2022.

Jesse Timmermans: I'll start by recapping our fourth quarter results and then close with updates on recent trends in the business and commentary on our cost structure for 2024. Starting with the fourth quarter results, net sales were $258 million, a year-over-year decrease of 1% and a three-point improvement from our comparison in the third quarter of 2023 as we continue to navigate a challenging environment for consumer discretionary spending, particularly in our luxury segment. Revolve segment net sales increased 1% and Ford segment net sales decreased 10% year-over-year in the fourth quarter. By territory, domestic net sales decreased 2% and international net sales increased 7% year over year.

The gross profit comparison at the segment level as more favorable that revolve and forward underscoring our great progress in rebalancing the revolve segment inventory.

Jesse: Moving on to operating expenses the high level summary is that much better than expected efficiency in selling and distribution expenses in the fourth quarter was largely offset by our general and administrative expenses coming in higher than our outlook.

Jesse: Fulfillment costs for three 5% of net sales slightly better than our outlook and higher year over year as expected.

Jesse: Selling and distribution costs were 17, 8% of net sales around 120 basis points more efficient than our fourth quarter outlook and an increase of 24 basis points year over year.

Jesse Timmermans: Active customers, which is a trailing 12-month measure, increased by 33,000 customers during the fourth quarter. This growth expanded our active customer count to 2.5 million, an increase of 9% year-over-year. Additionally, our customers placed 2 million orders in the fourth quarter, an increase of 3% year-over-year.

Jesse: Our efforts to drive reductions in our global shipping and logistics costs are starting to become visible on our P&L, partially offset by a higher return rate year over year in the fourth quarter.

Jesse: Our marketing investment also came in more favorable than expected representing 16, 4% of net sales an increase of 104 basis points year over year.

The increase reflects a planned increase in brand marketing investments and a shift in the timing of events in the fourth quarter of 2023 as compared to the prior year, partially offset by year over year efficiency improvements in performance marketing as a percentage of net sales.

Jesse Timmermans: The increase in orders placed was offset by a decrease in Average Order Value, or AOV, of 1% year-over-year to $303, as well as a year-over-year increase in return rates. Shifting to gross profit, consolidated gross margin was 52%, at the high end of our guidance range. The increase of 57 basis points year over year primarily reflects a higher mix of net sales at full price and an increased mix of net sales from the higher margin Revolve segment, partially offset by a lower mix of own brand net sales within our Revolve segment compared to the fourth quarter of 2022. The gross profit comparison at the segment level is more favorable at Revolve than Forward.

Jesse: General and administrative costs were $34 $7 million, an increase of 21% year over year that included $2 8 million of non routine important export fees and an additional $600000 in costs for the legal matter. We mentioned last quarter that has now been settled.

Jesse: Our tax rate was 28% in the fourth quarter up from 24% in the prior year.

Jesse: Net income was $3 5 million or <unk> <unk> per diluted share to 56% year over year decline in net income primarily reflects our increased marketing investment year over year and increased G&A expenses year over year.

Jesse Timmermans: Underscoring our great progress in rebalancing the Revolve segment inventory, moving on to operating expenses, a high-level summary is that much better-than-expected efficiency in selling and distribution expenses in the fourth quarter was largely offset by our general and administrative expenses coming in higher than our outlook. Fulfillment costs were 3.5% of net sales, slightly better than our outlook, and higher year-over-year growth is expected. Selling and distribution costs were 17.8% of net sales, around 120 basis points, more efficient than our fourth quarter outlook, and an increase of 24 basis points year over year.

Jesse: Adjusted EBITDA was $9 million, a decrease of 40% year over year.

Jesse: Moving on to the balance sheet and cash flow statement for the full year 2023, net cash provided by operating activities was $42 million and free cash flow was $39 million.

Jesse: An increase of 85% and 114% year over year, respectively.

Jesse: Contributing to the strong cash flow metrics were improved inventory dynamics, partially offset by lower net income.

Jesse: Inventory at December 31, 2023 with $204 million.

Jesse: A decrease of 5% year over year.

Jesse Timmermans: Our efforts to drive reductions in our global shipping and logistics costs are starting to become visible in our P&L, partially offset by a higher return rate year-over-year in the fourth quarter. Our marketing investment also came in more favorable than expected, representing 16.4% of net sales, an increase of 104 basis points year-over-year. The increase reflects a planned increase in brand marketing investment and a shift in the timing of events in the fourth quarter of 2023 as compared to the prior year, partially offset by year-over-year efficiency improvements in performance marketing as a percentage of net sales. General and administrative costs were $34.7 million, an increase of 21% year-over-year, which included $2.8 million of non-routine import and export fees and an additional $600,000 in costs for the legal matter mentioned last quarter that has now been settled.

Jesse: The year over year decline was four point steeper than our net sales decline demonstrating the important progress we have made in rebalancing our inventory.

Jesse: As of December 31, 2023, cash and cash equivalents were $245 million.

Jesse: An increase of $11 million or 5% year over year, and we had no debt.

Jesse: Since the end of 2019, we have increased our cash balance by $180 million.

Jesse: Our strong financial position enabled us to continue to invest in the business, while returning capital to stockholders through the repurchase of class a common shares as part of our commitment to enhancing shareholder value.

Jesse: During the fourth quarter, we repurchased nearly $1 3 million class a common shares at an average price of $13 94.

Jesse: Approximately $69 million remained on a $100 million stock repurchase program at year end.

Jesse Timmermans: Our tax rate was 28% in the fourth quarter, up from 24% in the prior year. Net income was $3.5 million, or $0.05 per diluted share. The 56% year-over-year decline in net income primarily reflects our increased marketing investment year-over-year and increased G&A expenses year-over-year. Adjusted EBITDA was $9 million, a decrease of 40% year-over-year.

Now let me update you on some recent trends in the business since the fourth quarter ended and provide some direction on our cost structure to help in your modeling of the business for 2024.

Jesse: Starting from the top the top line pressure, we experienced in the fourth quarter has continued with net sales through the first eight weeks of 2024 decreasing by a mid single digit percentage year over year.

Jesse: To provide context for our net sales training for the eight week period through February 25th remember that in early 2023, we had a much larger assortment of markdown inventory than we do today.

Jesse Timmermans: Moving on to the Balancing and Cash Flow Statement, for the full year 2023, net cash provided by operating activities was $43 million, and free cash flow was $39 million, an increase of 85% and 114% year-over-year, respectively. Contributing to the strong cash flow metrics were improved inventory dynamics, partially offset by lower net income. Inventory at December 31, 2023 was $204 million, a decrease of 5% year-over-year.

Jesse: Notably our net sales at full price have increased slightly year over year through the first eight weeks of 2024.

Jesse: Markdown sales have decreased as our inventory today is substantially healthier.

Jesse: With much healthier inventory entering the year the proportion of our net sales at full price and our gross margin are also much healthier in early 2024 as compared to the same period in 2023.

Jesse: Yeah.

Jesse: To assist in your modeling of net sales for the full first quarter of 2024 I also want to highlight that our net sales comparison for the upcoming month of March is easier than the year over year comparison, we faced through the first eight weeks of 2024.

Jesse Timmermans: The year-over-year decline was four points steeper than our net sales decline, demonstrating the important progress we have made in rebalancing our inventory. As of December 31st, 2023, our cash and cash equivalents were $245 million. An increase of $11 million, or 5% year-over-year, and we had no debt. Since the end of 2019, we have increased our cash balance by $180 million. Our strong financial position enabled us to continue to invest in the business while returning capital to stockholders through the repurchase of Class A common shares, as part of our commitment to enhancing shareholder values. During the fourth quarter, we repurchased nearly 1.3 million Class A common shares at an average price of $13.94.

Jesse: Consistent with our commentary on the fourth quarter of 2022 earnings Conference call last February.

Jesse: Consistent with recent performance net sales comparisons in the revolve segment continued to outperform the forward segment year over year and early 2024.

Jesse: Lastly, I would like to point out the difficult comparisons we face in international markets in the first quarter as our international net sales increased 16% year over year in the first quarter of 2023.

Jesse: Shifting to gross margin, we expect gross margin in the first quarter of 2024 of between 51, 4% and 51, 9%, implying a nearly two point increase in gross margin year over year compared to the first quarter of 2023.

Jesse: For the full year 2024, we expect gross margin of between 52, 5% and 53% an increase of about 90 basis points year over year at the midpoint.

Jesse Timmermans: Approximately $69 million remained on our $100 million stock repurchase program at year-end. Now, let me update you on some recent trends in the business since the fourth quarter ended, and provide some direction on our cost structure to help in your modeling of the business for 2024. Starting from the top, the top-line pressure we experienced in the fourth quarter has continued, with net sales through the first eight weeks of 2024 decreasing by a mid-single-digit percentage year over year. To provide context for our net sales trending for the eight-week period through February 25th, remember that in early 2023, we had a much larger assortment of markdown inventory than we do today. Notably, our net sales at full price have increased slightly year over year through the first eight weeks of 2024, while our markdown sales have decreased as our inventory today is substantially healthier.

Jesse: Fulfillment, we expect fulfillment as a percentage of net sales of approximately three 5% for the first quarter of 2024.

Jesse: For the full year 2024, we expect fulfillment cost between three 3% and three 5% of net sales.

Jesse: Approximately flat year over year at the midpoint of the range.

Jesse: Selling and distribution, we expect selling and distribution costs for the first quarter of 2024 to be approximately 18, 1%, which implies our first year over year decrease in selling and distribution expense as a percentage of net sales in three years.

Jesse: For the full year 2024, we expect selling and distribution costs of between 17, 8% and 18% and expected decrease of roughly 50 basis points year over year at the midpoint of the range as we continue to realize the efficiency efforts we invested in during 2023.

Jesse Timmermans: With much healthier inventory entering the year, the proportion of our net sales at full price and our gross margin were also much healthier in early 2024 as compared to the same period in 2023. To assist in your modeling of net sales for the full first quarter of 2024, I also want to highlight that our net sales comparison for the upcoming month of March is easier than the year-over-year comparison we faced through the first eight weeks of 2024.

Jesse: Marketing, we have an active calendar brand building events in the first quarter, including two impactful events held in Las Vegas around the Super Bowl and dozens of events and Aspen at the revolve and forward pop up.

Jesse: As a result, we expect marketing in the first quarter of 2024 to be approximately 16% of net sales.

Jesse Timmermans: Consistent with our commentary on the fourth quarter of 2022 earnings conference call last February, and consistent with recent performance, net sales comparisons in the Revolve segment continue to outperform the Forward segment year-over-year in early 2024. Lastly, I would like to point out the difficult comparison we face in international markets in the first quarter, as our international net sales increased 16 percent year over year in the first quarter of 2023. Shifting to gross margin, we expect gross margin in the first quarter of 2024 between 51.4% and 51.9%, implying a nearly two-point increase in gross margin year-over-year compared to the first quarter of 2023. For the full year 2024, we expect a growth margin of between 52.5% and 53%, an increase of about 90 basis points year-over-year at mid- Fulfillment. We expect fulfillment as a percentage of net sales of approximately 3.5% for the first quarter of 2024. For the full year 2024, we expect fulfillment costs between 3.3% and 3.5% of net sales, approximately flat year over year at the midpoint of the range.

Jesse: For the full year 2024, we expect our marketing investment to represent between 16% and 16, 2% of net sales consistent with our marketing investment of 16, 1% of net sales in 2023.

Jesse: In terms of sequencing in 2024, we expect marketing as a percentage of net sales to be more linear than in recent years, particularly in the second quarter.

Jesse: General and administrative we expect G&A expense of approximately $33 million in the first quarter of 2024.

Jesse: And between 130 and $133 million.

For the full year 2024.

Jesse: This implies a 4% year over year increase in G&A costs for the full year 2024 at the midpoint of the guidance range as we continue to invest in longer term growth initiatives.

Jesse: We expect G&A expense in dollar terms to be fairly steady throughout the year.

Jesse: Lastly, we continue to expect our effective tax rate to be around 24% to 26% both in the first quarter and in the full year 2024.

Jesse: To recap, we closed out a challenging year with a solid fourth quarter highlighted by a return to gross margin expansion year over year that we expect will continue in 2024.

Jesse: We also expect to drive efficiencies in our largest operating expense category selling and distribution costs and.

Jesse Timmermans: Distribution. We expect selling and distribution costs for the first quarter of 2024 to be approximately 18.1%, which implies our first year-over-year decrease in selling and distribution expenses as a percentage of net sales in three years. For the full year 2024, we expect selling and distribution costs of between 17.8% and 18%, an expected decrease of roughly 50 basis points year-over-year at the midpoint of the range as we continue to realize the efficiency efforts we invested in during 2023.

Jesse: And finally, we expect to continue to leverage our financial strength and invest in the attractive long term opportunity ahead of us.

Speaker Change: Now, we'll open it up for your questions.

Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad, we'll pause for just a moment to compile the Q&A roster.

Speaker Change: Your first question comes from the line of Mark <unk> from Baird. Your line is open.

Mark: Good afternoon. Thanks for taking my question maybe to start out I was hoping you could elaborate a bit more on the quarter to date and the positive full price selling trends youre seeing I guess any reads from the festival season early on here anything youre going to be doing differently.

Jesse Timmermans: Marketing. We have an active calendar of brand building events in the first quarter, including two impactful events held in Las Vegas around the Super Bowl and dozens of events in Aspen at the Revolve and Forward pop-up. As a result, we expect marketing in the first quarter of 2024 to be approximately 16% of net sales. For the full year 2024, we expect our marketing investment to represent between 16 percent and 16.2 percent of net sales, consistent with our marketing investment of 16.1 percent of net sales in 2023. In terms of sequencing, in 2024, we expect marketing as a percentage of net sales to be more linear than in recent years, particularly in the second quarter. For General and Administrative, we expect G&A expense of approximately $33 million in the first quarter of 2024 and between $130 and $133 million for the full year 2024. This implies a 4% year-over-year increase in GNA costs for the full year 2024 at the midpoint of the guidance range, as we continue to invest in longer-term growth initiatives. However, we expect G&A expense in dollar terms to be fairly steady throughout the year.

Mark: This spring from a marketing perspective that we could watch for I know you called out the easier comparison, but just wondering any other dynamic beyond that what do you think can drive sustained positive inflection in the growth rate as we move through spring.

Mark: And then I had a follow up on margin.

Speaker Change: Yes, so we feel really good about the trends we're seeing early in the quarter with regards to full price sales and I think it's a reflection of all the work we've done on the inventory side revolve in particular looks quite healthy for us we still have some work to do.

Speaker Change: But really promising trends on that side.

Speaker Change: We move through the spring.

Speaker Change: I was one of our core seasons.

Speaker Change: So a bit early we haven't kind of hit that season forlorn, yet, but were certainly optimistic we'll see some better trends on the sales side as we move through the course screen months of March and then April and May.

Speaker Change: Okay.

Speaker Change: And then the selling and distribution.

Speaker Change: Yes, I think a 100 basis points over 100 basis points better than your plan in the fourth quarter, and I think youre looking to sustain at or below the 18% for the year.

Jesse Timmermans: And lastly, we continue to expect our effective tax rate to be around 24 to 26 percent, both in the first quarter and for the full year 2024. To recap, we closed out a challenging year with a solid fourth quarter highlighted by a return to gross margin expansion year-over-year that we expect will continue in 2024. We also expect to drive efficiencies in our largest operating expense category, selling and distribution policy. And finally, we expect to continue to leverage our financial strength and invest in the attractive long-term opportunity ahead of us. Now, we'll open it up for your questions. At this time, I would like to remind everyone that in order to ask a question, press star, then number one on your telephone keypad.

Speaker Change: What are the implicit assumptions youre, making there for the trajectory of return rates and just as we unpack that I mean are you able to quantify some of the efficiency savings you're seeing from some of those more controllable initiatives. Thank you.

Speaker Change: Yeah, Yeah. Thanks, Mark we probably won't quantify specifically those initiatives, we've put a lot of good work into those in 2023. So it's great to finally see those coming through in the P&L, but maybe for some of the other assumptions that do impact that line item.

Mark: We're assuming is flat to slightly positive for the year.

Mark: Then return rate, we are modeling in a flat return right. So.

Mark: We're optimistic that we can make gains there and we've got a lot of good things in the works, but we're not modeling that in at this point and then I think Keith.

Mark: Keep in mind also that Q1, typically has a slightly lower <unk> and Thats why you see the <unk>.

Mark R. Altschwager: We'll pause for just a moment to compile the Q&A roster. Your first question comes from a line marked Mark Altschwager from Baird. Your line is open. Good afternoon.

Mark: In part why you see the Q1 guidance of 18, 1%, a little bit higher than that 17% or 17, 8% to 18% for the full year.

Anna Driever: Your next question comes from the line of Anna and Driever from Needham Your line is open.

Speaker Change: Great. Thanks, so much and congrats guys nice results, we had two questions.

Mark R. Altschwager: Thanks for taking my question. Maybe to start out, I was hoping you could elaborate a bit more on the quarter-to-date and the positive full-price selling trends you're seeing. I guess just any reads from the festival season early on here, anything you're going to be doing differently this spring from a marketing perspective that we could watch for? I know you called out the easier comparison, but just wondering any other dynamics beyond that which you think could drive a sustained positive inflection in the growth rate as we move through spring?

Anna Driever: Wanted to follow up on that G&A expenses, you mentioned the accrual that you saw in the fourth quarter, but can you talk about what's driving what looks like a double digit growth in <unk> and also for the year and also secondly, looking at category performance, great to see beauty and men's working well, but fashion in Berlin.

Mike Karanikolas: Thanks, and then I had a follow-up question on Mark's question. Yeah, so we feel really good about the trends we're seeing early in the quarter with regard to full price sales. And I think it's a reflection of all the work we've done on the inventory side. Revolve, in particular, looks quite healthy.

Anna Driever: This continued to decline. So can you talk about what are you doing specifically to improve trends there either fashion trends that you see in apparel as 24 unfolds that revolve could capitalize on thanks so much.

Mike Karanikolas: Forge, we still have some work to do, but really promising trends on that side. As we move through spring, that's always one of our core seasons, and it's still a bit early.

Speaker Change: Yeah sure. Thanks, Anna and I will take that first one on G&A and then pass it over to Mike and Michael for the for the second part of that question.

Michael Binetti: Yes, we did have some non routine items in the quarter. If you pull those out it was closer to in line with the guidance that we gave but to your point that does mean that Q1 is higher than Q4 on G&A and so a couple of things to keep in mind there.

Jesse Timmermans: We haven't kind of hit that season full on yet, but we're certainly optimistic we'll see some better trends on the sales side as we move through the core spring months of March and then April. Thank you. And then the selling and distribution, nice progress there. I think 100 basis points, more than 100 basis points better than your plan in the fourth quarter. And I think you're looking to sustain at or below 18% for the year. What are the implicit assumptions you're making there for the trajectory of return rates?

Michael Binetti: When we make our merit adjustments our salary increases in January of every year and two thirds of that line item is people. So there is a sequential increase there.

Michael Binetti: Then also we do have incentive bonuses and incentive compensation in G&A and given the results of this past year.

Michael Binetti: Bonuses were not accrued to the full amount obviously and then in the full year for 2024, we're starting off in January with the expectation that we meet our target. So there's a there's a difference in the the accruals for incentive compensation.

Michael Binetti: Okay.

Michael Binetti: Our next question comes from the line of Edward <unk> from Piper Sandler Your line is open.

Jesse Timmermans: And just as we unpack that, I mean, are you able to quantify some of the efficiency savings you're seeing from some of those more controllable initiatives? Thank you. Yeah, yeah.

Edward: Hey, good afternoon. Thanks for taking the question just trying to understand a little bit more on the gross margin expansion both for the quarter and for the year is it just driven by lower markdowns or at this point are you now assuming that mix either more dresses are private label is a positive gross margin driver for the balance of the year. Thank you.

Jesse Timmermans: Thanks, Mark. We probably won't quantify it, and a lot of it. So it's, you know, great to find. But maybe for some of the other assumptions that do impact that line item, AOV, we're assuming is flat to slightly positive for the year, and then return rate, we are modeling in a flat return rate. So, you know, we're optimistic that we can make gains there, and we've got a lot of good things in the works, but we're not modeling that in at this point. And then I think you should also keep in mind that Q1 typically has a slightly lower AOV, and that's why you don't want to use it, in part, while you see the Q and A. 1.1 percent, a little bit higher than that.

Speaker Change: Yes, Thanks Ed.

Speaker Change: It's largely the farmer and increase in that full price sales mix for the year.

Speaker Change: Did close out 2023 for the full year at 79%, which is in line with 2019, so very healthy, but if you remember in the first part of the year, especially the first half of the year. We are very sub optimal in terms of full price mix. So so that's the largest driver there and then we continue to make inroads just in kind of the.

Speaker Change: The third party margins in general we're not factoring in an increase in owned brand mix for 2024, or so so that's not part of it.

Jesse Timmermans: 7, Your next question comes from the line of Anna Andreeva from Needham. Your line is open. Great, thanks so much.

Anna Andreeva: And congrats guys, nice results. We had two questions. I wanted to follow up on the G&A expenses.

Speaker Change: And then forward revolve mix always has an impact and based.

Speaker Change: Based on the results today as we commented we are seeing revolve outpace forward, which and revolve carries a higher margin in that segment.

Jesse Timmermans: You mentioned the accrual that you saw in the fourth quarter. But can you talk about what's driving what looks like double-digit growth in one Q and also for the year? And also, secondly, looking at category performance, it's great to see beauty and men's working well, but fashion apparel and dresses continue to decline. So can you talk about what you are doing specifically to improve trends there? Are there fashion trends that you see in apparel as 24 unfolds that Revolve could capitalize on? Thanks so much.

Speaker Change: Great. Thank you.

Speaker Change: Your next question comes from the line of Michael Binetti from Evercore ISI. Your line is open.

Michael Binetti: Hey, guys congrats on nice quarter.

Michael Binetti: Couple from me.

Michael Binetti: I guess on the in the U S. Can you talk a lot in the in the.

Michael Binetti: When you talked about in the prepared remarks about the international.

Michael Binetti: How are you thinking about plans grow the U S in 2024.

Michael Binetti: Just curious your thoughts there on how to get back to positive and then on the pop up store you guys have been fairly dogmatic about sticking to ecommerce only and certainly theres a lot of advantages sustained area. Your core channel you have a lot of compounded excellence there.

Jesse Timmermans: Yeah, sure. Thanks, Anna. And I'll take that first one on G&A and then pass it over to Mike and Michael for the second part of that question. Yes, we did have some non-routine items in the quarter. If you pull those out, it was, you know, closer to in line with the guidance that we gave. But to your point, that does mean that Q1 is higher than Q4.

Michael Binetti: When you see the turn out that you spoke of at these pop up stores the sales metric the new customer connections, maybe a way to extend the efforts you've made to make points of shipment and points of product returns closer to the consumer it seems like there could be some niches that you could scratch is there is there.

Jesse Timmermans: So a couple things. One, we make our merit adjustments, our salary increases in January of every year, and two-thirds of that line item is people, so there is a sequential increase there. And then also, we do have incentive bonuses, incentive compensation in G&A, and given the results of this past year, bonuses were not accrued to the full amount, obviously, and then in the full year for 2024, we're starting off in January with the expectation that we meet our target, so there's a there's a difference in the uh the. Your next question comes from a line from Edward Ruma from Piper Sand Hey, good afternoon.

Michael Binetti: <unk> for this business to have a small fleet of high impact stores are a key cities.

Michael Binetti: Our strategy on stores at some point.

Speaker Change: Yes, definitely so as we think about.

Speaker Change: Just taking the first part of your question as we think about growth for 2024 for US. It's just about continuing to invest in the things that makes sense continue to invest on the brand side make sure we nail merchandising mix and the position with the consumer.

Speaker Change: And I think with a much healthier inventory position, particularly on the revolve side, we're well positioned to do that.

Edward Ruma: Thanks for taking the question. Just trying to understand a little bit more on the gross margin expansion, both for the quarter and for the year. Is it just driven by lower markdowns, or at this point are you now assuming that mix, either more dresses or private label, is a positive gross margin driver for the balance of the year? Thank you.

Certainly it's been a bit frustrating the past 18 months not seen the growth we're accustomed to but the market opportunity remains huge we have very low penetration in our target customer base also just kind of touch on the.

Speaker Change: The store thing as it relates to the growth opportunity. The fact that over half of the customers. We saw a pop up store, where new customers again, I think validates that.

Jesse Timmermans: So it's largely the former, an increase in that full price sales mix for the year. We did close out 2023 for the full year at 79%, which is in line with 2019. So, very healthy.

A lot more share to take all the category expansion. We're doing so we think the potential is quite huge and obviously, we need to execute well to make sure. We're seizing it at the appropriate pace and.

Jesse Timmermans: If you remember, in the first part of the year, especially the first half of the year, we were very suboptimal. So that's the largest driver there. And then we continue to make inroads just in kind of the third party margins, in general, we're not factoring in and Own Brand Mix. So, so that's not.

Speaker Change: And we're hopeful that things will start to turn as we progressed through the year.

Speaker Change: And then as we think about physical stores.

Speaker Change: We have always felt like revolve as an incredibly strong brands and we.

Michael Binetti: And then, you know, Forward Revolve mix always has an impact. And based on the results today, as we commented, we're seeing Revolve out, and Revolve carry the higher. Great, thank you. Your next question comes from the line of Michael Binetti from Evercore ISI. Your line is open. Hey guys, congrats on the next quarter. A couple for me.

Speaker Change: Also feel like physical stores arent going anywhere, we'll have to see where the ultimate balance of physical versus digital ends up but physical in our view will always be an important channel and so yes, I think that is an exciting opportunity for us we're not going to go after it just to chase share. If we go after it we're going to make sure we're doing it in the right way in a profitable way.

Michael Binetti: I guess in the U.S., you talked a lot in your prepared remarks about international trade. How are you thinking about plans to grow the U.S. in 2024? Just curious about your thoughts there on how to get back to positive.

Speaker Change: I think as you mentioned theres a lot of upside opportunities with it particularly for our business, which has such a high return rate.

Speaker Change: That can be a great traffic driver and helps reduce return costs.

Mike Karanikolas: And then on the pop-up story, you guys have been fairly dogmatic about sticking to e-commerce only, and certainly there are a lot of advantages to staying there. Your core channel, you have a lot of compounded excellence there. But when you see the turnout that you spoke of at these pop-up stores, the sales metrics, the new customer connections, maybe a way to extend the efforts you've made to make points of shipment and points of product returns closer to the consumer, it seems like there could be some itches that you could scratch. Is there a potential for this business to have a small fleet of high-impact stores or a key cities strategy for stores at some point? Thank you.

Speaker Change: Increase.

Speaker Change: Some of those customers coming in.

Speaker Change: And then the.

Speaker Change: The Aspen store results and Youll, certainly Aspen is a unique location and we've had a lot of marketing activity supporting it so it's a bit early too.

Speaker Change: Extrapolate too much from it but certainly at the surface level, but the numbers are quite compelling that we see there.

Speaker Change: Certainly an interesting data point for us.

Speaker Change: Thinking more and more of those.

Speaker Change: Whats the potential opportunity there is.

Mike Karanikolas: Yeah, definitely. So as we think about, just taking the first part of your question, as we think about growth for 2024, for us, it's just about continuing to invest in the things that make sense, continue to invest on the brand side, and make sure we nail the merchandising mix and the position with the consumer. And, you know, I think with a much healthier inventory position, particularly on the Revolve side, we're well positioned to do that. But, certainly, it's been a bit frustrating the past 18 months not seeing the growth we're accustomed to. But the market opportunity remains huge. We have very low penetration in our target customer base.

Speaker Change: As a result of the traction that we're seeing.

Speaker Change: We do anticipate testing out the aspen location a bit longer than we originally anticipated, whereas originally anticipated just as a pure pop up events.

It's interesting to consider the potential further than that.

Speaker Change: Okay. Thanks, I will talk more later, thanks, a lot guys. Congrats again.

Speaker Change: Your next question comes from the line of Kunal <unk> from UBS. Your line is open.

Speaker Change: Alright. Thanks, a lot. This is Jason <unk> from UBS I have a couple of questions. The first one is Macy's said this morning that closing about 150 stores nationwide and whats curious how you guys are digested. This news at a high level as more physical retailers pulled back how much quickly both benefit from it.

Michael Binetti: Also, you know, just kind of touching on the store thing as it relates to the growth opportunity, the fact that over half of the customers we saw at the pop-up store were new customers again, I think validates that opportunity, a lot more share to take, all the category expansion we're doing. So, you know, we think that the potential is quite huge. And obviously, we need to execute well to make sure we're seizing it at the appropriate pace.

Speaker Change: And that will follow.

Speaker Change: Yes.

Speaker Change: We've always said that one of the biggest sources of market share gain out there is a lot of these legacy retailers, particularly in kind of the mid and higher end and certainly Macy's dose have stores like that in their bloomingdale's goods business and some iron in Macy's stores and I think it's reflective of the broader department store business has been ceded share for years and so for US I think.

Michael Binetti: And we're hopeful that things will start to turn as we progress through the year. And then, as we think about physical stores, you know, we have always felt like Revolve has an incredibly strong brand. And we also feel like physical stores aren't going anywhere. We'll have to see where the ultimate balance of physical versus digital ends up. But physical retail, in our view, will always be an important channel. And so, yeah, I think that is an exciting opportunity for us. We're not going to go after it just to chase share.

Speaker Change: Just kind of another data point into ongoing multiyear trend.

Speaker Change: Should we execute well should mean very performance for us.

Speaker Change: Got it. Thank you secondly, quick one can you help us understand sort of the.

Speaker Change: How the inventory levels and gross margin would trend for the rest of this year.

Mike Karanikolas: If we go after it, we're going to make sure we do it in the right way, in a profitable way. I think, as you mentioned, there are a lot of upside opportunities with it, particularly for our business, which has such a high return rate. You know, that can be a great traffic driver and help reduce return costs and increase sales from those customers coming in. And then, you know,

Speaker Change: In terms of Maryland beauty can you help us understand sort of the typical profile for those two categories. Thank you.

Speaker Change: Yes, so on the first one.

Speaker Change: The inventory and margin trends.

Speaker Change: I think you can see in the guidance that we gave with Q1 being 51, 4% to $51 nine and then a full year being 52, 5% to 53, we do see.

Speaker Change: Sequential improvement throughout the year. There is also seasonality. There. So Q1 is typically lower than say, a Q2 has a higher ratio of full price.

Canal Medicar: The Aspen store results, and you know, certainly Aspen is a unique location. We've had a lot of marketing activities supporting it. So it's a bit early to extrapolate too much from it. But certainly, at the surface level, the numbers are quite compelling that we see there. So, you know, that's certainly an interesting data point for us that, you know, has us thinking more and more about what the potential opportunity there is. And, you know, as a result of the traction that we're seeing, we do anticipate testing out the Aspen location for a bit longer than we originally anticipated, whereas originally, we anticipated just as a pure pop-up event. You know, we think it's interesting to consider the potential for the Okay, thanks. We'll talk more later. Thanks a lot, guys. Congratulations again.

Speaker Change: And then inventory.

Speaker Change: I think in total we're excited to be back into <unk>.

Speaker Change: Moderate growth mode, there with bookings being positive year on year. After after a year of correction in 2023.

Speaker Change: But it is a tale of two cities there with revolve.

Speaker Change: As we've commented in much better shape than for it. So we still have some work to do on forward.

Speaker Change: But that revolve starting off the year very well.

Speaker Change: And then yes.

Speaker Change: You had mentioned and I think beauty with both those men's and beauty.

Speaker Change: I typically sells their beauty and men's yeah, yeah, yeah. Yeah. So beauty is the I guess, the most different but significantly lower <unk>, but with that comes a much slower return rate. So those are the biggest differences between beauty and kind of the core business, though.

Speaker Change: When you get down to a contribution margin level that puts and takes there relatively balanced out and then I would say men's is closer to the women's business a lower return rate on men's.

Speaker Change: And then a slightly different product mix and.

Speaker Change: When you think about that versus the womens.

Speaker Change: Dresses plus or minus and then men's being more kind of shoes and apparel portion.

Canal Medicar: Your next question comes from a line of Canal Medicar from UBS. Your line is open. Hi, thanks a lot. This is Jason on behalf of Kunal from EBS.

Speaker Change: Your next question comes from the line of Jim Duffy from Stifel. Your line is open.

James Vincent Duffy: Thank you.

James Vincent Duffy: I appreciate you guys, taking my question I wanted to.

Mike Karanikolas: I have a couple of questions. The first one is, Macy's said this morning they're closing about 150 stores nationwide, and I was curious how you guys are digesting this news. At a high level, like as more physical retail stores pull back, how much could Revolve benefit from it? And I will follow. Yeah, you know, we've always said that one of the biggest sources of market share gain out there is a lot of these legacy retailers, particularly in the mid and higher end, and certainly Macy's does have stores like that. And, you know, their Bloomingdale's business and some higher end Macy's stores.

James Vincent Duffy: Focus on return rates for a moment to encourage you're going to see some sequential improvement in returns I am curious is that seasonality or some of the specific initiatives that you guys have.

James Vincent Duffy: Started to put in place are you beginning to see some benefits from those.

Speaker Change: Yes, Thanks, Jim.

Speaker Change: It was good to see that sequential decrease that said don't get too excited about it because there is some seasonality factor there.

Speaker Change: If you go back to pre Covid times, there is typically about a point sequential decline between <unk> and <unk>, we did see a larger sequential decrease than that this quarter, but theres also a lot of other mix components and things going on there, but I think it was good to see just don't want to get too far ahead of ourselves.

Canal Medicar: I think it's reflective of the broader department store business that has been gaining share for years. And so, you know, for us, I think this is just, you know, kind of another data point and ongoing multi-year trend that, should we execute well, should mean very good things. Got it. Thank you. The second is, you know, a quick one.

Speaker Change: And we are too.

Speaker Change: Second part of your question there we are still.

Are you optimistic on a lot of the initiatives, we have going into that that return rate initiative, but not not factoring that into the model yet for 2024.

Canal Medicar: Can you help us understand sort of how the inventory levels and gross margin would trend for the rest of this year? And in terms of men and beauty, can you help us understand sort of the typical AOV profile for those two categories? Yeah, so on the first one, the inventory and margin trends, you know, I think you can see in the guidance that we gave with Q1 being 51.4 to 51.9 and then the full year. We do see, you know, sequential improvement throughout the year. There's also seasonality there, lower than say a year ago. And then inventory, you know, I think in total, we're excited to be back into a moderate growth mode there with positive But it is the tale of two cities there, with Revolve, as we've commented, in much better shape than Ford. So we still have some work to do on Ford, but Revolve, starting off... And then you had men's and women's... Typically, beauty and men's, yeah. Yeah, yeah. So beauty is, I guess, the most different, with a significantly lower AOV.

Speaker Change: Your next question comes from the line of Rick Patel from Raymond James Your line is open.

Rick Patel: Thank you. Good afternoon, everyone can you talk about the health of the consumer I am curious if there are any changes to the way people behave in the fourth quarter relative to earlier in the year as we think about things like trade down sensitivity to price points and so on and what your underlying assumptions are for how this evolves as you go through 'twenty four.

Speaker Change: Yeah.

Speaker Change: Yes, so in the fourth quarter, we saw some I'd call it mildly improving trends on the revolve side.

Speaker Change: We've talked about in the past how revolve.

Speaker Change: There's kind of a full price off price ratios are a bit more a function of unsold inventory mix and what's going on in the broader market, but I would say kind of mildly better in the fourth quarter, but I wouldnt say kind of that.

Speaker Change: Anything that shows us a clear inflection point.

Jesse Timmermans: But with that comes a much lower return rate. So those are the biggest, core businesses, when you get down to a contribution margin level, www.revolvegroup.com that versus, third meant being born. Your next question comes from a line from Jim Duffy from Schieffel. Your line is open.

Speaker Change: Ford continues to be challenged and we mentioned earlier on the call ASO lives.

Speaker Change: Luxury sector data and I think particularly multi brands E. Commerce apparel continues to be challenged in the luxury segment. So.

James Vincent Duffy: Thank you. Appreciate you guys taking my question. I wanted to focus on return rates for a moment. It's encouraging to see some sequential improvement in returns. I'm curious.

Speaker Change: We haven't seen the inflection points, we'd like there we feel confident towards positioning.

Speaker Change: And confident in its ability to grow over the long term, but the.

Jesse Timmermans: Is it seasonality or some of the specific initiatives that you guys have started to put in place? Are you beginning to see some benefits from those? Yeah, thanks, Jim.

Speaker Change: Progress has been a little bit slower than we'd hoped for.

Speaker Change: Okay.

Speaker Change: Your next question comes from the line of Simeon Siegel from BMO capital markets. Your line is open.

Jesse Timmermans: Yeah, it was good to see that sequential decrease. That said, don't get too excited about it because there is some seasonality factor there. If you go back to, you know, pre-COVID times, there's typically about a... Thank you.

Simeon Avram Siegel: Thanks, Hey, guys. Good afternoon hope, you're all doing well.

Simeon Avram Siegel: Maybe to follow up on that a little bit so any way to break apart your active customer performance between revolve and forward and maybe to the comments about the luxury market dislocation just how are you thinking about what the timeline should look like for you to see the turn in that business and maybe speak to the revenues, which I think you are but then also the gross margin. Thank you.

Rick Patel: We did see a larger sequential decrease than that, but there's also a lot of other things there, but you know I think you know it was good to see just don't want to get too far ahead of ourselves. And we are, the second part of your question there. We are still very optimistic about a lot of the initiatives we have going into that, but not yet. Your next question comes from the line of Rick Patel from Raymond James. Your line is open. Thank you. Good afternoon, everyone.

Speaker Change: Yes, so on active customers breaking that out between revolve and forward.

Speaker Change: Not exactly but largely tracks to the revenue performance that we're seeing where we're seeing more more activity on the revolve side more positive activity on the revolve side and then more pressure on the forward side.

Mike Karanikolas: Can you talk about the health of the consumer? I'm curious if there are any changes to the way people behave in the fourth quarter relative to earlier in the year, as we think about things like trade downs, sensitivity to price points, and so on, and what your underlying assumptions are for how this evolves as you go through 24. Yeah, so in the fourth quarter, we saw some, I call them mildly improving trends on the Revolve side. And we've talked about in the past how Revolve's full price-off price ratios are a bit more a function of its own inventory mix than what's going on in the broader market. I would say mildly better in the fourth quarter, but I wouldn't say anything that shows us a clear inflection point. Ford continues to be challenged, and you know I mentioned earlier on the call some of the luxury sector data, and I think, particularly, multi-brand e-commerce apparel continues to be challenged in the luxury segment. So you know we haven't seen the inflection points we'd like to see there.

And then also kind of reflective of the revenue mix between domestic international.

Speaker Change: More positive activity on international then.

Speaker Change: On the domestic side. So you can kind of generally align sales and the new customer growth there, which then impacts active customers. We do expect the active customer growth number to come down I think thats it.

Speaker Change: And important to note given that last Q1 and Q1 of 2023, we had a record number of new customers now a lot of that growth came from markdown customers given our mix in the inventory repositioning that we're going through at that time, so really good healthy customer base the customer activity is healthier than the pre COVID-19 levels, but there are.

Speaker Change: On near term dynamics that we're working through there.

Speaker Change: And then the second part of your question.

Speaker Change: Just for I think I don't know micro Michael you had made the comment that this can be guided the market dislocation amongst the online luxury peers. So just how are you thinking about what the timeline or different expectations that you'd expect to see to be able to see that turn and again I think that generally speaks to the revenues, but it would also just helpful to hear your perspective on.

Simeon Avram Siegel: You know we feel confident in Ford's positioning and confident in its ability to grow over the long term, but you know the progress has been a little bit slower there. Your next question comes from Simeon Siegel from BMO Capital Markets. Your line is open. Thanks. Hey, guys. Good afternoon. Hope you're all doing well.

Speaker Change: The gross margin opportunity there.

Speaker Change: Yes, we're certainly hopeful we'll start to see some inflections in the back half of the year.

Jesse Timmermans: Maybe to follow up on that a little bit. So any way to break apart your active customer performance between Revolve and Forward? And maybe to the comments about the luxury market dislocation? Just how are you thinking about what the timeline should look like for you to see the turn in that? Maybe both speak to revenues, which I think you were, but then also gross margin. Yeah, so on active customers, breaking that out between revolve and forward, you know, it, you know, not exactly, but largely tracks to the revenue performance that we're seeing where we're seeing more, more activity on the revolve side, more positive activity on the revolve side, and then more pressure on the forward, and then also kind of reflective of revenue. International, more positive... international and then on the domestic side. So, you know, you can kind of generally align.

Speaker Change: And we still have some inventory to work through but we believe.

Speaker Change: So at this location in the online luxury world.

Speaker Change: Should should provide meaningful opportunities for us and we're getting closer to seeing the kind of inventory turns we want on the <unk> side of the business. So hopefully we see those margins improve in the sales trends improve.

Speaker Change: It may come in the back half of the year.

Speaker Change: Your next question comes from the line of Janine Stichter from <unk>. Your line is open.

Janine Stichter: Hi, Thanks for taking my question.

Janine Stichter: I understand youre not planning on brand penetration should grow this year at least Nathan how youre buying inventory I was wondering if you could speak to some of the Opex and Dana just can retool the owned brand mix and maybe fill in some of the gaps in the assortment and we noticed a very honestly that launched it feels a bit more casual and more of our southern leg easily seen from the brands. Just was hoping you could speak to the strategy there. Thank you.

Jesse Timmermans: Sales and the new customer growth there, which then impacts active customers. We do expect the active customer growth number to come down. I think that's note given that last Q1. We had a record number of new customers.

Yeah on a high level, it's kind of like the category as a kind of broad categories dresses.

Simeon Avram Siegel: Now, a lot of that growth came from Markdown customers, given our mix in the inventory repositioning that we were going through at that time. You know, a really good, healthy customer base. The customer activity is healthier than the pre-COVID levels; there are some, you know, near term, there, and then. Just for I think, I don't know, Mike or Michael, you had made the comment that this could be good, the market dislocation amongst the online luxury peers. So just how are you thinking about the timeline or different expectations that you'd expect to see to be able to see that turn?

Janine Stichter: Bottoms.

Speaker Change: Does that is it.

Nathan: One lens that will breakdown and share information, but also internally, we view and Houston kind of segmentation, even more important so we will see a diversification away from the category.

Nathan: Diversification into zones outside of our historic strength.

Nathan: Going out clothes warm weather into areas that the wardrobe areas of the closet and another as far as the department store that we arent just top of mind. So.

Mike Karanikolas: And again, I think that generally speaks to revenues, but it would also be helpful to hear your perspective on the gross market. Yeah, we're certainly hopeful we'll start to see some inflections in the back half of the year. You know, and we still have some inventory to work through, but you know, we believe this location in the online luxury world should provide meaningful opportunities for us. And, you know, we're getting closer to seeing the kind of inventory trends we want on the forward side of the business. So, you know, hopefully we will see those margins improve in the sales trend in a significant way once again. Your next question comes from the line of Janine Stichter from BTIG. Your line is open.

Nathan: Strong zone into kind of more.

Nathan: More sophisticated a little bit more chic little bit of a casual or potentially a little bit more modern workplace as well.

Nathan: Will that help the collection, which is going to look strong for US has also been a lot more casual away from dresses in terms of those other aspects of the.

Nathan: The customers' lives and we will continue to see more and more diversification knowing that the customer loves us and the customer Trust us.

Janine Stichter: Hi, thanks for taking my question. You know, I understand you're not planning for own brand penetration to grow this year, at least based on how you're handling the inventory. I was wondering if you could speak to some of the opportunity there just to retool the own brand mix and maybe fill in some of the gaps in the assortment. We noticed the Mariana Hewitt launch; it feels a bit more casual and more versatile than what we've usually seen from the own brands.

Nathan: And ultimately there's just so much more opportunity to.

Nathan: Connect with your on different levels of what she needs.

Speaker Change: Great and then can you just remind us how much higher margin on brand versus the broader assortment.

Speaker Change: Yes, we haven't specifically quantified that other than to say it is meaningfully higher than the third party.

Speaker Change: Maybe just let's just leave it there, but it is an important long term gross margin drivers, especially on the revolve side and then some opportunity longer term on for it as well.

Michael Binetti: Just was hoping you could speak to the strategy there. Thank you. Yeah, on a high level, it's kind of like the categories are kind of like the broad categories, dresses, you know, bottoms, you know, that sort of stuff is, you know, it's one lens that we break down and share information, but also internally, we view end use and kind of segmentation, you know, even more important. So we'll see diversification, you know, away from the categories, not away, diversification into So Mariana was a strong zone into kind of more, you know, a little bit more sophisticated, a little bit more chic, a little bit more casual, or potentially a little bit more modern workplace as well.

Speaker Change: Your next question comes from the line of Oliver Chen from TD Cowen Your line is open.

Oliver Chen: Hi, you've made a lot of progress in right sizing inventory, how should we think about the modeling of the inventory relative to sales growth going forward and those distinctions.

Oliver Chen: So as you think about categories.

Oliver Chen: Where were you outperforming our had opportunities for sort of chasing if there were some in terms of.

Oliver Chen: Outperforming versus underperforming categories and then finally, you have been very creative and proactive with artificial intelligence would love your thoughts on how material this might be it can definitely apply to.

Oliver Chen: Hi chain fraud detection, but it can also apply that very creative aspects. How would you help decipher what might actually be needle moving as you as you engage in that innovation. Thanks.

Michael Binetti: We'll see, we'll, you know, the health of the collection, which is going strong for us, has also been a lot more casual, you know, away from dresses in terms of other aspects of the customer's lives, and we'll continue to see more and more diversification, knowing that, you know, the customer loves us, and the customer trusts us. And ultimately, there's just so much more opportunity to, you know, connect with her on different levels of what she needs. Great And then, can you just remind us how much higher the margin the owned brands are versus the broader assortment?

Speaker Change: Yes, so I'll take the first couple there Oliver and then and then pass it over so on the inventory modeling.

Speaker Change: This quarter, we closed with inventory down five on net sales down one so and improved gap there from what you've been seeing earlier in the year, we do expect that overall gap to close and sales growth inventory growth to roughly aligned.

Oliver Chen: And again, just as a reminder, revolve in much better shape, so that positive gap to call. It on revolve.

Jesse Timmermans: Yeah, we haven't specifically quantified that other than to say it is meaningfully higher. But it is an important long-term gross margin driver, especially on the Revolve side and then, you know, some operators. Voila!

Oliver Chen: Is much healthier versus forward, where we still have work to do.

Oliver Chen: Going into the year, but having having going into the year with healthy full price healthy margin and back into inventory booking flash receipts growth mode, We're pretty excited about.

Oliver Chen: Your next question comes from a line from Oliver Chen from TD Cowen. Your line is open. Hi. You made a lot of progress in right-sizing inventories. How should we think about the modeling of inventory relative to sales growth going forward and those distinctions? Also, as you think about categories, where were you outperforming or had opportunities for chasing, if there were any, in terms of outperforming versus underperforming categories? And then, finally, you've been very creative and proactive with artificial intelligence. I would love your thoughts on how material this may be.

Oliver Chen: And then outperformance versus underperformance.

Oliver Chen: Dresses down 5% apparel down, 8% and then offset by really strong growth in handbags shoes, and accessories of plus seven and then.

Oliver Chen: Kind of the.

Oliver Chen: The highlight with beauty at plus 28%. So that continues to really outperform but I would say no significant misses on.

Oliver Chen: Missing demand or or or the or the opposite.

Oliver Chen: I feel like we're in pretty good shape as we enter the year.

Oliver Chen: Outside of Florida.

Oliver Chen: Yes.

Oliver Chen: Official intelligence side. It really is the aspect to touch every area of the business.

Oliver Chen: So certainly it's already had an impact on this.

Oliver Chen: Do I think more broadly most aspects of general operations.

Jesse Timmermans: It can definitely apply to Supply Chain and Fraud Detection, but it can also apply to very creative aspects. How would you help decipher what might actually be needle-moving as you engage in that innovation? Thanks. Yeah, so I'll take the first couple there, Oliver, and then and then pass it over.

Oliver Chen: You can see some sort of benefit there.

Oliver Chen: In terms of the website experience there is a ton of opportunities in terms of personalization and new ways of product discovery and search and kind of browsing. The website that we're actively working on both with third parties and also with our own internal team which is tremendous.

Jesse Timmermans: So on the inventory modeling, with it, this quarter, we closed with inventory down five on net sales down one, so you know, an improved gap there earlier in the year. We do expect that overall gap to close in sales, growth, and image, roughly align. And again, just as a reminder, Revolve is in much better shape.

Oliver Chen: On the buying and planning side it can assist us with those winding planning decisions, which maybe is a sub faster to supply chain, but.

Oliver Chen: It was a little bit more interest in one than the warehouse rebalancing.

Jesse Timmermans: So that positive gap, call it on Revolve, is much healthier versus Ford, where we still have... going into, you know, having going into the year with healthy full price healthy margin and back bookings. Thank you. And then outperformance versus underperformance, it's a.., dresses down 5%, apparel down 8%, and then offset by really strong growth in handbags. The highlight was beauty at.

Oliver Chen: And then to your point on kind of the most accretive aspects rates there as well.

Oliver Chen: One a potential within imagery and certainly there is a lot of I think really.

Oliver Chen: Exciting examples out there where we've all seen the power of where generally I can do with inventory getting it to the point, where its production is something that we're working on and by production I. Just I mean, you can do it consistently in a cost effective way in a repeatable way.

Michael Binetti: I would say no significant misses on missing demand or the. I feel like we're in pretty good shape, outside. Yeah, and on the artificial intelligence side, it really has the potential to touch every area of the business. You know, so certainly, it's already had an impact. I think more broadly, most aspects of general operations can see some sort of benefit there. You know, in terms of the website experience.

Oliver Chen: The teams are actively working on comp.

Oliver Chen: Confidence that that is something thats going to occur.

Oliver Chen: Sooner rather than later across the industry and we certainly hope to be a leader there.

Oliver Chen: And that enables you to do so many more things that you could prior right where you can really.

Michael Binetti: There's a ton of opportunities in terms of personalization and new ways of product discovery and search and the kind of browsing on the website that we're actively working on, both with third parties and also with our internal team, which is tremendous. You know, on the buying and planning side, it can assist us with those buying and planning decisions, you know, which maybe is a sub-aspect of supply chain, a little bit more interesting one than the warehouse rebalance, and then you know, to your point on kind of the most creative aspects. Right. There's a ton of potential within imagery, and, you know, certainly there's a lot of, I think, really I can do with imagery, you know, but getting it to the point where it's productionized is something that we're working on. And by productionized, I mean you can do it consistently in a cost-effective way in a repeatable way.

Oliver Chen: Customize the experience in the inventory to the individual user in terms of what those creatives.

Oliver Chen: We would hope to be able to.

Oliver Chen: You know kind of customize things and generate a lot more options than we could without.

Oliver Chen: To help with artificial intelligence.

Oliver Chen: Thank you last follow up performance marketing, it's been a little more rationale, but fairly volatile what are you assuming for your customer acquisition cost and anything youre seeing with keywords and also in light of.

Speaker Change: The dislocation we're all speaking too thank you.

Speaker Change: Yeah, so performance marketing into something that we've always.

Speaker Change: Kind of late quarter by quarter, with obviously trying to keep things in a certain range in terms of our overall spend as a percentage of sales and then.

Michael Binetti: And that's something our teams are actively working on, and I have confidence that that is something that's going to occur sooner rather than later across the industry, and we certainly hope to be a leader. And that kind of enables you to do so many more things, prior, right, where you can really customize the experience in the imagery to the individual user in terms of what those creatives look like.

Speaker Change: The various internal targets, we have in terms of acquisition costs. So.

Speaker Change: I'd say overall, we've seen what I would call a more challenging environment. The past couple of quarters. Despite the improvement in marketing efficiency that you saw.

Michael Binetti: We would hope to be able to kind of customize things and generate a lot more options without the help of artificial intelligence. Thank you. Last follow-up question: performance marketing has been a little more rational, but fairly volatile. What are you assuming for your customer acquisition cost and anything you're seeing with keywords and also in light of the dislocation, you know, we're all speaking to? Thank you.

So.

Speaker Change: Hopefully we start to see things trend there, but for now I can say, it's a little bit more challenging environment to be able to deploy to spend that we'd like the efficiencies that we'd like to see.

Speaker Change: But that's always been kind of the case across the years, where you have some periods, where it's a little bit tougher in some periods where opportunity opens up.

Oliver Chen: Yeah, so performance marketing is something that we've always kind of played quarter by quarter with obviously trying to keep things in a certain range in terms of our overall spend as a percentage of sales and then, you know, the various internal targets we have in terms of acquisition costs. So, you know, I would say overall that we've seen what I would call a more challenging environment the past couple quarters, despite the improvement in marketing efficiency that you saw. You know, so, you know, hopefully we will start to see things turn there. But for now, I can say it's a little bit more challenging environment to be able to deploy the spend that we'd like if the efficiencies that we'd like to see. But, you know, that's always been kind of the case across the years, where you have some periods where it's a little bit tougher than some periods where opportunities open up.

Speaker Change: Your next question comes from the line of Ashley Owens from Keybanc capital markets. Your line is open.

Ashley Owens: Great. Thanks, so much so just really quickly on fulfillment would appreciate some color on the shaping of that I think if youre on May 24, and then just how you're thinking about arbitrary number ex teeny revisions to that and then I have a follow up.

Ashley Owens: Yes.

Ashley Owens: Film that we expect to see some slight efficiencies as we progressed through the year. So Q1 four.

Speaker Change: We're guiding towards three five and then for the full year at 3533 to three five.

Speaker Change: So.

Speaker Change: Theres always some quarter to quarter fluctuation, there, but I would say over over the course of the year. Some some slight efficiencies and then return rate. We are at this point modeling and no no.

Mike Karanikolas: Your next question comes from Ashley Owens from KeyBank Capital Markets. Your line is open. Great, thanks so much.

Speaker Change: Kind of benefit or detriment on return rate, we are modeling in a flattish return rate for this year again, considering the seasonal fluctuations across the year, but that said optimistic on on the things we have in works, but not quite there yet where we can model it in.

Ashley Owens: So just really quickly on fulfillment, I would appreciate some color on the shaping of that as we move through 2024 and then just how you're thinking about that return rate number and if we start to see any reversions to that, and then I have a follow-up. Yeah, on fulfillment. We expect to see some slight efficiencies as we progress through the year. So key one.

Speaker Change: Okay, Great and then just quickly two I saw that <unk>.

Speaker Change: Slightly up year over year in the Doc So I'm just curious as to what drove that and then kind of as the inventory continues to rate hikes, there where do you see this number it normalizing.

Jesse Timmermans: 5, and, You know, there's always some quarter-to-quarter fluctuation there, but you know I would say over the course and then return rate. We are, you know, at this point, modeling, know, benefit. Thank you, but not quite there yet where we can. Okay, great. And then just quickly, too, I saw that AOV for forward was slightly up year over year in the docs, so just curious as to what drove that and then kind of as the inventory continues to go to the right sites here, where do you see this number normalized? Yeah, no, that was great.

Speaker Change: Yeah, no that was great and just to pick up on that and a slight increase in the forward.

Speaker Change: And maybe as a reminder, as well different from revolve where we're a heavy portion of the mix is dresses.

Speaker Change: Forward is largely handbags shoes accessories, and you can see the overall growth in handbags shoes, and accessories and some of our disclosures there. So we're seeing good growth in.

Speaker Change: And those higher price point categories, and then maybe just on the viewpoint as well.

Speaker Change: Slightly down minus 1% year.

Jesse Timmermans: And good to pick up on that and a slight increase in the forward AOV. And maybe as a reminder as well, different from Revolve where we're a heavy portion of addresses. Ford is largely a hand-made company, and you can see the overall growth. Disclosures there. So, you know, we're seeing good growth, and those are higher. And then maybe just on the AOV point as well, you know, slightly down minus one year-over-year on the Revolve, which led to the, and that is also a mixed component there with beauty, you know, growing phenomenally over the course of this year that does take AOV down. If you remove beauty from both years, then AOV does increase slightly on both.

Speaker Change: Year over year on revolve.

Speaker Change: Which led to the 1% decline overall any of you and that is also a mix component there with beauty growing phenomenally over the course of this year that does take the tick down if you remove beauty from both years than <unk> does increase slightly on revolve as well.

Speaker Change: Your final question comes from the line of Tom <unk> from Wedbush Securities. Your line is open.

Tom: Hi, guys. Thanks.

Tom: And Ian here.

Tom: Jesse I want to ask about the margin structure on the builds on itself.

Tom Nickic: Your final question comes from the line of Tom Nickic from Wedbush Securities. Your line is open. Hi guys, thanks for getting me in here. Jesse, I wanted to ask about the market structure of the business, and it looks like this year you should see a pretty significant improvement in both the gross margin and the op-ex. I'm assuming we'd like to kind of build back towards some of the higher margin levels that you had before, the high single-digit range where you were pre-COVID. If we were to look, you know, down the road a couple of years, like what line items do you think would be able to help bridge the gap between that, like, you know, three to 4% margin you're kind of applying for this year relative to the Yeah, yeah, no. That's a great question, Tom.

Tom: It looks like this year you should see.

Speaker Change: Yes pretty mentioned to remain above the gross margin and the opex to sales.

Tom: Ratio.

Tom: I'm, assuming you'd like to kind of build back towards some of the some of the higher margin levels that you had before.

Jesse: Thanks Jack.

Jesse: The high single digit range, where you werent pre COVID-19.

Jesse: If we are going to look.

Jesse: Down the road a couple of years like what line items.

Jesse: Do you think we'd be able to help bridge the gap between that like.

Jack: Yeah agreed to 4% margin, you're kind of implying for this year.

Jack: The eight or so that you were doing pre COVID-19.

Speaker Change: Yeah, Yeah, no that's great question Tom Thanks.

Jesse Timmermans: Thanks. You know, I think in the near term, you need guidance around that. So, you know, expect to see some growth margin improvement, um, you know, starting to realize selling a distribution line, and this kind of plays out over the We do expect further gross margin expansion, especially as we get forward. We talked about own brands, still a lot of opportunity for own brands, and beyond. So those are a couple of the gross margin drivers where we, you know, get back closer to that, you know. Some moderate efficiency gains and employee satisfaction, but not a huge one.

Jack: I think in the near term you can.

Speaker Change: Obviously, you gave the guidance around that so expect to see some gross margin improvement and then.

Jack: Starting to realize those efficiencies and that selling and distribution line.

Jack: And this kind of plays out over the longer term too if you kind of extend that we do expect further gross margin expansion, especially as we get forward, it's going to take.

Jack: A good part of this year to get forward rates. So once that happens we get improved margin on our forward business and then over the long term, we talked about owned brands still a lot of opportunity on owned brands as we get into 2025 and beyond so those are a couple of that gross margin drivers, where we expect to get.

Jack: Get back closer into that mid fifties zone versus.

Jack: Call. It 52, 5% to 53% were in today.

Jack: Some moderate efficiency gains and fulfillment not a huge lever there and then selling and distribution.

Jack: We've made great gains in the past quarter, it's looking get early on for the year and starting to realize some of the work that we put into that line item in 2023. So that's another meaningful line item.

Jesse Timmermans: We've made great gains in the past quarter. It's looking good early on for the year and starting to realize some of the work that we put into that line item in 2023. So that's another meaningful line item. Marketing. We want to keep the pedal down there.

Jack: Marketing, we want to keep the pedal down there back to Mike's comments on just the large opportunity that we have that's not one that we intend to pull back on and then finally G&A over the long term and you can kind of.

Jack: See what we've done for a few years prior to COVID-19 and gaining multiple points of efficiency on that selling and distribution line item, but that takes obviously getting back into growth mode.

Jesse Timmermans: Back to Michael, have. That's not one that we intend to pull back. And then finally, G&A over the long term, and you can kind of see what we did, you know, for a few years prior to COVID and gained, you know, multiple points. But that takes, obviously, getting back into growth mode, which we're optimistic about, but still, out there to call. That's all the time we have for questions today.

Jack: We're optimistic about that still too much uncertainty out there to call.

Jack: Timing and magnitude.

Speaker Change: That's all the time, we have for questions today, I will turn the call back to management for closing remarks.

Speaker Change: Thanks for joining us for this <unk>.

Jack: 20th year in review.

Jack: We're in a very very challenging environment, but we're very excited about the progress that we've made behind the scenes.

Jack: Most part of the team.

Jack: Hardware with all the products that we have in the upcoming quarters and we'll be excited to show we have.

Operator: I will turn the call back to management for closing remarks. Thanks for joining us for this, you know, 2023, you know, year in review. You know, we're in a very, very challenging environment, but we're very excited about the progress that we made behind the scenes. We're most proud of the team and the hard work with all the projects we have in the upcoming quarters, and we'll be excited to show what we have in the quarters ahead. Thank you. This concludes today's conference call. You may now disconnect. Please wait. The conference will begin shortly. Thank you for watching.

Jack: In the quarters ahead. Thank you.

Speaker Change: This concludes today's conference call you may now disconnect.

Speaker Change: Please wait the conference will begin shortly.

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