Q1 2024 Revolve Group Inc Earnings Call

Operator: Good afternoon, my name is J.L., and I will be your conference operator today. At this time, I would like to welcome everyone to Revolve's first quarter 2024 results conference call. All lines have been placed on me to prevent any background noise.

Good afternoon. My name is Gerald and I will be your conference operator today at this time I would like to welcome everyone to the revolves first quarter 2024 results conference call.

Operator: 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.

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 key followed by the number one on your telephone keypad. If you would like to withdraw your question, press the star one key again. Thank you. At this time, I'd like to turn the conference over to Erik Randerson, Vice President of Investor Relations at Revolve.

Erik Randerson: If you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.

Erik Randerson: If you'd like to withdraw your question press the star one key again thank you.

Erik Randerson: At this time I'd like to turn the conference over to Eric.

Erik Randerson: Randerson Vice President of Investor Relations at revolve you.

Erik Randerson: You may begin.

Erik Randerson: Good afternoon, everyone, and thanks for joining us to discuss Revolve's first quarter 2024 results. Before we begin, I'd like to mention that we have posted a presentation containing key one financial highlights to 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 and operating initiatives, industry trends, our marketing events, our partnerships, our physical retail stores, and our outlet for net sales, gross margin, 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 Exchange Commission, including without limitation our annual report on Form 10-K for the year into December 31, 2023, and our subsequent quarterly reports on Form 10-Q, all of which can be found on our website at investors.revolve.com. 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> first quarter 2024 results.

Erik Randerson: Before we begin I'd like to mention that we have posted a presentation containing Q1 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 related to our future growth our inventory balance our key priorities and operating initiatives industry trends our marketing event.

Erik Randerson: Our partnerships are physical retail stores and our outlook for net sales gross margin operating expenses and <unk>.

Erik Randerson: The 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 risk 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 Exchange Commission, including without limitation. Our annual report on Form 10-K for the year to December.

Erik Randerson: 31, 2023, and our subsequent quarterly reports on Form 10-Q, all of which can be found on our website at investors that revolve dot com, we undertake no obligation to revise or update any forward looking statements or information, except as required by law.

Erik Randerson: 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 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.

Erik Randerson: 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 subset.

Erik Randerson: Two for or superior to the financial information prepared and presented in accordance with GAAP and our non-GAAP measures may be different from non-GAAP measures used by other companies.

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

Erik 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 our 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 care Nikola for Michael <unk>.

Erik Randerson: Well as Jesse Timberlands, 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.

Michael Karanikolas: Hello everyone, and thanks for joining us today. We had an encouraging first quarter on many levels, highlighted by meaningful gross margin expansion and year-over-year efficiency in our variable logistics costs that exceeded our guidance ranges. The great work by our operations team on the efficiency measures discussed on prior calls enabled us to achieve our first year-over-year decrease in selling and distribution costs as a percentage of net sales in three years. These gains helped us to achieve significant profitability and cash flow in the first quarter, despite a slight decline in net sales year over year and the expected increase in marketing spend due to the timing of our brand building investments in 2024.

Mike: Hello, everyone and thanks for joining US today, we had an encouraging first quarter on many levels highlighted.

Michael Karanikolas: Highlighted by meaningful gross margin expansion and year over year efficiency and our variable logistics costs.

Michael Karanikolas: Exceeded our guidance ranges.

Michael Karanikolas: Great work by our operations team on the efficiency measures discussed on prior calls enabled us to achieve our first year over year decrease in selling and distribution costs as a percentage of net sales in three years.

Michael Karanikolas: These gains helped us to achieve significant profitability and cash flow in the first quarter. Despite a slight decline in net sales year over year and the expected increase in marketing spend due to the timing of our brand building investments in 2024.

Michael Karanikolas: Importantly, our net sales trajectory has improved since our last update when net sales during the first eight weeks of the first quarter declined by a mid-single-digit percentage year-over-year. In fact, our net sales returned positive year-over-year growth during March, and the momentum continued into April when our net sales growth remained positive to begin the second quarter. Most importantly, we achieved these solid results while continuing to invest in the foundations for long-term success. With that introduction, let me step back and provide a brief recap of the first quarter. Net sales were $271 million, a decrease of 3% year over year.

Michael Karanikolas: Importantly, our net sales trajectory has improved since our last update when net sales during the first eight weeks of the first quarter had declined by a mid single digit percentage year over year. In fact, our net sales returned to positive year over year growth during March and that momentum continued into April when our net sales growth remained positive.

Michael Karanikolas: To begin in the second quarter.

Michael Karanikolas: Most importantly, we achieved these solid results, while continuing to invest in the foundations for long term success.

Michael Karanikolas: Recall that in the first quarter of 2023, a much larger than normal percentage of our net sales were on markdown as we worked aggressively to reduce our inventory position a year ago. By comparison, in the first quarter of 2024, our inventory health was in a much better place. So the net sales comparison in Q1 2024 reflects increased net sales at full price year over year that was more than offset by lower net sales on markdown year over year.

Michael Karanikolas: With that introduction, let me step back and provide a brief recap of the first quarter.

Michael Karanikolas: Net sales were $271 million, a decrease of 3% year over year.

Michael Karanikolas: Recall that in the first quarter of 2023 amongst larger than normal percentage of our net sales were on markdowns as we worked aggressively to reduce our inventory position a year ago by comparison in the first quarter of 2024, our inventory health was in a much better place.

Michael Karanikolas: So the net sales comparison in Q1 2024 reflects increased net sales at full price year over year, there was more than offset by lower net sales on mark down year over year.

Michael Karanikolas: Our gross margin expansion in the first quarter powerfully demonstrates the financial benefit of our much cleaner inventory position and higher mix of net sales at full price year over year. Driven by the performance of the Revolve segment, our consolidated gross margin increased 250 basis points year-over-year in the first quarter. The margin gains resulted in increased gross profit dollars year-over-year, despite the lower revenue. By segment, Revolve Net sales decreased 1% year over year in the first quarter.

Michael Karanikolas: Our gross margin expansion in the first quarter powerfully demonstrates the financial benefit of our much cleaner inventory position and higher mix of net sales at full price year over year.

Michael Karanikolas: Driven by the performance of the revolve segment, our consolidated gross margin increased 250 basis points year over year in the first quarter. The margin gains resulted in increased gross profit dollars year over year, despite the lower revenue.

Michael Karanikolas: By segment revolve net sales decreased 1% year over year in the first quarter.

Michael Karanikolas: Forward net sales decreased 15% year-over-year, directionally consistent with external data points, including reports that U.S. luxury spending in March declined 18% year-over-year, according to Citi credit card data, the lowest monthly rate in nearly three years. We view the Luxury Industry Challenges as an exciting opportunity for Revolve to go on offense and invest in market share capture, supported by our consistent profitability and cash flow generation that sets us apart in fashion e-commerce Net income for the first quarter was $11 million, or $0.15 per diluted share, and adjusted EBITDA was $13 million.

Michael Karanikolas: Forward net sales decreased 15% year over year, Directionally consistent with external data points, including reports that U S luxury spending in March declined 18% year over year. According to Citi credit card data the lowest monthly rate in nearly three years.

Michael Karanikolas: We view the luxury industry challenges as an exciting opportunity for revolver to go on offense and invest and market share capture supported by our consistent profitability and cash flow generation that sets us apart and fashion E Commerce.

Michael Karanikolas: Net income for the first quarter was $11 million or.

Michael Karanikolas: Or <unk> 15 per diluted share and adjusted EBITDA was $13 million as.

Michael Karanikolas: As expected, both profitability measures declined year over year but benefited from gross margin expansion and operating expense efficiency outperforming our guidance ranges. Importantly, our business continues to generate meaningful cash flow. In the first quarter, we generated $38 million in operating cash flow, increasing our cash position by $28 million in just three months.

Michael Karanikolas: As expected both profitability measures declined year over year, but benefited from gross margin expansion and operating expense efficiency outperforming our guidance ranges.

Michael Karanikolas: Importantly, our business continues to generate meaningful cash flow in the first quarter, we generated $38 million in operating cash flow, increasing our cash position by $28 million in just three months.

Michael Karanikolas: Even while we continue to enhance shareholder value through the repurchase of an additional $8 million in shares of our Class A common stock during the first quarter at what we believe were attractive prices, beyond the numbers, I'm excited by our team's execution that has led to early progress on the strategic priorities outlined last quarter. Before turning it over to Michael, I'll give you a brief recap on our progress on each initiative.

Michael Karanikolas: Even while we continued to enhance shareholder value through the repurchase of an additional $8 million in shares of our class a common stock during the first quarter at what we believe were attractive prices.

Michael Karanikolas: Beyond the numbers I am excited by our team's execution that has led to early progress on the strategic priorities outlined last quarter.

Michael Karanikolas: Before turning it over to Michael who will give you a brief recap on our progress on each initiative.

Michael Karanikolas: First, I'm extremely proud that we've delivered efficiencies in our logistics costs year over year. Selling and distribution expense as a percentage of net sales decreased 50 basis points year over year, despite continued pressures from a higher return rate in the first quarter of 2024.

Michael Karanikolas: First I'm extremely proud that we have delivered efficiencies in our logistics costs year over year.

Michael Karanikolas: Selling and distribution expense as a percentage of net sales decreased 50 basis points year over year. Despite continued pressures from a higher return rate in the first quarter of 2024.

Michael Karanikolas: Considering the meaningful potential to drive efficiency if we can contain our return rate, we are extremely focused on initiatives designed to reduce our return rate and make returns more efficient. While not yet visible in our results, under the hood, we see early signs of progress from these tests and initiatives that we intend to scale in the coming quarter. Some focus areas we're excited about include improved size guidance that primarily leverages technology partners and AR tools.

Michael Karanikolas: Considering the meaningful potential to drive efficiency. If we can contain a return rate. We are extremely focused on initiatives designed to reduce our return rate and make returns more efficient while not yet visible in our results under the Hood, we see early signs of progress from these tests and initiatives that we intend to scale in the coming quarters.

Michael Karanikolas: Some focus areas. We are excited about include improved size guidance, primarily leverages technology partners and <unk> tools.

Michael Karanikolas: Testing important new measures designed to prevent wardrobeing, which refers to a customer wearing a purchase style out for an event and then returning it for a refund or exchange. And finally, effective last week, we have reduced our window for product returns to 30 days for returns and 60 days for exchanges, consistent with the return and exchange window we have successfully offered for many years prior to the pandemic. You may recall that in March of 2020, after the onset of the pandemic, we increased the window for returns and exchanges to 60 days and 90 days, respectively.

Michael Karanikolas: Testing of important new measures designed to prevent wardrobes, which refers to our customer we are in a purchase style out for an event and then returning it for a refund or exchange.

Michael Karanikolas: And finally effective last week, we have reduced our window for product returns to 30 days for returns and 60 days for exchanges consistent with the return of an exchange window. We have successfully offered for many years prior to the pandemic.

Michael Karanikolas: You may recall that in March of 2020 after the onset of the pandemic, we increased the window for returns and exchanges to 60 days and 90 days respectively.

Michael Karanikolas: Our analysis of the competitive landscape confirms that our hassle-free return policy remains among the most customer-friendly in the industry, especially considering that most apparel retailers now charge customers a fee for online product returns. By comparison, we continue to encourage our customers to use the home as a dressing room with a no-hassle, free shipping and returns policy, which we have offered since our launch in 2003, making us one of the pioneers of free returns.

Michael Karanikolas: Our analysis of the competitive landscape confirms that our hassle free return policy remains among the most customer friendly in the industry, especially considering that most apparel retailers now charge customers a fee for online product returns.

Michael Karanikolas: By comparison, we continue to encourage our customers to use the home is addressing them with a no hassle free shipping and returns policy, which we have offered since our launch in 2003 make us one of the pioneers of free returns.

Michael Karanikolas: Second, we further validated our opportunity to expand our share of wallets through continued expansion of emerging areas such as beauty, men's, and home. Net sales in the beauty category increased 34% year-over-year in the first quarter, and our pipeline of coveted beauty brands we expect to onboard has never been stronger. Third, we continue to expand our international presence, where we have remained focused on further elevating service levels to drive growth. Australia and the United Kingdom offer important proof points of our recent success.

Michael Karanikolas: Second we further validated our opportunity to expand our share of wallet through continued expansion of emerging areas such as beauty men's and home net sales in the beauty category increased 34% year over year in the first quarter and our pipeline of Covenant beauty brands, we expect to onboard has never been stronger.

Michael Karanikolas: Third we continue to expand our international presence, where we have remained focused on further elevating service levels to drive growth.

Michael Karanikolas: Australia, and the United Kingdom offer important proof points of our recent success.

Michael Karanikolas: Our operational excellence and a wide range of logistics partnerships drove shipping and cost efficiencies that enabled us to reduce the minimum purchase threshold for consumers in Australia and the UK to receive free international shipping. As with many of our service level breakthroughs, the consumer response has been incredible. We had improved year-over-year growth in both Australia and the UK in the first quarter, which helped us to offset a very tough comparison in China. Based on this success, we have already begun to expand this proven model to additional international countries.

Michael Karanikolas: Our operational excellence and wide range of logistics partnerships drove shipping and cost efficiencies that enabled us to reduce the minimum purchase threshold for consumers in Australia.

Michael Karanikolas: In the U K to receive free international shipping.

Michael Karanikolas: As with many of our service level breakthroughs consumer response has been incredible.

Michael Karanikolas: We had improved year over year growth in both Australia, and the UK in the first quarter, which helped us to offset a very tough comparison in China.

Michael Karanikolas: Based on the success, we have already begun to expand his proven model to additional international countries.

Michael Karanikolas: Fourth, we remain committed to efficiently investing to expand our brand awareness, grow our customer base, and strengthen our connection with the next generation of consumers. As Michael will expand upon, we reimagined the format of a Revolve festival held last month to be even more intimate and exclusive this year, while maintaining the elevated brand positioning that is so unique to Revolve. The marketing team delivered an incredible Revolve Festival event that generated a greater impact on our key metrics within the one-day format in 2024 than we had achieved over an entire weekend for last year's event.

Michael Karanikolas: Fourth we remain committed to efficiently investing to expand our brand awareness grow our customer base and strengthen our connection with the next generation consumer.

Michael Karanikolas: As Michael will expand upon we re imagined the format of our revolve festival held last month to be even more intimate and exclusive this year, while maintaining the elevated brand positioning that is so unique to revolve.

Michael Karanikolas: The marketing team delivered an incredible revolve festival event that generated a greater impact on our key metrics within the one day format. In 2024, then we had achieved over an entire weekend for last year's revolve Festival event and lastly, we continue to leverage AI and other technology to drive the business forward and even further elevate the customer experience by <unk>.

Michael Karanikolas: And lastly, we continue to leverage AI and other technology to drive the business forward and even further elevate the customer experience. For example, by leveraging AI and machine learning technology to better align product merchandising with customer preferences, we have driven notably higher conversion rates for our curated shops, such as our festival shop, where associated revenue increased more than 50% year over year in the period leading up to Revolve Festival. To wrap up, we are pleased with how the year has begun, encouraged by the return to year-over-year growth in March and April, and we are excited about our growth and efficiency initiatives that we believe improve our foundation for profitable growth over the long term.

Michael Karanikolas: Leveraging AI and machine learning technology to better align product merchandising with customer preferences, we have driven notably higher conversion rates for our curated shops, such as our festival shop, where associated revenue increased more than 50% year over year in the period, leading up to revolve festival.

Michael Karanikolas: GAAP up we are pleased with how the years begun encouraged by the return to year over year growth in March and April and we are excited about our growth and efficiency initiatives that we believe improve our foundation for profitable growth over the long term I would like to congratulate our team on the wins. This quarter. We have a lot of work ahead of us, but with your relentless driving commitment we are comping.

Michael Karanikolas: I would like to congratulate our team on the wins this quarter. We have a lot of work ahead of us, but with your relentless drive and commitment, we are confident in our ability to compete and win together in 2024 and beyond. Now, over to Michael.

Michael Karanikolas: And our ability to compete and win together in 2024 and beyond now over to Michael.

Michael Mente: Thanks, Mike, and hello everyone. I'm excited by the progress we have made on key priorities, especially the investments we are making in building our brands and continuing to strengthen our connection with the next generation of consumers. We are making the most of the opportunities at this important time to create brand, heat, and awareness as our core consumer gears up for an active lifestyle event and travel in the months ahead. For the 7th year, we held Revolve Festival in Palm Springs on April 13th in a reimagined format that was better than ever.

Michael Karanikolas: Thanks, Mike and Hello, everyone.

Michael Mente: I am excited by the progress we have made on key priorities, especially in the investments we are making in building our brands and continue to strengthen our connection with the next generation consumer.

Michael Mente: They are making the most of opportunities at this point in time to clean balance sheet and awareness as our core consumer gives us an active lifestyle Logan traveling in the months ahead.

Michael Mente: But the 70 and we held revolve festival in Palm Springs April titles, and re imagine format that was better than ever more intimate with a neutral <unk> festival. This year was incredibly efficient impactful and buzzing with LNG flowing some <unk> performance, including Ludacris T pain, Tom Paul on the AAN Twins.

Michael Mente: The more intimate venue for Revolve Festival this year was incredibly efficient, impactful, and buzzing with energy flowing from Y2K team performers including Ludacris, T-Pain, Tom Paul, and the Ying Yang Gang. Many top A-listers in the desert chose to attend Revolve Festival, including actors, musicians, athletes, celebrities, and content creators, such as Kendall Jenner, Rihanna, John Taylor, A$AP Rocky, Billie Eilish, Megan Fox, Hailey and Justin Bieber, Zay Flowers, DeAndre Hopkins, Lena Dobrev, Louis Reinhart, Sean White, Emma Roberts, and Natalia Bryant

Michael Mente: Let me tackle that doesn't that does a <unk> 10 loss estimates, including office musicians athletes celebrities and content creators such as Kendall Jenner Liana, Don Taylor Aesop Rocky.

Michael Mente: Megan Fox and Ian just to be safe Deandre Hopkins unit dose really line Shan life at <unk> and Italian bank.

Michael Mente: Most impressive is that we delivered our incredible Revolve Festival event while spending millions of dollars less than in recent years, and yet we delivered greater impact than before. In fact, press impressions from Revolve Festival in 2024 more than doubled year-over-year, while social media impressions also increased year-over-year for the one-day event, compared to last year's event that took place over an entire weekend. The key to our success is that our powerful Revolve brand consistently attracts a roster of top-tier content creators, band partners, and A-listers who understand that our events give them a unique platform to further strengthen their own personal brands.

Michael Mente: Most impressive is that we delivered our incredible of all first of all of that all spending millions of dollars test done in recent years and yet we delivered greater impact than before.

Michael Mente: Fact test impressions from Laval Festival in 2024 more than doubled year over year, while social media impressions also increased year over year. The one day back compared to last year as a law festival event that took place over an entire weekend.

Michael Mente: The key to our success is that our powerful <unk> have all been could you can't check the roster of top tier client creators and partners and industry to understand that our event kind of a unique platform to further strengthen their own personal bias.

Michael Mente: Importantly, delivering meaningful efficiency in our Revolve Festival investment year-over-year has allowed us to significantly expand our marketing playbook in the second quarter. Just two weeks after Revolve Festival, we hosted a successful activation at the Stagecoach Festival, attended by A-listers including Post Malone, Kaiga, and Charlie D'Amelio.

Michael Mente: However, meaningful efficiency and our loss estimate investment year over year has allowed us to significantly expand our marketing playbook and the second quarter.

Michael Mente: Just to recap the revolve festival, we hosted a successful activation at the Stagecoach festival ended by amateurs, including personal loan Tiger and tried to Emilio.

Michael Mente: We also have exciting activations in the upcoming weeks in Jamaica, San Tropez, and Sicily. All told, we are delivering a much broader range of activations in the second quarter of 2024 than in recent years, despite investing a lower percentage of net sales on our marketing investment year-over-year. We are also continuing to invest in marketing, production, and collaboration to drive success in our own brands. While contributions from own brands as a percentage of Revolve's segmented revenue remain below their long-term potential, we have had some notable recent success that further validates this long-term opportunity.

Michael Mente: We also have exciting activations in the ultimate leases, Jamaica central pain intensity. All told we are delivering a much broader range of activations in the second quarter in 2020 and thought that in recent years, despite investing although what percentage of net sales and our marketing investment year over year.

Michael Mente: We're also continuing to invest in marketing production and collaboration to drive success in our owned brands while contributions from owned brands as a percentage of revolve segment revenue remains below its long term potential we have had some notable recent success further validate this long term opportunity.

Michael Mente: We recently launched the first capsule of the academy-owned brand after Mariana Hewitt became its creative director. The initial selfie was outstanding, exceeding our expectations and strategically broadening our range of offers. The new Academy brand aesthetic expands our assortment to serve a wider range of our customers' lifestyles, including fashionable, everyday essentials for the office. The collaboration with Mariana as Creative Director extends our long-standing and successful partnership with her for many years. Mariana is the co-founder of Summer Fridays, a top-selling beauty brand on Revolve, and she is one of the top performers in our proprietary Revolve Brand Ambassador Program.

Michael Mente: The recently launched our first hospital at the Academy on band After Mariana Hewitt employment claims director initial starting with outstanding exceeding expectations and strategically brought in a range of options and newly ketamine band aesthetic expands our assortment to serve a wider range of our customers' lifestyle, including fashionable everyday at Epsilon.

Michael Mente: The collaboration with Merck <unk> co director extends our longstanding and successful partnership with over many years.

Michael Mente: As a cofounder of summer Friday, the past R&D better evolve and she is one of the top performers in our proprietary revolve brand Ambassador program. Another owned brand collection that has performed extremely well in recent months is household a collaboration with supermodel <unk> that we introduced in 2022.

Michael Mente: Another own-brand collection that has performed extremely well in recent months is HALSA, a collaboration with supermodel Elsa Hoff that we introduced in 2022. In March, we introduced health as an eighth job, and it has been one of the most successful owned brand capitals in our history. Of note, Helsa features higher-than-typical price points and has performed exceptionally well both on Revolve and Forward.

Michael Mente: In March we introduced <unk> eight chop and it had been one of the most successful on bank capital and a history of note also features higher than typical price points and is uniquely performed exceptionally well both revolve and forward.

Michael Mente: In fact, Helsa was one of the most searched brands on the Forward site in recent months. This is a remarkable achievement that Forward offers some of the most iconic luxury brands in the world. Another recently launched own brand that is exclusively available on Revolve and it is our first ever own brand within our men's offering. Wow.

Michael Mente: <unk> also was one of the most searched brands on the fluid side in recent months. This is remarkable considering that Florida office some of the most iconic luxury brands in the world. Another recent launch on brands that is exclusively available on our revolving forward as our first ever one bad within our men's offering wow.

Michael Mente: We view expansion and demand as a large and compelling opportunity for growth in the years to come. We were thrilled to see trendsetter Justin Bieber looking stylish, sporting a wild polo at our Revolve Festival after party last year. Now let's shift gears to discuss physical retail. The performance of our Revolve and Fuller pop-up shopping experience in Aspen during the first quarter was incredible, exceeding our initial financial goals. This exciting new channel for engaging customers in real life has been a home run for brand building, acquiring new customers, and even further strengthening our relationship with brand partners who view our desirable Aspen presence as an endorsement of their brand.

Michael Mente: We view expansion into men's is alive and compelling opportunities for growth in the years to come.

Michael Mente: We ought to see churn centered S&P EBIT, let's establish sporting allow polo at or about that on the last one.

Michael Mente: Yeah.

Michael Mente: Now, let's shift gears to discuss physical retail performance of our evolving for a pop up the shopping experience during the first quarter was incredible exceeding our initial financial goals. This exciting new channel for engaging customers in real life has been a hallmark of a band building quiet and customers and further strengthening our relationship with our bank partners review, an invaluable asset patents have elevated our bands.

Michael Mente: They're thrilled to partner with us and tap into an attractive customer demographic with a proven appetite for premium on-trend fashion. The Aspen results and feedback have been so compelling that we have entered into a multi-year lease to operate our physical retail presence in Aspen.

Michael Mente: Got to partner with us and tap into chapter customer demographic with a proven appetite for premium on trend fashion.

Michael Mente: And thoughts and feedback from Silicon Valley, and we have entered into a multiyear lease to operate a physical retail tenants and asking the economics are understandable and even more importantly, we see this as a huge opportunity to expand and elevate our bedrooms fashion paydown front of making payments incredibly successful as an engine aspen that let us to explore other regions for our retail shopping experiences may offer similar potential for compelling financial returns.

Michael Mente: The economics alone are favorable, and even more importantly, we see this as a huge opportunity to expand and elevate our brand in this fashion playground for the race with payments. The incredible success of our learnings in Aspen has led us to explore other regions where our retail shopping experience may offer similar potential for compelling financial returns and further elevation of our brand. We are excited to continue to test and learn more about physical retail, taking a thoughtful and measured approach consistent with our Founder Minute and Investor First mindset.

Michael Mente: And so the elevation of our brands.

Michael Mente: We are excited to continue to test and learn more about physical retail taking a thoughtful and measured approach consistent with our founder that invest in <unk>.

Michael Mente: We will keep you apprised of our plans and progress on this exciting initiative moving forward. Now, we'll close with an update on the dynamic competitive landscape within the luxury e-commerce sector. Challenges among certain of our luxury e-commerce competitors have further accelerated in recent months. The resulting disruption affecting luxury consumers and luxury brands creates a compelling opportunity for a profitable and cash-generative company like Revolve to capitalize by investing in strategies to gain market share.

Michael Mente: We will keep you apprised of our plans and progress with exciting initiatives moving forward now.

Michael Mente: Now I'll close with an update on the dynamic competitive landscape within that luxury e-commerce sector challenges amongst certain of our luxury E. Commerce competitors has further accelerated in recent months.

Michael Mente: Welcome disruption affecting luxury consumers and luxury brands creates a compelling opportunity for a profitable and cash generative company like Alibaba capitalized by investing in strategies to gain market share. We believe that there is an opportunity to proceed and millions of effectively abandoned luxury customers that are up for grabs in the aftermath of the recent energy malaise.

Michael Mente: We believe there is an opportunity to pursue the millions of effectively abandoned luxury customers that are up for grabs in the aftermath of the recent industry malaise. We are also renewing our efforts to expand our luxury brand relationships in the current environment. Beyond our financial strength, which is a huge competitive advantage, luxury brands see Forward as a highly attractive partner due to our strength in North America, our product curation, our distinctive styling point of view that has attracted younger luxury consumers, and our incredible brand marketing engine supported by Forward creative director Kendall Jenner.

Michael Mente: Also reducing our efforts takes longer in luxury and better relationships in the current environment beyond the financial strength that is a huge competitive advantage like <unk> is a highly attractive partner due to our strength in North America penetration. Mr design point of view that as a package in the luxury consumers and our incredible brand marketing engine supported by foreign cramped Acura Kendall Jenner.

Michael Mente: Finally, while many competitors have no choice but to play defense in the current environment, we are aggressively investing in the future to drive revenue and efficiency through expansion and the use of AI. As just one example, in the first quarter, we delivered a promising test of leveraging AI technology to intelligently route customer service inquiries that we believe could drive operating efficiency and even further raise the bar on our exceptional customer experience.

Michael Mente: Finally, while many competitors have no choice, but to play defense in the current environment. We are aggressively investing in the Ctrip and drive revenue and efficiency to the expansion of the use of AI.

Michael Mente: As just one example in the first quarter, we delivered promising test of leveraging AI technology intelligence customer service inquiries that we believe can drive operating efficiency and even sort of at the bottom of our exceptional customer experience.

Michael Mente: What's compelling is that in our testing, our internally developed AI technology solution has outperformed commercially available AI solutions we have tested previously. We have also recently assembled a dedicated internal generative AI team that is building on our early successes in leveraging AI for imagery on our website and other digital channels, as well as to expand the use of AI across the business in pursuit of the large market opportunity ahead of us. To summarize, our powerful brands, connection with the consumer, and our unwavering focus on the long term, along with our strong financial profile illustrated by the $38 million in cash flow from our operations we generated in the first quarter, enables us to invest in a multitude of initiatives in pursuit of our long-term growth opportunity ahead of us. Now I'll turn it over to Jesse for the discussion of the financials. Thanks, Michael.

Michael Mente: Most compelling linzess testing our internally developed technology solution has outperformed commercially available assays will be a touch of PST.

Jesse: We have also recently assembled a dedicated internal generative AI team that is building on our early successes and leveraging accurate imagery on our website and other digital channels as well as expanding use of AD hoc business interests of the large market opportunity ahead of us to summarize our pallister bonds can actually went to consumer and the wavelength told us in the long term along with strong.

Jesse: Financial profile illustrated by the $38 million cash flow from operations, we generate in the first quarter enables us to invest in a multitude of initiatives in pursuit of our long term growth opportunity ahead of us.

Jesse: Now I'll turn it over to justify discussion of the financials, Thanks, Michael and Hello, everyone. I am pleased with our execution in the first quarter highlighted by outperforming our guidance for gross margin expansion and selling and distribution cost efficiency, our largest operating expense line item I will start by recapping, our first quarter results and then close with updates on recent trends in the business and our outlook for.

Jesse Timmermans: Thanks, Michael, and hello, everyone. I am pleased with our execution in the first quarter, highlighted by outperforming our guidance for gross margin expansion and selling and distribution cost efficiency, our largest operating expense line item. I'll start by recapping our first quarter results and then close with updates on recent trends in the business and our outlook for gross margin and cost sharing. Starting with the first quarter results, net sales were $271 million, a year-over-year decrease of 3% as growth in net sales at full price was more than offset by a decrease in net sales on markdown. Revolve's segment net sales decreased 1% and Forward's segment net sales decreased 15% year-over-year within a luxury sector that remains challenging. By territory, domestic net sales and international net sales each decreased 3% year-over-year.

Jesse Timmermans: Gross margin and cost structure.

Jesse Timmermans: Starting with the first quarter results net sales were $271 million a year over year decrease of 3% as growth in net sales at full price was more than offset by a decrease in net sales on mark down year over year.

Jesse Timmermans: Revolve segment net sales decreased 1% and foreign segment net sales decreased 15% year over year within our luxury sector that remains challenged.

Jesse Timmermans: <unk> territory domestic net sales and international net sales each decreased 3% year over year.

Jesse Timmermans: Active Customers, which is a trailing 12-month measure due to $2.6 million, an increase of 5% year-over-year. Average order value, or AOV, increased 4% year-over-year to $299, benefiting from the higher mix of net sales at full price. However, the higher AOE was more than offset by a 2% decrease in total orders placed to $2.2 million and a year-over-year increase in return rates.

Jesse Timmermans: Active customers, which is a trailing 12 month measure grew to $2 6 million, an increase of 5% year over year.

Jesse Timmermans: Average order value or <unk> increased 4% year over year to $299 benefiting from the higher mix of net sales at full pace.

Jesse Timmermans: Higher A&P was more than offset by a 2% decrease in total orders placed to $2 2 million and a year over year increase in return rates.

Jesse Timmermans: Shifting to gross profit, gross profit increased 2% year over year to $142 million despite the decline in net sales. Consolidated gross margin was 52.3%, an increase of 250 basis points year-over-year and exceeding the high end of our guidance range, driven by our Revolve segment. The increased growth margin primarily reflects a higher mix of net sales at full price and lower inventory valuation adjustments year-over-year. Moving on to operating expenses, Fulfillment costs were 3.5% of net sales, consistent with our outlook and an increase of 23 basis points year-over-year.

Jesse Timmermans: Shifting to gross profit gross profit increased 2% year over year to $142 million. Despite the decline in net sales.

Jesse Timmermans: Consolidated gross margin was 52, 3% an increase of 250 basis points year over year and exceeding the high end of our guidance range driven by our revolve segment the.

Jesse Timmermans: The increased gross margin primarily reflects a higher mix of net sales at full price and lower inventory valuation adjustments year over year.

Jesse Timmermans: Moving onto operating expenses fulfillment costs were three 5% of net sales consistent with our outlook and an increase of 23 basis points year over year.

Jesse Timmermans: Selling and distribution costs were 17.9% of net sales, a decrease of 50 basis points year-over-year that marks the first time in three years that selling and distribution costs have decreased as a percentage of net sales year-over-year. Great execution in reducing logistics costs enabled us to outperform our guidance for selling and distribution cost efficiency, despite the higher return rate year-over-year. Our marketing investment also came in more favorable than expected in the first quarter, representing 15.3% of net sales.

Jesse Timmermans: Selling and distribution costs were 17, 9% of net sales a decrease of 50 basis points year over year that marks the first time in three years that selling and distribution costs have decreased as a percentage of net sales year over year.

Jesse Timmermans: Great execution in reducing logistics costs enabled us to outperform our guidance for selling and distribution cost efficiency. Despite the higher return rate year over year, our marketing investment also came in more favorable than expected in the first quarter, representing 15, 3% of net sales.

Jesse Timmermans: The increase of 158 basis points year-over-year is primarily due to a shift in the timing of our brand marketing investments this year, with a very active first quarter. General and Administrative costs were $33 million, consistent with our outlook. Around 40% of the year-over-year increase in G&A expense in the first quarter of 2024 reflects increased variable compensation expense in 2024 and increased stock-based compensation expense year-over-year. Our tax rate was 26% in the first quarter, up slightly from 25% in the prior year and within our expected range.

Jesse Timmermans: The increase of 158 basis points year over year is primarily due to a shift in the timing of our brand and marketing investments this year with a very active first quarter.

Jesse Timmermans: General and administrative costs were $33 million consistent with our outlook.

Jesse Timmermans: Around 40% of the year over year increase in G&A expense in the first quarter of 2024 reflects increased variable compensation expense in 2024 and increased stock based compensation expense year over year.

Jesse Timmermans: Our tax rate was 26% in the first quarter up slightly from 25% in the prior year and within our expected range.

Jesse Timmermans: Net income was $11 million, or $0.15 per diluted share, a decrease of 21% year-over-year. Net income in the first quarters of 2024 and 2023 each included an insurance recovery within other. For the first quarter of 2024, the insurance recovery was $2.8 million, or $2.1 million net of tax, equivalent to 3 cents per diluted share. Adjusted EBITDA was $13 million, a decrease of 12% year

Jesse Timmermans: Net income was $11 million or <unk> 15 per diluted share a decrease of 21% year over year.

Jesse Timmermans: Net income in the first quarters of 2024 and 2023 each included an insurance recovery within other income.

Jesse Timmermans: For the first quarter of 2020 for the insurance recovery was $2 8 million or $2 $1 million net of tax equivalent to <unk> <unk> per diluted share.

Jesse Timmermans: Adjusted EBITDA was $13 million, a decrease of 12% year over year.

Jesse Timmermans: Moving on to the balance sheet and cash flow statement, net cash provided by operating activities was $38 million, and free cash flow was $37 million, further strengthening our balance sheet and supporting our commitment to enhance shareholder value through capital allocation. These cash flow metrics decreased 21% and 23%, respectively, versus the first quarter of 2023, when our cash flow benefited meaningfully from favorable working capital movements, including a large reduction in inventory during the prior year period.

Speaker Change: Moving on to the balance sheet and cash flow statement.

Jesse Timmermans: Net cash provided by operating activities was $38 million and free cash flow was $37 million.

Jesse Timmermans: Further strengthening our balance sheet and supporting our commitment to enhance shareholder value through capital allocation.

Jesse Timmermans: These cash flow metrics decreased 21% and 23% respectively versus the first quarter of 2023, when our cash flow benefited meaningfully from favorable working capital movements, including a large reduction in inventory during the prior year period.

Jesse Timmermans: Inventory at March 31, 2024 was $202 million, a decrease of 1% on a sequential basis compared to December 31, 2023, and an increase of 6% year-over-year. We continue to view our inventory position in the Revolve segment as very clean, consistent with our gross margin expansion year-over-year, and we have made continued progress in rebalancing forward inventory. As of March 31, 2024, cash and cash equivalents were $273 million, an increase of $28 million or 11% from December 31, 2023, and we had no debt.

Jesse Timmermans: Inventory at March 31, 2024 was $202 million.

Jesse Timmermans: A decrease of 1% on a sequential basis compared to December 31, 2023, and an increase of 6% year over year.

Jesse Timmermans: We continue to view our inventory position in the revolve segment is very clean and consistent with our gross margin expansion year over year and.

Jesse Timmermans: And we have made continued progress in rebalancing forward inventory.

Jesse Timmermans: As of March 31, 2024, cash and cash equivalents were $273 million.

Jesse Timmermans: An increase of $28 million or 11% from December 31, 2023, and we had no debt.

Jesse Timmermans: The decrease in cash and cash equivalents year-over-year compared to March 31, 2023, reflects strong cash flow from operations that was more than offset by our stock repurchases in the last three quarters. Our strong financial position enabled us to continue to invest in the business while repurchasing Class A common shares as part of our commitment to enhance shareholder value. During the first quarter, we repurchased approximately 530,000 Class A common shares at an average price of $15.17.

Jesse Timmermans: The decrease in cash and cash equivalent to year over year compared to March 31, 2023 reflects strong cash flow from operations that was more than offset by our stock repurchases in the last three quarters, our strong financial position enabled us to continue to invest in the business, while repurchasing common shares as part of our commitment to enhance shareholder value.

Jesse Timmermans: During the first quarter, we repurchased approximately 530000 class a common shares at an average price of $15 17.

Jesse Timmermans: Approximately $61 million remained under our $100 million stock repurchase program as of March 31, 2024. Now, let me update you on some recent trends in the business since the first quarter ended and provide some direction on our cost structure to help in your modeling of the business for the second quarter and full year 2024. Starting from the top, the return to positive year-on-year net sales growth in March has continued into the second quarter, with net sales in April 2024 increasing by a low single-digit percentage year-over-year. Consistent with recent performance during the month of April, net sales comparisons in the Revolve segment continue to outperform the Forward segment year over year.

Jesse Timmermans: Approximately $61 million remained under our $100 million stock repurchase program as of March 31, 2024.

Jesse Timmermans: Now let me update you on some recent trends in the business since the first quarter ended and provide some direction on our cost structure to help in your modeling of the business for the second quarter and full year 2024.

Jesse Timmermans: Starting from the top that returned to positive year on year net sales growth in March has continued into the second quarter with net sales in April 2024, increasing by a low single digit percentage year over year.

Jesse Timmermans: Consistent with recent performance during the month of April net sales comparisons in the revolve segment continued to outperform the pharma segment year over year.

Jesse Timmermans: Shifting to growth margin, we expect growth margin in the second quarter of 2024 of between 53.9% and 54.4%, which implies a slight increase year-over-year at the midpoint of the range. For the full year 2024, we continue to expect gross margin to be between 52.5 and 53%. Fulfillment.

Jesse Timmermans: Shifting to gross margin, we expect gross margin in the second quarter of 2024 of between $53 nine and 54, 4%, which implies a slight increase year over year at the midpoint of the range.

Jesse Timmermans: For the full year 2024, we continue to expect gross margin to be between $52 five and 53%.

Jesse Timmermans: We expect fulfillment as a percentage of net sales of approximately 3.4% for the second quarter of 2024, consistent with the fulfillment efficiency ratio in the second quarter of 2023. For the full year 2024, we continue to expect fulfillment costs of between 3.3 and 3.5% of net sales. Selling and Distribution.

Jesse Timmermans: We expect fulfillment as a percentage of net sales of approximately three 4% for the second quarter of 2024.

Jesse Timmermans: Consistent with our fulfillment efficiency ratio in the second quarter of 2023.

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

Jesse Timmermans: We expect selling and distribution costs as a percentage of net sales of approximately 18% for the second quarter of 2024, which implies a year-over-year improvement of approximately 60 basis points. For the full year 2024, we continue to expect selling and distribution costs to improve to a range of between 17.8% and 18% of net sales. Marketing.

Jesse Timmermans: Selling and distribution, we expect selling and distribution costs as a percentage of net sales of approximately 18% for the second quarter of 2024, which implies a year over year improvement of approximately 60 basis points.

Jesse Timmermans: Full year 2024, we continue to expect selling and distribution costs to improve to a range of between $17 eight and 18% of net sales.

Jesse Timmermans: We have an extremely active calendar of brand building events in the second quarter, including Revolve Festival, our recent activation at Stagecoach Festival, and the many international events Michael mentioned. Importantly, we expect the increased efficiency of our impactful Revolve Festival investment in 2024 and our operating discipline to help us achieve marketing efficiency year-over-year in the second quarter. We expect marketing in the second quarter of 2024 to be approximately 17% of net sales, a decrease of approximately 180 basis points year-over-year.

Jesse Timmermans: Marketing, we had an extremely active calendar of random events in the second quarter, including revolve festival. Our recent activation at Stagecoach Festival and the many internationally then as Michael mentioned importantly, we expect the increased efficiency of our impactful revolve festival investment in 2024, and our operating discipline.

Jesse Timmermans: To help us achieve marketing efficiency year over year in the second quarter.

Jesse Timmermans: We expect marketing in the second quarter of 2020 for it to be approximately 17% of net sales a decrease of approximately 180 basis points year over year for.

Jesse Timmermans: For the full year 2024, we continue to expect our marketing investment to represent between 16 and 16.2% of net sales. For general and administrative purposes, we expect G&A expense of approximately $34 million in the second quarter. For the full year 2024, we continue to expect G&A expenses of between $130 million and $133 million, most likely towards the high end of the range, as we continue to invest in the business through a multitude of initiatives to drive long-term value creation.

Jesse Timmermans: For the full year 2024, we continue to expect our marketing investment to represent between 16 and 16, 2% of net sales general and administrative we expect G&A expense of approximately $34 million in the second quarter.

Jesse Timmermans: For the full year 2024, we continue to expect G&A expense of between $130 million to $133 million most likely towards the high end of the range as we continue to invest in the business through a multitude of initiatives to drive long term value creation.

Jesse Timmermans: We expect quarterly G&A expense in dollar terms to be relatively consistent throughout 2024. Note that this expectation is a change from the variability in quarterly G&A expense during 2022 and 2023 when we had non-routine accruals for two separate legal matters that we do not expect to incur this year. And lastly, we continue to expect our effective tax rate to be around 24 to 26 percent, both in the second quarter and for the full year 2024.

Jesse Timmermans: We expect quarterly G&A expense in dollar terms to be relatively consistent throughout 2024.

Jesse Timmermans: Note that this expectation is a change from the variability in quarterly G&A expense during 2022 and 2023, when we had non routine accruals for two separate legal matters that we do not expect to incur this year.

Jesse Timmermans: And lastly, we continue to expect our effective tax rate to be around 24% to 26% both in the second quarter and in the full year 2024 to recap we had a productive first quarter solid profitability and strong cash flow that further strengthened our balance sheet, our strong financial profile gives us the financial flexibility to invest in that.

Jesse Timmermans: To recap, we had a productive first quarter, solid profitability, and strong cash flow that further strengthened our balance sheet. Our strong financial profile gives us the financial flexibility to invest in the business, pursue strategic opportunities, and repurchase common stock to enhance long-term shareholder value. Now, we'll open it up to your questions. At this time, I would like to remind everyone that in order to ask a question, press star then the number 1 on your telephone keypad. Old Poshford

Jesse Timmermans: Business pursue strategic opportunities and repurchase common stock to enhance long term shareholder value.

Jesse Timmermans: Now, we'll open it up for your questions.

Operator: At this time, I would like to remind everyone that in order to ask a question, press star then the number 1 on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes from the line of Michael Benetti of Evercore. Your line is open.

Jesse Timmermans: 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.

Michael Benetti: Well pause for just a moment to compile the Q&A roster.

Operator: Yes.

Michael Benetti: Your first question comes from the line of Michael Binetti.

Michael Benetti: Of Evercore your line is open.

Michael Benetti: Hey guys, thanks for taking our question here. I just want to see if you could walk us through March versus April a little bit. Is April, Jesse, accelerating from March? And I think you gave us a little bit of color.

Michael Benetti: Guys. Thanks for taking my question here.

Michael Benetti: Thank you.

Michael Benetti: Walk us through.

Michael Benetti: The March or April a little bit as April April accelerating from March.

Michael Benetti: I'm curious about the cadence. I'm trying to remember a year ago if you gave us a cadence of how much percent of sales in the first quarter versus the second quarter was on markdown. I'm just trying to think about how much that comparison changes as you get into the second quarter considering full price sales are positive now as an encouraging update. And then I'm curious what would cause the selling, and you seem to have some line of sight on selling and distribution improvements accelerating in the second half after decelerating a little bit in the second quarter. Maybe just a little bit to help us with the visibility you have there.

Michael Benetti: Thank you.

Michael Benetti: Gave a little bit of color I'm curious on the cadence.

Michael Benetti: I remember a year ago, you gave us the cadence of how how much percent of <unk>.

Michael Benetti: In first quarter versus second quarter was on markdown I'm just trying to think about how much that comparison changes as you get into the second quarter considering.

Michael Benetti: Full price sales are positive now is an encouraging update and then I'm curious what would cause.

Michael Benetti: The selling and you seem to have some line of sight on selling and distribution distribution improvement.

Michael Benetti: Celebrating and in the second half after decelerating a little bit in the second quarter, maybe just a little bit to help us on the visibility you have there.

Jesse Timmermans: Yeah, thanks, Michael. So maybe starting with the March and April trends, I wouldn't say it was an acceleration or deceleration. March closed in positive territory. April, a positive low single digit. So, on the surface, a slight acceleration.

Speaker Change: Yes, Thanks, Michael.

Jesse Timmermans: So maybe starting with the March and April trends I wouldn't say it was acceleration deceleration March closed in positive territory April a positive low single digit so on the surface a slight acceleration.

Speaker Change: April data have slightly.

Jesse Timmermans: You know, April did have slightly easier comps. So, you know, there's a lot of puts and takes there and the Easter timing shift, but I would say it's just nice to have positive growth in two consecutive months. So looking forward to the balance of the year. On markdown, Q1 last year was, you know, a low point.

Speaker Change: Lately easier comps so.

Speaker Change: There's a lot of puts and takes there and Easter timing shift I would say just nice to have positive growth in two consecutive months and.

Jesse Timmermans: So looking forward to the balance of the year.

Jesse Timmermans: On markdown.

Jesse Timmermans: Q1 last year was.

Jesse Timmermans: We were on a significant markdown working through inventory, so there was a significant increase in the full price ratio from Q1 to Q2. Also, part of that is just the typical seasonality where we see Q2 at a higher full price mix. So we do expect an increase in full price mix as we go from Q1 into Q2 of this year. And you can see that in the margin guidance as well. Not as significant as we saw last year, given the inventory shifts that we were doing, but still an increase there. And optimistic about, again, that growth in full price, not only sales but also customers under the surface. And then repeat your selling and distribution process one again.

Jesse Timmermans: Low point, we are on significant markdown working through inventory. So there was a significant increase in the full price ratio from Q1 to Q2.

Jesse Timmermans: Also part of that is just the typical seasonality, where we see Q2 at a higher full price mix. So we do expect increase in full price mix as we go from Q1 into Q2 of this year and you can see that in the margin guidance as well not as significant as we saw last year given the inventory shifts that we are doing.

Jesse Timmermans: But it's still an increase there and optimistic on again that growth in full price not only sales, but also customers under the surface.

Jesse Timmermans: And then repeat your selling and distribution line again.

Jesse Timmermans: It sounds like it's so you have it going from it was like it was high 17s in the first quarter to 18% in the second quarter and then I guess 17 to 18 for the year suggests that it starts to you know improve in the second half as a percent of sales yeah it is in 2Q a little bit I'm just it sounded like you were pretty happy with what you're seeing there maybe just a little bit of help on what you're seeing that should continue to compound on the gains you've seen so far.

Speaker Change: It sounds like so you have it going from here.

Jesse Timmermans: It was high <unk> in the first quarter to 18% in the second quarter and then.

Jesse Timmermans: I guess 17 to 18.

Jesse Timmermans: Year suggests that it starts to.

Jesse Timmermans: In the second half as a percent of sales.

Jesse Timmermans: And can you give a little bit it sounded like you were pretty happy with what you're seeing there maybe just a little bit of help on what you're seeing that continue to compound on the gains you've seen so far.

Jesse Timmermans: Yeah, yeah, great. Yeah, really pleased with what we've seen there. And, you know, after talking about it for several quarters now, really good to see that come through in the numbers, and a 60 basis point decrease year over year in Q2. There is some seasonality there as well, with the higher full price return rate tending to tick up a little bit higher in Q2 just seasonally. So there is an impact on that line item in that Q2 period.

Speaker Change: Yes, yes, great. Yes, we're really pleased with what we've seen there and after talking about it for several quarters now really good to see that come through in the numbers and a 60 basis point decrease year over year in Q2.

Jesse Timmermans: There is some seasonality there as well.

Jesse Timmermans: The higher full price return rate tends to tick up a little bit higher in Q2, just seasonally so there is an impact.

Jesse Timmermans: On that line item in that Q2 period, and then to your point then it gets better in the back half of the year just due to seasonality and then as these initiatives continue to layer on we're optimistic about the trend there getting to that full year guidance that we outlined.

Jesse Timmermans: And then, to your point, then it gets better in the back half of the year just due to seasonality. And then, as these initiatives continue to add up, we're optimistic about the trend there getting to that full-year guidance that we outlined. Okay, thanks a lot.

Jesse Timmermans: Okay, thanks a lot. Congratulations, guys.

Speaker Change: Okay. Thanks, a lot congrats guys. Thanks.

Jesse Timmermans: Thanks.

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

Jesse Timmermans: Yes.

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

Oliver Chen: Hi Mike, Mike, and Jesse. Regarding what you're seeing now and the revenue guidance, are you going to continue to see negative transaction growth? How do you see that evolving along with average order values? And as we also look to model active customer growth? Would love your color on the back half. Also, as we think about categories, are there any callouts for better performing categories versus worse performing categories? That would be helpful as well.

Oliver Chen: Hi, Mike like Jesse regarding what you're seeing now and then.

Oliver Chen: The revenue guidance are you going to continue to see.

Oliver Chen: Transaction growth, how do you see that evolving along with average order values and as we also look to model the active customer growth would love your color on the back half.

Oliver Chen: Also as we think about categories are.

Oliver Chen: Are there any callouts for better versus worse performing categories that would be helpful as well.

Oliver Chen: And then you gave us a lot of color on return rates. However, return rates relative to your expectations I know, it's been a bit of a bumpy line item in terms of the bifurcated consumer that consumer that's somewhat under pressure. Thanks a lot.

Oliver Chen: And then you gave us a lot of color on return rates. How were return rates relative to your expectations? I know it's been a bit of a bumpy line item in terms of the bifurcated consumer and a consumer that's, you know, somewhat under pressure. Thanks a lot.

Jesse Timmermans: Yeah, thanks, Oliver. Okay, starting with the orders and number of transactions there. I guess it's important to note that Q1 of last year was a significant markdown quarter for us. So that, you know, had an elevated number of orders relative to sales. So we did compare that this quarter.

Speaker Change: Yes, Thanks Oliver.

Jesse Timmermans: Starting with the orders and number of transactions there I guess important to note that Q1 of last year with a significant markdown quarter for us. So that had an elevated number of orders relative to the sales. So we did comment that this quarter, we would expect to see that converge more or less with the net sales as we get to normalize.

Jesse Timmermans: We'd expect to see that converge more or less with net sales as we get to a more normalized place. Really happy with the AOV trend being up 4%. And that's with beauty being up 34% this quarter. So peeling out beauty, AOV was actually increased much higher than that 4% overall. And we'd expect to continue to see kind of in that zone with the kind of low single-digit increase in AOV as the year progresses. Active customers were up 5% this quarter.

Jesse Timmermans: Place really happy with the trend being up.

Jesse Timmermans: <unk>, 4% and Thats with beauty being up 34% this quarter. So appealing out beauty <unk> was actually increased much higher than that 4% overall.

Jesse Timmermans: And we would expect to continue to see kind of in that zone and that kind of low single digit increase in <unk>.

Jesse Timmermans: As the year progresses active customers.

Jesse Timmermans: The growth rate has come down as we've communicated over the last few quarters, and we'd continue to expect that growth rate to come down until we lap out of that really robust customer growth quarter that we had in Q1 of last year. Again, going back to that heavy markdown quarter that we had where we drove a lot of customers, lower AOV, higher orders. So until we get out of that period, it's going to be a tougher comp on that trailing 12-month active customer number.

Jesse Timmermans: Up 5% this quarter the growth rate has come down as we've communicated over the last few quarters and we would continue to expect that growth rate to come down until we lap out of that really robust customer growth quarter that we had in Q1 of last year again going back to that.

Jesse Timmermans: Heavy markdown quarter that we had where you have a lot of customers lower <unk> higher.

Jesse Timmermans: Higher orders, so until we got out of that period.

Jesse Timmermans: It's going to be a tougher comp on that trailing 12 month active customer number.

Jesse Timmermans: On categories, you know, I mentioned beauty, that was the star up 34%. On the flip side, handbags, shoes, and accessories were down 10%. And handbags skew more towards the forward segment, and you can see with forward being down 15% relative to that revolve being down one. Those are probably the two big ones to call out on the categories.

Jesse Timmermans: On categories.

Jesse Timmermans: I mentioned duty that was.

Jesse Timmermans: That was really the star up 34%.

Jesse Timmermans: On the flip side handbags shoes accessories were down, 10% and handbags shoes accessories skews more towards the forward segment and you can see with Ford being down 15% relative to that revolves being down one.

Jesse Timmermans: And those are probably the two big ones to call out on the categories.

Jesse Timmermans: And then return rate, I would say it's in line with our expectations. On the surface, it probably increased more than expected, but when you peel that back and look at just a normalized full price return rate, it was, you know, call it flattish. So, you know, kind of, I wouldn't say pleased yet, but, you know, kind of in line with expectations and excited to see how these return rate initiatives play out over the course of the year.

Jesse Timmermans: And then return rate I would say it's in line with our expectations on the surface it increased probably.

Jesse Timmermans: More.

Jesse Timmermans: More than expected, but when you Peel that back and look at just at normalized full price return rate.

Jesse Timmermans: As you know call it flattish so.

Jesse Timmermans: I wouldn't say pleased yet.

Jesse Timmermans: Kind of in line with expectations and excited to see how these return rate initiatives play out over the course of the year.

Michael Mente: Okay, thanks, Jesse. One quick follow-up on artificial intelligence. You've got a lot of great color, and you've been pioneers of test, read, and react, as well as using data-driven dashboards, but as we think about AI and

Speaker Change: Okay. Thanks Jessy.

Speaker Change: One quick follow up on artificial intelligence.

Michael Mente: Lot of great color on you've been pioneers of test read and react as well as using data driven dashboards, but as we think about AI and modeling where do you see the financial impact in terms of of merchandize margins our speed our inventory turns are.

Speaker Change: Or more logical functions just would love some high level thoughts on how that may manifest in value creation.

Michael Mente: Yeah, I think there can really be an impact all across the board. It can touch every aspect of the business, you know, and I think in a couple different ways, like certainly cost reductions in different areas, but I think when you get cost reductions, you have the opportunity to choose to invest some or all of those cost reductions into a better service or better personalization. So we've talked in the past about how the imagery side of the business has a lot of opportunity to reduce costs, but then again, potentially reinvested back into variants for things that are more suited to what each individual user wants to see.

Michael Mente: Yes, I think I can really be an impact all across the board a contest every aspect of the business.

Michael Mente: And I think in a couple of different ways, certainly cost reductions in different areas, but I think when you get cost reductions you have the opportunity to.

Michael Mente: To choose to invest some or all of those cost reduction into better service or better personalization. So we've talked in the past about how the imagery side of the business. There's a lot of opportunity to reduce costs, but then again potentially reinvested back end.

Michael Mente: Or variance for things that are more suited to what each individual user wants to see them. So.

Michael Mente: And so, you know, we're in the early stages, but we're continuing to make progress and get better and better with our efforts in terms of the quality of what we're able to churn out, how quickly we're able to churn it out, and what kind of costs we have. So we feel great about the progress there. You know, we mentioned on the call about some progress on helping route customer, you know, kind of inquiries, which, you know, is a smaller portion, but it just highlights how there are so many different things that can touch merchandise margins. As you mentioned, we already think we do a fantastic job managing those, but no doubt AI can unlock further on that side of the business should our efforts continue to yield fruit.

Michael Mente: We're in the early stages, but we're continuing to make progress and get better and better with our efforts in terms of the quality of what we're able to churn out how quickly we're able to turn it out at what kind of costs. So we feel great about the progress there.

Michael Mente: We mentioned on the call about some progress on helping routes.

Michael Mente: Customer kind of inquiries, which is a smaller portion, but it just highlights how theres. So many different things that can touch merchandize margins. As you mentioned, we already think we do a fantastic job managing those but no doubt.

Michael Mente: AI can unlock further gains on that side of.

Michael Mente: Okay.

Michael Mente: The business it should our efforts continued.

Michael Mente: So, yeah, really excited. You know, I think pretty much every aspect of the business has the potential to invest in. You know, we feel great about our investments, as we noted, while we do, keep up with and test the latest and greatest external technology, and a really strong internal team that helps us at www.revolve.com

Michael Mente: To yield fruit so.

Michael Mente: So really excited.

Michael Mente: Pretty much every aspect of the business has the potential to invest in.

Michael Mente: We feel great about our investments as we noted.

Michael Mente: While we do.

Michael Mente: Keep up with and test the latest and greatest external technology. We also have a really strong internal team that helps us.

Michael Mente: As well, which often produces better results in those external.

Michael Mente: Kind of efforts.

Michael Mente: So provides kind of cost savings for us right. So we're not at the mercy of whatever price some external vendor wants to charge.

Jay Soule: Your next question comes from the line of Jay Soule of UBS. Your line is open.

Michael Mente: Your next question comes from the line of Jay sole of UBS. Your line is open.

Jay Soule: Great. Thank you so much.

Jay Soule: Great. Thank you so much Mike you talked about investments in increasing brand awareness, obviously lot of marketing can you just talk about where you see the brand awareness today, where you think you can get it over a year or three year period, and how that brand awareness is going to turn into active customers. Thank you.

Michael Mente: Mike, you talked about investments and increasing brand awareness, you know, obviously a lot of marketing. Can you just talk about where you see the brand awareness today? You know, where you think you can get over a year or three-year period, and how that brand awareness is going to turn into active customers? Thank you.

Michael Mente: I think that, you know, looking at the overall market here, just, you know, anecdotally, we see, you know, stronger indexes, of course, in like the major cities and kind of like the New York's and LA's, but if you look at the global opportunity, we view this as a global opportunity, you know, we're very, very early scratch on the surface, you know, historically, you know, almost all of our marketing efforts have been on the market, and we still have a long way to go there, but also look out elsewhere, we're just barely starting that journey very soon.

Mike: I think that Youre looking at the overall market here just anecdotally, we see stronger indexes all questions like the major cities and kind of like the New York City, but if you look at the global opportunity. We view this as a global opportunity.

Michael Mente: Very very early scratching the surface.

Michael Mente: Historically, almost all of our <unk>.

Michael Mente: Marketing efforts have been on that market and we still have a long way to go there, but also look out elsewhere, just barely starting that journey very soon.

Michael Mente: Thanks. And maybe if I can add one about logistics, you know, obviously you talked about improved size guidance and preventing wardrobing and things like that. Do you have like a big picture sort of goal as to where you want the return rate to go? I mean, you talked a little bit about it in one of the other questions, but if you could just elaborate on that sort of bigger picture where you think you can get it to, that'd be helpful. Thank you. Yeah.

Speaker Change: Thanks, and maybe if I can add one about logistics, obviously you talked about.

Michael Mente: <unk> guidance, and preventing wardrobes and things like that.

Michael Mente: Like a big picture sort of goal as to where you want to return rate to go I mean, you talked a little bit about one of the other questions, but if you could just elaborate on that sort of bigger picture, where you think you can get it to that would be helpful. Thank you.

Michael Mente: Yeah, there isn't a specific number we're looking to drive it to. Instead, there are kind of directional parameters in terms of what we're trying to accomplish. You know, so we always want the home to be the dressing room.

Michael Mente: Yes, there isn't a specific number we're looking to drive it to and instead, there's kind of a directional parameters in terms of what we're trying to accomplish.

Michael Mente: So we always want the home to be addressing them, we understand no matter how much we improve the technology and the communication of information to the consumer there'll be a substantial number of returns.

Michael Mente: We understand that no matter how much we improve the technology and the communication of information to the consumer, there will be a substantial number of returns. But we would like to get it meaningfully lower than where it's at today in the right ways that are neutral or beneficial to the customer experience. And so, you know, we're already starting to see some success with some of the things we're working on. We're really hopeful about a lot of things that we have in the works. And so, you know, we'll see where that takes us. But this is going to be a multi-year journey with, hopefully, some big, big impact on the current.

Michael Mente: We'd like to get meaningfully lower than where it's at today in the right ways that are neutral or beneficial to the customer experience and so we're already starting to see some success with some of the things. We're working on we're really hopeful that a lot of things that we are in the works and so we'll see where that takes us, but theres going to be a multiyear journey with hopefully some some big big impact in the current year.

Michael Mente: Along the way.

Jay Soule: Got it. Okay. Thank you so much.

Speaker Change: Got it okay. Thank you so much.

Mark R. Altschwager: Your next question comes from the line of Mark Altschwager of Baird. Your line is open.

Jay Soule: Okay.

Jay Soule: Your next question comes from the line of Marcos Swagger of Baird. Your line is open.

Mark R. Altschwager: Thank you. Good afternoon.

Mark R. Altschwager: Thank you good afternoon.

Mark R. Altschwager: Was hoping to get a bit more color on the revolver versus forward trend that youre seeing so far in the second quarter.

Jesse Timmermans: I was hoping to get a bit more color on the Revolve versus Forward trend that you're seeing so far in the second quarter, you know, that positive inflection. Is that happening across both segments? And then international, which had been outperforming the U.S. in recent quarters. I think Q1 looked like it was more in line. Are there any surprises there? And maybe just speak to any trends you're seeing by region you'd like to call out?

Jesse Timmermans: Positive inflection is that happening across both segments.

Jesse Timmermans: And then international.

Jesse Timmermans: That had been outperforming the U S. In recent quarters I think Q1 looked like it was more in line. So any surprises there and maybe just speak to any trends you're seeing by region you'd like to call out.

Jesse Timmermans: Yeah. Hey Mark.

Speaker Change: Yeah, Hey, Mark number one on the.

Speaker Change: Revolvers as far as trend in April I think as we mentioned, it's largely consistent with how we exited the quarter revolve positive.

Jesse Timmermans: Number one on the Revolve versus Ford trend in April, I think, as we mentioned, it's largely consistent with how we exited the quarter. Revolve positive. Ford, not yet, but good traction on the Revolve segment.

Jesse Timmermans: Forward not yet.

Jesse Timmermans: And some of that goes back to the point we made in the prepared remarks around just luxury being so challenged, a challenged aspirational consumer, and still working through the inventory while making progress on the forward side. And then, domestic versus international, yeah, on the surface, both down 3%. But keep in mind that international last year had a much more difficult comp. International last year in Q1 was plus 16 versus domestic minus 5. So, you know, kind of normalizing for that, you know, good international results and really solid growth really across the board outside of China, which was negative.

Jesse Timmermans: Good traction on the revolve segment.

Jesse Timmermans: Some of that goes back to the point, we made in the prepared remarks around just luxury being so challenged.

Jesse Timmermans: Challenged aspirational consumer.

Jesse Timmermans: Still working through the inventory, while making progress on the farming side, and then domestic versus international yes on the surface bolt down 3%, but keep in mind that international last year.

Jesse Timmermans: Much more difficult comp international last year, and Q1 was plus 16 versus domestic minus five.

Jesse Timmermans: You know kind of normalizing for that.

Jesse Timmermans: Good international results and really solid growth really across the board outside of China.

Jesse Timmermans: It was negative.

Mark R. Altschwager: Thank you. And I wanted to follow up on marketing. It sounds like you're pleased with the results you're seeing with the evolving strategy. What are the key learnings so far and implications for the business moving forward as you look to engage with new and younger customers? And maybe quantitatively, it doesn't seem like you're looking for much efficiency in the back half of the year. Can you just walk us through what's different in the back half versus how you're approaching Q2, where you seem to be guiding to fairly material efficiency? Thank you.

Speaker Change: Thank you and I wanted to follow up on marketing. It sounds like you are pleased with the results youre seeing with the evolving strategy.

Mark R. Altschwager: The key learnings, so far and implications for the business moving forward as you look to engage with new and younger customers.

Mark R. Altschwager: Maybe qualitative or I'm, sorry, quantitatively it doesn't seem like you are looking for much efficiency in the back half of the year.

Mark R. Altschwager: Can you just walk us through whats different in the back half versus how youre approaching Q2, where you seem to be guiding to fairly material efficiency. Thank you.

Michael Mente: Yeah, I think the one thing that we're really noticing, which is really encouraging, is that, you know, we are confident that our customer knows us in certain zones. We're very strong in dresses, very strong in warm weather, very strong in vacation, but she's also eager and anxious to hear from us in other places. So, as we invest, you know, energy and marketing dollars in other places, we see, you know, a great connection with the customer, great efficiency, and, you know, a message being received very well, which kind of leads directly to the back half of the spending, which Jesse can get into in a little more detail.

Speaker Change: Yes, I think the one thing that we're really noticing which is really encouraging is that we are constantly.

Michael Mente: Confident that our customer knows that in certain zones was very strong and <unk> is very strong and warm weather very strong and vacation, but she's a little eager and anxious to hear from us in other places so as we invest energy and marketing dollars and other places we see a great connection with the customer a great efficiency and they'll message being we still see very well, which kind of lead directly to you.

Michael Mente: <unk>.

Jesse Timmermans: The back half of the spending with shell, which I think you get into a little more detail.

Jesse Timmermans: Yeah, yeah, to your point, Mark, lower in the back half of the year relative to the first half of the year. Again, Q1, we saw that 160 basis point increase. Q2, for our guidance, down 180 basis points. So then in the back half of the year, call it roughly consistent with 2023. But keep in mind, we're always opportunistic, and there are always timing shifts with the brand marketing activation.

Jesse Timmermans: Yes, yes to your point Mark.

Jesse Timmermans: Lower in the back half of the year relative to the first half of the year again in Q1, we saw that 160 basis point increase Q2 guidance down 180 basis points. So then in the back half of the year call. It roughly consistent with 2023, but keep in mind, we're always opportunistic in there so.

Jesse Timmermans: Timing shifts at the brand marketing activation, so quarter to quarter, there could be some volatility, but if you look on a kind of a two H basis call. It roughly in line to get to that full year and the 16% to $16 two versus <unk> one last year.

Jesse Timmermans: So, you know, quarter to quarter, there could be some volatility. But if you look on a kind of 2H basis, call it roughly in line to get to that full year in the 16 to 16.2 versus 16.1 last year.

Anna A. Andreeva: Your next question comes from Anna Andreeva of Needham. Your line is open.

Speaker Change: Your next question comes from the line of Anna and Teresa of need him. Your line is open.

Anna A. Andreeva: Great, thanks so much. Thanks for taking our question and great to see positive trends in the business. Two quick ones from us.

Anna A. Andreeva: Great. Thanks, so much thanks for taking our question and great to see positive trends in the business.

Anna A. Andreeva: Two quick ones from us on inventories I think you said <unk>.

Anna A. Andreeva: On inventories, I think you said Revolve's inventories are pretty clean. Can you just talk about your comfort level at Forward and at which point do you think inventories there will be closer to the sales trend? And then secondly, on return rates, you mentioned green shoots a couple of times. So should we expect improvement in return rates in the back half as some of these initiatives scale up? And I think in the past, you've said that each percentage change in return rate is equal to about 20 basis points on selling and distribution on an annual basis. Just curious if that's still the right math. Thanks.

Anna A. Andreeva: Inventories are pretty clean can you just talk about your comfort level that forward.

Anna A. Andreeva: Which point do you think inventories there.

Anna A. Andreeva: We'll be closer with the sales trend and then secondly on return rate you mentioned green shoots a couple of times. So should we expect improvement in return rates in the back half as some of these initiatives scale up and I think in the past you've said that each percentage change in return rates.

Anna A. Andreeva: Is equal to about 20 basis points on selling in distress on the annual basis, just curious if that's still the right math. Thanks.

Jesse Timmermans: Yeah, thanks, Anna. On inventory, I feel really good about the Revolve inventory. And that shows in the full price mix and the really solid margin. Quick note on that margin; it's two points higher on Revolve than it was in 2019 with, you know, call it half the own brand mix. I think that just goes to show the real strength in Revolve's inventory and full price margin. Forward, we are making good progress. We still have some work to do,

Speaker Change: Thanks, so much.

Speaker Change: Thanks Anna.

Jesse Timmermans: On inventory feel really good about the revolve inventory.

Jesse Timmermans: And that shows in our full price mix and a really solid margin quick note on that margin is two points higher on revolve than it was in 2019 with call. It half the owned brand mix I think that just goes to show that there is a real strength in the revolve inventory in full price margin forward, we are making good progress we still have some work to do.

Jesse Timmermans: I'd say we'll Yeah, I think targeting mid-year before we feel kind of balanced there, not to say that sales and inventory will exactly match, but we'll feel good about the balance. And also important to note that that inventory of plus six, most of that increase is coming from that clean Revolve segment as we're leaning in there. Forward was just slightly positive year over year. So, overall, feel good. Revolve strong.

Jesse Timmermans: I'd say well.

Anna: Yes, I think targeting mid year before we feel that kind of balance there not to say that sales and inventory will exactly match, but we'll feel good about the balance and also important to note that that inventory of plus six.

Jesse Timmermans: Most of that increase is coming from that clean revolve segment as we're leaning in there for I'd, which is slightly positive year over year.

Jesse Timmermans: So overall feel good revolve strong still some work to do on forward on return rate. We are optimistic about the all the work going into that and the changes we've made some green shoots we're not baking in any of those improvements into the into the guidance or into our modeling, we're still modeling that kind of flat to last year.

Jesse Timmermans: Still some work to do on Forward. On return rate, we are optimistic about all the work going into that and the changes we've made, some green shoots. We're not baking in any of those improvements into the guidance or into our modeling.

Anna A. Andreeva: We're still modeling that kind of flat to last year and then hoping for better than that, but we're not counting on it yet. And did you have one third one? Oh yeah, the math on the selling and distribution, yeah. Yeah. It's a little, yeah, a little north of that. It's kind of in the 30 to 50 if you include both fulfillment and selling and distribution combined.

Anna A. Andreeva: And then hope for better than that but not not counting on it yet.

Anna A. Andreeva: And did you have one third one.

Speaker Change: Oh, yes, sorry about that I was telling you distribution, yes, one percentage.

Anna A. Andreeva: Yes, it's a little yes.

Anna A. Andreeva: Yeah, a little north of that it's kind of in the 30 to 50. If you include both fulfillment and selling and distribution combined so on those two line items.

Anna A. Andreeva: Okay, great. Very helpful. Thank you, guys.

Jesse Timmermans: So on those two lines. Okay, great. Very helpful. Thank you, guys.

Speaker Change: Okay, great very helpful. Thank you guys.

Jesse Timmermans: Okay.

Janine Marie Hoffman Stichter: Your next question comes from the line of Janine Stichter of BTIG. Your line is open.

Jesse Timmermans: Your next question comes from the line of Janine Stichter of BTG. Your line is open.

Janine Marie Hoffman Stichter: Hi, good afternoon. Thanks for taking my question. I wanted to ask forward, understanding we're going through some challenges right now in the luxury or the aspirational luxury market, but how do you think about taking advantage of some of that dislocation that you mentioned with some of the other online e-commerce players and just leveraging your strong balance sheet here?

Janine Marie Hoffman Stichter: Hi, good afternoon. Thanks for taking my question. So wanted to ask about Howard understanding we're going through some challenges right now in the luxury of the aspirational luxury market, but how do you think about taking advantage of that dislocation that you mentioned with some of the other online E Commerce players and just leveraging your strong balance sheet to take advantage of that.

Michael Mente: Yeah, I think there's a couple different ways, you know, certainly with all the disruption in businesses in turmoil, we're on the lookout for strong people from those companies, and we're on the lookout for opportunities to potentially, you know, take market share and revenue share. And then, in some cases, we're looking at some of those asset opportunities themselves. So, you know, there's certainly a lot of opportunities, I think offset, obviously, by the short-term weakness that's continuing in terms of that aspirational luxury consumer.

Speaker Change: Yes, I think theres a couple of different ways.

Michael Mente: Certainly with all the disruption.

Michael Mente: And.

Michael Mente: Business is in turmoil, we're on the lookout for stronger people from those companies were on the lookout for opportunities to potentially.

Michael Mente: Take market share and revenue share and then in some cases, we're looking at some of those asset opportunities themselves. So.

Michael Mente: Theres certainly a lot of opportunities I think offset obviously by the short term weakness that's continuing in terms of that aspirational luxury consumer.

Michael Mente: And so we'll have to see how it all plays out. Things are tough, but we think over the long term, that kind of disruption and the damage Brands that come out of that, that are likely losing significant share, you know, leave an opportunity for others to take advantage of. So we're hopeful that we can start to take advantage of that in a bigger way.

Michael Mente: And so we'll have to see how it all plays out.

Michael Mente: Again things are tough, but we think over the long term that kind of disruption in the damaged.

Michael Mente: Does that come out of that that are might be losing significant share.

Michael Mente: It leaves an opportunity for others to take advantage of so we're hopeful that we can start to take advantage of that in a bigger way and hopeful that we can exit the year with some momentum there.

Michael Mente: Yes.

Michael Mente: Yes.

Janine Marie Hoffman Stichter: Great. And then just on physical retail, it sounds like the few experiences that you've launched this year have gone really well. So is there any update to how you're thinking about potential further physical retail pop-ups?

Speaker Change: Great and then just on physical retail it sounds like the experience that you've launched this year have gone really well with any update to how you're thinking about and potential further colby.

Janine Marie Hoffman Stichter: Okay.

Michael Mente: Yeah, the International is like, you know, really eye-opening, really encouraging. Sales are strong, obviously, but probably very strong. Obviously, return rates, you know, many skills compared to online. But new customer acquisition was incredible. So we thought that, wow, this is like a huge, huge market for us. You know, we've, of course, been focused on the online market for the past two decades. But looking at the ultimate potential of where the business can be, we really see an opportunity with physical retail.

Janine Marie Hoffman Stichter: Yes, Thanks for international is really eye opening really encouraging.

Michael Mente: Sales, John obviously, probably very strong obviously would tolerate return rates, maybe scaling back to online.

Michael Mente: Mhm acquisition was incredible so we thought that while this is a huge huge lanes for us.

Michael Mente: We focus on the online market for the past two decades, but.

Michael Mente: Looking at the ultimate potential where the business can be new ECA opportunity with physical retail we do recognize that it is an adjacent business, but it is a different business than our early wins are very very encouraging. So we're definitely putting a lot of.

Michael Mente: We do recognize that, you know, it is an adjacent business, but it is a different business. And, you know, our early wins are very, very encouraging. So we're definitely putting a lot of, you know, at this point, I would say more energy and focus, but not, you know, dollars to work just yet. We're really trying to build the muscle and really trying to get smart there. But ultimately, over the long term, we think it's a massive opportunity for us.

Michael Mente: And this is what I would say more and more energy and focus but not dollar story just yet we're really trying to build the muscle really trying to get my Doug, but ultimately over the long term, we think it's a massive opportunity for us.

Speaker Change: Okay. Thanks, so much.

Simeon Avram Siegel: Your next question comes from the line of Simeon Siegel of BMO Capital Markets. Your line is open.

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

Simeon Avram Siegel: Thanks. Hey guys, good afternoon. Hope you're all doing well. Just to follow up briefly on the quarter date again. So just with the positive inflection in net sales, was it a function of just now having lapped through the prior year markdown selling, or did you see improvement in full price selling as well? Sorry if I missed that. And then I know the trailing 12 month dynamic is something we always get tripped up on, but could you elaborate on your thoughts on the gap between the ongoing customer growth versus the order count and revenue trajectory? Just trying to think, like, are you seeing fewer orders per customer? And if so, any thoughts as to why and when that should more closely converge?

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

Simeon Avram Siegel: Just to follow up briefly on the quarter date again, so just with a positive inflection in net sales a function of just now having lapped through the prior year markdown selling or did you see improvement in full price selling as well sorry, if I missed that.

Jesse Timmermans: Thanks guys.

Simeon Avram Siegel: And then I know that trailing 12 month dynamic is something we I wished I get tripped up on but could you elaborate on your thoughts on the gap between the ongoing customer growth versus the order count and revenue trajectory. Just trying to think like are you seeing fewer orders per customer and if so any thoughts as to why and when that should more closely converge. Thanks guys.

Jesse Timmermans: Yeah, yeah, sure. On the full price dynamic, you know, in addition to the shift in full price sales, we are seeing an increase, just like for like, in full price sales, offset, of course, by just the significantly lower markdown sales. And that continued into April, not to the extent of Q1, but still healthy. And the majority of customers are full price, even in those heavy markdown periods. So, optimistic there.

Speaker Change: Yeah, Yeah sure on the full price dynamic dynamic.

Jesse Timmermans: In addition to the shift in full price sales, we are seeing an increase just like for like in.

Jesse Timmermans: In full price sales offset of course by just a significantly lower markdown sales and that continued into April not to the extent of Q1.

Jesse Timmermans: But it's still healthy and the majority of the customers higher full price even in those heavy markdown periods.

Jesse Timmermans: And those are really strong customers for us, which leads into your customer question. Again, Q1 of last year was a really heavy customer advertising quarter with the heavy markdowns. So until we get out of that, active customers will be challenged. Orders per customer are down year on year, kind of from those peaks that we saw in 21 and 22. And then also just, again, the heavy, heavy order activity in Q1 of last year, but still higher than 2019. So we're seeing overall just good, healthy, active customer behavior. It's just working through these volatile comps.

Jesse Timmermans: So optimistic there and those are really strong customers for us which leads into your customer question.

Jesse Timmermans: Again Q1 of last year was a really heavy customer add quarter with the heavy markdowns. So until we lap out of that the act of customers will be challenged.

Jesse Timmermans: Orders per customer are down year on year kind of from those peaks that we saw in 'twenty, one and 'twenty. Two and then also just again the heavy heavy order activity in Q1 of last year, but still higher than 2019. So we're seeing overall just good healthy active customer behavior is just working through these volatile comps.

Simeon Avram Siegel: Okay, so just any thought when active customer growth will more closely align with order growth or revenue growth, whichever way we want to look at it.

Speaker Change: Okay. So just any thought when the active customer growth will more closely align with the order growth or revenue growth whichever way, we want to look at it.

Jesse Timmermans: Yeah, I think it's really, you know, kind of Q4 this year and Q1 of next year.

Simeon Avram Siegel: Yes, I think it's really kind of Q4 this year Q1 of next year.

Simeon Avram Siegel: Perfect. Thanks a lot, guys. Best of luck for the rest of the year.

Speaker Change: Okay perfect. Thanks, a lot guys best of luck for the rest of year, yes. Thanks again.

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

Simeon Avram Siegel: Your next question comes from the line of Rick Patel of Raymond James Your line is open.

Rakesh Babarbhai Patel: Hey, good afternoon, and great progress, guys. Can you provide color on what percent of your returns happen outside of that 30-day window right now and what that looked like before the policy changed during COVID? I know your assumptions are for this to not be that much of a needle mover this year, but just curious where you see this mix settling.

Rakesh Babarbhai Patel: Hey, good afternoon, and great progress guys.

Rakesh Babarbhai Patel: Can you provide color on what percent of your returns happen outside of that 30 day window right now and what that looked like before the policy changed during Covid I know your assumptions are for this to not be that much of a needle mover. This year, but just curious where you see this mix settling.

Michael Mente: Yeah, it's a fairly significant portion of returns that occur outside 30 days. It's, it's, it's a minority, but it's, but it's a substantial portion. And that portion has increased over time.

Speaker Change: Yes, it's a fairly significant portion of the returns that occur outside 30 days.

Michael Mente: Yes.

Michael Mente: A minority, but it's but it's a substantial portion in that portion has increased over time.

Rakesh Babarbhai Patel: So, you know, we'll have to see what kind of impact the return policy has. We're certainly hopeful that there could be some level of impact. But I think it's one of those things where, you know, you certainly can't say with any confidence whether there'll be a positive impact or not until you roll it out.

Michael Mente: So we'll have to see what kind of impacts the return policy.

Rakesh Babarbhai Patel: We're certainly hopeful there could be some level of impact, but I think it's one of those things were.

Rakesh Babarbhai Patel: You certainly can't say with any confidence whether there'll be a positive impact or not.

Rakesh Babarbhai Patel: Until you rolled out so we'll have to see what kind of impact it has on the overall return rates.

Michael Mente: And it sounds like you're making good progress on own brands. I know national brands have been more of a focus over the last couple of years, but I'm just curious how we should think about a potential acceleration for own brands and whether that's something that could be a needle mover this year.

Rakesh Babarbhai Patel: And it sounds like Youre, making good progress on owned brands National brands have been more of a focus over the last couple of years, but just curious how we should think about a potential acceleration for own brand and whether that's something that could be a needle mover this year.

Michael Mente: Yes.

Michael Mente: Okay.

Michael Mente: Yes, as the business has been stabilized over the past year or so, or I'll call it 18 months, you know, we, you know, as we have taken down our own brand, Style Delivery.

Michael Mente: Okay.

Speaker Change: Yes, as the business has been stabilized over the past year or so are about call. It 18 months.

Michael Mente: As we have taken down the old brand.

Michael Mente: We're starting to be a little bit more opportunistic. We haven't really planned for the acceleration at this point. We think now we're in a really, really healthy position to really start thinking about expansion once again. The inventory has been cleaned up, and the new brands are performing extremely well. So I think we're hopefully at near a tipping point for us to advance that saturation.

Michael Mente: File delivery, we are starting to be a little bit more opportunistic we haven't really planned for the acceleration at this point, we think now when it really really healthy position to really start to think about expansion once again.

Michael Mente: Inventory has been cleaned up the new brands are performing extremely well. So I think we're hopefully adding no new news.

Michael Mente: A tipping point for us to advance that saturation.

Speaker Change: Thanks very much.

Janet Joseph Kloppenburg: Our last question comes from the line of Janet Joseph of JJK Research Associates. Your line is open.

Michael Mente: Our last question comes from the line of Janet Joseph J J K Research Associates. Your line is open.

Janet Joseph Kloppenburg: Hi everybody, and congrats on the progress. I just wanted to ask about going forward. You know, you're saying that the handbag and accessories business continues to be weak. So I was wondering if you could discuss any strategies in place, in terms of assortment architecture, where you think that these conflict lines can moderate and if there's a possibility that, you know, they could flatten out or even turn positive as the year goes along.

Janet Joseph Kloppenburg: Hi, everybody.

Janet Joseph Kloppenburg: On the progress.

Janet Joseph Kloppenburg: I wanted to ask about forward.

Janet Joseph Kloppenburg: You're saying that the handbag.

Speaker Change: Thanks Ashwin. This is continues to be weak. So I was wondering if you could discuss any strategies.

Janet Joseph Kloppenburg: Place.

Janet Joseph Kloppenburg: In terms of assortment architecture, where you think.

Janet Joseph Kloppenburg: These comp declines Ken.

Janet Joseph Kloppenburg: Moderate and if there's a possibility of that.

Janet Joseph Kloppenburg: Hey, Chris flatten out or even turn positive as CEO of close along.

Janet Joseph Kloppenburg: I was wondering about opening price points are we're seeing some of the luxury brands tweak down opening price points and I was just wondering how youre thinking about.

Janet Joseph Kloppenburg: And I was wondering about opening price points there. We're seeing some of the luxury brands tweak down their opening price points, and I'm just wondering how you're thinking about your assortments in terms of categories and about your pricing. Thank you.

Janet Joseph Kloppenburg: In terms of categories and about your pricing. Thank you.

Michael Mente: Yeah, definitely. Yeah, so handbags, as we noted, have been particularly challenging. I think you're spot on that a lot of the price increases that the luxury brands have put in over the past couple years have put a crimp on demand. And so if consumers continue to adjust to the new normal, and hopefully as luxury brands start to, you know, rationalize prices in, you know, kind of a more accessible way, we're certainly hopeful we'll start to see that turn.

Speaker Change: Yes definitely.

Michael Mente: Yes, so handbags as we noted have been particularly challenged I think youre spot on that a lot of the price increases that the luxury brands put in over the past couple of years.

Michael Mente: Have you put a crimp on demand and so as consumers continue to adjust to the new normal and hopefully as luxury brands start to.

Michael Mente: <unk> price.

Michael Mente: Kind of more accessible way.

Michael Mente: We're certainly hopeful we'll start to see that turn and then obviously comps are you also so even without those changes just hopeful as comps get a bit easier that will start to see some better momentum in the <unk> business as we exit.

Michael Mente: And then obviously, comps are a big deal also. So even without those changes, just hopeful as comps get a bit easier, that we'll start to see some better momentum in the forward businesses in the back half of the year, especially with all that disruption and opportunity and revenue share loss from the

Michael Mente: The back half of the year, especially with all of that disruption and opportunity in revenue share loss from those disrupted brands.

Janet Joseph Kloppenburg: Okay, anything on, you know, assortments and how do you think they should be better positioned?

Speaker Change: Okay anything on.

Janet Joseph Kloppenburg: Hi, this Nick pace should be better positioned.

Michael Mente: Yeah, from the unsortment perspective, we're really thinking, you know, a little bit more expansion. I think it's not really just, you know, it's a lot of the core categories per se, but kind of end use and functionality ends up being meaningfully different. So I think that's really where I had set our focus is really tapping into the other aspects of lifestyle, but you know, beyond the aspects of our lifestyle which you love already.

Janet Joseph Kloppenburg: Yes.

Speaker Change: Dave we're really thinking.

Michael Mente: A bit more expansion I think it's not really.

Michael Mente: And of course, they categories per se, but it kind of end user functionality ends up being meaningfully different so I think thats really where I had said our focus is really tapping into the other aspects of lifestyle, but beyond that because her lifestyle wishy loved us already.

Michael Mente: That's all the time we have for questions today. I will turn the call back over to management for closing remarks.

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

Michael Mente: I want to thank everyone for joining us today. Thank you to the Revolve team for all the great progress we made this quarter. We feel great about the trends, particularly the progress made in March. And we're excited to hopefully continue the building momentum throughout the rest of the year. Thank you.

Michael Mente: Yes.

Speaker Change: I want to thank everyone for joining us today. Thank you to the revolve team for all the great progress. We've made through this quarter, we feel great about the trends, particularly exiting the quarter progress made on margin and sales.

Michael Mente: We're excited to hopefully continue the building momentum throughout the rest of the year.

Michael Mente: <unk>.

Operator: This concludes today's conference call. You may now disconnect.

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

Operator: Please wait; the conference will begin shortly.

Speaker Change: Please wait the conference will begin shortly.

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