Q2 2024 Revolve Group Inc Earnings Call

24 results conference call.

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Speaker Change: At this time I would like to turn the conference over to Erik Randerson, Vice President of Investor Relations at revolve.

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Speaker Change: Thank you you may begin.

Erik Randerson: Good afternoon, everyone and thanks for joining us to discuss <unk> second quarter 2024 result.

Good afternoon, My name is Emma and I will be your conference operator today.

Speaker Change: Before we begin I would like to mention that we have posted a presentation containing Q2 financial highlights to our Investor Relations website located at investors thought revolve dot com.

At this time I would like to welcome everyone to revolve second quarter 2024 results conference call.

Speaker Change: All lines have been placed on mute to prevent any background noise.

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.

Speaker Change: Operator assistance is required.

Speaker Change: After the Speakers' remarks, there will be a question and answer session.

Speaker Change: Please wait for the next available operator.

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

Speaker Change: History trends, our marketing events and impact our partnerships and strategic acquisitions, our physical retail stores and our outlook for net sales gross margin operating expenses and effective tax rate.

Speaker Change: [music].

Speaker Change: If you would like to withdraw your question again press the star one thank you.

Speaker Change: At this time I'd like to turn the conference over to Erik Randerson, Vice President of Investor Relations at revolve.

Speaker Change: 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 ended December 31, 2023, and our subsequent quarterly reports on Form 10-Q, all of which can be found on our website at investor <unk> <unk>.

Speaker Change: You may begin.

Erik Randerson: Good afternoon, everyone and thanks for joining us to discuss <unk>.

Speaker Change: Good afternoon, everyone and thanks for joining us to discuss <unk> second quarter 2024 results before we begin I'd like to mention that we have posted a presentation containing Q2 financial highlights to our Investor Relations website located at investors that revolve dot com.

Speaker Change: Thank you for your patience. Please stay on the line for the next available operator.

Speaker Change: <unk> Dot com.

Speaker Change: We undertake no obligation to revise or update any forward looking statements or information, except as required by law.

Speaker Change: 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.

Speaker Change: During our call today, we will also reference certain non-GAAP financial information, including adjusted EBITDA and free cash flow.

Speaker Change: Okay.

Speaker Change: Industry trends, our marketing events and impact our partnerships and strategic acquisitions, our physical retail stores and our outlook for net sales gross margin operating expenses and effective tax rate.

Speaker Change: We use non-GAAP measures in some of our financial discussions as we believe they provide valuable insight on our operational performance and underlying operating results the.

Speaker Change: The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for or superior to the financial information prepared and presented in accordance with GAAP and our non-GAAP measures may be different from non-GAAP measures used by other companies.

Speaker Change: 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 ended December $31.

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Speaker Change: Reconciliations of non-GAAP measures to the most directly comparable 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.

Speaker Change: Okay.

Speaker Change: Yeah.

Speaker Change: 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.

Speaker Change: Okay.

Speaker Change: Okay.

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

Speaker Change: Okay.

During our call today, we will also reference certain non-GAAP financial information, including adjusted EBITDA and free cash flow.

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

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Mike: Hello, everyone and thanks for joining us today.

Speaker Change: We use non-GAAP measures in some of our financial discussion because we believe they provide valuable insights on our operational performance and underlying operating results.

Speaker Change: Okay.

Mike: We delivered a strong second quarter highlighted by a return to topline growth.

Speaker Change: Okay.

Speaker Change: Yes.

Mike: Net income more than doubling year over year, and nearly 350 basis point increase in our adjusted EBITDA margin year over year.

Speaker Change: The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for or superior to financial information prepared and presented in accordance with GAAP and our non-GAAP measures may be different from non-GAAP measures used by other companies.

Speaker Change: Thanks.

Okay.

Speaker Change: Contributing to the significant growth and profitability was meaningfully better than expected marketing efficiency as well as increased logistics efficiencies, but also outperformed our guidance helped by improving trends in our return rate as many of our return rate initiatives begin to take hold late in the second quarter.

Speaker Change: Reconciliations of non-GAAP measures to the most directly comparable 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.

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Speaker Change: Most importantly, we achieved these strong results, while continuing to invest in initiatives to drive profitable growth and market share gains over the long term.

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

Speaker Change: Operator.

Speaker Change: Thanks.

Speaker Change: With that introduction, let me step back and provide a brief recap of the second quarter.

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

Speaker Change: Net sales were $282 million, an increase of 3% year over year that was driven by improved year over year trends in both segments relative to our comparisons in the first quarter of 2024.

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Mike: Hello, everyone and thanks for joining us today.

Speaker Change: We delivered a strong second quarter highlighted by a return to top line growth net income more than doubling year over year, and nearly 350 basis point increase in our adjusted EBITDA margin year over year.

Speaker Change: Net sales in the revolve segment increased 4% year over year, our best performance in six quarters.

Speaker Change: This was partially offset by a 4% decline in <unk> segment net sales an improvement of 10 points from Forbes year over year comparison in the first quarter of 2024.

Mike: Contributing to the significant growth and profitability was meaningfully better than expected marketing efficiency as well as increased logistics efficiencies that also outperformed our guidance helped by improving trends in our return rate as many of our return rate initiatives begin to take hold late in the second quarter.

Speaker Change: Okay.

Speaker Change: While we continue to see headwinds in a dynamic luxury environment, where forward competes as one of the financially strongest operators of our multi brand luxury E. Commerce platform. We are actively pursuing opportunities to capitalize on the current environment by investing in strategies to gain market share.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Most importantly, we achieved these strong results, while continuing to invest in initiatives to drive profitable growth and market share gains over the long term.

Speaker Change: Yes.

Speaker Change: Thank you for your patience. Please stay on the line for the next available operator.

Speaker Change: With that introduction, let me step back and provide a brief recap of the second quarter.

Speaker Change: Along these lines Michael will talk about our acquisition of a majority interest in the revered luxury brand and longtime brand partner of forward All excellent fund Ta.

Speaker Change: Net sales were $282 million, an increase of 3% year over year that was driven by improved year over year trends in both segments relative to our comparisons in the first quarter of 2024.

Speaker Change: Yes.

Michael: Net income for the second quarter was $15 million or 21 cents per diluted share an increase of 111% year over year.

Speaker Change: Net sales in the revolve segment increased 4% year over year, our best performance in six quarters.

Michael: Adjusted EBITDA was $20 million, an increase of 97% year over year, driven by a nearly 350 basis point expansion of our adjusted EBITDA margin.

Speaker Change: This was partially offset by a 4% decline in <unk> segment net sales an improvement of 10 points from Forbes year over year comparison in the first quarter of 2024.

Speaker Change: Thanks.

Speaker Change: No.

Speaker Change: Beyond the numbers I am excited by our team's execution that has led to continued great progress on the strategic priorities. We have outlined on prior calls I will discuss some of the key highlights since our update last quarter.

Speaker Change: Thank you for your patience. Please stay on the line for the next available operator.

Speaker Change: While we continue to see headwinds in a dynamic luxury environment, where forward competes as one of the financially strongest operators of our multi brand luxury E. Commerce platform. We are actively pursuing opportunities to capitalize on the current environment by investing in strategies to gain market share.

Speaker Change: Okay.

Speaker Change: First I am pleased to report that we delivered even greater efficiencies in our logistics costs year over year than last quarter contributing to our exceptional growth and profitability in the second quarter.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: Along these lines Michael will talk about our acquisition of a majority interest in the revered luxury brand and longtime brand partner go forward Alexander <unk>.

Speaker Change: Okay.

Speaker Change: Expressed as a percentage of net sales some distribution expense decreased approximately 70 basis points year over year and fulfillment expense decreased 15 basis points year over year.

Speaker Change: Thanks.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Yeah.

Michael: Net income for the second quarter was $15 million or 21 cents per diluted share an increase of 111% year over year.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: It was our first year over year decrease in fulfillment cost as a percentage of net sales in two and a half years.

Speaker Change: Thank you for your patience. Please stay on the line for the next available operator.

Speaker Change: I'd like to acknowledge great execution by our operations team for driving these efficiencies in the U S and international markets.

Speaker Change: Adjusted EBITDA was $20 million, an increase of 97% year over year, driven by a nearly 350 basis point expansion of our adjusted EBITDA margin.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Thanks.

Speaker Change: Shifting to the outlook for driving future efficiency gains I am thrilled to report that we are beginning to see early tangible benefits from the initiatives outlined on recent calls designed to reduce our return rates as.

Speaker Change: Beyond the numbers I am excited by our team's execution that has led to continued great progress on the strategic priorities. We have outlined on prior calls I will discuss some of the key highlights since our update last quarter.

Speaker Change: Okay.

Speaker Change: As a proof point, our return rate declines year over year in the second quarter, representing the first year over year decline for any quarter in more than three years.

Speaker Change: Okay.

Speaker Change: First I am pleased to report that we delivered even greater efficiencies in our logistics costs year over year than last quarter contributing to our exceptional growth and profitability in the second quarter.

Speaker Change: The financial benefits of potentially reducing our return rate in the future our compelling considering the appropriate one point decrease in our return rate, we would expect to realize cost savings of approximately 30% to 50 basis points and reduced selling and distribution and fulfillment costs.

Speaker Change: Thank you for your patience. Please stay on the line for the next available operator.

Speaker Change: Expressed as a percentage of net sales some distribution expense decreased approximately 70 basis points year over year and fulfillment expense decreased 15 basis points year over year.

Speaker Change: Thanks.

Speaker Change: Importantly, many of our efforts to reduce the return rate further elevate the customer experience, including by providing improved size guidance and leveraging technology and data for more personalized merchandising of products less likely to be returned.

Speaker Change: It was our first year over year decrease in fulfillment cost as a percentage of net sales in two and a half years.

Speaker Change: Thank you for your patience. Please stay on the line for the next available operator.

Speaker Change: I'd like to acknowledge great execution by our operations team for driving these efficiencies in the U S and international markets.

Speaker Change: Second we delivered strong results and expanding our international presence in the second quarter as net sales from international markets increased 13% year over year.

Speaker Change: [music].

Speaker Change: Shifting to the outlook for driving future efficiency gains I'm thrilled to report that we are beginning to see early tangible benefits from the initiatives outlined on recent calls designed to reduce our return rates as.

Speaker Change: Net sales increased across nearly all major regions, including China, where outstanding growth. During the important 618 shopping festival in China led resolve to be recognized as the second largest seller of fashion merchandise on Tmall global.

Speaker Change: As a proof point, our return rate declined year over year in the second quarter, representing the first year over year decline for any quarter in more than three years.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: The financial benefits of potentially reducing our return rate in the future our compelling considering the appropriate one point decrease in our return rate, we would expect to realize cost savings of approximately 30 to 50 basis points and reduced selling and distribution and fulfillment costs.

Speaker Change: The 618 festival is the second biggest event of the year in China for driving online sales trailing only singles day in November.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Thank you for your patience. Please stay on the line for the next available operator.

Speaker Change: I am also excited that we have recently launched a branded retail presence on the doyon and Red E Commerce marketplaces that serve more than 750 million monthly active users on a combined basis.

Speaker Change: Importantly, many of our efforts to reduce the return rate further elevate the customer experience, including by providing improved size guidance and leveraging technology and data for more personalized merchandising our products less likely to be returned.

Speaker Change: Thanks.

Speaker Change: Okay.

Speaker Change: Yes.

Speaker Change: These incredibly popular platforms serve a young gen Z demographic that skews female are highly relevant audience for our fashion beauty and lifestyle offerings.

Speaker Change: Second we delivered strong results and expanding our international presence in the second quarter as net sales from international markets increased 13% year over year.

Speaker Change: Third we remain committed to efficiently investing to expand our brand awareness and growing our customer base and further strengthening our connection with the next generation consumer.

Speaker Change: Thanks.

Speaker Change: Net sales increased across nearly all major regions, including China, where outstanding growth. During the important 618 shopping festival in China led revolve to be recognized as the second largest seller of fashion merchandise on Tmall global.

Speaker Change: Okay.

Speaker Change: Our team delivered outstanding results in the second quarter across brand and performance marketing channels, leveraging the strength of our brands.

Speaker Change: No.

Speaker Change: Thank you for your patience. Please stay on the line for the next available operator.

Speaker Change: Since the second quarter was our most efficient quarter for performance marketing investments in nearly four years based on our performance marketing investment calculated as a percentage of net sales Michael will talk about important wins in brand marketing efficiency measures that are also a key contributor to the increased marketing efficiency reflected in our updated 2024 guidance for marketing investments.

Speaker Change: Okay.

Speaker Change: We only have the Nemo.

Speaker Change: The 618 festival is the second biggest event of the year in China for driving online sales trailing only singles day in November.

Speaker Change: I'm also excited that we have recently launched a branded retail presence on the doyon and Red E Commerce marketplaces that serve more than 750 million monthly active users on a combined basis. These.

Speaker Change: Okay.

Michael: And lastly, we continue to leverage AI technology to drive growth and efficiency, while further elevating the customer experience. A perfect example is our recent development and successful launch into production of an internally developed AI search algorithm on our forward site per.

Speaker Change: Incredibly popular platforms serve a young gen Z demographic that skews female are highly relevant audience for our fashion beauty and lifestyle offerings.

Speaker Change: And oncology.

Speaker Change: Third we remain committed to efficiently investing to expand our brand awareness and growing our customer base and further strengthening our connection with the next generation consumer our team delivered outstanding results in the second quarter across brand and performance marketing channels leveraging the strength of our brands for instance, the second quarter was our most efficient quarter for <unk>.

Guy: Hello Guy.

Michael: For years consumers of search for products on our sites through a third party search platform with the emergence of AI and as part of our data driven mindset I challenged our team to develop and test our own AI search capabilities and tested against the incumbent retail search platform developed by a very large third party technology company.

Speaker Change: Performance marketing investments in nearly four years based on our performance marketing investment calculated as a percentage of net sales Michael will talk about important wins in brand marketing efficiency measures that are also a key contributor to the increased marketing efficiency reflected in our updated 2024 guidance for marketing investments and.

Speaker Change: Okay.

Michael: It is incredibly impressive that our internal team of data scientists developed a solution that outperforms. The third party search technology driving higher revenue per search and at a much lower operating cost with this success. Our internally developed AI search algorithm is now live on forward and we're currently testing the algorithm on a revolve site with promising early results.

Guy: Just noticed the other thing is just one of them.

Speaker Change: [music].

Speaker Change: And lastly, we continue to leverage AI technology to drive growth and efficiency, while further elevating the customer experience. A perfect example is our recent development and successful launch into production of an internally developed AI search algorithm on our forward site.

Michael: To wrap up we still have work to do yet I feel great about the important progress we have made in the first half of the year. We begin the third quarter of 2024 was solidly positive year over year growth in net sales for the month of July 2024, and there is momentum building across key growth and efficiency initiatives that we believe may further improve our foundation for profitable growth in the years.

Speaker Change: Okay.

Speaker Change: Thank you for holding met Binyam up your conference.

Speaker Change: No.

Speaker Change: For years consumers of search for products on our sites through a third party search platform with the emergence of AI and as part of our data driven mindset I challenged.

Speaker Change: Hello.

Michael: To come now.

Michel: Now over to Michel.

Michel: Thanks, Mike and Hello, everyone.

Michel: Aided by the Great progress we have made on our key priority assessment that we will report increased efficiency of our marketing investments year over year.

Michel: We built our brand and further strengthen our connection with our next generation consumer.

Speaker Change: I imagine revolve festival in April for propel for this type of quarter by similar expectations and generating a much greater impact on our key metrics within the one day upon that in 2024.

Speaker Change: Single buy entire weekend for last year in the bank, but we didn't stop there we had an incredibly active and assistant second quarter for brand building hosting a parcel of that at East Coast Festival. The Formula One Grand Prix in Miami, The met Gala in New York and that our retail store announcement as well as in international assistance, such as Mexico, Jamaica.

Speaker Change: Central pay separately.

Speaker Change: Particularly exciting with revolve and solid <unk> active party with evaporated fascinates Ekati beans that generated nearly 3 billion peso personal the top publications, including both L. W Magazine, The New York times on the phone.

Speaker Change: <unk> and people at the center of all this has the Tesla tightens incredible addressed at the after party that was custom designed for a buyer on vaccine rave reviews in the press.

Speaker Change: And on social media could in page six of the New airport client guidance Jeff.

Speaker Change: Red Hot at Ta revolve number of Los.

Speaker Change: Most exciting cosmopolitans ranking of the best <unk>, Cardi, B and our revolver Italian <unk> estimate number one that the very top of the list.

Speaker Change: Most impressive is that we are much more active in the second quarter of 2024 and delivered significantly increased marketing impact plus spending millions of dollars less year over year in fact for the second quarter year over year growth in our press and social media and passionate accelerating meaningfully even though we spent $7 $5 million less in Denmark and in second quarter of 2023.

Speaker Change: Our impactful marketing efforts in the second quarter also helped to drive a reacceleration of active customer growth trailing 12 months' active customers increased by 26000 during the second quarter with a similar increase in at the customers in the first quarter of 2024.

Speaker Change: Let's shift gears and talk about our recent acquisition of <unk> announced in June.

Speaker Change: <unk> view, the luxury industry challenges as an exciting opportunity to go on offense and invest in market share capture supported by our consistent profitability and cash flow generation that sets us apart and fashion E. Commerce. So we have had our eye out for opportunities. We took on an exciting transaction late in the second quarter with the acquisition of an 80% ownership stake in <unk> and iconic luxury fashion.

Speaker Change: Now that we are still going forward for many years.

Alexandra: Alexandra itself against the other 20% ownership of the business and equally excited to expand the partnership with <unk> group.

Speaker Change: Our team proceeded complex transaction and the depths of French bankruptcy court locking and compelling opportunity to acquire the <unk> business for our commitment to invest 6 million year over the next three years.

Speaker Change: Our strategy for two reasons, why and the entire <unk> team I still excited about the combination.

Speaker Change: Augment votes cast by only 15 Hopkins for brands in the World a recognition that it's incredibly important to luxury customers to provide some context, let's have a holdco legally protected and can only be used by brand the crude by the federation of HOKA and fashion.

Speaker Change: Chanel and Christian Dr.

Speaker Change: Alexander K, we expect to revolve and forward to benefit from the association with European Industrial plan, while giving us a direct line into the French fashion ecosystem.

Speaker Change: Ultimately 30, Alexander <unk> employees are based in Paris.

Speaker Change: The <unk> impact of all kinds of liver is an ideal complement to the alpine ability Brad that assessment incredible advantage of Amsterdam, Red carpets, including Kendall Jenner Rihanna beyond 10 aircraft.

Speaker Change: Katy Perry and original account for 30 Fas.

<unk> partnership with <unk>, we intend to realize the Latam brand, where they have we imagine new collection in the fall followed by a fashion show in Paris to terminate in January 2025.

Speaker Change: Also compelling either expected synergies from our e-commerce experience data driven merchandising spring.

Speaker Change: And operational excellence to help go to Alexander <unk> direct to consumer business, which has historically been very small our creative teams are already working hard and designing a new <unk> E Commerce site.

Speaker Change: With the <unk> coming off a period of Underinvestment in the near term alumnus that'll be need to invest ahead of the financial benefits, we expect to realize in future years and suddenly there is a whole lot of what we see.

Speaker Change: One of opportunity to grow this brand on a path to wholesale and other distribution channels in the years to come.

Speaker Change: We have also increased our organic investment in our luxury business.

Speaker Change: And the availability of outstanding talent, we have made a variety of strategic investments that forward that we believe can advance are considered the vast number of effectively abandoned letters from customers that are up for that.

Speaker Change: Construction as a case in point.

Speaker Change: Luxury e-commerce kind of matches fashion with shutdown is having a business that in 2022 reporting generated $460 million in revenue.

Speaker Change: Also importantly, delinquent loan accumulated.

Speaker Change: Enforce cabana affordable and attractive financing to our products for <unk>.

Speaker Change: The starting point of view, an equivalent bandwidth engine that has attracted young luxury customers.

Speaker Change: I am pleased to share that Nike has only commit to sell the full range of products and important for the first time building on Nike success and long term climate second final evolve.

Speaker Change: Now I will conclude with an update on our evaluation of the physical retail opportunity.

Speaker Change: I am excited to share that our key performance metrics such as traffic customer.

Speaker Change: That's permanently financed.

Speaker Change: We encourage all semi has been great.

Speaker Change: Great.

Speaker Change: Further our sorting out the cross selling the full market opportunity.

Speaker Change: Our momentum in physical retail anthem crackers, considering governor silver zinc longer articles are providing partnering.

Can I have always believed that when a part of the business is performing lifestyle. After that profile, we want to invest into that opex will be in a much bigger way.

Brian: Brian satisfaction, especially considering that most apparel sales still happening within the portfolio.

Same time, we recognize that physical <unk> as our new Jason market opportunity that.

Brian: But we haven't fully match rates.

Brian: Both of our incredible brand that we believe can drive into physical retail by before we moved so quickly from consuming in central London Goldberger until winter first validate that we can replicate the success in <unk>.

Brian: And in other locations.

Brian: So that as per their upstream device for any improper physical retail beyond anthem engage one of the most accomplished until advising that comes in the market. Our partner has <unk> pass over some of the world's most respected.

Brian: Apple Lululemon, Abercrombie <unk> Fitch and restoration hardware.

Brian: You can assume experience will help us navigate critical represents an evaluation of the test markets retail price selection negotiation architecture and design.

Speaker Change: Very excited to credit risk clients, that's a lot of opportunity in physical retail we should open up yet on what that.

Speaker Change: <unk> third quarter conference call in early November.

Speaker Change: To summarize it feels great to threat hardware around growth and efficiency initiatives deliver results on the top and bottom line without powerful brands. We are investing in for more than 20 years of operational excellence, south asset position, especially compared to our past and comments.

Speaker Change: We believe we are well positioned to pursue profitable growth and market share gains.

Speaker Change: I'll turn it over to Justin for discussion of the financial.

Justin: Thanks, Michael and Hello, everyone I am very pleased with our second quarter, both from a financial standpoint, and even more so by the progress made by the team on our operational initiatives that give me increased confidence in our financial outlook moving forward.

Justin: I will start by recapping, our second quarter results and then close with updates on recent trends in the business and our outlook for gross margin and cost structure for the balance of the year.

Justin: Starting with the second quarter results net sales were $282 million.

Justin: A year over year increase of 3%.

Justin: Revolve segment net sales increased 4% and forward segment net sales decreased 4% year over year.

Justin: In terms of geography, both territories returned to year over year growth in the second quarter.

Justin: Domestic net sales increased 1% year over year and international net sales increased 13% year over year.

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

Justin: Total orders placed for $2 3 million flat with the prior year.

Justin: Average order value or <unk>.

Justin: Increased 2% year over year to $306 benefiting from the higher mix of net sales at full price year over year.

Speaker Change: Another contributor to the improved year over year net sales growth was at a return rate decrease in year over year in the second quarter as the many initiatives designed to reduce our return rate and customer friendly ways have begun to deliver visible results.

Justin: Consolidated gross margin was 54% an increase of 70 basis points year over year, driven by a year over year increase in our higher margin revolve segment.

Justin: Let's move on to operating expenses, which was a true highlight that drove our meaningful operating leverage in the second quarter.

Justin: Note, we delivered better than expected operating expense efficiency across each of the four line items that we guide to each quarter.

Justin: Fulfillment costs were three 3% of net sales around 10 basis points more favorable than our guidance and a decrease of 15 basis points year over year.

Justin: Selling and distribution costs were 17, 9% of net sales also better than expected by approximately 10 basis points.

Justin: And lower by 73 basis points year over year.

Justin: This year over year decrease reflects the continued great work by our teams to drive efficiency in our logistics costs. While also benefiting from the slight decrease in our return rate year over year.

Justin: The biggest source of outperformance in the second quarter versus our guidance with marketing, which came in at 15, 2% of net sales significantly below our guidance of 17% of net sales.

Justin: This represents a 360 basis point decrease year over year compared to our marketing investment at 18, 8% of net sales in the second quarter of 2023.

Justin: General and administrative costs were $33 5 million around $500000 lower than our outlook.

Justin: The year over year increase that continued to outpace our net sales growth as we continue to invest in initiatives that support our long term growth opportunity.

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

Justin: The increased net sales and gross profit year over year, the meaningfully improved marketing efficiency and the outstanding progress driving efficiencies in our logistics costs helped us drive impressive growth on the bottom line.

Justin: Net income was $15 million or.

Justin: Or <unk> 21 per diluted share an increase of 111% year over year.

Justin: Adjusted EBITDA was $20 million, an increase of 97% year over year.

Justin: Moving onto the balance sheet and cash flow statements.

Justin: Net cash used by operating activities was $25 million and free cash flow was negative $27 million in second quarter, primarily due to unfavorable working capital movements that more than offset the increase in net income.

Justin: For the six month year to date period in 2024, we generated positive operating and free cash flow, although lower year over year, primarily reflecting an increase in inventory investments to support a return to topline growth.

Justin: Compared to a declining inventory balance in the first half of 2023, when we were very focused on rebalancing our inventory position.

Justin: Inventory at June 32024, with $234 million.

Justin: An increase of 14% year over year.

Justin: As of June 32024, our balance sheet remained in a very strong position with cash and cash equivalents of $245 million and no debt.

Justin: The decrease in cash and cash equivalents year over year compared to June 32023, primarily reflects positive cash flow from operations that was more than offset by our stock repurchases exceeding $40 million in the last four quarters.

Speaker Change: Any activities was $25 million and free cash flow was negative $27 million in the second quarter, primarily due to unfavorable working capital movements that more than offset the increase in net income.

Justin: Our strong financial position enabled us to execute on our capital allocation strategy in an effort to enhance shareholder value through one.

Speaker Change: For the six month year to date period in 2024, we generated positive operating and free cash flow, although lower year over year, primarily reflecting an increase in inventory investments to support a return to topline growth.

Justin: Investing in the business to support the long term growth opportunity ahead of us.

Speaker Change: <unk> to a declining inventory balance in the first half of 2023, when we were very focused on rebalancing our inventory position.

Justin: Opportunistically pursuing strategic M&A and partnerships than three.

Justin: Returning capital through our stock repurchase program, we repurchased approximately 119000 class a common shares at an average price of $15.83 during the quarter.

Speaker Change: Inventory at June 32024, with $234 million.

Speaker Change: An increase of 14% year over year.

Justin: Approximately $60 million remained under our $100 million stock repurchase program as of June 32024.

Speaker Change: As of June 32024, our balance sheet remained in a very strong position with cash and cash equivalents of $245 million.

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

Speaker Change: And no debt.

Speaker Change: The decrease in cash and cash equivalent to year over year compared to June 32023, primarily reflects positive cash flow from operations that was more than offset by our stock repurchases exceeding $40 million in the last four quarters.

Justin: Starting from the top are returned to positive year over year net sales growth has continued into the third quarter with net sales in July 2024, increasing by a mid single digit percentage year over year a.

Speaker Change: Our strong financial position enabled us to execute on our capital allocation strategy in an effort to enhance shareholder value through one.

Justin: The sequential improvement compared to the year over year trends reported for the second quarter of 2024.

Speaker Change: Investing in the business to support the long term growth opportunity ahead of us.

Speaker Change: <unk>.

Justin: Shifting to gross margin, we expect gross margin in the third quarter of 2024 of between $52, three and 52, 5%, which implies an increase of approximately 70 basis points year over year at the midpoint of the range.

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

Justin: Fulfillment.

Justin: We expect fulfillment as a percentage of net sales of approximately three 4% for the third quarter of 2024.

Justin: A decrease of approximately 20 basis points from the fulfillment efficiency ratio in the third quarter of 2023.

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

Justin: Selling and distribution, we expect selling and distribution costs as a percentage of net sales of approximately 18, 3% for the third quarter of 2024, which.

Justin: Which implies a year over year improvements of approximately 70 basis points.

Justin: For the 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.

Justin: I also want to note that our outlook for fulfillment costs and selling and distribution costs continues to assume a return rate that it's flat year over year for the full year 2024, consistent with our expectation at the beginning of the year.

Justin: We're optimistic that our great progress in the second quarter of 2024, and reducing the return rate year over year will continue and the team is working hard to achieve this however since.

Justin: Since the improved return it happened late in the second quarter as encouraged as we are not yet comfortable factoring in a lower return rate into our financial outlook until we can prove it out for a longer period.

Speaker Change: Selling and distribution, we expect selling and distribution costs as a percentage of net sales of approximately 18, 3% for the third quarter of 2024.

Justin: Marketing.

We believe our strategies to drive impactful marketing campaign, and an increased level of efficiency will continue.

Speaker Change: Which implies a year over year improvement of approximately 70 basis points.

Justin: We expect our marketing investment in the third quarter of 2024 to be approximately 15, 2% of net sales a.

Speaker Change: For the 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.

Justin: A decrease of approximately 20 basis points year over year.

Justin: For the full year 2024, we now expect our marketing investment to represent between 15, three and 15, 5% of net sales.

Speaker Change: I also want to note that our outlook for fulfillment costs and selling and distribution costs continues to assume a return rate that it's flat year over year for the full year 2024.

Justin: Which is a decrease of 70 basis points from our prior full year 2024 guidance range for marketing investments.

Speaker Change: Consistent with our expectation at the beginning of the year.

Michael: We are optimistic that our great progress in the second quarter of 2024, and reducing the return rate year over year will continue and the team is working hard to achieve this however.

Justin: General and administrative.

Justin: Offsetting some of the increased marketing efficiencies as our expectation for higher G&A costs than our prior full year guidance, we expect G&A expense of approximately $35 5 million in the third quarter.

Speaker Change: Since the improved return rate happened late in the second quarter as encouraged as we are not yet comfortable factoring in a lower return rate into our financial outlook until we can prove it out for a longer period.

Justin: For modeling purposes, remember that our G&A expense in the third quarter of 2023, a year ago included a non routine accrual of $6 6 million spread then pending legal matter that we do not expect to reoccur this year.

Speaker Change: Marketing.

Speaker Change: We believe our strategies to drive impactful marketing campaigns at an increased level of efficiency will continue.

Justin: For the full year 2024, we now expect G&A expense of between $135 million to $138 million.

Speaker Change: We expect our marketing investment in the third quarter of 2024 to be approximately 15, 2% of net sales.

Speaker Change: A decrease of approximately 20 basis points year over year.

Justin: Which at the midpoint is an increase of $3 5 million.

Speaker Change: For the full year 2024, we now expect our marketing investment to represent between $15 three and 15, 5% of net sales.

Justin: From the high end of our prior G&A guidance range that we guided to on last quarter's earnings call.

Justin: The majority of the G&A increase from our prior outlook as it related to the <unk> acquisition completed late in the second quarter <unk>.

Justin: Including around 30 employees based in Paris, and our investment to relaunch the <unk> brand and DTC website in the coming months.

Speaker Change: The remainder of the increase in our G&A outlook for the full year 2024 related to increased investment in certain key areas, where we see timely opportunities to invest today to even further increase our competitive position and drive future results such as the Florida investments that Michael discussed.

Speaker Change: And continued investment in AI technology, where we have already delivered meaningful growth and efficiency gains throughout the company.

Speaker Change: And lastly, we expect our effective tax rate to be around 24% to 26% in the third quarter and 25% to 26% for the full year 2024.

Speaker Change: To recap I am very encouraged by our second quarter results highlighted by the return to top line growth.

Speaker Change: Operating discipline that drove a more than doubling of net income year over year.

Speaker Change: And driving the first year over year decrease in our return rate and more than three years now we will open it up for your questions.

Speaker Change: Okay.

Speaker Change: At this time I would like to remind everyone to ask a question press star followed by the number one on your telephone keypad.

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

Rick Patel: Thanks, Good afternoon, everyone and congrats on the great progress I was hoping to get some additional color on.

Speaker Change: On second quarter results by months and.

Speaker Change: Also any additional color you can add two quarter to date trends as you think about the evolve platform versus four and I am curious if the kpis that drove the second quarter results.

Speaker Change: Are the same ones that youre seeing.

Speaker Change: Five a modest acceleration to July.

Rick Patel: Yeah. Thanks, Rick.

Rick Patel: And thanks for joining this is Jesse.

Speaker Change: On the intra quarter trends for Q2, if you remember last quarter. We said we were up in the low single digit range.

Speaker Change: April and May close to up plus three so I think relatively consistent throughout the quarter with maybe a slight improvement as we progress through the quarter and then that continued into July and then if you looked at July.

Speaker Change: Largely the same.

Speaker Change: Of Rick Patel with Raymond James Your line is open.

Speaker Change: The same trend in July as you saw in Q2 with revolve and international outperforming the domestic and foreign businesses.

Rick Patel: Thanks, Good afternoon, everyone and congrats on the great progress I was hoping to get some additional color.

Speaker Change: Overall, a very healthy and good progress again as we move through the quarter and then into July and similar Kpis as well.

Michael: On second quarter results by month end.

Speaker Change: And also any additional color you can add two quarter to date trend as you think about the <unk>.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Great and on the returns right it sounds like you're not baking in the progress that you saw late in the second quarter for the rest of the year.

Speaker Change: <unk> platform versus forward and I'm curious if the kpis that drove the second quarter results.

Speaker Change: Are the same ones that youre seeing.

Speaker Change: Does this reflect conservatism.

Speaker Change: Drive a modest acceleration through July.

Speaker Change: Until you see a little bit more traction or is there something about.

Guy: Yeah. Thanks, Rick.

Speaker Change: Maybe the seasonality of the business, where returns usually pick up around holiday or certain other peak periods that would give you pause.

Guy: And thanks for joining this is jesse on the intra quarter trends for Q2, if you remember last quarter. We said we were up in the low single digit range through April and we close to that plus three so you know I think relatively consistent throughout the quarter with maybe a slight improvement as we progress through the quarter and then that continued into July.

Speaker Change: Corporate debt into updated guidance.

Speaker Change: Yeah I think.

Speaker Change: I wouldn't necessarily say that it makes a conservatism I think.

Speaker Change: It trended well, but in the in the back half of the quarter. So we don't want to get too excited that there is great progress, but we're going to see a little more traction before you take that in.

Guy: And then if you look at July I would say largely the same same trend in July as you saw in Q2 with revolve and international outperforming the domestic and foreign businesses, but overall really healthy and good progress again as we moved through the quarter and then into July and similar Kpis as well.

Speaker Change: And I think we talked about the year over year decrease in return rates, but I think even more importantly is there is seasonality with return rate from Q1 to Q2 Q2 is generally our highest return rate quarter of the year and we saw Q1 to Q2 being flat so just.

Speaker Change: Yeah.

Speaker Change: Another another data point to support that return rates in the second quarter.

Speaker Change: Thank you very much.

Speaker Change: Yes.

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

Speaker Change: Hi, this is checking them all on behalf of Michael Binetti, Jason a little bit on the marketing costs.

Speaker Change: Our full year guidance, even though the second question is our nal alluded too high.

Keith: Keith on the market.

Speaker Change: We've seen this permanent efficiencies kind of flow through.

Speaker Change: And then the other question would be on the active.

Speaker Change: Customer strength, how should we think about that heading into <unk>.

Speaker Change: Second half of the year.

Speaker Change: Yeah. Thank you this just again.

Speaker Change: On the marketing, yes, we had a great quarter in terms of efficiency and it's both on the brand marketing side as Michael mentioned investing $7 $5 million less in revolve festival than we did last year and getting even better results.

Speaker Change: So that was a big driver in Q2, and we're continuing to see that efficiency on the brand marketing side in the back half of Q2 and into the back half of the year, but also important to notice that we did see efficiency on the performance marketing side as well. So that's what we baked into our guidance. If you look into the out years will continue to be opportunistic as it comes to marketing and kind.

Speaker Change: Read the landscape, so not commenting too much more beyond that but really happy with the efficiency this quarter.

Speaker Change: And on active customers, great to see that active customer number holding at a plus.

Speaker Change: 5% incremental increase in the active customer account.

Speaker Change: As we have communicated on prior calls we expect to that growth rate to come down and approximate the net sales growth rate over time as we learn.

Speaker Change: Some of those higher customer growth periods of last year, So I think look <unk>.

Speaker Change: We do expect to see similar as we go into the back half of the year, but not a significant increase to that growth rate until we lap out of that Q1 2023 heavy markdown period that we're in that drove a lot of new customers and I think on that customer client also important to note that the growth came from full price customers, which are very healthy customers.

Speaker Change: Partially offset by lower markdowns customers again, as we comp that that Q1 2023 period.

Speaker Change: Thanks, guys.

Speaker Change: Your next question comes from the line of Dylan Carden with William Blair Your.

Speaker Change: Your line is open.

Speaker Change: Yes.

Dylan Carden: Great. Thanks, just curious any update on beauty Matt.

Speaker Change: Cashman rates here and sort of how those interested in attending.

Speaker Change: And any help you can give on I know it's early days.

Speaker Change: Timing of the retail strategy I guess to just engage the consultant but.

Speaker Change: Is that in your mind, something like a 2025 rollout or anything there would be helpful as well. Thanks.

Speaker Change: Yes, I'll start with our beauty and men's.

Speaker Change: Great progress on both of those areas of the business as we commented 25% growth on beauty.

Speaker Change: A lot of new customers and I think on that customer point also important to note that the growth came from full price customers, which are very healthy customers.

Speaker Change: Men's is growing nicely as well, we're also seeing really great growth in the home.

Speaker Change: Partially offset by lower markdown customers again, as we comp that that Q1, 2023 period.

Speaker Change: On a category very small, but still really healthy growth. There. So good progress our team continues to execute.

Speaker Change: Add new and exciting brands, especially on the beauty front.

Guy: Thanks Guy.

Speaker Change: Your next question comes from the line of Dylan Carden with William Blair. Your line is open.

Speaker Change: And then timing of retail I think we mentioned on the prepared remarks, we have engaged the consultants we are.

Speaker Change: Actively I guess pursuing investigating learning, but we want to caution that we are moving.

Dylan Carden: Great. Thanks, just curious any update on beauty.

Speaker Change: Attachment rates or sort of how those businesses are trending.

Speaker Change: Very pragmatically learning as we go and we will have an update in our next quarterly call.

Speaker Change: And any help you can give on I know it's early days.

Speaker Change: And I know youre, probably not going to answer this one.

Speaker Change: Timing of the retail strategy I guess, you just engage the consultant but.

Speaker Change: The brand strategies sort of acquiring the acquisition that you made.

Speaker Change: Is that in your mind, something like a 2025 rollout or anything there would be helpful as well. Thanks.

Speaker Change: I know you've been opportunistic but is that something that as you kind of see those opportunities.

Speaker Change: Yeah, I'll start with our beauty and men's.

Speaker Change: You wouldn't baulk at you'd kind of maybe form some sort of stable of brands here.

Speaker Change: Great progress on both of those areas of the business as we commented a 25% growth on beauty.

Speaker Change: Yes.

Speaker Change: Yes, and disruption in the marketplace has really provided some unique opportunities here and we think Thats forever forever in our zone to our customer.

Speaker Change: Men's is growing nicely as well, we're also seeing really great growth in the home product category, very small, but still really healthy growth there.

Speaker Change: Strong design talent unique design talent and brands that are aligning with our overall 100 binney doses importance. So.

Speaker Change: Progress the team continues to execute and add new and exciting brands, especially on the beauty front.

Speaker Change: To come across this and it's the April to come across other opportunities with similar type profile on metrics, we wouldn't hesitate to pursue more.

Speaker Change: And then timing of retail I think we mentioned on the prepared remarks, we have engaged a consultant we are actively.

Speaker Change: Very good thank you very much.

Mark <unk>: Your next question comes from the line of Mark <unk> with Baird. Your line is open.

Mark <unk>: Good afternoon, Thanks for taking my question.

Speaker Change: Also wanted to follow up on the marketing.

Mark <unk>: Significant upside to your plan there significant change to the guide for the year. So I just wanted to better understand where you're seeing the efficiencies.

What has changed in the landscape relative to a few months ago.

I know you said Youre pleased with revolve festival, but I guess the spend there was known at the time that you've guided.

Speaker Change: And just any change to the underlying expectation on the top line that informs that guide for the year.

Speaker Change: Yes.

Speaker Change: Go to the brand marketing side will restock weight gain share growing significant reduction in spend but actual outperformance compared to last year, we really challenge the team to continue to evolve and we continue to get better.

Speaker Change: The landscape in the outside what we do the bad side is broad universe, but also at.

Speaker Change: A level below it's a very diverse portfolio. So we reallocated certain zones and some strategies that have been super Super effective and challenge the team to really do more with less.

Speaker Change: They are extremely.

Speaker Change: Positively that they can do sell so we will continue to push that but this will enable us to do at the appropriate time is really experiment with different tools different strategies in the future. So theres a lot in the future that youll see from us that is different experimental and youll see very very exciting and effective and that will be coming and then we will seek to drive greater efficiency reduce spend but continued performance by.

Speaker Change: Our internal measures.

Speaker Change: Yes, certainly on the digital performance marketing side, we challenged the team to do more with less and they delivered.

Speaker Change: That said I would say pretty landscape dependent and so sometimes we will see periods, we're able to get some efficiencies. There also be periods, where the environment gets a little bit more challenging so.

Speaker Change: Thank you.

Speaker Change: Typical to say, whether its a trend that continues through the back half of the year, but we're very pleased with.

Speaker Change: Ultimate performance marketing side that you've seen thus far.

Speaker Change: Thank you and then just on gross margin historically, we've seen a bigger sequential uptick in revolve segment Q2 versus Q1.

Speaker Change: That looks a bit more muted this year, maybe unpack some of the puts and takes there and just any implications as we think about the back half of the year.

Speaker Change: Yes.

Speaker Change: Yeah, no significant implications as we look at the back half of the year I think this year different from years past and of course. The last few years have been very abnormal with COVID-19 coming out of Covid.

Speaker Change: Tori question et cetera, but if you go back in time, there has been more of a seasonal impact there, but also a much different.

Speaker Change: Kind of skew on the full price markdown mix that was more consistent.

Speaker Change: This Q1 Q2 than it has been in the past.

Speaker Change: Your next question.

Speaker Change: Comes from the line of Oliver Chen with TD Cowen Your line is open.

Speaker Change #148: Well hi, everybody as we look towards the Q4 the comparison tough is a little bit.

Oliver Chen: What are some major catalyst for Q4 in terms of.

The potential to maintain that comp or improve any catalyst, we should think about for back to school and holiday.

Oliver Chen: Also would love your view on that.

Speaker Change #101: Customer behavior as you know.

Speaker Change #101: Macroeconomics, we've been seeing bifurcation in inflation pressure, but you're <unk>.

Speaker Change #106: <unk> growth continues to be really nice so would love your thoughts on how.

Speaker Change #102: The macros on the health of your customer is there.

Speaker Change #104: We're playing with what Youre seeing thanks a lot.

Speaker Change #104: Yes, so we feel.

Speaker Change #103: Really good about the trends we saw in the second quarter continued into Q3.

Speaker Change #106: No others out there commented on some of the customers and some macro pressures.

Speaker Change #105: Thankfully, it's not something we're seeing in our own data how much that speaks to the macro environment versus us just executing well.

Speaker Change #105: The strength in the market I think.

Speaker Change #105: Yes.

Speaker Change #105: Yes.

Speaker Change #105: Yeah.

Speaker Change #106: Too early to say, but we feel great about our own trends, we were seeing there as we look at the back half of the year I'll leave it to Jesse to go into any comp discussion, but we're focused on making our business. The best it can be we feel good about the trends and we're hopeful that those golf reach too.

Speaker Change: You are on the customer behavior as you know.

Speaker Change #108: Yes, nothing significant to add on the comps you mentioned the comps do get slightly tougher holiday season, as you know isn't as big for US as it is for others in terms of seasonality. So I know there is that tough.

Speaker Change: The macroeconomics, we'd been seeing bifurcation in inflation pressure, but.

Speaker Change: Your your growth continues to be a really nice so would love your thoughts on how the macro then the health of your customer.

Jesse: Shorter holiday season.

Speaker Change #109: While it may have some impact we don't expect a significant impact their back to school is a great season, as well, but again not.

Speaker Change: We're playing with what you're seeing thanks a lot.

Speaker Change: Yeah. So we feel really good about the trends we saw in the second quarter continued into Q3, and we know others out there commented on some weakening of the customer and some macro pressures.

Jesse: Over indexing for us like it does other so I would say nothing.

Speaker Change #109: Specific to call out and then I think just all of the initiatives that the team has been working on through last year and into the first half of this year that continue to really take effect and you could see visibly in the results. This quarter, we will continue to build.

Speaker Change: Thankfully, it's not something we're seeing in our own data how much that speaks to the macro environment versus us just executing well.

Speaker Change: The strength in the market I think.

Jesse: Okay Lastly.

Speaker Change: Right.

Speaker Change: Good.

Speaker Change #110: You've done a really good job like optimizing customer lifetime value with new brands that you've added owned brands with an older customer as well what are your thoughts on your private label capabilities now in which parts of your assortment.

Speaker Change: You know.

Speaker Change: Too early to say, but we feel great about our own trends that we're seeing there as we look at the back half of the year I'll leave it to Jesse to go into any comp discussion, but we're focused on making our business. The best it can be we feel good about the trends and we're hopeful that bodes well for each two.

Speaker Change #110: Do you feel like have the most opportunity for further improvement.

Jesse: Yeah, Yeah, nothing significant to add on the comps you mentioned you know the comps do get slightly tougher holiday season, as you know isn't as big for US as it is for others in terms of seasonality. So I know there's that tough.

Speaker Change #110: Yes. Thank you.

Speaker Change #115: And that has definitely been a lot of work there and I think the broadening of the assortment over the past several years the assignment as the peso. So as Mike mentioned one of the many things as continue to drive performance in the challenging environment and we expect this to continue to drive growth in the future because it is the owned brands, we've seen kind of the arc of expansion and contraction and now we're in a phase of kind of a trough in and ultimately will be.

Jesse: Shorter holiday season, but.

Jesse: Well it may have some impact we don't expect a significant impact there at the school is.

Jesse: Susan as well, but again not over.

Jesse: Over indexing for us like it does the other so I would say nothing specific to call out and then I think just all of the initiatives that the team has been working on you know through last year and into the first half of this year that continue to really take effect and you could see visibly in the results. This quarter will continue to build.

Speaker Change #116: Believe it will be steady expansion over the near term and long term I think this is part of it is the expansion outside of kind of our historic center dresses, which still remains very very strong expansion to other categories. It's supposed to be seen in the near term in terms of kind of what we would view as more.

Speaker Change #116: Core Essentials Foundation product, which also can be satellites and very very cool fashionable, but also very pleasing as well some things.

Speaker Change #116: Things that we know our customer is buying and shopping.

And then I was thinking of us as the <unk>.

Speaker Change #117: First based on that we'll be seeing effort and energy in that space equal to wholesale.

Speaker Change #117: But in energy Mtc and kind of the consumer as well.

Speaker Change #118: <unk>, yet to really be fully fully nurtured. So we've seen a broad roadmap to really enhance that experience over the lifecycle of the customer as well as kind of all aspects of the closet.

Dan: Thanks, Dan.

Dan: A lot of room to go in that zone.

Speaker Change #120: Thanks, Mike and Mike and Jesse Best regards.

Speaker Change #121: Your next question comes from the line of Matt Koranda with Roth Capital. Your line is open.

Matt Koranda: Hey, guys. Thanks for taking the question.

Matt Koranda: Just can you put a finer point Jesse for us on the progression in third quarter last year remind us I think you said comps get tougher, but I'm not sure. If you were talking about fourth quarter.

Speaker Change #123: Or youre talking about the progression of the third quarter. So maybe August and September if you could do that.

Jesse: Yes, sure, yes, I was more referencing the fourth quarter that gets a little tougher that Oliver was referencing.

Speaker Change #124: Look at the third quarter last year. If you recall, we commented that July was down mid single digits, we closed the quarter at minus 4% plus or minus in the Delaware where.

Speaker Change #124: Roughly even comps during the quarter.

Speaker Change #124: Okay.

Speaker Change #125: Okay got you and then just one on since a lot of others have been asked and answered I was curious on the inventory balances it looks up quite a bit more than sales year over year. So just wondering maybe if you could speak to the assortment and what we're positioning for some <unk>.

Speaker Change #125: Pretty upbeat like we're going to see additional growth and obviously July was good. So it seems like they were preparing for some some future growth, but maybe just if you could speak to the assortment, how we feel about it and health of inventory would be great.

Speaker Change #126: Yes, so on the revolve side, we feel very good about the health of the inventory it is turning a sixth slower.

Speaker Change #126: Nice to see but.

Speaker Change #127: <unk> health is good and the areas, whereas a bit over invested in our areas of lower markdown risk. So.

Speaker Change #128: And then for optimization, but we think it's within the zone.

Speaker Change #129: Help you turn that we're able to manage well in Ireland.

Speaker Change #128: Islands.

Speaker Change #128: We feel good about the mix.

Speaker Change #128: Okay.

Speaker Change #128: The path going forward looking inventory.

Speaker Change #128: Yes.

Speaker Change #130: Yeah, and maybe just to add to that Matt.

Speaker Change #131: The increase that we're seeing is primarily on the revolve side, which as you know as much.

Matt Koranda: Much more in favor for us easier to control.

Speaker Change #132: And the Assortments, great like Mike said forward, a few quarters ago and for the past several quarters have been commenting that we feel like around mid year, we would be more backend check on the forward side. We've made great progress there is a differential on the inventory sales growth for Florida's.

Speaker Change #133: Much tighter and so I think essentially there on forward.

Speaker Change #133: Okay.

Speaker Change #134: Your next question comes from the line of Jay sole with UBS. Your line is open.

Great. Thank you I'm wondering if you can elaborate a little bit on your comments you made about AI about the internal search engine.

Speaker Change #135: And also in the comments about elevating the customer experience as I mentioned in the press release, if you could talk a little bit more about that kind of where you see the company's ability to really use AI to improve the business going that would be helpful. Thank you.

Speaker Change #136: Yes, so yes, we're really proud of the results with the internal search and invert really excels I think is something of a traditional search struggle with right. So it's less about the specific attributes of those accretive that and more about us understanding general aesthetics and broader concepts that traditional search struggles with so.

Speaker Change #137: And it wasn't just a small one two was a very.

Speaker Change #136: <unk>.

Versus.

Speaker Change #136: We're very respected platform from a third party company so.

We're really pleased with those results. They look good on revolve thus far also and I think more broadly speaking.

Speaker Change #136: Sort of technology.

Speaker Change #136: It really opens up doors in terms of innovating in the customer experience right, where it can be good at search, but the types of things that stood out lend themselves much more broadly.

Speaker Change #138: Curious just new groups of customers exploring to navigating the website useful.

Speaker Change #139: Features we can put together some of them like we have in.

Speaker Change #140: For smaller portions of our customers from.

Speaker Change #140: Initial testing those types of things, but I think over the coming years youre going to see that really awful lot and our goal is to be at the forefront of that.

Speaker Change #140: Your next question comes from the line of Jim Duffy with Stifel. Your line is open.

Peter Mcgoldrick: Hi, This is Peter Mcgoldrick on for Jim Thanks for taking our questions. Jesse can you breakout the increase in G&A dollars in guidance between the vote.

Peter Mcgoldrick: This and other investment areas as we think about normalized G&A run rate going forward is there any component. That's a one time costs related to the re launch that should not recur and then related to that how should we be thinking about the contribution to the topline from the VA brand.

Speaker Change #142: Yeah sure. So if you look at the back half of the year and that increase of $3 5 million call. It let's say about half is a little more than half is from <unk>, specifically and then meaning.

Speaker Change #143: A meaningful portion of that remainder is due to the investments that you mentioned is still making investments in AI, making some really good investments on the <unk> side of the business.

Speaker Change #144: If you Peel back the call it non routine and investment areas G&A is in kind of mid single digit plus zones. So closer to in line with the sales growth.

Speaker Change #144: The contribution from <unk> on the top line.

Speaker Change #145: Not until later this year early next year until we see some good movement. There as we mentioned this is kind of a restart rebuild build the website.

Speaker Change #145: And launched the first collections there later this year.

Speaker Change #145: Into early next year.

Excellent and then on international regions, you pointed to encouraging signs out of China I was wondering if you breakout <unk>.

Speaker Change #146: Contribution from other regions is there anything standing out on a dollar contribution or growth rate basis, and how is international progress quarter to date relative to the mid single digit growth overall.

Speaker Change #145: Okay.

Speaker Change #147: Yes, So Q2 was a really strong quarter for international both in terms of absolute resolve and also just broadly speaking across regions.

Jesse: More than half is going to go to a specifically and then.

Jesse: A meaningful portion of that remainder is due to the investments that we mentioned, it's still making investments in AI, making some really good investments on the <unk> side of the business.

Speaker Change #147: We saw nearly every region in the green internationally.

Speaker Change #147: <unk> and.

Speaker Change #147: Standout regions continued to be sort of the standout region in the past quarter or so in Mexico. In particular, we continue to see really strong growth.

Speaker Change: You know if you Peel back the you know call it non routine and investment areas G&A is in the kind of mid single digit plus zone, so closer to in line with the sales growth.

Speaker Change #147: But we're really encouraged by.

Speaker Change #148: So I can you noted in China that we saw growth in China. Despite the headwinds there and we feel like we've made some some good solid progress in China. As you know a couple of quarters ago, you mentioned youre, making more investments into that region.

Speaker Change: In terms of contribution from <unk> T. A on the top line I'm not until later this year early next year until we see some good movement. There as we mentioned this is kind of a restart rebuild build the website and launch the first collections. There later this year into early next year.

Speaker Change #148: Obviously, there is a huge opportunity there and to do so.

Speaker Change #148: We started to see some impacts of those investments this quarter and we're hopeful we'll see more of that in the quarter.

Speaker Change: Excellent and then on international regions, you pointed to encouraging signs out of China I was wondering if you break out.

Speaker Change #150: Thank you.

Speaker Change #151: Your next question comes from Sean Dunlop with Morningstar. Your line is open.

Speaker Change: Contribution from other regions is there anything standing out on a dollar contribution or growth rate basis, and how is international progressed quarter to date relative to the mid single digit growth overall.

Sean Dunlop: Hey, guys. Thanks for taking the call I had one on the return rate initiatives. It looks like we shortened it a return window in knees.

Speaker Change: Okay.

Speaker Change: Yeah. So.

Speaker Change #152: Fraud detection to sort of avoid.

Speaker Change: <unk> was a really strong quarter for international both in terms of absolute resolving and also just broadly speaking across regions.

Rubin: Rubin good to see the progress there I guess I'm curious.

Rubin: Has there been any discernible pushback from consumers that they react to that at all I guess with.

Speaker Change: We saw nearly every region in the green.

Speaker Change: In Q2, and the standout regions continued to be sort of the standout regions of past quarters in Mexico. In particular, we continue to see really strong growth in.

Speaker Change #155: With us seeing a little bit less than one order per quarter on average that's something we would have seen in period or something that we're sort of keeping an eye out in future quarters.

Speaker Change: But we're really encouraged by.

Speaker Change #156: Yeah, Great question, so through our own customer service channels, we haven't seen really any kind of pushback against the return policy changed and it's still a very generous.

Speaker Change: In China, we saw growth in China, Despite there being some headwinds there and we feel like we've made some some good solid progress in China. As you know a couple of quarters ago, We mentioned, you're making more investments into that region.

Speaker Change #156: Arguably industry, leading orders from amongst the distributors, we can in terms of the Genesis of the return policy. So the returns window has shortened to.

Speaker Change: Obviously, there's a huge opportunity there and so you know.

Speaker Change: We started to see some impacts of those investments this quarter and we're hopeful we'll see more of that in the quarter.

Doug: 30 days for cash credit, but actually 60 days for store credit. So can you give us quite a long time to return items and Doug.

Speaker Change: Thank you.

Doug: Frankly with customers. If there is any kind of issue or exceptions. So.

Speaker Change: Yeah.

Speaker Change: Your next question comes from Sean Dunlop with Morningstar. Your line is open.

We think it's been a very positive change as we look at our own data. There is a whole host of things we've been working on with regard to returns.

Sean Dunlop: Hey, guys. Thanks for taking the call I had one on the return rate initiatives. It looks like we shortened to the return window.

Doug: Some of the impact in the second quarter may have been from that policy change, but we think a lot of that was through a number of these other areas that we've been working on Smith was started earlier in the quarter some of which are shown here.

Speaker Change: Fraud detection to sort of avoid.

Speaker Change: Wardrobe and good to see the progress there I guess I'm curious.

Doug: Pieces as we fine tune them and just the right. So.

Speaker Change: And has there been any discernible pushback from consumers if they react to that at all I guess with Oh with us seeing a little bit less than one order per quarter on average that's something we would have seen in period or something that we're sort of keeping an eye out in future quarters.

Doug: We'll also see how the year progresses, but we're hopeful over time, we can continue to make a big impact there.

Doug: Got it that's helpful. And then just one more for me on repurchases lets Blake just $1 $9 million there during the quarter.

Speaker Change: Yeah Yeah.

Speaker Change #158: And I guess I'm, just curious what plays into that capital return philosophy with.

Speaker Change: Yeah, Great question, so through our own customer service channels, we haven't seen really any kind of pushback against the return policy change and it's still a very generous.

Speaker Change #159: Just a little bit less than 60 million remaining on the authorization. It seems like at current prices that might be a pretty good investment.

Speaker Change: You know arguably industry, leading or amongst the distributors in terms of the generous return policy. So the return window with short into.

Speaker Change #160: Yeah, Yeah, no we think.

Speaker Change #161: Over the course of the last four quarters, it's been a great investment.

Speaker Change #161: And like you said, we still have $60 million there.

Speaker Change: 30 days for cash credit, but actually 60 days for store credit so consumers still have quite a long time to return items and you know what.

Speaker Change #163: Available sale will continue to be active no comment on kind of when and how and at what price, we buy but happy about the progress thus far.

We're very friendly with customers, if there's any kind of issue or exceptions. So you know when we think it's been a very positive change as we look at our own data. There is a whole host of things we've been working on with regard to returns.

Speaker Change #164: Okay got it thanks, so much.

Speaker Change #163: Yes.

Speaker Change #163: Your next question comes from the line of Ashley Owens with Keybanc. Your line is open.

Speaker Change: Thank you know some of the impact in the second quarter may have been from that policy change, but we think a lot of impact was through a number of these other areas that we've been working on smokeless started earlier in the quarter some of which are shown here.

Ashley Owens: Hi, Thanks, just a quick one for me maybe on Florida that talked a little about the inventory progress there any color on how return rates are looking and then any insight on the gross margins there.

Speaker Change: As we fine tune them right. So you know we'll have to see how the year progresses, but we're hopeful over time, we can continue to make a big impact there.

Speaker Change #166: A inflection yet or when should we expect to see that shift. Thanks.

Speaker Change: Got it that's helpful. And then just one more for me on repurchases looked like just $1 $9 million there during the quarter.

Speaker Change #167: Yeah, No specific comment on return rate specific to forward I think you just commenting on that overall.

Speaker Change: And I guess I'm, just curious what plays into that capital return philosophy with that.

Speaker Change #168: And to highlight the return policy change that Michael was mentioning was made on revolve only they never shifted thus far would return policy during COVID-19 likely did unresolved.

Speaker Change: A little bit less than 60 million remaining on the authorization. It seems like at current prices that might be a pretty good investment.

Speaker Change #168: Not an impact there on forward.

Speaker Change #170: In terms of margin.

Speaker Change: Yeah, Yeah, no we think.

Speaker Change #171: As I mentioned, we made great progress on the inventory balance markdown margin is still lower than where we want it to be and that is showing up in the overall gross margin for forward.

Speaker Change: Over the course of the last four quarters, it's been a great investment.

Speaker Change: And like you said, we still have $50 million there.

Speaker Change: Available sale will continue to be active no comment on kind of when and how and at what price, we buy but I'm happy with the progress thus far.

Speaker Change #171: With the goal of getting that back into the <unk> over the kind of near to mid term.

Speaker Change #171: Your next question comes from the line of Janine Stichter with Bts Ritchie Your line is open.

Speaker Change: Okay got it thanks, so much.

Speaker Change: Yeah.

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

Speaker Change #172: Hey, you got eastern Saggy on for Janine.

Janine Stichter: I just wanted to ask one quick one on owned brands I was just wondering as you guys are looking to start expanding that penetration again if.

Ashley Owens: Hi, Thanks, just a quick one for me maybe on Florida that talked a little about the inventory progress there any color on how return rates are looking into.

Speaker Change #174: If you have a target in mind of where you'd like that to get and if so what the timeline would be to get there. Thanks.

Ashley Owens: Any insight on the gross margins there are we at the point of inflection yet or when should we start to expect to see that shift. Thanks.

Speaker Change #175: No. We don't have a particular time in terms of Radnet is ultimate goal is just to get products get the best product with one of our consumer we think for the portion of owned brand. We are doing that great C. R.

Speaker Change: Yeah, No specific comment on return rate specific to forward I think just commenting on that overall.

Speaker Change: To highlight the return policy change that Mike was mentioning was made on revolve or maybe they never shifted the forward return policy during COVID-19 like we did under the old <unk>.

Speaker Change #176: Countries is down from our peak, Oxford saw metrics internal personnel next assortment doesn't have us fulfilling incredibly created by passing comment about sandy, but there is no long term target.

Speaker Change: I'm not an impact there on forward.

Speaker Change: In terms of margin.

Speaker Change #176: There is no.

Speaker Change: As I mentioned, we made great progress on the inventory balance markdown margin is still lower than where we want it to be and that is showing up in the overall gross margin for forward.

Speaker Change #177: Modest improvement in the near term is how it got into the near term.

Speaker Change #178: But also things that we continue to watch out for years I think there's no reason why we can't get to the penetration numbers of times past that of course, leading the business.

Speaker Change: You know with a goal of getting that back into the forty's over the near to mid term.

Speaker Change #178: Wanted to Egypt.

Speaker Change #179: Got it thank you.

Speaker Change: Okay.

Speaker Change #179: Your next question comes from the line of Janet Kloppenburg with J J K Research. Your line is open.

Speaker Change: Your next question comes from the line of Janine Stichter with GTI Ritchie Your line is open.

Janet Kloppenburg: Hi, everybody congratulations on the progress.

Janine Stichter: Hey, you got eaten saggy on for Janine.

Speaker Change: I just wanted to ask one quick one on owned brands and I was just wondering as you guys are looking to start expanding that penetration again, if if you have a target in mind of where you'd like that to get and if so what the timeline would be to get there.

Janet Kloppenburg: Just had a quick question just getting back to the inventory.

Janet Kloppenburg: I think you said it was isolated to revolve is that new categories.

Speaker Change #182: So the investment in private label.

Speaker Change #182: Maybe help us understand the direction of inventory and sleek can capacity end of the third quarter and just lastly.

Speaker Change: No we don't have a particular target when it comes to all granite.

Speaker Change: The ultimate goal is just to that product.

Speaker Change: Wonder if I could just I think you know for the portion of owned brand we are doing that great C. A R.

Speaker Change #183: As you think about July August solid trends.

Speaker Change #184: Any discernible change in spending on dress.

Speaker Change: Wondering if you can tell from our peak, our cross sell metrics internal pearsall nexus or rather than have associates.

Speaker Change #185: Casual denim or anything like that.

Sandy: That'll be great about that and talking about sandy, but there is no a longtime target.

Speaker Change #185: Thank you well positioned.

Speaker Change #185: Thank you.

Speaker Change: There is no there are.

Speaker Change #185: Yes.

Janet Kloppenburg: Yeah sure Janet.

Speaker Change: Modest improvement in the near term, it's all kind of things in the near term, but also think that if we continue to our job for years I think there's no reason why.

Speaker Change #188: Thanks for the questions on inventory, we expect to be kind of.

Speaker Change #188: Year over year increase in the same zone as we are in Q3 as we are today no specific categories or third party versus owned brand dynamics to call out, but I feel good about the health of the inventory there and again.

Speaker Change: Fishing numbers of times past, but of course, we think that this is.

Speaker Change: I wanted to teach them.

Speaker Change: Got it thank you.

Speaker Change: Your next question comes from the line of Janet Kloppenburg with J J K Research. Your line is open.

Speaker Change #189: Being unresolved much more.

Speaker Change #189: Versatile kind of in our control than on the <unk> side, so very manageable.

Janet Kloppenburg: Hi, everybody congratulations on the armor.

Speaker Change #189: And then no comments on any more specifics around the July trend I think other than to say, we already said were.

Janet Kloppenburg: I just have two quick questions just getting back to the inventory.

Janet Kloppenburg: I think you said it was isolated to revolve is that new categories are deeper investment in private label.

Speaker Change #189: Revolve and international continue to outpace the <unk>.

Speaker Change #189: Domestic and foreign side of the business.

Speaker Change #190: Okay. Thanks, so much.

Speaker Change: Maybe help us understand the direction of inventory as we think about the end of the third quarter.

Speaker Change #191: That's all the time, we ask a question today I will turn the call back to management for closing remarks.

Janet Kloppenburg: Lastly, as.

Speaker Change #191: Okay.

Speaker Change: As you think about July and that's all the time.

Speaker Change #192: Thank you guys are joining us on this quarterly earnings call me a relief out of the results and the progress that we've made really that has been broad based across a number of functions throughout the entire suite before me.

Speaker Change: Any discernible change in spending on fast.

Speaker Change: Casual denim or anything like that.

Speaker Change #193: At a very high level with a lot of work that has gone.

Speaker Change: Thank you well positioned or thank you.

Speaker Change #193: Foundation, that's been laid over many many quarters before.

Speaker Change #193: That is working to your progress ahead, knowing that this is great product, but also.

Dennis: Yeah sure Dennis.

Speaker Change: Thanks for the questions on inventory, we expect to be kind of a year over year increase in the same zone. As we are in Q3 and three are today, no specific kind of categories or third party versus owned brand dynamics to call out.

Speaker Change #193: Doing that there is a lot more obviously, you've made a lot of opportunities in front of us and beyond.

Speaker Change #193: We're quite prepared and excited for any purpose ahead as we have for the times passenger unfortunate that dynamic landscape and looking forward to another call with you guys.

Speaker Change: I feel good about the health of the inventory there and again.

Speaker Change #194: This concludes today's conference call you may now disconnect.

Speaker Change: Unresolved are much more a versatile kind of in our control than on the Ford side, So very manageable.

Speaker Change: And then no comments on any more specifics around the July trend.

Speaker Change: Other than to say you know, what we already said where revolve and international continue to outpace the.

Speaker Change: Domestic and foreign side of the business.

Speaker Change: Okay. Thanks, so much.

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

Janet Kloppenburg: Okay.

Speaker Change: Thank you guys, who are joining us on this quarterly.

Speaker Change: The earnings call me I'm really proud of the results and the progress that we've made it really that it's been broad based across a number of functions you know the entire Cooper for me.

Janet Kloppenburg: At a very high level with a lot of work that's gone.

Janet Kloppenburg: The foundation has been laid over many many quarters before.

Janet Kloppenburg: That is for continued progress ahead, knowing that this is great products, but also.

Janet Kloppenburg: Doing that there is a lot more promise who made a lot of opportunities on the west and beyond.

Janet Kloppenburg: We're quite prepared and excited to be had as we have for the type of passenger and for it to that dynamic landscape and looking forward to another call with you guys.

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

Janet Kloppenburg: Yeah.

Janet Kloppenburg: Hum.

Janet Kloppenburg: Yeah.

Janet Kloppenburg:

Janet Kloppenburg: Okay.

Janet Kloppenburg: Yeah.

Janet Kloppenburg: Okay.

Janet Kloppenburg: Yeah.

Janet Kloppenburg: Okay.

Janet Kloppenburg: [noise].