Q1 2025 Revolve Group Inc Earnings Call

25 results conference call all.

All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question Press Star one again, thank you.

Good morning, afternoon, evening. My name is Danica and I will be your conference operator today. At this time I would like to welcome everyone to Revolve's first quarter 2025 results conference call. All lines have been placed on mute to prevent any background noise.

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

Speaker Change: Good afternoon, everyone and thanks for joining us to discuss <unk> first quarter 2025 results.

Before we begin I'd like to mention that we have posted a presentation containing Q1 2025 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 innovation initiatives industry trends.

Speaker Change: The impact of changes in international trade policies, and our planned mitigation efforts, our marketing events and their expected impact our partnerships and strategic acquisitions, our physical retail stores and our outlook for net sales gross margins operating expenses and effective tax rate. These.

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 30.

Speaker Change: <unk> 24, and our subsequent quarterly reports on Form 10-Q, all of which can be found on our website at investors dot revolve dot com, we undertake no obligation to revise or update any forward looking statements or information, except as required by law.

Speaker Change: 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 of.

Speaker Change: A 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 presented in the prepared in accordance with GAAP and our non-GAAP measures may be different from non-GAAP measures used by other companies reconciliations of non-GAAP measures to the most directly comparable GAAP measures as well as the definitions of these measure.

Speaker Change: There are limitations on our rationale for using them can be found in this afternoon's press release and in our SEC filings joining.

Speaker Change: Joining me on the call today are co founders and co Ceos, Mike carrier, Nikolas, and Michael <unk> as well as Jesse <unk>, our CFO. Following our prepared remarks, we'll open the call for your questions with that I'll turn it over to Mike.

Speaker Change: Hello, everyone and thanks for joining us today are strong execution within a dynamic environment resulted in an outstanding first quarter results highlighted by double digit topline growth, 57% growth in operating income year over year and $45 million in operating cash flow further strengthened our balance sheet.

Speaker Change: What's more our adjusted EBITDA margin increased by 160 basis points year over year, and cash and cash equivalents on the balance sheet exceeded $300 million.

Speaker Change: It's a great start to the year in an environment that has become progressively more uncertain than when we last spoke at the end of February.

Speaker Change: We achieved these strong results, while continuing to invest in key foundations for long term success, including advancing our AI technology and personalization capabilities.

Speaker Change: A national expansion building, our brands, capturing a greater share of wallet among existing consumers and developing new owned brands.

Speaker Change: With that introduction I will begin by drilling deeper into our Q1 results then I'll talk about the current environment and global tariff uncertainty before wrapping up with progress on our longer term objectives.

Speaker Change: Starting with Q1 results our healthy topline performance illustrates that our strategic initiatives are working and that we are gaining market share during an uncertain time when industry peers with weaker foundations have dialed back investment plans.

Speaker Change: Net sales increased 10% year over year, driven by domestic and international net sales increases of 9% and 12% year over year, respectively.

Speaker Change: By segment revolve net sales increased 11% and Fortinet sales increased 3% year over year, our second consecutive quarter of growth within our luxury market remains challenged we see considerable opportunity for further gains amidst the disruption in the luxury market as evidenced by the recent bankruptcy and liquidation of candidates iconic premium depart.

Speaker Change: <unk> store chain Hudson's Bay.

Speaker Change: Now, let's unpack the strong bottomline results highlighted by a 57% increase in operating income and a.

Speaker Change: 45% increase in adjusted EBITDA year over year.

Speaker Change: In addition to our top line gains contributing to our strong growth and profitability was our brand strength that helped drive meaningful marketing efficiencies year over year as well as our successful efforts to drive efficiencies in our global logistics operations. In fact, our product return rate decreased by nearly three points year over year in the quarter, yielding significant operating inefficiencies.

Speaker Change: And contributing to further elevation of the customer experience.

Speaker Change: As an illustration of our progress our operating income margin and adjusted EBITDA margin were the highest for any first quarter in three years.

Speaker Change: Our profitable growth converted very strongly to generation of cash flows which is a particular advantage in the current environment, we generated $45 million in operating cash flow in the first quarter, increasing our cash position by $44 million in just three months.

Speaker Change: Now I'll address the recent slate of tariff announcements that are accretive and a great deal of uncertainty for our entire sector.

Speaker Change: Macro environment is facing geopolitical and macroeconomic uncertainty, particularly with the implementation of significant and broad based tariffs presenting considerable challenges for our sector.

Speaker Change: It's very challenging to operate in an environment when applicable tariffs can change almost daily yet our team is engaged collaborating with brands and other partners daily to mitigate the impacts and we believe we are fully up to the challenge.

Speaker Change: Shortly our leadership team has a strong track record for navigating in times of extreme uncertainty and coming out stronger on the other end.

Speaker Change: More than 20 years of operating our business, we have successfully navigated through turbulent cycles, including the global financial crisis, and COVID-19, we've emerged stronger as a result in contrast to many fashion E. Commerce peers, we have a profitable and cash generative business proven financial discipline, and a strong balance sheet and key competitive advantages.

Speaker Change: Together with our strong team enable us to constantly invest in the large opportunity ahead of us.

Speaker Change: Beyond the numbers and despite the current macro challenges I'm excited by our team's execution that has led the measurable progress on our strategic priorities before turning it over to Michael I will briefly recap our progress.

Michael: First we continue to efficiently invest to expand our brand awareness grow our customer base and strengthen our connection with the next generation consumer a powerful example is our eighth annual revolve festival held last month, which candidly exceeded our expectations for delivery and marketing impact.

Michael: <unk> engagement inefficiency.

Michael: As Michael will talk about industry remarks.

Michael: We're also encouraged that year over year growth in trailing 12 month active customers and average revenue per active customer accelerated in the first quarter, even while we achieved marketing efficiency of 100 basis points year over year.

Michael: Second we continue to expand our international presence, where we have made excellent progress in further improving the experience for our international customers by reducing friction and foreign currency payment processing and product returns among many other service enhancements.

Michael: In the first quarter International net sales increased 12% year over year, despite currency headwinds in most regions and what we hope is temporary weakness in Canada due to boycotts of U S retailers in response to U S policy.

Michael: These very solid results further validate the underlying strength of our international business and growth opportunity.

Michael: Beyond International we are relentlessly focused on further elevating the experience for all customers since the beginning of the customer has been at the center of our focus so I'm thrilled to report that in the first quarter, we achieved a modern record for our customer satisfaction score shipping.

Michael: Shipping efficiency is a great example of our continuous improvement in service levels customers Love. Our two day Express shipping offered in the U S free of charge, which truly incredible is that we now deliver more than a third of our U S shipments to customers in just one business day free of charge exceeding our two day promise by a full day.

Michael: Percentage of U S packages, we deliver to customers on only one business day has increased by six percentage points in the past three years underscoring our progress in raising the bar to delight our loyal customers.

Michael: And lastly, we continue to leverage AI and other technology to drive growth and efficiency I am excited to share that we have internally developed AI algorithms that we believe will drive efficiency and even further elevate the customer experience. Our internal data science team has developed AI technology algorithms that now automatically transcribed customer service phone calls providing greatly.

Michael: Increased visibility into agent performance and greater awareness of customer issues.

Michael: It is early days, we're excited about the potential for increasing operating efficiency as well as improve learning and training opportunities for our customer service teams.

Michael: We are also continuing to leverage AI to refine our shopping experience and personalization capabilities.

Michael: Cited to share that in collaboration with a third party. We are testing a new AI powered styling feature that enables shoppers on revolve to virtually style recommended items by mixing and matching styles from our vast assortment.

Virtual styling is a powerful use case for AI technology that we believe has the potential to elevate product discovery increased consumer engagement and loyalty and advance our efforts to reduce product returns.

Michael: To wrap up we delivered a strong first quarter and continued to strengthen our foundation for profitable growth over the long term.

Michael: I would like to thank our team for your hard work, we're staying nimble and for your dedication to exceeding our customers' expectations. We're in a very challenging environment and I'm confident that we have the organizational discipline to manage our way through the uncertainty and gain further market share in 2025 and beyond now over to Michel.

Michel: Thanks, Mike and Hello, everyone I am extremely proud of our impressive first quarter results, particularly in light of the current macro environment.

Michel: Our strong Q1 results were highlighted by a double digit top line growth and very strong cash flow as well as our outstanding progress on longer term initiatives.

Michel: Our success is the direct result of our continued strong execution by our team across the business, including in merchandising that experience marketing owned brands technology and international that collectively have further strengthen our connections with our engaging with your band consumers and content creators.

Michel: With that as an introduction I will focus my remarks by some of the strategic areas. We are investing in and that we are especially excited about.

Michel: Brand building investments highlighted by our revolve festival event expansion of owned brands and physical detailed exploration.

Michel: First revolve festival as our core consumer gears upfront and active lifestyle events in the months ahead, we are making the most of this opportunity to further build our brand heat and expand awareness.

On April 12, we hosted our eighth annual revolve festival and hotel the value. We can together the world of fashion music and culture and exclusive and immersive experience the atmosphere in the desert with electric elevated by high octane performances by our incredible lineup featuring little Wayne Tiger shallow and special guests <unk>, who took the stage and customer <unk>.

Michel: Hello.

Michel: Designed exclusively for her or by our own vans team.

Michel: The aspirational lifestyle event was very successful in elevating our brands and exciting and delighting our community of Vips brands Influencers partners and fans, who are fortunate enough to attend to invite activations at Ww called a hot ticket and the biggest celebrity job. The weekend the impressive range of Atlas actors musicians athletes celebrities and cut.

Michel: <unk> creators attending our weekend festivities included lease up black ink NY loaded.

Kendall Jenner Kylie Jenner carried olivine, Charlie and exceeded Dwayne Wade, Chris Brown, <unk> Taylor, Emma Roberts, Ariana Grande that Jordan Chiles, Julia Fox, Becky gene with <unk>, London, Barbara Alexander Christina.

Michel: Victor crews Braxton Berry of $10 nine should Buzzi <unk>.

Michel: <unk> <unk> out of Consigning Heidi Montag.

Michel: Pat.

Michel: We will also aestival has evolved to a buyback fashion show for the next generation of consumers featuring trendsetting styles from revolve and forward gets captured it looks across a variety of photo moments at immersive brand activations generating incredible content that dominates social media feeds and reaching one hundreds of millions of people through the basketball on account of our attendees.

Michel: The proof of our successes and the incredible numbers on the heels of last year's stellar festival results. When we delivered significantly greater marketing impact, while reducing spend by millions of dollars, we were able to raise the bar yet again as an encore and.

In fact, perhaps impressions from revolve festival in 2025 increased by more than 40% year over year, while social media impressions increased by more than 25% year over year achieved on reduced spending year over year.

Michel: Most impressive is that according to data and test company creator IQ revolves earned media value ranked number one among brands from April through April 20th coinciding with the Coachella Festival.

Michel: This is a true testament to our brand strength and our very strong execution by the team.

Michel: Second one bands, where our momentum has continued to build.

Michel: In the first quarter the mix of own brand net sales as a percentage of revolve segment net sales increased year over year for the first time in two and a half years.

Michel: It is particularly exciting considering that own bath typically generate much higher gross margins and third party brands and are exclusively available to revolve and forward.

Michel: Most important our underlying foundational metals for own brands continued to improve in the first quarter and in fact significantly outperformed our third party brands on key comparable metrics. This progress reinforces our confidence to invest in an incredible portfolio of new <unk> pass in the second half of 2025 and early 'twenty six.

Michel: Also notable is that in the first quarter within our limited physical retail footprint owned brands continues to generate a meaningful higher percentage of sales that we generate online.

Michel: Particularly with our upcoming launches we believe we can further increase our own brand penetration of revolve segment net sales in the years to come.

Michel: Third physical retail.

We continue to be very excited about the growth opportunity in physical retail over the long term.

Michel: We are making great progress towards opening a permanent store in Los Angeles at the growth in open air destination that is one of the highest grossing shopping and entertainment centers in the U S. Construction is underway and we are on track to open our doors in the fall in a central location without setting foot traffic.

Michel: Journey has already validated physical retail channel is a great source for brand building acquiring new customers and merchandising of our high margin owned brands.

Michel: Retail channel has also feature at a much lower return rate as compared to our online channel and further strengthen our relationships with partners, who view our premium retail environment has been elevated.

Michel: As founders focused on maximizing shareholder value over the long term, Mike and I are measured in our approach for this new opportunity to Los Angeles build will be our second retail store in our first in a major metropolitan market with Aspen in Los Angeles, We will have two unique destinations to leverage as we continue to test learn and iterate as we drive towards our internal performance goals, we have no plans to.

Michel: Further expand our retail footprint beyond Los Angeles until we fully optimize and achieve our internal success targets within our existing footprint.

Michel: To help ensure our success I am excited to share that we hired a head of retail with deep industry experience, our new leader brings a proven track record of success in opening and property operating retail stores for fashion and lifestyle brands.

Michel: Our job number one will be to open our permit Los Angeles store to grow and leverage the strength of our brands in connection with next generation consumers to maximize this exciting opportunity.

Michel: Before I close I want to touch on the exciting partnership in the worst with Grammy Award winning performer in global style icon Cardi B. We believe this partnership can be especially powerful and that we are creating a long term joint venture that is a first of its kind of for both parties debenture will leverage our strong operational brand building and marketing expertise with cardiac powerful brand transcending fashion and global audience.

Michel: That extends beyond our current core target demographic, both within the U S and abroad debentures will be multifaceted and will include the launch of apparel and the UAE.

After many successful brand collaborations together.

Speaker Change: Is excited to create a much deeper and longer term equity partnership for her namesake brand. She chose revolve, but because it was important to find a partner that would say chuter authenticity and she is also completely aligned with our long term focus we believe cottage revolve is a testament to the strength of our brands and the powerful platform that we have built.

Speaker Change: Wrapping up our strong financial profile illustrated by the $45 million in operating cash flow, we generated in the first quarter and the cash balance of over $300 million strategically.

Speaker Change: As a strategic advantage that gives us the capacity to invest for long term success.

Speaker Change: As our Q1 results of test our investments are working and I am excited about the many initiatives underway that we believe will continue to drive profitable growth over the long term.

Speaker Change: Now I'll turn it over to Jesse for a discussion of the financials.

Jesse: Thanks, Michael and Hello, everyone I am very proud of our strong first quarter results on both the top and bottom lines, especially considering the current macroeconomic environment.

Jesse: I'll start by Recapping, our first quarter results and then I will provide context on our tariff exposure and mitigation strategies before closing with update on recent trends in the business and guidance for the balance of the year.

Jesse: Starting with our first quarter results net sales were $297 million a year over year increase of 10%.

All segment net sales increased 11% and foreign segment net sales increased 3% year over year in the first quarter.

Jesse: By territory domestic net sales increased 9% and international net sales increased 12% year over year.

Jesse: Active customers a trailing 12 month measure increased 6% year over year, a slight uptick from the recent trend with only $2 7 million active customers at quarter end within what is a very large addressable market, we see a great deal of opportunity to further expand our customer base in the years ahead.

Jesse: Total orders placed for $2 3 million, an increase of 4% year over year.

Jesse: Average order value was $295 a decrease of 1% year over year. It was primarily due to lower <unk> and the forward segment driven by product mix.

Jesse: Consolidated gross margin was 52% a decrease of 30 basis points year over year, primarily reflects a lower mix of net sales at full price and deeper markdowns year over year.

Jesse: Offset by an increased mix of owned brands year over year as illustrated by the year over year decline in the first quarter and with many consumers feeling pressure in the current environment. We are seeing customers begin to move to more accessible price points.

Jesse: Importantly, our operating discipline enabled us to meaningfully outperform our guidance for operating expenses by a much greater amount than the slight miss on gross margin.

Jesse: So now moving on to operating expenses fulfillment costs were three 2% of net sales a decrease of 32 basis points year over year.

Jesse: Selling and distribution costs showed greater than expected efficiency at 16, 8% of net sales a.

Jesse: A decrease of 106 basis points year over year.

Jesse: This impressive result reflects a meaningful decrease in our return rate year over year as well as great execution by our teams to drive efficiency in our logistics costs, partially offset by a lower <unk> year over year.

Jesse: Our marketing investment was also more efficient than expected representing 14, 3% of net sales a decrease of 100 basis points year over year that was primarily due to efficiencies in our brand marketing investments.

Operator: to Revolve's first quarter 2025 results conference call. All lines have been placed on mute to prevent any background noise.

Jesse: General and administrative costs were $37 9 million outperforming our guidance of $39 $5 million.

Jesse: An increase of 58 basis points year over year as a percentage of net sales.

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 star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you.

Jesse: The increase in net sales and gross profit year over year, and a meaningfully improved efficiency in our marketing and logistics costs helped us to achieve exceptional growth and operating profitability.

Jesse: Our GAAP income from operations increased 57% year over year in the first quarter.

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

Jesse: As a reminder, below the operating income line in the first quarter of 2024, we recorded a non routine gain from an insurance recovery of $2 8 million.

Erik Randerson: Good afternoon, everyone, and thanks for joining us to discuss Revolve's first quarter 2025 results. Before we begin, I'd like to mention that we have posted a presentation containing Q1 2025 financial highlights to our investor relations website located at investors.revolve.com.

Jesse: Which was reflected in other income last year. This largely explains the decrease in other income year over year in the first quarter.

Jesse: Our tax rate was 27% in the first quarter up slightly from 26% in the prior year.

Erik Randerson: 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 innovation initiatives, industry trends, the impact of changes in international trade policies and our plant mitigation efforts, our marketing events and our expected impact, our partnerships and strategic acquisitions, our physical retail stores, and our outlook for net sales, gross margins, operating expenses, and effective tax rate.

Jesse: Net income increased to $11 million or <unk> 16 per diluted share up from <unk> 15 per diluted share in the first quarter of 2024.

Jesse: The insurance recovery in the prior year was equivalent to approximately <unk> <unk> per diluted share.

Jesse: Adjusted EBITDA was $19 million, an impressive increase of 45% year over year.

Jesse: Moving on to the balance sheet and cash flow statement, we delivered strong cash flows in the first quarter net.

Erik Randerson: These statements are subject to various risks, uncertainties, and assumptions that could cause our actual results to differ materially from these statements, including the risks mentioned in this afternoon's press release, as well as other risks and uncertainties disclosed under the caption risk factors and elsewhere in our findings with the Securities Exchange Commission, including without limitation, our annual report on Form 10-K for the year to December 31, 2024, 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.

Jesse: Net cash provided by operating activities and free cash flow were $45 million and $43 million, respectively, an increase of 18% and 17% year over year that further strengthened our balance sheet.

Or do you think about modeling cash flow for the balance of the year, we expect to build out of our permanent store in Los Angeles to at $8 million to $9 million to our Capex in 2025.

Jesse: As we customize our space at the growth ahead of the opening of the experiential retail destination later this year.

Jesse: Improved inventory dynamics were a key driver of our strong cash flow generation inventory at March 31, 2025, with $214 million, a decrease of $16 million or 7% compared to year end 2024.

Erik Randerson: During our call today, we will also reference certain non-GAAP financial information, including adjusted EBITDA and pre-cash We use non-GAP 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 is a substitute for or superior to the financial information presented and prepared in accordance with GAAP and our non-GAAP measures may be different from non-GAAP measures used by other companies. Reconciliations of non-GAP measures to the most directly comparable GAP measures, as well as the definitions of each measure, their limitations and our rationale for using them, can be found in this afternoon's press release and in our SEC filings.

Jesse: Inventory increased 6% year over year, which was outpaced by our 10% net sales growth for the first quarter.

Jesse: Importantly, the net sales growth to inventory growth differential was positive on both the revolve and forward segments.

Jesse: As of March 31, 2025, cash and cash equivalents were $301 million.

Jesse: Surpassing $300 million for the first time.

Jesse: Our balance of cash and cash equivalents increased by $44 million or 17% in just three months compared to year end 2024, and we continue to have no debt.

Erik Randerson: Joining me on the call today are co-founders and co-CEOs Mike Karanikolas and Michael Mente, as well as Jesse Timmermans, our CFO. Along our prepared remarks, we'll open the call for your questions.

Jesse: In the last five years, we have increased our net cash and cash equivalents balance for home and increase of $227 million in five years net of borrowings, while returning more than $40 million to shareholders through our stock repurchase program.

Mike Karanikolas: With that, I'll turn it over to Mike. Hello everyone, and thanks for joining us today. Our strong execution within a dynamic environment resulted in outstanding first quarter results highlighted by double digit top line growth, 57% growth in operating income year over year, and 45 million in operating cashflow that further strengthened our balance. What's more, our adjusted EBITDA margin increased by 160 basis points year-over-year and cash-in-cash equivalents on the balance sheet exceeded $300 million. It's a great start to the year in an environment that has become progressively more uncertain than when we last spoke at the end of February.

Jesse: Now, let's discuss our tariff exposure and mitigation strategies in more detail first our tariff exposure with.

Jesse: We purchased the majority of our inventory from third party brands under structures, where we are not the importer of record.

Jesse: And so for these inventory purchases, we are not directly impacted by higher tariffs.

Jesse: More specifically using 2024 as a benchmark approximately 78% of our total inventory purchases last year came from third party brands, where the products were imported into the U S. By our brand partners again in these instances, we do not pay the tariffs.

Mike Karanikolas: We achieved these strong results while continuing to invest in key foundations for long-term success, including advancing our AI technology and personalization capabilities, international expansion, building our brands, capturing a greater share of wallet among existing consumers, and developing new own brands.

Jesse: Now.

Jesse: That leaves approximately 22% of our 2024 inventory receipts, where we were the direct import of record and where we do pay the tariffs directly.

Mike Karanikolas: With that introduction, I will begin by drilling deeper into our Q1 results, then I'll talk about the current environment and global tariff uncertainty before wrapping up with progress on our longer term objective. Starting with Q1 results, our healthy top-line performance illustrates that our strategic initiatives are working and that we are gaining market share during an uncertain time when industry peers with weaker foundations have dialed back investment. Net sales increased 10% year over year, driven by domestic and international net sales increases of 9% and 12% year over year respectively. By segment, Revolve net sales increased 11% and Ford net sales increased 3% year over year, our second consecutive quarter of growth within a luxury market that remains For more information visit www.revolve.com We see considerable opportunity for further gains amidst the disruption in the luxury market as evidenced by the recent bankruptcy and liquidation of Canada's iconic premium department store chain, Hudson's Bay.

Jesse: This bucket is composed of our own brand products and from a limited number of third party branded products, where we are the importer of record.

Jesse: So to summarize we have no direct tariff exposure for around 78% of our inventory receipts.

Jesse: Whereas we do have direct tariff exposure for around 22% of our inventory receipts.

Jesse: Now given the very high tariff rate currently in place on China imports, let's talk about our China sourcing exposure.

Jesse: As mentioned based on our 2024 data approximately 22% of our inventory receipts have direct tariff exposure.

Jesse: Within that 22% approximately 72% related to products, we directly imported from China.

Jesse: Taking it one level deeper the vast majority of our own brand products were imported from China, and a much lower but still significant portion of third party products that we imported directly originated from China.

Mike Karanikolas: Now, let's unpack the strong bottom line results highlighted by a 57% increase in operating and a 45% increase in adjusted EBITDA year over year. In addition to our top line gains, contributing to our strong growth and profitability was our brand strength that helped drive meaningful marketing efficiencies year over year, as well as our successful efforts to drive efficiencies in our global logistics operations. In fact, our product return rate decreased by nearly three points year over year in the quarter, yielding significant operating efficiencies and contributing to further elevation of the customer experience. As an illustration of our progress, our operating income margin and adjusted EBITDA margin were the highest for any first quarter in three years.

Jesse: Said differently and to summarize approximately 16% of our total inventory purchases in 2024, we're directly imported from China.

Jesse: For the 78% of inventory that was not directly imported by us the percentage of products that have a China origin is much lower.

Jesse: Now, let's talk about our mitigation strategies, our focus is on the products that we directly import primarily within our own brands and to a lesser extent and the limited number of instances, where we are the importer of record for third party branded products.

Jesse: The biggest area of mitigation opportunity is in owned brands given the very high concentration of products imported from China.

Jesse: We are actively engaged in cost sharing discussions with our own brand manufacturing partners.

Mike Karanikolas: Our profitable growth converted very strongly to generation of cash flows, which is a particular advantage in the current environment. We generated $45 million in operating cash flow in the first quarter, increasing our cash position by $44 million in just three months.

Jesse: And while there is a longer lead time, we are also working to diversify our manufacturing sources outside of China.

Now, let's talk about our mitigation strategies, our focus is on the products that we directly import primarily within our own brands and to a lesser extent in the limited number of instances, where we are the importer of record for third party branded products.

Jesse: Other mitigation measures that we expect will help us to offset some of the increased costs due to tariffs include.

Mike Karanikolas: Now, I'll address the recent slate of tariff announcements that have created a great deal of uncertainty for our entire sector. The macroenvironment is facing geopolitical and macroeconomic uncertainty, particularly with the implementation of significant and broad-based tariffs presenting considerable challenges for our sector. It's very challenging to operate in an environment when applicable tariffs can change almost daily. Yet our team is engaged, collaborating with brands and other partners daily to mitigate the impacts, and we believe we are fully up to the task. Importantly, our leadership team has a strong track record for navigating times of extreme uncertainty and coming out stronger on the other end.

Jesse: Optimizing our product and port logistics selectively increasing prices for our products and further optimization of our supply chain.

Jesse: We are also working hard to mitigate the tariff impact for the limited instances, where we are the importer of record for third party branded products.

The biggest area of mitigation opportunity is in owned brands given the very high concentration of products imported from China.

We are actively engaged in cost sharing discussions with our own brand manufacturing partners.

Primarily by partnering with our third party brands to reduce the direct tariff impact and to a lesser extent selective price increases in partnership with our brand partners.

And while there is a longer lead time, we are also working to diversify our manufacturing sources outside of China.

Other mitigation measures that we expect will help us to offset some of the increased costs due to tariffs include.

Jesse: Now for the approximately 78% of products that are not directly imported by us.

Optimizing our product import logistics selectively increasing prices for our products and further optimization of our supply chain.

Jesse: We are a brand roster of over 1000 brands that source from dozens of countries all over the world, which provides us with optionality and flexibility in sourcing and product assortment.

Mike Karanikolas: In our more than 20 years of operating our business, we have successfully navigated through turbulent cycles, including the global financial crisis and COVID-19. We have emerged stronger as a result. In contrast to many fashion e-commerce peers, we have a profitable and cash-generative business, proven financial discipline. Strong Balance Sheet and Key Competitive Advantages that together, with our strong team, enable us to confidently invest in the large opportunity ahead of us. Beyond the numbers and despite the current macro challenges, I'm excited by our team's execution that has led to measurable progress on our strategic priorities.

We are also working hard to mitigate the tariff impact for the limited instances, where we are the importer of record for third party branded products, primarily by partnering with our third party brands to reduce the direct tariff impact and to a lesser extent selective price increases in partnership with our brand partners.

Jesse: We are actively working with these brand partners to manage through what is hopefully a transitory period of economic and supply chain disruption.

Jesse: Our confidence in our ability to navigate.

Jesse: Mike alluded to is supported by our track record.

Jesse: We successfully navigated through the global financial crisis.

Now for the approximately 78% of products that are not directly imported by us.

Jesse: First wave of Trump tariffs in 2018 in 2019, and the COVID-19 pandemic in all cases coming out stronger.

We are a brand roster of over 1000 brands that source from dozens of countries all over the world, which provides us with optionality and flexibility in sourcing and product assortment.

Jesse: We are on an even stronger footing today than we were during these previous cycles and we continue to have the financial discipline balance sheet strength and long term focus to support investing through this current cycle.

Mike Karanikolas: Before turning it over to Michael, I will briefly recap our progress. First, we continue to efficiently invest to expand our brand awareness, grow our customer base, and strengthen our connection with the next-generation consumer. A powerful example is our 8th annual Revolve Festival held last month, which handily exceeded our expectations for delivering marketing impact, consumer engagement, and efficiency.

We are actively working with these brand partners to manage through what is hopefully a transitory period of economic and supply chain disruption.

Jesse: Now let me update you on some recent trends in the business since the first quarter ended.

Our confidence in our ability to navigate through the tariff pressures that Mike alluded to is supported by our track record.

Jesse: And provide some direction on our cost structure to help in your modeling of the business for 2025.

We successfully navigated through the global financial crisis.

Jesse: Starting from the top our net sales in the month of April increased by a mid single digit percentage year over year with international growth outpacing the U S.

Mike Karanikolas: as Michael will talk about industry. We are also encouraged that year-over-year growth in trailing 12-month active customers and average revenue per active customer accelerated in the first quarter, even while we achieved marketing efficiency of 100 basis points year-over-year. Second, we continue to expand our international presence where we have made excellent progress in further improving the experience for our international customers by reducing friction in foreign currency payment processing and product returns among many other service enhancements. In the first quarter, international net sales increased 12% year-over-year, despite currency headwinds in most regions and what we hope is temporary weakness in Canada due to boycotts of U.S.

First wave of Trump tariffs in 2018 in 2019, and the COVID-19 pandemic in all cases coming out stronger.

Jesse: For modeling purposes for the balance of 2025, given the challenging backdrop with U S consumer confidence declining every month in 2025 to a five year low and U S consumer sentiment, having declined 30% year to date. It is clear that the consumer is feeling increasingly uncertain about the future.

We are an even stronger footing today than we were during these previous cycles and we continue to have the financial discipline balance sheet strength and long term focus to support investing through this current cycle.

Now let me update you on some recent trends in the business since the first quarter ended.

Provide some direction on our cost structure to help in your modeling of the business for 2025.

Jesse: While we do not give revenue guidance the increasingly uncertain backdrop has led us to moderate our internal revenue growth expectations for the full year and as a result, we are taking a measured approach to planning our inventory buys for the balance of 2025.

Starting from the top our net sales in the month of April increased by a mid single digit percentage year over year with international growth outpacing the U S.

For modeling purposes for the balance of 2025, given the challenging backdrop with U S consumer confidence declining every month in 2025 to a five year low and U S consumer sentiment, having declined 30% year to date. It is clear that the consumer is feeling increasingly uncertain about the future.

Mike Karanikolas: retailers in response to U.S. policy. These very solid results further validate the underlying strength of our international business and growth opportunity.

Jesse: Now before we get into guidance, let me caveat that our outlook is based on the current status of tariffs as of today may six 2025, and our estimate of the impact of potential mitigating activities that are currently underway.

Mike Karanikolas: Beyond international, we are relentlessly focused on further elevating the experience for all customers. Since the beginning, the customer has been at the center of our focus, so I'm thrilled to report that in the first quarter, we achieved a modern record for our customer satisfaction score. Shipping efficiency is a great example of our continuous improvement in service levels. Customers love our two-day express shipping offered in the U.S. free of charge. What's truly incredible is that we now deliver more than a third of our U.S. shipments to customers in just one business day, free of charge, exceeding our two-day promise by a full day.

Jesse: Our outlook for gross margin is especially susceptible to variability given the uncertainty surrounding the timing and level of tariffs that will ultimately be an effect as well as the timing and magnitude of the potential impacts resulting from our mitigation efforts.

While we do not give revenue guidance the increasingly uncertain backdrop has led us to moderate our internal revenue growth expectations for the full year.

And as a result, we are taking a measured approach to planning our inventory buys for the balance of 2025.

Jesse: With that let's discuss our updated guidance for gross margin, which includes our best estimate for the impact of tariffs net of our mitigation efforts.

Now before we get into guidance, let me caveat that our outlook is based on the current status of tariffs as of today may six 2025, and our estimate of the impact of potential mitigating activities that are currently underway.

Jesse: We expect gross margin in the second quarter of 2025 of between 50% to 53%.

Mike Karanikolas: The percentage of U.S. packages we deliver to customers in only one business day has increased by six percentage points in the past three years, underscoring our progress in raising the bar to delight our loyal customers.

Which assumes some tariff impact later in the second quarter by comparison, we expect the magnitude of tariff impacts to increase in the third quarter and particularly in the fourth quarter of 2025.

Our outlook for gross margin is especially susceptible to variability given the uncertainty surrounding the timing and level of tariffs that will ultimately be an effect as well as the timing and magnitude of the potential impacts resulting from our mitigation efforts.

Mike Karanikolas: And lastly, we continue to leverage AI and other technology to drive growth and efficient I'm excited to share that we have internally developed AI algorithms that we believe will drive efficiency and even further elevate the customer experience. Our internal data science team has developed AI technology algorithms that now automatically transcribe customer service phone calls, providing greatly increased visibility into agent performance and greater awareness of customer interaction. It is early days, yet we are excited about the potential for increasing operating efficiency as well as improved learning and training opportunities for our customer service team. We are also continuing to leverage AI to refine our shopping experience and personalization capabilities.

Jesse: As a result for the full year 2025, we now expect gross margin of between 50% and 52%.

With that let's discuss our updated guidance for gross margin, which includes our best estimate for the impact of tariffs net of our mitigation efforts.

Jesse: For additional context, the high end of the guidance range reflects a minimal tariff impact with the assumption that we are able to mitigate the vast majority of the impact and or tariffs are reduced to a much lower level relative to where we stand today.

We expect gross margin in the second quarter of 2025 of between 52 and 53%.

Which assumes some tariff impacts later in the second quarter.

Jesse: The low end of the guidance range assumes elevated tariff rates and our best estimate of the impact of our mitigation efforts.

By comparison, we expect the magnitude of tariff impacts to increase in the third quarter and particularly in the fourth quarter of 2025.

Jesse: Again, our guidance reflects our best estimate at this point in what is a very dynamic situation with a number of variables at play all of which are very uncertain.

As a result for the full year 2025, we now expect gross margin of between 50% and 52%.

Mike Karanikolas: I'm excited to share that in collaboration with a third party, we are testing a new AI-powered styling feature that enables shoppers on Revolve to virtually style recommended items by mixing and matching styles from our vast assortment. Virtual styling is a powerful use case for AI technology that we believe has the potential to elevate product discovery, increase consumer engagement and loyalty, and advance our efforts to reduce product return.

For additional context, the high end of the guidance range reflects a minimal tariff impact with the assumption that we are able to mitigate the vast majority of the impact and or tariffs are reduced to a much lower level relative to where we stand today.

Jesse: Fulfillment, we expect fulfillment as a percentage of net sales of approximately three 1% for the second quarter of 2025 and.

Jesse: And between three and three 2% of net sales for the full year 2025 unchanged from our previous guidance.

The low end of the guidance range assumes elevated tariff rates and our best estimate of the impact of our mitigation efforts.

Jesse: Selling and distribution, we expect to selling and distribution costs as a percentage of net sales of approximately 17, 9% for the second quarter of 2025.

Mike Karanikolas: To wrap up, we delivered a strong first quarter and continue to strengthen our foundation for profitable growth over the long term. I would like to thank our team for your hard work, for staying nimble, and for your dedication to exceeding our customers' expectations. We are in a very challenging environment, yet I'm confident that we have the organizational discipline to manage our way through the uncertainty and gain further market share in 2025 and beyond.

Again, our guidance reflects our best estimate at this point in what is a very dynamic situation with a number of variables at play all of which are very uncertain.

Jesse: And we now expect a range of 17, two to 17, 5% for the full year 2025.

Jesse: The slight increase from our prior range, primarily reflects our expectation for lower average order values in the coming months given the current macro environment.

Fulfillment, we expect fulfillment as a percentage of net sales of approximately three 1% for the second quarter of 2025.

And between three and three 2% of net sales for the full year 2025 unchanged from our previous guidance.

Jesse: For context, lower average order values are a headwind to logistics efficiency because of lower <unk> means that our shipping costs comprise a larger percentage of the revenue we generate on a per order basis.

Michael Mente: Now, over to Michael. Thanks, Mike. And hello, everyone.

Selling and distribution, we expect to selling and distribution costs as a percentage of net sales of approximately 17, 9% for the second quarter of 2025.

Michael Mente: I'm extremely proud of our impressive first quarter results, particularly in light of the current macro environment. Our strong Q1 results were highlighted by double-digit top-line growth and very strong cash flow, as well as our outstanding progress on longer-term Our success is the direct result of our continued strong execution by our team across the business, including in merchandising, site experience, marketing, own brands, technology, and international that collectively have further strengthened our connections with our engaged community of brands, consumers, and content creators.

Jesse: Marketing.

Jesse: We expect our marketing investment in the second quarter of 2025 to be approximately 15% of net sales a slight decrease year over year for the full year 2000.

And we now expect a range of 17, two to 17, 5% for the full year 2025.

Jesse: We expect our marketing investments represent between $14 nine and 15, 1% of net sales unchanged from our prior guidance.

The slight increase from our prior range, primarily reflects our expectation for lower average order values in the coming months given the current macro environment.

Jesse: General and administrative we expect G&A expense of approximately $39 million in the second quarter of 2025 and between 154 and $157 million for the full year 2025.

For context, lower average order values are a headwind to logistics efficiency because of lower <unk> means that our shipping costs comprise a larger percentage of the revenue we generate on a per order basis.

Michael Mente: With that as an introduction, I will focus my remarks on some of the strategic areas we are investing in and that we are especially excited about. Brand building investments highlighted by a Revolve Festival event, expansion of own brands, and physical retail exploration. First, Revolve Festival. As our core consumer gears up for an active lifestyle event in the months ahead, we are making the most of this opportunity to further build our brand heat and expand awareness. On April 12th, we hosted our 8th Annual Revolve Festival in Coachella Valley, bringing together the worlds of fashion, music, and culture in an exclusive and immersive experience.

Marketing.

Jesse: A slight decrease from our prior full year guidance range.

We expect our marketing investment in the second quarter of 2025 to be approximately 15% of net sales.

Jesse: And lastly, due to some discrete items affecting our tax rate. This year, we now expect our effective tax rate to be approximately 27% to 28% for the full year 2025, with a highest quarterly tax rate expected in the third quarter of 2025.

A slight decrease year over year for the full year 2000.

We expect our marketing investments represent between $14 nine and 15, 1% of net sales unchanged from our prior guidance.

General and administrative we expect G&A expense of approximately $39 million in the second quarter of 2025 and between 154 and $157 million for the full year 2025.

Jesse: In 2026%, we expect our effective tax rate to return to our previous guidance range of between 24 and 26%.

Jesse: To recap we delivered strong Q1 results in an environment that has become increasingly challenged.

Michael Mente: The atmosphere in the desert was electric, elevated by high-octane performances by our incredible lineup featuring Lil Wayne, Tyga, Jell-O, and special guest Cardi B, who took the stage in custom Revolve Atelier look, designed exclusively for her by our own brand. The Aspirational Lifestyle event was very successful in elevating our brands and exciting and delighting our community of VIPs, brands, influencers, partners, and fans who were fortunate enough to attend the invite-only activations that WWD called a hot ticket and the biggest celebrity draw of the weekend. Thank you to all of our sponsors, including Shaboozie, YG, Victoria Monet, Gracie Hunt, Alice Kamsani, Heidi Montag, and Spencer Pratt.

Might decrease from our prior full year guidance range.

Jesse: With our strong performance over the last few quarters and our very healthy balance sheet. We are entering into this time of turbulence on solid footing.

And lastly, due to some discrete items affecting our tax rate. This year, we now expect our effective tax rate to be approximately 27% to 28% for the full year 2025.

Jesse: We believe we are well positioned to navigate through the current tariff uncertainty and other macro challenges ahead.

With the highest quarterly tax rate expected in the third quarter of 2025.

Jesse: <unk>, our financial strength that is supported by a premium price point and healthy gross margin operating discipline and agility, our technology and data driven DNA, our powerful brands and our connection with the next generation consumer.

In 2026, we expect our effective tax rate to return to our previous guidance range of between 24 and 26%.

To recap we delivered strong Q1 results in an environment that has become increasingly challenged with.

Jesse: Now we will open it up for your questions.

Speaker Change: At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.

With our strong performance over the last few quarters and our very healthy balance sheet. We are entering into this time of turbulence on solid footing.

We believe we are well positioned to navigate through the current tariff uncertainty and other macro challenges ahead, considering our financial strength that is supported by a premium price points and healthy gross margin operating.

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

Mark: Good afternoon, and thank you for taking my question I appreciate all the detail here.

Discipline and agility, our technology and data driven DNA, our powerful brands and our connection with the next generation consumer.

Speaker Change: Jesse maybe.

Speaker Change: Could drill a little bit more into some of the tariff math and assumptions as we try to unpack that so if I understand correctly. The low end of your gross margin guidance assumes.

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

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 Mente: Revolve Festival has evolved into a vibrant fashion show for the next generation of consumers, featuring trend-setting styles from Revolve and Forward. Guests capture their looks across a variety of photo moments and immersive brand activations, generating incredible content that dominates social media feeds and reaching hundreds of millions of people through the vast follower count of our A-list followers. The proof of our success is in the incredible numbers. On the heels of last year's stellar festival results, when we delivered significantly greater marketing impact while reducing spend by millions of dollars, we were able to raise the bar yet again as an encore.

Speaker Change: Tariff cost with little mitigation is that right and then I guess, if I if I look at the gross margin guidance reduction 240 basis points at the low end.

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

Good afternoon, and thank you for taking my question I appreciate all the detail here.

Consensus revenue this year, that's about $30 million of gross profit dollars.

Jesse maybe.

Could drill a little bit more into some of the tariff math and assumptions as we try to unpack that.

Speaker Change: Is that a rough approximation of the gross costs, you're thinking about for the back half of the year.

So if I understand correctly, the low end of your gross margin guidance assumes.

Speaker Change: Maybe let's just start there and then I have a follow up.

Speaker Change: Okay.

Michael Mente: In fact, press impressions from Revolve Festival in 2025 increased by more than 40% year over year, while social media impressions increased by more than 25% year over year, achieved on reduced spending year over year. Most impressive is that according to data insights company CreatorIQ, Revolve's earned media value ranked number one among brands from April 10th through April 20th, coinciding with the Coachella Festival.

Speaker Change: This guidance.

Terra cost with with little mitigation is that right and then I.

Speaker Change: The first part right.

Speaker Change: The elevated tariff rates that are in place today.

I guess, if I if I look at the gross margin guidance reduction 240 basis points at the low end.

Speaker Change: Best estimate of our mitigation effort. So I think that's the key difference from what you said, where it's not minimal mitigation efforts is our best estimate of mitigation efforts.

On consensus revenue that this year, that's about $30 million of gross profit dollars.

Speaker Change: And then yes, you can do the math on that on the gross margin impact given the guidance that we gave but it has a meaningful impact on a dollar basis.

That a rough approximation of the gross costs, you're thinking about for the back half of the year.

Michael Mente: This is a true testament to our brand strength and our very strong execution by Second, own brands where our momentum has continued to build. In the first quarter, the mix of own brand net sales as a percentage of Revolve segment net sales increased year over year for the first time in two and a half years. It is particularly exciting considering that own brands typically generate much higher growth margins than third-party brands and are exclusively available through Revolve and Forward. Most important, our underlying foundational metrics for own brands continue to improve in the first quarter, and in fact, significantly outperformed our third-party brands on key comparable metrics.

Speaker Change: And how quickly could you theoretically pivot to a higher percent of the third party sourced inventory or asked another way maybe to help us better understand the inventory commitments or flexibility you have on the owned brand front.

Maybe let's just start there and then I have a follow up.

Okay.

Any forward guidance.

Guidance.

I think you hit the first part right. It assumes the elevated tariff rates that are in place today.

Estimate of our mitigation efforts.

Speaker Change: Yes, we can flex pretty quickly I wouldn't say, it's necessarily a shift from one brand to third party, we're still very optimistic on the own brand.

Different from what you said, where it's not minimal mitigation efforts is our best estimate of mitigation efforts.

And then yes, you can do the math on that on the gross margin impact given the guidance that we gave but it has a meaningful impact on a dollar basis.

Speaker Change: Expansion, especially this quarter and see great opportunity there in the future, especially given the premium margin that owned brand carries.

Michael Mente: This progress reinforces our confidence to invest in an incredible portfolio of new own brand launches planned for the second half of 2025 and early 2026. Also notable is that in the first quarter within our limited physical retail footprint, own brands continue to generate a meaningful higher percentage of sales that we generate online. Particularly with our upcoming launches, we believe we can further increase our own brand penetration of Revolve segment net sales in the years to come.

Speaker Change: Now if you think about diversification of owned brand sourcing out of China that is a longer lead time, we can make some progress this year, but it's more of a 2026 story there.

And how quickly could you theoretically pivot to a higher percent of the third party sourced inventory or asked another way maybe help us better understand the inventory commitments or flexibility you have on the owned brand front.

Speaker Change: Thank you and then just finally on the demand backdrop are you seeing the tariff news and weaker sentiment affecting customer traffic and conversion trends at this point or maybe what gives you the confidence you could sustain growth, especially in the U S. As we look at the steeper comparisons in the coming quarters here. Thank you.

Yes, we can flex pretty quickly I wouldn't say, it's necessarily a shift from one brand to third party, we're still very optimistic on the owned brand.

Expansion, especially this quarter and see great opportunity there in the future, especially given the premium margin that owned brand carries.

Michael Mente: Third, physical retail. We continue to be very excited about the growth opportunity in physical retail over the long term. We are making great progress towards opening our permanent store in Los Angeles at The Grove, an open-air destination that is one of the highest-grossing shopping and entertainment centers in the U.S. Construction is underway, and we are on track to open our doors in the fall in our central location with outstanding foot traffic. Our journey has already validated the physical retail channel as a great source for brand building, acquiring new customers, and merchandising our high-margin own brands.

Now if you think about diversification of owned brand sourcing out of China that is a longer lead time, we can make some progress this year, but it's more of a.

Speaker Change: Yes, I think.

Speaker Change: Based on what we said in the prepared remarks, but we're seeing now is just that shift to more accessible price points, so thats impacting it.

2026 story there.

It's certainly having an impact on consumer confidence in and Thats, where we are moderating our expectations as we as we look ahead through the balance of this year given.

Thank you and then just finally on the demand backdrop are you seeing the tariff news and weaker sentiment affecting customer traffic and conversion trends at this point or maybe what gives you the confidence you could sustain growth, especially in the U S. As we look at the steeper comparisons in the coming quarters here. Thank you.

Speaker Change: Assuming that the current state of play is in place.

Michael Mente: The retail channel has also featured a much lower return rate as compared to our online channel and further strengthened our relationships with brand partners who view our premium retail environment as brand elevated.

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

Okay.

Yes, I think.

Michael Mente: As founders focused on maximizing shareholder value over the long term, Mike and I are measured in our approach for this new opportunity. The Los Angeles build will be our second retail store and our first in the major metropolitan market. With Aspen in Los Angeles, we will have two unique destinations to leverage as we continue to test, learn and iterate as we drive towards our internal performance goals. We have no plans to further expand our retail footprint beyond Los Angeles until we fully optimize and achieve our internal success targets within our existing footprint.

Based on what we said in the prepared remarks, what we're seeing now is just that shift to more accessible price points, so thats impacting it.

Katie: Hi, there. Thank you for taking my question. This is Katie on for Oliver.

I'd like to kind of go back to the one brand strategy and just kind of learn more about how youre thinking about launches for our own brands.

It is certainly having an impact on consumer confidence in and Thats, where we are moderating our expectations as we as we look ahead to the balance of this year given.

Katie: And sort of that product development, specifically around the second half are you delaying any.

Assuming that the current state of play is in place.

Katie: Innovation there to shift to third party and then I'll have one follow up after that thank you.

Alright. Your next question comes from the line of Oliver Chen with TD Cowen. Your line is now open.

Michael Mente: To help ensure our success, I am excited to share that we hired a head of retail with deep industry experience. Our new leader brings a proven track record of success in opening and profitably operating retail stores for fashion and lifestyle brands. Her job number one will be to open our permanent Los Angeles store to grow and leverage the strength of our brands in connection with next generation consumers to maximize this exciting opportunity.

Katie: Yes, we've definitely taken just hasnt to account and Theres been some pushback in some places and some don't really have very very very exciting things launching in each too. So there's been adjustments, but we have to be nimble. This environment. We have some awesome contracts will hold up very very excited to share with you guys.

Hi, there. Thank you for taking our question Katy on for Oliver.

I'd like to kind of go back to the on brand strategy and just kind of learn more about how you're thinking about launching our own brand.

Katie: Okay.

And sort of that product development, specifically around the second half are you delaying any.

Katie: Okay and then.

Michael Mente: Before I close, I want to touch on an exciting partnership in the works with Grammy Award winning performer and global style icon Cardi B. We believe this partnership can be especially powerful in that we are creating a long term joint venture that is a first of its kind for both parties. The venture will leverage our strong operational, brand building and marketing expertise with Cardi's powerful brand transcending fashion and global audience that extends beyond our current core target demographic, both within the US and abroad.

Katie: As a follow up to the selling and distribution expense line item.

Innovation there to shift to third party and then I'll have one follow up after that thank you.

Katie: Could you just talk a little bit more about really the fatal error.

Just thinking about what we can.

Yes, we've definitely taken just hasnt do account and there has been some pushback in some places and some don't.

Katie: Leverage too.

Katie: Do you have any incremental savings this year. Thank you.

Very very very exciting things launching in each too so theres been indefinitely, but we have to be nimble that environment. We think we have some awesome contracts will hold up very very excited to share with you guys.

Katie: Yeah, Yeah, we did guide up slightly for the second quarter based on what we're seeing in average order values, which.

Michael Mente: The venture will be multifaceted and will include the launch of apparel and the U.S. After many successful brand collaborations together, Cardi is excited to create a much deeper and longer term equity partnership for her namesake brand. She chose Revolve because it was important to her to find a partner that would stay true to her authenticity, and she is also completely aligned with our long-term focus. We believe Cardi choosing Revolve is a testament to the strength of our brands and the powerful platform that we have built.

Katie: Increases that selling and distribution as a percentage of net sales now that's not to take away from everything that the team has been doing they've been doing a phenomenal job in making that line item, especially more efficient. There's also a significant impact from a lower return rate on that line item. So that's that's the largest driver of the decrease since we've been seeing and the team has been doing.

Okay.

Okay and then.

As a follow up to the selling and distribution expense line item.

Could you just talk a little bit more about really the savings are.

Just thinking about what we can.

Leverage too.

Katie: <unk> work, there, but we do anticipate some pressure from that lower average order value that we've been seeing for the last month or two.

Have any incremental savings in sir thank you.

Yeah, Yeah, we did guide up slightly for the second quarter based on what we're seeing in average order values, which.

Michael Mente: Wrapping up, our strong financial profile, illustrated by the $45 million in operating cash flow we generated in the first quarter and the cash balance of over $300 million, is a strategic advantage that gives us the capacity to invest for long-term For more information visit www.FEMA.gov As our Q1 results attest, our investments are working, and I'm excited about the many initiatives underway that we believe will continue to drive profitable growth over the long term.

Speaker Change: Alright. Your next question comes from the line of Ana <unk> with Piper Sandler Your line is now open.

Increases that selling and distribution as a percentage of net sales now that's not to take away from everything that the team has been doing they've been doing.

Great. Good afternoon, and thank you for taking my question and thank you for all the color on parents are very helpful.

Nominal job in making that line item, especially more efficient. There's also a significant impact from a lower return rate on that line item. So that's that's the largest driver of the decreases we've been seeing and the team has been doing great work there, but we do anticipate some pressure from that lower average order values that we've been seeing for the last month or two.

Speaker Change: I wanted to ask you mentioned, a higher Mark downs in <unk> and also the shift to more accessible price points as of late are you guys planning to pull that promotional lever more to stimulate demand are you starting to see the industry get incrementally more promotional so far in the second quarter and just curious there's been some anecdotal evidence.

Jesse Timmermans: Now I'll turn it over to Jesse for a discussion of the financials. Thanks, Michael. And hello, everyone. I am very proud of our strong first quarter results on both the top and bottom lines, especially considering the current macroeconomic environment. I'll start by recapping our first quarter results, and then I will provide context on our tariff exposure and mitigation strategies before closing with updates on recent trends in the business and guidance for the balance of the year.

Okay.

Alright. Your next question comes from the line of Ana <unk> with Piper Sandler Your line is now open.

Speaker Change: In terms of demand pull forward ahead of tariffs at least in some categories out there do you expect you'll see that here in early two Q.

Great. Good afternoon, and thank you for taking my question and thank you for all the color on parents are very helpful.

Jesse Timmermans: Starting with the first quarter results, net sales were $297 million, a year-over-year increase of 10%. Revolve segment net sales increased 11% and forward segment net sales increased 3% year over year in the first quarter. By territory, domestic net sales increased 9% and international net sales increased 12% year over year. Active customers, a trailing 12-month measure, increase 6% year-over-year, a slight uptick from the recent trend. With only 2.7 million active customers at quarter end, within what is a very large addressable market, we see a great deal of opportunity to further expand our customer base in the years ahead.

Speaker Change: Yes, maybe on the markdown strategy first.

I wanted to ask you mentioned, a higher markdowns in <unk> and also the shift to more accessible price points as of late are you guys planning to pull that promotional lever more to stimulate demand are you starting to see the industry get incrementally more promotional so far in the second quarter and just curious there's been some anecdotal evidence.

Speaker Change: As we mentioned we are seeing customer shift to more accessible price points, whether that means shifting out of full price into markdown or.

Speaker Change: Higher markdowns within that markdown component.

Speaker Change: But we're not necessarily shifting our markdown strategy in response to that we typically.

Speaker Change: Based on our algorithms, we do what's right for the inventory down for the customer for the for the P&L. So no direct response to that or with anybody else is doing out there, we'll do what's right for the business.

The demand pull forward ahead of tariff at least in some categories out there do you expect that you'll see that here in early Q2.

Yes.

Speaker Change: On a whole now on the pull forward.

Markdown strategy first.

Speaker Change: <unk>.

As we mentioned we are seeing customer shift to more accessible price points, whether that means shifting out of full price and the markdown or.

Speaker Change: On our customers buy now wear now behavior, we didn't see any meaningful.

Jesse Timmermans: Total orders placed were $2.3 million, an increase of 4% year-over-year. Average order value was $295, a decrease of 1% year over year that was primarily due to lower AOV in the forward segment driven by product Consolidated growth margin was 52%, a decrease of 30 basis points year-over-year that primarily reflects a lower mix of net sales at full price and deeper markdowns year-over-year, partially offset by an increased mix of own brands year-over-year. As illustrated by the year-over-year AOV decline in the first quarter, and with many consumers feeling pressure in the current environment, we are seeing customers begin to move to more accessible prices.

Speaker Change: Indications of a pull forward in our business.

Higher markdowns within that markdown component.

We're not necessarily shifting our markdown strategy in response to that we typically.

Based on our algorithms, we do what's right for the inventory dawn for the customer for the for the P&L. So no direct response to that or what anybody else is doing out there we will do what's right for the business.

On a whole now on the pull forward.

Based on our customers buy now wear now behavior, we didn't see any meaningful.

Indications of a pull forward in our business.

Jesse Timmermans: Importantly, our operating discipline enabled us to meaningfully outperform our guidance for operating expenses by a much greater amount than the slight miss on gross margin.

Jay Sole: Next question comes from the line of Jay sole with UBS. Please go ahead.

Jay Sole: Great. Thank you so much I just want to ask you mentioned I think you said you're moderating your internal sales expectations can you just give us a little bit more color on that like the magnitude of that and does that include.

Jesse Timmermans: So, now moving on to operating. Fulfillment costs were 3.2% of net sales, a decrease of 32 basis points year over year. Selling and distribution costs showed greater than expected efficiency at 16.8% of net sales, a decrease of 106 basis points year over year. This impressive result reflects a meaningful decrease in our return rate year-over-year, as well as great execution by our teams to drive efficiency in our logistics costs, partially offset by a lower AOV year-over-year. Our marketing investment was also more efficient than expected, representing 14.3% of net sales, a decrease of 100 basis points year-over-year that was primarily due to efficiencies in our brand marketing investment.

Jay Sole: Any impact from some of the tariff mitigation strategies in other words, if youre assuming that you have to raise price do you assume that there is sort of the.

Jay Sole: Jos just these are such that maybe there is a disproportionate negative impact on unit volumes, just any color around that would be super helpful. Thank you.

Jay Sole: Yes, yes, I think that key point is there is that we are you know what we are seeing some softening.

Next question comes from the line of Jay sole with UBS. Please go ahead.

Jay Sole: And we want what we want to communicate is that we are moderating our inventory buys accordingly, so we want to keep everything in check now we need to be careful in the case that tariffs are reduced and everything opens up again, so we got to be very nimble there.

Great. Thank you so much I just wanted to ask you mentioned I think you said you're moderating your internal sales expectations can you just give us a little bit more color on that like the magnitude of that and does that include.

Any impact from some of the tariff mitigation strategies in other words, if youre assuming that you have to raise price do you assume that there is sort of.

And yes in terms of kind of units versus dollars and how we're planning for inventory and price increases. It is very dynamic and we're taking all of that into consideration with our inventory buys and then maybe on the elasticity point.

Jesse Timmermans: General and administrative costs were $37.9 million, outperforming our guidance of $39.5 million, albeit an increase of 58 basis points year-over-year as a percentage of net sales. The increase in net sales and gross profit year over year, and the meaningfully improved efficiency in our marketing and logistics costs, help us to achieve exceptional growth in operating profitability. Our GAAP income from operations increased 57% year-over-year in the first quarter. As a reminder, below the operating income line, in the first quarter of 2024, we recorded a non-routine gain from an insurance recovery of $2.8 million. which was reflected in other income last year.

Just these are such that maybe there is a disproportionate negative impact on unit volumes, just any color around that would be super helpful. Thank you.

Yes, yes, I think that key point is there is that we are.

Jay Sole: I think it's one that you can't look at in isolation, it's not.

We are seeing some softening.

Jay Sole: Not necessarily one percentage of price increase that would impact the consumers' behavior, you really have to factor in kind of everything else that's going on out there how she's feeling consumer sentiment et cetera, and very case by case product by product price point by price point.

And we want what we want to communicate is that we are moderating our inventory buys accordingly, so we want to keep everything in check now we need to be careful in the case that tariffs are reduced and everything opens up again, so we got to be very nimble there.

And yes in terms of kind of units versus dollars and how we're planning for inventory and price increases. It is very dynamic and we're taking all of that into consideration with our inventory buys and then maybe on the elasticity point.

Lorraine Hutchinson: Alright. Our next question comes from Lorraine Hutchinson with Bofa Securities. Your line is now open.

Lorraine Hutchinson: Thank you good afternoon.

Jesse Timmermans: This largely explains the decrease in other income year over year in the first quarter. Our tax rate was 27% in the first quarter, up slightly from 26% in the prior year. Net income increased to $11 million, or $0.16 per diluted share, up from $0.15 per diluted share in the first quarter of 2024. The insurance recovery in the prior year was equivalent to approximately $0.03 per diluted share.

Lorraine Hutchinson: I was wondering for the 78% of inventory purchases from third party brands. What are you hearing from them on price increase is that a strategy. They intend to take and how do you balance that with the customer kind of looking for better value in a tighter spending environment.

I think it's one that you can't look at in isolation.

Not necessarily one percentage of price increase that would impact the consumers' behavior, you really have to factor in.

Else Thats going on out there, how she's feeling consumer sentiment et cetera, and very case by case product by product price point by price point.

Lorraine Hutchinson: Yeah, Yeah, we are partnering very closely with those third party brands and we are seeing some price increases again vary product by product brand by brand.

Alright. Our next question comes from Lorraine Hutchinson with Bofa Securities. Your line is now open.

Jesse Timmermans: Adjusted EBITDA was $19 million, an impressive increase of 45% year-over-year.

Thank you and good afternoon.

Lorraine Hutchinson: And also keeping in mind.

Jesse Timmermans: Moving on to the balance sheet and cash flow statement. We delivered strong cash flows in the first quarter. Net cash provided by operating activities and free cash flow were $45 million and $43 million respectively. An increase of 18% and 17% year-over-year that further strengthened our balance. As you think about modeling cash flow for the balance of the year, we expect the build out of our permanent store in Los Angeles to add $8 to $9 million to our CapEx in 2025, as we customize our space at The Grove ahead of the opening of this experiential retail destination later this year.

I was wondering for the 78% of inventory purchases from third party brands. What are you hearing from them on price increase is that a strategy. They intend to take and how do you balance that with the customer kind of looking for better value in a tighter spending environment.

Lorraine Hutchinson: <unk> comparable across different destinations across different products.

Lorraine Hutchinson: But we are seeing some of that.

Lorraine Hutchinson: And then.

Last year's second part of that question.

Lorraine Hutchinson: And then any customer pushback or feedback from that.

Lorraine Hutchinson: Yes, nothing yet it's still very early though and this this is all just rolling in.

Yes, yes, we are partnering very closely with those third party brands and we are seeing some price increases again vary product by product brand by brand.

As we speak over the last few weeks.

Lorraine Hutchinson: Thank you.

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

And also keeping in mind prices comparable across different destinations across different products.

Jesse Timmermans: Improved inventory dynamics were a key driver of our strong cash flow generation. Inventory at March 31st, 2025 was $214 million, a decrease of $16 million or 7% compared to year-end 2024. Inventory increased 6% year-over-year, which was outpaced by our 10% net sales growth for the first quarter. Importantly, the net sales growth to inventory growth differential was positive on both the Revolve and Forward segments. As of March 31st, 2025, cash and cash equivalents were $301 million, surpassing $300 million for the first Our balance of cash and cash equivalents increased by $44 million or 17% in just three months compared to year-end 2024, and we continue to have no debt.

Lorraine Hutchinson: Thanks.

But we are seeing some of that.

Dylan Carden: I get that the dollars decrease that is your sales projections decrease, but keeping marketing spend that kind of 15% level can you sort of walk through your thinking there and then we've heard.

And then in last year's second part of that question.

And then any customer pushback or feedback from that.

Yes, nothing yet it's still very early though and this this is all just rolling in.

Dylan Carden: Albeit sort of early in the earnings season, some improvement in the efficiency of marketing or other brand sort of pulling back in marketing does that help you.

As we speak over the last few weeks.

Dylan Carden: Particularly if you're you had spoken last quarter about some AI.

Thank you.

Dylan Carden:

Your next question comes from Dylan Carden with William Blair. Your line is now open.

Dylan Carden: And sort of embedded in some of your engagement.

Dylan Carden: Marketing thanks.

Thanks.

Dylan Carden: Okay.

I get that the dollars decrease as your sales projections decrease, but keeping marketing spend that kind of 15% level can you sort of walk through your thinking there and then we've heard.

Dylan Carden: Yes.

Speaker Change: Yes, so I can jump in on the marketing side. So the market projections just based off the current the current trends that we're seeing and what we think is going to be the right zone for the business.

Albeit sort of early in the earning season some improvement in the efficiency of marketing or other brand sort of pulling back in marketing does that help you.

Jesse Timmermans: In the last five years, we have increased our net cash and cash equivalence balance fourfold, an increase of $227 million in five years net of borrowings, while returning more than $40 million to shareholders through our stock repurchase program.

Speaker Change: For the balance of the year in terms of the softness on the marketing side, you're right that historically, we've seen when theres any kind of economic weakness often brands pull back on marketing spend and that can open up marketing opportunities from what we've seen thus far we haven't seen anything major in that way.

Particularly if you're you had spoken last quarter about some AI.

Hum.

And sort of embedded in some of your engagement.

Jesse Timmermans: Now let's discuss our tariff exposure and mitigation strategies in more detail. First, our tariff exposure. We purchase the majority of our inventory from third-party brands under structures where we are not the importer of records. And so for these inventory purchases, we are not directly impacted by higher tariffs. More specifically, using 2024 as a benchmark, approximately 78% of our total inventory purchases of last year came from third-party brands where the products were imported into the U.S. by our brand partners. Again, in these instances, we do not pay the tariff. Now, that leaves approximately 22% of our 2024 inventory receipts where we were the direct importer of record and where we do pay the tariffs directly.

Thanks.

Okay.

Okay.

Speaker Change: And of course, Thats, where I think we're still early in.

Yes, I can jump in on the marketing side. So the market projections just based off the current.

Speaker Change: In the development of what happens with the tariffs and you can stay do they go away. So that's something that we could see more of but at this point, we haven't seen any major trends there as far as reduced marketing cpm's or marketing opportunities on that side.

The conference that we're seeing and what we think is going to be the right zone for the business.

For the balance of the year in terms of the softness on the marketing side, you're right that historically, we've seen when there is any kind of economic weakness.

Speaker Change: That said I think the team did an incredible job this quarter in terms of delivering marketing efficiencies with better tactics and strategies and then certainly continuing into Q2 with remarkable execution of of revolve festival by the team. So we feel good about our marketing playbook for the rest of the year, but at this point from an environment standpoint.

Often brands pull back on marketing spend and that can open up marketing opportunities from what we've seen thus far we haven't seen anything major in that way.

And of course, Thats, where I think we're still early.

In the development of what happens with the tariffs and duties stay do they go away. So that's something that we could see more of but at this point, we haven't seen any major trends there as far as reduced marketing cpm's or marketing opportunities on that side.

Speaker Change: It's more similar to what we've seen.

Speaker Change: Yes.

Speaker Change: Thanks.

Speaker Change: Alright. Your next question comes from Michael Binetti with ISI. Your line is now open.

Jesse Timmermans: This bucket is composed of our own brand products and from a limited number of third party branded products where we are the importer of record. So, to summarize, we have no direct tariff exposure for around 78% of our inventory receipts. Whereas we do have direct tariff exposure for around 22% of our inventory.

That said I think the team did an incredible job this quarter in terms of delivering marketing efficiencies with better tactics strategies and then certainly we saw continuing into Q2 with remarkable execution of revolve festival for the team. So we feel good about our marketing playbook for the rest of the year, but at this point from an environment standpoint.

Michael Binetti: Hey, guys. Thanks for taking my question.

Michael Binetti: Just a couple maybe on the model so nice to see the improvement on product return percentages again, there does that does that start to slow in our models as we look out over the next few quarters as you start to lap some of the real big improvement a year ago or do you have some incrementals that you could tell us about that will keep driving it lower year over year.

Jesse Timmermans: Now, given the very high tariff rate currently in place on China imports, let's talk about our China sourcing exposure. As mentioned, based on our 2024 data, approximately 22% of our inventory receipts have direct tariff exposure. Within that 22%, approximately 72% related to products we directly imported from China. Taking it one level deeper, the vast majority of our own brand products were imported from China and a much lower, but still significant portion of third party products that we imported directly originated from China. Said differently, and to summarize, approximately 16% of our total inventory purchases in 2024 were directly imported from China.

It's more similar to what we see.

Michael Binetti: And then on.

Yes.

Michael Binetti: I'm curious, if you're seeing any hesitation or similar shift your accessible price points outside the U S. As well and then one last one on the.

Thanks.

Alright. Your next question comes from Michael Binetti with ISI. Your line is now open.

Michael Binetti: Model I'm curious on the selling and distribution in Q2, I think it's quite a bit higher than the rate you were talking about for the year or is there any is there anything unique in <unk>.

Hey, guys. Thanks for taking my question.

Maybe on the model so nice to see the improvement on product return percentages again, there does that do.

Does that start to slow in our models as we look out over the next few quarters as you start to lap some of the real big improvements a year ago or do you have some incrementals that you could tell us about that will keep driving it lower year over year.

Speaker Change: Oh go ahead sorry.

Michael Binetti: Alright.

I can start with talking about the return rate side of things. So we do have a number of things still in the pipeline that we hope can deliver improvements on the return rate side.

And then on.

I'm curious, if you're seeing any hesitation or similar shift your accessible price points outside the U S. As well and then one last one on the.

Michael Binetti: But as is the case with any R&D type initiatives or things that are unproven for modeling and forecasting purposes internally, we're not baking any impact of those efforts in and so we would expect from a modeling perspective internally and externally.

Jesse Timmermans: For the 78% of inventory that was not directly imported by us, the percentage of products that have a China origin is much lower.

Model I'm curious on the selling and distribution in Q2, I think it's quite a bit higher than the rate you were talking about for the year or is there any is there anything unique in <unk>.

Jesse Timmermans: Now let's talk about our mitigation strategy. Our focus is on the products that we directly import, primarily within our own brands, and to a lesser extent, in the limited number of instances where we are the importer of record for third-party branded products. The biggest area of mitigation opportunity is in own brands, given the very high concentration of products imported from China. We are actively engaged in cost sharing discussions with our own brand manufacturing partners. And while there is a longer lead time, we are also working to diversify our manufacturing sources outside of China. Other mitigation measures that we expect will help us to offset some of the increased costs due to tariffs include Optimizing our product import logistics, selectively increasing prices for our products, and further optimization of our supply chain.

Michael Binetti: The return rates.

Oh go ahead sorry.

Michael Binetti: Improvements year over year should moderate as the year goes on because obviously, we started delivering a lot of that in the back half of the year.

Alright.

I can start with talking about the return rate side of things. So we do have a number of things still in the pipeline that we feel can deliver improvements on the return rate side, but as is the case with any R&D type initiatives or things that are unproven for modeling and forecasting purposes internally we're not.

Michael Binetti: Okay.

Michael Binetti: Yes, and maybe the double click on that link to your I think if you rewind to last quarter, where we said.

Michael Binetti: We had factored in a flat return rate year over year not to take away from our optimism given the significant reduction we had in Q1, we're now modeling and a slight decrease for the full year given our performance in Q1.

Baking any impact of those efforts in and so we would expect from a modeling perspective.

Michael Binetti: And then on the hesitation outside of the U S nothing significant to call out there on.

Internally and externally.

Speaker Change: The return rates should.

Michael Binetti: On a geo basis, we mentioned some pullback from Canadian customers, that's not necessarily price point, but just complete pullback.

Speaker Change: Improvements year over year should moderate as the year goes on because obviously, we started delivering a lot of that in the back half of the year.

Speaker Change: Okay.

Speaker Change: Yes, and maybe to double click on that link to you I think if you rewind to last quarter, where we said we would.

Jesse Timmermans: We are also working hard to mitigate the tariff impact for the limited instances where we are the importer of record for third-party branded products, primarily by partnering with our third-party brands to reduce the direct tariff impact and, to a lesser extent, selective price increases in partnership with our brand partners.

Michael Binetti: And then selling and distribution in Q2 that is generally higher that's what we see.

Speaker Change: Factored in a flat return rate year over year not to take away from our optimism given the significant reduction we had in Q1, we're now modeling and a slight decrease for the full year given our performance in Q1.

Michael Binetti: A higher return rate et cetera, so it typically in Q2 and seasonally higher than other quarters.

Michael Binetti: Okay.

Speaker Change: Alright. Our next question comes from Nathan <unk> with Morgan Stanley. Please go ahead.

Speaker Change:

Jesse Timmermans: Now, for the approximately 78% of products that are not directly imported by us. We have a brand roster of over 1,000 brands that source from dozens of countries all over the world, which provides us with optionality and flexibility in sourcing and product assortment. We are actively working with these brand partners to manage through what is hopefully a transitory period of economic and supply chain disruption. Our confidence and our ability to navigate the pressure that Mike alluded to is supported by our tracker.

Speaker Change: And then on the hesitation outside of the U S nothing significant to call out there.

Speaker Change: Hey, everyone. Thanks for taking the question I'm, just a little bit more on the April trends.

Speaker Change: On a geo basis.

Speaker Change: We mentioned some pullback from Canadian customers, that's not necessarily price point, but just complete pullback.

Stan.

Speaker Change: How youre thinking about what's driving that T cell in any way to kind of frame that micro versus macro in that and then on the gross margin guidance reduction is that fully or almost fully achievable harassers any other factors to call out there. Thank you.

Speaker Change: And in selling and distribution in Q2 that is generally higher.

Speaker Change: When we see.

Speaker Change: You know a higher return rate et cetera, so it typically in Q2 and seasonally higher than other quarters.

Speaker Change: Yeah on the April trend I think we we attribute this mostly to macro.

Nathan <unk>: Alright. Our next question comes from Nathan <unk> with Morgan Stanley. Please go ahead.

Jesse Timmermans: We successfully navigated through the global financial crisis, the first wave of Trump tariffs in 2018 and 2019, and the COVID-19 pandemic, in all cases coming out stronger. We are on even stronger footing today than we were during these previous cycles, and we continue to have the financial discipline, balance sheet strength, and long-term focus to support investing through this current cycle.

Speaker Change: The team has been performing exceptionally well, we're driving a lot of significant gains.

Nathan <unk>: Hey, everyone. Thanks for taking the question I'm, just a little bit more on the April trends.

Speaker Change: Conversion gains et cetera.

Speaker Change: Everything we can control is going well, it's just this macro uncertainty and overhang.

Nathan <unk>: Understand.

Nathan <unk>: How youre thinking about what's driving that T cell in any way to kind of frame that micro versus macro in that and then on the gross margin guidance reduction is that fully or almost fully achievable harassers any other factors to call out there. Thank you.

Speaker Change: And then your second part of the question gross margin fully attributable to tariffs.

Speaker Change: Yes, I think if you if you take tariffs out of the equation, we would probably guide slightly lower for gross margin on the full year just slightly.

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 2025. Starting from the top, our net sales in the month of April increased by a mid-single-digit percentage year-over-year, with international growth outpacing the US. For modeling purposes for the balance of 2025, given the challenging backdrop with U.S. consumer confidence declining every month in 2025 to a five-year low and U.S. consumer sentiment having declined 30 percent year-to-date, it is clear that the consumer is feeling increasingly uncertain about the future.

Nathan <unk>: Yeah on the April trend I think we attribute this mostly to macro.

Speaker Change: Just given what we saw in Q1 in that shift.

Nathan <unk>: The team has been performing exceptionally well, we're driving a lot of significant gains.

Speaker Change: The more accessible price points marked down et cetera.

Speaker Change: Completely take tariffs out of the equation.

Nathan <unk>: Conversion gains et cetera.

Nathan <unk>: I think everything we can control is going well, it's just this macro uncertainty and overhang.

Speaker Change: Because tariffs did have an impact on consumer sentiment. So it's hard to peel those apart, but but we did see a shift.

Nathan <unk>: And then your second part of the question gross margin fully attributable to tariffs.

Speaker Change: From full price and then and then deeper markdowns within that markdown bucket.

Nathan <unk>: Yes, I think if you if you take tariffs out of the equation, we would probably guide slightly lower for gross margin on a full year just slightly just given what we saw in Q1 in that shift.

Speaker Change: Okay helpful. Thank you.

Trevor Young: Your next question comes from Trevor Young with Barclays. Please go ahead.

Jesse Timmermans: While we do not give revenue guidance, the increasingly uncertain backdrop has led us to moderate our internal revenue growth expectations for the full year, and as a result, we are taking a measured approach to planning our inventory buys for the balance of 2025.

Trevor Young: Great. Thanks, first just back to the April trends could you clarify just how much of a differential there was between U S and international growth I think you said international was a little bit better.

Nathan <unk>: To the more accessible price points, mark down et cetera.

Nathan <unk>: Can't completely take tariffs out of the equation.

Nathan <unk>: Tariff did have an impact on consumer sentiment so it's hard to Peel those apart.

Trevor Young: On the comment around the Canada weakness in particular, and <unk> has that subsided and <unk> or has that persisted.

Jesse Timmermans: Now, before we get into guidance, let me caveat that our outlook is based on the current status of tariffs as of today, May 6, 2025, and our estimate of the impact of potential mitigating activities that are currently underway. Our outlook for growth margin is especially susceptible to variability, given the uncertainty surrounding the timing and level of tariffs that will ultimately be in effect, as well as the timing and magnitude of the potential impact resulting from our mitigation efforts. With that, let's discuss our updated guidance for gross margin, which includes our best estimate for the impact of tariffs, net of our mitigation efforts.

Nathan <unk>: But we did see a shift.

Nathan <unk>: From full price and then and then deeper markdowns within that markdown bucket.

Trevor Young: Yeah on a month to month basis, we don't get into.

Nathan <unk>: Okay helpful. Thank you.

Trevor Young: Excruciating detail there just because it is only amount other than to say that international did outpace the U S. So not much more to say there.

Nathan <unk>: Your next question comes from Trevor Young with Barclays. Please go ahead.

Trevor Young: Great. Thanks, first just back to the April trends could you clarify just how much of a differential there was between U S and international growth I think you said international was a little bit better.

Trevor Young: Yes, and then with regards to Canada, we are continuing to see it.

Trevor Young: Impacting the Canadian markets do too.

Trevor Young: And on the comment around the Canada weakness in particular, and <unk> has that subsided and <unk> or has that persisted.

Trevor Young: The sentiment shift and in Canada, and we saw a pretty sharp turn in that market.

Trevor Young: A lot of the tariff policy and other policies Canadian subjected to started rolling out.

Jesse Timmermans: We expect gross margin in the second quarter of 2025 of between 52 and 53%, which assumes some tariff impact later in the second quarter. By comparison, we expect the magnitude of tariff impacts to increase in the third quarter and particularly in the fourth quarter of 2025. As a result, for the full year 2025, we now expect a growth margin of between 50 and 52 percent. For additional context, the high end of the guidance range reflects a minimal tariff impact with the assumption that we are able to mitigate the vast majority of the impact and or tariffs are reduced to a much lower level relative to where we stand today.

Trevor Young: Yeah on a month to month basis, we don't get into.

Trevor Young: Okay.

Trevor Young: Excruciating detail there just because it is only amount other than to say that international did outpace the U S. So not much more to say there.

Trevor Young: Okay, Great and then second question just on the 78% of inventory imported by partners.

Trevor Young: I think the comment was that that's a lower ratio than the 72% of where your the importer of record coming from China, but could you give more specific and so like how much lower that China mix is and is that kind of the north start where you envision your mix of what you import going to over time, just trying to understand.

Trevor Young: And then with regards to Canada, we are continuing to see.

Trevor Young: Any impact in the Canadian markets do too.

Trevor Young: The sentiment shift in Canada, and we saw a pretty sharp turn in that market.

Trevor Young: How much lower does and where you are Mexico over time.

Trevor Young: A lot of the tariff policy and other policies cadence objected to started rolling out.

Trevor Young: Yeah, not any anymore detail there really other than to say, it's meaningfully lower than that 72% and keep in mind and maybe this will help you triangulate around it that that 72%, which is of that 'twenty two that is direct.

Trevor Young: Okay.

Trevor Young: Okay, Great and then second question just on the 78% of inventory imported by partners.

Jesse Timmermans: The low end of the guidance range assumes elevated tariff rates and our best estimate of the impact of our mitigation efforts.

Trevor Young: I think the comment was that that's a lower ratio than the 72% of where you are the importer of record coming from China, but could you get more specific than sort of like how much lower that China mixes and is that kind of the north star where you envision your mix of what you EMCORE going to over time, just trying to understand how much lower does and where your mix could go over time.

Jesse Timmermans: Again, our guidance reflects our best estimate at this point in what is a very dynamic situation with a number of variables at play, all of which are very uncertain.

Trevor Young: The vast pellet faster significant majority on owned brands is sourced from China, and then a much lower percentage on the third party side of those direct those direct imports. So you can get hopefully Olympic closer using those.

Jesse Timmermans: Fulfillment. We expect fulfillment as a percentage of net sales of approximately 3.1% for the second quarter of 2025, and between 3 and 3.2% of net sales for the full year 2025. Unchanged from our previous guidance.

Trevor Young: Okay, great. Thanks.

Trevor Young: Yeah, not any anymore detail there really other than to say, it's meaningfully lower than that 72% and keep in mind and maybe this will help you triangulate around it that that 72%, which is of that 'twenty two that is direct.

Trevor Young: And then in terms of the long term North star.

Trevor Young: It really depends on how the environment unfolds certainly we expect later this year or two.

Jesse Timmermans: Selling and Distribution. We expect selling and distribution costs as a percentage of net sales of approximately 17.9% for the second quarter of 2025, and we now expect a range of 17.2 to 17.5% for the full year 2025. The slight increase from our prior range primarily reflects our expectation for lower average order values in the coming months, given the current macro environment. For context, lower average order values are a headwind to logistics efficiency because a lower AOV means that our shipping costs comprise a larger percentage of the revenue we generate on a per order basis.

Trevor Young: Have some meaningful reduction in.

Trevor Young: China exposure with regards to owned brand in a much bigger impact in 2026, and then it depends on the tariff situation in <unk>.

Trevor Young: Vast pellet faster significant majority on owned brands is sourced from China, and then a much lower percentage on the third party side of those direct those direct imports you can get hopefully Olympic closer using those.

Other.

Trevor Young: On a macro issues going forward, but there is certainly a world where China could be very little of our production, but at this point, it's too early to say it depends on a lot of policy factors and other things that have yet to unfold.

Trevor Young: Okay, great. Thanks.

Trevor Young: And then in terms of the long term North star.

Trevor Young: It really depends on how the environment unfolds certainly we expect later this year or two.

Speaker Change: Your next question comes from Matt Koranda with Roth Capital. Your line is now open.

Trevor Young: We have some meaningful reduction in.

Matt Koranda: Hey, guys. Thanks.

Jesse Timmermans: Marketing. We expect our marketing investment in the second quarter of 2025 to be approximately 15% of net sales, a slight decrease year-over-year for the full year 2020. We expect our marketing investment to represent between 14.9% and 15.1% of net sales, unchanged from our prior guidance. General and Administrative, we expect G&A expense of approximately $39 million in the second quarter of 2025 and between $154 and $157 million for the full year 2025, a slight decrease from our prior full year guidance range. And lastly, due to some discrete items affecting our tax rate this year, we now expect our effective tax rate to be approximately 27 to 28 percent for the full year 2025, with the highest quarterly tax rate expected in the third quarter of 2025.

Matt Koranda: You're just spending back to consumer health and the message here I guess could you touch on more directly sort of how the uncertainty and the lower confidence shows up in your customer behavior. Most prominently it sounds mostly like lower <unk>. It sounds like at least in the past we have a precursor of kind of a higher return.

Trevor Young: China exposure with regards to owned brand.

Trevor Young: A much bigger impact in 2026, and then it depends on the tariff situation.

Trevor Young: Other.

Trevor Young: On a macro issues going forward. After there is suddenly a world where China could be very little of our production, but at this point, it's too early to say it depends on a lot of policy factors and other things would have yet to unfold.

Matt Koranda: Rates a couple of years ago.

Speaker Change: Your next question comes from Matt Koranda with Roth Capital. Your line is now open.

Matt Koranda: What else are you seeing in terms of the change in behavior or are there more percentage of transactions financed via a buy now pay later.

Matt Koranda: Hey, guys. Thanks.

Matt Koranda: What are the other sort of metrics, we should be looking for.

Speaker Change: You're just spending back to consumer health in.

Matt Koranda: Yes, those are all the main metrics that we've seen thus far we closely track the consumer sentiment and consumer confidence because we know that historically that can often have an impact on our consumers purchasing behavior and very central to the revolve brand as consumers feeling good and feeling great and moving their best life and so certainly.

Speaker Change: The message here I guess could you touch on more directly sort of how the uncertainty and the lower confidence shows up in your customer behavior. Most prominently it sounds mostly like lower ltvs. It sounds like at least in the past we have a precursor of kind of higher return rates.

Jesse Timmermans: In 2026, we expect our effective tax rate to return to our previous guidance range of between 24% and 26%.

Speaker Change: When disruption or macro weakness first hits that can often affects our consumers purchase behavior and then we saw a fairly meaningful shift in price points as Jesse mentioned around the same time. So you know as you know.

Speaker Change: A couple of years ago.

Speaker Change: What else are you seeing in terms of change in behavior or are there more percentage of transactions financed via a buy now pay later what are the other sort of metrics, we should be looking for.

Jesse Timmermans: To recap, we delivered strong Q1 results in an environment that has become increasingly challenging. With our strong performance over the last few quarters and our very healthy balance sheet, we are entering into this time of turbulence on solid footing. We believe we are well-positioned to navigate through the current tariff uncertainty and other macro challenges ahead, considering our financial strength that is supported by a premium price point and healthy gross margin, operating discipline and agility, our technology and data-driven DNA, our powerful brands, and our connection with the next generation consumers.

Matt Koranda: Along with.

Matt Koranda: A modest T cell and the growth rates that we were tracking so to <unk> point, it seems pretty clear to us that the macro factors are at play in.

Speaker Change: Those are all the main metrics that we've seen thus far we closely track the consumer sentiment and consumer confidence because we know that historically that can often have an impact on our consumers purchasing behavior and very central to the revolve brand.

Matt Koranda: Macro stuff almost works itself out over the long run, we actually feel great about the underlying trends and momentum.

Matt Koranda: Had through the past couple of quarters and through Q1.

Speaker Change: Consumer is feeling good and feeling great and living their best life and so certainly.

Matt Koranda: And also we feel great about our mitigation efforts.

Speaker Change: When disruption or macro weakness first hits that can often affect our consumers purchase behavior and then we saw a fairly meaningful shift.

Matt Koranda: Our supply chain will look like over the long term. So in the short term, there's a bit of impact, but we think all the factors for success are in place.

Operator: Now we'll open it up for your questions.

Jesse: Price points as Jesse mentioned around the same time, so you know as well.

Matt Koranda: We'll have to see how things play out over the couple of next couple of quarters, given the macro environment, particularly if it weakens, but we think we're well positioned.

Speaker Change: Along with.

Operator: 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.

Speaker Change: A modest T cell.

Speaker Change: The growth rates that we were tracking to jesse's point, it seems pretty clear to us that the <unk>.

Matt Koranda: Yeah.

Matt Koranda: Any willingness to just talk about sort of the <unk>.

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Mark Altschwager: Your first question comes from the line of Mark Altschwager with Baird. Your line is now open. Good afternoon. Thank you for taking my question. I appreciate all the detail here.

Speaker Change: Macro stuff always works itself out over the long run we actually feel great about the underlying trends and momentum that we have.

Return rate that you saw quarter to date has it changed materially since the first quarter.

Speaker Change: Through the past couple of quarters and through Q1.

Matt Koranda: And just maybe puts and takes around what's driving the net sales mid single digit growth rate that you highlighted.

Speaker Change: And also we feel great about our mitigation efforts in our supply chain will look like over the long term. So in the short term, there's a bit of impact, but we think all the factors for success are in place.

Jesse Timmermans: Jesse, maybe if we could drill a little bit more into some of the tariff math and assumptions as we try to unpack that. So, if I understand correctly, the low end of your gross margin guidance assumes the tariff costs with little mitigation. Is that right? And then, I guess if I look at the gross margin guidance reduction, 240 basis points at the low end, on consensus revenue this year, that's about $30 million of gross profit dollars. Is that a rough approximation of the gross costs you're thinking about for the back half of the year?

Matt Koranda: Yeah. So with regards to the return rate were not seen a meaningful shift in the return rate at this point of course as you know returns can be a lag theater, but in the data we have thus far if there aren't any signs of.

Speaker Change: We'll work to see how things play out over the couple of next couple of quarters, given the macro environment, particularly if it weakens, but we think we're well positioned.

Matt Koranda: The consumer sentiment impacted return rate just yet as you mentioned it could be something that happens in the future.

Speaker Change: Any willingness to just talk about sort of the return rate that you saw quarter to date has it changed materially from since the first quarter.

Matt Koranda: And again, we saw.

Matt Koranda: A modest DSL from Q1, and you're always going to have some variance up and down month by month also but certainly combined again with the price point shift.

Speaker Change: Just maybe puts and takes around what's driving the net sales mid single digit growth rate that you highlighted.

Matt Koranda: And the sentiment indicators it was pretty telling to us that there were some.

Speaker Change: Okay.

Speaker Change: Yes, so with regards to the return rate were not seen a meaningful shift in the return rate at this point of course as you know returns can be a lag, but and the data we have thus far if there aren't any signs of that.

Matt Koranda: Macro sentiment shift I will say as we exited April we start to saw some of those indicators reverse a bit but.

Mark Altschwager: Maybe let's just start there, and then I have a follow-up.

Matt Koranda: Again, it's a very volatile environment and so.

Jesse Timmermans: I need to clarify on the learning of guidance. This assumes, I think you got the first part right, it assumes the elevated tariff rates that are in place today and our best estimate of our mitigation efforts. So I think that's the key difference from what you said where it's not minimal. And then, yeah, you can do the math on the gross margin impact, given the guidance that we gave, but it is a meaningful impact on a dollar bill.

Speaker Change: Consumer sentiment impacted return rate just yet as you mentioned it could be something that happens in the future.

Matt Koranda: At this point, we certainly wouldn't count on.

Matt Koranda: But the direction of consumer sentiment being reversed or permanently reversed.

Speaker Change: And again, we saw.

Matt Koranda: Yeah.

Speaker Change: A modest DSL from Q1, and you're always going to have some variance up and down month by month also but certainly combined again with the price point shift.

Rick Patel: Alright. Your next question comes from Rick Patel with Raymond James Your line is now open.

Rick Patel: Thanks, Good afternoon.

Speaker Change: It was.

Speaker Change: Sentiment indicators, it was pretty telling to us that there was some.

Speaker Change: Can you talk about the outlook for own brands I think typically during uncertain times. The company has pulled back here and lean more into national brands, but youre pushing ahead with accelerating on brands. This year. So just curious what gives you the confidence in doing so this time around and whether we should expect owned brands to continue outperforming the rest of this year.

Speaker Change: Macro sentiment shift I will say as we exited April we'd start to saw some of those indicators reverse a bit but.

Jesse Timmermans: And how quickly could you theoretically pivot to a higher percent of the third party sourced inventory? Or as another way, maybe help us better understand the inventory commitments or flexibility you have on the owned brand front Yeah, we can flex pretty quickly. I wouldn't say it's necessarily a shift from own brand to third party. We're still very optimistic on the own brand expansion, especially this quarter and see great opportunity there in the future, especially given the premium margin that own brand carries. Now, if you think about diversification of own brand sourcing out of China, that is a longer lead time.

Speaker Change: Again, it's a very volatile environment and so.

Speaker Change: At this point, we certainly wouldn't count on.

Speaker Change: But the direction of consumer sentiment being reversed or permanently reversed.

Speaker Change: The team had been doing there's been many many years of investment improvement and it's really really showing from topline legend, we shared today as well as all of our internal metrics.

Rick Patel: Alright. Your next question comes from Rick Patel with Raymond James Your line is now open.

Rick Patel: Thanks, Good afternoon.

Speaker Change: We think a very great toward meeting so the team is strong we're performing well and will continue to invest because we see it as.

Rick Patel: Can you talk about the outlook for own brands I think typically during uncertain times. The company has pulled back here and lean more into national brands, but youre pushing ahead with accelerating owned brands. This year. So just curious what gives you the confidence in doing so this time around and whether we should expect owned brands to continue outperforming the rest of this year.

Speaker Change: An exciting part of the business Buckler brand building in a budget perspective.

Speaker Change: And then secondly, I think the guidance for G&A expense for the year was only cut by about $1 million. If demand does soften further and what kind of flex do you have in the business can become sharper with spending as we think about the ability to protect margins.

Jesse Timmermans: We can make some progress this year, but it's more of a 2026 story there.

Mark Altschwager: Thank you.

Jesse Timmermans: And then just finally, on the demand backdrop, are you seeing the tariff news and weaker sentiment affecting customer traffic and conversion trends at this point? Or maybe what gives you the confidence you can sustain growth, especially in the US as we look at the steeper comparisons in the coming quarters here? Thank you. Yeah, yeah, I think, you know, based on what we said in the prepared remarks, what we're seeing now is just that shift to more accessible price points. So that's impacting AOV. It's certainly having an impact on consumer confidence.

Rick Patel: The team has been doing there has been many many years of investment improvement and it's really showing from topline legend, we shared today as well as all of our internal metrics.

Speaker Change: We certainly have the ability to make further G&A reductions, but that it would not be the plan at all we're all about positioning the business for long term success versus delivering short term results.

Rick Patel: I think a very great toward meeting so the team is strong we're performing well and will continue to invest because we see it as an.

Rick Patel: An exciting part of the business book or brand building and a bunch of billing perspective.

Speaker Change: From a profit maximization standpoint so.

Rick Patel: And then secondly, I think the guidance for G&A expense for the year was only cut by about $1 million. If demand does soften further and what kind of flex do you have in the business could become sharper with spending as we think about the ability to protect margins.

Speaker Change: Again, we think we have great underlying trends, we want to continue to build for the long term and we think we're really well positioned to navigate the period, both with the initiatives that we have.

Katie: And, and that's where we are moderating our expectations as we as we look ahead through the balance of this year given, or, you know, assuming that the current state of play is All right, your next question comes from the line of Oliver Chen with TD Cowen. Your line is now open. Hi there, thank you for taking our question.

Speaker Change: A lot of what we're doing on the litigation side.

Speaker Change: As well as our really strong cash balance of $300 million. So we certainly don't want to do anything short sighted and cut expenses on things that could be long term opportunities.

Rick Patel: We certainly have the ability to make further G&A reductions, but that it would not be the plan at all we're all about positioning the business for long term success for us as delivering short term results.

Speaker Change: Yes.

Speaker Change: Yes.

Speaker Change: Alright. Our next question comes from Janine Stichter with BTG. Please go ahead.

Rick Patel: From a profit maximization standpoint so.

Speaker Change: Hi, Thanks for taking my questions just a couple from neon and inventory that you see the favorable inventory they'll spread there I was wondering if you could comment on the inventory composition at both brands I think last quarter, you had talked about being a little bit more weighted in the markdowns.

Rick Patel: Again, we think we have great underlying trends, we want to continue to build for the long term and we think we're really well positioned to navigate the period, both with the initiatives that we have.

Katie: This is Katie on for Oliver. I'd like to kind of go back to the on-brand strategy and just kind of learn more about how you're thinking about launches for on-brands and sort of that product development specifically around the second half. Are you delaying any innovation there to shift to third party? And then I'll have one follow-up after that. Yeah, we've definitely taken to have some to account and there's been some, you know, pushback in some places and some don't. We also have very, very, very exciting things launching. So there's been adjustments, but you know, we have to be nimble in this environment and we think we have some awesome products our customers will love coming very, very soon.

Rick Patel: But if it were done on the communications side.

Rick Patel: As well as our really strong cash balance of 300 million. So we certainly don't want to do anything short sighted.

Speaker Change: Just wondering if theres plenty pocket that Seth anywhere and then maybe just a bit more color on how much you are cutting back inventory for the back half and then how much flexibility you have in the model, if we do need to reaccelerate and enjoy that.

Rick Patel: Cut expenses on things that could be long term opportunities.

Rick Patel: Yeah.

Rick Patel: Sure.

Speaker Change: Great. Our next question comes from Janine Stichter with BTG. Please go ahead.

Speaker Change: Thank you.

Speaker Change: Yes on the first one I think we called it out in the prepared remarks, too, but very encouraging was that inventory to sales growth differential is positive on both forward and revolve. So we saw great progress on the revolve segment versus the progress that we saw on forward over the last couple of quarters. So we feel good about the inventory composition today on both.

Janine Stichter: Hi, Thanks for taking my questions. Just a couple from me on an inventory and I guess as a favorable inventory they'll spread there I was wondering if you could comment on the inventory composition at both brands I think last quarter, you had talked about seeing a little bit more weighted in the markdowns or Rob just wondering if theres Tony pocket that Seth anywhere and then maybe just a bit more color on.

Katie: Excited to share with you.

Jesse Timmermans: Okay, and then as a follow up to the selling and distribution expense line item, could you just talk a little bit more about really the savings there and, you know, just thinking about what we can leverage to have any incremental savings this year? Thank you. Yeah, yeah, we did guide up slightly for the second quarter based on what we're seeing in average order values, which increases that selling and distribution as a percentage of net sales. Now, that's not to take away from everything that the team has been doing, they've been doing a phenomenal job in making that line item especially more efficient.

Speaker Change: Segment.

And the full price markdown ratio is.

Janine Stichter: How much you are cutting back inventory for the back half and then how much flexibility you have in the model, if we do need to reaccelerate and enjoy that.

Speaker Change: In a zone that feels comfortable as well and then on inventory purchases, we're very flexible and we want to keep that in mind.

Janine Stichter: Thank you.

Janine Stichter: Yes on the first one I think we called it out in the prepared remarks, too, but very encouraging was that inventory to sales growth differential is positive on both forward and revolve. So we saw great progress on the revolve segment versus the progress that we saw on forward over the last couple of quarters. So we feel good about the inventory composition today on both.

Speaker Change: As we think about moderating our inventory buys but also staying flexible enough so that if and when demand does pick up if these tariffs are.

Speaker Change: Moderated call it that we can get back into the inventory and meet the demand.

Peter Mcgoldrick: Our next question comes from Peter Mcgoldrick with Stifel. Please go ahead.

Janine Stichter: Segments.

And the full price markdown ratio is.

Peter Mcgoldrick: Hey, Thanks for taking my question I wanted to understand your philosophy on investing in the near term opportunities drive share balanced against income statement performance you mentioned.

Jesse Timmermans: There's also a significant impact from a lower return rate on that line item. So that's, that's the largest driver of the decreases we've been seeing. And the team's been doing great work there.

Janine Stichter: In a zone that feels comfortable as well and then on inventory purchases, we're very flexible and we want to keep that in mind.

Janine Stichter: If you think about moderating our inventory buys but also staying flexible enough so that if and when demand does pick up if these tariffs are.

Anna Andreeva: But we do we do anticipate some pressure from that lower average order value that we've been seeing for the last All right, your next question comes from the line of Anna Andreeva with Piper Sandler. Your line is now open. Great. Good afternoon and thank you for taking our question. And Jesse, thank you for all the color on tariffs. Very helpful. We wanted to ask, you mentioned higher markdowns in 1Q and also the shift to more accessible price points as of late. Are you guys planning to pull the promotional lever more to stimulate demand? Are you starting to see the industry get incrementally more promotional so far in the second quarter?

Peter Mcgoldrick: Investing while peers are pulling back can you help us think about these dynamics.

Janine Stichter: Moderated to call. It that we can get back into your inventory and meet the demand.

Peter Mcgoldrick: Yes, 100%, yes, I think there's a couple.

Peter Mcgoldrick: Really important examples why don't we talk about own brand right. We think we do have the ability to control that inventory well, yes, theres going to be increased challenges with them with the tariff situation, but it's really checking and working well and it's a huge area of opportunity for us from a margin standpoint, as well as a growth in customer experience standpoint, So we're going to continue to invest in that.

Speaker Change: Our next question comes from Peter Mcgoldrick with Stifel. Please go ahead.

Peter Mcgoldrick: Hey, Thanks for taking my question.

Peter Mcgoldrick: I wanted to understand your philosophy on investing in the near term opportunities.

Peter Mcgoldrick: <unk> share balanced against income statement performance you mentioned in <unk>.

Peter Mcgoldrick: AI technology and technology in general we've gotten huge gains from that in the preceding quarters Thats going to continue to be an area of active investment for US and then of course was continuing to invest every aspect of the experience for the customer continued to invest in optimizing logistics efficiencies and return efficiencies and things of that nature, you are continuing to see that.

Peter Mcgoldrick: Investing while peers are pulling back can you help us think about these dynamics.

Peter Mcgoldrick: 100%, Yes, I think this is a key.

Jesse Timmermans: And just curious, there's been some anecdotal evidence of demand pull forward ahead of tariffs, at least in some categories out there. Do you expect to still see that here in early 2Q? Yeah, maybe on the markdown strategy first, you know, as we mentioned, we are seeing customers shift to more accessible price points, whether that means shifting out of full price into markdown, or, you know, higher markdowns within that markdown component. But we're not necessarily shifting our markdown strategy in response to that we typically, you know, based on our algorithms, we do what's right for the inventory balance for the customer for the for the P&L.

Peter Mcgoldrick: Couple.

Peter Mcgoldrick: Really important examples one of them we talked about on brand right. We think we do have the ability to control that inventory well, yes, there is going to be increased challenges with them with the tariff situation, but it's really checking and working well and it's a huge area of opportunity for us from a margin standpoint, as well as the growth in customer experience standpoint, So we're going to continue to invest in that.

Peter Mcgoldrick: Those items flow through to the balance sheet and the income statement in the current quarter. So.

Peter Mcgoldrick: Again, we think we have a lot of things that are working a lot of investments that are going well and we're always going to judge an investment on the basis of does the ROI on this investment look good rather than how does this investment affect the P&L statement for this current quarter.

Peter Mcgoldrick: AI technology and technology in general we've gotten huge gains from that in the preceding quarters Thats going to continue to be an area of active investment for US and then of course, there is continuing to invest every aspect of the experience with the customer continuing to invest in optimizing logistics efficiencies and return efficiencies and things of that nature youre continuing to see that.

Speaker Change: Okay, and then I was curious on the active customer base is keeps expanding sequentially can you talk about newly acquired customers. Obviously, you have international outperformance embedded in that but I'm curious, how you're meeting new customers and if there are any behavioral differences in these newer cohorts.

Jesse Timmermans: So no direct response to that or what anybody else is doing out there, we'll do what's right for the business on a whole.

Peter Mcgoldrick: Those items flow through to the balance sheet and the income statement in the current quarter. So.

Peter Mcgoldrick: Again, we think we have a lot of things that are working a lot of investments that are going well and we're always going to judge an investment on the basis of it.

Jesse Timmermans: Now on the pull forward, you know, based on our customers buy now wear now behavior, we didn't see any meaningful indication of a pull forward in our business.

Speaker Change: Yes, we continue to invest on the marketing side, where we're finding great opportunities obviously, both from a retention standpoint, but continuing to acquire large amounts of new customers and there is a huge untapped market and opportunity for us on the new customer side, obviously continuing to invest in all of our existing channels, but one thing we haven't talked about.

Peter Mcgoldrick: Does the ROI on this investment look good rather than how does this investment effects. The P&L statement for this current quarter.

Speaker Change: Okay, and then I was curious on the active customer base is keeps expanding sequentially can you talk about newly acquired customers. Obviously, you have international outperformance embedded in that but I'm curious how you are meeting new customers and if there are any behavioral differences in these newer cohorts.

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Speaker Change: So much on this earnings call, obviously with the tariff focus but is the exciting opportunity of the physical retail expansion and one of the really need stats on the physical retail side is that we find significant amounts of the purchases close to half our gross store Kane.

Speaker Change: Yes, we are continuing to invest on the marketing side, where we're finding great opportunities obviously, both from a retention standpoint, but continuing to acquire large amounts of new customers and there is a huge untapped market and opportunity for us on the new customer side, obviously, continuing to invest in all of our existing channels, but.

Speaker Change: Came from new customers.

Speaker Change: In essentially our hometown or home market of Los Angeles. So.

Jay Sole: Next question comes from the line of Jay Sole with UBS. Please go ahead. Great, thank you so much. I just want to ask, you mentioned, I think you said you're moderating your internal sales expectations. Can you just give us a little bit more color on that, like the magnitude of that? And does that include any impact from some of the tariff mitigation strategies? In other words, if you're assuming that you have to raise price, do you assume that there's sort of a, the last 50s are such that maybe there's a disproportionate negative impact on unit volumes?

Speaker Change: Because there is huge upside for us long term to continue to acquire those new customers.

Speaker Change: On top of that category expansion, continuing to invest and expand internationally. So we feel great about the trajectory.

Speaker Change: One thing we haven't talked about.

Speaker Change: So much on this earnings call, obviously with the tariff focus but is the exciting opportunity of the physical retail expansion and one of the really need stats on the physical retail side is that we find significant amounts of the purchases close to half of our growth story.

Speaker Change: Yeah.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: Sure.

Speaker Change: I apologize we have time for one more question, we'll go to the line of Lukas Cohen with BMO. Your line is now open.

Jesse Timmermans: Just any color around that would be super helpful. Thank you. Yeah, yeah, I think the key point is there is that we are, you know, we are seeing some softening. And we want to what we want to communicate is that we are moderating our inventory buys accordingly. So we want to keep everything in check. Now, we need to be careful, you know, in the case that tariffs are reduced, and everything opens up again. So we got to have to be very nimble there. And yeah, in terms of kind of units versus dollars, and how we're planning for inventory and price increases, it is very dynamic.

Speaker Change: It came from new customers and Thats in essentially our hometown or home market of Los Angeles. So.

Speaker Change: Hey, This is Lucas Cohen on for Simeon Siegel. Thanks for taking our question I think a second straight quarter and no repurchases, obviously, new dynamic here with with Capex investment and new stores as you build that out that.

Speaker Change: But there's huge upside for us long term to continue to acquire those new customers.

Speaker Change: Top of that category expansion, continuing to invest and expand internationally. So we feel great about the trajectory.

Speaker Change: Okay.

Speaker Change: That being said would still be great to get some context on what the future plans are for repurchases going forward.

Speaker Change: Okay.

Speaker Change: Okay.

Yes, Thanks Lucas.

Speaker Change: I apologize we have time for one more question, we'll go to the line of Lukas Cohen with BMO. Your line is now open.

Jesse Timmermans: And we're taking all of that into consideration with our inventory buys.

Speaker Change: Yes to your point, we haven't been active in the last few quarters now that said we were active in Q2 this year.

Jesse Timmermans: And then maybe on the elasticity point, you know, I think it's one that you can't look at in isolation, it's not necessarily one, you know, percentage of price increase that would impact the consumer's behavior, you really have to factor in kind of everything else that's going on out there, how she's feeling consumer sentiment, etc. And very case by case, product by product, price point by price point. All right.

Speaker Change: Do we still have a plan in place and we still see that as a.

Lucas Cohen: Hey, this is Lucas calling on for Simeon Siegel. Thanks for taking our question I think a second straight quarter and no repurchases, obviously, new dynamic here with with Capex investment and new stores as you build that out.

Speaker Change: Great return of capital to shareholders.

Speaker Change: And we have a strong cash balance such that we can invest in both the stock repurchases and our initiatives on the core business.

Speaker Change: Thanks.

Lucas Cohen: That being said it would still be great to get some context on what the future plans are for repurchases going forward.

Speaker Change: Okay.

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

Lorraine Hutchinson: Our next question comes from Lorraine Hutchinson with B of A Securities.

Speaker Change: Yes, Thanks, Lucas, yes to your point, we haven't been active in the last few quarters now that said we were active in Q2 this year.

Jesse Timmermans: Your line is now open. Thank you. Good afternoon. I was wondering, for the 78% of inventory purchases from third party brands, what are you hearing from them on price increase? Is that a strategy they intend to take? And how do you balance that with the customer kind of looking for better value in a tighter spending environment? Yeah, yeah, we are partnering very closely with those third party brands. And we are seeing some price increases, again, very product by product, brand by brand. And also keeping in mind, prices comparable, you know, across different destinations across different products.

Speaker Change: Hey, guys. Thanks for joining us.

Speaker Change: So we're really proud of all the work that we've invested in put into the organization that we're seeing a lot of progress across the board. We are believing that these macro challenges really provide a lot of opportunity that we're excited and focused for the challenges and opportunities that.

Lucas Cohen: So we still have a plan in place, we still see that as they.

Speaker Change: Great return of capital to shareholders.

Speaker Change: And we have a strong cash balances that we can invest in both the stock repurchases and our initiatives on the core business.

Speaker Change: Okay.

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

Speaker Change: Thanks.

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

Speaker Change: Hey, guys. Thanks for joining us.

Speaker Change: And some of the core we're really proud of all the work that we've invested in put into the organization and we're seeing a lot of progress across the board and leading to these macro challenges really provide a lot of opportunities that we're excited and focused for the challenges and opportunities that.

Jesse Timmermans: But we are seeing some of that. And then I lost your second part of that question. Oh, and then any customer pushback or feedback from that. Yeah, yeah, nothing yet. It's still very early, though.

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

Speaker Change: Okay.

Dylan Carden: And this, this is all, you know, just rolling in, kind of, you know, as we speak over the last Your next question comes from Dylan Carden with William Blair. Your line is now open. Thanks.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: [music].

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Speaker Change: Okay.

Jesse Timmermans: I get that the dollars decrease as your sales projections decrease, but keeping marketing spend that kind of 15% level, can you sort of walk through your thinking there? And then we've heard all be it sort of early in the earnings season, some improvement in the efficiency of marketing or other brands sort of pulling back in marketing. Does that help you? Particularly if you're you know, you'd spoken last quarter about some AI and sort of embedded in some of your engagement marketing. Thank you.

Jesse Timmermans: Yes, so I can jump in on the marketing side. So the market projection is just based off the current, you know, the current trends that we're seeing and what we think is going to be the right and that for the balance of the year. In terms of the softness on the marketing side, you're right that historically we've seen when there's any kind of economic weakness, often brands pull back on marketing spend and that can open up marketing opportunities. From what we've seen thus far, we haven't seen anything major in that way. And of course, I think we're still early in the development of what happens with the tariffs and do they stay, do they go away?

Jesse Timmermans: So that's something that we could see more of, but at this point, we haven't seen any major trends there as far as reduced marketing CPMs or. That said, I think the team did an incredible job this quarter in terms of delivering marketing efficiencies with better tactics and strategies, and then certainly continue Q2 with the remarkable execution of Revolve Festival by the team. So we feel good about our marketing playbook for the rest of the year, but at this point, from an environment standpoint, it's more similar to what we've seen. Thanks.

Michael Binetti: All right, your next question comes from Michael Binetti with ISI. Your line is now open. Hey, guys, thanks for taking our question. Just a couple maybe on the model. So nice to see the improvement on product return percentages again there. Does that start to slow in our models as we look out over the next few quarters as you start to lap some of the real, you know, big improvements a year ago? Or do you have some incrementals that you can tell us about that'll keep driving it lower year over year? And then on I'm curious if you're seeing any hesitation or similar shift to accessible price points outside the U.S.

Jesse Timmermans: as well. And then one last one on the model. I'm curious on the selling distribution in 2T. I think it's quite a bit higher than the rate you were talking about for the year. Is there anything unique in 2T?

Jesse Timmermans: Yeah, oh, go ahead. Sorry. Yeah. Sorry. Yeah, I can start with talking about the return rate side of things. So we do have a number of things still in the pipeline that we hope can deliver improvements on the return rate side. But as is the case with any R&D type initiatives or things that are unproven, for modeling and forecasting purposes internally, we're not baking any impact of efforts in. And so, you know, we would expect from a modeling perspective, internally and externally. return rate shift. Improvements year over year should moderate as the year goes on, because obviously we started delivering a lot of that in the back half of the year.

Jesse Timmermans: Okay. Yep, and maybe to double click on that one too, I think, you know, if you rewind to last quarter, where we said, you know, we had factored in a flat return rate year over year, not to take away from our optimism, given the significant reduction we had in Q1, we're now modeling in a slight decrease for the full year, given that performance in Q1. And then on the hesitation outside of the US, nothing, you know, significant to call out there on a geo basis. We mentioned, you know, some pullback from Canadian customers, that's not necessarily price point, but just, you know, complete pullback.

Jesse Timmermans: And then selling and distribution in Q2, that is generally higher. That's when we see, you know, a higher return rate, etc.

Nathan Feather: So it typically in Q2 is reasonably higher than other All right, our next question comes from Nathan Feather with Morgan Stanley. Please go ahead. Hey everyone, thanks for taking the question. Just a little bit more on the April trend.

Jesse Timmermans: Can you help us understand how you're thinking about what's driving that decel and any way to kind of frame the micro versus macro in that? And then on the gross margin guidance reduction, is that fully or almost fully attributable to tariffs? Are there any other factors to follow up there? Thank you. Yeah, on the April trend, you know, I think we we attribute this mostly to macro. You know, the team has been performing exceptionally well, we're driving a lot of significant gains, conversion gains, etc. So, you know, I think everything we can control is going well, it's just this macro uncertainty and overhang.

Jesse Timmermans: And then your second part of the question, gross margin fully attributable to tariffs. Yeah, I think, you know, if you if you took tariffs out of the equation, we would probably guide slightly lower for gross margin on the full year, just slightly, just given what we saw in Q1 and that shift, you know, to the more accessible price points, markdown, etc. Now, you can't completely take tariffs out of the equation, because tariffs did have an impact on consumer sentiment. So, you know, it's hard to peel those apart. But but we did see a shift, you know, from full price and then and then deeper markdowns within that markdown bucket.

Jesse Timmermans: Great. Helpful. Thank you.

Trevor Young: Your next question comes from Trevor Young with Barclays. Please go ahead. Great, thanks. First, just back to the April trends. Could you clarify just how much of a differential there was between US and international growth? I think you said international is a little bit better.

Jesse Timmermans: And on the comment around the Canada weakness in particular, in 1Q, has that subsided in 2Q or has that Yeah, on a month to month basis, we don't get into, you know, excruciating detail there just because it is only a month other than to say that international did outpace the US so not much more to say there. And then with regards to Canada, we are continuing to see any impact in the Canadian markets due to The sentiment shift in Canada, and we saw a pretty sharp turn in that market. a lot of the tariff policy and other policies that Canadians objected to started Okay, great.

Jesse Timmermans: And then second question, just on the 78% of inventory imported by partners. I think the comment was that that's a lower ratio than the 72% of where you're the importer of record coming from China. But could you get more specific as to like how much lower that China mix is? And is that kind of the North Star of where you envision your mix of what you import going to over time, just trying to understand, you know, how much lower it is and where your mix could go over time. Yeah, not any, any more detail there really, other than to say, it's meaningfully lower than that 72%.

Jesse Timmermans: And keep in mind, and maybe this will help you triangulate around it, that that 72%, which is of that 22, that is direct, the vast, call it vast or significant majority on own brands is sourced from China, and then a much lower percentage on the third party side of those direct, those direct imports, so you can get, you know, hopefully a little bit closer using those. Okay, great. Thanks.

Jesse Timmermans: Yeah, and then in terms of the long term North Star, you know, it really depends on how the environment unfolds, certainly we expect later this year. have some meaningful reduction in China Exposure with regards to own brand and and a much bigger impact in 2026. And then, you know, it depends on the tariff situation and other kind of macro issues going forward. But there's certainly a world where China could be very little of our production.

Matt Koranda: It's too early to say it depends on a lot of policy factors and other Your next question comes from Matt Koranda with Roth Capital.

Jesse Timmermans: Your line is now open. Hey guys, thanks. Maybe just spinning back to consumer health and the message here, I guess, could you touch on more directly sort of how the uncertainty and the lower confidence shows up in your customer behavior most prominently? It sounds mostly like lower AOVs. It sounds like, at least in the past, we have a precursor of kind of higher return rates a couple years ago. What else are you seeing in terms of the change in behavior? Are there more percentage of transactions financed via buy now pay later? What are the other sort of metrics we should be looking for?

Jesse Timmermans: Yeah, those are all the main metrics that we've seen thus far. We closely track the consumer confidence because we know that historically that can often have an impact on our consumers. purchasing behavior and very central to the Revolve brand. consumers feeling good and feeling great and living their best life. And so certainly when disruption or macro weakness first hits, it can often affect our consumer's purchase behavior. And then we saw a fairly meaningful shift. price points, as Jesse mentioned, around the same time. So, you know, along with, you know, a modest decel in the growth rates that we were tracking.

Jesse Timmermans: So, you know, to Jesse's point, it seems pretty clear to us that the macro factors are at play. And, you know, macro stuff always works itself out over the long run. We actually feel great about the underlying trends and momentum that we've had through the past couple quarters and through Q1. And also, we feel great about our mitigation efforts and what our supply chain will look like over the long term. So, yeah, in the short term, there's a bit of impact, but, you know, we think all the factors for success are in place. And, you know, we'll have to see how things play out over the next couple quarters, given the macro environment, particularly if it weakens.

Jesse Timmermans: But Any willingness to just talk about sort of the return rate that you saw quarter to date? Has it changed materially from since the first quarter? Just maybe put some takes around what's driving the net sales, the single digit growth rate that you highlighted? Yeah, so with regards to the return rate, we're not seeing a meaningful shift in the return rate at this point. Of course, as you know, returns can be a lagging indicator, but in the data we have thus far, there aren't any signs. The Consumer Sentiment Impact and Return Rate just yet, and as you mentioned it, it could be something that happens in the future.

Jesse Timmermans: And again, you know, we saw a modest decel from Q1, and you're always gonna have some variance up and down month by month also, but certainly combined again with the price point shift, it was in those sentiment indicators, it was pretty telling to us that. I will say, as we exited April, we start to saw some of those indicators reverse a bit. But, you know, again, it's a very volatile environment. And so. At this point, we certainly wouldn't. the direction of consumer sentiment being reversed.

Rick Patel: All right, your next question comes from Rick Patel with Raymond James.

Jesse Timmermans: Your line is now open. Thanks, good afternoon. Can you talk about the outlook for own brands? I think typically during uncertain times, the company is pulled back here and lean more into national brands, but you're pushing ahead with accelerating own brands this year. So just curious, what gives you the confidence in doing so this time around, and whether we should expect own brands to continue outperforming the rest of this year? The team has been doing, there's been, you know, many, many years of investment improvement and it's really, really showing from, you know, top line measures that we shared today as well as all of our internal metrics, you know, that we think are very, very forward leading.

Jesse Timmermans: So the team is strong, we're performing well, and we'll continue to invest in it because we see it as, you know, an exciting part of the business, both from a brand building and a market building perspective. And then secondly, I think the guidance for G&A expense for the year was only cut by about $1 million. If demand does soften further, what kind of flex do you have in the business to become sharper with spending as we think about the ability to protect margins We certainly have the ability to make further GNA reductions, but that would not.

Jesse Timmermans: at all, you know, we're all about. long-term success versus delivering short-term results from a profit maximization standpoint. So, you know, we again, we think we have great underlying trends we want to continue to build for the long term and we think we're really well positioned to navigate the period both with the initiatives that we have. as well as our really strong cash balance of $300 million. So, you know, we certainly don't want to do anything short-sighted and cut expenses on things that could be...

Janine Stichter: All right. Our next question comes from Janine Stichter with BTIG. Please go ahead. Hi, thanks for taking my questions. Just a couple for me on inventory. Nice to see the favorable inventory sales spread there. I was wondering if you could comment on the inventory composition at both brands. I think last quarter you talked about being a little bit more weighted in the markdowns at Revolve. I was wondering if there's still any pockets of excess anywhere.

Jesse Timmermans: And then maybe just a bit more color on how much you're cutting back inventory for the back half and then how much flexibility you have in the model if we do need to re-accelerate inventory buying. Thank you. Yeah, on the first one, I think we called it out in the prepared remarks too, but very encouraging was that inventory to sales growth differential was positive on both Forward and Revolve. So we saw great progress on the Revolve segment versus, you know, the progress that we saw on Forward over the last couple quarters. So we feel good about the inventory composition today on both segments.

Jesse Timmermans: And, you know, the full price markdown ratio is, you know, in a zone that feels comfortable as well. And then on inventory purchases, we're very flexible. And we want to keep that in mind, you know, as we think about moderating our inventory buys, but also staying flexible enough so that if and when demand does pick up, if these tariffs are, you know, moderated, call it, that we can get back into the inventory.

Jesse Timmermans: Our next question comes from Peter McGoldrick with Stiefel. Please go ahead. Hey, thanks for taking the question. I wanted to understand your philosophy on investing in the near term opportunities drive share balanced against income statement performance. You mentioned in investing while peers are pulling back. Can you help us think about these dynamics? Yeah, 100%. Yeah, I think there's a couple, you know, really important examples. One of them we talked about on brand, right? You know, we think we do have the ability to control that inventory. Well, yes, there's challenges with with the tariff situation. But it's really checking and working well.

Jesse Timmermans: And it's a huge area of opportunity for us from both a margin well as a group. So we're going to continue to invest. AI technology and technology in general, we've gotten huge gains from that in the preceding quarters, that's going to continue to be an area of active investment for us. And then of course, just continuing to invest every aspect of the experience for the customer, continue to invest in optimizing logistics efficiencies and return efficiencies and things of that nature, you're continuing to see that those items flow through to the balance sheet. We are always going to judge an investment on the basis of does the ROI on this investment look good rather than how does this investment affect the P&L stack.

Jesse Timmermans: Okay, and then I was curious on the active customer base, this keeps expanding sequentially. Can you talk about newly acquired customers? Obviously you have international outperformance embedded in that, but I'm curious how you're meeting new customers and if there are any behavioral differences in these newer cohorts. Yeah, as we continue to invest on the marketing side, we're finding great retention standpoint, but continuing to acquire large amounts of new customers. And there's a huge untapped market and opportunity for us on the new customer side, obviously continuing to invest in all of our existing channels.

Jesse Timmermans: But, you know, one thing we haven't talked about much on this earnings call, obviously with the tariff focus, but is the exciting opportunity of the physical retail expansion. And one of the really neat stats on the physical retail side is that we find significant amounts of the purchases, close to half at our growth store, came from new customers. And that's in essentially our hometown, our home market of Los Angeles. So, you know, there's this huge upside for us long term to continue to acquire those new customers, you know, on top of that category expansion, continuing to invest and expand internationally.

Jesse Timmermans: So, you know, we feel great about that. I apologize.

Operator: We have time for one more question.

Lucas Cohen: We'll go to the line of Lucas Cohen with EMO. Your line is now open. Hey, this is Lucas Cohen on for Simeon Siegel. Thanks for taking our question. I see second straight quarter no repurchases and obviously new dynamic here with with CapEx investment in new stores as you build that out. That being said, would still be great to get some context on what the future plans are for repurchases going forward.

Jesse Timmermans: Yeah, thanks, Lucas. Yeah, to your point, we haven't been active in the last two quarters. Now that said, we were active in Q2 of this year. We still have a plan in place. We still see that as a great return of capital to shareholders.

Operator: And we have a strong cash balance such that we can invest in both the stock repurchases and our initiatives on the corporate All right, that's all the time we have for questions today.

Mike Karanikolas: I will turn the call back to management for closing remarks. Hey guys, thanks for joining us. We're really proud of all the work that we've invested and put into the organization and we're seeing a lot of progress across the board. We really think that these MACO challenges really provide a lot of opportunities and we're excited and focused for the challenges and opportunities ahead.

All right, this concludes today's conference call. You may now disconnect.