Revolve Group, Inc. Q1 FY2025 earnings call

• Strong Q1 results with double-digit top line growth, 57% growth in operating income year-over-year and $45 million in operating cash flow. Adjusted EBITDA margin increased by 160 basis points year-over-year. - Invested in key foundations: AI technology and personalization, international expansion, building brands, capturing wallet share, and developing owned brands. - REVOLVE Festival in Q1 exceeded expectations with increased press and social media impressions. - Owned brand net sales mix as a percentage of REVOLVE segment net sales increased year-over-year for the first time in 2.5 years. - Progress on physical retail with construction underway for a permanent store in Los Angeles at The Grove. - Partnership with Cardi B in the works for a long-term joint venture including apparel and beauty lines.

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 FWRD net sales increased 3% year-over-year. REVOLVE is the larger segment contributing significantly to the top line growth, while FWRD is the luxury market segment with 3% growth.

• Gross margin for full year 2025 expected to be between 50% and 52%, with Q2 expected to be 52%-53% and Q3/Q4 seeing increased tariff impacts. - Fulfillment as a percentage of net sales expected to be approximately 3.1% in Q2 2025 and 3%-3.2% for full year 2025. - Selling and distribution costs expected to be 17.9% in Q2 2025 and 17.2%-17.5% for full year 2025. - Marketing investment expected to be approximately 15% in Q2 2025 and 14.9%-15.1% for full year 2024. - G&A expense expected to be $39 million in Q2 2025 and $154 million-$157 million for full year 2025. - Effective tax rate expected to be 27%-28% for full year 2025, returning to 24%-26% in 2026.

• Geopolitical and macroeconomic uncertainty, particularly significant and broad-based tariffs presenting challenges for the sector. - Uncertainty around the timing and level of tariffs, which impacts gross margin guidance. - Potential impact on consumer sentiment and purchasing behavior due to tariff-related uncertainties.

Q: Drill into tariff math and assumptions, specifically on gross margin guidance low end.

A: The low end assumes elevated tariff rates and best estimate of mitigation efforts.

Q: Pivot to third-party sourced inventory and owned brand flexibility.

A: Can flex pretty quickly, but diversification of owned brand sourcing out of China is a longer lead time.

Q: Tariff news and weaker sentiment affecting customer traffic and conversion.

A: Seeing shift to more accessible price points impacting AOV, but no meaningful pull forward in business.

Q: Owned brand strategy and product development for second half.

A: Have very exciting launches in H2, but adjustments made due to environment.

Q: Selling and distribution expense savings and incremental savings.

A: Largest driver is lower return rate, but lower AOV expected to cause some pressure.

Q: Marketing spend and efficiency with sales projections decreasing.

A: Marketing spend at 15% level based on current trends, no major marketing spend pullback seen yet.

Q: April trend decel, micro vs macro.

A: Mostly due to macro uncertainty, team performing well.

Q: Gross margin guidance reduction attributable to tariffs.

A: Fully attributable to tariffs, with shift to accessible price points and markdowns.

Q: April trends differential between U.S. and international growth.

A: International outpaced U.S., Canada weakness persisted.

Q: Inventory composition and cutback for back half.

A: Inventory sales spread positive on both segments, flexible with inventory buys.

Q: Investing in near-term opportunities vs income statement.

A: Invest in owned brands, AI, and customer experience as ROI looks good.

Q: Active customer base and newly acquired customers.

A: Continue to acquire new customers, with physical retail driving new customer purchases.

Q: Stock repurchases and future plans.

A: Still have plan in place, strong cash balance allows for repurchases and core business investment