Revolve Group, Inc.

After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during that time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one a second time. Thank you. And I would now like to turn the conference over to Eric Randerson, Senior Vice President of Investor Relations. You may begin.

Good afternoon, everyone, and thanks for joining us to discuss Revolve's third quarter 2025 results. Before we begin, I'd like to mention that we have posted a presentation containing Q3 2025 financial highlights to our investor relations website located at investors.revolve.com. I'd also like to remind you this conference call will include forward-looking statements, including statements related to our future growth, our inventory balance, our key priorities and business initiatives, industry trends, the impact of tariffs and our mitigation efforts, our marketing events and their expected impact, our physical retail stores, and our outlook for net sales, growth margin, operating expenses, and effective tax rates. These statements are subject to various risks, uncertainties, and assumptions that could cause our action 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 and Exchange Commission, including without limitation our annual report on Form 10-K for the year into 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. During our call today, we will also reference certain non-GAAP financial information, including adjusted EBITDA and free cash flow. We use non-GAAP measures in some of our financial discussions as we believe they provide valuable insights on our operational performance and underlying operating results. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for, 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-GAAP measures to the most directly comparable GAAP measures, as well as the definitions of each measure, their limitations, and our rationale for using them can be found in this afternoon's press release and in our SEC findings. Joining me on the call today are our co-founders and co-CEOs, Mike Pernikolas and Michael Mente, as well as Jesse Tremens, our CFO. Following our prepared remarks, we'll open the call for your questions. With that, I'll turn it over to Mike.

Hello, everyone, and thanks for joining us today. We had a very solid third quarter, highlighted by exceptional gross margin performance that led to a 45% increase year-over-year in adjusted EBITDA to $25 million, our highest ever for a third quarter. Particularly in the current tariff environment, I am extremely pleased by our nearly 350 basis point increase in gross margin in Q3 that puts us on track to expand our gross margin and adjusted EBITDA margin in the full year 2025 for the second straight year. On the other hand, we delivered net sales growth of only 4% in the third quarter, which is lower than the recent trend line and certainly lower than the growth rate we believe we are capable of achieving on an ongoing basis. It's important to note that in comparison to the third quarter of 2024, this year we pulled back meaningfully on certain promotions. While the shift in our approach added to an already tough net sales comparison in Q3, it also contributed to our gross profit dollars increasing by nearly three times the rate of net sales growth in the third quarter. Beyond the numbers, I'm thrilled by our progress in developing our longer-term investments that we believe create a strong foundation for profitable growth for years to come. including own brand expansion that was a key contributor to our Q3 results. With that as an introduction, I will step back and provide a brief recap of our Q3 results before reviewing the progress on our longer-term initiatives. Starting with Q3 results, net sales increased 4% year-over-year, driven by domestic and international net sales increases of 4% and 6% year-over-year, respectively. By segment, revolve net sales increased 5% and forward net sales increased 3% year-over-year. To illustrate the tougher comparison we faced in the third quarter, our revenue growth rate on a two-year stacked basis in Q3 was the highest we have achieved in more than two years. Our outstanding gross margin performance was the most powerful driver of upside in the third quarter and mostly flowed through to the bottom line. Despite meaningful tariff pressures, we delivered a consolidated gross margin of 54.6%, an increase of nearly 3.5 points year-over-year, significantly outperforming our guidance. Our ability to meaningfully expand our gross margin and operating margin year-over-year in the face of these tariff headwinds and broad-based input cost pressures demonstrates our team's agility, execution, and operating excellence. Shifting to our bottom line results, our operating discipline enabled us to achieve a 45% increase in adjusted EBITDA year-over-year, handily outpacing our net sales growth. Importantly, we have now delivered strong bottom line performance for nearly two years, making great progress improving our margins. For the first nine months of 2025, our adjusted EBITDA has increased 32% year-over-year, building on our huge gains in the full year 2024 when our adjusted EBITDA increased 60% year-over-year. And our business continues to generate meaningful cash flow, reinforcing our track record of delivering consistent profitability in cash flow. During the first nine months of 2025, our free cash flows have more than tripled, increasing our cash position by $63 million, or 25% year-over-year. Our strong balance sheet and cash flow create a key competitive advantage within a fashion e-commerce landscape marked by frequent bankruptcies and other failures in recent years. Now, I'll conclude by recapping our progress on key priorities and growth drivers that we are very excited about. We continue to invest in and build on several promising initiatives that we believe will play a key role in shareholder value creation over the long term. First, we continue to invest in marketing efforts to expand our brand awareness, grow our customer base, and strengthen our connection with the next generation consumer. We had an active and impactful third quarter for our brand building, featuring marketing activations at Fashion Weeks in Paris, New York, and Aspen, the experiential pop-up experiences we hosted in Nashville and SoHo, and more that Michael will talk about in his remarks. Longer term, we are also excited about the potential for physical retail to meaningfully expand our brand awareness and serve as an efficient new channel for customer acquisition. Second, we continue to successfully expand our international penetration. The Middle East and Europe were standouts in the third quarter, partially offset by continued challenges in certain Asian regions. The momentum of our revolved segment business in mainland China remains very strong, however, with net sales increasing more than 50% year-over-year, We are particularly excited about the launch of our first ever own brand collaboration made specifically for customers in the China market. The launch was supported by a live stream event attended by over 40,000 viewers, creating local demand for the collection that outperformed some of our most successful own brand collaborations from the U.S. This innovation further illustrates our exciting potential for international growth over the long term. Third, we have continued to expand our assortment to attract new customers and gain a greater share of consumer spending among our loyal existing customers. On a combined basis, sales of beauty, men's, and home products increased by a healthy double-digit percentage year-over-year in the third quarter. Notable brand additions in recent quarters have elevated our merchandise assortments in key areas outside of our historical core, further broadening consumer awareness and interest. As just one example, we expect net sales of our highly sought after beauty advent calendar to increase approximately 40% year-over-year in the 2025 holiday season, as our incredible offering and powerful marketing engine have created viral excitement on social media and in press outlets, including Vogue, Elle, Cosmopolitan, Marie Claire, Allure, and more. Finally, we are continuing to leverage AI technology to drive growth and efficiency initiatives across the company, touching nearly every facet of our operations, One innovative use case that is already driving results is deploying AI technology within our own brand's design process to deliver cost efficiencies and shorten development cycles. We are increasingly leveraging AI in the creative design process to produce renderings of own brand products with a variety of different materials, finishes, colors, and silhouettes. This is a huge advance because the AI imagery instantly allows our design and buying teams to visualize how products will look in different configurations before they without having to produce multiple physical samples, thereby accelerating the timeframe between the initial design concept and ultimately going live on the site. We are also leveraging AI to automate back office functions to drive efficiency. For instance, we are in the process of transitioning our accounts payable workflow from a historically manual and cumbersome process to an intelligent and primarily automated AI driven system developed internally by our data science team our AI technology now automatically ingests payment invoices per routine bill processing, significantly increasing efficiency and elevating the productivity of our team members. To wrap up, I want to take a moment to thank my Revolve colleagues for your focus and execution that enabled us to deliver very solid results in the third quarter while simultaneously moving the ball forward on exciting longer-term initiatives. Our leadership team is energized by the many opportunities ahead that we believe will accelerate our market share gains. We are successfully navigating ongoing macro uncertainty from a position of strength bolstered by our data-driven mindset and culture, operational excellence, powerful brands, and very strong financial foundation. The building momentum in our key growth and efficiency initiatives reinforces my confidence in our ability to drive profitable growth in the years ahead. Now, over to Michael.