Hello, my name is Sarah, and I will be your conference operator today. At this time, I would like to welcome everyone to Revolve's fourth quarter and full year 2024 results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session, and 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, simply press star one again. Thank you. At this time, I would like to turn the conference over to Eric Randerson, Vice President of Investor Relations at Revolve. Thank you. You may begin.

Good afternoon, everyone, and thanks for joining us to discuss Revolve's fourth quarter and full year 2024 results. Before we begin, I'd like to mention that we have posted a presentation containing Q4 and full year 2024 financial highlights to our investor relations website located at investors.revolve.com. I would also like to remind you that this conference call will include forward-looking statements including statements related to our future growth our inventory balance our key priorities and operating and innovation initiatives industry trends marketing events and their expected impact our partnership and strategic acquisitions our physical retail stores and our outlook for net sales gross margin operating expenses and effective tax rate 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 risk and uncertainties disclosed under the caption risk factors and elsewhere in our filings with the security exchange commission including without limitation our quarterly report on form 10q for the quarter ended september 30th 2024 and our annual report on form 10k for the year end of december 31 2024 which we expect to file with the sec on february 25th 2025 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'll 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. Presentation of non-GAAP financial information is not intended to be considered in isolation or as a substitute for or superior to 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 an RCC filings. Joining me on the call today are our co-founders and co-CEOs Mike Karenicolas and Michael Mente, as well as Jesse Timmermans, 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 finished the year with an outstanding fourth quarter, highlighted by double-digit top-line growth year-over-year and a more than doubling of net income and adjusted EBITDA year over year. Most importantly, we achieved these strong financial results while continuing to invest in key initiatives that we believe set us up well for profitable growth and market share gains over the long term. I'll start by briefly discussing highlights from our fourth quarter results before shifting to the full year 2024 accomplishments and closing out with our key priorities of 2025. Starting with the fourth quarter recap, up. Net sales were $294 million, an increase of 14% year-over-year, driven by improved trends across both segments and geographies relative to our year-over-year comparisons in the third quarter of 2024. In fact, net sales increased by a double-digit rate year-over-year across Revolve, Forward, Domestic, and International for the first time in two and a half years. Net sales in the Revolve segment increased 15% year-over-year, and net sales in the Forward segment increased 11% year-over-year. Forward returned to growth for the first time in seven quarters as our investments began delivering results within a luxury landscape that remains challenging. Gross margin increased by approximately 50 basis points year-over-year, well ahead of our gross margin outlook shared last quarter. Net income for the fourth quarter of $12 million, or $0.17 per diluted share, was more than triple the $3 million in the prior year quarter. Adjusted EBITDA was $18 million, an increase of 114% year-over-year, driving a 290 basis point expansion of our adjusted EBITDA margin. In addition to the gross margin expansion, contributing to our exceptional growth and profitability were significant marketing efficiencies and meaningful efficiencies in our logistics costs, which benefited from a more than two-point decrease in our return rate year-over-year. Beyond the numbers, I'm excited by our team's execution that has led to continued great progress on the strategic priorities we outlined on prior calls. I will now shift to a review of our performance and accomplishments for the full year 2024 before touching on our key areas of focus for the coming year. Entering 2024, our most critical objective was to return to growth and meaningfully improve our net sales performance. We executed extremely well on this priority as our net sales growth rate improved measurably each quarter throughout 2024, exiting with solid double-digit growth in the second half of the year. Net sales growth in our core domestic market improved every quarter throughout 2024, and we exited the year with double-digit growth in the U.S. during the fourth quarter. International net sales increased 14% year-over-year, driven by growth across nearly all regions that also improved as the year progressed. In 2024, we achieved record net promoter scores in international markets, underscoring our successful investments to further elevate the shopping experience for our international customers. We continue to drive impressive net sales growth in adjacent product zones. Sales of beauty, men's, and home products each increased by a healthy double-digit percentage year over year, more than tripling our consolidated growth rate on a combined basis and further validating our opportunity to expand our share of wallet. As a company focused on profitable growth, I'm very pleased that our 2024 profitability increased at a much faster rate than net sales. Net income and adjusted EBITDA increased 73% and 60% year-over-year, respectively. Unpacking the drivers of profitability growth, reducing our global logistics costs was a top priority for us in 2024. We achieved a nearly 130 basis point reduction in our variable logistics costs as a percentage of net sales driven by strong execution on initiatives designed to drive operating cost efficiencies and to reduce our return rate. Importantly, many drivers of this lower return rate in 2024 even further elevate the customer experience, such as our size and fit initiatives. Marketing was also a powerful driver of our profitability in 2024. We achieved a nearly 130 basis point reduction year-over-year in marketing spend as a percentage of net sales fueled by efficiency gains across both the performance and brand marketing channels. Operating in a highly competitive environment, we successfully optimized spend across our marketing channels and leveraged the strength of our brands to reduce our average cost to acquire customers year over year. Another key contributor to our improved profitability in 2024 is that our customer is increasingly spending with us at full price. The percentage of our net sales at full price improved three points year over year to approximately 82%, which we believe is appreciably higher than the industry benchmarks. The increased percentage of net sales at full price helped to drive gross margin expansion of 65 basis points year over year. Cash flow generated from operations in 2024 further strengthened our balance sheet, all while deploying capital to reduce the number of shares outstanding through stock repurchases as part of our efforts to enhance shareholder value. Finally, we meaningfully advanced our AI technology and personalization capabilities, further elevating the customer experience and contributing to our strong financial results. Here are a few highlights. On our e-commerce websites, we launched AI-powered search algorithms for improved product discoverability. In product merchandising, on our sites, we drove increased consumer engagement and conversion through AI-driven product recommendations and other site optimizations. In marketing, our AI algorithms expanded the reach in one of our largest performance marketing channels. In operations, we created AI algorithms to intelligently route customer service inquiries and used our data and algorithms to intelligently balance inventory units across our multiple global locations. And finally, AI served an important role in reducing our return rate through a number of initiatives. As a powerful illustration of our core competency, in a variety of instances, our internal solutions handily outperformed AI solutions from third-party technology vendors. I will wrap up with a discussion of our key priorities for 2025. As co-founders and the company's largest shareholders owning more than 31 million shares of Revolve Common Stock, or approximately 45% of the total shares outstanding, Michael and I are very aligned and focused on maximizing value over the long term. Our strategic priorities for 2025 are guided by this long-term owner mindset. We are focused on extending our momentum and driving attractive top-line and bottom-line performance while continuing to invest in exciting growth opportunities imported to the long-term, such as own-brand expansion, deploying AI technology, and exploration of physical retail expansion. As we look ahead, we see multiple levers for growth that we believe will enable us to gain market share for the years to come. First and foremost, we will continue to invest in expanding our brand awareness, acquiring new customers, and strengthening our connection with the next generation consumer. We will continue to focus on the core and invest in marketing, leveraging our brand strength and strong merchandising to acquire new customers, further engage with existing customers, and expand our market share. In addition, a new and exciting way we are increasingly engaging with consumers is through physical retail. Michael will talk more about these initiatives in his remarks. Second, we will continue to build on the successful expansion of our assortment to gain a greater share of our customers' spending on apparel, beauty, footwear, and accessories. We have earned our customers' trust and proven that with the right merchandising, they are eager to expand their purchases with us. In fact, as just one example, revenue generated from our curated ski shop increased more than 850% year-over-year in the fourth quarter. With the strength of our brand, and our outstanding customer experience, we see an incredible amount of white space to deepen customer relationships in many zones beyond the core event dressing and going outwear often associated with Revolve, including beauty, men's, home, and premium essentials. Third, we will further expand our international presence where we are investing in a market opportunity that is several times larger than the U.S. The great progress we have made to improve the international customer experience in recent years now allows us to confidently invest marketing dollars to drive profitable growth in key international markets. Finally, we will further enhance our technology stack and leverage AI and other technologies across our platform to drive growth and efficiency. Since our founding, our teams have operated with a data-driven mindset and culture of technology innovation, leveraging our proprietary technology stack that is ingrained in nearly all aspects of our operations. Our increasing success with AI technology in 2024 further confirms our competitive advantages and reinforces our commitment to invest as we expand the use of AI throughout the organization. In short, we view our outstanding top and bottom line results in the fourth quarter as a direct outcome of our team's strong execution on our strategic priorities. I would like to thank our talented and passionate team for their incredible efforts, innovations, persistence, and amazing ability to simply get things done that drove such strong execution in the fourth quarter. As our results attest, we believe we are gaining market share and further strengthening our foundation for future growth. I feel great about our current momentum and the exciting opportunities ahead in 2025 and beyond. Now, over to Michael.

Thanks, Mike, and hello, everyone. I'm proud of our strong results in the fourth quarter that were driven by our team's great execution across the business. Key contributors to our double-digit growth in net sales were vastly improved site merchandising and exciting gains in emerging product zones. The strong top-line growth combined with incredible efficiencies in our marketing logistics costs led to our more than tripling of net income year-over-year in the fourth quarter. With that as an introduction, I will focus my reports on the strategic areas we are investing in and that we are especially excited about. Merchandising and product assortment, brand awareness, physical retail expansion, and luxury in the high-end consumer. First, merchandising and product assortment. Meaningfully improved site merchandising and on-point inventory of buyers important contributors to our growth in the fourth quarter. Leveraging technology and data analytics, our teams are doing an outstanding job of improving our assortment across a broader range of use cases and creating compelling merchandising to direct increased consumer engagement and conversion. I attribute much of the incredible growth and demand for our Winter South, as Mike mentioned, to our site merchandising improvements and assortments put in front of our customers to optimize channel strategies. Looking forward, one area that I'm truly excited about is premium essentials our customers trust our brands and delight in our shopping experience creating a strong point of leverage for us to capture our greater share of wallet one of the first steps in this journey was the launch of the foundation shop on our evolve site featuring a selection of premium essentials from third-party unknown brands it's still early but the merchandising looks fantastic and has begun to prevail our customers desire to shop on revolve for their everyday wardrobe needs including for fall fashion and colder weather styles that were strong growth drivers in the fourth quarter response from our brand partners has been incredible with two coveted forward brands choosing a cross list on revolve after hearing about our foundation shop strategy that we expect to build on in coming quarters we also continue to see exciting gains in newer areas like beauty which has more than quadrupled in size in the past five years in fact our beauty men's and home products all achieved record sales in the fourth quarter this validates our ability to tap into our customer loyalty to drive adoption in adjacent products through further product expansion inside merchandising improvements we see a great deal of opportunity to both acquire new customers and capture more share of our existing customers wallet helping us to capitalize on these efforts are new ai algorithms developed by our internal teams to recommend complementary items in adjacent product zones after the purchase transaction is complete we are also very excited about the progress we made within own grants last year our goal coming into the year was to create a solid foundation for future growth and expansion, we did just that. Our own brand mix of Revolve segment net sales of 18% for the full year in 2024 is well below its long-term potential, and we believe the underlying foundational metrics are better than ever, setting us up well for 2025 and beyond. We are very excited about the pipeline of new-owned brands and development this year. Second, brand awareness. Our marketing efficiency meaningfully outperformed our outlook for the fourth quarter, contributing significantly to our outstanding results. Total marketing investment in the fourth quarter represented 14.8% of net sales, a decrease of approximately 170 basis points year over year. Our teams deserve a lot of credit for being very nimble in involving our marketing events and partnerships with content creators to maximize returns on our investments and increase our brand heat. This innovation of marketing strategies continues to elevate and further differentiate our brands, resonate with consumers, and deliver great results on the KPIs we are focused on. We host several impactful events at our holiday shop in Los Angeles and in Aspen, and many in partnership with brand partners. We have found these events to be highly efficient for building our brands and acquiring new customers. In fact, our New Year's Eve activation in Aston was our most successful and productive event of 2024, based on the number of views generated per video posts on our social media channels. And notably, this event was produced at a modest investment. Each video produced in connection with Aston's New Year's event was viewed on average of nearly 400,000 times, substantially outpacing the content views for our other marketing activations. Another way we are expanding our brand reach is by capitalizing on shifts in culture that have created new types of influencers. We were early to recognize the powerful intersection of fashion and sports, including collaboration with WNBA star and fashionista Angel Reads, who was recently featured on the cover of More recently, we are partnering with the new Women's Professional Volleyball League, where our Revolve logo is prominently featured on the back of every player's jersey, and our brand is featured throughout the arenas. As the new league's online fashion retail partner, we are collaborating with the league's top stars including former USA Olympic medalists. On a different, more somber note, as a company found in Los Angeles, Mike and I and the team were devastated by the physical and emotional damage caused by the LA wildfires that impacted many of our employees and partners. In January, we were able to leverage our influence for the benefit of our local community with the opening of the Revolve Free Shop, a temporary shop in downtown Los Angeles, to support hundreds of members of our local community directly impacted by the wildfires. We provided a broad selection of free clothing shoes beauty and hygiene products and blankets to support those most in need i have also personally donated 1 million dollars to several charities and causes including the los angeles fire department foundation the world's central kitchen and many individuals directly impacted by the wildfires third physical retail expansion i am very excited about the long-term growth opportunity in physical retail we recently crossed the one-year mark in our successful asthma store and are busy preparing for the opening of our los angeles store which will be our first permanent retail destination in the major metropolitan area the temporary revolve holiday shop discussed last quarter was an excellent and well-executed preview of our future of retail located within the high-end retail and entertainment district of the grove in los angeles and one of the most visited holiday shopping destinations in la we created incredible buzz and excitement by hosting dozens of impactful marketing events featuring vip appearances from kendall jenner Cardi B, Megan Fox, Dwayne Wade, Nicole Richie, Elsa Hoff, and Shea Mitchell. Of note, even on our home turf of Los Angeles, where our brands are most well-known, more than a third of the customers transacting at the Ropa Holiday Shop were new file. This reinforces the magnitude of opportunity to increase our brand awareness, expand our customer file, and increase our market share. We also saw early indications of lift in e-commerce in the local communities surrounding the growth, particularly among new customers. Confirming the physical retail can be extremely complimentary and provide a favorable hand yellow effect on our core e-commerce operations. Also very encouraging is that the Revolve Holiday Shop has generated a significantly higher mix of net sales from owned brands than we generate online. While it's a small sample size, this reinforces the exciting opportunity ahead of us to drive much higher owned brand penetration and corresponding gross margin in physical retail. We are very early in our physical retail journey and we are continuing to test and iterate. With the invaluable earnings gained so far, I am confident that we have a clear path for improvement as we pursue our physical strategy. We intend to hire a senior leader with deep industry experience who will help us maximize this growth opportunity over the long term, beginning with our Los Angeles store. Speaking of which, I'm thrilled to share the details of our permanent store in Los Angeles stated to open in the fall. We will occupy the exact same location as the Revolve Holiday Shop at The Grove. We believe our incredible permanent destination will elevate our brands with an essential and high traffic location in The Grove, providing great exposure and exciting growth opportunities for years to come. We expect to break ground on construction next month, and I can't wait for everyone to see our brand comply. Finally, luxury and the high-end consumer. In early 2024, we talked about the disruption of the luxury e-commerce market on the heels of two distressed sales of large competitors in late 2023. As a profitable company with consistent cash flow generation, we saw an opportunity to benefit from this industry turmoil by investing in the luxury segment while others seemingly had no choice but to cut back. Capitalizing on the opportunity, last year we made key investments in talent and support particularly focused on penetrating the high net worth segment of consumers that drive a disproportionate share of the luxury industry revenue. Our fourth quarter results are a powerful indication that our forward investments are paying off, particularly in key customer metrics. For instance, our average revenue generated per forward active customer increased by a double digit percentage year over year. We believe our investments were a key contributor to the forward 11 point improvement in top line growth year over year compared to the prior quarter. Another key driver of forward's improved growth in the fourth quarter is our forward renew offering of pre-owned handbags. Renew sales continues to have gained scale and nearly doubled year over year in the fourth quarter. To wrap it up, we are thrilled with our momentum in delivering strong growth and profitability and excited about the potential of long-term initiatives and investments as we pursue significant market opportunities at LightEd. Now I'll turn it over to Jesse for the financials.

Thanks Michael and hello everyone. I am extremely pleased with our fourth quarter results highlighted by double-digit net sales growth across segments and geographies, and a more than doubling of our net income and adjusted EBITDA year-over-year. I'll start by recapping our fourth quarter results and then close with updates on recent trends in the business and commentary on our gross margin and cost structure for 2025. Starting with the fourth quarter results, net sales were $294 million, a year-over-year increase of 14%, and a four-point improvement from our net sales growth in the third quarter of 2024. Revolve segment net sales increased 15% and forward segment net sales increased 11% year-over-year in the fourth quarter. By territory, domestic net sales increased 11% and international net sales increased 29% year-over-year. Active customers, which is a trailing 12-month measure, grew to 2.7 million, an increase of 5% year-over-year. Total orders placed were $2.2 million, an increase of 7% year-over-year and our highest order growth in more than a year. Average order value was $301, a decrease of 1% year-over-year that was due to lower AOV in the forward segment driven by product mix. Consolidated growth margin was 52.5% and came in well above our guidance range. The increase of 53 basis points year-over-year primarily reflects meaningful margin improvement in our forward segment and an increased mix of net sales from the higher margin revolve segment supported by strong full price mix in both segments moving on to operating expenses a high level summary is that much better than expected efficiency in marketing selling and distribution and fulfillment expenses in the fourth quarter was partially offset by higher than expected general and administrative expenses fulfillment costs were 3.2 percent of net sales a decrease of 27 basis points year-over-year and slightly better than our guidance. Selling and distribution costs were 16.5% of net sales, a decrease of 129 basis points year-over-year, and outperforming our guidance by roughly 80 basis points. This impressive result reflects outstanding execution by our teams to drive efficiency in our logistics costs, as well as a meaningful decrease in our return rate year-over-year. Our marketing investment came in much more favorable than expected, representing 14.8% of net sales, a decrease of 168 basis points year over year, which reflects efficiency gains across both the brand and performance marketing channels. General and administrative costs came in $6 million higher than our guidance, although most of the overage reflects costs that are excluded from adjusted EBITDA. First, there were $2.7 million in non-routine costs that were not factored into our outlook and are excluded from adjusted EBITDA. Second, also contributing to the higher GNA costs is that stock-based compensation came in much higher than expected and increased $1.7 million year-over-year. These non-cash costs are also excluded from adjusted EBITDA. In addition, we continue to invest in many longer-term initiatives that we believe set us up for profitable growth well into the future. Our tax rate was 20% in the fourth quarter, down from 28% in the prior year. The decrease was primarily due to excess tax benefits realized as a result of the exercise of non-qualified stock options. The meaningfully increased net sales and gross profit year over year, the improved marketing efficiency, and great progress driving efficiencies in our logistics costs result in an exceptional growth on the bottom line. Net income more than tripled to $12 million or $0.17 per diluted share from $3 million or $0.05 per diluted share in the fourth quarter of 2023. Adjusted EBITDA was $18 million, an increase of 114% year-over-year. For the full year 2024, adjusted EBITDA was $70 million, an increase of 60% year-over-year. Moving on to the balance sheet and cash flow statement. We delivered improved net cash provided by operating activities and free cash flow in the fourth quarter compared to the prior year period, further strengthening our balance sheet. Comparisons were less favorable for the full year 2024, however, as our net cash provided by operating activities of 27 million dollars and free cash flow of 18 million dollars decreased 38 percent and 54 percent year-over-year respectively our much higher net income year-over-year was more than offset by unfavorable changes in working capital including our investment in inventory during the year importantly we exited the fourth quarter of 2024 with inventory growth much more balanced, which we believe positions us to generate increased cash flows in 2025. Inventory at December 31st, 2024 was $229 million, an increase of 13% year-over-year, which was slightly outpaced by our 14% net sales growth for the fourth quarter, demonstrating the important progress we have made in rebalancing our inventory. As of December 31st, 2024, cash and cash equivalents were $257 million, an increase of $11 million or 5% year over year, and we had no debt. Since the end of 2019, we have increased our cash balance nearly fourfold, an increase of $191 million in five years, while returning more than $40 million to shareholders through stock repurchases over the last 18 months. Approximately $58 million remained available in our $100 million stock repurchase program at year end, unchanged from last quarter. Now, let me update you on some recent trends in the business since the fourth 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 through the first seven weeks of the first quarter of 2025 have increased by a high single-digit percentage year-over-year. In terms of linearity, months-to-date sales trends in February have been very solid, helping to offset softer net sales growth in January when the Los Angeles wildfires temporarily impacted demand in our largest region of California, and during which time we paused social media activity to focus on our relief efforts and in reverence to those impacted by the wildfires. For modeling purposes for the balance of the first quarter of 2025, remember that February 2025 has one less day than the prior year comparison due to leap year in February 2024. This uneven calendar year over year creates an approximately one-point headwind to net sales growth in the first quarter of 2025 shifting to gross margin we expect gross margin in the first quarter of 2025 of between 52.2 and 52.7 percent which implies an increase of 15 basis points year over year at the midpoint of the range for the full year 2025 we expect gross margin of between 52.4 and 52.9 percent which also implies a year-over-year increase of around 15 basis points at the midpoint of the range embedded in our 2025 expectations for gross margin are higher net sales at full price year-over-year and notable margin improvement in the forward segment which we expect to be partially offset by the new china tariffs that are most relevant to our revolve segment also important to the discussion of potential tariff impacts in supply chains is that we have extremely limited sourcing exposure to canada and mexico Fulfillment. We expect fulfillment as a percentage of net sales of approximately 3.2% for the first quarter of 2025, a decrease of approximately 30 basis points from the fulfillment efficiency ratio in the first quarter of 2024. For the full year 2025, we expect fulfillment costs of between 3 and 3.2% of net sales, a decrease of approximately 20 basis points year-over-year at the midpoint of the range selling and distribution we expect selling and distribution costs as a percentage of net sales of approximately 17.4 percent for the first quarter of 2025 which implies a year-over-year improvement of approximately 50 basis points for the full year 2025 we expect selling and distribution costs of between 17 and 17.2 percent of net sales a decrease of 20 basis points year over year at the midpoint of the range. Marketing. We expect our marketing investment in the first quarter of 2025 to be approximately 14.9% of net sales, a decrease of around 40 basis points year over year. For the full year 2025, we expect our marketing investment to represent between 14.9 and 15.1% of net sales, an increase of approximately 20 basis points year over year at the midpoint of the range as we expect continued efficiencies in marketing to be partially offset by continued investments to support brand building and customer acquisition. General and Administrative We expect G&A expense of approximately $39.5 million in the first quarter of 2025 and between $155 million and $158 million for the full year 2025. This implies a 10% year-over-year increase in G&A costs for the full year 2025 at the midpoint of the guidance range, as we continue to invest in longer-term growth initiatives, such as the launch of several exciting own brands and further expansion of AI technology throughout the organization. It also includes a full year of investment in the Alexandre Vautier fashion house we acquired in the second quarter of 2024. And lastly, we continue to expect our effective tax rate to be around 24 to 26% for the full year 2025. To recap, I am very encouraged by our fourth quarter and full year results, highlighted by an inflection in our top-line growth and more than 70% growth in net income for the full year 2024.

Most importantly, we achieved these strong results while investing meaningfully in growth and efficiency initiatives that we believe position us well to continue to gain market share over the long term in pursuit of the very large opportunity ahead of us now we'll open it up for your questions thank you at this time i would like to remind everyone in order to ask a question please press star one on your telephone keypad we'll pause for just a moment to compile the q a roster your first question comes from randy connick of jeffreys your line is open yeah thanks a lot um i guess jesse question for you uh really

helpful color on the gross margin outlook, great performance in the quarter. Just curious, you talked about the ability to kind of even increase the amount of full price proportion of sales in the business and I guess in Revolve. Give us some perspective on what drives that thought process going forward. And then on forward, actually, maybe give us some perspective of just how much lower the gross margins are at this point in time and where you can see those margins going ahead. Thanks.

Yeah, sure. Thanks. And yeah, definitely a great quarter and good to see that forward margin starting with a four again. We still see opportunity there, especially on a full year basis. Again, a reminder in the first half of the year was more challenged than the back half of the year. So we're entering 2025 in a really good place in terms of inventory on forward and expect that full price to continue on the overall full price landscape you know i think it's a couple things one styles continue to expand the team gets better and better at bringing in those new styles the merchandising is really resonating so we do see further opportunity there for full price even on top of the really healthy full price we exited 2024 on and again reminder the first half of 2024 was more pressured than the back half so we see a good full year 2025 ahead.

One last question. Just on the outlook for logistics, especially internationally, where does that sit right now? I'm sure the international margins, I don't know if it's the case, but I'm sure they're a little bit lower than the domestic margins. Maybe give us some perspective where those margins sit internationally relative to the domestic piece of the business that it revolves and kind of how that journey will unfold in the years ahead. Thanks.

Yeah. Yeah. From a growth margin perspective, it's relatively inline. There's always some product makes differences there but call it in line and then when you work down to contribution margin you know call it neutral um it is more expensive to ship internationally but that's offset by a lower return rate internationally than we see domestically so there's some puts and takes throughout um you know but it's uh comparable to that of domestic super helpful thanks guys the next question comes from oliver chen with td cowan your line is open hi mike mike and Jesse, great results.

As we look forward, the comparisons get a little tougher in terms of the revenue growth as we go throughout the year. What are your thoughts in terms of average order value relative to number of orders and how that may manifest as well as are you expecting a better first half versus second half given the nature of the comparison? Secondly, if we think about physical retail? What are just some key things you're thinking about longer term with physical and stores? Thanks, Jesse.

Yeah, yeah, I'll take that first one and then pass it along. In terms of orders versus AOV and customers, we expect strong growth, you know, in that customer and orders with a slight increase in AOV.

Again, going back to the full price mix with a higher full price mix assumed um you know we should see a slight uptick in alb but nothing meaningful so most of the growth coming from orders and uh and customers and then in terms of physical retail and how thinking about it it's a huge long-term opportunity we're really excited about our experiences there thus far the aspen store entering its second year now and then the Grove pop-up, which was a great success, and really excited to put our heads down and get that store open for the fall this year. We think it's a great location. There was phenomenal interest and traffic and turnout at our pop-up, and really excited to see what we can do in the fall. And again, long-term, it's a massive opportunity. Half of the apparel market or more is still offline, and so we're putting the pieces in place to go after that.

Okay. And on return rates, which have trended better, what should we know about what you're seeing now with return rates and any implications that has for the nature of the health of your consumer? When we do model revenue growth in the year ahead, do you think it'll be pretty bumpy or just consistently positive, ideally? Thank you.

Yeah, really hard to say what the cadence of revenue growth will be over the course of the year I think one thing to hit on maybe is seasonality because seasonality has been so volatile over the last few years and then this past year with a lot of our initiatives kicking in in the back half of the year we did see that revenue in absolute dollars increase sequentially each quarter so I think if we look ahead to 2025 you know absent any you know bigger macro factors we'd expect seasonality to return closer to where we were back in the pre-COVID era with Q2 being the highest and 1Q and 4Q being a little bit lower, but more muted than it has been in the pre-COVID period, just given the great success we've had in other product categories outside of that core kind of event, kind of festival going out apparel that we've had in the past. And then return rate, you know, we're for modeling purposes, we're modeling in a flat return rate for 2025. Now that's not to take away from the optimism we have in generating further gains there but from a modeling perspective we're still modeling a flat return rate with more opportunity to beat that in the first half of the year than the second half given the progress we made in 2024.

The next question comes from Jim Duffy of Stiefel. Your line is open.

Thank you, really nice quarter guys. I want to ask on Q1, no doubt a challenge for the team operating in the midst of wildfires. Are you able to size the January impact of the disruption from both the customers in the area and the pause you had in performance marketing to the January figures?

Yeah, yeah, it definitely had an impact. It's hard to give an exact number there because there were a lot of factors at play, but we definitely saw depressed sales specifically during that time period. And from a couple different perspectives, one in that core market of California and then more specifically around LA and you could really see that at the Grove store and then second you know which impacted you know more kind of nationwide sales was our pause on social and then also just a lot of the social attention was focused on you know wildfires there was also a lot of kind of weather challenges especially on the east coast and then also a lot of call it noise from administration change tariffs etc so January was challenging from a number of um perspectives but you know to our point in the uh in the prepared remarks february really picked up and is um it performed solid through that first couple weeks

of february so feeling optimistic about the progress despite the challenge we had in january okay thank you and then on the merchandising um can you put a little more color on broader use cases you gave the ski wear example which drove really impressive growth in the fourth quarter Or are there others like this that you would point to which are tangible drivers in 2025? And then maybe within that, if you could speak to the own brands that you're most excited So I think Michael's having trouble with his line.

Normally, Michael would answer these questions.

Can you guys hear me?

We got you, Michael.

Oh, sorry, guys. Yeah, I'm going to get interrupted with a lot of muting and unmuting from the operator. But, yeah, the ski shop has been incredible, and that's something where we continue to expand. But broader cold weather has been, you know, very, very strong for us, you know, over the past 20-some years. We've been known for, you know, a lot more warmer weather. But with the Aspen store and with, you know, merchandising focus, we've been able to connect really strong with outerwear, sweaters, and this past cold weather season. We're also seeing, you know, a lot more tailoring and sophisticated kind of, you know, styles, which can translate to, you know, a more affluent customer as well as kind of workwear, which has been super exciting for us. uh long-term wise also we think that foundational basics and essentials things that you know that our customers necessarily historically has thought of has gone quite well the foundation shop was launched we see that as a long-term journey so we really see a lot of traction in all aspects of our wardrobe uh long-term wise even more there's you know other things that we haven't even yet to tackle yet but those are three huge areas that we know our customer shops for and is now really shopping with us for so the team's done an incredible job there the next question

comes from Nathan Feather of Morgan Stanley. Your line is open.

Hey, everyone. Thanks for the question. Really encouraging to see forward return to double-digit growth here. I guess, do you feel you're back to sustainable, positive growth in that segment, you know, absent additional macro volatility there? Then can you, as an update on the inventory situation, how far would you say you are from normalized levels, specifically at forward? Thank you.

Yeah, so with regards to uh with regards to ford we feel great about progress in the fourth quarter uh you know ford's always been a little bit of more volatile business so you don't want to kind of refrain from commenting on precise projections going forward but we're continuing to see some positive momentum there we feel like we made great investments last year uh you know really tapping into the higher net worth customer segment as michael mentioned also we feel like we're starting to see some signs that luxury market is turning a bit so you know we're certainly optimistic we're going to see positive growth there in the quarter to come. But we'd like to see a couple more months of progress before putting anything too firm out there. With regards to the inventory situation, we're definitely seeing progress on inventory, still a bit more heavily inventory than we'd like. So continuing to work our way through there, some signs of recovery, really great results in Q4. And we're looking to strengthen a couple of nice quarters in a row before we get too bullish on that segment.

The next question comes from Michael Benetti with Evercore ISI. Your line is open.

Hey, guys. Great quarter, great holiday. Jesse, would you just to kind of put a final stamp on the question earlier, would you say the February run rate or whatever the run rate is since you went back to restarted social media is back to levels similar to 4Q, just so we can understand that that's kind of the normal rate here, given the volatility. And then I'm curious, you know, on the gross margin outlook for the year, what should we think about as the inputs that dictate the high end up 40 basis points versus the low end down 10 basis points that I understand from the puts and takes? And then one last one on the really impressed to hear the variable costs better by 130 basis points. I know that took a lot of work for you guys. Very impressive, especially as more of the orders coming from international, which I think has always been harder to serve. When, when did you get to that run rate and what are the incremental drivers from here? Are there, are there projects that can drive that higher from, from here?

Yeah. Okay. I'll try to, I'll try to hit all those. So maybe starting with February and the growth rate there, it did bounce back really nicely and it was really solid. And, you know, I'd say I'd put it in the zone of that Q4, which helped offset some of that January softness that we saw. So, you know, hard to say what happens from here, but you know our hope is that that that continues um on the puts and takes on gross margin there's a couple things i think you know the things we called out you know how how successful we are in driving that full price mix which you know we're confident in the other probably bigger factor that's more you know somewhat out of our control is just what exactly happens with tariffs when that comes in play timing of inventory receipts and then our mitigating factors we have a number of mitigating factors in the works which is why we're not getting too precise on specifying that tariff impact but that is definitely a variable we feel good about the inventory as we head into the year as mike called out so that definitely gives us a good start to 2025. on the variable really good work by the team in 2024 with you know outside of the return rate impact which i'll get to but we had you know 20 20 plus specific initiatives with different size and scale uh that were in play that helped that uh selling a distribution um efficient efficiency gain in 2024 if you look at the combination of selling and distribution and fulfillment there was about 160 basis point improvement about two-thirds of that was due to return rate and the lower return rate year over year so that definitely has a significant impact and we're optimistic we can continue to drive those gains. So that will be one factor. And the team continues to work on other efficiency gains. They've already identified a number of things as we head into 2025, not to get specific on those, but we're optimistic we can continue to manage those variable line items. And thank you for calling out the international, too. That is a factor. So even with that international pressure and international growing at 29%, being able to get those logistics efficiencies down was really impressive.

The next question comes from Mark Altschweger with Baird. Your line is open.

Good afternoon. Thanks for taking my question. You called out the reduction in your customer acquisition costs. I was hoping you could contextualize how much of that improvement is your internal initiatives and marketing approach versus perhaps a more favorable backdrop on the performance marketing front um and then separately jesse just gna i think you're guiding to about 10 growth in gna dollars um just in 2025 it's i think a higher leverage point than you communicated in the past and maybe i'm missing some one timers that uh in that calculation but maybe just unpack that a little bit and help us understand the gna investments thank you Yeah, so on the marketing side, in terms of the marketing agencies we saw during the year, it was largely driven by internal team initiatives.

There are a number of really nice things the team was able to do in terms of expanding our reach and efficiency with performance marketing. Some of them actually related to some of those AI initiatives that we talked about. Of course, there were initiatives beyond that. And then on the brand marketing side, really phenomenal work by the team structuring our brand marketing events in a way that was much more efficient but also more impactful than the previous year. So tremendous job by the team on the marketing side.

Yeah. And then on GNA, you know, in 2024, there were, you know, meaningful amounts of call it non-routine costs that were included in GNA to the tune of about $4 million. So hard to predict those going forward, but, you know, assume those go away in 2025. Thought Comp was also higher in 2024. So expecting that to normalize as we get into 2025. So that 10% is really core GNA growth plus investments that we continue to make, expecting additional investment in physical. We've got a number of own brand launches planned that we're really excited about, and that takes upfront investment in team and infrastructure there. And then Vautier will have a full year of cost impact versus the half year of 2024. So those are a couple of the kind of outliers outside of the core G&A growth.

The next question comes from Ana Andreeva with Piper Sandler. Your line is open.

Great. Thank you so much. And let me add my congrats as well. Great end to the year. Just to follow up on the quarter to date, great to hear that February improved so nicely. Just what are you seeing across the two brands and also international versus U.S. and any particular categories to call out that are driving the business. And then we had a follow-up as well.

Yeah, no additional color on the seven weeks in part because it's only seven weeks. So we don't want to give too much there. Other than to say we did see growth across both segments and both domestic and international. So, you know, optimistic that the growth is coming from all aspects of the business.

Okay, that's perfect. And just on marketing, you've been getting really nice efficiencies all of last year. Just curious, can you talk about how you approach the Revolve Festival coming up in April? You got some pretty nice marketing efficiencies last year already with the event. Just how do you think about that this year? And thanks again.

This year, from an investment perspective, we're looking at the same range. But, of course, we're always challenging the team to do better and better. So, you know, excited and optimistic that we can continue to improve on our investments in these areas. But, you know, from a dollar's perspective compared to last year, it'll be, you know, quite similar.

The next question comes from Jay Sol of UBS. Your line is open.

Thank you so much. Mike, my question is for you. You know, you talked a lot about AI and the prepared remarks about all the different ways that, you know, the companies utilize it to impact the business. But AI seems to be changing so fast. Can you just talk about maybe in the last 90 days how you've seen new opportunities emerge just based on AI technology getting better and what new things you're working on to maybe help drive the business forward using AI?

Yeah, 100%. That's what's so exciting about it. We've gotten so much in terms of incredible results in the past year, and it's changing so fast, and the team is working on new things every day. So, you know, we've got several really exciting projects. I think it's a bit too early to share them yet. But one of the things I'm particularly excited about, I think really kind of taps into newer ways of product discovery. And I think that one will take a little bit of refinement any time you're introducing a new way of shopping to customers and new interfaces, it can take some time for consumers to adapt. But I'm really excited about that one. We're continuing to leverage ML and AI against all facets of our business to improve efficiency, improve our existing algorithms. You know, we made huge gains in terms of site merchandising, search product recommendations last year. The team's continuing to tap into some of those same areas with the improved technology. So yeah, it's exciting. You know, I'm excited to see what the year comes, you know, and what comes with AI in the current year. You know, I think the nature of R&D type development is it can come in spurts, right, so you don't necessarily know what's going to hit until you fully validate everything. But there's a number of projects in the works that we're excited about.

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

Any just kind of follow up to that question, the comments about the expanded reach on sort of the performance channels via AI, anything you can provide there as far as details? Is that a proprietary versus third-party initiative? What are you seeing there? Yeah, so that used our own proprietary technology.

And, you know, we don't want to get too much into the details of what exactly we did. But, you know, we were able to deploy technology in an effective way to expand our reach. And it was among many things that helped our market in the 50G and re-experiment.

Fair. All right. And then just two quick ones here. Are you seeing any meaningful impact on the return rate, deleverage, or decline as it relates to product or category mix, men's, beauty, home? Or is it too early for that?

So with regards to return rate reductions, you're just going to warn if we're seeing it sort of more broadly across the board, or some categories are more impacted than others. Is that the question?

Now, you're getting bigger in categories that are theoretically lower return, right? Is that too small at this point to be showing up more meaningfully in that return rate on any given quarter?

Yeah, so category mid-shift, including, I'd include in that sort of geographic shift, play this for what meaningful impact in return rate reduction that we saw in 2024. It wasn't the largest area of impact, but it had a meaningful impact. You know, within that, I'd say domestic international was a bigger impact than individual category shift, but individual product category shifted did have some level of impact.

The next question comes from Ashley Owens with KeyBank Capital Markets. Your line is open.

Great. Thanks so much. So I wanted to dig further into the gross margin guidance a little bit. I I know you gave tidbits on tariff versus higher full price sales and then recovering forward. Maybe you just help us quantify the tariff impact you're assuming for Revolve and would love to hear color around your assumptions for own brands penetration given the launch of several new brands this year. And then two, just on the assortment in physical retail, you called out that within the pop-ups, you carried a higher mix of that own brand penetration.

So just anything you've done from a merchandising standpoint to really highlight these brands. is it up front so the customers immediately gravitate towards it is it the majority of inventory or what do you think is driving the higher mix there thank you yeah I'll take that first one and then pass it along so on the growth margin no further specificity on the tariff impact other than to say that the margin improvement that we do see is largely coming from the forward segment um and bringing that back into a more healthy zone on revolve we're planning you know essentially flat maybe a little bit of an increase there so most of the margin improvement is coming from the forward segment we do anticipate uh call it slight to moderate increase in own brand mix in 2025 um that is helping offset some of the tariff impacts most of the own brand launches that we're working on you know really take hold in the back half of the year so more of an impact in 2026 and 2025 but we still do anticipate a mixed expansion on own brands this year and regarding the physical story you know it's so part of why i'm so excited about physical retail is that we're far from optimal on on many areas one of those including our own brand version i think within stores and i believe we actually have less own brand product on a percentage basis on the in the store compared to the penetration on the site but those styles are

just performing incredibly well without massive optimization and visibility. A lot of the own brand section was actually upstairs in far from optimal locations. So I think when the customer is in person and encounters this product, she's loving it. So as we focus long-term, I think that there's a huge upside potential from where we are to where we can be, and it's great to see those initial results being awesome.

The next question comes from Lorraine Hutchinson with Bank of America. Your line is open.

Thank you. Good afternoon. On the last quarter's conference call, you talked about 15% to 16% marketing for 2025, and now you're guiding it to 15%. Can you talk about the drivers that caused that change? Was it just the efficiencies in 4Q, or are there other initiatives in place to help bring that down?

Yeah, it was really just the continued efficiencies that we're seeing in both channels, both in brand and performance, that gave us the confidence to guide to that 15 in 2025.

The next question comes from Janine Stitcher with BTIG. Your line is open.

Hi, thanks, and congrats to the momentum. Two questions for me. First, just on product categories, you mentioned a lot of success with some of the more everyday essentials and some of the newer categories, but can you elaborate on what you've seen within the core business, particularly in dresses? And then just on the cash balance, you've accumulated quite a nice balance of cash here.

Any thoughts on go-forward uses, potential acquisitions? thank you yeah on the on the first part uh dresses performed well um we saw great growth in some of those other categories but dresses was up i think 10 in 4q so you know a little south of the overall growth rate but still very healthy double digit um and the cash balance um you know we're continuing to look at a number of opportunities and continue to um you know be opportunistic there so not much more to say other than that um we have the buyback plan in place and then again just continuing to look at strategic opportunities great thank you the next question comes from matt karanda with

roth capital your line is open hey guys um i just said two i guess um it sounds like a decent portion of the higher gna guide is related to the store build out uh so maybe just if you could help us understand how we should interpret that in the context of the one permanent store that you're adding in LA? Is there more to come in 26? How do we assess success there? And then just on the message for overall margin expansion that we should take away from this, I guess I look at the full year guide. It looks like maybe contribution margin a little bit better, but operating margin potentially kind of flattish depending on what we plug in for sales growth.

So I wanted to maybe see if you could put a little bit of a finer point on how we should think about the opportunity for margin expansion over the next year or two. yeah yeah maybe on the first one um store build out and the cost associated with stores in this upcoming year is a factor i wouldn't say it's the most significant factor in that gna increase there's other investments there including the own brand expansion and some other things we're working on so it's a factor it's not the leading factor in the gna increase um and the overall margin expansion i think you're you're in line there um and it's largely dependent on the top line growth. But we do see margin expansion as a scenario, but again, depending on where top line shakes out.

The next question comes from Simeon Siegel with BMO Capital Markets. Your line is open.

Thanks. Hey, guys. Afternoon. I hope you're all doing well. Congrats. I'm a nice end of the year. Mike or Michael, do you think your customers know that your own brands are yours?

I'm curious if you think there's different customers that come exclusively for third party or for own brands, or if it's really just not that segmented and then jesse can you just remind us the gross margin differential for own brands and then i follow up after thank you you know i don't think our customer really knows the own brand are ours i think they really you know shop the brand you know really for the merits of their you know design fit quality and such like that it's really you know we really drive you know our merchandise with the best product in front of our customer and a lot of times that's you know our own band but when there's greater party product we you know put that you know aggressively as well so i think it really shows that uh teams really working hard to make sure that we did that amazing product internally yeah and then on the uh gross margin

differential i guess the reminder is that we don't disclose that other than to say that it is meaningfully richer than the third-party margin but maybe one additional kind of note there is that the own brand margin is healthier today than it was back in 2019 so that differential has increased. You know, the underlying fundamental metrics that we're looking at on own brands are really healthy. That was our goal as we kind of went into 2023 and 2024. So really good to see that checking. And that gives us, again, the confidence to really, you know, really push here and launch those own brands we talked about this year.

All right. That's great.

And so then in the back of that and on the OPEX improvements you've been seeing and guiding to just any thoughts that you're thinking about made a long-term even margin opportunity, it looks like the margins really moving in the right direction yeah definitely moving in the right direction made a lot of progress in 2024 again entering the year with a focus on efficiency and those variable costs getting a return right down while making investments in ai and other areas so you know to see that come through while making investments and delivering those results was great so um you know over the long term we do see opportunity um in even margin expansion you Our goal is to get into that high single digits and ultimately into the double digits.

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

Thanks, guys. Really proud of the fourth quarter and really proud of the steady progress over all of 2024. Great progress operation, through and through all aspects of the organization, all while making aggressive investments to the future that have potential transformational outcomes. so really proud of the team through and through all across the board and really excited for all that we're working on this coming year this concludes today's conference call you may now I'll disconnect.