Conference Transcript - RVLV 2026-03-11

Jay Soule, Analyst — UBS

Hey, everybody. I'm Jay Soule, UBS's retailing department, stores, and specialty soft lines analyst, and welcome to the UBS 2026 Global Consumer and Retail Conference. Really excited that you're here. Before I go any further, I just want to get the disclosure statements out of the way. As a research analyst, I'm required to provide certain disclosures relating to the nature of my own relationships and that of UBS with any company on which I express to you at this event. These disclosures are available at www.ubbs.com slash disclosures. Alternatively, you can please reach out to me and I can provide them to you after the event now with that super excited to have Revolve here with us today Jesse Timmermans who's the CFO the company series gonna give a presentation and then we'll go into a Q&A session so without any further ado Jesse I'm gonna turn it over to you all right

Jesse Timmermans, CFO

thanks Jay thanks for having us thanks for giving us the coveted 8 a.m. slot lots of exciting things to talk about a lot going on at Revolve so we'll get right into it we'll kind of hit first who we are and what we've built second we'll touch on most recent results. And then third, most importantly, where we're going over the coming years. So we are a leading fashion destination for the next generation. So if you rewind, Mike and Michael, who are still our co-CEOs today and very active in the business, founded the business over 20 years ago. Neither Mike or Michael were fashion guys. Arguably one is still not a fashion guy. So they had to rely on data from day one to make their decision. So So this is everything from data-driven merchandising to actually building essentially the entire ERP inventory management technology foundation from the ground up, all internally developed. And this is very important, especially as we look ahead into this new world of AI and just really what that's built and really ingrained technology in the DNA of our culture. That is combined with a very powerful marketing engine and really addressing this next generation consumer and really connecting with her in a very special and different way, very authentically. We have global reach and consumer appeal, and all of this combines for a very profitable and capital-efficient business model. We operate in a very large and growing global market, over a $700 billion market in the U.S. and several times larger internationally. About 20% of our business is international today. And like I said, we serve that next-generation consumer. The Gen Z and millennial share of household income is increasing, and we are squarely focused on that next-generation consumer, who we feel is still largely underserved today. How we do this? Through two complementary retail segments. So first we have Revolve, which is 86% of the business, and that's complemented, and I say complemented with forward, because it is very complementary. If you kind of look down the line where they're similar and where they're different, where they're similar, very curated, and the powerful marketing engine. Where they're different is largely in the assortment, where Revolve is focused on fashion apparel, dresses, event wear, complemented with Ford, which is skewed more towards handbags and accessories. And we think it's very complementary in that it's a very similar customer. Revolve skews a little bit younger, Ford skews a little bit older. But we know that if the Revolve girl is buying a $300 dress, she's complementing that with a great pair of shoes and a handbag from Ford. So we think there's a massive opportunity to continue to increase the overlap between Revolve and Ford and really tap into that 86% of the business that is Revolve and move her to Ford for those other accessories and handbags and such. And more and more, we are cross-listing inventory across both the Revolve and Ford sites. If you think about IHELSA, one of our more premium brands on the Ford site is also listed on Revolve, is also listed on Ford. And then we'll talk about a recent brand launch that we had just last week, Revolve Los Angeles, that is listed on both Revolve and Ford. So we think there's a massive opportunity here to continue to integrate these two platforms from a consumer perspective and in physical stores. Both of our stores, Aspen and Grove, have both Revolve and Ford offerings in them. We have a long track record of profitable growth. So the combination of that powerful marketing engine and really touching this next-generation consumer combined with a very capital-efficient business model, the founder-led mentality has led to very consistent growth and not just growth but profitable growth. If you look at the 16-year CAGR, 13% net sales CAGR and a 9% both adjusted EBITDA and net income CAGR. And net income is important both from a GAAP basis and non-GAAP on adjusted EBITDA, both profitable. And this has led to significant market share gains over time, 16% CAGR over the last nine-ish years versus 13% for the e-commerce market and 2% for the overall market. So taking share, but still a long ways to go. We still feel like we have very small penetration in the overall market in the U.S. and then even smaller globally. And that stands out, that long track record of profitable growth. And again, not just adjust Debedab, but gap profitability and free cash flow. One of the only among our set of peers to have both of those. What are the key metrics driving our performance? So if you kind of double-click on that long-term track record of profitability, number one, it's active customers. We have a very strong base of active customers, 2.8 million today and growing very meaningfully, 13% CAGR. we had a six percent increase in active customers this past year and that customer buys at full price she is coming to us for discovery for finding what's new she's not price comparing more often than not she is going not to a brand page but for what's new or our different shops on the site so it's very much a discovery in a full price play and it's a premium ticket so a $300 average order value which really sets us apart and especially differentiates us from the very crowded low price point players out there and our customer first mindset very important especially as we think about loyalty and we'll get into that in a minute but from day one Mike and Michael knew that if we wanted to make this successful and really replicate that physical shopping experience the home needed to be the dressing room so again day one free shipping free returns we were one of the if not the first to offer that and that's been critical to our customer experience and that customer experience just continues to get better and better while others are pulling back and making it harder to return slowing shipping not shipping on time multiple boxes coming for a single order our customer experience gets better and better so our CSAT score continues to increase and now over a third of our deliveries happen in one business day exceeding our two day business or two day business day promise and that's earned our customers trust so if we think about how that how that plays out about 56% of our active customers today are existing customers so very very significant portion of our customer base is an existing customer and she's very loyal that 56% of customers place 81% of the orders and 83% and represent 83% of net sales so not only does she come back more frequently representing that 81% of orders, but she buys that higher average order values over time. After you get past the initial one-year drop-off that's typical in e-commerce, year two and beyond, we have over 100% revenue retention, which blended results in that 89% revenue retention overall. And our cohorts are very consistent over time, and we have 20 years of data to look at this. Of course, there's been some volatility given COVID and rebound, etc., But if you normalize for all of that, it's been very consistent over time. And it continues to get better. Our net sales per active customer is increasing. Our orders per active customer are increasing. And part of that is the customer experience that we offer and her trust in the brand. And then also category diversification that we'll get into a little bit later where we're giving her more and more reasons to come back to the platform. And maybe Jay's favorite slide, AI. so this goes all the way back to founding and again Mike and Michael being Mike being an engineer Michael being a business analyst everything built from day one on technology on data so even before this last 18 months of AI evolution using machine learning again relying on the data we have a very rich set of data that's been built over 20 years we have up to 60 attributes on each piece of clothing across that 2.8 million active customers gives us a very rich set of data to rely on and AI is not just a buzzword it's not just one area of the business it really permeates throughout the business so if we think about from the front end and the customer website experience we developed our own internal search algorithm that displays the third-party provider that we're using and it performed better not only did it perform better but we're not paying several hundred thousand dollars to a third party to use that internal search functionality. Also using AI for discovery on the site, different shops and curation using a virtual styling tool on the site. So it starts all the way from that customer experience site experience and then into marketing, using AI and marketing to expand the reach within one of our largest channels, using AI to suppress marketing to some of our high return rate customers. So So not only are we getting better marketing efficiency, but also reducing return rates. And then some of our processes, kind of those midstream processes like own brand development, using AI to speed up the design process. So using AI to create different variations within that design process so it doesn't have to go back and forth and samples and different sketches, we can move faster. And then all the way to the back office. so using AI for customer service translating voice to text to better mine the data better call routing for customer service increase which plays out in customer experience and then all the way to the finance function where we're using an internally developed AI functionality to ingest invoices and process the payable so it really is across the board and it is both I guess maybe three three benefits one is conversion and revenue if you think about the website website enhancements and then two is efficiency we are getting efficiencies we look at some of those back-office enhancements that we've made and then some of it is just increasing speed and velocity and output if you think about the own brand design function or using AI in some of our marketing and editorial processes where we are spending 25% of what we used to given AI but we're output is six times larger so very important and a long ways to go it's moving fast and we are fully embracing it and I think the key differentiator for us is having that again that technology DNA just ingrained in the culture and then entrepreneurial mindset the founder led mentality that team has really embraced this and moving faster than we think anybody else in the sector cash flow we'll kind of flip to balance sheet and cash flow here for a minute. Very strong cash flow over time. We generated $59 million in operating cash flow last year, $46 million in free cash flow. That has led to a very strong balance sheet, over $300 million in total cash at the end of 2025, and no debt. Very important, especially in times of disruption like this, where we can leverage our balance sheet to invest in things like AI, and we can stay on offense and increase and improve the customer experience while others are pulling back. Or invest in marketing while others are pulling back. So we tend to thrive in times of disruption and innovation, and this is a very opportune time for us to invest. With that, if we think about capital allocation priorities, number one, again, I'll go back to the founder-led mindset. Mike and Michael still own 43% of the business. They're still very active in the office every day, grinding more energized and excited than ever, given all the opportunities we have in front of us and that permeates throughout the organization. So number one capital allocation priority is back into the business. That's where we think we have the greatest ROI opportunity. If you look at last year, a lot of investments in the back, kind of behind the scenes to build for a lot of what's to come in 2026. And that was all the way from a little bit of marketing and then also within that G&A line item. We didn't get leverage in G&A in 2025 and that was largely due to the investments we've been making in AI and then in own brands, gearing up for some exciting launches that we have up ahead. Number two priority is thoughtfully evaluate M&A opportunities. We think there is a lot of opportunity out there. At the same time, we're very disciplined on this front, but we do look at a lot of things. Very disciplined, but we do think there's opportunity there. And then number three is return of capital. So how are we doing on these capital allocation priorities? Number one, investing in the business. I mentioned some of these things. AI, category expansion, own brands. We think there's a massive international opportunity, and we'll get into more of these later. Physical retail we think is a massive opportunity. We opened a store in Aspen about two years ago and just opened our store at The Grove in L.A. about two months ago. still 60% of the retail dollars are flowing through a physical door today this next-generation consumer seems to be coming back in and really thriving in that in-store experience so we do see an opportunity there to expand physically number two on evaluating M&A investments and partnerships I would put partnerships in this bucket as well we did make a minority investment in a brand earlier this year that really supports our category diversification initiative we are partnering with Cardi B in a joint venture to launch a beauty brand that is launching shortly so just a couple examples of our kind of M&A and partnership opportunities and then number three return of capital now we do have a buyback plan in place we've deployed forty four million dollars of the 100 million dollar plan at very attractive prices our average is just over fourteen dollars versus the stock price whatever it is today or twenty towards the end of February so we'll touch on our most recent results we had a very strong fourth quarter and entered 2026 on very strong footing so in the fourth quarter double-digit top-line growth the great thing is that this top line growth wasn't just one area it really was across the business so 10 percent overall double-digit across both revolve and forward and both domestic and international. We also saw great category diversification. Beauty was a standout at 43% growth. Our fashion apparel grew at 11%. Within fashion apparel, outerwear was a standout. So really showed the progress we've been making on category diversification. We expanded gross margin both for the quarter and the full year, about 90 basis points for the full year, despite a lot of headwinds this year, of course, given tariffs and a lot of the challenges out there where others have seen contracting gross margin like actually expanded gross margin and then had leverage across most line items on the P&L which resulted in a forty four percent increase in adjusted EBITDA for the quarter and thirty five percent for the year so again in a challenging year where others are struggling we've seen bankruptcies the tariff pressure actually delivering a forty four percent increase in adjusted EBITDA was phenomenal and then I mentioned 2026 is off to a great start we saw 16% growth for the first seven weeks of the year there was some comp dynamics there as we're comping the LA wildfires from last year but despite that the two-year growth is maintained pretty consistently through the fires and then exiting that fire comp if you look at our two-year growth and kind of normalized for a lot of those comps we are at about 15% to your growth in Q3 that accelerated 26% in Q4 and then And again, really great progress for the first seven weeks of 2026. And I can't not mention all the disruption and turmoil out there in the luxury industry and how that compares with how we're doing on the forward side of the business. So you all know about the Saxon-Neiman bankruptcy most recently, but this really started several years ago with Farfetch matches. We had Essence, Luisa Villaroma. So a lot of turmoil out there in the luxury industry that we think benefits us. There's one report that says there's $500 million to $1 billion up for grabs in this luxury sector. And while others are going bankrupt and struggling and pulling back on inventory buys, pulling back on customer service, cutting heads, not paying bills, Ford grew 14% in this most recent quarter and delivered a 33% increase in gross margin. So we think this is a very opportune time to invest in Forward. We've been making those investments. We've seen brands come to us, so both from a brand expansion opportunity and then also marketing. We've been increasing our marketing on the Forward side of the business. We just named Rosie Huntington-Whiteley as our fashion director on the Forward side of the business, which resonated really well with both brands and customers. Forward is performing really well in-store. And our personal shopper program has been really important in that growth. So this is really focused on that high-value customer, that VIP clienteling. That business grew over 100% in 2025. So a lot of opportunity in the luxury side for forward. Now, the most exciting part, where are we going? So five key priorities. And I would say outside of number one, there's really no one that's more important than the other. But if we go through these, number one is increase the customer base. That's where we see the most opportunities, still 3% penetrated in our core demographic. Number two, broaden our product offering. Number three, grow international sales. Number four, expand own brand mix. And number five, invest in physical retail. So we'll hit on each one of those here. So number one, increase our customer base. As I mentioned, we think we're about 3% penetrated in our core customer demographic, and that is on a customer basis. If you look at females age 18 to 44 in the U.S., we are about 3% if you look at our active customer base. Also, if you look at our revenue of just over $1.2 billion compared to that $700 billion TAM in the U.S., less than 3% penetrated. And if you don't believe any of that, you can look at comparative active customer numbers for some of the peers out there. So even if you just pick one Nordstrom at 30 million active customers versus our 2.8, there's a lot of customers up for grabs out there. And again, back to the luxury point where others are pulling back, customers are frustrated, brands are frustrated. We see a huge opportunity to continue to expand our customer base over time. So that's the number one priority, number one ROI, number one investment. We are investing in marketing this year, largely behind a new own brand launch that we'll talk about. But that's also a halo for acquiring new customers and really expanding our customer-based category. Diversification is an important part of this, so a lot of opportunity there. Number two, I mentioned broaden our product offering and increase loyalty and really tap into more aspects of our life and give her more reasons to come back, increase that retention, increase the frequency of orders. And this is across a number of different segments here. So beauty, number one, is about 6% of the business today in the fourth quarter, 5% in 2025. We think that can be double-digit percentage of the business. That grew up 43% this past quarter. Phase one for beauty was really getting the selection right. And beauty is very similar to the overall revolved business, where it's very much about curation, emerging brands what's new and giving her that kind of discovery we feel like she's getting bored with some of the other players out there so really giving her that engagement and discovery on the revolve and forward platform number two I had on his men's men's we feel like it's a huge opportunity and that customer is very underserved today in this demographic from a multi-brand perspective so we think there's a big opportunity here in men's the combination of beauty men's and home grew at over 2x the overall growth rate of our overall business in q4 in similar to beauty phase one is really getting the brand assortment right and getting that that curation right on the men's side made great progress there brought in a new leader about two years ago that's really really developed the own or the men's assortment so phase two on both beauty and men's is now start to market and really really improve the site experience for both of those segments. And then even within our core, that core female customer, we see a lot of opportunity for other aspects of her life. I mentioned outerwear, but there's also essentials, the Monday through Friday attire, more basics. Active is another huge opportunity. So a lot of opportunity here that feeds into own brands. I'll skip to own brands because we do think that own brand complements this category diversification through development of both new own brands and then also expanding the assortment within our existing own brands so some examples here new brands like Sofia Ritchie we launched about a quarter ago so this is SRG partnership with Sofia Ritchie more I guess you would say kind of more of those kind of I wouldn't say essentials kind of elevated essentials not necessarily event where the revolve known for additional categories with our existing brands for example help us we also have a huge opportunity internationally this past quarter we designed developed and sold a own brand our first own brand within China so this brand was designed specifically for the Chinese customer in China both from a design and fit perspective it was developed and manufactured in China it was fulfilled from our Hong Kong warehouse and sold via live stream we had a hundred thousand viewers on the live stream and because it was designed specifically for this customer a very low return rate so not only was a great customer acquisition tool but very cost effective and efficient given that the return rate was much lower than our overall return rate because of that design element and then also fulfilled all within the country so we see huge opportunity here for doing more of that. And then just a few days ago, we launched Revolve Los Angeles, our first namesake brand. This is what we think will be very transformational. We are investing marketing behind this in 2026. It's not just about this one brand, but we think it really provides a halo for the overall business. And it really started with kind of the relaunch of our Reimagine logo back in December of 2025. So it was redesigned, reimagined the logo. That fed into this launch of Revolve Los Angeles with this first launch. That will be followed by several more launches. So we think it's really exciting, both from a category expansion opportunity, also from a brand halo opportunity. And people are asking, why now? And what is this? More often than not, when you talk to a customer on the street and you ask her what brand she's wearing, she doesn't know. She just says Revolve. So that told us there's a huge opportunity to create a Revolve namesake brand. Also, if you look at the Add to Cart, 95% of the Add to Carts don't come from a brand page. They come from whatever funnel she's going through for discovery, whether it's one of our shops or searching for what's new or one of the curated selections that we have. So huge opportunity there, more to come. A lot of investment behind this in 2026, and a lot of the groundwork has already been laid behind the scenes in 2025. Then I'll go back to international. So, huge opportunity internationally. If you look at our 21% penetration internationally for us versus the 78% overall for the market, we have massive opportunity to grow internationally. Phase one of international was really get the customer experience right. from shipping to payment methods. Phase two is really getting the merchandise right and starting to really market to market for that international customer. So a lot of opportunity here. China is a massive opportunity. I mentioned the own brand launch that we've had there where there's more to come. Also leveraging these channels specific to China. For the rest of the world, social media marketing is largely consistent. It's very different in China, so partnering with the Tmall, Duyans, Reds of the world to really engage with that customer in the way that she shops. And then physical retail. We say prudent expansion into physical retail because we acknowledge that we are very good at online. We've been doing online for 20 years. We have not built the retail muscle yet, but we're getting there, and we're getting there fast. We opened Aspen two years ago, like I mentioned. We opened the Grove just over a month ago. or two months ago so a lot of opportunity here but again being very prudent and disciplined about our expansion we also acknowledge that Aspen and Grove are two very unique destinations Aspen is a very affluent customer nobody's from Aspen that shopping at the store so it's hard to get a good read on the halo effect from that Aspen store very low traffic but very high conversion high price so very productive store but also a very unique store And then we have the Grove, which is higher traffic, lower conversion, skews a little bit more Revolve, a little bit more towards that premium price point versus the luxury in Aspen. So after we get a few months of experience and data from both of these destinations, we'll start to learn more and push the accelerator down. That said, we're not holding back on talking to landlords. The Grove has been a great example of landlord recognition. Rewind six months ago, we're talking to Tier 1 landlords around the country, and they had no idea who Revolve was because they're physical people. They think in the physical world. They didn't know about Revolve, which is predominantly online. After opening the Grove, they're now coming to us all of a sudden with space open. So we are in active discussions with landlords. These things take time, but we could reasonably see one to two more stores in 2026. As I mentioned, there's still a lot of dollars flowing through physical doors. The next generation consumer is seeming to now kind of be back in store and really embracing that physical experience. What we're seeing so far is that the new store, the stores are a great source of new customers. We're also seeing great productivity from our own brands. own brand mix is skewing higher in store not just from a mixed perspective but also from a skit sales versus inventory productivity perspective and the return rate is a fraction of that of our online sales so a huge opportunity here as physical stores expand to reduce our return rate which provides significant leverage on the on the P&L with that I'll open it up yeah if you have any

Jay Soule, Analyst — UBS

questions. We'll see if any questions came in on the iPad here, but I'll start with just one question because, you know, Revolve Los Angeles is a big initiative for this year, and, you know, you touched on, you're making a lot of investments. Can you just dive in a little bit and tell us a little bit about what the big picture plan is, you know, beyond this year? Like, where do you see that going? Obviously putting a halo over the entire Revolve brand, but on that. Yeah, yeah,

Jesse Timmermans, CFO

we are super excited about this. This has been, I would say, years in the making. We've thought about this for years we thought now is the right time given all the investment we made in our own brands platform the expansion that we've experienced there and then again like I mentioned when you talk to somebody on the street they don't know what brand they're wearing they just think it's revolved so that told us we have the brand power to you launch a brand with the revolve name and then also that that add to cart rate stat that I mentioned where 95% of the add to carts are coming not from a brand page but from discovery so all of that said we thought now is the right time there's also a lot of again opportunity and disruption in the market putting a lot of marketing behind this because we do think it is transformational for the business this is the first launch it is very elevated I know if you've seen it on the site we've already had several of those styles sold out but this will be followed by a number of events and then also several more jobs I think three more drops this year that really kind of double down in our category expansion opportunity so we think it's huge both from a new customer acquisition halo effect for the overall overall business cross-listing between revolve and forward and then and then that just that expanding more more categories and going deeper on own brand okay sounds pretty

Jay Soule, Analyst — UBS

exciting it is yeah we're super excited all right now maybe um i don't see any questions on the ipad so we can do just show of hands if you want to ask a question and if anybody shall ask one more and then hopefully everybody can start raising your hand but one thing that i find interesting about the company you put the slide up about you know the consistency and the growth rate high growth over think was it over 16 years it was 16 over the okay you know historically revolve is a company that really focused on women's dresses that was like the main category and and that's sort of thought of as a very fashion-sensitive category, a volatile category, a category depending on trend and getting trend right, which is not easy to do. And I guess if you didn't know that about Revolve, if you didn't know what Revolve does, and you just looked at the consistency of the growth, you would never guess it was in such a fashion-sensitive category prone to volatility. So the question is, how is it that the growth has been so consistent, yet you play in such a volatile category? Because that's a pretty good trick. To be able to grow consistently and be profitable and generate cash flow, but yet play in such a fashion-sensitive space?

Jesse Timmermans, CFO

Yeah, yeah. That's a great question. So I think it comes down to maybe two things. One, again, is Mike and Michael still owning 43% of the business, very founder-led, owner mindset, and growing at the right pace. So I think that's really important. Investing in brand has been important. So about 25% of our marketing goes to brand marketing. You can't see a direct, like, day one ROI like you can on digital performance marketing. But over the years, you really build a strong brand and that loyalty with the customer. So I think that's number one is that founder-led mindset, investing in the brand, really building a brand, and growing at the right pace. And not kind of hack at all costs or acquiring customers at all costs, but staying profitable and building a strong balance sheet. and then number two is the data and technology component so again from day one Mike and Michael again they were not fashion guys when they started the business they had to rely on data to make their decisions so everything from day one was homegrown internally built data-driven merchandising so to your point it's a very volatile category styles come and go trends come and go so to be able to manage inventory and cash flow so well and grow so consistently is really remarkable and it really comes down to that data-driven merchandising So we will buy very shallow initially, and then we can read how those products are working, how those styles are working, and then reorder into those products really quickly. And not only from a reorder perspective, but even the new styles are not necessarily new because we have up to 60 data points on each piece of clothing. So we know from our 100,000 styles on the site and 60 attributes on each piece of each one of those styles, what style and what attribute is working. So we can kind of piece together different attributes across different, not even dresses, from dresses, pants, tops, figure out what trend is working, and then buy into that for the new inventory. And, of course, the better the new inventory is, the better the reorders will be. And about two-thirds of our inbound incoming new inventory is reorder. So that kind of tells you that that ratio between, you know, that shallow initial buy versus the kind of the overall.

Jay Soule, Analyst — UBS

Let me ask you one. I'll follow up and then I'll put it to the audience. But how much does the success over the last 20 years inform us about the potential to maintain, you know, consistent, stronger? Not necessarily the same growth rate every year, obviously, but, I mean, just a good growth rate because it sounds very clear. I mean, 60 attributes, identify trends, reorder quickly. have you has the business model had to evolve over time like just change based on the consumers going here and going there in other words have is what what the company's done over the last 15 years is that you see that like just the process and the way you analyze the business the way you follow the customer is that durable is that consistent I mean does the you know you need to read build you rebuild the operating model every year just based on the way the world is changing or is it like pretty like there's some fundamental first principles that are just applied all the time which is going to help drive growth yeah yeah

Jesse Timmermans, CFO

I think both I think you have those first principles that will always be there and then you have things like AI that comes about that really accelerates those first principles and I'll use maybe our markdown algorithm as an example we made huge gains on gross margin this year using AI to influence our markdown algorithm so as I mentioned over 80% of our sales are at full price but for that 20% that is on markdown the markdowns have been algorithm driven both from a kind of a velocity and how fast you mark down and then how deep the markdowns are this has been data driven using machine learning and now with AI we're able to really just supercharge that process which resulted in again significant gains on gross margin so that's one where first principles the core is there but using new technology to really emphasize and supercharge. So I think that will be the case going forward. The core will be there and then we'll leverage new technologies to really stay ahead of the others. Okay. Now I don't want to

Jay Soule, Analyst — UBS

just take advantage of all Jesse's time. Anybody, Joe, any questions anybody wants to ask? I know it's early in the morning here. Maybe I'll just

Jesse Timmermans, CFO

If we accelerate stores it will be margin accretive and top line accretive. So that is our goal and that's our baseline is it has to be top-line accretive and bottom line four-wall EBITDA margin accretive now there is some overhead that needs to be built and we've made those some of those investments in 2025 and that's some of the investments that went into G&A where you don't see the G&A leverage in 2025 so hired a head of retail and now kind of supplementing that head of retail with dedicated buyer dedicated planner visual merchants and things like that there is incremental capex so you saw an uptick in capex this past year a large part of that was the grove the grove we really wanted to make a splash with the grove to really set the stage and build those kind of set the precedent with landlords across the country and the world I wouldn't expect capex for future stores to be to the magnitude of the grove store but there will be more capex than there has been in the past with the stores yeah still very small. We haven't quantified it yet. Again, we want to get some experience under our belt with the Grove and get a couple seasons under our belt before we get too granular on the specifics around the stores, but still small today, but very productive on a store-by-store basis thus far.

Jay Soule, Analyst — UBS

I'll throw it in there about forward, just because

Jay Soule, Analyst — UBS

I think you mentioned gross margin, a lot of improvement in gross margin with A lot of improvement in gross margin. And I think a question that I think comes up as you like how'd you do that you maintain that growth rate that gross margin forward

Jesse Timmermans, CFO

yeah yeah a large piece of that forward gain was the markdown algorithm uh improvement so really improved both the full price mix and then the markdown margin within forward um that said there was also other inventory improvements that we really got forward inventory right size this past year after a lot of volatility from covid and then coming out of covid and then the hangover after COVID, so we're kind of now normalized. So we're about 42.5% margin on the Ford business. We think that's a good place to be. We've been higher, we've been lower, but kind of in that low to mid-40s is a good healthy place for the Ford business to be. That is lower than the Revolve business, largely due to the product mix, where Ford does skew more handbags, shoes, accessories versus that higher margin dress category. But those categories also have a lower return rate and forward carries a much higher average order value. So by the time you get down to contribution margin, it's plus or minus neutral to the kind of relative to Revolve. Yeah. So number one is invest back into the business. Mike and Michael being founders, still owning 43% of the business, very long-term mindset, very aligned with shareholder interests and building that long-term value. So that's number one. You saw that in 2025 with a lot of investments in GNA, which on the physical stores, and then also really building behind the scenes the own brand team and process ahead of this launch that we had this past So a lot of investments in kind of back office and support in 2025, and then in 2026, a lot of investment in marketing, both for the specific own brand launch Revolve Los Angeles, but then overall Halo, and then also Beauty and Men's, a much smaller portion of that marketing spin but more emphasis on beauty and men's in this coming year so that's number one and number two is thoughtfully evaluate M&A we look at a lot of things we think there's a lot of opportunity out there but we are very disciplined when it comes to that we made a minority investment in a small apparel brand earlier this year that really emphasis our category diversification also a partnership with Cardi B to launch a beauty brand that is launching shortly. So more of that to come, but again, very disciplined and opportunistic, I'd say. And then number three is return of capital via our share buyback plan. So we have $100 million authorization. We've deployed $44 million of that at very attractive prices. So that's kind of number three and a backstop to the first two. Yeah, yeah, we think agentic commerce is an opportunity for us we are seeing significant increase in traffic from LLM and other players out there very small piece of the overall pie today but growing very rapidly we're also experimenting and testing with more agentic features on the site so surfacing more relevant the most relevant Q&A and also testing more you know call it chat bot technology where she can really engage with the site so we think it's an opportunity and again given our technology DNA our innovative culture we will fully embrace it and you know I think if you look back in time and all the other kind of innovations and disruptions that have taken place over our 20 years we've been able to capitalize on these and take advantage I think you know faster and better than others yeah yeah so about on average because it is it does fluctuate quarter to quarter and month to month. But on average, over the course of the year, about 25% of our marketing goes to, I'll put it in, brand marketing. So that's both events and influencers. Events being things like Revolve Festival is coming up in another, I guess, only a month away now. And then more events coming and kind of influencer-type marketing around this Revolve Los Angeles brand in this coming year. So if you look at the marketing guidance that we gave for this year a pretty meaningful step up from last year the vast majority of that is in the brand marketing pocket and that actually brings us back to our historical average the last two years have been very efficient on the marketing side specifically brand marketing so two years ago Michael challenged the team the brand marketing team with getting more efficient on festival so this is a great example where we cut the festival from two days to one day. The budget was half of what it was the year prior, and we generated more press and social media impressions as a result. That was in 2024. 2025 challenged them with getting even better, and they did the same, cut the budget again, delivered more press and social media impressions. So the core of the brand marketing has gotten really efficient, which now gives the opportunity with that strong foundation to invest this coming year, both, again, specifically for the Revolve Los Angeles brand, but again, overall halo effect for the brand. We think it's going to be very meaningful. And then Beauty and Men's, why now? It's actually been building for quite some time. I think we launched Beauty in 2016. So it's been a slow build. During COVID, it spiked, I think, you know, over 6%, maybe higher percentage of the business given the shift in kind of what she was looking for during that COVID time. But a great example of how we were able to pivot given that time in our history from dresses and event wear into beauty and other categories and really serve her needs. And now for 2025, it's about 5%. We think now is the right time. We've invested in leadership there and really building out the assortment, and that's phase one. Now we'll start to market. I think another reason is there's some, you know, I would call it fatigue out there with the existing multi-brand beauty players so we think you know having a very curated kind of that revolve discovery emerging brand offering for the customer is really important and then also in store it works really well in store so it's all kind of coming together men's again we've had men's over time just more recently in last couple years invested in leadership they're really getting the brand assortment right and I think also having the having the brand power that we built over the last 20 years also you know just having more scale really helped enable that investment and again I think that that male customer that next generation male customer is largely underserved from a multi-brand perspective for this for this aesthetic

Jay Soule, Analyst — UBS

I think that's a great place to stop thank you so much for your time everybody thank you Bob thanks everybody thank you