Hello. Great. My name is Dylan Cardin. We have Mike Kernikoulas here, the CEO of Revolve. He's going to do a presentation for everyone. I'm required to inform you that the disclosures are available on our website. So that's all you need from me.
Great. Thank you. Excited to get started. I'm Mike Kernikoulas, founder and CEO of Revolve. So Revolve is a leading online fashion retailer. We're founder-led. I've been at this 20 plus years. We're profitable. Profitable every single year but one, 2008. We're a fast-growing company, growing faster than the market in the past several years and also the past 10 years if you look at it. And we'll have some slides on that later. And importantly, we're a company that is built on data and technology. That's actually our background. Our background was not fashion. It was engineering and business analysis, my co-founder and I. And we're built on community and culture. We have a very unique brand marketing strategy. And we're built for the age of social media. And importantly, we're built for the age of AI. And we have a lot of exciting things going on in AI. It's transforming retail. And I think there's no company better positioned in the fashion space than us given our background and given everything we've accomplished with data and technology over the past 20 years. And you can see some high level numbers of us were a billion dollar size plus company. But you know, we're very small in the overall marketplace. It's a huge market, 700 billion plus. We have a huge opportunity in front of us. We're rapidly growing and we've got a ton of exciting initiatives to continue to drive the growth going forward. All right, and so just a little bit about us in terms of what differentiates to evolve, why we've been so successful. By all accounts, if you looked at us when we started, we probably had no business being successful, no reason to be successful. My business partner and I, we founded this out of the house in our early 20s, going up against behemoths with a lot of money. but we were able to succeed and become really the premier brand in the premium fashion space, you know, due to a number of things that we've historically done better than others. And the thing I'll start with that we've become best known for today is our brand, where in this premium fashion space, I'd argue no one has a stronger brand than us. Certainly no one does it in the way that we do. The first slide that we were on, I'll actually back up a slide here. Picture there of Revolve Festival. I'd argue there's no other event out there among brands like it, where it's become this iconic cultural moment within the Coachella Valley Music Festival. It's known worldwide and attracts thousands of influencers, gets billions of impressions on social media, and is really an iconic cultural moment. And, of course, that's just part of what we do. You know, that's the highlight of our spring marketing. But we're known for influencer marketing. We've pioneered it, and we're the leaders in social media marketing. And, you know, if you look at compared to our competitors in the premium space, particularly multi-brand, right, they've never really mastered social media and brand the way that we have, you know, a company like Nordstrom, who's among the legacy players that we've been taking millions, hundreds of millions of dollars of share from, and they're still, you know, $10 billion plus company. They've never quite mastered social media and brand in this new age. And it's one of the key reasons we've been able to take share from companies like them. The next one proprietary data and technology I don't think there's a company like us, you know, certainly others have great technology out there, you know. You know, in most cases we can't compete directly with the company like Google, but as i'll show you later on. We actually replaced the search technology of a company i'll call it such as Google I don't want to name the country, but essentially a company essentially leader in search with our own AI search technology that significantly outperformed them. over a double digit increase in performance versus the incumbent. So I don't think there's anyone out there that has the level of tech DNA that we do in the fashion space with the level of investment that we have where we're able to invest but still run a profitable company where we've been profitable again every single year but one 2008, that was the great recession. And we'll get into some examples later but we'll talk about the ways in which this technology makes us better and gives us a better experience for customers. And again, has been creating this destination, this experience that drives customers towards us and away from these legacy players. Moving on, we have multiple large growth vectors I talked about in the opening slide that we're still a small, very small player in the overall market, 700 billion plus apparel market. And if you look at some of our most direct competitors, like some of these legacy department stores it's tens of billions of dollars of share at stake right in terms of you know that they've been seeding to us over the years and we think that process is only going to accelerate as companies like ours which are built for the next generation of consumers continue to take share and then you know moving on you know last one i touched on strong profitability strong consistent growth we've grown in nearly every single year there are a couple down years they're all macro related and i'm being founder led with a long-term mindset we've always been willing in a period of macro trouble or in a period where the business needs to reset to take down revenue a bit. But we've grown nearly every single year. We've got very consistent growth in cash flows. We'll talk about it. Since IPO, we've generated hundreds of millions of dollars of cash flow. Again I think very unique for digitally native retailers and for tech focused companies like ours. All right. Telling you a little bit about our company and the brands that we carry. So we're Revolve Group Inc. We're primarily known for Revolve. That's our main business. It's about 83% of the overall business revolve operates in the contemporary space. It's premium product, close to a $300 AOV. And then we also have a smaller portion of our business for it is our luxury business. It's maybe more comparable to a Saks or Neiman Marcus in terms of the price points that it carries a much higher AOV about double that of revolve, a little bit more than double that of revolve. And it's also doing quite well. And as we'll talk about with the disruption in the luxury space, there's a lot of opportunity for Ford. And these two pieces fit together really nicely in a complementary way. Revolve customers, as they gain in spending power, we can graduate them up to Ford. And so these two sites very much complement each other and are built on the same technology backbone and on the same brand marketing engine. All right, looking at the market opportunity, already touched on it. Huge market. It's large. It's growing. There's a number of growth vectors that have been helping fuel our momentum, certainly e-commerce growth over the years. And, of course, more recently, e-commerce growth is tapered compared to physical, right? And e-commerce is still outperforming physical. It's not quite as strong as the growth driver was before, but it's still a nice tailwind. Importantly for us, though, and we'll talk about it, physical is something completely untapped for us, or nearly completely untapped. We have two physical stores now, and that's more than half of the market that's completely untapped for us that can really supercharge our current growth algorithm, which is already going at a nice rapid pace. Moving on, looking at some key metrics driving performance. I think the most interesting thing on this slide is the percentage of net sales at full price, 80% plus, which is very much an outlier in the fashion industry to achieve those levels of full price. And that speaks to our data and technology and our process and our capabilities and how we're able to bring this better experience to customers. If you look at the legacy department stores, they're in the 60% zone, and we've consistently been able to achieve numbers close to 80, and in the past five years, 80% plus, which is also something important. And as we improve our technology and our processes, we've been driving long-term improvements in how we do business. And I think this very much speaks to both the profitability profile of the company, but also how we're able to create a better experience, a better destination for consumers. We know how to present product to consumers. We know how to bring up the right product to consumers in the right places with a lot of our personalization algorithms and recommendation algorithms, related products, et cetera, which are nearly all homegrown. And I'll say with regards to homegrown tech, too, we are agnostic. So, you know, we're not religious about it. We don't do homegrown stuff just to do it. And sometimes we'll use a third party. But we always put our best up against what the best is out there, right? And I mentioned on the search, for many years, we actually used the search technology from the leading player in search. And we'll always do that. But the fact that so much of what we do is homegrown speaks to our very unique capabilities. And I think the reason we're able to outperform these companies that have larger investment is because, you know, Certainly, we're great at tech, but we know fashion in a way that these tech-focused companies do not know fashion. So we know how to craft technology to the fashion space. And then, of course, we know our customer and our brand. And so these abilities to kind of customize and tailor technology to what we do, which is something that the big companies can't do, is why we're able to out-compete them and produce better technology, which ultimately produces a better experience, better financial metrics. And then, you know, the other thing I want to talk about is customer loyalty, which comes from combination of things the great on site experience that we provide customers which again is powered by technology it's powered by brand is powered by data. It's also powered by a mentality customer centric customer first mentality really going back to this idea of that we had no business succeeding 20 years ago, and you know I always liked the slogan from I think it was Avis many years ago. years ago of we're number two, so we try harder. And so that was always the mindset that we had. We're the underdog. We're gonna try harder. We're gonna be the best at every single thing and starting with customer experience, you know, so very customer centric, free shipping, free returns. We were the innovators of that, along with Sappos. I would say we both independently invented that concept of the home is the dressing room for us back in 2003, it was a core founding principle, but just beyond that, just having incredible customer experience across the board. You see in a lot of the metrics that we mentioned, really high customer satisfaction ratios. We also have, and I think it's on the next slide, we'll talk about our customer retention, which is really high. And we still to this day include pre-printed return stickers and labels in every order that we ship, which is something that the Zappos of the world and the Zolandos have actually gone away from as they've looked to get, you know, kind of last bits of profitability out of their customer. And it's not to say that we'll never do it, but we will probably never do it. You know, I'm never religious about anything, but I always have a long term mindset and I know that customers come to us for that experience. They know we're going to provide a better experience than anyone else. And if I'm looking for margin, I'm generally going to get it elsewhere. And I talked about the customer loyalty. So we have, you know, really nice revenue retention rates. Eighty nine percent revenue retention year over year in the most recent year, very much in line with historicals. Now, during the COVID and post COVID period, you know, if you look at historical numbers, you see that number going around, you know, up and down just kind of due to the macro going on. The 89%, very strong number. And again, very much in line with historicals. You can see we have a really nice continued growth in active customers over time. And, you know, when you treat your customers well, and, you know, I was talking before the meeting with some folks about some other companies they were looking at that had some financial troubles but I pointed out this is because of their model, right? Their model locks people in. They're not treating customers well. You can show growth for a while, but it's hard to show consistent growth for 20 plus years if you're not treating your customers well, if you're not providing the best in class experience. And that's always our mentality. And again, you see it in those revenue retention rates. And that's why we're built for long-term success and why we're able to continue to grow year after year. So 20 plus years of data and technology. We talked about it. My background was in engineering before founding Revolve, all of our core systems are homegrown. You know, I'm proud to say many of the core systems that we built 20 plus years ago are still powering a billion plus company today. They were built right from the start to scale. They're built to be flexible. They're built to allow us to continue to innovate. And, you know, again, it shows up in the numbers and we're constantly improving our algorithms and algorithms and tech. Like last year, one of our big wins was we made a significant improvement to our markdown process, which the original markdown process was automated. It was actually written by me, like probably 18 plus years ago. And I actually challenged the team around a year ago. I said, Hey, look, we have these things. It was written by me. You know, I'm proud of that. I'm glad we're still using it, but I'll bet we can do better, right? We have a big team now and, you know, incredible team of really smart people. Like, let's take a look at that. Let's see what we can do better. Also technology has changed, right? AI technology, a lot of advances in technology. Let's see what we can do. And so, you know, the team dug in and they were able to create some new, better automated processes, leveraging the latest technology. And there's also where we had a huge margin gain last year versus expectation, even with the impact of the tariffs, we showed strong margin gains last year. And so it's just an example of how we're continuing to innovate. The algorithms that power our site, the recommendation algorithms, the personalization algorithms, all built on homegrown technology. And so it really covers all facets of our business, allows us to be more efficient. We have really cool technologies that allow us to automatically process invoices. In the age of AI, it's disrupting, you know, I'd say life in general, in a good way, right? You know, business life, you know, maybe it hasn't quite disrupted yet. And Revolve is built for this moment because we have such a strong foundation in data and technology. And I'll talk about a few really cool examples that we've, you know, demonstrated publicly before on the next slide. But also one really cool anecdote, you know, is my co-founder and co-co and I, you know, constantly have conversations with the team. And say maybe it was a few months ago, we were talking with one of the senior engineers who's very heavy in AI work for us. And, you know, we're talking about some recent work he'd done and we're talking about, OK, what's the next low hanging fruit we can go after? Because, you know, as the CEO, that's typically how you think. What's the low hanging fruit, right? What's the next easy win? And the engineer came back and he said, I don't want low hanging fruit. Give me high hanging fruit. Give me something really difficult. Right. And which is great. And that's the mentality of the people that we have. And so the project we gave this person is actually regarding our retail stores, which is still a new area for us. but we wanted better tracking of movements of customers in the store, what they were doing. For example, how many were going into the dressing rooms, how many were going to different areas. And so we challenged them to use the latest in AI technology to be able to track what people were doing out in the store, to be able to count how many people are going in and out of the dressing room, how many people are going in and out of certain areas, right? To help us build those foundational data pieces for physical retail that we've always had on the online side. And within, I would say around a week, a week and a half, this guy came back and he had an incredible prototype. I swear, it looked like something out of the Terminator movie, right? You know, you can see the videos and it's auto-targeting, you know, and counting all the people. And I think it just goes to show how in this age of AI, a company like ours and a team like ours is really able to move fast and innovate and use the latest in technology to, you know, to disrupt and do things in a better way than these legacy players out there. And these are the things that have made us successful online and are going to make us successful on the physical side. So a couple of cool examples here, I don't know if my eyesight is getting old in my age, but I've got a bit of trouble seeing some of these slides. So first one, AI-powered search, we talked about it. Really cool, double-digit gains versus the incumbent, the worldwide leader in search. Again, just goes to show the power of what our teams can do. On the slide, there's an example of an AI search, the type of search that AI does better than traditional search. You know, traditional search is very good with specific keywords, you know, or, you know, and, you know, it has some tricks that can layer over that where it can know certain words are similar to another, where AI search excels at is things that might not necessarily show up in labels, right? Things that might be more vibes or feelings or aesthetics, right? Where if you don't have incredible tagging across every product, it's not going to show up. And so we've got an example here, dresses in Ibiza, I believe is the example. And the AI powered search is able to immediately know what that is. And it doesn't matter that none of the dresses are tagged as Ibiza. The AI knows what the vibe of Ibiza is and it knows what the vibe of our dresses are and is able to put together the result. And it's pretty darn incredible. Next one, AI enabled virtual try on. This is actually through a third party partner of ours. And, you know, we do have a mutually beneficial financial relationship with them and essentially an interest in this company. But it goes to show how we will use the best in third party technology also. We've seen really nice gains with this tool, allows customers to, on a virtual model, create outfits using AI pretty much in real time. We have not really spread this across the whole website in a big way yet. We're starting to expand it. It's supported on a large number of products. not all of them yet we've seen really strong gains here it's just another example of how ai really improves the customer experience and then the last one here generative ai q a you've seen on other sites such as amazon this is another thing that we're rolling out and of course you know amazon has great tech as well so we've rolled this out on our addresses category on the main website and we've seen nice lift with that and so that's something that we're rolling out across the board all right diving into some key financial metrics so long-term track record of healthy top-line growth most recent quarter things are accelerating 16% growth year over year in Q1 so you know we've been at this you know 20 plus years but we think we're getting better than ever and we're getting stronger than ever and certainly you know in the age of AI and technology where we think we're we're built to accelerate and take advantage of this current opportunity and then again you can see you know kind of nice growth and continued growth and active customers over time next one consistent profitability profitable every year This shows the profitability and adjusted EBITDA over the past couple of years. A nice consistent growth there. Nice expansion in margins as we've grown revenue at the same time with 90 plus million dollars in adjusted EBITDA in the most recent year. And again, leading to market share gains over many years. So 16% CAGR over the past, you know, approximately 10 years, outpacing the overall econ market at 13%. And, you know, we believe that's because, you know, we're able to take share from these players and that we've got a better experience for customers. And then finally, here, you know, on the kind of financial target side. So progress towards our, we'll call it medium term financial targets. So it is a big growth, a big focus of ours to increase our margins over time. You know, as a founder, I'm always going to put experience first, customers first. But, you know, as a business person, we have to run a profitable business. We've always done so, but the most recent trailing EBITDA margins in the past 12 months, close to 8%. You know, that's not where we want to be. We want to be at 10% plus in the midterm, and so we're driving towards there, and, you know, we'll do the things, you know, to kind of tweak the levers we need to do to get there. And there's a couple of levers that we'll talk about. And then longer term, I want to be at 12% plus, and I think that's a nice, healthy place for a business like ours to be where we're balancing profitability and customer experience and growth. Cash flow generation. Since IPO, we've generated hundreds of millions of dollars of cash. You know, something I'm very proud of is a founder-led bootstrap company. For the first nine years, we've always been able to generate cash. We've always run our business in a very disciplined way. And that's continued post IPO. And I think it's very much differentiated from other digitally native companies. You know, and, you know, we combine the best of, You know, probably the old school, old school, physical retail merchandising mindset and, you know, kind of profitability based mindset with, you know, the newest and latest and greatest in tech and the mindset to drive and innovate there. And then talking about capital allocation as a founder led business, we have a very long term mindset. First and foremost, we want to invest back into the business. Of course, since we try to run an efficient business, we often have excess cash and we've been building up excess cash. And it's often a question I get from investors, what are we planning on doing with all that excess cash? And, you know, as the largest shareholders in the business, my founder and I still own 40% plus of the business. We are 100% in the investor's seat where we want what investors want. So, you know, in some form or another, we want that cash returned back to investors. But most importantly, we want to make the best financial decision with it. So, you know, we're very long-term focused, opportunistic minded. And so, you know, number two, after investing in the business, we have this thoughtful M&A. And for us, this all is a tricky balance, right, where we want to be opportunistic. I like having that cash on the balance sheet. You never know when the right opportunity is going to be there, you know, some kind of disruption. And I like having that cash. But at the same time, you know, we'll thoughtfully buy back shares, start to return money to investors as well. And in the most recent quarter, we've actually bought back eight million dollars in shares already this quarter.
All right.
And then, you know, looking ahead, I think what's incredible, you know, I talked a lot about the core business, why it's so powerful, you know, why we've been so successful. We have really lane opening game changing initiatives in the works on the horizon that can supercharge our growth rates, which are really already quite nice, right, for the space and our size. So the first one I want to talk about here quickly, Revolve Los Angeles, our namesake label. We launched it earlier this year. We have never done a Revolve-based label. And for us, that's a very big step. We do have own brands. Close to 20% of our business is own brands. But it's always been other labels. It's never been Revolve. And I think this really opens things up for us from a marketing playbook, from a brand playbook, from a margin playbook, having our own label in ways that, you know, having in these essentially would appear to be third-party labels owned by us in our own brands previously. And so we're still in the early stages here. We're very long-term minded. So I think for some in the investment community, the launcher of Los Angeles might have been confusing of why are we launching so high-end? We launched an incredible premium product. We used some of the best designers in the world for it. Really show-stopping pieces, $2,000 plus, you know incredible pieces that would you know look appropriate walking down the finest luxury shows in the world but it's part of a long-term positioning in play we want to open up with the best of the best and then you know mid to longer term we're going to do some things that are more commercial and where we think we can really build margin and drive gains like we have some really cool things in the works with a sort of subline we're calling revolve sport we have some really good cool things in the works with various logo gear and you know these basics and logo gear and kind of distinctive styles that are very accessible. This is where this can be huge profit drivers for us down the road, but we're building towards it. Next, joint venture with Cardi B. Cardi B has actually been a phenomenal business partner. Obviously, she has her public persona. She works hard, she's very business focused, and she's been a great partner doing everything that we've advised her in terms of what needs to be done to make a brand successful. We launched a brand, Grow Good with her, hair care brand for the textured hair market and you know we've gotten positive feedback from people without textured hair as well so we'll see where that brand goes incredible launch you know first set of products sold out I believe in less than an hour so then we increased the orders and then the next set also sold out in less than an hour so we have some big orders in the works there we'll see where that brand goes you know a lot of opportunity from a you know revenue standpoint from a margin standpoint, obviously beauty has really nice margins and a very concise product set is only six SKUs. So I think some really attractive things about that business. And then lastly, I touched on it, physical retail. Revolve has really excelled online. I think we do it better than anyone else. Physical retail is the next mountain for us to conquer. And, you know, we're still working, working up our muscles there. We've got two stores. We're learning how to be the best we can in those stores, but our intent is to conquer physical retail as well. You know, but still call it around 60% of the apparel market. And that's huge, you know, huge untapped space for us. And importantly, a large portion of the customers in our physical retail store, even in the one we have in Los Angeles, are new customers. So it can also supercharge the e-com business as we roll out these physical retail stores. We're still less than 3% penetrated in the overall market, which again speaks to our strong growth trajectory and profile. All right. And the next slide talking about, again, long-term mindset, our stock ownership, I touched on it. My business partner and I own 40% plus of the stock still. We think, as you do, we're the biggest investors in the stock. Also, fun fact, I guess, CEO compensation benchmarks. We're paid quite well. I certainly can't complain about $400,000 plus a year. We're underpaid versus the overall CEO market. That's fine with us. we make our money off of the business and the stock growing, not off of our CEO compensation. So, you know, the 400,000 is enough to keep my family happy. And then, you know, in terms of long-term wealth creation, we're, you know, driving it through stock growth. All right, looking at most recent results, talked about it, accelerating growth, 16% plus growth year over year, also accelerating margins. We've gotten, you know, a lot of, you know, I think questions in the market about why are we not driving the margins higher faster and the reality is we have it's been a bit perplexing because we have particularly over the past couple years you look we have substantial increase in EBITDA margins but you know we're never going to drive things in a in a straight line kind of very controlled way you know we're long-term mindset we're going to invest where we think there's opportunities but you know driving not just growth in q1 but also increase in uh you know in in strong increase in earnings uh you know 25 plus year over year in excess of the revenue growth and incredible free cash flow in Q1, $45 million. Ford segment talked about it, you know, a smaller portion of the business, but, you know, exciting opportunity there. There's billions of dollars, tens of billions of dollars of share available there, and those players are being disrupted, and they're going away, and Ford is gaining from the disruption in the space. And so really strong growth in Ford in Q1, 17% plus, even stronger growth in gross profit, 36% plus key growth, growth drivers, you know, we talked about the transformational drivers, but just the core, we still have incredible opportunity, you know, very small, only around 3% penetrated in our target market. So you know, we're a billion dollars plus, but we think we can be 10 billion plus and more company, you know, and so we're very early on in our journey. And certainly there's 10s of billions of share available from these legacy players in this chart here shows you, you know, us compared to some larger players like Nordstrom's, you know, Macy's, Ulta, Zalando, you know, obviously Nordstrom most comparable in terms of offering and price point, but you can see huge share opportunity available. We have a big opportunity to expand our product offering in wallet share. So historically, there were certain categories that we focused more in, you know, we've had fairly broad coverage of a lot of a number of categories, but where we were strongest in was things like going out dresses, you know, categories where customers are living their best life uh we want to get a lot more into the day-to-day of customers lives and you know we know there's big opportunity areas like active wear work wear everyday wear basics that revolve plays and we have good stuff but we're not necessarily customers number one destination for that and that's something that we're actively working on building and expanding international we've got a huge international opportunity international has been outgrowing uh the us for a number of quarters now you know i i think uh you know i don't have with the exact stat off the top of my head. Really strong growth, 20% plus growth. Very under penetrated internationally. It's currently around 20% of the business. You know, long-term it could be 40% plus, even larger. And so, you know, outperforming, we have a number of initiatives there, exciting things. China, very under tapped market, really focused there. Expand own brand, we talked about it, particularly with the Revolve label, new collaborations. And then physical retail, incredible opportunity. And I'm out of time. Thank you so much.