roth annual conference - meetmax.com · 16/03/2020 · 2) adjusted ebtda and free cash flow are...
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TH
E A
NALYST D
AY P
RESEN
TATIO
N 2
018
March 16, 2020
ROTH ANNUAL CONFERENCE
PAGE
2
Note on Forward-Looking Statements
Information in this presentation contains forward-looking statements as defined within the meaning of U.S. federal securities laws, including, but not limited to, statements about REVOLVE and the environment in which REVOLVE operates, including statements regarding future results of operations and financial position of REVOLVE. Forward-looking statements include all statements that are not historical facts and can be identified by terms such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “will,” “would,” or similar expressions and the negatives of those terms.
Forward-looking statements are based on information available at the time those statements are made and on our current expectations and projections about future events , and are subject to risks and uncertainties. If any of these risks or uncertainties materialize or if any assumptions prove incorrect, actual performance or results may differ materially from those expressed in or suggested by the forward-looking statements. These risks and uncertainties include, without limitation, risks related to general economic conditions, our fluctuating operating results, seasonality in our business, our ability to acquire products on reasonable terms, our online business model, demand for our products, our ability to attract customers in a cost effective manner, the strength of our brand, competition, fraud, system interruptions, our ability to fulfill orders, and the potential impact of coronavirus on our supply chain and operating results. Additional risks and uncertainties are described in greater detail under the heading “Risk Factors” in our Quarterly Report on Form 10-Q filed with the U.S. Securities and Exchange Commission and our other filings with the SEC.
We undertake no obligation to update any forward-looking statements made in this presentation to reflect events or circumstances after the date of this presentation or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions, or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements.
Unless otherwise indicated, all references in this presentation to “REVOLVE”, “we”, “our”, “us”, or similar terms refer to REVOLVE and Revolve Group, Inc. and its subsidiaries.
Use of Non-GAAP Financial Measures
In addition to U.S. GAAP financials, this presentation includes certain non-GAAP financial measures, including Adjusted EBITDA and free cash flow. These non-GAAP measures are in addition to, not a substitute for or superior to, measures of financial performance prepared in accordance with U.S. GAAP. The non-GAAP financial measures used by REVOLVE may differ from the non-GAAP financial measures used by other companies. We use these non-GAAP financial measures to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital. Our management believes that these non-GAAP financial measures provide meaningful supplemental information regarding our performance and liquidity by excluding certain expenses that may not be indicative of our ongoing core operating performance. We believe that both management and investors benefit from referring to these non-GAAP financial measures in assessing our performance and when analyzing historical performance and liquidity and when planning, forecasting, and analyzing future periods.
For a reconciliation of these non-GAAP financial measures to GAAP measures, please see the tables captioned “Reconciliation of Non-GAAP Financial Measures” included in our earnings press releases and SEC filings.
PAGE
3: THE LEADING FASHION
DESTINATION FOR THE NEXT-GENERATION CONSUMER
DISRUPTIVE BRAND MARKETING CREATES AN EMOTIONAL
CONNECTION WITH OUR CONSUMER AND IS HIGHLY EFFICIENT AND
SCALABLE
UNIQUE OWNED BRANDS PLATFORM ENHANCES OUR OFFERING AND
GENERATES HIGHER GROSS MARGINS THAN THIRD-PARTY BRANDS
PROPRIETARY TECHNOLOGY PLATFORM ENABLES DATA-DRIVEN “READ &REACT” MERCHANDISING MODEL AND CUSTOMIZED USER EXPERIENCE
PROFITABLE AND CAPITAL EFFICIENT FINANCIAL MODEL UNDERPINNED
BY SUPERIOR CUSTOMER ECONOMICS AND LOYALTY
PAGE
4NEXT-GENERATION CONSUMERS AND DIGITAL WILL DRIVE THE INDUSTRY GOING FORWARD
Next Generation Consumers
eCommerce
0%
3%
13%
OFFLINE TOTAL ONLINE
25%
36%
2015A 2020E
SHOP DIGITALLY
ENGAGE SOCIALLY
WANT DISCOVERY
DRIVING ALL GROWTHIN $564Bn FASHION MARKET (1)
Source: Euromonitor and U.S. Census BureauNote:1. 2018 U.S. Apparel, Footwear and Beauty Market
Percent of Population Aged 18-44 in the U.S.
2018-2021 U.S. Apparel, Footwear and Beauty Market CAGR
PAGE
5YET, NEXT-GENERATION CONSUMERS ARE UNDERSERVED
AND MANY TRADITIONAL RETAILERS FAIL TO CONNECT WITH THEM
SPECIALTY STORES
NARROW ASSORTMENTLIMITED REACH
STRUGGLING TO COMPETE IN DIGITAL WORLD
TRADITIONAL E-COMMERCE
UNINSPIRING BRANDS AND OFFERINGSTRANSACTIONAL AND COMMODITIZED
OVERLY BROAD ASSORTMENTDOES NOT SUPPORT DISCOVERY AND ENGAGEMENT
DEPARTMENT STORES
TOO BROADMISSING ON-TREND BRANDS AND STYLES
LACK INSPIRATION AND EMOTIONWHERE HER MOM SHOPS
PAGE
6REVOLVE HAS UNIQUELY CONNECTED WITH HER
NEGINMIRSALEHI5.7M--USUKFRANCE
LILLYMAYMAC4.0M
--VIETNAMPHILIPPINESTHAILAND
CHIARAFERRAGNI18.5M
--ITALYUSBRAZIL
OLIVIACULPO
4.6M
--USUK
AUSTRALIA
CAMILACOELHO
8.6M
--BRAZIL
USFRANCE
ARIELLECHARNAS
1.3M
--USUK
CANADA
NATASHA OAKLEY
2.1M
--AUSTRALIA
USUK
INNOVATIVE | ONGOING | SCALABLE | REPEATABLE | GLOBAL | ONCE-IN-A-LIFETIME
WITH A HIGHLY SCALABLE NETWORK OF OVER 4,500 PASSIONATE INFLUENCERS
WE CREATE EXPERIENCES THAT EXCITE AND ENGAGE OUR COMMUNITY
POWERFUL BRAND AND INNOVATIVE MARKETING STRATEGY
ROLASATO5.8M
--JAPANUSTAIWAN
#REVOLVEAROUNDTHEWORLD
#REVOLVEFESTIVAL #REVOLVESUMMER
#REVOLVEAWARDS
PAGE
7
DIFFERENTIATED, CURATED SELECTION:SALES BY TYPE OF BRAND (FY 2019)
UNIQUE MARKET POSITIONING
EMERGING
BRANDS
40%of Net Sales
E STABLISHED
BRANDS
23%of Net Sales
OWNED
BRANDS
36%of Net Sales
76% of Net Sales fromEmerging and Owned Brands(1)
REVOLVE IS THE FASHION DESTINATION FOR NEXT-GENERATION CONSUMERS
HIGH MIX OF EMERGING AND OWNED BRANDS = LIMITED SKU OVERLAP WITH COMPETITITORS
CONSTANT NEWNESS -- >1,000 NEW STYLES PER WEEK AT LIMITED AVAILABILITY, BRINGS CUSTOMERS BACK FREQUENTLY
REVOLVE HAS EARNED CUSTOMER TRUST TO SHOW NEW BRANDS THAT ARE ON TREND
> 50% OF NET SALES FROM CUSTOMERS THAT VISIT THE SITES AT LEAST TWICE EACH WEEK
$275 AVERAGE ORDER VALUE, ILLUSTRATES PREMIUM OFFERING
Notes:
1) In the REVOLVE Segment.
PAGE
8REVOLVE BY THE NUMBERS
Notes:
1) Net Sales Retention defined as portion of 2019 sales attributable to total active customers from the previous year 2) Adjusted EBTDA and Free Cash Flow are non-GAAP measures. See Appendix for GAAP financial measures and reconciliations
2019 FINANCIAL RESULTS HIGHLIGHT OUR SCALE,
PROFITABITY AND CAPITAL EFFICIENCY
89%2019 NET SALES RETENTION (1)
79%2019 NET SALES AT FULL PRICE
ATTRACTIVECUSTOMER ECONOMICS
53.6%GROSS MARGIN
9.3%EBITDA MARGIN
5.6% FREE CASH FLOW MARGIN (2)
(2)
45% 74%PRE-EXISTING CUSTOMERS (45% OF 2019 TOTAL) DRIVE 74% OF 2019 NET SALES
$601M NET SALES
$36M NET INCOME
$46M NET CASH PROVIDED BY OPERATING ACTIVITIES
MEANINGFUL SCALE
ATTRACTIVE MARGIN
PAGE
9KEY GROWTH INITIATIVES
ACQUIRE
NEW
CUSTOMERS
FURTHER
INCREASE
CUSTOMER
LOYALTY
AND WALLET
SHARE
GROW SALES OF
OWNED BRANDS
GROW
INTERNATIONAL
SALES
ENHANCE AND
BROADEN OUR
OFFERING
CONTINUE
TO INNOVATE
PAGE
10BIG OPPORTUNITY TO EXPAND ACTIVE CUSTOMERS
PROVEN, SCALABLE MARKETING APPROACH LARGE MARKET OPPORTUNITY
57 MILLION
U.S. WOMEN AGE 18-44(1)
RVLV Penetration:
2016: 0.7M active customers (~1%)
2019: 1.5M active customers (~3%)
BRAND MARKETING
~25% OF SPEND
ELITE INFLUENCERS
EXCLUSIVE EVENTS
PERFORMANCE MARKETING
~75% OF SPEND
RETARGETING PAID SEARCH
AFFILIATE
PAID SOCIAL
PERSONALIZED EMAIL/PUSH
Note:1) US Census data
PAGE
11GROW INTERNATIONAL SALES
INTERNATIONAL STRATEGICOPPORTUNITIES
• ENHANCE SITE EXPERIENCE
• STREAMLINE FULFILLMENT
• FURTHER IMPROVE SERVICE LEVELS
• REDUCE FRICTION WITHIN SHIPPING AND RETURNS
• AMPLIFY GLOBAL BRAND AWARENESS
• EXPAND AND FURTHER ACTIVATE LOCAL INFLUENCER NETWORKS
UK CASE STUDY: NET SALES TREND AFTER FREE EXPRESS SHIPPING / HASSLE-FREE RETURNS
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
UK NET SALES TREND2016-2018
BIG LIFT FROM Q2 18 LAUNCHOF ENHANCED SERVICES IN UK
2016 2017 2018
PAGE
12SIGNIFICANT OPPORTUNITY TO GROW OWNED BRANDS
NEW BRANDSCONTINUE TO USE DATA TO IDENTIFY BRAND
OPPORTUNITIES
ADDITIONAL CATEGORIESLOWER PRICE POINT | LUXURY
EYEWEAR | BEAUTY
EXISTING BRANDEXPANSION
SKU GROWTH OPPORTUNITIESWITHIN EXISTING BRANDS
INFLUENCER ANDCELEBRITY PARTNERSHIPS
CONTINUE TO PARTNER WITH INFLUENCERS AND CELEBRITIES TO DRIVE SALES AND AWARENESS
PAGE
13OPPORTUNITY TO EXPAND OUR OFFERING
LEVERAGING THE CORE REVOLVE PLATFORM
Note:1. 12 months ended December 31, 2019
PRICE POINT: $100-$30088% OF NET SALES (1)
AOV: $256 (1)GEN X / MILLENNIAL
LUXURY
MILLENNIAL
CONTEMPORARY
PRICE POINT: $300-$1,00012% OF NET SALES (1)
AOV: $636 (1)
010101111011 00100001010111101100100001010111101100100001010100010010100000010000111011001000
010101111011001000010101111011001000010101111011001000010101111011001000
0000000010101010001100011111111010101010101010111000000011010101101
OPPORTUNITYTO CONVERT REVOLVE CUSTOMERS
NEWER / FUTURE
OPPORTUNITIES
OPPORTUNITYTO CONVERT REVOLVE CUSTOMERS WORK
BEAUTY
MEN’S
PRICE POINT: $40-$100
GEN Z
PAGE
14
FINANCIAL MODEL + BUSINESS MODEL
PAGE
15
46.6%48.5%
53.2% 53.6%
2016 2017 2018 2019
TOPLINE GROWTH AND PROFITABILITY
($MM)($MM)
NET SALES
$312
$400
$499
$601
2016 2017 2018 2019
ADJUSTED EBITDA (1)
Notes:1. Adjusted EBITDA is calculated as net income before other expense, net taxes, depreciation and amortization, adjusted to exclude the effects of equity-based compensation expense, and certain one-time expenses. See Appendix for GAAP financial measures and reconciliations
GROSS MARGIN % ADJ. EBITDA / MARGIN
$9.5
$28.4
$46.5
$55.6
3.1%
7.1%9.3% 9.3%
2016 2017 2018 2019
PAGE
16UNDERSCORED BY STRONG CUSTOMER BEHAVIOR
ACTIVE CUSTOMER BASE (1)
(000s)
AVERAGE ORDER VALUE
REFLECTS PREMIUM NATURE OF PRODUCT OFFERING
(000s)
TOTAL ORDERS PLACED
712
842
1,175
1,488
2016 2017 2018 2019
1,999
2,552
3,710
4,715
2016 2017 2018 2019
$293$304
$279 $275
2016 2017 2018 2019
REVOLVE: $256 (2019) FORWARD: $636 (2019)
Note:1. An active customer is defined as a unique customer account from which a purchase was made across our platform at least once in the preceding 12-month period. In any particular period, we determine our number of active customers by counting the total number of customers who
have made at least one purchase in the preceding 12-month period, measured from the last date of such period.
PAGE
17
$0
$100
$200
$300
$400
$500
$600
$700
2014 2015 2016 2017 2018 2019
Net
Sal
es (
$M
M)
Calendar Year
2013 Cohort and Prior 2014 Cohort 2015 Cohort 2016 Cohort 2017 Cohort 2018 Cohort 2019 Cohort
89%2019 NET SALES
RETENTION
TRACK RECORD OFRETAINING 100%+
OF NET SALES AFTER YEAR 2
COHORT TRENDS DEMONSTRATE THE VALUE OF THE REVOLVE CUSTOMER BASE
Note:
1. Net sales retention defined as portion of sales attributable to total active customers from the previous year
NET SALES BY COHORT
NET SALES RETENTION BY COHORT
PAGE
18
($MM)
NET CASH PROVIDED BY OPERATING ACTIVITIES
($1.5)
$16.5
$26.7
$46.1
2016 2017 2018 2019
($4.5)
$14.2
$23.6 $33.6
2016 2017 2018 2019
FREE CASH FLOW (1)
Notes:1. Free cash flow defined as net cash provided by operating activities less net cash used for capital expenditures. See Appendix for GAAP financial measures and reconciliations
CASH FLOW GENERATION HAS CREATED A STRONG BALANCE SHEET
$~10M CapEx investment to consolidate several fulfillment centers into one newly-modernized fulfillment center
($MM)
$11.4 $10.6
$16.4
$65.4
2016 2017 2018 2019
Includes $12.5M in net proceeds from the IPO
CASH ON BALANCE SHEET ($MM)
STRONG YOY GROWTHDESPITE STEPPED UP CAPEX IN 2019
GROWING CASH POSITION
PAGE
19: THE LEADING FASHION
DESTINATION FOR THE NEXT-GENERATION CONSUMER
DISRUPTIVE BRAND MARKETING CREATES AN EMOTIONAL
CONNECTION WITH OUR CONSUMER AND IS HIGHLY EFFICIENT AND
SCALABLE
UNIQUE OWNED BRANDS PLATFORM ENHANCES OUR OFFERING AND
GENERATES HIGHER GROSS MARGINS THAN THIRD-PARTY BRANDS
PROPRIETARY TECHNOLOGY PLATFORM ENABLES DATA-DRIVEN “READ &REACT” MERCHANDISING MODEL AND CUSTOMIZED USER EXPERIENCE
PROFITABLE AND CAPITAL EFFICIENT FINANCIAL MODEL UNDERPINNED
BY SUPERIOR CUSTOMER ECONOMICS AND LOYALTY
PAGE
20GAAP TO NON-GAAP RECONCILIATION
FYE DECEMBER 31, 2016 2017 2018 2019
NET INCOME $2.2 $5.0 $30.6 $35.7
(+) OTHER EXPENSE, NET 0.9 1.4 0.6 0.9
(+) PROVISION FOR INCOME TAXES 2.4 14.1 10.5 11.5
(+) DEPRECIATION ANDAMORTIZATION
2.4 2.8 2.9 4.0
(+) EQUITY-BASED COMPENSATION 0.0 0.9 1.4 2.1
(+) NON-ROUTINE EXPENSES 1.6 4.1 0.4 1.5
ADJUSTED EBITDA $9.5 $28.4 $46.5 $55.6
FYE DECEMBER 31, 2016 2017 2018 2019
NET CASH (USED IN) PROVIDED BY OPERATING ACTIVITIES
($1.5) $16.5 $26.7 $46.1
(-) PURCHASES OF PROPERTY AND EQUIPMENT
(3.0) (2.3) (3.0) (12.5)
FREE CASH FLOW ($4.5) $14.2 $23.6 $33.6
ADJ. EBITDA ($MM)
FREE CASH FLOW ($MM)