We're all set. Great. Thanks. Good morning, everyone. My name's Trevor Young. I'm one of the internet analysts here at Barclays. I'm pleased to be hosting Jesse Timmermans, the CFO from Revolve Group Inc. Thanks so much for joining us. Yeah, thanks for having us. So I guess to start, just give us a bit of an introduction for those in the room who are maybe less familiar with the company. Could you just give a high-level overview and highlight some of the key differentiating factors about Revolve? Yeah, yeah, absolutely. We were started over 20 years ago by Mike and Michael, who are still our co-founders, co-CEOs, and largest investors today. So I think that's one key differentiator, is that we are founder-led and we have a culture of innovation. That leads into another differentiator, which is data-driven and having that mindset and culture. Mike and Michael were not fashion guys when they started the business over 20 years ago. I'd say maybe Mike is still not a fashion guy. But so they had to rely on data to make all of their decisions, and that was from merchandising decisions to essentially building our whole ERP, inventory management, warehouse management, marketing, analytics, et cetera, which is a key differentiator for us, and early on in data-driven merchandising and decisions, which led into machine learning, which now leads into today's world of AI. Another key differentiator is just the consistent growth and profitability. So I think growing consistently, but not just growing, but growing profitably, which has led to a really strong balance sheet with over $300 million of cash, no debt, which puts us in a really unique position where we can invest through these tough times and really take share in this market. Yeah, particularly in mid-cap internet too, particularly in the e-com space, it's pretty uncommon for companies to be as profitable as long as you have. So definitely one of the key differentiators that we like about the name. On consumer demand and kind of industry trends, the luxury market seems rather challenged, yet FWRD segment, which for those of you who don't know, is kind of the higher-end, higher price point category. It's putting up positive growth overall and improving margins. First, should we assume that that means you are taking share within the luxury category? And if so, why do you think you're outperforming and how durable do you think that outperformance is? Yeah, yeah, we're really pleased with the FWRD performance over the last couple of years. And we do think we're taking share, especially in this market where you're seeing a lot of others really struggle, whether it's going through reorganization or not paying bills to their brands, which leads to everything accruing to us, the few good remaining players out there. And at the end of the day, it comes down to having the product for that customer. That customer is very keen on finding that good product and having good service, which we've always provided to her. And again, that continues to accrue to us in these challenging times. So we feel like we're really well positioned on the FWRD side of the business. We've been investing a lot in that higher-end consumer, the preferred client experience. So through great product, great service. And again, at the end of the day, she's looking for that great product. And with others struggling, the product accrues to us. We've added some really great brands that we've been chasing for several years, Dries Van Noten, Phoebe Philo, just a couple of examples on the FWRD side of the business. Okay, got it. And sticking with kind of overall consumer demand trends, how do you see the health of the younger demo audience? I think you do tend to skew towards younger-end consumers, that 25-35-year-old group. We have seen some concerns across the consumer ecosystem. Are you seeing those same types of trends? Do you see any divergence between the high-end or lower-end consumer in that specific cohort or anything you can point to there? Yeah, yeah, nothing significant standing out from an age basis. From an income level, consistent with what you've been hearing, a little softer on the low end and then relative strength on the higher end, but yeah, nothing really standing out from an age perspective, and the consumer, I think, has proven to be pretty resilient, and I think more resilient than we would have expected. Okay. And I think in the Q3 call, you all had maybe called that out that I think the higher-end actually maybe ticked up a little bit while the lower-end maybe was a tad softer. And that's probably just a continuation of prior trends. Yep. Okay, got it. You alluded to your data, your tech stack, your AI as kind of part of your differentiators. Let's hit on AI first. How are you leveraging AI to drive growth as well as internally to achieve efficiencies? How have your expectations for some of those use cases changed as technology has progressed in the last few years? Yeah, we are very optimistic on AI and have a really great internal team that is leveraging AI technology and really putting it into effect in the business. And it's not just talk, it's real results. So maybe I'll start with maybe the customer-facing AI initiatives on the site. We developed our own internal search algorithm on the site. We pulled that from a third party that is really good at search. We developed it on our own, and it performed better than that third party. And we don't have to pay the third party the fees to use that technology. And because we own the algorithm, we can constantly update it. We've been making updates to the long-tail search within that algorithm, which has driven significant conversion gains on the site. Also on the site, just continued optimization on personalization, customization for that specific customer. We have 100,000 styles on the site at any given point, so helping her better navigate to find the right product for her in that special event or whatever she's looking for. Leveraging a third party for a virtual styling tool on the site where you can kind of mix and match and create different outfits. Creating more curated shops. So again, trying to guide her through that shopping process. Narrow down the inventory choices. Got it. So that's a lot of the site. And there's many other things, but those are some of the key things on the site. And then that feeds into more of the kind of back office, call it. So using AI to intelligently place inventory around our warehouses around the world to optimize kind of speed to the customer and cost of shipping to the customer. Also translating customer service calls from voice to text so we can better mine that data and have better customer experience. Using AI to expand the reach on one of our larger marketing channels, which feeds into customer acquisition and marketing efficiency. And then in the back-back office, some exciting things for me personally, like using AI to read invoices and feed the relevant information into the AP system to pay bills. So again, it's across the board. Oh, another good example is on the own brand front, using AI to do quicker iterations on color and pattern permutations in the design process to speed up the design process on our own brand platform. So it seems like across a lot of fronts, both customer-facing, product-facing, as well as kind of more middle or back-office functions. Yep, yep, definitely. Yeah, yeah. And really, like I said, a strong team. And I think, again, back to the differentiators, having a data-driven culture and innovative culture driven by Mike and Michael, I think we're on the cutting edge of this. Got it. I didn't hear you mention agentic commerce at all. That is super topical right now. How do you think about how the power of brands changes in the future when consumers might use AI shopping agents rather than going directly to revolve.com or brand's website directly? Yeah, yeah, I think it largely has yet to be determined, but we are of the view that if it's good for the customer, it's good for us, and we will go where the customer goes. We're actually working separate from kind of third-party agentic commerce. We're actually working on some agentic functionality on our site, again, to help the consumer kind of navigate through all of the products that we have. But yeah, I think TBD, we are actually seeing a very small, small base, but referrals from AI to the Revolve site increase almost 2,000% year on year. Again, very small base. Small base, yep. But yeah, so I think we'll be there, and we will adopt. And I think, yeah, I think it has yet to be determined on how much is cannibalistic versus incremental. We do think it opens up a new channel for customers to discover products. And with our unique assortment, I think it's beneficial to us. And again, if it's good for the customer, it's good for us. Okay. Do you think luxury as a category will be a bit different than other pockets of consumer spend if consumers adopt that agentic commerce experience? Will the consumer experience on Revolve with browsability, similar item recommendations and tools like your fit predictor become that much more important? Or do you think maybe the value of some of that and that browsing behavior diminishes? Yeah, I think it remains important. On the luxury side, I think that side of the business will be slower to adopt some of these technologies. It's still a high-touch, kind of high personalization on that front. We've been investing a lot in our preferred customer program, so really servicing these high-end, high-income consumers. And I think that will continue to be important to that customer. Since you mentioned it, can you just expand on that preferred customer program a little bit? Yeah, yeah. So this is really servicing that high-income consumer that is looking for great product. It's mostly on the FWRD side of the business, that luxury platform. So it's really just understanding the customer, having a personal relationship with that customer, knowing the upcoming needs in his or her life, knowing the events that they're going to when great product comes to the site, making sure we're getting that in front of her. And again, going back to the competitive landscape too, at the end of the day, that customer is really looking for the great product. So number one, you have to have the product to sell. Got it. Got it. it. Okay. Shifting gears, let's hit on your physical retail strategy. So in contrast to a lot of players in the space, you actually started online and you're now migrating to have a physical footprint. Can you talk about that approach and why now? Help us walk through why this is synergistic with the online business and with your own brand rollout, and how big might physical retail be for Revolve in some future state? Yeah, yeah, absolutely. Yeah, we are very optimistic on the physical retail opportunity. On the why now, I think it took us, we needed some brand power and scale, and we're at that point now, 20 years into the business, really building the power of the Revolve brand. And it truly is a brand. Oftentimes when you run into a customer on the street and you ask her what she's wearing, she doesn't know the actual specific brand. She just knows it's Revolve. The other why now, we are seeing that that younger customer is really wanting to get back in person and touch and feel the product and have experiences and have that social interaction of shopping. So that was another factor. We started off with Aspen just over a year ago. That store performed really well, which led us to soon to be open The Grove store in LA. So we'll see how these two stores do, and that will kind of help determine the pace of rollout for future stores. Aspen is going really well, but we also acknowledge that Aspen is a very unique market. It's a destination, lower traffic, higher conversion, high-income, affluent customer. So we want to see how The Grove does in a more major metropolitan market. So we'll read the data there, but that said, we're not waiting for that. We're already kind of out there scouring markets, talking to landlords, getting ready for the next location. And how fast? Not sure yet. We're taking a very kind of, I guess, disciplined approach to rollout. So it's not, you won't hear us say there's going to be about a 50 or 100 store kind of rollout target. It's going to be one or two at a time as we learn. Because the other piece, to your point, we've been doing online for 20 years. I think we're really good at it. We don't have that physical retail muscle yet. So we're starting to build that, investing in a team, investing in the reporting processes, infrastructure that we need to support a solid business there. Got it. That actually kind of leads into my next question. You probably already answered part of it, but given that it is pretty rare for online native companies to roll out physical stores, that sometimes does give investors a little bit of pause. So how do you kind of ease some of those concerns for investors on that physical store rollout? Yeah, yeah, absolutely. Number one, we'll be disciplined. Everything we do is tested heavily, and that's part of the reason we want to get both Aspen and The Grove and get some really good solid data there. The other piece to it is the ingredients are there such that it will be accretive to the overall business in our view. So number one, great new customer acquisition channel. New customers have over-indexed in the stores to date. Also, we saw a small halo effect in LA, which is our home kind of in our backyard, which was really encouraging to us. The second piece is a much lower return rate, which provides a lot of benefits on the P&L with shipping and logistics costs. And then own brands, which have a significantly higher margin than our third-party brands, are outperforming in-store both in terms of mix and in the productivity of the inventory on own brands in the store. So combination of all those, the ingredients are there. So we're pretty optimistic on the accretion to the P&L. Got it. Makes a lot of sense. Since you mentioned own brands, let's hit on that. You do seem to have some renewed efforts there, and the recent SRG collaboration drove record results for a new launch. Can you just remind investors, again, who are less familiar with the story, what the own brand strategy is, what's the playbook from here, and why will it be an increasingly important part of the Revolve story going FWRD? Yeah, yeah. There's a few pieces to the own brands. Number one, the margin accretion, which of course we love, but also it fills gaps in the assortment. Also exclusive to the Revolve platform, so we're not competing on keywords, not competing on other products, and really builds brand value. The business was about 18% of the Revolve segment in 2024. We've been increasing that mix this year. In 2019, we're at 36%, so it kind of gives you some parameter on how big it could be. That said, we're going at a more, I guess, moderated pace than we did back in that 2016- 2019 era and being more disciplined around the quality of the assortment. And really focusing on the underlying key metrics within own brands, the full price sell-through. We have to produce at higher minimums than we can purchase on the third-party side. So you have to be really careful about your full price sell-through on those production runs. But so far, coming out of COVID and rebuilding that own brand platform, it's been performing really well. So we can be at similar overall economics on a much lower mix than we were back in 2019, given how healthy that business is. Okay. And is that kind of the North Star to get back to that pre-COVID mix? Is that important? Does it not matter? It's more just how does the business ramp on its? Yeah, yeah. More the latter. Yeah. We don't have a specific mix target. We know it can be bigger than it is today. We don't necessarily need to be at that 36% to drive the economics that we want. And then back to the store piece, we think the mix can be and has been much higher in the store than online. So really optimistic how own brands can play out in-store. Okay. So a lot of potential margin left there as well. Yeah, yeah, absolutely. Okay. International is obviously part of the story as well, and specifically China has been called out as an area of strength with Revolve China sales doubling over the last few years. How much of a challenge is it to adapt from the Western consumer habits to some of those international markets, particularly Asia and China? Yeah, yeah. That's been a really encouraging thing over the last couple of years. You mentioned the doubling of the Revolve business in China, and in this past quarter, Revolve Mainland China was up 50% year over year. Five-zero. 50. And that's really encouraging to us in that Revolve is more emerging Western brands. So the fact that that customer is really trusting Revolve to find those brands from us gives us a lot of confidence in growing that market. Also unique, this past quarter, we actually developed an exclusive own brand launch that was designed, developed, produced in-country for that specific customer. We marketed that via live stream and performed really well on par with some of our best domestic launches. So more to come on that. And to your point, China is more unique than some of the other markets. So we do have a dedicated team focused on China that we started to build 18 months to two years ago. So we're seeing those investments really start to pay off, partnering with the likes of Tmall, Douyin, Red. So it's more different than some of the other markets in terms of marketing, the customer, but really encouraged by the results. Okay. Got it. Pricing is super topical. Wholesale pricing and retail pricing on both fronts has landed. Inventory starts to reflect tariff impacts. Can you speak to one, what you saw in 3Q in terms of wholesale and retail price increases and how you're adjusting your own brand prices related to that? And similarly, what are you expecting in 4Q and into next year? Yeah, yeah. So for 3Q, we saw mid to high single-digit price increases on the new inventory coming in. So it didn't impact all of the sales and all the inventory because we're sitting on inventory already. And then in 4Q, it's pushing into the double-digit zone on the new inventory. We haven't seen significant resistance from the customer thus far. I don't think we've seen the peak of more broad price increases yet. We'll have to see how that plays out. But to date, haven't seen significant resistance from the customer on those price increases. That said, our customer is different, and our offering is different. She comes to us for that full price sale for the discovery. So it's not necessarily a kind of a value or a bargain shopping experience. And then own brands, our goal is not to under or overprice relative to third parties. We want to be competitive and consistent on a like-for-like brand and category basis, and we're actually seeing some opportunity within own brands, given the quality of the product, to actually increase prices without resistance, separate from tariffs, especially on kind of that really unique product and the higher quality product. Got it. Okay, so price increase is starting to layer in. Your consumer is not really pushing back yet, from what you can tell, on the own brand side, potentially trying to maybe keep pace, maybe not flex that up or down, except for maybe some pockets on unique opportunities to flex that up. Yeah, more surgical. Got it. Okay. Let's shift gears to the margin side and expenses. The latest full-year gross margin guide was even higher than the guide you issued prior to all of the tariff uncertainty earlier this year, which frankly, at this point, feels like it was years ago. Tariff impacts have been a headwind for others in your industry, though. How have you been able to mitigate that impact so well such that your guide as of today is actually higher than where we were at the start of the year before all of that uncertainty? Yeah, yeah. Really proud of the team and the efforts in mitigating the tariffs. We've been able to mitigate the vast majority of the tariff impact. And some of that comes through price, but there were other things that we did on kind of the logistics and the import mechanisms to offset some of that tariff. And we've got great brand partnerships and relationships with our brands, and had some really good dialogue between us and the brands and really kind of working on mutually beneficial ways to manage through this. So really proud of that and the team's effort there. And then separate from tariffs, we've been making some optimization on our markdown algorithm. It's been driving some pretty meaningful gains on gross margin, both on the Revolve and the FWRD side of the business. And then maybe unique to the third quarter, we did shift our promotional strategy. So in the prior year, we were heavier on promotions and pulled back on that this current year, which had a significant impact to margin in the third quarter. We were up 350 basis points and 11% on gross margin, gross profit dollars, which we view as kind of the true indicator of the health of the business. And those are ongoing. The markdown algorithm will continue to pay dividends. The kind of pullback on the promotional strategy, the biggest impact on a comp basis was in Q3, but there will be some lingering impact in Q4 through Q2 of 2026. Okay. Got it. So it sounds like some of those benefits will persist, some one-time in nature. Yep. And then on the tariff side too, some of the things that we've done on the tariff side, again, still very uncertain out there. So depending on where tariffs shake out, ultimately, there is a potential benefit to lift margin as a result of some of the things we did in response to the tariffs. Okay, and realize you're not giving 2026 guide yet, but how should we think about gross margin progression in the coming years from where we stand today or where you think you finish this year? Yep. Yeah. So if you look at our guide for this year, which is about 53.5% on gross margin, we feel like there's a pretty, I don't want to call it easy, but a pretty clear bridge to 55% gross margin. We're sitting on really healthy inventory across both segments, Revolve and FWRD. Net sales are outpacing the inventory growth. Optimization to that markdown algorithm, the shift in the promotional strategy, and then own brand mix is probably the biggest driver going FWRD. Whereas we continue to expand own brand mix, that adds pretty meaningful margin lift that bridges us to that 55%. Okay, so it seems like a lot of levers all within your control to get there. Yep. Got it. Okay. More than a year ago, you took a number of actions to help drive a structural improvement in return rates, and you had seen some pretty material improvements there for about a year or so now. Now in 3Q, return rates started to tick back up, though. How much of that was some of that just being kind of seasonal factors or product mix factors versus lapping some of the benefits? And then relatedly, where do we see return rates going over time? Is that still a lever that you can get more improvement there? Yeah, yeah. A lot of, like you said, great improvements over the past year as it relates to return rate. That said, we knew about lapping those benefits coming into the back half of this year. So we had guided flat year-over-year return rate. We did come in higher than flat. It was 50-60 basis points higher year on year. We attribute that all to the markdown and the shift in promo strategies. So higher full price sales has a higher return rate, and then the shallower markdowns also has a higher return rate, less on final sale, which doesn't have the opportunity to return. So I think the return rate was in the range of expectations, and then especially considering the markdown and promo shift. Going FWRD, we do have some things we're still working on the return rate as it relates to the business as it stands today. Those things probably hit more in mid-2026. And then as the business changes more structurally with product diversification and stores, we do see a longer-term return rate reduction. So dresses has by far and away the highest return rate out of our category set. We've been expanding. The combination of men's, beauty, and home has increased double digits the past several quarters. Those all have a lower return rate, especially beauty has a low single-digit return rate versus the dresses, 50-plus%. And then stores have kind of low to mid-single-digit return rate. So as the business and the mix shifts over time, we do expect to see a moderation in that return rate. Okay, so just to kind of recap, made changes about a year or so ago. You've now lapped some of those impacts. You saw an uptick in 3Q. It sounds like that was all within your control by managing markdown and full price mix, right? Heading into next year, it sounds like some other levers that we'll, I'm sure, get more color on at some point, and then longer-term favorable mix with retail, men's, beauty, some other category dynamics. Yep, exactly. Okay. Okay. Got it. So still seems like a lot of levers to flex that in the right direction. Yeah, yeah. And at the end of the day, really staying focused on the customer and that experience and want to make sure that the home is still the dressing room. And there's a lot we can do back to the AI on the site to better guide her initial purchase decision. Okay. Got it. The next big lever is marketing. Last year, you saw more than a point of leverage. While coming into this year, you had guided to modest deleverage. Now we're nearly done with the year. We are seeing a bit more leverage once again in that line. What changed on the marketing front? And as we look ahead, will this contribute to further EBITDA margin expansion, or will initiatives like some of the new owned brands and store launches require some incremental marketing? Yeah, yeah. Really proud of the team again on this front. On the brand marketing side, we're able to get even more efficiency on that side of the marketing spend. So if you look at our biggest event, Revolve Festival, which takes place in April, we reduced the budget last year, reduced the budget again this year, and in both years drove higher press and social impressions and just had a really great experience for the people that were at Revolve Festival. Really great content and really great reaction to that. So that's the biggest example, but that kind of permeates through the rest of the year. Also, and maybe this feeds into next year, we have some really big things planned coming up. So I would say kind of flat to deleverage as we look ahead as a result of investments. But again, these are very good brand-building long-term investments that we think are important for the business. Okay, so maybe some purposeful investment going FWRD. Yeah. Got it. Okay. So to wrap up on the margin front, you're on pace to be around 7% margin, EBITDA margin this year. That's well off of trough levels a few years back, but we're also well below peak that we saw back in 2021. I realize you don't have explicit long-term margin guide out there, but is there any reason we can't get back to a low double digit or even a teens EBITDA margin over some period of time? Yeah. That is definitely our goal, getting back into double-digit EBITDA margin. Combination of getting back to double-digit top line growth and then kind of working the bridge from, call it where we're at today, to double-digit. Number one comes from gross margin. So if we can get 1.5 points out of gross margin as a result of own brand mix and staying healthy on full price mix and everything else, that adds the 1.5 points and translates right down to the bottom line. Goes through, yeah. The other lever is G&A. So over the past year to 18 months, we've been making some pretty meaningful investments in the business from physical retail and the team behind that to these own brand launches that take time to design, develop, manufacture. So a lot of those costs are built in upfront before you realize the revenue. A lot of investments in AI and tech. So kind of as we start to leverage those investments, we should start to see leverage on that G&A line item. So that's the other big lever. Don't expect to get significant leverage on fulfillment, selling, and distribution. Maybe there's some pockets there if we can get return rate down. And then marketing we talked about, not factoring in any leverage there because we want to continue to invest in the business. We have a strong balance sheet to do so, and there's a lot of customers out there to acquire, so don't want to take our foot off the gas on the marketing front. Got it. Okay. So just to recap, maybe growth improves at some point. You get upwards of a point and a half on gross margin, and then the balance would probably come from the G&A side. And then you'll flex marketing up and down kind of opportunistically and then not so much on the fulfillment side. Yep. Okay. Got it. Last one for me before we open it up to the audience. Cash flow, capital allocation. You have a very clean balance sheet. You have more than $300 million in cash on hand, no debt. You're generating $60 million in TTM free cash flow. What is the playbook from here from a capital allocation perspective? Yeah, yeah. Really great to have a strong balance sheet and the ability gives us confidence to invest through cycles, which is really important. So number one is organic growth and investing in the business and the things I mentioned, physical retail, expanding own brands, AI, technology, and continuing to market. So that's number one. Number two is opportunistic M&A. We look at a lot of stuff. We think there are opportunities out there. It's likely something that would fill a product gap and kind of help accelerate that product category expansion. And then number three, we do have a buyback plan in place, looking for kind of meaningful value there, so not overly aggressive, but we do have it in place. And with the cash balance, we have the ability to do all three of these things. Right. Okay. Got it. Great. Let's open it up to the audience in case anyone has any questions. Anyone? Okay. I guess we are all set then. Okay. Thank you so much, Jesse. Really appreciate it. Thanks. Yeah. Good job.