Revolve (NYSE:RVLV) Delivers Strong Q4 Numbers, Shows User Growth

Radek Strnad /
2022/02/23 4:10 pm EST
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Online fashion retailer Revolve Group (NASDAQ: RVLV) announced better-than-expected results in the Q4 FY2021 quarter, with revenue up 70.3% year on year to $239.8 million. Revolve made a GAAP profit of $29.3 million, improving on its profit of $18.9 million, in the same quarter last year.

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Revolve (RVLV) Q4 FY2021 Highlights:

  • Revenue: $239.8 million vs analyst estimates of $222 million (7.99% beat)
  • EPS (GAAP): $0.39
  • Free cash flow was negative $6.52 million, down from positive free cash flow of $1.34 million in previous quarter
  • Gross Margin (GAAP): 54.8%, down from 55.9% same quarter last year
  • Trailing 12 months Active Customers : 1.84 million, up 368 thousand year on year

“Our exceptional fourth quarter results demonstrate the power of our brands and our connection with the next generation consumer, highlighted by further acceleration of our net sales growth to 70% over the prior year and 63% over the fourth quarter of 2019,“ said co-founder and co-CEO Mike Karanikolas.

Launched in 2003 by software engineers Michael Mente and Mike Karanikolas, Revolve Group (NASDAQ: RVLV) is a next generation fashion retailer that leverages social media and a community of fashion influencers to drive its merchandising strategy.

Consumers ever rising demand for convenience, selection, and speed are secular engines underpinning ecommerce adoption. For years prior to Covid, ecommerce penetration as a percentage of overall retail would grow 1-2% annually, but in 2020 adoption accelerated by 5%, reaching 25%, as increased emphasis on convenience drove consumers to structurally buy more online. The surge in buying caused many online retailers to rapidly grow their logistics infrastructures, preparing them for further growth in the years ahead as consumer shopping habits continue to shift online.

Sales Growth

Revolve's revenue growth over the last three years has been strong, averaging 23.7% annually. Revolve's revenue took a hit when the pandemic first hit, but it has since rebounded strongly, as you can see below.

Revolve Total Revenue

This quarter, Revolve beat analyst estimates and reported a very impressive 70.3% year on year revenue growth.

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Usage Growth

As an online retailer, Revolve generates revenue growth by growing both the number of buyers, and the average order size.

Over the last two years the number of Revolve's active buyers, a key usage metric for the company, grew 7.27% annually to 1.84 million users. This is an ok growth for a consumer internet company, but it is good to see that it has started to pick up again lately.

Revolve Trailing 12 months Active Customers

In Q4 the company added 368 thousand active buyers, translating to a 25% growth year on year.

Key Takeaways from Revolve's Q4 Results

With a market capitalization of $3.83 billion Revolve is among smaller companies, but its more than $218.4 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.

We were impressed by the strong user growth Revolve delivered this quarter. And we were also excited to see that it outperformed Wall St’s revenue expectations. Zooming out, we think this was a fantastic quarter that should have shareholders cheering. The company is up 3.66% on the results and currently trades at $52 per share.

Revolve may have had a good quarter, so should you invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.