Online fashion retailer Revolve (NASDAQ: RVLV) reported Q4 CY2024 results topping the market’s revenue expectations, with sales up 13.9% year on year to $293.7 million. Its GAAP profit of $0.17 per share was 79.3% above analysts’ consensus estimates.
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Revolve (RVLV) Q4 CY2024 Highlights:
- Revenue: $293.7 million vs analyst estimates of $282.9 million (13.9% year-on-year growth, 3.8% beat)
- EPS (GAAP): $0.17 vs analyst estimates of $0.09 (79.3% beat)
- Adjusted EBITDA: $18.27 million vs analyst estimates of $10.74 million (6.2% margin, 70.1% beat)
- Operating Margin: 3.9%, up from 0.9% in the same quarter last year
- Free Cash Flow Margin: 0.6%, down from 2.2% in the previous quarter
- Active Customers : 2.67 million, up 125,000 year on year
- Market Capitalization: $2.10 billion
"We finished the year with an outstanding fourth quarter, highlighted by double-digit top-line growth year-over-year and a more than doubling of net income and Adjusted EBITDA year-over-year," said co-founder and co-CEO Mike Karanikolas.
Company Overview
Launched in 2003 by software engineers Michael Mente and Mike Karanikolas, Revolve (NASDAQ: RVLV) is a fashion retailer leveraging social media and a community of fashion influencers to drive its merchandising strategy.
Online Retail
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
A company’s long-term performance is an indicator of its overall quality. While any business can experience short-term success, top-performing ones enjoy sustained growth for years. Regrettably, Revolve’s sales grew at a mediocre 8.2% compounded annual growth rate over the last three years. This fell short of our benchmark for the consumer internet sector and is a tough starting point for our analysis.
This quarter, Revolve reported year-on-year revenue growth of 13.9%, and its $293.7 million of revenue exceeded Wall Street’s estimates by 3.8%.
Looking ahead, sell-side analysts expect revenue to grow 8.1% over the next 12 months, similar to its three-year rate. This projection doesn't excite us and suggests its newer products and services will not catalyze better top-line performance yet.
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Active Customers
Buyer Growth
As an online retailer, Revolve generates revenue growth by expanding its number of users and the average order size in dollars.
Over the last two years, Revolve’s active customers , a key performance metric for the company, increased by 9% annually to 2.67 million in the latest quarter. This growth rate is solid for a consumer internet business and indicates people are excited about its offerings. 
In Q4, Revolve added 125,000 active customers , leading to 4.9% year-on-year growth. The quarterly print was lower than its two-year result, suggesting its new initiatives aren’t accelerating buyer growth just yet.
Revenue Per Buyer
Average revenue per buyer (ARPB) is a critical metric to track for online retailers like Revolve because it measures how much customers spend per order.
Revolve’s ARPB fell over the last two years, averaging 6.6% annual declines. This isn’t great, but the increase in active customers is more relevant for assessing long-term business potential. We’ll monitor the situation closely; if Revolve tries boosting ARPB by taking a more aggressive approach to monetization, it’s unclear whether buyers can continue growing at the current pace. 
This quarter, Revolve’s ARPB clocked in at $110.09. It grew by 8.6% year on year, faster than its active customers .
Key Takeaways from Revolve’s Q4 Results
We were impressed by how significantly Revolve blew past analysts’ EBITDA expectations this quarter. We were also happy its revenue outperformed Wall Street’s estimates. Overall, we think this was a decent quarter with some key metrics above expectations. The stock remained flat at $28.55 immediately after reporting.
Revolve put up rock-solid earnings, but one quarter doesn’t necessarily make the stock a buy. Let’s see if this is a good investment. What happened in the latest quarter matters, but not as much as longer-term business quality and valuation, when deciding whether to invest in this stock. We cover that in our actionable full research report which you can read here, it’s free.
