All right. Thank you. Good morning, everyone. Thanks for being here at the 2026 Raymond James Institutional Investors Conference. I'm Rick Patel, Senior Research Analyst covering retail soft lines, global brands, and digital commerce here at RayJ. I'm thrilled to be hosting our presenter, Revolve. Revolve is a digitally native and multi-branded seller of fashion apparel, footwear, beauty, and accessories. The company operates under two nameplates, including its namesake Revolve banner, as well as the FWRD banner, which is focused on luxury. Very happy to introduce Chief Financial Officer, Jesse Timmermans. Jesse, the floor is yours.
All right. Thanks, Rick. Hello, everybody. A lot to get through today, we'll try to get going here. Tell you, number 1, who we are, number 2, what we've built over the last 20 years, 20-plus years, more importantly, our great progress and momentum over the last couple of quarters, most importantly, where we're going. Who we are. We are the leading fashion destination for the next generation consumer. We were founded over 20 years ago by Mike and Michael, still co-CEOs today, still own over 40% of the common stock. Still very engaged and very owner mindset within the company. They were not fashion guys when they founded the business.
Mike was an engineer, Michael was a business analyst, so everything they did was based on data and technology, which is core to our DNA today. That's pillar number one is really data-driven merchandising and a very, very strong technology backbone. That combined with a great marketing engine that has global appeal that connects with this next generation fashion consumer, and that's really important as some of the legacy players have struggled to really connect with that consumer, both in the way they shop and the merchandise they are offering. We've operated a very profitable and capital-efficient business model over time. If you think about the market opportunity that we have and where we operate, it is over $700 billion domestic market and several times larger than that internationally, that $3.3 trillion.
Right now, about 20% of our business is international with a lot of headroom for growth. We operate primarily online. We'll talk about stores in a little bit, but we do have 2 stores, but currently primarily online, and very under-penetrated in the overall market with a lot of opportunity to grow. We operate 2 segments. Revolve is the lion's share at 86% of the business. This is premium, primarily apparel, very highly curated, mostly dresses, fashion apparel. We have our complementary FWRD segment, which is 14% of the business, much higher average order value, skews more towards handbags, shoes, accessories. The luxury brands, some examples here. The common factor between the 2 is very highly curated.
Even in that high-end fashion luxury sector of FWRD, it's very highly curated, with a lot of emerging brands, and really, again, speaks to that next generation consumer, comparing that to some of the legacy department stores or others out there, that don't connect with that customer. As I mentioned, we have a long track record of growth, and not just growth, but profitable growth. Just over $1.2 billion last year, growing net income at a 9% six-year CAGR, and similarly on adjusted EBITDA. That's really important. That goes back to the owner mindset, and Mike and Michael founding this business, bootstrapping it for the first decade that they were in business, and always focused on free cash flow and adjusted EBITDA. This has led to market share gains over the years.
If you look at the total market at a 2% CAGR versus e-commerce at 13% and us at 16%. It really stands out in the market, only us and Zalando providing both profitable adjusted EBITDA and then also free cash flow with none of the others out there. You know, we've seen a lot of turmoil in the luxury industry that we'll talk about, so really important to have a strong balance sheet and being able to operate in a profitable manner. Some of the underlying key metrics driving our performance. Active customers. We have a very strong active customer base, and we sell at full price. This is very much a differentiator and leads to our premium gross margin.
82% full price mix. The average from 2022 to 2025 was 81% in 2025. A very premium AOV. This is really important to stay elevated, kinda distance ourselves from some of the lower price point players out there in a market that is very crowded. We have a very customer-first mindset. This is from day one. From day one, both technology and then the home is the dressing room, free shipping, free returns. Mike and Michael realized very early on that if we wanted to create this premium destination for this next generation consumer, they had to be able to try on the product at home and kind of replicate that physical experience as much as possible.
That's led to very high customer satisfaction score, again, back to the full price sales mix, and very high loyalty among our existing customers. Fifty-six percent of our active customer base is an existing customer, so they've purchased from us in the past. They represent 83% of our net sales. Typically, what we see when a customer comes in, there's that typical fall off from order 1 to order 2, but once they stick from order 2 or year 2 and beyond, the revenue retention is over 100% in those out years. They're coming back not only more frequently, but also purchasing at higher average order values over time.
We'll talk about some of the other category expansion opportunities that we have, but beauty, for example, where the new customer comes in at a much lower price point, but then graduates up into higher price points, and then ultimately graduating up into FWRD, that very high price point, luxury sector. Very high retention, so 89% retention. This has been volatile over the past few years with COVID and rebound and then hangover, and now it's back to that 89%, consistent with where we were in 2019, and then also consistent if you average all the ups and downs over the course of the kinda 2020 through 2024 era. AI, back to our core technology DNA and founding. We have very much leveraged AI. It's not just a buzzword for us.
We've been using it for over a year, and it even goes back before this most recent AI buzz and machine learning. Again, back to leveraging technology, data-driven merchandising, machine learning, to really drive the business. AI has just really expanded and accelerated the pace of development, and it's across the business from the website, more curation, very much guiding the customer along her journey and finding the right product. We developed our own search algorithm on the site that outperformed the incumbent that we were paying. Merchandising, assortment, own brand product development, this starts to get back into the back office, so using AI to speed up the development process within our own brands. Optimizing supply chain and logistics, making sure that we've got the right product in the right distribution center across the world. Reducing return rate.
We've made some great progress on reducing our return rate over the past year, AI has played a big role in that. All the way in the back office, using AI to kind of intelligently process our invoices, using AI to transcribe our voice customer service calls into text so that we can better mine the data and serve that customer, and a lot more opportunity on the AI front as we look ahead. We talked about cash flow. We have a very strong balance sheet, over $300 million in cash. Really great to have, especially in times like this, where others are pulling back and playing defense, we can very much be on the offense. As we think about capital allocation priorities, again, number 1, we are founder-led. We operate with a very long-term owner mindset.
Number one, opportunity and priority for us and where we see the highest ROI is investing back in the business. We have a lot of exciting things coming up in 2026 that we're investing behind that we've built a foundation for in 2025. Number two is thoughtfully evaluate M&A, number three is return of capital via a buyback plan that we have in place. How are we progressing against those key capital allocation priorities? Number one, investing back in the business. We have a lot going on, a lot of exciting things, from investing in own brands and expanding that to physical retail, which we'll talk about a little bit more in our growth opportunities. AI, I mentioned, category diversification, international. A lot of shots on goal when it comes to our own business.
Priority number 2, evaluating M&A investments. We are very disciplined on this front. We did make a minority investment in an apparel brand that closed in early 2026 that further supports our category diversification efforts. Again, very thoughtful and disciplined on the M&A front. 3rd is the return of capital. We do have a buyback plan in place. We've deployed $44 million of that plan at a very creative price points. Getting more into the recent results, Q4 and our growth drivers looking ahead. We closed 2025 very strong. Double-digit top-line growth with a 44% increase in adjusted EBITDA year-over-year. Again, very consistent, not just growth, but expansion in profitability.
The 10% is an acceleration from Q3, where we saw 4%. There are some comp dynamics, but even on a two-year basis, we expanded from a 15% two-year growth in Q3 to 26% two-year growth in Q4. That momentum continued into the first seven weeks of 2026, where we saw 16% one-year growth. There were also some comp dynamics there. We're comping the LA wildfires last year, but again, on a two-year basis, we comped through that, and the first couple weeks of February as we exited the fires last year remained strong. We're off to a great start. And again, a lot going on for 2026.
If we're entering into a new chapter for Revolve and have an exciting series of launches coming up in 2026 that will be revealed within the coming weeks that we're really excited about, that we are investing behind. The G&A investment has taken place over the past 18 months. Now what you see in 2026 is the marketing investment to support those launches, as reflected in our guidance. We have a joint venture with Cardi B that is launching soon, first beauty followed by an apparel line. Then other initiatives, international is a key priority for us. We've had some great progress internationally, specifically in China, launching a China-specific own brand for that Chinese customer. Then retail expansion. We have our store in Aspen that has been open over 1 year and performing extremely well.
We just opened the doors to the Grove store in L.A. in late December. More opportunity on the retail front. We just wanted to take a minute too and just reflect on and highlight the opportunity we have within luxury. Over the past, not just the most recent bankruptcy and the headlines around Saks and Neiman, but this has been developing for the past several years. If you go back to 2024 with Farfetch and Matches, then into 2025, LuisaViaRoma, SSENSE, and now Saks and Neiman, we see a huge opportunity here, both from a brand perspective, from a customer's perspective, and from a market share perspective. You can see on the left versus how FWRD is performed on the right, with 14% year-over-year sales growth on top of that expanded gross margin.
This isn't that we're marking down and taking share via markdown sales or any short-term opportunities there. This is very much a long-term play, expanding gross margin while expanding sales. We're getting some great talent. We're getting some great brands added to the site. We see this as a huge opportunity as we look ahead. Where are we going? Five key priorities as we look ahead for the coming years. Number one, increase the customer base. Number two, broaden the product offering, grow international sales, expand our own brand mix, and then invest in physical retail, which we'll double-click into each one of those. Investing in our core customer, expanding our customer base. We still have a massive opportunity, even domestically, to expand our customer base.
We think we're sub 3% penetrated in the U.S., just based on the number of customers in our core demographic, or if you look at the spend on apparel, handbags, shoes, accessories in the U.S. versus where we're at. If you don't believe those, then you can look at some of the other players in the market and their count of active customers just to see how much opportunity we have out there. That's number one, invest in marketing, keep doing a great job on the brand, the merchandise, the curation, the selection, everything we do great at, and continue to acquire new customers. Number two is broaden product offering, and this kind of feeds into acquiring new customers and taking more share in the market. Right now, we're heavily skewed towards dresses. About 30% of the business is dresses.
We think there's a huge opportunity to capture more wallet share, be a part of her life, in more areas. Beauty, great example, percent in the fourth quarter. It's about 6% of the business now. We think it can be +10% of the business over time if you look at comparative department stores. Again, this is a great new customer acquisition tool. She comes in, she buys beauty at a low price point, graduates up into the higher price point, dresses and other apparel. Even within apparel, opportunity to expand into some of those other categories... Kind of the Monday through Friday, not just the event wear.
It's hard when you look at, kind of our category disclosure, which is dresses, fashion apparel, versus kind of trying to think about it from a, kind of a lifestyle perspective. Event wear includes dresses and some of that fashion apparel. What we're looking to expand into is, again, that Monday through Friday, the active, the gym, the brunches and other areas. We see a massive opportunity in men's. This is very much an area of investment. Men's has been more about curating the right assortment. We made a lot of great progress on that in 2025. Now we'll start to market. We feel that nobody's doing a really great job at serving that young next-generation male out there.
We have a very captive female audience that we can leverage, and then also market towards that new male customer. Product diversification, added bonus is that they do carry lower return rates. Beauty specifically has low to mid-single-digit return rate versus our overall return rate of +50%. As we expand categories, there should be a natural reduction in return rate over time. Grow international sales. Another massive opportunity here. Our international business is 21% of our business versus 78% of the global market. This just shows the opportunity more broadly. To illustrate our potential here, you can see it growing from 17% of the business to over 20% currently. What are we doing to expand that business, and where do we see opportunity?
Across all regions, number one, we still see opportunity there. The chapter one of the journey is to really get the international experience on par with that U.S. experience, so offering free shipping and free returns in more regions, getting faster at shipping, getting the payment processing right, getting that customer service experience on par. Now moving more into merchandising and marketing. Two key areas where we see opportunity is China and the Middle East. If you look at China specifically and kind of example in getting that dialed in for that specific consumer, we developed a own brand specifically for the Chinese consumer in mainland China that was designed specifically for her, sized specifically for her, and marketed specifically for her via live stream in China.
Added benefit is that we fulfilled the product from China, it was manufactured there, fulfilled there, warehoused there, significant contribution margin accretive for this. We think it's very replicable. Over time, we can do more of these within the China market. Interestingly, over time, you know, if you rewind back 2 to 3 years ago, China was more about FWRD and those brand names. Now Revolve is the majority of the China business. That China consumer is really that curation and that discovery that we offer on Revolve. Own brands. Another huge opportunity here. Own brands was about 20% of the business in 2025. We peaked at 36% back in 2019, that's one way to show the opportunity.
Why this is such a great opportunity, own brands carry a much higher gross margin than that of a third party, so very margin accretive. These brands are exclusive to us, so it creates a draw and discovery for the customer. Very efficient from the marketing perspective because nobody else is bidding on these keywords and really marketing these products. They are true brands in and of themselves. From a customer perspective, they don't know they're our brands. Examples here, SRG, Helsa, I talked about the China collaboration, some more exciting ones coming up in 2025 as we look to expand own brands. These also provide just a brand halo for us as well. Finally, physical retail. We have, I mentioned, opened the store in Aspen. It's been open for over a year, performing very well.
Just opened The Grove at the end of December. Very early on at The Grove, but very excited about what The Grove can do. We see massive opportunity here. Number 1, still 60% plus of the dollars in fashion retail are still going through a physical door. Still a massive opportunity out there. Number 2, own brands. We think curating the stores and over-indexing on own brands is a huge opportunity. Right now in Aspen and The Grove, own brands perform better than online, both in terms of the mix in the store and also the sales productivity versus the inventory balance that we have in store. New customers. Over half of our customers in the stores are new customers, so a great way to expose the customer out there to our brand.
These are very unique stores, very curated depending on the region. Aspen is about 3,000 sq ft, features Revolve and FWRD. Ski is a little bit more FWRD, a little bit more high-end, as you would guess. Grove is 8,000 sq ft. Again, features Revolve, FWRD, Men's, Beauty. The challenge and the opportunity is we have 100,000 styles on the site at any given point online. How do you get those 100,000 styles, and which 100,000 styles do you get in the store? We think that's more of an opportunity than a challenge, and we can have a very curated and experiential offering for the customer physically. Also added bonus is that return rate is much lower in store. Again, helping us on the return rate initiative over time.
With that, Rick, that concludes my prepared remarks.
All right. Thank you, Jesse, for that overview. We have a few minutes for Q&A, please feel free to raise your hand and I'll get you the mic. Maybe I can kick things off by asking you about margin. Can you talk about the margin roadmap from where you are today to the long-term goal of double digits? How do you get there, and where do you have the most confidence?
Thanks for that. We see a very clear path to double-digit EBITDA margin. Loosely speaking, let's say our starting point currently is 8%, we got 2 points to go to get into that double digit. That comes from 2 key areas. Number 1 is gross margin. Very confident in the path to gaining gross margin to achieve that double-digit EBITDA margin. Primary driver there being own brands. We're at 20% now. We expanded that by 2 points in 2025, we'd expect a similar cadence over the next couple of years. That drives that Revolve gross margin, of course. FWRD's in a really good place at 42.5%, roughly, that's a good place for FWRD to be.
FWRD will be more volatile quarter to quarter, but in a very healthy place. Most of the expansion coming from Revolve, driven by own brand. The second lever is G&A leverage. We are now back into the point where we're starting to gain G&A leverage after several quarters of investment, and that investment has gone into physical retail, own brand, and rebuilding the foundation and really building behind some of these brands that are still and other areas of the business, and just kind of being on the offense of really investing in the FWRD business and the team there. After several quarters of investment to the G&A leverage initiative, and we think there's meaningful opportunity there.
If you go back to kind of in the 2016 to 2019 era, you know, gaining at least a point of margin out of G&A over the coming years. Very confident in both. More excited about the gross margin expansion, given the benefits that we get from own brands.
Great. Thank you.
own brand seems like a big opportunity, obviously, and 3 so far. I know you can't give guidance on it, but if you were to look 5 years down the line, could those be in double digits? Like, what is kind of the broader goal of how many own brands you can have under the umbrella?
Yeah. Yeah. No stated goal other than to say it can be much larger than it is today. You know, I think a good proxy is that 36% that we were at back in 2019. We think that is very achievable. We're gonna do so at a more moderate pace, though, than we did back in the 2016 to 2019 ramp. You know, at that couple points a year over time, the added variable that we have in a positive way is physical stores. We think if online is 20% today, stores can easily be 40%, so that increases the overall percentage at a greater rate than maybe we otherwise would. We have just over 20 brands now. I think it's 24 to 28 brands.
The expansion will come from both new brands and then also expansion within our existing brands and expanding into some of those other categories and building out the brands that we do have. Four out of our top 10 brands, top 10 selling brands on the site are our own brands. It just kinda shows the customer appeal and how it's resonating. It's not just that we're... You know, we're not promoting them any differently. We're not pricing them any differently. They just truly are brands in and of themselves, and the quality is there where the customer keeps coming back.
you know, maybe we can touch a little bit more on the luxury sector, right? There's been a lot of dislocation there, a number of competitors going bankrupt, most recently being Saks, which you highlighted. Can you talk about the impact that this has had on FWRD and what you see as the opportunity going forward?
Yeah. Yeah. We see this as a huge opportunity and, you know, it's very much in the headlines currently, but like I mentioned, this has been kind of happening over the past few years and building over the past few years, starting with Farfetch and Matches and now to the most recent. We think it is definitely an opportunity. Number one, from a customer perspective, and acquiring new customers. There's been reports out there that it's a $500 million to $1 billion opportunity of dollars up for grabs, and there's not that many places left for customers to go. Why would the customer come to us? That feeds into the second piece, which is brands. In order for the customer to these luxury players, including FWRD, you have to have the right brands.
As brands are pulling back and don't have as many distribution points, that gravitates towards FWRD. So having the brands to offer the customer, having great relationships, paying our bills, simple things like that, having a great customer and marketing and physical stores has really helped acquire new brands within the FWRD umbrella. So combination customer, brands, and then also really servicing. We've been investing more in servicing that high-value customer, and really driving that business. That business increased 100% in 2025. Something we've had over time but haven't really invested in, so really putting the investment into that and really serving that high-end consumer.
Can you also talk about AI?
Yeah
... initiatives that you turned on in 2025? You know, the growth rate seemed to be a very strong proof point of an inflection point. Maybe just some of the initiatives around 2025 and what excites you about what's in the pipeline for 2026.
Yeah. Yeah. No, we are super excited about AI. I think, you know, arguably, and I'm biased, but probably the best in retail at leveraging AI to drive the business, and it's not just efficiencies on the back end. It is really driving the customer experience as well. On the site, I think I mentioned, developed our own internal search algorithm that outperformed the incumbent that is arguably the best in the search business. Not only are we getting better results and driving conversion gains, but we're also saving money by not paying a third party. We'll use third parties, we'll use our own technology. We're agnostic, but more often than not, our technology can outperform. That's one.
On the site, also a lot of improvement in the curation in the shops and really driving her to the right place and what she's looking for. Starting to test, this gets into a little bit in kind of what's coming, but starting to test more of agentic AI on the site and chatbot, kind of resurfacing or surfacing the Q&A that's the most relevant to what she is searching for. A lot to come on just kind of how she interacts on the site and leaning into agentic AI more. Kind of, I wouldn't say all the way back office, we call it mid office, using AI to help in the design of our own brands. This is kind of a speed and velocity play, not necessarily efficiency.
More often than not, we won't kind of cut costs or save both of AI. We're just increasing productivity and increasing velocity and getting more out of what we're doing. Another example is kind of in our editorial processes using AI, and this is one where we are spending 25% of what we were pre-AI, but we're generating 6 times the content. Again, an example of, you know, not doing it necessarily to save money, but be more efficient and use that efficiency to drive more productivity. The back office, transcribing customer service calls from voice to text, so we can mine that data. Using AI to kind of guide the customer service agent down the right path to service that customer. Using it for invoice processing, intelligently placing inventory around the world in our distribution centers.
If a product is more likely to sell in Europe after being returned, we'll keep it in Europe and not ship it all the way back to the U.S. or in our Hong Kong warehouse or in L.A. or in Pennsylvania. A lot of efficiencies gained there. More to come.
That's great. Last question will be on retail. The two stores that you have have pretty strong initial read. What are you waiting for in order to hit the accelerator and just have more rapid expansion?
Yeah. Yeah. We're super pleased with the store performance thus far. That said, we fully acknowledge that we are online people. We think we've done a really good job building an online business over the last 20 years, but retail is new to us. We wanna take our time there, build the muscle, and do it in the right way, so we don't get over our skis and have to pull back. That's number 1 is just really building the muscle. That comes from building the team, the processes, the reporting, and really making sure we're confident before we really push the accelerator down. We also have 2 stores that have performed very well, but 1 is in Aspen, very unique market, lower traffic, higher conversion, very...
We have The Grove, very different, high traffic, lower conversion, still a lot of tourists, more kind of premium price point versus the high-end of Aspen. We've got two really great data points, but they're very different, and we've only got a month of data on the one. Really wanna read that, get a couple of seasons under our belt, before we push the accelerator down too hard. That said, landlords are knocking down the door, and opening up space for us. We are not holding back on having those discussions 'cause leases take time, finding the right space takes time. We're having those discussions and could reasonably see one to two stores later this year. Super excited again, just given the market opportunity, the new customer opportunity, and that own brand opportunity in store.
That's great. Let's leave it there. Thank you, Jesse.
All right.
... for the insights, and thank you all for your interest.
Thanks, Rick.