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What changed in Revolve Group, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Revolve Group, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+322 added−312 removedSource: 10-K (2025-02-25) vs 10-K (2024-02-27)

Top changes in Revolve Group, Inc.'s 2024 10-K

322 paragraphs added · 312 removed · 289 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

47 edited+4 added−3 removed74 unchanged
Biggest changeWe give our employees the opportunity to make an immediate contribution to our business, while maintaining our commitment to maximizing value over the long term.
Biggest changeWe give our employees the opportunity to make an immediate contribution to our business, while maintaining our commitment to maximizing value over the long term. The success of our managerial strategies and innovative culture is evident in our long track record and our ability to manage through significant challenges in the macroeconomic environment over the course of our operating history.
Our strong net revenue retention rates and high average order values drive 9 attractive customer lifetime value that enables us to invest in customer acquisition and long-term brand building activities. Unique Owned Brand Platform .
Our strong net revenue retention rates and high average order values drive attractive customer lifetime value that enables us to invest in customer acquisition and long-term brand building activities. 9 Unique Owned Brand Platform .
When coupled with our innovative marketing approach, we develop strong brand equity 11 for each owned brand. We bring new owned brand products to market by working with a flexible network of manufacturing partners and third-party suppliers. We work with suppliers and manufacturers in China, the United States, India and other countries.
When coupled with our innovative marketing approach, we develop strong brand equity for each owned brand. We bring new owned brand products to market by working with a flexible network of manufacturing partners and third-party suppliers. We work with suppliers and manufacturers in China, the United States, India and other countries.
Our customer service technology is complemented by third party technology and provides our representatives with up-to-date and relevant product and fulfillment information to better serve our customer regardless of the communication channel. We generate highly personalized and relevant full life-cycle email and retargeting messaging.
Our customer service technology is complemented by third party technology and provides our representatives with up-to-date and relevant product and fulfillment information to better serve our customer regardless of the communication channel. We generate highly personalized and relevant full life-cycle email, SMS and retargeting messaging.
The algorithms we use in our fulfillment centers enable us to efficiently position inventory, including strategically directing products returned by customers to the optimal fulfillment center location and giving customers the ability to pre-order merchandise items that are in the process of being returned to our fulfillment centers.
The algorithms we use in our fulfillment centers enable us to efficiently position inventory, including strategically directing products returned by customers to the optimal fulfillment center location 12 and giving customers the ability to pre-order merchandise items that are in the process of being returned to our fulfillment centers.
Although we have not sought copyright registration for our technology or works to date, we rely on common law copyright and trade secret protections in relation to our proprietary technology, 14 products and the content displayed on our sites, including our photography and fabric prints that we design.
Although we have not sought copyright registration for our technology or works to date, we rely on common law copyright and trade secret protections in relation to our proprietary technology, products and the content displayed on our sites, including our photography and fabric prints that we design.
Our investments have created a highly scalable, flexible infrastructure that optimizes inventory and order allocation, reduces shipping and fulfillment expenses and delivers merchandise quickly and efficiently to our customers. Our fulfillment, shipping and return processes create a seamless customer experience, which fosters 13 customer loyalty.
Our investments have created a highly scalable, flexible infrastructure that optimizes inventory and order allocation, reduces shipping and fulfillment expenses and delivers merchandise quickly and efficiently to our customers. Our fulfillment, shipping and return processes create a seamless customer experience, which fosters customer loyalty.
We intend to further localize and improve the shopping experience and merchandise selection for our international customers and leverage the global reach of our brand and our worldwide network of influencers to accelerate growth outside of the United States. Grow our Owned Brand Offering .
We intend to further localize and improve the shopping experience and merchandise selection for our international customers and leverage the global reach of our brand and our worldwide network of influencers to accelerate growth outside of the United States. 10 Grow our Owned Brand Offering .
We offer a broad yet curated assortment of over 100,000 apparel and footwear styles, as well as accessories, beauty and home products, presented in a visually compelling manner to encourage discovery and engagement. Since our inception, we have attracted and maintained strong relationships with a diversified group of premium lifestyle and luxury brands, from emerging designers to globally recognized brands.
We offer a broad yet curated assortment of over 110,000 apparel and footwear styles, as well as accessories, beauty and home products, presented in a visually compelling manner to encourage discovery and engagement. Since our inception, we have attracted and maintained strong relationships with a diversified group of premium lifestyle and luxury brands, from emerging designers to globally recognized brands.
This evolution in consumer behavior accompanies a significant transition of purchasing power to the Millennial generation. According to U.S. Federal Reserve data, the Millennials’ share of U.S. household net worth during the first nine months of 2023 more than doubled compared to the same period in 2019. We Believe There is an Opportunity to Better Serve Next-Generation Consumers.
This evolution in consumer behavior accompanies a significant transition of purchasing power to the Millennial generation. According to U.S. Federal Reserve data, the Millennials’ share of U.S. household net worth during the first nine months of 2024 more than doubled compared to the same period in 2019. We Believe There is an Opportunity to Better Serve Next-Generation Consumers.
We optimize our assortment through the development of a portfolio of 25 owned brands that span multiple categories. We apply market insights and proprietary data analytics to identify gaps and emerging trends within the marketplace. We then develop new styles for existing brands or launch new brands with a unique aesthetic or category focus to address these areas.
We optimize our assortment through the development of a portfolio of 29 owned brands that span multiple categories. We apply market insights and proprietary data analytics to identify gaps and emerging trends within the marketplace. We then develop new styles for existing brands or launch new brands with a unique aesthetic or category focus to address these areas.
In addition, the SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and 15 other information regarding issuers that file electronically.
In addition, the SEC maintains a website at www.sec.gov that contains reports, proxy and information statements, and other information regarding issuers that file electronically.
Our algorithms analyze the billions of impressions generated by our influencer network and the number of click-throughs and conversion rates from our performance marketing efforts to cost-efficiently and effectively market to consumers. We use customer shopping and purchase behavior to personalize our email and retargeting efforts seamlessly across multiple customer touchpoints. 12 • Site Experience .
Our algorithms analyze the billions of impressions generated by our influencer network and the number of click-throughs and conversion rates from our performance marketing efforts to cost-efficiently and effectively market to consumers. We use customer shopping and purchase behavior to personalize our email, SMS and retargeting efforts seamlessly across multiple customer touchpoints. • Site Experience .
Information contained in, or that can be accessed through, our website is not a part of, and is not incorporated into, this report .
Information contained in, or that can be accessed through, our website is not a part of, and is not incorporated into, this report . 15
We have built a portfolio of 25 owned brands, each crafted with unique attributes with pricing similar to that of premium third-party brands, supported by dedicated marketing investments. We believe our consumers perceive these as highly desirable, independent brands, rather than private labels or house brands.
We have built a portfolio of 29 owned brands, each crafted with unique attributes with pricing similar to that of premium third-party brands, supported by dedicated marketing investments. We believe our consumers perceive these as highly desirable, independent brands, rather than private labels or house brands.
As a trusted premium lifestyle brand and a go-to online source for discovery and inspiration, we deliver exceptional service and an engaging customer experience with a vast yet curated offering totaling over 100,000 apparel and footwear styles, as well as beauty, accessories and home products.
As a trusted premium lifestyle brand and a go-to online source for discovery and inspiration, we deliver exceptional service and an engaging customer experience with a vast yet curated offering totaling over 110,000 apparel and footwear styles, as well as beauty, accessories and home products.
Our efficient operations allow us to ship over 97% of orders on the same day if placed before 3 p.m. Eastern Time. We are also able to ship to and service customers in over 150 countries and territories and offer shipping within two to three business days for customers representing over 80% of our international sales.
Our efficient operations allow us to ship over 96% of orders on the same day if placed before 3:00 p.m. Eastern Time. We are also able to ship to and service customers in over 150 countries and territories and offer shipping within two to three business days for customers representing over 80% of our international sales.
We complement our social media efforts through a variety of brand marketing campaigns and in-person events. Our events are attended by top influencers who promote the REVOLVE and FWRD brands and the products we offer.
We complement our social media efforts through a variety of brand marketing campaigns and events. Our events are attended by top influencers who promote the REVOLVE and FWRD brands and the products we offer.
Furthermore, by introducing new products almost daily in limited quantities, we create a sense of urgency for our customers. As a result, sales of products at full retail price represented approximately 79%, 85%, 87%, 77% and 79% of total net sales in 2023, 2022, 2021, 2020 and 2019, respectively. Our Brands .
Furthermore, by introducing new products almost daily in limited quantities, we create a sense of urgency for our customers. As a result, sales of products at full retail price represented approximately 82%, 79%, 85%, 87% and 77% of total net sales in 2024, 2023, 2022, 2021 and 2020, respectively. Our Brands .
We leverage a strategic asset of hundreds of millions of data points, drawing from 20 years of data across hundreds of thousands of styles, up to 60 unique attributes per style and millions of customer interactions.
We leverage a strategic asset of hundreds of millions of data points, drawing from more than 20 years of data across hundreds of thousands of styles, up to 60 unique attributes per style and millions of customer interactions.
Further, the owned brand portfolio enhances loyalty, given that the substantial majority of our owned brand styles are available only on the REVOLVE site. We bring new products to market by working with a flexible network of manufacturing partners and employ our “read and react” model.
Further, the owned brand portfolio enhances loyalty, given that the substantial majority of our owned brand styles are available only on our sites. We bring new products to market by working with a flexible network of manufacturing partners and employ our “read and react” model.
Our dynamic platform connects a deeply engaged community of millions of consumers, thousands of global fashion influencers and over 1,200 emerging, established and owned brands.
Our dynamic platform connects a deeply engaged community of millions of consumers, thousands of global fashion influencers and over 1,400 emerging, established and owned brands.
Mobile sales in particular have rapidly increased as consumers leverage advances in technology, further enhancing their ability to discover, browse and purchase anytime from anywhere. In 2023, customer orders placed through mobile devices represented 69.7% of our total orders. Media Consumption and Shopping Behaviors of Next-Generation Consumers.
Mobile sales in particular have rapidly increased as consumers leverage advances in technology, further enhancing their ability to discover, browse and purchase anytime from anywhere. In 2024, customer orders placed through mobile devices represented 73.7% of our total orders. Media Consumption and Shopping Behaviors of Next-Generation Consumers.
Unlike traditional private label offerings, our owned brands command pricing similar to premium third-party brands due to their brand equity, as demonstrated by their collective social media following, which exceeded 4.1 million followers on Instagram and TikTok as of December 31, 2023.
Unlike traditional private label offerings, our owned brands command pricing similar to premium third-party brands due to their brand equity, as demonstrated by their collective social media following, which exceeded 4.2 million followers on Instagram and TikTok as of December 31, 2024.
Our talent acquisition efforts combined with retention of our employee base yielded positive results and allowed us to grow our headcount from just over 1,000 employees at the end of 2019 to over 1,470 employees at the end of 2023. We attribute this success to our strong brand and efficient recruitment process.
Our talent acquisition efforts combined with retention of our employee base yielded positive results and allowed us to grow our headcount from just over 1,000 employees at the end of 2019 to over 1,600 employees at the end of 2024. We attribute this success to our strong brand and efficient recruitment process.
We have a proven history of leveraging our technology platform to expand capacity and increase service levels in a capital-efficient manner. We will continue to evaluate opportunities to enhance our platform in the United States and internationally. Human Capital As of December 31, 2023, we had 1,478 employees worldwide, most of whom are employed in the United States.
We have a proven history of leveraging our technology platform to expand capacity and increase service levels in a capital-efficient manner. We will continue to evaluate opportunities to enhance our platform in the United States and internationally. 13 Human Capital As of December 31, 2024, we had 1,632 employees worldwide, most of whom are employed in the United States.
The broad reach of our social media–driven marketing and events generates consumer appeal and credibility for our owned brands, expanding our reach and driving incremental traffic to our sites. Net sales of owned brands represented 20.0%, 22.4%, 20.1%, 26.7% and 36.1% of REVOLVE segment net sales for 2023, 2022, 2021, 2020 and 2019, respectively.
The broad reach of our social media–driven marketing and events generates consumer appeal and credibility for our owned brands, expanding our reach and driving incremental traffic to our sites. Net sales of owned brands represented 18.2%, 20.0%, 22.4%, 20.1% and 26.7% of REVOLVE segment net sales for 2024, 2023, 2022, 2021 and 2020, respectively.
Additionally, in contrast to many eCommerce retailers that now offer many products for sale that are actually fulfilled by brands and other third parties, we directly fulfill all customer orders from our distribution centers, which ensures that we can maintain an exceptional customer experience.
Additionally, in contrast to many eCommerce retailers that now offer many products for sale that are actually fulfilled by brands and other third parties, we directly fulfill the vast majority of customer orders from our distribution centers, which ensures that we can maintain an exceptional customer experience.
We are innovating across our user interface, technology platform, supply chain and distribution capabilities to improve service levels, further enhance and personalize the customer experience, increase conversion rates and further optimize our operational processes. Pursue Strategic Acquisitions and Investments .
We are innovating across our user interface, technology platform, supply chain and distribution capabilities to improve service levels, further enhance and personalize the customer experience, increase conversion rates and further optimize our operational processes.
Our approach facilitates constant newness, with over 1,500 new styles launched per week on average in 2023. Illustrating the efficacy of our data-driven merchandising, in 2023, approximately 79% of our net sales were at full price, which we believe is appreciably higher than industry benchmarks.
Our approach facilitates constant newness, with over 1,900 new styles launched per week on average in 2024. Illustrating the efficacy of our data-driven merchandising, in 2024, approximately 82% of our net sales were at full price, which we believe is appreciably higher than industry benchmarks.
Our average order value was $297 in 2023, which is reflective of our focus on premium merchandise and our differentiation from mass market, low price or value-based retailers.
Our average order value was $302 in 2024, which is reflective of our focus on premium merchandise and our differentiation from mass market, low price or value-based retailers.
Our online presence includes the collective following of over 11.6 million Instagram and TikTok followers across REVOLVE, FWRD and our individual owned brands as of December 31, 2023. We complement our powerful social media and influencer marketing with a robust digital performance marketing strategy.
Our online presence includes the collective following of over 12.1 million Instagram and TikTok followers across REVOLVE, FWRD and our individual owned brands as of December 31, 2024. We complement our powerful social media and influencer marketing with a robust digital performance marketing strategy.
We believe we are the leading U.S. online destination targeted towards next-generation consumers seeking premium fashion. In 2023, we generated $1.1 billion in net sales, served over 2.5 million active customers, offered over 1,200 brands and delivered over 300,000 unique styles, which we believe makes us one of the largest standalone fashion eCommerce businesses in the United States.
We believe we are the leading U.S. online destination targeted towards next-generation consumers seeking premium fashion. In 2024, we generated $1.1 billion in net sales, served 2.7 million active customers, offered over 1,400 brands and delivered over 210,000 unique styles, which we believe makes us one of the largest standalone fashion eCommerce businesses in the United States.
Intellectual Property We primarily protect our intellectual property through the trademark, copyright and trade secret laws of the United States. As of December 31, 2023, we owned over 780 trademark registrations, over 160 trademark applications and over 70 Internet domain names.
Intellectual Property We primarily protect our intellectual property through the trademark, copyright and trade secret laws of the United States. As of December 31, 2024, we owned over 760 trademark registrations, over 70 trademark applications and over 90 Internet domain names.
In 2023, our owned brands represented six out of our top ten brands in the REVOLVE segment and contributed 20.0% of the REVOLVE segment’s net sales. 7 Representative REVOLVE Owned Brands Our Industry Large and Growing Addressable Market. We participate in the large and growing apparel, footwear, beauty, accessories and home product sectors.
In 2024, our owned brands represented five out of our top ten brands in the REVOLVE segment and contributed 18.2% of the REVOLVE segment’s net sales. 7 Representative REVOLVE Owned Brands Our Industry Large and Growing Addressable Market. We participate in the large and growing apparel, footwear, beauty, accessories and home product sectors.
Government Regulation Our business is subject to a number of domestic and foreign laws and regulations that affect companies conducting business on the Internet, many of which are still evolving and could be interpreted in ways that could harm our business.
Our trademarks, including domain names, are material to our business and brand identity. 14 Government Regulation Our business is subject to a number of domestic and foreign laws and regulations that affect companies conducting business on the Internet, many of which are still evolving and could be interpreted in ways that could harm our business.
Our effective customer acquisition combines with strong repeat purchase behavior to generate an attractive ratio of customer lifetime value to customer acquisition cost. We believe we are well-positioned in the market and there is significant room to expand our core customer base. As a result, we will continue to invest in attracting new customers to the REVOLVE community.
Our Growth Strategies Continue to Acquire New Customers . Our effective customer acquisition combines with strong repeat purchase behavior to generate an attractive ratio of customer lifetime value to customer acquisition cost. We believe we are well-positioned in the market and there is significant room to expand our core customer base.
We intend to continue optimizing our assortment to drive revenue and profitability growth by introducing new owned brands and expanding our current owned brands into additional styles and categories. Continue to Innovate .
We intend to continue optimizing our assortment to drive revenue and profitability growth by introducing new owned brands and expanding our current owned brands into additional styles and categories. Evaluate Expansion of Physical Retail Stores .
We engage with consumers through social media, events, press and other digital channels, generating multiple touchpoints in an authentic way. We integrate our marketing content with our product curation, visual merchandising and editorial content.
We understand our consumers, how they shop and where they seek fashion and lifestyle inspiration. We engage with consumers through social media, events, press and other digital channels, generating multiple touchpoints in an authentic way. We integrate our marketing content with our product curation, visual merchandising and editorial content.
We complement our social media and community-driven brand marketing with sophisticated performance marketing efforts, including paid search and product listing ads, affiliate marketing, paid social, retargeting, personalized email marketing and mobile “push” communications through our mobile applications. Deep Connection with Our Loyal Customers . We understand our consumers, how they shop and where they seek fashion and lifestyle inspiration.
We complement our social media and community-driven brand marketing with sophisticated performance marketing efforts, including paid search and product listing ads, affiliate marketing, paid social, retargeting, personalized email and SMS marketing and mobile “push” communications through our mobile applications. Deep Connection with Our Loyal Customers .
Our trademark registrations and applications, which we have filed in the United States and in various jurisdictions outside the United States, have focused primarily on the REVOLVE and FWRD word marks and those marks associated with our unique individual owned brands. Our trademarks, including domain names, are material to our business and brand identity.
Our trademark registrations and applications, which we have filed in the United States and in various jurisdictions outside the United States, have focused primarily on the REVOLVE and FWRD word marks and those marks associated with our unique individual owned brands.
We have a global network of thousands of influencers who regularly create branded REVOLVE and FWRD content. We believe we are a preferred partner for influencers, as their association with REVOLVE and FWRD enhances their personal brands through our exclusive events and premium product offering.
These efforts typically lead to higher earned media value relative to that of our competitors. We have a global network of thousands of influencers who regularly create branded REVOLVE and FWRD content. We believe we are a preferred partner for influencers, as their association with REVOLVE and FWRD enhances their personal brands through our exclusive events and premium product offering.
Our technology mines data from a database we have built over 20 years, consisting of hundreds of thousands of styles and millions of customer interactions, creating a strategic asset of hundreds of millions of data points. • Machine Learning and Artificial Intelligence.
Our technology mines more than 20 years of data from an internally developed database, consisting of hundreds of thousands of styles and millions of customer interactions, creating a strategic asset of hundreds of millions of data points. • Machine Learning and Artificial Intelligence.
The following table sets forth the number of employees by team as of December 31, 2023: Team As of December 31, 2023 Fulfillment and logistics 737 Customer service 172 Owned brand design and development 140 Merchandising and planning 104 Creative photography, studio and editorial 96 Marketing 63 Technology and data science 58 Other 108 Total 1,478 Competition The online and offline retail markets generally, as well as the premium lifestyle and luxury product markets more specifically, are highly competitive and rapidly evolving.
The following table sets forth the number of employees by team as of December 31, 2024: Team As of December 31, 2024 Fulfillment and logistics 779 Customer service 187 Owned brand design and development 158 Merchandising and planning 124 Creative photography, studio and editorial 116 Marketing 62 Technology and data science 56 Retail 37 Other 113 Total 1,632 Competition The online and offline retail markets generally, as well as the premium lifestyle and luxury product markets more specifically, are highly competitive and rapidly evolving.
Proprietary, Scalable Technology Platform and Robust Data Net . Our proprietary, scalable technology, data analytics and artificial intelligence and machine learning-supported platform efficiently and seamlessly manages our merchandising, marketing, website experience, fulfillment, product development, sourcing, and pricing decisions. We have a proven history of leveraging our technology platform to flexibly expand capacity in a capital-efficient manner.
Proprietary, Scalable Technology Platform and Robust Data Net . Our proprietary, scalable technology, data analytics and artificial intelligence and machine learning-supported platform efficiently and seamlessly manages our merchandising, marketing, website experience, fulfillment, product development, sourcing, and pricing decisions.
Our Marketing Approach We leverage a variety of marketing and advertising programs to build our brands, drive traffic to our websites and mobile applications, acquire new customers and engage with our existing customers.
Our Marketing Approach We leverage a variety of marketing and advertising programs to build our brands, drive traffic to our websites and mobile applications, acquire new customers and engage with our existing customers. 11 We are a leader in experiential and influencer marketing, using social media channels and cultural events designed to deliver authentic aspirational experiences featuring our premium merchandise to attract and retain customers.
Continue to Increase Customer Loyalty and Wallet Share .
As a result, we will continue to invest in attracting new customers to the REVOLVE community. Continue to Increase Customer Loyalty and Wallet Share .
Removed
In 2023, we drove 49% of traffic for REVOLVE from free and low-cost sources, as measured by the number of visitors who landed on the REVOLVE website or mobile application directly, via email marketing links, or through paid branded search terms and organic search results.
Added
We have a proven history of leveraging our technology platform to flexibly expand capacity in a capital-efficient manner, as demonstrated by our capital expenditures averaging less than one percent of net sales for the past several years.
Removed
The success of our managerial strategies and innovative culture is evident in our long track record and our ability to manage through significant challenges in the macroeconomic environment, including the great recession in 2008 and 2009 and the more recent COVID-19 pandemic. 10 Our Growth Strategies Continue to Acquire New Customers .
Added
With our strong brands, unique assortment of merchandise and connection with the next-generation consumer, we believe there is an opportunity to expand our market share within our addressable market through expansion into physical retail.
Removed
We are a leader in experiential and influencer marketing, using social media channels and cultural events designed to deliver authentic aspirational experiences featuring our premium merchandise to attract and retain customers. These efforts typically lead to higher earned media value relative to that of our competitors.
Added
We intend to evaluate and test physical retail as a potential growth driver over the long term, building on our early success in leveraging physical retail locations to increase brand awareness and acquire new customers. Continue to Innovate .
Added
We are increasingly leveraging artificial intelligence, or AI, and machine learning to drive growth and efficiency throughout our operations, including to optimize our product assortment and personalize our website experience through advanced search and product recommendations. Pursue Strategic Acquisitions and Investments .

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

143 edited+20 added−12 removed381 unchanged
Biggest changeAdditionally, with many of our employees and employees of our service providers now working remotely, we and our service providers have less capability to monitor and enforce our data protection and data security policies and face increased privacy, data protection and data security risks. 40 Also, due to political uncertainty and military actions associated with geopolitical tensions, including Russia’s war against Ukraine, we and our vendors and service providers are vulnerable to heightened risks of cybersecurity incidents and security and privacy breaches from or affiliated with nation-state actors.
Biggest changeAlso, due to political uncertainty and military actions associated with geopolitical tensions, including wars and conflicts in Ukraine/Russia, Israel/Gaza and the Middle East, we and our vendors and service providers are vulnerable to heightened risks of cybersecurity incidents and security and privacy breaches from or affiliated with nation-state actors.
In a competitive environment, the costs associated with establishment and retention of these relationships may increase and there can be no assurance that our investments and efforts will ultimately result in new customers or increased sales to existing customers.
In a competitive environment, the costs associated with the establishment and retention of these relationships may increase and there can be no assurance that our investments and efforts will ultimately result in new customers or increased sales to existing customers.
For example, in 2018, California enacted the California Consumer Privacy Act, or CCPA, which, among other things, requires new disclosures to California consumers and affords such consumers new abilities to opt out of certain sales of personal information.
For example, in 2018, California enacted the California Consumer Privacy Act, or CCPA, which, among other things, requires certain disclosures to California consumers and affords such consumers new abilities to opt out of certain sales of personal information.
These provisions include the following: • permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships; • require super-majority voting to amend some provisions in our certificate of incorporation and bylaws; 48 • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • eliminate the ability of our stockholders to call special meetings of stockholders; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; • restrict the forum for certain litigation against us to Delaware; • reflect the dual class structure of our common stock; and • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
These provisions include the following: • permit the board of directors to establish the number of directors and fill any vacancies and newly created directorships; • require super-majority voting to amend some provisions in our certificate of incorporation and bylaws; • authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • eliminate the ability of our stockholders to call special meetings of stockholders; • prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; • provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; • restrict the forum for certain litigation against us to Delaware; • reflect the dual class structure of our common stock; and • establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings.
As such, these requirements may have a material adverse effect on our business, financial condition and results of operations. Further, the laws and regulations that govern the status and classification of independent contractors and other similar non-employee services providers are subject to change and divergent interpretations by various authorities, which can create uncertainty and unpredictability for us.
As such, these requirements may have a material adverse effect on our business, financial condition and results of operations. 32 Further, the laws and regulations that govern the status and classification of independent contractors and other similar non-employee services providers are subject to change and divergent interpretations by various authorities, which can create uncertainty and unpredictability for us.
While we have policies and procedures to address compliance with such laws, and notwithstanding our efforts 35 to conduct our operations in material compliance with these regulations, we cannot assure you that all of our employees, agents, representatives, business partners or third-party intermediaries will not take actions in violation of applicable law for which we may be ultimately held responsible.
While we have policies and procedures to address compliance with such laws, and notwithstanding our efforts to conduct our operations in material compliance with these regulations, we cannot assure you that all of our employees, agents, representatives, business partners or third-party intermediaries will not take actions in violation of applicable law for which we may be ultimately held responsible.
We rely on third-party suppliers, manufacturers, distributors and other vendors and they may not continue to produce products or provide services that are consistent with our standards or applicable regulatory requirements, which could harm our brand, cause consumer dissatisfaction, and require us to find alternative suppliers of our products or services. We do not own or operate any manufacturing facilities.
We rely on third-party suppliers, manufacturers, distributors and other vendors and they may not continue to produce products or provide services that are consistent with our standards or applicable regulatory requirements, which could harm our brand, cause consumer dissatisfaction, and require us to find alternative suppliers of our products or services. 21 We do not own or operate any manufacturing facilities.
In China, for example, the Personal Information Protection Law, or PIPL, was adopted on August 20, 2021 and went into effect on November 1, 2021. The PIPL shares similarities with the GDPR, including extraterritorial application, data minimization, data localization and purpose limitation requirements, as well as obligations to provide certain notices and rights to citizens of China.
In China, for example, the Personal Information Protection Law, or PIPL, was adopted on August 20, 2021 and went into effect on November 1, 2021. The PIPL shares similarities with the GDPR, including extraterritorial application, data minimization, data 39 localization and purpose limitation requirements, as well as obligations to provide certain notices and rights to citizens of China.
If any such claim is valid, we may be compelled to cease our use of such intellectual property or other proprietary rights and pay damages, including statutory damages of up to $150,000 per work infringed in the event of willful copyright infringement. We could also be subject to actual damages, the amounts of which may be difficult to quantify.
If any such claim is valid, we may be compelled to cease our use of such intellectual property or other proprietary rights and pay damages, including statutory damages of up to $150,000 per work infringed in the event of willful copyright infringement. We could also 45 be subject to actual damages, the amounts of which may be difficult to quantify.
We may also be contractually required to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, 37 regulations or other legal obligations relating to privacy or consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or handle as part of operating our business.
We may also be contractually required to indemnify and hold harmless third parties from the costs or consequences of non-compliance with any laws, regulations or other legal obligations relating to privacy or consumer protection or any inadvertent or unauthorized use or disclosure of data that we store or handle as part of operating our business.
This bill, and other similar initiatives throughout the United States, could lead to additional challenges to the classification of influencers and models and a potential 32 increase in claims, lawsuits, arbitration proceedings, administrative actions, government investigations and other legal and regulatory proceedings at the federal, state and municipal levels challenging the classification of any influencers or models as independent contractors.
This bill, and other similar initiatives throughout the United States, could lead to additional challenges to the classification of influencers and models and a potential increase in claims, lawsuits, arbitration proceedings, administrative actions, government investigations and other legal and regulatory proceedings at the federal, state and municipal levels challenging the classification of any influencers or models as independent contractors.
Furthermore, the third parties we rely on in China may disclose our confidential information or intellectual property to competitors or third parties, which could result in the illegal distribution and sale of counterfeit versions of our products. If any of these events occur, our business, financial condition and results of operations could be materially and adversely affected.
Furthermore, the third parties we rely on in China may disclose our confidential information or intellectual property to competitors or third parties, which could result in the illegal distribution and sale of counterfeit versions of our products. If any of these events occur, our business, financial condition and results 35 of operations could be materially and adversely affected.
Our net sales depend on the number of visitors who shop on our sites and the 41 volume of orders we can handle. Unavailability of our sites or reduced order fulfillment performance would reduce the volume of goods sold and could also materially adversely affect consumer perception of our brand. We may experience periodic system interruptions from time to time.
Our net sales depend on the number of visitors who shop on our sites and the volume of orders we can handle. Unavailability of our sites or reduced order fulfillment performance would reduce the volume of goods sold and could also materially adversely affect consumer perception of our brand. We may experience periodic system interruptions from time to time.
Any audits and inspections by governmental agencies related to these matters could result in significant settlement amounts, damages, fines or other penalties, divert financial and management resources, and result in significant legal fees. An unfavorable outcome of any particular proceeding could 31 have an adverse impact on our business, financial condition and results of operations.
Any audits and inspections by governmental agencies related to these matters could result in significant settlement amounts, damages, fines or other penalties, divert financial and management resources, and result in significant legal fees. An unfavorable outcome of any particular proceeding could have an adverse impact on our business, financial condition and results of operations.
In addition, investigating or defending against any such allegations, actions or investigations will likely result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees. 33 We may experience fluctuations in our tax obligations and effective tax rate, which could adversely affect our operating results.
In addition, investigating or defending against any such allegations, actions or investigations will likely result in a materially significant diversion of management’s attention and resources and significant defense costs and other professional fees. We may experience fluctuations in our tax obligations and effective tax rate, which could adversely affect our operating results.
If we grow faster than we anticipate, we may exceed our fulfillment center capacity sooner than 26 we anticipate, we may experience problems fulfilling orders in a timely manner or our customers may experience delays in receiving their purchases, which could harm our reputation and our relationship with our customers, and we would need to increase our capital expenditures more than anticipated.
If we grow faster than we anticipate, we may exceed our fulfillment center capacity sooner than we anticipate, we may experience problems fulfilling orders in a timely manner or our customers may experience delays in receiving their purchases, which could harm our reputation and our relationship with our customers, and we would need to increase our capital expenditures more than anticipated.
In addition, the loss of one or more of our key personnel or the inability to promptly identify a suitable successor to a key role could have an adverse effect on our business. In particular, our 27 co-chief executive officers have unique and valuable experiences leading our company from its inception through today.
In addition, the loss of one or more of our key personnel or the inability to promptly identify a suitable successor to a key role could have an adverse effect on our business. In particular, our co-chief executive officers have unique and valuable experiences leading our company from its inception through today.
Finally, our acquisitions and other strategic transactions could be viewed negatively by analysts, investors or customers and cause our stock price to decline. Adverse litigation judgments or settlements resulting from legal proceedings in which we may be involved could expose us to monetary damages or limit our ability to operate our business.
Finally, our acquisitions and other strategic transactions could be viewed negatively by analysts, investors or customers and cause our stock price to decline. 30 Adverse litigation judgments or settlements resulting from legal proceedings in which we may be involved could expose us to monetary damages or limit our ability to operate our business.
Developments relating to cross-border data transfer may result in data protection regulators applying differing standards for, and requiring ad hoc verification of, transfers of personal data from Europe or other regions to the U.S. The European 38 Commission has released revised SCCs addressing the CJEU concerns.
Developments relating to cross-border data transfer may result in data protection regulators applying differing standards for, and requiring ad hoc verification of, transfers of personal data from Europe or other regions to the U.S. The European Commission has released revised SCCs addressing the CJEU concerns.
If our information technology systems suffer damage, disruption or shutdown and we do not effectively resolve the issues in a timely manner, our business, financial condition and results of operations may be materially and adversely affected and we could experience delays in reporting our financial results. Our eCommerce operations are important to our business.
If our information technology systems suffer damage, disruption or shutdown and we do not effectively resolve the issues in a timely manner, our business, financial condition and results of operations may be materially and adversely affected and we could experience delays in reporting our financial results. 42 Our eCommerce operations are important to our business.
To attract top talent, we offer, and expect to continue to offer, competitive compensation and benefits packages before we can validate the productivity of new employees. We may also elect to increase compensation levels to remain competitive in attracting and retaining 16 talented employees. We may not be able to hire new employees quickly enough to meet our needs.
To attract top talent, we offer, and expect to continue to offer, competitive compensation and benefits packages before we can validate the productivity of new employees. We may also elect to increase compensation levels to remain competitive in attracting and retaining talented employees. We may not be able to hire new employees quickly enough to meet our needs.
We have been, are and may in the future become involved in private actions, collective actions, investigations and various other legal proceedings by customers, employees, suppliers, competitors, government agencies, law enforcement, customs officials or others. The results of any such litigation, investigations and other legal proceedings 30 are inherently unpredictable and expensive.
We have been and may in the future become involved in private actions, collective actions, investigations and various other legal proceedings by customers, employees, suppliers, competitors, government agencies, law enforcement, customs officials or others. The results of any such litigation, investigations and other legal proceedings are inherently unpredictable and expensive.
These requirements may be interpreted and applied in a manner that is inconsistent from one jurisdiction to another or may conflict with other rules or our practices. As a result, our practices likely have not complied or may not comply in the future with all such laws, regulations, requirements and obligations.
These requirements may be interpreted and applied in a manner that is inconsistent from one 37 jurisdiction to another or may conflict with other rules or our practices. As a result, our practices likely have not complied or may not comply in the future with all such laws, regulations, requirements and obligations.
We acquire and retain customers through paid search and product listing ads, affiliate marketing, paid social media marketing, retargeting, personalized email marketing and mobile “push” communications through our mobile apps. If we are unable to cost-effectively drive traffic to our sites, our ability to acquire new customers and our financial condition would suffer.
We acquire and retain customers through paid search and product listing ads, affiliate marketing, paid social media marketing, retargeting, personalized email and SMS marketing and mobile “push” communications through our mobile apps. If we are unable to cost-effectively drive traffic to our sites, our ability to acquire new customers and our financial condition would suffer.
Such recalls or removal of merchandise can result in, among other things, lost sales, diverted resources, potential harm to our reputation and increased customer service costs and legal expenses, which could have a material adverse effect on our operating results.
Such recalls or removal of merchandise can result in, among other things, lost sales, diverted resources, potential harm to our 31 reputation and increased customer service costs and legal expenses, which could have a material adverse effect on our operating results.
Further, the enforceability of similar exclusive forum provisions in other companies’ organizational documents has been challenged in legal proceedings, and it is possible that a court of law could rule that these types of provisions 49 are inapplicable or unenforceable if they are challenged in a proceeding or otherwise.
Further, the enforceability of similar exclusive forum provisions in other companies’ organizational documents has been challenged in legal proceedings, and it is possible that a court of law could rule that these types of provisions are inapplicable or unenforceable if they are challenged in a proceeding or otherwise.
We may not be able to maintain and enhance our existing brand community if we receive customer or influencer 18 complaints, negative publicity or otherwise fail to live up to consumers’ expectations, which could materially adversely affect our business, operating results and growth prospects.
We may not be able to maintain and enhance our existing brand community if we receive customer or influencer complaints, negative publicity or otherwise fail to live up to consumers’ expectations, which could materially adversely affect our business, operating results and growth prospects.
If we are unable to retain, attract and motivate talented employees with the appropriate skills at cost-effective compensation levels or if changes to our business adversely affect morale or retention, we may not achieve our objectives and our business and operating results could be adversely affected.
If we are unable to retain, attract and motivate talented employees with the appropriate skills at cost-effective compensation levels or if changes to our business adversely affect morale or retention, we may not achieve our objectives and our business and 27 operating results could be adversely affected.
We are subject to the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require our management to certify financial and other information in our quarterly and annual reports and provide an annual management report on the effectiveness of internal controls over financial reporting.
We are subject to the SEC’s rules implementing Sections 302 and 404 of the Sarbanes-Oxley Act, which require our management to certify financial and other information in our quarterly and annual reports and provide an annual 29 management report on the effectiveness of internal controls over financial reporting.
We expend substantial resources in the development of new high-quality products but are susceptible to counterfeiting, which may harm our reputation for producing such products and force us to incur expenses in enforcing our intellectual property rights.
We expend substantial resources in the development of new high-quality products but are susceptible to counterfeiting, which may harm our 44 reputation for producing such products and force us to incur expenses in enforcing our intellectual property rights.
Any failure, or perceived failure, by us to comply with our privacy policies or with any federal, state or international laws, regulations, industry self-regulatory principles, industry standards or codes of conduct, regulatory guidance, orders to which we may be subject or other legal or contractual obligations relating to privacy, data protection, information security or consumer protection could adversely affect our reputation, brand and business, and may result in claims, proceedings or actions against us by governmental entities or others or other liabilities or require us to change our operations and/or cease or modify our use of certain data sets.
Any failure, or perceived failure, by us to comply with our privacy policies or with any federal, state or international laws, regulations, industry self-regulatory principles, industry standards or codes of conduct, regulatory guidance, orders to which we may be subject or other actual or alleged legal or contractual obligations relating to privacy, data protection, information security or consumer protection could adversely affect our reputation, brand and business, and may result in claims, proceedings or actions against us by governmental entities or others or other liabilities or require us to change our operations and/or cease or modify our use of certain data sets.
As new mobile devices and platforms are released, it is difficult to predict the problems we may encounter in developing applications for these alternative devices and platforms and we may need to devote significant resources to the creation, support and maintenance of such applications.
As new mobile devices and platforms are released, it is difficult to predict the problems we may encounter in developing applications for these alternative devices and platforms and we may 28 need to devote significant resources to the creation, support and maintenance of such applications.
Any errors or vulnerabilities discovered in our code after release could result in damage to our reputation, loss of customers, disruption to our eCommerce channels, loss of net sales or liability for damages, any of which could adversely affect our growth prospects and our business.
Any errors or vulnerabilities discovered in our code after release could result in damage to our reputation, 43 loss of customers, disruption to our eCommerce channels, loss of net sales or liability for damages, any of which could adversely affect our growth prospects and our business.
Our limited registered copyright and patent protection may restrict our ability to protect our technologies and processes from competition. We primarily rely on unregistered copyrights to protect our designs and products and on trade secret laws to protect our technologies and processes, including the algorithms 44 we use throughout our business.
Our limited registered copyright and patent protection may restrict our ability to protect our technologies and processes from competition. We primarily rely on unregistered copyrights to protect our designs and products and on trade secret laws to protect our technologies and processes, including the algorithms we use throughout our business.
For example, in some cases, the Federal Trade Commission, or the FTC, has sought enforcement action where an endorsement has failed to clearly and conspicuously disclose a financial relationship or material connection between an influencer and an advertiser.
For example, in some cases, the Federal Trade Commission, or the FTC, has sought enforcement action where an 19 endorsement has failed to clearly and conspicuously disclose a financial relationship or material connection between an influencer and an advertiser.
If we are unable to secure new facilities for the expansion of our fulfillment operations or to effectively control expansion-related expenses, our business, prospects, financial condition and operating results could be materially and adversely affected.
If we are unable to secure new facilities for the expansion of our fulfillment operations or to effectively control 26 expansion-related expenses, our business, prospects, financial condition and operating results could be materially and adversely affected.
We and our third-party service providers may not have the resources or technical sophistication to anticipate or prevent all such cyberattacks, and we or they may face difficulties or delays in identifying and responding to cyberattacks and data security breaches and incidents.
We and our third-party service providers may not have the resources or technical sophistication to anticipate or prevent all such cyberattacks, and we or they may 40 face difficulties or delays in identifying and responding to cyberattacks and data security breaches and incidents.
Future issuances of shares of our Class A common stock or the conversion of a substantial number of shares of our Class B common stock, or the perception that these sales or conversions may occur, could depress the market price of our Class A common stock and result in dilution to our existing stockholders.
Future issuances of shares of our Class A common stock or the conversion of a substantial number of shares of our Class B common stock, or the perception that these issuances or conversions may occur, could depress the market price of our Class A common stock and result in dilution to our existing stockholders.
We have also experienced and may continue to experience increased levels of returns due to changes in consumer shopping behavior and discretionary spending as a result of changes in macroeconomic conditions or consumer confidence, including levels of unemployment, the size and timing of federal stimulus programs, salaries and wage rates, high inflation, high interest rates, recession or fears of recession, housing costs, energy and fuel costs, the resumption of student loan repayments, income tax rates and the timing of tax refunds, consumer perceptions of personal well-being and security, availability of consumer credit and consumer debt levels.
We have also experienced and may in the future experience increased levels of returns due to changes in consumer shopping behavior and discretionary spending as a result of changes in macroeconomic conditions or consumer confidence, including levels of unemployment, the size and timing of federal stimulus programs, salaries and wage rates, high inflation, high interest rates, recession or fears of recession, housing costs, energy and fuel costs, the resumption of student loan repayments, income tax rates and the timing of tax refunds, consumer perceptions of personal well-being and security, availability of consumer credit and consumer debt levels.
Additionally, in June 2023, Apple announced new SDK privacy controls that it has integrated into iOS 17, which was released in September 2023, including new protections designed to limit tracking or identification of user devices.
Additionally, in June 2023, Apple announced new SDK privacy controls that it integrated into iOS 17, which was released in September 2023, including new protections designed to limit tracking or identification of user devices.
Additionally, in June 2023, Apple announced new SDK privacy controls that it has integrated into iOS 17, which was released in September 2023, including new protections designed to limit tracking or identification of user devices.
Additionally, in June 2023, Apple announced new SDK privacy controls that it integrated into iOS 17, which was released in September 2023, including new protections designed to limit tracking or identification of user devices.
Risks Related to Our Class A Common Stock 45 The market price of our Class A common stock may be volatile or may decline steeply or suddenly regardless of our operating performance, and we may not be able to meet investor or analyst expectations.
Risks Related to Our Class A Common Stock The market price of our Class A common stock may be volatile or may decline steeply or suddenly regardless of our operating performance, and we may not be able to meet investor or analyst expectations.
Our systems and operations are vulnerable to damage or interruption from fire, flood, power loss, telecommunications failure, terrorist attacks, cyberattacks, data loss, acts of war, break-ins, earthquakes and similar events.
Our systems and operations are vulnerable to damage or interruption from fire, flood, power 41 loss, telecommunications failure, terrorist attacks, cyberattacks, data loss, acts of war, break-ins, earthquakes and similar events.
Additionally, the relationship between the UK and the EU in relation to certain aspects of data protection law remains unclear following the UK’s exit from the EU, including with respect to regulation of data transfers between EU member states and the UK.
Additionally, the relationship between the UK and the EU in relation to certain aspects of data protection law remains unclear following the UK’s exit from the EU, including with respect to data transfers between EU member states and the UK.
If our operating results fall below the expectations of analysts or investors or below any forecasts we 46 may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our Class A common stock could decline substantially.
If our operating results fall below the expectations of analysts or investors or below any forecasts we may provide to the market, or if the forecasts we provide to the market are below the expectations of analysts or investors, the price of our Class A common stock could decline substantially.
Our results of operations may be affected by the timing, effectiveness and costs 43 associated with the successful implementation of any upgrades or changes to our systems and infrastructure.
Our results of operations may be affected by the timing, effectiveness and costs associated with the successful implementation of any upgrades or changes to our systems and infrastructure.
Further, our third-party manufacturers, suppliers, distributors, fulfillment centers and other vendors may: • have economic or business interests or goals that are inconsistent with ours; • take actions contrary to our instructions, requests, policies or objectives; • be unable or unwilling to fulfill their obligations under relevant purchase orders, including obligations to meet our production deadlines, quality standards, pricing guidelines and product specifications, and to comply with applicable regulations, including those regarding the safety and quality of products; • have financial difficulties, including as a result of negative economic conditions; • encounter raw material or labor shortages; • encounter increases in raw material or labor costs which may affect our procurement costs; • encounter difficulties with proper payment of custom duties or excise taxes; • misuse our confidential information or intellectual property or disclose them to competitors or third parties; • engage in activities or employ practices that may harm our reputation; and • work with, be acquired by, or come under control of, our competitors. 22 Shipping is a critical part of our business and any changes in our shipping arrangements or any interruptions in shipping could adversely affect our operating results.
Further, our third-party manufacturers, suppliers, distributors, fulfillment centers and other vendors may: • have economic or business interests or goals that are inconsistent with ours; • take actions contrary to our instructions, requests, policies or objectives; • be unable or unwilling to fulfill their obligations under relevant purchase orders, including obligations to meet our production deadlines, quality standards, pricing guidelines and product specifications, and to comply with applicable regulations, including those regarding the safety and quality of products; • have financial difficulties, including as a result of negative economic conditions; • encounter raw material or labor shortages; • encounter increases in raw material or labor costs which may affect our procurement costs; • encounter difficulties with proper payment of custom duties or excise taxes; • misuse our confidential information or intellectual property or disclose them to competitors or third parties; • engage in activities or employ practices that may harm our reputation; and • work with, be acquired by, or come under control of, our competitors. 22 Shipping is a critical part of our business and any changes in or interruptions to our shipping arrangements, or any damage, theft or loss of inventory during shipping, could adversely affect our business and operating results.
Any such claim, proceeding or action could hurt our reputation, brand and business, force us to incur significant expenses in defense of such proceedings, distract our management, increase our costs of doing business, result in a loss of customers and suppliers or an inability to process credit card payments and may result in the imposition of monetary penalties.
Any actual or alleged claim, proceeding or action could hurt our reputation, brand and business, force us to incur significant expenses in defense of such proceedings, distract our management, increase our costs of doing business, result in a loss of customers and suppliers or an inability to process credit card payments and may result in the imposition of monetary penalties.
Item 1A. RISK FACTORS Investing in our Class A common stock involves certain risks. You should carefully consider the following risk factors, in addition to the other information contained in this report, including the section of this report captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto.
Item 1A. RISK FACTORS Investing in our Class A common stock involves certain risks. You should carefully consider the following risk factors, in addition to the other information contained in this report, including the section of this report titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes thereto.
Use of social media and influencers may materially and adversely affect our reputation or subject us to regulatory and tax obligations, fines or other penalties. We use third-party social media platforms as, among other things, marketing tools. For example, we maintain accounts on Instagram, Facebook, TikTok, Pinterest, YouTube and X (formerly Twitter).
Use of social media and influencers may materially and adversely affect our reputation or subject us to regulatory and tax obligations, fines or other penalties. We use third-party social media platforms as, among other things, marketing tools. For example, we maintain accounts on Instagram, Facebook, TikTok, Pinterest, YouTube and X.
We have in the past incurred and may in the future incur losses from various types of fraud, including stolen credit card numbers, claims that a customer did not authorize a purchase, merchant fraud and customers who have closed bank accounts or have insufficient funds in open bank accounts to satisfy payments.
We have in the past incurred and may in the future incur losses from various types of fraud and theft, including theft of merchandise, stolen credit card numbers, claims that a customer did not authorize a purchase, merchant fraud and customers who have closed bank accounts or have insufficient funds in open bank accounts to satisfy payments.
In addition, our future growth and our results of operations could suffer if we experience difficulties in integrating our mobile applications into mobile devices, if problems arise with our relationships with providers of mobile operating systems 28 or mobile application download stores, such as those of Apple Inc. or Google Inc., if those providers impose restrictions on the data collection or use practices or other functionality of our applications, if our applications receive unfavorable treatment compared to competing applications, such as the order of our products in the Apple App Store, or if we face increased costs to distribute or have customers use our mobile applications.
In addition, our future growth and our results of operations could suffer if we experience difficulties in integrating our mobile applications into mobile devices, if problems arise with our relationships with providers of mobile operating systems or mobile application download stores, such as those of Apple Inc. or Alphabet Inc., if those providers impose restrictions on the data collection or use practices or other functionality of our applications, if our applications receive unfavorable treatment compared to competing applications, such as the order of our products in the Apple App Store, or if we face increased costs to distribute or have customers use our mobile applications.
Fluctuations in our tax obligations and effective tax rate could adversely affect our business, financial condition and operating results. We could be required to collect additional sales taxes or be subject to other tax liabilities that may increase the costs our customers would have to pay for our offering and adversely affect our operating results. The U.S.
Fluctuations in our tax obligations and effective tax rate could adversely affect our business, financial condition and operating results. We could be required to collect additional sales taxes or be subject to other tax liabilities that may increase the costs our customers would have to pay for our offering and adversely affect our operating results.
It is not clear how existing laws governing issues such as property ownership, sales and other taxes and consumer privacy apply to the Internet as many of these laws were adopted prior to the advent of the Internet and do not contemplate or address the unique issues raised by the Internet or eCommerce.
It is not clear how existing laws governing issues such as property ownership, libel, consumer protection, sales and other taxes, and consumer privacy apply to the Internet as many of these laws were adopted prior to the advent of the Internet and do not contemplate or address the unique issues raised by the Internet or eCommerce.
As existing eCommerce and social media platforms continue to rapidly evolve and new platforms develop, and as customer behavior and preferences evolve, we must continue to adapt to maintain an effective and authentic presence on these platforms and establish presences on new or emerging popular social media platforms.
As existing eCommerce and social media platforms continue to rapidly evolve and new platforms develop, existing platforms are banned and as customer behavior and preferences evolve, we must continue to adapt to maintain an effective and authentic presence on these platforms and establish presences on new or emerging popular social media platforms.
Although our net sales have grown profitably over time, this should not be considered as indicative of our future near term performance. We may not be successful in navigating through macroeconomic challenges and may not be successful in executing our growth strategy.
Although our net sales have grown profitably over time, this should not be considered as indicative of our future performance. We may not be successful in navigating through macroeconomic challenges and may not be successful in executing our growth strategy.
Our use of artificial intelligence and machine learning could adversely affect our business and operating results. We use artificial intelligence, or AI, and machine learning, or ML, in our business to, among other things, optimize our product assortment and personalize our website experience through advanced search and product recommendations.
Our use of artificial intelligence and machine learning could adversely affect our business and operating results. We use AI and machine learning in our business to, among other things, optimize our product assortment and personalize our website experience through advanced search and product recommendations.
In the “Schrems II” decision issued by the Court of Justice of the European Union, or CJEU, on July 16, 2020, the CJEU invalidated one mechanism for cross-border personal data transfer, the EU-U.S. Privacy Shield, and imposed additional obligations on companies relying on the SCCs to transfer personal data. The Swiss-U.S.
In the “Schrems II” decision issued by the Court of Justice of the European Union, or CJEU, on July 16, 2020, the CJEU invalidated one mechanism for cross-border personal data transfer, the EU-U.S. Privacy Shield, and imposed additional obligations on companies relying on the SCCs to transfer personal data. The Swiss-U.S. Privacy Shield framework also was invalidated.
We believe that the sustainability of our recent net sales growth, and potential future growth, will depend upon, among other factors, our ability to: 25 • address the short- and long-term macroeconomic challenges by adjusting our cost structure, meeting our customers’ service expectations, shifting our marketing strategy and maintaining a relevant merchandise assortment; • identify and develop emerging, established and owned brands while maintaining the relationships and product curation with existing, established and owned brands; • acquire new customers and retain existing customers; • provide a premium shopping experience for our customers; • offer an assortment of merchandise that is attractive to consumers; • develop new features to enhance the consumer experience on our sites; • increase the frequency with which new and repeat customers purchase products on our sites through merchandising, data analytics and technology; • add new suppliers and deepen our relationships with our existing suppliers; • attract and retain personnel; • enhance and scale the systems our consumers use to interact with our sites and invest in our infrastructure platform; • target additional categories and price points beyond premium apparel for Millennial and Generation Z consumers, such as luxury, beauty and home products, and men’s apparel; • expand internationally; and • pursue strategic acquisitions and investments.
In future periods, our net sales may decline or grow more slowly than we expect. 25 We believe that the sustainability of our recent net sales growth, and potential future growth, will depend upon, among other factors, our ability to: • address the short- and long-term macroeconomic challenges by adjusting our cost structure, meeting our customers’ service expectations, shifting our marketing strategy and maintaining a relevant merchandise assortment; • identify and develop emerging, established and owned brands while maintaining the relationships and product curation with existing, established and owned brands; • acquire new customers and retain existing customers; • provide a premium shopping experience for our customers; • offer an assortment of merchandise that is attractive to consumers; • develop new features to enhance the consumer experience on our sites; • increase the frequency with which new and repeat customers purchase products on our sites through merchandising, data analytics and technology; • add new suppliers and deepen our relationships with our existing suppliers; • attract and retain personnel; • enhance and scale the systems our consumers use to interact with our sites and invest in our infrastructure platform; • target additional categories and price points beyond premium apparel for Millennial and Generation Z consumers, such as luxury, beauty and home products, and men’s apparel; • expand internationally; and • pursue strategic acquisitions and investments.
See also “—If sensitive information, including such information about our customers, is disclosed or accessed without authorization, or if we or our third-party providers are subject to real or perceived cyberattacks or other security breaches or incidents, our customers may curtail use of our platform, we may be exposed to liability and our reputation would suffer.” We must successfully maintain, scale and improve our information technology systems and personnel, and failure to do so could have a material adverse effect on our business, financial condition and results of operations. 42 We must successfully maintain, scale and improve our information technology systems and personnel to support our current operations and future growth.
See also “—If sensitive information, including such information about our customers, is disclosed or accessed without authorization, or if we or our third-party providers are subject to real or perceived cyberattacks or other security breaches or incidents, our customers may curtail use of our platform, we may be exposed to liability and our reputation would suffer.” We must successfully maintain, scale and improve our information technology systems and personnel, and failure to do so could have a material adverse effect on our business, financial condition and results of operations.
Moreover, we may not benefit from our acquisitions and other strategic transactions as we expect or in the time frame we expect, which could adversely affect our business, operating results and financial condition. We also may issue additional equity securities in connection with such transactions, which could cause dilution to our stockholders.
Moreover, we may not benefit from our acquisitions and other strategic transactions as we expect or in the timeframe we expect, which could adversely affect our business, operating results and financial condition. We also may issue additional equity securities in connection with such transactions, which could cause dilution to our stockholders.
The UK has implemented legislation similar to the GDPR, including the UK Data Protection Act and legislation similar to the GDPR referred to as the UK GDPR, which provides for fines of up to the greater of 17.5 million British Pounds or 4% of a company’s worldwide turnover, whichever is higher.
The UK has implemented legislation similar to the GDPR, including the UK Data Protection Act and legislation similar to the GDPR referred to as the UK GDPR, which provides for fines of up to the greater of 17.5 million British Pounds or 4% of organizational worldwide turnover, whichever is higher.
Natural disasters, such as earthquakes, wildfires, hurricanes, tornadoes, floods and other adverse weather and climate conditions; unforeseen public health crises, such as the COVID-19 pandemic; political crises; terrorist attacks; wars and geopolitical tensions; worsening U.S.-China relations; social unrest; or other catastrophic events, whether occurring in the United States or internationally, could disrupt our operations, or the operations of one or more of our third-party providers or vendors, and adversely affect our operating results.
Natural disasters, such as earthquakes, wildfires, hurricanes, tornadoes, floods and other adverse weather and climate conditions; public health crises; political crises; terrorist attacks; wars and geopolitical tensions, including worsening U.S.-China relations; social unrest; and other catastrophic events, whether occurring in the United States or internationally, could disrupt our operations, or the operations of one or more of our third-party providers or vendors, and adversely affect our operating results.
Some of the factors and events that have negatively influenced consumer spending, and may do so in the future, include inflationary pressures, fluctuating interest rates and credit availability, public health crises, such as the COVID-19 pandemic, high levels of unemployment, high consumer debt levels, reductions in net worth, declines in asset values and related market uncertainty, reductions in home values and home foreclosures, resumption of student loan payments, adverse developments affecting the financial services industry, labor strikes, fluctuating currency exchange rates, fluctuating fuel and other energy costs, fluctuating commodity prices, wars and conflicts in Ukraine/Russia, Israel/Gaza and the Middle East, other geopolitical tensions, general uncertainty regarding the overall future political and economic environment, and social unrest.
Some of the factors and events that have negatively influenced consumer spending, and may do so in the future, include inflationary pressures, fluctuating interest rates and credit availability, public health crises, high levels of unemployment, high consumer debt levels, reductions in net worth, declines in asset values and related market uncertainty, reductions in home values, home foreclosures, resumption of student loan payments, increases in mortgage rates and rents, adverse developments affecting the financial services industry, labor strikes, fluctuating currency exchange rates, fluctuating fuel and other energy costs, fluctuating commodity prices, wars and conflicts in Ukraine/Russia, Israel/Gaza and the Middle East, other geopolitical tensions, general uncertainty regarding the overall future political and economic environment, and social unrest.
Tariffs imposed by the U.S. government or a global trade war could increase the cost of our products, which could have a material adverse effect on our business, financial condition and results of operations. 36 The U.S. government has in the past made, and may in the future make, significant changes in U.S. trade policy and has taken certain actions that could negatively impact U.S. trade, including imposing tariffs on certain goods imported into the United States.
Risks Related to Our International Operations Tariffs imposed by the U.S. government or a global trade war could increase the cost of our products, which could have a material adverse effect on our business, financial condition and results of operations. 34 The U.S. government has in the past made, and may in the future make, significant changes in U.S. trade policy and has taken certain actions that could negatively impact U.S. trade, including imposing tariffs on certain goods imported into the United States.
If we fail to comply with applicable rules and regulations, we may be subject to fines or higher transaction fees and may lose our ability to accept online payments or other payment card transactions. If any of these events were to occur, our business, financial condition and operating results could be adversely affected. We may incur significant losses from fraud.
If we fail to comply with applicable rules and regulations, we may be subject to fines or higher transaction fees and may lose our ability to accept online payments or other payment card transactions. If any of these events were to occur, our business, financial condition and operating results could be adversely affected.
Although we have measures in place and utilize third parties to detect and reduce the occurrence of fraudulent activity in our marketplace, those measures and providers may not always be effective.
Although we have measures in place and utilize third parties to detect and reduce the occurrence of theft and fraudulent activity, those measures and providers may not always be effective.
Factors that could cause fluctuations in the market price of our Class A common stock include the following: • market volatility and economic disruption caused by macroeconomic factors, including but not limited to inflation, consumer confidence and events such as the COVID-19 pandemic; • actual or anticipated fluctuations in our customer base, the level of customer engagement, net sales or other operating results; • variations between our actual operating results and the expectations of securities analysts, investors and the financial community; • any forward-looking financial or operating information we may provide to the public or securities analysts, any changes in this information or our failure to meet expectations based on this information; • actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company or our failure to meet these estimates or the expectations of investors; • whether investors or securities analysts view our stock structure unfavorably, particularly our dual-class structure and the significant voting control of our executive officers, directors and their affiliates; • additional shares of our Class A common stock being sold into the market by us or our existing stockholders, or the anticipation of such sales; • repurchases of our Class A common stock pursuant to our stock repurchase program and any announcement of a termination of the program; • announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; • changes in operating performance and stock market valuations of companies in our industry, including our vendors and competitors; • price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; • lawsuits threatened or filed against us; • developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies; • imposition of fines or other remedial measures as a result of the underpayment of customs duties; and • other events or factors, including those resulting from war and geopolitical tensions, or incidents of terrorism, or responses to these events.
Factors that could cause fluctuations in the market price of our Class A common stock include the following: • market volatility and economic disruption caused by macroeconomic factors, including but not limited to inflation, consumer confidence and events such as natural disasters and public health crises; • actual or anticipated fluctuations in our customer base, the level of customer engagement, net sales or other operating results; • variations between our actual operating results and the expectations of securities analysts, investors and the financial community; • any forward-looking financial or operating information we may provide to the public or securities analysts, any changes in this information or our failure to meet expectations based on this information; • actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company or our failure to meet these estimates or the expectations of investors; • whether investors or securities analysts view our stock structure unfavorably, particularly our dual-class structure and the significant voting control of our executive officers, directors and their affiliates; • additional shares of our Class A common stock being sold into the market by us or our existing stockholders, or the anticipation of such sales; • repurchases of our Class A common stock pursuant to our stock repurchase program and any announcement of a termination of the program; • announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; • changes in operating performance and stock market valuations of companies in our industry, including our vendors and competitors; • price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; • lawsuits threatened or filed against us; • developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies; • imposition of fines or other remedial measures as a result of the underpayment of customs duties; and • other events or factors, including those resulting from war and geopolitical tensions, or incidents of terrorism, or responses to these events. 46 In addition, extreme price and volume fluctuations in the stock markets have affected and continue to affect many eCommerce and other technology companies’ stock prices.
The retail industry is highly competitive. We compete with department stores, specialty retailers, independent retail stores, the online offerings of these traditional retail competitors, brands that we offer and also offer their merchandise directly to the consumer, and eCommerce companies that market merchandise similar to the merchandise we offer.
We compete with department stores, specialty retailers, independent retail stores, the online offerings of these traditional retail competitors, brands that we offer that also offer their merchandise directly to the consumer, and eCommerce companies that market merchandise similar to the merchandise we offer.
In addition, the worsening of U.S.-China relations have also negatively impacted our supply chain and our cost to source from China. While we have maintained long-standing relationships with many of our largest suppliers, we engage our third-party suppliers and manufacturers on a purchase order basis and are not party to long-term contracts with any of them.
In addition, the worsening of U.S.-China relations has and may continue to negatively impact our supply chain and our cost to source from China. While we have maintained long-standing relationships with many of our largest suppliers, we engage our third-party suppliers and manufacturers on a purchase order basis and are not party to long-term contracts with any of them.
We may expand our use of AI and ML into other areas of our business including the design and development of owned brand merchandise and general administrative functions.
We may expand our use of AI and machine learning into other areas of our business including the design and development of owned brand merchandise and general administrative functions.
Our servers are located in close proximity to one another in Southern California and are vulnerable to power outages, telecommunications failures and catastrophic events.
The majority of our servers are located in close proximity to one another in Southern California and are vulnerable to power outages, telecommunications failures and catastrophic events.
In addition, our ability to receive inbound inventory efficiently and ship merchandise to customers may be negatively affected by public health crises, such as the COVID-19 pandemic, inclement weather, fire, flood, power loss, earthquakes, labor disputes, acts of war, geopolitical tensions, terrorism, trade embargoes, customs and tax requirements, political crises, social unrest and other factors.
In addition, our ability to receive inbound inventory efficiently and ship merchandise to customers may be negatively affected by public health crises, inclement weather, fire, flood, power loss, earthquakes, labor disputes, acts of war, geopolitical tensions, terrorism, trade embargoes, customs, tariffs and tax requirements, political crises, social unrest and other factors.
Due to our liberal return policy and consumer behavior, we have experienced and 17 may continue to experience heightened levels of returns, which have and may continue to negatively impact our operating results and financial position.
Due to our liberal return policy and consumer behavior, we have experienced and may in the future experience heightened levels of returns, which have and may continue to negatively impact our operating results and financial position.
For example, AI algorithms are based on ML and predictive analytics, which can include unexpected biases and lead to discriminatory outcomes.
For example, AI algorithms are based on machine learning and predictive analytics, which can include unexpected biases and lead to discriminatory outcomes.
As part of our long-term growth plans, we expect to acquire, invest in or partner with additional businesses, assets and technologies, and to enter into commercial collaborations, that we believe could further complement or expand our business.
As part of our long-term growth plans, we may continue to acquire, invest in or partner with additional businesses, assets and technologies, and enter into commercial collaborations, which we believe could further complement or expand our business.
For example, the Inflation Reduction Act of 2022, among other things, imposed a one percent excise tax on certain stock repurchases by public companies. The Organization of Economic Cooperation and Development proposed implementing a global minimum tax of fifteen percent, which is being adopted or considered by many jurisdictions.
For example, the Inflation Reduction Act of 2022, among other things, imposed a one percent excise tax on certain stock repurchases by public companies. The Organization of Economic Cooperation and Development proposed implementing a global minimum tax of fifteen percent, which has been adopted by many jurisdictions, including the UK, and is being considered by others for implementation.
As of December 31, 2023, our co-chief executive officers and MMMK Development, Inc., an entity controlled by our co-chief executive officers, collectively beneficially owned approximately 46% of the outstanding shares of common stock and collectively controlled approximately 89% of the voting power of our outstanding common stock.
As of December 31, 2024, our co-chief executive officers and MMMK Development, Inc., an entity controlled by our 47 co-chief executive officers, collectively beneficially owned approximately 45% of the outstanding shares of common stock and collectively controlled approximately 89% of the voting power of our outstanding common stock.
We believe that much of the growth in our customer base to date has originated from social media and our influencer-driven marketing strategy.
We believe that a meaningful portion of the growth in our customer base to date has originated from social media and our influencer-driven marketing strategy.
Demand may be affected by macroeconomic factors such as high inflation and low consumer confidence, events such as the COVID-19 pandemic and wars, seasonality, new product launches, rapid changes in product cycles and pricing, product defects, promotions, changes in consumer spending patterns, changes in consumer tastes with respect to our products, and various other factors, such as political instability and social unrest, and our consumers may not purchase products in the quantities that we expect.
Demand may be affected by macroeconomic factors such as high inflation and low consumer confidence, public health crises, wars and other geopolitical tensions, seasonality, new product launches, rapid changes in product cycles and pricing, product defects, promotions, changes in consumer spending patterns, changes in consumer tastes with respect to our products, and various other factors, such as political instability and social unrest, and our consumers may not purchase products in the quantities that we expect.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur chief architect, who has over 15 years of experience in software engineering, has served as our chief architect for seven years, works with our cybersecurity management committee to manage our cybersecurity policies and processes, including those described in the “Risk Management and Strategy” section above.
Biggest changeOur chief architect, who has over 15 years of experience in software engineering and has served as our chief architect for eight years, is a member of our cybersecurity committee and works to manage our cybersecurity policies and processes.
For additional information regarding whether any risks from cybersecurity threats are reasonably likely to materially affect our company, including our business strategy, results of operations or financial condition, please see the section titled “Risk Factors.” Governance One of the key functions of our board of directors is informed oversight of our risk management process, including risks from cybersecurity threats.
For additional information regarding whether any risks from cybersecurity threats are reasonably likely to materially affect our company, including our business strategy, results of operations or financial condition, please see the section titled “Risk Factors.” 50 Governance One of the key functions of our board of directors is informed oversight of our risk management process, including risks from cybersecurity threats.
Our chief architect and the cybersecurity management committee are responsible for our cybersecurity rules and methods, like those described in the “Risk Management and Strategy” section. They stay updated and track how we 50 prevent, identify, lessen and address cybersecurity issues.
Our chief architect and the cybersecurity committee are responsible for our cybersecurity rules and methods, like those described in the “Risk Management and Strategy” section. They stay updated and track how we prevent, identify, lessen and address cybersecurity issues.
This is done through regular checks of our systems, tests to find security weaknesses and having a plan ready to respond to any incidents. In addition to regular meetings, the chief architect and co-chief executive officer regularly discuss active, emerging and potential cybersecurity risks.
This is done through regular checks of our systems, tests to find security weaknesses and having a plan ready to respond to any incidents. In addition to regular meetings and participation on the cybersecurity committee, the chief architect and co-chief executive officer regularly discuss active, emerging and potential cybersecurity risks.
They stay informed and manage how we identify, address, prevent and resolve cybersecurity issues and related matters. This is done through regular checks of our systems, tests to identify security weaknesses and maintaining our incident response plan.
Our chief architect and cybersecurity committee stay informed and manage how we identify, address, prevent and resolve cybersecurity issues and related matters. This is done through regular checks of our systems, tests to identify security weaknesses and maintaining our incident response plan.
Added
We have established a cybersecurity committee, composed of members of senior management, to provide guidance, management and oversight of our cybersecurity and data responsibility initiatives and risk assessment and mitigation protocols, including those described in the “Risk Management and Strategy” section above.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changePR OPERTIES The following table sets forth information with respect to our facilities, all of which are used by both our REVOLVE and FWRD segments: Location Type Square Footage (approximate) Lease Expiration Cerritos, California Corporate headquarters and fulfillment center 281,100 2028 Berks County, Pennsylvania Fulfillment center 95,600 2027 La Palma, California (1) Fulfillment center 75,000 2027 Los Angeles, California Office space 42,200 2028 Cerritos, California Office and studio space 37,000 2032 Los Angeles, California Office and studio space 6,100 2027 (1) Approximately 30,000 square feet is sublet to a third-party on a month-to-month basis.
Biggest changePR OPERTIES The following table sets forth information with respect to our facilities, all of which are used by both our REVOLVE and FWRD segments: Location Type Square Footage (approximate) Lease Expiration Cerritos, California Corporate headquarters and fulfillment center 281,100 2028 Berks County, Pennsylvania Fulfillment center 95,600 2027 La Palma, California (1) Fulfillment center 75,000 2027 Los Angeles, California Office space 42,200 2028 Cerritos, California Office and studio space 37,000 2032 Los Angeles, California Office and studio space 6,100 2027 Aspen, Colorado Retail store 3,200 2026 Paris, France Office space 9,000 2032 (1) Approximately 30,000 square feet is sublet to a third-party on a month-to-month basis.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeFuture litigation may be necessary to defend ourselves and to determine the scope, enforceability and validity of third-party proprietary rights, or to establish our proprietary rights.
Biggest changeFuture litigation may be necessary to defend ourselves and to determine the scope, enforceability and validity of third-party proprietary rights, or to establish our 51 proprietary rights.
The results of any litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. Item 4. MINE SAF ETY DISCLOSURES Not applicable. 51 PAR T II
The results of any litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors. Item 4. MINE SAF ETY DISCLOSURES Not applicable. 52 PAR T II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe following table summarizes repurchases of shares of our Class A common stock for the three months ended December 31, 2023: Period Total Number of Shares Purchased Average Price Paid per Share Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (1) October 1, 2023 to October 31, 2023 556,520 $ 13.89 556,520 $ 79,704,982 November 1, 2023 to November 30, 2023 560,166 $ 13.74 560,166 $ 72,006,959 December 1, 2023 to December 31, 2023 174,949 $ 14.77 174,949 $ 69,423,627 Total 1,291,635 1,291,635 (1) Exclusive of broker fees and excise taxes. 52 Cumulative Stock Performance Graph The following graph and table compare the performance of (1) an investment in our Class A common stock over the period of June 7, 2019 through December 31, 2023, beginning with an investment at the $34.00 closing market price on June 7, 2019, the end of the first day our Class A common stock traded on the NYSE following our initial public offering at $18.00 per share, and thereafter based on the closing price of our Class A common stock on the NYSE, with (2) an investment in the S&P 500 and the S&P Retail Select Industry, in each case beginning with an investment at the closing price on June 7, 2019 and thereafter based on the closing price of the index.
Biggest changeAs of December 31, 2024, the approximate dollar value of shares that may yet be repurchased under the existing stock repurchase program was $57.6 million. 53 Cumulative Stock Performance Graph The following graph and table compare the performance of (1) an investment in our Class A common stock over the period from December 31, 2019 through December 31, 2024, with (2) an investment in the S&P 500 and the S&P Retail Select Industry, in each case beginning with an investment at the closing price on December 31, 2019 and thereafter based on the closing price of the index.
Holders of Record As of February 20, 2024, we had two registered holders of record of our Class A common stock and two registered holders of record of our Class B common stock.
Holders of Record As of February 18, 2025, we had one registered holder of record of our Class A common stock and two registered holders of record of our Class B common stock.
(in dollars) June 7, 2019 December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 Revolve Group, Inc. $ 100.00 $ 54.00 $ 91.68 $ 164.82 $ 65.47 $ 48.76 S&P 500 $ 100.00 $ 113.67 $ 134.58 $ 173.21 $ 141.84 $ 179.13 S&P Retail Select Industry $ 100.00 $ 113.11 $ 160.19 $ 229.03 $ 156.39 $ 190.07 The graph and the table above shall not be deemed “filed” with the SEC for the purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing made by us with the SEC, regardless of any general incorporation language in such filing. 53 Item 6. [ RESERVED] 54
(in dollars) December 31, 2019 December 31, 2020 December 31, 2021 December 31, 2022 December 31, 2023 December 31, 2024 Revolve Group, Inc. $ 100.00 $ 169.77 $ 305.23 $ 121.24 $ 90.31 $ 182.41 S&P 500 $ 100.00 $ 118.40 $ 152.39 $ 124.79 $ 157.59 $ 197.02 S&P Retail Select Industry $ 100.00 $ 141.63 $ 202.49 $ 138.26 $ 168.04 $ 188.41 The graph and the table above shall not be deemed “filed” with the SEC for the purposes of Section 18 of the Exchange Act or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing made by us with the SEC, regardless of any general incorporation language in such filing. 54 Item 6. [ RESERVED] 55
The stock repurchase program is funded from available cash and cash equivalents.
The stock repurchase program is funded from available cash and cash equivalents. There were no shares of our Class A common stock repurchased during the three months ended December 31, 2024.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeYear Ended December 31, 2023 2022 2021 (in thousands) Net sales $ 1,068,719 $ 1,101,416 $ 891,390 Cost of sales 514,520 509,093 401,567 Gross profit 554,199 592,323 489,823 Operating expenses: Fulfillment expenses 36,654 31,804 21,322 Selling and distribution expenses 197,052 190,419 133,506 Marketing expenses 171,774 181,648 140,398 General and administrative expenses 126,585 115,312 89,306 Total operating expenses 532,065 519,183 384,532 Income from operations 22,134 73,140 105,291 Other (income) expense, net (15,627 ) (3,476 ) 563 Income before income taxes 37,761 76,616 104,728 Provision for income taxes 9,614 17,919 4,888 Net income $ 28,147 $ 58,697 $ 99,840 Year Ended December 31, 2023 2022 2021 Net sales 100.0 % 100.0 % 100.0 % Cost of sales 48.1 46.2 45.0 Gross profit 51.9 53.8 55.0 Operating expenses: Fulfillment expenses 3.4 2.9 2.4 Selling and distribution expenses 18.4 17.3 15.0 Marketing expenses 16.1 16.5 15.8 General and administrative expenses 11.9 10.5 10.0 Total operating expenses 49.8 47.2 43.2 Income from operations 2.1 6.6 11.8 Other (income) expense, net (1.4 ) (0.3 ) 0.1 Income before income taxes 3.5 6.9 11.7 Provision for income taxes 0.9 1.6 0.5 Net income 2.6 % 5.3 % 11.2 % Comparison of Years Ended 2023 and 2022 Net Sales Year Ended December 31, Change 2023 2022 $ % (dollars in thousands) Net sales $ 1,068,719 $ 1,101,416 $ (32,697 ) (3.0 %) The decrease in net sales for 2023 compared to 2022 was primarily due to a higher proportion of returned purchases, partially offset by an increase in the number of orders placed by customers.
Biggest changeYear Ended December 31, 2024 2023 2022 (in thousands) Net sales $ 1,129,911 $ 1,068,719 $ 1,101,416 Cost of sales 536,638 514,520 509,093 Gross profit 593,273 554,199 592,323 Operating expenses: Fulfillment expenses 37,389 36,654 31,804 Selling and distribution expenses 195,169 197,052 190,419 Marketing expenses 167,176 171,774 181,648 General and administrative expenses 142,122 126,585 115,312 Total operating expenses 541,856 532,065 519,183 Income from operations 51,417 22,134 73,140 Other income, net (13,030 ) (15,627 ) (3,476 ) Income before income taxes 64,447 37,761 76,616 Provision for income taxes 15,676 9,614 17,919 Net income $ 48,771 $ 28,147 $ 58,697 66 Year Ended December 31, 2024 2023 2022 Net sales 100.0 % 100.0 % 100.0 % Cost of sales 47.5 48.1 46.2 Gross profit 52.5 51.9 53.8 Operating expenses: Fulfillment expenses 3.3 3.4 2.9 Selling and distribution expenses 17.3 18.4 17.3 Marketing expenses 14.8 16.1 16.5 General and administrative expenses 12.6 11.9 10.5 Total operating expenses 48.0 49.8 47.2 Income from operations 4.5 2.1 6.6 Other income, net (1.2 ) (1.4 ) (0.3 ) Income before income taxes 5.7 3.5 6.9 Provision for income taxes 1.4 0.9 1.6 Net income 4.3 % 2.6 % 5.3 % Comparison of Years Ended 2024 and 2023 Net Sales Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Net sales $ 1,129,911 $ 1,068,719 $ 61,192 5.7 % The increase in net sales for 2024 compared to 2023 was primarily due to a lower proportion of returned purchases, a 1.9% increase in the number of orders shipped, and a 1.7% increase in the average order value.
Macro factors that can affect consumer confidence, shopping behavior and spending patterns, and thereby our near-term and long-term results of operations, include inflation levels, employment rates, business conditions, changes in the housing market, changes in the stock market, adverse developments affecting the financial services industry, the availability of credit, resumption of student loan payments, U.S. government stimulus payments, interest rates, foreign currency exchange rates, fuel, energy and raw material costs, supply chain challenges, and wars and geopolitical tensions.
Macro factors that can affect consumer confidence, shopping behavior and spending patterns, and thereby our near-term and long-term results of operations, include inflation levels, employment rates, business conditions, changes in the housing market, changes in the stock market, adverse developments affecting the financial services industry, the availability of credit, resumption of student loan payments, U.S. government stimulus payments, interest rates, foreign currency exchange rates, fuel, energy and raw material costs, supply chain 60 challenges, and wars and geopolitical tensions.
If our growth rates moderate over the long-term, the impact of these seasonality trends on our results of operations may become more pronounced. Our seasonality trends have also been impacted by macroeconomic conditions described in “—Overall Economic Trends” above. The following table presents quarterly net sales expressed as a percentage of total net sales.
If our growth rates moderate over the long-term, the impact of these seasonality trends on our results of operations may become more pronounced. Our seasonality trends have also been impacted by macroeconomic conditions described in “—Overall Economic Trends” above. 64 The following table presents quarterly net sales expressed as a percentage of total net sales.
No significant interest or penalties related to sales taxes are recognized in the accompanying consolidated financial statements. We have exposure to losses from fraudulent credit card charges. We record losses when incurred related to fraudulent charges as such amounts have historically been insignificant. 70 Inventory Inventories are stated at the lower of cost and net realizable value.
No significant interest or penalties related to sales taxes are recognized in the accompanying consolidated financial statements. We have exposure to losses from fraudulent credit card charges. We record losses when incurred related to fraudulent charges as such amounts have historically been insignificant. Inventory Inventories are stated at the lower of cost and net realizable value.
We acquire and retain customers through paid search/product listing ads, affiliate marketing, our brand ambassador program, paid social, retargeting, personalized email marketing and mobile “push” communications through our mobile applications. We have developed an efficient logistics infrastructure, which allows us to provide free shipping and returns to our customers in the United States.
We acquire and retain customers through paid search/product listing ads, affiliate marketing, our brand ambassador program, paid social, retargeting, personalized email and SMS marketing and mobile “push” communications through our mobile applications. We have developed an efficient logistics infrastructure, which allows us to provide free shipping and returns to our customers in the United States.
The brands we sell on our platform consist of a mix of emerging third-party, established third-party (including iconic luxury brands) and owned brands. Our product mix consists primarily of apparel, footwear, beauty and accessories products. Our merchandise mix across our two reporting segments carry a range of margin profiles and may cause fluctuations in our gross margin.
The brands we sell on our platform consist of a mix of emerging third-party, established third-party (including iconic luxury brands) and owned brands. Our product mix consists primarily of apparel, footwear, beauty, accessories and home products. Our merchandise mix across our two reporting segments carry a range of margin profiles and may cause fluctuations in our gross margin.
For further information on all of our significant accounting policies, please see Note 2, Significant Accounting Policies , of the accompanying notes to our consolidated financial statements included elsewhere in this report. 69 Net Sales Revenue is primarily derived from the sale of apparel merchandise through our sites and, when applicable, shipping revenue.
For further information on all of our significant accounting policies, please see Note 2, Significant Accounting Policies , of the accompanying notes to our consolidated financial statements included elsewhere in this report. Net Sales Revenue is primarily derived from the sale of apparel merchandise through our sites and, when applicable, shipping revenue.
Some of these limitations are: • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; • Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; • Adjusted EBITDA does not consider the potentially dilutive impact of equity-based compensation; • Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; • Adjusted EBITDA does not reflect certain non-routine items that may represent a reduction in cash available to us; and • other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
Some of these limitations are: • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Adjusted EBITDA does not reflect cash capital expenditure requirements for such replacements or for new capital expenditure requirements; • Adjusted EBITDA does not reflect changes in, or cash requirements for, our working capital needs; • Adjusted EBITDA does not consider the potentially dilutive impact of equity-based compensation; • Adjusted EBITDA does not reflect tax payments that may represent a reduction in cash available to us; • Adjusted EBITDA does not reflect certain transaction costs that may represent a reduction in cash available to us; • Adjusted EBITDA does not reflect certain non-routine items that may represent a reduction in cash available to us; and • other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
We plan to continue to conduct in-person events at varying levels of scale in the future and make opportunistic investments in marketing initiatives that could increase marketing as a percentage of net sales to levels in excess of historical levels for certain quarters or periods of time in the future.
We plan to continue to conduct events at varying levels of scale in the future and make opportunistic investments in marketing initiatives that could increase marketing as a percentage of net sales to levels in excess of historical levels for certain quarters or periods of time in the future.
We view total orders placed as a key indicator of the velocity of our business and an indication of the desirability of our products and sites to our customers. Total orders placed, together with 58 average order value, is an indicator of the net sales we expect to recognize in a given period.
We view total orders placed as a key indicator of the velocity of our business and an indication of the desirability of our products and sites to our customers. Total orders placed, together with average order value, is an indicator of the net sales we expect to recognize in a given period.
Additionally, in June 2023, Apple announced new software development kit, or SDK, privacy controls that it has integrated into iOS 17, which was released in September 2023, including new protections designed 59 to limit tracking or identification of user devices.
Additionally, in June 2023, Apple announced new software development kit, or SDK, privacy controls that it has integrated into iOS 17, which was released in September 2023, including new protections designed to limit tracking or identification of user devices.
Our actual results and the timing of certain events could differ materially from those anticipated in or implied by these forward-looking statements as a result of several factors, including those discussed in the sections titled “Risk Factors” and “Forward-Looking Statements.” For discussion regarding our financial condition and results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021, refer to Part II, Item 7.
Our actual results and the timing of certain events could differ materially from those anticipated in or implied by these forward-looking statements as a result of several factors, including those discussed in the sections titled “Risk Factors” and “Forward-Looking Statements.” For discussion regarding our financial condition and results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022, refer to Part II, Item 7.
We defer revenue based on an allocation of the price of the customer purchase and the estimated standalone selling price of the points earned. Revenue is recognized once the reward is redeemed or expires or once unconverted points expire.
We defer revenue based on an allocation of the price of the customer purchase and the estimated 71 standalone selling price of the points earned. Revenue is recognized once the reward is redeemed or expires or once unconverted points expire.
We believe these investments will yield positive returns in the long 61 term; however, we cannot be certain that these efforts will grow our customer base or be cost-effective in the short term.
We believe these investments will yield positive returns in the long term; however, we cannot be certain that these efforts will grow our customer base or be cost-effective in the short term.
Adjusted EBITDA To provide investors with additional information regarding our financial results, we have disclosed in the table above and elsewhere in this report Adjusted EBITDA, a non-GAAP financial measure that we calculate as net income before other income, net; taxes; and depreciation and amortization; adjusted to exclude the effects of equity-based compensation expense and certain non-routine items.
Adjusted EBITDA To provide investors with additional information regarding our financial results, we have disclosed in the table above and elsewhere in this report Adjusted EBITDA, a non-GAAP financial measure that we calculate as net income before other income, net; taxes; and depreciation and amortization; adjusted to exclude the effects of equity-based compensation expense, certain transaction costs and certain non-routine items.
In addition, we have elected to treat shipping and handling as fulfillment activities and not a separate performance obligation. In accordance with our policy on returns and exchanges, merchandise returns are generally accepted for full refund if returned within 60 days of the original purchase date and merchandise may be exchanged up to 90 days from the original purchase date.
In addition, we have elected to treat shipping and handling as fulfillment activities and not a separate performance obligation. In accordance with our policy on returns and exchanges, merchandise returns are generally accepted for full refund if returned within 30 days of the original purchase date and merchandise may be exchanged up to 60 days from the original purchase date.
As of December 31, 2023, the majority of our cash and cash equivalents was held for working capital purposes. We believe that our existing cash and cash equivalents, cash flows from operations as well as the available borrowing capacity under our line of credit will be sufficient to meet our anticipated cash needs for at least the next 12 months.
As of December 31, 2024, the majority of our cash and cash equivalents was held for working capital purposes. We believe that our existing cash and cash equivalents, cash flows from operations as well as the available borrowing capacity under our line of credit will be sufficient to meet our anticipated cash needs for at least the next 12 months.
Active customers increased during 2023 as compared to 2022 primarily due to our ability to engage with our existing customers and acquire new customers through our sales and marketing efforts. Total Orders Placed We define total orders placed as the total number of orders placed by our customers, prior to product returns, across our platform in any given period.
Active customers increased during 2024 as compared to 2023 primarily due to our ability to engage with our existing customers and acquire new customers through our sales and marketing efforts. Total Orders Placed We define total orders placed as the total number of orders placed by our customers, prior to product returns, across our platform in any given period.
As a trusted premium lifestyle brand and a go-to online source for discovery and inspiration, we deliver exceptional service and an engaging customer experience with a vast yet curated offering totaling over 100,000 apparel and footwear styles, as well as beauty, accessories and home products.
As a trusted premium lifestyle brand and a go-to online source for discovery and inspiration, we deliver exceptional service and an engaging customer experience with a vast yet curated offering totaling over 110,000 apparel and footwear styles, as well as beauty, accessories and home products.
Year Ended December 31, 2023 2022 2021 % of Orders placed by existing customers 79 % 77 % 76 % % of Net sales generated from existing customers 80 % 79 % 77 % The following chart illustrates the spending behavior of our customer cohorts over time, as reflected in customer purchases of our products annually.
Year Ended December 31, 2024 2023 2022 2021 % of Orders placed by existing customers 80 % 79 % 77 % 76 % % of Net sales generated from existing customers 81 % 80 % 79 % 77 % The following chart illustrates the spending behavior of our customer cohorts over time, as reflected in customer purchases of our products annually.
Failure to attract new visitors to our sites and convert them to customers would impact future net sales growth. If our marketing efforts do not connect with our customer or fail to cost-effectively promote our brand or convert impressions into new customers, our net sales growth and profitability will be adversely affected.
Failure to attract new visitors to our sites and convert them to customers would impact future net sales growth. If our marketing efforts do not connect with our customer or fail to cost-effectively promote our brands or convert impressions into new customers, our net sales growth and profitability will be adversely affected.
If we are unable to maintain our historically strong retention rates, our operating results could be adversely impacted. The variability in our cohort net sales retention rates in 2020 to 2023 is a departure from our consistent retention rates in prior years, which we attribute primarily to external economic factors.
If we are unable to maintain our historically strong retention rates, our operating results could be adversely impacted. The variability in our cohort net sales retention rates in 2020 to 2024 is a departure from our consistent retention rates in prior years, which we attribute primarily to external economic factors.
Our social media and brand marketing strategy is combined with robust and sophisticated digital performance marketing activities and our proprietary brand ambassador program. Once we have attracted potential new customers to our sites, our goal is to 55 convert them into active customers and then encourage repeat purchases.
Our social media and brand marketing strategy is combined with robust and sophisticated digital performance marketing activities and our proprietary brand ambassador program. Once we have attracted potential new customers to our sites, our goal is to 56 convert them into active customers and then encourage repeat purchases.
We have maintained a high percentage of sales that occur at full price, which we believe reflects our data-driven merchandising strategy, customer acceptance of our merchandise and the 56 sense of urgency we create through frequent product introductions in limited quantities.
We have maintained a high percentage of sales that occur at full price, which we believe reflects our data-driven merchandising strategy, customer acceptance of our merchandise and the 57 sense of urgency we create through frequent product introductions in limited quantities.
Due to the variability in our retention rates in recent years, which was primarily driven by external economic factors, we believe the average of our cohort net sales retention rates from 2020 to 2023 is a relevant measure for benchmarking our performance in retaining customers.
Due to the variability in our retention rates in recent years, which was primarily driven by external economic factors, we believe the average of our cohort net sales retention rates from 2020 to 2024 is a relevant measure for benchmarking our performance in retaining customers.
Cohort net sales retention rate is calculated as net sales attributable to a given customer cohort divided by the total net sales attributable to the same customer cohort from one year prior. Cohort net sales retention rate was 77% in 2023 compared to 97% in 2022, 120% in 2021 and 74% in 2020.
Cohort net sales retention rate is calculated as net sales attributable to a given customer cohort divided by the total net sales attributable to the same customer cohort from one year prior. Cohort net sales retention rate was 85% in 2024 compared to 77% in 2023, 97% in 2022, 120% in 2021 and 74% in 2020.
No borrowings were outstanding as of December 31, 2023 and 2022. We are also obligated to pay other customary fees for a credit facility of this size and type, including an unused commitment fee.
No borrowings were outstanding as of December 31, 2024 and 2023. We are also obligated to pay other customary fees for a credit facility of this size and type, including an unused commitment fee.
We support our logistics network with proprietary algorithms to optimize inventory allocation, reduce shipping and fulfillment expenses and deliver merchandise quickly and efficiently to our customers, which allows us to ship over 97% of orders on the same day if placed before 3 p.m. Eastern Time.
We support our logistics network with proprietary algorithms to optimize inventory allocation, reduce shipping and fulfillment expenses and deliver merchandise quickly and efficiently to our customers, which allows us to ship over 96% of orders on the same day if placed before 3:00 p.m. Eastern Time.
Total orders placed increased in 2023 as compared to 2022 primarily due to our ability to engage with our existing customers and acquire new customers through our sales and marketing efforts.
Total orders placed increased in 2024 as compared to 2023 primarily due to our ability to engage with our existing customers and acquire new customers through our sales and marketing efforts.
Existing customers, whom we define as customers in a year who have purchased from us in any prior year, account for a greater and greater share of active customers over time. Existing customers as a percentage of total active customers were 52%, 50%, 49% and 49% for 2023, 2022, 2021 and 2020, respectively.
Existing customers, whom we define as customers in a year who have purchased from us in any prior year, account for a greater and greater share of active customers over time. Existing customers as a percentage of total active customers were 54%, 52%, 50% and 49% for 2024, 2023, 2022 and 2021, respectively.
Our dynamic platform connects a deeply engaged community of millions of consumers, thousands of global fashion influencers and over 1,200 emerging, established and owned brands.
Our dynamic platform connects a deeply engaged community of millions of consumers, thousands of global fashion influencers and over 1,400 emerging, established and owned brands.
Net sales represent the sales of these items and shipping revenue when applicable, net of estimated returns and promotional discounts. Net sales are primarily driven by growth in the number of our customers, the frequency with which customers purchase and average order value.
Net sales represent the sales of these items and shipping revenue when applicable, net of estimated returns and promotional discounts. Net sales are primarily driven by growth in the number of our customers, the frequency with which customers purchase, the proportion of returned merchandise and average order value.
Year Ended December 31, 2023 2022 2021 2020 2019 First quarter 26 % 26 % 20 % 25 % 23 % Second quarter 26 % 26 % 26 % 25 % 27 % Third quarter 24 % 24 % 27 % 26 % 26 % Fourth quarter 24 % 24 % 27 % 24 % 24 % Total 100 % 100 % 100 % 100 % 100 % Our business is directly affected by the behavior of consumers.
Year Ended December 31, 2024 2023 2022 2021 2020 First quarter 24 % 26 % 26 % 20 % 25 % Second quarter 25 % 26 % 26 % 26 % 25 % Third quarter 25 % 24 % 24 % 27 % 26 % Fourth quarter 26 % 24 % 24 % 27 % 24 % Total 100 % 100 % 100 % 100 % 100 % Our business is directly affected by the behavior of consumers.
Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for year ended 2022, which was filed with the SEC on February 23, 2023. Overview REVOLVE is the next-generation fashion retailer for Millennial and Generation Z consumers.
Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for year ended 2023, which was filed with the SEC on February 27, 2024. Overview REVOLVE is the next-generation fashion retailer for Millennial and Generation Z consumers.
Under these covenants, we are prohibited from paying cash dividends with respect to our capital stock. We were in compliance with all financial covenants as of December 31, 2023 and 2022.
Under these covenants, we are prohibited from 69 paying cash dividends with respect to our capital stock. We were in compliance with all financial covenants as of December 31, 2024 and 2023.
Revenue recognized in net sales on breakage on store credit and gift cards was $2.6 million and $1.7 million for 2023 and 2022, respectively. Sales taxes and duties collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales.
Revenue recognized in net sales on breakage on store credit and gift cards was $3.3 million and $2.6 million for 2024 and 2023, respectively. Sales taxes and duties collected from customers and remitted to governmental authorities are accounted for on a net basis and therefore are excluded from net sales.
We expect fulfillment expenses to fluctuate as a percentage of net sales due to pressure from increased costs such as wages and other input cost pressure, expansion of our fulfillment network footprint and capacity, and our customers’ propensity to return merchandise, to be partially offset by operating efficiencies from increased scale as well as automation of the fulfillment center workflow.
We expect fulfillment expenses to fluctuate as a percentage of net sales due to pressure from increased costs such as wages and other input cost pressure, expansion of our fulfillment network footprint and capacity, and our customers’ propensity to return merchandise. Longer term, we expect operating efficiencies from increased scale as well as automation of the fulfillment center workflow.
In 2023, average order value for merchandise sold through the REVOLVE and FWRD segments was approximately $274 and $692, respectively, reflecting the brands sold and typical profile of the shoppers on such sites. We believe our high average order value demonstrates the premium nature of our product assortment.
In 2024, average order value for merchandise sold through the REVOLVE and FWRD segments was approximately $281 and $666, respectively, reflecting the brands sold and typical profile of the shoppers on such sites. We believe our high average order value demonstrates the premium nature of our product assortment.
Segment and Geographic Performance Our financial results are affected by the performance across our two reporting segments, REVOLVE and FWRD, as well as across the various geographies in which we serve our customers. The REVOLVE segment contributes to a majority of our net sales, representing 84.6% and 83.7% of our net sales for 2023 and 2022, respectively.
Segment and Geographic Performance Our financial results are affected by the performance across our two reporting segments, REVOLVE and FWRD, as well as across the various geographies in which we serve our customers. 63 The REVOLVE segment contributes to a majority of our net sales, representing 85.9% and 84.6% of our net sales for 2024 and 2023, respectively.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Issuer’s Repurchases of Equity Securities.” Historical Cash Flows Year Ended December 31, 2023 2022 2021 (in thousands) Net cash provided by operating activities $ 43,342 $ 23,436 $ 62,313 Net cash used in investing activities (4,198 ) (5,167 ) (2,195 ) Net cash (used in) provided by financing activities (30,377 ) 887 12,766 68 Net Cash Provided by Operating Activities Cash from operating activities consists primarily of net income adjusted for certain non-cash items, including depreciation, equity-based compensation, and the effect of changes in working capital and other activities.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Issuer’s Repurchases of Equity Securities.” Historical Cash Flows Year Ended December 31, 2024 2023 2022 (in thousands) Net cash provided by operating activities $ 26,692 $ 43,342 $ 23,436 Net cash used in investing activities (9,114 ) (4,198 ) (5,167 ) Net cash (used in) provided by financing activities (5,363 ) (30,377 ) 887 Net Cash Provided by Operating Activities Cash from operating activities consists primarily of net income adjusted for certain non-cash items, including depreciation, equity-based compensation, and the effect of changes in working capital and other activities.
Our returns reserve as of December 31, 2023 and 2022 was $63.8 million and $63.4 million, respectively, and the provisions recorded for returns were $1,505.9 million and $1,410.5 million, during 2023 and 2022, respectively. Actual levels of returns may vary from our estimates as of period ends and would be recorded in future periods.
Our returns reserve as of December 31, 2024 and 2023 was $69.7 million and $63.8 million, respectively, and the provisions recorded for returns were $1,544.1 million and $1,505.9 million, during 2024 and 2023, respectively. Actual levels of returns may vary from our estimates as of period ends and would be recorded in future periods.
During 2023 and 2022, net sales to customers outside of the United States were $198.3 million and $187.1 million, respectively, representing an increase of 6.0%. Net sales to customers outside of the United States are impacted by various factors including import and export taxes, currency fluctuations and other macroeconomic conditions described in “—Overall Economic Trends” above.
During 2024 and 2023, net sales to customers outside of the United States were $226.4 million and $198.3 million, respectively, representing an increase of 14.2%. Net sales to customers outside of the United States are impacted by various factors including import and export taxes, currency fluctuations and other macroeconomic conditions described in “—Overall Economic Trends” above.
We believe the 2023 cohort net sales retention rate reflects a normalization following the resurgence of consumer spending on fashion apparel in 2021 and 2022, coupled with a more challenging macroeconomic environment in 2023.
We believe our cohort net sales retention rate in 2024 began to normalize following the resurgence of consumer spending on fashion apparel in 2021 and 2022, coupled with a more challenging macroeconomic environment in 2023.
Net Cash Used in Investing Activities Our primary investing activities have consisted of purchases of property and equipment to support our fulfillment centers and our overall business growth and internally developed software for the continued development of our proprietary technology infrastructure.
Net Cash Used in Investing Activities Our primary investing activities have consisted of purchases of property and equipment to support our fulfillment centers and our overall business growth and internally developed software for the continued development of our proprietary technology infrastructure. In addition, for 2024, our investing activities included purchases of rental product and cash paid for an acquisition.
The following table presents a reconciliation of free cash flow to net cash provided by operating activities, as well as information regarding net cash used in investing activities and net cash (used in) provided by financing activities, for each of the periods indicated: Year Ended December 31, 2023 2022 2021 (in thousands) Net cash provided by operating activities $ 43,342 $ 23,436 $ 62,313 Purchases of property and equipment (4,198 ) (5,167 ) (2,195 ) Free cash flow $ 39,144 $ 18,269 $ 60,118 Net cash used in investing activities $ (4,198 ) $ (5,167 ) $ (2,195 ) Net cash (used in) provided by financing activities $ (30,377 ) $ 887 $ 12,766 Active Customers We define an active customer as a unique customer account from which a purchase was made across our platform at least once in the preceding 12-month period.
The following table presents a reconciliation of free cash flow to net cash provided by operating activities, as well as information regarding net cash used in investing activities and net cash (used in) provided by financing activities, for each of the periods indicated: Year Ended December 31, 2024 2023 2022 (in thousands) Net cash provided by operating activities $ 26,692 $ 43,342 $ 23,436 Purchases of property and equipment (5,649 ) (4,198 ) (5,167 ) Purchases of rental product (3,038 ) — — Free cash flow $ 18,005 $ 39,144 $ 18,269 Net cash used in investing activities $ (9,114 ) $ (4,198 ) $ (5,167 ) Net cash (used in) provided by financing activities $ (5,363 ) $ (30,377 ) $ 887 59 Active Customers We define an active customer as a unique customer account from which a purchase was made across our platform at least once in the preceding 12-month period.
We have provided below a reconciliation of Adjusted EBITDA to net income, the most directly comparable GAAP financial measure. We have included Adjusted EBITDA in this report because it is a key measure used by our management and board of directors to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital.
We have included Adjusted EBITDA in this report because it is a key measure used by our management and board of directors to evaluate our operating performance, generate future operating plans and make strategic decisions regarding the allocation of capital.
Net Cash (Used in) Provided by Financing Activities Our financing activities primarily consist of proceeds from the exercise of stock options, borrowings and repayments related to the existing line of credit, when applicable and repurchases of our Class A common stock.
Net Cash (Used in) Provided by Financing Activities Our financing activities primarily consist of repurchases of our Class A common stock and proceeds from the exercise of stock options, when applicable.
Purchases of property and equipment may vary from period-to-period due to the timing and extent of the expansion of our operations. Net cash used in investing activities was $4.2 million and $5.2 million in 2023 and 2022, respectively.
Purchases of property and equipment may vary from period-to-period depending on the timing and extent of the expansion of our operations Net cash used in investing activities was $9.1 million and $4.2 million in 2024 and 2023, respectively.
Liquidity and Capital Resources The following table shows our cash and cash equivalents, accounts receivable and working capital as of the dates indicated: As of December 31, 2023 December 31, 2022 (in thousands) Cash and cash equivalents $ 245,449 $ 234,724 Accounts receivable, net 12,405 5,421 Working capital 338,969 337,131 (1) Working capital for all periods presented above is defined as current assets less current liabilities.
Liquidity and Capital Resources The following table shows our cash and cash equivalents, accounts receivable and working capital as of the dates indicated: As of December 31, 2024 December 31, 2023 (in thousands) Cash and cash equivalents $ 256,600 $ 245,449 Accounts receivable, net 10,338 12,405 Working capital 364,991 338,969 (1) Working capital for all periods presented above is defined as current assets less current liabilities.
We expect selling and distribution expenses to fluctuate as a percentage of net sales reflecting input cost pressures, particularly freight charges and fuel surcharges, from elevated return rates due to consumer behavior, investments in international markets to offer hassle-free returns, partially offset by efficiencies realized from optimized shipping methods.
We expect selling and distribution expenses to fluctuate as a percentage of net sales reflecting changes to input costs, particularly freight charges and fuel surcharges, from changes in our return rates, investments in international markets to offer hassle-free returns and efficiencies realized from optimized shipping methods.
We also offer REVOLVE products on two large international marketplaces, Tmall Global in China and Nykaa Fashion in India, to expand our distribution reach in these key geographies. For 2023 and 2022, we generated $198.3 million and $187.1 million, respectively, in net sales shipped to customers internationally, or 18.6% and 17.0% of total net sales, respectively.
We also offer REVOLVE products on international marketplaces such as Tmall Global, RED and Douyin in China and Nykaa Fashion in India, to expand our distribution reach in these key geographies. For 2024 and 2023, we generated $226.4 million and $198.3 million, respectively, in net sales shipped to customers internationally, or 20.0% and 18.6% of total net sales, respectively.
Net cash used in financing activities was $30.4 million in 2023 and was primarily attributable to repurchases of shares of our Class A common stock under our stock repurchase program. Net cash provided by financing activities was $0.9 million in 2022 and was attributable to cash proceeds from the exercise of stock options.
Net cash used in financing activities was $5.4 million in 2024 and was primarily attributable to repurchases of shares of our Class A common stock under our stock repurchase program, partially offset by cash proceeds from the exercise of stock options.
Existing customers typically place more orders annually than new customers and at higher average order values, resulting in existing customers representing approximately 79% of orders and approximately 80% of net sales in 2023, up from 77% of orders and 79% of net sales in 2022, and 57% of orders and 58% of net sales in 2014, again having increased in each year since 2014.
Existing customers typically place more orders annually than new customers and at higher average order values, resulting in existing customers representing approximately 80% of orders and approximately 81% of net sales in 2024, up from 79% of orders and 80% of net sales in 2023, and 77% of orders and 79% of net sales in 2022.
The average cohort net sales retention rate for 2020-2023 was 92%, which is higher than the 89% net sales retention rate reported in 2019. 60 Merchandise Mix We offer merchandise across a variety of product types, brands and price points.
The average cohort net sales retention rate for 2020-2024 was 89%, consistent with the 89% net sales retention rate reported in 2019. 62 Merchandise Mix We offer merchandise across a variety of product types, brands and price points.
The net sales decrease in 2023 compared to 2022 was primarily due to a decrease in the number of orders shipped. 62 Net sales to customers outside of the United States contributed to 18.6% and 17.0% of our net sales for 2023 and 2022, respectively.
The net sales decrease in 2024 compared to 2023 was primarily due to a decrease in the number of orders shipped. Net sales to customers in the United States contributed to 80.0% and 81.4% of our net sales for 2024 and 2023, respectively.
Year Ended December 31, 2023 2022 2021 (in thousands, except average order value and percentages) Gross margin 51.9 % 53.8 % 55.0 % Adjusted EBITDA $ 43,409 $ 90,234 $ 114,585 Free cash flow $ 39,144 $ 18,269 $ 60,118 Active customers 2,543 2,340 1,840 Total orders placed 8,701 8,304 6,636 Average order value $ 297 $ 304 $ 271 Adjusted EBITDA and free cash flow are non-GAAP measures.
Year Ended December 31, 2024 2023 2022 (in thousands, except average order value and percentages) Gross margin 52.5 % 51.9 % 53.8 % Adjusted EBITDA $ 69,516 $ 43,409 $ 90,234 Free cash flow $ 18,005 $ 39,144 $ 18,269 Active customers 2,668 2,543 2,340 Total orders placed 8,867 8,701 8,304 Average order value $ 302 $ 297 $ 304 Adjusted EBITDA and free cash flow are non-GAAP measures.
The increase in general and administrative expenses as a percentage of net sales was primarily driven by the increase in general and administrative costs as well as a slight decline in net sales.
The increase in general and administrative expenses as a percentage of net sales was driven by growth in general and administrative expenses outpacing growth in net sales.
Non-routine items in 2022 included $6.3 million in legal fees and charges for a settled legal matter and $0.1 million in other non-routine items. 57 Free Cash Flow To provide investors with additional information regarding our financial results, we have also disclosed in the table above and elsewhere in this report free cash flow, a non-GAAP financial measure that we calculate as net cash provided by operating activities less cash used in purchases of property and equipment.
Free Cash Flow To provide investors with additional information regarding our financial results, we have also disclosed in the table above and elsewhere in this report free cash flow, a non-GAAP financial measure that we calculate as net cash provided by operating activities less cash used in purchases of property and equipment and purchases of rental product.
The FWRD segment contributes to a smaller portion of our overall net sales, representing 15.4% and 16.3% of our net sales for 2023 and 2022, respectively. During 2023 and 2022, FWRD generated $164.2 million and $179.7 million in net sales, respectively, representing a decrease of 8.6%.
The FWRD segment contributes to a smaller portion of our overall net sales, representing 14.1% and 15.4% of our net sales for 2024 and 2023, respectively. During 2024 and 2023, FWRD generated $159.4 million and $164.2 million in net sales, respectively, representing a decrease of 2.9%.
Marketing Expenses Marketing expenses consist primarily of targeted online performance marketing costs, such as paid search/product listing ads, affiliate marketing, paid social, retargeting, search engine optimization, personalized email marketing and mobile “push” communications through our mobile applications. Marketing expenses also consist of investment in brand marketing channels, including events, payments to influencers and other forms of online and offline marketing.
Marketing Expenses Marketing expenses consist primarily of targeted online performance marketing costs, such as paid search/product listing ads, affiliate marketing, paid social, retargeting, search engine optimization, personalized email 65 and SMS marketing and mobile “push” communications through our mobile applications.
We continue to modify and expand our fulfillment network to support our growth and the demand for our products. To date, we have successfully expanded internationally with limited investment and physical presence.
We continue to modify and expand our fulfillment network to support our growth and the demand for our products. To date, we have successfully expanded internationally with limited investment and physical presence. Our ongoing initiative to elevate the international service levels and customer experience has been a key contributor to our growth.
As a result, we experienced a decrease of $12.3 million in performance marketing expense, partially offset by a $2.4 million increase in brand marketing expense. 66 General and Administrative Expenses Year Ended December 31, Change 2023 2022 $ % (dollars in thousands) General and administrative expenses $ 126,585 $ 115,312 $ 11,273 9.8 % Percentage of net sales 11.9 % 10.5 % The increase in general and administrative expenses in 2023, as compared to 2022, was primarily due to a $1.7 million increase in salaries and related benefits and equity-based compensation expense related to an increase in our headcount, a $1.7 million increase related to professional services and other occupancy costs, and a $7.9 million increase in other operating expenses.
General and Administrative Expenses Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) General and administrative expenses $ 142,122 $ 126,585 $ 15,537 12.3 % Percentage of net sales 12.6 % 11.9 % The increase in general and administrative expenses in 2024, as compared to 2023, was due to a $7.9 million increase in salaries and related benefits, a $6.0 million increase related to professional services and other occupancy costs, a $4.2 million increase in equity-based compensation expense, a $1.1 million increase in studio and design costs and a $4.2 million increase in other operating expenses and transaction costs, partially offset by a $7.9 million decrease in non-routine expenses.
We have recently experienced and may continue to experience an increase in the cost of goods due to an increase in the cost of materials. 63 Fulfillment Expenses Fulfillment expenses represent those costs incurred in operating and staffing our fulfillment centers, including costs attributed to inspecting and warehousing inventories and picking, packaging and preparing customer orders for shipment.
Fulfillment Expenses Fulfillment expenses represent those costs incurred in operating and staffing our fulfillment centers, including costs attributed to inspecting and warehousing inventories and picking, packaging and preparing customer orders for shipment. Fulfillment expenses also include the cost of warehousing facilities.
We expect our cost of sales to fluctuate as a percentage of net sales primarily due to how we manage our inventory and merchandise mix.
We expect our cost of sales to fluctuate as a percentage of net sales primarily due to how we manage our inventory and merchandise mix. We have recently experienced and may continue to experience an increase in the cost of goods due to an increase in the cost of materials.
During 2023, we recorded $7.5 million in legal fees and charges for two separate settled legal matters and $2.8 million in non-routine import and export fees. During 2022, we recorded a $6.3 million accrual for a separate legal matter that has since been settled.
Non-routine items in 2023 included $7.5 million in legal fees and charges for two separate settled legal matters and $2.8 million related to non-routine import and export fees. Non-routine items in 2022 included $6.3 million in legal fees and charges for a settled legal matter and $0.1 million in other non-routine items.
Income Taxes Year Ended December 31, 2023 2022 (dollars in thousands) Income before income taxes $ 37,761 $ 76,616 Provision for income taxes 9,614 17,919 Effective tax rate 25.5 % 23.4 % The increase in the effective tax rate for 2023 compared to 2022 was primarily due to an increase in state income taxes and non-deductible expenses combined with a decrease in excess tax benefits related to the exercise of non-qualified stock options, partially offset by a higher proportion of foreign-derived intangible income.
Income Taxes Year Ended December 31, 2024 2023 (dollars in thousands) Income before income taxes $ 64,447 $ 37,761 Provision for income taxes 15,676 9,614 Effective tax rate 24.3 % 25.5 % 68 The decrease in the effective tax rate for 2024 compared to 2023 was primarily due to an increase in excess tax benefits related to the exercise of non-qualified stock options, partially offset by a lower proportion of foreign-derived intangible income and an increase in disallowed expenses related to Section 162(m) of the Internal Revenue Code for covered employee's compensation.
The increase in cost of sales as a percentage of net sales was primarily due to a lower percentage of full price sales combined with a higher mix of third party brand sales.
The decrease in cost of sales as a percentage of net sales was primarily due to a higher percentage of full price sales, partially offset by increased inbound shipping rates and a higher mix of third-party brand sales.
The increase in selling and distribution expenses as a percentage of net sales was primarily due to customers returning a higher proportion of their purchases, higher shipping rates and a lower average order value as compared to the comparative period in the prior year.
The decrease in selling and distribution expenses as a percentage of net sales was primarily due to lower shipping rates, lower proportion of returned purchases and higher average order value, partially offset by higher merchant processing fees.
Contractual Obligations As of December 31, 2023, our principal contractual obligations consist of obligations under operating leases for office and fulfillment facilities. For a description of our leases, please see Note 5, Leases , to our consolidated financial statements included elsewhere in this report.
For a description of our leases, please see Note 5, Leases , to our consolidated financial statements included elsewhere in this report.
We believe these increases are reflective of our ability to engage and retain our customers through our differentiated marketing and compelling merchandise offering and shopping experience. The increasing share of our net sales from existing customers reflects our customer loyalty and the net sales retention behavior we see in our customer cohorts.
Orders placed by existing customers and net sales from existing customers have each increased each year since 2014. We believe these increases are reflective of our ability to engage and retain our customers through our differentiated marketing and compelling merchandise offering and shopping experience.
During 2023 and 2022, REVOLVE generated $904.5 million and $921.7 million in net sales, respectively, representing a decrease of 1.9%. The net sales decrease in 2023 compared to 2022 was primarily due to a higher proportion of returned merchandise, partially offset by an increase in the number of orders placed.
During 2024 and 2023, REVOLVE generated $970.5 million and $904.5 million in net sales, respectively, representing an increase of 7.3%. The net sales increase in 2024 compared to 2023 was primarily due to an increase in average order value combined with a lower proportion of returned purchases and an increase in the number of orders shipped.
Our future capital requirements and the adequacy of available funds will depend on many factors, including those described in the section titled “Risk Factors.” We may not be able to secure additional financing to meet our operating requirements on acceptable terms, or at all. 67 Sources of Liquidity Since our inception, we have financed our operations and capital expenditures primarily through cash flows generated by operations, private sales of equity securities, the incurrence of debt, the net proceeds we received through our IPO, as well as proceeds received from the exercise of stock options.
Our future capital requirements and the adequacy of available funds will depend on many factors, including those described in the section titled “Risk Factors.” We may not be able to secure additional financing to meet our operating requirements on acceptable terms, or at all.
The following table presents the percentage of orders placed by and the net sales generated from existing customers.
The increasing share of our net sales from existing customers reflects our customer loyalty and the net sales retention behavior we see in our customer cohorts. 61 The following table presents the percentage of orders placed by and the net sales generated from existing customers.
Selling and Distribution Expenses Year Ended December 31, Change 2023 2022 $ % (dollars in thousands) Selling and distribution expenses $ 197,052 $ 190,419 $ 6,633 3.5 % Percentage of net sales 18.4 % 17.3 % The increase in selling and distribution expenses in 2023, as compared to 2022, was primarily due to an increase in the number of orders shipped and returned.
Selling and Distribution Expenses Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Selling and distribution expenses $ 195,169 $ 197,052 $ (1,883 ) (1.0 %) Percentage of net sales 17.3 % 18.4 % The decrease in selling and distribution expenses in 2024, as compared to 2023, was primarily due to a $7.1 million decrease in shipping and handling costs, a $0.4 million decrease in other selling expenses, partially offset by a $5.6 million increase in merchant processing fees.
Marketing expenses are primarily related to growing and retaining our customer base and building the REVOLVE and FWRD brands.
Marketing expenses also consist of investment in brand marketing channels, including events, payments to influencers and other forms of online and offline marketing. Marketing expenses are primarily related to growing and retaining our customer base and building the REVOLVE and FWRD brands.
Marketing Expenses Year Ended December 31, Change 2023 2022 $ % (dollars in thousands) Marketing expenses $ 171,774 $ 181,648 $ (9,874 ) (5.4 %) Percentage of net sales 16.1 % 16.5 % The decrease in marketing expenses in 2023, as compared to 2022, was primarily due to reduced investment in performance marketing campaigns driven by efficiencies in marketing investments.
Marketing Expenses Year Ended December 31, Change 2024 2023 $ % (dollars in thousands) Marketing expenses $ 167,176 $ 171,774 $ (4,598 ) (2.7 %) Percentage of net sales 14.8 % 16.1 % The decrease in marketing expenses in 2024, as compared to 2023, was primarily due to a $8.7 million decrease in brand marketing expense, partially offset by a $4.1 million increase in performance marketing expense.
Factors Affecting Our Performance Overall Economic Trends The overall economic environment and related changes in consumer behavior have a significant impact on our business.
Average order value increased during 2024 as compared to 2023, primarily due to a higher percentage of sales at full price. Factors Affecting Our Performance Overall Economic Trends The overall economic environment and related changes in consumer behavior have a significant impact on our business.
The increase in our operating cash flow was primarily due to a $55.6 million net increase due to reduced investments in inventory, partially offset by a $28.7 million decrease in net income adjusted for non-cash items and a $7.0 million decrease from changes in other working capital.
We generated $26.7 million of operating cash flow in 2024 compared to $43.3 million in 2023. The decrease in our operating cash flow was primarily due to negative impact from changes in working capital, partially offset by higher net income adjusted for certain non-cash items.
A reconciliation of Adjusted EBITDA to net income is as follows: Year Ended December 31, 2023 2022 2021 (in thousands) Net income $ 28,147 $ 58,697 $ 99,840 Excluding: Other (income) expense, net (15,627 ) (3,476 ) 563 Provision for income taxes 9,614 17,919 4,888 Depreciation and amortization 5,094 4,791 4,508 Equity-based compensation 5,839 5,862 4,786 Non-routine items (1) 10,342 6,441 — Adjusted EBITDA $ 43,409 $ 90,234 $ 114,585 (1) Non-routine items in 2023 included $7.5 million in legal fees and charges for two separate settled legal matters and $2.8 million related to non-routine import and export fees.
Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including various cash flow metrics, net income and our other GAAP results. 58 A reconciliation of Adjusted EBITDA to net income is as follows: Year Ended December 31, 2024 2023 2022 (in thousands) Net income $ 48,771 $ 28,147 $ 58,697 Excluding: Other income, net (13,030 ) (15,627 ) (3,476 ) Provision for income taxes 15,676 9,614 17,919 Depreciation and amortization 4,429 5,094 4,791 Equity-based compensation 10,028 5,839 5,862 Transaction costs (1) 1,194 — — Non-routine items (2) 2,448 10,342 6,441 Adjusted EBITDA $ 69,516 $ 43,409 $ 90,234 (1) Includes legal and professional service fees related to potential and consummated strategic acquisitions and investments.
For 2023, other (income) expense, net also includes $5.1 million of insurance proceeds related to a settled legal matter. 64 Results of Operations The following tables set forth our results of operations for the periods presented and express the relationship of certain line items as a percentage of net sales for those periods.
Results of Operations The following tables set forth our results of operations for the periods presented and express the relationship of certain line items as a percentage of net sales for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeForeign Currency Risk Most of our sales are denominated in U.S. dollars, and therefore, our net sales are not currently subject to significant foreign currency risk. However, our products for sale in foreign countries are generally priced in the country’s local currency based on the currency exchange rate in effect at the time.
Biggest changeForeign Currency Risk Most of our sales are denominated in U.S. dollars, and therefore, our net sales are not currently subject to significant foreign currency risk. However, our products for sale in foreign countries are generally priced in the 72 country’s local currency based on the currency exchange rate in effect at the time.
Fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our consolidated statements of income. To date, foreign currency transaction gains and losses have not been material to our consolidated financial statements and we have not engaged in any foreign currency hedging transactions. 71
Fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our consolidated statements of income. To date, foreign currency transaction gains and losses have not been material to our consolidated financial statements and we have not engaged in any foreign currency hedging transactions. 73

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