Good afternoon, everyone, and thanks for joining us to discuss Revolve's second quarter 2026 results. Before we begin, I'd like to mention that we have posted a presentation containing Q2 2026 financial highlights for our investor relations website located at investors.revolve.com.

I'd also like to remind you that this conference call will include forward-looking statements, including statements related to our future growth, our inventory balance, our key priorities and business initiatives, industry trends, our marketing events and their expected impact, our physical retail stores, our owned brand and luxury brand expansions, our use of AI, our market position and competitive positioning, our partnerships, and our outlook for net sales, gross margin, operating expenses, and effective tax rate. These statements are subject to various risks, uncertainties, and assumptions that could cause our actual results to differ materially from these statements, including the risks mentioned in this afternoon's press release as well as other risks and uncertainties disclosed under the caption Risk Factors and elsewhere in our filings with the Securities and Exchange Commission, including without limitation our Annual Report on Form 10-K for the year ended December 31, 2025, and our subsequent quarterly reports on Form 10-Q, all of which can be found on our website at investors.revolve.com.

We undertake no obligation to revise or update any forward-looking statements or information except as required by law. During our call today, we will also reference certain non-GAAP financial information, including adjusted EBITDA and free cash flow.

We use non-GAAP measures in some of our financial discussions as we believe they provide valuable insights on our operational performance and underlying operating results. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information presented and prepared in accordance with GAAP, and our non-GAAP measures may be different from non-GAAP measures used by other companies.

Reconciliations of non-GAAP measures to the most directly comparable GAAP measures, as well as the definitions of each measure, their limitations, and our rationale for using them, can be found in this afternoon's press release and our SEC filings. Joining me on the call today are our co-founders and co-CEOs, Mike Karanikolas and Michael Mente, as well as Jesse Timmermans, our CFO.

Following our prepared remarks, we'll open the call for your questions. With that, I'll turn it over to Mike.

Hello, everyone, and thanks for joining us today. We had a very solid quarter, highlighted by strong and profitable growth across segments and geographies, leading to continued market share gains.

In fact, we achieved double-digit net sales growth across REVOLVE, FWRD, domestic, and international for the third consecutive quarter. Our underlying business metrics illustrate our increased momentum with next-generation consumers.

Trailing 12-month active customers further accelerated in the second quarter to 11% growth year-over-year, fueled by a record quarterly performance for new customer acquisition and increased engagement from pre-existing customers. The 115,000 increase in active customers in just three months is our highest quarterly growth in four years, which has enabled us to surpass the 3 million active customer milestone in Q2.

Also notable, our product return rate decreased year-over-year for the second consecutive quarter, outperforming our expectations. The win reflects a favorable mix shift, helped by successful expansion of product categories outside of our historical core and continued progress on our initiatives designed to reduce our return rate in customer-friendly ways.

Our net sales momentum has continued into the third quarter, with net sales in July increasing approximately 18% year-over-year, reinforcing my confidence in our path to achieve our goal of double-digit revenue growth for the full year 2026. The continued strong growth signals that our investments in brand, technology and AI, site experience, and category expansion are truly paying off.

Beyond the numbers, Mike and I are most excited about the progress on our longer-term initiatives. 2026 is a foundational year for REVOLVE, focused on successfully launching longer-term investments that we believe have the potential to transform our business over time.

I'm excited about our early progress against these large opportunities, such as building our physical retail muscle and developing our first-ever REVOLVE namesake label within our owned brand assortment. Moreover, our Gro-Good beauty products developed in partnership with Cardi B were introduced in the second quarter to much fanfare that exceeded our expectations.

Seeking to capitalize on such growth opportunities, our investments in 2026 have been meaningful, approximating two points of adjusted EBITDA margin in 2026 to seed these exciting initiatives in our efforts to ensure their long-term success. As a founder-led company bolstered by a rock-solid balance sheet and consistent cash flow generation, Mike and I are focused on maximizing value over the long term.

Michael will talk more about each of these initiatives in his remarks. Underscoring our confidence in our future outlook, we repurchased nearly 500,000 shares of REVOLVE Group common stock in the second quarter, reducing our Class A common shares by more than 1%.

The approximately $10 million returned to shareholders represents less than a third of our free cash flow generation year-to-date. With that as an introduction, I will step back and provide a brief recap of our second quarter results before reviewing the progress on our longer-term initiatives.

Net sales for the second quarter were $347 million, an increase of 12% year-over-year. This marks our third consecutive quarter of double-digit top-line growth.

By segment, REVOLVE net sales increased 13% and FWRD net sales increased 11% year-over-year. By territory, domestic net sales increased 11% and international net sales grew 16% year-over-year.

Gross margin was 56.6%, which included an approximately 160 basis point benefit from IEEPA tariff refunds, up from 54.1% in the second quarter of 2025. Excluding the tariff refund, gross margin increased approximately 90 basis points year-over-year, fueled primarily by successful AI and data-driven recalibrations of our markdown algorithm.

Growth in our operating expenses in Q2 and year-to-date 2026 reflect the strategic investments in longer-term initiatives that we are so excited about, which is particularly evident on the marketing line. In the second quarter, we also experienced elevated logistics cost headwinds, particularly in international markets affected by today's dynamic geopolitical environment, where variable fuel and other surcharges on international customer shipments increased meaningfully year-over-year.

Shifting to our bottom-line results, net income was $19 million and diluted earnings per share was 26 cents, which includes a 6-cent gain from IEEPA tariff refunds. This is an increase from diluted EPS of 14 cents in the second quarter of 2025, which was negatively impacted by a loss on the disposal of a former subsidiary, as well as a higher-than-normal tax rate.

Adjusted EBITDA increased to $27 million, including a $5.6 million benefit from IEEPA tariff refunds, and was achieved while heavily investing in the compelling longer-term growth initiatives discussed earlier, all of which we believe could be game changers. This is up from adjusted EBITDA of $23 million in the second quarter of 2025.

Incidentally, we filed for approximately $8 million in IEEPA tariff refunds, most of which we received and recognized in our second quarter financial results. As a reminder, we successfully mitigated the vast majority of the tariff impact, thanks to the great work, agility, and execution by our team.

Now I'll conclude by recapping our progress against our longer-term strategic priorities and growth drivers. We're advancing on a strong slate of initiatives, and the team's execution has us well positioned for meaningful long-term value creation.

First, we continue to invest to expand our brand awareness, grow our customer base, and strengthen our connection with the next-generation consumer. We had a very active and impactful second quarter for brand building, featuring incredible activations at REVOLVE Festival and Stagecoach, attended by countless A-listers, our first-ever men's brand marketing and World Cup activations, and aspirational lifestyle events in Monaco and Spain that collectively generated hundreds of millions of press and social media impressions.

We are very pleased with the results of our brand-building efforts and investments in growth initiatives that drove a record number of new customers and strong growth in active customers in the second quarter. Second, we continue to meaningfully expand our international penetration, highlighted by 16% net sales growth outside of the US.

Net sales increased across all regions, with Mexico again delivering exceptional growth on the heels of the marketing and service enhancements discussed last quarter. Most impressively, after a weak start to Q2, the Middle East region rebounded to strong double-digit growth for the quarter, helped by our agility in opportunistically capitalizing on driving demand at a time when competitors pulled back.

All told, international generated nearly 23% of total net sales in the second quarter, the highest mix we have ever reported. Yet we still have so much white space for future growth in a market that is more than three times larger than the US opportunity.

Third, our second quarter results further validate our successful efforts to expand our share of wallet among our loyal customers. The fashion apparel category outpaced our net sales growth in Q2, driven by particular strength from wardrobe essentials, including tops, pants, outerwear, intimates, shorts, and jeans.

Emerging product areas of beauty and men's also continued to perform very well, growing faster than the overall business on a combined basis. Finally, we continue to leverage AI to drive innovation, growth, and efficiency across the platform.

I will provide two examples of our incredible progress, one that is customer-facing and another that has delivered huge gains for internal analytics, strategy, and faster decision-making. First, I'm excited by the promising evaluations of an enhancement to our on-site search algorithms that will soon allow consumers to upload photo images to discover similar items from our assortment.

For example, a customer could upload a photo of a celebrity wearing a cute dress, and our AI-driven innovation will show the exact item, if available, along with similar items on REVOLVE. We expect the innovation to elevate product discovery and drive increased customer engagement and fashion inspiration, and serve as a foundational technology for future enhancements.

Testing of this feature on the REVOLVE site will begin in the coming weeks. Shifting gears, we have also leveraged AI technology to develop proprietary data repositories that serve as powerful in-house analytics tools.

For example, our team members can now query our full data warehouse in plain English, with AI agents returning insights in minutes with full reporting and analysis. Particularly exciting is a related feature we have developed from scratch to help us elevate the shopping experience and drive higher conversion in our retail stores.

Leveraging AI, we built custom algorithms to analyze store visual feeds to provide insight into store performance. As a result, we can now see in real time the traffic and conversion rates by store and floor, among many other metrics.

This AI innovation has helped us to build the foundational data pieces for physical retail that we have always had in e-commerce. To wrap up, our business momentum is strong, and we are making great progress advancing our exciting longer-term initiatives that further strengthen our foundation for profitable growth.

I want to thank our team for their focus, dedication, and resilience that have played such critical roles in delighting our customers every day and positioning the company for future success. Now over to Michael.

Thanks, Mike, and hello, everyone. We delivered another quarter of double-digit profitable growth while continuing to invest in long-term strategies that we believe will strengthen our brands and accelerate our growth potential.

We believe our market share gains validate our core competitive advantages, which position us for continued success over the long term: our data-driven DNA and proprietary technology infrastructure, our operational excellence and agility, and our powerful brands and connection with the next-generation consumer. With that as an introduction, I will focus my remarks on some of the strategic areas we are investing in and that we are especially excited about: owned brands and our new REVOLVE namesake label, FWRD's momentum in the luxury market, physical retail expansion, and our joint venture with Cardi B.

First, owned brands. Our owned brand penetration of REVOLVE segment net sales increased year-over-year for the sixth consecutive quarter in Q2, with even more excitement and newness ahead in the second half of the year.

In late June, we dropped our second assortment of REVOLVE Los Angeles, the summer collection of our first-ever namesake label. Our brand campaign featured REVOLVE Los Angeles brand ambassador Irina Shayk, who perfectly showcased our brand vision of effortless glamour and confidence.

I am thrilled to share that the sell-through metrics for REVOLVE Los Angeles drop number two are even stronger than our first assortment in the early going. Our REVOLVE namesake label is a multi-year journey.

The focus in this initial stage of the journey is to build the brand with a disciplined and thoughtful approach through an integrated product, merchandising, and marketing strategy. The initial drops are beautiful statement pieces offered at higher-than-average price points that will help establish the premium, aspirational positioning of the REVOLVE Los Angeles brand in the eyes of consumers, while also providing a halo for the broader REVOLVE brand and ecosystem, both online and in store.

We are deeply investing in marketing strategies to build favorable brand awareness that will be the foundation for driving more meaningful sales volume in 2027 and beyond. To that end, following this initial brand-building phase, we plan to introduce REVOLVE-branded offerings in greater depth across additional categories and price points to drive increased demand and higher sales volumes.

We are truly encouraged with our progress to date with REVOLVE Los Angeles. The product looks incredible, and everything is moving ahead as we have envisioned.

Second, FWRD. Our FWRD segment delivered 11% net sales growth year-over-year, roughly four times the estimated growth rate of the global personal luxury goods market in 2026, according to Bain-Altagamma research.

FWRD was also a key contributor to our strong second quarter for customer acquisition that Mike discussed. An encouraging rebound in handbags net sales growth in recent months was a key driver of FWRD's impressive growth, including our FWRD Renew pre-owned luxury handbags that are available online and prominently showcased at our retail locations.

Also significant, luxury brands are increasingly creating in-demand products that are exclusively available on FWRD. In June, we launched our second annual FWRD Summer Club capsule that features exclusive-to-FWRD styles from coveted luxury brands, including Missoni, The Attico, Cult Gaia, and Same, as well as the first-ever Fforme and Eliou collaboration.

Net sales for the Summer Club capsule increased nearly 50% year-over-year, resulting in very positive feedback from our brand partners. In an industry scarred by retailer bankruptcies in recent quarters, luxury brands increasingly recognize FWRD as a clear winner in the space for the long term.

As such, we were proud to recently launch Christian Louboutin on FWRD, an iconic luxury brand with only limited wholesale distribution, including women's and men's collections. Third, physical retail.

We remain very excited about the growth opportunity in physical retail ahead of us. With learnings from Aspen and Los Angeles and supported by ongoing investments in our team, operations, and retail technology platform, we are on track to open our third retail store in the fourth quarter.

We are excited to expand to Greater Miami, a top-five market for our business, where we will open in Aventura Mall, Florida's largest retail destination attracting 30 million visitors annually. Aventura is a natural fit for our retail strategy.

It will expand our brand awareness and addressable market, will enable us to engage more deeply with many new and existing customers, and gives us a stronger platform to increase the penetration of our owned brands. Our strong customer concentration in South Florida has been shopping REVOLVE online for years, and soon we will be able to meet them where they are.

REVOLVE's future storefront is centrally located near other premium consumer brands, ideally positioned for Aventura's high-traffic volume from locals and international tourists. Our Aventura store will emphasize experiential retail, including events and activations for our millennial and Gen Z consumers who are drawn to immersive, shareable environments that mirror the communities they engage with online.

Our brand partners are also excited to participate in store events to create meaningful brand experiences, such as our successful SKIMS activation recently held in our Los Angeles store at The Grove. We'll have much more to say on this exciting topic during our November earnings call.

Finally, I'll provide an update on our Cardi B joint venture, highlighted by the phenomenally successful launch of Gro-Good beauty products in the second quarter. In short, early demand for Gro-Good offerings has outstripped available inventory across the board.

Our first three drops in April, May, and early July sold out within hours, with key products selling out within minutes, and our most recent drop in late July had the highest customer repeat rate and highest conversion rate out of any drop thus far. With such incredible demand, brand heat, and growing awareness among Cardi B's massive following, we have ordered a much larger restock of Gro-Good inventory that we expect to begin receiving this fall as we look to build on the strong early market response.

There are many positive signals that reinforce our confidence in the exciting opportunity ahead. In just a few months, the Gro-Good brand has attracted 670,000 Instagram followers, several hundred thousand consumers have requested back-in-stock notifications, and an even larger number have signed up to receive product marketing via email and SMS.

Early customer reviews for the products are glowingly positive, with an exceptional customer review score averaging 4.9 out of 5 stars across the Gro-Good product line. This has already led to significant numbers of repeat purchases.

In fact, nearly a third of Gro-Good's orders in early July were repeat customers who had previously purchased the products in April or May, and this ratio was even higher for the most recent drop in late July. Most exciting is that Gro-Good's gross margin is highly accretive to our business model, directionally similar to our owned brands assortment.

Also notable is that Gro-Good customers are nearly all incremental, with very little overlap with REVOLVE and FWRD. Exclusively available on Gro-Good's DTC site, every Gro-Good product retails under $20, ideally priced for the mass market.

We're still in the very early innings here, and the momentum has us excited about what lies ahead. To close, we're energized by the momentum across our business and the breadth of initiatives underway that we believe will fuel growth for years to come.

We remain committed to investing in our brands, innovating for our customers, and pursuing the substantial market opportunities ahead of us with the same discipline and ambition that have gotten us here. Now I will turn it over to Jesse for a discussion of the financials.

Thanks, Michael, and hello, everyone. We are excited about the current momentum in the business and the progress being made on our growth initiatives that we believe set us up well for further growth and margin expansion.

We are very focused on the long term, putting our balance sheet to work by investing in longer-term initiatives to capture further market share, while at the same time striking a balance by delivering profitable growth in the near term. I'll start by recapping our second quarter results, and then close with updates on recent trends in the business and guidance for the balance of the year.

Starting with the second quarter results, net sales were $347 million, a year-over-year increase of 12%, our third consecutive quarter of double-digit growth. REVOLVE segment net sales increased 13% and FWRD segment net sales increased 11% year-over-year in the second quarter.

By territory, domestic net sales increased 11% and international net sales increased 16% year-over-year. Growth in trailing 12-month active customers accelerated to 11% year-over-year, surpassing 3 million active customers for the first time.

That momentum has carried into the third quarter, reinforcing the strength of our brands. Contributing to the healthy top line was 11% growth in total orders placed year-over-year to 2.7 million.

Average order value was $299, compared to $300 in the second quarter of 2025. The very slight decrease was driven by initial orders of Gro-Good beauty products, which have much lower price points and average order values.

Absent the addition of the Gro-Good business, AOV would have been in excess of $300, reflecting a slight increase year-over-year. Incidentally, the Gro-Good product sales are included in the REVOLVE segment and also within the other category for the net sales by product category disclosures in our 10-Q filing.

Consolidated gross margin was 56.6%, which was positively impacted by 162 basis points from IEEPA tariff refunds received during the quarter, up from 54.1% in the second quarter of 2025. Excluding the tariff refunds, gross margin increased approximately 90 basis points year-over-year with margin expansion across both segments.

The Q2 financial highlights presentation posted on our investor relations website today has a breakdown of the tariff refunds recorded to cost of goods sold, split between the two operating segments. Now moving on to operating expenses.

Fulfillment costs were 3.3% of net sales, a slight increase from 3.2% in the second quarter of 2025. Selling and distribution costs were 17.9% of net sales and slightly above our guidance range.

The 47 basis point increase year-over-year primarily reflects increased costs for customer shipments, including variable fuel surcharges elevated by the geopolitical environment, partially offset by a reduced product return rate. Our marketing investment was 16.5% of net sales, an increase of 130 basis points year-over-year and higher than our guidance.

As with the first quarter, we meaningfully increased our marketing investments to support our growth initiatives, such as our new REVOLVE Los Angeles label, and we are continuing to test and invest in new marketing channels this year for the first time, such as connected TV, which have contributed to some of the variability quarter-to-quarter. General and administrative expenses were $43.4 million, an increase of 13% year-over-year and slightly above plan as certain strategic growth investments advanced more quickly than we anticipated.

Zooming out, the three largest contributors to increased G&A spending year-over-year in the second quarter relate to the longer-term investments in our REVOLVE namesake label, physical retail, and our joint venture with Cardi B, all of which we are incredibly excited about. Below the operating line, in the second quarter, we recorded other income of $2.3 million, an increase from recording other expense of $2.9 million a year ago.

Recall that results for the second quarter of 2025 included a $2.4 million loss from the disposal of a former subsidiary, as well as higher-than-typical foreign exchange losses within other expense. Our tax rate was 25% in the second quarter, consistent with our guidance, and a decrease of nearly 9 percentage points from the prior year.

Net income was $19 million and diluted earnings per share was 26 cents, which includes a 6-cent positive impact from IEEPA tariff refunds. This compares to diluted EPS of 14 cents in the second quarter of 2025, which was negatively impacted by the charge from the disposal of a former subsidiary and higher-than-typical foreign currency exchange losses noted earlier, as well as a higher-than-normal effective tax rate.

Adjusted EBITDA was $27 million, including a $5.6 million positive impact from IEEPA tariff refunds, achieved while heavily investing in the compelling longer-term growth initiatives. This was a 17% increase from adjusted EBITDA of $23 million in the second quarter of 2025.

Moving on to the balance sheet and cash flow statement. Net cash used by operating activities was $8 million, and free cash flow was negative $11 million in the second quarter, primarily due to unfavorable working capital movements that more than offset the increased net income.

For the six-month year-to-date period in 2026, we generated positive operating cash flow and free cash flow of $41 million and $34 million, respectively. Our strong financial position enabled us to continue to invest in the business while, at the same time, returning capital to stockholders through the repurchase of Class A common shares as part of our commitment to enhancing shareholder value.

During the second quarter, we repurchased nearly 500,000 Class A common shares at an average price of $19.98, retiring more than 1% of our Class A common stock in just three months. Inventory at June 30, 2026, was $276 million, an increase of 25% year-over-year.

Of note, the year-over-year growth in inventory is skewed by tariff-related delays experienced in the second quarter of 2025 that resulted in a year-over-year decline in inventory in last year's second quarter. On a two-year stacked basis, comparing our results to the second quarter of 2024, our net sales growth outpaced our inventory growth by approximately 5 percentage points.

As of June 30, 2026, our balance of total cash and cash equivalents was $312 million, an increase of $1 million year-over-year, and we continue to have no debt. Now let me update you on some recent trends in the business since the second quarter ended and provide some direction on our outlook to help in your modeling of the business for the balance of the year.

Before I do, there are a few items that deserve mention to provide additional color as it relates to our guidance outlook for the balance of the year. First, we still have an additional $1.4 million in outstanding potential IEEPA tariff refund claims that we have not received or included in our financials or guidance.

Second, increased net sales of Gro-Good beauty products in the second half of 2026 could lead to further downward shifts in our combined average order value year-over-year. On the other hand, Gro-Good's unit economics are highly accretive to our gross margin and bottom-line profitability, it is a trade we're happy to make.

Third, given the reduction in our return rate in the first half of the year, we're feeling more confident in the opportunity to drive it down further over time, though we're not yet baking that into our guidance. With that, let's start from the top.

We're off to an encouraging start with net sales through the month of July 2026, increasing by approximately 18% year-over-year, a 6-point acceleration compared to our growth rate in the second quarter of 2026. Shifting to gross margin, we expect gross margin in the third quarter of 2026 of between 53.5% and 54.0%, which implies a decrease of approximately 88 basis points year-over-year at the midpoint of the range.

Embedded in our guidance assumptions are the more difficult gross margin comparisons from the third quarter of 2025, which increased roughly 3.5 points last year and meaningfully benefited from the data-driven recalibration of our markdown algorithms. Consistent with year-to-date trends, we also expect our full-price mix of net sales to remain slightly lower year-over-year, but still very strong relative to the broader market.

For the full year 2026, we continue to expect gross margin of between 53.5% and 54%, which implies a year-over-year increase of around 25 basis points at the midpoint of the range. Fulfillment: We expect fulfillment as a percentage of net sales of approximately 3.4% for the third quarter of 2026, and between 3.2% and 3.4% of net sales for the full year 2026, unchanged from our previous guidance.

Selling and distribution: We expect selling and distribution costs as a percentage of net sales of approximately 17.5% for the third quarter of 2026, consistent year-over-year. For the full year, we continue to expect selling and distribution costs of between 17.1% and 17.3% of net sales.

Marketing: We expect our marketing investment to be approximately 15% of net sales in the third quarter, and north of 16% of net sales in the fourth quarter, with some key brand-building investments planned in Q4. For the full year 2026, we now expect our marketing investment to be between 15.8% and 16% of net sales, an increase that largely reflects the second quarter performance and continued investments in our longer-term growth initiatives.

General and administrative: We expect G&A expense of approximately $43.5 million in the third quarter of 2026, and now expect G&A expense of between $170 million and $172 million for the full year 2026, as we continue to prudently invest in key growth opportunities, such as the REVOLVE namesake label, physical retail, and the Cardi B joint venture. Lastly, we continue to expect our effective tax rate to be around 24% to 26% for the full year 2026.

To recap, I am very excited about the momentum in the business and believe the growth initiatives we're investing behind have the potential to supercharge our profitable growth and market share gains in the years ahead. Now we'll open it up for your questions.

Thank you. Good afternoon, everyone.

I was hoping you can unpack the acceleration that you saw in July to 18% growth. How much of that do you think reflects a strong consumer versus the timing of activations and new initiatives you have?

Then how are you thinking about the durability of that growth in 3Q and 4Q?

We feel great about the trends we're seeing in July month-to-date. From our perspective, we don't necessarily see it as a broader consumer trend across all companies, but we're certainly seeing nice trends internally.

We think it's a result of a lot of the execution we've done, especially heading out of Q2. We made some larger marketing investments in Q2, we think those are starting to pay dividends, and we're seeing that in the form of the accelerated growth in Q3.

As we look to the back half of Q3, we're certainly hopeful that we'll continue to see better growth trends in Q3 than Q2, which was also strong. Then,

can you also talk about where your new customer acquisition is coming from? I guess how do we think about gross customer adds as you think about geography or any particular categories or channels that have been particularly effective?

We've seen really broad-based strength across the business, both on the revenue side and the new customer side. It's really across the board.

Internally, there's some key growth drivers. We talked about international being particularly strong.

Of course, domestic had a great quarter as well. Category expansion is something that we've been investing for years, and we saw continued progress in the most recent quarter there.

Then, of course, some of the newer marketing investments that we're making. Of course, when we experiment with some new marketing channels, some of that money in the short term isn't going to work out, but it's still money well spent.

We feel good about the marketing capabilities that we've layered on with some of these new investments and the ability to drive growth in active customers.

Thanks very much.

Hey, everyone. Thanks for taking the question, and congrats on the quarter.

Can you help us think through the ramp trajectory for Gro-Good into the back half in '27? When does it reach that point where it kind of tips over to really being material to results, if it's not already?

Then any learnings you're taking from that as you think about the owned-brand strategy going forward?

Hey, Nathan. Thanks for the question.

We're really excited about the Gro-Good launches, those first three launches performing extremely well. As we mentioned in this call and on the prior call, the growth has largely been limited by the inventory availability.

We expect to get more inventory in this fall to drive more meaningful top-line growth. Then that will continue into 2027.

I think, if all goes well, by the time we exit this year, we'll have more to say and more granular disclosure on how well Gro-Good is performing.

Great. Thank you.

Then, can you give a little more detail on what you're seeing on the return rate side? What have you done to continue to push that downwards, and how should we think about the opportunities going forward that remain in order to continue that downward pace?

In the second quarter in particular, it's a mix of a couple things. Part of it is a category mix shift, which, certainly part of an ongoing long-term strategy of ours, and so that had a helpful impact on return rates in the second quarter.

Then the other thing, of course, is these initiatives that we continue to roll out or expand against return rate, and so we saw some nice gains there as well. For the back half of the year, we're feeling good about the direction of return rates, but for now we're forecasting flat.

In terms of specific details on initiatives, I don't want to get into kind of specific initiatives, but we're continuing to roll out both existing initiatives that have had some positive impact and continuing to R&D new efforts. Of course, as technology advances, I think there's some really exciting things we can do on the return rate side and the visualization side for customers.

Hey, guys. Thanks for taking our question.

Congrats on a nice quarter. If we strip out the tariff refund, Jesse, I think the flow-through was a little lower than it's been in a few quarters.

I can hear you guys feel good on the business and where you're at. Is it safe to say that you took the opportunity to invest when you got the refund or that you invested more than you were planning because you got the refund in hand?

I'm trying to think about flow-through, how to think about it for the rest of the year, if you don't mind. Then, I know you mentioned full-price selling was a little lower than last year in third quarter.

Can you just comment on what you're seeing in the promotional environment and how you set your expectations for markdowns and full-price selling through the year? Then anything you can comment on the nice July trends you're seeing, any comment on the consumer in the US versus international would be appreciated.

Thanks, Michael. Maybe for the first one, we didn't necessarily invest because of the tariff refund.

We felt really good about the investments we were making. Like Mike mentioned, we saw some really good results out of the marketing, I think we would have done those absent the tariff refund, just given the results that we were seeing.

Now, it is nice to have that tariff refund back, but all in all, I think we're feeling really good about the growth initiatives. Those early green shoots that we're seeing in active customers, the strong top-line growth.

Again, even absent the tariff refund, we would have invested. Then markdown is a little bit heavier than we would like.

Full-price mix is still very healthy, starts with an 8. Really good in the broader scheme of things, but we do expect continued pressure similar to what we saw this quarter for the back half of the year until things start to normalize out.

Then in July, not much more to add other than what Mike said. We are just seeing that nice, broad-based growth across both segments and geographies.

I think really impressive and a surprise to us was the Middle East rebounding into strong double digit this quarter, and we did not forecast that. I think it is very much a story of the growth initiatives starting to play out and just good, broad-based growth.

Thanks a lot, guys. Really appreciate it.

Great. Thank you so much for taking our question, and congrats, a really nice quarter, guys.

We wanted to follow up on the guidance. Can you just talk about what's driving the higher G&A for the year?

This line item has grown double digits really for some time now, and obviously lots of initiatives that are working, but can you talk about where you are in the investment cycle? Secondly, just on gross margin, not sure if you mentioned what are you seeing with input costs and what's embedded for the rest of the year, and then we have a follow-up as well.

Thanks, Anna. For G&A, it's largely the growth initiatives that are driving that higher year-on-year.

If you kind of break that out, we mentioned there was about a 2-point impact to adjusted EBITDA for the full year. About 50 basis points of that is in G&A and about 150 is in marketing.

Some really meaningful investments in marketing, but also G&A. As far as the investment cycle goes, it's largely a this-year story where we would expect to start to see some leverage into next year.

If you strip out those growth initiatives from G&A, for the year-to-date, G&A was 12.4% as stated, it would be about 11.8%, so that would have shown some nice leverage year-on-year. That's kind of more indicative of what we'd expect in the out years where G&A is growing in the mid-single digits, and then of course top line, if we continue to deliver that double-digit top-line growth, we should see some meaningful leverage.

Then on input costs, we have factored those higher input costs into the guidance, similar to what we did last quarter and what we mentioned. We are starting to see those trickle in, and that's primarily on those petroleum-based synthetic fabrics, but then also in the other products, just higher mill and factory costs, transportation costs, etc.

That's factored into our guidance, and it is a pressure point, but it's not abrupt, it's a more of a gradual impact.

That's super helpful. Just as a follow-up, looking at the gross margins between FWRD and REVOLVE, the delta is 12 to 13 points currently, used to be higher.

How do you think about the potential to further narrow that? Do you think structurally FWRD can be a high 40s gross margin business over time, and I guess what needs to happen to get there?

I think contrary to that, we'd hope to expand that differential. FWRD is in a really good place, in that kind of low- to mid-40s is a good place for FWRD to be.

Of course, last year in Q3, we had a really phenomenal 45% gross margin quarter for FWRD. In that low- to mid-40s is a good place for FWRD to be.

Now, we'd intend to expand that differential given the owned brand expansion on the REVOLVE side. We're still, call it around 20% on REVOLVE versus the 36% that we were back in 2019.

As we continue to expand owned brand penetration, we'd expect to see that REVOLVE gross margin expand.

All right. Thank you so much.

Best of luck.

Hi, thanks, and congrats on the momentum. Wanted to ask about REVOLVE Los Angeles.

I think you mentioned that you're planning to expand it to more categories and price points. Can you elaborate on exactly where you're going and the timing of that?

Then on marketing, just curious for your thoughts on what the right percentage of sales on marketing is. Is that something we should expect to see leverage on next year once we get past this big investment year for REVOLVE Los Angeles?

Thank you.

For REVOLVE Los Angeles, it's positioned initially out the gates as our premium pinnacle product, akin to a Ralph Lauren Purple Label. Over time, we'll expand to a range of categories.

Our customers shops us across her entire closet. We really see an opportunity for REVOLVE-label product to be in every aspect of her wardrobe, whether that's particularly REVOLVE Los Angeles or another REVOLVE label.

Really super excited because the early stages are going extremely well, and really give us permission and license to expand the REVOLVE-label products into every aspect of her lifestyle. Very excited about that.

Then with regard to marketing, we've had some great opportunities to invest this year, some newer channels, some channels that are really checking well and as well as big initiatives to put dollars behind. Marketing investments are up a bit this year.

We're always going to play the marketing line item a bit quarter-to-quarter depending on the opportunities that we see, and then also we have going on strategically. As we look forward to next year, I would expect that marketing line item to come down a bit since we've invested heavily this year.

Great. Thank you.

Hey, thanks, guys, for taking my question. I wanted to ask about inventory levels.

You pointed out the inventory build measures favorably on a two-year stack. Can you help us think about the flow of goods relative to your forward plans?

Yeah. Thanks, Peter.

Last year, and just to kind of reiterate what we said, we did see receipt delays last year in the height of the tariff uncertainty, inventory was down last year. We're seeing really healthy receipts this year.

If you look on a two-year stack basis, net sales is outpacing that inventory growth by about 5 points. Now, with that, inventory is a little bit heavier than we would like, still within the range of normal for us.

We'll continue to see that comp dynamic in Q3 before it normalizes in Q4, but starting to see really healthy receipts as we look into the back half of the year.

Thanks for that. Then on Gro-Good, it's encouraging to hear the really strong start.

It seems you're seeing strong repurchase behavior out of the gate. Can you tell us about the potential for crossover behavior with the REVOLVE segment?

Then, you mentioned Gro-Good was reflected in the AOV metric. Is that also influencing your active customer numbers?

On the Gro-Good side, yeah, we're encouraged by a lot of metrics on Gro-Good, certainly the off-the-charts demand, but the repeat and retention rates have been really strong, with the most recent drop approaching 40%, which for a brand this early is incredibly good sign, because it's certainly one thing to command the attention of consumers, but you want them to love the product and you want them to come back. The retention rates show they're liking the product, and then also, you look at the product reviews and all that, and I think we have a hit on our hands.

Then with regards to the AOV question, yeah, Gro-Good had certainly had an impact on AOV in the quarter. Absent Gro-Good, AOV would have been up, but it's a bit of a different business model than REVOLVE, but still actually much higher AOVs than we initially anticipated when we projected and forecasted that business because we're seeing consumers make purchases with lots of items.

Peter, to your question, because it is consolidated, Gro-Good is reflected in all of the metrics, including active customers.

Okay. Are you breaking that out?

Not at this point. Again, when it gets more meaningful, which ideally is later this year when we get the higher inventory receipts, then we'll start breaking that out more granularly.

All right. Thank you, and continued success.

Good afternoon. Thanks for taking the question.

Just a first one on stores, with Miami coming, you'll have three and I think probably a better read on what that means for the halo. What do you need to see from these stores to shift from opening one store per year to committing to perhaps a faster pace of rollout, and is there a market count that you're thinking about in your head yet that you're willing to share?

Going backwards, not necessarily at this point in terms of count. I think one thing that is really up for grabs, I think how we think about it internally is square feet.

I think that we're really in the early stages of figuring out the optimal format for how large these stores can be. We can see cases of much larger stores or we can also see cases of a high number of smaller stores depending on what we've seen in the marketplace.

In terms of more accelerated rollout, really this is the patient build-out of the infrastructure, process, and technology for us. This is really making sure that we have the robust systems that we have in our e-com business that we can roll out in a very, very aggressive way.

What we're trying to do is a little bit different than other chain-type stores where every store is identical. We're really seeing that with our broad mix, we really have this huge opportunity to really connect with our customer in each neighborhood and each territory in very, very unique way, as well as a combination of high volume and high-touch service.

I think we're in uncharted territory in a very, very cool, opportunistic way. The early stages have been very, very awesome with a lot of learnings.

Also there's a lot of investment across the board with technology, team, process, and everything you need to achieve $2 billion-plus in revenue. Patience and slow up front so we can be super speedy and powerful over the long term.

Thank you. A follow-up for Jesse on gross margin.

You're holding the guide for the year even as those tariff refunds are now hitting the numbers. What are the incremental offsets you're considering?

Is that the working in of higher markdowns given the inventory levels being slightly higher than you wanted, as you mentioned? Or is there anything related to tariff Section 301 changes that are impacting the outlook?

Thank you.

We held the margin guidance for the full year the same. With the tariff refunds, it's at the high end of that guidance, and then without the tariff refunds, it's at the low end of the guidance.

I would say margin is still within our expectations that we laid out last quarter. Nothing significantly changed there, still within the range.

Now, the new Section 301, we have factored in the new, call it average 12.5%, not any incremental that could come in a later phase. That is a potential, but that to my understanding is still under investigation and timing is uncertainty.

Right now it's just the 12.5%.

Thank you. Best of luck.

Thanks.

Hey, guys, thanks. I guess the question's been asked in different ways before, but maybe I'll attack from a different angle.

The July acceleration, any categories that you guys want to call out as showing sort of the most strength? Then just remind us maybe, Jesse, if you could, the cadence of comps from third quarter last year so we know sort of [chuckle] how much more difficult they get for the remainder of the quarter.

On the comp, I'll take that first. As you recall last year in the Q2 earnings release, we said July was up 7%, and then we closed the quarter at plus 4%.

It does indicate that comps get a little bit lighter for this back half of the quarter. Then Q4 pops back up to 10%, they get a little bit tougher in Q4.

Again, really pleased with not just that one-year growth, but if you look at the two-year growth, that increased sequentially in each month of Q2 and further increased in July. Feeling good about the underlying momentum.

I don't think there's anything really specific to call out on any category, other than just say just continued momentum across both segments, REVOLVE and FWRD, and domestic and international. That's helpful.

I guess, maybe the one to call out, which is relevant to Q2 as well, we continue to see men's, beauty, home outpace the overall growth. Again, speaking to that category diversification, that continues to play out nicely.

Great to hear. Then maybe just one more: Sounds like the owned brand expansion is going really well, just given some of the commentary that you gave, but I guess it doesn't seem like it's coming through in the gross margin outlook.

I guess can you just speak to the factors at play there and why the gross margin outlook wouldn't be a little bit higher given the mix of owned brands is improving for the remainder of the year?

Yeah. We feel great about the owned brand progress.

It is increasing year-on-year that penetration on the REVOLVE segment. That said, it's increasing at a very, call it modest rate.

I think we mentioned this in prior quarters, too, where we wouldn't expect to see that rapid expansion that we saw back in 2018, '19, but more like a 1 to 2 point expansion per year. With more opportunities as we expand the categories under REVOLVE Los Angeles and some other things, but at this point it's a more modest increase on owned brands.

Then offsetting that, of course, is what we've talked about, the slightly lower full-price mix and some of those input costs. Kind of net-net, all reflected in the guidance, but there's some offsets to that owned brand penetration.

Great. Thanks so much.

Mike, my question's for you. Just talking about AI, sounds like a lot of different initiatives are happening.

How much are all these different initiatives giving you better visibility into demand planning, inventory management? Can you look out now two quarters or three quarters longer than before just because you have better information and a better idea of where things are going, a better intelligence?

Maybe just gives a sense of how just your confidence in predicting and forecasting the business and in making long-term investments given what you've done in AI. That's the first question.

Thank you.

AI is certainly having a huge impact on our ability to properly optimize our inventory, forecast what categories are going to do the best, analyze recent trends in the business. At the same time, our focus was primarily on how do we leverage those things right to increase sales, increase demand.

We have been seeing some really nice results the past four quarters, and certainly a meaningful portion of that I think is driven by a lot of these enhancements, both on the back end in terms of optimizing category mix and product mix and those sorts of things to meet demand of customers, and then on the front end when customers visit, to make sure we're putting the right products in front of people. What's exciting to me is that it's so early on, right?

I think we have much cooler things both already, kind of in beta and test internally and then certainly in the works as part of longer-term plans that can really help us optimize things. That said, as you look kind of from a kind of planning the forecast standpoint, I think for us primarily the benefit of AI and technology to date has really been optimizing the mix on the marketing side, the inventory side, what to show to customers.

There's still going to be some level of uncertainty as far as consumer confidence and, kind of how the winds shift in further-out quarters. We feel good about our ability to project those things.

Our target for this year was to achieve double-digit-plus growth, and I'd say, we're well on our path to achieving that forecast.

Got it. Maybe one other question.

Can you just talk about the token costs? As you've invested more in AI, have you been able to control token costs and how have you done that?

Is it impacting SG&A? Any thoughts on that would be helpful.

Thank you.

That's a big area of focus. At the same time, we're trying to strike the balance of not squashing innovation internally.

You're right, certainly not a meaningful part, but not negligible either, some of the increased G&A is token costs. We have a number of internal optimization strategies that we've both executed on and are continuing to execute on.

At the same time, we're trying to balance that with giving our employees some reasonable free rein to innovate, even if it means we're not fully optimized, because we think the value of that innovation is going to pay off big in the long term.

Maybe, Mike, if I can ask one more. Just with some of the developments, these open-source models that seem to be much lower cost, is that an opportunity for the company?

How do you think about open-source versus maybe closed-source models?

100%. We're already leveraging open-source models in a very significant way, and so we already have optimizations in place that can route certain types of tasks and queries automatically to where we think it's going to still produce the result we need, but with the cheaper open-source model.

I think long-term open source and some of these lower-cost models is going to be a huge part of the mix. It's already a huge part of our mix.

At the same time, kind of on the sort of forefronts of innovation, a lot of times our employees like to use the latest and greatest, and so, we give them some leash to do that even if it isn't fully optimized just because, again, I want to strike that balance between giving them some free rein while controlling costs. But 100%, equally important to the AI innovation is parallel cost efforts and optimization efforts constantly analyzing, okay, what work was done on the frontier models that we can move to a cheaper model or an open-source model.

The difference between the frontier models and the open source is that gap is diminishing day by day, we feel very good about our efforts there and long-term our abilities to optimize cost versus benefit.

Got it. Super interesting.

Thank you so much.

Yep.

Hi, thank you. The active customer growth and top line has been impressive.

How do you see where you are relative to past longer-term algorithms? You clearly have a lot of investments as well that you're making on the OpEx side that seem really prudent for where you're going.

How might we contrast this and how you're thinking about the algorithm top and bottom line relative to years past and the snapshot we're seeing now? Then on that topic of AI, Mike, reinforcement learning and how that intersects with personalization, is that on your mind as a material driver?

Then specifically, as you continue to think about physical, how can you do the rapid A/B testing and the inventory management and the personalization engines that you run physically? Or what's on your mind for scaling that?

Cuz I think it can be harder to do stuff that you do digitally so quickly within seconds, in a physical environment. Thank you.

Yeah, 100%. Just to continue the AI thread, I'll start on the AI question with regards to the impact of AI on personalization and just bringing the right product to customers at the right time.

I think the impact there has the potential to be absolutely huge. I think we're very early on.

I think we have great personalization capabilities compared to others. I think we're just scratching the surface of what we can do with that, particularly from the standpoint of the AI contributions.

At the same time, I want to say every week, but it seems like every week, at least every month, the team comes to me with something new and innovative and interesting, and we have some really nice things in the works, AI-driven further enhancements to our search. I know search doesn't sound sexy, but it's really the building block of how do you get customers the product that they want kind of the right time what they're looking for that are even better than the enhancements that we've already made.

Then I think actually we can roll out a nice way to the buying side. We can use that same building block to optimize the inventory management further, just kind of further ability of AI to really dissect and diagnose products and understand how to categorize things and the difference between one product and another and what consumers are really gravitating towards.

Opportunity for that is absolutely huge. With regards to physical stores, you're right.

It's a different beast for us, and for us there's a learning curve on some of those elements, including us I don't want to say discovering because it's common sense, but on the site you can change an algorithm or swap out inventory instantly at kind of no cost in terms of what you're showing to a customer. Obviously with physical, you have to be much more deliberate.

At the same time, what I'm really excited about is our continued kind of growing abilities on the physical side with regards to just kind of all the kind of historical learnings and infrastructure and team and basics that maybe some other stores already have in place, but then really leveraging in the kind of innovation that I think only REVOLVE or certainly very few can bring to the table, including some of the AI innovations to analyze the video feeds and give us real-time metrics on what's going on in the store and diagnoses and recommendations and all that. I think it's quite exciting the direction that we're going, and as Michael said, we want to make sure we get it right before moving too fast, but it's quite exciting for us.

Then finally, with regards to the active customer and top-line growth, yeah, we're really pleased. I think it's a combination of things.

I think from a sort of trajectory change, we're still in the early innings on some of these big growth initiatives, physical and Gro-Good, and certainly they're contributing some growth, but I wouldn't say at this point that's kind of a large part of the growth acceleration you're seeing is from those initiatives, but they're already starting to contribute a bit. Then I think the rest of it is a lot of the core things, right, that we've been doing in terms of how we've been executing and us getting better and better at how we execute the core business, and I think you're really seeing that in some of the acceleration of numbers there.

Is low double-digit the new normal for active customer growth, and when you think about cohorts and demographics, is that changing as you continue to scale, or is it holding? Then, should profits grow slower or faster than sales?

Acknowledging that you're making investments that are accretive, but over a certain time horizon.

I don't want to necessarily say that low doubles is the new norm for active customers. Maybe what I would say is that net sales growth and active customer growth get closer together and align closer than they have in the past, especially given all the wild comps we've had over the last five years.

Kind of looking ahead, net sales growth in the double digit, active customer growth in the double digit. Variable costs are largely variable.

Some leverage on marketing as we exit this investment year. Then G&A is where you see the real leverage as we comp the growth initiatives, and if we're growing top line double digit and G&A mid-single digits.

Then the other big piece, the big driver there is gross margin. If you back out the tariff refunds, year-to-date we're at 53.8%, and our target is to be at 55%.

You get a solid point or more out of gross margin, and then the leverage on G&A gets you up to that profit growth that we'd expect to see in 2027 and beyond.

Thanks very much. Best regards.

Thanks, Oliver.

Hi, this is Jon Elias on for Simeon Siegel. Thanks for taking our questions.

You noted lower full-price sales mix this quarter. Just curious, are there any product categories you would call out there?

Then, it's great to see the buyback activity in 2Q. How should we think about capital allocation for the rest of the year?

On the full-price mix, it is a little bit lower year-over-year. We had a really phenomenal full-price mix last year, it has come down off of that, but still starts with an 8, still very healthy, and that's been increasing at a good rate over time, we feel good about that mix.

On capital allocation, we feel really good about our position, and that we're able to not only buy back shares, but invest in these growth initiatives at the same time and pursue opportunistic M&A, it's a really great place to be. No comment on the balance of the year in terms of M&A or buybacks, but there is continued growth investments in the back half of the year that's reflected in our guidance.

Thank you very much. Have a good one.

Thank you for joining us once again. We're very proud of another quarter, particularly the healthy top line and exiting with an even healthier top line.

While we have many investments that we've discussed, many of them are not contributing in meaningful ways yet, we're very excited for the results in future quarters and years ahead. Thanks, guys.