Revolve Group, Inc. 10-K

Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page No. REVOLVE GROUP, INC. Reports of Independent Registered Public Accounting Firm 78 Consolidated Balance Sheets 82 Consolidated Statements of Income 83 Consolidated Statements of Comprehensive Income 84 Consolidated Statements of Changes in Members’/Stockholders’ Equity 85 Consolidated Statements of Cash Flows 86 Notes to Consolidated Financial Statements 87 77 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors Revolve Group, Inc.: Opinion on the Consolidated Financial Statements We have audited the accompanying consolidated balance sheets of Revolve Group, Inc. and subsidiaries (the Company) as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, changes in members’/stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 28, 2022 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. Change in Accounting Principle As discussed in Note 2 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2021 due to the adoption of Accounting Standards Update No. 2016-02, Leases (Topic 842) . Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 78 Sales return reserve As discussed in Note 2 to the consolidated financial statements, the Company has recorded a sales return reserve as of December 31, 2021 of $49.3 million. The Company establishes a reserve for merchandise returns, based on historical experience, merchandise mix and expected future returns, which is recorded as a reduction of sales. We identified the evaluation of the sales return reserve as a critical audit matter. There was auditor judgment required to evaluate the impact of recent sales return experience that could impact the rate of historical experience used to estimate the sales return reserve. The following are the primary procedures we performed to address this critical audit matter. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s process for estimating the sales return reserve. This included controls related to the development of estimated return rates and the Company’s lookback analysis based on actual returns received subsequent to the period end. We evaluated expected future returns by assessing the timing of the number of days between actual sales dates and actual return dates for the year ended December 31, 2021. In addition, we analyzed actual returns received by the Company after December 31, 2021 to evaluate management’s estimate as of December 31, 2021. We assessed the Company’s ability to estimate by comparing the historically recorded sales return reserve to actual subsequent period returns. /s/ KPMG LLP We have served as the Company’s auditor since 2014. Los Angeles, California February 28, 2022 79 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and Board of Directors Revolve Group, Inc.: Opinion on Internal Control Over Financial Reporting We have audited Revolve Group, Inc. and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of income, comprehensive income, changes in members’/stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2021, and the related notes (collectively, the consolidated financial statements), and our report dated February 28, 2022 expressed an unqualified opinion on those consolidated financial statements. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. 80 /s/ KPMG LLP Los Angeles, California February 28, 2022 81 REVOLVE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED B ALANCE SHEETS (In thousands, except share and per share data) December 31, 2021 2020 Assets Current assets: Cash and cash equivalents $ 218,455 $ 146,013 Accounts receivable, net 4,639 4,621 Inventory 171,259 95,272 Income taxes receivable 3,375 10,689 Prepaid expenses and other current assets 42,114 20,330 Total current assets 439,842 276,925 Property and equipment (net of accumulated depreciation of $ 9,347 and $ 14,652 as of December 31, 2021 and December 31, 2020, respectively) 8,946 11,211 Right-of-use lease assets 6,566 — Intangible assets, net 1,212 1,260 Goodwill 2,042 2,042 Other assets 2,746 500 Deferred income taxes, net 19,059 13,814 Total assets $ 480,413 $ 305,752 Liabilities and Stockholders' Equity Current liabilities: Accounts payable $ 54,345 $ 39,337 Income taxes payable — 195 Accrued expenses 33,899 24,733 Returns reserve 49,296 25,602 Current lease liabilities 3,766 — Other current liabilities 18,916 15,821 Total current liabilities 160,222 105,688 Non-current lease liabilities 3,177 — Total liabilities 163,399 105,688 Stockholders' equity: Class A common stock, $ 0.001 par value; 1,000,000,000 shares authorized as of December 31, 2021 and December 31, 2020; 40,276,417 and 32,856,611 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively. 40 33 Class B common stock, $ 0.001 par value; 125,000,000 shares authorized as of December 31, 2021 and December 31, 2020; 32,956,904 and 38,540,095 shares issued and outstanding as of December 31, 2021 and December 31, 2020, respectively. 33 38 Additional paid-in capital 103,590 86,040 Retained earnings 213,351 113,953 Total stockholders' equity 317,014 200,064 Total liabilities and stockholders’ equity $ 480,413 $ 305,752 The accompanying notes are an integral part of these consolidated financial statements. 82 REVOLVE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STAT EMENTS OF INCOME (In thousands, except per share data) Year Ended December 31, 2021 2020 2019 Net sales $ 891,390 $ 580,649 $ 600,993 Cost of sales 401,567 275,369 279,040 Gross profit 489,823 305,280 321,953 Operating expenses: Fulfillment 21,322 16,471 19,413 Selling and distribution 133,506 80,496 87,706 Marketing 140,398 76,371 89,141 General and administrative 89,306 70,876 77,595 Total operating expenses 384,532 244,214 273,855 Income from operations 105,291 61,066 48,098 Other expense, net 563 994 931 Income before income taxes 104,728 60,072 47,167 Provision for income taxes 4,888 3,282 11,500 Net income 99,840 56,790 35,667 Less: Repurchase of Class B common stock upon corporate conversion — — ( 40,816 ) Net income (loss) attributable to common stockholders $ 99,840 $ 56,790 $ ( 5,149 ) Earnings (net loss) per share of Class A and Class B common stock: Basic $ 1.38 $ 0.81 $ ( 0.09 ) Diluted $ 1.34 $ 0.79 $ ( 0.09 ) Weighted average number of shares of Class A and Class B common stock outstanding: Basic 72,513 69,773 7,719 Diluted 74,547 72,058 7,719 The accompanying notes are an integral part of these consolidated financial statements. 83 REVOLVE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS O F COMPREHENSIVE INCOME (In thousands) Year Ended December 31, 2021 2020 2019 Net income $ 99,840 $ 56,790 $ 35,667 Other comprehensive (loss) income: Cumulative translation adjustment ( 442 ) 486 268 Total other comprehensive (loss) income ( 442 ) 486 268 Total comprehensive income $ 99,398 $ 57,276 $ 35,935 The accompanying notes are an integral part of these consolidated financial statements. 84 REVOLVE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS'/STOCKHOLDERS’ EQUITY (In thousands, except share data) Class T Preferred Units Class A Common Units Common Stock Additional Paid-in Accumulated Members' Equity/ Retained Total Members'/ Stockholders' Number Amount Number Amount Number Amount Capital Earnings Equity Balance as of December 31, 2018 23,551,834 $ 15,000 41,936,219 $ 3,548 — $ — $ — $ 61,270 $ 79,818 Corporate conversion ( 23,551,834 ) ( 15,000 ) ( 41,936,219 ) ( 3,548 ) 67,889,013 68 18,480 — — Repurchase of Class B common stock — — — — ( 2,400,960 ) ( 2 ) — ( 40,814 ) ( 40,816 ) Issuance of Class A common stock upon initial public offering, net of offering costs — — — — 3,382,352 3 52,719 — 52,722 Issuance of Class A common stock from exercise of stock options — — — — 208,578 — 752 — 752 Equity-based compensation — — — — — — 2,067 — 2,067 Cumulative effect of adoption of ASC 606 — — — — — — — 286 286 Cumulative translation adjustment — — — — — — — 268 268 Net income — — — — — — — 35,667 35,667 Balance as of December 31, 2019 — — — — 69,078,983 69 74,018 56,677 130,764 Issuance of Class A common stock from exercise of stock options and vesting of restricted stock units — — — — 2,317,723 2 8,699 — 8,701 Equity-based compensation — — — — — — 3,364 — 3,364 Cumulative translation adjustment — — — — — — — 486 486 Other — — — — — — ( 41 ) — ( 41 ) Net income — — — — — — — 56,790 56,790 Balance as of December 31, 2020 — — — — 71,396,706 $ 71 $ 86,040 $ 113,953 $ 200,064 Issuance of Class A common stock from exercise of stock options and vesting of restricted stock units — — — — 1,836,615 2 12,764 — 12,766 Equity-based compensation — — — — — — 4,786 — 4,786 Cumulative translation adjustment — — — — — — — ( 442 ) ( 442 ) Net income — — — — — — — 99,840 99,840 Balance as of December 31, 2021 — $ — — $ — 73,233,321 $ 73 $ 103,590 $ 213,351 $ 317,014 The accompanying notes are an integral part of these consolidated financial statements. 85 REVOLVE GROUP, INC. AND SUBSIDIARIES CONSOLIDATED STATEM ENTS OF CASH FLOWS (In thousands) Year Ended December 31, 2021 2020 2019 Operating activities: Net income $ 99,840 $ 56,790 $ 35,667 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 4,508 4,827 3,952 Equity-based compensation 4,786 3,364 2,067 Deferred income taxes, net ( 5,245 ) 1,476 ( 1,613 ) Changes in operating assets and liabilities: Accounts receivable ( 18 ) 130 586 Inventories ( 75,987 ) 8,985 ( 15,623 ) Income taxes receivable 7,314 ( 9,928 ) ( 761 ) Prepaid expenses and other current assets ( 22,221 ) 3,825 1,662 Other assets ( 2,246 ) 142 89 Accounts payable 15,008 9,524 9,594 Income taxes payable ( 195 ) ( 275 ) ( 447 ) Accrued expenses 9,166 5,334 1,001 Returns reserve 23,694 ( 9,502 ) 5,920 Right-of-use lease assets and current and non-current lease liabilities ( 448 ) — — Other current liabilities 4,357 ( 919 ) 3,963 Net cash provided by operating activities 62,313 73,773 46,057 Investing activities: Purchases of property and equipment ( 2,195 ) ( 2,324 ) ( 12,455 ) Net cash used in investing activities ( 2,195 ) ( 2,324 ) ( 12,455 ) Financing activities: Proceeds from initial public offering, net of underwriting discounts paid — — 57,077 Repurchase of Class B common stock upon corporate conversion — — ( 40,816 ) Proceeds from borrowings on line of credit — 30,000 — Repayment of borrowings on line of credit — ( 30,000 ) — Payment of deferred offering costs — ( 41 ) ( 1,834 ) Proceeds from the exercise of stock options, net 12,766 8,701 752 Net cash provided by financing activities 12,766 8,660 15,179 Effect of exchange rate changes on cash and cash equivalents ( 442 ) 486 268 Net increase in cash and cash equivalents 72,442 80,595 49,049 Cash and cash equivalents, beginning of year 146,013 65,418 16,369 Cash and cash equivalents, end of year $ 218,455 $ 146,013 $ 65,418 Supplemental disclosure of cash flow information: Cash paid during the period for: Interest $ — $ 342 $ — Income taxes, net of refund $ 3,014 $ 11,950 $ 14,324 The accompanying notes are an integral part of these consolidated financial statements. 86 REVOLVE GROUP, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Description of Business Revolve Group, Inc., or REVOLVE, is an online fashion retailer for Millennial and Generation Z consumers. Through our websites and mobile apps we deliver an aspirational customer experience from a vast, yet curated offering. Our dynamic platform connects a deeply engaged community of consumers, global fashion influencers, and emerging, established and owned brands. We are headquartered in Los Angeles County, California. Note 2. Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or GAAP, and applicable rules and regulations of the Securities and Exchange Commission. The accompanying consolidated financial statements include the balances of Revolve Group, Inc. and all of its subsidiaries. All intercompany transactions and balances have been eliminated in consolidation. These reclassifications had no effect on the reported results of operations. Our fiscal year ends on December 31 of each year. Impact of COVID-19 on Our Business The COVID-19 pandemic had a material adverse impact on our business operations and operating results for 2020. In particular, as a result of social distancing and stay-at-home orders around the world that commenced in March 2020, demand for our largest product categories that are focused on social occasions had been significantly negatively impacted. Furthermore, during 2020 we were unable to host large-scale, in-person events that are key to driving awareness, traffic and new customers. As our net sales, business operations and operating results improved in mid-2020, we began to sequentially increase our inventory purchases and incur certain operating expenses to support the improving trends in consumer demand. Our net sales, business operations and operating results continued to improve throughout 2021 due to increased demand as a result of our ability to acquire new customers and engage with our existing customers, and among other things, the easing of stay-at-home orders and other restrictions in certain states and countries, U.S. government stimulus payments and the accelerated rollout of vaccinations in the United States and some of our other key markets. With the improving trends, we continued to invest in inventory to support the consumer demand, increased our investment in headcount and cautiously increased the frequency and scale of in-person marketing activations. While demand for our products improved, the extent of this increased demand in the future remains uncertain. In particular, the recent rise of cases primarily as a result of COVID-19 variants, has resulted in restrictions being reinstated in certain cities and states in the United States as well as certain key markets around the world. We believe that our existing cash and cash e quivalents and cash flows from operations will be sufficient to meet our anticipated cash needs for at least the next 12 months. However, our liquidity assumptions may prove to be incorrect given the continued uncertainty of the COVID-19 pandemic, and we could exhaust our available financial resources sooner than we currently expect. Reverse Split On May 24, 2019, we effected a one-for-22.31 reverse split of all of our issued and outstanding Class T units and Class A units. All figures have been presented on the basis of the reverse split wherever applicable for all the periods presented in these consolidated financial statements. Corporate Conversion Prior to our initial public offering, or IPO, we operated as a Delaware limited liability company under the name Revolve Group, LLC. In connection with the IPO, Revolve Group, LLC converted into a Delaware corporation and 87 changed its name to Revolve Group, Inc. so that the top-tier entity in our corporate structure was a corporation rather than a limited liability company, which we refer to as the Corporate Conversion. In conjunction with the Corporate Conversion, all of the outstanding Class T and Class A units of Revolve Group, LLC were converted into an aggregate of 67,889,013 shares of our Class B common stock. The holders of Class T units received an aggregate of 2,400,960 shares, representing the total preference amount for the Class T units. The remaining 65,488,053 shares of our Class B common stock were allocated on a pro rata basis to the Class T and Class A unitholders based on the number of units held by each holder. In connection with the Corporate Conversion, Revolve Group, Inc. holds all property and assets of Revolve Group, LLC and assumed all of the debts and obligations of Revolve Group, LLC. The members of the board of managers and the officers of Revolve Group, LLC became the members of the board of directors and the officers of Revolve Group, Inc. Initial Public Offering On June 7, 2019, we completed an IPO, in which we issued and sold 2,941,176 shares of our Class A common stock at a public offering price of $ 18.00 per share. We received approximately $ 45.8 million in net proceeds after deducting $ 3.3 million of underwriting discounts and approximately $ 3.8 million in offering costs. Upon the closing of the IPO, we used $ 40.8 million of the net proceeds from the offering to repurchase an aggregate of 2,400,960 shares of Class B common stock held by TSG6 L.P. and certain of its affiliates, or TSG, and Capretto, LLC. In June 2019, we issued and sold an additional 441,176 shares of Class A common stock at a price of $ 18.00 per share following the underwriters’ exercise of their option to purchase additional shares and received proceeds of $ 7.5 million, net of underwriting discounts and commissions of $ 0.5 million. In connection with the IPO, 10,147,059 Class B shares were converted into Class A shares by the selling stockholders. Use of Estimates The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant items subject to such estimates and assumptions include: the allowance for sales returns, the valuation of deferred tax assets, inventory, equity‑based compensation, valuation of goodwill, reserves for income tax uncertainties and other contingencies, and breakage of store credit and gift cards. Deferred Offering Costs Deferred offering costs of $ 3.8 million, which consisted of direct incremental legal, consulting, accounting fees and other direct costs relating to the IPO, were capitalized and offset against proceeds upon the consummation of the IPO, which became effective on June 6, 2019. In the third and fourth quarters of 2019, we paid an additional $ 0.5 million in offering costs. Net Sales On January 1, 2019 we adopted Accounting Standard Update, or ASU, No. 2014-09, Revenue from Contracts with Customers (Topic 606) , and its subsequent updates, which replaces most existing revenue recognition guidance under Accounting Standards Codification, or ASC, 605. It provides principles for recognizing revenue for the transfer of promised goods or services to customers with the consideration to which the entity expects to be entitled in exchange for those goods or services. Upon the adoption of ASC 606 under the modified retrospective approach, we recorded a net increase of $ 0.3 million to beginning retained earnings as of January 1, 2019 resulting primarily from the recognition of breakage revenue from estimated unredeemed store credit and gift cards over the expected customer redemption period. In addition, we prospectively included expected merchandise to be returned, net of related costs, within prepaid expenses and other current assets rather than including it in our inventory balance within our consolidated balance sheets. Results for reporting periods beginning January 1, 2019 and thereafter are presented 88 under ASC 606, while prior period amounts have not been adjusted and continue to be reported in accordance with ASC 605. Revenue is primarily derived from the sale of apparel merchandise through our sites and, when applicable, shipping revenue. In accordance with ASC 606, we recognize revenue through the following steps: (1) identification of the contract, or contracts, with the customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, we satisfy a performance obligation. A contract is created with our customer at the time the order is placed by the customer, which creates a performance obligation to deliver the product to the customer. We recognize revenue for the performance obligation at the time control of the merchandise passes to the customer, which is at the time of shipment. In addition, we have elected to treat shipping and handling as fulfillment activities and not a separate performance obligation. In March 2020 we launched the REVOLVE Loyalty Club within the REVOLVE segment and in April 2021 we expanded the program to include the FWRD segment. Eligible customers who enroll in the program will generally earn points for every dollar spent and will automatically receive a $ 20 reward once they earn 2,000 points. 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. Rewards generally expire 90 days after they are issued and unconverted points generally expire if a customer fails to engage in any activity that generates points for a period of one year or if their participation in the program is otherwise terminated. 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 may be exchanged up to 60 days from the original purchase date. We modify our policy during the holiday season to extend the return and exchange period. In addition, to provide our customers with more flexibility to return or exchange during this time of increased social distancing as a result of the COVID-19 pandemic, merchandise returns for purchases made starting in March 2020 may be accepted for full refund if returned within 60 days of the original purchase date and may be exchanged up to 90 days from the original purchase date. At the time of sale, we establish a reserve for merchandise returns, based on historical experience, merchandise mix and expected future returns, which is recorded as a reduction of sales. Accordingly, cost of sales is also reduced and an offsetting asset is recorded within prepaid expenses and other current assets for expected merchandise to be returned. The following table presents a rollforward of our sales return reserve for the years ended December 31, 2021, 2020, and 2019 (in thousands): December 31, 2021 2020 2019 Beginning balance $ 25,602 $ 35,104 $ 29,184 Returns ( 870,445 ) ( 489,712 ) ( 691,953 ) Provisions 894,139 480,210 697,873 Ending balance $ 49,296 $ 25,602 $ 35,104 We may also issue store credit in lieu of cash refunds or exchanges and sell gift cards without expiration dates to our customers. Store credits issued and proceeds from the issuance of gift cards are recorded as deferred revenue and recognized as revenue when the store credit or gift cards are redeemed or upon inclusion in our store credit and gift card breakage estimates. Revenue recognized in net sales on breakage on store credit and gift cards was $ 1.2 million, $ 1.3 million and $ 2.4 million for the years ended December 31, 2021, 2020 and 2019, 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 currently collect sales taxes in all states that have adopted laws imposing sales tax collection obligations on out-of-state retailers and are subject to audits by state governments of sales tax collection obligations on out-of-state retailers in jurisdictions where we do not currently collect sales taxes, whether for prior years or prospectively. No significant interest or penalties related to sales taxes are recognized in the accompanying consolidated financial statements. 89 We have exposure to losses from fraudulent credit card charges. We record losses when incurred related to these fraudulent charges as amounts have historically been insignificant. See Note 11, Segment Information , for disaggregation of revenue by reportable segment, geographic area and product category. Cost of Sales Cost of sales consists of the purchase price of merchandise sold to customers and includes import duties, net of drawback claims, and other taxes, inbound freight costs, receiving costs, defective merchandise returned from customers, inventory write-offs, and other miscellaneous shrinkage . Fulfillment Fulfillment expenses primarily consist of those costs incurred in operating and staffing the fulfillment center, including costs attributable to inspecting and warehousing inventories, picking, packaging and preparing customer orders for shipment. Fulfillment expenses also include the cost of warehousing facilities. Selling and Distribution Selling and distribution expenses consist of customer service, shipping and other transportation costs incurred delivering merchandise to customers and customers returning merchandise, merchant processing fees, and shipping supplies. The amount of shipping and handling costs included in selling and distribution is $ 84.8 million, $ 52.3 million, and $ 57.0 million for the years ended December 31, 2021, 2020, and 2019, respectively. Marketing Marketing expenses are expensed as incurred and consist primarily of targeted online performance marketing costs, such as paid search/product listing ads, paid social, retargeting, affiliate marketing, search engine optimization, personalized email marketing and mobile “push” communications through our app. Marketing expenses also include brand marketing investments, including events, fees paid to influencers, and other forms of online and offline marketing. Marketing expenses are primarily related to growing and retaining the customer base. General and Administrative General and administrative expenses consist primarily of payroll and related benefit costs and equity‑based compensation expense for employees involved in general corporate functions including merchandising, marketing, studio and technology, as well as costs associated with the use by these functions of facilities and equipment, including depreciation, rent and other occupancy expenses. Earnings (Net Loss) per Share Basic earnings (net loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period. Diluted earnings (net loss) per share represents net income (loss) divided by the weighted-average number of common shares outstanding, inclusive of the effect of dilutive stock options and restricted stock units, or RSUs. See Note 10, Earnings (Net Loss) per Share , for further information. Cash and Cash Equivalents We maintain the majority of our cash and cash equivalents in money market funds and checking accounts with major financial institutions within the United States. Deposits in these institutions may exceed federally insured limits. Accounts Receivable, Net Accounts receivable are composed primarily of amounts due from financial institutions related to credit card sales. We do not maintain an allowance for doubtful accounts related to these receivables as payment is typically received in full within a few business days after the sale. We carry the remaining portion of accounts receivable at invoiced amounts less allowances for doubtful accounts and other deductions. Allowance for doubtful accounts was 90 insignificant at both December 31, 2021 and 2020. Management evaluates the ability to collect accounts receivable based on a combination of factors. An allowance for doubtful accounts is maintained based on the length of time receivables are past due and the status of a customer’s financial position. Receivables are written off in the period deemed uncollectible after collection efforts have proven unsuccessful. We do not accrue interest on our trade receivables. Inventory Inventories are stated at the lower of cost and net realizable value. Cost is determined using the specific identification method. Cost of inventory includes import duties and other taxes and transport and handling costs. We write down inventory when it appears that the carrying cost of the inventory may not be recovered through subsequent sale of the inventory. We analyze the quantity of inventory on hand, the quantity sold in the past year, the anticipated sales volume, the expected sales price and the cost of making the sale when evaluating the value of our inventory. If the sales volume or sales price of specific products declines, additional write-downs may be required. Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist primarily of expected merchandise returns net of related costs, advanced payments on inventory to be delivered from vendors, prepaid packaging, and prepaid insurance. Property and Equipment, Net Property and equipment are stated at cost net of accumulated depreciation and amortization. Repair and maintenance costs are expensed as incurred. Depreciation is calculated on the straight‑line method over the estimated useful lives of the assets. The estimated useful lives of equipment and fixtures, and leasehold improvements range from three to five years or if shorter, the remaining lease term for leasehold improvements . The estimated useful life of our capitalized software is three years . Leases We lease office and warehouse space and equipment used in connection with our operations under various operating leases, some of which provide for rental payments on a graduated basis, rent holidays and other incentives. As of January 1, 2021, upon the adoption of ASU No. 2016-02, Leases (Topic 842) as noted below, operating leases with a term greater than one year are recorded on the consolidated balance sheets as right-of-use lease assets and lease liabilities at the commencement date. These balances are initially recorded at the present value of future minimum lease payments calculated using our incremental borrowing rate and expected lease term, which includes options to extend or terminate the lease which we are reasonably certain to exercise and adjusted for items such as initial direct costs paid or incentives received. A right-of-use lease asset and lease liability are not recognized for leases with an initial term of 12 months or less, and the lease expense is recognized on a straight-line basis over the lease term. We also elected to combine lease and non-lease components on all new or modified leases into a single lease component. Impairment of Long-Lived Assets We review long‑lived assets for possible impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable. This determination includes evaluation of factors such as future asset utilization and future net undiscounted cash flows expected to result from the use of the assets. If circumstances require a long‑lived asset or asset group be tested for possible impairment, we first compare undiscounted cash flows expected to be generated by that asset group to its carrying amount. If the carrying amount of the long‑lived asset or asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying amount exceeds its fair value. No impairment losses were recognized during the years ended December 31, 2021, 2020, and 2019. 91 Goodwill Goodwill represents the excess of acquisition cost over the fair value of the related net assets acquired and is not subject to amortization. As of December 31, 2021 and 2020, we had goodwill of $ 2.0 million. We review our goodwill annually for impairment or when circumstances indicate its carrying value may not be recoverable. We perform this evaluation at the reporting unit level, comprised of the principle business units within our REVOLVE segment. In order to test for goodwill impairment, we compare the fair value of the reporting unit to its carrying value, including goodwill. If the fair value of the reporting unit is less than its carrying amount, goodwill is written down for the amount by which the carrying amount exceeds the reporting unit's fair value. However, the loss recognized cannot exceed the carrying amount of goodwill. We perform our annual impairment review of goodwill at December 31, and when a triggering event occurs between annual impairment tests. No goodwill impairment was recorded for the years ended December 31, 2021, 2020, and 2019. Income Taxes Income taxes are accounted for under the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and are recorded net on the face of the balance sheet. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. We recognize the effect of income tax positions only if those positions are more-likely than-not of being sustained. Recognized income tax positions are measured at the largest amount that is greater than 50 % likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. Deferred tax assets are recognized to the extent it is believed that these assets are more likely than not to be realized. In assessing the realizability of deferred tax assets, management considers whether it is more-likely than-not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax‑planning strategies in making this assessment. Based upon the level of historical taxable income and projections for future taxable income over the periods in which the deferred tax assets are deductible, management believes it is more‑likely than‑not that we will realize the benefits of these deductible differences, net of the valuation allowance. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the carryforward period are reduced. Equity-based Compensation We measure equity-based compensation expense associated with the awards granted based on their estimated fair values at the grant date. For awards with service conditions only, equity-based compensation expense is recognized over the requisite service period using the straight-line method. For awards with service and performance conditions, we recognize the compensation expense if and when we conclude that it is probable that the performance condition will be achieved. The Company reassesses the probability of achieving the performance condition at each reporting date. Forfeitures are recorded as they occur. See Note 9, Equity-based Compensation , for additional details. Employee Benefit Plan We sponsor a qualified 401(k) defined contribution plan covering eligible employees. Participants may contribute a percentage of their pretax earnings annually, subject to limitations imposed by the Internal Revenue Service. We have the ability to make discretionary contributions to the 401(k) plan but have not done so to date. 92 Commitments and Contingencies Liabilities for loss contingencies arising from claims, assessments, litigation, fines, and penalties and other sources are recorded when it is probable that a liability has been incurred and the amount can be reasonably estimated. Legal costs incurred in connection with loss contingencies are expensed as incurred. Fair Value Measurements We utilize valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. We determine fair value based on assumptions that market participants would use in pricing an asset or liability in the principal or most advantageous market. The carrying amounts for our cash and cash equivalents, accounts receivable, accounts payable, line of credit and accrued expenses approximate fair value due to their short-term maturities. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels: • Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities. • Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full-term of the asset or liability. • Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date. We consider all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Our cash equivalents are comprised of money market funds, which are valued based on Level 1 inputs consisting of quoted prices in active markets. Our cash equivalents as of December 31, 2021 and 2020 were $ 172.9 million and $ 117.9 million, respectively. Comprehensive Income Comprehensive income consists of net income and foreign currency translation adjustments. Related Party Transactions TSG is a related party of TSG6 L.P., a former investor in our Company. We incurred $ 0.5 million of management fees from TSG for the year ended December 31, 2019. There were no management fees incurred from TSG for the years ended December 31, 2021 and 2020. Upon the closing of our IPO, our management agreement with TSG was terminated. There were no amounts owed to TSG as of December 31, 2021 and 2020. As of December 31, 2020, TSG6 L.P. was no longer an investor in our Company. Certain Risks and Concentrations We are subject to certain risks, including dependence on third‑party technology providers and hosting services for our website servers, exposure to risks associated with online commerce security, credit card fraud, as well as the interpretation of state and local laws and regulations in regards to the collection and remittance of sales and use taxes. We do not have significant vendor concentrations. Recent Accounting Pronouncements On December 31, 2021, we lost an emerging growth company status due to our becoming a "large accelerated filer" as defined in Rule 12b-2 of the Securities Exchange Act of 1934, as amended, which required us to significantly accelerate our compliance efforts to, for example, engage our independent registered public accounting firm to attest to the effectiveness of our internal controls as required by Section 404(b) of the Sarbanes-Oxley Act in our Annual Report on Form 10-K. Furthermore, as an emerging growth company, we had elected under the JOBS Act to delay adoption of new or revised accounting pronouncements applicable to public companies until such pronouncements are made applicable 93 to private companies. Due to our ceasing to be an emerging growth company on December 31, 2021, we are no longer eligible to delay adoption of such new or revised accounting pronouncements applicable to public companies. Recently Adopted Accounting Pronouncements In February 2016, the Financial Accounting Standards Board, or FASB issued ASU No. 2016-02, Leases (Topic 842) . Under this ASU, a lessee is generally required to recognize the lessee’s rights and obligations resulting from leases on the balance sheet by recording a right-of-use asset and a lease liability. The new standard requires lessees to classify leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on a straight-line basis over the term of the lease. In November 2019, the FASB issued ASU No. 2019-10 extending the effective date of this new lease standard by one year. In June 2020, the FASB issued ASU No. 2020-05, further extending the effective date by one year making it effective for emerging growth companies for annual periods beginning after December 15, 2021 and interim periods within fiscal years beginning after December 15, 2022, with early adoption permitted. As we lost our emerging growth company status at the end of fiscal year ended December 31, 2021, we adopted ASU 2016-02 during the fourth quarter of 2021 using the modified retrospective adoption method utilizing the simplified transition option available in ASC 842, which allows entities to continue to apply the legacy guidance in ASC 840, including its disclosure requirements, in the comparative periods presented in the year of adoption. The effective date of adoption was January 1, 2021 and as part of our adoption we retrospectively adjusted financial statements for the first three quarters of 2021. As of the effective date of adoption, we recognized a r ight-of-use lease asset of $ 9.7 million which was adjusted for $ 1.3 million previously recorded as deferred rent and $ 0.4 million previously recorded as prepaid rent and recorded $ 4.5 million in current operating lease liabilities and $ 5.9 million in operating lease liabilities, net of current portion. In addition, we have chosen to apply the transition package of three practical expedients which allow companies not to reassess whether agreements contain leases, the classification of leases, and the capitalization of initial direct costs. The Company did not elect the practical expedient to use hindsight when determining the lease term. As a result of adopting ASU 2016-02, the impact to our consolidated balance sheets as of March 31, 2021, June 30, 2021 and September 30, 2021 was as follows (in thousands): March 31, 2021 As reported Impact due to ASC 842 As adjusted Assets: Prepaid expenses and other current assets $ 26,145 $ ( 439 ) $ 25,706 Total current assets 331,480 ( 439 ) 331,041 Right-of-use lease assets — 9,868 9,868 Total assets 359,817 9,429 369,246 Liabilities and stockholders' equity: Current lease liabilities — 4,532 4,532 Other current liabilities 18,366 ( 1,042 ) 17,324 Total current liabilities 132,104 3,490 135,594 Non-current lease liabilities — 5,939 5,939 Total liabilities 132,104 9,429 141,533 Total liabilities and stockholders’ equity 359,817 9,429 369,246 94 June 30, 2021 As reported Impact due to ASC 842 As adjusted Assets: Prepaid expenses and other current assets $ 31,637 $ ( 443 ) $ 31,194 Total current assets 389,621 ( 443 ) 389,178 Right-of-use lease assets — 8,771 8,771 Total assets 419,666 8,328 427,994 Liabilities and stockholders' equity: Current lease liabilities — 4,163 4,163 Other current liabilities 19,634 ( 862 ) 18,772 Total current liabilities 155,218 3,301 158,519 Non-current lease liabilities — 5,027 5,027 Total liabilities 155,218 8,328 163,546 Total liabilities and stockholders’ equity 419,666 8,328 427,994 September 30, 2021 As reported Impact due to ASC 842 As adjusted Assets: Prepaid expenses and other current assets $ 39,315 $ ( 401 ) $ 38,914 Total current assets 419,846 ( 401 ) 419,445 Right-of-use lease assets — 7,672 7,672 Total assets 449,311 7,271 456,582 Liabilities and stockholders' equity: Current lease liabilities — 3,917 3,917 Other current liabilities 21,688 ( 754 ) 20,934 Total current liabilities 166,176 3,163 169,339 Non-current lease liabilities — 4,108 4,108 Total liabilities 166,176 7,271 173,447 Total liabilities and stockholders’ equity 449,311 7,271 456,582 As a result of adopting ASU 2016-02, the impact to our consolidated statements of cash flows for the three months ended March 31, 2021, six months ended June 30, 2021 and nine months ended September 30, 2021, was as follows (in thousands): Three Months Ended March 31, 2021 As reported Impact due to ASC 842 As adjusted Prepaid expenses and other current assets $ ( 5,815 ) $ 2 $ ( 5,813 ) Right-of-use lease assets and current and non-current lease liabilities — ( 222 ) ( 222 ) Other current liabilities 2,545 220 2,765 Six Months Ended June 30, 2021 As reported Impact due to ASC 842 As adjusted Prepaid expenses and other current assets $ ( 11,307 ) $ 6 $ ( 11,301 ) Right-of-use lease assets and current and non-current lease liabilities — ( 406 ) ( 406 ) Other current liabilities 3,813 400 4,213 95 Nine Months Ended September 30, 2021 As reported Impact due to ASC 842 As adjusted Prepaid expenses and other current assets $ ( 18,985 ) $ ( 36 ) $ ( 19,021 ) Right-of-use lease assets and current and non-current lease liabilities — ( 472 ) ( 472 ) Other current liabilities 5,867 508 6,375 As a result of adopting ASU 2016-02, there was no impact to our consolidated statements of income. In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments—Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments . The standard requires entities to utilize a new impairment model, known as the current expected credit loss model which includes historical experience, current conditions, and reasonable and supportable forecasts. Under the new guidance, an entity recognizes an allowance for estimated credit losses upon recognition of the financial instrument. The new guidance also changes the impairment model for available-for-sale debt securities, requiring the use of an allowance to record estimated credit losses and subsequent recoveries. As we lost our emerging growth company status at the end of fiscal year ended December 31, 2021, we adopted ASU 2016-13 during the fourth quarter of 2021. The effective date of adoption was January 1, 2021 . This standard did not have a have a material impact on our consolidated financial statements and related disclosures. In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment , which simplifies the accounting for goodwill impairment by removing step two from the goodwill impairment test. Under this new guidance, if the carrying amount of a reporting unit exceeds its estimated fair value, an impairment charge shall be recognized in an amount equal to that excess, limited to the total amount of goodwill allocated to that reporting unit. The update also eliminates the requirement for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment. As we lost our emerging growth company status at the end of fiscal year ended December 31, 2021, we adopted ASU 2017-04 during the fourth quarter of 2021. The effective date of adoption was January 1, 2021 . This standard did not have a have a material impact on our consolidated financial statements and related disclosures. In December 2019, the FASB issued ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes , which is intended to simplify various aspects related to the accounting for income taxes. As we lost our emerging growth company status at the end of fiscal year ended December 31, 2021, we adopted ASU 2019-12 during the fourth quarter of 2021. The effective date of adoption was January 1, 2021 . This standard did not have a have a material impact on our consolidated financial statements and related disclosures. Note 3. Goodwill and Other Intangible Assets, Net The carrying value of goodwill as of December 31, 2021 and 2020, was $ 2.0 million. No goodwill impairment was recorded for the years ended December 31, 2021, 2020 and 2019. The gross amounts and accumulated amortization of our acquired identifiable intangible assets with finite useful lives as of December 31, 2021 and 2020, included in intangible assets, net in the accompanying consolidated balance sheets, are as follows (in thousands): December 31, Useful life 2021 2020 Customer relationships 3 – 6 years $ 381 $ 381 Trademarks (1) 4 – 10 years 3,241 3,148 Total intangible assets 3,622 3,529 Less accumulated amortization ( 2,410 ) ( 2,269 ) Total intangible assets, net $ 1,212 $ 1,260 (1) Includes $ 0.6 million and $ 0.7 million of intangible assets not subject to amortization as of December 31, 2021 and 2020, respectively. 96 Our amortization expense for acquired identifiable intangible assets with finite useful lives was $ 0.1 million, $ 0.3 million, and 0.3 million for the years ended December 31, 2021, 2020, and 2019, respectively. Future estimated amortization expense for acquired identifiable intangible assets is as follows (in thousands): Amortization Expense Year ending December 31: 2022 $ 121 2023 117 2024 106 2025 96 2026 79 Thereafter 170 Total amortization expense $ 689 Note 4. Property and Equipment, Net Property and equipment, net is summarized as follows (in thousands): December 31, 2021 2020 Office and warehouse equipment and fixtures $ 10,873 $ 14,195 Computer equipment and capitalized software 5,818 7,839 Leasehold improvements 1,217 3,432 Other 385 397 Total property and equipment 18,293 25,863 Less accumulated depreciation and amortization ( 9,347 ) ( 14,652 ) Total property and equipment, net $ 8,946 $ 11,211 Total depreciation and amortization expense for the years ended December 31, 2021, 2020 and 2019 was $ 4.4 million, $ 4.5 million, and $ 3.6 million, respectively. For the years ended December 31, 2021, 2020 and 2019, $ 2.4 million, $ 2.4 million, and $ 2.2 million, respectively, was recorded in general and administrative expense and $ 2.0 million, $ 2.1 million, and $ 1.4 million, respectively, was recorded in fulfillment expense in the accompanying consolidated statements of income. 97 Note 5. Leases During the fourth quarter of 2021 we adopted ASU 2016-02. The effective date of adoption was January 1, 2021 and as part of our adoption we retrospectively adjusted financial statements for the first three quarters of 2021. See Note 2, Significant Accounting Policies for more information. We lease office and warehouse space and equipment used in connection with our operations under various operating leases, some of which provide for rental payments on a graduated basis, rent holidays and other incentives. Operating leases with a term greater than one year are recorded on the consolidated balance sheets as right-of-use lease assets and lease liabilities at the commencement date. These balances are initially recorded at the present value of future minimum lease payments calculated using our incremental borrowing rate and expected lease term and adjusted for items such as initial direct costs paid or incentives received. The following table includes the components of our lease expense recorded in fulfillment expenses and general and administrative expenses in the accompanying consolidated statements of income. Year Ended December 31, 2021 (in thousands) Operating lease expense $ 4,528 Short-term lease expense 183 Variable lease expense 247 Total $ 4,958 The following table presents future minimum lease payments and the impact of discounting as of December 31, 2021. December 31, 2021 (in thousands) 2022 $ 3,851 2023 3,201 2024 — 2025 — 2026 — Total minimum lease payments (1) 7,052 Less imputed interest ( 109 ) Present value of lease liabilities $ 6,943 (1) Excludes approximately $ 6.3 million of future minimum lease payments (undiscounted basis) for leases that had not commenced as of December 31, 2021. These leases are expected to commence in 2022 with lease terms ranging from three months to ten years from commencement. In addition, excludes approximately $ 7.3 million of future minimum lease payments (undiscounted basis) for a lease that we entered into in January 2022. This lease commenced in February 2022 and has a term of five years from commencement. The weighted-average remaining term for our leases as of December 31, 2021 was 1.9 years. The weighted-average discount rate for our leases as of December 31, 2021 was 1.7 %. Supplemental cash flow information related to our leases is as follows: Year Ended December 31, 2021 (in thousands) Cash paid for amounts included in the measurement of lease liabilities: Operating cash flows - operating leases $ 5,321 Supplemental non-cash information: Lease assets obtained in exchange for new operating lease liabilities 1,440 A schedule of the future minimum lease payments under noncancelable operating leases as of December 31, 2020, in accordance with ASC 840, was as follows: 98 December 31, 2020 (in thousands) 2021 $ 4,802 2022 3,201 2023 3,197 2024 — 2025 — Total minimum lease payments $ 11,200 Rental expense was $ 4.7 million and $ 5.4 million for the years ended December 31, 2020 and 2019, respectively, and is included in fulfillment expenses and general and administrative expenses in the accompanying consolidated statements of income. Note 6. Line of Credit On March 23, 2021, we am ended and restated our existing credit agreement to, among other things, extend the expiration date from March 23, 2021 to March 23, 2026 . The line of credit provides us with up to $ 75.0 million aggregate principal in revolver borrowings, based on eligible inventory and accounts receivable less reserves. Borrowings under the credit agreement accrue interest, at our option, at (1) a base rate equal to the highest of (a) the federal funds rate, plus 0.50 %, (b) the prime rate and (c) an adjusted LIBO rate determined on the basis of a one-month interest period , plus 1.00 %, or (2) an adjusted LIBO rate, subject to a floor of 0.00 %, in each case, plus a margin ranging from 0.25 % to 0.75 % per year in the case of base rate loans, and 1.25 % to 1.75 % per year in the case of LIBO rate loans. No borrowings were outstanding as of December 31, 2021 and 2020. We are also obligated to pay other customary fees for a credit facility of this size and type, including an unused commitment fee. The credit agreement also permits us, in certain circumstances, to request an increase in the facility by an additional amount of up to $ 25.0 million (in an initial minimum amount of $ 10 million and in increments of $ 5 million thereafter) at the same maturity, pric ing and other terms. Our obligations under the credit agreement are secured by substantially all of our assets. The credit agreement also contains customary covenants restricting our activities, including limitations on our ability to sell assets, engage in mergers and acquisitions, enter into transactions involving related parties, obtain letters of credit, incur indebtedness or grant liens or negative pledges on our assets, make loans or make other investments. Under the 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, 2021 and 2020. Note 7. Commitments and Contingencies Contingencies We record a loss contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We also disclose material contingencies when we believe a loss is not probable but reasonably possible. Accounting for contingencies requires us to use judgment related to both the likelihood of a loss and the estimate of the amount or range of loss. Although we cannot predict with assurance the outcome of any litigation or tax matters, we do not believe there are currently any such actions that, if resolved unfavorably, would have a material impact on our operating results, financial position and cash flows. Indemnifications In the ordinary course of business, we may provide indemnifications of varying scope and terms to vendors, directors, officers and other parties with respect to certain matters. We have not incurred any material costs as a result of such indemnifications and have not accrued any liabilities related to such obligations in our consolidated financial statements. Tax Contingencies We are subject to income taxes in the United States and the United Kingdom, or UK. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are transactions and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax-related uncertainties based on estimates or whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these reserves in light of changing facts and circumstances, 99 such as the outcome of tax audits. Our provision for income taxes does not include any reserve provision because we believe that all of our tax positions are highly certain. Legal Proceedings We are a defendant in a purported class action lawsuit filed in the Superior Court of California, Los Angeles County, which was filed in May 2019, arising from employee wage-and-hour claims under California law for alleged meal period, rest period, payment of wages at separation, wage statement violations, and unfair business practices. On January 6, 2020, we and the individual defendant in the case entered into a binding memorandum of understanding to settle the case. In December 2019, we accrued approximately $ 1.0 million to general and administrative expenses which, as of December 31, 2020, still remained accrued within accrued expenses on the accompanying consolidated balance sheet. On January 5, 2021, the court granted approval of the settlement, which was subsequently paid by the Company during the first quarter of 2021. Leases We have obligations under operating leases for office and fulfillment facilities. For a description of our leases, please see Note 5, Leases . Note 8. Income Taxes The components of the provision for income tax expense (benefit) are as follows (in thousands): December 31, 2021 Current Deferred Total U.S. federal $ 6,233 $ ( 4,696 ) $ 1,537 State and local 2,008 ( 549 ) 1,459 Foreign 1,892 — 1,892 $ 10,133 $ ( 5,245 ) $ 4,888 December 31, 2020 Current Deferred Total U.S. federal $ 975 $ 926 $ 1,901 State and local 381 550 931 Foreign 450 — 450 $ 1,806 $ 1,476 $ 3,282 100 December 31, 2019 Current Deferred Total U.S. federal $ 8,446 $ ( 700 ) $ 7,746 State and local 4,218 ( 913 ) 3,305 Foreign 449 — 449 $ 13,113 $ ( 1,613 ) $ 11,500 The components of net deferred tax assets (liabilities) are as follows (in thousands): December 31, 2021 2020 Deferred tax assets: Accrued liabilities, reserves and other $ 13,265 $ 8,775 UNICAP 4,419 2,513 Tax basis goodwill 1,484 1,791 Investment in FWRD 2,502 2,528 Equity-based compensation 1,600 1,693 Deferred revenue 1,694 1,319 Net operating loss 113 28 Gross deferred tax assets 25,077 18,647 Valuation allowance ( 27 ) ( 28 ) Deferred tax assets, net of valuation allowance 25,050 18,619 Deferred tax liabilities: Accrued expenses and reserves ( 3,994 ) ( 2,317 ) State taxes ( 420 ) ( 585 ) Depreciation ( 1,577 ) ( 1,903 ) Total gross deferred liabilities ( 5,991 ) ( 4,805 ) Net deferred tax assets $ 19,059 $ 13,814 As of December 31, 2021, we had gross federal and state operating loss carryforwards of $ 0.1 million and $ 1.6 million, respectively. As of December 31, 2020, we had gross federal and state operating loss carryforwards of $ 0.1 million and $ 0.1 million, respectively. If not utilized, these losses will begin to expire in 2034 . For the years ended December 31, 2021 and 2020, the valuation allowance was insignificant. Our effective tax rate was different than the statutory U.S. federal income tax rate for the following reasons: December 31, 2021 2020 2019 Computed “expected” tax expense 21.0 % 21.0 % 21.0 % Valuation allowance — ( 1.0 ) ( 1.1 ) State and local income taxes, net of federal tax benefit 1.1 1.2 5.8 Foreign-derived intangible income ( 0.4 ) ( 0.2 ) ( 1.3 ) Permanent items 0.1 0.5 1.2 Equity-based compensation ( 16.8 ) ( 15.9 ) ( 1.2 ) Other ( 0.3 ) ( 0.1 ) — 4.7 % 5.5 % 24.4 % For the years ended December 31, 2021, 2020 and 2019, we filed a consolidated federal and state income tax return for Revolve Group, Inc. We believe that there are no uncertain tax positions that would impact the accompanying consolidated financial statements. We do not anticipate there will be a material change in our recognition of uncertain tax positions in the next 12 months. The tax years ended December 31, 2018 through 2021 remain subject to possible examination by the Internal Revenue Service and the tax years ended December 31, 2017 through 2021 remain subject to possible examination by 101 state tax jurisdictions. No interest or penalties related to income taxes are recognized in the accompanying consolidated financial statements. Note 9. Equity-based Compensation In 2013, Twist Holdings, LLC, or Twist, and Advance Holdings, LLC, or Advance, which became the Revolve Group, Inc., adopted equity incentive plans, which we refer to collectively as the 2013 Plan, pursuant to which the board of managers could grant options to purchase Class A units to officers and employees. Options could be granted with an exercise price equal to or greater than the unit’s fair value at the date of grant. All issued awards have 10 year terms and generally vest and become fully exercisable annually over five years of service from the date of grant. Awards will become fully vested upon the sale of the company. On March 15, 2018, all outstanding options to purchase Class A units of Twist granted under the Twist Holdings, LLC 2013 Equity Incentive Plan, each of which we refer to as a Twist Option, were exchanged for options to purchase Class A units of Revolve Group, Inc. under the 2013 Plan. The number of Revolve Group, Inc. Class A units and the per unit exercise price of each converted option was adjusted from the underlying Twist Option by taking into account the implied values of Twist and Revolve Group, Inc. as of immediately before the exchange and in a manner that did not result in an increase to the intrinsic value of the converted option. In addition, the 2013 Plan was amended to increase the maximum number of Class A units available to be issued to 6,207,978 . Upon the effectiveness of the Corporate Conversion on June 6, 2019, as discussed in Note 2, Significant Accounting Policies , the options to purchase Class A units of Revolve Group, LLC were converted into options to purchase Class B common stock of Revolve Group, Inc. on a 1:1 basis and in a manner that did not result in an increase to the intrinsic value of the converted option. In September 2018, the board of directors adopted the 2019 Equity Incentive Plan, or the 2019 Plan, which became effective in June 2019. Under the 2019 Plan, a total of 4,500,000 shares of our Class A common stock are reserved for issuance as options, stock appreciation rights, restricted stock, restricted stock units, or RSUs, performance units or performance shares. Upon the completion of our IPO, the 2019 Plan replaced the 2013 Plan, however, the 2013 Plan will continue to govern the terms and conditions of the outstanding awards previously granted under that plan. The number of shares that will be available for issuance under our 2019 Plan also will increase annually on the first day of each year beginning in 2020, in an amount equal to the least of: (1) 6,900,000 shares, (2) 5 % of the outstanding shares of all classes of our common stock as of the last day of the immediately preceding year and (3) such other amount as our board of directors may determine . All future grants going forward will be issued under the 2019 Plan. On January 1, 2021, the number of shares available under the 2019 Plan was increased by 2.0 million shares to approximately 5.0 million shares. As of December 31, 2021, approximately 4.9 million common shares remain available for future issuance under the 2019 Plan. On January 1, 2022, the number of shares available under the 2019 Plan was further increased by 3.7 million shares to approximately 8.6 million shares. 102 The grant-date fair value of RSUs is measured on the grant date based on the closing fair market value of our Class A common stock. The grant-date fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. The Black-Scholes option pricing model requires inputs such as expected term, fair value per unit of our Class A shares, expected volatility and risk-free interest rate. These inputs are subjective and generally require significant analysis and judgment to develop. We utilized the simplified method for calculating expected term for the years ended December 31, 2021, 2020 and 2019 using the average of the vesting period and the contractual life of the option, as we do not have enough historical data to estimate the expected term. The dividend yield is 0 %, as we have not paid, nor do we expect to pay, dividends. The risk-free interest rate is based on the implied yield available on U.S. Treasury issues with an equivalent remaining term. For the options granted in 2021, expected volatility is estimated based on the average historical volatility of the Company's stock. For the options granted in 2020 and 2019, expected volatility is estimated based on the average historical volatility of similar entities with publicly traded shares. For the options granted during 2019, we relied on valuations of our Class A shares prepared by an independent third-party valuation firm in accordance with the guidance provided by the American Institute of Certified Public Accountants 2013 Practice Guide, Valuation of Privately-Held-Company Equity Securities Issued as Compensation, the results of which were aligned with our internal valuation approach. For the options granted during 2021 and 2020, the fair value is based on observable market prices. All historical data presented in the tables within this footnote have been recast to retroactively reflect all share and per share data of options as if they had been issued by Revolve Group, Inc. and that both the reverse split and Corporate Conversion had occurred. See Note 2, Significant Accounting Policies, for further information regarding the reverse split and Corporate Conversion. The weighted average assumptions for the grants in the years ended December 31, 2021, 2020 and 2019 are provided in the following table: December 31, 2021 2020 2019 Valuation assumptions: Expected dividend yield — % — % — % Expected volatility 41.1 % 40.2 % 37.3 % Expected term (years) 6.5 6.5 6.5 Risk-free interest rate 1.2 % 0.6 % 2.4 % Option activity under the 2013 and 2019 Plans is as follows: Number of Shares Weighted Average Exercise Price Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (in thousands) Balance at January 1, 2021 4,121,225 $ 9.20 7.0 $ 87,842 Granted 171,105 54.12 7.9 Exercised ( 1,822,663 ) 7.03 — Forfeited ( 124,380 ) 21.89 — Expired ( 3,016 ) 15.27 — Balance at December 31, 2021 2,342,271 13.48 7.5 100,232 Exercisable at December 31, 2021 446,294 11.00 5.8 20,101 Vested and expected to vest 2,342,271 13.48 7.5 100,232 103 RSU award activity under the 2019 Plan is as follows: Class A Common Stock Weighted Average Grant Date Fair Value Weighted Average Remaining Contractual Term Aggregate Intrinsic Value (in thousands) Unvested at January 1, 2021 20,140 $ 15.89 1.2 $ 628 Granted (1) 26,787 49.68 0.3 — Vested ( 14,591 ) 15.76 Forfeited — — Unvested at December 31, 2021 32,336 43.94 0.6 1,812 (1) Includes an adjustment of 8,876 shares underlying performance-based RSU awards made during the year ended December 31, 2021. The vesting of such RSUs is based upon the Company’s current performance against predefined financial targets. There were 171,105 options and 26,787 RSUs granted during the year ended December 31, 2021. The weighted average grant-date fair value of options and RSUs granted during the year ended December 31, 2021 was $ 22.99 per share and $ 49.68 per share, respectively. As of December 31, 2021, there was $ 11.0 million of total unrecognized compensation cost related to unvested options and RSUs granted under the 2013 Plan and 2019 Plan, which is expected to be recognized over a weighted average service period of 3.3 years. Equity‑based compensation cost that has been included in general and administrative expense in the accompanying consolidated statements of income amounted to $ 4.8 million, $ 3.4 million, and $ 2.1 million for the years ended December 31, 2021, 2020 and 2019, respectively. An excess income tax benefit of $ 17.6 million, $ 9.6 million and $ 0.6 million was recognized in the consolidated statements of income for equity‑based compensation arrangements for the years ended December 31, 2021, 2020 and 2019, respectively. 104 Note 10. Earnings (Net Loss) per Share Basic and diluted earnings (net loss) per share is presented in conformity with the two-class method required for multiple classes of common stock. In connection with our IPO, we established two classes of authorized common stock: Class A common stock and Class B common stock. The rights of the holders of Class A and Class B common stock are identical, except for voting and conversion rights. Each share of Class A common stock is entitled to one vote per share. Each share of Class B common stock is entitled to ten votes per share and is convertible at any time into one share of Class A common stock. Basic earnings (net loss) per share is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of shares of common stock outstanding during the period. Diluted earnings (net loss) per share represents net income divided by the weighted-average number of shares of common stock outstanding, inclusive of the effect of dilutive stock options and RSUs. For the year ended December 31, 2019, our potential dilutive shares relating to stock options and RSUs were not included in the computation of diluted earnings (net loss) per share as the effect of including these shares in the calculation would have been anti-dilutive. The undistributed earnings are allocated based on the participation rights of shares of Class A and Class B common stock as if the earnings for the year have been distributed. As the liquidation and dividend rights are identical for both classes, the undistributed earnings are allocated on a proportionate basis. The calculation of diluted earnings per share for Class A common stock assumes the conversion of Class B common stock, while diluted earnings per share of Class B common stock does not assume the conversion of Class A common stock as Class A common stock is not convertible into Class B common stock. Similarly, outstanding options to purchase Class B common stock and RSUs that are dilutive are included in the calculation of diluted earnings for both Class A and Class B common stock. For the calculation of basic and diluted earnings (net loss) per share for the year ended December 31, 2019, the $ 40.8 million of Class B shares issued and subsequently repurchased in connection with our IPO to satisfy the total preference amount for the Class T Units is treated as a dividend and subtracted from net income available to common stockholders on a proportionate basis. In addition, the net losses for the year ended December 31, 2019 were not allocated to our participating security as the Class T preferred units were not contractually obligated to share in the Company’s losses. Basic and diluted earnings (net loss) per share and the weighted-average shares outstanding have been computed for all periods shown below to give effect to the reverse split, the Corporate Conversion and the repurchase of shares of Class B common stock that occurred in connection with our IPO. See Note 2, Significant Accounting Policies, for further information regarding the reverse split and Corporate Conversion. The following table presents the calculation of basic and diluted earnings (net loss) per share: Year Ended December 31, 2021 2020 2019 Class A Class B Class A Class B Class A Class B Numerator Net income $ 51,426 $ 48,414 $ 16,165 $ 40,625 $ 4,805 $ 30,862 Repurchase of Class B common stock — — — — ( 5,499 ) ( 35,317 ) Net income (loss) attributable to common stockholders - basic 51,426 48,414 16,165 40,625 ( 694 ) ( 4,455 ) Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares 48,414 — 40,625 — — — Reallocation of undistributed earnings to Class B shares — 1,403 — 513 — — Net income (loss) attributable to common stockholders - diluted $ 99,840 $ 49,817 $ 56,790 $ 41,138 $ ( 694 ) $ ( 4,455 ) Denominator Weighted average shares used to compute earnings (net loss) per share — basic 37,350 35,163 19,861 49,912 7,719 49,575 105 Conversion of Class B to Class A common shares outstanding 35,163 — 49,912 — — — Effect of dilutive stock options and RSUs 2,034 2,034 2,285 2,285 — — Weighted average number of shares used to compute earnings (net loss) per share — diluted 74,547 37,197 72,058 52,197 7,719 49,575 Earnings (net loss) per share: Basic $ 1.38 $ 1.38 $ 0.81 $ 0.81 $ ( 0.09 ) $ ( 0.09 ) Diluted $ 1.34 $ 1.34 $ 0.79 $ 0.79 $ ( 0.09 ) $ ( 0.09 ) The following have been excluded from the computation of basic and diluted earnings (net loss) per share as their effect would have been anti-dilutive (in thousands): Year Ended December 31, 2021 2020 2019 Stock options to purchase common shares and RSUs 456 4,188 4,917 Note 11. Segment Information We have two reportable segments, REVOLVE and FWRD, each offering apparel, shoes, accessories, and beauty products available for sale to customers through their respective websites. Our reportable segments have been identified based on how our chief operating decision makers manage our business, make operating decisions, and evaluate operating performance. Our chief operating decision makers are our co-chief executive officers. We evaluate the performance of our reportable segments based on net sales and gross profit. Management does not evaluate the performance of our reportable segments using asset measures. During the years ended December 31, 2021, 2020 and 2019, no customer represented over 10 % of net sales. The following table summarizes our net sales and gross profit for each of our reportable segments (in thousands): Year Ended December 31, 2021 2020 2019 Net sales REVOLVE $ 745,127 $ 500,898 $ 527,251 FWRD 146,263 79,751 73,742 Total $ 891,390 $ 580,649 $ 600,993 Gross profit REVOLVE $ 420,151 $ 272,018 $ 292,042 FWRD 69,672 33,262 29,911 Total $ 489,823 $ 305,280 $ 321,953 All of our long-lived assets and goodwill are located in the United States as of the years ended December 31, 2021, 2020 and 2019. The following table lists net sales by geographic area (in thousands): Year Ended December 31, 2021 2020 2019 United States $ 726,292 $ 467,515 $ 502,882 Rest of the world (1) 165,098 113,134 98,111 Total net sales $ 891,390 $ 580,649 $ 600,993 (1) No individual country exceeded 10% of total net sales for any period presented. The following tables summarize net sales and percentage of net sales by product category for the years ended December 31, 2021, 2020 and 2019 (in thousands): 106 Year Ended December 31, 2021 2020 2019 Net Sales Fashion Apparel $ 467,257 $ 322,436 $ 312,459 Dresses 223,203 131,015 178,197 Handbags, Shoes and Accessories 164,565 94,742 84,298 Beauty 30,049 24,454 11,420 Other (1) 6,316 8,002 14,619 Total net sales $ 891,390 $ 580,649 $ 600,993 As a percentage of net sales Fashion Apparel 52 % 56 % 52 % Dresses 25 % 23 % 30 % Handbags, Shoes and Accessories 19 % 16 % 14 % Beauty 3 % 4 % 2 % Other (1) 1 % 1 % 2 % Total net sales 100 % 100 % 100 % (1) Includes deferred revenue, shipping revenue and other revenue. Note 12. Detail of Certain Balance Sheet Accounts Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consist of the following (in thousands): December 31, 2021 2020 Expected merchandise returns, net $ 18,521 $ 9,585 Advanced payments on inventory to be delivered from vendors 13,059 5,224 Prepaid insurance 1,859 1,425 Other 8,675 4,096 Total prepaid expenses and other current assets $ 42,114 $ 20,330 Accrued Expenses Accrued expenses consist of the following (in thousands): December 31, 2021 2020 Marketing $ 11,023 $ 6,463 Salaries and related benefits 8,216 9,158 Sales taxes 5,594 2,750 Selling and distribution 3,893 3,379 Other 5,173 2,983 Total accrued expenses $ 33,899 $ 24,733 Other Current Liabilities Other current liabilities consist of the following (in thousands): December 31, 2021 2020 Store credit $ 9,630 $ 10,068 Gift cards 2,977 2,158 Other 6,309 3,595 Total other current liabilities $ 18,916 $ 15,821 107 Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOU NTANTS ON ACCOUNTING A ND FINANCIAL DISCLOSURE None. Item 9A. CONTROL S AND PROCEDURES Evaluation of Disclosure Controls and Procedures Our management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this report. Based on that evaluation, our co-chief executive officer and chief financial officer concluded that our disclosure controls and procedures were effective as of December 31, 2021. Management’s Report on Internal Control over Financial Reporting Our management, including our principal executive officer and principal financial officer, is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) of the Exchange Act. Our internal control over financial reporting is a process to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that: (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of our assets; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements. Under the supervision and with the participation of our management, including our co-chief executive officer and chief financial officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2021 , based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, our co-chief executive officer and chief financial officer concluded that our internal control over financial reporting was effective as of December 31, 2021 . Our independent registered public accounting firm, KPMG LLP, has audited the effectiveness of our internal control over financial reporting as of December 31, 2021, as stated in their report which is included herein. Changes in Internal Control over Financial Reporting There was no change in our internal control over financial reporting during the three months ended December 31, 2021, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. 108 Inherent Limitation on Effectiveness of Internal Control The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating and evaluating the controls and procedures and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances. In addition, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting. Item 9B. OTHE R INFORMATION None. Item 9C. DISCL OSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS Not applicable. 109 PART III Item 10. DIRECTORS, EXECUTIVE OF FICERS AND CORPORATE GOVERNANCE The information required under this Item is incorporated herein by reference to the information set forth in our Proxy Statement for the 2022 Annual Meeting of Stockholders, or the Proxy Statement. Item 11. EXECUTI VE COMPENSATION The information required under this Item is incorporated herein by reference to the information set forth in the Proxy Statement. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OW NERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS The information required under this Item is incorporated herein by reference to the information set forth in the Proxy Statement. Item 13. CERTAIN RELATIONSHIPS AND RELATE D TRANSACTIONS, AND DIRECTOR INDEPENDENCE The information required under this Item is incorporated herein by reference to the information set forth in the Proxy Statement. Item 14. PRINCIPAL ACCOU NTING FEES AND SERVICES The information required under this Item is incorporated herein by reference to the information set forth in the Proxy Statement. 110 PART IV Item 15. EXHIBITS AND FINA NCIAL STATEMENT SCHEDULES The following documents are filed as part of this report or incorporated herein by reference: (a) Financial Statements. Our Consolidated Financial Statements listed in the “Index to Consolidated Financial Statements” under Part II, Item 8 of this report. (b) Financial Statement Schedules . Schedules are omitted because the required information is inapplicable, not material or the information is presented in the consolidated financial statements or related notes. (c) Exhibits. The exhibits listed in the Exhibit Index immediately below are filed as part of this report or are incorporated by reference herein. 111 EXHIBIT INDEX Exhibit Number Description Form File No. Exhibit No. Filing Date Filed/ Furnished Herewith 3.1 Certificate of Incorporation of Revolve Group, Inc. 10-Q 001-38927 3.1 August 12, 2019 3.2 Bylaws of Revolve Group, Inc. 10-Q 001-38927 3.2 August 12, 2019 4.1 Specimen Common Stock Certificate of the registrant S-1/A 333-227614 4.1 November 21, 2018 4.2 Description of Securities 10-K 001-38927 4.2 February 26, 2020 10.1+ Form of Director and Executive Officer Indemnification Agreement S-1/A 333-227614 10.1 October 9, 2018 10.2+ Form of Registration Rights Agreement S-1/A 333-227614 10.2 October 9, 2018 10.3+ Advance Holdings, LLC 2013 Equity Incentive Plan S-1/A 333-227614 10.3 October 9, 2018 10.4+ Form of Option Agreement under the 2013 Advance Holdings, LLC Equity Incentive Plan S-1/A 333-227614 10.4 October 9, 2018 10.5+ 2019 Equity Incentive Plan S-1/A 333-227614 10.5 March 14, 2019 10.6+ Form of Notice of Stock Option Grant and Stock Option Agreement under the 2019 Equity Incentive Plan S-1/A 333-227614 10.6 March 14, 2019 10.7+ Form of Notice of Restricted Stock Unit Grant and Restricted Stock Unit Agreement under the 2019 Equity Incentive Plan S-1/A 333-227614 10.7 March 14, 2019 10.8+ 2019 Employee Stock Purchase Plan S-1/A 333-227614 10.8 March 14, 2019 10.9+ Revolve Group, Inc. Executive Incentive Compensation Plan S-1/A 333-227614 10.9 October 9, 2018 10.10+ Outside Director Compensation Policy S-1/A 333-227614 10.16 October 9, 2018 10.11 Amended and Restated Credit Agreement, dated as of March 23, 2021, by and among Alliance Apparel Group, Inc., Eminent, Inc., Advance Development, Inc, Revolve Group, Inc., Twist Holdings, LLC, the other guarantors from time to time party thereto, the lenders from time to time party thereto and Bank of America, N.A., as administrative agent and collateral agent for the lenders. 8-K 001-38927 10.1 March 26, 2021 10.12+ Executive Employment Agreement between Eminent, Inc. and Michael Karanikolas S-1/A 333-227614 10.12 October 9, 2018 10.13+ Executive Employment Agreement between Eminent, Inc. and Michael Mente S-1/A 333-227614 10.13 October 9, 2018 10.14+ Executive Employment Agreement between Eminent, Inc. and Jesse Timmermans S-1/A 333-227614 10.14 October 9, 2018 10.15+ Executive Employment Agreement between Eminent, Inc. and David Pujades S-1/A 333-227614 10.15 October 9, 2018 21.1 Subsidiaries of the Registrant X 23.1 Consent of KPMG LLP, Independent Registered Public Accounting Firm X 31.1 Certification of Principal Executive Officer Pursuant to Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X 112 31.2 Certification of Principal Financial Officer Pursuant to Rules 13a-15(d) and 15d-15(e) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 X 32.1* Certifications of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 X 101.INS Inline XBRL Instance Document X 101.SCH Inline XBRL Taxonomy Extension Schema Linkbase Document X 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document X 101.DEF Inline XBRL Taxonomy Definition Linkbase Document X 101.LAB Inline XBRL Taxonomy Extension Label Linkbase Document X 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document X 104 Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) X + Indicates a management contract or compensatory plan. * The certifications attached as Exhibit 32.1 accompanying this report are deemed furnished and not filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Revolve Group, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this report, irrespective of any general incorporation language contained in such filing. 113 Item 16. FORM 10-K SUMMARY None. 114 SIGNAT URES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. REVOLVE GROUP, INC. By: /s/ JESSE TIMMERMANS Jesse Timmermans Chief Financial Officer Dated: February 28, 2022 KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and appoints Michael Karanikolas, Michael Mente and Jesse Timmermans, and each of them, with full power of substitution and resubstitution and full power to act without the other, as his or her true and lawful attorney-in-fact and agent to act in his or her name, place and stead and to execute in the name and on behalf of each person, individually and in each capacity stated below, and to file, any and all documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing, ratifying and confirming all that said attorneys-in-fact and agents or any of them or their and his or her substitute or substitutes, may lawfully do or cause to be done by virtue thereof. Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the date indicated. Signature Title Date /s/ Michael Karanikolas Co-Chief Executive Officer and Director February 28, 2022 Michael Karanikolas (Principal Executive Officer) /s/ Michael Mente Co-Chief Executive Officer and Director February 28, 2022 Michael Mente /s/ Jesse Timmermans Chief Financial Officer February 28, 2022 Jesse Timmermans (Principal Financial and Accounting Officer) /s/ Melanie Cox Director February 28, 2022 Melanie Cox /s/ Oana Ruxandra Director February 28, 2022 Oana Ruxandra /s/ Marc Stolzman Director February 28, 2022 Marc Stolzman 115