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Item 8. Financial Statements and Supplementary Data

2024-02-27 compared with 2023-02-23 · 145 added, 116 removed, 641 unchanged (29% of the section changed)

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Consolidated Statements of Comprehensive Income

Consolidated Statements of Changes in Members’/Stockholders’

Consolidated Statements of Changes in Stockholders’ Equity

Consolidated Statements of Cash Flows

Notes to Consolidated Financial Statements

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

R eport of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

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We have audited the accompanying consolidated balance sheets of Revolve Group, Inc.

and subsidiaries (the Company) as of December 31, 2022 and December 31, 2021, 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, 2022, and the related notes (collectively, the consolidated financial statements).

and subsidiaries (the Company) as of December 31, 2023 and December 31, 2022, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, 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, 2023 and December 31, 2022, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2023, in conformity with U.S.

generally accepted accounting principles.

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 23, 2023 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) .

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, 2023, 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 27, 2024 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

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.

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The following are the primary procedures we performed to address this critical audit matter.

We evaluated the design and tested the operating effectiveness of an internal control related to the Company’s lookback analysis over the sales return reserve based on actual returns received subsequent to 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, 2023.

In addition, we analyzed actual returns received by the Company after December 31, 2022 to evaluate management’s estimate as of December 31, 2022.

We assessed the Company’s ability to estimate by comparing the historically recorded sales return reserve to actual subsequent period returns.

We have served as the Company’s auditor since 2014.

In addition, we analyzed actual returns received by the Company after December 31, 2023 to evaluate management’s estimate as of December 31, 2023.

We assessed the Company’s ability to estimate by comparing the historically recorded sales return reserve to actual subsequent period returns.

We have served as the Company’s auditor since 2014.

Los Angeles, California

February 27, 2024

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Report of Registered Independent Public Accounting Firm

To the Stockholders and Board of Directors

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We have audited Revolve Group, Inc.

and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2022, 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, 2022, based on criteria established in Internal Control –

Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements), and our report dated February 23, 2023 expressed an unqualified opinion on those consolidated financial statements.

and subsidiaries' (the Company) internal control over financial reporting as of December 31, 2023, 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, 2023, 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, 2023 and December 31, 2022, the related consolidated statements of income, comprehensive income, changes in stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2023, and the related notes (collectively, the consolidated financial statements), and our report dated February 27, 2024 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.

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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.

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Total stockholders’ equity

Total liabilities and stockholders’

Total liabilities and stockholders’ equity

The accompanying notes are an integral part of these consolidated financial statements.

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Year Ended December 31,

Other comprehensive (loss) income:

Other comprehensive income (loss):

Cumulative translation adjustment

Total other comprehensive (loss) income

Total other comprehensive income (loss)

Total comprehensive income

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AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS'/STOCKHOLDERS’

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY

(In thousands, except share data)

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Issuance of Class A common stock from exercise of stock options and vesting of restricted stock units

Repurchases of Class A common stock

Equity-based compensation

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Financing activities:

Proceeds from borrowings on line of credit

Repayment of borrowings on line of credit

Payment of deferred offering costs

Proceeds from the exercise of stock options, net

Net cash provided by financing activities

Repurchases of Class A common stock

Net cash (used in) provided by financing activities

Effect of exchange rate changes on cash and cash

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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.

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:

We recognize revenue through the following steps:

(1) identification of the contract, or contracts, with the customer;

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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.

We have a Loyalty Club program within the REVOLVE and FWRD segments.

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 .

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In accordance with our policy on returns and exchanges, merchandise returns are generally accepted for full refund if returned within 60 days of the original purchase date and merchandise may be exchanged up to 90 days from the original purchase date.

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.

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, 2023, 2022 and 2021 (in thousands):

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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 expenses primarily consist of those costs incurred in operating and staffing the fulfillment centers, including costs attributable to inspecting and warehousing inventories, picking, packaging and preparing customer orders for shipment.

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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, shipping supplies and other selling expenses.

Selling and distribution expenses consist of shipping and other transportation costs incurred delivering merchandise to customers and customers returning merchandise, customer service costs, merchant processing fees, shipping supplies and other selling expenses.

The amount of shipping and handling costs included in selling and distribution is $ 128.1 million, $ 120.8 million, and $ 84.8 million for the years ended December 31, 2023, 2022 and 2021, respectively.

Marketing expenses are expensed as incurred and consist primarily of targeted online performance marketing costs, such as paid search/product listing ads, affiliate marketing, paid social, retargeting, search engine optimization, personalized email marketing and mobile “push”

communications through our mobile applications.

Marketing expenses also include brand marketing investments, including events, fees paid to influencers, and other forms of online and offline marketing.

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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 per Share

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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.

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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 make inventory valuation adjustments 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.

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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.

Equity Investments

We hold an equity investment in a privately held company without readily determinable fair value.

This investment is measured at cost, less impairment and included in other assets in the accompanying consolidated balance sheets.

Changes in fair value resulting from observable transactions for identical or similar investments of the same issuer are recorded in other income (expense), net.

Property and Equipment, Net

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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.

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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) , 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.

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.

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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, 2023, 2022 and 2021.

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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.

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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 related to the collection and remittance of sales and use taxes.

We do not have significant vendor concentrations.

Accounting Pronouncements Not Yet Effective

There have been no new accounting pronouncements not yet effective that have significance, or potential significance, to our consolidated financial statements.

In November 2023, the Financial Accounting Standards Board, or FASB, issued Accounting Standards Update, or ASU, 2023-07, Segment Reporting (Topic 280):

Improvements to Reportable Segment Disclosures , which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses and information used to assess segment performance.

ASU 2023-07 is effective for us for annual periods beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted.

The amendments should be applied retrospectively to all prior periods presented in the financial statements.

We are currently in the process of evaluating the effects of this pronouncement on our consolidated financial statements and related disclosures.

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740):

Improvements to Income Tax Disclosures , which enhances income tax disclosures, primarily through changes to the rate reconciliation and disaggregation of income taxes paid.

ASU 2023-09 is effective for us for annual periods beginning after December 15, 2024, with early adoption permitted.

We are currently in the process of evaluating the effects of this pronouncement on our consolidated financial statements and related disclosures.

Goodwill and Other Intangible Assets, Net

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(1) Includes $ 1.2 million and $ 1.0 million of intangible assets not subject to amortization as of December 31, 2023 and 2022, respectively.

Our amortization expense for acquired identifiable intangible assets with finite useful lives was $ 0.1 million, $ 0.1 million, and $ 0.3 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Our amortization expense for acquired identifiable intangible assets with finite useful lives was $ 0.1 million for each of the years ended December 31, 2023, 2022 and 2021.

Future estimated amortization expense for acquired identifiable intangible assets is as follows (in thousands):

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Variable lease expense

Rental expense was $ 4.7 million for the year ended December 31, 2020, and is included in fulfillment expenses and general and administrative expenses in the accompanying consolidated statements of income.

The following table presents future minimum lease payments and the impact of discounting as of December 31, 2023.

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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 .

On March 23, 2021, we amended and restated ou r existing credit agreement to, among other things, extend the expiration date from March 23, 2021 to March 23, 2026 .

On May 11, 2023, we amended the credit agreement to replace the LIBO reference rate with a term SOFR reference rate and made conforming changes throughout the credit agreement.

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.

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 term SOFR rate determined on the basis of a one-month interest period , plus 1.00 %, or (2) an adjusted term SOFR 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 term SOFR rate loans.

No borrowings were outstanding as of December 31, 2023 and 2022.

We are also obligated to pay other customary fees for a credit facility of this size and type, including an unused commitment fee.

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.

$ 5.0 million thereafter) at the same maturity, pricing 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 .

The credit agreement also contains customary covenants restricting certain of 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, repurchase stock or grant liens or negative pledges on our assets, make loans or make other investments.

Under these covenants, we are prohibited from paying cash dividends with respect to our capital stock .

We were in compliance with all financial covenants as of December 31, 2023 and 2022.

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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.

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

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Legal Proceedings

On March 15, 2022, we received a cease and desist letter alleging copyright infringement and related claims.

As of December 31, 2022, we had accrued $ 6.3 million to general and administrative expenses for estimated losses and legal fees that we expected to incur in connection with these claims.

On February 3, 2023, we entered into a final settlement agreement with the claimant and ultimately expect to pay approximately $ 1.3 million in settlement costs and legal fees related to this matter, net of insurance proceeds.

In March 2022, we received a cease and desist letter alleging copyright infringement and related claims.

During 2022, we ac crued $ 6.3 million to general and administrative expenses for estimated losses and legal fees that we expected to incur in connection with these claims and during the three months ended March 31, 2023, we accrued an additional $ 0.3 million for estimated legal fees.

In February, 2023, we entered into a final settlement agreement with the claimant and paid approximately $ 1.5 million in settlement costs and legal fees related to this matter, net of insurance proceeds.

The related insurance proceeds of $ 5.1 million were recorded within other income, net in the accompanying statements of income.

In March 2023, we received a separate cease-and-desist letter alleging copyright infringement and related claims.

During 2023, we accrued $ 7.3 million to general and administrative expenses for estimated losses and legal fees that we expected to incur in connection with these claims.

In November 2023, we entered into a final settlement agreement with the claimant and paid $ 7.3 million in settlement costs and legal fees related to this matter.

As of the date of this report, we expect to receive approximately $ 2.6 million in insurance proceeds related to this matter.

We record insurance proceeds related to legal matters within other income (expense), net in the period in which they are received.

In February 2024, the U.S.

Fish and Wildlife Service served us with a notice of violation and proposed civil penalty, alleging that we have violated certain administrative requirements under the Endangered Species Act and the Lacey Act in connection with our export and import of certain items of merchandise.

During the fourth quarter of 2023, we accrued $ 2.8 million to general and administrative expenses for estimated losses and legal fees related to this matter, which remains pending as of the date of this report.

While we believe the amount accrued is adequate based on the information available to us as of the date of this report, the ultimate loss and associated legal expenses may differ from the amount accrued.

We have obligations under operating leases for office and fulfillment facilities.

For a description of our leases, please see Note 5, Leases .

The components of income before income tax expense are as follows (in thousands):

Year Ended December 31,

The components of the provision for income tax expense (benefit) are as follows (in thousands):

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Net deferred tax assets

As of December 31, 2022, we had gross federal and state operating loss carryforwards of $ 0.1 million and $ 0.1 million, respectively.

As of December 31, 2021, we had gross federal and state operating loss carryforwards of $ 0.1 million and $ 1.6 million, respectively.

If not utilized, these losses will begin to expire in 2034 .

For the years ended December 31, 2022 and 2021, the valuation allowance was insignificant.

As of December 31, 2023, and 2022, gross federal and state operating loss carryforwards were insignificant.

In accordance with ASC 740-30-25-17, we intend that the undistributed net earnings from continuing operations as well as the future net earnings of the foreign subsidiaries to be permanently reinvested in our operations outside of the U.S.

Our effective tax rate was different than the statutory U.S.

federal income tax rate for the following reasons:

Computed “expected”

Valuation allowance

Computed “expected” tax expense

State and local income taxes, net of federal tax benefit

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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.

In 2013, Twist Holdings, LLC, or Twist, and Advance Holdings, LLC, or Advance, which subsequently became part of Revolve Group, Inc., adopted equity incentive plans that 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, 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.

The then-outstanding options to purchase Class A units were converted into options to purchase shares of our Class B common stock in connection with our corporate conversion in June 2019 .

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:

Upon the completion of our IPO, the 2019 Plan replaced the 2013 Plan, however, the 2013 Plan continues 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 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.

As of December 31, 2023, approximately 9.1 million common shares remain available for future issuance under the 2019 Plan.

On January 1, 2023, the number of shares available under the 2019 Plan was further increased by 3.7 million shares to approximately 11.9 million shares.

Our board of directors determined no t to increase the number of shares reserved for issuance under the 2019 Plan as of January 1, 2024 .

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.

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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, 2022, 2021 and 2020 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.

We utilized the simplified method for calculating expected term using the average of the vesting period and the contractual life of the option.

The dividend yield is 0 %, as we have not paid, nor do we expect to pay, dividends.

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Treasury issues with an equivalent remaining term.

For the options granted in 2022 and 2021, expected volatility is estimated based on the average historical volatility of the Company's stock.

For the options granted in 2020, expected volatility is estimated based on the average historical volatility of similar entities with publicly traded shares.

Expected volatility is estimated based on the average historical volatility of the Company ’s stock.

The fair value of options granted is based on observable market prices.

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.

The weighted average assumptions for the grants in the years ended December 31, 2023, 2022 and 2021 are provided in the following table:

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Unvested at January 1, 2023

Forfeited (2)

Unvested at December 31, 2023

(1) Includes an adjustment of 5,100 shares underlying performance-based RSU awards made during the year ended December 31, 2023.

The vesting of such RSUs is based upon the Company’s current performance against predefined financial targets.

(2) Includes an adjustment of ( 93,573 ) shares underlying performance-based RSU awards made during the year ended December 31, 2023.

The vesting of such RSUs is based upon the Company’s current performance against predefined financial targets.

There were 2,841,203 options and 129,106 RSUs granted during 2023.

The weighted average grant-date fair value of options and RSUs granted during 2023 was $ 7.24 per share and $ 25.48 per share, respectively.

As of December 31, 2022, there was $ 14.0 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 3.5 years.

Equity‑based compensation cost that has been included in general and administrative expense in the accompanying consolidated statements of income amounted to $ 5.9 million, $ 4.8 million, and $ 3.4 million for the years ended December 31, 2022, 2021 and 2020, respectively.

An excess income tax benefit of $ 0.5 million, $ 17.6 million and $ 9.6 million was recognized in the consolidated statements of income for equity‑based compensation arrangements for the years ended December 31, 2022, 2021 and 2020, respectively.

As of December 31, 2023, there was $ 17.5 million of total unrecognized compensation cost related to unvested RSUs and time-based options granted under the 2013 Plan and 2019 Plan, which is expected to be recognized over a weighted average service period of 3.4 years.

2023 Performance Option Awards

On September 15, 2023, the Company granted an aggregate of 1,701,479 performance-based options to certain members of management with an exercise price of $ 13.05 and a grant-date fair value of $ 6.79 .

In addition, on November 3, 2023, the Company granted 49,971 performance-based options to a member of management with an exercise price of $ 13.35 and a grant-date fair value of $ 6.94 .

Collectively, we refer to these option awards as the 2023 Performance Option Awards.

The 2023 Performance Option Awards are subject to multiple vesting tranches that vest upon achievement of certain predefined financial milestones.

As of December 31, 2023, we had $ 2.1 million of total unrecognized stock-based compensation expense for the financial milestones that were considered probable of achievement, which will be recognized over a weighted-average period of 2.3 years.

As of December 31, 2023, we had unrecognized stock-based compensation expense of $ 9.5 million for the operational milestones that were considered not probable of achievement.

During 2023, we recorded stock-based compensation expense of $ 0.3 million related to the 2023 Performance Option Awards.

Equity‑based compensation cost that has been included in general and administrative expense in the accompanying consolidated statements of income amounted to $ 5.8 million, $ 5.9 million, and $ 4.8 million for the

years ended December 31, 2023, 2022 and 2021, respectively.

An excess income tax benefit of $ 0.1 million, $ 0.5 million and $ 17.6 million was recognized in the consolidated statements of income for equity‑based compensation arrangements for the years ended December 31, 2023, 2022 and 2021, respectively.

Earnings per Share

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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.

In August 2023, our board of directors authorized a stock repurchase program of up to $ 100 million of our outstanding Class A common stock.

Repurchases during any given fiscal period under the repurchase program reduce the weighted-average number of shares of common stock outstanding for the period.

The following table presents the calculation of basic and diluted earnings per share:

Year Ended December 31,

Repurchase of Class B common stock

Net income attributable to common stockholders - basic

Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares

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Net income attributable to common stockholders - diluted

Weighted average shares used to compute earnings per share —

Weighted average shares used to compute earnings per share — basic

Conversion of Class B to Class A common shares outstanding

Effect of dilutive stock options and RSUs

Weighted average number of shares used to compute earnings per share —

Weighted average number of shares used to compute earnings per share — diluted

Earnings per share:

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Year Ended December 31,

Stock options to purchase common shares

Stock options to purchase Class A

and Class B common stock, and RSUs

Stock Repurchase Program

In August 2023, our board of directors authorized a stock repurchase program of up to $ 100 million of our outstanding Class A common stock.

The timing and amount of any stock repurchases is determined based on market conditions, stock price and other factors, and the program does not require us to repurchase any specific number of shares of Class A common stock.

The program has no expiration date but it may be modified, suspended or terminated at any time.

The stock repurchase program is funded from available cash and cash equivalents.

All repurchased shares under the share repurchase program will be retired.

During 2023, we repurchased and retired 2,198,854 shares of Class A common stock for a total cost of $ 30.6 million, exclusive of broker fees and excise tax, at an average price of $ 13.91 per share.

Broker fees and excise taxes incurred on share repurchases represent direct costs of the repurchase and are recorded as part of the cost basis.

Segment Information

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During the years ended December 31, 2023, 2022 and 2021, 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):

The following tables summarize our net sales and gross profit for each of our reportable segments (in thousands):

Year Ended December 31,

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Salaries and related benefits

Legal matters

Selling and distribution

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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, 2023.

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.

Management’s Report on Internal Control over Financial Reporting

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.

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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, 2022, based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

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, 2023, 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, 2023.

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OTHE R INFORMATION

Securities Trading Plans of Directors and Executive Officers

During our last fiscal quarter, the following directors and officers, as defined in Rule 16a-1(f), adopted a “Rule 10b5-1 trading arrangement” as defined in Regulation S-K Item 408, as follows:

On December 11, 2023 , MMMK Development, Inc., or MMMK Development, an entity controlled by our co-chief executive officers , Mike Karanikolas and Michael Mente , adopted a Rule 10b5-1 trading arrangement providing for the sale from time to time of an aggregate of up to 4,813,100 shares of our Class A common stock.

The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c).

The duration of the trading arrangement is until November 29, 2024 , or earlier if all transactions under the trading arrangement are completed.

During our last fiscal quarter, no other director or officer, as defined in Rule 16a-1(f), adopted or terminated a “Rule 10b5-1 trading arrangement” or a “non-Rule 10b5-1 trading arrangement,” each as defined in Regulation S-K Item 408.

DISCL OSURE REGARDING FOREIGN JURISDICTIONS THAT PREVENT INSPECTIONS

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The information required under this Item is incorporated herein by reference to the information set forth in the Proxy Statement.

PRINCIPAL ACCOU NTING FEES AND SERVICES

PRINCIPAL ACCOU NTANT FEES AND SERVICES

The information required under this Item is incorporated herein by reference to the information set forth in the Proxy Statement.

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(a) Financial Statements.

Our Consolidated Financial Statements listed in the “Index to Consolidated Financial Statements”

under Part II, Item 8 of this report.

Our Consolidated Financial Statements listed in the “Index to Consolidated Financial Statements” under Part II, Item 8 of this report.

(b) Financial Statement Schedules .

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Description of Securities

February 23, 2023

Form of Director and Executive Officer Indemnification Agreement

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October 9, 2018

LIBOR Transition Amendment, dated as of May 11, 2023, to 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.

August 2, 2023

Subsidiaries of the Registrant

February 28, 2022

Consent of KPMG LLP, Independent Registered Public Accounting Firm

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Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Compensation Recovery Policy

Inline XBRL Instance Document

Inline XBRL Taxonomy Extension Schema Linkbase Document

Inline XBRL Taxonomy Extension Calculation Linkbase Document

Inline XBRL Taxonomy Definition Linkbase Document

Inline XBRL Taxonomy Extension Label Linkbase Document

Inline XBRL Taxonomy Extension Presentation Linkbase Document

Inline XBRL Taxonomy Extension Schema With Embedded Linkbase Documents

Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

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February 27, 2024

/s/ Jennifer Baxter Moser

February 27, 2024

Jennifer Baxter Moser

/s/ Oana Ruxandra

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data