What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-02-25 compared with 2025-02-25 · 94 added, 67 removed, 375 unchanged (30% of the section changed)

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REVOLVE is the next-generation fashion retailer for Millennial and Generation Z consumers.

As a trusted premium lifestyle brand and a go-to online source for discovery and inspiration, we deliver exceptional service and an engaging customer experience with a vast yet curated offering totaling over 110,000 apparel and footwear styles, as well as beauty, accessories and home products.

As a trusted premium lifestyle brand and a go-to online source for discovery and inspiration, we deliver exceptional service and an engaging customer experience with a vast yet curated offering totaling over 140,000 apparel and footwear styles, as well as beauty and accessories.

Our dynamic platform connects a deeply engaged community of millions of consumers, thousands of global fashion influencers and over 1,600 emerging, established and owned brands.

Through more than 20 years of continued investment in technology, data analytics and innovative marketing and merchandising strategies, we have built a powerful platform and brand that we believe is connecting with the next generation of consumers and is redefining fashion retail for the 21st century.

Through more than 20 years of investment in technology, data analytics and innovative marketing and merchandising strategies, we have built a powerful platform and brand that we believe is connecting with the next generation of consumers and is redefining fashion retail.

We sell merchandise through two complementary segments, REVOLVE and FWRD, that leverage one platform.

Through REVOLVE, we offer an assortment of premium apparel, footwear, beauty, accessories and home products from emerging, established and owned brands.

Through REVOLVE, we offer an assortment of premium apparel, footwear, beauty and accessories from emerging, established and owned brands.

Through FWRD, we offer an assortment of curated and elevated iconic and emerging luxury brands.

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Gross margin is impacted by the mix of sales at full price and markdowns, as well as the level of markdowns.

Gross margin is also impacted by inbound freight costs and the level of tariffs and duties placed on imported products.

In the near-term, given the significant increase in tariff rates on imported products from April 2, 2025 through February 20, 2026, particularly from China, our gross margin may be adversely impacted by the effects of tariffs, though any long-term impact remains unclear.

See the section titled “—Factors Affecting Our Performance—Overall Economic Trends.”

Certain of our competitors and other retailers report cost of sales differently than we do.

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(1) Includes legal and professional service fees related to potential and consummated strategic acquisitions and investments.

(2) Non-routine items in 2024 included a $2.0 million non-routine loss related to a shipment theft incident, which we expect to recover in full through our insurance in future periods, and a $0.5 million charge for a settled matter related to non-routine import and export fees.

(2) Non-routine items in 2025 primarily represent an accrual for certain pending legal matters.

Non-routine items in 2024 included a $2.0 million non-routine loss related to a shipment theft incident, which was recovered in full through our insurance in 2025, and a $0.5 million charge for a settled matter related to non-routine import and export fees.

Non-routine items in 2023 included $7.5 million in legal fees and charges for two separate settled legal matters and $2.8 million related to non-routine import and export fees.

Non-routine items in 2022 included $6.3 million in legal fees and charges for a settled legal matter and $0.1 million in other non-routine items.

Free Cash Flow

To provide investors with additional information regarding our financial results, we have also disclosed in the table above and elsewhere in this report free cash flow, a non-GAAP financial measure that we calculate as net cash provided by operating activities less cash used in purchases of property and equipment and purchases of rental product.

We have provided below a reconciliation of free cash flow to net cash provided by operating activities, the most directly comparable GAAP financial measure.

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Because of these limitations, you should consider free cash flow alongside other financial performance measures, including net cash provided by operating activities, purchases of property and equipment and our other GAAP results.

The following table presents a reconciliation of free cash flow to net cash provided by operating activities, as well as information regarding net cash used in investing activities and net cash (used in) provided by financing activities, for each of the periods indicated:

The following table presents a reconciliation of free cash flow to net cash provided by operating activities, as well as information regarding net cash used in investing activities and net cash used in financing activities, for each of the periods indicated:

Year Ended December 31,

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Purchases of property and equipment

Purchases of rental product

Purchases of rental product, net of proceeds from the sale of rental product

Free cash flow

Net cash used in investing activities

Net cash (used in) provided by financing activities

Net cash used in financing activities

Active Customers

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We define average order value as the sum of the total gross sales from our sites in a given period, prior to product returns, divided by the total orders placed in that period.

In 2024, average order value for merchandise sold through the REVOLVE and FWRD segments was approximately $281 and $666, respectively, reflecting the brands sold and typical profile of the shoppers on such sites.

We believe our high average order value demonstrates the premium nature of our product assortment.

In 2025, average order value for merchandise sold through the REVOLVE and FWRD segments was approximately $279 and $640, respectively, reflecting the brands sold, category mix and typical profile of the shoppers on such sites.

We believe that average order value is a measure that is useful to investors and management in understanding our ongoing operations and in analysis of ongoing operating trends.

Average order value varies depending on the site through which we sell merchandise, the percentage of sales at full price, and for sales at less than full price, the level of markdowns on these products, product mix, and the number of units per order.

Average order value increased during 2024 as compared to 2023, primarily due to a higher percentage of sales at full price.

Average order value can be adversely impacted by negative consumer sentiment, including as a result of tariffs.

A shift in product mix toward lower-priced products or categories may also reduce our average order value.

In the near-term, average order value may decrease year-over-year given the challenging macroeconomic environment, as customers seek to purchase products at more accessible price points.

We expect this potential decrease to be at least partially offset by price increases as a result of the actual or anticipated effects of incremental tariffs that were in effect at various times and rates over the course of 2025 and early 2026, though any long-term impact remains unclear.

The impact of tariffs may also impair comparability of average order value with prior periods.

See the section titled “—Factors Affecting Our Performance—Overall Economic Trends.”

Average order value decreased slightly during 2025 as compared to 2024, primarily due to a lower average selling price and a shift in product mix.

Factors Affecting Our Performance

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The overall economic environment and related changes in consumer behavior have a significant impact on our business.

In general, positive conditions in the broader economy promote customer spending on our sites, while economic weakness, which generally results in a reduction of customer spending, may have a more pronounced negative effect on spending on our sites.

Macro factors that can affect consumer confidence, shopping behavior and spending patterns, and thereby our near-term and long-term results of operations, include inflation levels, employment rates, business conditions, changes in the housing market, changes in the stock market, adverse developments affecting the financial services industry, the availability of credit, resumption of student loan payments, U.S.

government stimulus payments, interest rates, foreign currency exchange rates, fuel, energy and raw material costs, supply chain

challenges, and wars and geopolitical tensions.

In general, positive conditions in the broader economy promote customer spending on our sites, while

economic weakness, which generally results in a reduction of customer spending, may have a more pronounced negative effect on spending on our sites.

Macro factors that can affect consumer confidence, shopping behavior and spending patterns, and thereby our near-term and long-term results of operations, include tariffs imposed by the U.S.

or foreign governments or a global trade war, inflation levels, employment rates, business conditions, changes in the housing market, changes in the stock market, adverse developments affecting the financial services industry, the availability of credit, resumption of student loan payments, interest rates, foreign currency exchange rates, fuel, energy and raw material costs, supply chain challenges, and wars and geopolitical tensions.

In addition, during periods of low unemployment, we generally experience higher labor costs.

For example, since February 2025, the U.S.

government has imposed incremental tariffs on most goods imported from China, from which we source a significant portion of our products, subject to certain exceptions.

At various points in 2025, the total tariff rate on our goods imported from China reached 152.5%.

These tariffs are in addition to a pre-existing Section 301 tariff of 7.5% and baseline Harmonized Tariff Schedule, or HTS, tariffs, which vary by product.

In addition, U.S.

tariffs on goods imported from certain other countries from which we source products included an incremental reciprocal tariff of 10% imposed since April 2025.

Since August 7, 2025, higher reciprocal tariff rates for many U.S.

trading partners, including countries such as Japan, Turkey, Indonesia and India, had been imposed pursuant to additional executive orders modifying the reciprocal tariff rates for certain countries.

Products of India also have been targeted since August 2025 with a current rate of 18%.

On February 20, 2026, the Supreme Court of the United States of America ruled against President Trump’s use of the International Emergency Economic Powers Act, or IEEPA, to impose tariffs on global trade partners, effective immediately.

The impact of this decision on previous tariffs that we have paid is undetermined while the case is returned to the Court of International Trade for reconsideration in accordance with the Supreme Court ruling.

Heightened tariffs, particularly on Chinese goods, directly impact our owned brand products and, to a lesser extent, a limited number of third-party branded products for which we are the importer of record.

In addition, we face various indirect exposures to the effects of heightened tariffs from other third-party brands.

tariffs on China or other countries from which we source products are reinstated or are increased further, it will increase our cost of sales and may also increase the price of our products.

Raising prices of our products could adversely impact customer demand.

In addition, heightened tariffs may adversely impact our ability to acquire products on acceptable terms and may also adversely impact global logistics, which may result in our inability to purchase sufficient inventory to meet customer demand and in turn materially and adversely impact our net sales.

Furthermore, these and future changes in trade policy may adversely impact the macroeconomic environment, consumer sentiment and international demand if consumers outside of the United States boycott U.S.

If we are not able to adjust our inventory levels and our inventory assortment in response to reduced customer demand, our gross margin may be adversely impacted.

We are undertaking a series of actions and initiatives to mitigate the impact of heightened tariffs, including cost-sharing discussions with our owned brand manufacturing partners, diversifying our owned brand manufacturing sources outside of China, partnering with our third-party brands to mitigate the impact of tariffs, optimizing our product import logistics, selectively increasing prices for our products and further optimizing our supply chain.

However, our mitigation efforts may be costly and may not yield near-term results or be as effective as we intend, or at all, and may have other negative impacts on our business, operations and financial condition.

See the sections titled “Risk Factors—Risks Related to Our Business and Industry—Tariffs imposed by the U.S.

or foreign governments have increased and may in the future continue to increase the cost of our products, which could ignite a global trade war and have a material adverse effect on our business, financial condition and results of operations” and “—We purchase inventory in anticipation of sales, and if we are unable to manage our inventory effectively, our operating results could be adversely affected.”

Customer Acquisition and Growth in Brand Awareness

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If our marketing efforts do not connect with our customer or fail to cost-effectively promote our brands or convert impressions into new customers, our net sales growth and profitability will be adversely affected.

Competition for social media and influencer-based marketing channels continues to increase, making it more difficult to differentiate ourselves and cost-effectively acquire customers.

Furthermore, changes in the user experience on social media platforms, including a shift towards video and the level of recommended content as well as changes in privacy practices by third parties, may make it more difficult to gain customer awareness and cost effectively acquire and retain customers.

The social media and influencer-based marketing landscape continues to shift and competition remains intense, which may

adversely impact our ability to differentiate ourselves and cost-effectively acquire and retain customers.

Furthermore, changes in the user experience on search, social media and other platforms, including recent developments in artificial intelligence, or AI, and the introduction of large language models, or LLMs, a shift towards video and the level of recommended content as well as changes in privacy practices by third parties, may make it more difficult to gain customer awareness and cost-effectively acquire and retain customers.

For example, in March 2025, Google introduced an experimental AI mode within its search platform and other platforms have or may in the future launch similar functionality, which may change consumer search behavior and affect our ability to cost-effectively acquire and retain customers.

Additionally, Apple Inc.

has imposed requirements for consumer disclosures regarding privacy practices, and has implemented an application tracking transparency framework that requires opt-in consent for certain types of tracking.

This transparency framework was launched in April 2021 and has made it more difficult and costly to acquire and retain customers.

Additionally, in June 2023, Apple announced new software development kit, or SDK, privacy controls that it has integrated into iOS 17, which was released in September 2023, including new protections designed to limit tracking or identification of user devices.

introduced new SDK privacy controls in 2023 that it integrated into iOS 17, including new protections designed to limit tracking or identification of user devices.

has also updated Apple Mail, including automated inbox categorization, sender-level grouping, and AI-generated email previews.

These changes may reduce the visibility and effectiveness of our email communications, which could negatively impact customer engagement and, over time, affect customer retention.

In February 2022, Google announced its Privacy Sandbox initiative for Android, a multi-year effort expected to restrict tracking activity and limit advertisers’ ability to collect app and user data across Android devices, and in July 2024, announced its change from a previously-announced plan to stop supporting third-party cookies in its Google Chrome browser as a part of this initiative.

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Cohort net sales retention rate is calculated as net sales attributable to a given customer cohort divided by the total net sales attributable to the same customer cohort from one year prior.

Cohort net sales retention rate was 85% in 2024 compared to 77% in 2023, 97% in 2022, 120% in 2021 and 74% in 2020.

sales retention rate was 89% in 2025 compared to 85% in 2024, 77% in 2023 and 97% in 2022.

If we are unable to maintain our historically strong retention rates, our operating results could be adversely impacted.

The variability in our cohort net sales retention rates in 2020 to 2024 is a departure from our consistent retention rates in prior years, which we attribute primarily to external economic factors.

In 2020, our cohort net sales retention rate was negatively impacted by COVID-19 headwinds before recovering very strongly in 2021 and, to a lesser extent, in 2022.

We believe our cohort net sales retention rate in 2024 began to normalize following the resurgence of consumer spending on fashion apparel in 2021 and 2022, coupled with a more challenging macroeconomic environment in 2023.

Due to the variability in our retention rates in recent years, which was primarily driven by external economic factors, we believe the average of our cohort net sales retention rates from 2020 to 2024 is a relevant measure for benchmarking our performance in retaining customers.

The average cohort net sales retention rate for 2020-2024 was 89%, consistent with the 89% net sales retention rate reported in 2019.

Merchandise Mix

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The brands we sell on our platform consist of a mix of emerging third-party, established third-party (including iconic luxury brands) and owned brands.

Our product mix consists primarily of apparel, footwear, beauty, accessories and home products.

Our product mix consists primarily of apparel, footwear, beauty and accessories.

Our merchandise mix across our two reporting segments carry a range of margin profiles and may cause fluctuations in our gross margin.

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During 2025 and 2024, REVOLVE generated $1,054.0 million and $970.5 million in net sales, respectively, representing an increase of 8.6%.

The net sales increase in 2024 compared to 2023 was primarily due to an increase in average order value combined with a lower proportion of returned purchases and an increase in the number of orders shipped.

The net sales increase in 2025 compared to 2024 was primarily due to an increase in the number of orders shipped and a lower proportion of returned purchases.

The FWRD segment contributes to a smaller portion of our overall net sales, representing 14.0% and 14.1% of our net sales for 2025 and 2024, respectively.

During 2024 and 2023, FWRD generated $159.4 million and $164.2 million in net sales, respectively, representing a decrease of 2.9%.

The net sales decrease in 2024 compared to 2023 was primarily due to a decrease in the number of orders shipped.

During 2025 and 2024, FWRD generated $171.6 million and $159.4 million in net sales, respectively, representing an increase of 7.7%.

The net sales increase in 2025 compared to 2024 was primarily due to an increase in the number of orders shipped, partially offset by a lower average order value.

Net sales to customers in the United States contributed to 79.3% and 80.0% of our net sales for 2025 and 2024, respectively.

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In addition, any weakening of a local currency versus the U.S.

dollar results in our products becoming more expensive in that local currency, which has had, and may continue to have, a negative impact on demand for our products in the geographies that use such currency.

dollar results in our products becoming more expensive in that local currency, which at times has had, and may continue to have, a negative impact on demand for our products in the geographies that use such currency.

Seasonality in our business has not historically followed that of traditional retailers which typically experience concentration of net sales in the fourth quarter in connection with the holidays.

Our operating income has also been affected by these historical trends because many of our expenses are relatively fixed in the short term.

If our growth rates moderate over the long-term, the impact of these seasonality trends on our results of operations may become more pronounced.

Our seasonality trends have also been impacted by macroeconomic conditions described in “—Overall Economic Trends” above.

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Components of Our Results of Operations

Net sales consist primarily of sales of women’s apparel, footwear, beauty, accessories and home products.

Net sales consist primarily of sales of apparel, footwear, beauty and accessories.

We recognize product sales at the time control is transferred to the customer, which is when the product is shipped.

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Net sales are primarily driven by growth in the number of our customers, the frequency with which customers purchase, the proportion of returned merchandise and average order value.

Net sales may be impacted by tariffs and other changes to trade policy, particularly in the near term.

See the section titled “—Factors Affecting Our Performance—Overall Economic Trends.”

Cost of Sales

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We expect our cost of sales to fluctuate as a percentage of net sales primarily due to how we manage our inventory and merchandise mix.

We have recently experienced and may continue to experience an increase in the cost of goods due to an increase in the cost of materials.

We have recently

experienced and may continue to experience an increase in the cost of goods due to an increase in the cost of materials and as a result of increased tariffs, particularly on products with a China origin.

Fulfillment Expenses

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Marketing Expenses

Marketing expenses consist primarily of targeted online performance marketing costs, such as paid search/product listing ads, affiliate marketing, paid social, retargeting, search engine optimization, personalized email

and SMS marketing and mobile “push” communications through our mobile applications.

Marketing expenses consist primarily of costs to execute targeted marketing campaigns across free and paid channels, such as paid search/product listing ads, affiliate marketing, paid social, retargeting, search engine optimization, personalized email and SMS marketing, and mobile “push” communications through our mobile applications.

Marketing expenses also consist of investment in brand marketing channels, including events, payments to influencers and other forms of online and offline marketing.

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Over the long-term, we expect general and administrative expenses to continue to increase in absolute dollars to support business growth with general and administrative expenses as a percentage of net sales declining over the long-term as we leverage our investments and as our business scales.

General and administrative expenses as a percentage of net sales may also increase if we are unable to adjust our cost structure for changes in customer demand and net sales.

Other Income, Net

Other income, net consists primarily of interest income on our money market funds, partially offset by foreign currency exchange gains and losses and fees associated with our line of credit.

For 2025, other income, net includes $4.5 million of insurance proceeds related to a previously disclosed shipment theft incident and a $2.4 million loss on deconsolidation of a subsidiary.

For 2024 and 2023, other income, net also includes $2.8 million and $5.1 million of insurance proceeds related to settled legal matters, respectively.

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(dollars in thousands)

The increase in net sales for 2024 compared to 2023 was primarily due to a lower proportion of returned purchases, a 1.9% increase in the number of orders shipped, and a 1.7% increase in the average order value.

The increase in net sales for 2025 compared to 2024 was primarily due to a 6.9% increase in the number of orders shipped combined with a lower proportion of returned purchases, partially offset by a 1.0% decrease in the average order value.

Net sales in the REVOLVE segment increased 8.6% to $1,054.0 million in 2025 compared to net sales of $970.5 million in 2024.

Net sales generated from our FWRD segment decreased 2.9% to $159.4 million in 2024 as compared to net sales of $164.2 million in 2023.

Net sales generated from our FWRD segment increased 7.7% to $171.6 million in 2025 as compared to net sales of $159.4 million in 2024.

Cost of Sales

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Percentage of net sales

The increase in cost of sales in 2024, as compared to 2023, was primarily due to an increase in net sales and an increase in inbound shipping expenses to receive product merchandise from vendors.

The decrease in cost of sales as a percentage of net sales was primarily due to a higher percentage of full price sales, partially offset by increased inbound shipping rates and a higher mix of third-party brand sales.

The increase in cost of sales in 2025, as compared to 2024, was primarily due to an increase in net sales.

The decrease in cost of sales as a percentage of net sales was primarily due to a lower mix of third-party brand sales and shallower markdowns within markdown sales, partially offset by a lower percentage of full price sales and the impact of increased import tariff rates.

Fulfillment Expenses

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Percentage of net sales

Fulfillment expenses in 2024 were higher as compared to 2023, primarily due to increased occupancy costs, partially offset by efficiencies gained from successful expansion and optimization of our fulfillment network.

The decrease in fulfillment expenses as a percentage of net sales was primarily due to an increase in average order value and a lower proportion of returned purchases.

The increase in fulfillment expenses in 2025, as compared to 2024, was primarily due to an increase in the number of units processed.

The decrease in fulfillment expenses as a percentage of net sales was primarily due to a lower proportion of returned purchases, partially offset by a decrease in average order value.

Selling and Distribution Expenses

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Percentage of net sales

The decrease in selling and distribution expenses in 2024, as compared to 2023, was primarily due to a $7.1 million decrease in shipping and handling costs, a $0.4 million decrease in other selling expenses, partially offset by a $5.6 million increase in merchant processing fees.

The decrease in selling and distribution expenses as a percentage of net sales was primarily due to lower shipping rates, lower proportion of returned purchases and higher average order value, partially offset by higher merchant processing fees.

The increase in selling and distribution expenses in 2025, as compared to 2024, was primarily due to increases in orders placed and net sales that resulted in a $8.1 million increase in shipping and handling costs, a $2.4 million increase in customer service expenses, a $2.2 million increase in merchant processing fees and a $1.8 million increase in other selling expenses.

The decrease in selling and distribution expenses as a percentage of net sales was primarily due to efficiencies gained in our shipping logistics and lower proportion of returned purchases, partially offset by lower average order value.

Marketing Expenses

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Percentage of net sales

The decrease in marketing expenses in 2024, as compared to 2023, was primarily due to a $8.7 million decrease in brand marketing expense, partially offset by a $4.1 million increase in performance marketing expense.

The decrease in marketing expenses as a percentage of net sales was due to efficiencies in our brand marketing and performance marketing investments.

The increase in marketing expenses in 2025, as compared to 2024, was due to a $16.5 million increase in performance marketing expense, partially offset by a $8.3 million decrease in brand marketing expense.

The decrease in marketing expenses as a percentage of net sales was primarily due to efficiencies in our brand marketing investments.

General and Administrative Expenses

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Percentage of net sales

The increase in general and administrative expenses in 2024, as compared to 2023, was due to a $7.9 million increase in salaries and related benefits, a $6.0 million increase related to professional services and other occupancy costs, a $4.2 million increase in equity-based compensation expense, a $1.1 million increase in studio and design costs and a $4.2 million increase in other operating expenses and transaction costs, partially offset by a $7.9 million decrease in non-routine expenses.

The increase in general and administrative expenses as a percentage of net sales was driven by growth in general and administrative expenses outpacing growth in net sales.

The increase in general and administrative expenses in 2025, as compared to 2024, was primarily due to a $7.2 million increase related to professional services and other occupancy costs, a $5.0 million increase in salaries and related benefits and equity-based compensation expense, a $0.7 million increase in non-routine and transaction costs and a $2.0 million increase in other operating expenses.

The slight increase in general and administrative expenses as a percentage of net sales was driven by increased investment in strategic growth initiatives and an increase in non-routine and transaction costs.

Year Ended December 31,

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Effective tax rate

The decrease in the effective tax rate for 2024 compared to 2023 was primarily due to an increase in excess tax benefits related to the exercise of non-qualified stock options, partially offset by a lower proportion of foreign-derived intangible income and an increase in disallowed expenses related to Section 162(m) of the Internal Revenue Code for covered employee's compensation.

The increase in the effective tax rate in 2025, as compared to 2024, was primarily due to a decrease in excess tax benefits related to the exercise of non-qualified stock options.

Liquidity and Capital Resources

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Sources of Liquidity

Since our inception, we have financed our operations and capital expenditures primarily through cash flows generated by operations, private sales of equity securities, the incurrence of debt, the net proceeds we received through our IPO, as well as proceeds received from the exercise of stock options.

Since our inception, we have financed our operations and capital expenditures primarily through cash flows generated by operations and to a much lesser extent private sales of equity securities, the incurrence of debt, the net proceeds we received through our IPO, as well as proceeds received from the exercise of stock options.

Line of Credit

On March 23, 2021, we amended and restated our 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.

On February 2, 2026, we amended our existing credit agreement to, among other things, extend the maturity date from March 23, 2026 to February 2, 2031.

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 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.

Borrowings under the credit agreement accrue interest at a per annum rate equal to, at our option, (1) a base rate equal to the highest of (a) the federal funds rate, plus 0.50%, (b) the prime rate and (c) a term SOFR rate determined on the basis of a one-month interest period, plus 1.00%, or (2) a 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, depending upon availability under the credit agreement as of the most recently ended fiscal quarter.

No borrowings were outstanding as of December 31, 2025 and 2024.

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 $10.0 million and in increments of $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.

Our obligations under the credit agreement are secured by substantially all of our assets and the assets of our subsidiaries that are borrowers or guarantors under the credit agreement.

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, 2024 and 2023.

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

We are also required to maintain a minimum consolidated fixed charge coverage ratio of 1.00 to 1.00 for any twelve consecutive fiscal month period, determined as of the last date of each fiscal quarter.

Our short-term and long-term liquidity requirements primarily arise from operating costs such as merchandise purchases, compensation and benefits, lease obligations, marketing and other expenditures necessary to support our business growth.

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Net cash used in investing activities

Net cash (used in) provided by financing activities

Net cash used in financing activities

Net Cash Provided by Operating Activities

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We generated $59.4 million of operating cash flow in 2025 compared to $26.7 million in 2024.

The decrease in our operating cash flow was primarily due to negative impact from changes in working capital, partially offset by higher net income adjusted for certain non-cash items.

The increase in our operating cash flow was primarily due to higher net income adjusted for certain non-cash items and positive impact from changes in working capital.

Net Cash Used in Investing Activities

In addition, for 2024, our investing activities included purchases of rental product and cash paid for an acquisition.

Our primary investing activities have consisted of purchases of property and equipment to support our fulfillment centers and our overall business growth and internally developed software for the continued development of our proprietary technology infrastructure, leasehold improvements in our retail store locations, purchases of rental product and proceeds from sale of rental product.

Purchases of property and equipment may vary from period-to-period depending on the timing and extent of the expansion of our operations.

Net cash used in investing activities was $14.9 million and $9.1 million in 2025 and 2024, respectively.

Net Cash (Used in) Provided by Financing Activities

Net Cash Used in Financing Activities

Our financing activities primarily consist of repurchases of our Class A common stock and proceeds from the exercise of stock options, when applicable.

Net cash used in financing activities was $5.4 million in 2024 and was primarily attributable to repurchases of shares of our Class A common stock under our stock repurchase program, partially offset by cash proceeds from the exercise of stock options.

Net cash used in financing activities was $30.4 million in 2023 and was primarily attributable to repurchases of shares of our Class A common stock under our stock repurchase program.

Net cash used in financing activities was $1.4 million in 2025 compared to $5.4 million in 2024 and was primarily attributable to repurchases of shares of our Class A common stock under our stock repurchase program, partially offset by cash proceeds from the exercise of stock options.

Contractual Obligations

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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.

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.

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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 7. Management’s Discussion and Analysis