Reformation — Third Quarter Fiscal 2026 Earnings Summary

Financial Performance:

• Net revenue increased 19.1% year-over-year to $173.6 million.
• Direct-to-consumer (DTC) net revenue grew 16.7% to $152.8 million.
• Wholesale and Other net revenue grew 40.8% to $20.8 million.
• Gross margin expanded 252 basis points to 60.4% (from 57.9% in Q3 FY25), driven by lower average tariff rates, higher average unit retail, and approximately 50 basis points in IEEPA tariff-related net refunds from vendors.
• Total operating expenses increased 31.3% to $97.5 million, or 56.1% of net revenue.
• Marketing expenses increased 20.0% to $14.6 million (8.4% of net revenue, flat year-over-year).
• SG&A expenses increased 33.5% to $82.8 million, primarily due to $10.5 million in IPO-related stock-based compensation, higher shipping expenses, and costs associated with new stores and public company operations.
• Net loss was $(1.1) million, or $(0.02) per share, compared to net income of $5.0 million, or $0.10 per share, in the prior-year period.
• The effective tax rate was 165.9%, driven by discrete tax impacts related to limitations on the deductibility of executive compensation following the IPO.
• Adjusted EBITDA grew 64.2% to $23.1 million, with an adjusted EBITDA margin of 13.3% (up 366 basis points year-over-year).
• Cash and cash equivalents totaled $97.7 million; total net debt was $36.2 million.
• Inventory increased to $83.8 million from $61.6 million in the prior year, attributed to strategic raw material holdings, seasonal builds, and new store openings.
• Deferred revenue was $6.0 million (current) and $5.8 million (non-current).

Guidance and Future Outlook:

• Raised full-year Fiscal 2026 net revenue guidance to $610 million–$612 million, representing 20%–21% growth (previously $602 million–$606 million).
• Raised full-year Fiscal 2026 Adjusted EBITDA margin guidance to approximately 14.2%, at the high end of the previous range.
• Capital expenditures for the full year are expected to be $26 million–$27 million, primarily for 16 planned new store openings.
• The Company expects to end Fiscal 2026 with 80 retail stores globally.

Business Segments and Product Lines:

• International revenue increased 24.7% to $36.4 million, driven by growth across focus markets and retail footprint expansion.
• U.S. revenue increased 17.7% to $137.2 million.
• Active customers increased 23.4% to 1.25 million.
• DTC Net Revenue per Customer declined 0.5% to $419, reflecting accelerated growth in new customers with lower initial spend levels.
• Opened seven stores during the quarter, including the reopening of the Palisades store, bringing the total to 77 retail stores globally.
• Wholesale growth was driven by increased demand from existing partners.

Market and Competitive Landscape:

• The Company reported its 22nd consecutive quarter of double-digit revenue growth.
• Management highlighted significant white space ahead in a large global market and the durability of the business model.
• The brand operates retail stores across the US, UK, Canada, and France, and serves over 150 countries via e-commerce.

Risks and Challenges:

• Risks include general economic conditions, consumer discretionary spending, seasonality, and competition in the apparel industry.
• Potential impacts from tariffs imposed by the U.S. government or a global trade war.
• Challenges related to attracting and retaining customers, maintaining brand value, and accurately forecasting demand.
• Risks associated with leasing property, sustainability targets, supplier reliance, and intellectual property protection.
• The Company noted the challenge in reconciling non-GAAP financial outlooks to GAAP measures due to the difficulty in quantifying foreign currency fluctuations, taxes, and increased tariffs.

Management Commentary and Tone:

• CEO Hali Borenstein stated that strong Q3 results reflect the durability of the business and momentum across strategic growth pillars.
• Management emphasized the combination of a powerful brand, differentiated operating model, and significant white space as positioning factors for continued double-digit growth.
• The tone remains focused on delivering against long-term objectives to drive sustainable profitability and shareholder value.

Other Key Points:

• The Company completed its Initial Public Offering (IPO) during the period, resulting in significant stock-based compensation expenses and tax impacts.
• Financing activities included proceeds from the IPO ($132.2 million net), proceeds from a term loan ($89.2 million), and repayment of term loans ($114.1 million).
• The Company paid dividends of $88.2 million during the period.
• Payments for repurchase of common stock totaled $2.7 million.
• Stock-based compensation expense was $35.4 million for the 39 weeks ended September 26, 2026, compared to $0.9 million in the prior year.
• A loss on extinguishment of debt of $2.2 million was recorded for the 39 weeks ended September 26, 2026.
• The conference call to discuss results was scheduled for November 5, 2026, at 5:00 p.m. ET.