Good afternoon. My name is Paul, and I'll be your conference operator today. At this time, I would like to welcome everyone to Revolve's Fourth Quarter and Full Year 2021 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions]. Thank you. At this time, I would like to turn the conference over to Erik Randerson, Vice President of Investor Relations at Revolve. Thank you. You may begin.

Good afternoon, everyone, and thanks for joining us to discuss Revolve's fourth quarter and full year 2021 results. Before we begin, I'd like to mention that we have posted a presentation containing Q4 and full year financial highlights to our Investor Relations Web site located at investors.revolve.com. I would also like to remind you that this conference call will include forward-looking statements, including statements related to our current expectations regarding the continued impact of the COVID-19 pandemic on our business, operations and financial results, our growth and market opportunities, our ability to manage through supply chain challenges, our plans to expand our operations footprint and loyalty programs, our marketing investments and events, our merchandise mix, our seasonality pattern, freight costs and our outlook for operating expenses, net sales, gross margin, and effective tax rate. These statements are subject to various risks, uncertainties and assumptions that could cause our actual results to differ materially from these statements, including the risks mentioned in this afternoon's press release as well as other risks and uncertainties disclosed under the caption “Risk Factors” and elsewhere in our filings with the Securities and Exchange Commission, including, without limitation, our annual report on Form 10-K for the year ended December 31, 2020 and our subsequent quarterly reports on Form 10-Q, all of which can be found on our Web site at investors.revolve.com. We undertake no obligation to revise or update any forward-looking statements or information except as required by law. During our call today, we will also reference certain non-GAAP financial information, including adjusted EBITDA and free cash flow. We use non-GAAP measures in some of our financial discussions, as we believe they provide valuable insights on our operational performance and underlying operating results. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for, or superior to, the financial information prepared and presented in accordance with GAAP, and our non-GAAP measures may be different from non-GAAP measures used by other companies. Reconciliations of non-GAAP measures to GAAP measures, as well as the definitions of each measure, their limitations and our rationale for using them, can be found in this afternoon's press release and in our SEC filings. Joining me on the call today are our co-Founders and co-CEOs, Mike Karanikolas and Michael Mente, as well as Jesse Timmermans, our CFO. Following our prepared remarks, we'll open the call for your questions. With that, I'll turn it over to Mike.

Good afternoon, everyone. I'm excited to update you on our exceptional top line growth and profitability in the fourth quarter. Our extraordinary performance capped off a phenomenal year for us, a year in which we outperformed in the face of macro challenges and supply chain headwinds, demonstrating the strength of our brands and great execution by our team. There are three points that I want everyone to walk away with today. First, our business has experienced incredible momentum, as demonstrated by our financial results and key operating metrics. We delivered record results in the fourth quarter, highlighted by net sales of 240 million, an increase of 70% year-over-year and 63% growth on a two-year basis versus the fourth quarter of 2019. This is an acceleration of approximately 5 points compared to the two-year growth rate we reported for the third quarter of 2021. And the outstanding revenue trends have continued through the first seven weeks of the quarter. We also delivered record profitability for our fourth quarter, highlighted by 29 million in net income and 34 million in adjusted EBITDA, with each measure increasing by strong triple digit percentage compared to pre-COVID levels in Q4 of 2019. For the full year in 2021, we achieved record net income of 100 million, almost 3x higher than the net income of 36 million reported in 2019. An exciting driver of our outstanding results was a record increase in active customers. We added 162,000 active customers in the fourth quarter, outpacing our prior record of 124,000 announced just last quarter. Equally important, our rapidly growing base of active customers are increasingly productive in generating orders and net sales, further illustrating our business momentum and increasing consumer engagement across the business. Our customer acquisition and retention efforts were also very efficient in the fourth…

Thanks, Mike. I couldn't be more proud of the team and our performance for the fourth quarter. Our results were nothing short of incredible across the board. Net sales growth in the Revolve segment accelerated for the fourth consecutive quarter to a 68% increase year-over-year. FWRD delivered an even stronger 83% growth in net sales year-over-year in the fourth quarter. To perform this well, while facing serious challenges including a COVID spike, inflation concerns, supply chain delays, labor shortages and major changes in the digital advertising, is astounding. Also exciting is that for the full year in 2021, 87% of our total net sales were at full price. That is 10 points higher than in 2020, and represents the first time the full price mix of net sales exceeded 80% for a full year. Our team deserves a lot of credit for these results, being so agile and decisive during a fluid environment. The competitive differentiators Mike alluded to are built into our DNA have guided us throughout the pandemic and have positioned us for continued success over the long term. It starts with our proprietary technology, data-driven culture, and exceptional team. Our accelerated growth throughout 2021 benefited significantly from having access to the right type of inventory during a time when supply chains were an industry-wide challenge. Our proprietary technology and data-driven approach have been a huge differentiator in this time of disruption. Since we have automated so many aspects of the decision-making process, we can leverage data much faster than others to identify trends and make merchandizing decisions in a very quick, accurate and efficient way. Reading and reacting quickly to have the right inventory for her needs at the right time has been core to our success over the years and was key to our success in…

Thanks, Michael, and hello everyone. We believe our results throughout 2021 demonstrate the exceptional momentum of our brands, our competitive differentiation and our focus on operational excellence. I'll start by recapping the fourth quarter results, highlighted by continued acceleration in our top line growth and record growth in active customers. Net sales were $240 million, a year-over-year increase of 70%, and reflect a two-year growth rate of 63% compared to the fourth quarter of 2019. This two-year growth rate is 5 points higher than the 58% two-year growth rate that we reported for the third quarter of 2021. Both segments contributed to our exceptional growth. Revolve segment net sales increased 68% and FWRD segment net sales increased 83% year-over-year in the fourth quarter. From a merchandizing standpoint, triple digit growth in dresses was a notable contributor to our accelerated growth in net sales during the fourth quarter. And yet, the net sales mix of dresses remains well below pre-COVID levels, which illustrates how successful we have been in driving rapid growth across a wide range of categories. Also notable is that owned brands as a percentage of Revolve segment net sales increased year-over-year for the first time in two years. We continue to expect the owned brands mix of Revolve segment net sales to trend higher in 2022, increasing from the owned brand mix of 20% we achieved for the full year of 2021. By territory, both domestic and international markets contributed to the strong top-line results. Active customers increased by an exceptional 162,000 compared to the third quarter of 2021, handily outpacing the prior record performance announced just last quarter. This expanded our active customer count to 1.8 million, an increase of 25% year-over-year. This expansion was driven by record new customer additions as well as record retention rates.…

[Operator Instructions]. Your first question comes from the line of Erinn Murphy with Piper Sandler. Your line is open.

Great. Thank you. Good afternoon and congratulations on a great end to 2021. Two questions, if I may. First, just as we think about the category performance going forward following two years of the global pandemic, can you talk a little bit more about what you're expecting between casual denim dresses in the forward business? And then how are you thinking about the return rate into 2022? And then I've got one follow up. Thank you.

When it comes to category mix right now -- this is Michael Mente. Hi, Erinn. We’re seeing strong strength across the board in all categories. Our going out categories are particularly strong right now, especially on a year-over-year basis compared to the depths of the pandemic and such. But we're seeing strong growth with some of these categories as [indiscernible] that were kind of stay-at-home categories, like beauty. So across the board, we see great strength and looking to hope to continue the strength.

Great. And then -- yes, keep going.

So sorry, Mike here. With regards to return rates, we've seen that uptick in recent quarters. And we do expect that trend to continue. But we also expect it to level off throughout the year. But just as things continue to reopen up and consumer trends get back to where they were pre-pandemic, we expect to see further uptakes there. And as well, we continue to invest in our international territories, making it easier and easier to return items, which we think is key to our long-term success.

Great. And then my second kind of key question is just on own brands, that 20% now. Do you see this going towards prior peak over the next couple of years? And if so, wouldn't your gross margin be structurally higher over time? Thank you.

Yes, maybe I'll jump in on this one. This is Jesse. So yes, growth in the owned brands, especially this last quarter, was the first increase that we've seen in the last couple of years, and we do expect it to move moderately higher in 2022. And we want to use that moderately carefully. We're trying to do the right thing, focus on quality assortments and the right pace of expansion. So we're not committing to getting back to that 36% peak at any given time. I think we can get to the comparable economics at a lower mix than we were at before. And then maybe on your last point, structurally, yes. The owned brands carry a significantly higher gross margin than a third party. So as owned brands increase, we do expect to see higher gross margin over time. That said, and I know you've commented on this in the last couple of quarters, we do expect that full price to move down this year and approach closer to historical levels. We think we can do better than our previous highs of 79%. But it will come off the highs that we've seen. It already has since Q2. And then that also goes for the depth of markdowns as well. But overall, I feel great about our margin and hitting that 55% long-term target this year, we're really proud of.

Your next question comes from the line of Oliver Chen with Cowen. Your line is open.

Thanks a lot. Congrats on a great quarter. The guidance was very helpful. You’re anniversarying a tougher compare in March. At the same time, you've done a really great job with active customers within the FWRD division as well. So will those help offset a potential deceleration? And then a second question, FWRD has been remarkable. We'd love your thoughts on categories. And if you could just help us compare and contrast your approach to marketing at that division and marketing techniques as well as the percentage of sales as we look ahead to that big long-term opportunity. Thank you.

Yes, definitely. Hi, Oliver. Mike here. So yes, with regards to the momentum of the business, you're absolutely right. There's a ton of things we have that are really working well for us. We think the business is really strong regardless of comps. Active customers are at all-time highs -- active customer adds are at all-time highs, strong acceleration from the previous quarter. So we feel great about the momentum. The FWRD business is strong as well. At the same time, there's such a shift in comps between the first couple of months in the year in March and beyond that it'd be remiss for us not to remind the analyst community of that as far as how it's going to affect the growth rates going forward. From a marketing perspective with FWRD, we're able to leverage a lot of the same techniques and tactics that we built on the Revolve side. And that's something that we're continuing to build. It's something that historically we haven't leveraged as strongly, but we're starting to leverage influencers more strongly on the FWRD side. The new Brand Ambassador program, which has been a huge successful for Revolve, we're looking to roll out [ph] FWRD in the coming months. And then, of course, FWRD just being such an incredible premium positioned brand just opens up all sorts of avenues to market the brand that we're really excited about. And certainly having Kendall Jenner as our Creative Director doesn't hurt.

And one thing I'll say, Oliver, [indiscernible] also seeing strong strength across the board with a very sharp rebound in event-driven categories. But the one thing I didn't mention earlier is that part is particularly exciting as the handbag business for FWRD is quite strong. The Revolve brand name [indiscernible] handbags, that kind of mix really does reside under the FWRD kind of retail brand. So as we continue to migrate the Revolve customer over FWRD, we expect to see continued strength in the handbag category for many quarters to come.

Your next question comes from the line of Seth Sigman with Guggenheim. Your line is open.

Hi, everybody. Thanks for taking the question. As you look at the acceleration of the business and the drivers of outperformance, Mike, I think you've talked about some of the differentiators, which I think makes sense. But do you think there's anything specific or unique to this period that may be helping, maybe better in-stock levels or any other drivers that are perhaps unique to this period? Or you just think good old execution and firing on all cylinders? Thanks.

Definitely. So I think there's some factors. I maybe wouldn't use the word unique to this period, but have contributed to our success in a big way. And I think first off just broadly speaking, Revolve has historically thrived in times of disruption. We're very agile and nimble as an organization. We have a history of really strong execution. And when the environment is tough, we think it's even easier for us in general to put distance between ourselves and the competition. In terms of factors that we've been able to leverage to continue to increase the strength of our brand and gain distance from the competition we think from a brand perspective. Second half of last year really starting in the fall, we put on some incredible brand marketing efforts and certainly some big news with bringing in Kendall Jenner as Creative Director, Revolve Fashion Week. We're incredibly excited to be able to get back to Revolve Festival this upcoming year. So just a lot of momentum there. From an inventory and technology perspective as well as the way in which we present products to our customers and how we personalize the Web site, very significant major upgrades over the past couple of years that have really contributed to our success. So we view it as more part of a longer term path than a continuance of what we've done, but we think we are continuing to gain distance between ourselves and the competition.

Okay, very helpful. Just a follow-up question on the gross margin if you could perhaps bridge the gross margin upside this quarter. Obviously, it came in well ahead of your expectations despite some of those inbound freight pressures that you highlighted. Just more color on perhaps the upside drivers there? And then regarding the outlook, it sounds like you're expecting some normalization in promotional activity. Is that something that you're seeing right now, or just anticipating that throughout the year? Thanks.

Yes. This quarter, it was mostly the full price mix as well as the markdowns continued to perform really well. Now it is down off of the peaks of Q2, but continue to perform really ahead of our expectations and then also the owned brand acceleration in mix slightly ahead. So those are the main contributors on Q4. And then to that earlier point on the full price mix coming down from the peak of Q2. So we are starting to see that and we do anticipate it to continue to shift back towards -- again towards the normal historical norms. And again, we think we can do better than that 79% previous peak. We are really healthy in terms of inventory right now, turns and then also the mix of reorders. And that's coming in part from expansion in breadth. We have a lot more breadth on the site and kind of back to the core, buying broad and shallow and then hitting on those reorders has been phenomenal the past few quarters.

Your next question comes from the line of Michael Binetti with Credit Suisse. Your line is open.

Hi, guys. Congrats on a great quarter. Thanks for all the detail here. I guess can we get -- Jesse, can we get a little more help bridging down the P&L in the first quarter here, maybe down to the EBITDA line? I know you helped us how to think about sales and a little color on gross margin, but maybe some of the other lines if you wouldn't mind? And then, Jesse, I have to ask. So related to the 20% plus revenue guidance for the year, you ended the year with 25% more customers. Mike talks about the cohorts outperforming for the year, you're shipping across -- the consumer shopping across the two different chains now with loyalty working, AOVs are spending higher with dresses and higher price items leading the way. What are we getting back? What are we getting back that will get us down to a 20% revenue growth rate for the year?

Yes. Thanks for that question, Michael. I think what we're trying to say is that we feel really good about our long-term plan, our long-term target of 20%. Now we hope to do better than that. We do have a lot of tailwind, to your point. We had great customer adds on both, on the new customers -- record new customer, also on the retention that we didn't touch on yet in the post call. But retention was a record as well. Full price mix is good. FWRD is hitting on all cylinders. The customer is strong. But it is still very uncertain and I think today's no exception in the market. So, I think it's us just giving caution to that upside on the 20%. So we'll do what we can control, and then kind of the rest we'll deal with. And we've managed through times like this before, so just keep our heads down and execute. And then on kind of full P&L kind of walking through the line items, we talked about margin. Fulfillment is maintaining roughly where we're at. It's reasonable. We get efficiencies with space maximization, continued automation and other efficiencies there. On the flipside, we do have some cost pressures in terms of wages and other input costs on that line item. Selling and distribution is probably the biggest kind of inflation cost pressure line item to focus on. So we closed out the year at 15.9% I think assuming that level or slightly higher for 2022. And again, the biggest piece of this line item is shipping where we're starting to see real pressure on the shipping side, particularly on the surcharges, fuel in particular. So continued pressure on that line item. Marketing, we’ve hit on that, continuing to invest there. There will be some seasonality shifting back closer to the historical pre-COVID norms. We had some great events this quarter, even more coming up in Q2 that Michael touched on. And in G&A, we continue to invest in G&A, building the team, building the support to really drive this top line demand.

Your next question comes from the line of Camilo Lyon with BTIG. Your line is open.

Thanks. Good afternoon. And great to see all the continuing momentum, particularly here in the first quarter. I wanted to delve into that a little bit first, if we could. By the commentary you gave about January and February and the implied March, it sounds like you're anticipating or projecting a flattish sort of March result. But then in the same breadth, we're talking about really the penetration of dresses and going out occasionwear and higher AOVs with new customers that have come on. So kind of in the same vein is the question that Michael asked just a minute ago. Is there something that we're not contemplating that suggests that kind of thinking for that March period is the right way to think about it?

Yes, I'm not going to comment too much on the specifics of March. Maybe just reiterating that continued strength from Q4 into this first seven weeks in the same zone is that Q4 growth. So that momentum continues. Again, the future is uncertain but we continue to -- we have a lot of good stuff lined up for Q1 and into Q2. And again approaching closer to that historical seasonality where we see the build into Q2, the Festival season and summer months. So again, a lot of tailwinds but again some uncertainties out there too that we're being cautious on.

Got it. And then maybe, Jesse, if you could talk about the freight costs that you mentioned and how to think about those in the '22 outlook, and what's really embedded from a perspective of any sort of relief that you are expecting or are you anticipating that the pressures experiencing Q4 persist at that same rate throughout 2022? And if you could actually tell us what that margin impact in Q4 was, that'd be great too.

Yes, we are not baking in any relief in 2022. I think our best guess is that that doesn't happen until 2023. And that freight is sitting on two line items. One is selling and distribution, and that's the most evident. So again, we think we can manage to around that 16% zone, but probably not a lot of benefit there given the pressures. And then in gross margin as well. There's pressure there on the inbound freight, the inbound freight from the 80% that is third party and then also the 20% that is owned brand. And if you look at that owned brand specifically where we have the most direct visibility through the full supply chain, we saw freight costs increase 3x from the pre-COVID levels back in 2019. So that has a real impact on the gross margin, which kind of reverting back to our gross margin point, a lot of tailwinds but we do have some cost pressures there as well. And maybe to your point on the impact on margin and maybe how much this comprises, keeping in mind that we do have the higher price point to that premium product, the freight is increasing but we are more insulated and can manage it maybe better than some of the others that operate at lower price points. So that premium price point, again, allowing us to absorb more of those freight charges without a significant impact.

Your next question comes from the line of Mark Altschwager with Baird. Your line is open.

Thank you. Good afternoon. So you look to be well on your way to eclipse 1 billion in net revenue this year, so clearly a lot of momentum on multiple fronts. I was hoping you could talk more about the investments that are needed to sustain the pace of revenue growth that you've been delivering. Mike, I think you mentioned the technology stack and planned expansion on the fulfillment front. Maybe you could expand on that a bit. And Jesse, maybe speak to the margin implications medium term as you pursue some of those investments.

Yes. So from my perspective, broadly speaking, what we're looking to do is make Revolve the best [indiscernible] for premium fashion, for younger consumers, for next generation consumers. And we think we're the best game in town there. But we want to continue to build on that advantage and get better and better, right. And so just continuing to invest and we've seen the results of our investments over the past couple of years, and we think there's a lot more to invest in, whether it's continuing to invest in the technology stack and make sure we're bringing the best products to customers when they want to see them. On the fulfillment center side, first, that's pretty exciting, because it opens up an opportunity to get even better at service levels. We're already two days shipping everywhere within the U.S., right, and one day to some locations. Opening up that East Coast fulfillment center is going to allow us to start getting more and more customers to next day shipping. And so just continuing to invest in all the areas across the business that are going to continue to allow us to thrive and provide a better offering for consumers. On the owned brands we mentioned, we're really pleased with the momentum we've seen there, year-over-year growth for the first time in several years and really excellent metrics across the board indicating the product resonated with consumers. So we're going to continue to build on that. We're not going to commit to any specific targets, because it's all about delivering great product to the consumer. But we feel great about the momentum there. So again, just continuing to invest and get better and better. And we think that's going to extend our lead on the legacy players that we're taking share from.

Yes. And then maybe -- sorry, to the second part of your question there, the three areas that you're going to see this in is G&A. So this is reflected in our G&A commentary and this includes owned brands, technology, Web site, everything Mike talked about. The secondary is marketing, keeping the pedal down on marketing, so that call it 15.8% in 2022, a full point higher than the pre-COVID levels of 2019 on a much higher base of revenue, which impacts the brand marketing, so more investments there. And then on the CapEx front related to the fulfillment center, you can go back to [indiscernible] less than $5 million a year, so very capital efficient. 2019 was $12 million and that's when we moved into our consolidated facility here. The East Coast facility will be smaller than this facility, so call it roughly a third of this facility. So you can kind of roughly back into -- it won't have a significant CapEx impact.

Your next question comes from the line of Ed Yruma with KeyBanc. Your line is open.

Hi. Good afternoon. Thanks for taking the question. I was wondering if you could comment a little bit more on the shape of the year as it relates to marketing spend. I know you're keeping it kind of flat year-over-year, and I know you do have a build because of the Festival season in second quarter, and you're going to lap I think tougher or higher marketing spend in third quarter. How should we think about how it spreads through the balance of the year? And then just to click down a little bit, you guys also mentioned some improvements in performance marketing. Can you kind of talk a little bit more about that? Thank you.

Yes, maybe I'll hit the first one and then kick it over to Mike. On the curve of marketing closer to the historical norms where Q1 and Q4 are the lowest, Q2 has historically been the highest. That's been probably the difference this year compared to the pre-COVID level is just the success of our fall activities back in 2021 with New York Fashion Week. So you might see that curve, not quite as steep on either end, but higher in Q2 and Q3 than Q1 and Q4.

As you know, we did get some nice efficiency there in the fourth quarter. Our performance marketing is dynamic, things shift from month-to-month, from quarter-to-quarter. So we're really pleased with the results that we saw in the fourth quarter. But broadly speaking, it's kind of within the normal shifts that we see quarter-to-quarter and month-to-month. The one thing I'll maybe comment on more specifically is IDFA, as you know, has been a headwind. And for us, we've been very pleased with being able to navigate it. And we think that the strength of our brand really gives us a diverse way in which we can market, which makes us less reliant on some of the more extreme levels of targeting that come with IDFA. And so we think that was a factor in our success in the recent period.

Your next question comes from the line of Tom Nikic with Wedbush Securities. Your line is open.

Hi. Ygal Arounian here on for Tom. Thanks for taking my question. So we were interested, so you said FWRD mix is going to be a headwind to gross margin for the year. We're just really wondering, within that segment, do we see that gross margin gap narrowing or do you think that is going to stay muted?

Call it roughly the same. We're in the mid 40s now. I think that's a really healthy place to be. If you look back to again 2019, we were closer to the 40% zone. So a 5 point expansion in the last couple of years we feel really good about. I think it will be plus/minus in that same 10 point differential.

Your next question comes from the line of Simeon Siegel with BMO Capital Markets. Your line is open.

Thanks a lot. Nice job, guys. Did you say what you're expecting for active customers in Q1 and the year? And then more qualitatively, just as you think -- I guess where do you think you're getting them from? Like where are you on the expanding awareness trajectory, where you take share from, et cetera? And then just following up on the point right before, can you just maybe dig in again into how you think about the IDFA privacy changes, so how it impacts maybe your competitors versus how you guys can navigate through that? Thank you.

Yes, maybe I'll start with that first part and then [indiscernible] again maybe just doubling down on our prepared remarks and that it came from both new customers and that really robust activity from the existing customers. So we feel great about that. We're not giving any guidance on new customers or active customers, but given that that active customer number is a trailing 12-month number, and we're still kind of couple of months of COVID activity [indiscernible] year-over-year growth to increase from the Q4 growth rate at least in Q1, but then starting to get closer where active customers and the net sales growth start to converge around the middle of the year.

Yes. And then in terms of where active customers are coming from, we believe we're still really a small penetration in our target market in terms of percent market share. So for us, we just continue to invest in the things that we've been investing for many years. We're really pleased with the momentum we saw in active customer growth this period. And kind of more specifically, right, as far as how we market and help customers first hear about us. We -- this is primarily through social media, brand marketing and word of mouth, and that's really kind of where they're finding out about us. And then a lot of the performance marketing channels are what kind of take them from that initial awareness to making purchases on our site. Sorry, and then with regards to the IDFA, yes. It certainly I think had a big impact on some companies out there, and it was something that we were -- we had mentioned is having a possible impact on us several quarters ago. And we're pleased with how things have played out. Certainly, there's been some impact on our side in terms of how it's affected our marketing. Many of those impacts have offset one another. And I think if you look at the big picture in terms of what we're able to do to recruit customers and how we believe we have a better offering than the legacy players out there, things like IDFA are more kind of blips along the road versus an important part of our strategy and execution.

Your next question comes from the line of Matt Koranda with ROTH Capital. Your line is open.

Hi, guys. Thanks. I just wondered on AOV if you could unpack the key drivers of growth on a year-over-year basis in Q4? It looks like my assumption would be mostly mix. But anything on AOV you can say would be helpful. And then just in terms of approaching that prior peak where you guys were like in 2017 around 300, it feels like we can eclipse that just with a better mix of forward revenue. So just anything you can say there on the trajectory of AOVs throughout the year will be helpful?

Yes. So on the current quarter, to your point, number one mix where FWRD continued to outperform. So there's some mix shift there. Number two is mix shift by category. So within Revolve, we're seeing that dress mix pick up. As the year progressed and into Q4, more people going out. And then even within dresses and within categories, just more -- kind of more going out kind of in use products within each of those categories. So it's coming from a number of different places. And then again, that whole price mix continued to be strong coming down from the Q2 peak, but still very strong on a year-over-year basis. So as we're looking to 2022, we do expect to continue to increase for the same reasons really. Number one, that FWRD mix in FWRD continuing to perform; number two, for the full year of 2021, the dress mix was 25%. So still not at that kind of 30% pre-COVID level [indiscernible] dresses, higher price point items. And then again, continued shift within categories as well. So I think we feel good about the AOV growth coming from AOV, but more importantly from customers, customer activity and just core growth in the business.

Your next question comes from the line of Roxanne Meyer with MKM Partners. Your line is open.

Great, thanks. Thanks for taking my question and congrats on an amazing fourth quarter. My question is looking at the relationship between growth in active customers and orders placed. If you look pre-COVID, the growth rates were somewhat aligned. You look at fourth quarter, growth and orders placed was 3x that of active customers and for the full year was double. So I guess what's driving the growth in orders in an outsized way? And how should we think about that going forward?

Yes, this gets back to that trailing 12-month aspect of the active customers. That's one reason where for the full year, we had a couple of months early on in the year still being dragged down and the customer growth really accelerated through the year. And then you have this quarterly number of orders that was just phenomenal at plus 70%. So you have kind of an outsized quarter within a quarter compared to a blended active customer number over the course of the year. So that's one reason. And then I think our customers [indiscernible] breaking records on retention. Our existing customers tend to place orders more frequently and higher average order value. They do see some kind of order frequency element as the customers came back after being quiet there during COVID. So expecting that to continue into 2022 as well. Acquiring new customers at full price. Full price customers for us have historically performed much better than the marked down customer, so feeling good as we head into the year.

As we are at the end of the call, your last question is from the line of Susan Anderson with B. Riley. Your line is open.

Hi. Alec Legg on for Susan. Thanks for squeezing us in. My question was just related to the strong balance sheet and the cash balance that you've built up. What are your thoughts on what to use that excess cash for, how much is earmarked for current investments such as the DC, increased working capital usage, thoughts on M&A, any guidance would be pretty helpful?

Yes, thanks for that question. And to your point, feel really good about the balance sheet, the strength of the balance sheet, especially after coming out of a year like 2020 during COVID. So to see that build is just phenomenal. And we have been investing in inventory. So to have that cash balance on top of this significant investment in inventory to support this most recent demand we also feel good about. So where does that cash go from here forward? Not a significant draw on cash due to CapEx. I touched on kind of fulfillment center expansion later this year, and that should be a very minor CapEx outlay. Working capital, no significant needs there. So that gets back to your third point of M&A. We continue to look at [indiscernible] selective and disciplined and just continue to look at it more opportunistically over the long term and do attract new business.

Thanks. And just to follow up on the DC. Do you have [indiscernible] instead of shipping everything out of West Coast, you have an East Coast DC. Is there a potential number on that?

Not a specific number. I would say that -- there's going to be some minor disruption anytime you get a facility up and running. So some, call it, deep cost very short term. And then over the very -- quickly thereafter having some offsetting efficiencies into the fulfillment line item, so I think this is one way of battling some of those cost pressures that we're seeing. And then more importantly, Mike can double down on this, just the customer experience of deliveries.

That's all the time we have for questions today. I will now turn the call back to the management for closing remarks.

All right, thanks. And of course a special thank you to our team who continues to get better at everything that we do, we’re continuing to improve, continuing innovation. As we look forward in the future, there’s going to be challenges no doubt, but in these challenges like billions of dollars of opportunities for us. So we're excited to see you guys next quarter.

This concludes today's conference call. You may now disconnect.