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The RealReal Announces Second Quarter 2024 Results

Q2 2024 Revenue of $145 million, up $14 million or 11% Year-Over-Year
Q2 2024 Net Loss of $(17) million, or (11.5%) of Total Revenue, an improvement of $25 million Year-Over-Year
Q2 2024 Adjusted EBITDA of $(1.8) million or (1.2)% of Total Revenue, up $21 million Year-Over-Year

SAN FRANCISCO, Aug. 06, 2024 (GLOBE NEWSWIRE) -- The RealReal (Nasdaq: REAL)—the world’s largest online marketplace for authenticated, resale luxury goods—today reported financial results for its second quarter ended June 30, 2024. Second quarter 2024 gross merchandise value (GMV) and total revenue increased 4% and 11% respectively, compared to the second quarter of 2023. During the quarter, consignment revenue grew 17% compared to the same period in 2023. Second quarter Adjusted EBITDA improved $21 million compared to the second quarter of 2023.

“We continue to build on our progress and momentum,” said John Koryl, Chief Executive Officer of The RealReal. “In the second quarter, we delivered accelerated year-over-year growth and delivered double-digit revenue growth. In the first half of 2024 we grew revenue by $16 million, improved net loss by $76 million and improved Adjusted EBITDA by $46 million compared to the prior year period. We believe this demonstrates the success of the changes we’ve made and highlights the resilience of our go-forward business model.”

Koryl continued, “As the leading e-commerce marketplace for authenticated luxury goods, we are playing to our strengths and growing with the large market for circular fashion. Due to our extensive and rich dataset of luxury items and transactions, we believe we are well positioned to benefit from the recent advancements in generative AI. Looking ahead, we remain focused on achieving operational excellence, delivering exceptional service to our highly-engaged community, and expanding margins toward a sustainably profitable business.”

Second Quarter Highlights

  • GMV was $441 million, an increase of 4% compared to the same period in 2023
  • Total Revenue was $145 million, an increase of 11% compared to the same period in 2023
  • Gross Profit was $107 million, an increase of $21 million compared to the same period in 2023
  • Gross Margin was 74.1%, an increase of over 800 basis points compared to the same period in 2023
  • Net Loss was $(17.0) million or (11.5)% of total revenue, compared to $(41.3) million or (31.6)% of total revenue in the same period in 2023
  • Adjusted EBITDA was $(1.8) million or (1.2)% of total revenue compared to $(22.3) million or (17.1)% of total revenue in the same period in 2023
  • GAAP basic net loss per share was $(0.16) compared to $(0.41) in the prior year period and GAAP diluted net loss per share was $(0.20) compared to $(0.41) in the prior year period
  • Non-GAAP basic and diluted net loss attributable to common shareholders per share was $(0.13) compared to $(0.30) in the prior year period
  • Top-line-related Metrics
    • Trailing three months active buyers was 381,000, an increase of 9% compared to the same period in 2023
    • Orders were 820,000, an increase of 4% compared to the same period in 2023
    • Average order value (AOV) was $538, which is consistent with the same period in 2023
    • AOV was driven by a year-over-year increase in units per transaction offset by lower average selling prices

Q3 and Full Year 2024 Guidance
Based on market conditions as of August 6, 2024, we are updating our full year guidance and providing guidance for third quarter 2024 GMV, total revenue and Adjusted EBITDA, which is a Non-GAAP financial measure.

We have not reconciled forward-looking Adjusted EBITDA to net income (loss), the most directly comparable GAAP measure, because we cannot predict with reasonable certainty the ultimate outcome of certain components of such reconciliations including payroll tax expense on employee stock transactions that are not within our control, or other components that may arise, without unreasonable effort. For these reasons, we are unable to assess the probable significance of the unavailable information, which could materially impact the amount of future net income (loss).

 Q3 2024Full Year 2024
GMV$410 - $430 million$1.79 - $1.82 billion
Total Revenue$135 - $142 million$580 - $595 million
Adjusted EBITDA$(2) - $1 million$0 - $6 million
   

Webcast and Conference Call
The RealReal will post a shareholder letter on its investor relations website at investor.therealreal.com/financial-information/quarterly-results and host a conference call at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to answer questions regarding its results. Investors and analysts can access the call at https://register.vevent.com/register/BI7e473afdc4f6494aa3d4037bcc8c536f. The call will also be available via live webcast at investor.therealreal.com along with the stockholder letter and supporting slides.

An archive of the webcast conference call will be available shortly after the call ends at investor.therealreal.com.

About The RealReal, Inc.
The RealReal is the world’s largest online marketplace for authenticated, resale luxury goods, with 37 million members. With a rigorous authentication process overseen by experts, The RealReal provides a safe and reliable platform for consumers to buy and sell their luxury items. We have hundreds of in-house gemologists, horologists and brand authenticators who inspect thousands of items each day. As a sustainable company, we give new life to pieces by thousands of brands across numerous categories—including women's and men's fashion, fine jewelry and watches, art and home—in support of the circular economy. We make selling effortless with free virtual appointments, in-home pickup, drop-off and direct shipping. We handle all of the work for consignors, including authenticating, using AI and machine learning to determine optimal pricing, photographing and listing their items, as well as shipping and customer service.

Investor Relations Contact:
Caitlin Howe
IR@therealreal.com

Press Contact:
Mallory Johnston
PR@therealreal.com

Forward Looking Statements
This press release contains forward-looking statements relating to, among other things, the future performance of The RealReal that are based on the company's current expectations, forecasts and assumptions and involve risks and uncertainties. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,” “anticipate,” “target,” “contemplate,” “project,” “believe,” “estimate,” “predict,” “intend,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology. These statements include, but are not limited to, statements about future operating and financial results, including our strategies, plans, commitments, objectives and goals, in particular in the context of the impacts of recent geopolitical events, including the conflict between Russia and Ukraine and the Israel-Hamas war, and uncertainty surrounding macro-economic trends, the debt exchange, financial guidance, anticipated growth in 2024, the anticipated impact of generative AI, and long-range financial targets and projections. Actual results could differ materially from those predicted or implied and reported results should not be considered as an indication of future performance. Other factors that could cause or contribute to such differences include, but are not limited to, inflation, macroeconomic uncertainty, geopolitical instability, any failure to generate a supply of consigned goods, pricing pressure on the consignment market resulting from discounting in the market for new goods, failure to efficiently and effectively operate our merchandising and fulfillment operations, labor shortages and other reasons.

More information about factors that could affect the company's operating results is included under the captions “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in the company's most recent Annual Report on Form 10-K for the year ended December 31, 2023 and subsequent Quarterly Reports on Form 10-Q, copies of which may be obtained by visiting the company's Investor Relations website at https://investor.therealreal.com or the SEC's website at www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to the company on the date hereof. The company assumes no obligation to update such statements.

Non-GAAP Financial Measures
To supplement our unaudited and condensed financial statements presented in accordance with generally accepted accounting principles (“GAAP”), this earnings release and the accompanying tables and the related earnings conference call contain certain non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA as a percentage of total revenue (“Adjusted EBITDA Margin”), free cash flow, non-GAAP net loss attributable to common stockholders, and non-GAAP net loss per share attributable to common stockholders, basic and diluted. We have provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures in this earnings release.

We do not, nor do we suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors should also note that non-GAAP financial measures we use may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies, including other companies in our industry.

Adjusted EBITDA is a key performance measure that our management uses to assess our operating performance. Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure as an overall assessment of our performance, to evaluate the effectiveness of our business strategies and for business planning purposes. Adjusted EBITDA may not be comparable to similarly titled metrics of other companies.

We calculate Adjusted EBITDA as net loss before interest income, interest expense, other (income) expense net, provision (benefit) for income taxes, depreciation and amortization, further adjusted to exclude stock-based compensation, employer payroll tax expense on employee stock transactions, legal settlement charges, restructuring, warehouse fire costs (net), CEO transition costs, gain on extinguishment of debt, change in fair value of warrant liabilities and certain one-time expenses. The employer payroll tax expense related to employee stock transactions are tied to the vesting or exercise of underlying equity awards and the price of our common stock at the time of vesting, which may vary from period to period independent of the operating performance of our business. Adjusted EBITDA has certain limitations as the measure excludes the impact of certain expenses that are included in our statements of operations that are necessary to run our business and should not be considered as an alternative to net loss or any other measure of financial performance calculated and presented in accordance with GAAP.

In particular, the exclusion of certain expenses in calculating Adjusted EBITDA and Adjusted EBITDA Margin facilitates operating performance comparisons on a period-to-period basis and, in the case of exclusion of the impact of stock-based compensation and the related employer payroll tax expense on employee stock transactions, excludes an item that we do not consider to be indicative of our core operating performance. Investors should, however, understand that stock-based compensation and the related employer payroll tax expense will be a significant recurring expense in our business and an important part of the compensation provided to our employees. Accordingly, we believe that Adjusted EBITDA and Adjusted EBITDA Margin provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Free cash flow is a non-GAAP financial measure that is calculated as net cash (used in) provided by operating activities less net cash used to purchase property and equipment and capitalized proprietary software development costs. We believe free cash flow is an important indicator of our business performance, as it measures the amount of cash we generate. Accordingly, we believe that free cash flow provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management.

Non-GAAP net loss per share attributable to common stockholders, basic and diluted is a non-GAAP financial measure that is calculated as GAAP net loss plus stock-based compensation expense, provision (benefit) for income taxes, payroll tax expenses on employee stock transactions, CEO transition costs, restructuring charges, legal settlement charges, warehouse fire costs (net), gain on extinguishment of debt, change in fair value of warrant liabilities and certain one-time expenses divided by weighted average shares outstanding. We exclude the effect of our liability classified warrants to arrive at the weighted average common shares outstanding when their effect is anti-dilutive. We believe that making these adjustments before calculating per share amounts for all periods presented provides a more meaningful comparison between our operating results from period to period.


THE REALREAL, INC.
Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
 
 Three Months Ended June 30, Six Months Ended June 30,
  2024   2023   2024   2023 
Revenue:       
Consignment revenue$112,714  $96,577  $228,362  $199,220 
Direct revenue 16,724   20,887   29,433   45,840 
Shipping services revenue 15,496   13,391   30,939   27,699 
Total revenue 144,934   130,855   288,734   272,759 
Cost of revenue:       
Cost of consignment revenue 13,108   14,575   26,388   30,104 
Cost of direct revenue 13,760   20,446   26,045   45,476 
Cost of shipping services revenue 10,600   9,660   21,556   21,022 
Total cost of revenue 37,468   44,681   73,989   96,602 
Gross profit 107,466   86,174   214,745   176,157 
Operating expenses:       
Marketing 13,759   15,351   29,042   32,869 
Operations and technology 65,422   65,575   128,394   133,607 
Selling, general and administrative 47,082   44,326   93,852   94,171 
Restructuring    1,864   196   38,252 
Total operating expenses (1) 126,263   127,116   251,484   298,899 
Loss from operations (18,797)  (40,942)  (36,739)  (122,742)
Change in fair value of warrant liability 5,630      (9,953)   
Gain on extinguishment of debt       4,177    
Interest income 2,263   2,404   4,332   4,457 
Interest expense (5,769)  (2,678)  (9,520)  (5,345)
Loss before provision for income taxes (16,673)  (41,216)  (47,703)  (123,630)
Provision for income taxes 35   114   106   200 
Net loss attributable to common stockholders$(16,708) $(41,330) $(47,809) $(123,830)
Net loss per share attributable to common stockholders       
Basic$(0.16) $(0.41) $(0.45) $(1.23)
Diluted$(0.20) $(0.41) $(0.45) $(1.23)
Weighted average shares used to compute net loss per share attributable to common stockholders       
Basic 106,882,054   100,973,105   106,047,054   100,294,359 
Diluted 111,117,389   100,973,105   106,047,054   100,294,359 
        
(1) Includes stock-based compensation as follows:       
Marketing$72  $349  $482  $799 
Operating and technology 2,690   3,301   4,994   6,992 
Selling, general and administrative 4,940   5,116   9,346   9,966 
Total$7,702  $8,766  $14,822  $17,757 


THE REALREAL, INC.
Condensed Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
 
 June 30,
2024
 December 31,
2023
Assets   
Current assets   
Cash and cash equivalents$150,746  $175,709 
Accounts receivable, net 16,450   17,226 
Inventory, net 21,119   22,246 
Prepaid expenses and other current assets 19,134   20,766 
Total current assets 207,449   235,947 
Property and equipment, net 96,769   104,087 
Operating lease right-of-use assets 82,952   86,348 
Restricted cash 14,911   14,914 
Other assets 5,342   5,627 
Total assets$407,423  $446,923 
Liabilities and Stockholders’ Deficit   
Current liabilities   
Accounts payable$12,650  $8,961 
Accrued consignor payable 65,465   77,122 
Operating lease liabilities, current portion 22,080   20,094 
Convertible senior notes, net, current portion 26,550    
Other accrued and current liabilities 85,059   82,685 
Total current liabilities 211,804   188,862 
Operating lease liabilities, net of current portion 97,024   104,856 
Convertible senior notes, net 276,159   452,421 
Non-convertible notes, net 131,278    
Warrant liability 20,370    
Other noncurrent liabilities 6,042   4,083 
Total liabilities 742,677   750,222 
Stockholders’ deficit:   
Common stock, $0.00001 par value; 500,000,000 shares authorized as of June 30, 2024, and December 31, 2023; 108,495,705 and 104,670,500 shares issued and outstanding as of June 30, 2024, and December 31, 2023, respectively 1   1 
Additional paid-in capital 832,179   816,325 
Accumulated deficit (1,167,434)  (1,119,625)
Total stockholders’ deficit (335,254)  (303,299)
Total liabilities and stockholders’ deficit$407,423  $446,923 


THE REALREAL, INC.
Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
 
 Six Months Ended June 30,
  2024   2023 
Cash flows from operating activities:   
Net loss$(47,809) $(123,830)
Adjustments to reconcile net loss to cash used in operating activities:   
Depreciation and amortization 16,536   15,786 
Stock-based compensation expense 14,822   17,757 
Reduction of operating lease right-of-use assets 7,443   9,168 
Bad debt expense 1,246   1,029 
Non-cash interest expense 5,701    
Issuance costs allocated to liability classified warrants 374    
Accretion of debt discounts and issuance costs 1,045   1,279 
Property, plant, equipment, and right-of-use asset impairments    33,505 
Provision for inventory write-downs and shrinkage 1,840   6,531 
Gain on debt extinguishment (4,177)   
Change in fair value of warrant liability 9,953    
Loss related to warehouse fire, net 389    
Other adjustments (672)  56 
Changes in operating assets and liabilities:   
Accounts receivable, net (470)  5,184 
Inventory, net (629)  10,532 
Prepaid expenses and other current assets 4,796   4,121 
Other assets 184   (2,820)
Operating lease liability (9,893)  (11,437)
Accounts payable 2,813   1,763 
Accrued consignor payable (12,704)  (19,706)
Other accrued and current liabilities (957)  (9,639)
Other noncurrent liabilities (52)  (137)
Net cash used in operating activities (10,221)  (60,858)
Cash flow from investing activities:   
Proceeds from maturities of short-term investments     
Capitalized proprietary software development costs (5,138)  (7,514)
Purchases of property and equipment (5,142)  (19,764)
Net cash used in investing activities (10,280)  (27,278)
Cash flow from financing activities:   
Proceeds from exercise of stock options 112   3 
Taxes paid related to restricted stock vesting (364)  (411)
Proceeds from issuance of stock in connection with the Employee Stock Purchase Program 624   446 
Cash received from settlement of capped calls in conjunction with the Note Exchange 396    
Issuance costs paid related to the Note Exchange (5,233)   
Net cash provided by (used in) financing activities (4,465)  38 
Net decrease in cash, cash equivalents and restricted cash (24,966)  (88,098)
Cash, cash equivalents and restricted cash   
Beginning of period 190,623   293,793 
End of period$165,657  $205,695 
 

The following table reflects the reconciliation of net loss to Adjusted EBITDA for each of the periods indicated (in thousands):

 Three Months Ended June 30, Six Months Ended June 30,
  2024   2023   2024   2023 
Adjusted EBITDA Reconciliation:       
Net loss$(16,708) $(41,330) $(47,809) $(123,830)
Depreciation and amortization 8,227   7,965   16,536   15,786 
Interest income (2,263)  (2,404)  (4,332)  (4,457)
Interest expense 5,769   2,678   9,520   5,345 
Provision for income taxes 35   114   106   200 
EBITDA (4,940)  (32,977)  (25,979)  (106,956)
Stock-based compensation 7,702   8,766   14,822   17,757 
Payroll taxes expense on employee stock transactions 118   24   174   68 
Legal settlement 600      600   1,100 
Restructuring charges (1)    1,864   196   38,252 
Gain on extinguishment of debt (2)       (4,177)   
Change in fair value of warrant liability (3) (5,630)     9,953    
One time expenses (4) 389      389   159 
Adjusted EBITDA$(1,761) $(22,323) $(4,022) $(49,620)
 

(1) The restructuring charges for the three and six months ended June 30, 2023 consist of impairment of right-of-use assets and property and equipment, employee severance charges, and other charges, including legal and transportation expenses. See "Note 10 - Restructuring" in the notes to the unaudited financial statements for disclosure regarding the restructuring expenses incurred.

(2) The gain on extinguishment of debt for the six months ended June 30, 2024 reflects the difference between the carrying value of the Exchanged Notes and the fair value of the 2029 Notes.

(3) The change in fair value of warrant liability for the six months ended June 30, 2024 reflects the remeasurement of the warrants issued by the Company in connection with the Note Exchange in February 2024.

(4) One time expenses for the three and six months ended June 30, 2024 reflects the loss related to the fire at our New Jersey authentication center, net of estimated insurance proceeds. See "Note 11 - Commitments and Contingencies" in the notes to the unaudited financial statements for disclosure regarding the event. One time expenses for the three and six months ended June 30, 2023 consists of retention bonuses for certain executives incurred in connection with our founder's resignation on June 6, 2022.

A reconciliation of GAAP net loss to non-GAAP net loss attributable to common stockholders, the most directly comparable GAAP financial measure, in order to calculate non-GAAP net loss attributable to common stockholders per share, basic and diluted, is as follows (in thousands, except share and per share data):

 Three Months Ended June 30, Six Months Ended June 30,
  2024   2023   2024   2023 
Net loss$(16,708) $(41,330) $(47,809) $(123,830)
Stock-based compensation 7,702   8,766   14,822   17,757 
Payroll tax expense on employee stock transactions 118   24   174   68 
Legal settlement 600      600   1,100 
Restructuring    1,864   196   38,252 
Provision for income taxes 35   114   106   200 
Gain on extinguishment of debt       (4,177)   
Change in fair value of warrant liability (5,630)     9,953    
One time expenses$389  $  $389  $159 
Non-GAAP net loss attributable to common stockholders$(13,494) $(30,562) $(25,746) $(66,294)
Weighted-average common shares outstanding to calculate Non-GAAP net loss attributable to common stockholders per share, basic and diluted 106,882,054   100,973,105   106,047,054   100,294,359 
Non-GAAP net loss attributable to common stockholders per share, basic and diluted$(0.13) $(0.30) $(0.24) $(0.66)
 

The following table presents a reconciliation of net cash used in operating activities to free cash flow for each of the periods indicated (in thousands):

 Three Months Ended June 30, Six Months Ended June 30,
  2024   2023   2024   2023 
Net cash used in operating activities$(6,754) $(30,425) $(10,221) $(60,858)
Purchase of property and equipment and capitalized proprietary software development costs (4,959)  (11,358)  (10,280)  (27,278)
Free Cash Flow$(11,713) $(41,783) $(20,501) $(88,136)
 

Key Financial and Operating Metrics:

 June 30,
2022
 September 30,
2022
 December 31,
2022
 March 31,
2023
 June 30,
2023
 September 30,
2023
 December 31,
2023
 March 31, 2024 June 30,
2024
  
GMV$454,163  $440,659  $492,955  $444,366  $423,341  $407,608  $450,668  $451,941  $440,914 
NMV$332,508  $325,105  $367,382  $327,805  $303,918  $302,912  $335,245  $334,815  $329,422 
Consignment Revenue$96,917  $93,874  $110,199  $102,643  $96,577  $102,852  $113,500  $115,648  $112,714 
Direct Revenue$42,646  $34,005  $33,252  $24,953  $20,887  $17,356  $15,964  $12,709  $16,724 
Shipping Services Revenue$14,872  $14,824  $16,204  $14,308  $13,391  $12,964  $13,909  $15,443  $15,496 
Number of Orders 934   952   993   891   789   794   826   840   820 
Take Rate 36.1%  36.0%  35.7%  37.4%  36.7%  38.1%  37.7%  38.4%  38.5%
Active Buyers (1) 385   404   430   388   351   364   381   384   381 
AOV$486  $463  $496  $499  $537  $513  $545  $538  $538 
 

(1) During the three months ended June 30, 2024, we updated active buyers to be buyers who purchased goods through our online marketplace during the period presented. For example, active buyers for the three months ended June 30, 2024 were buyers who purchased goods during the 3 months ended. Previously we had measured buyers who purchased goods during the 12 months ended on the last day of the period presented. The prior periods have been updated to active buyers during the 3 months ended on the last day of the period presented.


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