Q1 2023 Gross Merchandise Value Increased 4% Year-Over-Year
Q1 2023 Total Revenue Decreased 3% Year-Over-Year
Q1 2023 Consignment Revenue Grew 22% Year-Over-Year
SAN FRANCISCO, May 09, 2023 (GLOBE NEWSWIRE) -- The RealReal (Nasdaq: REAL)—the world’s largest online marketplace for authenticated, resale luxury goods—today reported financial results for its first quarter ended March 31, 2023. The company reported a higher take rate and higher gross margins compared to the same period in 2022. First quarter 2023 gross merchandise value (GMV) increased 4%, compared to the same period in 2022.
“During the first quarter of 2023, we made progress on our financial and operating results. For the quarter, revenue exceeded the mid-point of our guidance, and Adjusted EBITDA exceeded the high-end of our guidance range. We believe our strategy of re-focusing efforts on the higher margin consignment business is starting to deliver results. During the first quarter, consignment revenue grew 22%, and direct revenue declined 49% year-over-year. Additionally, we made progress on minimizing lower-value consigned items. As a result of these actions, we expanded our gross margin in the first quarter, and we were able to deliver a higher take rate, more gross profit dollars, and improved profitability, ” said John Koryl, Chief Executive Officer of The RealReal.
Koryl added, “The early results from our key initiatives are encouraging, and we continue to believe that taking these steps will help us achieve profitability. Importantly, we continue to project that we are on track to achieve Adjusted EBITDA profitability on a full year basis in 2024.”
First Quarter Financial Highlights
- GMV was $444 million, an increase of 4% compared to the same period in 2022
- Total Revenue was $142 million, a decrease of 3% compared to the same period in 2022
- Gross Profit was $90 million, an increase of $11 million compared to the same period in 2022
- Net Loss was $(82.5) million or (58.1)% of total revenue, including a restructuring charge of $36.4 million, compared to $(57.4) million or (39.1)% of total revenue in the same period in 2022
- Adjusted EBITDA was $(27.3) million or (19.2)% of total revenue compared to $(35.3) million or (24.1)% of total revenue in the first quarter of 2022
- GAAP basic and diluted net loss per share was $(0.83) compared to $(0.61) in the prior year period
- Non-GAAP net loss attributable to common shareholders per share, basic and diluted, was $(0.36) compared to $(0.47) in the prior year period
- Top-line-related Metrics
- Active buyers reached 1,014,000, an increase of 22% compared to the same period in 2022
- Orders reached 891,000, an increase of 1% compared to the same period in 2022
- Average order value (AOV) was $499, an increase of 2% compared to the same period in 2022
- Higher AOV was driven by a year-over-year increase in average selling prices (ASPs), partially offset by decreased units per transaction (UPT)
- GMV from repeat buyers was 86% compared to 85% in the first quarter of 2022
Q2 and Full Year 2023 Guidance
Based on market conditions as of May 9, 2023, we are providing guidance for the second quarter and full year 2023 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).
| Q2 2023 | Full Year 2023 | |
| GMV | $400 - $430 million | $1.7 - $1.8 billion |
| Total Revenue | $125 - $135 million | $535 - $565 million |
| Adjusted EBITDA | $(29) - $(25) million | $(75) - $(65) million |
Webcast and Conference Call
The RealReal will post a stockholder letter on its investor relations website at investor.therealreal.com/financial-information/quarterly-results and host a conference call at 2:30 p.m. Pacific Time (5:30 p.m. Eastern Time) to answer questions regarding its first quarter 2023 results. Investors and analysts can access the call at https://register.vevent.com/register/BIa37d935bbc144ea8a6d4a4398f35639b. 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 more than 32 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 do 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 handling shipping and customer service.
Investor Relations Contact:
Caitlin Howe
Senior Vice President, Investor Relations
IR@therealreal.com
Press Contact:
Laura Hogya
Head of Communications
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,” “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 and uncertainty surrounding macro-economic trends, disruptions in the financial industry, inflation and the COVID-19 pandemic, our ability to achieve anticipated savings in connection with our real estate reduction plan and associated workforce reduction, and our financial guidance, timeline to profitability, 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, the impact of the COVID-19 pandemic on our operations and our business environment, inflation, macroeconomic uncertainty, disruptions to the the financial industry, 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, 2022 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"), 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 on employee stock transactions, 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 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 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, and non-recurring items divided by weighted average shares outstanding. We believe that adding back stock-based compensation expense and related payroll tax, provision (benefit) for income taxes, and non-recurring items as adjustments to our GAAP net loss, 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 March 31, | |||||||
| 2023 | 2022 | ||||||
| Revenue: | |||||||
| Consignment revenue | $ | 102,643 | $ | 83,989 | |||
| Direct revenue | 24,953 | 48,823 | |||||
| Shipping services revenue | 14,308 | 13,888 | |||||
| Total revenue | 141,904 | 146,700 | |||||
| Cost of revenue: | |||||||
| Cost of consignment revenue | 15,529 | 13,733 | |||||
| Cost of direct revenue | 25,030 | 40,034 | |||||
| Cost of shipping services revenue | 11,362 | 14,316 | |||||
| Total cost of revenue | 51,921 | 68,083 | |||||
| Gross profit | 89,983 | 78,617 | |||||
| Operating expenses: | |||||||
| Marketing | 17,518 | 17,961 | |||||
| Operations and technology | 68,032 | 67,101 | |||||
| Selling, general and administrative | 49,845 | 48,262 | |||||
| Restructuring charges | 36,388 | — | |||||
| Total operating expenses(1) | 171,783 | 133,324 | |||||
| Loss from operations | (81,800 | ) | (54,707 | ) | |||
| Interest income | 2,053 | 98 | |||||
| Interest expense | (2,667 | ) | (2,664 | ) | |||
| Other income (expense), net | — | (139 | ) | ||||
| Loss before provision for income taxes | (82,414 | ) | (57,412 | ) | |||
| Provision for income taxes | 86 | — | |||||
| Net loss attributable to common stockholders | $ | (82,500 | ) | $ | (57,412 | ) | |
| Net loss per share attributable to common stockholders, basic and diluted | $ | (0.83 | ) | $ | (0.61 | ) | |
| Weighted average shares used to compute net loss per share attributable to common stockholders, basic and diluted | 99,608,071 | 93,476,106 | |||||
| (1)Includes stock-based compensation as follows: | |||||||
| Marketing | $ | 450 | $ | 593 | |||
| Operating and technology | 3,691 | 5,249 | |||||
| Selling, general and administrative | 4,850 | 6,672 | |||||
| Total | $ | 8,991 | $ | 12,514 | |||
THE REALREAL, INC.
Condensed Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
| March 31, 2023 | December 31, 2022 | ||||||
| Assets | |||||||
| Current assets | |||||||
| Cash and cash equivalents | $ | 247,145 | $ | 293,793 | |||
| Accounts receivable, net | 8,941 | 12,207 | |||||
| Inventory, net | 30,843 | 42,967 | |||||
| Prepaid expenses and other current assets | 24,202 | 23,291 | |||||
| Total current assets | 311,131 | 372,258 | |||||
| Property and equipment, net | 101,876 | 112,679 | |||||
| Operating lease right-of-use assets | 95,587 | 127,955 | |||||
| Other assets | 3,160 | 2,749 | |||||
| Total assets | $ | 511,754 | $ | 615,641 | |||
| Liabilities and Stockholders’ Equity (Deficit) | |||||||
| Current liabilities | |||||||
| Accounts payable | $ | 8,867 | $ | 11,902 | |||
| Accrued consignor payable | 72,114 | 81,543 | |||||
| Operating lease liabilities, current portion | 20,691 | 20,776 | |||||
| Other accrued and current liabilities | 82,271 | 93,292 | |||||
| Total current liabilities | 183,943 | 207,513 | |||||
| Operating lease liabilities, net of current portion | 117,553 | 125,118 | |||||
| Convertible senior notes, net | 450,481 | 449,848 | |||||
| Other noncurrent liabilities | 3,297 | 3,254 | |||||
| Total liabilities | 755,274 | 785,733 | |||||
| Stockholders’ equity (deficit): | |||||||
| Common stock, $0.00001 par value; 500,000,000 shares authorized as of March 31, 2023, and December 31, 2022; 100,152,432 and 99,088,172 shares issued and outstanding as of March 31, 2023, and December 31, 2022, respectively | 1 | 1 | |||||
| Additional paid-in capital | 790,132 | 781,060 | |||||
| Accumulated deficit | (1,033,653 | ) | (951,153 | ) | |||
| Total stockholders’ equity (deficit) | (243,520 | ) | (170,092 | ) | |||
| Total liabilities and stockholders’ equity (deficit) | $ | 511,754 | $ | 615,641 | |||
THE REALREAL, INC.
Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
| Three Months Ended March 31, | |||||||
| 2023 | 2022 | ||||||
| Cash flows from operating activities: | |||||||
| Net loss | $ | (82,500 | ) | $ | (57,412 | ) | |
| Adjustments to reconcile net loss to cash used in operating activities: | |||||||
| Depreciation and amortization | 7,821 | 6,364 | |||||
| Stock-based compensation expense | 8,991 | 12,514 | |||||
| Reduction of operating lease right-of-use assets | 5,172 | 4,797 | |||||
| Bad debt expense | 651 | 193 | |||||
| Accrued interest on convertible notes | 575 | 575 | |||||
| Accretion of debt discounts and issuance costs | 633 | 641 | |||||
| Loss on disposal/sale of property and equipment and impairment of capitalized proprietary software | 36 | 175 | |||||
| Property, plant, equipment, and right-of-use asset impairments | 32,891 | — | |||||
| Provision for inventory write-downs and shrinkage | 3,446 | 1,809 | |||||
| Other adjustments | — | — | |||||
| Changes in operating assets and liabilities: | |||||||
| Accounts receivable, net | 2,615 | (602 | ) | ||||
| Inventory, net | 8,678 | (4,492 | ) | ||||
| Prepaid expenses and other current assets | (1,139 | ) | (426 | ) | |||
| Other assets | (461 | ) | (779 | ) | |||
| Operating lease liability | (6,158 | ) | (3,655 | ) | |||
| Accounts payable | (1,385 | ) | 2,030 | ||||
| Accrued consignor payable | (9,429 | ) | (2,389 | ) | |||
| Other accrued and current liabilities | (894 | ) | (8,627 | ) | |||
| Other noncurrent liabilities | 24 | (70 | ) | ||||
| Net cash used in operating activities | (30,433 | ) | (49,354 | ) | |||
| Cash flow from investing activities: | |||||||
| Proceeds from maturities of short-term investments | — | — | |||||
| Capitalized proprietary software development costs | (4,214 | ) | (3,304 | ) | |||
| Purchases of property and equipment | (11,706 | ) | (5,143 | ) | |||
| Net cash used in investing activities | (15,920 | ) | (8,447 | ) | |||
| Cash flow from financing activities: | |||||||
| Proceeds from exercise of stock options | — | 637 | |||||
| Taxes paid related to restricted stock vesting | (295 | ) | — | ||||
| Net cash (used in) provided by financing activities | (295 | ) | 637 | ||||
| Net increase (decrease) in cash and cash equivalents | (46,648 | ) | (57,164 | ) | |||
| Cash and cash equivalents | |||||||
| Beginning of period | 293,793 | 418,171 | |||||
| End of period | $ | 247,145 | $ | 361,007 | |||
The following table reflects the reconciliation of net loss to Adjusted EBITDA for each of the periods indicated (in thousands):
| Three Months Ended March 31, | |||||||
| 2023 | 2022 | ||||||
| Adjusted EBITDA Reconciliation: | |||||||
| Net loss | $ | (82,500 | ) | $ | (57,412 | ) | |
| Depreciation and amortization | 7,821 | 6,364 | |||||
| Interest income | (2,053 | ) | (98 | ) | |||
| Interest expense | 2,667 | 2,664 | |||||
| Provision for income taxes | 86 | — | |||||
| EBITDA | (73,979 | ) | (48,482 | ) | |||
| Stock-based compensation | 8,991 | 12,514 | |||||
| CEO transition costs(1) | 159 | — | |||||
| Payroll taxes expense on employee stock transactions | 44 | 205 | |||||
| Legal settlement | 1,100 | 304 | |||||
| Restructuring charges(2) | 36,388 | — | |||||
| Other (income) expense, net | — | 139 | |||||
| Adjusted EBITDA | $ | (27,297 | ) | $ | (35,320 | ) | |
(1) The CEO transition charges for the three months ended March 31, 2023 consists of retention bonuses for certain executives incurred in connection with our founder's resignation on June 6, 2022.
(2) The restructuring charges for the three months ended March 31, 2023 consists of impairment of right-of-use assets and property and equipment, employee severance charges, and other charges, including legal and transportation expenses.
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 March 31, | |||||||
| 2023 | 2022 | ||||||
| Net loss | $ | (82,500 | ) | $ | (57,412 | ) | |
| Stock-based compensation | 8,991 | 12,514 | |||||
| Payroll tax expense on employee stock transactions | 44 | 205 | |||||
| CEO transition costs | 159 | — | |||||
| Restructuring charges | 36,388 | — | |||||
| Legal settlement | 1,100 | 304 | |||||
| Provision for income taxes | 86 | — | |||||
| Non-GAAP net loss attributable to common stockholders | $ | (35,732 | ) | $ | (44,389 | ) | |
| Weighted-average common shares outstanding used to calculate Non-GAAP net loss attributable to common stockholders per share, basic and diluted | 99,608,071 | 93,476,106 | |||||
| Non-GAAP net loss attributable to common stockholders per share, basic and diluted | $ | (0.36 | ) | $ | (0.47 | ) | |
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 March 31, | |||||||
| 2023 | 2022 | ||||||
| Net cash used in operating activities | $ | (30,433 | ) | $ | (49,354 | ) | |
| Purchase of property and equipment and capitalized proprietary software development costs | (15,920 | ) | (8,447 | ) | |||
| Free Cash Flow | $ | (46,353 | ) | $ | (57,801 | ) | |
Key Financial and Operating Metrics:
| March 31, 2021 | June 30, 2021 | September 30 2021 | December 31, 2021 | March 31, 2022 | June 30, 2022 | September 30, 2022 | December 31, 2022 | March 31, 2023 | |||||||||||||||||||||||||||
| GMV | $ | 327,327 | $ | 350,001 | $ | 367,925 | $ | 437,179 | $ | 428,206 | $ | 454,163 | $ | 440,659 | $ | 492,955 | $ | 444,366 | |||||||||||||||||
| NMV | $ | 244,162 | $ | 256,509 | $ | 273,417 | $ | 318,265 | $ | 310,511 | $ | 332,508 | $ | 325,105 | $ | 367,382 | $ | 327,805 | |||||||||||||||||
| Consignment Revenue | $ | 64,887 | $ | 72,452 | $ | 78,373 | $ | 86,508 | $ | 83,989 | $ | 96,917 | $ | 93,874 | $ | 110,199 | $ | 102,643 | |||||||||||||||||
| Direct Revenue | $ | 23,735 | $ | 22,460 | $ | 29,387 | $ | 45,262 | $ | 48,823 | $ | 42,646 | $ | 34,005 | $ | 33,252 | $ | 24,953 | |||||||||||||||||
| Shipping Services Revenue | 10,195 | 10,000 | 11,078 | 13,355 | 13,888 | 14,872 | 14,824 | 16,204 | 14,308 | ||||||||||||||||||||||||||
| Number of Orders | 690 | 673 | 757 | 861 | 878 | 934 | 952 | 993 | 891 | ||||||||||||||||||||||||||
| Take Rate | 34.3 | % | 34.5 | % | 34.9 | % | 35.0 | % | 35.7 | % | 36.1 | % | 36.0 | % | 35.7 | % | 37.4 | % | |||||||||||||||||
| Active Buyers | 687 | 730 | 772 | 797 | 828 | 889 | 950 | 998 | 1,014 | ||||||||||||||||||||||||||
| AOV | $ | 474 | $ | 520 | $ | 486 | $ | 508 | $ | 487 | $ | 486 | $ | 463 | $ | 496 | $ | 499 | |||||||||||||||||
| % of GMV from Repeat Buyers | 83.6 | % | 84.5 | % | 84.1 | % | 83.8 | % | 85.0 | % | 84.7 | % | 84.2 | % | 84.0 | % | 86.2 | % | |||||||||||||||||
