The RealReal Announces First Quarter 2022 Results

San Francisco, California, UNITED STATES


Q1 2022 Gross Merchandise Value Increased 31% Year-Over-Year
Q1 2022 Total Revenue Increased 48% Year-Over-Year

SAN FRANCISCO, May 10, 2022 (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, 2022. The company reported solid top-line growth and significant operating expense leverage. First quarter 2022 gross merchandise value (GMV) increased 31%, compared to the same period in 2021.

“We are pleased with our financial results for the first quarter of 2022, which exceeded our expectations on both the top- and bottom-line. The strong growth is particularly noteworthy given the COVID-related staff absences in our Authentication Centers early in the year, which negatively impacted the time for processing and launching items on our website. During the first quarter, we also continued to deliver significant operating expense leverage on both our fixed and variable expenses,” said Julie Wainwright, founder and CEO of The RealReal.

Wainwright added, “We continue to see strong demand in our business despite recent geopolitical events and uncertainty surrounding macroeconomic trends. In fact, as inflation has ramped and prices have increased in the primary (i.e. new goods) luxury market, we believe The RealReal is a demonstrated value option offering unique and highly coveted items in our online marketplace. We believe we are well positioned for a strong year.”

Robert Julian, CFO of The RealReal, stated, “Based on our strong first quarter results, we are pleased to confirm our full year 2022 guidance that was provided previously. Additionally, we are on track to achieve the financial targets in our Vision 2025 based on the key assumptions of continued top-line growth of at least 30% annually, variable cost productivity and fixed cost leverage.”

First Quarter Financial Highlights

  • GMV was $428 million, an increase of 31% compared to the same period in 2021
  • Total Revenue was $147 million, an increase of 48% compared to the same period in 2021
  • Net Loss was $57 million compared to $56 million in the same period in 2021
  • Adjusted EBITDA was $(35.3) million or (24.1)% of total revenue compared to $(35.6) million or (36.1)% of total revenue in the first quarter of 2021
  • GAAP basic and diluted net loss per share was $(0.61) compared to $(0.62) in the prior year period
  • Non-GAAP basic and diluted net loss per share was $(0.47) compared to $(0.49) in the prior year period
  • Top-line-related Metrics
    • Trailing 12 months (TTM) active buyers reached 828,000, an increase of 21% compared to the same period in 2021
    • Orders reached 878,000, an increase of 27% compared to the same period in 2021
    • Average order value (AOV) was $487, an increase of 3% compared to the same period in 2021
    • Higher AOV was driven by a year-over-year increase in units per transaction (UPT), partially offset by decreased average selling prices (ASPs) driven by a normalization of category mix coming out of COVID-19 (i.e. more demand for ready-to-wear)
    • GMV from repeat buyers was 85% compared to 84% in the first quarter of 2021

Q2 and Full Year 2022 Guidance
Based on market conditions as of May 10, 2022, we are providing guidance for the second quarter of 2022 GMV, total revenue and Adjusted EBITDA, which is a Non-GAAP financial measure. Additionally, please note that we are confirming (and restating below) our full year 2022 guidance.

 Q2 2022Full Year 2022
GMV$450 - $470 million$2,000 - $2,100 million
Total Revenue$150 - $160 million$635 - $665 million
Adjusted EBITDA$(33) - $(29) million$(100) - $(80) million

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).

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 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to answer questions regarding its first quarter 2022 results. Investors and analysts can access the call by dialing (866) 996-5385 in the U.S. or (270) 215-9574 internationally. The passcode for the call is 1299713. 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 27 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. At our 19 retail locations, including our 16 shoppable stores, customers can sell, meet with our experts and receive free valuations.

Investor Relations Contact:
Caitlin Howe
Vice President, Investor Relations
IR@therealreal.com

Press Contact:
Erin Santy
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, inflation and the COVID-19 pandemic, and our financial guidance, timeline to profitability, 2025 vision 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, 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, 2021 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 net 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 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,
  2022   2021 
Revenue:   
Consignment and service revenue$97,877  $75,082 
Direct revenue 48,823   23,735 
Total revenue 146,700   98,817 
Cost of revenue:   
Cost of consignment and service revenue 28,049   20,114 
Cost of direct revenue 40,034   20,365 
Total cost of revenue 68,083   40,479 
Gross profit 78,617   58,338 
Operating expenses:   
Marketing 17,961   15,561 
Operations and technology 67,101   51,934 
Selling, general and administrative 48,262   43,616 
Total operating expenses (1) 133,324   111,111 
Loss from operations (54,707)  (52,773)
Interest income 98   87 
Interest expense (2,664)  (3,296)
Other income (expense), net (139)  17 
Loss before provision for income taxes (57,412)  (55,965)
Provision for income taxes    28 
Net loss attributable to common stockholders$(57,412) $(55,993)
Net loss per share attributable to common stockholders, basic and diluted$(0.61) $(0.62)
Weighted average shares used to compute net loss per share attributable to common stockholders, basic and diluted 93,476,106   90,044,082 
    
(1) Includes stock-based compensation as follows:   
Marketing$593  $736 
Operating and technology 5,249   4,696 
Selling, general and administrative 6,672   5,487 
Total$12,514  $10,919 



THE REALREAL, INC.
Condensed Balance Sheets
(In thousands, except share and per share data)
(Unaudited)

 March 31,
2022
 December 31,
2021
Assets   
Current assets   
Cash and cash equivalents$361,007  $418,171 
Accounts receivable, net 8,176   7,767 
Inventory, net 73,698   71,015 
Prepaid expenses and other current assets 21,379   20,859 
Total current assets 464,260   517,812 
Property and equipment, net 90,419   89,286 
Operating lease right-of-use assets 140,489   145,311 
Other assets 3,266   2,535 
Total assets$698,434  $754,944 
Liabilities and Stockholders’ Equity (Deficit)   
Current liabilities   
Accounts payable$6,292  $4,503 
Accrued consignor payable 68,653   71,042 
Operating lease liabilities, current portion 19,518   18,253 
Other accrued and current liabilities 85,322   94,188 
Total current liabilities 179,785   187,986 
Operating lease liabilities, net of current portion 138,214   143,159 
Convertible senior notes, net 447,653   348,380 
Other noncurrent liabilities 2,099   2,291 
Total liabilities 767,751   681,816 
Stockholders’ equity (deficit):   
Common stock, $0.00001 par value; 500,000,000 shares
   authorized as of March 31, 2022, and December 31, 2021;
   94,300,104 and 92,960,066 shares issued and outstanding
   as of March 31, 2022, and December 31, 2021,
   respectively
 1   1 
Additional paid-in capital 742,802   841,255 
Accumulated deficit (812,120)  (768,128)
Total stockholders’ equity (deficit) (69,317)  73,128 
Total liabilities and stockholders’ equity (deficit)$698,434  $754,944 



THE REALREAL, INC.
Condensed Statements of Cash Flows
(In thousands)
(Unaudited)

 Three Months Ended March 31,
  2022   2021 
Cash flows from operating activities:   
Net loss$(57,412) $(55,993)
Adjustments to reconcile net loss to cash used in operating activities:   
Depreciation and amortization 6,364   5,435 
Stock-based compensation expense 12,514   10,919 
Reduction of operating lease right-of-use assets 4,797   4,755 
Bad debt expense 193    
Accrued interest on convertible notes 575   1,469 
Accretion of debt discounts and issuance costs 641   1,815 
Loss on disposal/sale of property and equipment and impairment of capitalized proprietary software 175    
Other adjustments    5 
Changes in operating assets and liabilities:   
Accounts receivable, net (602)  1,219 
Inventory, net (2,683)  (7,181)
Prepaid expenses and other current assets (426)  1,769 
Other assets (779)  (106)
Operating lease liability (3,655)  (3,983)
Accounts payable 2,030   (5,072)
Accrued consignor payable (2,389)  (2,569)
Other accrued and current liabilities (8,627)  (547)
Other noncurrent liabilities (70)  257 
     Net cash used in operating activities (49,354)  (47,808)
Cash flow from investing activities:   
Proceeds from maturities of short-term investments    4,000 
Capitalized proprietary software development costs (3,304)  (2,405)
Purchases of property and equipment (5,143)  (5,925)
Net cash used in investing activities (8,447)  (4,330)
Cash flow from financing activities:   
Proceeds from issuance of 2028 convertible senior notes, net of issuance costs    278,844 
Purchase of capped calls in conjunction with the issuance of the 2028 convertible senior notes    (33,666)
Proceeds from exercise of stock options 637   3,973 
Net cash provided by financing activities 637   249,151 
Net increase (decrease) in cash and cash equivalents (57,164)  197,013 
Cash and cash equivalents   
Beginning of period 418,171   350,846 
End of period$361,007  $547,859 

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,
  2022   2021 
Adjusted EBITDA Reconciliation:   
Net loss$(57,412) $(55,993)
Depreciation and amortization 6,364   5,435 
Stock-based compensation 12,514   10,919 
Payroll taxes expense on employee stock transactions 205   506 
Legal settlement 304   288 
Interest income (98)  (87)
Interest expense 2,664   3,296 
Other (income) expense, net 139   (17)
Provision for income taxes    28 
Adjusted EBITDA$(35,320) $(35,625)

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,
  2022   2021 
Net loss$(57,412) $(55,993)
Stock-based compensation 12,514   10,919 
Payroll tax expense on employee stock transactions 205   506 
Legal settlement 304   288 
Provision for income taxes    28 
Non-GAAP net loss attributable to common stockholders$(44,389) $(44,252)
Weighted-average common shares outstanding used to calculate Non-GAAP net loss attributable to common stockholders per share, basic and diluted 93,476,106   90,044,082 
Non-GAAP net loss attributable to common stockholders per share, basic and diluted$(0.47) $(0.49)

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,
  2022   2021 
Net cash used in operating activities$(49,354) $(47,808)
Purchase of property and equipment and capitalized proprietary software development costs (8,447)  (8,330)
Free Cash Flow$(57,801) $(56,138)

Key Financial and Operating Metrics:

 March 31,
2020
 June 30,
2020
 September 30,
2020
 December 31,
2020
 March 31,
2021
 June 30,
2021
 September 30,
2021
 December 31,
2021
 March 31,
2022
 (in thousands, except for AOV and percentages)
GMV$257,606  $182,771  $245,355  $301,219  $327,327  $350,001  $367,925  $437,179  $428,206 
NMV$184,625  $139,797  $189,059  $223,390  $244,162  $256,509  $273,417  $318,265  $310,511 
Consignment and Service Revenue$65,086  $46,768  $64,152  $71,320  $75,082  $82,452  $89,451  $99,863  $97,877 
Direct Revenue$12,942  $10,523  $13,645  $15,512  $23,735  $22,460  $29,387  $45,262  $48,823 
Number of Orders 574   438   550   671   690   673   757   861   878 
Take Rate 36.2%  36.0%  35.4%  35.7%  34.3%  34.5%  34.9%  35.0%  35.7%
Active Buyers 602   612   617   649   687   730   772   797   828 
AOV$449  $417  $446  $449  $474  $520  $486  $508  $487 
% of GMV from Repeat Buyers 84.4%  82.3%  82.9%  82.4%  83.6%  84.5%  84.1%  83.8%  85.0%