The RealReal, Inc. (REAL) 10 Aug 222022 Q2 Earnings call transcript

Company Profile

Participants

Caitlin Howe	Vice President of Investor Relations
Julie Wainwright	Founder
Rati Levesque	President and Co-Chief Executive Officer
Robert Julian	Co-Chief Executive Officer and Chief Financial Officer
Simeon Siegel	BMO Capital Markets
Irwin Boruchow	Wells Fargo Securities, LLC
Rick Patel	Raymond James
Anna Andreeva	Needham and Company
Kunal Madhukar	UBS
Susan Anderson	B. Riley FBR, Inc.
Michael Binetti	Credit Suisse
Tom Nikic	Wedbush Securities
Lauren Schenk	Morgan Stanley
Noah Zatzkin	KeyBanc Capital Markets
Ashley Helgans	Jefferies LLC
Edward Yruma	Piper Sandler
Oliver Chen	Cowen and Company, LLC
Marvin Fong	BTIG

Call transcript

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Operator

Good afternoon, and welcome to The RealReal Second Quarter 2022 Earnings Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Caitlin Howe, VP of Investor Relations of RealReal. ahead. go Please

Caitlin Howe

operator. Thank you,

Robert today ended to President, for me Financial our Levesque; discuss XX, XXXX, period Officer, Chief June and and Co-Interim the our and Joining CEO results Julian. Co-Interim Rati CEO

Before known during make call that remind today's risks unknown I and we which we involve would begin, statements, to you like forward-looking and will uncertainties.

from statements. Our such actual in results those may suggested differ materially

the certain financial GAAP which comparable provided include also will forward-looking we our to Company's and Form reconciliations uncertainties, both find recent and these measures for other in presentation operating more results financial have could that XX-Q. measures can and non-GAAP measures, in You XX-K our risks, most historical affect most on earnings the Form subsequent historical information factors reports about quarterly Today's release. press

the addition of Relations In today, I like earlier we the our release, President remarks. Levesque, Investor of on turn RealReal press over to stockholder now for website. The issued letter a introductory Co-Interim CEO earnings call which would to and available Rati are both to

Rati Levesque

you, go for session. Thanks, on thank remarks business, commentary today, we provide some everyone I Q&A and joining opening and call our the then and Robert into Caitlin, our and will earnings will

of leadership CEOs Julie direction about I During her roles as Julie that on thank efforts the this are our are new the and incredible second moving our quarter, vision, we we enthusiastic energized CEO, the will for strong Wainwright, years. of and We announced over XX year. be Founder Co-Interim Robert the and in at end tireless business. past the and

financial of quarter XXXX, During results. the delivered we solid second

we growth projections lower on meet our GMV did and we than topline expected, our slightly EBITDA. adjusted guidance revenue was exceeded While

experience our change GMV XX%, shortfall, sales a rate product labor QX did in downward and we a growth due some pressure mix. to was While

by was the selectively to this normal a force. people, normal and proactively hiring the consignors backfilling QX strategies supply including quarter meaningful needing increasing sales our shortfall, more the sales underlying challenge the from to hiring believe address attrition to with First returning levels roles, the in sales steps labor entered exasperated and in technology We higher in multiple key of and these at side, issue. we implemented utilizing actions self-serve. attrition are labor end addressing for compensation combined We markets than

Additionally, leads our opportunities consignment continue remain to and robust.

together, for fourth Taken for believe step-up the a we in positioned quarter. well we supply are significant

side. in second priced like and items, GMV items in and Starting The on pressure came from was quarter quarter, like watches to shoes. was jewelry there fine the accelerating The into first in the consumer priced the demand second and higher shift from QX shift ready-to-wear demand. lower a

mirrored go reduction the value Therefore, higher product consumers year-over-year, are as to closely order mix continues more in mix proportion high the to coming more but back in GMV quarter While take rates resulted apparel attend improved and office, events. the from average shoes of travel also second a value. perform, pre-COVID and

some at Furthermore, remains reduce and customers point, occurred momentum new both as about anticipated. of flywheel acquisition strong we We is optimistic expect Overall, it repeat buyer are business. cost. to to to categories demand direction strong believe our helping demand quickly we the across continue believe and more has our grow. our While normalize than the we us

to to financial pass a which him close it are expenses we taking further. over brief costs, explain at manage Finally, more I'll look for our will a update. Robert effectively now

Robert Julian

Rati. Thanks,

Rati cost mentioned, to we for quarter. adjusted We some than EBITDA effectively are GMV, financial better with pleased Despite our deliver able results for manage results pressure on the expected our the second and quarter. were as

for force and open in implemented we modest reduced spending. example, slowed discretionary in hiring reduction support corporate roles functions, For a our support

We necessary. loss, be if adjusted grew will the contingency QX, prepared will the and guidance year-over-year, implement GMV actions we to continue both environment monitor sequentially our further we our and economic In EBITDA narrowed and for exceeding broader trends, XX%, quarter. and to revenue XX%

a our However, our shortfall adjusted of adjusted the EBITDA full-year XXXX on in RealReal and to and on target. we prudent it to we QX shift believe be are demand, result an project reduce that as supply we in The basis EBITDA Vision in will our XXXX guidance. track Notably, XXXX achieve is profitable to consumer continue

cost productivity, As and elements first we've based three We targets on primary of growth, rigorous these half delivered previously, fixed discipline. on projections are all the XXXX. communicated and cost these three of topline variable financial levers; in

the mentioned, session. business Rati for we strategy and Vision our and profitability this XXXX to With continue will into opportunity that, prospects long-term lead are we now As Q&A energized toward goals. and to go our our about

Operator

you. Thank

begin Capital Markets. our now Simeon will ahead. question-and-answer session. the from Siegel BMO will go We Please And first from come [Operator Instructions] question

Simeon Siegel

I doing the factors Thanks, mentioned. talk hoping well. we demand was all through everyone. you versus Hope could supply that you're

take demand So the And like I the ASP rate, in from about improved drop think that items. you talked about. was on the supply-driven then sounded that had you hand, which a the we shortfall other and talked the shift in

dynamic? the miss down us Thank versus just slight into demand maybe you through the So help supply in versus line think in you. broken GMV can revs that

Rati Levesque

And of GMV and I we then – in and supply you Part as out like and GMV. say QX, we ASP came was those Early down so down. things what different miss supply, couple – AOV talked down in we in we're that factors. of will know, I I a supply-driven company, the of effect brought Great a kind of separate that two side that And the about, most specifically. we came saw happened, mentioned Sure. brought that on is thing miss growth. Resignation we're mean that that. Two, so the QX, the though saw the like second seeing It And some

really that of back And shift in XXXX so we numbers back that where increased. pre-COVID shift to ready-to-wear saw consumer

Simeon Siegel

from Okay. any technology approaching the All obviously going – then self-serve, right. consignors that good labor you're forward? And to the help any for intentional how Thanks. at maybe learnings beginning, maybe with not does but

Rati Levesque

sure. for Yes,

was During COVID, self-serve us we say. And that become there more stores, really was helped silver would of luxury channels all forced That's I what sales kind van the saw upon productive. those our was and lining managers. call it virtual, of force our what we pickup,

what we friction the per items pick through So manager focused luxury really we've is up on so amount channel more there's making up. can of go least our productivity been sure saw And day. that

of last driven up technology. out overall few years, our the self-service So we've seen that go over

there good to some learnings continue really So we optimize. and

Robert Julian

growth So rates. one also Robert. little Simeon, the context our a is I'll thing – and GMV add this about expected

first about in still supply in XX%. of and close labor XX% roughly some at grew So was guidance, of so and on our We've everything, sort rate half in GMV the our midpoint growth price in in and the changes the we average some mid-XXs, the is pressure it selling to XX% GMV pretty talked but at of or midpoint. consistent about year, due the QX, pretty QX, both to

that north So same just we're we growing the XX%, first still We're half. of quite grew XX% growing in the rapidly. not

it's some not and we've a rate it's XX-plus percent growth bad still at headwinds, had while slow So growth.

Simeon Siegel

have of the Everyone Thanks of right. lot. the luck rest best for year. All Perfect. a

Rati Levesque

you. Thank

Operator

come Please will ahead. Wells question next the go Ike from Boruchow Fargo. from And

Irwin Boruchow

Robert you. two Hey, thanks. for questions

quarter and Just then we at XQ on year-over-year the I trying of I before math we back on that through as I'm And get dynamic great. single-digit But there based impacting looking in EBITDA QX it guess, AOVs amount question, the assume fourth run of for QX? kind AOV there mixed rate And guess like maybe right? kind to back half year, question. looks of – into the that should what's just would then Any we're when pulling this levers is be to decent we that negative quick real the year-over-year and move a something that are some to going more improvement you're growth my am mid I looking do than adjusted you're I the rate XQ. I'm implied. the continues help of curious, assume AOVs

Robert Julian

what into triangulating year-to-date can and and suspect doing our of results our guidance, that I of the you QX, of adjusted you're get EBITDA. that of what Sure. Yes. is sort kind QX the part suggests

guidance midpoint directly, for the is for a of the of that for QX to QX you $XX get million QX, X.X%. loss, And EBITDA our to middle addressing adjusted triangulate $XX adjusted is do our a is of revenue. if you So million roughly and EBITDA percent XX%, which of

in rates and And be cost. that. is of get leverage And margin a our in the midpoint I a single-digit improvement say QX. what GMV quarter QX functions our and you up a there's at question gross Part logical that QX. that is lot and where in assumed is significant QX in continue volume. that the variable the flow a it we of EBITDA on costs business continue to take And guidance, to this is We'll not fixed dollars drives different is of a our that call in support we're has will creates margin good the cost in between in So revenue QX. projecting million those QX in terms it And loss And why million. XXX our of QX That to GMV. largest our through. GMV relatively much leverage. seasonal is so a from step flat would QX QX adjusted more is also $XXX what productivity stay experience always and in of tremendous and

our and guidance so that us specifically. And implied forecast into to that's in gave in we that's that QX leads QX result what full-year

Rati Levesque

expect continue. do And mix we to

– ready-to-wear, expect the was this us, I is So question, the numbers. for normal we that your believe part we back do to pre-COVID of new think last

Robert Julian

at continued of a sort this degradation Yes. that than previously a shift fairly quicker stable we Not forward. anticipated, but stay new probably reached that or we've going normal maybe will what level consistent

Irwin Boruchow

Thank you very much.

Rati Levesque

you. Thank

Operator

James. question is from go from And Patel Please the Rick next ahead. Raymond

Rick Patel

particular time past pertain you price the on if supply or negative I'm to think I everyone. you've afternoon, on when this constraints, in Good curious Does to supply do see shortfall. you've leaned cushion categories opportunity impact. And Thanks. same points? the partners Question the the around. the had to labor-related this branded any

Rati Levesque

point team. category about talk or to is not labor people about a So, field, price our supply. this talking in a the I When shortfall, out specific I'm no, sales

sure I Great I make just saw what sorry repeating QX, in into if The we biggest the We our myself, want mentioned, Part that's it Resignation supply. like So Two. And to to numbers it's crystal had call clear. effect I'm increase attrition

So it wasn't category specific. or pricing

of that more us. as branded a partners, play is far for brand As

play awareness We us. lever, for but and as supply is have a not big used a that for it branded

like in So those we'll general we're profitable And growth. on continue to really do focused have we been.

it's are I revenue the focused reduced think percentage go purchased, XX%. of part we've profitable important we limited on a we that back the needed just And growth. past, category this – that in maybe was reminder had to people's We direct couldn't everyone again, as really channel. was as QX revenue, XX% we month, growth. of That's sorry, mix we're to a And was as of Direct that's profitable home. and that inventory the a XX%, quarter. that inventory our times in XX% which vendor revenue this items focused because especially of during in about on COVID, hard in to did into say our the that is a this lot again,

Rick Patel

margins? And how you your [indiscernible] half magnitude believe more gross the about can little there, in margin particularly I we get direct should in of on think and segment that a think us the fourth gross quarter. help about back bit difficult point, comparisons growth

curious trend So like? that looks just what line

Robert Julian

low-XXs. of does owned revenue. So By to go about had we this have reduced be or we QX total our year, it revenue. XX% we'd of should risen of that in the to we back we the and of sequentially it, out percentage In inventory, and to significant started the And margin what business. to what is to deemphasizing be eventually time saw gross to back impact our that, that from the between sequentially is And lower In let me talk this percentage Rick, margin. in XX% XX% much year, before, if that the you the like XXXX, how to return get our revenue, of XX% to and and total reduced XX%. about percentage is XX%, and prior direct talking tended QX, XX% to it that pretty back expected had our XXXX that that, do a on end

XXXX the back gross first from on margin revenue mid-XXs. in our gross the the had XX%, when direct, proportion year a was coming so was again, XXXX, we of half of smaller in So our in margin and

recover about roughly to continue in second comes we'll answers probably hopefully And we'll line, that half Now that proportion year. the more back half in of improve the of question. but your as that

Rick Patel

the Good back half. luck in Thank you.

Robert Julian

Thank you.

Rati Levesque

Thank you.

Operator

And Needham and Andreeva from Anna Company. from go the is next question Please ahead.

Anna Andreeva

so and Thank much, Great. afternoon, you good guys.

Robert Julian

Anna. Hi,

Anna Andreeva

I topline the growth continued guys to longer we on in Hi. you're trends quantified secondly, think and I And that so a XX% they tracking do Thank rate guys you Are referring think previously goals. the there accelerate longer-term of on? guidance no result the Have wanted letter, of of GMV the shareholder one just topline outlooks get to GMV line as talked that the the if labor you of you target you're supply-related much if in to you shortfall profitability sure, not, levers much. should how is this or the there? plus in reach need shortages? to basing was Curious XQ growth to make currently, based about you're about

Robert Julian

our growth is rate we new what we at update will find growth XX% less demonstrating first projected came is was more what – might focus I So Anna, of question had Day projections. let about up a we our to that adjusted it's in cash our we we we then importance will lower to what XXXX like confident good of can our rate growth and relative me EBITDA, haven't will adjusted opposed address because our take And we're on cost we're feel our a look when in was productivity like. of revenue, EBITDA growth think the what is the in Vision then on XXXX priority think or our order actually Investor not part and second that achieve one questions goals, in GMV. And growth the one and talked And goals growth. providing topline we're might demonstrating we look And a rates. rate. and as the we Vision of was what that the base profitable and assumed a terms in flow But hopefully fact, profitable I

a our confident path. we that that gap at we before described. true means the Vision full-year growth And miss make I so by feel smaller we that up can and something forecast and will goals even we our the it's we much our but feel again, think large that, a reduction re-guide adjusted I I admittedly, our that XXXX it's that on fairly demonstrates that is close what And it will than EBITDA a midpoint, in in GMV the can make line. we much, at less think just like rate aggressive But had

Rati Levesque

to labor year, for and all It's that. that remember game the getting on important one, name answer XX% GMV more of a right the – right consumer supply the believe XXXX. question hired that's back supply first great tracking the with us QX the driven the say driven And miss spend. QX. half the now is directly, the set we're in do to I'd focused and And your by trained Yes. say we're now. of was And I of what shift of quarter part to I out up really up Vision agree even I'd about to in that. driven up

Anna Andreeva

much, you guys. helpful. Very Thank so

Rati Levesque

Thank you.

Operator

go ahead. Mark The next from Altschwager from Baird. is Please question

Unidentified Analyst

for [indiscernible] is today. This Hi. Mark

out coming follow-up been about seen to salesforce categories? that supply after talked the themselves there any you disruptions talking brands the issues about. just competitive we've parse Can on is not Just as effects from these platforms and more factors, we've going we've that

Rati Levesque

a of the the there. good. and strong. news. on The silver engagement sellers The no Yes. there. good we very volume that Thanks think that's I I really are labor. issues. for looking that was That's to The hired grow was just opportunities is growth factor XX% lining. mean, It repeat tough There that All other question. is and needed able team already the fast mentioned, like and enough grow to It us. team I getting was XX%, combination of for the not was And up. by being hidden new attrition

Robert Julian

curve to trying the And catch being I under salesforce to those a is will a is learning add some tail Rati of and in do go there not to immediately. a and there little to XXX% productive through And up. mentioned, folks then and have as training bit hired they're that,

is that fully been And be folks do who's a to get productive, time even there trained bit when little on we get tail a fully for to job little and bit so like a longer. of hired, do of have we have fully the somebody

And all so – projections our current in what's that's forecast. and reflected that's

Unidentified Analyst

then follow-up you. And Thank just a as there. Okay.

how seeing – you of resale to there's new we've online pressures? about you that your differences people So bringing customers shift were apparel. base, been inflationary versus existing attracted customer the a Are talked because maybe into are as in any

Rati Levesque

is just No numbers. that's difference shifted in consumer cohort. to about It pattern pre-COVID the the really

Unidentified Analyst

Thank you. Okay.

Rati Levesque

Thank you.

Operator

from Madhukar ahead. is UBS. with go Please question next Kunal The

Kunal Madhukar

One, Hi. be you my would one. and talked you in impacted Rati, questions. about, Thanks for Great because supply second XX% be, is A may. would GMV the if so the of would that of what And taking couple, mix, that? terms how the Three, Resignation Part there a being address – risk I That supply is issues.

help didn't if with of know you. the much you did having stores? Thank how kind have supply stores So you versus

Rati Levesque

Yes. you. Thank

at part The Part right compensation, we're not right of this things multiple self-service is Three, And new we sized people that. a important. really to size sure that making every We've supply and labor looking we've on so what not the kind then ahead we're is sales CRO As day. far bringing right done side, to we've dependent the and Resignation board the of ground. on added as a get that of The so in have piece across Great the leadership the compensation,

make didn't op things So those culture all Resignation is in back happen Great it's the sure of had did time. all the news XXXX that And these worked The make the growth, this it that on interesting, we during we to sure things Two. of second half side. to And we good saw happen implemented the career Part

So sales this the it. piece of is now

Robert Julian

And we're up. to recover see we're it right. catch starting starting already, Rati, to

have And so issue, we starting seen when from the are we recover. we've the trend improve biggest to

Rati Levesque

think Right. shifting. And I the market is

to as acquisition are payback And getting speed those seeing, seller from side. to again, come question think We're how on numbers I'm a healthy, The XX% happen. or seeing hires now retention second the the As to I tool on one-year. then And our perform? our to QX. in especially quite did stores that of stores. lot focus getting as you execute was seeing are break all continue The better. is sure sellers is of your stores up an of be in new we continue even

we from open about stores We to anywhere and from stores continue focus our now. we're to to has We and year And next thinking we'll piece, and saying one So great. made that is also because three of But about keep opportunistic. sales optimize. of that more that new And on continues we'd ones. self-service productive that channel. the be as it team that the really supply said

Kunal Madhukar

could, on so So is trade more, you Are in and great. around the maybe within – concerns spend AOV kind buying spend? the to you, mixshift, a Thank if or and much. and you to that attributed you seeing fears seeing have but of are regard people the even one consumer what consumer down apparel, economic that? discretionary And this Okay, I macro with low?

Rati Levesque

is XXXX. not, really are mirroring back numbers just it our we When pre-COVID to

trade seeing anything just down the aren't mix within we category It's specific. more category. So

Operator

Susan Anderson question you. be go Riley. Thank from next the Please will from B. ahead. And

Susan Anderson

taking for Hi, good on follow-up my evening. guidance. Thank I just guess the to question. you

being guess you curious So to you're what more, EBITDA EBITDA the get I less, that down? line, able sales lower flex guess with brought the lowered I'm now even to though bottom you expense topline think to I that areas

Rati Levesque

at are a areas on that And variable expense good leverage We're to We're marketing let and there flywheel we've project, tackle looking add we everything we're basis. many people – fixed already, we'll spend. leverage things. tackled continue to are tech multiple seeing that at news and leverage, here, on is looking Robert that and the effect. both from I'll but

Robert Julian

entire million GMV. and and costs, we'll more that's And Susan, in Yes. result exercises places authentication. fixed largely looking really our full-year put it. to productive retail QX further more But didn't of that couple we're and And we've but structure, We're which QX footprint, more that to for more contingency I QX actions, operations, gone a constantly and about to force outbound structure I $XXX continue earlier to mentioned reduction cost our much at it and implied But we the productivity efficient. always continue I essentially we cost the talk our for variable through efficient. monitor guidance efficiency really of structure put cost continued be to our as cost have the the to will and in maintaining look this on in examine into is our at a to productive our in ways inbound benefit the flat sales place plans. become looking to continue say to of

Caitlin Howe

Hey, Caitlin. is Susan, this

see gross really a going We're margin I too. becomes the the back to improvement thing just on total cost direct, expense gross controls line half add The the in other is smaller some percentage outside and and pickup the operating of in margin good of is would revenue.

Susan Anderson

as and then forward? to think that I we shift Should going the take really this we Okay, going pre-COVID. quarter also, great. with also How kind about levels back And should mix now think helpful. about being AOV I about right rates, of That's kind percentage the now? just the of ask guess wanted

Robert Julian

on it's has which take the rate, between and of half start been the in consistent. I'll going to first I'm Yes. year. say, been XX% XX% pretty

that think the second in the it's year. half range in I roughly of that

sort all shifts modeling So the fairly and be on, the even out and of it's throughout entire consistent so average, to movements with on year.

Susan Anderson

great. Go Thanks Okay, so much. ahead.

Rati Levesque

go ahead. part question? Sorry, Was of there your another

Susan Anderson

Just take the levels. AOV the and rate

Robert Julian

Yes.

So had pressure on AOV has some it.

we selling down said, average As are prices slightly.

up. fairly I think order worth from per mentioning as units consistent, there small this Net-net, it's year. year in that a to say in QX a decline maybe that's are was slightly prior unusual average order result We'll value. very comparison prior a year of

outlier. I was is last order $XXX, $XXX but QX prior The $XXX. which full-year value an average think year, year really was under was our

And to strange AOV $XXX now So range. what very in we're had a seeing the we $XXX is compare.

$XXX on I drop average, in in for QX. maybe see level somewhere QX, But little the a think the of higher off we full-year. a little but to a that in range kind return

Rati Levesque

take think – make of a and under items I year take And on in commission mix down rate product did $XXX. change We it's note changes. important unbranded commission jewelry and last to up and the rate based goes in QX usually

this change items commission a quarter made in under also for QX We $XX.

our and biggest of move see then, do you with the course, mix again, those of changes. factor So product commission being

Robert Julian

of before in I what of that year. mix. the our rate, it's wash is the net I That's been it's the terms some year of being consistent first half rates less more that offset or described more reduction Rati. good of Yes. By of take the maybe think take aggressive half due point, a second expected to terms a And the in all category, by a we've or in little versus

Susan Anderson

it. Got

details all Thanks the guys. Okay. Great. for

Rati Levesque

Thank you.

Operator

the go question come Credit will And Michael Suisse. Please Binetti from next from ahead.

Michael Binetti

Hey. Thanks here. our for questions taking

OpEx So us you Robert basis the X,XXX told last of that points leverage. quarter, I think

said you was I think and basis variable. Investor what you about I in us focused points of the on X,XXX that about OpEx on it costs on you roughly update Can those on quarter us was you Day that had X,XXX think? at XXX the same second leverage the fixed

Robert Julian

Yes.

have roughly our is was organization. authentication about OpEx center I was year-over-year, excluding points and roughly XXX stock-based basis sales leverage compensation what or support productivity our was X,XXX OpEx and So cost total our in variable on from X,XXX

Michael Binetti

from us XXX the quite bit a was when help you the little half? first it into go XXX, as back roll variable Would up bit back was you puts that that XXX continue of the that and forward said takes, maybe that the to you and improve was quarter some half – a into does

Robert Julian

the half Frankly, productivity support from mostly the functions. back is

what to projections topline and just because it's our think to in the our are elements and with GMV reduction experiencing we're centers revenue, the and some I as expenses fixed authentication lower on that harder and in productivity there get on much variable it's tougher lower volume.

in and terms the functions. year of of half the in expecting operating the second So I coming is to productivity cost projecting from say what we're primarily see support would

Michael Binetti

I back multi-year leverage the what in a the are and Investor the point? help can you Maybe showed than forward EBITDA you where numbers lower think targets bridge at And you thought. little on Day of conservatism or held profile target, go guess think you capture maybe flies can walking bit if us you a just bit Okay. get after what the to then comment the – this even you that can the some – of that GMV on little the you

Robert Julian

I completely you in some Vision And a numbers be will really that in would be XXXX. and I there's modeling, our even model to EBITDA linear Sure. we LRP projections the way. just – into projection XXXX variables, did count goes tell on create not I that that along the the use but in that adjusted positive flows many Michael, And understood break our in that to there path. ebbs to so never And break even,

transitory, will some I moving all and different in possibilities that that analysis Monte safety if all accommodation I XXXX the for we enough way. EBITDA. that's $XXX XXXX know allow question, full a But the was I being you would that bumps road. you in down – and could I and sure that. an about of a on that catch bumps But positive build to variability still I don't And addressing or will, that that our achieve built some of years. in can we your labor I next And we we tell would the I some of good a of enough a because we Vision several that on of a shortfall in up variability answer up that net Carlo for so EBITDA cushion wanted can if say run of that least over along but feel the it these and target some adjusted And we positive variables feel at I confidently as make to we're potential admit described, didn't did that

confidence gives what able that's so Vision numbers. And be to reaffirm to me XXXX the

Michael Binetti

help all Thanks lot the Okay. guys. for a

Rati Levesque

you. Thank

Operator

And Nikic Please Tom the next question is ahead. from from go Wedbush.

Tom Nikic

saying be will discussion to down in for that the QX, Robert, you revenues already Hey the question. everybody. guide lot guidance, relative this did EBITDA but you're QX, better. at if in so when will essentially all adjusted taking I QX the sorry, total be around what flattish net revenues was versus addressed Thanks my – look a to

will less to OpEx like it me that happen loss the of decline So gross reconcile in million kind it how on Like $XX QX. Can actually just margin? the a increase than better does Is $XX dollars help huge you that? quarter-over-quarter? like that something Is revenue? of like million

Robert Julian

guidance for on Yes. I in a $XX.X $XX contradict projecting And of hate Tom, numbers, but million of what a versus midpoint our the QX. loss loss million to you is of we're

about it's improvement. $XXX,XXX So an

in million million $XX on roughly $X about it's call EBITDA improvement in adjusted numbers, revenue. and $X and million Let's sequentially about a to it, less round $X less in GMV million

GMV midpoint the way better QX an bit of basis on – like flat, that looks So dollars margin it, less a margin both would EBITDA EBITDA our adjusted to exactly Tom, revenue, lot, awful basis, at adjusted I describe minus of in EBITDA is XX.X% little bit the a them a little guidance. QX,

very, similar is to very QX see So QX. I

Tom Nikic

Yes, that. it. Got for apologies

it. for I Thank model think a for got I've QX. clarification. the appreciate you in mistake I my

Robert Julian

Sure. Thanks.

Operator

And Schenk ahead. the be question go Lauren will next from Stanley. Morgan Please from

Lauren Schenk

I trade end supply why like to maybe I that about ask is supply, going on Is just it guess an make the Thanks. particularly, really items, you'll inventory, sort just to pull lack in that now? EBITDA again. Thanks. continue Great. around pullback that vendor decide it back of a given wanted the off higher off of sounds The trade forward? and to

Rati Levesque

right. an off. EBITDA That's exactly is trade It

EBITDA, our about you being the focus. priority think look EBITDA, a and talk at EBITDA take and profitable I is we revenue us that heard when growth adjusted earlier GMV.

you So us we through. it this was important for it as of through some when wasn't flow profitable product that flowed

team trained going core us again, So all seeing a side. getting to important was for of really We're consigned the of that well. business. it hired great for to as kind we And We're the and that's back value QX. and we're the up a come us to do and set high in – our up consigned what consigned on from

Robert Julian

versus of little little there's intensive less you Right. the the that shipping which kind part of clean We us accounting requires hold in a bit talking better us look where out the of a nobody bit very asked margin. parts way. a consigned stripped so out us a to that requires of our in flow leads business change to margins our at about separated can inventory. direct have three a it business And business and cash see we and maybe presentation, result, especially of growth you're those margin – is our if about business, put And cash upfront, is you this when direct to strategy

the in it of consigned is intensive. cash is is numbers, margin while part our so business business And direct round reported margin and gross is gross XX% the XX% very

And profitable deemphasize our said, the and that, decision conserve business, so is also on on to cash. focus as consigned to our Rati growth more focus frankly

and to willing bit we're which us And results. gross better little of a will think so those adjusted a EBITDA better we lower ultimately rate, growth accept all reasons, margins a for give

Lauren Schenk

I labor attributed I XX% you supply? Very XX% is shortage that how just GMV of say guess would guess, that vendor kind much of follow-up to the of back miss you clear. of one the on versus supply. pull the

Rati Levesque

labor all it's shortage. Oh,

obviously again, as mean, that labor one direct So shortage, those as reason percentage was miss. business, constrained kind two number of far the separate I a as – I supply-related we're so there. supply things, of I a – the and business

So again, the GMV miss is driven out of the supply piece.

Lauren Schenk

Thanks. Okay.

Rati Levesque

Thank you.

Operator

is Please next go ahead. question Noah KeyBanc. from from the Zatzkin And

Noah Zatzkin

Thanks my for taking question.

then as down the first we supply then shortfall quarter the we the think that the the related should quarter, step first sequentially quarter ticked be rate media the the and how last long-term? year, move thinking mix down second in plans to of and more how And as versus back was in Thank Just helpful. marketing half it on about marketing the color flexibility the kind through will you're any half as versus second well on in rate, about of you. also

Rati Levesque

do has Sure. The supply. change with the nothing It back in that about really of marketing first. efficiencies. driving year half to say is the I'll

getting We're and smarter. I'd marketing differently mentioned I the have through about We're that there, using decrease, channels. flywheel you'll smarter as optimizing mix see the it I see to we're the in see getting channels QX year. efficiencies. nugget goes, as We the objectives bit continue to that's think forward. this we're those And far say and to our data different just earlier continue continuing we gold go little better effect back and of we marketing in our flywheel

Noah Zatzkin

you. Thank

Operator

question next from Helgans come Ashley will Jefferies. Please ahead. And the of go

Ashley Helgans

Hey, thanks question. for taking our

give spend were throughout the Just if of from wondering We consumer cadence on could the some us on one you color one quarter? the quick platform us.

Rati Levesque

just spend what was. Sure. In QX, we was said it consumer the

shift that So jewelry, continues shoes. handbags. you're from higher even and what goods, that And value now mixed saw say ready-to-wear it fine Is I'd asking? healthy, we watches, into shift see we a be to

Ashley Helgans

like months was variances quarter? between in in I June, three versus months, any if like the of guess, April, there terms May the the

Rati Levesque

year kind accelerate saw closer we the say of the I'd more summer it in to the back months. half of

Ashley Helgans

helpful. Super Okay.

Rati Levesque

see summer general as during well. And in seasonality in we our months the business do

Ashley Helgans

Wonderful.

Operator

from Thank you. Ed ahead. question the is next Piper Please from And go Sandler. Yruma

Edward Yruma

then taken half taking for Two seeing risk on is guess Have part for readjusted that staffing? some of the lack we first, inventory And know for consideration hard Thank goods, the the you've driven there macro the driven potential direct have? Are for potential and pressures to impact the as follow-up, watches you. by and appreciate I of me. question. as do jewelry by guide that any the or supply adjustment you emphasized handbags. Thanks seeing and GMV actual the commentary you you are GMV guys. business, or any any I deflationary back particularly the year. Hey the supply I all but on a is weakening simply of and

Rati Levesque

the as seeing to as jewelry business. business higher So I come value watches, goods, The is we're direct in from answer far news our good goods value first higher of risk part and question the the specifically. consigned in

tools we our in before high bring the proper consigned to seeing say, we through would whereas – I are value the So have didn't channel.

again, that side. use offset of will value supply We coming with direct were consigned coming the in the reasons the as on of we I of One high crutch that supply able it, to the in, say. kind a

I'll pull value. that take Robert been that we've that having high levers And drive the to we can then more one. there's events So far specifically as value let these as guidance,

Robert Julian

Yes.

average whether in both it's due lot the to the we second of what conversions selling order. for side, it's or of a and half mix value, the and it's described. on rates of mix consumer prices a really units And the per of supply reflection the demand reflective inputs opportunities terms demand shortfall the of that we saw side, labor in high low issue also or supply to in take on So in the of and guidance in year, terms

And really things. reflection so of a it's those

We are a don't have ball. crystal economists not and we

and inputs And what the second the there's year. adjusted we direct want primary half broadly. topline. expect related to the much some in to away our more growth just from not the very deemphasizing that's focus because so just we uncertainty we don't profitable growth. really the It's know that business have boosted Certainly, the back these that feel half past related also turned and of have really would But on to reason we've that to the really of it in we

Edward Yruma

much. so Thanks

Operator

go is Please from Albert from Cowen question next Chen The ahead. and Company.

Oliver Chen

Chen. Oliver Robert, It’s you. Thank Hi, Rati. hi, Hi.

of versus the the think I guidance, do answered love how Regarding evolving? what lowered comments view And in kept fixed that see components you you're but the profitability terms profitability, thoughts that on variable guidance Robert, giving are your you earlier, would that. it of XXXX you you on

a market lot. a Thanks turnover, and strategies really take also rate what in curious term still compensation risk more other How is supply definitely seeing really things segments? some we're competitors happen about gathering inspire regarding luxury labor still competitors I'm factor? and to and and the to that at do Second, and what is might you'll to And you your accelerate, certain point, really sales potential innovation just feel longer retain higher, people tight as well. and as do a about tight take third and labor market

Robert Julian

And in our and mentioned to when I'll And for start primary XXXX mentioned XXXX be ourselves adjusted guidance earlier, projections. you before, important, to and allowed your elements those go I with projections, we've paths some focus, XXXX. achieve described that that considering goal. as there into of Vision lowered that lot So the And XXXX those choose there's one the as that a of financial about are being and different of our a projections. lot we've Albert, EBITDA, I variability the first different there's most we've that question many as variables case, in ways

flows of most expected important important EBITDA. you've three looks What the GMV. actually It like is main adjusted way. and the XXXX the in least We projections towards, guiding being elements the of most are that the as ebbs terms along the risk described we at

growth, numbers. some base, I adjusted again, And slower we as on that look productivity cash to projections. at even can So that EBITDA we manage still our cash said, get that and think to believe and I with other to track to the the cost find continue, ensure to flow inputs EBITDA we're our adjusted flow our we hit to

Rati Levesque

some that transitory. And are saw of again, we those problems

I second like two and then on take And to feel where exactly. bump service it's one at other earnings value think always we're versus looking rate of more and about pricing. see we the We was We're So optimize. questions, can and take pressure. win always [indiscernible] looking and and a your competitors we rate

we – any hit pricing kind how to of us as what versus far look thresholds regularly, We seen as competitors. pay haven't yet. We at our

almost that have kind sophisticated algorithm pretty pricing price. XX of is We and offer seller our best to our million shoppers, luxury

And hiring pricing earning And this doing continue especially to a make QX. at market, asked take comp been piece continue look and making side. we've size I'd going a what to are we on the compensation and there. look we're to on on We and that. into about times staying that look a to to are really side, again, we there, see I and someone we continuing right and monitor. say of it we sure then done the on to we'll some key We're And our really here we rate. we are the that year, look well, couple at as, we're of a earlier headwinds the needed that compensation, pricing leadership at way at strategy continue we'll sure our to in values seeing So markets. with think have still continue as if looking as labor at far couple progress big the

Oliver Chen

actions data do you and innovation are all that And way a key and retain core competencies as a helpful. letter mentioned to in Very to the preservation Which do do how and strategic prioritizing priority. your Okay. you well? that as

Robert Julian

it. of you sorry. and I'm were just your when Albert, main up good of catch the there getting – the part to you broke we question, didn't part

Oliver Chen

and and flow? going prioritizing – to you're investment cash tough cash that just innovation to curious decisions about do and relative that make cash was to about make and sure balancing to I decisions

Robert Julian

million of of roughly cash prioritizing is of related in holding and $XX inventory. one inventory. main our so actually we're cash elements improving Yes, to the cash And

completely this programs bringing was of Now, associated other of get that us cut some about categories. really of terms in now in wholesalers and to new those that vendors comes $XX from million business. off out it of from or through in on. direct and we came inventory any and that Inventory have so But inventory paid with policy

and you'll as between so we the sells balance cash. the see inventory amount And of do reflected end in that pretty expect end in QX a And that of through, to overall significant of reduction generate our this significant year.

focus paid. cash a part consignment margin, our cash take we less out no we less Also of And there for more so or this paid basis that's of intensive the just cash. is after higher on When of consigners direct, consignment course, prioritization business items get and on us. get versus themselves the

a that basis. cash on be So very positive could flow

and prioritize in a are to things us couple little of past than doing cash things to will differently generate cash. that those a the bit allow that some we're So

to investment, In there's of the we because three a trade bit now off little about elements a of our profitability. there talked in path terms

continued them variable of productivity. One is cost

efficient get And items in more to so innovation, and AI some to in so on. we invest and do have other ways authenticating in

to it And at path. see technology, automation, those so look is in find innovation, return will one and and you a to of on each we just decisions with case-by-case in our the us ones the continue basis in best fundamental invest

Oliver Chen

Thank you Very very much. helpful.

Rati Levesque

you. Thank

Operator

of ahead. BTIG. next is Please The Marvin from go question Fong

Marvin Fong

questions. me Great. Two squeezing Thanks here. in for

on seemed of First like the memory. one buyers. in recent active better on, It one performances

to, you some shipping. it's I small wondering good of you able for And deals disclosure, programs that in shipping because And be just second question, great. like think up at were quarter-over-quarter a past, do have guys or done noticed, around people deal or looking a Just the that you any to then any I my macro there – renegotiate on the continuously broken operating the had it know revenue activate was you value, [indiscernible]? new some on you it's growth and guys would loss. commentary that been guys attribute If what looks some instituted you

be Thanks. if to break reach we wondering great. shipping even, that'd eventually Just can expect

Rati Levesque

first the take I'll one.

marketing base, is our concerned – and existing our coming buyers active as from gone are are existing customer from far XX% customer buyers base up. As our our – have and buyers. our coming our

attribution buyers. model from coming factors. out our I marketing are mix on couple say contributed the of more getting different a revenue it's marketing our I specifically Our to our Like and And driven channel. existing would efficient said, we're side,

the So to the more us, attribution us that buyer the of having means efficiencies optimize enabling there. journey more and or customer through

then active we'll buyers as And we're see when So go lower smarter see up. value sometimes go we up getting goods, have well what we we see there. is buyers and

things So into And dig then our that and the deeper your base tools – lapsed working and to able into buyer and using some space get we've dig second some in, the really is us. of to of we're been question really well lapsed on… our for was

Robert Julian

Yes.

we were movement services, of getting questions was shareholders did and the lot category go that it the what polluted it other and two net directly get reaching were presentation, bit So services after that a little about what last and consigned then our margin. They part second call, wrong gross people a about was was of past, confusion. a into shipping about direct the a business actually category the from In and answer answer the well, lumped the motivation and way consigned reported which why was second on we saying, reporting And question by analysts was net to I'll consigned and other segments margin causing services was were earnings GAAP little the your the services that shipping down? we around shipping. in the And in the happening margin our started And shipping our other and talk of in modified bit, conclusions. that. question in in consignment your then financials, I'll it's and behind

a show like shipping now shipping. and sort pure we then useful line. its break own three way, in category it analysts the mid-XXs disclosure That in the that show and be out we elements margin and is and So in the consigned in more do its other on range, out and to shareholders own felt of direct – margin would break as margin negative resulted small better the a consignment to mid-teens, a to

has pressure there on And been have gone shipping. up. costs so Shipping

to some One-time, we We one-time possible for from have units not that multiple complicated in there folks we consumer mixed to is for. things if locations. in that Jersey. are shipments single in more shipping done some aspects. it our These charge SKU try that get but New some the Phoenix, mitigate do we're We some retail naturally will a unit to organization, in, XXXX, a and pay customers. charge And is shipping have

for add might And that? so to shipments, a harder to expense makes but Rati, positive. we it only consumer, multiple do there charge that And one shipping want be which us to turn you to

Rati Levesque

good and we the headwind also things the been That's Robert some do news, working in convergent. we because pass for Those we'll to margin Yes, seem rate of We increases shipping but nature quarter. carriers, affect shipping to hasn't doesn't I that seem the overall that our that's us affect, to and of about. for of cost our is down. slow business that flat earlier seemed customers continue But that increases to a our the some because say have diversified it's and to optimize. talked would year-over-year because of always us. the We've that of rate of saw

is we're of think pulling this when have flat our stay goal We years shipping to end the few over next that at some other we about really levers year. margin. And the

Robert Julian

can our easy we like it's goal in the the past. It's that's Right. nature we given a If not just certainly would – gap, frankly, business. of that been narrow to,

Marvin Fong

Okay. That makes perfect sense. you. Thank

Rati Levesque

Thank you.

Operator

to gentlemen, I over remarks. and for session. any closing back this our Levesque the Ladies turn to would concludes Rati question-and-answer like conference

Rati Levesque

Thank dedicated you RealReal for our The call. every to I our continued joining closing, In us moving today thank team for on day. business want forward their earnings to

forward profitability. look and on progress we call, earnings our to further next to path results our sharing During

Finally, goods make on than joining XX million who to the and Thank more thank like passion to of extend members our us more I'd lifecycle you. luxury our mission are sustainable.

Operator

Thank Thank for presentation. you. The attending conference you today’s has now concluded.

now may You disconnect.

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