REAL - Earnings call transcript Q3 2024

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Operator

Good day. Thank you for standing by. Welcome to The RealReal Third Quarter 2020 Financial Results Conference Call. [Operator Instructions] Please note that today's conference is being recorded. I will now hand the conference over to your speaker host, Caitlin Howe, Senior Vice President of Finance. ahead. go Please

Caitlin Howe

operator. Thank you,

today ended to and for me Ajay our Rati discuss XX, XXXX, period Gopal. Officer, September Financial Officer and the are Levesque; Joining Chief results Chief President; Executive

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

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

most information factors results will find financial more XX-Q. about Form company's that in forward and affect can uncertainties Form other both these measures, subsequent You and also and operating could our the on non-GAAP quarterly recent XX-K risks, historical looking. include reports certain presentation Today's

non-GAAP website. I over to have to is release, of the measures call which to GAAP would turn on the Chief earnings Levesque, We The historical most Investor our now RealReal. press reconciliations available provided like Relations financial Officer Executive measures for Rati comparable in our

Rati Levesque

authenticated third you, the Caitlin. conference of the company, largest people in service. years built afternoon, welcome most honored everyone, with RealReal. call. new online and Thank The some at Good XX speak spent you I've talented the today quarter The of I'm this industry. CEO on as We marketplace and earnings last of to with best, the a goods unmatched customer working the resale for foundation expertise luxury world's RealReal trust, to

vision: way to are the shop company's teams the against change the better. Our executing well for people

made the report the business, I'm to enabling service, I'm high-touch continuing shopping playbook. built for full results. GMV, We our excellence been obsessing human to third changes the raise are on quarter to exceeded quarter, year to guidance. the momentum with and business and to and strong our we've and and operational increasing strategies, service. us through involved technical our creating pleased I've of the our in proud a scaling over forward champion expertise adjusted of expectations business EBITDA third we've confidence and revenue deeply looking experience unique progress circular I'm made, the growth our foundational

acceleration strength versus Third versus of by of revenue, quarter GMV the in up year, driven $XXX X% on second year Revenue consignment more increased million and XX%, an a XX% from last basis. quarter. XX% last than X-year increase grew an

We also path profitability. achieved progress solid on our to

cash of $X.X quarter second marks are Supply Third importantly, of positive the metrics quarter. versus increasing units and EBITDA year. value with EBITDA, quarter strong, free our positive and flow adjusted million we last delivered adjusted for positive both

value $XXX before, As believe there's in for we've highlighted in items billion the we alone. untapped luxury U.S. resale

Our growth supply that is driven our for platform. unlocking by

approach the years, this unique supply-constrained We business. a Essentially, profitable unlock sell refer we can the what approach of this to we managers, growth our that luxury are playbook. We to that our power is Over often mention we procure built it. can stores supply, supply. that includes if the multichannel the and we marketing as means a

areas: our sales, executing rate and retail on through key marketing playbook relies supply over sell-through lifetime Our driving in against our X is stores. XX%. Success growth

The with relationships team, with and building education RealReal. about our for consignors is our providing first This these selling comprised is responsible managers. areas sales of key luxury maintaining our of and team primarily The

and the primary in Our advising of value clients' goods as the consultants, on to luxury also serve luxury assess purchases managers market. helping of trusted their assets current

profitable our at tools them other supply. Recently, with tool managers a in working the on understand we which luxury top luxury likely generate to to to tool, helps consumer annually their clients most We've macro managers million their which jobs enables supply data $XX our Our incentive direct leverages consign efficiently efficiently. and relationships. and are and sales structure team points. launched their sales to The our created providing do given efforts time up we've client through an been to drive smart

and sales merchandising to curate platform's are able Our tech our teams assortment capabilities. through

We and data. We demand, and in team brands these and and which purchase are mobilize our consignment ways leverage categories items. are we historical identify proactively trend enhancing information sales to pursue high the

We incentive are our with sales seeing success updates. team continued and composition structure

As we've deeper with with towards our we've previously experience shifted profile target. discussed, luxury and luxury consignor connections individuals manager existing

margin dollars expansion. In units, addition, incentive on to our rates team. structure sales for trends, contributed is our strong high team's and our up line top has in supply showing versus retention our sales The GMV we focused benefit growth historically which gross

key second is for marketing. The growth

in intersection authority ultimate a real and XX As have our mover the expertise. we spent of value, luxury approaching and position of real the space, first from years creating fashion

turnaround, like a showcase we've press realized uses that topics about role luxury some social resale quiet have media that resale recently the engage seen sustainability engagement The resale and trends. the feel industry data and brand's our which the our had makes bit XXXX, Furthermore, customers leveraging post. we may in recently annual we've these published educate in relatable. Through Xx on content space. to report we highest Instagram During our helping space. of on this In the potential doubled engagement authentication consignors. report, we been platforms down We complicated previously, rates both leadership efforts, and to TikTok to in asserting social and like customers started the

and can an view awareness customers exciting RealReal. to work we up, talk there's do. what this differentiates more perception still about as The While We to opportunity are

third key retail. area The growth is to

experts consignors with stores for to and on-the-spot jewelry fine for valuations watches. and Our offer a experience curated provide access

affirming the the consignors traditional with is our areas focused retail We that fleet store being of strategy versus working. where prime locations, our solely stores position areas. XX in of performance neighborhood live retail pleased are on We

primary of strategy awareness. aspect supply to retail is A that is drive store's our generate and unique the intent

this Houston forward are in welcoming continue and and We the to in path year. X later stores X looking on to of Miami year key fleet our opening per markets, stores to

supply-driven retail our centered recap, are team, playbook results business, supply, growth through we on a marketing sales driving stores. is our and So as to generating and

excellence. operational Moving to

robust improve improve efficiency, operational automation, proprietary assets customer leveraging to processing our AI capabilities time our to efficiencies. while trust we Cost and supporting increased the top from line through continue reduced We this year keeping and expanded XXXX, experience. steady investments by headcount and In build important growth. over XX%, and operational have savings current funded margins that our drive data work

XXXX authentication, vision For with process ] a customer helping tools RealReal like The items. in [ leader reshaping how has trust. and years, in we The undertaken proprietary work is we've shields build been

human fairest robust data now with route and supply. cost The and to and sets on use lowering items growth and price. data our our speed items for of our structure our are differentiator. By to to human of we're wealth Through historical accelerated return our optimal to is We our will pivoting revenue attribution quarter items automate proprietary ample enabled unit QX, we business, intervention. We important and levels. The sales GMV for our important fourth the determine authentication technology leveraging we've operational through help improve and AI reduce moved our based and quickly of to headed as improved we level, copywriting and expertise and focus improving economics. priced into fixed incorporating the using instill data an along sell with confidence pricing trends, algorithms. and combination pricing core majority our growth and that current costs, are fashion to highest, consignment risk back

growth and execution now, our to the down, the are team hard for future, quarter. room our clear forward bottom the for We're we're the year. we right planning excited to with EBITDA I'll with to the on starting the that XXXX. outlook looking scale. remainder chapter in It's of of I'm on as but by playbook turn the the line. momentum close final results As about seeing to to RealReal our proof and XXXX. I'd the to for heads enter points quarter and that, sales year, our XXXX delivering of With like throughout is strong the business. next leader positive commitments discuss in both adjusted is of financial encouraged we we're top QX growth. thank work over call out working, The lots Ajay their our positioned I'm the market in and for focused

Ajay Gopal

Thank you, Rati.

results our balance quarter strengthening important profitably step We throughout encouraged third the sheet. are strong an we Our as the and business our acceleration focus third by scaling line were growth on quarter. top in

This efficiencies, resulted As you playbook, on gross in earlier, mentioned quarter. supply, on our along is the for growth working. growth, positive is higher with margins centered adjusted focus operational Rati EBITDA driving heard and unlocking which our

QX, and increased good versus last points as was of active GMV business orders supply as trends led growing buyers was average XX-month helped returns due increased X% established detailed results, second to last of the beginning down Now buyers quarter. Revenue for baseline revenue the last a and X% the increased the QX to in XX.X%, trailing an $XXX basis, quarter, acceleration take strength increased was versus grew the business. from a versus turning in year. XXX,XXX. the our year. Consignment XX% $XXX measured Direct as XXX,XXX of and a larger last This million On on up Active our XX quarter rate revenues million versus top healthy XX% XX%, compared we and basis in to XX% basket prior consecutive by year. strong lower consignment shipping to higher X-month to volume, a line. for stable basis sizes with direct year trailing year fuel at period. respectively,

reminder, late a we As XXXX. percentages rate take modified our in

items designed those lower-priced, of of our profit number the platform. limit were on Some to changes lower

the We see account under we $XXX. of our impact as available reduced active buyer sale expected for to items an to number

retaining margin As that yielded. inflection changes anniversary see these we gross a updates, XX-month these to positive beginning while data in the active are we buyer the benefits

an million rate. million basis margin improved as take a last Third Gross profit year, our consignment and higher-margin year-over-year. of XXX quarter improvement business in percentage in points increased of by the $XX gross of the versus quarter driven third revenue XX.X% increase total $XXX

Third million year-over-year. million of $XXX quarter $X increased operating expenses

business. for year-to-date quarter. As million in cash, our power positive million last work restricted percent business cash, versus of QX milestone our quarter. total model. as with $XXX a cash and free increased cost flow basis second ended to our $X.X we've EBITDA is time year basis, to operating of $X.X notable our a a year. We in This resulted delivered equivalents achieved points the demonstrate above have balance. the a across On XXX million improvement quarter EBITDA $XX of last million Adjusted million a as leveraged third leverage the results the we These adjusted in in marks $X cash versus efficiency revenue, drive expense QX

focus means our the about talk on growing us acquiring ahead This inventory heard don't cash tie consignment we up You've our revenues. that of season.

benefit In cycle fact, favorable item pay resulting conversion platform. positive an capital cash our on our creates flows a we after sells when working consignors to grow. we our The cash

for now Turning outlook of our the the to year. remainder

result quarter and As performance, year GMV, our a third guidance full our EBITDA range. we of raising are revenue strong adjusted

expect the our full guidance, resulting range $XXX and range million GMV prior to GMV quarter $XXX of $XXX expected growth $X.XXX to X% of the range is favorability. to We versus million take be in in continued which rate million, revenue by to in a GMV QX of year growth the at year driven $X.XX million, of billion billion. Fourth represents $XXX midpoint

driving $XXX be full $X.X to currently Fourth million, million Rati's Our enthusiasm expected while our dedication adjusted over ever between range their full flywheel. I excellence. the to million expected EBITDA most mark would across solidifying process year to range now performance quarter also about we year between growing is and be to a thanks the of an work and teams service our margin, expected to QX significant our operational in my are in adjusted million technology the results. single-digit and and $X.X $XXX financial year-over-year. current to playbook, our profitable and our the $X.X to business path positive using share organization, friction to revenue be EBITDA, the in positive a extend quarter million executing high by in the and growth on consignment as would million. In for our closing, $X.X obsessing is I like Across accelerator reducing

the on strong We year begin growth adjusted the accelerating expect will this to a sales turn that, close to positive over footing, Q&A. to and out Operator? EBITDA. With back with operator I call

Operator

[Operator Instructions] with question And from Mark of line first our coming the Altschwager Baird.

Mark Altschwager

you're context seat? new that additional separately, us the So thoughts Can outlook? And or the just that you strategic initiatives other in implies on seeing in in you're confidence share trends guidance can in factors you're acceleration or some continued quarter-to-date on planning changes that QX. any agenda on you any you Rati, now then GMV any supply give give CEO

Rati Levesque

Thank question. you, Mark. Thanks the for

So seeing. What confidence us I there. X QX we're supply questions guidance in trends some of gives and heard our the

with quite is really talked start we're the playbook. feeling and looking that I'll healthy one. that's driven about important So will right when at. main really in good the supply talked And business, so growth past which we at We're we're strategies, supply-driven where supply now. out which of X I say and following quarters. It's about in we've the about a

together, script. And together that retail heard the marketing and coming really the working nicely. really You in it's sales,

launched for on referral to other well. we seeing work them, retention. so working sales there we're expanding compensation the really seeing key And the highs lows or that structure the really as markets. program We're We're side, all-time

front, On talked marketing and the we're really mid- high-value on personalization, seeing side, consignor. that past, this effect. about retail the the in targeting this And halo we've

of $XX price, selling average million higher. even year, Xx up stores in that so to up we're seeing Some also and high a these to bring

strategic growth that have business. things scale the We some now. together as our good big, our these right as confidence that, really calling in We're million operationalize is really we're then seeing strategy there that to momentum X as closets. And want working. and monetize the far people's is people really coming in a my And supply seeing TAM in lot their closet. $XXX So we playbook of we know initiative,

So X making our sure say categories. take and We when rightsized now buying, the I our years unprofitable sticky business. not really direct strategy. everything CEO, I'd came as co-interim see of take that that ago, profitable. that So got some looked right? changes. We and I good in at is made we we're product moved rate, out feeling about that rid That's rates, the I changing,

seeing work. You're it

in seeing You're it QX.

in it seeing X% You're in QX an of guidance implied of QX.

working. growth to and are about as we people new great, way then far also continue So is things to for shop. those of on Return all be supply-driven expand to we'll acquire kind And internally, with supply. that point continue big goes, of change ways we'll think to talking the that as the us innovation idea we'll when a

Mark Altschwager

Ajay. Maybe for helpful. super all follow-up That's a quick

opportunity gains Just on gross beyond margin, Is margin. in as XXXX? you continue to there see consignment we look gross some further there nice

Ajay Gopal

consignment QX for impact in a that may basis, a the but out more is higher. XX.X%. gross in reported of Thanks had right about I drove to we've that your say of pointed as performance XX%. you lot go-forward and that It we business. One QX, good the feel margin. where would place in I on Mix gross have of We you a sort you aggregate revenues question, the should mix To to going really margin at was couple think business feel that gross drove a Mark. the we on driver things nearly as on revenues, of with know business really expect margins range. coming we stand and our our about the in sequentially, margins consignment be highest there what our of results strong our really we're our a forward, right quarter XX.X% XX.X%, consignment expect revenues. today big look When margin a in good point same now. I coming really A small on from

Operator

coming Owens Our KeyBanc Markets. next question Ashley line with from the Capital

Ashley Owens

slight so on improvement there, versus it in just could how just about in quarter. in on makeup the out of the saw some given update we called on maybe us you XQ, back AOV a this. offset price fourth be should this to the if wanted an consumer, in AOV year-over-year as growth thinking the quarter, help circle from to and growth volume sensitivity was last just start We a volume within I

Rati Levesque

Yes.

So as necessary. and I'll add please on Ajay, start,

price resilient. as sensitivity, say macro our So far has quite as business and that been will I

about our most and as really obsessing operational our that's consumer, intersection over our around to continue we trust excellence important that I is We value also thing. This being they luxury X the and growth on and and focus and but strong, think of is strong. talked giving with supply what demand buyer service, really pillars want. seller playbook, resonating that

we going I item shows give sure that we're play. sure And are So a -- the making that goes people price. heavy in understand that's that that, some you tactics primary can every list on but on making value

on that the see come really listing value can product in you So detail.

Ashley Owens

just And a go-forward bit bit a we a little more a what I of to strategy the marketing that Great. click leveraging basis be? level With wanted should the about in then Okay. right into just as the there sales thinking holiday, one be should how quarter, on follow-up. heading and down percent on

Rati Levesque

Yes.

to the the this with goes X-legged marketing. stool We'll marketing see continue back to efficiencies. So piece,

some a see spend the You feel summer to confident we to lower a being continue higher holiday, should expect QX seasonality based the on spend quarter. there. in That months, drive going QX look-alike to in you'll SEO, is and quarter continuing it talents that our efficiencies. is campaigns understanding attribution, going also down, dollar We've our is and incremental acquisition They're and P&L. really where better personalization launching some marketing. invested costs there, said,

opportunities we're next So there over years. about the the excited

Ajay Gopal

been to a investments them QX past. say just in spending our our by Yes. And that our find ability and compared just results marketing Rati add to you're we've I productivity to highlighted maybe efficiencies what the combination funded the and is that being seeing to in would that, how money in of

our it technology really and and a for marketing the we about think we were new some CMO volume. approaching in just how improving helping pay remember, that brought fairly behind investments are the we the -- driving investments total of recently, might You is

Operator

question with of Northland the Capital Markets. next Our Bobby Brooks line from coming

Robert Brooks

question and yourselves that's the guidance first products have a to So houses results is raise whose XQ your recently, contrast year. strong fill some and really for seen weaker luxury results the great

those So remind how a consumer, obviously, you of not. despite RealReal grow still faced all a big does can Chinese first They handle? brands. the which could maybe But to just Real difference outside us large in exposure that, have being headwinds between

Rati Levesque

for consumer book Thanks average working. the the top model. know resonating like. double a Bobby. past. business of and play, that is about, Yes. from in We going average with the primary do Thank say from very between the different again, We're with look resilient sustainability really supply luxury really this, a all is and and will this the what really just I'm really talked And great looks even question. order you value, I on And have -- at heard metrics bottom. you, value The growth market. these selling the we it consumer. We're intersection conversion, then business supply. strong piece the down is to quite our We've you place say KPIs in price, we and to me look our at you demand playbook grown our value

easy, coming product service to we're retail We're those It's excellence, that, marketing can focused I and there of sales, heard -- the think have operational X consumer more. with delivering together. the really talk pillars, momentum making and and What is doubling So that's base, and well. and earn really playbook it me about what resonates on our fast, that as service they It's where drive obsessing business, down you over hearing. a gives that it's we to all the continue about, growth that right? you're lot feeling excited in we're

product that favor the and have mix our diversified in also we really well. -- as So a idea works

Operator

the And of our with Marvin BTIG. next line question coming Fong from

Marvin Fong

investors Rati, goes but looking been a the of questions term, we long more question new Congratulations, on get so of have questions of but Ajay, kind anyone. role. Most for lot here, out a perhaps from my to asked

call like sort of sort it terms might we about algorithm through of XXXX of margin think sort about the or we about think or in flow as of you Just incremental beyond. want should to

like it here margins and the kind a XX%, in based incremental good a So fourth incremental bit but But just for your looks off like, of third XXXX instance, beyond? margin in on what's to dropping were the guidance. use over quarter quarter [indiscernible]

Ajay Gopal

Thanks for question, Marvin. the

margins think term. long Here's how about I the over

it's changes today. made EBITDA I that frame breakeven, as business breakeven. And are We directed in changes pleased to think has step were we of business helpful how adjusted a really primarily back a EBITDA the being with I'm first starting of These where getting number out. XXXX. to played late

positions the so seen results us far, and in You've well looking forward. that really our proof points

RealReal. forward, going we dollars at and path I think see on growth. strong growing going have to We're clear flow-through a to both The margins

flow-throughs the is for at for going give our improve here. Rati unit economics, there's growth on of further particular, business gross to areas. incremental revenues, those margin to are work the on we total on opportunities from areas strong in highlighted unit consignment continue and Our XX.X% economics, and us focus We being operational to with our excellence. XX.X% focus that combined on our growth, believe

finding how a think we business. competitive can set work in really continue us gives data advantage across authentication. We in our And on in we in drive our sales and rich logistics, efficiencies marketing, efficiencies to

going the So last I right growth got the we we got we feel operating -- would and to in from incremental product expenses. thing it's that forward. And facilities see flow-through leverage in where expect as terms get that our well. investments our line right fixed to like operating on cost strong improve we've in we Marvin, of the expect We've say, further from, technology, the and footprint, leverage

Marvin Fong

think And sale. like you're some now comment it better follow-up uptake Could that was of it on lot the items the What sustainable? out third that? a return and my improved, And other then math, kind my of called of a was allowing believe people as like rate question, are that by monetization initiatives? return And I final was and quarter. your you drove pay that, it that Great. I is in a that fee to to corollary maybe seems to

Rati Levesque

Thank you, Marvin.

out are rates is lower. It That's a Operational efficiencies lower. factor. is churn they're mix. So reason of primary the also driven that really

service, but that more that attribution the faster, by So make makes it efficient. that's listing sure driven it it over making the the faster, only AI obsessing not are does

we're So happy that. the driven it of But about out it's what looks on mix within quarter. again, depends so like the mix,

return as the it's of days. are that far into. As mostly goes, on early definitely that couple way We'll insurance well testing Super final our something we items and is over as have a as next sale read handbags. quarters,

more give initiative. So continue to happy you test we information this as to to

Operator

Our line [indiscernible] next Fargo. with Wells the question coming from

Unknown Analyst

mine you This it the asked of of last is but have talking a the for bit you you're through you Most on little saw But consumer just about about quarter. blew particularly promotional, a bit the trends out bit, could kind maybe Robert quarter, quarter, talk been you more a little were already. park [indiscernible]. slowing this it little

can any So and you on that color looks exiting? give how it

Rati Levesque

and resilient. I business being Yes. I health answer Robert. Sure, our consumer take model that. to the back quite this can

on So I'm there. that going to message double down

are supply. are. We as been pickups couple we're over company, Supply is numbers the supply. and before, it's well now We very said running the as is marketing retail, really good seller a because that of referral last place promotion the working program initiatives of supply-driven for team, -- we've we've offering strategy and a where the the all about of they we're years, this personalized in seeing offer [indiscernible], meeting retention sales our the around

that a true, a people be are found good we to see if demands place, we'll is So harder follow. environment, supply even because in in play. for that looking the value And

about it's trust excellence and down meeting and on on our where over us, the they obsessing seller the building service, with growth consumer, business, for are. doubling really core operational playbook, moat, our our So focusing

yes. to we're So path, going that continue down

Ajay Gopal

the thanks for question. Robert,

to through Let We add did a answer. me of QX. see couple points Rati's acceleration

then order improvements really at how there. has an values strong. they our little prior we from actually and about average think consistent look beginning I at basis, question, QX. We gradual And of consumer up were to a of when us about were resilient. $XXX was above were feel for as your soft, preference, continued very year we saw $XXX X%. into that a sort you indication by and the average They in QX They've good on and values stayed compare order versus momentum

all quarter I how played good the us So in, means we and going feel what really think that about out forward. for

Operator

Our question with coming from [indiscernible] next UBS.

Unknown Analyst

the talked about, is you if you it the now? question but Of My the year really to initiatives clarify that's from really could from different growth beginning all what's that is just driven quarter, to changed guidance. the not quarter upside last until this what the really of just

Ajay Gopal

Jay. question, the for Thanks

on things. for in the the few think by a I QX, particular, -- story story versus expectations us was driven

strong. growth always supply. And out about good feeling stores really the playbook. our unlocking sell-through how and would business of by really described rate as is and point once we're find combination to volume. our being is business, First our and our mentioned marketing sales We've Rati foremost, and supply, in that we supply driven I

over lifetime XX% have We supply.

volume in playbook X growth supply was by in unlocking expectations our big factor driven So QX.

gross The other is would make QX margin. I point on

mix You noticed at That were we consignment company. that towards this and margins in on our focus I business, operational gross happens, When excellence. our thing last QX. And is it say that margin us on sequentially, a shift our favorable and by for upside lifts gross revenues. source margin up was as for driven another the was gross the of in XX.X%, a highest was would that ever overall

EBITDA, We positive for drive business, and -- yet. reported pleased to that us. in were think point continue which not we performance. We time probably particularly a high quarter resulted a more efficiencies And it's $X.X is that at would I we quite where to in -- would which the the QX, bottom that. second at opportunities in there we also managed line done it's seasonal not I because do previously, say was We which we've can notably, look million strong in

Operator

and queue. conference at Ladies call. further for you have your will Thank this the may all no gentlemen, you. disconnect. questions conclude time, you Thank This the participation, in now and we

The RealReal, Inc. (REAL) 4 Nov 242024 Q3 Earnings call transcript