The RealReal Announces Fourth Quarter and Full Year 2020 Results
Returned to Growth, December GMV +6% Y/Y; Q1 2021 QTD GMV Growth +14% Y/Y
Q4 Total Supply Units Shipped Increased 13% Y/Y; December Growth Exceeded 20% Y/Y
Q4 New Buyers Reached a Quarterly Record, Increasing 21% Y/Y
“With improving trends in Q4, culminating in December GMV increasing 6% Y/Y, we exited the year with strong momentum. Q1 2021 GMV grew 14% Y/Y quarter to date through
Supply and GMV growth are the lifeblood of The RealReal’s marketplace and drive its success and path to profitability. Supply trends continued to improve in Q4. Total units shipped to the company’s authentication centers improved approximately 10% Q/Q and increased 13% Y/Y in Q4, with growth exceeding 20% Y/Y in December. Retail supply units from The RealReal’s retail locations (stores and Luxury Consignment Offices) improved dramatically in Q4, increasing 70% Y/Y driven by marketing execution and the contribution of new retail locations. Supply continues to sell quickly, with the company’s four-day sell-through continuing to trend at pre-COVID levels. New buyers achieved a quarterly record, increasing 21% Y/Y.
- Consignors who interact with a
RealRealretail location consign more than 1.5x as much retail value as other consignors;
- Buyers who purchase in store and online spend more than 3x as much per year as online-only buyers;
- Buyers who engage with The RealReal’s stores have higher NPS scores than online-only buyers; and
- Buyers who interact with The RealReal’s retail locations have higher average order values (AOVs) and higher order frequency than online-only buyers.
“We exited 2020 with our marketplace back to GMV growth, supply momentum increasing and widespread vaccine distribution hopefully around the corner. Growth is a powerful driver of profitability as it enables us to realize efficiencies in our operations, leverage our fixed expenses, and negotiate better rates with our service providers. We remain focused on executing our growth recovery plans and have accelerated the timeline for opening our new
Fourth Quarter Financial Highlights
- Gross Merchandise Volume (GMV) was
$301.2 million, a 235bps Q/Q improvement and a 1% Y/Y decrease.
- Total Revenue was
$84.6 million, a 10% Y/Y decrease1.
- Consignment and Service Revenue was
$69.1 million, a 16% Y/Y decrease1.
- Direct Revenue was
$15.5 million, a 38% Y/Y increase.
- Gross Profit was
$51.1 million, a 18% Y/Y decrease1.
- Net Loss was (
- Adjusted EBITDA was
($35.8) millionor (42.3%) of total revenue. Adjusted EBITDA includes $1.6 millionof COVID-related expenses.
- GAAP basic and diluted net loss per share was (
- Non-GAAP basic and diluted net loss per share was (
- At the end of the fourth quarter, cash, cash equivalents and short-term investments totaled
Other Fourth Quarter Financial Highlights and Key Operating Metrics
- Trailing 12 months active buyers reached 648,856, an increase of 12% Y/Y.
- New buyers achieved a quarterly record and increased 21% Y/Y versus down 9% Y/Y in Q3.
- Orders reached 671,278, a 10% Q/Q improvement and a 5% Y/Y increase.
- Average Order Value (AOV) was
$449, a decrease of 6% Y/Y, and was driven primarily by lower units per transaction. Average selling price (ASP) was essentially flat Y/Y in Q4 and benefited from ASP strength in the Fine Jewelry category and strong demand in high-value handbags, which was offset by momentum with new buyers who usually transact at lower AOVs initially.
- Consignment Take Rate decreased 50bps Y/Y to 35.7%, reflecting strong performance on a relative basis from lower-take-rate categories (such as handbags, jewelry and sneakers) and a greater mix of consignors earning higher commissions.
- GMV from repeat buyers was 82.4% compared to 82.9% in the fourth quarter of 2019.
- In Q4, we signed a lease for an authentication center in
Phoenix, which we plan to begin operating from during the summer of 2021. The Phoenixfacility will create more than 1,500 local, full-time jobs over the next five years offering competitive pay, rewards and benefits.
- Our 2020 sell-through percent was 99%, an increase from 94% in 2019. Sell-through percent represents the ratio of GMV to initial supply value for the specified year.
- Since The RealReal’s inception in 2011 through
Dec. 31, 2020, consignment with The RealRealsaved 17,023 metric tons of carbon and 827 million liters of water. In 2020 alone, members saved the equivalent of the GHG emissions from 7.4 million driving miles and 712 million glasses of water by consigning with The RealReal.
- Consignment of Gucci items grew 2.5 times faster than overall consignment following the launch of our partnership on
Oct. 5through the end of the year, a testament to the success of our collaboration. As a further result of our groundbreaking partnership, together with Gucci, The RealRealis planting more than 35,000 trees with One Tree Planted.
1 Reflects a
We anticipate Q1 GMV will be in the range of
Webcast and Conference Call
Investor Relations Contact:
Head of Investor Relations
Head of Communications
Forward Looking Statements
This press release contains forward-looking statements relating to, among other things, the future performance of The
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 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
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, and Contribution Profit. 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.
In Q4, we reflected a
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, certain one-time expenses and prior period adjustments. 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 and prior period adjustments 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, excludes an item that we do not consider to be indicative of our core operating performance. Investors should, however, understand that stock-based compensation 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, 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.
Contribution Profit is a non-GAAP financial measure that is calculated as gross profit per order minus variable expenses including variable marketing, operations, sales and merchandising expenses. Fixed expenses include occupancy, general & administrative, technology, marketing headcount, and certain operations and merchandising headcount costs.
We view contribution profit as an important metric to assess our marginal profitability and measure our progress driving operating efficiencies. Accordingly, we believe that contribution profit provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management.
|Statements of Operations|
|(In thousands, except share and per share data)|
|Three Months Ended
|Consignment and service revenue||$||69,073||$||82,522||$||245,643||$||267,412|
|Cost of revenue:|
|Cost of consignment and service revenue||19,723||20,987||66,976||73,579|
|Cost of direct revenue||13,728||10,197||45,406||41,252|
|Total cost of revenue||33,451||31,184||112,382||114,831|
|Operations and technology||45,950||39,960||163,808||143,231|
|Selling, general and administrative||38,715||34,553||141,762||110,663|
|Total operating expenses (1)||101,731||85,409||360,383||301,628|
|Loss from operations||(50,597||)||(22,862||)||(174,499||)||(98,422||)|
|Other income (expense), net||(80||)||5||(169||)||(2,102||)|
|Loss before provision for income taxes||(52,963||)||(21,227||)||(177,414||)||(96,547||)|
|Provision (benefit) for income taxes||63||147||101||199|
|Accretion of redeemable convertible preferred stock to redemption value||$||—||$||—||$||—||$||(3,355||)|
|Net loss attributable to common stockholders||$||(53,026||)||$||(21,374||)||$||(177,515||)||$||(100,101||)|
|Net loss per share attributable to common stockholders, basic and diluted||$||(0.60||)||$||(0.25||)||$||(2.03||)||$||(2.11||)|
|Weighted average shares used to compute net loss per|
|share attributable to common stockholders, basic and diluted||88,810,674||85,823,352||87,587,409||47,478,544|
|(1) Includes stock-based compensation as follows:|
|Operating and technology||3,019||1,083||10,241||3,148|
|Selling, general and administrative (2)||3,865||1,608||12,326||4,990|
|(2) Includes compensation expense related to stock sales by current and former employees in
|Condensed Balance Sheets|
|(In thousands, except share and per share data)|
|Cash and cash equivalents||$||350,846||$||154,446|
|Prepaid expenses and other current assets||17,072||13,804|
|Total current assets||421,469||408,439|
|Property and equipment, net||63,454||55,831|
|Operating lease right-of-use assets||118,136||—|
|Liabilities and Stockholders’ Equity|
|Accrued consignor payable||57,053||52,820|
|Operating lease liabilities, current portion||14,999||—|
|Other accrued and current liabilities||61,862||54,567|
|Total current liabilities||148,260||118,546|
|Operating lease liabilities, net of current portion||115,084||—|
|Convertible senior notes, net||149,188||—|
|Other noncurrent liabilities||1,284||9,456|
| authorized as of
89,301,664 and 85,872,320 shares issued and outstanding
|Additional paid-in capital||723,302||693,426|
|Accumulated other comprehensive income||11||7|
|Total stockholders’ equity||191,293||338,928|
|Total liabilities and stockholders’ equity||$||605,109||$||466,930|
|Condensed Statements of Cash Flows|
|Cash flows from operating activities:|
|Adjustments to reconcile net loss to cash used in operating activities:|
|Depreciation and amortization||18,845||13,408|
|Stock-based compensation expense||24,322||7,711|
|Reduction of operating lease right-of-use assets||16,062||—|
|Bad debt expense||903||1,371|
|Compensation expense related to stock sales by current and former employees||—||819|
|Change in fair value of convertible preferred stock warrant liability||—||2,100|
|Accrued interest on convertible notes||216||—|
|Loss on retirement of property and equipment||280||—|
|Accretion of unconditional endowment grant liability||51||94|
|Accretion of debt discounts and issuance costs||2,399||11|
|Amortization of premiums (discounts) on short-term investments||(137||)||(320||)|
|Changes in operating assets and liabilities:|
|Prepaid expenses and other current assets||(3,443||)||(4,108||)|
|Operating lease liability||(12,752||)||—|
|Accrued consignor payable||4,233||17,561|
|Other accrued and current liabilities||7,994||10,686|
|Other noncurrent liabilities||(166||)||2,762|
|Net cash used in operating activities||(132,762||)||(54,490||)|
|Cash flow from investing activities:|
|Purchases of short-term investments||(73,280||)||(220,609||)|
|Proceeds from maturities of short-term investments||278,215||39,281|
|Capitalized proprietary software development costs||(8,678||)||(9,267||)|
|Purchases of property and equipment||(19,910||)||(24,761||)|
|Net cash provided by (used in) investing activities||176,347||(215,356||)|
|Cash flow from financing activities:|
|Proceeds from issuance of common stock in initial public offering, net of issuance costs||—||315,541|
|Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs||—||43,492|
|Proceeds from issuance of convertible preferred stock, net of issuance costs||—||26,283|
|Proceeds from issuance of convertible senior notes, net of issuance costs||166,278||—|
|Purchase of capped calls||(22,546||)||—|
|Proceeds from exercise of stock options and common stock warrants||8,859||2,729|
|Proceeds from issuance of Employee Stock Purchase Program||972||—|
|Taxes paid related to restricted stock vesting||(748||)||(130||)|
|Repayment of debt||—||(9,250||)|
|Net cash provided by financing activities||152,815||378,665|
|Net increase in cash, cash equivalents and restricted cash||196,400||108,819|
|Cash, cash equivalents, and restricted cash|
|Beginning of period||154,446||45,627|
|End of period||$||350,846||$||154,446|
The following table reflects the reconciliation of net loss to Adjusted EBITDA for each of the periods indicated (in thousands):
|Three Months Ended
|Adjusted EBITDA Reconciliation:|
|Depreciation and amortization||5,172||3,870|
|Prior period adjustment (1)||2,247||—|
|Abandoned offering costs||—||293|
|Other (income) expense, net||80||(5||)|
|Provision for income taxes||63||147|
|(1) This adjustment is the result of an administrative error related to a reconciliation of a subset of adjustments to consignor commissions that were paid outside of our normal payment cycle.|
A reconciliation of GAAP net loss to non-GAAP net loss attributable to common stockholders, the most directly comparable GAAP financial measure, in order to calculate non-GAAP net loss attributable to common stockholders per share, basic and diluted, is as follows (in thousands, except share and per share data):
|Three Months Ended
|Prior period adjustment||2,247||—|
|Abandoned offering costs||—||293|
|Provision for income taxes||63||147|
|Non-GAAP net loss attributable to common stockholders||$||(43,305||)||$||(14,984||)|
|Weighted-average common shares outstanding used to calculate
Non-GAAP net loss attributable to common stockholders per
share, basic and diluted
|Non-GAAP net loss attributable to common stockholders per share,
basic and diluted
The following table presents a reconciliation of net cash (used in) provided by operating activities to free cash flow for each of the periods indicated (in thousands):
|Three Months Ended
|Net cash (used in) provided by operating activities||$||(36,745||)||$||3,629||$||(132,762||)||$||(54,490||)|
|Purchase of property and equipment and capitalized proprietary software development costs||(6,263||)||(11,247||)||(28,588||)||(34,028||)|
|Free Cash Flow||$||(43,008||)||$||(7,618||)||$||(161,350||)||$||(88,518||)|
|Key Financial and Operating Metrics:|
|(In thousands, except AOV and percentages)|
|Consignment and Services Revenue||$||55,575||$||60,070||$||69,245||$||82,522||$||65,297||$||46,866||$||64,407||$||69,073|
|Number of Orders||498||505||577||637||574||438||550||671|
|% of GMV from Repeat Buyers||82.4||%||83.1||%||81.8||%||82.9||%||84.4||%||82.3||%||82.9||%||82.4||%|
|Contribution Profit Per Order:|
|2020||2019||2018||2020 Y/Y Change|
|Gross Profit (1)||$||185.9||$||203.2||$||136.9||-9%|
|Gross Profit Per Order||$||83.2||$||91.6||$||85.8||-9%|
|Contribution Margin||3.2||%||13.8||%||6.7||%||(1060 bps)|
|(1) Reflects prior period adjustments.|
Source: The RealReal