Q2 Gross Merchandise Value Decreased 20% Year over Year to $182.8 million
Q2 Total Revenue Decreased 21% Year over Year to $57.4 million
Q2 Gross Profit Decreased 22% Year over Year to $35.8 million

SAN FRANCISCO, Aug. 06, 2020 (GLOBE NEWSWIRE) -- The RealReal (Nasdaq: REAL)—the world’s largest online marketplace for authenticated, consigned luxury goods—today reported financial results for its second quarter ended June 30, 2020. 

“Since we reported our Q1 results in early May, GMV trends have improved significantly with May GMV down approximately 19% Y/Y, and June GMV down 8% Y/Y.  Importantly, improvements have continued into July with GMV decreasing by only 2% Y/Y for the month,” said Julie Wainwright, CEO of The RealReal. “Our GMV recovery prompted us to begin reinvesting in growth in Q2 earlier than previously expected. While Q2 was challenging, the pandemic has been a catalyst for reinvention and innovation at The RealReal. With the normalization of our processing capacity and the evolution of our supply acquisition strategy, we are now laser focused on returning to sustained growth.”

Together, virtual appointments and vendor channel performance have markedly improved the company’s ability to source supply. Supply Y/Y growth trends improved each month in Q2, and continued into July with Y/Y growth turning positive for the month. In April, the company pivoted to virtual appointments to continue delivering personalized consignment consultations and support consignors monetizing assets in their homes during these uncertain times. The company conducted approximately 25,000 virtual appointments in Q2. In addition, The RealReal B2B vendor program continued to demonstrate resilience and registered GMV growth of 19% Y/Y in Q2.

On the demand side, traffic trends remained healthy in Q2 with sessions up 20% Y/Y despite a significant reduction in advertising spend early in Q2. The company’s four day sell-through continued to trend at pre-COVID levels, which demonstrates that supply continues to sell quickly. 

“We have never been more optimistic about our long-term opportunity. We are confident that supply will ramp over the coming months as we continue to lean into the digital experience, remove friction from the consignment process, invest in advertising and optimize our operations,” continued Wainwright. 

Second Quarter Financial Highlights

• Gross Merchandise Volume (GMV) was $182.8 million, a decrease of 20% year over year.
• Total Revenue was $57.4 million, a decrease of 21% year over year.
• Consignment and Service Revenue was $46.9 million, a decrease of 22% year over year.
• Gross Profit was $35.8 million, a decrease of 22% year over year.
• Net Loss was ($42.9) million.
• Adjusted EBITDA was ($31.8) million or (55.4%) of total revenue.
• Adjusted EBITDA includes $2.9 million of COVID related expenses such as higher payroll expenses, personal protective equipment, deep cleanings, medical personnel at our facilities, transportation services, etc.
• GAAP basic and diluted net loss per share was ($0.49).
• Non-GAAP basic and diluted net loss per share was ($0.42). 
• At the end of the second quarter, cash, cash equivalents and short-term investments totaled $410.3 million.

Other Second Quarter Financial Highlights and Key Operating Metrics

• Raised $143.3 million in net proceeds, inclusive of capped call costs, through a convertible note offering to bolster our already strong balance sheet.
• Trailing 12 months active buyers reached 611,845, an increase of 24% year over year.
• Orders reached 438,440, a decrease of 13% year over year.
• Average Order Value was $417 compared to $453 in the second quarter of 2019.
• Consignment Take Rate decreased 60bps year over year to 36.0%.
• GMV from repeat buyers was 82.3% compared to 83.1% in the second quarter of 2019.
• Since inception through June 30, consignment with The RealReal saved 15,040 metric tons of carbon and 698 million liters of water.   

Financial Outlook
Given limited near-term visibility, the company elects to not provide an updated financial outlook.

Webcast and Conference Call
The RealReal will post a stockholder letter on its investor relations website at https://investor.therealreal.com/financial-information/quarterly-results in lieu of a live presentation and host a conference call at 2 p.m. PDT to answer questions regarding its second quarter 2020 financial results, the stockholder letter and the supporting slides. Investors and participants can access the call by dialing (866) 996-5385 in the U.S. and (270) 215-9574 internationally. The passcode for the conference line is 9053887. The call will also be available via live webcast at https://investor.therealreal.com along with the stockholder letter and the supporting slides. An archive of the webcast conference call will be available shortly after the call ends. The archived webcast will be available at https://investor.therealreal.com.

About The RealReal, Inc. 
The RealReal is the world’s largest online marketplace for authenticated, consigned luxury goods. With a rigorous authentication process overseen by experts, The RealReal provides a safe and reliable platform for consumers to buy and sell their luxury items. We have 150+ in-house gemologists, horologists and brand authenticators who inspect thousands of items each day. As a sustainable company, we give new life to pieces by hundreds of brands, from Gucci to Cartier, supporting the circular economy. We make consigning effortless with free in-home pickup, drop-off service, virtual appointments and direct shipping for individual consignors and estates. At our stores in LA, NYC and San Francisco, customers can shop, consign, and meet with our experts. At our 10 Luxury Consignment Offices, four of which are in our retail stores, our expert staff provides free valuations.

Investor Relations Contact:
Paul Bieber
Head of Investor Relations
paul.bieber@therealreal.com

Press Contact:
Erin Santy
Head of Communications
pr@therealreal.com

Forward Looking Statements
This press release contains forward-looking statements relating to, among other things, the future performance of The RealReal that are based on the company's current expectations, forecasts and assumptions and involve risks and uncertainties. In some cases, you can identify forward-looking statements by terminology such as “may,” “will,” “should,” “could,” “expect,” “plan,” anticipate,” “believe,” “estimate,” “predict,” “intend,” “potential,” “continue,” “ongoing” or the negative of these terms or other comparable terminology. These statements include, but are not limited to, statements about future operating results, including the amounts of our operating expense and capital expenditure investments or reductions and our strategies, plans, commitments, objectives and goals, in particular in the context of the impacts of the COVID-19 pandemic and the recent social unrest. Actual results could differ materially from those predicted or implied and reported results should not be considered as an indication of future performance. Other factors that could cause or contribute to such differences include, but are not limited to, the impact of the COVID-19 pandemic and the recent social unrest on our operations and our business environment, any failure to generate a supply of consigned goods, pricing pressure on the consignment market resulting from discounting in the market for new goods, failure to efficiently and effectively operate our merchandising and fulfillment operations and other reasons.

More information about factors that could affect the company's operating results is included under the captions “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in the company's most recent Annual Report on Form 10-K and subsequent quarterly reports on Form 10-Q, copies of which may be obtained by visiting the company's Investor Relations website at https://investor.therealreal.com or the SEC's website at www.sec.gov. Undue reliance should not be placed on the forward-looking statements in this press release, which are based on information available to the company on the date hereof. The company assumes no obligation to update such statements.

Non-GAAP Financial Measures
To supplement our unaudited and condensed financial statements presented in accordance with generally accepted accounting principles ("GAAP"), this earnings release and the accompanying tables and the related earnings conference call contain certain non-GAAP financial measures, including Adjusted EBITDA, free cash flow, non-GAAP net loss attributable to common stockholders, and non-GAAP net loss per share attributable to common stockholders, basic and diluted. We have provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures in this earnings release.

We do not, nor do we suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors should also note that non-GAAP financial measures we use may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies, including other companies in our industry.

Adjusted EBITDA is a key performance measure that our management uses to assess our operating performance. Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure as an overall assessment of our performance, to evaluate the effectiveness of our business strategies and for business planning purposes. Adjusted EBITDA may not be comparable to similarly titled metrics of other companies.

We calculate Adjusted EBITDA as net loss before interest income, interest expense, other (income) expense net, provision for income taxes, depreciation and amortization, further adjusted to exclude stock-based compensation, and certain one-time expenses. Adjusted EBITDA has certain limitations as the measure excludes the impact of certain expenses that are included in our statements of operations that are necessary to run our business and should not be considered as an alternative to net loss or any other measure of financial performance calculated and presented in accordance with GAAP.

In particular, the exclusion of certain expenses in calculating Adjusted EBITDA 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 provides 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 for income taxes, and nonrecurring items divided by weighted average shares outstanding. We believe that adding back stock-based compensation expense, provision for income taxes, and non-recurring items as adjustments to our GAAP net loss, before calculating per share amounts for all periods presented provides a more meaningful comparison between our operating results from period to period.

THE REALREAL, INC.
Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
	Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
Revenue:
Consignment and service revenue	$	46,866			$	60,070			$	112,163			$	115,645
Direct revenue		10,523				12,139				23,466				27,146
Total revenue		57,389				72,209				135,629				142,791
Cost of revenue:
Cost of consignment and service revenue		12,860				17,200				30,949				33,146
Cost of direct revenue		8,760				8,959				19,714				21,213
Total cost of revenue		21,620				26,159				50,663				54,359
Gross profit		35,769				46,050				84,966				88,432
Operating expenses:
Marketing		9,639				11,715				22,561				23,448
Operations and technology		36,543				34,320				77,280				65,865
Selling, general and administrative		32,559				25,355				67,663				47,674
Total operating expenses (1)		78,741				71,390				167,504				136,987
Loss from operations		(42,972	)			(25,340	)			(82,538	)			(48,555	)
Interest income		616				610				1,902				1,015
Interest expense		(384	)			(380	)			(404	)			(511	)
Other income (expense), net		(97	)			(1,706	)			(89	)			(1,987	)
Loss before provision for income taxes		(42,837	)			(26,816	)			(81,129	)			(50,038	)
Provision for income taxes		55				59				55				59
Net loss	$	(42,892	)		$	(26,875	)		$	(81,184	)		$	(50,097	)
Accretion of redeemable convertible preferred stock to redemption value	$	—			$	—			$	—			$	(3,355	)
Net loss attributable to common stockholders	$	(42,892	)		$	(26,875	)		$	(81,184	)		$	(53,452	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.49	)		$	(2.83	)		$	(0.94	)		$	(5.87	)
Weighted average shares used to compute net loss per share attributable to common stockholders, basic and diluted		87,064,384				9,494,447				86,826,590				9,102,234
(1) Includes stock-based compensation as follows:
Marketing	$	335			$	74			$	523			$	143
Operating and technology		2,852				476				4,330				966
Selling, general and administrative (2)		2,942				737				4,686				2,107
Total	$	6,129			$	1,287			$	9,539			$	3,216
(2) Includes compensation expense related to stock sales by current and former employees in March 2019.

THE REALREAL, INC.
Condensed Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
	June 30, 2020				December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	304,348			$	154,446
Short-term investments		105,934				208,811
Accounts receivable		6,312				7,779
Inventory, net		20,705				23,599
Prepaid expenses and other current assets		14,950				13,804
Total current assets		452,249				408,439
Property and equipment, net		60,000				55,831
Operating lease right-of-use assets		118,798				—
Other assets		3,013				2,660
Total assets	$	634,060			$	466,930
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	5,989			$	11,159
Accrued consignor payable		34,883				52,820
Operating lease liabilities, current portion		15,045				—
Other accrued and current liabilities		46,636				54,567
Total current liabilities		102,553				118,546
Operating lease liabilities, net of current portion		115,608				—
Convertible senior notes, net		146,958				—
Other noncurrent liabilities		1,040				9,456
Total liabilities		366,159				128,002
Stockholders’ equity:
Common stock, $0.00001 par value; 500,000,000 shares authorized as of June 30, 2020 and December 31, 2019; 87,348,241 and 85,872,320 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively		1				1
Additional paid-in capital		703,189				693,426
Accumulated other comprehensive income		401				7
Accumulated deficit		(435,690	)			(354,506	)
Total stockholders’ equity		267,901				338,928
Total liabilities and stockholders’ equity	$	634,060			$	466,930

THE REALREAL, INC.
Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
	Six Months Ended June 30,
	2020				2019
Cash flows from operating activities:
Net loss	$	(81,184	)		$	(50,097	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		8,756				5,993
Stock-based compensation expense		9,539				2,397
Reduction of operating lease right-of-use assets		8,059				—
Bad debt expense		474				681
Compensation expense related to stock sales by current and former employees		—				819
Change in fair value of convertible preferred stock warrant liability		—				2,100
Accretion of unconditional endowment grant liability		27				44
Accretion of debt discounts and issuance costs		169				9
Amortization of premiums (discounts) on short-term investments		(251	)			42
Changes in operating assets and liabilities:
Accounts receivable		993				(2,627	)
Inventory, net		2,894				(2,309	)
Prepaid expenses and other current assets		(1,321	)			(867	)
Other assets		(394	)			411
Operating lease liability		(4,842	)			—
Accounts payable		(5,529	)			157
Accrued consignor payable		(17,937	)			(1,855	)
Other accrued and current liabilities		(5,624	)			(1,744	)
Other noncurrent liabilities		(410	)			672
Net cash used in operating activities		(86,581	)			(46,174	)
Cash flow from investing activities:
Purchases of short-term investments		(73,280	)			(9,151	)
Proceeds from maturities of short-term investments		176,802				22,898
Capitalized proprietary software development costs		(3,779	)			(3,887	)
Purchases of property and equipment		(10,861	)			(10,042	)
Net cash provided by (used in) investing activities		88,882				(182	)
Cash flow from financing activities:
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		166,314				—
Purchase of capped calls		(22,546	)			—
Proceeds from exercise of stock options and common stock warrants		4,354				1,775
Payment of deferred offering costs		—				(3,057	)
Taxes paid related to restricted stock vesting		(521	)			—
Repayment of debt		—				(2,750	)
Net cash provided by financing activities		147,601				65,743
Net increase in cash, cash equivalents and restricted cash		149,902				19,387
Cash, cash equivalents, and restricted cash
Beginning of period		154,446				45,627
End of period	$	304,348			$	65,014

The following table reflects the reconciliation of net loss to Adjusted EBITDA for each of the periods indicated (in thousands):

	Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
Adjusted EBITDA Reconciliation:
Net loss	$	(42,892	)		$	(26,875	)		$	(81,184	)		$	(50,097	)
Depreciation and amortization		4,611				3,185				8,756				5,993
Stock-based compensation		6,129				1,287				9,539				2,397
Legal settlement		—				—				1,110				—
Restructuring charges		442				—				442				—
Compensation expense related to stock sales by current and former employees		—				—				—				819
Interest income		(616	)			(610	)			(1,902	)			(1,015	)
Interest expense		384				380				404				511
Other (income) expense, net		97				1,706				89				1,987
Provision for income taxes		55				59				55				59
Adjusted EBITDA	$	(31,790	)		$	(20,868	)		$	(62,691	)		$	(39,346	)

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 June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
Net loss	$	(42,892	)		$	(26,875	)		$	(81,184	)		$	(50,097	)
Stock-based compensation		6,129				1,287				9,539				2,397
Compensation expense related to stock sales by current and former employees		—				—				—				819
Accretion of redeemable convertible preferred stock		—				—				—				(3,355	)
Remeasurement of preferred stock warrant liability		—				1,820				—				2,100
Legal settlement		—				—				1,110				—
Restructuring charges		442				—				442				—
Provision for income taxes		55				59				55				59
Non-GAAP net loss attributable to common stockholders	$	(36,266	)		$	(23,709	)		$	(70,038	)		$	(48,077	)
Weighted-average common shares outstanding used to calculate Non-GAAP net loss attributable to common stockholders per share, basic and diluted		87,064,384				9,494,447				86,826,590				9,102,234
Non-GAAP net loss attributable to common stockholders per share, basic and diluted	$	(0.42	)		$	(2.50	)		$	(0.81	)		$	(5.28	)

The following table presents a reconciliation of net cash used in operating activities to free cash flow for each of the periods indicated (in thousands):

	Three Months Ended June 30,								Six Months Ended June 30,
	2020				2019				2020				2019
Net cash used in operating activities	$	(31,610	)		$	(23,603	)		$	(86,581	)		$	(46,174	)
Purchase of property and equipment and capitalized proprietary software development costs		(6,674	)			(8,500	)			(14,640	)			(13,929	)
Free Cash Flow	$	(38,284	)		$	(32,103	)		$	(101,221	)		$	(60,103	)

Key Financial and Operating Metrics:

	June 30, 2018			September 30, 2018			December 31, 2018			March 31, 2019			June 30, 2019			September 30, 2019			December 31, 2019			March 31, 2020			June 30, 2020
	(In thousands, except AOV and percentages)
GMV	$	162,954		$	170,923		$	218,495		$	224,116		$	228,487		$	252,766		$	302,975		$	257,606		$	182,771
NMV	$	115,916		$	123,550		$	153,776		$	160,538		$	164,782		$	186,617		$	219,508		$	184,625		$	139,797
Consignment and Services Revenue	$	41,426		$	44,968		$	53,894		$	55,575		$	60,070		$	69,245		$	82,522		$	65,297		$	46,866
Direct Revenue	$	7,021		$	8,255		$	10,449		$	15,007		$	12,139		$	12,271		$	11,209		$	12,942		$	10,523
Number of Orders		359			409			471			498			505			577			637			574			438
Take Rate		35.5	%		36.4	%		34.9	%		35.3	%		36.6	%		36.8	%		36.2	%		36.2	%		36.0	%
Active Buyers		352			379			416			456			492			543			582			602			612
AOV	$	453		$	418		$	464		$	450		$	453		$	438		$	476		$	449		$	417
% of GMV from Repeat Buyers		82.9	%		82.9	%		81.6	%		82.4	%		83.1	%		81.8	%		82.9	%		84.4	%		82.3	%

Source: The RealReal