The RealReal Announces Second Quarter 2023 Results
Q2 2023 Gross Profit Margin Increased 908 basis points Year-Over-Year
Q2 2023 Net Income of
Q2 2023 Adjusted EBITDA of
“Our strategic shift to re-focus on the higher margin portion of the consignment business is showing results. In the second quarter of 2023, GMV and revenue exceeded the mid-point of our guidance, and Adjusted EBITDA exceeded the high-end of our guidance range for the quarter,” said
Koryl continued, “During the second quarter, we continued to transition away from company-owned inventory and consigned items that sell for under
Second Quarter Financial Highlights
- GMV was
$423 million , a decrease of 7% compared to the same period in 2022 - Total Revenue was
$131 million , a decrease of 15% compared to the same period in 2022 - Gross Margin was 65.9%, an increase of 908 basis points compared to the same period in 2022
- Net Loss was
$41.3 million or (31.6)% of total revenue compared to$53.2 million or (34.4)% in the same period in 2022 - Adjusted EBITDA was
$(22.3) million or (17.1)% of total revenue compared to$(28.8) million or (18.7)% of total revenue in the second quarter of 2022 - GAAP basic and diluted net loss per share was
$(0.41) compared to$(0.56) in the prior year period - Non-GAAP basic and diluted net loss attributable to common shareholders per share was
$(0.30) compared to$(0.40) in the prior year period - Top-line-related Metrics
- Trailing 12 months (TTM) active buyers reached 985,000, an increase of 11% compared to the same period in 2022
- Orders reached 789,000 in the second quarter, a decrease of 16% compared to the same period in 2022
- Average order value (AOV) was
$537 , an increase of 10% compared to the same period in 2022 - Higher AOV was driven by a year-over-year increase in average selling prices (ASPs) driven by a shift into higher-value items and reduced lower-value items, partially offset by a decrease in units per transaction (UPT).
- GMV from repeat buyers was 87% which is an increase of approximately 260 basis points compared to the prior year period
Q3 and Full Year 2023 Guidance
Based on market conditions as of
We have not reconciled forward-looking Adjusted EBITDA to net income (loss), the most directly comparable GAAP measure, because we cannot predict with reasonable certainty the ultimate outcome of certain components of such reconciliations including payroll tax expense on employee stock transactions that are not within our control, or other components that may arise, without unreasonable effort. For these reasons, we are unable to assess the probable significance of the unavailable information, which could materially impact the amount of future net income (loss).
Q3 2023 | Full Year 2023 | |
GMV | ||
Total Revenue | ||
Adjusted EBITDA |
Webcast and Conference Call
The
An archive of the webcast conference call will be available shortly after the call ends at investor.therealreal.com.
About
The
Investor Relations Contact:
Senior Vice President, Investor Relations
IR@therealreal.com
Press Contact:
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
More information about factors that could affect the company's operating results is included under the captions “Risk Factors” and “Management's Discussion and Analysis of Financial Condition and Results of Operations” in the company's most recent Annual Report on Form 10-K for the year ended
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 revenue ("Adjusted EBITDA Margin"), non-GAAP net loss attributable to common stockholders, and non-GAAP net loss per share attributable to common stockholders, basic and diluted. We have provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measures in this earnings release.
We do not, nor do we suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors should also note that non-GAAP financial measures we use may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies, including other companies in our industry.
Adjusted EBITDA is a key performance measure that our management uses to assess our operating performance. Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure as an overall assessment of our performance, to evaluate the effectiveness of our business strategies and for business planning purposes. Adjusted EBITDA may not be comparable to similarly titled metrics of other companies.
We calculate Adjusted EBITDA as net loss before interest income, interest expense, other (income) expense net, provision (benefit) for income taxes, depreciation and amortization, further adjusted to exclude stock-based compensation, employer payroll tax on employee stock transactions, and certain one-time expenses. The employer payroll tax expense related to employee stock transactions are tied to the vesting or exercise of underlying equity awards and the price of our common stock at the time of vesting, which may vary from period to period independent of the operating performance of our business. Adjusted EBITDA has certain limitations as the measure excludes the impact of certain expenses that are included in our statements of operations that are necessary to run our business and should not be considered as an alternative to net loss or any other measure of financial performance calculated and presented in accordance with GAAP.
In particular, the exclusion of certain expenses in calculating Adjusted EBITDA and Adjusted EBITDA Margin facilitates operating performance comparisons on a period-to-period basis and, in the case of exclusion of the impact of stock-based compensation and the related employer payroll tax on employee stock transactions, excludes an item that we do not consider to be indicative of our core operating performance. Investors should, however, understand that stock-based compensation and the related employer payroll tax will be a significant recurring expense in our business and an important part of the compensation provided to our employees. Accordingly, we believe that Adjusted EBITDA and Adjusted EBITDA Margin provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.
Free cash flow is a non-GAAP financial measure that is calculated as net cash (used in) provided by operating activities less net cash used to purchase property and equipment and capitalized proprietary software development costs. We believe free cash flow is an important indicator of our business performance, as it measures the amount of cash we generate. Accordingly, we believe that free cash flow provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management.
Non-GAAP net loss per share attributable to common stockholders, basic and diluted is a non-GAAP financial measure that is calculated as GAAP net loss plus stock-based compensation expense, provision (benefit) for income taxes, and non-recurring items divided by weighted average shares outstanding. We believe that adding back stock-based compensation expense and related payroll tax, provision (benefit) for income taxes, and non-recurring items as adjustments to our GAAP net loss, before calculating per share amounts for all periods presented provides a more meaningful comparison between our operating results from period to period.
Statements of Operations
(In thousands, except share and per share data)
(Unaudited)
Three Months Ended |
Six Months Ended |
||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Revenue: | |||||||||||||||
Consignment revenue | $ | 96,577 | $ | 96,917 | $ | 199,220 | $ | 180,906 | |||||||
Direct revenue | 20,887 | 42,646 | 45,840 | 91,469 | |||||||||||
Shipping services revenue | 13,391 | 14,872 | 27,699 | 28,760 | |||||||||||
Total revenue | 130,855 | 154,435 | 272,759 | 301,135 | |||||||||||
Cost of revenue: | |||||||||||||||
Cost of consignment revenue | 14,575 | 14,254 | 30,104 | 27,987 | |||||||||||
Cost of direct revenue | 20,446 | 36,660 | 45,476 | 76,694 | |||||||||||
Cost of shipping services revenue | 9,660 | 15,834 | 21,022 | 30,150 | |||||||||||
Total cost of revenue | 44,681 | 66,748 | 96,602 | 134,831 | |||||||||||
Gross profit | 86,174 | 87,687 | 176,157 | 166,304 | |||||||||||
Operating expenses: | |||||||||||||||
Marketing | 15,351 | 16,983 | 32,869 | 34,944 | |||||||||||
Operations and technology | 65,575 | 69,276 | 133,607 | 136,377 | |||||||||||
Selling, general and administrative | 44,326 | 52,136 | 94,171 | 100,398 | |||||||||||
Restructuring charges | 1,864 | 275 | 38,252 | 275 | |||||||||||
Total operating expenses(1) | 127,116 | 138,670 | 298,899 | 271,994 | |||||||||||
Loss from operations | (40,942 | ) | (50,983 | ) | (122,742 | ) | (105,690 | ) | |||||||
Interest income | 2,404 | 260 | 4,457 | 358 | |||||||||||
Interest expense | (2,678 | ) | (2,675 | ) | (5,345 | ) | (5,339 | ) | |||||||
Other income (expense), net | — | 266 | — | 127 | |||||||||||
Loss before provision for income taxes | (41,216 | ) | (53,132 | ) | (123,630 | ) | (110,544 | ) | |||||||
Provision for income taxes | 114 | 33 | 200 | 33 | |||||||||||
Net loss attributable to common stockholders | $ | (41,330 | ) | $ | (53,165 | ) | $ | (123,830 | ) | $ | (110,577 | ) | |||
Net loss per share attributable to common stockholders, basic and diluted | $ | (0.41 | ) | $ | (0.56 | ) | $ | (1.23 | ) | $ | (1.17 | ) | |||
Weighted average shares used to compute net loss per share attributable to common stockholders, basic and diluted | 100,973,105 | 94,901,943 | 100,294,359 | 94,192,963 | |||||||||||
(1)Includes stock-based compensation as follows: | |||||||||||||||
Marketing | $ | 349 | $ | 614 | $ | 799 | $ | 1,207 | |||||||
Operating and technology | 3,301 | 5,616 | 6,992 | 10,865 | |||||||||||
Selling, general and administrative | 5,116 | 7,435 | 9,966 | 14,107 | |||||||||||
Total | $ | 8,766 | $ | 13,665 | $ | 17,757 | $ | 26,179 |
Condensed Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
2023 |
2022 |
||||||
Assets | |||||||
Current assets | |||||||
Cash and cash equivalents | $ | 188,890 | $ | 293,793 | |||
Accounts receivable, net | 5,994 | 12,207 | |||||
Inventory, net | 25,904 | 42,967 | |||||
Prepaid expenses and other current assets | 18,866 | 23,291 | |||||
Total current assets | 239,654 | 372,258 | |||||
Property and equipment, net | 105,775 | 112,679 | |||||
Operating lease right-of-use assets | 91,018 | 127,955 | |||||
Restricted cash | 16,805 | — | |||||
Other assets | 5,468 | 2,749 | |||||
Total assets | $ | 458,720 | $ | 615,641 | |||
Liabilities and Stockholders’ Deficit | |||||||
Current liabilities | |||||||
Accounts payable | $ | 13,153 | $ | 11,902 | |||
Accrued consignor payable | 61,837 | 81,543 | |||||
Operating lease liabilities, current portion | 20,819 | 20,776 | |||||
Other accrued and current liabilities | 72,146 | 93,292 | |||||
Total current liabilities | 167,955 | 207,513 | |||||
Operating lease liabilities, net of current portion | 112,151 | 125,118 | |||||
Convertible senior notes, net | 451,127 | 449,848 | |||||
Other noncurrent liabilities | 3,071 | 3,254 | |||||
Total liabilities | 734,304 | 785,733 | |||||
Stockholders’ deficit: | |||||||
Common stock, |
1 | 1 | |||||
Additional paid-in capital | 799,398 | 781,060 | |||||
Accumulated deficit | (1,074,983 | ) | (951,153 | ) | |||
Total stockholders’ deficit | (275,584 | ) | (170,092 | ) | |||
Total liabilities and stockholders’ deficit | $ | 458,720 | $ | 615,641 | |||
Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended |
|||||||
2023 | 2022 | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ | (123,830 | ) | $ | (110,577 | ) | |
Adjustments to reconcile net loss to cash used in operating activities: | |||||||
Depreciation and amortization | 15,786 | 13,060 | |||||
Stock-based compensation expense | 17,757 | 26,179 | |||||
Reduction of operating lease right-of-use assets | 9,168 | 9,669 | |||||
Bad debt expense | 1,029 | 680 | |||||
Accretion of debt discounts and issuance costs | 1,279 | 1,293 | |||||
Loss on disposal/sale of property and equipment and impairment of capitalized proprietary software | 56 | 229 | |||||
Property, plant, equipment, and right-of-use asset impairments | 33,505 | — | |||||
Provision for inventory write-downs and shrinkage | 6,531 | 950 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable, net | 5,184 | 723 | |||||
Inventory, net | 10,532 | (3,965 | ) | ||||
Prepaid expenses and other current assets | 4,121 | 238 | |||||
Other assets | (2,820 | ) | (351 | ) | |||
Operating lease liability | (11,437 | ) | (8,395 | ) | |||
Accounts payable | 1,763 | 3,567 | |||||
Accrued consignor payable | (19,706 | ) | (6,599 | ) | |||
Other accrued and current liabilities | (9,639 | ) | (14,421 | ) | |||
Other noncurrent liabilities | (137 | ) | (184 | ) | |||
Net cash used in operating activities | (60,858 | ) | (87,904 | ) | |||
Cash flow from investing activities: | |||||||
Capitalized proprietary software development costs | (7,514 | ) | (6,620 | ) | |||
Purchases of property and equipment | (19,764 | ) | (9,599 | ) | |||
Net cash used in investing activities | (27,278 | ) | (16,219 | ) | |||
Cash flow from financing activities: | |||||||
Proceeds from exercise of stock options | 3 | 965 | |||||
Proceeds from issuance of stock in connection with the Employee Stock Purchase Program | 446 | 900 | |||||
Taxes paid related to restricted stock vesting | (411 | ) | (23 | ) | |||
Net cash provided by financing activities | 38 | 1,842 | |||||
Net decrease in cash, cash equivalents and restricted cash | (88,098 | ) | (102,281 | ) | |||
Cash, cash equivalents and restricted cash | |||||||
Beginning of period | 293,793 | 418,171 | |||||
End of period | $ | 205,695 | $ | 315,890 |
The following table reflects the reconciliation of net loss to Adjusted EBITDA for each of the periods indicated (in thousands):
Three Months Ended |
Six Months Ended |
||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Adjusted EBITDA Reconciliation: | |||||||||||||||
Net loss | $ | (41,330 | ) | $ | (53,165 | ) | $ | (123,830 | ) | $ | (110,577 | ) | |||
Depreciation and amortization | 7,965 | 6,696 | 15,786 | 13,060 | |||||||||||
Interest income | (2,404 | ) | (260 | ) | (4,457 | ) | (358 | ) | |||||||
Interest expense | 2,678 | 2,675 | 5,345 | 5,339 | |||||||||||
Provision for income taxes | 114 | 33 | 200 | 33 | |||||||||||
EBITDA | (32,977 | ) | (44,021 | ) | (106,956 | ) | (92,503 | ) | |||||||
Stock-based compensation(1) | 8,766 | 13,665 | 17,757 | 26,179 | |||||||||||
CEO separation benefits(2) | — | 902 | — | 902 | |||||||||||
CEO transition costs(3) | — | 566 | 159 | 566 | |||||||||||
Payroll taxes expense on employee stock transactions | 24 | 70 | 68 | 275 | |||||||||||
Legal settlement | — | — | 1,100 | 304 | |||||||||||
Restructuring charges(4) | 1,864 | 275 | 38,252 | 275 | |||||||||||
Other (income) expense, net | — | (266 | ) | — | (127 | ) | |||||||||
Adjusted EBITDA | $ | (22,323 | ) | $ | (28,809 | ) | $ | (49,620 | ) | $ | (64,129 | ) |
(1) The stock-based compensation expense for the three and six months ended
(2) The CEO separation benefit charges for the three and six months ended
(3) The CEO transition charges for the three and six months ended
(4) The restructuring charges for the three and six months ended
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 |
Six Months Ended |
||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Net loss | $ | (41,330 | ) | $ | (53,165 | ) | $ | (123,830 | ) | $ | (110,577 | ) | |||
Stock-based compensation | 8,766 | 13,665 | 17,757 | 26,179 | |||||||||||
CEO separation benefits | — | 902 | — | 902 | |||||||||||
CEO transition costs | — | 566 | 159 | 566 | |||||||||||
Payroll tax expense on employee stock transactions | 24 | 70 | 68 | 275 | |||||||||||
Legal settlement | — | — | 1,100 | 304 | |||||||||||
Restructuring charges | 1,864 | 275 | 38,252 | 275 | |||||||||||
Provision for income taxes | 114 | 33 | 200 | 33 | |||||||||||
Non-GAAP net loss attributable to common stockholders | $ | (30,562 | ) | $ | (37,654 | ) | $ | (66,294 | ) | $ | (82,043 | ) | |||
Weighted-average common shares outstanding used to calculate Non-GAAP net loss attributable to common stockholders per share, basic and diluted | 100,973,105 | 94,901,943 | 100,294,359 | 94,192,963 | |||||||||||
Non-GAAP net loss attributable to common stockholders per share, basic and diluted | $ | (0.30 | ) | $ | (0.40 | ) | $ | (0.66 | ) | $ | (0.87 | ) |
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 |
Six Months Ended |
||||||||||||||
2023 | 2022 | 2023 | 2022 | ||||||||||||
Net cash used in operating activities | $ | (30,425 | ) | $ | (38,550 | ) | $ | (60,858 | ) | $ | (87,904 | ) | |||
Purchase of property and equipment and capitalized proprietary software development costs | (11,358 | ) | (7,772 | ) | (27,278 | ) | (16,219 | ) | |||||||
Free Cash Flow | $ | (41,783 | ) | $ | (46,322 | ) | $ | (88,136 | ) | $ | (104,123 | ) |
Key Financial and Operating Metrics:
2021 |
2021 |
2021 |
2022 |
2022 |
2022 |
2022 |
2023 |
||||||||||||||||||||||||||||
(in thousands, except AOV and percentages) | |||||||||||||||||||||||||||||||||||
GMV | $ | 350,001 | $ | 367,925 | $ | 437,179 | $ | 428,206 | $ | 454,163 | $ | 440,659 | $ | 492,955 | $ | 444,366 | $ | 423,341 | |||||||||||||||||
NMV | $ | 256,509 | $ | 273,417 | $ | 318,265 | $ | 310,511 | $ | 332,508 | $ | 325,105 | $ | 367,382 | $ | 327,805 | $ | 303,918 | |||||||||||||||||
Consignment Revenue | $ | 72,452 | $ | 78,373 | $ | 86,508 | $ | 83,989 | $ | 96,917 | $ | 93,874 | $ | 110,199 | $ | 102,643 | $ | 96,577 | |||||||||||||||||
Direct Revenue | $ | 22,460 | $ | 29,387 | $ | 45,262 | $ | 48,823 | $ | 42,646 | $ | 34,005 | $ | 33,252 | $ | 24,953 | $ | 20,887 | |||||||||||||||||
Shipping Services Revenue | $ | 10,000 | $ | 11,078 | $ | 13,355 | $ | 13,888 | $ | 14,872 | $ | 14,824 | $ | 16,204 | $ | 14,308 | $ | 13,391 | |||||||||||||||||
Number of Orders | 673 | 757 | 861 | 878 | 934 | 952 | 993 | 891 | 789 | ||||||||||||||||||||||||||
Take Rate | 34.5 | % | 34.9 | % | 35.0 | % | 35.7 | % | 36.1 | % | 36.0 | % | 35.7 | % | 37.4 | % | 36.7 | % | |||||||||||||||||
Active Buyers | 730 | 772 | 797 | 828 | 889 | 950 | 998 | 1,014 | 985 | ||||||||||||||||||||||||||
AOV | $ | 520 | $ | 486 | $ | 508 | $ | 487 | $ | 486 | $ | 463 | $ | 496 | $ | 499 | $ | 537 | |||||||||||||||||
% of GMV from Repeat Buyers | 84.5 | % | 84.1 | % | 83.8 | % | 85.0 | % | 84.7 | % | 84.2 | % | 84.0 | % | 86.2 | % | 87.3 | % |
![](https://ml.globenewswire.com/media/Mzk0YTA3YzUtMDgxMi00NGM3LWEyYTEtMGU4ZTYzZThhYTcwLTExOTU0MjE=/tiny/The-RealReal.png)
Source: The RealReal