The RealReal Announces Third Quarter 2020 Results
Q3 GMV Growth Improved 17% Q/Q; Decreased 3% Y/Y to
Q3 Total Revenue Improved 16% Q/Q; Decreased 4% Y/Y to
Q3 Gross Profit Improved 18% Q/Q; Decreased 5% Y/Y to
“Improving trends in
Supply trends improved significantly quarter over quarter. Total supply units shipped to our e-commerce facilities improved approximately 32% Q/Q and increased 3% Y/Y in Q3. Excluding NYC and
On the demand side, traffic trends remained healthy in Q3 with sessions up 18% Y/Y, and the company’s four day sell-through continued to trend at pre-COVID levels, which demonstrates that supply continues to sell quickly.
On National Consignment Day
“We are laser focused on making the operational changes and strategic investments that will position us to emerge from COVID a stronger, more agile company prepared to capitalize on the significant luxury resale market opportunity in front of us,” continued Wainwright.
Third Quarter Financial Highlights
- Gross Merchandise Volume (GMV) was
$245.4 million , a 17% Q/Q improvement and a 3% Y/Y decrease. - Total Revenue was
$78.1 million , a 16% Q/Q improvement and a 4% Y/Y decrease. - Consignment and Service Revenue was
$64.4 million , a 15% Q/Q improvement and a 7% Y/Y decrease. - Direct Revenue was
$13.6 million , a 25% Q/Q and 11% Y/Y increase. - Gross Profit was
$49.8 million , a 18% Q/Q improvement and a 5% Y/Y decrease. - Net Loss was (
$43.3 million ). - Adjusted EBITDA was
($29.0) million or (37.2%) of total revenue. - Adjusted EBITDA includes
$2.2 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 (
$0.41 ). - At the end of the third quarter, cash, cash equivalents and short-term investments totaled
$395.2 million .
Other Third Quarter Financial Highlights and Key Operating Metrics
- Trailing 12 months active buyers reached 617,269 an increase of 14% Y/Y.
- Orders reached 550,084, a 9% Q/Q improvement and a 5% Y/Y decrease.
- Average Order Value was
$446 , an increase of 2% Y/Y. - Consignment Take Rate decreased 140bps Y/Y to 35.4% reflecting strong performance on a relative basis from lower-take-rate categories (such as handbags, jewelry and sneakers) and a higher mix of consignors earning higher commissions.
- GMV from repeat buyers was 82.9% compared to 81.8% in the third quarter of 2019.
- Since inception through
Sept. 30 , consignment with TheRealReal saved 16,105 metric tons of carbon and 756 million liters of water.
Financial Outlook
Given limited near-term visibility, the company elects to not provide a financial outlook.
Webcast and Conference Call
The
About
The
Investor Relations Contact:
Head of Investor Relations
paul.bieber@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 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, 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 (benefit) 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 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.
Statements of Operations | ||||||||||||||||
(In thousands, except share and per share data) | ||||||||||||||||
(Unaudited) | ||||||||||||||||
Three Months Ended |
Nine Months Ended |
|||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Revenue: | ||||||||||||||||
Consignment and service revenue | $ | 64,407 | $ | 69,245 | $ | 176,570 | $ | 184,890 | ||||||||
Direct revenue | 13,645 | 12,271 | 37,111 | 39,417 | ||||||||||||
Total revenue | 78,052 | 81,516 | 213,681 | 224,307 | ||||||||||||
Cost of revenue: | ||||||||||||||||
Cost of consignment and service revenue | 16,304 | 19,446 | 47,253 | 52,592 | ||||||||||||
Cost of direct revenue | 11,964 | 9,842 | 31,678 | 31,056 | ||||||||||||
Total cost of revenue | 28,268 | 29,288 | 78,931 | 83,648 | ||||||||||||
Gross profit | 49,784 | 52,228 | 134,750 | 140,659 | ||||||||||||
Operating expenses: | ||||||||||||||||
Marketing | 15,186 | 13,390 | 37,747 | 36,838 | ||||||||||||
Operations and technology | 40,578 | 37,407 | 117,858 | 103,271 | ||||||||||||
Selling, general and administrative | 35,384 | 28,436 | 103,047 | 76,110 | ||||||||||||
Total operating expenses (1) | 91,148 | 79,233 | 258,652 | 216,219 | ||||||||||||
Loss from operations | (41,364 | ) | (27,005 | ) | (123,902 | ) | (75,560 | ) | ||||||||
Interest income | 448 | 1,902 | 2,350 | 2,918 | ||||||||||||
Interest expense | (2,406 | ) | (60 | ) | (2,810 | ) | (572 | ) | ||||||||
Other income (expense), net | — | (119 | ) | (89 | ) | (2,106 | ) | |||||||||
Loss before provision for income taxes | (43,322 | ) | (25,282 | ) | (124,451 | ) | (75,320 | ) | ||||||||
Provision (benefit) for income taxes | (17 | ) | (8 | ) | 38 | 51 | ||||||||||
Net loss | $ | (43,305 | ) | $ | (25,274 | ) | $ | (124,489 | ) | $ | (75,371 | ) | ||||
Accretion of redeemable convertible preferred stock to redemption value | $ | — | $ | — | $ | — | $ | (3,355 | ) | |||||||
Net loss attributable to common stockholders | $ | (43,305 | ) | $ | (25,274 | ) | $ | (124,489 | ) | $ | (78,726 | ) | ||||
Net loss per share attributable to common stockholders, basic and diluted | $ | (0.49 | ) | $ | (0.30 | ) | $ | (1.43 | ) | $ | (2.28 | ) | ||||
Weighted average shares used to compute net loss per share attributable to common stockholders, basic and diluted | 87,869,321 | 84,634,956 | 87,176,677 | 34,556,485 | ||||||||||||
(1) Includes stock-based compensation as follows: | ||||||||||||||||
Marketing | $ | 705 | $ | 145 | $ | 1,228 | $ | 287 | ||||||||
Operating and technology | 2,892 | 1,098 | 7,222 | 2,064 | ||||||||||||
Selling, general and administrative (2) | 3,775 | 1,277 | 8,461 | 3,384 | ||||||||||||
Total | $ | 7,372 | $ | 2,520 | $ | 16,911 | $ | 5,735 | ||||||||
(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) | ||||||||
(Unaudited) | ||||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 343,092 | $ | 154,446 | ||||
Short-term investments | 52,156 | 208,811 | ||||||
Accounts receivable | 4,559 | 7,779 | ||||||
Inventory, net | 19,236 | 23,599 | ||||||
Prepaid expenses and other current assets | 18,255 | 13,804 | ||||||
Total current assets | 437,298 | 408,439 | ||||||
Property and equipment, net | 61,944 | 55,831 | ||||||
Operating lease right-of-use assets | 115,013 | — | ||||||
Other assets | 2,020 | 2,660 | ||||||
Total assets | $ | 616,275 | $ | 466,930 | ||||
Liabilities and Stockholders’ Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 5,410 | $ | 11,159 | ||||
Accrued consignor payable | 44,490 | 52,820 | ||||||
Operating lease liabilities, current portion | 15,263 | — | ||||||
Other accrued and current liabilities | 55,767 | 54,567 | ||||||
Total current liabilities | 120,930 | 118,546 | ||||||
Operating lease liabilities, net of current portion | 111,680 | — | ||||||
Convertible senior notes, net | 148,057 | — | ||||||
Other noncurrent liabilities | 1,300 | 9,456 | ||||||
Total liabilities | 381,967 | 128,002 | ||||||
Stockholders’ equity: | ||||||||
Common stock, |
1 | 1 | ||||||
Additional paid-in capital | 713,195 | 693,426 | ||||||
Accumulated other comprehensive income | 107 | 7 | ||||||
Accumulated deficit | (478,995 | ) | (354,506 | ) | ||||
Total stockholders’ equity | 234,308 | 338,928 | ||||||
Total liabilities and stockholders’ equity | $ | 616,275 | $ | 466,930 |
Condensed Statements of Cash Flows | ||||||||
(In thousands) | ||||||||
(Unaudited) | ||||||||
Nine Months Ended |
||||||||
2020 | 2019 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (124,489 | ) | $ | (75,371 | ) | ||
Adjustments to reconcile net loss to cash used in operating activities: | ||||||||
Depreciation and amortization | 13,673 | 9,537 | ||||||
Stock-based compensation expense | 16,911 | 4,916 | ||||||
Reduction of operating lease right-of-use assets | 12,003 | — | ||||||
Bad debt expense | 661 | 1,208 | ||||||
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 | 39 | 70 | ||||||
Accretion of debt discounts and issuance costs | 1,268 | 11 | ||||||
Amortization of premiums (discounts) on short-term investments | (114 | ) | 38 | |||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | 2,559 | (2,572 | ) | |||||
Inventory, net | 4,363 | (3,491 | ) | |||||
Prepaid expenses and other current assets | (4,626 | ) | (3,375 | ) | ||||
Other assets | 578 | 136 | ||||||
Operating lease liability | (8,710 | ) | — | |||||
Accounts payable | (4,164 | ) | 1,394 | |||||
Accrued consignor payable | (8,330 | ) | 4,611 | |||||
Other accrued and current liabilities | 2,511 | 494 | ||||||
Other noncurrent liabilities | (150 | ) | 1,356 | |||||
Net cash used in operating activities | (96,017 | ) | (58,119 | ) | ||||
Cash flow from investing activities: | ||||||||
Purchases of short-term investments | (73,280 | ) | (12,169 | ) | ||||
Proceeds from maturities of short-term investments | 222,217 | 33,998 | ||||||
Proceeds from sale of short-term investments | 7,932 | — | ||||||
Capitalized proprietary software development costs | (6,640 | ) | (6,670 | ) | ||||
Purchases of property and equipment | (15,685 | ) | (16,111 | ) | ||||
Net cash provided by (used in) investing activities | 134,544 | (952 | ) | |||||
Cash flow from financing activities: | ||||||||
Proceeds from issuance of common stock in initial public offering, net of issuance costs | — | 315,486 | ||||||
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 | 7,135 | 2,448 | ||||||
Taxes paid related to restricted stock vesting | (748 | ) | (20 | ) | ||||
Repayment of debt | — | (9,250 | ) | |||||
Net cash provided by financing activities | 150,119 | 378,439 | ||||||
Net increase in cash, cash equivalents and restricted cash | 188,646 | 319,368 | ||||||
Cash, cash equivalents, and restricted cash: | ||||||||
Beginning of period | 154,446 | 45,627 | ||||||
End of period | $ | 343,092 | $ | 364,995 |
The following table reflects the reconciliation of net loss to Adjusted EBITDA for each of the periods indicated (in thousands):
Three Months Ended |
Nine Months Ended |
|||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Adjusted EBITDA Reconciliation: | ||||||||||||||||
Net loss | $ | (43,305 | ) | $ | (25,274 | ) | $ | (124,489 | ) | $ | (75,371 | ) | ||||
Depreciation and amortization | 4,917 | 3,545 | 13,673 | 9,537 | ||||||||||||
Stock-based compensation | 7,372 | 2,520 | 16,911 | 4,916 | ||||||||||||
Legal settlement | — | — | 1,110 | — | ||||||||||||
Restructuring charges | 72 | — | 514 | — | ||||||||||||
Compensation expense related to stock sales by current and former employees | — | — | — | 819 | ||||||||||||
Interest income | (448 | ) | (1,902 | ) | (2,350 | ) | (2,918 | ) | ||||||||
Interest expense | 2,406 | 60 | 2,810 | 572 | ||||||||||||
Other (income) expense, net | — | 119 | 89 | 2,106 | ||||||||||||
Provision for income taxes | (17 | ) | (8 | ) | 38 | 51 | ||||||||||
Adjusted EBITDA | $ | (29,003 | ) | $ | (20,940 | ) | $ | (91,694 | ) | $ | (60,288 | ) |
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 |
Nine Months Ended |
|||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net loss | $ | (43,305 | ) | $ | (25,274 | ) | $ | (124,489 | ) | $ | (75,371 | ) | ||||
Stock-based compensation | 7,372 | 2,520 | 16,911 | 4,916 | ||||||||||||
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 | — | — | — | 2,100 | ||||||||||||
Legal settlement | — | — | 1,110 | — | ||||||||||||
Restructuring charges | 72 | — | 514 | — | ||||||||||||
Provision for income taxes | (17 | ) | (8 | ) | 38 | 51 | ||||||||||
Non-GAAP net loss attributable to common stockholders | $ | (35,878 | ) | $ | (22,762 | ) | $ | (105,916 | ) | $ | (70,840 | ) | ||||
Weighted-average common shares outstanding used to calculate Non-GAAP net loss attributable to common stockholders per share, basic and diluted | 87,869,321 | 84,634,956 | 87,176,677 | 34,556,485 | ||||||||||||
Non-GAAP net loss attributable to common stockholders per share, basic and diluted | $ | (0.41 | ) | $ | (0.27 | ) | $ | (1.21 | ) | $ | (2.05 | ) |
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 |
Nine Months Ended |
|||||||||||||||
2020 | 2019 | 2020 | 2019 | |||||||||||||
Net cash used in operating activities | $ | (9,436 | ) | $ | (11,945 | ) | $ | (96,017 | ) | $ | (58,119 | ) | ||||
Purchase of property and equipment and capitalized proprietary software development costs | (7,685 | ) | (8,852 | ) | (22,325 | ) | (22,781 | ) | ||||||||
Free Cash Flow | $ | (17,121 | ) | $ | (20,797 | ) | $ | (118,342 | ) | $ | (80,900 | ) |
Key Financial and Operating Metrics:
2019 |
2019 |
2019 |
2019 |
2020 |
2020 |
2020 |
|||||||||||||||
(In thousands, except AOV and percentages) |
|||||||||||||||||||||
GMV | $ | 224,116 | $ | 228,487 | $ | 252,766 | $ | 302,975 | $ | 257,606 | $ | 182,771 | $ | 245,355 | |||||||
NMV | $ | 160,538 | $ | 164,782 | $ | 186,617 | $ | 219,508 | $ | 184,625 | $ | 139,797 | $ | 189,059 | |||||||
Consignment and Services Revenue | $ | 55,575 | $ | 60,070 | $ | 69,245 | $ | 82,522 | $ | 65,297 | $ | 46,866 | $ | 64,407 | |||||||
Direct Revenue | $ | 15,007 | $ | 12,139 | $ | 12,271 | $ | 11,209 | $ | 12,942 | $ | 10,523 | $ | 13,645 | |||||||
Number of Orders | 498 | 505 | 577 | 637 | 574 | 438 | 550 | ||||||||||||||
Take Rate | 35.3 | % | 36.6 | % | 36.8 | % | 36.2 | % | 36.2 | % | 36.0 | % | 35.4 | % | |||||||
Active Buyers | 456 | 492 | 543 | 582 | 602 | 612 | 617 | ||||||||||||||
AOV | $ | 450 | $ | 453 | $ | 438 | $ | 476 | $ | 449 | $ | 417 | $ | 446 | |||||||
% of GMV from Repeat Buyers | 82.4 | % | 83.1 | % | 81.8 | % | 82.9 | % | 84.4 | % | 82.3 | % | 82.9 | % |
Source: The RealReal