UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 25, 2020

 

The RealReal, Inc.

(Exact name of Registrant as Specified in Its Charter)

 

 

(855) 435-5893

(Registrant’s Telephone Number, Including Area Code)

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

Securities registered pursuant to Section 12(b) of the Act:

 

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

 

 

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Item 2.02 Results of Operations and Financial Condition.

On February 25, 2020, The RealReal, Inc. (“The RealReal”) issued a press release announcing its financial results for the quarter ended December 31, 2019. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K and is incorporated by reference herein.

Item 7.01 Regulation FD Disclosure

On February 25, 2020, The RealReal posted supplemental investor materials on its investor.therealreal.com website.  The RealReal announces material information to the public about The RealReal, its services and other matters through a variety of means, including filings with the Securities and Exchange Commission, press releases, public conference calls, webcasts, the investor relations section of its website (investor.therealreal.com) in order to achieve broad, non-exclusionary distribution of information to the public and for complying with its disclosure obligations under Regulation FD.

The information in this current report on Form 8-K and the exhibit attached hereto is being furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, regardless of any general incorporation language in such filing.

Item 9.01 Financial Statements and Exhibits.

(d) Exhibits

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

 

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Exhibit 99.1

 

THE REALREAL ANNOUNCES FOURTH QUARTER AND FULL YEAR 2019 RESULTS

 

Q4 Gross Merchandise Value Increased 39% Year over Year to $303.0 million

Q4 Total Revenue Increased 57% Year over Year to $97.3 million

Q4 Adjusted EBITDA Margin Improved 16.7 Percentage Points Y/Y

2019 Contribution Profit Per Order Increased 126% Y/Y to $19.72

 

SAN FRANCISCO, Feb. 25, 2020 -- The RealReal (Nasdaq: REAL)—the world’s largest online marketplace for authenticated, consigned luxury goods—today reported financial results for its fourth quarter and full year ended Dec. 31, 2019.

 

“Our Q4 results exemplify our long standing approach to balancing growth and operating leverage.  In Q4, we achieved 39% Y/Y GMV growth with all top level categories experiencing strong growth. At the same time, Q4 adjusted EBITDA margin improved by approximately 17 percentage points Y/Y. Additionally, 82.9% of GMV was driven by repeat buyers in the quarter, a rare attribute of our marketplace that underscores our buyer loyalty and the strength of our flywheel,” said Julie Wainwright, CEO and founder.  

 

Fourth Quarter Financial Highlights

 

Full Year 2019 Financial Highlights

 

“In 2019, we surpassed $1 billion in GMV. We also made significant progress on our path to profitability while still making investments to capitalize on the massive opportunity in front of us. In 2020, we will continue to invest in growth while driving meaningful operating leverage as we

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continue to revolutionize luxury resale and deliver value to our consignors and our buyers,” continued Wainwright.

 

The RealReal continues to invest and innovate in authentication. We believe we have the most rigorous authentication process in the marketplace. Every item we sell is subject to that process. The impact of automation and technology has dramatically changed the authentication team’s day-to-day activities, allowing them to process more products per person while also expanding the depth of our authentication process, training and quality control procedures.  

 

“Our goal is to be the safest marketplace to buy pre-owned luxury goods, and our processes will continue to evolve throughout 2020 as we integrate more technology to stay ahead of counterfeiters,” added Wainwright. “Our buyer NPS score of 71 and the fact that approximately 83% of GMV came from repeat buyers and 81% of GMV came from repeat consignors in 2019, indicates that we are focused on the right issues.”

 

The RealReal continues to deepen its sustainability commitments, pledging to become carbon neutral in 2021 as part of the CEO Carbon Neutral Challenge issued by Gucci president and CEO Marco Bizzarri. Since its founding through the end of 2019, The RealReal has offset 13,300 metric tons of carbon and saved 608 million liters of water.

 

Other Fourth Quarter Highlights

 

Q1 and FY 2020 Financial Outlook

Based on information available as of Feb. 25, 2020, we are providing the following financial guidance for the first quarter as well as for the full year 2020.  

 

 

Webcast and Conference Call

The RealReal will host a conference call and webcast to discuss its fourth quarter and full year 2019 financial results today at 2 p.m. PDT. 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 1182588. The call will also be available via live webcast at investor.therealreal.com along with supporting slides. An archive of the webcast conference call

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will be available shortly after the call ends. The archived webcast will be available at 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 and direct shipping for individual consignors and estates. At our stores in LA and NYC, customers can shop, consign, and meet with our experts. At our nine Luxury Consignment Offices, three 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

 

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Forward Looking Statements

This press release contains forward-looking statements within the meaning of federal and state securities laws. Forward-looking statements generally relate to future events or our future financial or operating performance.  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,” “would,” “continue,” “ongoing” or the negative of these terms or other comparable terminology.  Forward-looking statements in this release include, but are not limited to statements about future operating results, including our financial outlook and guidance for the first quarter of 2020 and full year 2020, our ability to drive revenue growth, our ability to drive operating leverage, our ability to add capacity, capabilities and automation to our operations and our strategies, plans, commitments, objectives and goals. Forward-looking statements are based on current expectations of future events. Investors should realize that if underlying assumptions prove inaccurate or that known or unknown risks or uncertainties materialize, actual results could vary materially from our expectations and projections. Investors are therefore cautioned not to place undue reliance on any forward-looking statements. These forward-looking statements speak only as of the date of this press release and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events or otherwise. Our future results may be different from those described in our forward-looking statements for a variety of reasons, including 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. A list and description of risks, uncertainties and other factors that could cause or contribute to differences in our results can be found in our filings with the Securities and Exchange Commission (“SEC”), including our prospectus filed pursuant to Rule 424(b) under the Securities Act of 1933, as amended, on June 28, 2019, our Quarterly Report on Form 10-Q for the quarters ended June 30, 2019 and September 30, 2019, and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019 that will be filed with the SEC by March 2, 2020. We qualify all of our forward-looking statements by these cautionary 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 Contribution Profit, 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. 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

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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, net other (income) expense, income tax provision, 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 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 for income taxes, and nonrecurring items divided by weighted average shares outstanding. We believe that adding back stock-based compensation expense and 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.

 

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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.

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THE REALREAL, INC.

Statements of Operations

(in thousands, except share and per share data)

(unaudited)

 

 

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THE REALREAL, INC.

Balance Sheets

(in thousands, except share and per share data)

(unaudited)

 

 

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THE REALREAL, INC.

Statements of Cash Flows

(in thousands)

(unaudited)

 

 

 

 

 

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

 

 

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):

 

 

 

 

 

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

 

 

 

Key Financial and Operating Metrics:

 

 

 

2019 and 2018 Contribution Profit Per Order:

 

 

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