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May 7, 2019
Julie Wainwright
Chairperson and Chief Executive Officer
TheRealReal, Inc.
55 Francisco Street
Suite 600
San Francisco, CA 94133
Re: TheRealReal, Inc.
Draft Registration Statement on Form S-1
Submitted April 8, 2019
CIK No. 0001573221
Dear Ms. Wainwright:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so we may
better
understand your disclosure.
Please respond to this letter by providing the requested information and
either submitting
an amended draft registration statement or publicly filing your registration
statement on
EDGAR. If you do not believe our comments apply to your facts and circumstances
or do not
believe an amendment is appropriate, please tell us why in your response.
After reviewing the information you provide in response to these comments
and your
amended draft registration statement or filed registration statement, we may
have additional
comments.
Form S-1 filed on April 8, 2019
Prospectus Summary, page 1
1. Clarify by what measure you are the "largest online marketplace for
authenticated,
consigned luxury goods."
Risk Factors, page 13
2. In your risk factor on page 28, please revise to disclose whether or not
you are currently
collecting sales taxes in local jurisdictions in which you do not have a
physical presence
and, if not, why not, in order to give readers a sense of the magnitude
of this risk.
Julie Wainwright
FirstName LastNameJulie Wainwright
TheRealReal, Inc.
Comapany NameTheRealReal, Inc.
May 7, 2019
May 7, 2019 Page 2
Page 2
FirstName LastName
Management Discussion and Analysis of Financial Condition and Results of
Operations
Overview, page 49
3. Here or in an appropriate section of your prospectus, please revise to
disclose whether
mobile sales generate a material portion of your GMV and, if so,
disclose this amount.
4. We note that you discuss your take rate and you state elsewhere that
consignors can earn
up to 80% and that the average commission rate is 65%. In an
appropriate place in your
prospectus, please provide the high and low ends of your consignment
range(s) and
elaborate upon how these rates are set and why they differ. Also,
explain why your take
rate has improved over time.
Use of Proceeds, page 49
5. It appears that you have no specific plan for your use of proceeds.
Please revise your
disclosure to discuss the principal reasons for the offering. Please
refer to Item 504 of
Regulation S-K.
Key Financial and Operating Metrics
GMV, page 55
6. We note that 29.0% and 28.7% of GMV in 2017 and 2018 represented goods
that
were returned or the order cancelled. With a view to understanding,
please explain to
us why you chose to include such transactions in your calculation of
GMV.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Key Financial and Operating Metrics, page 55
7. We note your presentation of gross merchandise value ("GMV"). To
provide your
investors with appropriate context in which to evaluate this metric,
revise to provide the
following additional disclosures:
We note that you discuss and quantify GMV on several pages that
precede your page
55 definition of GMV. Please ensure that you define GMV within
close proximity
to the earliest GMV references within your filing or provide an
appropriate cross
reference.
Provide a more detailed explanation of your GMV calculation. For
example, explain
if it includes amounts paid for goods that you recognize as direct
revenue in addition
to amounts paid for sales of consigned goods.
Explain how GMV relates to your current and future results of
operations and disclose
any known limitations with the use of this measure.
Julie Wainwright
FirstName LastNameJulie Wainwright
TheRealReal, Inc.
Comapany NameTheRealReal, Inc.
May 7, 2019
May 7, 2019 Page 3
Page 3
FirstName LastName
Explain in sufficient detail how you determine the numerators and
denominators when
calculating your take rate percentage. In doing so, clarify if the
numerator represents
GAAP consignment revenue or some other measure and if the
denominator is
calculated net of returns and cancellations.
In light of the Chanel lawsuit disclosed on page F-30, tell us
your consideration of
disclosing the percentage of GMV derived from the sale of Chanel
goods. In this
regard, we note you disclose on page 77 that Chanel is a
top-selling luxury designer on
your marketplace. Alternatively, tell us why this information
would not be useful to
investors.
Components of our Operating Results, page 56
8. You refer to "marketplace" and "online markeplace" throughout your
prospectus and it is
not clear whether these references have different meanings. In order
to understand where
sales from your retail stores are reflected in GMV and Revenues,
please clarify your
references to "marketplace." If your references to "marketplace"
include sales at your
retail stores, please consistently revise to state as much and
disclose the amount of
revenues and GMV that are attributable to your retail stores, given
your disclosure
elsewhere about the "favorable performance" of your retail stores to
date.
Results of Operations, page 57
9. Tell us your consideration of quantifying, within MD&A and your
financial statement
footnotes, revenue by major product category and/or top-selling luxury
designer. If you
believe no revisions are necessary, tell us how you complied with the
disclosure
requirement of ASC 280-10-50-40.
10. Where you identify intermediate causes of changes in your operating
results, also describe
the reasons underlying those causes. For example, you indicate that
the annual increase in
consignment and service revenue was driven by an increase in GMV and
an improvement
in your take rate. Please explain in reasonable detail the reasons why
your GMV and take
rate increased. Also apply this comment to the remainder of your
results of operations
discussion, as necessary. See SEC Release No. 33-8350.
Liquidity and Capital Resources, page 60
11. Given your disclosure on page 72, it appears that you intend to expand
offline and open
new physical retail locations. Please expand your liquidity and
capital resources
disclosures to discuss in further detail your expansion plans and the
required capital, or
range, which would be deemed necessary to meet these expansion plans.
Please clarify
the anticipated funding source(s) of these expansion plans. Refer to
Item 303(a)(1)-(2) of
Regulation S-K.
Julie Wainwright
FirstName LastNameJulie Wainwright
TheRealReal, Inc.
Comapany NameTheRealReal, Inc.
May 7, 2019
May 7, 2019 Page 4
Page 4
FirstName LastName
Critical Accounting Policies and Estimates
Revenue Recognition, page 62
12. Your revenue recognition critical accounting policy discussion appears
to represent a
repetition of what you already disclose within your significant
accounting policies
footnote on page F-11. We remind you that such disclosure should
supplement, not
duplicate, the description of accounting policies that are already
disclosed in the notes to
the financial statements. The disclosure should provide greater
insight into the quality and
variability of information regarding financial condition and operating
performance. While
accounting policy notes in the financial statements generally describe
the method used to
apply an accounting principle, the discussion in MD&A should present a
company's analysis of the uncertainties involved in applying a
principle at a given time or
the variability that is reasonably likely to result from its
application over time. For
example, consider expanding upon how management establishes the
returns reserve and
discuss the accuracy of prior estimates in relation to actual return
experience. Refer to
Section V of SEC Release 33-8350. Please revise your disclosures as
appropriate.
Business
Our Product Assortment, page 77
13. Please revise to quantify the volume of luxury goods you consign
according to the
categories you describe, as the chart does not clearly depict these
volumes. Also, explain
why you articulate this volume in terms of GMV rather than revenue,
given that we
presume the take rates for each category likely differ.
Executive Compensation
Annual Cash Bonus, page 90
14. We note that you disclose the percentage of bonus awarded based on
attainment of certain
goals. Please revise to quantify the targets and the actual
performance attained and used
to determine each officer's payment under the cash bonus portion of
executive
compensation, consistent with Item 402(o)(5) of Regulation S-K, or
tell us why you do
not believe this disclosure is material.
Description of Capital Stock
Exclusive Forum, page 109
15. We note that your forum selection provision identifies the Court of
Chancery of the State
of Delaware (or, if the Court of Chancery does not have jurisdiction,
the federal district
court for the District of Delaware) as the exclusive forum for certain
litigation, including
any "derivative action." We presume this provision applies to actions
arising under the
Securities Act, given your disclosure that nothing in your certificate
of incorporation
precludes such claims. Please revise to clearly state whether your
exclusive forum
provision will apply to actions arising under the Securities Act or
Exchange Act. If so,
Julie Wainwright
TheRealReal, Inc.
May 7, 2019
Page 5
please also state that there is uncertainty as to whether a court
would enforce such
provision.
Direct Revenue, page F-11
16. Tell us whether you record an asset for the right to recover goods
from your customers.
Also tell us and disclose whether or not you take title to all
returned items sold on a
consignment basis. Please refer to ASC 606-10-55-23.
5. Balance Sheet Components
Other Accrued and Current Liabilities, page F-21
17. Based on your disclosure on page 55, sales returns appear material to
your financial
statements. Please tell us what consideration you gave to providing a
roll-forward of your
sales return reserve within your footnote or within Schedule II under
Rules 5-04 and 12-
09 of Regulation S-X.
General
18. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to
do so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications.
You may contact Robert Babula, Staff Accountant, at 202-551-3339 or
Andrew Blume,
Staff Accountant, at 202-551-3254 if you have questions regarding comments on
the financial
statements and related matters. Please contact Scott Anderegg, Staff Attorney,
at 202-551-3342
or Mara Ransom, Assistant Director at 202-551-3264 with any other questions.
FirstName LastNameJulie Wainwright Sincerely,
Comapany NameTheRealReal, Inc.
Division of
Corporation Finance
May 7, 2019 Page 5 Office of
Consumer Products
FirstName LastName