0001573221falseTheRealReal, Inc.00015732212024-08-062024-08-06

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): August 6, 2024
_______________________________________________________________________
The RealReal, Inc.
(Exact name of Registrant as Specified in Its Charter)
_______________________________________________________________________
Delaware001-3895345-1234222
(State or Other Jurisdiction
of Incorporation)
(Commission File Number)
(IRS Employer
Identification No.)

55 Francisco Street Suite 150
San Francisco, CA 94133
 
(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):
oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading
Symbol(s)
Name of each exchange on which registered
Common stock, $0.00001 par value
REAL
The Nasdaq Global Select Market
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 o
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. o


Item 2.02 Results of Operations and Financial Condition.
On August 6, 2024, The RealReal, Inc. (“The RealReal”) issued a press release announcing its financial results for the quarter ended June 30, 2024. 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 August 6, 2024, The RealReal posted a stockholder letter on its investor.therealreal.com website. A copy of the stockholder letter is furnished as Exhibit 99.2 to this Current Report on Form 8-K and is incorporated by reference herein.
The information in this current report on Form 8-K and the exhibits 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
Exhibit
Number
Description
99.1
99.2
104Cover Page Interactive Data File (embedded within the Inline XBRL document)
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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.
The RealReal, Inc.
Date: August 6, 2024
By:/s/ Ajay Madan Gopal
Ajay Madan Gopal
Chief Financial Officer
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Exhibit 99.1
THE REALREAL ANNOUNCES SECOND QUARTER 2024 RESULTS
Q2 2024 Revenue of $145 million, up $14 million or 11% Year-Over-Year
Q2 2024 Net Loss of $(17) million, or (11.5%) of Total Revenue, an improvement of $25 million Year-Over-Year
Q2 2024 Adjusted EBITDA of $(1.8) million or (1.2)% of Total Revenue, up $21 million Year-Over-Year

SAN FRANCISCO, August 6, 2024 — The RealReal (Nasdaq: REAL)—the world’s largest online marketplace for authenticated, resale luxury goods—today reported financial results for its second quarter ended June 30, 2024. Second quarter 2024 gross merchandise value (GMV) and total revenue increased 4% and 11% respectively, compared to the second quarter of 2023. During the quarter, consignment revenue grew 17% compared to the same period in 2023. Second quarter Adjusted EBITDA improved $21 million compared to the second quarter of 2023.

“We continue to build on our progress and momentum,” said John Koryl, Chief Executive Officer of The RealReal. “In the second quarter, we delivered accelerated year-over-year growth and delivered double-digit revenue growth. In the first half of 2024 we grew revenue by $16 million, improved net loss by $76 million and improved Adjusted EBITDA by $46 million compared to the prior year period. We believe this demonstrates the success of the changes we’ve made and highlights the resilience of our go-forward business model.”

Koryl continued, “As the leading e-commerce marketplace for authenticated luxury goods, we are playing to our strengths and growing with the large market for circular fashion. Due to our extensive and rich dataset of luxury items and transactions, we believe we are well positioned to benefit from the recent advancements in generative AI. Looking ahead, we remain focused on achieving operational excellence, delivering exceptional service to our highly-engaged community, and expanding margins toward a sustainably profitable business.”
Second Quarter Highlights
•GMV was $441 million, an increase of 4% compared to the same period in 2023
•Total Revenue was $145 million, an increase of 11% compared to the same period in 2023
•Gross Profit was $107 million, an increase of $21 million compared to the same period in 2023
•Gross Margin was 74.1%, an increase of over 800 basis points compared to the same period in 2023
•Net Loss was $(17.0) million or (11.5)% of total revenue, compared to $(41.3) million or (31.6)% of total revenue in the same period in 2023
•Adjusted EBITDA was $(1.8) million or (1.2)% of total revenue compared to $(22.3) million or (17.1)% of total revenue in the same period in 2023
•GAAP basic net loss per share was $(0.16) compared to $(0.41) in the prior year period and GAAP diluted net loss per share was $(0.20) compared to $(0.41) in the prior year period
•Non-GAAP basic and diluted net loss attributable to common shareholders per share was $(0.13) compared to $(0.30) in the prior year period
•Top-line-related Metrics
◦Trailing three months active buyers was 381,000, an increase of 9% compared to the same period in 2023
◦Orders were 820,000, an increase of 4% compared to the same period in 2023
◦Average order value (AOV) was $538, which is consistent with the same period in 2023
◦AOV was driven by a year-over-year increase in units per transaction offset by lower average selling prices

Q3 and Full Year 2024 Guidance
Based on market conditions as of August 6, 2024, we are updating our full year guidance and providing guidance for third quarter 2024 GMV, total revenue and Adjusted EBITDA, which is a Non-GAAP financial measure.

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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 2024Full Year 2024
GMV$410 - $430 million $1.79 - $1.82 billion
Total Revenue$135 - $142 million$580 - $595 million
Adjusted EBITDA$(2) - $1 million
$0 - $6 million

Webcast and Conference Call
The RealReal will post a shareholder letter on its investor relations website at investor.therealreal.com/financial-information/quarterly-results and host a conference call at 2:00 p.m. Pacific Time (5:00 p.m. Eastern Time) to answer questions regarding its results. Investors and analysts can access the call at https://register.vevent.com/register/BI7e473afdc4f6494aa3d4037bcc8c536f. The call will also be available via live webcast at investor.therealreal.com along with the stockholder letter and supporting slides.
An archive of the webcast conference call will be available shortly after the call ends at investor.therealreal.com.
About The RealReal, Inc.
The RealReal is the world’s largest online marketplace for authenticated, resale luxury goods, with 37 million members. 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 hundreds of 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 thousands of brands across numerous categories—including women's and men's fashion, fine jewelry and watches, art and home—in support of the circular economy. We make selling effortless with free virtual appointments, in-home pickup, drop-off and direct shipping. We handle all of the work for consignors, including authenticating, using AI and machine learning to determine optimal pricing, photographing and listing their items, as well as shipping and customer service.
Investor Relations Contact:
Caitlin Howe
IR@therealreal.com
Press Contact:
Mallory Johnston
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,” “target,” “contemplate,” “project,” “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 and financial results, including our strategies, plans, commitments, objectives and goals, in particular in the context of the impacts of recent geopolitical events, including the conflict between Russia and Ukraine and the Israel-Hamas war, and uncertainty surrounding macro-economic trends, the debt exchange, financial guidance, anticipated growth in 2024, the anticipated impact of generative AI, and long-range financial targets and projections. Actual results could differ materially from those predicted or implied and reported results should not be considered as an indication of future
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performance. Other factors that could cause or contribute to such differences include, but are not limited to, inflation, macroeconomic uncertainty, geopolitical instability, 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, labor shortages 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 for the year ended December 31, 2023 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, Adjusted EBITDA as a percentage of total 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 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 expense on employee stock transactions, legal settlement charges, restructuring, warehouse fire costs (net), CEO transition costs, gain on extinguishment of debt, change in fair value of warrant liabilities 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 expense 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 expense 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.
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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, payroll tax expenses on employee stock transactions, CEO transition costs, restructuring charges, legal settlement charges, warehouse fire costs (net), gain on extinguishment of debt, change in fair value of warrant liabilities and certain one-time expenses divided by weighted average shares outstanding. We exclude the effect of our liability classified warrants to arrive at the weighted average common shares outstanding when their effect is anti-dilutive. We believe that making these adjustments 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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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,
2024202320242023
Revenue:
Consignment revenue$112,714 $96,577 $228,362 $199,220 
Direct revenue16,724 20,887 29,433 45,840 
Shipping services revenue15,496 13,391 30,939 27,699 
Total revenue144,934 130,855 288,734 272,759 
Cost of revenue:
Cost of consignment revenue13,108 14,575 26,388 30,104 
Cost of direct revenue13,760 20,446 26,045 45,476 
Cost of shipping services revenue10,600 9,660 21,556 21,022 
Total cost of revenue37,468 44,681 73,989 96,602 
Gross profit107,466 86,174 214,745 176,157 
Operating expenses:
Marketing13,759 15,351 29,042 32,869 
Operations and technology65,422 65,575 128,394 133,607 
Selling, general and administrative47,082 44,326 93,852 94,171 
Restructuring — 1,864 196 38,252 
Total operating expenses (1)
126,263 127,116 251,484 298,899 
Loss from operations(18,797)(40,942)(36,739)(122,742)
Change in fair value of warrant liability5,630 — (9,953)— 
Gain on extinguishment of debt— — 4,177 — 
Interest income2,263 2,404 4,332 4,457 
Interest expense(5,769)(2,678)(9,520)(5,345)
Loss before provision for income taxes(16,673)(41,216)(47,703)(123,630)
Provision for income taxes35 114 106 200 
Net loss attributable to common stockholders$(16,708)$(41,330)$(47,809)$(123,830)
Net loss per share attributable to common stockholders
Basic$(0.16)$(0.41)$(0.45)$(1.23)
Diluted$(0.20)$(0.41)$(0.45)$(1.23)
Weighted average shares used to compute net loss per share attributable to common stockholders
Basic106,882,054 100,973,105 106,047,054 100,294,359 
Diluted111,117,389 100,973,105 106,047,054 100,294,359 
(1) Includes stock-based compensation as follows:
Marketing$72 $349 $482 $799 
Operating and technology2,690 3,301 4,994 6,992 
Selling, general and administrative4,940 5,116 9,346 9,966 
Total$7,702 $8,766 $14,822 $17,757 
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THE REALREAL, INC.
Condensed Balance Sheets
(In thousands, except share and per share data)
(Unaudited)
 June 30,
2024		December 31,
2023
Assets
Current assets
Cash and cash equivalents$150,746 $175,709 
Accounts receivable, net16,450 17,226 
Inventory, net21,119 22,246 
Prepaid expenses and other current assets19,134 20,766 
Total current assets207,449 235,947 
Property and equipment, net96,769 104,087 
Operating lease right-of-use assets82,952 86,348 
Restricted cash14,911 14,914 
Other assets5,342 5,627 
Total assets$407,423 $446,923 
Liabilities and Stockholders’ Deficit
Current liabilities
Accounts payable$12,650 $8,961 
Accrued consignor payable65,465 77,122 
Operating lease liabilities, current portion22,080 20,094 
Convertible senior notes, net, current portion26,550 — 
Other accrued and current liabilities85,059 82,685 
Total current liabilities211,804 188,862 
Operating lease liabilities, net of current portion97,024 104,856 
Convertible senior notes, net276,159 452,421 
Non-convertible notes, net131,278 — 
Warrant liability20,370 — 
Other noncurrent liabilities6,042 4,083 
Total liabilities742,677 750,222 
Stockholders’ deficit:
Common stock, $0.00001 par value; 500,000,000 shares authorized as of June 30, 2024, and December 31, 2023; 108,495,705 and 104,670,500 shares issued and outstanding as of June 30, 2024, and December 31, 2023, respectively
1 1 
Additional paid-in capital832,179 816,325 
Accumulated deficit(1,167,434)(1,119,625)
Total stockholders’ deficit(335,254)(303,299)
Total liabilities and stockholders’ deficit$407,423 $446,923 
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THE REALREAL, INC.
Condensed Statements of Cash Flows
(In thousands)
(Unaudited)
Six Months Ended June 30,
20242023
Cash flows from operating activities:
Net loss$(47,809)$(123,830)
Adjustments to reconcile net loss to cash used in operating activities: 
Depreciation and amortization16,536 15,786 
Stock-based compensation expense14,822 17,757 
Reduction of operating lease right-of-use assets7,443 9,168 
Bad debt expense1,246 1,029 
Non-cash interest expense5,701 — 
Issuance costs allocated to liability classified warrants374 — 
Accretion of debt discounts and issuance costs1,045 1,279 
Property, plant, equipment, and right-of-use asset impairments— 33,505 
Provision for inventory write-downs and shrinkage1,840 6,531 
Gain on debt extinguishment(4,177)— 
Change in fair value of warrant liability9,953 — 
Loss related to warehouse fire, net389 — 
Other adjustments(672)56 
Changes in operating assets and liabilities:
Accounts receivable, net(470)5,184 
Inventory, net(629)10,532 
Prepaid expenses and other current assets4,796 4,121 
Other assets184 (2,820)
Operating lease liability(9,893)(11,437)
Accounts payable2,813 1,763 
Accrued consignor payable(12,704)(19,706)
Other accrued and current liabilities(957)(9,639)
Other noncurrent liabilities(52)(137)
Net cash used in operating activities(10,221)(60,858)
Cash flow from investing activities: 
Proceeds from maturities of short-term investments— — 
Capitalized proprietary software development costs(5,138)(7,514)
Purchases of property and equipment(5,142)(19,764)
Net cash used in investing activities(10,280)(27,278)
Cash flow from financing activities:
Proceeds from exercise of stock options112 3 
Taxes paid related to restricted stock vesting(364)(411)
Proceeds from issuance of stock in connection with the Employee Stock Purchase Program624 446 
Cash received from settlement of capped calls in conjunction with the Note Exchange396 — 
Issuance costs paid related to the Note Exchange(5,233)— 
Net cash provided by (used in) financing activities(4,465)38 
Net decrease in cash, cash equivalents and restricted cash(24,966)(88,098)
Cash, cash equivalents and restricted cash
Beginning of period190,623 293,793 
End of period$165,657 $205,695 
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The following table reflects the reconciliation of net loss to Adjusted EBITDA for each of the periods indicated (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
Adjusted EBITDA Reconciliation:
Net loss$(16,708)$(41,330)$(47,809)$(123,830)
Depreciation and amortization8,227 7,965 16,536 15,786 
Interest income(2,263)(2,404)(4,332)(4,457)
Interest expense5,769 2,678 9,520 5,345 
Provision for income taxes35 114 106 200 
EBITDA(4,940)(32,977)(25,979)(106,956)
Stock-based compensation7,702 8,766 14,822 17,757 
Payroll taxes expense on employee stock transactions118 24 174 68 
     Legal settlement
600 — 600 1,100 
Restructuring charges (1)
— 1,864 196 38,252 
Gain on extinguishment of debt (2)
— — (4,177)— 
Change in fair value of warrant liability (3)
(5,630)— 9,953 — 
One time expenses (4)
389 — 389 159 
Adjusted EBITDA$(1,761)$(22,323)$(4,022)$(49,620)

(1) The restructuring charges for the three and six months ended June 30, 2023 consist of impairment of right-of-use assets and property and equipment, employee severance charges, and other charges, including legal and transportation expenses.
(2) The gain on extinguishment of debt for the six months ended June 30, 2024 reflects the difference between the carrying value of the Exchanged Notes and the fair value of the 2029 Notes.
(3) The change in fair value of warrant liability for the three and six months ended June 30, 2024 reflects the remeasurement of the warrants issued by the Company in connection with the Note Exchange in February 2024.
(4) One time expenses for the three and six months ended June 30, 2024 reflects estimated losses related to the fire at one of our New Jersey authentication centers, net of estimated insurance recoveries. See "Note 11 - Commitments and Contingencies" in the notes to the unaudited financial statements for disclosure regarding the event. One time expenses for the six months ended June 30, 2023 consists of retention bonuses for certain executives incurred in connection with our founder's resignation on June 6, 2022.

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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,
2024202320242023
Net loss$(16,708)$(41,330)$(47,809)$(123,830)
Stock-based compensation7,702 8,766 14,822 17,757 
Payroll tax expense on employee stock transactions118 24 174 68 
Legal settlement600 — 600 1,100 
Restructuring charges— 1,864 196 38,252 
Provision for income taxes35 114 106 200 
Gain on extinguishment of debt— — (4,177)— 
Change in fair value of warrant liability(5,630)— 9,953 — 
One time expenses389 — 389 159 
Non-GAAP net loss attributable to common stockholders$(13,494)$(30,562)$(25,746)$(66,294)
Weighted-average common shares outstanding to calculate Non-GAAP net loss attributable to common stockholders per share, basic and diluted106,882,054 100,973,105 106,047,054 100,294,359 
Non-GAAP net loss attributable to common stockholders per share, basic and diluted$(0.13)$(0.30)$(0.24)$(0.66)
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,
2024202320242023
Net cash used in operating activities$(6,754)$(30,425)$(10,221)$(60,858)
Purchase of property and equipment and capitalized proprietary software development costs(4,959)(11,358)(10,280)(27,278)
Free Cash Flow$(11,713)$(41,783)$(20,501)$(88,136)

Key Financial and Operating Metrics:
June 30,
2022		September 30,
2022		December 31,
2022		March 31,
2023		June 30,
2023		September 30,
2023		December 31,
2023		March 31, 2024June 30,
2024
GMV$454,163 $440,659 $492,955 $444,366 $423,341 $407,608 $450,668 $451,941 $440,914 
NMV$332,508 $325,105 $367,382 $327,805 $303,918 $302,912 $335,245 $334,815 $329,422 
Consignment Revenue$96,917 $93,874 $110,199 $102,643 $96,577 $102,852 $113,500 $115,648 $112,714 
Direct Revenue$42,646 $34,005 $33,252 $24,953 $20,887 $17,356 $15,964 $12,709 $16,724 
Shipping Services Revenue$14,872 $14,824 $16,204 $14,308 $13,391 $12,964 $13,909 $15,443 $15,496 
Number of Orders934 952 993 891 789 794 826 840 820 
Take Rate36.1 %36.0 %35.7 %37.4 %36.7 %38.1 %37.7 %38.4 %38.5 %
Active Buyers (1)
385 404 430 388 351 364 381 384 381 
AOV$486 $463 $496 $499 $537 $513 $545 $538 $538 
(1) During the three months ended June 30, 2024, we updated active buyers to be buyers who purchased goods through our online marketplace during the 3 months ended on the last day of the period presented. Previously we had measured buyers who purchased goods during the 12 months ended on the last day of the period presented. The prior periods have been updated to active buyers during the 3 months ended on the last day of the period presented.
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Exhibit 99.2
image_11a.jpg
The RealReal Second Quarter 2024 Shareholder Letter
August 6, 2024
Executive Summary & Key Highlights

▪Consignment Revenue Grew 17% Year-Over-Year: During the second quarter, consignment revenue grew 17% compared to the prior year period. For the first half of 2024, consignment revenue grew 15% compared to the prior year period.

▪Growth in Q2 Flowed Through to Improved Bottom Line Results: For the second quarter of 2024, Adjusted EBITDA was $(1.8) million, an improvement of $21 million year-over-year. For the first half of 2024, Adjusted EBITDA was $(4.0) million, an improvement of $46 million compared to the prior year period.

▪Focused on Profitable Growth and Consignor Experience: We believe sales, marketing and stores will provide the next chapter of our profitable growth. Our approach of continuous improvement and measured technology investments is working.

▪Outlook for the Third Quarter and Full Year 2024: Today, we provided forward-looking financial guidance for the third quarter, and updated our full year 2024 guidance. We raised our Adjusted EBITDA guidance, which now exceeds breakeven for full year 2024.

Dear Shareholders,

Earlier today, we provided our financial and operational results for the second quarter. We continue to build on the progress and momentum we delivered in 2023 and into 2024. After returning to overall top-line growth earlier this year, we accelerated growth on both gross merchandise value (“GMV”) and revenue. Our focus on the consignment business resulted in a 17% year-over-year increase in consignment revenue. In addition to top-line growth, the company delivered improved margins year-over-year. For the second quarter of 2024, Adjusted EBITDA was $(1.8) million, an improvement of $21 million year-over-year. For the first half of 2024, Adjusted EBITDA improved $46 million compared to the prior year period.

Consignment Revenue Grew 17% Year-Over-Year

First half 2024 consignment revenue grew 15% compared to the first half of 2023. We believe this demonstrates the success of our strategic initiatives, highlights the resilience of our go-forward business model and positions us to capitalize on the expanding total addressable market for luxury resale.

We ended the second quarter with 381,000 active buyers on a trailing three month basis, up 9% compared to the same period in 2023. We experienced particular strength in new buyers, and members reached 37 million in the second quarter, up double-digits year-over-year, demonstrating our ability to continue growing our community and the luxury resale ecosystem.



On the supply front in Q2, the momentum continued and it fueled strong growth in our consignment revenue. We’ve refined our approach to sales and marketing and these changes are paying off. We reoriented our sales team’s compensation to better align incentives with our strategic focus on profitable supply. Better compensation alignment and recent upgrades to our leadership team have resulted in a significant increase in average tenure among our luxury managers. Additionally in Q2, more targeted marketing spend drove marketing efficiency and progress toward attracting higher life-time value consignors.

During the second quarter, we also opened a new neighborhood store in Chicago adding to our small fleet of The RealReal boutiques. Early indications point to the Chicago store attracting new consignors and bringing more high-value supply. We believe that sales, marketing and stores worked in concert to deliver profitable supply, which in turn drove strong results in the second quarter.

As a market leader in luxury resale, we also see our role as being the category thought leader. In June, we unveiled a provocative installation of fake handbags on Canal Street in New York City. The installation was designed to attract attention to the pervasive counterfeit issue and highlight our expertise in authentication. The installation was featured in The New York Times and Vogue, and drove social media engagement on Instagram and TikTok. Overall, the installation raised our brand awareness, and reinforced our position as thought leaders and a trusted marketplace for luxury goods.


Growth in Q2 Flowed Through to Improved Bottom Line Results

For the second quarter of 2024, we generated GMV of $441 million, a year-over-year increase of 4%, and total revenue of $145 million, a year-over-year increase of 11%. GMV growth was driven by a 4% increase in orders and consistent average order value compared to the same period in 2023. Second quarter gross margin was 74.1%, an improvement of 829 basis points year-over-year.

Our second quarter Adjusted EBITDA was $(1.8) million, or (1.2)% of total revenue, compared to $(22.3) million, or (17.1)% of total revenue in the second quarter of 2023.

We ended the second quarter with $166 million of cash and cash equivalents, and restricted cash. We had $21 million of inventory, net, at the end of the second quarter, a decrease of $1 million compared to fiscal year end 2023.


Focused on Profitable Growth and Consignor Experience

We believe sales, marketing and stores will be the engine powering the next chapter of profitable growth for our core consignment business. When these three areas work effectively in concert, sellers encounter a seamless and frictionless multi-channel experience. We will continue to refine our approach to sales and marketing, as well as identify attractive new markets for opening stores. In addition, we see opportunities to drive incremental growth from new supply channels. For example, we are expanding our reach into professional vendor supply by testing drop-ship capabilities that enable vendors to access our vast buyer community.
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As the only full-service luxury consignment reseller at scale, we obsess over service and continue to evolve our offering based on input from our large seller community. As a result, we recently expanded our “fair” condition and debuted “as is,” a new condition category that is our most accessible to date. With the debut of this new category, we believe we have expanded the overall assortment and acknowledged the demand for well-loved luxury items.

In addition to driving growth, we believe we will realize further efficiencies going forward. Across multiple areas of our marketplace, we believe we are well positioned to leverage recent advancements in AI. Our 13 years of data and 40 million items are powerful. This wealth of product and transactional data drives our pricing algorithms. Sellers benefit as we optimize for higher selling prices and rapid sell-through.

In our operations, we aim to further drive efficiencies and reduce processing times. Our continuous improvement approach and measured technology investments are in the early stages of delivering productivity. We see opportunities in our proprietary technology like Vision and Shield to accelerate the inbound processing of items, including adding more automation in authentication. Overall, we believe we are positioned to benefit from AI advancements as we profitably scale our business.


Q3 and Full Year 2024 Outlook

Based on market conditions as of August 6, 2024, we are providing guidance for the third quarter and full year 2024 for GMV, revenue and Adjusted EBITDA, which is a non-GAAP financial measure:
Q3 2024Full Year 2024
GMV$410 - $430 million$1.79 - $1.82 billion
Revenue$135 - $142 million$580 - $595 million
Adjusted EBITDA$(2) - $1 million$0 - $6 million

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).

As the leading e-commerce marketplace for authenticated luxury goods, we are playing to our strengths and growing with the large market for circular fashion. We remain focused on achieving operational excellence, delivering exceptional service to our highly-engaged community, and expanding margins toward a sustainably profitable business.

In closing, I want to thank our entire team at The RealReal for their efforts to fulfill our mission, promote the circular economy, and deliver world-class service. I also want to thank our entire The RealReal community of 37 million members as they join us on our mission to extend the life of luxury and make fashion more sustainable.
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Sincerely,
johnsignaturea.jpg
John E. Koryl
CEO of The RealReal
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Exhibit 99.2
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Forward Looking Statements
This shareholder letter 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,” “target,” “contemplate,” “project,” “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 and financial results, including our strategies, plans, commitments, objectives and goals, in particular in the context of the impacts of recent geopolitical events, including the conflict between Russia and Ukraine and the Israel-Hamas war, and uncertainty surrounding macro-economic trends, the debt exchange, financial guidance, anticipated growth in 2024, the anticipated impact of generative AI and long-range financial targets and projections. 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, inflation, macroeconomic uncertainty, geopolitical instability, 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, labor shortages 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 for the year ended December 31, 2023 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 shareholder letter, 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 stockholder letter and the accompanying tables and the related earnings conference call contain certain non-GAAP financial measures, including Adjusted EBITDA and Adjusted EBITDA as a percentage of total net revenue (“Adjusted EBITDA Margin”). 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 expense on employee stock transactions, legal settlement charges, restructuring, warehouse fire costs (net), CEO transition costs, gain on extinguishment of debt, change in fair value of warrant liabilities 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
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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 expense 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 expense 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.

The following table reflects the reconciliation of net loss to Adjusted EBITDA and Adjusted EBITDA as a percentage of total revenue for each of the periods indicated (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2024202320242023
     Total revenue$144,934 $130,855 $288,734 $272,759 
Adjusted EBITDA Reconciliation:
Net loss$(16,708)$(41,330)$(47,809)$(123,830)
Depreciation and amortization8,227 7,965 16,536 15,786 
Interest income(2,263)(2,404)(4,332)(4,457)
Interest expense5,769 2,678 9,520 5,345 
Provision for income taxes35 114 106 200 
EBITDA(4,940)(32,977)(25,979)(106,956)
Stock-based compensation7,702 8,766 14,822 17,757 
Payroll taxes expense on employee stock transactions 118 24 174 68 
Legal settlement 600 — 600 1,100 
Restructuring charges (1)
— 1,864 196 38,252 
Gain on extinguishment of debt (2)
— — (4,177)— 
Change in fair value of warrant liability (3)
(5,630)— 9,953 — 
One time expenses (4)
389 — 389 159 
Adjusted EBITDA$(1,761)$(22,323)$(4,022)$(49,620)
       Adjusted EBITDA (% of revenue)(1.2)%(17.1)%(1.4)%(18.2)%
(1) The restructuring charges for the three and six months ended June 30, 2023 consist of impairment of right-of-use assets and property and equipment, employee severance charges, and other charges, including legal and transportation expenses.
(2) The gain on extinguishment of debt for the six months ended June 30, 2024 reflects the difference between the carrying value of the Exchanged Notes and the fair value of the 2029 Notes.
(3) The change in fair value of warrant liability for the three and six months ended June 30, 2024 reflects the remeasurement of the warrants issued by the Company in connection with the Note Exchange in February 2024.
(4) One time expenses for the three and six months ended June 30, 2024 reflects estimated losses related to the fire at one of our New Jersey authentication centers, net of estimated insurance recoveries. See "Note 11 - Commitments and Contingencies" in the notes to the unaudited financial statements for disclosure regarding the event. One time expenses for the six months ended June 30, 2023 consists of retention bonuses for certain executives incurred in connection with our founder's resignation on June 6, 2022.
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Cover
Aug. 06, 2024
Cover [Abstract]  
Document Type 8-K
Document Period End Date Aug. 06, 2024
Entity Registrant Name TheRealReal, Inc.
Entity Central Index Key 0001573221
Amendment Flag false
Entity Incorporation, State or Country Code DE
Entity File Number 001-38953
Entity Tax Identification Number 45-1234222
Entity Address, Address Line One 55 Francisco Street
Entity Address, Address Line Two Suite 150
Entity Address, City or Town San Francisco
Entity Address, State or Province CA
Entity Address, Postal Zip Code 94133
City Area Code 855
Local Phone Number 435-5893
Written Communications false
Soliciting Material false
Pre-commencement Tender Offer false
Pre-commencement Issuer Tender Offer false
Title of 12(b) Security Common stock, $0.00001 par value
Trading Symbol REAL
Security Exchange Name NASDAQ
Entity Emerging Growth Company false
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