RealReal Inc (REAL) 2024 Q2 法說會逐字稿

Good day and thank you for standing by.

Welcome to the RealReal second-quarter 2024 financial results conference call.

(Operator Instructions) Please be advised that today's conference is being recorded.

I would now like to hand the conference over to your first speaker today, Caitlin Howe, Senior Vice President of Finance.

Please go ahead.

Thank you, operator.

Joining me today to discuss our results for the period ended June 30, 2024 are Chief Executive Officer, John Koryl; President and Chief Operating Officer, Rati Levesque, and Chief Financial Officer, Ajay Gopal.

Before we begin, I would like to remind you that during today's call, we will make forward-looking statements, which involve known and unknown risks and uncertainties.

Our actual results may differ materially from those suggested in such statements.

You can find more information about these risks, uncertainties, and other factors that could affect our operating results in the company's most recent Form 10-K and subsequent quarterly reports on Form 10-Q.

Today's presentation will also include certain non-GAAP financial measures, both historical and forward looking, for which historical financial measures we have provided reconciliations to the most comparable GAAP measures in our earnings press release.

In addition to the earnings press release, we issued a shareholder letter earlier today, both of which are available on our Investor Relations website.

I would now like to turn the call over to John Koryl, Chief Executive Officer of The RealReal.

Thanks, Caitlin, and welcome to our earnings call.

Today, we reported financial results for Q2 and the first half of 2024.

We delivered another strong quarter with accelerated year-over-year GMV growth and double-digit revenue growth.

Our focus on the consignment business resulted in a 17% year-over-year increase in consignment revenue in the second quarter.

Active buyers on a trailing three-month basis grew 9% compared to the same period in 2023.

In addition to growth, we significantly improved our bottom-line results.

In the second quarter, adjusted EBITDA was negative $1.8 million, an improvement of $21 million and the 11th consecutive quarter of year-over-year improvement in adjusted EBITDA.

In 2024, we returned to top-line growth and the incremental revenue dollars flowed to our bottom line at a high rate.

In the first half of 2024, we grew revenue by $16 million and improved adjusted EBITDA by $46 million compared to the prior year.

We believe this demonstrates the success of our strategic initiatives, highlights the resilience of our business model, and positions us to capitalize on the expanding market for luxury resale.

As I look ahead, we are focused on delivering sustained growth and expanding our margins.

We believe sales, marketing, and stores are the engine powering the next chapter of our profitable growth.

When these three areas work together, our sellers encounter a frictionless multichannel experience.

We will continue to refine our approach and identify attractive markets for new stores.

We also see opportunities to drive incremental growth from new supply channels.

In addition to growth, we are realizing operational efficiencies to drive profitability.

We can leverage our recent advancements in AI, thanks to 13 years' worth of data on 40 million luxury items.

Our approach to continuous improvement and measured investments is paying off.

Today, we provided Q3 2024 guidance and updated our full-year guidance.

We increase the midpoint of our full-year adjusted EBITDA range, and we are now guiding to positive adjusted EBITDA for full-year 2024.

I am truly excited about the momentum in our business.

As the leading marketplace for authenticated luxury goods, we are playing to our strengths.

We remain focused on core business growth, operational excellence, and exceptional service to drive profitability.

With that, let's open the call for questions.

(Operator Instructions) Rick Patel, Raymond James.

Hey, this is [Josh Ruiz] filling in for Rick.

Thanks for taking my question.

I was hoping to get just a bit more color on the guidance.

I understand that quarter over quarter, we're looking at a bit of a decline on GMV, but bottom line is improving.

So I was hoping to just get a bit more clarity on the moving pieces there.

Hi, thanks for the question.

This is Ajay.

There are a couple of things worth highlighting as additional context behind our guidance.

First, let's talk about GMV.

We expect our GMV growth in the second half to accelerate versus our first half.

And this is as we head into the seasonal peak of our business volume in Q4.

To your question, I would characterize our outlook on the second half as being prudent about a potential slowdown in consumer spending.

To be clear, we're only seeing modest pressure today.

We saw some compression in prices driven by a preference towards more discounted products.

This started late in Q2 and has continued into July.

In Q2, our ASP, average selling price, was down 3%.

This was offset by a comparable increase in items per order, which resulted in AOE being flat versus prior year.

So our guidance for the rest of the year reflects a balanced view on how this dynamic is going to play out in the second half of 2024.

Moving to the bottom line, your question on adjusted EBITDA.

I would say our guidance reflects an increased confidence in our ability to deliver a year with positive adjusted EBITDA.

So that's EBITDA above breakeven in 2024.

This confidence stems from our strong performance in the first half.

It also sounds from the resilience of our business model and its ability to mitigate small shifts in consumer spending.

It's worth spending some -- expanding on this theme of resilience.

I'd call out three factors that contribute to this strength.

Firstly, our consignment model.

So this means that we don't share any upside or downside in -- sorry, this means we share any upside or downside in prices with our sellers.

Unlike a retailer, we do not feel the full impact of a change in price.

So that gives us more confidence in the bottom line.

The second thing I would point to is our take rate architecture.

This gives us a built-in buffer when prices go down.

It really helps cover any costs that are independent of price and helps protect our margins.

And finally, I would highlight how we are a full-category luxury marketplace.

And in doing that, we serve a more resilient customer and we offer them a full assortment of products that span a wide range of prices, categories, and brands.

This breadth helps us meet any shifts in consumer demand.

So hopefully, that gives you context for what's behind our guidance in the second half there.

Yeah.

I really appreciate the color.

Best of luck in the second half.

Thank you.

Thanks for the question.

Ashley Owens, KeyBanc Capital Markets.

Hi.

Thanks for taking my question.

It's Chandana Madaka on for Ashley today.

So my question was just about luxury landscape.

There's just a lot of chatter around maybe open space.

I was curious maybe kind of what trends you're noting.

I know you mentioned your thoughts about the customer or maybe a little bit spending slowdown, but maybe any more thoughts around aspirational customer, like what's emerging and working on the platform?

Thank you.

Thank you for the question, this is Rati.

So a couple of different things, I mentioned this last quarter as well.

Saw a little bit more price sensitivity with our consumer or the health of our consumer, but I will say that we were able to make up for in volume.

So what I mean by that is we're a supply constrained business, we brought in more supply, and we're able to sell through that supply.

So again, able to make up for it in volume.

I will also say that our buyers are up 9% year over year.

Active buyers buying jewelry is one of our top-growing categories in Q2 when I look at year-over-year driven out of higher value designers.

So there's a lot of optimism there as well even when we're seeing kind of this price sensitivity.

And like Ajay mentioned, we don't squeeze our margin.

So we can look at our ASP, price to sell.

We share that with the seller in most ways.

So again, feeling mostly okay there and healthy when we look at the consumer because of this kind of green shoots that we're seeing.

We're really pushing the value play of our business, making sure people understand what they're getting and how much it is priced in the primary market.

So educating them on what the value is and what the price was in the primary market.

We will continue to do and really continuing to focus on supply and make sure that that is available for our consumer.

Awesome.

Thank you.

Marvin Fong, BTIG.

Great.

Good evening.

Thanks for taking my questions.

Excuse me.

Just maybe to start with on the guidance, obviously, we cannot draw an inference from what the implied fourth-quarter GMV guidance is.

And it looks like you're guiding at the midpoint to something around 17% up quarter-over-quarter.

And if I just look at the past couple of years, it wasn't as large of a sequential increase.

But certainly, if you go back further in time, you were able to deliver that sequential growth.

So could you just kind of clue us in on your thoughts as you constructed your fourth-quarter guidance as well?

Do you expect it would be kind of a normal seasonal pattern?

Or are you baking in any incremental weakness on the consumer?

Any additional color would be great.

Thanks for the question, Marvin.

Let me start and then I'll invite Rati to weigh in what she's saying.

So we are expecting the usual seasonal pattern usual seasonal pattern of our business going into Q4.

Q3 to Q4, we do see a significant increase.

If you look at our growth rate, the midpoint of our guidance would imply that we expect Q4 to grow 9% year on year.

We see that as good acceleration versus where we are today and versus where we expect to be in Q3.

I think I would add -- I'd invite Rati to add more color to what gives us confidence.

To double down on that, like you mentioned, Ajay, we do see the same seasonal trends in the summer.

We saw it last year, and then we saw Q4 pick up.

We're a Q4 story or H2 back half of the story in many ways and then like many other retailers.

What gives us confidence and somewhat more confidence is the amount of supply that has been coming in that top of the funnel.

And when we look at that right, price point, by consignor growth, by category, again, we're seeing that quite healthy.

So we are in a good place to win in the back half of the year.

Got it.

Great.

And on direct revenue, pretty nice step up quarter over quarter.

Is this in the right level to expect in the coming quarters?

Or should we expect it to fall back more to where it was in the first quarter?

Thanks.

Yeah, I can take that question.

So our direct revenue, we see that staying within the 9% to 10% of total revenue on a go-forward basis.

Q2 was at the high end of that, but still within the range that we would expect it to be.

The point I would make there is we went through a period where we were defocusing on that revenue stream.

We think now it's in a healthy place and it's where you would expect it to be.

I would also draw your attention to the margins, which were a notable improvement versus what we've seen in the past.

The margin rate on a go-forward basis, we would expect it to be in the mid-teens.

We think Q2 was a good starting point for us and really gives us the right foundation for how this business, how this revenue stream is going to perform going forward.

Got it.

Thanks so much, Ajay.

Thanks, everyone.

Thank you.

Thank you.

Thank you.

We are showing no further questions at this time, so I would like to turn it back to John Koryl for closing remarks.

Thank you for joining us today.

Before closing the call, I want to give a sincere thank you to all of our employees for their exceptional execution in 2024 so far.

We also wanted to thank our more than 37 million members as they join us on our mission to extend the life of luxury and make fashion more sustainable.

Thank you.

Thank you, everyone, for participating in today's conference.

This does conclude the program, and you may now disconnect.