The RealReal, Inc. (NASDAQ:REAL) Q1 2024 Earnings Call Transcript May 7, 2024

The RealReal, Inc. misses on earnings expectations. Reported EPS is $-0.2956 EPS, expectations were $-0.14. REAL isn't one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and thank you for standing by. Welcome to the RealReal First Quarter 2024 Financial Results Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [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 at the RealReal. Go ahead, Caitlin.

Caitlin Howe: Thank you, operator. Joining me today to discuss our results for the period ended March 31, 2024, our 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.

John Koryl: Thanks, Caitlin, and welcome to our earnings call. Today, we reported financial results for the first quarter of 2024. Our continued strategic focus on the core consignment business and driving efficiencies is delivering results. In Q1, healthy supply, combined with strong demand, resulted in a return to overall top line growth for the first time in three quarters. These results were fueled by double-digit growth in consignment revenue our most profitable segment. Growth wasn't the only story. In Q1, we also reported our highest ever gross margin rate, which resulted in significantly improved bottom line results, compared to the prior year. Adjusted EBITDA improved by $25 million year-over-year. For Q1, GMV and adjusted EBITDA came in above the high end of our guidance range, and revenue came in at the high end of our guidance range.

The RealReal is starting 2024 with strong momentum in the core business. We continue to refine our approach to sales and marketing, to drive profitable supply. We reoriented our sales team's compensation, to better align incentives with our strategic focus on profitable supply, and we use more targeted marketing spend to attract higher lifetime value consigners. We are focused here for Q2 and the back half of the year. As we transition back into overall growth mode, we are beginning to strategically test new initiatives that we believe are key to growing our core business. We are in the early stages of realizing further efficiencies across our unique marketplace, which encompasses our functional areas of sales, marketing, authentication and operations.

We see opportunities to invest in automation and AI, as we leverage our data to improve client experience and to work profitably - and to profitably scale the business. We project that we are on track to deliver positive adjusted EBITDA, for the full year 2024. Today, we provided Q2, 2024, guidance and updated our full year guidance, with an increase in the midpoint of our full year adjusted EBITDA range. We believe our continued focus on the core consignment business is working. We are growing our consignment revenue, expanding margins delivering exceptional experiences to our consignors, and providing outstanding luxury goods to our buyers. I am very excited about the momentum in our business and believe we will continue to capitalize on our position as a leader in luxury presale.

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

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