The RealReal, Inc. (REAL) 7 Nov 232023 Q3 Earnings call transcript

Good day, and thank you for standing by. Welcome to The RealReal Q3 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would like to introduce your host for today's call, Caitlin Howe, SVP of Finance. Please go ahead.

operator. you, Thank

Financial to September today Koryl, results the and for and Joining XXXX, discuss our ended Chief Levesque, Rati XX, Operating John Robert Chief period Julian. Chief me Officer; our Officer, Executive President Officer;

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

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

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

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

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

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

and the Today, Thanks, EBITDA high Caitlin, earnings QX financial end of and GMV the our of quarter guidance exceeded midpoint XXXX. third results range. guidance adjusted the exceeded our call. Revenue reported we and of range welcome to our for

company's best improvement largely of year. third was The we late and XXXX. update the made consignor of by in last driven in our XXXX EBITDA adjusted the our quarter financial was IPO The quarter performance commission structure

decision direct improvements Our operational revenue reduce to efficiency. continued strategic and in

November do rate consignor in a our of things. us This of overhauled we card recall, you couple change XXXX. If helped to

our contribution item. reduced lower-priced which turn improved variable able our costs limit were and per to items, we First, margin in

and increased take remaining portion rate. of items our items, mid-value we the our Second, the lower on value

we driven higher our result shifted few impact of limited business has that and change purposely of the course the flowing QX gross P&L. while past direct significantly revenue consignment can see was of by which revenue, mix the this XX%, our You over The the we grew quarters in margins. through dramatically

combined a Finally, processes. in average profit the year. deliver inventory rate, compared value, adjusted to variable company-owned results order delivered authentication through costs, reduced gross these our team margin operations to centers a efficiencies improved higher EBITDA prior significantly higher improved lower dollars, gross our actions In QX, and higher

we the to significant past together work this tactics, team Over fantastic put I few of and changes seeing they made in have business proud we more strategy financial couldn't our the year. and changes quarters, the are operational have these our this and be benefits results. for throughout of

end down CFO announced his Robert we from when position. the as September, Julian at that CFO role or step a will In the of new assumes January

future be pleased last his is earnings well the underway. As I this wish I best thank Robert's business in want the for for his to a to many will result, likely report that personally him contributions call. and to the am search Robert endeavors. replacement

Looking continue to deliver are positive EBITDA on we a track forward, on year XXXX. we full adjusted basis in project that to

Overall, the portion shift I'm delivering in business. excited business is progress strategic summary, In results. refocus the our significant our higher-margin our of to of about trajectory on consignment

positioned well business continue consignment leader resale. luxury market-making capitalize to are We be to on model the as we in our

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

Altschwager Instructions] from Instructions]. Our question from comes first Mark [Operator Baird. [Operator

from And BTIG. our comes from next Fong question Marvin

drilling revenue just give new the just an update could Maybe guess I'd so us -- like start you a deeper. little I just bit to Great with maybe streams. on

increasing those example, initiatives tested advancing believe things like some this quarter, of So for past like and traffic that. you I

terms maybe maybe things could update the of and So of where just strategy. give partnership in you kind on a an us stand advertising

lot as of in launch return we We're the with did launched was results of insurance July, in perspective, did have still advertising to It's And any all QX, one. for thanks that really, warranty, experimentation. I'll both a start yet not well. an whatsoever. we for Marvin, more Yes. in we QX looking question. those. and material From QX we towards

referred we or launch make is planned That conversations as in inventory. impact then not actually to past And virtual any XXXX. until what to material

if it, is to want from all our So business a is getting business XXX% story that at and that you about strength. where really look building of we core core in position and it this our be

all think, the as was down also was and And looks guys I follow-up. made in a reflection little a just a sequentially maybe it quite up bit, though ops bit. orders, tech improvements Terrific. I like costs mean you of even

you're cost it a processing like sounds at lower orders So per order.

of just little your can is down whatnot? that of you there? should cost terms we of there kind kind do you in achieved of there more further? Just could mean, that about having or into think bit objectives a you to automation drill I kind Or

and Marvin, our this We've so in tech. seen lot in you're invested seeing technology automation is operations, Robert. and results. our considerable one. very efficiency productivity have and in and you're in take it new I'll that right, And including on, a we

a improvement. if always driving huge for at. right. range, the in that X% and for X% and looking past improvement We've don't the productivity But sort reasonable be another function always there's continuous efficiency. to of step know about you're that talked of We're I we're we'll of productivity spirit from in where is

efficiency investments productivity, good the and made. We we've seen we've seen the have of and results

next . Okay. on your endeavor. Great. good And luck

question from .= And Baird. our from Altschwager comes next Mark

Can you right? all hear me

Sure can.

wishes best Robert, And Wonderful. you. . to

. Mark. Thanks,

flat X% that and slowing down. quarters metric So to ask quarter, a know positive resale the I close up isn't growth buyer about is that been evidence this that in decelerate perhaps as active recent has I wanted that cited buyer year-over-year. to think did I or

elaborate behavior you So I couple any guess a you're trends? seeing? changes One, in And the buyer are on things. of you surprised that maybe can by

that the happening you're of any two, you how achieve, the planning XXXX of shifts And are profitability regarding implications given and to expect there? some level

pass first Mark, the and going take Yes. I'll along. the to I'm answer, it part of

active far see did are but So deceleration, a buyers was as it expected. we also concerned, as meaningful

our remember, those the half those So and we purposely . unprofitable kind the units. we're and growth decelerating shrinking XXXX, in categories of changes made back unprofitable of

So $XXX and those a of category. items that under of volume and lot some

again, driven it low that out we of buyers shrink expected and would was our that active again, value. So

Mark other and thing -- the this Caitlin. is

up The right? the versus other members, other we business is $X thing is last so at, the that of would just quarter. that just one add look the million of I metrics new that was again, And health

still feel we And so have we momentum the good, like business. in

active that something buyers And was so did the expect the Rati we in piece as near mentioned, term.

being that of adjusted XXXX. for about just on to the our how we at I expectations EBITDA your positive continue question reiterate might end things XXXX, impact all ask did you track Mark, And And would in we're considered. that very that to say

far Calin's buyer. And at of as of just add a What more forth. health of the the how and the they Mid the so value Yes. at looking we to spending? those look on business metrics There's and high far as at? to are point, there we're as they much buyers, that, health the quality little looking as can to are other

in QX during if was Okay. redialing a that, held And the sales are the the outlook, apologies was guide, prior missed just you as and the regarding the bit I quick below first implied essentially GMV EBITDA in what while outlook. a question. But follow-up, and I

that efficiencies just mix more EBITDA, a factors? terms much is could cost other shifts some you bit hoping Was and revenue of unpack finding versus in of how or any unchanged that the incremental you're in

of I that. just take this today. geopolitically would the there is in with lot uncertainty QX, on And for guide And a certain Robert. amount I'll a there's economy. Mark, going that markets our the say globally, is

or other backtracking little say, taking nothing being or in cautious, in just for be that all a anything account. see I a But some prudent we'll kind expected might progress. else QX would of any be we're that so all just, to negative trying uncertainty taking our that prudent in and of of . There's into how into that again, things bit And in bit than just change indicates results and little account. trend

the seen in QX. that our and are saw improved continue. largely and QX you they're our things in have to structural results you've expected what But results in of

nothing gleaned And in hit QX QX progression so nothing going terms to in you results of from terms or of the that there's to be QX.

And our next Fargo. Ike question from Boruchow Wells comes from

you the high should year. I use? the X gross you XXs rate run months you said to improved for quick questions Is the that that kind of gross now margin above efficiencies XX%, there's Congrats you've couple on but quarter, and the this Is we of to great could got me. business know margins a some get seasonality, that A there. the -- see. that's ago, I in think the exiting thought up

Just should margin kind quarter? the fourth of curious how about gross think we in

there's guys the question kind And is, EBITDA that it's us APIs, next underpinning just understand adjusted to profitable that helpful that margin? of then by my kind if us what's continue Or gross you year. AOV of just any whether give underpin that, second to anything or of can help reiteration another be reiterate. assumption you

I'll is take this Ike, Robert. that.

so made Regarding changes largely and the structural back in that we structural mentioned had rate I as the we a November, gross margin change are change. card earlier, in that QX,

improved revenue eliminating that our shift our much direct and business, of lower permanent gross reiterated proportion margin. coming and have to a total We is a the which improved of mix direct out

inventory QX owned beginning that of a that to pretty inventory, were the in work direct we down margin quarters And trying as the of were direct to a within the -- as we old we seen return our also business discounting rid some had We've inventory the doing direct inventory. improving. significant some through of work and get

And business, negative had And and to more the return is that's positive or X where quarters seen to and what we gross margin normal we structural. you've for direct reported had margin. return also a even a some

and in bit [indiscernible] normal. and you I that maybe I new this our and and a to within it's margin maybe level. see coy of little I X gross direct gross handle the fact, think But category, as idea, this And terms I -- is gross that the low this the about a of you that from So in potential was think of in improvement can see margin. the gross continue kind margin for in range improvement And bit expect little around margin actually scare of of margin. gross of we level and something margin we little model can XXs a largely a bit in may

terms I to the introduced what the couldn't can your think that it deliver that our potential said with I core seen low we've what agree you so as basically, Robert. double-digit Ike, gross add somewhere from inventory virtual XX% then with margin that we've are us and in more, we we revenue add do that growth, XXXX okay, say, so also streams, core complements business can on where you've that around make well, question, you And of relates and take efficiencies new business very is commitment. you the the that to and growth. with that's and progress pleased

comes question next Securities. our Nikic And from from Tom Wedbush

initiative? the now benefits do you from the the it, pretty guess, Are further you fruit to going low-hanging kind improvement think I continue that Do we of [indiscernible] now. model, continue is mix you'll So you to made Or changes? the the items? lapping we're Like our think changes then higher? see continuing lapped that to picked you'll you we've of to see much kind see Rate of and come low-value it move from lower to

we've Robert. are is we would question question. this I'm say that now lapping your And thing One not I that that sure Thanks made. in the the this that's is accurate. quite Tom, changes for idea embedded

some there you year, do from big we've going to of is a QX made, have XXXX of think QX If comparison that about pretty still the I and year-over-year changes change. to even is think this

we've the revenue made few X. fully for card last either. lapped commission the been revenue of pretty rate that not as down November percentage We but on quarters, of working direct change, structure the consistently a And our

that talked there's we that made, changes to that beginning has think really year, the very proven about the And do half of still I of this second accurate. impact improvement. be so to going true And at And we the XXXX. and see you're have

a still going impact year-over-year And so some on XXXX of basis half XXXX. first the into has

things we I So rollover of effect full results, -- QX expect what reflected we getting in effect you call improvement in with year and the and a the that some XXXX that in XXXX the should will QX. of come would made did

we've made lapping of a impact of the So terms the business in little to to go there's the still ways changes entire model.

Yruma And question comes Piper . next from from our Edward Sandler.

fewer you facilities, through a as the now any authentication pushing of as are then result a of first, And units dis-efficiencies just seeing that? kind follow-up, on guess, I you're the back you observing were in about Or commentary, spend holiday simply quarter-to-date, softer the trends macro concern actually guidance lots it the of overall? press and just which revision? is stuff drove just that

other the been to one reduce maybe there holiday you know that out-of-policy post kind then follow-up. And returns changes historically, of numbers any the return direct Have have policies? season? I

can Right. there. start I Ed.

So I'll not at start seeing question returns your easy an one. because policy last this Out of time. first. We're there any with changes that's

to So as past seen we've flat what numbers far the pretty go. historic in as

of talking I'm are lot earlier, and was operations coming seeing of the mentioned to question our and efficiencies. we less less on and not investments, because lot you The units like No, around that's first in efficiencies. their accelerating OpEx, what a specifically a and are we operations, did efficiencies about, less Robert seeing

talk carrier transportation, you've diversification. So heard us about

into that that sure coming each inventory adding All through also of control, getting is coming tighter efficiencies. item process, we're fruition, making the about

making bit things the a just tighter So process. throughout little

about feel of mix as prudent far we're I'll it's then with the on behavior. Robert add direction we've as of as far on investments. the good far impact So a the macro as had in, and the And and and so kind bit we as there that piece, our Koryl guidance, a buyer little what seeing as let really

handbags, said product. want we going the good supply-constrained really is a And and We about quite there. I That to solid business. jewelry, we're feeling is were healthy right First good. watches, now. supply of always that and really is all, healthy we're where marquee say consumer fine

is news. that So good

are seeing we Where ready-to-wear. is softness some in

more to So consumer and bit sensitive specific that. it's kind little of category be the we're kind of seeing a answer, a promotion

prudent nothing So that about, guidance. kind we're alarmed to again, think we we're in it's do watching be for right of to that. the And but thing our

precise think I were the made also for honestly, No, some we to we we pullback supply. some changes opportunity, commission like it's the really mid-value. in we When saw Edward, promotions low not we in a a more had to lot real Yes. softness -- volume, running in only us were juice a but

to We're of same was with So solicit to we blunt a actions. now we got a a can in built promotional And a little specific demand. bit specific there. instrument when And more little it that way such the a lot bit personalization we surgical had approach. exact talking we're capability, capabilities personalization, customers about that building the use

business. haven't So about always I've you been a all heard supply-constrained about at much, demand since where talked here us we've being not talk

members pool the price absence Now very a assessing right draw we How our can to are a through see can the certain elements their the to make micro that the where many there have business how is bit but actually And adjust keep more categories going the do certain in those actually a to are we site basis. the lot of have see all and to actually points to we of are promotional, behavior sure We're visiting the good do have people certain have -- see become where we regular transactions, trends and throughput in what right? and prices, at observing a large we to macro news products. do we certain little people on even we together many of pace. from,

consignors what p expect the mean out you're that, to a as you kind mean grid, to follow-up the kind of pay or? payouts? initially obviously, to I does of adjusting not just the Maybe but that

When a year, drive actual we now. This -- to when the to little promotional is had there. having bit had activity be supply earlier more in we promotional the buyer were we on side some more

I'm type So talking get of buy to the a to reinitiate lapsed promotions before. haven't customer, they somebody That's to bought Edward. a about that in category

next Markets. question Capital comes KeyBanc Owens And Ashley from our from

this ask wanted efficiencies? they as about pullback? marketing the did see down some during Or to you Just an quarter. came dollars intentional Was

think color on well. any just would we be how as the then going rate And helpful should about forward

Yes.

for So question. that thank you

but an As of of was efficiencies, the as marketing out intentional areas, far that again, some in efficiencies. driven pullback

out in low able consignors again, we base, segment them mid-value, So really the right and to from our high-value, were target value, customers, areas.

You value heard us soft. about talk mid the that looking supply and was at the how specifically.

So efficiencies those doing the general. marketing is great to find continue to job team a in

. question? there was sorry, part second a I'm

Yes.

Just about how thinking going we the be forward? rate should

I know offer that we continue and to efficiencies. operationalize find --

sales, department, marketing, other operations, . any find it's there. like So, efficiencies we'll to continue whether

Rick our . And comes next from Instructions] question from James. Patel [Operator Raymond

about talk direct direct it on and quarter? the to of you business Can fourth in of assumes XXXX? the what in size the the the revenue . And degree size business right to way the for think guidance GMV see forward? what going And thoughts about any you impacting

take one. Rick, this is Robert. I'll that

to You that will revenue drive There's direct as mentioned of saw down a inventory a that's revenue the total sometimes to was creates low as to There's returns it our in before, be be in found low have business. always direct honest, teens. policy QX And direct business. we percent gotten there direct some and level business. pretty

open watches specific there purchases. do high-demand we We although on, are very may or or or buy to so it's stopped items, have some less to some more Rolex generally, Hermès items, very continue that the handbags whether

around will current level probably there some the direct always to so is getting this teens But the normal. be be in And low revenue. new

is that should similar year. very and to next into going what think expect I something so in also QX And you

well. are on you touched And certain that categories doing

of watches. working? monetize positioned guess, your this how feel categories and you for handbags jewelry, you these supply that how that's demand touch do are I I to think about you're you Can mentioned inventory working? fine on

us dynamic that about news it good we're to supply. comes is The when quite

or Our time. customers talked in retail we've the we sales about have in supply a value. right that of the supply are really need team to does versus bringing the like need we past changed units the merchants at way nice the job looking the at definitely

So that quality, example. team gets that higher-end for, the points for product, sales more

and as inventory are year-over-year again, far at, when sell. far I as look handbags, quite product concerned, mid- as as jewelry, to So watches healthy high-value

as the does in team good end a supply the through the well. of puts So us QX good some feel in about place year,

I would for call I'm questions. . turn no And further John over remarks. closing like showing to Koryl now back the to

you Thank us Thank today. you. joining for

Before take efforts closing to at the mission humbled call, of work a The more out our I us want our team to moment such Thank to daily am are our business our XX that values fulfill our like life to than passionate mission million sustainable. live you professional Thank on your for a of members sustainability, RealReal. thank extend move and with also workforce. luxury you. I make dedicated, of excellence I'd fashion forward. more our and joining and . to thank to the

today's concludes you conference This participating. call. for Thank

now disconnect. may You