Release Date: February 20, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• The RealReal Inc (NASDAQ:REAL) reported a 14% revenue growth in Q4 2024, showcasing strong financial performance.
• The company achieved positive adjusted EBITDA and positive free cash flow for the full year 2024, marking significant financial milestones.
• Consignment revenue increased by 14% for the year, with success in unlocking mid and high-value supply.
• The RealReal Inc (NASDAQ:REAL) improved its gross margin by 600 basis points through optimizing consignment take rates and operational efficiencies.
• The company expanded its smart sales AI initiative, leveraging data to enhance sales team efficiency and customer engagement.

Negative Points

• Direct revenue was down 18% as the company established a better baseline for that business.
• Operating expenses remained flat year over year, indicating potential challenges in cost management.
• The company faces a headwind of approximately 1 point of GMV and revenue growth for Q1 2025 due to the leap year effect.
• Despite improvements, the SG&A expenses remain high, accounting for about 18% of revenue, which is higher than typical retailers.
• The RealReal Inc (NASDAQ:REAL) is still in the early stages of implementing AI-driven initiatives, which may take time to fully realize efficiency gains.

Q & A Highlights

• Warning! GuruFocus has detected 5 Warning Signs with REAL.

Q: Could you provide guidance on operating cash flow and free cash flow for this year, and discuss plans for marketing spend? A: We haven't provided specific guidance on cash flow for 2025, but we are pleased with the results from 2024, where adjusted EBITDA translated to $27 million in operating cash flow and nearly $1 million in free cash flow. Regarding marketing, we are seeing good leverage and plan to continue investing in channels that provide strong ROI, such as social media, to drive growth. Ajay Gal, CFO

Q: How do you expect the relationship between take rate and Average Order Value (AOV) to evolve? A: Our AOV reached a high of $579 in Q4, contributing significantly to GMV growth. The take rate is expected to remain stable as we have completed adjustments to our rate structure. Higher AOVs may lead to a lower effective take rate percentage, but the dollar value of transactions will be higher. Ajay Gal, CFO

Q: What will drive supply growth moving forward, and how significant is the role of retail in acquiring new consigners? A: Supply growth will be driven by a combination of marketing, sales, and retail efforts. We are focusing on attracting mid to high-value consigners. Retail plays a crucial role, with 25% of new consigners coming through our stores, and these consigners typically have higher average selling prices. Rati Lebeck, CEO

Q: Can you elaborate on the efficiency improvements in your sales team and the potential for further productivity gains? A: Our sales team has become 15% more efficient, and we are just beginning to see the benefits of our new compensation structure. Our top sales reps bring in over $10 million annually, and we believe there is potential for further productivity improvements as we focus on quality supply. Rati Lebeck, CEO

Q: How do you plan to leverage AI to improve the consigner experience and drive operational efficiencies? A: We are implementing initiatives like Smart Sales and Athena AI to enhance efficiency and service. Athena AI will improve item processing speed and accuracy, leading to better pricing and reduced time to market. These initiatives will streamline operations and enhance both consigner and buyer experiences. Rati Lebeck, CEO

For the complete transcript of the earnings call, please refer to the full earnings call transcript.