The RealReal, Inc. (NASDAQ:REAL) Q1 2020 Earnings Conference Call May 6, 2020 5:00 PM ET Company Participants Paul Bieber - Head of Investor Relations Julie Wainwright - Founder, Chairperson and Chief Executive Officer Matt Gustke - Chief Financial Officer Conference Call Participants Justin Post - Bank of America Merrill Lynch Oliver Chen - Cowen and Company Michael Binetti - Credit Suisse Abigail Zvejnieks - KeyBanc Capital Markets Inc. Aaron Kessler - Raymond James & Associates, Inc. Irwin Boruchow - Wel ...

Financial Performance - The company's GMV for the three months ended March 31, 2020, was $257.6 million, representing a 15% growth compared to $224.1 million in the same period of 2019[129]. - Total revenue for the same period was $78.2 million, an 11% increase from $70.6 million year-over-year[129]. - Gross profit for the three months ended March 31, 2020, was $49.2 million, reflecting a 16% growth from $42.4 million in the prior year[129]. - Total revenue for the three months ended March 31, 2020, was $78.2 million, an increase of $7.7 million, or 11%, compared to $70.6 million for the same period in 2019[159]. - Consignment and service revenue increased by $9.7 million, or 17%, driven by a 32% increase in active buyers and a GMV growth exceeding 30% in January and February 2020[160]. - Direct revenue decreased by $2.1 million, or 14%, due to COVID-19 impacts and a lower mix of sales of owned items[162]. - Adjusted EBITDA for the three months ended March 31, 2020, was a loss of $30.9 million, compared to a loss of $18.5 million for the same period in 2019[152]. Active Buyer Growth - The active buyer base grew to over 16.5 million members as of March 31, 2020, with 602 active buyers in the latest quarter compared to 456 in the same quarter of 2019[128][144]. - The percentage of GMV from repeat consignors remained stable at 82% for both Q1 2020 and Q1 2019[138]. Expenses and Cost Management - Marketing expenses increased by $1.2 million, or 10%, to $12.9 million, maintaining 17% of total revenue[165]. - Operations and technology expenses rose by $9.1 million, or 29%, to $40.7 million, increasing as a percentage of revenue from 45% to 52%[167][168]. - Selling, general and administrative expenses increased by $12.8 million, or 57%, to $35.1 million, with a percentage of revenue rising from 32% to 45%[169][170]. - The company has implemented cost-saving measures including reducing marketing investments and instituting a hiring freeze to preserve liquidity[175]. Cash Flow and Liquidity - As of March 31, 2020, the company had unrestricted cash and short-term investments of $303.3 million and an accumulated deficit of $392.8 million[174]. - Net cash used in operating activities for Q1 2020 was $55.0 million, compared to $22.6 million in Q1 2019, reflecting a net loss of $38.3 million[180][181]. - Cash provided by investing activities in Q1 2020 was $32.8 million, significantly higher than $7.4 million in Q1 2019, driven by $114.0 million from short-term investments[182][183]. - Cash provided by financing activities in Q1 2020 was $2.4 million, a decrease from $69.7 million in Q1 2019, primarily due to reduced stock issuance[184][185]. - The company anticipates that existing cash and cash equivalents will be sufficient to meet working capital and capital expenditure needs for at least the next 12 months[175]. Future Outlook and Challenges - The company expects the COVID-19 pandemic to have a materially adverse impact on its business operations and results for at least the remainder of 2020[132]. - The company plans to continue investing in technology and physical infrastructure to support future growth despite the challenges posed by COVID-19[141]. - The company expects operations and technology expenses to increase over the long term to support growth, including investments in automation and technology improvements[156]. - Operating losses and negative cash flows from operations are expected to continue due to COVID-19 challenges and expansion investments[175]. - The company may seek additional equity or debt financing to support future capital requirements, depending on revenue growth and investment timing[176]. Debt and Financing - The company has no outstanding term loans as of March 31, 2020, following the full repayment of its term loans[188][189]. - Interest income increased by $0.9 million, or 218%, due to higher cash and investment balances associated with IPO proceeds[171]. Market Conditions - The company does not believe inflation has had a material effect on its business, but acknowledges potential risks if costs rise significantly[200].

TheRealReal Investor Presentation May 2020 Safe Harbor 1 This presentation 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," "believe," "estimate," "predict," "intend," "potential," "continu ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For The Transition Period From To Commission File Number 001-38953 The RealReal, Inc. (Exact name of Registrant as specified in its Charter) | Delaware | 45-1234222 | | --- | --- | | (State or o ...

The RealReal INVESTOR PRESENTATION February 2020 Safe Harbor This presentation and the accompanying oral presentation contain forward-looking statements. These statements may relate to, but are not limited to, expectations of future results of operations or financial performance of The RealReal, certain of our key financial and operating metrics, capital expenditures, plans for growth and future operations, and technological capabilities, as well as assumptions relating to the foregoing. Forward-looking sta ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2019 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____ to ____ Commission File Number: 001-38953 The RealReal, Inc. (Exact Name of Registrant as Specified in its Charter) Delaware 45-1234222 ( State or othe ...

[PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents The RealReal, Inc.'s unaudited condensed financial statements for Q2 2019 and year-to-date, covering balance sheets, operations, comprehensive loss, equity changes, cash flows, and notes on IPO, debt, and legal matters [Condensed Financial Statements](index=5&type=section&id=Condensed%20Financial%20Statements) The financial statements reveal strong revenue growth alongside widening net losses, with Q2 2019 revenue up **51%** to **$71.0 million** and net loss expanding to **$26.9 million** Balance Sheet Highlights | Financial Metric | June 30, 2019 | December 31, 2018 | | :--- | :--- | :--- | | Total Current Assets | $99.4M | $89.1M | | Total Assets | $158.1M | $135.4M | | Total Liabilities | $96.9M | $98.9M | | Total Stockholders' Deficit | ($306.1M) | ($257.7M) | Key Financial Performance (Three Months Ended June 30) | Metric (Three Months Ended June 30) | 2019 | 2018 | | :--- | :--- | :--- | | Total Revenue | $71.0M | $47.0M | | Gross Profit | $46.1M | $30.8M | | Loss from Operations | ($25.3M) | ($15.9M) | | Net Loss | ($26.9M) | ($17.6M) | | Net Loss Per Share | ($2.83) | ($2.28) | Cash Flow Summary (Six Months Ended June 30) | Cash Flow (Six Months Ended June 30) | 2019 | 2018 | | :--- | :--- | :--- | | Net cash used in operating activities | ($46.2M) | ($28.7M) | | Net cash (used in) provided by investing activities | ($0.2M) | $6.0M | | Net cash provided by financing activities | $65.7M | $98.9M | [Notes to Unaudited Condensed Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Financial%20Statements) The notes detail significant accounting policies, the post-period IPO raising **$320.9 million**, debt repayment, lease commitments totaling **$128.8 million**, and a material legal contingency with Chanel, Inc - The company completed its IPO on July 2, 2019, after the quarter end, selling **17,250,000 shares** of common stock and receiving aggregate net proceeds of **$320.9 million**[37](index=37&type=chunk)[39](index=39&type=chunk) - Consignment revenue is reported on a net basis, representing the company's percentage of proceeds ('take rate'), as it acts as an agent. Direct revenue from company-owned inventory is reported on a gross basis[48](index=48&type=chunk)[53](index=53&type=chunk) - On July 26, 2019, following the IPO, the company fully repaid the outstanding principal of its Term Loans, amounting to **$6.5 million**[93](index=93&type=chunk)[119](index=119&type=chunk) - Chanel, Inc. filed a lawsuit in November 2018 alleging that the company sold counterfeit goods and made false representations about its authentication process. The company intends to defend itself vigorously, but the outcome is uncertain[114](index=114&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A)](index=25&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2019 financial performance, highlighting **51%** revenue growth driven by **40%** GMV increase, alongside widening operating losses due to scaling investments [Key Financial and Operating Metrics](index=27&type=section&id=Key%20Financial%20and%20Operating%20Metrics) Q2 2019 saw strong growth in key metrics, with GMV up **40%** to **$228.5 million**, active buyers increasing **40%** to **492,000**, and an improved take rate of **36.6%** Key Operating Metrics (Three Months Ended June 30) | Metric (Three Months Ended June 30) | 2019 | 2018 | | :--- | :--- | :--- | | GMV | $228.5M | $163.0M | | Number of Orders (in thousands) | 505 | 359 | | Take Rate | 36.6% | 35.5% | | Active Buyers (in thousands) | 492 | 352 | | AOV | $453 | $453 | - Growth is supported by strong repeat business, with **81% of GMV** from repeat consignors and **83% from repeat buyers** in Q2 2019[130](index=130&type=chunk)[131](index=131&type=chunk) - Adjusted EBITDA, a non-GAAP measure, was a loss of **$20.9 million** for Q2 2019, compared to a loss of **$13.1 million** in Q2 2018[144](index=144&type=chunk) [Results of Operations](index=30&type=section&id=Results%20of%20Operations) Q2 2019 total revenue grew **51%** to **$71.0 million**, but operating expenses increased **53%** to **$71.4 million**, resulting in a wider operating loss of **$25.3 million** - Consignment and service revenue increased by **44%** in Q2 2019, driven by GMV growth and an improved take rate[154](index=154&type=chunk) - Direct revenue grew **114%** in Q2 2019 due to a higher volume of returns received after consignor payment, which are then sold as company-owned inventory[155](index=155&type=chunk) - Marketing expense increased **26%** but decreased as a percentage of revenue from **20% to 17%**, showing improved efficiency[158](index=158&type=chunk) - SG&A expense increased **76%** due to higher headcount in sales and administrative functions, increased stock compensation, and higher legal and consulting fees in preparation for being a public company[161](index=161&type=chunk) [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) As of June 30, 2019, the company had **$66.7 million** in cash, significantly bolstered by **$320.9 million** IPO proceeds, which will fund operations despite historical negative cash flows - The company received net proceeds of **$320.9 million** from its IPO on July 2, 2019, significantly strengthening its balance sheet[167](index=167&type=chunk) - Net cash used in operating activities was **$46.2 million** for the six months ended June 30, 2019, an increase from **$28.7 million** in the prior year period, reflecting investments in growth[172](index=172&type=chunk) - The company fully repaid its outstanding Term Loans of **$6.5 million** on July 26, 2019[181](index=181&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=35&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate fluctuations on its **$66.7 million** cash and investments, with a **10%** rate change not expected to materially impact financial results - The main market risk is interest rate risk on the company's **$66.7 million** portfolio of cash, cash equivalents, and short-term investments[195](index=195&type=chunk) - A hypothetical **10% change** in interest rates is not expected to materially impact financial results[195](index=195&type=chunk) [Item 4. Controls and Procedures](index=36&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2019, with no material changes to internal control over financial reporting identified - Management concluded that disclosure controls and procedures were effective as of the end of the reporting period[197](index=197&type=chunk) - No material changes to internal control over financial reporting were identified during the quarter[198](index=198&type=chunk) [PART II. OTHER INFORMATION](index=37&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in a lawsuit filed by Chanel, Inc. in November 2018, alleging trademark and advertising issues related to counterfeit goods and authentication claims - Chanel, Inc. filed a lawsuit against the company in November 2018, alleging trademark and advertising-related claims[202](index=202&type=chunk) - The core allegations from Chanel are that the company misrepresented counterfeit products as authentic and that only Chanel can properly authenticate its secondhand goods[202](index=202&type=chunk) [Item 1A. Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) This section outlines key risks including the need to attract consignors, the critical authentication process, historical net losses, intense competition, operational scaling challenges, potential litigation, and data security vulnerabilities [Business and Operational Risks](index=37&type=section&id=Business%20and%20Operational%20Risks) Operational success depends on securing luxury goods supply and accurate authentication, with risks including historical net losses, reliance on discretionary spending, competition, and scaling complex logistics - The business's success is contingent on its ability to attract and retain consignors to provide a sufficient supply of pre-owned luxury goods[205](index=205&type=chunk) - The company has a history of net losses, including **$50.1 million** in the first six months of 2019, and may not achieve or maintain profitability in the future[209](index=209&type=chunk) - Failure to accurately authenticate items and prevent the sale of counterfeit goods could severely damage the company's reputation and lead to liability[217](index=217&type=chunk) [Legal, Regulatory, and Financial Risks](index=42&type=section&id=Legal%2C%20Regulatory%2C%20and%20Financial%20Risks) The company faces significant legal risks from the Chanel lawsuit, complex regulations for secondhand goods and data privacy, and financial risks from tax law changes and NOL carryforward limitations - The company is party to a lawsuit with Chanel, which alleges trademark infringement and misrepresentation regarding the company's authentication process[221](index=221&type=chunk) - The business is subject to numerous laws governing the sale of secondhand goods and data privacy (e.g., CCPA, GDPR), and failure to comply could result in fines and penalties[238](index=238&type=chunk)[247](index=247&type=chunk) - The Supreme Court's *Wayfair* decision may require the company to collect sales tax in more jurisdictions, creating administrative burdens and potential liabilities for past and future sales[264](index=264&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=56&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details unregistered equity sales, including **10.18 million** Series H preferred shares for **$70.0 million**, and the use of **$320.9 million** IPO net proceeds for debt repayment and general corporate purposes - In March 2019, the company sold an aggregate of **10,182,111 shares** of its Series H preferred stock for an aggregate purchase price of **$70.0 million**[289](index=289&type=chunk) - The company's IPO on July 2, 2019 raised approximately **$320.9 million** in net proceeds after underwriting discounts and commissions[292](index=292&type=chunk) - A portion of the IPO proceeds was used to repay **$6.5 million** in debt, with the remainder allocated to general corporate purposes, working capital, and funding The RealReal Foundation[293](index=293&type=chunk)