The RealReal(REAL)2024-11-04 21:17Financial Performance - GMV increased by 6% to $433.1 million in Q3 2024 compared to $407.6 million in Q3 2023, and by 4% to $1,325.9 million in the nine months ended September 30, 2024 compared to $1,275.3 million in the same period of 2023[128] - NMV increased by 11% to $335.2 million in Q3 2024 compared to $302.9 million in Q3 2023, and by 7% to $999.4 million in the nine months ended September 30, 2024 compared to $934.6 million in the same period of 2023[128] - Total revenue increased by 11% to $147.8 million in Q3 2024 compared to $133.2 million in Q3 2023, and by 8% to $436.5 million in the nine months ended September 30, 2024 compared to $405.9 million in the same period of 2023[128] - Gross profit increased by 18% to $110.7 million in Q3 2024 compared to $94.1 million in Q3 2023, and by 20% to $325.5 million in the nine months ended September 30, 2024 compared to $270.2 million in the same period of 2023[128] - Adjusted EBITDA for the three months ended September 30, 2024, was $2.3 million, compared to a loss of $7.0 million in the same period in 2023[150] - Net loss for the three months ended September 30, 2024, was $17.9 million, compared to $22.9 million in the same period in 2023[161] - Total gross margin improved by 430 basis points in Q3 2024, driven by higher consignment revenue and improved take rate[172] - Total gross margin increased by 799 basis points in the nine months ended September 30, 2024, driven by the increase in consignment revenue and improvement in take rate[192] - Net cash used in operating activities was $1.1 million for the nine months ended September 30, 2024, compared to $71.8 million for the same period in 2023[210] - Net cash used in investing activities was $16.8 million for the nine months ended September 30, 2024, primarily for purchases of property and equipment and capitalized proprietary software development costs[212] - Net cash used in financing activities was $4.6 million for the nine months ended September 30, 2024, primarily due to payment of debt issuance costs related to the Note Exchange[213] Revenue Breakdown - Consignment revenue for the three months ended September 30, 2024, was $116.9 million, up from $102.9 million in the same period in 2023[161] - Direct revenue for the three months ended September 30, 2024, was $15.6 million, down from $17.4 million in the same period in 2023[161] - Shipping services revenue for the three months ended September 30, 2024, was $15.2 million, up from $13.0 million in the same period in 2023[161] - Consignment revenue increased by $14.1 million, or 14%, to $116.9 million in Q3 2024, driven by a 6% increase in GMV and a higher take rate of 38.6% (up from 38.1%)[164] - Direct revenue decreased by $1.7 million, or 10%, to $15.6 million in Q3 2024 due to reduced vendor-purchased inventory[166] - Shipping services revenue increased by $2.3 million, or 17%, to $15.2 million in Q3 2024, driven by higher order volume and increased shipping fees[167] - Consignment revenue increased by $43.2 million, or 14%, in the nine months ended September 30, 2024, driven by a 4% increase in GMV, a 3% increase in AOV, and a 110 basis point improvement in take rate[183][184] - Direct revenue decreased by $18.1 million, or 29%, in the nine months ended September 30, 2024, primarily due to planned actions to minimize vendor-purchased inventory[185] - Shipping services revenue increased by $5.5 million, or 14%, in the nine months ended September 30, 2024, primarily due to an increase in the standard shipping fee per order[187] Cost and Expense Analysis - Cost of consignment revenue decreased by $0.3 million, or 2%, to $13.3 million in Q3 2024, contributing to a 180 basis point increase in consignment gross margin[168] - Operations and technology expenses increased by $5.2 million, or 8%, to $66.2 million in Q3 2024 due to higher headcount-related compensation[175] - Selling, general and administrative expenses increased by $2.7 million, or 6%, to $47.5 million in Q3 2024, primarily due to higher employee compensation[177] - Marketing expenses remained flat at $11.6 million in Q3 2024, but decreased as a percentage of revenue to 8% from 9%[173][174] - Cost of consignment revenue decreased by $4.0 million, or 9%, in the nine months ended September 30, 2024, driven by reduced overhead costs, leading to a 296 basis point increase in consignment revenue gross margin[188] - Cost of direct revenue decreased by $22.2 million, or 36%, in the nine months ended September 30, 2024, primarily due to the decrease in direct revenue[189] - Marketing expense decreased by $3.8 million, or 9%, in the nine months ended September 30, 2024, primarily due to decreased advertising costs[193] - Restructuring charges decreased by $37.2 million, or 99%, in the nine months ended September 30, 2024, as the company completed real estate and workforce reductions in 2023[198] Membership and Engagement - The company has a global base of more than 37.8 million members as of September 30, 2024[127] - The percentage of GMV from repeat consignors in Q3 2024 was 85%, up from 83% in Q3 2023[131] - As of September 30, 2024, 15% of buyers in the last twelve months had become consignors, and 48% of consignors had become buyers[133] - The company's buyer net promoter score was 51 in 2023, higher than the online shopping industry average of 45[132] - Active buyers are defined as those who purchased goods through the online marketplace, regardless of returns or cancellations, reflecting scale and engagement[146] - The Average Order Value (AOV) is a key driver of operating leverage, reflecting the average price of items sold and the number of items per order[147] Take Rate and Commission Structure - The company's take rate on consigned goods increased to 38.6% in Q3 2024 from 38.1% in Q3 2023, driven by a larger sales mix of higher take rate categories such as women's apparel[126] - The company has cumulatively paid more than $4.6 billion in commissions to consignors through September 30, 2024[128] - The company's take rate structure offers consignors up to 90% commission on watches sold for over $7,500 and 20% commission on items under $100[145] Debt and Financial Obligations - Interest expense increased by $3.3 million, or 123%, for the three months ended September 30, 2024, compared to the same period in 2023, due to the contractual interest expense related to the 2029 Notes issued in February 2024[182] - Interest expense increased by $7.5 million, or 93%, in the nine months ended September 30, 2024 compared to the same period in 2023, primarily due to the contractual interest expense related to the 2029 Notes issued in February 2024[203] - The company issued $135.0 million in aggregate principal amount of 2029 Notes in exchange for $145.8 million of 2025 Notes and $6.5 million of 2028 Notes, extending the average maturity date of its outstanding indebtedness[218] - The 2029 Notes bear interest at a rate of 13.00% per annum, consisting of cash interest at 8.75% and payment-in-kind interest at 4.25%[219] - As of September 30, 2024, the company's cash requirements related to the 2029 Notes were $225.8 million, with $12.2 million expected to be paid within the next 12 months[221] - The company recorded a gain of $4.2 million from the Note Exchange, representing the difference between the carrying amount of the Exchanged Notes and the fair value of the 2029 Notes[223] Cash and Liquidity - As of September 30, 2024, the company had cash and cash equivalents of $153.2 million and an accumulated deficit of $1,185.4 million[204] - The company expects operating losses and negative cash flows from operations to continue in the foreseeable future, but believes its existing cash and cash equivalents will be sufficient to meet working capital and capital expenditure needs for at least the next 12 months[205] Other Financial Items - The company recognized a $0.7 million unrealized gain on warrant liability in Q3 2024, compared to no change in Q3 2023[180] - Interest income decreased by $0.3 million, or 14%, to $1.9 million in Q3 2024 due to lower average cash balances[181] - The fair value of warrant liability increased by $9.2 million, or 100%, in the nine months ended September 30, 2024, due to the issuance of warrants as part of the Note Exchange in February 2024[199]