The RealReal(REAL) - 2023 Q4 - Annual Results

Financial Highlights and Business Update The company achieved significant profitability milestones in Q4 2023, including positive Adjusted EBITDA and free cash flow, and improved full-year financial performance despite revenue declines, further strengthening its capital structure through strategic debt exchanges Fourth Quarter 2023 Financial Highlights The company achieved positive Adjusted EBITDA and free cash flow in Q4 2023, significantly improving profitability despite a 9% GMV and 10% revenue decrease - The company achieved positive Adjusted EBITDA and positive free cash flow for the first time since its IPO in 2019, driven by a strategic shift to focus on the consignment business[2] Q4 2023 Financial Performance vs. Q4 2022 | Metric | Q4 2023 | Q4 2022 | Change | | :--- | :--- | :--- | :--- | | GMV | $451 million | $493 million | -9% | | Total Revenue | $143 million | $160 million | -10% | | Net Loss | $22 million | $39 million | +$17M | | Adjusted EBITDA | $1.4 million | $(20.2) million | +$21.6M | | GAAP Net Loss per Share | $(0.21) | $(0.39) | Improved | | Non-GAAP Net Loss per Share | $(0.07) | $(0.29) | Improved | - Key operating metrics showed mixed results in Q4 2023 compared to the prior year period: Trailing 12-months active buyers decreased by 8% to 922,000, and orders decreased by 17% to 826,000. However, Average Order Value (AOV) increased by 10% to $545[6][13] Full Year 2023 Financial Highlights Full-year 2023 saw a 9% revenue and 5% GMV decrease, yet the company significantly improved profitability, reducing net loss and halving its Adjusted EBITDA loss Full Year 2023 Financial Performance vs. Full Year 2022 | Metric | Full Year 2023 | Full Year 2022 | Change | | :--- | :--- | :--- | :--- | | GMV | $1.73 billion | $1.81 billion (approx) | -5% | | Total Revenue | $549 million | $603 million | -9% | | Net Loss | $168 million | $196 million | +$28M | | Adjusted EBITDA | $(55.2) million | $(112.4) million | +$57.2M | | GAAP Net Loss per Share | $(1.65) | $(2.05) | Improved | | Non-GAAP Net Loss per Share | $(0.87) | $(1.53) | Improved | - The company ended 2023 with cash, cash equivalents, and restricted cash totaling $191 million[13] Debt Exchange Transactions Strategic debt exchange transactions reduced total indebtedness by over $17 million and extended 2025 maturities to 2029, enhancing capital structure flexibility - The company exchanged a portion of its 3.00% Convertible Senior Notes due 2025 and 1.00% Convertible Senior Notes due 2028[3] - The exchange was for $135 million of new 4.25%/8.75% PIK/Cash Senior Secured Notes due 2029 and warrants to purchase up to 7,894,737 shares of common stock[3] - The transactions resulted in a reduction of total debt by more than $17 million and extended a significant portion of 2025 maturities, creating substantial runway and capital structure flexibility[3][5] Financial Guidance The company issued Q1 and full-year 2024 guidance, projecting GMV and revenue ranges, with Adjusted EBITDA expected to approach breakeven or profitability Q1 and Full Year 2024 Guidance The company provided Q1 and full-year 2024 guidance, projecting GMV between $415M-$445M for Q1 and $1.80B-$1.88B for full year, with Adjusted EBITDA nearing breakeven Q1 and Full Year 2024 Guidance | Metric | Q1 2024 Guidance | Full Year 2024 Guidance | | :--- | :--- | :--- | | GMV | $415M - $445M | $1.80B - $1.88B | | Total Revenue | $135M - $145M | $580M - $605M | | Adjusted EBITDA | $(8)M - $(4)M | $(8)M - $8M | - The company has not reconciled its forward-looking Adjusted EBITDA guidance to the most comparable GAAP measure, net income (loss), due to the inability to predict certain components with reasonable certainty[9] Consolidated Financial Statements This section presents the company's consolidated financial statements, detailing revenue and profitability trends, balance sheet changes, and cash flow activities for the period Statements of Operations Full-year 2023 total revenue decreased to $549.3 million, yet gross profit increased to $376.3 million, and net loss improved to $(168.5) million Full Year Income Statement Highlights (in thousands) | Line Item | 2023 | 2022 | | :--- | :--- | :--- | | Total Revenue | $549,304 | $603,493 | | Gross Profit | $376,278 | $348,691 | | Loss from Operations | $(166,293) | $(189,163) | | Net Loss | $(168,472) | $(196,445) | | Net Loss per Share | $(1.65) | $(2.05) | - Consignment revenue, the core business, grew from $385.0M in 2022 to $415.6M in 2023, while direct revenue was more than halved, falling from $158.7M to $79.2M[25] Balance Sheets As of December 31, 2023, total assets decreased to $446.9 million, total liabilities decreased to $750.2 million, and stockholders' deficit increased to $(303.3) million Balance Sheet Highlights (in thousands) | Line Item | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Cash and cash equivalents | $175,709 | $293,793 | | Total Assets | $446,923 | $615,641 | | Total Liabilities | $750,222 | $785,733 | | Total Stockholders' Deficit | $(303,299) | $(170,092) | Statements of Cash Flows Full-year 2023 net cash used in operating activities improved to $(61.3) million, resulting in a $103.2 million net decrease in cash, ending at $190.6 million Full Year Cash Flow Highlights (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(61,268) | $(91,557) | | Net cash used in investing activities | $(42,128) | $(36,922) | | Net cash provided by financing activities | $226 | $4,101 | | Net decrease in cash | $(103,170) | $(124,378) | | Cash at end of period | $190,623 | $293,793 | Non-GAAP Financial Measures and Reconciliations This section provides reconciliations of GAAP net loss to non-GAAP measures, including Adjusted EBITDA, non-GAAP net loss, and free cash flow, highlighting key adjustments and performance improvements Reconciliation of Net Loss to Adjusted EBITDA This section reconciles GAAP Net Loss to Adjusted EBITDA, showing a positive $1.4 million Adjusted EBITDA in Q4 2023 and a significant full-year improvement to $(55.2) million Adjusted EBITDA Reconciliation Highlights (in thousands) | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Loss | $(21,693) | $(38,610) | $(168,472) | $(196,445) | | Adjusted EBITDA | $1,442 | $(20,174) | $(55,169) | $(112,454) | Reconciliation of GAAP Net Loss to Non-GAAP Net Loss This table reconciles GAAP Net Loss to Non-GAAP Net Loss, showing a Q4 2023 Non-GAAP net loss of $(7.3) million and a full-year improvement to $(88.8) million Non-GAAP Net Loss Reconciliation (in thousands, except per share data) | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | GAAP Net Loss | $(21,693) | $(38,610) | $(168,472) | $(196,445) | | Non-GAAP Net Loss | $(7,318) | $(28,177) | $(88,760) | $(147,233) | | Non-GAAP Net Loss per Share | $(0.07) | $(0.29) | $(0.87) | $(1.53) | Reconciliation of Net Cash Used in Operating Activities to Free Cash Flow The company achieved positive free cash flow of $3.8 million in Q4 2023, a significant turnaround, and improved full-year free cash flow to $(103.4) million Free Cash Flow Reconciliation (in thousands) | Metric | Q4 2023 | Q4 2022 | FY 2023 | FY 2022 | | :--- | :--- | :--- | :--- | :--- | | Net cash from (used in) operating activities | $10,523 | $3,698 | $(61,268) | $(91,557) | | Free Cash Flow | $3,793 | $(6,969) | $(103,396) | $(128,479) | Key Financial and Operating Metrics This section presents a quarterly breakdown of key financial and operating metrics, including GMV, orders, active buyers, AOV, and Take Rate Quarterly Key Metrics This section details quarterly operating metrics, showing Q4 2023 GMV at $450.7 million, AOV increasing to $545, and Take Rate improving to 37.7%, despite a decline in active buyers Key Metrics Comparison: Q4 2023 vs Q4 2022 | Metric | Q4 2023 | Q4 2022 | | :--- | :--- | :--- | | GMV (in thousands) | $450,668 | $492,955 | | Number of Orders (in thousands) | 826 | 993 | | Active Buyers (in thousands) | 922 | 998 | | AOV | $545 | $496 | | Take Rate | 37.7% | 35.7% |