The RealReal(US:REAL)2022-02-24 02:30Financial Data and Key Metrics Changes - The company reported solid financial results for Q4 and full year 2021, with continued top-line growth and significant operating expense leverage [6][10] - The gross profit per order was approximately $92 or $93 in 2021, with expectations for continued growth [17][19] - A decline in gross margin of about 550 basis points in Q4 was primarily due to a mix shift towards direct business, which accounted for 31.5% of total revenue compared to just under 19% the previous year [39][40] Business Line Data and Key Metrics Changes - The average selling price (ASP) has been increasing steadily, with the average order size rising from about 1.93 to over 2 units per order [27][28] - The company plans to deemphasize the direct business segment where inventory is purchased for resale, aiming for a decline in direct revenue as a percentage of total revenue [40][51] Market Data and Key Metrics Changes - The luxury resale market is experiencing heightened consumer demand, particularly in categories like handbags and fine jewelry, which are expected to continue growing [10][129] - The company has diversified its regional mix beyond traditional strongholds like New York and LA, with healthy supply across various categories [76] Company Strategy and Development Direction - The company is focused on leveraging technology to improve operational efficiency and unit economics, with plans to achieve profitability on a full-year adjusted EBITDA basis by 2024 [8][10] - The strategic plan, referred to as Vision 2025, will be detailed at the upcoming Investor Day, highlighting long-term financial targets [10][16] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving profitability by 2024, relying on continued top-line growth of at least 30% and improved operational efficiency [9][75] - The impact of COVID-19 is receding, allowing for more predictable business operations and a return to forward-looking guidance [8][10] Other Important Information - The company has opened new stores, with a focus on opportunistic locations that align with their retail model [20][22] - Shipping expenses in Q4 were offset by increased shipping revenue, indicating effective cost management strategies [68] Q&A Session Summary Question: Timeline to profitability and GMV targets - Management did not disclose specific GMV targets for 2024 but confirmed a continued growth rate of 30% plus [15][16] - Gross profit per order was approximately $92 or $93 in 2021, with expectations for growth [17] Question: Inflationary environment and handbag pricing - Price increases in the primary market benefit the resale market, allowing for higher prices while still offering value to consumers [26] Question: Gross margin decline in Q4 - The decline was primarily due to a mix shift towards direct business, which negatively impacted gross margins [39][40] Question: Take rate and AOV relationship - An inverse relationship between take rate and average order value is expected to persist, with stability anticipated in the near term [45][48] Question: Cost efficiencies and operating leverage - Management expects improved operating leverage in the latter half of the year, with fixed cost leverage becoming more pronounced as revenue grows [60][61] Question: Investment areas for 2022 - Major investments will focus on technology to optimize pricing and automate operations, which are expected to drive EBITDA improvements [65][66] Question: Shipping expenses in Q4 - Shipping expenses were more or less balanced with increased shipping revenue, indicating effective cost management [68] Question: Supply sources and regional performance - Supply remains healthy, with in-home concierge services being the most valuable channel, followed by retail locations [31][76] Question: Competitive pressures on take rates - The company does not see significant pressure to lower take rates, maintaining a competitive edge across multiple categories [126][128]