The RealReal(REAL) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Third quarter GMV grew 6% year-over-year, reaching $433 million, an acceleration from the second quarter [8][27] - Revenue for the third quarter was$148 million, an increase of 11%, driven by a 14% rise in consignment revenue [8][27] - Adjusted EBITDA for the third quarter was positive $2.3 million, marking the second consecutive quarter of positive adjusted EBITDA [9][31] - Gross profit improved by$17 million year-over-year to $111 million, with a gross margin of 74.9$200 billion untapped value for luxury resale items in the U.S., indicating significant market potential [9] - The average order value (AOV) remained strong at $522, reflecting resilience in consumer demand [70] Company Strategy and Development Direction - The company is focused on a growth playbook that emphasizes unlocking supply through sales, marketing, and retail strategies [10][19] - The retail strategy includes opening one to three stores per year in key markets, with plans for new locations in Miami and Houston [19] - The company aims to enhance operational efficiency through automation and AI, reducing processing time by over 10% [20][21] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in supply trends and the overall business model, emphasizing a resilient approach to market challenges [40][56] - The company raised its full-year guidance for GMV, revenue, and adjusted EBITDA based on strong third-quarter performance [34][35] - Management is optimistic about Q4 sales and expects to achieve positive adjusted EBITDA for the year [36][37] Other Important Information - The company has implemented a new incentive structure for its sales team, focusing on GMV dollars rather than units, contributing to gross margin expansion [15] - The company is leveraging social media for marketing, achieving high engagement rates and increasing brand awareness [16][17] Q&A Session Summary Question: Guidance for continued GMV acceleration in Q4 - Management noted healthy supply trends and the effectiveness of their growth playbook, which combines sales, marketing, and retail strategies [40][41] Question: Opportunities for further gross margin improvement - Management indicated that while current gross margins are strong, they expect to maintain similar levels moving forward, with potential for slight improvements [46][47] Question: Consumer price sensitivity and AOV growth - Management reported resilience in their business model, with strong demand and effective marketing strategies contributing to stable AOV [49][50] Question: Growth despite headwinds in luxury brands - Management emphasized the unique value proposition of their business model, which focuses on the intersection of luxury and sustainability [55][56] Question: Long-term margin expectations - Management outlined a clear path for growing both revenue and margins, with expectations for strong flow-through on incremental growth [61][62] Question: Return rates and monetization initiatives - Management attributed improved return rates to operational efficiencies and indicated that return insurance is in early testing phases [64][66] Question: Consumer trends and performance in Q3 - Management highlighted strong supply and demand dynamics, with a focus on building trust and operational excellence [68][69]