The RealReal, Inc. (NASDAQ:REAL) Q4 2023 Earnings Call Transcript

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The RealReal, Inc. (NASDAQ:REAL) Q4 2023 Earnings Call Transcript February 29, 2024

The RealReal, Inc. beats earnings expectations. Reported EPS is $-0.07, expectations were $-0.11. The RealReal, Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day and thank you for standing by. Welcome to the RealReal Fourth Quarter and Full Year 2023 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Caitlin Howe, Senior Vice President of Finance. Please go ahead.

Caitlin Howe: Thank you, operator. Joining me today to discuss our results for the period ended December 31, 2023 and our Chief Executive Officer, John Koryl; President and Chief Operating Officer, Rati Levesque; and Interim Chief Financial Officer and Chief Legal Officer, Todd Suko. Before we begin, I would like to remind you that during today's call, we will make forward-looking statements which involve known and unknown risks and uncertainties. Our actual results may differ materially from those suggested in such statements. You can find more information about these risks, uncertainties and other factors that could affect our operating results in the company's most recent Form 10-K and subsequent quarterly reports on Form 10-Q.

Today's presentation will also include certain non-GAAP financial measures, both historical and forward-looking for which historical financial measures, we have provided reconciliations to the most comparable GAAP measures in our earnings press release. In addition to the earnings press release, we issued a shareholder letter earlier today, both of which are available on our Investor Relations website. I would now like to turn the call over to John Koryl, Chief Executive Officer of the RealReal.

John Koryl: Thanks, Caitlin and welcome to our earnings call. Today, we reported financial results for the fourth quarter and full year 2023. For the first time since our IPO in 2019, we reported a full quarter of positive adjusted EBITDA as well as our first-ever quarter of positive free cash flow. Our Q4 adjusted EBITDA exceeded the high end of our Q4 guidance range and the Q4 GMV and revenue exceeded the midpoint of our guidance range. Importantly, we announced today a reworking of our capital structure, for which I'll provide further details later in my prepared remarks. Additionally, we recently announced two exciting leadership updates. First, our new CFO, Ajay Gopal will join us in March. Ajay brings with him a strong background as an e-commerce CFO as well as an extensive experience with two-sided marketplace.

A smiling customer examining a finely crafted luxury watch in a specialty store.
A smiling customer examining a finely crafted luxury watch in a specialty store.

We look forward to introducing Ajay in the near future. We also announced that Karen Katz, who is a current member of our Board and the former CEO at Neiman Marcus Group is our newly appointed Board Chairperson. Taken together, we believe that the RealReal starting off 2024 with solid momentum from a business operations and organizational perspective. Our improved financial results in 2023 were driven by our strategic shift to refocus on our core consignment business. We refined our growth model with a focus on profitable supply. As part of these efforts, we reduced direct revenue by half, overhauled our consignor commission structure and revamped our approach to sales and marketing. Looking ahead, our new initiative of drop ship consignment previously referred to as virtual consignment has the potential to unlock incremental supply from trusted partners.

Operationally, our results in 2023 were a significant step forward on our path to profitability. We are beginning to deliver efficiencies from our investments in automation and artificial intelligence. In 2024, we are focused on enhancing our technological capabilities and processes to improve the product flow in our authentication centers and further automating our authentication. While these initiatives require a small investment in Q2 of this year, we are bullish on the long-term benefits. It will enable us to continue to enhance our best-in-class authentication and deliver a superior experience to our customers. Regarding our capital structure. Today, we announced that we entered into a private, separately negotiated debt exchange transactions with certain holders of our convertible senior notes due in 2025 and 2028.

As a result of the debt exchange transactions we reduced our total indebtedness by more than $17 million, creating substantial runway and capital structure flexibility for us to execute on our strategic vision. Looking forward, we project that we are on track to deliver a breakeven adjusted EBITDA year in 2024. Today, we provided Q1 2024 and full year 2024 financial guidance. Through growing profitable supply, driving operational efficiencies and delivering exceptional service to our consignors and buyers, we believe we can continue to make significant progress on the bottom line as we reaccelerate growth in 2024. I'm excited about the trajectory of our business and believe we will continue to capitalize on our position as the leader in luxury resale.

With that, let's open the call for questions.

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