The RealReal(REAL) - 2024 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a 14% revenue growth in Q4 2024, with full-year GMV reaching $18 billion, up 6% year-over-year [6][10][31] - Adjusted EBITDA for the full year was positive at$ 9.3 million, marking a $64 million increase compared to 2023 [40] - Free cash flow improved significantly, reaching$ 1 million for the full year, an increase of $104 million year-over-year [41] Business Line Data and Key Metrics Changes - Consignment revenue increased by 14% for the year, driven by successful unlocking of mid and high-value supply [10][38] - Active buyers on a trailing 12-month basis grew by 5% year-over-year, reaching 972,000 [10][34] - Average order value (AOV) reached an all-time high of$ 579 in Q4, contributing significantly to GMV growth [34][58] Market Data and Key Metrics Changes - The company noted that nearly 25% of new consignors were acquired through retail locations, indicating a strong market presence [20][66] - The luxury resale market is projected to continue growing, with the company well-positioned to capture a significant share [30][42] Company Strategy and Development Direction - The company is focused on three strategic pillars: unlocking supply, driving operational efficiencies, and enhancing service [11][21][24] - The growth playbook includes optimizing the sales team, refining marketing strategies, and expanding retail locations [12][17][19] - The company aims to leverage AI initiatives like SmartSales and Athena to improve efficiency and enhance the consignor experience [15][23][112] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to unlock profitable supply and achieve high single-digit to low double-digit growth over the medium term [42] - The company anticipates stable gross margins and operating expenses in 2025, with a focus on maintaining operational efficiency [43][44] Other Important Information - The company completed a strategic debt transaction, reducing total indebtedness by $37 million, enhancing its capital structure [47] - The company plans to open one to three new stores annually, maintaining its strategy of positioning stores in affluent areas [94] Q&A Session Summary Question: Operating cash flow and free cash flow guidance for the year - Management did not provide explicit guidance but noted positive cash flow metrics for Q4 and 2024, with$ 27 million in operating cash flow and close to $1 million in free cash flow [53] Question: Marketing spend plans for the first quarter and beyond - Management indicated that marketing spend is yielding good returns and will continue to be balanced with investments in sales and stores [56] Question: Supply growth drivers and mix of current vs. new consignors - Management highlighted the importance of targeting mid to high-value consignors and noted that 25% of new consignors come from retail [66] Question: Active buyers' stickiness and engagement - Management reported that buyers are resilient and engaged, with a 20% year-over-year increase in buyers spending$ 5,000 or more [75] Question: Sales team productivity and efficiency - Management noted a 15% increase in supply generated per sales rep and emphasized the potential for further productivity gains [82] Question: Breakdown of growth forecast for Q1 - Management expects revenue growth of 9% to 12% for Q1, with strong momentum carried over from Q4 [85] Question: SG&A leverage opportunities - Management indicated that SG&A includes both variable and fixed costs, with opportunities for leverage primarily in sales and G&A functions [90][106]