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TI

TheRealReal, Inc. (REAL)·Q2 2025 Earnings Summary

Executive Summary

  • TheRealReal delivered a breakout Q2 2025: revenue $165.188M (+14% YoY), record GMV $504.105M (+14% YoY), and Adjusted EBITDA $6.839M (4.1% margin), with non-GAAP EPS of -$0.06; raised FY 2025 guidance across GMV, revenue, and Adjusted EBITDA .
  • Results beat Wall Street: revenue beat consensus by ~$5.6M and non-GAAP EPS beat by ~$0.03; Adjusted EBITDA ahead of expectations due to operating leverage and AI-driven efficiencies* .
  • Guidance raised: FY 2025 revenue $667–$674M (prior $645–$660M), GMV $2.030–$2.045B (prior $1.96–$1.99B), Adjusted EBITDA $29–$32M (prior $20–$30M) .
  • Key catalysts: accelerating supply (record new consignors), AI intake “Athena” touching ~20% of units (target 30–40% by YE), and deleveraging (paid remaining $26.7M of 2025 notes) .

What Went Well and What Went Wrong

What Went Well

  • Record GMV and revenue, with Adjusted EBITDA margin up 530 bps YoY; management: “Q2 was a breakout quarter…record GMV and Revenue…Adjusted EBITDA ahead of expectations” .
  • Consignment economics strengthened: consignment gross margin 89.3% (+93 bps YoY); total gross margin 74.3% (+20 bps YoY) .
  • AI/automation scaling: Athena intake now ~20% of units; aiming for 30–40% by YE; CEO: “With AI and automation central to our efficiency gains, we are poised for sustained growth…” .

What Went Wrong

  • GAAP profitability still negative: net loss -$11.366M (GAAP diluted EPS -$0.13); free cash flow -$14.993M in Q2 as CapEx stepped up for authentication center upgrades .
  • Take rate compressed to 37.9% (from 38.5% YoY) on mix into higher-AOV items; CFO: “when we mix into high-value items…it has an effect on our take rate…going down” .
  • Direct revenue margin variability persists (16.2% in Q2) depending on category mix (watches/handbags vs others), complicating margin predictability quarter-to-quarter .

Financial Results

Core Financials (YoY and Seq trend)

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$144.934 $163.995 $160.033 $165.188
Gross Profit ($USD Millions)$107.466 $122.063 $120.023 $122.676
Gross Margin (%)74.1% 74.4% 75.0% 74.3%
Net Income ($USD Millions)-$16.708 -$68.455 $62.400 -$11.366
GAAP Diluted EPS ($)-$0.20 -$0.62 -$0.14 -$0.13
Adjusted EBITDA ($USD Millions)-$1.761 $11.007 $4.110 $6.839
Adjusted EBITDA Margin (%)-1.2% 6.7% 2.6% 4.1%

Notes: The unusually high Q1 2025 GAAP net income reflected non-cash items: $42.503M change in warrant liability and $37.101M gain on extinguishment of debt .

Segment Revenue

MetricQ2 2024Q1 2025Q2 2025
Consignment Revenue ($USD Millions)$112.714 $123.814 $128.620
Direct Revenue ($USD Millions)$16.724 $20.454 $20.495
Shipping Services Revenue ($USD Millions)$15.496 $15.765 $16.073

KPIs

MetricQ2 2024Q1 2025Q2 2025
GMV ($USD Millions)$440.914 $490.405 $504.105
Active Buyers (TTM, 000s)942 985 1,001
AOV ($USD)$538 $564 $581
Take Rate (%)38.5% 38.6% 37.9%
Number of Orders (000s)820 869 868

Comparison to Consensus (Q2 2025)

MetricActualConsensus
Revenue ($USD Millions)$165.188 $159.624*
Primary EPS ($)-$0.06 (non-GAAP per press) -$0.0829*
Adjusted EBITDA ($USD Millions)$6.839 $3.463*

Values marked * are from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GMV ($USD)FY 2025$1.96B – $1.99B $2.030B – $2.045B Raised
Revenue ($USD)FY 2025$645M – $660M $667M – $674M Raised
Adjusted EBITDA ($USD)FY 2025$20M – $30M $29M – $32M Raised
GMV ($USD)Q3 2025—$495M – $502M New
Revenue ($USD)Q3 2025—$167M – $170M New
Adjusted EBITDA ($USD)Q3 2025—$6.1M – $7.1M New

CFO also noted expectation for strong positive free cash flow in Q3–Q4 and CapEx PP&E at 2–3% of revenue for FY 2025 .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
AI/Technology Initiatives (Athena)Emphasis on using AI to drive operating leverage and consignor experience ; Q1 reaffirmed strategy and highlighted AI applied to operations Athena touching ~20% of units, targeting 30–40% by YE; expanding to listing automation, enhanced search; VisionShield + Athena for authentication Increasing
Supply Engine / New ConsignorsExiting 2024 with strength; unlocking supply via growth playbook ; Q1: highest new consignors in 2+ years Record new consignors; marketing reinvestment and re-consign/referral programs; pop-up events unlocking high-value supply Improving
Tariffs/MacroQ1: reaffirmed guidance despite tariff uncertainty; potential beneficiary given domestic supply CEO: “we are a tariff beneficiary”; pricing algorithms follow primary market; AOV strength partially price-driven Tailwind narrative
Product Mix & Direct MarginQ4: revenue growth across categories Direct margin 16.2% within 15–25% range; variability by category mix (watches vs handbags) Stable/Variable
Retail/RegionalStore openings late 2024 (Houston, Miami) supporting supply Retail driving ~25% of new consignors; Houston new sellers +92%, supply +~50% Positive
Regulatory/AuthenticationStrong authentication highlighted; risk factors maintained Collaboration with law enforcement; >250k fakes kept off market; AI elevating speed/accuracy Ongoing priority

Management Commentary

  • CEO: “Q2 was a breakout quarter…record GMV and Revenue, both up 14% year-over-year, alongside Adjusted EBITDA ahead of expectations…With AI and automation central to our efficiency gains, we are poised for sustained growth, improved profitability, and consistent cash flow” .
  • CFO: “Consignment gross margin was 89.3%…we expect gross margin to be within the 74–75% range…operating expenses leveraged by 660 bps driven by productivity and AI/automation” .
  • CFO medium-term ambition: “I see no structural reason why we can’t be a 15–20% EBITDA business over the medium term” .
  • CEO on tariffs: “we are a tariff beneficiary…our pricing algorithms follow and we benefit” .

Q&A Highlights

  • Top-line cadence and take rate: Management sees momentum into Q3 with slight acceleration; take rate pressure expected when mixing into high-value items, but gross profit dollars benefit .
  • AI “Athena” scaling: Coverage at ~20% of items; targeted 30–40% by YE; expected to cut multiple dollars from cost per unit; expanding to more categories and listing automation .
  • Supply initiatives: Re-consign feature and richer (ROI-positive) referral program converting buyers to sellers; store events (e.g., $800k Newport Beach, $500k Chicago in single day) .
  • Direct business: Margin within 15–25% range, driven by category mix; high-ticket items lower % margin but attractive dollar contribution .
  • Free cash flow: Expect strong positive FCF in Q3–Q4; CapEx stepped up timing in Q2 for authentication center upgrades .

Estimates Context

  • Q2 2025 actual vs consensus: revenue $165.188M vs $159.624M*; non-GAAP EPS -$0.06 vs -$0.0829*; Adjusted EBITDA $6.839M vs $3.463M* — a clear beat on top-line and EPS, and ahead on Adjusted EBITDA .
  • Q3 2025 outlook vs consensus: company guiding revenue $167–$170M and Adjusted EBITDA $6.1–$7.1M; S&P consensus revenue ~$170.257M* and EPS -$0.0558* — guidance broadly in line at mid-to-high end; estimate risk skewed toward modest upward revisions if supply momentum persists .
  • FY 2025: Company raised revenue to $667–$674M vs consensus ~$689.392M*, implying consensus may need to drift down to management’s updated range absent additional upside catalysts .

Values marked * are from S&P Global.

Key Takeaways for Investors

  • Momentum real and compounding: record GMV/revenue, raised FY guide, and Adjusted EBITDA margin expansion driven by supply and AI-enabled efficiency .
  • Near-term setup: Q3 guidance aligns with consensus; watch for continued new consignor growth and AOV strength to push revenue toward high end of range .
  • Margin path: consignment gross margin improvement plus OpEx leverage support the trajectory; direct margin variability is mix-driven—monitor category trends (watches/jewelry vs handbags) .
  • Cash inflection: management targets strong positive FCF in 2H; deleveraging continues (2025 notes paid), extending maturities and improving flexibility .
  • Risk flags: take rate compression from higher-AOV mix; Q2 free cash flow negative on CapEx timing; GAAP profitability still negative .
  • Strategic catalysts: scaling Athena (30–40% by YE), dropship expansion (watches, handbags, fine jewelry), and retail events unlocking high-value supply .
  • Medium-term thesis: if AI-led unit economics and supply flywheel sustain, the CFO’s 15–20% EBITDA margin target becomes increasingly credible; stock likely sensitive to quarterly cash generation and guidance cadence .