Sign in

You're signed outSign in or to get full access.

TI

TheRealReal, Inc. (REAL)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered record GMV and revenue, with GMV $519.8M (+20% YoY) and revenue $173.6M (+17% YoY); Adjusted EBITDA margin expanded to 5.4% (+380 bps YoY) as AI-enabled operational initiatives and sales compensation changes drove leverage .
  • Revenue and EPS beat consensus: revenue $173.6M vs $170.3M estimate; non-GAAP EPS $(0.04) vs $(0.056) estimate; management raised FY 2025 guidance across GMV, revenue, and Adjusted EBITDA [*S&P Global].
  • GAAP net loss widened to $(54.1)M due to a $(43.9)M change in fair value of warrant liability; non-GAAP net loss improved to $(5.2)M, highlighting non-cash items’ impact .
  • Catalyst: Raised FY and issued strong Q4 guidance (Adjusted EBITDA $17.5–$18.5M; revenue $188–$191M), pointing to accelerating margin expansion and sustained supply unlock—key potential stock drivers .

What Went Well and What Went Wrong

What Went Well

  • Record GMV ($519.8M) and revenue ($173.6M) with strong mix and higher ASP; Adjusted EBITDA rose to $9.3M (5.4% margin), demonstrating operating expense leverage and efficiency gains .
  • AI initiatives (Athena intake touching 27% of items, on track for 30–40% by year-end) delivered 370 bps leverage in operations and tech; management targets “multiple dollars per unit” cost reductions medium term .
  • Management raised FY guidance and set Q4 guidance implying further margin expansion; CEO emphasized “accelerating growth and expanded margins,” driven by the growth playbook and AI .

Quotes:

  • “We delivered another quarter of accelerating growth and expanded margins… Given this continued momentum, we are raising our full-year outlook.” – CEO Rati Levesque .
  • “Athena… touched 27% of all items… on track for 30%-40% by year-end.” – CEO Rati Levesque .
  • “Fourth-quarter adjusted EBITDA… ~9.5% of total revenue.” – CFO Ajay Gopal .

What Went Wrong

  • GAAP net loss widened to $(54.1)M due largely to a non-cash $(43.9)M increase in warrant liability fair value; despite operational improvements, headline GAAP optics are negative .
  • Take rate declined 70 bps YoY to 37.9% due to mix shift into higher-value items (beneficial to gross profit dollars but dilutive to percentage metrics) .
  • Gross margin held at 74.3% (down ~60 bps YoY) on higher direct revenue mix, even as consignment gross margin improved; direct margin volatility by category remains a watch item .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
GMV ($USD Millions)$490.4 $504.1 $519.8
Revenue ($USD Millions)$160.0 $165.2 $173.6
GAAP Diluted EPS ($)$(0.14) $(0.13) $(0.49)
Non-GAAP EPS ($)$(0.08) $(0.06) $(0.04)
Gross Margin (%)75.0% 74.3% 74.3%
Adjusted EBITDA ($USD Millions)$4.11 $6.84 $9.29
Adjusted EBITDA Margin (%)2.6% 4.1% 5.4%
Free Cash Flow ($USD Millions)$(35.85) $(14.99) $13.72

Segment revenue breakdown:

Segment Revenue ($USD Millions)Q1 2025Q2 2025Q3 2025
Consignment revenue$123.8 $128.6 $134.4
Direct revenue$20.5 $20.5 $22.9
Shipping services revenue$15.8 $16.1 $16.2
Total revenue$160.0 $165.2 $173.6

KPIs:

KPIQ1 2025Q2 2025Q3 2025
Active buyers (TTM, ‘000)985 1,001 1,024
AOV ($)$564 $581 $584
Take rate (%)38.6% 37.9% 37.9%
Number of orders (‘000)869 868 890

Additional margin detail (Q3):

  • Consignment gross margin: 89.3% (+70 bps YoY); Direct gross margin: 20.9% (+370 bps YoY) .

Non-GAAP adjustments (Q3, selected):

  • Warrant liability fair value change $(43.9)M; gain on extinguishment of debt $3.68M; stock-based comp $6.61M .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
GMV ($USD)Q4 2025N/A$585–$595M New
Total Revenue ($USD)Q4 2025N/A$188–$191M New
Adjusted EBITDA ($USD)Q4 2025N/A$17.5–$18.5M New
GMV ($USD)FY 2025$2.030–$2.045B $2.099–$2.109B Raised
Total Revenue ($USD)FY 2025$667–$674M $687–$690M Raised
Adjusted EBITDA ($USD)FY 2025$29.0–$32.0M $37.7–$38.7M Raised

Q3 actuals vs Q3 guidance (set in August):

  • GMV: $519.8M vs $495–$502M (beat) .
  • Revenue: $173.6M vs $167–$170M (beat) .
  • Adjusted EBITDA: $9.29M vs $6.1–$7.1M (beat) .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
AI/technology (Athena, Smart Sales/pricing)Q1: reaffirmed focus on AI/pricing and operational flexibility ; Q2: Athena ~20% items; target 30–40%; pricing algorithm expanding; cost per unit reduction target Athena touched 27% items; on track 30–40% YE; AI driving O&T leverage; aim for full listing automation and “multiple dollars per unit” savings Strengthening execution
Supply unlock & sales compensationQ1: highest new consignors in 2+ years; growth playbook (sales/marketing/stores) ; Q2: sales comp plan focusing on value; pop-up events unlocked $0.8M–$0.5M supply First full quarter of new comp across sales; supply value per luxury manager +12% YoY; events unlocking $2.6M over days; adding 1–3 stores/year Accelerating
Tariffs/macroQ2: tariff backdrop cited; resale value proposition benefits; ASP/AOV mix effects Mix into higher-value items; take rate down 70 bps; consumer acceptance rising (58% prefer secondary) Favorable tailwinds
Product/category performanceQ2: fine jewelry strong; category mix influences direct margins ; watches/handbags noted Fine jewelry fastest-growing; first-time watch buyers +46%; wedding dress searches +247%; “lived-in” handbags trend Positive mix shift
Retail/store strategyQ2: retail generated ~25% new consignors; Houston store metrics cited 18 locations; events in Newport Beach/Tysons; plan +1–3 stores/year; 25% new consignors from stores Scaling
Direct revenue & marginsQ2: direct rev 12% of total; margin 16.2%; 15–25% range Direct rev 13% of total; margin 20.9%; expect 10–15% of revenue going forward Improving margin within range
Cash flow & deleveragingQ2: reduced 2025 notes; balance sheet strengthened; positive FCF expected 2H Q3 OCF $19M; FCF $14M; debt reduced $6M via exchange; $123M cash+restricted Improving cash dynamics

Management Commentary

  • “We set a new record on quarterly GMV… adjusted EBITDA of $9.3 million… up 380 basis points year-over-year.” – CEO Rati Levesque .
  • “Productivity increased with supply value per existing luxury manager up 12% year-over-year.” – CEO Rati Levesque .
  • “Athena… touched 27% of all items… on track for 30%-40% by year-end… future vision is to achieve full listing automation and reduce our processing time from 14 days to… 7 days.” – CEO Rati Levesque .
  • “Fourth-quarter adjusted EBITDA… between $17.5 million and $18.5 million… full-year adjusted EBITDA… $37.7–$38.7 million… 400 bps improvement versus 2024.” – CFO Ajay Gopal .
  • “Free cash flow was $14 million in the third quarter, a $12 million improvement year-over-year.” – CFO Ajay Gopal .

Q&A Highlights

  • Growth outlook: Management expects medium-term growth balancing high single to low double digits; short term (1H26) closer to low double digits given momentum .
  • DropShip: Expanded from watches/handbags into jewelry; seen as medium-term supply contributor, potentially enabling international partners .
  • Mix and take rate: ASP growth and mix into higher-value items lowered take rate by 70 bps; pricing algorithm expansion capturing incremental seller value .
  • Operations and tech leverage: Athena drives 370 bps O&T leverage; as scale increases (30–40% of items), expect “couple dollars per item” savings; dollars in O&T rise with unit volume even as per-unit costs fall .
  • Marketing: Increased Q3 spend with one-time costs; full-funnel approach delivering ROI; focus on flywheelers (buy/sell both sides) with higher LTV .

Estimates Context

Comparison to Wall Street consensus (S&P Global):

MetricQ3 2025 ActualQ3 2025 ConsensusQ4 2025 GuidanceQ4 2025 Consensus
Revenue ($USD Millions)$173.6 $170.3*$188–$191 $190.6*
Primary EPS ($)$(0.04) non-GAAP $(0.0558)*N/A (Adjusted EBITDA guided)$0.0353*

Notes:

  • Management guides and reports Adjusted EBITDA; consensus “EBITDA Consensus Mean” is GAAP-based and not directly comparable to Adjusted EBITDA. Q3 Adjusted EBITDA was $9.29M vs consensus EBITDA $7.29M*, with GAAP EBITDA impacted by warrant fair value changes [*S&P Global].
  • Values retrieved from S&P Global.*

Implications:

  • Q3 revenue and EPS beat consensus; Q4 guidance revenue midpoint (~$189.5M) is slightly below consensus ($190.6M*), but Adjusted EBITDA implies significant margin expansion (~9.5%), suggesting estimates may need upward revision on profitability even if revenue is roughly in line [*S&P Global].

Key Takeaways for Investors

  • Sustained top-line acceleration with improving unit economics: revenue beats and record GMV alongside expanding Adjusted EBITDA margin signal operating flywheel strength .
  • AI-driven efficiency is a durable margin lever: Athena expansion and automation should continue to lower per-unit costs and drive OPEX leverage through 2026 .
  • Mix shift raises ASP and gross profit dollars while diluting take rate; watch category mix and direct revenue share as key drivers of margin trajectory .
  • Non-cash volatility (warrant liability) distorts GAAP optics; focus on non-GAAP performance and cash generation (Q3 FCF $13.7M) for economic progress .
  • Raised FY guidance and strong Q4 Adjusted EBITDA outlook are potential catalysts; look for confirmation via Q4 execution on supply unlock and AI scaling .
  • Balance sheet improving with debt exchanges and cash generation; monitor further deleveraging initiatives .
  • Near-term trading: favor momentum on profitability expansion; medium-term thesis: category leadership in luxury resale, AI-enabled operations, and scalable store/event strategy underpin sustained growth and margin gains .