TheRealReal, Inc. (REAL)·Q4 2024 Earnings Summary

Executive Summary

• Q4 2024 delivered acceleration: GMV rose 12% YoY to $503.5M and revenue grew 14% to a company record $164.0M, both above Q3’s run-rate and with adjusted EBITDA of $11.0M (6.7% margin), well ahead of prior-year and above prior guidance ranges .
• Mix and unit economics improved: Gross margin was 74.4% (+40 bps YoY) as higher-value supply and efficiencies drove leverage; AOV hit an all-time high of $579 and trailing 3-month active buyers rose 7% YoY to 408k .
• 2025 outlook intact: For Q1 2025, GMV $484–492M, revenue $157–161M, and adjusted EBITDA $3.0–4.5M; FY 2025 GMV $1.96–1.99B, revenue $645–660M, and adjusted EBITDA $20–30M (margin expansion of 200–300 bps YoY) .
• Capital structure improved: The company exchanged $183M of 2028 converts for $147M due 2031, reducing total debt by ~$37M; year-end cash, cash equivalents and restricted cash totaled $187M. Positive free cash flow achieved for the full year and Q4 free cash flow was $19.2M .
• Stock catalysts: Continued proof of profitable growth (AOV highs, stable take rate), maintained FY25 guide, and further AI-driven efficiency (Athena, SmartSales) are near-term narrative supports; watch for cash generation seasonality and direct revenue margin stability .

What Went Well and What Went Wrong

What Went Well

• Record top line and profitability momentum: Q4 revenue reached $164.0M (+14% YoY) and adjusted EBITDA rose to $11.0M (6.7% margin) from $1.4M a year ago; gross margin improved to 74.4% (+40 bps YoY) .
• Higher-value mix and demand: AOV hit $579 (+6% YoY), driving ~6 points of GMV growth; active buyers (trailing 3 months) rose to 408k (+7% YoY), with buyers spending $5K+ up 20% YoY (call commentary) .
• AI/operational execution: Pricing algorithm used for 85% of units; automation cut >1 day from processing; “Athena” to authenticate and auto-attribute, expected to touch ~50% of items by year-end; “SmartSales” AI to improve sales productivity .

What Went Wrong

• GAAP loss optics: Q4 GAAP net loss widened to $(68.5)M largely due to a $(59)M non-cash warrant liability fair value adjustment; non-GAAP net loss per share improved to $(0.01) .
• Take rate headwind with higher AOV: Management noted higher AOV reduces effective take rate percent by design, even as dollar economics improve; take rate expected to be “relatively stable” going forward .
• SG&A still high on revenue base: Investors questioned fixed G&A at ~two-thirds of SG&A (implied ~$120M); management sees it as a leverage opportunity vs. revenue as scale builds .

Financial Results

P&L, Profitability, and Cash Flow (USD Millions, except per-share and %)

Notes: Q4 GAAP loss includes a $(59)M non-cash warrant liability fair value change .

Revenue Mix (USD Millions)

KPIs

Drivers and deltas:

• YoY: Revenue +14% and GMV +12% on higher-value consignment; AOV +6% to $579; gross margin +40 bps .
• QoQ: GMV up sharply into holiday (Q3 GMV $433.1M), with AOV rising from $522 to $579 .
• Profitability: Adjusted EBITDA inflected to $11.0M in Q4 vs $2.3M in Q3 and $1.4M in Q4’23; Q4 free cash flow $19.2M .

Guidance Changes

2025 Guidance (Maintained vs. Preliminary)

2024 Q4/FY Guidance vs Results

Earnings Call Themes & Trends

Management Commentary

• “We accelerated growth through the year, culminating in 14% revenue growth in Q4… We delivered positive adjusted EBITDA and positive free cash flow for the full year.” — Rati Levesque, CEO .
• “Q4 GMV of $504 million increased 12% versus last year… Revenue of $164 million increased 14%... Adjusted EBITDA of $11 million or 6.7% of revenue… We generated $27 million in operating cash flow for the quarter, resulting in free cash flow of $19 million.” — Ajay Gopal, CFO .
• “Athena leverages our data assets and AI capabilities… we expect [it] to touch almost half of the items coming into our authentication centers” — Rati Levesque .
• “AOV in Q4 was a high point… $579 per order… expect take rate to be relatively stable going forward.” — Ajay Gopal .
• “We are projecting FY GMV of $1.96–$1.99B… revenue $645–$660M… adjusted EBITDA $20–$30M… 200–300 bps margin expansion.” — Ajay Gopal .

Q&A Highlights

• Cash flow outlook: No explicit 2025 cash flow guidance; noted strong FY24 flow-through from adjusted EBITDA to operating cash flow and free cash flow, with back-half weighting expected due to project cadence and incentive timing .
• Marketing efficiency: Marketing leverage of ~130 bps for FY24; rebalancing into channels with stronger ROI, including social; spend as a percent of revenue can be seasonal .
• AOV vs take rate: Higher AOV reduces effective take rate percent per rate card, but increases absolute dollars per transaction; take rate to remain relatively stable post lapping pricing changes .
• Supply from stores: ~25% of new consignors acquired via retail; retail consignors’ ASP per unit is 5–7x higher, supporting mix and AOV .
• SG&A leverage opportunity: Roughly two-thirds of SG&A fixed/semi-fixed; management expects continued leverage as revenue scales; AI-driven “SmartSales” cited as a productivity lever on the variable side .

Estimates Context

• We attempted to retrieve consensus (EPS, revenue, EBITDA) from S&P Global for Q4 2024, FY 2024, Q1 2025, and FY 2025, but the service returned a rate-limit error; consensus details were therefore unavailable at this time. As a result, we cannot quantify beats/misses vs Wall Street consensus in this report (S&P Global data unavailable).
• Directionally, Q4 showed outperformance vs company guidance (GMV and adjusted EBITDA above prior ranges, revenue near the high end) and FY24 adjusted EBITDA above the prior range, suggesting potential upward pressure on near-term estimate revisions absent contrary Street data .

Key Takeaways for Investors

• Mix-driven acceleration: GMV and revenue growth re-accelerated with AOV at a record $579; the strategy to target mid/high-value consignors and leverage stores is working, while keeping the take rate percent broadly stable .
• Operating leverage now visible: Q4 adjusted EBITDA margin expanded to 6.7% and FY24 turned positive; FY25 guide implies a further 200–300 bps margin expansion on similar gross margin and stable take rate assumptions .
• AI as a durable efficiency driver: “Athena” and “SmartSales” support faster processing, better attribution/pricing, and salesforce productivity—key for scaling profitable growth .
• Cash generation inflecting: Q4 free cash flow of $19.2M and positive full-year free cash flow signal a structurally improved cash cycle; expect back-half seasonality in 2025 cash flows .
• Balance sheet risk moderated: The convert exchange reduced indebtedness by ~$37M and pushed maturities to 2031, improving flexibility through the next phase of profitable growth .
• Watch items: Monitor take rate stability amid rising AOV, direct revenue margin (management expects ~15% on direct), and continued SG&A leverage as scale builds .
• Trading lens: With beats vs internal guidance and maintained FY25 outlook, near-term sentiment should be supported by the profitable growth narrative; catalysts include sustained AOV strength, active buyer growth, and AI rollouts translating to OpEx leverage .

Appendix: Additional Q4/FY24 Data Points

• Net loss optics: Q4 GAAP basic/diluted net loss per share $(0.62) driven by $(59)M warrant liability remeasurement; non-GAAP net loss per share improved to $(0.01) .
• Year-end liquidity: Cash, cash equivalents and restricted cash totaled $187M at year-end 2024 .
• Segment dynamics: Consignment and shipping revenues grew 14% and 15% for FY24; direct revenue declined 18% as the business re-based for profitability .
• Store cadence: Management maintained plan for 1–3 openings per year; two stores opened in Q4 (Miami and Houston), with strong early performance .