REAL — The RealReal, Inc.

Summary of RealReal Q3 2025 Earnings Call

1. Key Financial Results and Metrics

• Gross Merchandise Volume (GMV): Achieved a record of $520 million, up 20% year-over-year.
• Revenue: Increased to $174 million, a 17% rise from the previous year.
• Adjusted EBITDA: Reported at $9.3 million, representing 5.4% of total revenue, with a margin expansion of 380 basis points year-over-year.
• Free Cash Flow: Reached $14 million, a $12 million improvement year-over-year.
• Active Buyers: Surpassed 1 million, marking an all-time high with a 7% year-over-year increase.
• Average Order Value (AOV): Increased to $584, a 12% rise compared to last year.
• Gross Margin: Maintained at 74.3%, consistent with Q2 2025.

2. Strategic Updates and Business Highlights

• Growth Strategy: Focused on three pillars: growth playbook, operational efficiency, and customer service.
• Sales Team Initiatives: New compensation plan rolled out, emphasizing value over volume, leading to a 12% year-over-year increase in supply value per luxury manager.
• Marketing Efforts: New and repeat consignors grew by double digits; emphasis on attracting "flywheelers" who engage in both buying and selling.
• Retail Expansion: Plans to add 1 to 3 new stores annually, with successful high-value events generating significant consignor engagement.
• AI Integration: The Athena AI system is enhancing operational efficiency, processing 27% of items, with a goal of 30% to 40% by year-end.

3. Forward Guidance and Outlook

• Q4 2025 Guidance: GMV expected between $585 million to $595 million (17% growth), revenue between $188 million to $191 million (16% growth), and adjusted EBITDA between $17.5 million and $18.5 million.
• Full Year 2025 Guidance: GMV projected at $2.10 billion to $2.11 billion (15% growth), revenue between $687 million to $690 million (15% growth), and adjusted EBITDA between $37.7 million and $38.7 million (400 basis points improvement).

4. Bad News, Challenges, or Points of Concern

• Declining Take Rate: The take rate decreased by 70 basis points to 37.9% due to a higher mix of direct revenue.
• Competitive Pressures: Increased attention to resale may lead to more entrants in the market, raising concerns about pricing and supply acquisition dynamics.
• Operational Costs: While efficiencies are being realized, the need for continued investment in technology and marketing could pressure margins if not managed carefully.

5. Notable Q&A Insights

• Confidence in Q4 Guidance: Management expressed strong confidence in achieving Q4 targets, citing effective sales and marketing strategies and early success in referral programs.
• Future Growth Expectations: Anticipated growth rates for 2026 are expected to be in the high single digits to low double digits, with potential for higher growth in the first half of the year.
• Supply Acquisition Strategy: Emphasis on the importance of sales, marketing, and retail collaboration to unlock supply, with ongoing testing of drop shipping initiatives.
• Customer Demographics: Noted a younger customer base, primarily millennials and Gen Z, contributing to higher lifetime value and engagement.

Overall, RealReal demonstrated strong performance in Q3 2025, with positive growth metrics and strategic initiatives in place, although it faces challenges related to competitive pressures and operational costs.