REAL — The RealReal, Inc.

Summary of The RealReal (REAL) Q4 2025 Earnings Call

1. Key Financial Results and Metrics

• Q4 GMV: $616 million, up 22% year-over-year.
• Full Year GMV: $2.13 billion, a 16% increase from the previous year.
• Q4 Total Revenue: $194 million, an 18% increase; consignment revenue rose 16%.
• Direct Revenue: Increased 39% in Q4 compared to the previous year.
• Adjusted EBITDA: $22 million in Q4 (11.3% margin), a $11 million increase year-over-year; full year adjusted EBITDA of $42 million (6.1% margin).
• Free Cash Flow: $43 million in Q4, a $23 million improvement year-over-year.
• Gross Margin: 74.8% in Q4, up 40 basis points year-over-year; full year gross margin at 74.6%.

2. Strategic Updates and Business Highlights

• Growth Playbook: Focus on unlocking supply through enhanced sales strategies and AI tools, including Smart Sales and Athena for operational efficiency.
• Customer Engagement: Active buyer growth accelerated to 9% on a trailing 12-month basis; 40% of new consignors came from existing buyers.
• Operational Excellence: 35% of units processed through Athena by year-end, contributing to operational leverage and reduced cycle times for item listings.
• MyCloset Initiative: Evolving to provide customers with tools for tracking and capitalizing on closet value, enhancing the customer experience.
• AI Integration: Continued investment in AI for pricing, authentication, and enhancing customer discovery through improved search functionalities.

3. Forward Guidance and Outlook

• 2026 GMV Growth: Projected between 12% to 15%.
• Revenue Growth: Expected between 10% to 13%.
• Adjusted EBITDA: Forecasted to be between $57 million and $65 million, representing an increase in margin to approximately 8%.
• Q1 Guidance: GMV growth anticipated between 19% to 22% and revenue growth between 16% to 18%.

4. Challenges and Points of Concern

• Take Rate Decline: Q4 take rate was 36.5%, down 120 basis points year-over-year due to a shift towards higher-value items with lower percentage take rates.
• Market Sensitivity: The business is closely tied to the luxury market's health, which has shown mixed signals.
• Competitive Pressures: The luxury resale market is becoming increasingly competitive, necessitating continuous innovation and customer engagement strategies.

5. Notable Q&A Insights

• Athena's Impact: The AI tool is expected to expand its processing capabilities into mid- and high-value items, improving operational efficiency and customer satisfaction.
• Sales Team Efficiency: The company is focusing on both hiring and optimizing the existing sales team to enhance productivity and supply growth.
• Drop Shipping Initiatives: Testing in categories like watches and handbags is ongoing, with plans to expand but not seen as a primary growth driver.
• AI in Supply Procurement: AI is being leveraged to enhance the seller experience, targeting better engagement and conversion from buyers to consignors.
• Operational Leverage: The majority of margin expansion is expected to come from operational efficiencies, particularly in operations and tech.

Overall, The RealReal demonstrated strong financial performance in Q4 2025, with significant growth in GMV and revenue, while also outlining strategic initiatives aimed at sustaining this momentum into 2026. However, challenges related to take rates and market conditions remain pertinent.