The RealReal (NASDAQ:REAL) Exceeds Q4 Expectations But Guidance Underwhelms

Kayode Omotosho /
2023/02/28 4:25 pm EST

Secondhand luxury marketplace The RealReal (NASDAQ: REAL) announced better-than-expected results in the Q4 FY2022 quarter, with revenue up 10% year on year to $159.7 million. However, guidance for the next quarter was less impressive, coming in at $140 million at the midpoint, being 13.2% below analyst estimates. The RealReal made a GAAP loss of $38.6 million, improving on its loss of $52.2 million, in the same quarter last year.

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The RealReal (REAL) Q4 FY2022 Highlights:

  • Revenue: $159.7 million vs analyst estimates of $157.2 million (1.53% beat)
  • EPS (non-GAAP): -$0.29 vs analyst estimates of -$0.36
  • Revenue guidance for Q1 2023 is $140 million at the midpoint, below analyst estimates of $161.4 million
  • Free cash flow was negative $6.97 million, compared to negative free cash flow of $17.4 million in previous quarter
  • Gross Margin (GAAP): 60.5%, up from 55.6% same quarter last year
  • Trailing 12 months Active Buyers : 1 million, up 201 thousand year on year

“We are pleased to announce solid financial results for the fourth quarter and full year 2022, including improved gross profit and Adjusted EBITDA loss on a year-over-year basis,” said Rati Levesque, President and Chief Operating Officer of The RealReal.

Founded by consignment store aficionado Julie Wainwright, The RealReal (NASDAQ: REAL) is an online marketplace for buying and selling secondhand luxury goods.

Marketplaces have existed for centuries. Where once it was a main street in a small town or a mall in the suburbs, sellers benefitted from proximity to one another because they could draw customers by offering convenience and selection. Today, a myriad of online marketplaces fulfill that same role, aggregating large customer bases, which attracts commission paying sellers, generating flywheel scale effects which feed back into further customer acquisition.

Sales Growth

The RealReal's revenue growth over the last three years has been strong, averaging 27.9% annually. 

The RealReal Total Revenue

This quarter, The RealReal reported an mediocre 10% year on year revenue growth, roughly in line with what analysts expected.

The RealReal is guiding for revenue to decline next quarter 4.57% year on year to $140 million, a further deceleration on the 48.5% year-over-year decrease in revenue the company had recorded in the same quarter last year.

In volatile times like these we look for robust businesses with strong pricing power. Unknown to most investors, this company is one of the highest-quality software companies in the world, and their software products have been the default standard in critical industries for decades. The result is an impressive business that is up an incredible 18,152% since the IPO. You can find it on our platform for free.

Usage Growth

As a online marketplace, The RealReal generates revenue growth both by growing the number of buyers using the platform and how much each of those buyers spends.

Over the last two years the number of The RealReal's paying users, a key usage metric for the company, grew 21.6% annually to 1 million users. This is a strong growth for a consumer internet company.

The RealReal Trailing 12 months Active Buyers

In Q4 the company added 201 thousand paying users, translating to a 25.2% growth year on year.

Key Takeaways from The RealReal's Q4 Results

Since it has still been burning cash over the last twelve months it is worth keeping an eye on The RealReal’s balance sheet, but we note that with a market capitalization of $131.4 million and more than $293.8 million in cash, the company has the capacity to continue to prioritise growth over profitability.

This quarter, The RealReal reported a mediocre 10% year on year revenue growth, roughly in line with what analysts expected.

The RealReal may have had a tough quarter, but does that actually create an opportunity to invest right now? It is important that you take into account its valuation and business qualities, as well as what happened in the latest quarter. We look at that in our actionable report which you can read here, it's free.

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The author has no position in any of the stocks mentioned.