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The RealReal (NASDAQ:REAL) Reports Bullish Q1, Stock Soars


Jabin Bastian /
2022/05/10 4:50 pm EDT
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Secondhand luxury marketplace The RealReal (NASDAQ: REAL) reported Q1 FY2022 results beating Wall St's expectations, with revenue up 48.4% year on year to $146.7 million. Guidance for next quarter's revenue was $155 million at the midpoint, 2.16% above the average of analyst estimates. The RealReal made a GAAP loss of $57.4 million, down on its loss of $55.9 million, in the same quarter last year.

Is now the time to buy The RealReal? Access our full analysis of the earnings results here, it's free.

The RealReal (REAL) Q1 FY2022 Highlights:

  • Revenue: $146.7 million vs analyst estimates of $136.3 million (7.59% beat)
  • EPS (non-GAAP): -$0.47 vs analyst estimates of -$0.52
  • Revenue guidance for Q2 2022 is $155 million at the midpoint, above analyst estimates of $151.7 million
  • The company reconfirmed revenue guidance for the full year, at $650 million at the midpoint
  • Free cash flow was negative $57.8 million, compared to negative free cash flow of $28.4 million in previous quarter
  • Gross Margin (GAAP): 53.5%, down from 59% same quarter last year
  • Trailing 12 months Active Buyers : 828 thousand, up 141 thousand year on year

“We are pleased with our financial results for the first quarter of 2022, which exceeded our expectations on both the top- and bottom-line. The strong growth is particularly noteworthy given the COVID-related staff absences in our Authentication Centers early in the year, which negatively impacted the time for processing and launching items on our website. During the first quarter, we also continued to deliver significant operating expense leverage on both our fixed and variable expenses,” said Julie Wainwright, founder and CEO 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 very strong, averaging 33.6% annually. The RealReal's revenue took a hit when the pandemic first hit, but it has since rebounded strongly, as you can see below.

The RealReal Total Revenue

This quarter, The RealReal beat analyst estimates and reported an impressive 48.4% year on year revenue growth.

Guidance for the next quarter indicates The RealReal is expecting revenue to grow 47.7% year on year to $155 million, slowing down from the 83.1% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 34.8% over the next twelve months.

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 18.9% annually to 828 thousand users. This is a strong growth for a consumer internet company.

The RealReal Trailing 12 months Active Buyers

In Q1 the company added 141 thousand paying users, translating to a 20.5% growth year on year.

Key Takeaways from The RealReal's Q1 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 $435 million and more than $361 million in cash, the company has the capacity to continue to prioritise growth over profitability.

We were impressed by the exceptional revenue growth The RealReal delivered this quarter. Zooming out, we think this impressive quarter should have shareholders feeling very positive. The company is up 9.52% on the results and currently trades at $4.83 per share.

The RealReal may have had a good quarter, so should you 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.