The RealReal (NASDAQ:REAL) Surprises With Strong Q4, Stock Soars On Strong Guidance

Kayode Omotosho /
2022/02/23 4:27 pm EST
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Secondhand luxury marketplace The RealReal (NASDAQ: REAL) reported Q4 FY2021 results topping analyst expectations, with revenue up 68.2% year on year to $145.1 million. The company expects that next quarter's revenue would be around $135 million, which is the midpoint of the guidance range. That was in roughly line with analyst expectations. The RealReal made a GAAP loss of $52.1 million, down on its loss of $51.3 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) Q4 FY2021 Highlights:

  • Revenue: $145.1 million vs analyst estimates of $135 million (7.47% beat)
  • EPS (non-GAAP): -$0.42 vs analyst estimates of -$0.39
  • Revenue guidance for Q1 2022 is $135 million at the midpoint, above analyst estimates of $134.2 million
  • Management's revenue guidance for upcoming financial year 2022 is $650 million at the midpoint, beating analyst estimates by 8.76% and predicting 38.9% growth (vs 57.6% in FY2021)
  • Free cash flow was negative $28.4 million, compared to negative free cash flow of $47.3 million in previous quarter
  • Gross Margin (GAAP): 55.5%, down from 61.2% same quarter last year
  • Trailing 12 months Active Buyers : 797 thousand, up 149 thousand year on year

“We are pleased to announce solid financial results for fourth quarter 2021, including Adjusted EBITDA loss that improved both sequentially and on a year-over-year basis. The improvements were driven primarily by strong top-line growth and operating expense leverage across all major functions of the business,” 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 33.9% annually. The RealReal's revenue took a hit when the pandemic first hit, but it has since rebounded, as you can see below.

The RealReal Total Revenue

This quarter, The RealReal beat analyst estimates and reported a very impressive 68.2% year on year revenue growth.

Guidance for the next quarter indicates The RealReal is expecting revenue to grow 36.6% year on year to $135 million, improving on the 26.6% year-over-year increase in revenue the company had recorded in the same quarter last year. For the upcoming financial year management expects revenue to be $650 million at the midpoint, growing 38.9% compared to 57.6% increase in FY2021.

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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 18.7% annually to 797 thousand users. This is a strong growth for a consumer internet company.

The RealReal Trailing 12 months Active Buyers

In Q4 the company added 149 thousand paying users, translating to a 22.9% 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 $737.2 million and more than $418.1 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. And we were also glad that the revenue guidance for the full year exceeded analysts' expectations. Zooming out, we think this was a fantastic quarter that should have shareholders cheering. The company is up 6.17% on the results and currently trades at $7.56 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.