The RealReal's (NASDAQ:REAL) Posts Q2 Sales In Line With Estimates But Stock Drops

Kayode Omotosho /
2022/08/09 4:43 pm EDT

Secondhand luxury marketplace The RealReal (NASDAQ: REAL) reported results in line with analyst expectations in Q2 FY2022 quarter, with revenue up 47.2% year on year to $154.4 million. However, guidance for the next quarter was less impressive, coming in at $150 million at the midpoint, being 8.72% below analyst estimates. The RealReal made a GAAP loss of $53.1 million, improving on its loss of $70.7 million, in the same quarter last year.

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The RealReal (REAL) Q2 FY2022 Highlights:

  • Revenue: $154.4 million vs analyst estimates of $153.9 million (small beat)
  • EPS (non-GAAP): -$0.40 vs analyst estimates of -$0.45
  • Revenue guidance for Q3 2022 is $150 million at the midpoint, below analyst estimates of $164.3 million
  • The company dropped revenue guidance for the full year, from $650 million to $625 million at the midpoint, a 3.84% decrease
  • Free cash flow was negative $46.3 million, compared to negative free cash flow of $57.8 million in previous quarter
  • Gross Margin (GAAP): 56.7%, down from 60.4% same quarter last year
  • Trailing 12 months Active Buyers : 889 thousand, up 159 thousand year on year

“Overall, The RealReal delivered solid results in the second quarter of 2022. While top-line GMV growth was slightly lower than expected, we met our revenue projections and exceeded our guidance on Adjusted EBITDA. Our top-line growth experienced some pressure during the second quarter due to a sales labor-related supply shortfall and a mix of product sold more reflective of our pre-COVID mix. We implemented multiple strategies to address the sales labor-related supply shortfall, including by refocusing recruitment efforts on staffing the sales team, hiring a new Chief Revenue Officer, selectively increasing compensation in key markets, and utilizing technology for consignors to self-serve. We believe these actions are meaningful steps in addressing the underlying labor shortage and position us well for a step-up in supply for the fourth quarter of 2022. Furthermore, our leads and opportunities for consignment remain robust,” said Rati Sahi Levesque, Co-Interim Chief Executive Officer (“CEO”), 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 very strong, averaging 33% annually.

The RealReal Total Revenue

This quarter, The RealReal reported an impressive 47.2% year on year revenue growth, in line with analysts' expectations.

Guidance for the next quarter indicates The RealReal is expecting revenue to grow 26.2% year on year to $150 million, slowing down from the 52.7% 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 28.7% over the next twelve months.

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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 18.6% annually to 889 thousand users. This is a solid growth for a consumer internet company.

The RealReal Trailing 12 months Active Buyers

In Q2 the company added 159 thousand paying users, translating to a 21.7% growth year on year.

Key Takeaways from The RealReal's Q2 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 $340.6 million and more than $315.8 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 to see the user growth. On the other hand, it was unfortunate to see that the revenue guidance for the full year missed analysts' expectations and the revenue guidance for the next quarter missed analysts' expectations. Overall, this quarter's results were not the best we've seen from The RealReal. The company is down 7.86% on the results and currently trades at $2.81 per share.

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.