The RealReal's (NASDAQ:REAL) Q1 Sales Top Estimates, Next Quarter's Growth Looks Optimistic

Radek Strnad /
2024/05/07 4:58 pm EDT

Secondhand luxury marketplace The RealReal (NASDAQ: REAL) announced better-than-expected results in Q1 CY2024, with revenue up 1.3% year on year to $143.8 million. The company expects next quarter's revenue to be around $140 million, in line with analysts' estimates. It made a non-GAAP loss of $0.12 per share, improving from its loss of $0.83 per share in the same quarter last year.

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The RealReal (REAL) Q1 CY2024 Highlights:

  • Revenue: $143.8 million vs analyst estimates of $139.2 million (3.3% beat)
  • EPS (non-GAAP): -$0.12 vs analyst estimates of -$0.15
  • Revenue Guidance for Q2 CY2024 is $140 million at the midpoint, roughly in line with what analysts were expecting (adjusted EBITDA guidance for Q2 is better than expectations)
  • The company reconfirmed its revenue guidance for the full year of $592.5 million at the midpoint
  • Gross Margin (GAAP): 74.6%, up from 63.4% in the same quarter last year
  • Free Cash Flow was -$8.79 million, down from $1.45 million in the previous quarter
  • Active Buyers : 922,000, down 92,000 year on year
  • Market Capitalization: $440.8 million

“We continue to focus on the core consignment business and driving efficiencies to deliver results. In the first quarter of 2024 we grew profitable consignment supply, which resulted in a return to overall top-line growth and an all-time high gross margin rate,” said John Koryl, Chief Executive 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.

Online Marketplace

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 that feed back into further customer acquisition.

Sales Growth

The RealReal's revenue growth over the last three years has been strong, averaging 24.6% annually. This quarter, The RealReal beat analysts' estimates but reported lacklustre 1.3% year-on-year revenue growth.

The RealReal Total Revenue

Guidance for the next quarter indicates The RealReal is expecting revenue to grow 7% year on year to $140 million, improving from the 15.3% year-on-year decline it recorded in the comparable quarter last year. Ahead of the earnings results, analysts were projecting sales to grow 9.6% over the next 12 months.

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Usage Growth

As an online marketplace, The RealReal generates revenue growth by increasing both the number of users on its platform and the average order size in dollars.

Over the last two years, The RealReal's users, a key performance metric for the company, grew 10.9% annually to 922,000. This is decent growth for a consumer internet company.

The RealReal Active Buyers

Unfortunately, The RealReal's users decreased by 92,000 in Q1, a 9.1% drop since last year.

Revenue Per User

Average revenue per user (ARPU) is a critical metric to track for consumer internet businesses like The RealReal because it measures how much the company earns in transaction fees from each user. Furthermore, ARPU gives us unique insights as it's a function of a user's average order size and The RealReal's take rate, or "cut", on each order.

The RealReal ARPU

The RealReal's ARPU has declined over the last two years, averaging 4.6%. Although the company's users have continued to grow, it's lost its pricing power and will have to make improvements soon. This quarter, ARPU grew 11.4% year on year to $155.97 per user.

Key Takeaways from The RealReal's Q1 Results

It was great to see The RealReal beat analysts' revenue expectations this quarter. We were also glad next quarter's revenue and adjusted EBITDA guidance both came in higher than Wall Street's estimates. On the other hand, its number of users declined and its revenue growth was quite weak. Overall, this was a mediocre quarter for The RealReal. The stock is up 3.3% after reporting and currently trades at $3.9 per share.

So should you invest in The RealReal right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.