REAL 8-K

TheRealReal, Inc. (REAL)

8-K 2020-08-06 For: 2020-08-06

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Delaware		001-38953	45-1234222
(State or Other Jurisdiction of Incorporation)		(Commission File Number)	(IRS Employer Identification No.)

	55 Francisco Street Suite 600 San Francisco, CA 94133
	(Address of Principal Executive Offices, including Zip Code)

	The RealReal, Inc.

Date: August 6, 2020	By:	/s/ Matt Gustke
		Matt Gustke
		Chief Financial Officer

	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019
Revenue:
Consignment and service revenue	$	46,866		$	60,070		$	112,163		$	115,645
Direct revenue		10,523			12,139			23,466			27,146
Total revenue		57,389			72,209			135,629			142,791
Cost of revenue:
Cost of consignment and service revenue		12,860			17,200			30,949			33,146
Cost of direct revenue		8,760			8,959			19,714			21,213
Total cost of revenue		21,620			26,159			50,663			54,359
Gross profit		35,769			46,050			84,966			88,432
Operating expenses:
Marketing		9,639			11,715			22,561			23,448
Operations and technology		36,543			34,320			77,280			65,865
Selling, general and administrative		32,559			25,355			67,663			47,674
Total operating expenses (1)		78,741			71,390			167,504			136,987
Loss from operations		(42,972	)		(25,340	)		(82,538	)		(48,555	)
Interest income		616			610			1,902			1,015
Interest expense		(384	)		(380	)		(404	)		(511	)
Other income (expense), net		(97	)		(1,706	)		(89	)		(1,987	)
Loss before provision for income taxes		(42,837	)		(26,816	)		(81,129	)		(50,038	)
Provision for income taxes		55			59			55			59
Net loss	$	(42,892	)	$	(26,875	)	$	(81,184	)	$	(50,097	)
Accretion of redeemable convertible preferred stock to redemption value	$	—		$	—		$	—		$	(3,355	)
Net loss attributable to common stockholders	$	(42,892	)	$	(26,875	)	$	(81,184	)	$	(53,452	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.49	)	$	(2.83	)	$	(0.94	)	$	(5.87	)
Weighted average shares used to compute net loss per share attributable to common stockholders, basic and diluted		87,064,384			9,494,447			86,826,590			9,102,234

(1) Includes stock-based compensation as follows:
Marketing	$	335		$	74		$	523		$	143
Operating and technology		2,852			476			4,330			966
Selling, general and administrative (2)		2,942			737			4,686			2,107
Total	$	6,129		$	1,287		$	9,539		$	3,216

(2) Includes compensation expense related to stock sales by current and former employees in March 2019.

	June 30, 2020			December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	304,348		$	154,446
Short-term investments		105,934			208,811
Accounts receivable		6,312			7,779
Inventory, net		20,705			23,599
Prepaid expenses and other current assets		14,950			13,804
Total current assets		452,249			408,439
Property and equipment, net		60,000			55,831
Operating lease right-of-use assets		118,798			—
Other assets		3,013			2,660
Total assets	$	634,060		$	466,930
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	5,989		$	11,159
Accrued consignor payable		34,883			52,820
Operating lease liabilities, current portion		15,045			—
Other accrued and current liabilities		46,636			54,567
Total current liabilities		102,553			118,546
Operating lease liabilities, net of current portion		115,608			—
Convertible senior notes, net		146,958			—
Other noncurrent liabilities		1,040			9,456
Total liabilities		366,159			128,002
Stockholders’ equity:
Common stock, $0.00001 par value; 500,000,000 shares authorized as of June 30, 2020 and December 31, 2019; 87,348,241 and 85,872,320 shares issued and outstanding as of June 30, 2020 and December 31, 2019, respectively		1			1
Additional paid-in capital		703,189			693,426
Accumulated other comprehensive income		401			7
Accumulated deficit		(435,690	)		(354,506	)
Total stockholders’ equity		267,901			338,928
Total liabilities and stockholders’ equity	$	634,060		$	466,930

	Six Months Ended June 30,
	2020			2019
Cash flows from operating activities:
Net loss	$	(81,184	)	$	(50,097	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		8,756			5,993
Stock-based compensation expense		9,539			2,397
Reduction of operating lease right-of-use assets		8,059			—
Bad debt expense		474			681
Compensation expense related to stock sales by current and former employees		—			819
Change in fair value of convertible preferred stock warrant liability		—			2,100
Accretion of unconditional endowment grant liability		27			44
Accretion of debt discounts and issuance costs		169			9
Amortization of premiums (discounts) on short-term investments		(251	)		42
Changes in operating assets and liabilities:
Accounts receivable		993			(2,627	)
Inventory, net		2,894			(2,309	)
Prepaid expenses and other current assets		(1,321	)		(867	)
Other assets		(394	)		411
Operating lease liability		(4,842	)		—
Accounts payable		(5,529	)		157
Accrued consignor payable		(17,937	)		(1,855	)
Other accrued and current liabilities		(5,624	)		(1,744	)
Other noncurrent liabilities		(410	)		672
Net cash used in operating activities		(86,581	)		(46,174	)
Cash flow from investing activities:
Purchases of short-term investments		(73,280	)		(9,151	)
Proceeds from maturities of short-term investments		176,802			22,898
Capitalized proprietary software development costs		(3,779	)		(3,887	)
Purchases of property and equipment		(10,861	)		(10,042	)
Net cash provided by (used in) investing activities		88,882			(182	)
Cash flow from financing activities:
Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs		—			43,492
Proceeds from issuance of convertible preferred stock, net of issuance costs		—			26,283
Proceeds from issuance of convertible senior notes, net of issuance costs		166,314			—
Purchase of capped calls		(22,546	)		—
Proceeds from exercise of stock options and common stock warrants		4,354			1,775
Payment of deferred offering costs		—			(3,057	)
Taxes paid related to restricted stock vesting		(521	)		—
Repayment of debt		—			(2,750	)
Net cash provided by financing activities		147,601			65,743
Net increase in cash, cash equivalents and restricted cash		149,902			19,387
Cash, cash equivalents, and restricted cash
Beginning of period		154,446			45,627
End of period	$	304,348		$	65,014

	June 30, 2018			September 30, 2018			December 31, 2018			March 31, 2019			June 30, 2019			September 30, 2019			December 31, 2019			March 31, 2020			June 30, 2020
	(In thousands, except AOV and percentages)
GMV	$	162,954		$	170,923		$	218,495		$	224,116		$	228,487		$	252,766		$	302,975		$	257,606		$	182,771
NMV	$	115,916		$	123,550		$	153,776		$	160,538		$	164,782		$	186,617		$	219,508		$	184,625		$	139,797
Consignment and Services Revenue	$	41,426		$	44,968		$	53,894		$	55,575		$	60,070		$	69,245		$	82,522		$	65,297		$	46,866
Direct Revenue	$	7,021		$	8,255		$	10,449		$	15,007		$	12,139		$	12,271		$	11,209		$	12,942		$	10,523
Number of Orders		359			409			471			498			505			577			637			574			438
Take Rate		35.5	%		36.4	%		34.9	%		35.3	%		36.6	%		36.8	%		36.2	%		36.2	%		36.0	%
Active Buyers		352			379			416			456			492			543			582			602			612
AOV	$	453		$	418		$	464		$	450		$	453		$	438		$	476		$	449		$	417
% of GMV from Repeat Buyers		82.9	%		82.9	%		81.6	%		82.4	%		83.1	%		81.8	%		82.9	%		84.4	%		82.3	%

	January	February	March	April	May	June	July

Y/Y Growth	28%	30%	-15%	-33%	-19%	-8%	-2%