REAL 8-K

TheRealReal, Inc. (REAL)

8-K 2020-11-09 For: 2020-11-09

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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: November 9, 2020	By:	/s/ Matt Gustke
		Matt Gustke
		Chief Financial Officer

	Three Months Ended September 30,						Nine Months Ended September 30,
	2020			2019			2020			2019
Revenue:
Consignment and service revenue	$	64,407		$	69,245		$	176,570		$	184,890
Direct revenue		13,645			12,271			37,111			39,417
Total revenue		78,052			81,516			213,681			224,307
Cost of revenue:
Cost of consignment and service revenue		16,304			19,446			47,253			52,592
Cost of direct revenue		11,964			9,842			31,678			31,056
Total cost of revenue		28,268			29,288			78,931			83,648
Gross profit		49,784			52,228			134,750			140,659
Operating expenses:
Marketing		15,186			13,390			37,747			36,838
Operations and technology		40,578			37,407			117,858			103,271
Selling, general and administrative		35,384			28,436			103,047			76,110
Total operating expenses (1)		91,148			79,233			258,652			216,219
Loss from operations		(41,364	)		(27,005	)		(123,902	)		(75,560	)
Interest income		448			1,902			2,350			2,918
Interest expense		(2,406	)		(60	)		(2,810	)		(572	)
Other income (expense), net		—			(119	)		(89	)		(2,106	)
Loss before provision for income taxes		(43,322	)		(25,282	)		(124,451	)		(75,320	)
Provision (benefit) for income taxes		(17	)		(8	)		38			51
Net loss	$	(43,305	)	$	(25,274	)	$	(124,489	)	$	(75,371	)
Accretion of redeemable convertible preferred stock to redemption value	$	—		$	—		$	—		$	(3,355	)
Net loss attributable to common stockholders	$	(43,305	)	$	(25,274	)	$	(124,489	)	$	(78,726	)
Net loss per share attributable to common stockholders, basic and diluted	$	(0.49	)	$	(0.30	)	$	(1.43	)	$	(2.28	)
Weighted average shares used to compute net loss per share attributable to common stockholders, basic and diluted		87,869,321			84,634,956			87,176,677			34,556,485

(1) Includes stock-based compensation as follows:
Marketing	$	705		$	145		$	1,228		$	287
Operating and technology		2,892			1,098			7,222			2,064
Selling, general and administrative (2)		3,775			1,277			8,461			3,384
Total	$	7,372		$	2,520		$	16,911		$	5,735

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

	September 30, 2020			December 31, 2019
Assets
Current assets
Cash and cash equivalents	$	343,092		$	154,446
Short-term investments		52,156			208,811
Accounts receivable		4,559			7,779
Inventory, net		19,236			23,599
Prepaid expenses and other current assets		18,255			13,804
Total current assets		437,298			408,439
Property and equipment, net		61,944			55,831
Operating lease right-of-use assets		115,013			—
Other assets		2,020			2,660
Total assets	$	616,275		$	466,930
Liabilities and Stockholders’ Equity
Current liabilities
Accounts payable	$	5,410		$	11,159
Accrued consignor payable		44,490			52,820
Operating lease liabilities, current portion		15,263			—
Other accrued and current liabilities		55,767			54,567
Total current liabilities		120,930			118,546
Operating lease liabilities, net of current portion		111,680			—
Convertible senior notes, net		148,057			—
Other noncurrent liabilities		1,300			9,456
Total liabilities		381,967			128,002
Stockholders’ equity:
Common stock, $0.00001 par value; 500,000,000 shares authorized as of September 30, 2020 and December 31, 2019; 88,532,457 and 85,872,320 shares issued and outstanding as of September 30, 2020 and December 31, 2019, respectively		1			1
Additional paid-in capital		713,195			693,426
Accumulated other comprehensive income		107			7
Accumulated deficit		(478,995	)		(354,506	)
Total stockholders’ equity		234,308			338,928
Total liabilities and stockholders’ equity	$	616,275		$	466,930

	Nine Months Ended September 30,
	2020			2019
Cash flows from operating activities:
Net loss	$	(124,489	)	$	(75,371	)
Adjustments to reconcile net loss to cash used in operating activities:
Depreciation and amortization		13,673			9,537
Stock-based compensation expense		16,911			4,916
Reduction of operating lease right-of-use assets		12,003			—
Bad debt expense		661			1,208
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		39			70
Accretion of debt discounts and issuance costs		1,268			11
Amortization of premiums (discounts) on short-term investments		(114	)		38
Changes in operating assets and liabilities:
Accounts receivable		2,559			(2,572	)
Inventory, net		4,363			(3,491	)
Prepaid expenses and other current assets		(4,626	)		(3,375	)
Other assets		578			136
Operating lease liability		(8,710	)		—
Accounts payable		(4,164	)		1,394
Accrued consignor payable		(8,330	)		4,611
Other accrued and current liabilities		2,511			494
Other noncurrent liabilities		(150	)		1,356
Net cash used in operating activities		(96,017	)		(58,119	)
Cash flow from investing activities:
Purchases of short-term investments		(73,280	)		(12,169	)
Proceeds from maturities of short-term investments		222,217			33,998
Proceeds from sale of short-term investments		7,932			—
Capitalized proprietary software development costs		(6,640	)		(6,670	)
Purchases of property and equipment		(15,685	)		(16,111	)
Net cash provided by (used in) investing activities		134,544			(952	)
Cash flow from financing activities:
Proceeds from issuance of common stock in initial public offering, net of issuance costs		—			315,486
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		166,278			—
Purchase of capped calls		(22,546	)		—
Proceeds from exercise of stock options and common stock warrants		7,135			2,448
Taxes paid related to restricted stock vesting		(748	)		(20	)
Repayment of debt		—			(9,250	)
Net cash provided by financing activities		150,119			378,439
Net increase in cash, cash equivalents and restricted cash		188,646			319,368
Cash, cash equivalents, and restricted cash
Beginning of period		154,446			45,627
End of period	$	343,092		$	364,995

	March 31, 2019			June 30, 2019			September 30, 2019			December 31, 2019			March 31, 2020			June 30, 2020			September 30, 2020
	(In thousands, except AOV and percentages)
GMV	$	224,116		$	228,487		$	252,766		$	302,975		$	257,606		$	182,771		$	245,355
NMV	$	160,538		$	164,782		$	186,617		$	219,508		$	184,625		$	139,797		$	189,059
Consignment and Services Revenue	$	55,575		$	60,070		$	69,245		$	82,522		$	65,297		$	46,866		$	64,407
Direct Revenue	$	15,007		$	12,139		$	12,271		$	11,209		$	12,942		$	10,523		$	13,645
Number of Orders		498			505			577			637			574			438			550
Take Rate		35.3	%		36.6	%		36.8	%		36.2	%		36.2	%		36.0	%		35.4	%
Active Buyers		456			492			543			582			602			612			617
AOV	$	450		$	453		$	438		$	476		$	449		$	417		$	446
% of GMV from Repeat Buyers		82.4	%		83.1	%		81.8	%		82.9	%		84.4	%		82.3	%		82.9	%

	January	February	March	April	May	June	July	August	Sept.	October

Y/Y Growth	28%	30%	-15%	-33%	-19%	-8%	-2%	-6%	-1%	-5%

	April	May	June	July	2Q20	3Q20

New York City	-58%	-54%	-35%	-1%	-49%	2%
Los Angeles	-52%	-36%	-25%	-11%	-38%	-10%
Other	-40%	-16%	-5%	8%	-20%	7%
Total	-46%	-28%	-15%	3%	-29%	3%