Q4 2025 TheRealReal Inc Earnings Call

February 26, 2026

Speaker #1: Good afternoon, everyone. My name is Lenius, and I will be your conference operator today. At this time, I would like to welcome you to the RealReal fourth-quarter 2025 earnings call.

Operator: Good afternoon, everyone. My name is Lenius, and I will be your conference operator today. At this time, I would like to welcome you to The RealReal Q4 2025 Earnings Call. All lines have been placed on mute. After the speaker's remarks, there will be a question and answer session. At this time, I would like to turn the call over to Caitlin Howe, Senior Vice President of Finance.

Speaker #1: All lines have been placed on mute. After the speaker's remarks, there will be a question-and-answer session. At this time, I would like to turn the call over to Caitlin Howe, Senior Vice President of Finance.

Speaker #2: Thank you, Operator. Joining me today to discuss our results for the period ended December 31, 2025 are Chief Executive Officer and President Rati Levesque, and Chief Financial Officer Ajay Gopal.

Caitlin Howe: Thank you, operator. Joining me today to discuss our results for the period ended 31 December 2025, are Chief Executive Officer and President, Rati Leveque, and Chief Financial Officer, Ajay Gopal. Before we begin, I would like to remind you that during today's call, we will make forward-looking statements which involve known and unknown risks and uncertainties. Our actual results may differ materially from those suggested in such statements. You can find more information about these risks, uncertainties, and other factors that could affect our operating results in the company's most recent Form 10-K and subsequent quarterly reports on Form 10-Q. Today's presentation will also include certain non-GAAP financial measures, both historical and forward-looking. We have provided reconciliations for historical non-GAAP financial measures to the most comparable GAAP measures in our earnings press release, which is available on our investor relations website.

Speaker #2: Before we begin, I would like to remind you that during today's call, we will make forward-looking statements which involve known and unknown risks and uncertainties.

Speaker #2: Our actual results may differ materially from those suggested in such statements. You can find more information about these risks, uncertainties, and other factors that could affect our operating results in the company's most recent Form 10-K and subsequent quarterly reports on Form 10-Q.

Speaker #2: Today's presentation will also include certain non-GAAP financial measures, both historical and forward-looking. We have provided reconciliations for historical non-GAAP financial measures to the most comparable GAAP measures in our earnings investor relations website.

Speaker #2: I would now like to turn the call over to Rati Levesque, Chief Executive Officer of the RealReal.

Caitlin Howe: I would now like to turn the call over to Rati Leveque, Chief Executive Officer of The RealReal.

Speaker #3: Thank you, Caitlin, and good afternoon, everyone. Thanks for joining us as we discuss our fourth-quarter and full-year results. 2025 was a transformative year for the RealReal.

Rati Sahi Levesque: Thank you, Caitlin, and good afternoon, everyone. Thanks for joining us as we discuss our Q4 and full year results. 2025 was a transformative year for The RealReal. We accelerated top line growth throughout the year, culminating in exceptional Q4 performance. We delivered $616 million in GMV for the quarter, representing 22% growth while achieving an Adjusted EBITDA margin of 11%. During the Q4, we surpassed the $2 billion mark in GMV for the year, a milestone for The RealReal that gives us further confidence in our growth trajectory and our market leadership position. For the full year, we delivered $2.1 billion in GMV and our first year of positive Adjusted EBITDA in every quarter, demonstrating our ability to scale profitably while maintaining strong momentum.

Speaker #3: We accelerated top-line growth throughout the year, culminating in exceptional fourth-quarter performance. We delivered 616 million dollars in GMV for the quarter, representing 22% growth while achieving an adjusted EBITDA margin of 11%.

Speaker #3: During the fourth quarter, we surpassed the 2 billion dollar mark in GMV for the year, a milestone for the RealReal that gives us further confidence in our growth trajectory and our market leadership position.

Speaker #3: For the full year, we delivered 2.1 billion dollars in GMV and our first year of positive adjusted EBITDA in every quarter, demonstrating our ability to scale profitably while maintaining strong momentum.

Speaker #3: Before Ajay walks you through our detailed results in a moment, let me provide some context. Our performance in 2025 is the result of years of laying the groundwork for the luxury resale market and refining our business model.

Rati Sahi Levesque: Before Ajay walks you through our detailed results in a moment, let me provide some context. Our performance in 2025 is the result of years of laying the groundwork for the luxury resale market and refining our business model. We built a durable and hard to replicate foundation that uniquely positions us to lead and create long-term value. We are leading a fundamental shift in the luxury consumer's mindset. Our customers have begun to view their closets as a portfolio of assets to be tracked, actively managed, and eventually monetized. With 47% of all consumers considering resale value when making a purchase in the primary market, we are influencing the luxury consumer's behavior in a meaningful way. I see us becoming the personal advisor of the closet, providing tools, access to information, and curated insights.

Speaker #3: We've built a durable and hard-to-replicate foundation that uniquely positions us to lead and create long-term value. We are leading a fundamental shift in the luxury consumer's mindset.

Speaker #3: Our customers have begun to view their closets as a portfolio of assets to be tracked, actively managed, and eventually monetized. With 47% of all consumers considering resale value when making a purchase in the primary market, we are influencing the luxury consumer's behavior in a meaningful way.

Speaker #3: I see us becoming the personal advisor of the closet, providing tools, access to information, and curated insights. Today, we are blending uniqueness, quality, and depth with the commercial scale and accessibility that only the RealReal can offer.

Rati Sahi Levesque: Today, we are blending uniqueness, quality, and depth with the commercial scale and accessibility that only The RealReal can offer. We are leaning into this vision through disciplined execution of our three strategic pillars. First, our growth playbook, which is how we unlock supply through meeting the customer where they are. Second, operational excellence, which is how we drive profitability. Third, obsess over service, where we uplevel our experience. These efforts are underpinned by a foundational culture of trust with our community of over 40 million members. Diving into our growth playbook, our sales team, which we built over the last 15 years, is a competitive differentiator that anchors our growth playbook. Our model combines art and science, deep personal relationships our team cultivates with consignors, accelerated by data and insights.

Speaker #3: We are leaning into this vision through disciplined execution of our three strategic pillars: first, our growth playbook, which is how we unlock supply through meeting the customer where they are; second, operational excellence, which is how we drive profitability; and third, obsess over service, where we uplevel our experience.

Speaker #3: These efforts are underpinned by a foundational culture of trust with our community of over 40 million members. Diving into our growth playbook, our sales team, which we've built over the last 15 years, is a competitive differentiator that anchors our growth playbook.

Speaker #3: Our model combines art and science, deep personal relationships, our team cultivates with consignors, accelerated by data and insights. Last year, we rolled out Smart Sales, our AI-enabled tool that automates lead scoring, ensuring our sales team is mobilized towards the highest value supply opportunities.

Rati Sahi Levesque: Last year, we rolled out Smart Sales, our AI-enabled tool that automates lead scoring, ensuring our sales team is mobilized towards the highest value supply opportunities. In Q4, we launched a new tool for our sales team, which leverages our vast data and AI-led pricing algorithms to provide real-time valuation estimates. It allows for a more precise dialogue with consignors about their expected earnings and strengthens our position as a trusted advisor. Sales team tenure reached an all-time high in Q4, with 54% of our team at TRR for 2 years or longer. The longer a sales associate is with TRR, the more productive they become. On average, an experienced sales rep delivered approximately 20% more value than a first-year sales professional. Our marketing engine drives our sales execution. Active buyer growth accelerated in Q4 to 9% on a trailing 12-month basis.

Speaker #3: In Q4, we launched a new tool for our sales team, which leverages our vast data and AI-led pricing algorithms to provide real-time valuation estimates.

Speaker #3: It allows for a more precise dialogue with consignors about their expected earnings and strengthens our position as a trusted advisor. Sales team tenure reached an all-time high in Q4, with 54% of our team at TRR for two years or longer.

Speaker #3: The longer a sales associate is with TRR, the more productive they become. On average, an experienced sales rep delivered approximately 20% more value than a first-year sales professional.

Speaker #3: Our marketing engine drives our sales execution. Active buyer growth accelerated in Q4 to 9% on a trailing 12-month basis. We aren't just finding shoppers; we are identifying future consignors.

Rati Sahi Levesque: We aren't just finding shoppers, we are identifying future consignors. Our Q4 results highlight the supply wheel in action. 40% of new consignors come from our existing buyer base. By turning buyers into sellers, we're acquiring supply more cost effectively while deepening the loyalty of our community. We accelerated new buyer growth in Q4, and we believe it's a positive catalyst for future supply. Through leveraging social channels and high impact creative like our holiday influencer campaigns, we've energized our existing customers and attracted a new generation of luxury shoppers. Our second pillar, operational excellence, is centered on scaling our unique technology and operational advantages. Our current industry-leading authentication approach is the result of years of strategic development. To date, we've received 12 patents formally recognizing our innovations in luxury resale and positioning us to capitalize on AI as an enablement tool in authentication and pricing.

Speaker #3: Our Q4 results highlight the supply wheel in action, 40% of new consignors come from our existing buyer base. By turning buyers into sellers, we're acquiring supply more cost-effectively while deepening the loyalty of our community.

Speaker #3: We accelerated new buyer growth in Q4, and we believe it's a positive catalyst for future supply. Through leveraging social channels and high-impact creative like our holiday influencer campaigns, we've energized our existing customers and attracted a new generation of luxury shoppers.

Speaker #3: Our second pillar, operational excellence, is centered on scaling our unique technology and operational advantages. Our current industry-leading authentication approach is the result of years of strategic development.

Speaker #3: To date, we've received 12 patents formally recognizing our innovations in luxury resale, and positioning us to capitalize on AI as an enablement tool in authentication and pricing.

Speaker #3: We continue to lean into our authentication expertise through Athena, our proprietary AI-enabled intake process. Athena is designed to optimize the blend of human expertise and technology.

Rati Sahi Levesque: We continue to lean into our authentication expertise through Athena, our proprietary AI-enabled intake process. Athena is designed to optimize the blend of human expertise and technology. By automating the repetitive data-driven tasks, we are reducing costs and increasing speed to site. A core advantage of our model involves physical possession. When our experts have an item in hand, we verify details that cannot be captured digitally, like the weight of a gemstone or the texture of a fabric. The success of our approach is showing up in our results. We met our goal of exiting 2025 with 35% of all units fully flowing through Athena, a key contributor to the strong leverage we delivered in the quarter. Looking to the future, we are focused on further automation around listings and fulfillment to continue our progress on operational speed, accuracy, and efficiency.

Speaker #3: By automating the repetitive, data-driven tasks, we are reducing costs and increasing speed to site. A core advantage of our model involves physical possession. When our experts have an item in hand, we verify details that cannot be captured digitally, like the weight of a gemstone or the texture of a fabric.

Speaker #3: The success of our approach is showing up in our results. We met our goal of exiting 2025 with 35% of all units fully flowing through Athena, a key contributor to the strong leverage we delivered in the quarter.

Speaker #3: Looking to the future, we are focused on further automation around listings and fulfillment to continue our progress on operational speed and accuracy and efficiency.

Speaker #3: Our third pillar is obsessing over service, which is focused on upleveling the experience for our customers. As you may recall, we introduced myCloset last year, the first phase was re-consign, which provides a one-click consignment experience for items purchased on TRR's platform.

Rati Sahi Levesque: Our third pillar is obsessing over service, which is focused on upleveling the experience for our customers. As you may recall, we introduced My Closet last year. The first phase was Reconsign, which provides a one-click consignment experience for items purchased on TRR's platform. The next step in the evolution of My Closet is customer tools to track and capitalize on the value of their closet. We're evolving our consignor interaction to make it less transactional and more relational and enduring. We are the trusted advisor for our customers as they journey through the primary and secondary luxury markets. Currently, we're testing app features that allow consigners to get on-demand valuation and earnings estimates, and look forward to expanding My Closet as we move through 2026. We are obsessing over service in other ways, including leveraging Gen AI to transform how our members discover items on our platform.

Speaker #3: The next step in the evolution of myCloset is customer tools to track and capitalize on the value of their closet. We're evolving our consignor interaction to make it less transactional and more relational and enduring.

Speaker #3: We are the trusted advisor for our customers as they journey through the primary and secondary luxury markets. Currently, we're testing app features that allow consignors to get on-demand valuation and earnings estimates, and look forward to expanding myCloset as we move through 2026.

Speaker #3: We are obsessing over service in other ways, including leveraging Gen AI to transform how our members discover items on our platform. We've launched a new natural language search experience to make discovery more intuitive and are seeing encouraging results.

Rati Sahi Levesque: We've launched a new natural language search experience to make discovery more intuitive and are seeing encouraging results. The new search experience drove a notable improvement in new customer conversion during our test period. As we look out through 2026, we will expand these capabilities further, starting with AI recommendations in the near term, followed by visual and agentic conversational search to further create a hyper-personalized, high-end shopping experience. In closing, we've proven that our growth playbook is working. By integrating our team's deep expertise with our industry-leading technology, we're building an engine that is designed to scale, win, and deliver lasting value. I want to thank our team across the country and our more than 40 million members. The trust you place in us is our most valuable asset.

Speaker #3: The new search experience drove a notable improvement in new customer conversion during our test period. As we look out through 2026, we will expand these capabilities further, starting with AI recommendations in the near term followed by visual and agentic conversational search to further create a hyper-personalized high-end shopping experience.

Speaker #3: In closing, we've proven that our growth playbook is working. By integrating our team's deep expertise with our industry-leading technology, we're building an engine that is designed to scale, win, and deliver lasting value.

Speaker #3: I want to thank our team across the country and our more than 40 million members. The trust you place in us is our most valuable asset.

Speaker #3: Looking forward, we're excited to continue to drive results together and delivering on our mission to be the definitive authority in luxury resale. Thank you.

Rati Sahi Levesque: Looking forward, we're excited to continue to drive results together and delivering on our mission to be the definitive authority in luxury resale. Thank you. With that, I'll turn the call over to Ajay.

Speaker #3: With that, I'll turn the call over to Ajay.

Speaker #1: Thank you, Rati, and good afternoon, everyone. I'm pleased to review our financial results for the fourth quarter and full year 2025, a year of transformation and accelerating momentum.

Ajay Gopal: Thank you, Rati. Good afternoon, everyone. I'm pleased to review our financial results for Q4 and full year 2025, a year of transformation and accelerating momentum. In Q4, we delivered double-digit top-line growth in both GMV and total revenue, driven by healthy supply and strong buyer engagement. Our disciplined execution against our three strategic pillars, the growth playbook, operational excellence, and obsessing over service, continued to pay off. We delivered 450 basis points of Adjusted EBITDA margin expansion, demonstrating the operating leverage in our business model. We also generated free cash flow of $43 million in Q4, up $23 million year-over-year. Turning to our detailed Q4 results, beginning with the top line. Q4 GMV of $616 million increased 22% compared to last year.

Speaker #1: In Q4, we delivered double-digit top-line growth in both GMV and total revenue, driven by healthy supply and strong buyer engagement. Our disciplined execution against our three strategic pillars—the growth playbook, operational excellence, and obsessing over service—continued to pay off.

Speaker #1: We delivered 450 basis points of adjusted EBITDA margin expansion demonstrating the operating leverage in our business model. We also generated free cash flow of $43 million in Q4, up 23 million year over year.

Speaker #1: Turning to our detailed fourth-quarter results, beginning with the top line. Q4 GMV of $616 million increased 22% compared to last year. Growth was driven roughly evenly by unit volume and higher average selling prices.

Ajay Gopal: Growth was driven roughly evenly by unit volume and higher average selling prices. Q4 total revenue of $194 million increased 18% with consignment revenue up 16% year-over-year. Direct revenue increased 39% compared to Q4 of 2024. In Q4, active buyers, orders, and average order value all increased year-over-year. On a trailing twelve-month basis, active buyer growth accelerated to 9% year-over-year. Orders were up 10%, and average order value increased 11% versus last year. This growth reflects our success in unlocking supply, particularly in high value categories like fine jewelry and watches. Q4 take rate of 36.5% declined 120 basis points year-over-year. This was driven by a favorable mix shift into higher value items and categories. These items carry a lower percentage take rate while generating more profit dollars and improved unit economics.

Speaker #1: Q4 total revenue of $194 million increased 18% with consignment revenue up 16% year over year. Direct revenue increased 39% compared to Q4 of 2024.

Speaker #1: In Q4, active buyers' orders and average order value all increased year over year. On a trailing 12-month basis, active buyer growth accelerated to 9% year over year.

Speaker #1: Orders were up 10%, and average order value increased 11% versus last year. This growth reflects our success in unlocking supply particularly in high-value categories like fine jewelry and watches.

Speaker #1: Q4 take rate of 36.5% declined 120 basis points year over year. This was driven by a favorable mix shift into higher value items and categories—these items carry a lower percentage take rate while generating more profit dollars and improved unit economics.

Speaker #1: On margins and profitability, fourth-quarter gross profit of $145 million increased 19% year over year. Gross margin of 74.8% in Q4 increased 40 basis points compared to the prior year period.

Ajay Gopal: On margins and profitability, Q4 gross profit of $145 million increased 19% year-over-year. Gross margin of 74.8% in Q4 increased 40 basis points compared to the prior year period. Breaking this down by channel, consignment gross margin was 89.6% in Q4, an improvement of 60 basis points year-over-year, reflecting our continued focus on operational efficiency. Direct gross margin was 26% in Q4, an increase of more than 1,200 basis points year-over-year, driven by favorable mix of products sold. Q4 operating expenses of $139 million leveraged 600 basis points year-over-year as a percentage of revenue. Excluding stock-based compensation, operating expenses leveraged by 550 basis points.

Speaker #1: Breaking this down by channel, consignment gross margin was 89.6% in the fourth quarter, an improvement of 60 basis points year over year, reflecting our continued focus on operational efficiency.

Speaker #1: Direct gross margin was 26% in the fourth quarter, and increase of more than $1,200 basis points year over year driven by favorable mix of products sold.

Speaker #1: Fourth-quarter operating expenses of $139 million leveraged $600 basis points year over year, as a percentage of revenue. Excluding stock-based compensation, operating expenses leveraged by $550 basis points.

Speaker #1: These improvements were driven through increased use of AI and automation in our operations, sales team productivity, and leverage on fixed costs. Fourth-quarter adjusted EBITDA of $22 million or $11.3% of total revenue increased $11 million versus prior year.

Ajay Gopal: These improvements were driven through increased use of AI and automation in our operations, sales team productivity, and leverage on fixed costs. Q4 Adjusted EBITDA of $22 million or 11.3% of total revenue increased $11 million versus prior year. Adjusted EBITDA margins increased 450 basis points year-over-year. On cash flow and the balance sheet, we ended the quarter with $166 million in cash equivalents, and restricted cash. Our operating cash flow in Q4 was $49 million, a $21 million improvement year-over-year. Free cash flow was $43 million in Q4, a $23 million improvement year-over-year, demonstrating our business model's favorable cash dynamics as we grow. Moving to our full year 2025 results. Full year GMV of $2.13 billion increased 16% versus prior year.

Speaker #1: Adjusted EBITDA margins increased 450 basis points year over year. On cash flow and the balance sheet, we ended the quarter with $166 million in cash, cash equivalents, and restricted cash.

Speaker #1: Our operating cash flow in the fourth quarter was $49 million, a 21 million improvement year over year. Free cash flow was $43 million in the fourth quarter, a 23 million improvement year over year, demonstrating our business model's favorable cash dynamics as we grow.

Speaker #1: Moving to our full year 2025 results. Full year GMV of 2.13 billion increased 16% versus prior year. Revenue of $693 million was up 15% versus the prior year, driven by strong execution of our growth playbook and our strategic focus on unlocking supply.

Ajay Gopal: Revenue of $693 million was up 15% versus the prior year, driven by strong execution of our growth playbook and our strategic focus on unlocking supply. Full year gross profit of $517 million grew 15% year-over-year. Gross margin of 74.6% increased 10 basis points versus full year 2024. Operating expenses of $541 million leveraged 600 basis points in 2025. This improvement was driven through increased use of AI and automation, sales and retail team productivity, and leverage on fixed costs. We delivered Adjusted EBITDA of $42 million for full year 2025 or 6.1% of total revenue, an increase of 450 basis points year-over-year.

Speaker #1: Full year gross profit of $517 million grew 15% year over year. Gross margin of 74.6% increased 10 basis points versus full year 2024. Operating expenses of $541 million leveraged $600 basis points in 2025.

Speaker #1: This improvement was driven through increased use of AI and automation, sales and retail team productivity, and leverage on fixed costs. We delivered adjusted EBITDA of $42 million for full year 2025, or 6.1% of total revenue, and increase of $450 basis points year over year.

Speaker #1: This improvement in profitability translated to 37 million in operating cash flow and free cash flow of $5 million. Over the past two years, we have reduced our total indebtedness by over $80 million, demonstrating our commitment to strengthening the balance sheet while delivering profitable growth.

Ajay Gopal: This improvement in profitability translated to $37 million in operating cash flow and free cash flow of $5 million. Over the past 2 years, we have reduced our total indebtedness by over $80 million, demonstrating our commitment to strengthening the balance sheet while delivering profitable growth. Looking back on 2025, we made significant progress across our strategic priorities. We unlocked supply at scale through our growth playbook, expanded adjusted EBITDA margins, generated positive free cash flow, and strengthened our balance sheet. These results give us confidence in our momentum as we look to 2026. Turning to our full year outlook. We are projecting full year GMV growth in the range of 12% to 15%. Revenue growth is expected to be between 10% and 13%.

Speaker #1: Looking back on 2025, we made significant progress across our strategic priorities. We unlocked supply at scale through our growth playbook, expanded adjusted EBITDA margins, generated positive free cash flow, and strengthened our balance sheet.

Speaker #1: These results give us confidence in our momentum as we look to 2026. Now turning to our full year outlook. We are projecting full year GMV growth in the range of 12% to 15%.

Speaker #1: Revenue growth is expected to be between 10% and 13%. For the full year, we expect gross margin to remain relatively consistent with 2025. Adjusted EBITDA is expected to be in the range of 57 million to 65 million.

Ajay Gopal: For the full year, we expect gross margin to remain relatively consistent with 2025. Adjusted EBITDA is expected to be in the range of $57 million to 65 million. This represents approximately 8% margin at the midpoint, an expansion of nearly 200 basis points versus 2025, which is aligned to our target of 15% to 20% Adjusted EBITDA margins over the medium term. We continue to expect capital expenditures on property, plant, and equipment to remain between 2% and 3% of total revenue for the full year. Regarding cash flow timing, similar to 2025, we expect operating cash flow and free cash flow to benefit from our favorable working capital dynamics in the second half of the year. Moving to our outlook for Q1.

Speaker #1: This represents approximately 8% margin at the midpoint, and expansion of nearly $200 basis points versus 2025. Which is aligned to our target of 15 to 20% adjusted EBITDA margins over the medium term.

Speaker #1: We continue to expect capital expenditures on property, plant, and equipment to remain between 2 and 3 percent of total revenue for the full year.

Speaker #1: Regarding cash flow timing, similar to 2025, we expect operating cash flow and free cash flow to benefit from our favorable working capital dynamics in the second half of the year.

Speaker #1: Moving to our outlook for the first quarter. GMV growth is expected in the range of 19% to 22% versus prior year. First quarter revenue growth is expected in the range of 16% to 18%.

Ajay Gopal: GMV growth is expected in the range of 19% to 22% versus prior year. Q1 revenue growth is expected in the range of 16% to 18%. We expect direct revenue to be in the range of 12% to 15% of total revenue. Q1 Adjusted EBITDA is expected to be between $11 million and $13 million, representing approximately 6% to 7% of total revenue and 340 to 430 basis points of margin expansion year-over-year. In closing, our Q4 and full year 2025 performance underscores the financial power of our model. By scaling our growth playbook while leveraging AI-driven efficiencies, we have improved our unit economics and delivered meaningful margin expansion. Our progress on delevering, combined with our ability to translate gains and Adjusted EBITDA into free cash flow, strengthens our financial foundation.

Speaker #1: We expect direct revenue to be in the range of 12 to 15% of total revenue. First quarter adjusted EBITDA is expected to be between $11 million and $13 million.

Speaker #1: Representing approximately 6 to 7 percent of total revenue, and $340 to $430 basis points of margin expansion year over year. In closing, our fourth quarter and full year 2025 performance underscores the financial power of our model.

Speaker #1: By scaling our growth playbook, while leveraging AI-driven efficiencies, we have improved our unit economics and delivered meaningful margin expansion. Our progress on de-levering, combined with our ability to translate gains and adjusted EBITDA into free cash flow, strengthens our financial foundation.

Speaker #1: As we enter 2026, we're focused on continuing to drive operating leverage as we scale. Thank you to the entire RealReal team for your dedication and for driving these outstanding results.

Ajay Gopal: As we enter 2026, we're focused on continuing to drive operating leverage as we scale. Thank you to the entire RealReal team for your dedication and for driving these outstanding results. With that, I will now turn the call back over to the operator for Q&A.

Speaker #1: With that, I will now turn the call back over to the operator for Q&A.

Speaker #2: Thank you. At this time, if you would like to ask a question, please click on the raised hand button, which can be found on the black bar at the bottom of your screen.

Operator: Thank you. At this time, if you would like to ask a question, please click on the Raise Hand button, which can be found on the black bar at the bottom of your screen. If you have dialed in by telephone, please press star 9 to raise or lower your hand. When it is your turn to talk, you'll receive a message on your screen from the host allowing you to talk, and then you'll hear your name called. Please accept under your audio and ask your question. If you have dialed in by telephone, please press star 6 to unmute. We will wait a moment for the queue to form. Our first question comes from Ashley Owens. Please go ahead.

Speaker #2: If you have dialed in by telephone, please press star 9 to raise or lower your hand. When it is your turn to talk, you'll receive a message on your screen from the host allowing you to talk.

Speaker #2: And then you'll hear your name called. Please accept under your audio and ask your question. If you have dialed in by telephone, please press star 6 to unmute.

Speaker #2: We will wait a moment for the cue to form. Our first question comes from Ashley Owens. Please go ahead.

Speaker #3: Hi. Thanks. Can you hear me?

Ashley Owens: Hi. Thanks. Can you hear me?

Speaker #4: Yes, Ashley. We can hear you.

Operator: Yes, Ashley, we can hear you.

Speaker #3: Perfect. Well, first and foremost, congrats on the quarter. I did want to start out—I just noticed that Austin Tech accelerated its de-leverage, so did want to touch on Athena.

Ashley Owens: Perfect. Well, first and foremost, congrats on the quarter. I did want to start out, I just noticed that Austin Tech accelerated its deleverage, so I did want to touch on Athena. You've talked through the year about how central Athena is to that operational model, and you hit the target you gave to November in Q4. First and foremost, with the 35% update here, is that a count of units that are seeing intake fully completed by Athena? Just as importantly, how are you thinking about expanding that penetration across low, mid, and high value items in 2026?

Speaker #3: You've talked through the year about how central Athena is to that operational model and you hit the target you gave us in November in 4Q.

Speaker #3: So first and foremost, with the 35% update here, is that a count of units that are seeing intake fully completed by Athena? And just as importantly, how are you thinking about expanding that penetration across low, mid, and high-value items in 2026?

Speaker #4: Thanks for the question, Ashley. Yeah, we're pleased with the progress that we've been able to make with Athena. We ended the year with 35% of the units in our fulfillment center being processed through Athena.

Ajay Gopal: Thanks for the question, Ashley. Yeah, we're pleased with the progress that we've been able to make with Athena. We ended the year with 35% of the units in our fulfillment center being processed through Athena. That was a primary driver for the operating leverage that you commented on in our Ops and Tech line. All in Ops and Tech leveraged 330 basis points for the year, and it was a combination of Athena with other automation efficiencies that we've been able to unlock in that part of the P&L. You know, 35% was our target for the end of the year, where we will continue to build on that.

Speaker #4: And that was a primary driver for the operating leverage that you commented on in our Austin Tech line. All in Austin Tech leveraged 330 basis points for the year.

Speaker #4: And there was a combination of Athena, with other automation efficiencies that we've been able to unlock in that part of the P&L. 35% was our target for the end of the year, where we will continue to build on that.

Speaker #4: Going forward, we're excited to extend Athena into the mid-value items and then we will continue to build on that, taking it into higher-value items.

Ajay Gopal: Going forward, we're excited to extend Athena into the mid-value items, and then we will continue to build on that, taking it into higher value items. We expect this to take place over multiple quarters, and it will continue to be a source of leverage for us going forward.

Speaker #4: We expect this to take place over multiple quarters and it will continue to be a source of leverage for us going forward.

Speaker #3: Okay, great. And maybe just to follow up quickly on Athena as well—I know it affected the intake to listings. Could you expand on how it affected the intake-to-listing cycle times in Q4?

Ashley Owens: Okay, great. Maybe just to follow up quickly on Athena as well, I know it affected the intake to listing. Could you expand on how it affected the intake to listing cycle times in Q4? You previously stated a long-term goal to cut that timeline meaningfully. How much progress did you see in this quarter? What's the current day's listing count? What would you consider a reasonable target for 2026 as some of these automation and workflow optimizations start to mature?

Speaker #3: You've previously stated a long-term goal to cut that timeline meaningfully. How much progress did you see in this quarter? What's the current days to listing count?

Speaker #3: And what would you consider reasonable target for 2026 as some of these automation and workflow optimizations start to mature?

Speaker #4: Yeah. Thanks for the follow-up. We are excited about Athena, not just in terms of how it delivers efficiency improvements, but also in how it reduces the cycle time, which leads to a higher consignment satisfaction because we're able to get their items up on the website with website sooner.

Ajay Gopal: Yeah. Thanks for the follow-up. You know, we are excited about Athena, not just in terms of how it delivers efficiency improvements, but also on how it reduces the cycle time, which leads to a higher consignor satisfaction because we're able to get their items up on the website sooner. When you think about the 35% of items that went through Athena, what essentially happens is the item first goes to photography, once we've completed taking those images, we're able to pretty much launch the item on the website. Those items are going very quickly through our fulfillment center and not having to go through multiple handoffs as compared to the other items.

Speaker #4: When you think about the 35% of items that went through Athena, what essentially happens is the item first goes to photography. And once we've completed taking those images, we're able to pretty much launch the item on the website.

Speaker #4: So those items are going very quickly through our fulfillment center and not having to go through multiple handoffs as compared to the other items.

Ajay Gopal: We'll as we build the coverage from Athena, we'll extend that benefit to more and more items in our portfolio.

Speaker #4: As we build the coverage from Athena, we'll extend that benefit to more and more items in our portfolio.

Speaker #3: Great. Thanks so much, and best of luck for '26.

Ashley Owens: Great. Thanks so much, and best of luck for 2026.

Speaker #4: Thank you.

Ajay Gopal: Thank you.

Speaker #2: Our next question comes from Ike Barucho at Wells Fargo Securities. Please go ahead.

Operator: Our next question comes from Ike Boruchow at Wells Fargo Securities. Please go ahead.

Speaker #5: Hey, guys. Congrats. I guess I was wondering maybe a Jay Rati the guide for Q1 will obviously 4Q much better. But I think three months ago, you told us you only expected slightly above algo growth in the first half.

Ike Boruchow: Hey, hey, guys. Congrats. I guess I was wondering, maybe Jay or Rati, the guide for Q1 will obviously Q4 much better, but I think 3 months ago, you told us you only expected slightly above algo growth in the first half, so above low double digits, and you're guiding 22% GMV. Just what are you seeing quarter-to-date? What gives you that confidence to guide those numbers?

Speaker #5: So above low double digits in your guiding 22% GMB. So just what are you seeing quarter to date? What gives you that confidence to guide those numbers?

Speaker #4: Yes. Hi, Ike. Thanks for the question. A couple of things that we're seeing in the business, right? We're seeing our buyer and seller be quite resilient.

Rati Sahi Levesque: Yes. Hi, Ike. Thanks for the question. A couple of things that we're seeing in the business, right? We're seeing our buyer and seller be quite resilient. We all know it's driven by supply. Our growth playbook is working. It's important to understand that trifecta of our sales strategy, our marketing strategy, and retail strategy kind of coming together there. We have seen, for example, the sales team and the Smart Engine or Smart Sales that we've called in the past, the conversion is getting better on the sales side. We're able to get more appointments per day, more volume per sales rep. On the marketing side, the flywheel strategy is working. We're turning buyers into consigners in a more impactful way.

Speaker #4: We all know it's driven by supply. Our growth playbook is working. So it's important to understand that trifecta of our sales strategy, our marketing strategy, and retail strategy kind of coming together there.

Speaker #4: So we have seen for example, the sales team and the smart engine or smart sales that we've called in the past, the conversion is getting better on the sales side.

Speaker #4: We're able to get more appointments per day, more volume per sales rep. On the marketing side, the flywheel strategy is working. We're turning buyers into consigners.

Speaker #4: In a more impactful way. And then on the demand side, still early, but our AI or agentic testing there on discovery and search is really impacting conversion, especially on the new buyer side.

Rati Sahi Levesque: On the demand side, you know, still early, but our AI or agentic testing there on discovery and search is really impacting conversion, especially on the new buyer side. All of these things, you know, some of these are we're testing our way into, and they need to scale up throughout the year. Definitely seeing the supply really coming through.

Speaker #4: So all of these things, some of these are we're testing our way into and they need to scale up throughout the year. But definitely seeing the supply really coming through.

Speaker #5: Have you seen a slowdown since the fourth quarter, I guess, is something I'm curious about?

Mark Altschwager: Have you seen a slowdown since Q4, I guess, is something I'm curious about.

Ike Boruchow: Have you seen a slowdown since Q4, I guess, is something I'm curious about.

Speaker #4: We showed you, or we gave you, your guide for Q1. I would say as far as macro goes, same trends on buyers and sellers—double-digit growth on both buyers and sellers as well.

Rati Sahi Levesque: We showed you or we gave you your guide for Q1. I would say as far as macro goes, same trends on buyers and sellers, double-digit growth on both buyers and sellers as well.

Speaker #6: Yeah. No slowdown, Ike. I would add that when you think about Q4, you've heard us talk about how it's become increasingly more relevant as more and more people turn to resale.

Anna Glaessgen: Yeah, no slowdown, Ike. I would add that, you know, when you think about Q4, you've heard us talk about how it's become increasingly more relevant, as more and more people turn to resale for gifting. We saw that play out in Q4, which, you know, which we believe is one of the drivers for the acceleration from Q3.

Ajay Gopal: Yeah, no slowdown, Ike. I would add that, you know, when you think about Q4, you've heard us talk about how it's become increasingly more relevant, as more and more people turn to resale for gifting. We saw that play out in Q4, which, you know, which we believe is one of the drivers for the acceleration from Q3.

Speaker #6: For gifting and we saw that play out in Q4. Which we believe is one of the drivers for the acceleration from Q3.

Speaker #5: Great. Thanks, guys.

Mark Altschwager: Great. Thanks, guys.

Speaker #3: Thanks, Ike.

Rati Sahi Levesque: Thanks, Ike.

Speaker #2: Our next question comes from Bobby Brooks at Northland Securities. Please go ahead.

Operator: Our next question comes from Bobby Brooks at Northland Securities. Please go ahead.

Speaker #7: Hey, good afternoon, guys. Thank you for taking my question. I would just be interested to hear first on an update of how testing with dropshipping has gone and maybe what are the plans for it as we go into 2026.

Bobby Brooks: Hey, good afternoon, guys. Thank you for taking my question. I would just be interested to hear first on an update of how testing with drop shipping has gone and maybe what are the plans for it as we go into 2026. Maybe it would be helpful to just take a step back and remind folks what categories you've kind of started in and how you've selected those certain vendors who can access the drop shipping beta testing, I guess I'll call it, and how you expect that to evolve moving forward.

Speaker #7: And maybe it would be helpful to just take a step back and remind folks what categories you've kind of started in and how you've selected those certain vendors who can access the dropshipping beta testing, I guess I'll call it.

Speaker #7: And how you expect that to evolve moving forward.

Speaker #4: Yes. Hi, Bobby. Thanks for the question. I'll start, Ajay, if I miss anything. Feel free to jump in. Dropship, we're seeing this year was all about testing and expanding categories.

Rati Sahi Levesque: Yes. Hi, Bobby. Thanks for the question. I'll start. Ajay, if I miss anything, feel free to jump in. Drop ship, we're seeing, you know, this year was all about testing and expanding categories. We started in watches. We also launched handbags and fine jewelry. They were very much to specific or targeted partners. Continue to expand that to international markets, for example. I'd say the growth rate is healthy, but not the main driver of our growth. We'll continue to expand to other categories, continue to test and learn in the next couple of quarters.

Speaker #4: We started in watches. We also launched handbags and buying jewelry. There were very much to specific or targeted partners. So we're continuing to expand that to international markets, for example.

Speaker #4: I'd say the growth rate is healthy, but not the main driver of our growth. So we'll continue to expand to other categories. Continue to test and learn in the next couple of quarters.

Speaker #7: Got it. And then setting aside smart sales tool and the rollout of broader rollout of dropshipping, are there any other exciting initiatives aimed at driving more incremental supply?

Bobby Brooks: Got it. Setting aside Smart Sales tool and the rollout, broader rollout of drop shipping, are there any other exciting initiatives aimed at driving more incremental supply? Obviously, that's like the key part of the growth engine here is unlocking more supply. Just wanted to hear if there's any other initiatives that folks should be kinda looking forward to. Maybe it's even partnering with direct brands directly.

Speaker #7: Obviously, that's the key part of the growth engine here is unlocking more supply. So just wanted to hear if there's any other initiatives that folks should be kind of looking forward to.

Speaker #7: And maybe it's even partnering with direct brands directly.

Speaker #4: Yes. And I think that's what is gives us confidence in the full-year guide as well and what we're seeing into Q1. We have many new initiatives that some of them are earlier in days and some of them a little bit later in days.

Rati Sahi Levesque: I think that's what is, you know, gives us confidence in the full year guide as well and what we're seeing into Q1. We have many new initiatives that some of them are earlier in days and some of them, a little bit later in days, but Smart Sales is one of them for sure. Referrals and affiliate programs, that's another one I'm really excited about seeing, one of the higher growth channels when I look at where supply is coming from. Again, early days, but you can see how this could really scale up. Our retail strategy, again, a quarter of our new sellers are coming from retail. We've also looking at our marketing ROI. Higher LTV is what we're seeing. As we're reinvesting in marketing, we're really seeing that pay off.

Speaker #4: But smart sales is one of them for sure. Referrals and affiliate programs that's another one. Really excited about seeing one of the higher growth channels when I look at where supply is coming from.

Speaker #4: Again, early days, but you can see how this could really scale up. Our retail strategy—again, a quarter of our new sellers are coming from retail.

Speaker #4: We've also looking at our marketing ROI, higher LTV is what we're seeing. So as we're reinvesting in marketing, we're really seeing that pay off.

Speaker #4: I would say another is flywheel. We talked a little bit about that in the last quarter's call. Our strategy about around buyers becoming consigners.

Rati Sahi Levesque: I would say another is flywheel. We talked a little bit about that in the last quarter's call, our strategy around buyers becoming consignors. We're seeing that accelerate. Early days on that. That also gives us confidence headed into full year.

Speaker #4: And we're seeing that accelerate early days on that, but that also gives us confidence headed into full year.

Speaker #7: Got it. Appreciate the color and congrats on the strong year.

Bobby Brooks: Got it. Appreciate the color and congrats on the strong year.

Speaker #4: Thanks, Bobby.

Rati Sahi Levesque: Thanks, Bobby.

Speaker #2: Our next question comes from Anna Glassian at B-Rider Securities. Please go ahead.

Operator: Our next question comes from Anna Glaessgen at B. Riley Securities. Please go ahead.

Speaker #8: Hi, good afternoon. Thanks for taking my question. I'd like to turn back to Athena, and it's nice to see that it met the target of between 30 to 40 percent of units by year-end.

Anna Glaessgen: Hi. Good afternoon. Thanks for taking my question. I'd like to turn back to Athena. Nice to see that it met the target of between 30% to 40% of units by year-end. Wondering if you'd be willing to share your outlook for its contribution to unit processing in 2026. Thanks.

Speaker #8: Wondering if you'd be willing to share your outlook for its contribution to unit processing in 2026. Thanks.

Speaker #6: Thanks, Anna. Yeah, we're pleased with Athena exiting the year at 35%. It's one of our key use cases of how we are able to leverage our unique data set of 50 million items combined with recent developments in the world of AI and unlock real efficiencies in our platform.

Rati Sahi Levesque: Thanks, Anna. Yeah, we're pleased with Athena exiting the year at 35%. It's, it's one of our key, you know, use cases of how we're able to leverage our unique data set of 50 million items, combine it with recent developments in the world of AI and unlock real efficiencies in our, in our platform. You know, we'll, we'll continue to build on it, as I mentioned earlier, right? 35% is nowhere close to where we could be. In, in theory, we see that extending to all the items in our fulfillment center, and we will pace that, you know, over the next few quarters.

Ajay Gopal: Thanks, Anna. Yeah, we're pleased with Athena exiting the year at 35%. It's, it's one of our key, you know, use cases of how we're able to leverage our unique data set of 50 million items, combine it with recent developments in the world of AI and unlock real efficiencies in our, in our platform. You know, we'll, we'll continue to build on it, as I mentioned earlier, right? 35% is nowhere close to where we could be. In, in theory, we see that extending to all the items in our fulfillment center, and we will pace that, you know, over the next few quarters.

Speaker #6: We'll continue to build on it, as I mentioned earlier, right? 35% is nowhere close to where we could be in theory. We see that extending to all the items in our fulfillment center.

Speaker #6: And we will pace that over the next few quarters.

Speaker #8: Got it. So safe to say it should continue to increase.

Mark Altschwager: Got it. safe to say it should continue to increase.

Anna Glaessgen: Got it. safe to say it should continue to increase.

Speaker #6: Yeah, it'll continue to go up.

Ajay Gopal: Yeah, it'll continue to go up.

Speaker #8: Got it. And then secondly, exciting to hear about the initiatives within Agentic Search. I guess when should we expect that to be formally launched on the website?

Mark Altschwager: Got it. Then secondly, you know, exciting to hear about the initiatives within agentic search. I guess, when should we expect that to be formally launched on the website?

Anna Glaessgen: Got it. Then secondly, you know, exciting to hear about the initiatives within agentic search. I guess, when should we expect that to be formally launched on the website?

Speaker #4: Yes. Hi, Anna. So, we are also very excited about it. Just really focused on discovery, matching, getting the right product to the right person.

Rati Sahi Levesque: Yes. Hi, Anna. We are also very excited about it. You know, just really focused on discovery, matching, getting the right product to the right person. We're seeing it deliver incremental revenue, we will start to scale that up. But what we are seeing right now, like I mentioned, with new buyer conversion, and the testing looks very good. Then we see us kind of moving on to conversational and visual search as well, just to kind of, again, get that flywheel going, and continuing that buyer growth at double-digit numbers.

Speaker #4: We're seeing it deliver incremental revenue. So we will start to scale that up. But what we are seeing right now, like I mentioned, was new buyer conversion in the testing looks very good.

Speaker #4: And then we see us kind of moving on to conversational and visual search as well. Just to kind of, again, get that flywheel going.

Speaker #4: And continuing that buyer growth at double-digit numbers.

Speaker #8: Great. Thanks, team.

Mark Altschwager: Great. Thanks, team.

Anna Glaessgen: Great. Thanks, team.

Speaker #5: Thank you.

Ajay Gopal: Thank you.

Speaker #2: Our next question comes from Marvin Fong at BTIG. Please go ahead.

Operator: Our next question comes from Marvin Fong at BTIG. Please go ahead.

Speaker #7: Great. Good evening. Thanks for taking my questions. Congratulations on the quarter. Question on just sort of like, ASP and product mix. So I believe higher value items has been really strong for a while now.

Marvin Fong: Great. Good evening. Thanks for taking my questions. Congratulations on the quarter. Question on just sort of like ASP and product mix. You know, I believe, you know, higher value items has been really strong for a while now. Fine jewelry, handbags, watches. You know, can you address specifically like your supply pipeline visibility, how is that going there? Are you at all sort of reaching the, you know, a point where it's getting a little harder to obtain those types of items and/or is that pipeline very strong? Just as it's a driver of AOV, I'd love to get a better understanding. You know, if we break it down kind of like for like, are you seeing ASPs climb?

Speaker #7: Fine jewelry, handbags, watches—how can you address specifically your supply pipeline visibility? How is that going there? Are you at all sort of reaching the point where it's getting a little harder to obtain those types of items?

Speaker #7: And/or is that pipeline very strong? And just as it's a driver of AOV, I'd love to just get a better understanding if we break it down kind of like for like, are you seeing ASPs climb?

Speaker #7: So for instance, even within apparel and other goods, are prices rising or what's sort of going on there?

Marvin Fong: For instance, even within, you know, apparel and other goods, Are prices rising or what's sort of going on there?

Speaker #6: Yeah. Thanks, Marvin. Thank you for the question. A few things to unpack there. I think at the start, I would say when you look at our 22% growth in Q4, it's a healthy balance between volume and price.

Ajay Gopal: Yeah. Thanks, Marvin. Thank you, thank you for the question. A few things to unpack there. I think at the start, I would say when you look at our 22% growth in Q4, it's a healthy balance between volume and price. you know, almost an even 50/50 split between the two elements. You had a question about, you know, how it shows up in ASPs like for like. A large part of what we are seeing has been driven by the shift into higher value items and categories. You heard us highlight fine jewelry as a category that has been experiencing strong growth. In fact, it was one of our strong, fastest growing categories in 2025.

Speaker #6: Almost an even 50/50 split between the two elements. You had a question about how it shows up in ASPs like for like. A large part of what we are seeing has been driven by the shift into higher value items and categories.

Speaker #6: You've heard us highlight fine jewelry as a category that has been experiencing strong growth. In fact, it was one of our strong fastest-growing categories in 2025.

Speaker #6: We have a lot of sophistication built into how we how our pricing algorithm manages ASPs, right? So we are always trying to find the highest price on behalf of our consigners.

Ajay Gopal: We have a lot of sophistication built into how our pricing algorithm manages ASPs, right? We are always trying to find the highest price on behalf of our consignors. You know, that pricing algorithm is looking at over 100 data points and, you know, trying to figure out exactly what we think a customer would be willing to pay for any given item. The last point I would make is to your question on how does it influence supply. You know, one of the key strengths about The RealReal as a platform is as trends come and go, you know, we are able to quickly respond to them and really capitalize on consumer preferences shifting. You know, fine jewelry is a great example of that.

Speaker #6: And that pricing algorithm is looking at over 100 data points and trying to figure out exactly what we think a customer would be willing to pay for any given item.

Speaker #6: The last part I would make is to your question on how does it influence supply. One of the key strengths about the RealReal as a platform is, as trends come and go, we are able to quickly respond to them and really capitalize on consumer preferences shifting.

Speaker #6: So fine jewelry is a great example of that. We saw that trend start to pick up in late Q4 of 2024. And we've been able to capitalize on that very effectively.

Ajay Gopal: We saw that trend start to pick up in late Q4 of 2024, and we've been able to capitalize on that very effectively, and we will continue to do that as a marketplace.

Speaker #6: And we will continue to do that as a marketplace.

Speaker #7: Okay. Great. And follow-up question just on direct, you mentioned margins there are very strong. You mentioned favorable mix. So just drill down on that.

Marvin Fong: Okay, great. Follow-up question just on direct. You mentioned, you know, margins there are very strong. You mentioned favorable mix. To just drill down on that, was it a matter of the product mix, again, higher ASP items, or is it also that, you know, Get Paid Now, you know, contributed a bit more? Could you kind of decompose, you know, what kind of drove that and how sustainable that is into Q1 and maybe beyond?

Speaker #7: Was it a matter of the product mix? Again, higher ASP items? Or is it also that get paid now contributed a bit more? Could you kind of decompose what kind of drove that and how sustainable that is in the first quarter and maybe beyond?

Speaker #6: Yeah. Thank you for the questions. We are pleased with the margin expansion we've seen in our direct channel. It was 26% gross margin for in Q4 and 22% for the full year.

Ajay Gopal: Yeah. Thank you for the questions. We are pleased with the margin expansion we've seen in our direct channel. It was 26% gross margin in Q4 and 22% for the full year. Both of those numbers are quite substantial improvements. 880 basis point improvement on a full year basis versus what direct used to look like, if you go back a year. We've made conscious effort to change the mix of what goes through that items. Right now it's a mix of Get Paid Now and other select supply that we know is incremental to our platform and runs through that channel. You know, those margins will stay within that fairly wide range of 15% to 25% going forward.

Speaker #6: Both of those numbers are quite substantial improvements. 880 basis point improvement on a full-year basis versus what direct used to look like. If you go back a year, we've made conscious effort to change the mix of what goes through that items.

Speaker #6: And right now, it's a mix of get paid now and other select supply that we know is incremental to our platform and runs through that channel.

Speaker #6: Those margins will stay within that fairly wide range of 15 to 25 percent going forward. And it'll vary based on the mix of what we sell.

Ajay Gopal: It'll vary based on the mix of what we sell.

Speaker #7: Okay. Perfect. Thanks. And congrats again.

Marvin Fong: Okay, perfect. Thanks and congrats again.

Speaker #6: Thank you.

Ajay Gopal: Thank you.

Speaker #2: Our next question will come from Mark Ultschweiger at Baird. Please go ahead.

Operator: Our next question will come from Mark Altschwager at Baird. Please go ahead.

Speaker #7: Thank you for taking my question. I guess maybe a couple on the model here. First, you're guiding to revenue growth a couple hundred basis points below the GMB growth.

Mark Altschwager: Thank you for taking my call. I guess a couple on the model here. First, you're guiding to revenue growth, a couple hundred basis points below the GMV growth. Obviously, a lot of moving pieces as we go from A to B there. Maybe just what are the key factors we should be thinking about, take rate, revenue mix or otherwise, that are influencing that this year?

Speaker #7: Obviously, a lot of moving pieces as we go from A to B there. Maybe just one of the key factors we should be thinking about, take great revenue mix or otherwise that are influencing that this year?

Speaker #6: Yeah. Thank you. Thank you for the question. Yes, we are. We are guiding to a revenue growth that is a couple of basis a couple of percentage points lower than GMV.

Ajay Gopal: Yeah. Thank you. Thank you for the question. Yes, we are guiding to a revenue growth that is a couple of base, you know, a couple of percentage points lower than GMV. The key driver there really is our take rate. If you look at the second half of 2025, we've seen a favorable shift in our product mix towards higher value items and categories. Our take rate structure is designed in such a way that when we sell those items, they attract a lower percentage take rate, but they bring in higher absolute dollars and stronger unit economics against those items.

Speaker #6: The key driver there really is our take rate. If you look at if you look at the second half of 2025, we've seen a favorable shift in our product mix towards higher value items and categories.

Speaker #6: Our take rate structure is designed in such a way that when we sell those items, they attract a lower percentage take rate. But they bring in higher absolute dollars and stronger unit economics against those items.

Speaker #6: We do expect that phenomenon to play out in the first half of '26 when we will be lapping sort of the change that occurred late in '25.

Ajay Gopal: We do expect that phenomena to play out in the first half of 2026 when we will be lapping sort of the change that occurred late in 2025. It should normalize going forward, particularly in the second half of the year.

Speaker #6: And it should normalize going forward, particularly in the second half of the year.

Speaker #7: Very helpful. Also wanted to ask about the sales team and just any hiring goals you have for 2026. You spoke earlier about the efficiency you're seeing.

Jay Sole: It's very helpful. Also wanted to ask about the sales team and just any hiring goals you have for 2026. You spoke earlier about the efficiency you're seeing with that team as they build tenure. Trying to just better understand the strategy behind further efficiencies relative to expanding the team as you look to fuel supply growth.

Mark Altschwager: It's very helpful. Also wanted to ask about the sales team and just any hiring goals you have for 2026. You spoke earlier about the efficiency you're seeing with that team as they build tenure. Trying to just better understand the strategy behind further efficiencies relative to expanding the team as you look to fuel supply growth.

Speaker #7: Is that with that team, they build tenure. So trying to just better understand the strategy behind further efficiencies relative to expanding the team as you look to fuel supply growth.

Speaker #8: Yes. Thanks, Mark. So on the sales side, the relationship that we built there is really important with the consigners. It's definitely a combination of art and science there.

Rati Sahi Levesque: Yes. Thanks, Mark. On the sales side, you know, the relationship that we built there is really important with the consignors. It's definitely, a combination of art and science there. When we think about the growth rate there, we think about hiring healthy, in that area as we're growing our business, but it's also finding more efficiencies there too. We measure things like how much value are they bringing in per sales rep, how many appointments per day are we taking. Things like Smart Sales or Smart Engine, definitely help that experience. It's definitely a two-pronged approach.

Speaker #8: And when we think about the growth rate there, we think about hiring healthy in that area as we're growing our business. But it's also finding more efficiencies there too.

Speaker #8: So we measure things like how much value are they bringing in per sales rep? How many appointments per day are we taking? Things like smart sales or smart engine.

Speaker #8: Definitely help that experience. So it's definitely a two-pronged approach.

Speaker #7: Thank you.

Jay Sole: Thank you.

Mark Altschwager: Thank you.

Speaker #2: Our next question will come from Dylan Carden at William Blair. Please go ahead.

Operator: Our next question will come from Dylan Carden at William Blair. Please go ahead.

Speaker #7: I think I did that right. I guess I'll know. Curious on my closet this next phase, where you kind of dig deeper into the consumer's—the customer's—closet.

Dylan Carden: I think I did that right. I guess I'll know. Curious on the My Closet, this next phase where you kind of dig deeper into the consumer's, the customer's closet. Is that something happening in 2026? I guess, is there a line of sight into how you might be able to sort of target or get after the balance of what's in the closet beyond what's just been purchased on RealReal at this point?

Speaker #7: Is that something happening in '26? And I guess, is there a line of sight into how you might be able to sort of target or get after the balance of what's in the closet beyond what's just been purchased on RealReal at this point?

Speaker #8: Yes, Dylan. Thanks for the question. For those that don't know what my closet is, I want to say, first of all, we see ourselves as that personal advisor to the seller already.

Rati Sahi Levesque: Yes, Dylan. Thanks for the question. For those that don't know what My Closet is, you know, I wanna say, first of all, we see ourselves as that personal advisor to seller all, we're looking into My Closet and testing our way into that. You saw us launch something called Reconsign that was focused on our flywheelers as well. When people are buying things on our site, how do we target them and get them to consign? That's been working quite nicely. The next phase of that goes into pricing transparency.

Speaker #8: We're seeing that behavior shift in the seller. Where they call us to now get better insights into the primary market, what should they buy, what should they sell, what holds its resale value, and what doesn't.

Speaker #8: So how do we leverage that? We're looking into my closet and testing our way into that. You saw us launch something called Reconsign. That was focused on our flywheelers as well.

Speaker #8: So when people are buying things on our site, how do we target them and get them to consign? That's been working quite nicely. The next phase of that goes into pricing transparency.

Speaker #8: So again, empowering them with the insights on brands, pricing, what to hold on to, what to trade up, and so forth. So by the end of this year, we'll have kind of the full build of

Rati Sahi Levesque: Again, empowering them with the insights on brand, pricing, what to hold on to, what to trade up, and so forth. By the end of this year, we'll have kind of the full build of something like this early net going into even early next year, but we're testing our way into that, and you're gonna see improvements into that relationship. The real vision there, like I said, is being that personal advisor to our seller. We're really getting them to think about The RealReal when they're in the primary market, right? How do we gain mind share in that first phase.

Speaker #1: Of something like this early net going into even early next year . But we're testing our way into that , and you're going to see improvements into that relationship .

Speaker #1: And the real vision there . Like I said , is being that personal advisor to our seller . But we're really getting them to think about the real , real when they're in the primary market , right .

Speaker #1: How do we gain mindshare in that , in that first space

Speaker #2: I guess that brings up another question about how tied in you are—your business is to the broader health of the luxury market.

Dylan Carden: I guess that brings up another question about how tied in you are, your business is to the broader health of the luxury market. I know there's been some sort of mixed signals for the primary market, but how does that sort of flow through your business, if you have a sense?

Speaker #2: Is , and I know there's been some sort of mixed signals for the primary market , but but how does that sort of flow through your business ?

Speaker #2: If you have a sense

Speaker #1: Yeah , yeah , definitely some mixed signals . But how I see it is the primary resale can coexist . We are seeing the shift into resale happening as resales becoming more mainstream , driven by the Gen Z and millennial cohorts .

Rati Sahi Levesque: Yeah. Yeah, definitely some mixed signals, but how I see it is the primary market and resale can coexist. We are seeing the shift into resale happening as resale is becoming more mainstream, driven by the Gen Z and millennial cohorts. You know, we mentioned this last time, almost 50% now prefer resale, and that TAM continues to grow, right? $200 billion in people's closets and $80 billion gets added. We have the access to all that inventory. The, you know, the magical thing about our business at the end of the day is that we're brand agnostic or channel agnostic.

Speaker #1: You know , we mentioned this last time , almost 50% now prefer resale . And that Tam continues to grow , right , $200 billion in people's closets and 80 billion gets added .

Speaker #1: So we have that access to all that inventory . You know , the magical thing about our business , at the end of the day , is that we're brand agnostic or channel agnostic .

Speaker #1: So we can react to the trends pretty quickly , bring in the right product at the right time for the consumer , and definitely opportunistic about even partnerships that we have seen , that you've seen that's done in the past as well with the primary market

Rati Sahi Levesque: We can react to the trends pretty quickly, bring in the right product at the right time for the consumer, definitely opportunistic about even partnerships, that we have seen, that you've seen us done in the past as well with the primary market.

Speaker #2: Well , and then to that end , you keep teaming up here . Thank you . The new tools from a search functionality , natural language search .

Dylan Carden: Well, to that end, you keep teeing me up here, thank you. The new tools from a search functionality, natural language search. I'd just be curious if you're using other things to make the overall curation and discovery process easier. I know, I think at least it's early days for that. If you're seeing meaningful improvement in conversion, time on site, return to site, those types of metrics. Thanks.

Speaker #2: And I just am curious if you're using other things to make the overall curation and discovery process easier. And I know, at least, it's early days for that.

Speaker #2: If you're seeing meaningful improvement in conversion time , on site , return to site , those types of metrics , thanks .

Speaker #1: Yes for sure . So definitely early days like you mentioned . But we are testing Agentic commerce testing our way into it . And I think I mentioned earlier , especially around search and discoverability matching .

Rati Sahi Levesque: Yes, for sure. Definitely early days, like you mentioned, but we are testing agentic commerce and testing our way into it. I think I mentioned earlier, especially around search and discoverability matching, like I mentioned before, matching the right product to the right person much faster. We did see conversion go up for new buyers, especially as we're testing our way into that. You know, we'll continue to kinda double down there as we see fit and be thoughtful about our approach, but as we scale up.

Speaker #1: Like I mentioned before , matching the right product to the right person much faster . We did see conversion go up for new buyers , especially as we're testing our way into that .

Speaker #1: So , you know , we'll continue to kind of double down there as we see fit and be thoughtful about our approach . But as we scale up

Speaker #2: I appreciate it. Thank you. Nice work.

Dylan Carden: Really appreciate it. Thank you. Nice work.

Speaker #3: Thank you

Speaker #4: Our next question will come from Jason at UBS. Please go ahead.

Operator: Thank you. Our next question will come from Jay Sole at UBS. Please go ahead.

Speaker #5: Great . Thank you so much . My question is for you . Are you talking about a lot of leverage on opex to get the nice EBITDA margin expansion for the year ?

Matt Koranda: Great. Thank you so much. Jim, my question is for you. Are you talking about a lot of leverage on OpEx to get the nice EBITDA margin expansion for the year? Can you just talk about some of the ways you're gonna be able to control expenses as you grow revenue to get that leverage? Thank you.

Jay Sole: Great. Thank you so much. Jim, my question is for you. Are you talking about a lot of leverage on OpEx to get the nice EBITDA margin expansion for the year? Can you just talk about some of the ways you're gonna be able to control expenses as you grow revenue to get that leverage? Thank you.

Speaker #5: You just talk about some of the ways you're going to be able to control expenses as you grow revenue to get that , to get that leverage .

Speaker #5: Thank you .

Speaker #3: Yeah , thanks . Thanks for the question , Jay . You know , we're making good progress towards our medium term goal of expanding margins to the range of 15 to 20% in 2025 .

Ajay Gopal: Yeah. Thanks, thanks for the question, Jay. you know, we're making good progress towards our medium-term goal of expanding margins to the range of 15% to 20%. In 2025, we delivered 6% Adjusted EBITDA margin, and our guidance for 2026 has a midpoint of 8%. you know, we see that as being well on track to that range of 200 to 300 basis points of margin expansion on every year to get to that goal. That is being driven by. I would say that at the forefront, it's really about getting efficiencies in the operations and tech line of our P&L. That's where we see the effect of initiatives like Athena, where we are able to leverage AI and automation to drive efficiency gains.

Speaker #3: We delivered 6% adjusted EBITDA margin . And our guidance for 2026 has has at a midpoint of 8% . You know , we see that as being well on track to that range of 200 to 300 basis points of margin expansion on a every year to get to that goal that is being driven by , I would say that at the forefront , it's really about getting efficiencies in the operations and tagline of our PNL .

Speaker #3: That's where we see the effect of initiatives like Athena, where we are able to leverage AI and automation to drive gains outside in other lines.

Ajay Gopal: Outside in other lines, you know, sales, SG&A. You've heard us talk about how we are bringing other tools to help our sales team be more effective. Things like Smart Engine and Smart Sales really help optimize the time that our reps spend dealing with consignors and help them, you know, be that much more efficient at unlocking supply. Finally, you know, a key element of our story on operating expense leverage is our fixed cost base as well. We are in a good place, and that continues to be a source of leverage for us as we grow as a business.

Speaker #3: You know, Sales SNA, you've heard us talk about how we are bringing other tools to help our sales team be more effective.

Speaker #3: Things like Smart Engine and Smart Sales really help optimize the time that our reps spend dealing with consignors and help them, you know, be that much more efficient at unlocking supply.

Speaker #3: And then finally , you know , a key element of our story on operating expense leverage is , is our fixed cost base as well .

Speaker #3: We are in a good place , and that continues to be a source of leverage for us as we grow as a business

Speaker #5: Got it . Thank you so much

[Analyst]: Got it. Thank you so much.

Jay Sole: Got it. Thank you so much.

Speaker #4: Our final question for today comes from Matt Koranda at Roth Capital Partners . Please go ahead

Operator: Our final question for today comes from Matt Koranda at ROTH Capital Partners. Please go ahead.

Speaker #5: Hi , guys .

Speaker #6: Hopefully, you can hear me here. Nice work in the quarter. A lot has been asked and answered. I guess one of the things I wanted to hear a little bit more about was how AI can help you on the supply side.

[Analyst]: Hey, guys. Hopefully you can hear me here.

Matt Koranda: Hey, guys. Hopefully you can hear me here.

Ajay Gopal: Yep.

[Analyst]: Nice work in the quarter. A lot has been asked and answered. One of the things I wanted to hear a little bit more about was how AI can help you on the supply side. I know AI has been discussed a lot in terms of Athena, in terms of processing inbound items, in terms of merchandising and sort of adding assortment customization to your buyers. What can AI do for you, I guess, in the supply procurement side of the house?

Matt Koranda: Nice work in the quarter. A lot has been asked and answered. One of the things I wanted to hear a little bit more about was how AI can help you on the supply side. I know AI has been discussed a lot in terms of Athena, in terms of processing inbound items, in terms of merchandising and sort of adding assortment customization to your buyers. What can AI do for you, I guess, in the supply procurement side of the house?

Speaker #6: I know AI has been discussed a lot in terms of Athena , in terms of processing inbound items , in terms of merchandising and sort of adding assortment customization to your buyers .

Speaker #6: But what can I do for you ? I guess in the in the supply procurement side of the house and you have anything that moves the needle in 26 on that front ?

Rati Sahi Levesque: Yeah.

[Analyst]: Do you have anything that moves the needle in 2026 on that front?

Matt Koranda: Do you have anything that moves the needle in 2026 on that front?

Speaker #1: Yes . Great question . Thanks , Matt . So you know , we're definitely are an AI beneficiary and not new to IA .

Rati Sahi Levesque: Yes. Great question. Thanks, Matt. You know, we definitely are an AI beneficiary and not new to AI, and definitely been early adopters there. We've always focused on our differentiators, whether that's authentication, supply, like you said, and pricing and data, just to zoom out for a second. Really excited not only about the efficiencies that we believe that we'll see there and are seeing there, but also around transforming the seller experience as you dig in. Smart Engine is a piece of that, right? We've talked a lot about that really gaining traction, converting, more of those sellers, and then converting buyers into sellers with a more targeted approach. Getting smarter about targeting those areas and getting them in. Everything we do on the buyer side does feed into the seller side as well.

Speaker #1: AI and definitely been early adopters . There . We've always focused on our differentiators , whether that's authentication supply like you said and pricing and data .

Speaker #1: Just to zoom out for a second . So it really excited not only about the efficiencies that we believe that we'll see there and are seeing there , but also around transforming the seller experience as you dig in .

Speaker #1: So Smart Engine is a piece of that , right ? We've talked a lot about that really gaining traction , converting more of those sellers and then converting buyers into sellers with a more targeted approach .

Speaker #1: So getting smarter about targeting those areas and getting them in everything we do . On the buyer side does feed into the seller side as well .

Speaker #1: And I think that's really important to remember because as they earn more pricing for their items , they're happier with the service and then they come back and sign with us very quickly .

Rati Sahi Levesque: I think that's really important to remember because as they earn more pricing for their items, they're happier with the service, and then they come back and consign with us very quickly. That marketplace approach is really important as well. We talked about a little bit about My Closet. That is another place where we really become that trusted advisor, making sure people understand what to consign and when to get consigned. Using that data over now more than 50 million items that we've consigned and, you know, over 40 million members, to kind of create that deep human connection with the seller specifically, on the agentic AI side. Think about, you know, that human and AI kind of technology coming together to create that experience.

Speaker #1: So that marketplace approach is really important as well . And we talked about a little bit about my closet . That is another place where we really become that trusted advisor , making sure people understand what to consign and when to consign .

Speaker #1: And using that data over . Now , more than 50 million items that we've consigned and over 40 million members to kind of create that deep human connections with the with the seller specifically on the AI side .

Speaker #1: So think about, you know, that human and AI kind of technology coming together to create that experience. And so we're pretty excited about that.

Rati Sahi Levesque: We're pretty excited about that.

Speaker #6: Okay . Very helpful . Thank you . And then maybe just one other one on the margin expansion . That's planned for the EBITDA guide for 26 .

[Analyst]: Okay. Very helpful. Thank you. Then maybe just one other one on the margin expansion that's planned for the EBITDA guide for 2026. Just wanted to maybe hear you put a finer point on the sources of margin expansion within OpEx. It sounds like that's gonna be the biggest driver in terms of margin expansion for 2026. Is it evenly split between O&T and SG&A, or is it more heavily on the O&T side of things, just given Athena implementation and how that benefits you on O&T?

Matt Koranda: Okay. Very helpful. Thank you. Then maybe just one other one on the margin expansion that's planned for the EBITDA guide for 2026. Just wanted to maybe hear you put a finer point on the sources of margin expansion within OpEx. It sounds like that's gonna be the biggest driver in terms of margin expansion for 2026. Is it evenly split between O&T and SG&A, or is it more heavily on the O&T side of things, just given Athena implementation and how that benefits you on O&T?

Speaker #6: Just wanted to maybe hear you put a finer point on the sources of margin expansion within OpEx. It sounds like that's going to be the biggest driver in terms of margin expansion for '26.

Speaker #6: Is it evenly split between OTT and SG&A , or is it more heavily on the ONT side of things , just given Athena implementation ?

Speaker #6: And how does that benefit you on ONT?

Speaker #3: Yeah , thanks for the question . Between those two categories , we do expect operations in tech to be to be the leader in terms of generating operating leverage .

Ajay Gopal: Yeah. Thanks for the question. Between those two categories, we do expect Operations and Tech to be the leader in terms of generating operating leverage. That is what we've shared. That's what you see in our results in 2025 and that sort of directional mix is going to continue going forward as well.

Speaker #3: That is what we've experienced . That's what you see in our results in 2025 . And that that sort of directional mix is going to continue going forward as well

Speaker #6: Okay . Great . Thanks guys .

Speaker #3: Thank you

[Analyst]: Okay. Great. Thanks, guys.

Matt Koranda: Okay. Great. Thanks, guys.

Ajay Gopal: Thank you.

Operator: Thank you. That concludes the Q&A session and today's call. You may now disconnect.

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