The Realreal, Inc. · NASDAQ:REAL
The Realreal — Investor Day (March 2022)
58 slides from The Realreal's investor day presentation, Mar 22, 2022
Slide 1: 2022 Investor Day
Exhibit 99.2 2022 INVESTOR DAY
Slide 2: Welcome and Opening Remarks
Welcome and Opening Remarks Caitlin Howe Vice President, Investor Relations 2022 Investor Day 2
Slide 3: Safe Harbor/Disclosure Statement
Safe Harbor/Disclosure Statement These materials contain forward-looking statements relating to, among other things, the future performance of The RealReal that are based on the company's current expectations, forecasts and assumptions and involve risks and uncertainties. In some cases, you can iden
Slide 4: Today's Agenda
Today’s Agenda Welcome and Opening Remarks 10:00 am 11:20 am 11:20 am Break 10:00 am Caitlin Howe Vice President, Investor Relations Financial Overview Company Overview & Strategy | ESG 11:35 am 10:05 am 11:35 am 10:05 am Robert Julian Julie Wainwright Chief Financial Officer Chief Executive Officer
Slide 5: Company Overview, Vision & Strategy
Company Overview, Vision & Strategy Julie Wainwright Chief Executive Officer, Founder and Chairperson 2022 Investor Day 5
Slide 6: The RealReal Snapshot
1 The RealReal Snapshot (NASDAQ: REAL) June 2011 3,000+ 3.0M 2019 Founded Employees 2021 Orders IPO Date $754M ~$1.5B $467M 2 Market Cap 2021 GMV 2021 Revenue 84% ~$2.5B 2M+ 62 25M+ GMV from Cumulative 3 Customers NPS Score Total Members Repeat Buyers Commission Payouts (1) As of 12/31/21, unless ot
Slide 7: Key Messages | Investment Thesis
Key Messages | Investment Thesis L A R G E T A M L E A D E R I N NA S C E NT D E E P L UX UR Y R E S A L E C O M P E T I T I V E • Nearly $200B worth of luxury M A R K E T M O A T supply in U.S. homes* • World's largest online luxury resale • Proprietary technology and • Total addressable market mar
Slide 8: TAM is Large and Propelled by Strong Secular Tailwinds
TAM is Large and Propelled by Strong Secular Tailwinds C O V E T E D U N I Q U E O F F E R I N G S A N D S H I F T S I N C O N S U M E R 3 ~$700B A N D S U S T A I N A B I L I T Y D R I V E R E S A L E M I N D S E T A N D B E H A V I O R S 3 World-wide luxury goods available R E S A L E P U R C H A
Slide 9: Our Mission and Vision: Extend the Life Cycle of Luxury
O U R M I S S I O N Extend the Life Cycle of Luxury Expertly crafted items are designed to last a lifetime – they can change hands countless times and still retain their beauty and value. We bring expertise and enthusiasm to our mission of extending the life of luxury goods and enable more people to
Slide 10: ESG is Ingrained in Our Culture and Strategy
ESG is Ingrained in Our Culture and Strategy Environmental Social Governance Pioneering and enabling circular economy, Focusing on diversity and inclusion, employee safety, Ensuring oversight of ESG and ethics and extending the lifecycle of luxury human capital management and data privacy with a div
Slide 11: Board of Directors Skills Matrix
S K I L L S M A T R I X Experienced and Diversified Public Company Executive 38% Board of Directors Strategic Global Business Leader 38% COMMI TTEES COMMI TTEES 25% Technology / Innovation Retail Marketing / Branding 50% Operational Excellence 75% Julie Wainwright James Miller Founder, CEO, Chairper
Slide 12: Experienced Leadership Team Focused on Execution
Experienced Leadership Team Focused on Execution Rati Sahi Levesque Julie Wainwright Robert Julian CHIEF EXECUTIVE OFFICER, FOUNDER & CHAIRPERSON PRESIDENT CHIEF FINANCIAL OFFICER Orr Shakked Jessica Fortier Michael Sewell CHIEF MARKETING OFFICER SVP, OPERATIONS SVP, ENGINEERING Rachel Vaisman Saman
Slide 13: We Are the Leader in Our Industry
We Are the Leader in Our Industry PRIMARY COMPETITION* Brick & Mortar High End Auction Houses Do Nothing/Hold on to Consignment Shops (e.g., Sotheby’s/Christie’s) Luxury Goods CIRCULAR ECONOMY/ High Medium Medium N/A SUSTAINABILITY High High High N/A AOV (Average Order Value) PRODUCT BREADTH High Me
Slide 14: Powerful Flywheel Reduces Buyer Acquisition Costs
Powerful Flywheel: Reduces Buyer Acquisition Costs (BAC) and Drives Retention Among Buyers and Consignors 57% 14% of consignors of buyers are * * are buyers consignors LOWERS ACQUISITION COSTS DRIVES RETENTION Capturing Positive Operating Leverage from Marketing and Repeat Rate (*) In 2021 2022 Inve
Slide 15: Clear Strategy and Path to Profitability in 2025
Clear Strategy and Path to Profitability in 2025 Continue to Grow Top-line Target 30%+ per year (over prior year) Drive Operational Excellence and continuous improvement Control Fixed Costs remain relatively flat (~grow with inflation) 2022 Investor Day 15
Slide 16: Key Takeaways | Investment Thesis
Key Takeaways | Investment Thesis L A R G E T A M • Nearly $200B worth of luxury supply in U.S. homes* • Total addressable market (TAM) expected to grow due to secular tailwinds, including sustainability fueling wide acceptance of resale L E A D E R I N N A S C E N T L U X U R Y R E S A L E M A R K
Slide 17: Operational & Commercial Excellence
Operational & Commercial Excellence Rati Sahi Levesque President
Slide 18: Key Messages | Operational & Commercial Excellence
Key Messages | Operational & Commercial Excellence W O R L D - C L A S S P E R F O R M A N C E S A L E S T E A M M A R K E T I N G is the cornerstone of our and high retention rates drive omni-channel strategy down our buyer acquisition cost for generating supply (BAC) C O N T I N U O U S P R O P R
Slide 19: Marketing, Sales Team, Operations, Technology
2 MAR K E T I N G S AL E S T E AM 1 1 2 How We Generate Consignor Our Omnichannel Approach to Supply Opportunities Generation 4 3 O P E R AT I O NS 4 T E C H NO LOG Y Building Trust and Delivering Excellent How We Stand Out from the Service Efficiently at Scale Competition 3 2022 Investor Day 19
Slide 20: In-Home Sales Team is Our Most Valuable Supply Channel
In-Home Sales Team is Our Most Valuable Supply Channel • In-home appointments generate majority of supply F R I C T I O N L E S S • Convenience for consignor: meet them where they are E X P E R I E N C E • Multi-modal optionality reduces friction (virtual, vans) D Y N A M I C • Drives high-value sup
Slide 21: Brick & Mortar Drove 30% of New Consignors
Brick & Mortar Drove 30% of New Consignors* • 19 brick and mortar locations: - 16 shoppable stores 11 neighborhood 5 flagship - 3 luxury consignment offices • Neighborhood stores are highest return on invested capital* in our brick & mortar fleet • Stores provide a halo effect, driving a GMV lift Ne
Slide 22: Marketing, Sales Team, Operations, Technology
2 MAR K E T I N G S AL E S T E AM 1 1 2 How We Generate Consignor Our Omnichannel Approach to Supply Opportunities Generation 4 3 O P E R AT I O NS 4 T E C H NO LOG Y Building Trust and Delivering Excellent How We Stand Out from the Service Efficiently at Scale Competition 3 2022 Investor Day 22
Slide 23: Performance Marketing
Performance Marketing Orr Shakked Chief Marketing Officer
Slide 24: Performance Marketing, High Retention and Flywheel Effect Drive Efficiencies
Performance Marketing, High Retention and Flywheel Effect Drive Efficiencies Buyer Acquisition Costs Continue to Decline LTV/BAC LTV Buyer Acquisition Costs Continue to Decline improving increasing $178 $178 $168 $139 $124 $114 57% $104 of consigners become buyers 2015 2016 2017 2018 2019 2020 2021
Slide 25: Active Customers and Consignors Continue to Grow
Active Customers and Consignors Continue to Grow Active Consignors Active Customers Active Consignors by Time Active Customers by Time Between By Tim Si e nSi cen Jo cie nJoin Join and Purchase By Time Since Join 1 2 3 4 5 6 7 8 9 10 1 2 3 4 5 6 7 8 9 10 2012 2013 2014 2015 2016 2017 2018 2019 2020
Slide 26: We Attract a Valuable, Younger, and Diverse Audience
We Attract a Valuable, Younger, and Diverse Audience* Buyers - Age Buyers - Income Buyers - Gender 18-34 < $50k 35-44 F $50 - 100k 45-54 M $100 - 200k 55-64 Over $200k 65+ Consignors - Gender Consignors - Age Consignors - Income 18-34 < $50k 35-44 F $50 - 100k 45-54 M $100 - 200k 55-64 Over $200k 65
Slide 27: Our NPS is Best in Class among Peers
Our NPS is Best in Class among Peers % Likelihood to Recommend - NPS Rating (among Ever Used that Brand) • We do all the work for consignors, leading to high satisfaction rates and high repeat business • Our model is the preferred model by both customers and 29 NPS 62 NPS 35 NPS consignors Q12a_1: O
Slide 28: Customers and Consignors are Highly Engaged
Customers and Consignors are Highly Engaged In 2021… Customers: • Average annual visits per active customer: 127 • Average time per visit: 19 minutes • Percent of customers who “obsess” (or favorite) items: 69% • Average obsesses per customer: 11 Consignors: • Average site visits per active consigno
Slide 29: Marketing, Sales Team, Operations, Technology
2 MAR K E T I N G S AL E S T E AM 1 1 2 How We Generate Consignor Our Omnichannel Approach to Supply Opportunities Generation 4 3 O P E R AT I O NS 4 T E C H NO LOG Y Building Trust and Delivering Excellent How We Stand Out from the Service Efficiently at Scale Competition 3 2022 Investor Day 29
Slide 30: Operational Excellence & Continuous Improvement
Operational Excellence & Continuous Improvement Jessica Fortier SVP, Operations
Slide 31: Our Single-SKU Inventory Model is Differentiated and Difficult to Replicate
Our Single-SKU Inventory Model is Differentiated and Difficult to Replicate Buyers Become Consignors In-home Pickup SUPPLY SIDE DEMAND SIDE Pick, Pack & Ship Virtual Appointment Online FOUR Purchases AUTHENTICATION Pick, Pack & Ship CENTERS BOPIS In-store Drop Off In-store Purchases Direct Ship Tran
Slide 32: Robust Authentication Process is a Key Differentiator
Robust Authentication Process is a Key Differentiator Authentication Gemologists Stage 1: Stage 2: Watchmakers Photography & Receiving Quality Quality Photo Editing Control Control Fashion Experts/Authenticators Item Listed for Sale Home & Art Specialists 2022 Investor Day 32
Slide 33: Proprietary Technology Combined with Process Improvements Drive Optimization
Proprietary Technology Combined with Process Improvements Drive Optimization We Know Authentic Over 100k fakes • Expertise: Large US employer of gemologists, and hundreds of other experts rejected • Accuracy: Proprietary authentication tools and databases of 10M+ items Single SKU Platform at Scale 7
Slide 34: What's Ahead
What’s Ahead Authentication Leadership at Scale • Employer of choice for experts; experts in training • Predictive risk-management and authentication automation Automation Driving World-Class Service • Specialized support for high-volume consignors • Expand self-service, including AI-powered interac
Slide 35: Marketing, Sales Team, Operations, Technology
2 MAR K E T I N G S AL E S T E AM 1 1 2 How We Generate Consignor Our Omnichannel Approach to Supply Opportunities Generation 4 3 O P E R AT I O NS 4 T E C H NO LOG Y Building Trust and Delivering Excellent How We Stand Out from the Service Efficiently at Scale Competition 3 2022 Investor Day 35
Slide 36: Proprietary Technology in Authentication
Proprietary Technology in Authentication Christopher Rachel Brossman Vaisman VP, Machine Learning VP, Merchandising Operations
Slide 37: New Authentication Technologies Applied to Handbags in 2022
New Authentication Technologies Applied to Handbags in 2022 Proprietary Technology Enables Authentication at Scale O P E R AT I ON AL E F F E C T IV E NE S S Route items most likely to be counterfeited to our experienced expert authenticators increasing catch rate C O S T E F F I C I E NCY Unlock au
Slide 38: Intelligent Authentication Routing with Proprietary SHIELD Technology
Intelligent Authentication Routing with Proprietary SHIELD Technology I N I T I A L S T A T E C U R R E N T S T A T E M A C H I N E L E A R N I N G M O D E L : S H I E L D High High P r o p r i e t a r y d a t a f r o m 1 0 + y e a r s o f a u t h e n t i c a t i n g a s w e l l as h i s t o r i c a
Slide 39: Authenticate High Value/Risk Items with Proprietary VISION Model
Authenticate High Value/Risk Items with Proprietary VISION Model Fake V I S I O N – C O N V O L U T I O N A L N E U R A L N E T ### ### ### ### ### ### ### ### ### ### ### ### <<XXX>> <<XX>> Layer 1 Layer 2 Layer 3 Layer 4 Layer 5 Layer 6 and 7 Layer 8 With images of the product, Authentic the VISIO
Slide 40: What's Next
What’s Next SHIELD Utilize intelligent routing for more supply categories leading to further labor and process efficiencies VISION Scale new ML techniques to cover 40% of handbag supply by the end of 2022 EFFICIENCY Apply new technologies to all handbags and other categories to drive operational eff
Slide 41: Dynamic Pricing
Dynamic Pricing Courtney Casabat Sr. Director, Merchandise Planning and Pricing
Slide 42: Our Pricing Philosophy
Our Pricing Philosophy Market price for our unique items driven by supply and demand dynamics O U R P R I C I N G I S D Y N A M I C Near real-time data informs pricing W E P U T C O N S I G N O R S F I R S T Selling at optimal price drives repeat consignment * WE C R E A T E S A L E S V E L O C I T
Slide 43: Our Iterative Approach to Optimize Prices
Our Iterative Approach to Optimize Prices M O D E L I N C O R P O R A T E S M O R E D A T A P O I N T S M U L T I P L E M A R K E T C O N D I T I O N V A R I A B L E S Sold at $160 K E E P M O D E L F R E S H in 3 days 1 Item Level Attributes Control with market demand * Initial Price and historical
Slide 44: Operational & Commercial Excellence Wrap-Up
Operational & Commercial Excellence Wrap-Up Rati Levesque President
Slide 45: Key Takeaways | Operational & Commercial Excellence
Key Takeaways | Operational & Commercial Excellence W O R L D - C L A S S S A L E S T E A M is a cornerstone of our omni-channel strategy for generating supply P E R F O R M A N C E M A R K E T I N G and high retention rates drive down our BAC C O N T I N U O U S I M P R O V E M E N T in operations
Slide 46: Our Path to Profitability
Our Path to Profitability Robert Julian Chief Financial Officer
Slide 47: Areas of Current and Continued Focus as New CFO
Areas of Current and Continued Focus as New CFO Key Observations as New CFO • Differentiated business model with significant competitive advantages: • Full-service • Authentication • Data • Over 25 million members and growing • Powerful flywheel leading to lower BAC • Talented team at all levels of
Slide 48: Key Messages | Our Path to Profitability
Key Messages | Our Path to Profitability Ta r g e t A n n u a l To p - l i n e G r o w t h o f 3 0 % + V a r i a b l e C o s t P r o d u c t i v i t y F i x e d C o s t L e v e r a g e Ta r g e t F u l l Ye a r A d j . E B I T D A P r o f i t a b i l i t y i n 2 0 2 4 V i s i o n 2 0 2 5 : G M V o f
Slide 49: Strong Track Record of Top-Line Growth
Strong Track Record of Top-Line Growth REVENUE & GMV ($M) G R E A T E R W A L L E T S H A R E Revenue: +37% CAGR from younger generations as a result of our sustainability focus $1,482 GMV: +32% CAGR ~$700B World-wide luxury goods available S T R O N G H I S T O R I C A L 1 for resale $1,008 $987 G
Slide 50: Fixed and Variable Costs Breakdown
Fixed and Variable Costs Breakdown 2 0 2 1 TO TA L O P E R AT I N G E X P E N S E : $438M Primarily Variable Primarily Fixed & Hybrid • G&A Admin, • Marketing • Sales Occupancy, • Merchandising • Stores / Luxury Consignment Offices Depreciation • Business • Customer Service • Finance Operations • Op
Slide 51: Leveraging Prior Investments
Leveraging Prior Investments Enhancements to Infrastructure/Fixed Costs: • Accelerated authentication center move from CA to AZ • Accelerated neighborhood store strategy to drive supply acquisition • Grew technology/development budget to cement and enhance data/technology advantage • Scaled support
Slide 52: Path to Vision 2025
Path to Vision 2025 FY 2022E FY 2021 FY 2025E Mid-point of Actual Vision Guidance (in millions, except percentages) Gross Merchandise Value $1,482 $2,050 $5,000+ Total Revenue $468 $650 $1,500+ Gross Profit $273 $390 $950 as % of Revenue 58.4% 60.0% 63.3% Total Operating Expense - excl. SBC $439 $50
Slide 53: Target Adj. EBITDA Margin Bridge
Target Adj. EBITDA Margin Bridge ~425 - 450 bps Gross Margin Expansion: Direct ~6.5 - 7.0% Revenue to decrease as a percent of ~(150) - (200) bps Total Revenue over time ~1450 - 1500 bps Fixed Cost Leverage: Control fixed 0% costs through leveraging prior investments and thoughtfully managing fixed
Slide 54: Strategic Capital Deployment Focused on Growth
Strategic Capital Deployment Focused on Growth R E I N V E S T F O R G R O W T H R E A C H S T R O N G P R O F I TA B I L I T Y F I N A N C I A L • Prioritize growth given F O U N DAT I O N significant near- and mid- term opportunities • Targeting positive Adj. EBITDA in 2024 • $418M in Cash and • M
Slide 55: Key Takeaways | Our Path to Profitability
Key Takeaways | Our Path to Profitability V i s i o n 2 0 2 5 A d j . E B I T D A G M V : $ 5 . 0 B + F i x e d C o s t T a r g e t A n n u a l V a r i a b l e C o s t P r o f i t a b i l i t y in R e v . : $ 1 . 5 B + L e v e r a g e P r o d u c t i v i t y T o p - l i n e G r o w t h 2024 A d j .
Slide 56: Q&A
Q&A 2 20 02 22 2 I In nv ve es sto tor r D Da ay y 56 56
Slide 57: Appendix
Appendix 2 20 02 22 2 I In nv ve es sto tor r D Da ay y 57 57
Slide 58: Non-GAAP to GAAP Reconciliation Tables
Non-GAAP to GAAP Reconciliation Tables 2022 Investor Day 58