Q1 2020 Earnings Call

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Ladies and gentlemen, because the operator todays conference is scheduled to begin momentarily until that time, you're like will again be placed in home. Thank you for your patience again, ladies and gentlemen, they just the operator today's conference is scheduled to begin momentarily until that time your life will again be placed in home.

Thank you for your patience.

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Ladies and gentlemen, thank get free standing by welcome to their real real Fraced acquired 2020 financial results Conference call. At this time, all participants I know listen only mode.

After the speakers presentation there'll be a question answer session at the asked that question discussion you don't need to fresh start and then number one on your telephone if you're a class and further assistance.

Or is there I'd now like to Honda conference over the years Speaker today, you're probably right. Thank you. Please go ahead.

Thank you good afternoon, and welcome to the real real earnings call for the quarter ended March 31st 2025.

Hi, Paul Bieber head of Investor Relations at the real real.

Joining me today to discuss our results for founder and CEO truly Wainwright, Chief Financial Officer Mikulski.

Each of US is conducting the call from our home so we apologize for any technical difficulties.

Hopefully you've had a chance to read out shareholder letter that we published earlier today, along with our press release.

Before we begin I'd like to remind you that management will make forward looking statements. During the course of this call. These forward looking statements involve known and unknown risks and uncertainties and our actual results could differ materially.

You can find more information about these risks uncertainties and other factors that could affect our operating results no. Most recent periodic reports on form 10-K and in our earnings release from earlier today.

Our presentation well include non-GAAP financial measures and we have provided we can affiliations that most comparable GAAP meritor measures in our earnings press release, which is available on our Investor Relations website.

With that I'll hand, the call over to Julie introductory remarks, and then won't go straight secure night Julie.

So I am I want to say Hello to everyone and thank you for joining the call I would be remiss, if I didnt start to call with a major thank you to all the employees of the rail Ralph This is Dan as I'm sure everyone, saying, an unprecedented times for the employees for our customers.

Consigners.

Our every every hurt him we deal with how have they been the small businesses. So much businesses I'd have business partners.

It has been a time, where strength has try amps telesphere worked hard decisions have been made where there's been tremendous innovation.

And tremendous thanks through that and innovation, but one thing is very clear the team at the rail Ral errors and excellent team. It's one of the best seems I've ever worked with the in my 40 year career I'm proud to be part of this company.

And we are not only going to persevere, we know we're going to end up on top again, a big Thank you to everyone that rail rail touches from that the real real employees.

To our Consigners.

Our cash buyers and everyone. We do business with now that's all in that it didn't start the business. This is a crazy time, so you're gonna here, the words fluid et cetera from us a lot because it is a fluid time with that operator, we're ready to take some questions.

Okay. Thank you and as a reminder to ask a question here when you get past hardening in number one on your telesales. He would drive question present pounds.

And your first question comes from the line, suggesting pellets from Bank of America. Your line is now open.

Great. Thanks for taking my question I know, it's a tough time for everyone. First first question can you help us understand how much of the downturn in sales is supply related versus demand related and maybe you could talk about the percent of items, that's sell through today versus pre kobin just to sell through rate.

And then secondly can you talk a little bit.

The passage of the warehouse today, and how are you thinking about California stage to plan and how do you see brisbin, maybe potentially opening up thank you.

Right. So this is truly I'll take I'll start with most of it till as we've said many many times where supply driven business. Our demand did pull off about 10 days, but it came roaring back. So I demand is clearly there and its Hep C code that bubble. So we're excited about that I because.

Challenge at first in AD.

And the first two weeks in April was actually getting supply and.

In our biggest state and our biggest region and then secondarily processing that we do have warehouse opt center in Brisbane, California, and Kaka and Perth Amboy.

California is a little different I'd say two here while it is a directional notion our governor does not mean every local town nor vocal county has to follow phase to sell it at least what's that leaves us with more uncertainty however, having said that.

We were told late this weekend that we could now bring back half of our staff 200 people in ships have 100 per shift to work in Brisbane.

And we're very excited about that we started on Furloughing people.

Hmm rerouting product back to the Brisbane area. So again that prior to cold and we had 460 people. So now we're gonna be able to run a shift of 100 times to every day, we're very excited about that and we think it's going to that enhance our ability.

To pass things that processing very quickly and more importantly, we started curbside pickup in many many states in April and a initiated a fleet of vans.

Yeah actually ball expand as the as states, helping up so.

We feel good about where we are things are picking up things are opening up now again and again I may use that word, but it's still fluid. So <unk>, but we are excited about what we're seeing and measures comp constrained opening.

Yeah, let me pick up on on the call around on the question, Iran sort of sell through rates sitting Julie alluded to in fact, the demand has held up quite well ours bounced back quite well after the initial posts.

Covered shock so we continue to see a traffic being up year over year to spend our money. Despite our marketing spend being down two thirds or more and that's the result of that is that our sell through rates, we measure them over multiple periods of time four days being the first marker for day so.

All through his held up as bounced back remarkably well and is now it has covered levels.

It's really underscoring the point that as new product comes to the site, it's going to sell.

Great. Thanks, Thanks, Matt Thanks, Julie appreciate it.

Yes.

Alright. Thank you for your next question from the line, Yes, Oliver Chen from calling your line is now open. Thanks, a lot in high Julie high but think slot Paul regarding the last two weeks of April that was encouraging with GMP improving modestly could you speak to why that may be happening and also it was also encouraging.

What you mentioned on net promoter scores in April would love your thoughts on that and then the virtual consignment you've quickly and agile we pivoted to that what do you think that means in terms of step changes and the way [laughter] customers interact and unit economics as well.

[noise], So Oliver let let's just go through a couple of things, though the reason April the end of April picked up is because we rolled out virtual and we also rolled out a fleet of bands for curbside pickup. So I'd demand at had the people come to the side had a lot more product to get into so that this is really a new.

[music] initiative correct.

Or tool.

Our like for a while.

And we're hoping.

In the near term meeting in the next you know few weeks, we'll also have curbside drop off in our retail location. So we're really really I'm excited about that but really the pickup in demand was due to this that kept the whole company innovate now Tim said unit economics, and where that goes it's too early to.

How I think we're still going to have a blended rate people love the face to face.

Meetings, but we are getting a lot of units per when we do the virtual appointment so it looks very encouraging now.

But again, it's early days, we don't even have a full month of data and from that.

Okay, and our last question Julie's about as you look at context for the industry and the things were seeing with frankly bankruptcies and promotions and.

Other people left on inventory <unk>, what are your thoughts for how you'll be.

For that kind of that promotional environment and how your business model will be flexible. Thank you.

So.

In the past some same price compression.

When people.

Equally come out we are not seen that now at all.

So again that may change, but we're not seeing price compression and what we mean by price compression we have to lower our prices in response to add department stores in particular Boeing their prices. So we aren't seeing that any of our discounting is due to gets older women.

Sorry, selling because the newer inventory is likely to go on the site.

Thank you best regards.

Okay. Thank you for your next question from the line is Michael Binetti from kind of changed your line is helping.

Oh, Hey, guys. Thanks for taking my questions here essentially detail in the in the later today I'm I just want to square a couple of things I think you said in mid April.

You are seeing tracking about flat year over year, despite marking down significantly today, you're seeing traffic up slightly year over year, the marketing was down 66% two thirds or but given what we've heard a broader retail about E commerce accelerating significantly with other online resellers pointing to trends now back book recruit Robby.

I guess do you feel like you've left in business on the TV by restricting advertising much Julie.

Our first I think we may of last year, we can we just hold on for a.

I'm in it.

Okay, but it's still see her line here.

She's probably give me the best answer every novel.

She's going to call back in for.

Operator can you have fallen Expediter entry Bakken from Hall.

When she calls Bakken.

Alright, okay.

And actually noted falling back in his role he's having difficulties as well. So she can expedite has entered the Bakken.

[laughter].

Operator, both jewelry amount on hold now so.

Okay.

Oh excuse me Michael Binetti did a good yeah I'm press star one again I'll be releasing your line so that I can pick up the lineup the speaker.

Sure.

Alright, well.

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Okay.

Yeah.

Yes, Hey, Julie I can hear you.

Hey, Paul can you hear us.

Yes, you're back on.

All right [laughter] well necessary.

I think go to that again, yes.

Okay.

Okay. So I'm trying to now remember that the question that we [laughter] you threw out marketing spend and are we leaving and.

Moving things on the table. So an abstract yes go ahead gradually Oh, yes, I mean, we are going where we are living here, what we waited for marketing, we weren't going to be running marketing against quad by empty shelves. So now that everything's loosening up a we will be out revising our marketing budget and b.

You know, adding adding more money back end to add dry by normal business. So again, the worst thing we could have done it spend a lot of money when the product as well is harder to get in but again things are starting to loosen up so everything's fluid everything's changing and we will be revising our marketing budget.

Hi, Thank you I don't know question.

Okay.

So you lost anybody else sorry, operator would you say there's no more questions.

Yes for our next question from your line is Ed Yruma from Keybanc capital. Your line is now open.

Hi, this is a hobby.

And on behalf of and we just wanted to know when do you think you'll see the effects on the top employees are going back to the Brisbane sector.

Do you think that will immediately increase supply or what do you think like the timeline it.

This quarter.

I'm happy to Julie obviously every luck, we're going to that's about processing the product coming in.

So there's two components one as the our ability to do curbside pickup increases across the line.

We're going to be there and that gardening and they already started in may that we believe it's going to pick up even more and some key regions like that western state and also the northeast corridor. So we're excited about that and the good news is when we get the products and we can then pass them. We do process them, we give a backlog now.

And we expect that backlog should diminish in the next few weeks with Brisbane opening up so like I said right now it feels not like we're getting back to normal but things are loosening up and it looks more promising that has no last few weeks.

Great. Thank you.

Alright. Thank you for our next question from the line of Michael Binetti from Credit Suisse.

Hey, guys.

Hey, guys question.

[laughter].

So I just wanted to make sure absolutely Calibrin a few comments earlier. The Julie you also said that man came back quickly. After 10 days, we've heard that in other places a retail as well I think he said it's back to pre corona levels, or maybe where you were trending out on a daily basis in February but I think the.

The commentary you gave on forward guidance peak, a little bit more of a ramp back to year over year levels in fourth quarter can you help me try to calibrate coupled with a those comments. Please sure. They certainly sounds like you're now invite Matt you jump in here too what the way we measure.

Our demand is our sell through without price reduction in a four day period.

So, but we clearly need more product yet so our overall GMB is still down but the products we have.

It is selling at without a price reduction at a very fast clip.

Our focus is really about getting more supply n. and supply is limiting our growth not consumers.

Wishing to buy on our site, Matt do you want to give more color.

Yes, that's the yeah, that's mostly what I'm, saying he said I guess I'll just add that.

Traffic is another way to think about interest in our demand traffic is up a modestly year over year, which has really.

Similar to what we were immediately post Super Covance shock Sandy the second week of.

As of March I guess, the third week of March so up modestly right now on a much lower marketing spend.

Okay, and then I wanted to ask about your you comment at some of the virtual appointments are you seeing good yields there. Good conversion rates is there any any kind of metrics you can tell if we should think about that'd be a pick up on the business going forward it might be.

Good to hear a little bit more about some of the metrics, you're seeing and I don't know jewel you're dealing with fairly limited time frame of data but.

No.

Sure. So limited it there Gary let me just give you a couple of data point that we've done 10000 virtual appointment.

And that's great. So we're sort of I'm excited about that we're doing something you today actually launching which is giving consignors the ability to sell schedule, which we also think will be pretty exciting right now it in beta warm, but it will be rolled out very shortly.

We were worried when we started doing that curbside pickup that with the virtual appointments that we wouldn't get a lot of unit in fact, we're getting pretty much the same equivalent units.

As if we were coming here, how I think it's because again we remove.

Question, It's a combination of a virtual appointment with a curbside pickup with a ban is great. What we don't but we only have Chen dance running and so that's really not a lot where immediately expanding those 215, and we'll add them on an add on.

On a necessary basis. So I don't you know, we're talking a lot of different thing, but yeah. It you know it looks promising it doesn't look like a one to one replacements for our L. M visiting but in some areas may end up being that so that's a well have a lot more information by the time we.

Get through the end of June and then we can really get strong guidance on that including what the economics are looking like.

Okay, great. Thanks, a lot guys I'll get back into queue for the rest of my question.

[laughter].

Hi, Thank you name lunch and for our next question.

The line of Aaron Kessler from Raymond James Your line is now open.

Great. Thanks, guys a word it may have missed a question, but I don't think I did.

On the you mentioned the business centers opportunity I think interest up 10, X., how should we think about the longer term opportunity. There do you think this changes that or is it just more of a near term phenomenon.

That does that resets little bit lower as we get passed us.

I would just how demand change maybe among existing buyers versus new buyers. Thank you.

Hey, Matt you, let me take that got [laughter]. Okay. So our vendor business has historically been small and weve used it to kind of fill in products strategically in key categories typically higher value categories.

You correctly state that interest and it's our new vendors are the vendors by vendors, we just mean businesses.

Any form this could be a boutique it could be a store could be a brand it could be on any form of reseller.

Interest from new new vendors is up 10 x. versus pickup at levels.

So we're going to continue with our pre existing strategy thing, we're only going to bring in product.

That we know we can sell.

Hi value high demand coveted products. So historically, we're running about 5% of our GMB coming from the vendor business that will tick up a few percentage points.

In the near term and it frankly, it's anybody's guess, how long that goes but I'd say so long as.

They are difficulties in the retail environment I'd expect to see an elevated level of vendor business, but we're not going to compromise our our standards for quality and value going forward. So we'd expect it to.

Not likely to exceed 10% of urge our GMB anytime soon.

And then reminds me of your second question, just maybe how to manage chance, maybe maga existing buyers of new buyers and maybe additionally, just on the supply front are you seeing what kind of sheltered helping people are kind of cleaning out the clauses more on how looking to.

Sell more once they're able to or want to some of these restrictions are lifted.

Okay, Yeah, I guess I'll take the first one.

On on new investments in repeat buyers.

Just going to be a broken record or anywhere suppliers really driving all of these trends.

New buyers and repeat buyers are both kind of impacted by.

Our limited selection available on the site agendas trends or are there, they're tracking more or less in parallel.

As supply rebounds, we'd expect to see both an increase in new buyer growth and an increase.

And in repeat buyers purchase volume.

Got it Andrew just interesting I don't think we have much more to add to the today question around supply and if there's sort of pent up demand for it.

We're seeing certainly that there's there's strong interest in consignment again, our constraints just been our ability to handle that volume either doing pick ups.

Or is there any one of our other means that we didn't anticipate as restrictions or lease and in primarily in Brisbane here in California that we will start resuming not not typical but increased marketing activities, which we'd expect to start generating more interesting consignment consignment leads which were.

Well positioned to convert and start increasing supply trajectory.

Got it thank you.

Alright. Thank you for our next question from the line if I could Marcelo from Wells Fargo. Your line is now open.

Hi, good afternoon, everyone Oklahoma.

Everyone in your families are seeking doing well.

I think this question might be for a up from Matt I know, there's no specific guidance, but you talked about a normalization potentially by June in gradual improvement from there. So I guess my questions would be.

Are there any puts and takes or details you can give that they kind of go behind the assumption that you're going to making sure. The rebuild a JV and then two quick ones on on what you say in a shareholder letter.

You talk about the growth rates gradually improving but then you make a comment about Q3, what I wanted to understand is are you, saying to the Q3 growth rate could be worse than Q2 are you, saying that the the the growth there's not going to be linear in the sense that like the growth rate improved meaningfully much more for Q4.

His Q3.

Sure.

I will take ourselves so.

Yeah. It will go back to the introduced an julie's introductory comment to things are very fluid. We don't know more than any of you do about whats going to happen as as states begin to reopen and therefore restrictions on our business that loosened beyond what we know today.

We just made the point to lay out the set of assumptions then we're using to offer as as much of an outlook as we can given information we have.

So that is based on the assumption that we do see I progressing opening of the economy beginning in June and therefore, our business trends would start to to follow that and our growth rates would start increasing.

From from that basis by Q3, what we means a Q3 of 2019 was essentially our IPO corridor, where we had a significant acceleration in the business. It came back down to more normal levels in the fourth quarter of 2018. So what we mean specifically is that the improvement in growth rates as we go quarter to quarter is.

Not likely to be linear not that necessarily that we expect to the year over year growth rate in Q3 to be lower than in Q2.

Got it and then Oh, just when you say potentially exited the quarter in Q4 2019 levels as wanted to clarify do you mean, the quarter itself could be comparable to the Q4 of 19 or that you're on your exiting the quarter [laughter] sorry.

Yeah, well, let's it's up overly precise from look for what we're able to foresee yeah. We can we can accurately predict what's going to happen for Q2 analysts in the months of Q4 I think the spirit of that is just to say that we think that Bobby I by the end of that peak holiday season, given its kind of.

For December.

That you're our internal models in our resource builds and the staffing that we are planning for in our E. Commerce centers in our sales team would support growth its are approaching 2019 levels in peak holiday season.

Okay. Thanks, a lot.

Alright. Thank you for our next question from the line of Susan Anderson from B. Riley FBR. Your line is that will be.

Hi, Thanks for taking my question. Thanks for all the details in the shareholder letter and I had a quick question on the 70 million in cost phase is that meant to just be in this or how is that sanofi spread out over the year. Then also can you talk a little bit about where the savings are coming from thanks.

Sure.

So 70 million it just to be clear is is is the intent of the expense reductions we've made that would impact this fiscal year.

The.

The customer broadbased, the largest was marketing so think of rock approximately 20 $25 million that 70.

It was intended to be marketing and the rest of it is broadly speaking head count related including things like hiring freezes.

Layoffs Unfortunately in furloughs.

That make made up the bulk of done the rest of it in terms of the sequencing of of the cuts. We took action pretty early which is serving us well the cuts be can towards the end of March this growth you're paying people.

Into the really part of April So, we'll have a pretty good and lower run rate in the second quarter, that's more or less tracking the.

Our expected GMP profile, and then building kind of back up from there as we get to the rest of the year.

Great. That's helpful. And then just on the technology front it looks like you're still investing there I think as plan, but I guess have you kind of any of indefinite slated for this year.

On the Texas right to make operations more efficient.

You know this is that we did put a hold on some hires intact, but that was at least <unk>. There were two areas that would at least terror attack and then also our sales team. So bad sales relationship with our Consigners, new and repeat is really important hello.

Both of those were left mostly intact I would say they add the tech team had you chapel their priorities, we weren't doing virtual consignments prior.

Two lab, you know Hogan situation. So it they're really more focus there they're focused chains and they had the they released affected but they also were affected.

Yes, and I would add to that that the day pre existing priorities are largely untouched right. So we've talked a lot about focusing on operations efficiencies in automation and we continue to make good progress there made progress in the first quarter and expect to see continuing progress throughout the year such that the.

Three key areas that are impacted by automation, which include Copywriting fluttery touching and pricing could all approach 75% of of unit volume.

Great. That's helpful. Thanks, So much hope everyone face even have healthy and good luck next quarter.

Thank you too.

Okay. Okay.

Okay. Thank you once again, if we like to ask a question. Please press Star then the number one on your Telesales. Your next question comes from the line of Simeon Siegel from BMO capital. Your line is now open.

Hi, This is a t. soccer thinking oh, thanks for taking the questions.

In terms of new by acquisition does the current environment change the gokul its benji when things, Illinois.

Meaning.

Are there any learnings from the median Nick and I feel optimization.

Oh.

Well, let me tell you that whenever we learned were not resting are.

I mean, it's going to be that interesting are applicable going forward everything we do as tab and learn now having said that a while ago. We went in Oh Gee add more aggressively than digital AD. During this time a shelter in place. It's really served us well, but I mean that doesn't mean that we're going to.

Continue that strategy going forward, but I would even while we kept budgets, we kept a very small but yet running on such a property like kulu, which is done very well at these l.. We always continue to work out in the background and that's actually been driving our cars down our cost of acquisition itself.

No that and his pre tell them that we really you know we're in good shape in any case with him. We really got some great performance marketing people on our team that know how to drive efficiencies and effectiveness at the same time.

Great. Thank you okay. Thanks, an operator I think we'll take one more question.

There are any.

Once again, if he'd like to ask a question. These spreads tighten in number one on your telephone.

Okay.

Right.

Listen I wasn't they do I do want to I think I was cut off with or without good question on retail and it's going to be a adds gonna be carnage out there.

We are dependent on retail I think that's gonna be our gain during this period of time and it does make me sad to think the retailers that are primarily a retail company I'm going to have such a hard time, but.

We're in a unique position to get stronger due to that it's not a position I necessarily want to be end, but it's an opportunistic position for us. It goes from strength to strength. So I want to thank you all fear time.

Hopefully we can do this again without technical areas. The next time, we might even be in a real office instead of working I've various helms.

I hope, you're all saying at healthy.

And Dan. Please remember we're open for consignment virtual you can do sell scheduling them virtual appointment with Bob to work with you. Thank so much.

Ladies and gentlemen, they think that todays conference call. Thank you all for participating you may now disconnect.

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