Q2 2022 RealReal Inc Earnings Call

August 9, 2022

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Okay.

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Good afternoon, and welcome to the real real second quarter 2022 earnings results Conference call.

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Please note this event is being recorded.

I would now like to turn the conference over to Caitlin, how VP of Investor Relations of real Weil. Please go ahead.

Thank you operator, joining me today to discuss our results for the period ended June 30th 2022, our co interim CEO and President Ross you go back and co interim CEO and Chief Financial Officer, Robert Julian.

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.

Can find more information about these risks uncertainties and other factors that could affect our operating results in the Companys. 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 for which historical financial measures. We have provided reconciliations to the most comparable GAAP measures in our earnings press release. In addition to the earnings press release, we issued a stockholder letter earlier today.

Both of which are available on our Investor Relations website.

I'd now like to turn the call over to Rocky <unk> co interim CEO and president of the real real for introductory remarks.

Thanks, Caitlin and thank you everyone for joining our earnings call today.

Robert and I will provide some opening remarks and commentary on the business and then we will go into our Q&A session.

During the second quarter, we announced that our founder and CEO , Julie Wainwright will be moving on at the end of this year, we thank Julie for her incredible vision and tireless efforts and strong leadership over the past 11 years.

Robert and I are energized and our new roles at co interim CEO and we are enthusiastic about the direction of the business.

During the second quarter of 2022 we delivered solid financial results while.

While top line G. M D growth was slightly lower than expected, we did meet our revenue projections and we exceeded our guidance on adjusted EBITDA.

While our Q2 G. M D growth rate was 30% we did experience some downward pressure due to a sale labor shortfall and a change in product mix.

First from the supply side, we entered the quarter needing more salespeople and this hiring challenge was exasperated by a higher than normal attrition in our sales force.

We proactively implemented multiple strategies to address the labor shortfall, including hiring and back filling sales roles.

Selectively increasing compensation in key markets and utilizing technology are confined to self serve.

We believe these actions combined with attrition returning to normal levels at the end of Q2 are meaningful steps in addressing the underlying labor issue.

Additionally, our consignment leads and opportunities continued to remain robust.

Together, we believe we are well positioned for a significant step up in supply for the fourth quarter.

The second pressure on G. M D. In Q2 came from the demand side.

Starting in the first quarter and accelerating into the second quarter, there was a shift in consumer demand.

<unk> was from higher priced items like fine jewelry and watches to lower priced items like ready to wear and shoes.

High value continues to perform the second quarter mix more closely mirrored our pre COVID-19 product mix as consumers go back to the office.

Travel more and attend events.

Therefore, the higher proportion of G M b coming from apparel and shoes resulted in improved take rate year over year, but also a reduction in average order value, while we expected demand normalized across categories at some point it occurred more quickly than anticipated.

We're all we are optimistic about the direction of the business. We believe our demand remains strong as both new and repeat customers continued to grow. Furthermore.

Furthermore, we believe our flywheel has strong momentum and is helping us to reduce our buyer acquisition cost.

Finally, we are taking a close look at expenses to more effectively manage our costs, which Robert will explain further I'll now pass it over him over to him for a brief financial update.

Thanks Rajiv.

We are pleased with our financial results for the second quarter.

Despite some pressure on GMT as Roger mentioned, we were able to effectively manage our cost and deliver better than expected adjusted EBITDA results for the quarter.

For example, we implemented a modest reduction in force in our corporate support functions slowed hiring for open support roles and reduced discretionary spending.

We'll continue to monitor the broader economic environment and trends and we will be prepared to implement further contingency actions if necessary.

In Q2, we grew GMB, 30% revenue, 47% and narrowed our adjusted EBIT loss, both sequentially and year over year.

<unk> our guidance for the quarter.

However, as a result of our supply shortfall in Q2 and the shift in consumer demand. We believe it is prudent to reduce our full year 2022 guidance.

Notably we continue to project that the real real will be profitable on an adjusted EBITDA basis in 2024.

We are on track to achieve our vision 2025, adjusted EBIT target.

As we've communicated previously these financial targets and projections are based on three primary levers topline growth variable cost productivity and rigorous fixed cost discipline. We delivered on all three of these elements in the first half of 2022.

As Rafi mentioned, we are energized about our long term strategy and prospects and for the opportunity to continue to lead this business towards profitability in our vision 2025 goals with that we will now go into our Q&A session.

Thank you.

We will now begin our question and answer session to ask a question you May Press Star then one on your telephone keypad, if youre using a speakerphone. Please pick up your handset before pressing the keys.

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At this time, we will pause momentarily to assemble our roster.

And the first question will come from Simeon Siegel from BMO capital markets. Please go ahead.

Thanks, Hey, everyone hope, you're all doing well.

I was hoping we could talk through some supply versus demand factors that you mentioned, so I think you talked about the drop in ASP and the improved take rate, which sounded like that was a shift in demand from from the items and.

Then on the other hand, we had the supply driven shortfall that you talked about so can you just maybe help us think through that slight miss in GNP versus the in line Reds broken down into the supply versus demand dynamic. Thank you.

Sure I mean, so as most of you know where supply driven company. So I will say that in the Mrs supply like we talked about came out of out of a couple of different factors early in Q2, we saw kind of the great resignation part too.

And that brought down growth it broke that brought down some of the G. M. D mess that we're seeing in Q3 specifically.

And what what don't I separate those two things that is the supply side, we saw that effect on G. M. D. And then the second thing that happened like we mentioned was a L. D and E. S. P came down and so we saw that consumer shifts really back to pre COVID-19 number numbers I'm back in 2019, where that shift of red.

To where increased.

Okay, Alright, Thanks, and then maybe any obviously not intentional the beginning but any learnings from the technology for consumers to self serve.

Does that maybe help with how youre approaching labor going forward.

Yes for sure. We you know during Covid. It was kind of forced upon us and that was the silver lining I would say and what we saw there was stores stores van pick up virtual all of those self service channels really helped our luxury managers thats, what we call our sales force become more productive.

So we saw productivity go up and really what we've been focused on is making sure. There's the least amount of friction through that channel. So our luxury manager can pick up more items per day. So we've seen that go up overall over the last few years driven out of our self service technology.

So some really good learnings there and we continue to optimize.

So assuming and also one thing this is Robert I'll add a little context about the GMB and our expected growth rates.

So in the first half of the year.

We grew GMB, roughly 30% and it was pretty consistent both in Q1 Q2 pretty close to 30% we've talked about some pressure on supply.

Due to labor and some changes in average selling price and everything but at the midpoint of our guidance. Our GMB growth rate is still sort of in the mid twenties, 23% or so.

At the midpoint, so we're still growing quite rapidly we're growing north of 20% just not the same 30% that we grew in the first half so while it's slow and we've had some headwinds it's still.

Not a bad growth rate.

93 plus percent growth.

Alright, perfect alright, Thanks, a lot everyone have best of luck for the rest of the year.

Thank you.

And the next question will come from Ike <unk> from Wells Fargo. Please go ahead.

Hey, thanks.

Robert two questions for you just I'm trying to do the math real quick before for I guess, you can get my question, but it looks like Youre looking for.

A decent amount of adjusted EBITDA improvement year over year in the fourth quarter based on what's implied I guess.

Curious am I looking at that right and then Theres something.

The levers that you're pulling that are impacting <unk> more than <unk> and then back to the question I guess, when we assume <unk> until the back half of the year should we assume that this mix dynamic.

Continues and that we're going to kind of run rate.

A negative maybe mid single digit year over year.

Growth rate on the <unk>.

<unk> as we move through Q3, and Q4 any help there would be great.

Yes, sure I can I suspect that part of what Youre doing is kind of triangulating our year to date results and our Q3 guidance and you can sort of get into the Q4.

What that suggest of adjusted EBITDA.

Wrestling that directly the midpoint of our adjusted EBITDA for Q3 is $28 million loss, which is a 19% as a percent of revenue and if you triangulate to the middle of our guidance for Q4, you do get to $13 million.

Of adjusted EBITDA for Q4.

Roughly seven 5%.

So single digit adjusted EBITDA margin loss in Q4.

And the logical question is why so much improvement of what drives that part of it is volume.

We continue to be a seasonal business and our largest.

Quarter in terms of <unk> revenue is always Q4, and there is a significant step up in <unk> between Q3 and Q4 at the midpoint of our guidance call. It $100 million that has a flow through.

I would say that the take rates in the gross margin that is assumed in Q4 is not that different in Q3, where you get a lot of this leverage is in our support functions in our fixed cost and what we're projecting is those costs will stay relatively flat from.

From Q3 to Q4 on a $100 million more dollars of GMP and that creates tremendous leverage.

We'll also continue to experience good productivity in our variable cost in Q4, and so that's what leads us to to that result in Q4, that's implied in our full year forecast in the Q3 guidance that we gave specifically.

And we do expect mix to continue so we do expect them.

Last part of your question ready to wear. This this is the new normal we believe for us back to pre Covid numbers.

Yes, not a continued shift or degradation sort of consistent.

That maybe we've reached this new normal quicker than we previously anticipated, but probably at a level that will stay fairly stable going forward.

Thank you very much.

Thank you.

And the next question is from Rick Patel from Raymond James. Please go ahead.

Thanks, Good afternoon, everyone.

On the labor related to supply shortfall.

Does this pertain to any particular categories or price point.

And its past I think you've had supply constraints, you've leaned on branded partners to cushion the negative impact I'm curious if you see the opportunity to do the same this time around.

So now this is not specific to price point or a category supply when I talk about our labor shortfall I'm talking about people out in the field our sales team.

So like I mentioned, sorry, if I'm repeating myself I just want to make sure it's crystal clear.

We saw attrition increase.

In Q2, we called the great resignation part to them and that's what had the biggest effect too.

Two our numbers into supply so it wasn't category, our pricing specific as far as branded partners.

That is more of our brands play for US we have not used that as a supply.

As the supply lever, but it is a big brand and awareness play for US. So we'll continue to do those like we have been and we're really focused you know in general unprofitable growth I will you know I think it's important to say that a part of the mix was a lot of this direct revenue that.

We had in the past, which is maybe 30% 30% of our of our inventory in Q1, our preferred as a percentage of revenue was about 30% that's reduced to 28%. This month this quarter and that's because again, we are focused on profitable growth and direct revenue just as a reminder.

Everyone is our items that we purchased especially in the vendor channel, we did that during hard times and Covid and needed the inventories. They couldn't go back into People's homes and were really limited in that category again focused on profitable growth.

And on that point can you help us think about the magnitude of growth in the direct segment during that kind of thing.

And also how we should think about.

Gross margins I believe your gross margin comparisons get a little bit more difficult there, particularly in the fourth quarter. So just curious what that trend line looks like.

So Rick let me talk about sequentially, how much of this direct revenue the owned inventory.

What percentage that is of our total revenue.

And if you go back to 2019 or before that percentage tended to be between 15, and 20% and that is our lower margin business.

In Q1 of this year that percentage has risen to 34%.

In Q2, we had reduced it and we started talking about deemphasizing the editor sequentially it reduced from 34% to 28% of our total revenue by the time, we get out to the end of the year it should be in the low twenties.

And eventually what we'd like to do is return back to the 15% to 20% that we saw back in 2019 and prior to that it does have a pretty significant impact on our expected gross margin. So again.

Gross margin in the first half of the year was.

<unk> 55 per cent.

Back in 2018, 19, and so on when we had a smaller proportion of our revenue coming from direct.

Our gross margin was in the mid sixties.

That will probably recover about half of that roughly.

In the second half of the year and we will continue to improve as that proportion comes more back in line, but I'm.

Hopefully that answers your question.

Thank you good luck in the back half.

Thank you.

And the next question is from Ana from Danny Areva in terms of Needham <unk> Company. Please go ahead.

Great. Thank you so much and good afternoon guys.

Couple of Guyana.

Hi.

Have you quantified how much of the shortfall N. G. M. V was the result of his labor supply related shortages are curious if you're tracking in line with the <unk> guidance currently or do you guys need trends to accelerate to get there and secondly, I just wanted to make sure I think.

The shareholder letter, you're referring to continued topline growth as one of the levers to reach the profitability goals are they no longer based on 30% plus growth rate you guys talked about previously and if not is there a top line target that we should think about that you're basing the longer term.

Outlooks on thank you so much.

Let me let me take the second part of the question because I think it's a good one relative to our projected growth rates in one of the questions that came up when we had investor day, we talked about vision 2025 was a growth rate that was 35% as you know.

Assumed in our projections and I think what we're demonstrating a what we feel confident in is that we could actually achieve our adjusted EBIT goals and our cash flow goals in fact at a lower growth rate and we haven't we're not providing a new update on of what the top line might look like or what the.

Growth rate might look like.

But what we're hopefully demonstrating is we will address our cost base and we will find productivity and we will focus on more profitable growth as opposed to less profitable growth and our order of priority in terms of importance in our vision 2025 was first adjusted EBITDA.

When revenue <unk>, and so again I think that our full year forecast and our re guide demonstrates that as you know admittedly, it's a fairly large reduction in <unk> at the midpoint, but a much much smaller miss on the adjusted EBITDA line and I think that it's something that we can close that gap and we feel confident we will make up in <unk>.

Vision 2025.

Pat.

But it is true that we will feel like we can make our goals even at a less aggressive growth rate than what we had before by the means that I just described.

Yeah, I agree with that and I would say when you know to answer the first part of your question more directly I think the G. M. D mess was 75% and driven to supply driven by supplying about Florida are driven out of the shift in consumer spend I do believe we're tracking to vision 2025, it's important to ring.

Remember that and even the back half of the year. What we're focused on right now is getting that labor all hired up and trained up in Q3 to set us up for a great Q4, and that's really that's really the name of the game right now.

Very helpful. Thank you so much good.

Thank you.

And the next question is from Mark <unk> from Baird. Please go ahead.

Right.

Today, just to follow up on the supply issues that we've been talking about can you parse out is there any.

Stocks coming from competitive factors not just the sales force disruptions that we've talked about I haven't seen more platforms and brands themselves going out the door category.

Yes. Thanks for that question I mean, I think that's the good news.

The silver lining your opportunities on new and repeat sellers are very strong engagement is there there the growth is theyre all looking good it really was a factor of labor. There was no. Other hidden issues. It was just getting hired up and like I mentioned, we already needed to.

Grow that team by 20, 25% and the combination of not being able to grow that team fast enough and the attrition volume what was tough for us.

I will add to that there is a little bit of a tail.

Two.

Being under hired in the sales force and trying to catch up and then as Rajeev mentioned those folks do have to go through training and there is some learning curve and they're not 100% productive immediately and so there is a little bit of a tail that EBIT. When we do get fully hired we do have to have a little bit of time for folks to get full.

Really trained and be fully productive.

Somebody who's been on the job longer and so that's all that's what's reflected in our current projections and forecasts.

Okay. Thank you and then.

Okay.

Follow up here.

Oh.

There's been a shift into apparel is are you seeing any differences in the new customers that you were bringing online versus your existing customer base, maybe people are attracted to resale.

Inflationary pressures.

No no difference in the cohort it really is just about the consumer pattern and that's shifted to pre COVID-19 numbers.

Okay. Thank you.

Thank you.

The next question is from Kunal <unk> with UBS. Please go ahead.

Alright, Thanks for taking my questions. A couple if I may one what is the risk that they don't.

But as.

He said Oh designation part three.

Uh huh.

How would you address that.

That could be one.

And.

Yeah.

The second would be in terms of the supply mix.

Talked about <unk> being impacted you know, 75% because of the supply issues. So how much did you know having stores.

To help with the supply versus if you didn't comp stores.

Thank you.

Thank you yeah, it's Scott, yes, as far as the great ranks as a nation part three this is not you know.

Part of what we're looking at every day the compensation, we've done multiple things to rightsize supply and to kind of get ahead of that and we've right sized company compensation self service piece. So that we're not so labor dependent is as really important and then we've added leadership across the board on the sales side.

Bringing in a new CRO and making sure that we have the right people on the ground. So you know it's interesting we saw this happen in.

In the back half of 2022 on the op side and we did all of these things to make sure culture career growth to make sure that it didn't happen in the second time. The good news is all of those things that we had implemented worked during the great resignation part two. So this is this is now the sales piece.

Of it and we're starting to see it recover already we're starting to catch up and so we've seen the trend.

Proved from.

When we had the biggest issue.

We are starting to recover right right and I think it's I think the market is shifting.

As I'm sure a lot of you are seeing we are seeing that happen, we're seeing retention numbers getting better and again our focus now is getting all of those new hires up to speed to execute on Q4, and then I think your second question was how did the stores perform.

Stores continue to be quite healthy, especially as an acquisition tool on the seller side, 30% of our sellers continue to come in from stores. They the payback or breakeven is in one year. So that that is also really great, but we focus on supply in that piece of it has made the.

Sales team more productive because of the self service.

Self service channel and we'll continue to optimize them you know, we're opportunistic we keep saying that about stores and about new one we said that next year, we'd opened from anywhere from one to three stores and that continues to be our thinking as of now.

Okay, great and one more if I could.

With regard to keeping on the economic or the macro fears and.

Consumer discretionary spend and what have you sometimes around that.

You can see the trade down.

And consumers spend so the yield will be that may be attributed to mix shift, but even within you would've been about it are you seeing people kind of buying door. Thank you so much.

One we are not it really is just mirroring our pre COVID-19 numbers back to 2019, so we arent seeing anything trade down within the category. It's just it's just more category mix specific.

Thank you and the next question will be from.

Susan Anderson from B Riley. Please go ahead.

Hi, Good evening and thank you for taking my question.

I guess just to follow up on the guidance so the lowered EBITDA in cells.

With EBITDA being lowered less I guess I'm curious what expense areas, you think you're able to flex more I guess now to get to that bottom line, even though that you brought the top one job.

Looking at multiple things, we're looking at everything from tech leverage to variable and fixed leverage marketing spend and the good news is we're seeing that flywheel effect I'll, let Robert add on here, but we are there are many expense areas that we've tackled already and that will continue to tackle both on it.

Our project people and leverage basis, and we've gone through a couple of exercises to examine our cost structure to put in.

Cost reduction actions, which I mentioned earlier.

And further contingency plans, but I will say Susan that largely the benefit to the Q4 result, that's implied in our full year guidance really is maintaining the cost structure as we have put in place the fixed cost structure from Q3 to continue into Q4, essentially flat on a $100 million more.

<unk>.

But we'll continue to monitor it.

And we're always looking for places to be more productive and more efficient I didn't really talk that much about our variable costs, but we continue to look at the productivity of our salesforce and the efficiency of our retail footprint.

And our entire operations inbound and outbound and authentication, we're constantly looking at ways to continue to become more productive and efficient Nishu. This is Caitlin you know the other thing I would just add and outside of the operating expenses.

Good cost control is really gross margin improvement in the back half as direct becomes a smaller percentage of total revenue, we're going to see some pick up on the gross margin line too.

Okay great.

And then okay I just wanted to ask about that.

And take rates I guess now with the mix shift kind of going back to pre COVID-19 and how should we think about that going forward should we think about this quarter as kind of being the right percentage levels now.

Yes, I'll start on take rate, which has been.

Pretty consistent I'm going to say, it's been between 35 and 36% in the first half of the year I think that it's roughly in that range in the second half of the year, So even with all the shifts and movements and so on on average it's sort of modeling out to be fairly consistent.

Throughout the entire year.

Okay. Thank you very much.

Okay.

Yep.

So.

Sorry go ahead was there another part of that partner part of your question.

Just the AG and the take rate levels.

Yes, So <unk> has had some pressure on it as we said average selling prices are down slightly I think units per order are fairly consistent maybe slightly up net net it's a it's a small decline in average order value, what we will say that.

There was a very unusual result, it's worth mentioning.

In prior year as a comparison from Q2 of this year. The prior year I think our average order value last year was $520, which is really an outlier.

The full year was under 500.

Prior year, but Q2 was $5 20, so we had a very strange compare.

And what we're seeing now is <unk> and the <unk>.

Or <unk> 85 to $4 90 range I think we see a little drop off in Q2, but it's kind of a return to that level, maybe a little higher.

In Q4, but on average.

Somewhere in the 480 range for the full year.

And it's important to note.

Take rate take rate, usually goes up and down based on product mix and commission changes, we did make a commission change in Q4 of last year, an unbranded jewelry and items under $100. We also made a commission change.

This quarter in Q3 for items under $50. So you do see those move with again product mix of being the biggest factor and then of course, our commission changes, yes, that's a good point.

By category, we have been consistent or maybe a little more aggressive in terms of take rate.

Being offset by some some reduction.

Due to mix and I think the net of all that is what I described before.

Wash more or less in terms of our expected take rates in the second half of the year versus the first half of the year.

Got it okay.

Great. Thanks for all the details yet.

Thank you.

And the next question will come from Michael Binetti from Credit Suisse. Please go ahead.

Hey, Thanks for taking my questions here, So Robert last quarter, you I think you've told us.

Thanks.

Okay.

Sorry, I have a bad connection here, the 9800 basis points of Opex leverage I think you said 600 basis points of it was on those fixed costs that you focused us on at the Investor day in about $2 50 on variable can you update us on what that was in the second quarter you had roughly the same opex leverage about 18 50 I think.

Yes, so what I have is.

Our total opex leverage excluding stock based compensation was roughly 2900 basis points year over year.

In about 2400 was support Opex and roughly 500 was from.

Variable cost or productivity on our authentication center and our sales organization.

Can you help us roll that forward into the back half a little bit.

500 or is that 500 variable was up quite a bit from the first quarter. When he said it was $2 50 with maybe some of the puts and takes and does that continue to improve as you go into the back half.

Frankly.

The bass.

Productivity is mostly from the support functions. So I think what we're experiencing with the reduction in the topline projections of lower GM V. In revenue, it's harder to get as much productivity in our transportation centers in our variable expenses because there are some fixed elements to that and it's just tougher on lower volume.

So I would say, what we're projecting and expecting to see in terms of operating cost productivity in the second half of the year is primarily coming from the support functions.

Okay, and then I guess just walking forward. The comment that you think you can get to the EBITDA the multiyear targets on.

Even if the <unk> is a little bit lower than what you thought maybe what are some of the.

Can you help US bridge, maybe what are you held back and showed a little bit of conservatism in the Investor day numbers on the on the leverage profile that you think you can go after and capture at this point.

Sure. There's so many variables Michael that goes into our projections and the MRP model that we use to create the vision 2025 numbers in our projection to breakeven RB not just breakeven, but it would be positive adjusted EBITDA in 2024, and I will tell you that in that modeling.

Never really did count on a completely linear path and I understood that there would be some ebbs and flows along the way and so we built in some accommodation for that variability along the way.

I will admit that I did it run at full Monte Carlo analysis on all the possibilities of all these different variables moving up and down over the next several years, but I will tell you that I did build them enough of a safety net or a cushion. If you will that I can still say confidently that.

We feel good about being positive adjusted EBITDA in 2024 and that we can achieve our vision 2025.

Target of at least 100 million of positive EBITDA, but.

I don't know if thats enough of an answer to your question but.

I wanted to make sure that I would allow for some variability and some potential bumps in the road.

And because some of the bumps are we described we feel is <unk>.

Transitory is it was it was a labor shortfall that we're addressing and that we can catch up on that and so thats. What gives me confidence to be able to reaffirm the vision 2025 numbers.

Okay. Thanks, a lot for all that.

Thank you.

And the next question is from Tom Nick <unk> from Wedbush. Please go ahead.

Hi, everybody. Thanks for taking my question.

Robert Sorry, if this was addressed already and all that.

Discussion around guidance, but so when I look at the Q3 guide.

Relative to what you did in Q2.

You're essentially saying that revenues like total net revenues will be flattish.

Down.

Versus Q2, but the adjusted EBITDA will be a lot better something like $14 million to $18 million better than the loss from Q2.

How how does that happen on less revenue.

Isn't that like the Opex dollars will actually declined quarter over quarter or is it like a huge.

Increase in gross margin can you just kind of help me reconcile that.

Yeah and Tom.

Hey to contradict you.

Members, but.

What we're what we're projecting for <unk> the midpoint of our guidance is a loss of $28 million versus a loss of $28 8 million in Q2. So it's about an $800000 improvement let's call. It in round numbers, it's about $1 million improvement on adjusted EBITDA sequentially.

<unk>.

Roughly $15 million less in GMB, and about $4 million to $5 million less in revenue. So.

The way I would describe it Tom is that Q3 looks an awful lot like Q2, a little bit less <unk> revenue, a little bit better adjusted EBIT dollars on a EBITDA margin basis, adjusted EBITDA margin basis, exactly flat both of them minus 18, 7%.

At the midpoint of our guidance so.

I see Q3 is very very similar to Q2.

Got it apologies for that I think I think I've got a mistake.

A mistake in my in my model for Q2, but.

Alright, Thank you for the clarification I appreciate it.

Sure.

And the next question will be from Lauren Schenk from Morgan Stanley . Please go ahead.

Great. Thanks, I wanted to ask about supply again.

The pullback in vendor inventory I guess given the <unk>.

Lack of supply, particularly it sounds like may be around at the higher end items, why why decided to pull back on that now or is it just really a an EBITDA tradeoff and is that sort of a tradeoff that youll continue to make going forward. Thanks.

That's exactly right. It isn't EBITDA tradeoff I think you heard us talk earlier about profitable growth and that is our focus EBITDA being the priority when we take a look at EBITDA adjusted EBITDA revenue N G M D.

It was it was important for us as we flow through some of this product.

It wasn't it wasn't profitable when you walk through so it was important for us to kind of end, where I can find business, we're really going back to our core of what we do and Thats on the consigned side, we're seeing the high value come in from the consigned as well.

And again getting that Tmall hired up in trains to set us up for a great Q4, but and this is part of our strategy that.

Maybe a little bit less growth.

It leads to a better result, especially when you're talking about.

The direct business, which is very cash flow intensive.

Requires us to put cash out upfront it requires us to hold inventory and if you look at nobody asked us about the there was a little bit of a change in our accounting presentation, where.

Where we have separated consigned business and margin versus direct business their margin, we kind of stripped out the shipping. So that you can see the margins of those three parts of our business in a clean way.

So the consigned part of our business is reported as been round numbers, 85% gross margin.

While the direct business is 15% gross margin and is very cash intensive.

And so our decision is to deemphasize that focus more on the <unk> business as Rafi said focus on profitable growth and frankly also the conserve our cash.

So for all those reasons, we're willing to accept a little bit lower of a growth rate.

Which we think will give us better gross margins and ultimately a better adjusted EBITDA results.

Very clear I guess, just one follow up on that on the 75%.

Of of kind of the the GMB mess and you attributed to supply I guess, how much of that 75% would you say is labor shortage versus the pull back of better supply.

Oh, it's all labor shortage, so labor labor shortage as far as again, we're supply constrained business. So that was the number the number one reason of it yeah, I mean, I kind of I separate those things those two things.

Direct direct as a percentage of business and the supply related mess. So again. The GMB met is is driven out of the supply piece.

Okay. Thanks.

Thank you.

And the next question is from Noah <unk> from Keybanc. Please go ahead.

Thanks for taking my question just on the marketing rate ticked down in the first half versus last year, and then sequentially in the second quarter versus the first quarter.

The step down in the second quarter related to the supply shortfall and kind of how should we think about that right.

More long term and then also any color on how youre thinking about marketing mix as well as the flexibility and media plans as we move through the back half would be helpful. Thank you.

Sure the marketing change in in the back half of the year has nothing to do with supply all I'll say that first it really is about driving efficiencies I think I mentioned earlier.

The flywheel there.

A little bit of a gold nugget there the flywheel effect in the back continuing to decrease we've seen in Q2, and we continue to see those marketing efficiencies and as far as marketing mix goes I'd say, we're getting smarter, we're optimizing our channels, we're getting smarter about our objectives and we're using.

Different channels differently go forward, we just have better data and Youll continue to see that through the through this year.

Thank you.

And the next question will come from Ashley Hogan, which come from Jefferies. Please go ahead.

Hey, Thanks for taking my question just one quick one.

Wondering if you could give us some color on the cadence of consumer spend on the platform throughout the throughout.

Throughout the quarter.

Sure.

In Q2.

<unk> spend was just what we said it was so we saw a shift from higher value goods.

Fine jewelry watches handbags, and even though I'd say that continues to be healthy, we see a mix shift into ready to wear and shoes.

Is that what you're asking.

I guess in terms of like the month like April May versus June if there was any variances between.

For the three months in the quarter.

I'd say, we saw it kind of accelerate in the back or the back half of the year more closer to the summer months.

Okay.

<unk> in general in our business.

During the summer months as well.

Wonderful wonderful.

Thank you and our next question is from Ed Marimba Piper Sandler. Please go ahead.

Hey, guys. Thanks for taking the question two for me I guess first I know that you've deemphasize direct as part of the business, but we are seeing some actual deflationary pressures in hard goods, particularly watches and jewelry and handbags are you seeing any impact and is there any potential risk of the inventory that you do have and then as a follow up.

I appreciate all the commentary on supply and the readjusted, Jim do you guys have in the back half of the year have you taken any consideration for macro or the potential weakening, whereas the GMB adjustment simply driven by the lack of supply driven by staffing. Thank you.

So I answer the first part of the question as far as risks of higher value goods watches and jewelry in the direct business. The good news is we're seeing.

Higher value goods come in from our consigned business, specifically, so we are seeing whereas before I would say we didn't have the proper tools to bring in the high value through our combined channel one of the reasons that we used direct as a crutch a bit I will say, we were able to kind of offset that with the supply coming in again the high valley.

Supply coming in on the confined side. So there's more levers that we can pull specifically these high value of events that we've been having to drive tried the value and then as far as guide.

Guidance I'll, let Robert take that one yes. So in terms of the guidance in the second half of the year, it's really reflective of what we saw in terms of the supply shortfall due to the.

Labour issue that we described and it's also a reflection of a lot of inputs on both the supply and demand side, whether it's opportunities. Our conversions are mixed for high the low value take rates of the day.

<unk> side.

Consumer mix and average selling prices and units per order and so it's really a reflection of those things.

We are not economists and we don't have a crystal ball and so.

We don't know really what to expect in the second half of the year certainly theres some uncertainty.

Just broadly.

But that's not really the primary reason that we have.

Adjusted our topline it's more related to these inputs and also very much related to the deemphasizing of the direct business in.

In the past that would have boosted.

Back half growth.

And we've turned away from it.

Just because we feel that we want to really focus on the profitable growth.

Thanks, so much.

The next question is from Albert Chen from Cowen and company. Please go ahead.

Alright, Thank you Oliver Chen.

Okay.

Regarding the profitability guidance, because youre, giving Robert.

What are your thoughts on the fix versus variable components in terms of how you see that evolving.

Thank you you answered it earlier, but.

You lowered guidance you kept.

The 2024 view of profitability.

Would love comments on that.

Second we're definitely seeing more innovation at competitors.

Other competitors do.

Some things to really accelerate gather supply as well.

Do you how do you feel about your take rate.

What might happen to that longer term as it is.

Potential risk factor.

And third point, the labor market is really tight still.

Luxury salespeople regarding compensation and turnover.

Just curious about.

Strategies will take to retain and inspire.

And also higher and what still is a really tight labor market in certain segments. Thanks a lot.

So I'll start with your first question about the 2024 and 2025 projections considering that.

Lowered our guidance for 2022.

And as I mentioned before there is a lot of different paths and theres a lot of different variables that go into that vision 2025 financial projections and when you choose one of those elements to be the primary focus the most important and in our case, we describe that as being adjusted EBITDA there are.

Many ways to achieve that goal and as I mentioned earlier.

We've allowed ourselves some variability in those projections, we expect it ebbs and flows along the way.

It looks like the most at risk in terms of the 2025 projections as GMB.

But you could actually described as the least important of the three main elements that we are guiding towards the.

The most important being adjusted EBITDA. So I think that we continue as I said to look at our cost base to find productivity.

<unk>.

To manage.

The other inputs to ensure that we can get to our adjusted EBITDA or cash flow projections.

Again, EBIT with some slower growth, we believe that we're still on track to hit the adjusted EBITDA and cash flow numbers and again some of those problems that we saw are transitory. So you're right. We feel like it's more of a bump first of all catch up well exactly and then your other two questions that I think the second one was about competitors.

Take rate pressure.

Win on service and earnings and value and pricing, we're always looking at take rate and we're always looking to see where we can optimize.

We haven't seen you know.

US hit any kind of threshold, yet we look at pricing regularly as far as what how we pay versus our competitors, we have almost 30 million luxury shoppers.

And our pricing.

Our pricing algorithm is pretty sophisticated to kind of offer our seller that best price. So we will continue to look at that and we continue to look at take rate. We look at it about a couple of times a year again with pricing to make sure that our values are still.

There, especially on the pricing on the earnings side and then on the labor market I think someone asked this earlier as well what you know what are we doing as far as if we continue to see.

Some headwinds here on the conflict and we're continuing to look at compensation, our leadership driving strategy and we'll continue to monitor.

Making sure that we're staying on the hiring piece and the compensation side, we've been really looking at a couple of key markets I'd say, we needed to right size, there and we have done that and we are seeing Prague.

Progress in a big way going into Q3.

Okay very helpful. In your letter mentioned preservation.

As a key.

Priority.

Which actions are you prioritizing to do that.

How do you do that in a strategic way to retain.

All the innovation and core competencies.

And data as well.

Albert you broke up there just when you were getting to the good parts of the system.

Maybe part of your question and we didn't catch it I am sorry.

I was just curious about.

Advertising cash and decisions that youre going to make to make sure to do that and balancing.

Decisions.

<unk> inhibition of investment relative to the cash and cash flow.

Yes, so one of the main elements of cash and prioritizing cash and improving cash actually is related to our inventory.

And we're holding 74 million roughly dollars of inventory now some of that comes from from out of policy or from other get paid now programs and so on but about $40 million of it was inventory associated with this direct business inventory that came to us through vendors and wholesalers and.

We have really cut that off completely in terms of bringing in any new inventory.

In those categories and so is that sell through we do expect to generate significant amount of cash and youll see that reflected in a pretty significant reduction in our overall inventory balance between the end of Q2 and the end of this year.

So that's part of our prioritization of cash also just a focus on higher margin less cash incentive consignment business versus direct of course, there is no cash out for us.

When we take items on a consignment basis and the the consignors themselves get paid more or less after we get paid.

So that could be very positive.

Cash flow basis. So those are a couple of things that will allow us to prioritize cash and some things that we're doing a little bit differently than in the past to generate cash.

In terms of investment now Theres, a little bit of a trade off there because we talked about the three elements of our cast our path to profitability. One of them is continued variable cost productivity.

And so we do have to invest in some innovation and AI and other ways to get more efficient and.

And authenticating items and so on and so we just look at each one of those decisions on a case by case basis and find the ones with the best return.

If you will.

She is continue to invest in technology.

In automation and innovation.

It is fundamental to our path.

Thank you very much very helpful.

Thank you.

And the next question is from Marvin Fong from <unk>. Please go ahead.

Great. Thanks for squeezing me in here two questions.

First one on on active buyers it seemed.

Like one of the better performances in recent memory.

Just wondering.

You would you attribute that quarter over accruals.

Growth two do you think it's.

People because of the macro looking for for a deal or good value was there any.

Programs, you guys instituted or were able to activate somewhat spires has any commentary on that would be great.

Then my second question on the new disclosure I just noticed you guys have.

Coconut shipping revenue and it looks like it's been continuously operating at a small loss.

I know that in the past you guys had done some renegotiated some deals around shifting just wondering if we can expect shipping to eventually reach breakeven that'd be great. Thanks.

I'll take the first one far as marketing is concerned and our customer base and our active customer base. Our buyers have gone up 84% are coming from our existing our buyers are coming from our existing buyers or revenue are coming from our existing buyers and I would say it's contributed to a couple of different <unk>.

Actors like I said, we're getting more efficient on the marketing side, specifically driven out of our marketing model mix in our attribution channels. So that means more attribution do this through the journey of the customer and the buyer, having us are enabling us to optimize them more efficient.

Sees there so we're getting smarter there and then sometimes what we see is we see when we have lower values God's will see market will see buyers go up as well in active buyers go up so we've been able to really dig in and dig deeper into our lapsed buyer base and some of the things and I.

One of the tools that we're using to get into our lap space is working really well for us.

And then your second question was on <unk>.

Yes, so the second question around shipping and in our presentation.

In our GAAP financials, which we modified a little bit and I'll talk a little bit about what the motivation was behind that and then I'll answer your question directly about the net shipping margin.

In the past we were reporting two business segments direct.

And then consigned and other services and the one thing to that consigned and other services was the net shipping.

After our last earnings call, we started to get a lot of questions from shareholders and analysts about the movement in that reported gross margin of the second category in some signs in services and it was getting.

Polluted in a way by what was happening in shipping and people were reaching the wrong conclusions. They were saying why did your consignment margin go down and the answer was well it's actually the other services part of that category. It was causing confusion. So we felt like that it would be a better disclosure and more useful to <unk>.

Our holders and analysts to breakout the three elements into show consignment as its own category and a pure way.

And then break out shipping and other as its own line.

That resulted in now we do show consigned margin in sort of that mid <unk> range. The direct margin mid teens and a small negative margin on the shipping.

And so there has been pressure on shipping shipping.

Shipping costs have gone up we've done things to try to mitigate that there is some more complicated aspects, we do charge for shipping to customers. One time folks you had a one time charge 12 95.

But it is possible that we are shipping from multiple locations.

There is these mixed shipments that naturally the consumer will not pay for them where are signals for new units and we have some units in a retail organization some in <unk>.

Phoenix, Southern New Jersey, So we only charge one shipping expense to a consumer but there might be multiple shipments, which makes it harder for us to to turn that positive ROTC you want to add to that yes, I would say that overall shipping larger margin is flat year over year and that's because of some of the things we do that Robert talked about.

Past some of the that cost to our customers that doesn't seem to affect and hasnt seemed to affect conversion. We've diversified our shipping carriers also working for us, but it's always been a headwind for us because of the nature of our business and because of the rate increases that we saw earlier in the quarter. They those rate increases.

Have seemed to slow down and that's the good news, but we'll continue to optimize we have some other levers that we're pulling them at the end of this year and really our goal is to stay flat over.

Over the next few years when we when we think about shipping margin, but if we can narrow that gap, we would certainly like to that's been a goal in the past it's just.

And frankly, it's not easy given the nature of our business.

Okay that makes perfect sense. Thank you.

Thank you.

Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Roddie Vivek for any closing remarks.

Thank you for joining us today on our earnings call in closing I want to thank the real real team for their continued dedicated to moving our business forward every day during our next earnings call. We look forward to sharing results and further progress on our path to profitability finally, I'd like to thank our more than 20.

8 million members, who are joining us on our mission to extend the lifecycle of luxury goods and make fashion more sustainable. Thank you.

And thank you. The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

You have been removed from the comp.

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Good afternoon, and welcome to the real real second quarter 2022 earnings results Conference call.

Participants will be in a listen only mode should you need assistance. Please signal conference specialist by pressing the star key followed by zero.

After todays presentation, there will be an opportunity to ask questions.

To ask a question you May press Star then one on your telephone keypad.

To withdraw from the queue. Please press Star then two.

Please note this event is being recorded.

I would now like to turn the conference over to Caitlin, how VP of Investor Relations a real real. Please go ahead.

Thank you operator, joining me today to discuss our results for the period ended June 32022, our co interim CEO and President Ron <unk> and co interim CEO and Chief Financial Officer, Robert Julian.

Other factors that could affect our operating results in the Companys. Most recent Form 10-K, and subsequent quarterly reports on Form 10-Q.

Both of which are available on our Investor Relations website.

I would now like to turn the call over to <unk> co interim CEO and president of the rail rail for introductory remarks.

Thanks, Caitlin and thank you everyone for joining our earnings call today.

Robert and I will provide some opening remarks and commentary on the business and then we will go into our Q&A session.

During the second quarter, we announced that our founder and CEO , Julie Wainwright will be moving on at the end of this year.

We thank Julie for her incredible vision and tireless efforts and strong leadership over the past 11 years.

Robert and I are energized in our new roles as co interim Ceos and we are enthusiastic about the direction of the business.

During the second quarter of 2022, we delivered solid financial results.

Topline GMB growth was slightly lower than expected, we did meet our revenue projections and we exceeded our guidance on adjusted EBITDA.

While our Q2 GMB growth rate was 30% we did experience some downward pressure due to a sales labor shortfall and a change in product mix.

From the supply side, we entered the quarter needing more salespeople and this hiring challenge was exasperated by a higher than normal attrition in our sales force.

We proactively implemented multiple strategies to address the labor shortfall, including hiring and back filling sales roles selectively increasing compensation in key markets.

And utilizing technology for our confined to self serve.

We believe these actions combined with attrition returning to normal levels at the end of Q2 are meaningful steps in addressing the underlying labor issue. Additionally.

Additionally, our consignment leads and opportunities continue to remain robust.

Together, we believe we are well positioned for a significant step up in supply for the fourth quarter.

The second pressure on GMB in Q2 came from the demand side.

Starting in the first quarter and accelerating into the second quarter, there was a shift in consumer demand.

<unk> towards some higher priced items like fine jewelry and watches to lower priced items like ready to wear and shoes.

High value continues to perform the second quarter mix more closely mirrored our pre COVID-19 product mix as consumers go back to the office travel more and attend events.

Therefore, the higher proportion of GMB coming from apparel and shoes resulted in improved take rate year over year, but also a reduction in average order value, while we expected demand to normalize across categories at some point it occurred more quickly than anticipated.

We are optimistic about the direction of the business. We believe our demand remains strong as both new and repeat customers continue to grow.

Furthermore, we believe our flywheel has strong momentum and is helping us to reduce our buyer acquisition cost.

Finally, we are taking a close look at expenses to more effectively manage our costs, which Robert will explain further I'll now pass it over him over to him for a brief financial update.

Thanks Rottie.

We are pleased with our financial results for the second quarter. Despite.

Despite some pressure on GMB as Rodney mentioned, we were able to effectively manage our cost and deliver better than expected adjusted EBITDA results for the quarter.

For example, we implemented a modest reduction in force in our corporate support functions slowed hiring for open support roles and reduced discretionary spending.

We will continue to monitor the broader economic environment and trends and we will be prepared to implement further contingency actions if necessary.

In Q2, we grew GMB, 30% revenue, 47% in there.

Narrowed our adjusted EBIT loss, both sequentially and year over year.

Exceeding our guidance for the quarter.

However, as a result of our supply shortfall in Q2 and the shift in consumer demand. We believe it is prudent to reduce our full year 2022 guidance.

Notably we continue to project that the real real will be profitable on an adjusted EBITDA basis in 2024, and we are on track to achieve our vision 2025, adjusted EBITDA target.

Thank you.

To withdraw from the question queue. Please press Star then two.

At this time, we will pause momentarily to assemble our roster.

And the first question will come from Simeon Siegel from BMO capital markets. Please go ahead.

Thanks, Hey, everyone hope, you're all doing well.

Then on the other hand, we had the supply driven shortfall that you talked about so can you just maybe help us think through that slight miss in <unk> versus the inline Reds broken down into the supply versus demand dynamic.

Thank you.

Sure.

As most of you know, we're a supply driven company. So I will say that in the missing supply like we talked about came out out of a couple of different factors early in Q2, we saw kind of the great resignation part too.

And that brought down.

It broke that brought down some of the GMB mess that we're seeing in Q3 specifically.

And what I separate those two things that is the supply side, we saw that effect on GMB and then the second thing that happened like we mentioned was <unk> and ASP came down and so we saw that consumer shifts really back to pre COVID-19 number numbers back in 2019, where that shift of <unk>.

To where increased.

Okay, Alright, Thanks, and then maybe any obviously not intentional the beginning but any good learnings from the technology for consumers to self serve does that maybe help with how youre approaching labor going forward.

Yes for sure.

During COVID-19 it was kind of forced upon us and that was the silver lining I would say and what we saw there was stores stores band pickup virtual all of those self service channels really helped our luxury managers thats, what we call our sales force become more productive. So we saw productivity go.

And really what we've been focused on is making sure. There is the least amount of friction through that channel. So our luxury manager can pick up more items per day. So we've seen that go up overall over the last few years driven out of our self service technology.

So some really good learnings there and we continue to optimize.

So assuming and also one thing this is Robert I'll add a little context about the GMB and our expected growth rates.

So in the first half of the year.

Grew GMB, roughly 30% and it was pretty consistent both in Q1 Q2 pretty close to 30% we've talked about some pressure on supply.

Due to labor and some changes in average selling price and everything but at the midpoint of our guidance. Our GMB growth rate is still sort of in the mid twenties, 23% or so above at the midpoint. So we are still growing quite rapidly we're growing north of 20% just not the same 30% that we grew in the.

First half so while it's slow and we've had some headwinds it's still.

Not a bad growth rate.

93 plus percent growth.

Alright, perfect alright, Thanks, a lot everyone have best of luck for the rest of the year.

Thank you.

And the next question will come from Ike <unk> from Wells Fargo. Please go ahead.

Hey, thanks.

Robert two questions for you just I am trying to do the math real quick before for I guess, you can get my question, but it looks like Youre looking for.

A decent amount of adjusted EBITDA improvement year over year in the fourth quarter based on what's implied I guess.

Curious am I looking at that right and if there is something.

Levers that youre pulling that are impacting <unk> more than <unk> and then back to the question I guess, when we assume <unk> until the back half of the year should we assume that this mix dynamic continues and that we're going to kind of run rate.

A negative maybe mid single digit year over year.

Growth rate on the.

<unk> as we move through Q3, and Q4 any help there would be great.

Yes, sure I can I suspect that part of what Youre doing is kind of triangulating our year to date results and our Q3 guidance and you can sort of get into the Q4.

What that suggest of adjusted EBITDA.

Dressing that directly the midpoint of our adjusted EBITDA for Q3 is $28 million loss, which is 19% as a percent of revenue and if you triangulate to the middle of our guidance for Q4, you do get to $13 million.

Adjusted EBITDA.

For Q4.

Roughly seven 5%.

So single digit adjusted EBITDA margin loss in Q4.

And the logical question is why so much improvement and what drives that part of it is volume and we continue to be a seasonal business and our largest.

Quarter in terms of <unk> revenue is always Q4, and there is a significant step up in GMB between Q3, and Q4 at the midpoint of our guidance call it $100 million.

That has a flow through.

From Q3 to Q4 on a $100 million more dollars of GMP and that creates tremendous leverage.

We'll also continue to experience good productivity.

Our variable cost in Q4, and so that's what leads us to to that result in Q4, that's implied in our full year forecast in the Q3 guidance that we gave specifically.

And we do expect mix to continue so we do expect.

That was the last part of your question ready to wear.

Is the new normal we believe for us back to pre Covid numbers.

Yes, not a continued shift our degradation sort of consistent.

That maybe we've reached this new normal quicker than we previously anticipated, but probably at a level that will stay fairly stable going forward.

Thank you very much.

Thank you.

And the next question is from Rick Patel from Raymond James. Please go ahead.

Thanks, Good afternoon, everyone question on the labor related supply shortfall.

Does this pertain to any particular categories or price points.

And its past I think you've had supply constraints, you've leaned on branded partners to cushion the negative impact I'm curious if you see the opportunity to do the same this time around.

So now this is not specific to price point or a category supply when I talk about the labor shortfall I'm talking about people out in the field our sales team. So like I mentioned, sorry, if I'm repeating myself I just want to make sure it's crystal clear.

We saw attrition increase in Q2, we call that the great resignation part too and that's what had the biggest effect to our numbers and to supply. So it wasn't category our pricing specific as far as branded partners.

That is more of our brands play for US we have not used that as a supply.

The supply lever, but it is a big brand and awareness play for US we will continue to do those.

We have been and we're really focused in general unprofitable growth I will I think it's important to say that a part of the mix was a lot of this direct revenue that we had in the past, which is maybe 30% 30% of our of our inventory in Q1, our preferred as a.

Percentage of revenue was about 30% that's reduced to 28%. This month this quarter and that's because again, we are focused on profitable growth direct revenue just as a reminder to everyone is our items that we purchased especially in the vendor channel we did that during hard times and co.

And needed the inventory as we Couldnt go back into People's homes, and we're really limited that category again focused on profitable growth.

And on that point can you help us think about the <unk>.

Magnitude of growth in the direct segment through the back half.

Also how we should think about.

Gross margins I believe your gross margin comparisons get a little bit more difficult there, particularly in the fourth quarter. So just curious what that trend line looks like.

So Rick let me talk about sequentially, how much of this direct revenue the owned inventory.

What percentage that is of our total revenue and.

And if you go back to 2019 or before that percentage tended to be between 15, and 20% and that is our lower margin business.

In Q1 of this year that percentage of risen to 34%.

In Q2, we had reduced it and we started talking about deemphasizing that sequentially it reduced from 34% to 28% of our total revenue by the time, we get out to the end of the year it should be in the low twenties.

And eventually what we'd like to do is returned back to the 15% to 20% that we saw back in 2019 and prior to that it does have a pretty significant impact on our expected gross margin. So again.

Gross margin in the first half of the year was.

55%.

Back in 2018, 19, and so on when we had a smaller proportion of our revenue coming from direct.

Our gross margin was in the mid sixties.

That will probably recover about half of that roughly.

In the second half of the year and we will continue to improve as that proportion comes more back in line.

Hopefully that answers your question.

Thank you good luck in the back half.

Thank you.

And the next question is from Dana any Areva in terms from Needham <unk> Company. Please go ahead.

Great. Thank you so much and good afternoon guys.

Couple of Diana <unk>.

Have you quantified how much of the shortfall in <unk> was the result of this labor supply related shortages curious if you're tracking in line with the <unk> guidance currently or do you guys need trends to accelerate to get there and secondly, I just wanted to make.

Sure I think in the shareholder letter, you're referring to continued topline growth as one of the levers to reach the profitability goals are they no longer based on 30% plus growth rate you guys talked about previously and if not is there a top line target that we should think about that you're basing the longer term.

Outlooks on thank you so much.

So let me let me take the second part of the question because I think it's a good one relative to our projected growth rates in one of the questions that came up when we had investor day, we talked about vision 2025.

Was the growth rate that was 35%.

Assuming in our our projections and I think what we're demonstrating a what we feel confident in is that we could actually achieve our adjusted EBIT goals and our cash flow goals in fact at a lower growth rate.

We haven't we're not providing a new update us of what the top line might look like or what the growth rate might look like.

But what we're hopefully demonstrating as we will address our cost base and we will find productivity and we will focus on more profitable growth as opposed to less profitable growth and our order of priority in terms of importance in our vision 2025 was first adjusted EBITDA.

When revenue than GMB, and so again, I think that our full year forecast and our re guide demonstrates status admittedly, it's a fairly large reduction in <unk> at the midpoint, but a much much smaller miss on the adjusted EBITDA line and I think that it's something that we can close that gap and we feel confident we will make up in our <unk>.

<unk> 2025.

Pat.

But it is true that we will feel like we can make our goals even at a less aggressive growth rate than what we had before by the means that I just described.

Yes, I agree with that and I would say one to answer the first part of your question more directly I would say the GMB Miss was 75% and driven to supply driven by supplying about quarter driven out of the shift in consumer spend I do believe we're tracking to vision 2025, it's important to.

Okay very helpful. Thank you so much good.

Thank you.

And the next question is from Mark Swager Hope from Baird. Please go ahead.

So that's what made me to ask you on to move today.

Follow up on the supply issues that we've been talking about.

Can you parse out is there any.

Stocks coming from competitive factors not just the sales force disruptions that we've talked about as we've seen more platforms and brands results going out the door category.

Yes. Thanks for that question I mean, I think that's the good news.

The silver lining your opportunities on new and repeat sellers are very strong engagement is there.

There the growth is theyre all looking good it really was a factor of labor there was no. Other hidden issues. It was just getting hired up and like I mentioned, we have already needed to grow that team by 20, 25% and the combination of not being able to grow that team fast enough and the attrition.

In volume.

Tough for us.

I will add to that there is a little bit of a tail.

Two.

Being under hired and the sales force and trying to catch up and then as Rajeev mentioned those folks do have to go through training and there is some learning curve and they're not 100% productive immediately and so there is a little bit of a tail that EBIT. When we do get fully hired we do have to have a little bit of time for folks to to get <unk>.

Fully trained and be fully productive like somebody who's been on the job longer and so thats all thats whats reflected in our current projections and forecasts.

Okay. Thank you and then just.

This is a follow up there.

No.

Theres been a shift into apparel is are you seeing any differences in the new customers that you were bringing online versus your existing customer base, maybe as people are attracted to resale.

Hi, Sherri pressures.

No no difference in the cohort it really is just about the consumer pattern, that's shifted to pre COVID-19 numbers.

Okay. Thank you.

Thank you.

The next question is from Kunal <unk> with UBS. Please go ahead.

Alright, Thanks for taking my questions a couple if I may one what is the risk.

That is as good as I think you said designation part three.

And how would you address that.

That could be one.

And.

Okay.

The second would be in terms of the supply mix.

I think you talked about <unk> being impacted 75% because of the supply issues. So how much did having stores.

Help with the supply versus if you didn't comp stores.

Okay.

Thank you, yes, and yes as far as the great resignation part three this is now.

A part of what we're looking at every day.

Compensation, we've done multiple things to right size supply and to kind of get ahead of that we've right sized company compensation. The self service piece. So that we're not so labor dependent is a really important and then we've added leadership across the board on the sales side, bringing in a new <unk> and <unk>.

Ensure that we have the right people on the ground. So it's interesting we saw this happen in the back half of 2022 on the op side and we did all of these things.

Make sure culture career growth to make sure that it didn't happen in the second time. The good news is all of those things that we had implemented worked during the great resignation part two. So this is this is now the sales piece of it and we're starting to see it recover already right.

Turning to catch up and so we've seen the trend improved from when we had the biggest issue is we are starting to recover right and I think I think the market is shifting as I'm sure. A lot of you are seeing we are seeing that happen. We're seeing retention number is getting better and again our focus now is.

Getting all of those new hires up to speed to execute on Q4, and then I think your second question was how did the stores perform the stores continue to be quite healthy, especially as an acquisition tool on the seller side, 30% of our sellers continue to come in from stores.

The payback or breakeven is in one year. So that that is also really great, but we focus on supply in that piece of it has made the sales team more productive because of the self service.

Self service channel and we'll continue to optimize them, we're opportunistic we keep saying that about stores and about new one.

We said that next year, we'd opened from anywhere from 1% to three stores that continues to be our thinking as of now.

Okay great.

One more if I could.

With regard to keeping on the economic or the macro fears.

Consumer discretionary spend and what have you in terms around that.

Are you seeing a trade down.

In consumer spend.

<unk> that may be attributed to mix shift, but even within you would've been about it are you seeing people kind of buying doors.

So much.

One we are not it really is just mirroring our pre COVID-19 numbers back to 2019, so we arent seeing anything trade down within the category. It's just it's just more category mix specific.

Thank you and the next question will be from Susan Anderson from B Riley. Please go ahead.

Hi, Good evening. Thank you for taking my question.

I guess just to follow up on the guidance, so the lower EBITDA and sales.

With EBITDA being lowered less I guess I'm curious what expense areas.

You are able to flex more I guess now to get to that bottom line, even though that you brought the top line.

We're looking at multiple things, we're looking at everything from tech leverage to variable and fixed leverage marketing spend the good news is we're seeing that flywheel effect I'll, let Robert add on here, but we are there are many expense areas that we've tackled already and that will continue to tackle both.

On our project people on leverage basis, and we've gone through a couple of exercises to examine our cost structure to put in.

Cost reduction actions, which I mentioned earlier.

Further contingency plans, but I will say Susan that largely the benefit to this Q4 result, that's implied in our full year guidance really is maintaining the cost structure as we have put in place a fixed cost structure from Q3 to continue into Q4, essentially flat on a $100 million more of <unk>.

<unk>.

But we'll continue to monitor and we're always looking for places to be more productive and more efficient I didn't really talk that much about our variable costs, but we continue to look at the productivity of our salesforce and the efficiency of our retail footprint.

And our entire operations inbound and outbound and authentication, we're constantly looking at ways to continue to become more productive and efficient.

This is Caitlin you have the other thing I would just add and outside of the operating expense.

Cost control is really gross margin improvement in the back half as direct becomes a smaller percentage of total revenue, we're going to see some pick up on the gross margin line too.

Okay, Great that's really helpful and then.

Hopefully the I wonder about.

The Ob and take rates I guess now with the mix shift kind of going back to pre COVID-19 how.

How should we think about that going forward should we think about this quarter as kind of being the right percentage levels now.

Yes, I'll start on take rate, which has been.

Pretty consistent I'm going to say, it's been between 35 and 36% in the first half of the year I think that it's roughly in that range in the second half of the year, So even with all the shifts and movements and so on an average it sort of modeling out to be fairly consistent.

Throughout the entire year.

Okay.

Yes.

Yeah.

So.

Sorry go ahead was there another part of that partner on the part of your question.

Just the AG and the take rate levels.

There was a very unusual resulted that's worth mentioning.

In prior year as a comparison from Q2 of this year as the prior year I think our average order value last year was $520, which is really an outlier.

The full year was under 500.

Your year, but Q2 was 520, so we had a very strange compare.

And what we're seeing now is <unk> and the.

Or <unk> 85 to $4 90 range I think we see a little drop off in Q2, but as kind of a return to that level, maybe a little higher in Q4, but on average.

Somewhere in the 480 range for the full year.

And it's important to note.

Great take rate, usually goes up and down based on product mix and commission changes, we did make a commission change in Q4 of last year, an unbranded jewelry and items under $100. We also made a commission change.

This quarter in Q3 for items under $50. So you do see those move with again product mix of being the biggest factor and then of course, our commission changes, yes, that's a good point ROTC by.

Laurie we've been consistent or maybe a little more aggressive in terms of take rate.

Being offset by some there's some reduction.

Due to mix and I think the net of all that is what I described before that.

It's a wash more or less in terms of our expected take rates in the second half of the year versus the first half of the year.

Got it okay.

Thanks for all the details yet.

Thank you.

And the next question will come from Michael Binetti from Credit Suisse. Please go ahead.

Hey, Thanks for taking my questions here, so Robert last quarter.

Thank you told us.

Thank you.

Okay.

I'm, sorry, I have a bad connection here the 90 to 100 basis points of Opex leverage I think you said 600 basis points of it was on those fixed costs that you focused us on at the Investor day in about $2 50 on variable can you update us on what that was in the second quarter you had roughly the same opex leverage about $18 50 I think.

Yes, so what I have is.

Our total opex leverage excluding stock based compensation was roughly 2900 basis points year over year.

And about 2400 was support Opex and roughly 500 was from.

Variable cost or productivity on our authentication center and our sales organization.

Yes.

Can you help us roll that forward into the back half a little bit that that 500 or is that 500 variable was up quite a bit from the first quarter. When he said it was $2 50 with maybe some of the puts and takes and does that continue to improve as you go into the back half.

Frankly the bag.

Yeah.

Productivity is mostly from the support functions. So I think what we're experiencing with the reduction in the topline projections of lower GM V. In revenue, it's harder to get as much productivity in our Atlanta patient centers in our variable expenses because there are some fixed elements to that and it's just tougher on lower volume.

So I would say, what we're projecting and expecting to see in terms of operating cost productivity in the second half of the year is primarily coming from the support functions.

Okay, and then I guess just.

Walking forward the comment that you think you can get to the EBITDA target the multiyear targets on.

Even if the <unk> is a little bit lower than we thought maybe what are some of the.

Can you help US bridge, maybe where you held back and showed a little bit of conservatism in the Investor day numbers on the on the leverage profile that you think you can go after and capture at this point.

Sure.

So many variables Michael that goes into our projections and the MRP model that we use to create the vision 2025 numbers in our projection to breakeven RB not just breakeven, but it would be positive adjusted EBITDA in 2024, and I will tell you that in that modeling and never really did count.

On a completely linear path and I understood that there would be some ebbs and flows along the way and so we built in some accommodation for that variability along the way.

The safety net or a cushion if you will that I can still say confidently that.

We feel good about being positive adjusted EBITDA in 2024 and that we can achieve our vision 2025.

Target of at least $100 million of positive EBITDA, but.

I don't know if thats enough of an answer to your question but.

I wanted to make sure that I would allow for some variability and some potential bumps in the road.

And because some of the bumps are we describe we bill as <unk>.

Transitory is it was it was a labor shortfall that we're addressing and we can catch up on that and and so thats. What gives me confidence to be able to reaffirm the vision 2025 numbers.

Okay. Thanks, a lot for that.

Thank you.

And the next question is from Tom Nicky.

Wedbush. Please go ahead.

Hi, everybody. Thanks for taking my question Rob.

Sorry, if this was addressed already and all that.

Discussion around guidance, but so when I look at the Q3 guide realm.

Relative to what you did in Q2.

You're essentially saying that revenue like total net revenues will be flattish to down.

Versus Q2, but the adjusted EBITDA will be a lot better something like $14 million to $18 million better than the loss in Q2.

Like how how does that happen on less revenue.

Is it that like the Opex dollars will actually declined quarter over quarter or is that like a huge.

Increase in gross margin like can you just kind of help me reconcile that.

Yes, and Tom.

Hate to contradict you.

But.

<unk>.

Roughly $15 million less in GMB, and about $4 million to $5 million less in revenue. So.

At the midpoint of our guidance so.

I see Q3 is very very similar to Q2.

Got it.

For that I think I think I have got a mistake.

A mistake in my in my model for Q2, but.

Alright, Thank you for the clarification I appreciate it.

Sure.

And the next question will be from Lauren Schenk from Morgan Stanley . Please go ahead.

Great. Thanks, I wanted to ask about supply again.

The pullback in vendor inventory I guess given the.

Lack of supply, particularly it sounds like maybe around the higher end items, why why decided to pull back on that now or is it just really a an EBITDA tradeoff and is that sort of a tradeoff that you will continue to make going forward. Thanks.

It wasn't it wasn't profitable when you do so it was important for us to kind of end, where I can find business, where really going back to our core of what we do and thats on the consignor side, we're seeing the high value come in from the consigned as well and.

And again getting that Tmall hired up in trains to set us up for a great Q4, but and this is part of our strategy.

Maybe a little bit less growth.

It leads to a better results, especially when you're talking about the direct business, which is very cash flow intensive.

Requires us to put cash out upfront it requires us to hold inventory and if you look at nobody asked us about there's a little bit of a change in our accounting presentation.

Where we have separated consigned business and margin versus direct business and margin, we kind of stripped out the shipping. So that you can see the margins of those three parts of our business in a clean way.

So the consigned part of our businesses reported has been round numbers, 85% gross margin.

While the direct business is 15% gross margin and is very cash intensive.

And so our decision is to deemphasize that focus more on the <unk> business as Rafi said focus on profitable growth and frankly also the conserve our cash.

So for all those reasons, we're willing to accept a little bit lower of a growth rate.

Which we think will give us better gross margins and ultimately.

<unk> adjusted EBITDA results.

Very clear I guess, just one follow up on that on the 75%.

Of of kind of the the GMB method and you attributed to supply I guess, how much of that 75% would you say is labor shortage versus the pull back of better supply.

It's all labor shortage, so labor labor shortage as far as again, we're supply constrained business. So that was the number the number one reason of it yeah, I mean, I kind of I separate those things those two things.

Direct direct as a percentage of business and the supply related Miss So again, the <unk> is driven out of the supply piece.

Okay. Thanks.

Thank you.

And the next question is from Noah <unk> from Keybanc. Please go ahead.

Thanks for taking my question just on the marketing rate ticked down in the first half versus last year, and then sequentially in the second quarter versus the first quarter was the.

Stepped down in the second quarter related to the supply shortfall and kind of how should we think about that right.

More long term and then also any color on how youre thinking about marketing mix as well as the flexibility and media plans as we move through the back half would be helpful. Thank you.

Sure the marketing change in in the back half of the year has nothing to do with supply all I'll say that first it really is about driving efficiencies I think I mentioned earlier.

Flywheel there.

A little bit of Golden Nugget, there the flywheel effect in the back continuing to decrease we've seen in Q2, and we continue to see those marketing efficiencies and as far as marketing mix goes I'd say, we're getting smarter, we're optimizing our channels, we're getting smarter about our objectives and we're using <unk>.

Brent channels differently go forward, we just have better data and Youll continue to see that through this year.

Thank you.

And the next question will come from Ashley Hogan from Jefferies. Please go ahead.

Hey, Thanks for taking our question just one quick one.

We were wondering if you could give us some color on the cadence of consumer spend on the platform throughout the call.

Throughout the quarter.

Sure.

In Q2 consumer spend was just what we said it was so we saw a shift from higher value goods.

Fine jewelry watches handbags, and even though I would say that continues to be healthy, we see a mixed shift into ready to wear and shoes.

Is that is that what youre asking.

I guess in terms of like the month like April May versus June if there was any variances between.

The three months in the quarter.

I'd say, we saw it kind of accelerate in the back or the back half of the year more closer to the summer months.

Okay.

<unk> in general in our business during the summer months as well.

Wonderful wonderful.

Thank you and our next question is from Ed Rumour Piper Sandler. Please go ahead.

I appreciate all the commentary on supply and the Readjusted Jimmy guide for the back half of the year have you taken any consideration for macro or the potential weakening or is the GM of the adjustment simply driven by the lack of supply driven by staffing. Thank you.

So I'll answer the first part of the question as far as risk to higher value goods watches and jewelry in the direct business. The good news is we're seeing.

Supply coming in on the confined side. So there's more levers that we can pull specifically these high value events that we've been having to drive tried the value and then as far as guide.

Guidance I'll, let Robert take that one yes. So in terms of the guidance in the second half of the year, it's really reflective of what we saw in terms of the supply shortfall due to the labor issue that we described and it's also a reflection of a lot of inputs on both the supply and demand side, whether it's opportunities are.

Conversions are mixed for high to low value take rates on the demand side.

Consumer mix and average selling prices and units per order.

So it's really a reflection of those things.

We're not economists and we don't have a crystal ball and so.

We don't know really what to expect in the second half of the year certainly theres some uncertainty.

Just broadly.

But that's not really the primary reason that we have.

Adjusted our topline it's more related to these inputs and also very much related to the deemphasizing of the direct business.

In the past that would have boosted back half growth.

And we've turned away from it.

Just because we feel that we want to really focus on the profitable growth.

Yes.

Thanks, so much.

The next question is from Albert Chen from Cowen and company. Please go ahead.

Alright, Thank you Oliver Chen.

Hi, Ross.

Regarding the profitability guidance that youre, giving Robert.

What are your thoughts on the fixed versus variable components in terms of how you see that evolving.

Thank you you answered it earlier, but.

You lowered guidance you kept.

The 2024 view of profitability.

Would love comments on that.

Second we are definitely seeing more innovation at competitors.

Other competitors do.

Some things to really accelerate gathering supply as well.

Do you how do you feel about your take rate.

What might happen to that longer term.

Potential risk factor.

And third point, the labor market is really tight still.

Luxury salespeople regarding compensation and turnover.

Just curious about.

Strategies, you'll take to retain and inspire and also higher and what still is a really tight labor market in certain segments. Thanks a lot.

So Albert I'll start with your first question about the 2024 and 2025 projections considering that.

Lowered our guidance for 2022.

As I mentioned before there is a lot of different paths and theres a lot of different variables that go into that vision 2025 financial projections and when you choose one of those elements to be the primary focus the most important and in our case, we've described that as being adjusted EBITDA there are men.

Any ways to achieve that goal and as I mentioned earlier.

We've allowed ourselves some variability in those projections, we expect it ebbs and flows along the way.

It looks like the most at risk in terms of the 2020 by projections as GMB.

I would actually describe as the least important of the three main elements that we are guiding towards the.

The most important being adjusted EBITDA, So I think that.

We continue as I said to look at our cost base to find productivity.

<unk>.

To manage.

The other inputs to ensure that we can get to our adjusted EBITDA or cash flow projections.

Again, EBIT with some slower growth we.

We believe that we're still on track to hit the adjusted EBITDA and cash flow numbers and again some of those problems that we saw are transitory. So we feel like it's more of a bump first of all catch up exactly and then your other two questions I think the second one was about competitors and take rate pressure.

Win on service and earnings and value and pricing, we're always looking at take rate and we're always looking to see where we can optimize.

We haven't seen us.

Hit any kind of threshold, yet we look at pricing regularly as far as how we pay versus our competitors, we have almost $30 million luxury shoppers.

And our pricing and our pricing algorithm is pretty sophisticated to kind of offer our seller that best price. So we will continue to look at that and we continue to look at take rate. We look at it about a couple of times a year again with pricing to make sure that our values are still.

There, especially on the pricing on the earnings side and then on the labor market I think someone asked this earlier as well what you know what are we doing as far as if we continue to see.

Some headwinds here on the company and we're continuing to look at compensation, our leadership driving strategy and we'll continue to monitor and we're really making sure that we're staying on the hiring piece and the compensation side. We've been really looking at a couple of key markets I'd say, we needed to right size, there and we have done that and we are seeing.

Progress in a big way going into Q3.

Okay very helpful. In your letter mentioned preservation.

As a key.

Priority.

Which actions are you prioritizing to do that.

How do you do that in a strategic way to retain.

All the innovation and core competencies.

And data as well.

Albert you broke up there just wondering you were getting to the good parts of it.

Part of your question and we didn't catch it I am sorry.

Just curious about.

Prioritizing cash and decisions that youre going to make to make sure to do that and balancing.

Tough decisions about innovation and investment relative to the cash and cash flow.

Yes so.

One of the main elements of cash and prioritizing cash and improving cash actually is related to our inventory.

And we're holding 74 million roughly dollars of inventory now some of that comes from from auto policy or from other get paid now programs and so on but about $40 million of it was inventory associated with this direct business inventory that came to us through vendors and wholesalers.

And we have really cut that off completely in terms of bringing in any new inventory.

In those categories and so is that fell through we do expect to generate significant amount of cash and youll see that reflected in a pretty significant reduction in our overall inventory balance between the end of Q2 and the end of this year.

And so that's part of our prioritization of cash.

Also just a focus on just.

Higher margin less cash intensive consignment business versus direct of course, there was no cash out for us.

When we take items on a consignment basis and the the consignors themselves get paid more or less after we get paid.

So that could be very positive.

The cash flow basis. So those are a couple of things that will allow us to prioritize cash and some things that we're doing a little bit differently than in the past to generate cash.

In terms of investment now Theres, a little bit of a tradeoff there because we've talked about the three elements of our cast our path to profitability. One of them is continued variable cost productivity.

And so we do have to invest in some innovation and AI and other ways to get more efficient in.

And authenticating items and so on and so we just look at each one of those decisions on a case by case basis and find the ones with the best return.

If you will.

You'll see us continue to invest in technology.

In automation and innovation.

It is fundamental to our path.

Thank you very much very helpful.

Yes.

Thank you.

And the next question is from Marvin Fong from <unk>.

Please go ahead.

Great. Thanks for squeezing me in here two questions.

First one on on active buyers it seemed.

Like one of the better performances in recent memory.

Just wondering.

What would you attribute that.

The quarter over growth.

Growth two do you think.

People.

Those are the macro looking for for a deal or a good value was there any.

Programs, you guys instituted or were able to activate some lot spires has any commentary on that would be great and then my second question.

On the new disclosure I just noticed you guys had.

Broken out shipping revenue and it looks like it's been continuously operating at a small loss.

I know that in the past you guys had done some renegotiated some deals around shipping just wondering if we can expect shipping to eventually reach breakeven that'd be great. Thanks.

I'll take the first one as far as marketing is concerned.

Our customer base and our active customer base, our buyers have gone up 84%.

From our existing our buyers are coming from our existing buyers or revenue are coming from our existing buyers and I would say it's contributed to a couple of different factors like I said, we're getting more efficient on the marketing side, specifically driven out of.

Our marketing model mix in our attribution channels. So that means more attribution do this through the journey of the customer and the buyer.

Giving us are enabling us to optimize more efficiencies there. So we're getting smarter there and then sometimes what we see is we see when we have lower value of God's will see market will see buyers go up as well in active buyers go up so we've been able to really dig in and dig deeper into our lapsed buyer base and some of the thing.

<unk> and <unk>.

Some of the tools that we're using to get into our lap space is working really well for us.

And then your second question was on.

Yes, so the second question around shipping and in our presentation.

In our GAAP financials, which we modified a little bit and I'll talk a little bit about what the motivation was behind that and then I'll answer your question directly about the net shipping margin.

In the past we were reporting two business segments direct.

And then consigned and other services and the one thing to that consigned and other services was the net shipping.

After our last earnings call, we started to get a lot of questions from from shareholders and analysts about the movement in that reported gross margin of the second category in some signs in services and it was getting.

Our holders and analysts to breakout the three elements into show consignment as its own category and a pure way.

And then break out shipping and other is its own line.

That resulted in now we do show consigned margin in sort of that mid <unk> range. The direct margin mid teens and a small negative margin on the shipping.

And so there has been pressure on shipping shipping.

Shipping costs have gone up we've done things to try to mitigate that there is some more complicated aspects, we do charge for shipping to customers. One time folks you had a one time charge 12 95.

But it is possible that we are shipping from multiple locations.

There is these mixed shipments that naturally the consumer will not pay for them, where a single SKU units and we have some units in our retail organization.

Pass some of that cost to our customers that doesn't seem to affect and hasnt seemed to affect conversion. We've diversified our shipping carriers also working for us, but it's always been a headwind for us because of the nature of our business and because of the rate increases that we saw earlier in the quarter. They those rate increases.

Have seemed to slow down that's the good news, but we'll continue to optimize we have some other levers that we're pulling at the end of this year and really our goal is to stay flat over.

Over the next few years when we when we think about shipping margin right and if we can narrow that gap, we would certainly like to that's been a goal in the past it's just.

And frankly, it's not easy given the nature of our business.

Okay that makes perfect sense. Thank you.

Thank you.

Ladies and gentlemen, this concludes our question and answer session I would like to turn the conference back over to Rodney sacks for any closing remarks.

Yes.

<unk>, who are joining us on our mission to extend the lifecycle of luxury goods and make fashion more sustainable. Thank you.

And thank you. The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Q2 2022 RealReal Inc Earnings Call

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