Q2 2025 The RealReal Inc Earnings Call
Slides and I'll be your conference operator. Today at this time, I'd like to welcome everyone to the real real second quarter, 2025 Financial results conference call all lines have been placed on me to prevent any background noise.
After the speakers remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number 1 on your telephone keypad. If you would like to redraw your question, press star 1 again, thank you. I would now like to turn the call over to Kaitlyn house senior Vice President of Finance. Please go ahead.
Thank you, operator. Joining me today to discuss our results for the period ended June 30, 2025, is our Chief Executive Officer and President, Rati Levesque.
And Chief Financial Officer. Ajo Paul.
before we begin, I would like to remind you that during today's call, we will make forward-looking statements, which involve known and unknown risks and uncertainties our actual results May differ materially from those suggested in such statements,
You can find more information about these risks on certainties and other factors that could affect our operating results in the company's most recent form, 10K and subsequent quarterly reports on form 10q.
Today's presentation will also include certain non-gaap Financial measures both historical and forward-looking.
We have provided reconciliations for historical non-gaap, Financial measures to the most comparable gaap measures in our earnings press release which is available on our investor relations website.
I would now like to turn the call over to Rosy lvac Chief Executive Officer of the real rail.
Thank you, Caitlyn. Good afternoon, everyone. I'm pleased to review our second quarter 2025 results.
Q2 was a breakout quarter for the real real. We demonstrated progress while further validating the success of our strategic roadmap
Our strong Q2 performance was highlighted by 14% Topline growth, coupled with adjusted ibida above expectations.
These results were driven by our clear strategic Vision Innovative mindset and unique position in a growing category.
We are fundamentally changing the way people shop. And we are at a pivotal moment, not just as a company, but as a category leader.
Before diving into this quarter's highlights. I'll take a moment to explain more about what changing the way people shop needs to us.
For the past 14 years, we've been ahead of the Curve.
now, the circular economy is on the rise,
we are not only leading the cultural shift in luxury resale. We are also helping to define it.
Our operating and consumer expertise and growing brand. Affinity drives our Market leadership.
Our operating and consumer expertise is showcased in our world-class Authentication.
Which has been the Cornerstone from day 1 creating trust with our customers.
Our growth Playbook centers on a scalable Supply engine and helps us Forge enduring relationships with our sellers.
And our powerful brand attracts customers across the generational Spectrum, with 53% of our customers, being Millennial and gen Z. All of these are underpinned by our data-driven intelligence.
From authentication to pricing to our smart sales and smart prospects engines. We are leveraging AI to drive, efficiency, scalability and user engagement.
Today's modern consumer is embracing the circular economy and approaching luxury resale is an option of First Resort. Not last, our customers view their closet as an investment that retains value. In fact, 47% of our consumers, consider the resale value of ready to wear items before making a purchase.
The real real helps our sellers unlock that value and allows them to reinvest in other pieces changing the way they shop on multiple fronts.
Prioritizing uniqueness circularity and financial savvy.
This quarter's results, affirm our strong brand affinity and cultural relevance positioning us for sustained growth, improved profitability and consistent cash flow.
Revenue of 165 million.
Both up 14% year-over-year.
With 6.8 million of 4.1% margin. Which is a substantial beat versus expectations.
This performance was underpinned by record. New consigners double-digit growth for the second quarter in a row and our highest number of new consigners ever.
We're incurring by this trend which is continued into Q3 as new. Consignor growth is a leading indicator for supply.
Based on our second quarter results and the momentum we are seeing in the business. We are raising our full year outlook.
Through strong execution across our strategic pillars, unlocking Supply drug growth Playbook driving operational efficiency and obsessing over service. We are fueling Topline momentum and powering our profitability.
The first pillar our growth Playbook is focused on 3 key areas sales, marketing, and stores.
The new Sales Team Compensation Plan has been fully implemented and emphasizes retail value, rather than simply unit targets.
This means we are delivering even more of the goods and Brands buyers want.
The key areas of our growth Playbook amplify 1, another to generate Supply.
Our seasoned sales team has been collaborating with our store team on experiential, pop-up events, like a recent event, Newport Beach, which unlocked 800,000 dollars of supply.
And another at a Chicago store, which brought in $500,000 in a single day, these events generate excitement, brand Energy and incremental high-value Supply.
We're also making it simpler for those who already know and love us to engage on the platform.
Our new reconsigned program makes it easy for our existing repeat consigners.
To add items. They've previously bought from us back to their cell list.
This provides a seamless convenient way to re-engage with our platform, creating a circular Loop for luxury assets.
Reconsigned strengthens our supply and is performing well increasing New Opportunities and accelerating the flywheel.
on the supply Innovation front where progressing with our drop ship initiative, building on the success and watches and Handbags we are expanding drop ship to find jewelry in Q3
In the back half of this year, we plan to partner with larger luxury, good aggregators and international vendors.
While still early days, we are confident in drop ship and its ability to drive incremental Supply.
Within the second pillar driving operational efficiency, AI and automation are central to our efficiency gains. Our new product intake process, Athena, is now touching approximately 20% of all units, and we are on track to reach 30% to 40% by the end of the year.
Our next phase will focus on enabling listing, automation, enhancing search through Ai and further, reducing manual processes.
Through our Ai and automation efforts. We are increasing efficiency and accuracy, reducing processing time. And we are on track to cut multiple dollars from our processing cost per unit over the medium term.
Authentication, is a differentiator that sets us apart?
We set the industry standard for luxury goods authentication and we continue to raise the bar.
We actively collaborate with law enforcement and government agencies, to address the issue of counterfeiting within luxury.
Since our Inception, we've kept over 1 quarter of a million fakes off the market.
With proprietary technology, like Vision Shields. Now Athena we are the definitive Authority on what is real. As we combine our extensive data, AI capabilities and authentication expertise
Going forward, we believe Athena will continue to elevate our authentication process in particular driving speed and efficiency while reinforcing the rigorous accuracy that defines our approach.
Touching briefly on our third. Strategic pillar obsessing over service.
Platform.
During Q2 we made a number of enhancements to our consignor page. All aimed at improving transparency in the confinement process and reinforcing trust with our sellers.
Furthermore, in July, we launched a new price history feed.
which is currently in a phased rollout. This provides consigners with simple timely and actionable insights to maximize their earnings.
we are also building toward an extension of our platform called my closet, a digital catalog of luxury items allowing sellers to keep up on Market insights and lovely managers to give proactive confinement, recommendations,
On the buyer side we are working to elevate the shopping journey in the coming quarters. We look forward to releasing features like Visual and conversational search powered by AI to make it effortless for buyers to discover items. They love our Relentless focus on Innovation, will help us continue to meet and anticipate the evolving needs of our Discerning customers.
In closing, there is a rising tide in luxury resale that. We've helped Pioneer. Now, we're capitalizing on it and accelerating. It resale is the smart choice for a luxury minded consumer and price increases in the primary Market due to tariffs or other factors. Make our value proposition even
More compelling.
Our business is fueled by the vast pool of luxury items currently sitting in domestic closets.
A large and growing cam of over 200 billion dollars that our growth Playbook is designed to effectively tap into.
Our disciplined approach to operational, execution, and unlocking Supply, driving efficiency and obsessing over service creates a powerful flywheel that fuels our growth.
We lead with vision authenticity and a Relentless commitment to Excellence.
The market is ready, the customer is ready, and we are more ready than ever to embrace the moment and Define the next era of luxury refill.
With that, I'll turn the call over to AJ.
Thank you Roy. Good afternoon everyone. I'm pleased to report a financial results for Q2 2025, which demonstrates the disciplined execution, and the effectiveness of our strategy to drive profitable growth.
This past quarter. We delivered our highest ever quarterly gmv revenue and new consigners.
Our results, reflect strong performance across the board, and validate the Strategic Investments. We are making positioning us for continued momentum in both growth and efficiency.
now, turning to our detailed second quarter results, beginning with the Top Line,
Q2 gmv of 504 million increased 14% compared to last year.
This growth was driven primarily by healthy Supply which led to strong growth in units and to a lesser extent from mixing into higher value items.
Our active biobase also expanded increasing 6% on a trailing 12-month basis to exceed 1 million active buyers.
Q2 revenue of 165 million increased 14% year-over-year.
Since assignment Revenue grew 14% while direct Revenue increased 23% compared to Q2 of 2024 and represented 12% of total revenue in the quarter.
Continuing with our second quarter results, second quarter gross profit of $123 million increased 14% year-over-year.
Gross margin was 74.3% in the quarter and increase of 20 basis points compared to the prior year.
In the second quarter, Consignment gross margin was 89.3% and Improvement of 93 basis points year-over-year.
Growth margin was 16.2% in the second quarter, within our previously communicated range of 15% to 25%.
Direct gross, margin fluctuates, quarterly largely based on the category of products sold.
For instance, in a quarter, when we sell more watches at high price points, direct gross margin may be lower than in a quarter with a higher mix of handbags.
Overall, we are pleased with the stability and continued improvements in total gross margin.
Excluding software compensation operating expenses leveraged by 660 basis points, driven by productivity, from our sales, team leveraged on our fixed costs, and gains from Ai and Automation in our authentication Center operations.
Second quarter, adjusted ibido, 6.8 million or 4.1% of total revenue, increased 8.6 million versus the prior year.
adjusted, Evita margins increased 530 basis, points year-over-year
To date adjusted even on margin of 3.4% increased 475 basis points. So this is prior year.
Primarily due to operating expense Leverage.
We are pleased with the progress, we're making in our productivity efforts and expect operating expenses to continue to be a source of Leverage moving forward.
We are encouraged by our continued progress towards achieving sustained. Positive free cash flow and strengthening our balance sheet.
We ended the quarter with 109 million in cash cash equivalents and restricted cash.
Our operating cash flow on the second quarter was -4 million. A 3 million Improvement year-over-year and a 25 million Improvement quarter over quarter.
In Q2 actions related, to strengthening the balance sheet for the primary drivers of the change in cash balance.
During the quarter we reduced our total debt by 27 million. As we paid off the remaining balance of our 2025 convertible notes.
since the beginning of 2024, we have reduced, our total debt by 80 million
We have also rebalanced our debt maturity cycle and strengthened the balance sheet.
our next maturity isn't until 2028,
Capital expenditures on property, plant and equipment. For the quarter were 8 million due to the timing of planned Investments to upgrade and densify our authentication centers.
We continue to anticipate fully your capex. Ppne to remain within 2 to 3% of total revenue.
Looking ahead, we expect to generate strong positive, free cash, flows in Q3 and Q4.
10 minutes of last year, we expect free cash flows to outpace adjusted Ava. Die in the second half.
Demonstrating our business models, favorable cash dynamics. As we grow.
Turning to our pnl outlook for the remainder of the year.
We are increasing our full year guidance, demonstrating our confidence in the trajectory and strategy of the business.
We now expect fully your gmv in the range of 2.030 to 2.045 billion for the year up 11% year-over-year at the midpoint of our guidance range.
We expect Revenue in the range of 667 million to 674 million.
Up 12% year-over-year at the midpoint of our guidance.
And we now expected adjusted, evida in the range of 29 to 32 million with margin expansion, driven by Topline growth and operating expense Leverage,
Moving to our outlook for the third quarter.
Gmv is expected in the range of 495 million to 5502 million, which represents 15% growth compared to the prior year at the midpoint of our guidance range.
Third quarter revenue is expected in the range of 167 to 170 million.
This reflects a 14% growth compared to last year at the midpoint of our guidance range.
We continue to expect direct Revenue, to remain in the range of 10. To 15% of total revenue.
Third quarter, adjusted Eva is expected to be between 6.1 and 7.1 million. Approximately 3.9% of total revenue and over 230 basis points of margin expansion year-over-year at the midpoint of our range.
In closing, our second quarter Financial results. Show the effectiveness of our disciplined approach to unlocking Supply driving efficiency and obsessing over service.
Record, gmv, and revenue, coupled with our improved profitability is stemming from the powerful. Flywheel effect. We've created
Through our growth Playbook. We are confident in our ability to continue driving profitable Supply.
Additionally, our investments in Ai and automation is already yielding efficiency gains and improved Community economics with more to come.
Our business and our outlook for 2025 signal confidence in our ability to capitalize on the increased consumer interest in luxury resale.
We are poised for sustained growth, improved profitability and consistent cash flow while defining the next era of luxury resale.
With that, I will turn the call back over to the operator to begin Q&A operator.
At this time, I would like to remind everyone in order to ask a question. Please press star then the number 1 on your telephone keypad,
No, pause for just a moment to compile the Q&A roster.
Your first question comes from the line of Ike barroco with Wells, Fargo, please go ahead.
Hey everyone, uh, congrats on the quarter, uh, 2 from me. I'll start with the top line, I guess, maybe Roi. Um, just really, you know, great Revenue beat in the quarter and and the guidance is pretty impressive. Just had any chance, you could comment on kind of the Cadence you've seen, um, over the past couple of months or or just something, you know, quarter a day just kind of, it's just a, you know, a pretty big inflection in the business and would love to get more details and maybe with underpinning that
Yes, I I thanks for the question. Um, as far as quarter to date is concerned, you know, we are seeing a momentum in the business. You saw a breakout quarter in Q2, we see that. Um, you know, momentum keep Pace in Q3 with a slight, if anything acceleration that is factored into our guidance. Um, but what gives us confidence there? As you know, is the supply uh, second quarter of double digit, uh new seller growth as well. Um, and our growth playback book those in reinvestments, there really working.
Got it. And then, uh, for a j on the margins, I guess, uh, your, you know, the gross sales are kind of starting to flatten out in the mid, uh, 700s. But, um, which makes sense. Um, and the take rate I think was down year over year, uh, because of the, uh, the the buyer shift and the the higher awe of aov product, is that just something we should keep in mind. Going forward, should should the take rate, you know, start to go down a little bit as you're getting more aov. Uh customer should the gross margin the uh reported maybe even start to be down year over year even though you're generating big growth and and better. Evida just kind of curious how we should think about the model. Um you know in the near term going forward.
Yeah, thanks. Thanks for the question. Like, uh, I I think on take rate you, you nailed it. It's really just, uh, to the ties. Back to the, uh, average order value, right? Aov is in Q2 or up 8%. Uh, and as you said, when we mix into high value items, uh, it has an effect on our take rate as a percentage going down, but clearly high value items bring in a higher gross profit dollars for us. So, you know, we'll take them all day long. Um, the second part of your question, on, on gross margin. I, you know, the Anchor Point for our gross margin is really our Consignment, uh, gross margins. They were at 89.3% and showing really, uh, Healthy Growth at 90 per basis points versus year on year. Uh, I think you should expect us to be within the 74 to 75% range. Uh, some of it is the mix of Consignment versus other of direct revenues and shipping revenues. But but really I think at the end of the day, take rate connects back to Consignment, gross margin, both of which are really strong.
yeah, thanks, I think that's
Your next question comes from the line of Bobby Brooks with Northland Capital markets. Please go ahead.
Hey, good afternoon guys. Uh thank you for taking my question and congrats on the strong quarter uh in the opening remarks. Rody I believe you were talking about expanding to I believe the term was luxury vendors and international consigners. I just wanted to double, click on that, to understand what those would look like in actuality and maybe help frame the opportunity.
Be there for driving more Supply.
Yes, hi Bobby. Thanks for the question. Um, I was referring to in the prepared remarks are drop Ship Channel. Um, you know, we're this year is really about testing and learning this area. Still really early days. Um, we are happy with some of the momentum. We're seeing um, this year, you know, testing learning, like I said, but also building the capabilities at the end of the day. So, you know, we started with certain categories, we've expanded to find jewelry watches and Handbags as well. Um, but I do believe this could be a growth driver over the next few years. Um, and especially if we're looking at onboarding, you know, International uh, Partners as well.
About the scalability of the, of the sales force. Obviously, a few years back. You guys made the intentional shift and the hiring process. And that's really resulted in improved Supply Trends and combine that with the new sales, force incentives. That's that's further bolstered it. But, uh, kind of what I'm getting at is with gmv up 14%. Could you give us a sense for how much did the luxury manager had count increase?
Um, yeah, you know, as far as efficiencies go, um, when we look at the sales, uh, functions and we look at every variable function, this way whether its operations, uh, retail locations, or sales organizations, we always, uh, really gold them on hitting a certain amount of efficiency. So, let's say, low single digit efficiencies in each of these areas. So we saw the same here on the sales side and a few things Drew, uh, kind of really drove that efficiency. So, 1 of them is appointments per day. I talk a lot about that, right? How do we increase their appointments per day? Um, the compensation structure driving, um, the quality of their appointments versus the quantity of their appointments, um, things like the Recon sign program, the referral program, all of these things drove Supply. Um, but also helped us find and see efficiencies in the sales force.
Got it. That's that's helpful. I'll return back to the queue. Thank you.
Your next question comes from the line of Ashley Owens.
With keybanc capital markets, please go ahead.
Hi, thanks for taking our questions. So, Robbie, I think you mentioned in the prepared work that the quarter had highest new co-signers ever. So, I just wanted to dig into that a bit, you know, I know there's been a ton of focus on the sales team. Um, providing them with new tools to unlock Supply, but just curious, if you've made any tweaks to the approach, anything you're doing differently than in years past to track new customers. Um, if you saw a strong response to some of the other co-signer tools that you also outlined and then additionally, just higher number of buyers become sellers, anything to kind of highlight there. Thank you.
Yes, thanks, Ashley, for the question. Um, yeah, we are seeing momentum in new consigners 100% as well as supply. Um, a couple of things drove that. Um, number one was the marketing reinvestment that we made. It's a real full-funnel approach. Um, and so I'm really happy with what we're seeing in terms of efficiencies in marketing, and then we're able to take that money and reinvest it into new sellers and grow. The second thing I would say is our growth playbook, right? You've heard me talk about that a lot; that's zero marketing and retail really coming together, meeting the customer consignor where they are, um, you know.
You know, and I could give you a couple of examples of that on the sales side. Like I said, it's the compensation structure. Um, the referral program to bring on new sellers. Um, we made that more rich but still very much Roi positive. Um, we also introduced something, our customers were asking for or reconsigned feature. So it had our buyers become consigners and that flywheel is really important for what we do, um, on the retail side, a few different things, you know, quarter of our new consigners come from retail and we're offering now, pop-up events. Um, I talked about that in my prepared remarks on demand appointments, we have 3 new stores, um, in Market this year and I'll give you an example, you know of 1 Houston, really happy with the performance over there. Um, we're seeing 92% increase in new sellers in Houston. Um, almost 50% more Supply in that market. Um, so just to give you, you know, those are those, that's just 1 of the stores, right? We've got a couple of other
So, gives us confidence, you know, going into Q3 as well.
Thank you. Um, just to follow up so you touched on Athena a little bit, but it would be curious how much of the assortment this has now been rolled out to you in any updates to metrics and the roll out process. You're willing to share. I think last quarter, it was called out that about 10% of the items are processed through Athena and that you were cutting processing time by 20%
Yes. Um I'll start a you know feel free to step in here. So as far as operational leverage and efficiencies um you know, AI is the Cornerstone of that. Um but Athena is also a big 1. Like you said right now it's at 20% coverage by the end of the year will be close to 40% there and we're on track for that. Um but really at the end of the day, the objective is to cut right? Multiple dollars and costs per unit in the medium term.
Paper helpful. Thank you.
Thanks.
Btig. Please go ahead.
Great. Uh, good evening. Thanks for taking the question, is congrats on the quarter. Um
Yeah, I would just like to kind of touch on this. I don't know if this is like related to terrorists or anything, but you know the strength, you know, the aov was very strong. Usually, it's seasonally kind of weaker, and I think you called out good performance and higher ticket items. So do, do you think that that was at all tied to terrorists and people trying to maybe get ahead of that but just um,
And the other side of that question is, you know if if you do get some better pricing that would um make transactions more profitable for you. Uh, and and increase um that the LTV of customers would would you consider reinvesting some of that into more marketing? You guys have obviously driven some really nice marketing leverage but just want to get your thoughts on on those those 2 aspects of pricing. Yes, thanks.
Marvin, thanks for the question. Um, as far as
All of the initiatives that we've reinvested in um, that I just talked about around marketing, retail sales, all of those tactics and projects directly contribute to the growth. So that's number 1. Um, and that's what we believe that it's driven out of. Um, but you know, you brought up tariffs. Uh, I do believe we are a tariff beneficiary for many different.
Reasons. Right. Our sources, the domestic closet. There's hundred billion dollars trapped in there and as pricing increases in the primary Market. Um, our pricing algorithms follow and we benefit and see pricing increases as well. Um, you also brought up average order value, and yes that's up 8% about 8% up year-over-year and I would say that's half price and that's half volume and I think that's really important to know, right? As we reinvest in marketing, we're also seeing the volume come through. You also see it in um, in our overall growth rate, right? 14% up year-over-year, 2, thirds of, that is volume. And a third of that is price. Um, and and I think your last question was around, you know, would we invest more in marketing 100%, right? Gaining more efficiency. As we continue to test their learn there, we continue to find deficiency and our plan is to continue and then invest their social being, you know, um, paid social or seeing a lot of, uh, kind of momentum there as well. And we'll uh,
Continue continue to test new channels with this more full funnel approach. Like I mentioned before.
Got it, and if I may just to build on on Ashley's question there. Uh, so getting Athena up to 30 or 40% by year, end, would that be that you're expanding Athena into other categories? Or are you just going to be covering more? I think you've been started with ready to wear, but how exactly is that expansion going to manifest itself?
Yes, that's exactly right. Marvin? It's going to move uh, and cover more categories. That's right.
Yeah, and Marvin just to build on that. Like, you know, we've we've often talked about Athena as an example of our focus on on AI. Um, behind behind the Tina is is an artificial intelligence model. And and really what we're doing is training it testing it. And making sure that once we're comfortable with, we open it to more categories. Uh, so we started with ready to wear and as the model gets more and more accurate with other categories, we will we will continue to expand it. Yeah, Marvin and this is Caitlin just 1. Other thing to add when we talk about the 20% that's a
It's not yet a total value. So we really see this as not only just a 1 or 2 quarter, you know, to drive operational efficiency. But but we see this as a multi-year process to getting to being much more efficient on the authentication on the processing of goods.
Mhm. Perfect. I appreciate all that. Thank you.
Thanks, Marvin.
Your next question comes from Mark out, stagger with birth, please go ahead.
Great, thank you for taking my question. Congrats on the results. Um, just to start, um, how would you characterize this as breakout performance? Um, you know, guiding to low double-digit revenue growth. Just curious, with the progress that you're making across many of these strategic initiatives, any update on how you're thinking about the medium-term topline algo for the platform? I guess, what are the factors that...
With the support sustained growth in this, you know, low, double digit low, teens range, versus the kind of high single low, double that we were talking about entering the year.
Sure maybe. Um, but our focus is really, um, on profitable growth right now. So I'd say for planning purposes. Um, that's what I would plug in.
Fair enough and then just 1 1 on on margin J. Drove really nice margin leverage here in the second quarter. Um, I guess first maybe help us understand where you outperform the plan and then as we look at the guidance for Q3 and implied for the back half. Um, I guess it it would suggest kind of less year-over-year margin expansion. So just just curious, I mean, what would be different or what are you planning different in terms of flow through Dynamics in Q3 in the back? Half versus um what we saw in the first half.
Thank you. Yeah. Long long long. Thanks. Thank you so much for that question. You know, we feel really good about how we are expanding even on margins uh at the business. You know, we uh, lost as a reminder last year was our first full year of adjusted our profitability. We, uh, we ended the year with 1.6%. Uh, and if I look at the first half we've uh, slightly more than doubled that we're going to be reporting, 3.4% ibida, margin and our guidance, for the full year, 2025 implies 4 to 5%, uh, margin for the full year. So very, very pleased with the progress that we are. We're seeing their, uh, we expect that trajectory to continue and it's really driven by, by 3 things. It's, uh, starting with the gross margin, like we have very healthy gross margins, 74 to 75%. And we see that translating nicely into as we grow, uh, you heard ratios.
Talk about our focus on our excellence and and AI. Uh those initiatives are are delivering good results. So you can see that in our Opex leverage in in q1 and Q2 and we expect that to continue. And finally, just our fixed cost base. We are, we are getting good leverage on our fixed cost base our investments in product and technology that tool will continue. And I see, no structural reason why we can't be a 15 to 20% over the over the medium-term.
Thank you.
Your next question comes from the line of analysis, with B Rally security. Please go ahead.
Hi, good afternoon. Thanks for taking my questions. Um, I'd like to Circle back on the new consignor growth. I understand, you know, it just happened in the second quarter. So it's a little early to have seen repeat consigning, but just wondering if there's anything in the data about this recent cohort to suggest that this is a consumer response to tariffs or a response to increase prices in the primary Market or anything to suggest that this is more of a 1-time surge in nature, rather than, you know, a permanent shift in, in consignor growth. Thanks.
Yes. Hi Anna. Thanks for the question. Um, we, you know, again we're able to kind of the, uh, directly. Um, see the where, where this new, where these new sellers are, come coming from what projects and initiatives are are driving these new consigners. So, I mentioned our rec, consign program, a referral program, our reinvestment in marketing. Um, so we do believe that this is not a 1-time benefit. This is now the second quarter um, right that we're seeing double digit growth there. Um and then, as far as the change in the cohorts, any changes, I'm not seeing any changes there. You know, they are uh, pretty consistent mostly gen Z Millennial. Um, is almost, you know, 55% high frequency medium to high income, um, and they will say they buy and sell often. If if anything, I think we're getting better at targeting um, this group and these cohorts, and these flywheelers,
Got it. Thanks and and then turning to um the the potential benefit from Athena now uh taking over 30 to 40% of intake, anything to share on what the potential savings for unit. Could be, I know you referenced, you know, a couple dollars per unit but um anything you can share their incrementally as to what the opportunity could be. As that's more fully rolled out.
about how we believe that we can take out multiple dollars of cost on per item basis as we scale it, you know, cross our business
Great, thanks.
Your next question comes from the line of J. So with UBS, please go ahead.
Great. Thank you for taking the question. Um, can you just talk about, um, the luxury space overall? Some of the, you know, public uh, European luxury companies that have talked about, maybe a Slowdown in luxury spending at a full price level? Can you talk about the interplay between that Trend and how that benefits or just, you know?
Affects the the resale Market. Thank you.
Yes, thanks Jay for the question, um, as far as the luxury space, um, and the Slowdown, or any kind of impact that we're seeing on resale. Um, you know, that's the interesting thing about our business, it's the diversity of products. Um, the multiple kind of go categories, multiple Brands. Um, so if some things are out of favor, other things are in favor, right? And our pricing algorithms. Um, so for example, jewelry is really hot right now, we're selling. Um, that really well. We've um, updated prices or increased prices on both branded and unbranded while maybe another brand is out of favor. And you have to, you know, uh, price accordingly. So, we're seeing both things there. Um, we don't see that having a huge impact on our business. Um, I will say when the luxury space increases let's
Say, you know, tariffs do impact their business and they have to increase their prices in the primary Market. We usually um, also increase our prices um so we can benefit from that.
And and maybe just to add to that uh you know you hear us talk about the 200 billion Tam that drives our business as a as a supply of in business, you know? We, we we get excited about the fact that we see about hundred billion dollars of items that are already in people's closets, our growth, Playbook excels at unlocking that supply and bringing it on to our platform, which is a, which is a source of growth for us. So, you know, as the primary Market goes through its ups and downs. Uh, you know, the the effect on us is is is you know, hard to hard to sort of tease out because we have enough time to go after
Got it. Interesting. Maybe just one more, if I could just touch on the direct revenue segment's gross margin. It looks a little bit different from last quarter. Could you just talk about, you know, what the differences were? Is that seasonal, and where do you expect the margins in that segment to trend for the second half of the year?
Um, direct was that your question? Yeah, yeah, yeah, yeah, yeah. Uh, thank you. Thanks for that question. Yeah, direct. You know, we've we've rebuilt our Direct business to be a much more attractive and more profitable part of uh, part of our portfolio today. Uh, you know, you've heard us talk about how we expect, uh, margins gross. Margins in that Revenue stream to be between 15, to 25%, which I acknowledge is a pretty wide range. And really, it comes back to, it comes down to the mix of what we sell of the items, being sold through that, um,
Through that uh, Revenue stream, for example, when we sell higher priced items like watches or high-end jewelry, our percentage margin on those products is going to be lower, but the dollars are are very attractive.
Understood got it. Thank you so much.
Your last question comes from the line of Bobby Brooks.
With Northland Capital markets, please go ahead.
Hey guys, thanks for taking the follow-up question and just go circling back on Athena was just curious where in your inbound process. Do you see the most opportunity to cut dollars out? Uh and then feel like it would be helpful to for investors to maybe draw a bridge of how applying Athena to those areas could drive those costs lower. Thank you.
Oh, thanks Bobby. Um, you know Athena as a project as we've talked spoken about it is really uh touching the what happens to an item. From the moment it arrives in our fulfillment centers Till It's Made available, right? So think about it, as the uh as a project that is driving efficiencies into uh, how we, you know, how we set up an item, how we create that listing and, you know, just make sure that it's an authentic authenticated item. That's, that's sort of the core of what Athena is looking at right now. Um, I would, I'd say Athena is an example of what we're doing in. Artificial intelligence, you've heard about us, talk about how AI is really focused on our U.
You know, it's it's in multiple places. And I think what you're seeing in our Opex, Leverage is really a result of how we've brought that to bear on the areas where we can make massive differences in our business.
Appreciate the color.
And at this time, I will now turn the call back over to Rody Lebec CEO for closing remarks.
Thank you. First of all, I just wanted to thank you all for your questions and we appreciate you joining us today. I want to extend a sincere. Thank you to every member of the real real team. These impressive results we've shared today, our direct reflection of your hard work and disciplined execution across our strategic pillars, I couldn't be more proud of your dedication to our mission and what we've accomplished together.
The moment, the momentum we have is real and it's fueled by your commitment to operational excellence and to defining the next era of luxury resale. Thank you all. And we'll speak to you again soon.
Ladies and gentlemen, that concludes today's call, thank you all for joining. You may now disconnect