Prepared remarks
Good afternoon, everyone. My name is Megan, and I will be your conference operator today. At this time, I would like to welcome you to The RealReal First Quarter 2026 Earnings Call. At this time, I would like to turn the call over to Caitlin Howe, Senior Vice President of Finance.
Thank you, operator. Joining me today to discuss our results for the period ended March 31, 2026, are Chief Executive Officer and President, Rati Levesque; and Chief Financial Officer, Ajay Gopal. Before we begin, I would like to remind you that during today's call, we will make forward-looking statements, which involve known and unknown risks and uncertainties. Our actual results may differ materially from those suggested in such statements. You can find more information about these risks, uncertainties and other factors that could affect our operating results in the company's most recent Form 10-K and subsequent quarterly reports on Form 10-Q. Today's presentation will also include certain non-GAAP financial measures, both historical and forward-looking. We have provided reconciliations for historical non-GAAP financial measures to the most comparable GAAP measures in our earnings press release, which is available on our Investor Relations website. I would now like to turn the call over to Rati Levesque, Chief Executive Officer of The RealReal.
Good afternoon, and thank you for joining us on today's call. Q1 demonstrated the strength of our platform as our financial and operating results exceeded expectations. I'm very proud of the team's execution during the quarter. Q1 was our fourth consecutive quarter of double-digit top line growth and our third consecutive quarter of growth exceeding 20%. We also expanded adjusted EBITDA margin by over 400 basis points year-over-year. Trailing 12-month active buyers grew double digits year-over-year, which reflects higher levels of trust and an acceleration in engagement with our platform. I want to take a step back to provide perspective on where we've been, where we are and where we're headed. 2024 was about stabilization. We defined our strategic direction and got to work executing against it. We stabilized operations, improved unit economics and validated our transformation. 2025 was about optimization. Last year, we articulated our growth playbook and go-to-market engine to unlock supply and drive profitable growth. The results validated our approach. We surpassed $2 billion in GMV, accelerated top line and delivered positive adjusted EBITDA in every quarter. 2026 and beyond is about compounding. We've laid a solid foundation and the mechanics are working. Now our customer relationships, our data, our brand and our scale are reinforcing each other, each one making the next stronger, compounding our advantages. We've become the barometer of the luxury industry. We capture luxury demand in real time. The categories, brands and looks trending on our platform are often the earliest signal of where the market is moving. Our customers come to us first to see what's trending, what their items are worth and where fashion is heading. A customer's relationship with The RealReal begins before the transaction and continues long after it. When you consider that about 50% of our customer base is Gen Z and millennial, it's clear that resale is not a passing trend. It's a core component of the future of luxury. And with 47% of luxury consumers considering resale value when purchasing in the primary market, we're changing how people shop. Our business helped to drive this shift. We've created a full-service managed marketplace with the authentication, logistics and trust luxury requires. By modernizing how consumers think about fashion and the value of their closet, we're cementing the operating system for luxury ownership. We are leaning into this vision through three strategic pillars. First, our growth playbook, which is how we unlock supply and drive flywheel behavior as we become the default luxury resale destination; second, obsessing over service, which informs our mindset in every customer interaction and turns transactions into relationships; and third, operational excellence, which is how we use AI, automation and data to improve unit economics and enable scale. Our first pillar is our growth playbook and the mechanics are working. Our sales team remains a key competitive asset. We are actively deepening our moat, empowering our sales team to act as trusted advisers, helping to manage our consignors' closets. Our algorithmic pricing tools equip our sales team with data-driven earnings estimates, giving consignors clarity and confidence. In a brand-forward marketplace, this trust deepens engagement and loyalty, which keeps consignors coming back. We're also extending the reach of our sales team through our referral programs. With the Real Partners program, we're building a network of stylists, closet organizers and real estate agents, the professionals closest to luxury closets who refer their clients to The RealReal and earn commission. It's an efficient way to reach high-value consignors, and we see significant long-term potential to expand our partner base. Turning to stores. Our stores continue to deepen the consignor relationship, and we're excited about the new markets we're adding for 2026 in San Francisco and Boston. Stores play an important role in generating supply. Sellers who engage with the store deliver 40% more value. In terms of newer supply channels, our drop-ship and vendor channels are expanding. We're building an asset-light international supply network and starting to develop a partner base in places like Italy, France and Japan. Building on our success with drop-ship in the U.S., we see significant runway to grow this channel over the medium term. These supply strategies are successfully driving the compounding mechanics of our platform and accelerating our network effects. As buyers become consignors, our flywheel spins. These flywheelers, whom we affectionately refer to as RealRealers, spend 50% more time with us than the average customer and the flywheel accelerates. The next strategic pillar, obsessing over service, propels the growth playbook forward. Service and data insights for both sellers and buyers helps turn a one-time transaction into a relationship. The full MyCloset suite is the product manifestation of our vision to become the personal adviser to the closet, creating the system of record for our customers' luxury assets. MyCloset will provide real-time estimated value, price tracking and trend intelligence. This further removes friction for the seller and engages customers beyond the transaction. On the buyer experience, our product roadmap includes AI recommendations in the near term, followed by enhancements in search and discovery. Every item on our platform is unique, which makes agentic and conversational search powerful, and we're excited to continue rolling out features in 2026. Through our growth playbook and obsessing over service, we are building the infrastructure layer for luxury and efficiently connecting buyers to consignors. Our third pillar, operational excellence drives profitability and scalability. Our AI-enabled intake system, Athena, is automating the repetitive data-driven parts of intake, freeing up our experts to focus on the valuable work that requires specialized expertise and judgment. We're targeting to end 2026 with nearly 50% of items fully flowing through Athena, improving processing times, speed to site and our unit economics. Beyond intake, our pricing strategy is also getting smarter. Building on our foundation of structured market signals to inform pricing, we've recently introduced AI-powered image embedding. By incorporating image data, our models better account for visual characteristics when determining market value. These visual details give us better comparables to price against and help maximize earnings for our consignors. Later this year, we're rolling out an automated storage and retrieval system at our Perth Amboy authentication center, adding automation and increasing our capacity by 35%. This lets us efficiently handle growing volume at higher speeds without opening additional warehouses, more throughput in the same footprint. Together, these three strategic pillars are compounding our advantages and extending our leadership position in the growing luxury resale market. None of this is possible without our consignors. Over the past 15 years, we've paid out more than $6 billion to our consignors, who trust us with pieces that carry real meaning and real value. I also want to sincerely thank our team. None of this happens without you. Together, we built a strong foundation, and I'm excited about where we're headed next. I will now turn the call over to Ajay.
Thank you, Rati. Good afternoon, everyone. I am pleased to review our financial results for the first quarter of 2026, which demonstrate a powerful start to the year and the continued disciplined execution of our strategic pillars. We are helping customers view their closets as an asset class, and The RealReal is the trusted destination to manage and monetize those assets. In Q1, we delivered robust top line growth with GMV increasing 24% and revenue up 19% year-over-year. Beyond the headline numbers, we saw deeper engagement with our platform. In Q1, 43% of our new consignors came from our active buyer base. These flywheelers, or RealRealers, as Rati mentioned, enhance our network effects and are an important driver of our long-term growth. Our approach to unlocking high-quality supply, combined with our focus on operational efficiency, is yielding results. In Q1, we achieved adjusted EBITDA of $13.1 million, or 6.9% of total revenue, and expanded our margins by 430 basis points, which showcases our ability to drive operating leverage. Now turning to our detailed first quarter results, beginning with top line. Q1 GMV of $606 million increased 24% compared to last year. On a two-year stacked basis, GMV was up 32%. Q1 total revenue of $190 million increased 19% year-over-year. Consignment revenue grew 18% and direct revenue increased 26% compared to Q1 of 2025. Buyer engagement accelerated with trailing 12-month active buyers up 10% year-over-year. Average order value of $646 increased 15% versus last year. Q1 take rate of 36.4% declined 220 basis points year-over-year. This was due to a favorable mix into higher-value items. As we've explained before, these items carry a lower percentage take rate while generating more profit dollars and improved unit economics. On margins and profitability, first quarter gross profit of $141 million increased 18% year-over-year. Gross margin of 74.5% decreased 50 basis points compared to the prior year, driven primarily by the mix of products sold. First quarter operating expenses leveraged 730 basis points year-over-year as a percent of revenue. The improvement was driven by operating efficiencies and volume leverage on fixed costs. As we continue to scale Athena, outbound automation and other productivity initiatives, we are driving operating leverage. First quarter adjusted EBITDA was $13.1 million, an increase of $9 million versus the prior year and 6.9% of total revenue, an increase of 430 basis points year-over-year. Moving to the balance sheet and cash flow. We ended the quarter with $139 million in cash, cash equivalents and restricted cash. Our operating cash flow in the first quarter was negative $16.6 million, an $11.7 million improvement year-over-year. As a reminder, our cash flow is influenced by seasonal factors and similar to prior years, we expect our cash flow to be back half weighted. Moving to our financial outlook. Based on our strong performance, we are increasing our full year outlook and providing guidance for the second quarter of 2026. We are raising full year GMV to the range of $2.42 billion to $2.47 billion, representing 14% to 16% growth year-over-year. Revenue is expected to be between $770 million to $784 million, translating to 11% to 13% growth versus last year. Adjusted EBITDA is expected in the range of $59 million to $67 million, which represents 8.1% margin at the midpoint. This is an improvement of approximately 200 basis points versus 2025, and we remain on track to reach our target of 15% to 20% adjusted EBITDA margins over the medium term. Moving to our outlook for the second quarter. We expect GMV in the range of $590 million to $600 million, representing 17% to 19% growth year-over-year and 32% on a two-year basis at the midpoint. Revenue is expected to be between $186 million to $189 million, representing 13% to 14% growth versus last year. Second quarter adjusted EBITDA is expected to be between $11 million and $12 million, representing 6.1% margin at the midpoint and approximately 200 basis points of margin expansion year-over-year. In closing, our performance is evidence that our strategy is working. We are driving top line growth while strategic investments in AI and automation are enabling us to expand margins over time. Each year, over 35 million buyers purchase luxury goods in the U.S. primary market and resale adoption is growing. We are helping to drive that adoption through our unique approach to unlocking supply, removing friction for our sellers and accelerating the flywheel. I want to extend my gratitude to our entire team for their hard work and execution to start the year. With that, we will move to Q&A. Operator?
Questions and answers
Our first question will come from Marvin Fong with BTIG.
Congratulations on the strong results. I'd like to start with guidance: your guidance calls for fairly consistent growth on a two-year basis for GMV. In light of the Middle East conflict and surging fuel prices, on both demand and supply sides, is there anything to call out about shifting product mix on buyer demand? On the supply side, might you be seeing any incremental supply as consumers try to cope with the cost of living?
Thanks, Marvin. A couple of things. We're confident in the full year. This is now our fourth consecutive quarter of double-digit growth. We're seeing both buyers and consignors being quite resilient, and that trend continues. Our value propositions are resonating with customers. At the intersection of value and luxury, we are well positioned when the value of a dollar becomes top of mind. We also have a higher-income customer profile. Our supply looks healthy, driven by our growth playbook, retail becoming mainstream, and the flywheel. We saw acceleration in our buyers and those buyers becoming sellers. Top-of-funnel metrics are healthy, supported by our marketing and social channels, and are largely driven by Gen Z and millennials. We continue to build trust with sellers and see strong top-of-funnel indicators.
Got it. If I could follow up: we saw a surge in average order value and consumers are clearly shopping higher-end items. Why do you believe that's happening? How sustainable is that trend, considering consumers may be stressed? You continue to outperform in handbags, jewelry and those types of items; any thoughts on sustainability of that trend?
Thanks for the question, Marvin. We've seen a healthy balance between price and volume over the last few quarters driving our growth. The shift to higher AOV is a testament to the trust we've built in our platform and customers' willingness to come to The RealReal for high-value product. This showcases the flexibility of our marketplace: as customer preferences shift from one category to another, we can quickly pivot to meet demand and deliver what they're looking for.
Our next question will come from Dylan Carden with William Blair.
Curious about the balance between customer growth and AOV over the rest of the year. On marketing and customer acquisition, you speak to the flywheel and compounding behavior. Is there a healthy repeat trend in the business where you're seeing returns from efforts in the last two to three years that are now showing up in orders or order value?
Dylan, thanks. We are seeing a nice mix of customer growth and willingness to buy higher-priced items. In Q1, active buyers accelerated 10% on a trailing 12-month basis. We've had success shifting mix into higher-value items and capitalizing on that opportunity. I'll turn it over to Rati for the flywheeler part because that's an exciting story.
With flywheelers, our strategy is working. We've seen acceleration in buyers, and it's not just any buyers: we bring in buyers who are sticky and who turn into consignors. As retail becomes more mainstream, we target the right flywheelers and bring them into our ecosystem, driven by Gen Z and millennials. Our marketing investment has been focused on those cohorts, with high confidence in ROI, leveraging AI through our smart engine and more targeted offers. Social and our affiliate and referral programs are our fastest-growing segments, and we're optimistic about investment in those areas.
Would further retail expansion be part of that going forward? Could you accelerate stores? Do you need to accelerate stores?
Stores are always part of our strategy. Retail locations are a key component of the growth playbook: they act as marketing, our sales engine, and they embody the IP of our sales team. That trifecta compounds growth and supply. We will continue to consider retail expansion as part of our broader strategy.
Our next question will come from Ike Boruchow with Wells Fargo.
Ajay, thinking about how the model should move from here: you had said three months ago that take rate should be pressured in the first half and normalize in the back half. Can you give specifics on how you're expecting that to flow? And on the direct side of the business, which was up 26%—does that growth rate moderate as you move through the year? How should we think about those two line items?
Absolutely. Starting with take rate: our blended take rate in Q1 was 36.4%. We expect pressure on take rate due to mix shifting into higher-value items. Our take rate is designed to give us strong unit economics across a wide price band. Higher-value items carry a lower percentage take rate but generate better unit economics and stronger profit dollars, which is a favorable trade-off for us. We expect that dynamic to continue into Q2 as reflected in our guidance. We anticipate the lines to get closer in the second half as mix evolves, but ultimately it depends on market preferences and our ability to capitalize on shifts in real time. On direct revenue, we made changes last year to the mix and improved margins. In Q1, direct revenue grew 26%, slightly higher than aggregate GMV growth of 24%. We view direct revenue as healthy and expect it to scale with the business, remaining in the range of roughly 10% to 15% of total revenues going forward.
Our next question will come from Bobby Brooks with Northland Capital Markets.
You're seeing excellent buyer growth in Gen Z and millennial cohorts. Is the same true for consignor growth? A lot of supply sitting in closets may be with Gen X or baby boomers. Do consignor demographics match buyer demographics? If so, how do you approach winning consignors in older demographics?
Many of our new consignors come from our buyer population, and those patterns have not changed. Supply may be somewhat more diverse, but trends are still driven by millennials and Gen Z. Tactics to bring on flywheelers include reconsign features like MyCloset with one-click reconsign to convert first-time consignors into repeat consignors. Pricing estimators, our sales team, and retail locations are all working to bring on supply. These initiatives are attracting consignors in similar cohorts to our buyers.
On building an international pipeline of supply, you called out France and Italy. Is that supply from individual consignors similar to the U.S. model, or are you working with brands or manufacturers? Any color there?
Drop-ship internationally is still early. We're learning and it's meaningful in growth rate but not the primary growth driver yet. We're unlocking supply from international vendors and partners to test and learn before a more localized international approach. We're launching cross-border this year, focusing on demand with a drop-ship-first approach to see product mix and sell-through before broader localization. The opportunity is large, and we're excited about next steps.
One last question: the implied revenue guide shows some deceleration compared to Q1, but Q1 had an easier comp with the California fires last year. Listening to the commentary, things seem to be accelerating—does the Q2 revenue guide at face value understate that acceleration? Could you expand on the momentum you're seeing below the numbers?
Q1 was strong: GMV up 24% and our fourth consecutive quarter of accelerating GMV. The strength is driven by fundamentals: growing interest in resale, our strategic initiatives unlocking supply, and attracting more buyers—active buyers grew 10%. For Q2, the fundamentals remain true and we are starting the quarter strong. That confidence is reflected in our full-year guidance, where we've increased the midpoint of GMV growth from 13.5% to 15%. We'll continue to execute against the plan.
Our next question will come from Matt Koranda with ROTH Capital.
You leveraged operations and technology nicely in the quarter. On a per-order basis, O&T was kind of flat. As Athena penetrates further later this year, how should we think about per-order O&T expense and whether we get leverage later in the year?
Operations and tech were a significant source of operating leverage this quarter and last year. In Q1, it drove 320 basis points of leverage. We expect it to continue to be a key source of margin expansion as we scale Athena and other productivity initiatives. In our full-year plan to expand EBITDA by 200 basis points, ops and tech will remain central to margin expansion.
Philosophically, if you get upside from Athena efficiency, would you reinvest those dollars in marketing to speed customer acquisition, or let it flow to the bottom line? Thoughts on how you think about upside from Athena?
Great question. We see efficiency upside being reinvested in growth. We've put more into marketing as confidence in ROI has increased. We also plan to invest in product and technology, including AI capabilities. We'll continue to invest in areas that drive growth while balancing margin expansion. We're set up to do both.
Our next question will come from Mark Altschwager with Baird.
Can you talk about supply visibility for watches, jewelry and handbags, which have driven the AOV story for a few quarters? Are you seeing any signs of tightening in those categories over the next six to 12 months, or is supply still robust? Relatedly, Ajay, given you begin to cycle the step-up in AOV from last year, the revenue guide implies some moderating AOV growth in the back half—should we expect that, or could AOV momentum continue?
On supply: watches, jewelry and handbags remain strong. We continue to see healthy supply driven by our retail locations, sales team incentives and our NPS for mid- and high-value product. Our 15 years of proprietary data and AI agility allow us to scale supply quickly into areas customers want. We're not seeing a slowdown in high-value supply; if anything, it's picked up. Tactically, the flywheel, Real Partners and affiliates are bringing in high and mid-value product that sells through well, which drives higher consignor earnings and accelerates the flywheel.
On AOV for the second half: it's about balancing price and volume. We've seen a healthy balance between the two. Quarters can vary; some quarters emphasize AOV more than units. In our implied second-half guidance, we do expect the balance to shift a bit from Q1 toward more units and less AOV, but ultimately it depends on customer preferences. We have the ability to quickly pivot and capitalize on trends as they develop.
Our next question will come from Ashley Owens with KeyBanc.
Given recent increases in oil and gas prices and pressure on lower-income consumers, are you seeing any divergence in activity between higher-value customers and more aspirational buyers on the platform?
We're not seeing a change in trends in customer health. Buyers and consignors remain resilient. Our value proposition and trust are resonating: value and luxury together work for customers when dollars are top of mind. Resale is becoming mainstream. We're seeing trends across high-value, emerging brands and vintage. We're also seeing first-time buyers spending more on their first purchase, which is positive for the marketplace. Resale is moving from a single transaction to a deeper, ongoing relationship; about 50% consider resale value before purchasing in the primary market and nearly 60% prefer the secondary market outright. Those behavior changes support our growth.
Has prior economic pressure helped grow adoption for resale in past cycles?
We were built out of a recession, and in general we've seen interest in monetizing closets during periods of pressure. I can't predict macro turns, but current signals show supply pipeline, new consignors and buyers are healthy, and people are choosing to monetize their closets and prioritize value. That favors our business.
Our next question will come from Jay Sole with UBS.
On AI and operational throughput: how much of the margin expansion in Q1 was driven by Athena and smarter AI pricing? Also, any color on AI rollouts versus seasonal tailwinds—are you seeing a measurable decrease in time to site for unique SKUs?
Athena is a material component of our operational efficiency. We processed 35% of items through that workflow at the end of last year and we expect to get close to 50% toward the end of this year, so it will continue to be a source of efficiency. We're also investing in an automated storage and retrieval system at one of our fulfillment centers, which will increase capacity by about 35% and allow faster throughput without adding more physical footprint. Those operational investments, combined with Athena, drive meaningful efficiency.
We have 15 years of proprietary data that positions us well for AI. Our objective is to remove friction, unlock supply, lower fixed and variable costs, shorten our service levels and reduce unit costs. Athena is one part of that, along with smart sales, authentication improvements, the automated storage and retrieval system, and efficiencies across corporate functions. On site experience, we are testing agentic AI for conversational search and discovery. We're in the early innings but excited about leveraging our moat—authentication, pricing, data and sales expertise—to drive scale and margin toward our target of 15% to 20% adjusted EBITDA.
Our next question will come from Marni Shapiro with The Retail Tracker.
Congratulations on a fantastic quarter. Several friends who consign and buy from you said the experience has been much better. What are you doing to enhance the experience for buyers and consignors? How is that rolling out and what should we expect for the rest of the year?
We've been focused on obsessing over service for both consignors and buyers. Initiatives include the pricing estimator, reconsign features like MyCloset, operational improvements to reduce exceptions, and improving search and discovery. We're listening to customer pain points and addressing them. The pricing estimator is launching today for a select group of sellers. These efforts aim to increase NPS and deepen relationships beyond single transactions, turning them into ongoing relationships.
Are customers telling you that trust is the most important factor? It seems trust may be a bigger moat than ease of use, given concerns about counterfeits and verification.
Trust is critical. We cement trust through our sales organization, pricing and data, authentication expertise and community. Growing interest in the category validates that resale is here to stay and is becoming part of the fashion infrastructure. Our sales team, authentication capabilities and data-driven pricing form a strong competitive moat, and we're doubling down on those advantages.
Also, congratulations on the visibility from The Devil Wears Prada 2 placements—great marketing.
Thank you.
Thank you.
That concludes the Q&A session and today's call. You may now disconnect.