Prepared remarks
Good afternoon, everyone. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome you to the RealReal Second Quarter 2026 Earnings Call. The operator provided instructions regarding the conference. At this time, I would like to turn the call over to Emily Gacka, Senior Director of Investor Relations.
Thank you, operator. Joining me today to discuss our results for the period ended June 30, 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. Q2 was another standout quarter for our business. We delivered GMV of $617 million, an all-time high for The RealReal, up 22% year-over-year and marking our fourth consecutive quarter of GMV growth above 20%. Revenue grew 17% to $193 million and trailing 12-month active buyers accelerated for the fourth consecutive quarter, up 11% year-over-year. Along with strong top-line growth, we also delivered meaningful margin expansion. Adjusted EBITDA margin of 7% was up nearly 300 basis points versus last year. These results reflect the disciplined execution of our strategy. Quarter after quarter, we're improving the customer experience, deepening trust and compounding our advantage. Our buyers are higher quality, our sellers are more engaged and the platform connecting them gets smarter every quarter. Given the strength of what we're seeing, we are confidently raising our full-year outlook. The RealReal is a marketplace deliberately designed for the luxury consumer and the way they want to be served. We've developed deep expertise across the full range of luxury, establishing the trust that comes from handling our members' most valued possessions. Every part of our platform from sourcing and authentication to pricing and merchandising is built to deliver an unparalleled service, and it will continue to evolve as our customers do. As the resale market grows, trust is what separates leaders from the rest. We take possession of every item, we authenticate it, and we stand behind our work, a standard most marketplaces structurally cannot match. That's what brought a consignor to us in Q2 with a $2.5 million F.P. Journe watch, and it's the same standard that serves a member discovering luxury for the first time. That full service has enabled us to build the largest authenticated luxury data set in the world. And AI is unlocking the power of that data across pricing, search, authentication and the tools our members use to manage the value of what they own. We've seen where luxury demand is moving in real time. When demand moves, we're positioned to secure the supply and have the data and pricing intelligence to meet it. Let's discuss the progress we're making against our strategic pillars, starting with our growth playbook. Our sales team sets us apart. We don't wait for supply to come to us. Our people go out and source it, which means our assortment is curated, not accumulated. Year-to-date, supply per sales representative is up 15% versus last year and the relationships they build deepen over time with consignors coming back and bringing more of their closet with them. The same relationships and trust that bring consignors back also bring us new ones through referrals. Our Real Partners program connects us with high-value supply through professionals like stylists and real estate agents who already have the trust of luxury consumers. Sellers referred through our Real Partners program consign 4x the value of our average new consignor. The program demonstrates the network effects in our business, and we see meaningful runway ahead. As we discussed last quarter, we're building an asset-light international supply network. In the second quarter, we onboarded two large Japanese vendors onto our dropship program. The success of our sales team, partnerships and our newer supply initiatives is bringing more high-quality supply every quarter. On the marketing side, we are acquiring higher-quality buyers. New buyers, up double digits in the second quarter, are showing stronger lifetime value and are more likely to turn into consignors, becoming RealRealers and reinforcing our flywheel. In Q2, we launched our Be a RealRealer campaign, putting flywheel messaging at the center of our brand marketing. We're investing in marketing with a healthy balance across brand building and performance channels. We see real opportunity as resale adoption accelerates and younger generations discover luxury through our platform. We are also enriching the product data we share with paid channels, helping search platforms match the right buyer to the right item. These new buyers are spending more on their first purchase. That same depth of data is why we lead when consumers turn to AI to look for pre-owned luxury. Our stores deepen consignor relationships, deliver high-quality supply and build trust in the communities we serve. We are expanding our store footprint strategically in 2026. We look forward to opening our first Boston area store this fall and an additional neighborhood store in the L.A. market, one of our largest and fastest-growing regions. These new stores, along with our San Francisco location, which opened earlier this year, bring our total store count to 20. Going forward, we'll continue to target one to three new stores per year. Turning to our second pillar, obsessed over service. On the buyer side, we recently started testing an AI-powered conversational shopping agent in partnership with Google. We have over one million one-of-a-kind listings and more than 40 million members. So we are always finding ways to make product discovery more intuitive. For example, if you're looking for a dress for a fall wedding in Upstate New York, our agent will deliver a specific and personalized set of results. We're also using AI and our proprietary data to automatically add richer detail to every listing, information like occasion, collection and trend data to reduce the need for manual input. This means items are more discoverable, both on and off platform. On the seller side, more than two-thirds of our consignors tell us they prefer a full-service experience. They are looking for a trusted partner who handles everything. This is what our full-service model delivers. You hand us the item, and we do the rest. Every day, we work to make our experience even better, faster and more transparent as well as easier to engage with. First, our price estimator tool is now built on a centralized AI-powered pricing architecture that gives our sales team and our consignors consistent real-time visibility into the current market value of their items. Our sales team is actively using the tool, and we've launched it in a test for 20% of our consignors. We're also redesigning our digital onboarding for new consignors, removing friction from the seller funnel and making it more conversational from the first interaction. And we continue to build the feature set for MyCloset, the product manifestation of our vision to become the personal adviser of the closet. We're building the system of record for our customers' luxury assets and expect to begin rolling out the broader consumer-facing experience in the coming quarters. Turning to operational excellence. Athena, our AI-enabled intake system, continues to scale, and we remain on track for our year-end target of nearly 50% of items flowing fully through it. We're also starting to process higher-value items that previously required manual handling and attribution. A year in, Athena has shown us there's even more opportunity. We've begun experimenting with its next iteration, extending AI and automation into parts of intake that weren't in the initial phase and removing more manual steps. Ultimately, Athena and our broader technology investments are helping to remove multiple dollars per unit from our processing costs, increasing speed to sell and allowing us to scale with minimal incremental headcount investment. We're delivering growth while continuing to drive operating leverage across the business. Entering the year, we said 2026 would be the year our advantages begin to compound. That statement is starting to become reality. Each part of our platform from authentication and pricing to supply and member experience makes the other stronger. Looking at the broader landscape, we're leading a meaningful shift in how luxury consumers shop. In a recent survey of our customers, over 70% of respondents said that The RealReal elevates their personal style, allowing them to better express who they are. They're prioritizing quality, individuality and lasting value over trend cycles. The RealReal is more than a marketplace. With access to decades of fashion across thousands of designers, we help our customers discover, shop with confidence and maximize the value of their closets. Before I turn the call over to Ajay, I want to thank our team for delivering an exceptional quarter in Q2. Results like this require execution across every part of the business, and I'm incredibly proud of our team. Your dedication continues to raise the bar for how we show up for our consignors and buyers and reinforces my conviction in where we're headed. With that, I'll turn the call over to Ajay.
Thank you, Rati. Good afternoon, everyone. I am pleased to review our second quarter results, which demonstrate in the financials what Rati just described. Our strategy is delivering results, and we are beginning to see the compounding effects we've been investing toward. You can see it in the durability of our growth and the operating leverage in our model. Q2 GMV of $617 million increased 22% year-over-year and accelerated to 37% on a two-year stacked basis. We delivered adjusted EBITDA of $13.5 million or 7% of revenue, expanding 290 basis points year-over-year. Orders increased 8% and average order value grew 13% to $659. Q2 revenue of $193 million increased 17%, with consignment revenue up 15% and direct revenue up 26%, supported by strong supply through the quarter with strength across our sales team, stores and direct channels. Beyond the top line, we saw deeper engagement across the platform. Trailing 12-month active buyers grew 11%, surpassing 1.1 million. We also saw more of our buyers become consignors. In the second quarter, 44% of our new consignors came from our active buyer base, up from 40% just two quarters ago. This highlights the strong network effects in our model and is a meaningful driver of long-term growth and profitability. Our second quarter take rate was 35.9%, down 200 basis points year-over-year. As we've discussed, this movement is driven by a favorable shift in product mix. In the first half of 2026, sales of items above $1,000 increased 36% versus last year as buyers increasingly trust us with higher-value items. These items carry a lower take-rate percentage but generate more profit dollars per transaction and stronger unit economics. Gross margin expanded 10 basis points to 74.4%. Gross profit of $143 million was up 17% versus last year. Total operating expenses leveraged approximately 470 basis points year-over-year. Excluding stock-based compensation, OpEx leveraged 370 basis points, primarily driven by operations and technology leverage. This reflects the tangible impact of automation and our Athena initiative. As more items flow through our AI-enabled intake system, we are processing more volume with less incremental labor. Excluding stock-based compensation, SG&A also leveraged approximately 110 basis points, reflecting improved productivity and fixed cost discipline as we scale. In the second quarter, we made strategic investments, increasing our spend in both brand and performance marketing. As the leader in an attractive and growing market, we see opportunities to acquire high-quality buyers and consignors and to build more awareness as resale adoption accelerates. We expect to continue with a similar level of investment in the third quarter. Together, this brought adjusted EBITDA above our prior guidance to $13.5 million or 7% of revenue, expanding 290 basis points versus last year. We ended the quarter with $134 million in cash, cash equivalents and restricted cash. Capital expenditures on property and equipment for the quarter were $4 million. We continue to anticipate full-year capital expenditures on PP&E to remain within 2% to 3% of total revenue. 2026 investments are concentrated in our operations infrastructure, including our automated storage and retrieval system, which is expected to go live in Q4 and will expand capacity at our Perth Amboy authentication center by 35%. In Q2, we generated $2 million in operating cash flow, an improvement of $5 million year-over-year. Free cash flow improved $9 million versus last year. Looking ahead, we expect to generate strong positive free cash flow in both the third and fourth quarters. Similar to last year, we expect free cash flow to outpace adjusted EBITDA in the second half, demonstrating the favorable cash dynamics of our business model as we scale. Turning to guidance. With the first half complete, continued strength in our supply trends and greater visibility into the balance of the year, we are confidently raising our full-year outlook. For the third quarter, we expect GMV of $610 million to $620 million, representing 17% to 19% growth year-over-year; revenue of $194 million to $198 million or 12% to 14% growth and adjusted EBITDA of $13.5 million to $14.5 million. For the full year, we now expect GMV in the range of $2.535 billion to $2.565 billion, representing 19% to 20% growth year-over-year. Revenue is expected to be between $788 million and $797 million, translating to 14% to 15% growth. And adjusted EBITDA is expected in the range of $66 million to $69 million, which represents an 8.5% margin at the midpoint. This is an improvement of approximately 240 basis points versus 2025, and we remain on track to reach our target of 15% to 20% adjusted EBITDA margins over the medium term. In closing, Q2 demonstrates what we've been building toward: durable growth, expanding margins and a flywheel gaining real momentum. We entered the second half from a position of strength. That is a direct result of our team's outstanding execution across the business, and I want to thank them for an excellent quarter. With that, I will turn it over to the operator for questions.
Questions and answers
Your first question comes from Irwin Boruchow with Wells Fargo.
Congrats on the quarter. Just two for me. First, the revenue guide for the third quarter looks great. There's a lot of chatter out there on retail and some slowdown we've seen during the summer. Can you comment on anything quarter-to-date? It doesn't seem like you're seeing any of that, but I wanted to bring it up. And then, Ajay, I think you mentioned the pull forward of some investments. The flow-through margin on the second quarter was not as high as some other quarters. Can you dig into that a little bit more and is that something we should model for the future? Or is this kind of a one-time initiative? Just more detail on the margins in Q2 and what it means to the back half and going forward.
Thanks for the question. I'll start, and I'll hand it over to Ajay for the second part of your question. As far as what we're seeing on the platform right now, our consumer continues to be quite resilient. We're watching buyer activity and supply coming through the site. Supply continues to be strong, sitting at that intersection between luxury and value, where if consumer confidence softens, it often strengthens our case. Buyers continue to find our value proposition compelling on our platform. We also offer breadth and data across thousands of designers, categories and price points, so when consumer preference shifts, we're able to shift with them quickly.
Thanks, Rati. And to your other question on Q2 results, we're pleased with our results in Q2. GMV was up 22%, and we saw that translate to EBITDA of 7%, which was up 290 basis points year-over-year. As you look at that, it is in the range of what we expect to see on our path to delivering 15% to 20% adjusted EBITDA margins over the medium term. You've heard me talk about how we expect to add between 200 to 300 basis points of margin every year. Q2 was in line with that range, and our guidance for the year is also to add about 240 basis points in 2026.
Your next question comes from Bobby Brooks with Northland Capital Markets.
On the slides, it was called out AI pricing fully launched and one piece of it called out lifecycle discounting. But I know you had already had a system in place that automatically cut the price as items aged. I just wanted to get a little bit more granular on what's new there?
Bobby, thank you for the question. What we are referring to is how we've extended our AI-based pricing algorithm to now manage the movement of price from when an item is initially launched on the platform. We are slowly expanding coverage of that model to look at many more data points like page views an item is getting and the number of buyers that are clicking on the obsessed icon when they look at an item. We use those signals to then modulate the price of the item going forward. It's a lot more precise. Prior to this model, we still had many people who could override pricing and we had more merchandising effort going into it. Now we have more precision in how we move our prices. The net effect of doing all this is we are able to capture a slightly higher price, get the best possible price on behalf of our consignors and also make sure that our sell-through rate stays strong.
Got it. So a more precise way of doing it, essentially relying more on data signals?
Yes.
Active buyer growth has strengthened in the last few quarters, and the second quarter was the strongest percentage growth in some time, which is impressive given nominal numbers are higher. What in your approach to getting new buyers changed over the last couple of quarters that you think is driving this acceleration? And are there more benefits to come from the strategy?
I'll take this one. We're seeing the flywheel in action. That loop is gaining momentum. Our strategy is self-reinforcing: buyers we're acquiring are increasingly becoming consignors. In Q2, 44% of our new consignors came from our active buyer base. We surpassed 1.1 million buyers, growing 11% year-over-year. Spend is higher and we're seeing 50% more value come in through them. Our fastest-growing segments are Gen Z and Millennials, so younger buyers. As we think about our marketing messaging and material, you'll see us emphasize the flywheel. The Be a RealRealer campaign we launched had strong conversion.
And if I could squeeze one more in, you mentioned signing up two consignors for the dropship program from Japan. Could you provide more color there? Are those two large adds relative to prior additions? Trying to triangulate the scale.
We're making deliberate, measured progress on dropship as our way into international. In Q2, we onboarded two sizable Japanese vendors onto our dropship program and other significant partners in Europe, specifically France and Italy. They have the potential to become some of our larger sellers on the platform. It's still early days and this year is very much test and learn, but early results are encouraging. In the medium term, I believe the opportunity is real. Dropship supply tends to be incremental supply that wouldn't necessarily come via other consignment channels. July marked our highest volume month in dropship, so you're seeing strong effects there and we're excited about it.
Your next question comes from Marvin Fong with U.S. Bancorp BTIG.
Congratulations on the performance. On AOV, could you break that down between ASP and UPT? Secondarily, as ASP rises, do you see limitations as ASP reaches the limits of some of your buyer population? Or does luxury's price appreciation make buyers continue to purchase on your platform?
We've seen a healthy balance between units and price in our growth. In recent quarters that balance has indexed more toward price, driven primarily by consumers shifting their mix toward higher-value items. We cover a wide range in luxury fashion across multiple categories and price points. As a marketplace, we're largely agnostic to shifts within that mix because our monetization and unit economics are strong across our assortment. This flexibility allows us to quickly capitalize on shifts in luxury trends and contributes to the durable growth we've seen.
I'll add to that. How we're thinking about the AI shopping assistant is transforming the customer experience and optimizing for agentic search. We're launching a test around conversational shopping in partnership with Google. That personalized set of results gets shoppers to the most relevant listings faster, which could mean less discounting and better discoverability. We're using AI to automatically enrich listings with occasion, collection and trend data, making inventory more discoverable on and off platform, and we'll be watching conversion as a key KPI. Our sell-through is good, and improving discoverability should mean less discounting when the right product reaches the right buyer more quickly.
To add on the P&L impact, it really is about conversion. We have over one million items on our site at any point. Tools like conversational search help buyers find what they're looking for and convert faster. As we bring in more buyers through investments and improved discovery, we can then convert them into consignors and increase the lifetime value they represent to The RealReal.
Your next question comes from Matt Koranda with ROTH Capital.
This is Joseph on for Matt. I wanted to see if you could touch on guidance. There's a pretty big uptick in year-over-year growth trends for GMV versus the prior back half comps. Could you talk about what trends on supply or demand give the team confidence in the second-half outlook, or any notable consumer behavior changes given recent geopolitical and market volatility?
Q2 was a standout quarter and an all-time high in GMV, our fourth consecutive quarter above 20% growth. Behind that growth are strong fundamentals: supply is strong and our strategy to unlock supply is working, and our advantages are compounding. Our buyer base is growing — trailing 12-month buyers grew 11%, and more of those buyers are converting to sellers, 44% versus 40% a couple of quarters ago. These trends from Q2 and our strong line of sight into Q3 give us the confidence to raise our guidance for the year, moving the midpoint from 15% GMV growth to 20% for 2026.
To add to that, consignment is our key supply engine and momentum there is strong. Growth is coming from multiple channels simultaneously, and they reinforce each other. Our sales team remains our most powerful supply channel, with supply per sales representative up 15% year-to-date. The Real Partners program is bringing high-value consignors, retail locations are unlocking in-person trust and high-value product, dropship provides asset-light incremental supply, and stores are contributing as well — about a quarter of new consignors come from stores. That multi-channel approach is what makes our business durable.
Are there any new channels where you're finding more sellers? Can you expand on the flywheel?
Yes. Our channels include the sales team, which manages deep relationships and brings high-value supply; the Real Partners program, which taps professionals who have trust with luxury consumers and consign 4x the value of our average new consignor; the flywheel where buyers become consignors — 44% of new consignors are from active buyers; stores, which provide in-person trust and high-value items; and dropship, which brings incremental supply, especially in jewelry, watches and handbags from international partners. We're also opening additional stores to reach 20 locations by year-end.
Your next question comes from Mark Altschwager with Baird.
How are you thinking about luxury manager headcount growth from here? Is the plan to increase growth there or lean on productivity per manager as Athena intake reduces work? And what's the ramp curve for a new hire? How much of the high-value supplier you're winning is coming from your most senior managers versus the newer cohort?
We plan to grow luxury managers, but at a rate lower than the business because we're also driving productivity improvements. We're pushing on both fronts — hiring and improving efficiency through tools like agentic sales tests and pricing transparency. Supply per sales representative is up 15% year-to-date. Tenure has increased, which yields higher value. Ramp time has come down materially from a year ago due to better tools and training; I'd estimate about 60 days to full ramp today.
A modeling nuance: NMV grew faster than GMV, implying return or cancellation rate improved roughly 100 basis points year-over-year. What drove that? Mix effect from higher value, or improvements in imagery, pricing accuracy, or other factors?
We've worked on reducing return rates through better attribution and improved imagery, which helps buyers get exactly what they're expecting. Those efforts have driven a modest improvement in our return rate. In Q2 there was also a lapping effect from last year that contributed to the stronger growth in NMV versus GMV.
Your next question comes from Marni Shapiro with The Retail Tracker.
Congrats on a great quarter. Is time spent on the site directionally up or down? Are you seeing customers move between segments, for example starting in handbags then moving to dresses or jewelry?
Thanks. We do see customers more engaged, especially on the app. On average, customers spend over 40 hours a year on the app. Many users comment that they scroll The RealReal rather than social media. We're seeing more buyers become consignors. High-value categories like fine jewelry, watches, handbags and ready-to-wear are driving a lot of growth. Items over $1,000 sold were up nearly 40% year-over-year in the first half. Gen Z and Millennials are our fastest-growing segments.
Once someone adds something to obsessions, can you market to them to increase conversion? What is the conversion rate on obsessions?
Yes, we can observe customer behavior — views, items added to cart, obsessions, and related preferences. We use these signals to personalize outreach and improve conversion. This shift moves us from a transactional relationship to a relational one, becoming a personal adviser for customers' closets through products like MyCloset, the price estimator and seller experiences that deepen over time. Our proprietary data, spanning 15 years and millions of items, powers our pricing, authentication and search and helps us tailor marketing to increase conversion and consignor satisfaction.
Your next question comes from Ashley Owens with KeyBanc Capital Markets.
This is Victoria on for Ashley. With Athena on track for 50% by year-end and AI pricing fully launched, can you paint a picture of how the platform is getting smarter every quarter and what changes to expect from technology over the balance of the year? Also, how does the pricing algorithm determine prices for pre-used items versus dropship items in terms of condition, year, etc.?
Athena is our AI-powered intake process. We expanded from processing about 35% of items last year to a target of roughly 50% by year-end. It drives material efficiencies, reduces processing costs by multiple dollars per unit, and improves speed to sell. We have extended Athena beyond low-value items into mid and high-value items. Regarding pricing, our algorithm is applied to all items on the site — consignment and dropship. It looks at over 100 data points to compute likely prices, including category, historical sales, condition, popularity signals such as obsessions and page views, and other attributes. We built the algorithm to first focus on launch price and have extended it to manage discounting over an item's lifecycle.
On the variance between GMV and revenue: the gap widened this quarter, but guidance implied it would be similar or down from 1Q. What changed relative to expectations, and should we expect this gap to narrow in the second half?
The gap is primarily about take rate. We've seen a favorable shift in mix toward higher-value items. Selling more items over $1,000 reduces our take-rate percentage but increases profit dollars per transaction. Items above $1,000 increased 36% in the first half, which illustrates mix shifting toward higher-value sales. Our guidance assumes a similar relationship in the second half as we expect the mix dynamics to continue, and that's reflected in our 2026 outlook.
Your next question comes from Jay Sole with UBS.
What's your updated thinking on the convertible notes, warrant liability, dilution management and capital allocation priorities as free cash flow continues to improve?
We continue to operate a very cash-efficient business model. Our priority is to strengthen the balance sheet and reduce leverage. Over the last couple of years, we've reduced total debt by slightly over $80 million, and we'll continue to pursue all options to improve the balance sheet going forward.
Your next question comes from Anna Glaessgen with B. Riley Securities.
I wanted to get perspective on the growth in items above $1,000. Is it a mix of category shifts and mixing up within category?
We're seeing growth across categories: fine jewelry, watches, handbags and ready-to-wear. Part of the increase is even in unbranded jewelry we sell on the site. It's both category-driven and mix-driven within categories.
Your last question comes from Dylan Carden with William Blair.
Looking at the guide for the next two quarters, it looks like you're into that longer-term algorithm you speak to: low double-digit top line and 150 to 200 basis points of margin improvement. Is some of the low-hanging fruit on efficiency behind you at this point? Should we expect a slower pace of margin improvement as you work toward that structural topline?
When you think about our path to expanding EBITDA margins to 15% to 20%, we plan to balance growth with profitability. We intend to add roughly between 200 to 300 basis points of margin each year. Our guidance for this year implies accretion of about 240 basis points, which is in the middle of that range. We'll continue to manage the business to deliver both growth and margin expansion while capitalizing on the large TAM and our market leadership.
On the marketing efficiency side, as conversion and LTV improve, are you able to stimulate buyers to become consignors and vice versa? Is that a muscle you can flex more from the acquisition side?
Yes. We're seeing more levers to pull on marketing. The flywheel of buyers becoming consignors is real. We're getting smarter about targeting high-quality consignors and acquiring buyers who will have higher LTV and who are more likely to consign mid- and high-value product. We're making deliberate investments because the ROI supports it as resale adoption accelerates and younger consumers discover luxury.
That concludes today's call. You may now disconnect.