The RealReal (REAL) Q4 2025 Earnings Transcript

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DATE

Feb. 26, 2026 at 5 p.m. ET

CALL PARTICIPANTS

• Co-CEO & President — Rati Sahi Levesque
• Chief Financial Officer — Ajay Gopal

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TAKEAWAYS

• Gross Merchandise Value (GMV) -- $616 million for the quarter, marking 22% growth, with the year crossing $2.1 billion GMV.
• Revenue -- $194 million for the quarter, up 18%, with full-year revenue reaching $693 million, a 15% increase year over year.
• Adjusted EBITDA -- $22 million for the quarter (11.3% of total revenue), expanding 450 basis points year over year, and $42 million for the full year (6.1% margin).
• Free Cash Flow -- $43 million in the quarter, an improvement of $23 million year over year, and $5 million Canadian dollars for the full year.
• Operating Expenses -- $139 million in the quarter, leveraged by 600 basis points as a percentage of revenue compared to last year, mainly via automation, AI investments, and sales team productivity.
• Active Buyers -- Trailing twelve-month active buyers grew 9%, orders increased 10%, and average order value rose 11% year over year.
• Take Rate -- 36.5% for the quarter, declining 120 basis points year over year, attributed to higher-value item mix that brings larger profit but lower take rate percentages.
• Gross Margin -- 74.8% in the quarter, up 40 basis points year over year, with consignment gross margin at 89.6% (+60 basis points) and direct gross margin at 26% (up over 1,200 basis points year over year).
• Athena Deployment -- 35% of all fulfillment units processed through the AI-enabled Athena intake system at year end, meeting internal targets and driving significant operational leverage.
• Cash Position -- $166 million in cash, cash equivalents, and restricted cash at quarter end, with operating cash flow of $49 million for the quarter (a $21 million yearly improvement).
• 2026 Guidance -- GMV growth forecast of 12%-15%; revenue growth of 10%-13%; adjusted EBITDA range of $7 million to $65 million, targeting an 8% margin at the midpoint; and CapEx expected at 2%-3% of revenue.
• Q1 2026 Outlook -- GMV growth of 19%-22%; revenue growth of 16%-18%; direct revenue expected at 12%-15% of total revenue; adjusted EBITDA guidance of $11 million-$13 million (6%-7% of revenue and expansion of 340-430 basis points year over year).
• Sales Team Tenure/Productivity -- 54% of sales team with two or more years' tenure; experienced reps producing roughly 20% more value than first-year professionals.
• Buyer-to-Consignor Flywheel -- 40% of new consignors are existing buyers, lowering acquisition costs and boosting community loyalty.
• Category Trends -- Fine jewelry identified as one of the fastest-growing categories, materially impacting overall mix and margin profiles.
• Drop Ship Initiatives -- Beta tested across watches, handbags, and fine jewelry with selective partners, with international expansion planned but currently a minor contributor to growth.

SUMMARY

The RealReal (NASDAQ:REAL)'s results underscored sustained scaling of its platform and effective conversion of GMV into cash flow and net margin improvement. New technology rollouts, especially Athena and search/recommendation engines, are materially expanding operational leverage and user engagement. The RealReal's full-year and quarterly guidance indicate a deliberate shift to higher-value categories, productivity gains in sales and operations, and visibility into ongoing margin expansion.

• The RealReal's authentication model blends twelve patented processes with proprietary AI (Athena), and leadership stated, "We met our goal of exiting 2025 with 35% of all units fully flowing through Athena, a key contributor to the strong leverage we delivered in the quarter."
• Adjusted EBITDA margin is projected to expand by "nearly 200 basis points versus 2025," by 2026's midpoint guidance, confirming management's focus on "medium-term" targets of 15%-20% adjusted EBITDA margin.
• The direct sales channel (including "Get Paid Now") achieved 26% gross margin in the quarter, with expectations for future ranges between 15%-25%, depending on channel and product mix.
• Unit economics improvement is primarily attributed to a shift "roughly evenly by unit volume and higher average selling prices," not solely macro trends or specific product lines.
• Company-specific marketing and referral initiatives, alongside the MyCloset app suite, are cited as central levers expected to sustain supply pipeline and customer engagement into 2026.

INDUSTRY GLOSSARY

• GMV (Gross Merchandise Value): Total dollar value of goods sold across the platform before deducting returns, discounts, or take rates.
• Athena: The RealReal's proprietary AI-enabled intake and authentication platform for optimizing human/automated processing of consigned goods.
• Take Rate: The percentage fee The RealReal retains from each sale, after paying consignors.
• Reconsign: Feature within MyCloset that allows consignors to relist items for sale with one click, specifically for purchases made via The RealReal's platform.
• Get Paid Now: Direct-channel offering where consignors receive immediate payment for select items, as opposed to waiting for final sale.

Full Conference Call Transcript

Rati Sahi Levesque: Thank you, Caitlin, and good afternoon, everyone. Thanks for joining us as we discuss our fourth quarter and full year results. 2025 was a transformative year for The RealReal, Inc. We accelerated top line growth throughout the year, culminating in exceptional fourth quarter performance. We delivered $616,000,000 in GMV for the quarter, representing 22% growth while achieving an adjusted EBITDA margin of 11%. During the fourth quarter, we surpassed the $2,000,000,000 mark in GMV for the year, a milestone for The RealReal, Inc. that gives us further confidence in our growth trajectory and our market leadership position.

For the full year, we delivered $2,100,000,000 in GMV and our first year of positive adjusted EBITDA in every quarter, demonstrating our ability to scale profitably while maintaining strong momentum. Before Ajay walks you through our detailed results in a moment, let me provide some context. Our performance in 2025 is the result of years of laying the groundwork for the luxury resale market and refining our business model. We built a durable and hard-to-replicate foundation that uniquely positions us to lead and create long-term value. We are leading a fundamental shift in the luxury consumer's mindset. Our customers have begun to view their closets as a portfolio of assets to be tracked, actively managed, and eventually monetized.

With 47% of all consumers considering resale value when making a purchase in the primary market, we are influencing the luxury consumer's behavior in a meaningful way. I see us becoming the personal adviser of the closet, providing tools, access to information, and curated insights. Today, we are blending uniqueness, quality, and depth with the commercial scale and accessibility that only The RealReal, Inc. can offer. We are leaning into this vision through disciplined execution of our three strategic pillars. First, our growth playbook, which is how we unlock supply through meeting the customer where they are. Second, operational excellence, which is how we drive profitability. And third, obsess over service, where we uplevel our experience.

These efforts are underpinned by a foundational culture of trust with our community of over 40,000,000 members. Diving into our growth playbook, our sales team, which we have built over the last fifteen years, is a competitive differentiator that anchors our growth playbook. Our model combines art and science, deep personal relationships our team cultivates with consignors, accelerated by data and insights. Last year, we rolled out SmartSales, our AI-enabled tool that automates lead scoring, ensuring our sales team is mobilized towards the highest-value supply opportunities. In Q4, we launched a new tool for our sales team, which leverages our vast data and AI-led pricing algorithms to provide real-time valuation estimates.

It allows for a more precise dialogue with consignors about their expected earnings and strengthens our position as a trusted adviser. Sales team tenure reached an all-time high in Q4, with 54% of our team at The RealReal, Inc. for two years or longer. The longer a sales associate is with The RealReal, Inc., the more productive they become. On average, an experienced sales rep delivered approximately 20% more value than a first-year sales professional. Our marketing engine drives our sales execution. Active buyer growth accelerated in Q4 to 9% on a trailing twelve-month basis. We are not just finding shoppers, we are identifying future consignors. Our Q4 results highlight this flywheel in action.

40% of new consignors come from our existing buyer base. By turning buyers into sellers, we are acquiring supply more cost effectively while deepening the loyalty of our community. We accelerated new buyer growth in Q4, and we believe it is a positive catalyst for future supply. Through leveraging social channels and high-impact creative, like our holiday influencer campaigns, we have energized our existing customers and attracted a new generation of luxury shoppers. Our second pillar, operating excellence, is centered on scaling our unique technology and operational advantages. Our current industry-leading authentication approach is the result of years of strategic development.

To date, we have received 12 patents, formally recognizing our innovation in luxury resale and positioning us to capitalize on AI as an enablement tool in authentication and pricing. We continue to lean into our authentication expertise through Athena, a proprietary AI-enabled intake process. Athena is designed to optimize the blend of human expertise and technology. By automating the repetitive data-driven tasks, we are reducing costs and increasing speed to site. A core advantage of our model involves physical possession. When our experts have an item in hand, we verify details that cannot be captured digitally, like the weight of a gemstone or the texture of a fabric. The success of our approach is showing up in our results.

We met our goal of exiting 2025 with 35% of all units fully flowing through Athena, a key contributor to the strong leverage we delivered in the quarter. Looking to the future, we are focused on further automation around listings and fulfillment to continue our progress on operational speed, accuracy, and efficiency. Our third pillar is obsessing over service, which is focused on up-leveling the experience for our customers. As you may recall, we introduced MyCloset last year. The first phase was Reconsign, which provides a one-click consignment experience for items purchased on The RealReal, Inc.'s platform. The next step in the evolution of MyCloset is customer tools to track and capitalize on the value of their closet.

We are evolving our consignor interaction to make it less transactional and more relational and enduring. We are the trusted adviser for our customers as they journey through the primary and secondary luxury markets. Currently, we are testing app features that allow consignors to get on-demand valuation and earnings estimates and look forward to expanding MyCloset as we move through 2026. We are obsessing over service in other ways, including leveraging GenAI to transform how our members discover items on our platform. We have launched a new natural language search experience to make discovery more intuitive and are seeing encouraging results. The new search experience drove a notable improvement in new conversion during our test period.

As we look out through 2026, we will expand these capabilities further, starting with AI recommendations in the near term, followed by visual and agentic conversational search to further create a hyper-personalized high-end shopping experience. In closing, we have proven that our growth playbook is working. By integrating our team's deep expertise with our industry-leading technology, we are building an engine that is designed to scale, win, and deliver lasting value. I want to thank our team across the country and our more than 40,000,000 members. The trust you place in us is our most valuable asset.

Looking forward, we are excited to continue to drive results together and delivering on our mission to be the definitive authority in luxury resale. Thank you. With that, I will turn the call over to Ajay.

Ajay Gopal: Thank you, Rati, and good afternoon, everyone. I am pleased to review our financial results for the fourth quarter and full year 2025, a year of transformation and accelerating momentum. In Q4, we delivered double-digit top line growth in both GMV and total revenue, driven by healthy supply and strong buyer engagement. Our disciplined execution against our three strategic pillars—the growth playbook, operational excellence, and obsessing over service—continued to pay off. We delivered 450 basis points of adjusted EBITDA margin expansion, demonstrating the operating leverage in our business model. We also generated free cash flow of $43,000,000 in Q4, up $23,000,000 year over year. Turning to our detailed fourth quarter results, beginning with the top line.

Q4 GMV of $616,000,000 increased 22% compared to last year. Growth was driven roughly evenly by unit volume and higher average selling prices. Q4 total revenue of $194,000,000 increased 18%, with consignment revenue up 16% year over year. Direct revenue increased 39% compared to 2024. In Q4, active buyers, orders, and average order value all increased year over year. On a trailing twelve-month basis, active buyer growth accelerated to 9% year over year, orders were up 10%, and average order value increased 11% versus last year. This growth reflects our success in unlocking supply, particularly in high-value categories like fine jewelry and watches. Q4 take rate of 36.5% declined 120 basis points year over year.

This was driven by a favorable mix shift into higher-value items and categories. These items carry a lower percentage take rate while generating more profit dollars and improved unit economics. On margins and profitability, fourth quarter gross profit of $145,000,000 increased 19% year over year. Gross margin of 74.8% in Q4 increased 40 basis points compared to the prior-year period. Breaking this down by channel, consignment gross margin was 89.6% in the fourth quarter, an improvement of 60 basis points year over year, reflecting our continued focus on operational efficiency. Direct gross margin was 26% in the fourth quarter, an increase of more than 1,200 basis points year over year, driven by a favorable mix of products sold.

Fourth quarter operating expenses of $139,000,000 leveraged 600 basis points year over year as a percentage of revenue. Excluding stock-based compensation, operating expenses leveraged by 550 basis points. These improvements were driven through increased use of AI and automation in our operations, sales team productivity, and leverage on fixed costs. Fourth quarter adjusted EBITDA of $22,000,000, or 11.3% of total revenue, increased $11,000,000 versus prior year. Adjusted EBITDA margins increased 450 basis points year over year. On cash flow and the balance sheet, we ended the quarter with $166,000,000 in cash, cash equivalents, and restricted cash. Our operating cash flow in the fourth quarter was $49,000,000, a $21,000,000 improvement year over year.

Free cash flow was $43,000,000 in the fourth quarter, a $23,000,000 improvement year over year, demonstrating our business model's favorable cash dynamics as we grow. Moving to our full year 2025 results. Full-year GMV of $2,130,000,000 increased 16% versus prior year. Revenue of $693,000,000 was up 15% versus the prior year, driven by strong execution of our growth playbook and our strategic focus on unlocking supply. Full-year gross profit of $517,000,000 grew 15% year over year. Gross margin of 74.6% increased 10 basis points versus full-year 2024. Operating expenses of $541,000,000 leveraged 600 basis points in 2025. This improvement was driven through increased use of AI and automation, sales and retail team productivity, and leverage on fixed costs.

We delivered adjusted EBITDA of $42,000,000 for full-year 2025, or 6.1% of total revenue, an increase of 450 basis points year over year. This improvement in profitability translated to $37,000,000 in operating cash flow and free cash flow of CAD $5,000,000. Over the past two years, we have reduced our total indebtedness by over $80,000,000, demonstrating our commitment to strengthening the balance sheet while delivering profitable growth. Looking back on 2025, we made significant progress across our strategic priorities, unlocked supply at scale through our growth playbook, expanded adjusted EBITDA margins, generated positive free cash flow, and strengthened our balance sheet. These results give us confidence in our momentum as we look to 2026. Now turning to our full-year outlook.

We are projecting full-year GMV growth in the range of 12% to 15%. Revenue growth is expected to be between 10% to 13%. For the full year, we expect gross margin to remain relatively consistent with 2025. Adjusted EBITDA is expected to be in the range of $7,000,000 to $65,000,000. This represents approximately 8% margin at the midpoint, an expansion of nearly 200 basis points versus 2025, which is aligned to our target of 15% to 20% adjusted EBITDA margins over the medium term. We continue to expect capital expenditures on property, plant, and equipment to remain between 23% of total revenue for the full year.

Regarding cash flow timing, similar to 2025, we expect operating cash flow and free cash flow to benefit from our favorable working capital dynamics in the second half of the year. Moving to our outlook for the first quarter, GMV growth is expected in the range of 19% to 22% versus prior year. First quarter revenue growth is expected in the range of 16% to 18%. We expect direct revenue to be in the range of 12% to 15% of total revenue. First quarter adjusted EBITDA is expected to be between $11,000,000 and $13,000,000, representing approximately 6% to 7% of total revenue and 340 basis points to 430 basis points of margin expansion year over year.

In closing, our fourth quarter and full-year 2025 performance underscores the financial power of our model. By scaling our growth playbook while leveraging AI-driven efficiencies, we have improved our unit economics and delivered meaningful margin expansion. Our progress on delevering combined with our ability to translate gains in adjusted EBITDA into free cash flow strengthens our financial foundation. As we enter 2026, we are focused on continuing to drive operating leverage as we scale. Thank you to the entire The RealReal, Inc. team for your dedication and for driving these outstanding results. With that, I will now turn the call back over to the operator for Q&A. Thank you.

Operator: At this time, if you would like to ask a question, please click on the raised hand button, which can be found on the black bar at the bottom of your screen. If you have dialed in by telephone, please press 9 to raise or lower your hand. When it is your turn to talk, you will receive a message on your screen from the host allowing you to talk, and then you will hear your name called. Please accept under your audio and ask your question. If you have dialed in by telephone, please press 6 to unmute. We will wait a moment for the queue to form. Our first question comes from Ashley Anne Owens. Please go ahead.

Ashley Anne Owens: Hi. Thanks. Can you hear me?

Rati Sahi Levesque: Yes, Ashley. We can hear you. Perfect.

Ashley Anne Owens: Well, first and foremost, congrats on the quarter. I did want to start out, I just noticed that Ops and Tech accelerated its P&L leverage, so I did want to touch on Athena. You have talked through the year about how central Athena is to that operational model, and you hit the target you set for November in April. So first and foremost, with the 35% update here, is that a count of units that are seeing intake fully completed by Athena? And just as importantly, how are you thinking about expanding that penetration across low, mid, and high-value items in 2026?

Ajay Gopal: Thanks for the question, Ashley. We are pleased with the progress that we have been able to make with Athena. We ended the year with 35% of the units in our fulfillment center being processed through Athena, and that was a primary driver for the operating leverage that you commented on in our Ops and Tech line. All-in, Ops and Tech leveraged 330 basis points for the year, and there was a combination of Athena with other automation efficiencies that we have been able to unlock in that part of the P&L. 35% was our target for the end of the year. We will continue to build on that going forward.

We are excited to extend Athena into the mid-value items, and then we will continue to build on that, taking it into higher-value items. We expect this to play out over multiple quarters, and it will continue to be a source of leverage for us going forward.

Ashley Anne Owens: Okay. Great. And maybe just quickly on Athena as well. I know it affected the intake-to-listing cycle times. Could you expand on how it affected the intake-to-listing cycle times in April 2026 as some of these automation and workflow optimizations start to mature?

Ajay Gopal: Thanks for the follow-up. We are excited about 35% of items that went through Athena. What essentially happens is the item first goes to photography, and once we have completed taking those images, we are able to pretty much launch the item on the website. So those items are going very quickly through our fulfillment center and not having to go through multiple handoffs as compared to the other items. As we build the coverage from a P&L standpoint, we will extend that benefit to more and more items in our portfolio.

Ashley Anne Owens: Great. Thanks so much, and best of luck for 2026.

Rati Sahi Levesque: Thank you.

Operator: Our next question comes from Ike Boruchow at Wells Fargo Securities. Please go ahead.

Ike Boruchow: Hey. Hey, guys. Congrats. I guess I was wondering, maybe Ajay or Rati, the guide for Q1 is obviously much better. But I think three months ago, you told us you only expected slightly above algo growth in the first half, so above the low double digits, and you are guiding 22% GMV. So just what are you seeing quarter to date? What gives you that confidence to guide those numbers?

Rati Sahi Levesque: Hi, Ike. Thanks for the question. A couple of things that we are seeing in the business. We are seeing our buyer and seller be quite resilient. We all know it is driven by supply. Our growth playbook is working, so it is important to understand that trifecta of our sales strategy, our marketing strategy, and retail strategy coming together there. We have seen, for example, the sales team and the SmartEngine, or SmartSales that we have called in the past, the conversion is getting better on the sales side. We are able to get more appointments per day, more volume per sales rep. On the marketing side, the flywheel strategy is working.

We are turning buyers into consignors in a more impactful way. And then on the demand side, still early, but our AI or agentic testing there on discovery and search is improving conversion, especially on the new buyer side. All of these things—some of these we are testing our way into, and they need to scale up throughout the year—but we are definitely seeing the supply really coming through.

Ike Boruchow: Have you seen a slowdown since the fourth quarter, I guess, is something I am curious about?

Rati Sahi Levesque: We gave you our guide for Q1. I would say as far as macro goes, same trends on buyers and sellers, double-digit growth on both buyers and sellers as well.

Ajay Gopal: No slowdown, Ike. I would add that when you think about Q4, you have heard us talk about how it has become increasingly more relevant as more and more people turn to resale for gifting, and we saw that play out in Q4, which we believe is one of the drivers for the acceleration from Q3.

Ike Boruchow: Great. Thanks, guys.

Rati Sahi Levesque: Thanks, Ike.

Operator: Our next question comes from Bobby Brooks at Northland Securities. Please go ahead.

Bobby Brooks: Hey, good afternoon, guys. Thank you for taking my question. I would just be interested to hear first on an update of how testing with drop shipping has gone and maybe what are the plans for it as we go into 2026? And maybe it would be helpful to just take a step back and remind folks what categories you started in and how you have selected those certain vendors who can access the drop shipping beta testing, I guess I will call it, and how you expect that to evolve moving forward?

Rati Sahi Levesque: Hi, Bobby. Thanks for the question. I will start; Ajay, if I miss anything, feel free to jump in. Drop ship, we are seeing, this year was all about testing and expanding categories. We started in watches. We also launched handbags and fine jewelry. They were very much to specific or targeted partners. We will continue to expand that to international markets, for example. I would say the growth rate is healthy, but not the main driver of our growth. We will continue to expand to other categories and continue to test and learn in the next couple of quarters.

Bobby Brooks: Got it. And then setting aside SmartSales tool and the broader rollout of drop shipping, are there any other exciting initiatives aimed at driving more incremental supply? Obviously, that is the key part of the growth engine here—unlocking more supply. So just wanted to hear if there are any other initiatives that folks should be looking forward to, and maybe it is even partnering with direct brands directly.

Rati Sahi Levesque: Yes. I think that is what gives us confidence in the full-year guide. We have many new initiatives, some of them are earlier in days and some of them a little bit later in days, but SmartSales is one of them for sure. Referrals and affiliate programs, that is another one. We are really excited about seeing one of the higher-growth channels when I look at where supply is coming from. Again, early days, but you can see how this could really scale up. Our retail strategy—again, a quarter of our new sellers are coming from retail. We have also been looking at our marketing ROI. Higher LTV is what we are seeing.

So as we are reinvesting in marketing, we are really seeing that pay off. I would say another is the flywheel. We talked a little bit about that in the last quarter's call, our strategy around buyers becoming consignors, and we are seeing that accelerate—early days on that, but that also gives us confidence headed into the full year.

Bobby Brooks: Got it. Appreciate the color, and congrats on the strong year.

Rati Sahi Levesque: Thanks, Bobby.

Operator: Our next question comes from Anna Glaessgen at B. Riley Securities. Please go ahead.

Anna Glaessgen: Hi. Good afternoon. Thanks for taking my questions. I would like to turn back to Athena. Nice to see that it met the target of between 30% to 40% of units by year-end. Wondering if you would be willing to share your outlook for its contribution to unit processing in 2026? Thanks.

Ajay Gopal: Thanks, Anna. We are pleased with Athena exiting the year at 35%. It is one of our key use cases of how we are able to leverage our unique dataset of 50,000,000 items, combine it with recent developments in the world of AI, and unlock real efficiencies in our platform. We will continue to build on it, as I mentioned earlier. 35% is nowhere close to where we could be. In theory, we see that extending to all the items in our fulfillment center, and we will pace that over the next few quarters.

Anna Glaessgen: So it is safe to say it should continue to increase.

Ajay Gopal: Yes. It will continue to go up.

Anna Glaessgen: Got it. And then secondly, exciting to hear about the initiatives within agentic search. I guess, when should we expect that to be formally launched on the website?

Rati Sahi Levesque: Hi, Anna. We are also very excited about it. We are really focused on discovery, matching, getting the right product to the right person. We are seeing it deliver incremental revenue. We will start to scale that up. What we are seeing right now, like I mentioned, was new buyer conversion, and the testing looks very good. And then we see it moving on to conversational and visual search as well, just to, again, get that flywheel going and continue that buyer growth at double-digit numbers.

Anna Glaessgen: Great. Thanks, team.

Ajay Gopal: Thank you.

Operator: Our next question comes from Marvin Milton Fong at BTIG. Please go ahead.

Marvin Milton Fong: Great. Good evening. Thanks for taking my questions. Congratulations on the quarter. Question on sort of ASP and product mix. I believe higher-value items have been really strong for a while now—fine jewelry, handbags, watches. How are you addressing specifically your supply pipeline visibility? How is that going there? Are you at all reaching the point where it is getting a little harder to obtain those types of items, or is that pipeline very strong? And just as a driver of AOV, I would love to get a better understanding—if we break it down like-for-like, are you seeing price climbs, for instance, even within apparel and other goods? Are prices rising, or what is going on there?

Ajay Gopal: Thanks, Marvin. A few things to unpack there. At the start, I would say when you look at our 22% growth in Q4, it is a healthy balance between volume and price—almost an even 50/50 split between the two elements. You had a question about how it shows up in ASPs like-for-like. A large part of what we are seeing has been driven by the shift into higher-value items and categories. You heard us highlight fine jewelry as a category that has been experiencing strong growth. In fact, it was one of our fastest-growing categories in 2025. We have a lot of sophistication in how our pricing algorithm manages ASPs.

We are always trying to find the highest price on behalf of our consignors, and that pricing algorithm is looking at over 100 data points and trying to figure out exactly what we think a customer would be willing to pay for any given item. The last point I would make is to your question on how it influences supply. One of the key strengths about The RealReal, Inc. as a platform is as trends come and go, we are able to quickly respond to them and really capitalize on where consumer preference is shifting. So, fine jewelry is a great example of that.

We saw that trend start to pick up in 2024, and we have been able to capitalize on that very well, and we will continue to do that as a marketplace.

Marvin Milton Fong: Okay. Great. And follow-up question, just on direct. You mentioned margins there are very strong. You mentioned favorable mix. So to drill down on that, was it a matter of the product mix—again, higher ASP items—or is it also that Get Paid Now contributed a bit more? Could you decompose what drove that and how sustainable that is in the first quarter and maybe beyond?

Ajay Gopal: Thank you for the questions. We are pleased with the margin expansion we have seen in our direct channel. It was 26% gross margin in Q4 and 22% for the full year. Both of those numbers are quite substantial improvements—880 basis points of improvement on a full-year basis versus what direct used to look like if you go back a year. We have made a conscious effort to change the mix of what goes through that channel, and right now, it is a mix of Get Paid Now and other select supply that we know is incremental to our platform and runs through that channel.

Those margins will stay within that fairly wide range of 15% to 25% going forward, and it will vary based on the mix of what we sell.

Marvin Milton Fong: Okay. Perfect. Thanks, and congrats again.

Rati Sahi Levesque: Thank you.

Operator: Our next question will come from Mark R. Altschwager at Baird. Please go ahead.

Mark R. Altschwager: Thank you for taking my question. I guess a couple on the model here. First, you are guiding to revenue growth a couple hundred basis points below the GMV growth. Obviously, a lot of moving pieces as we go from A to B there. Maybe just what are the key factors we should be thinking about—take rate, revenue mix, or otherwise—that are influencing that this year?

Ajay Gopal: Thank you for the question. Yes, we are guiding to revenue growth that is a couple of percentage points lower than GMV. The key driver there really is our take rate. If you look at 2025, we have seen a favorable shift in our product mix towards higher-value items and categories. Our take rate structure is designed in such a way that when we sell those items, they attract a lower percentage take rate, but they bring in higher dollars and stronger unit economics against those items.

We do expect that phenomenon to play out in 2026 when we will be lapping the change that occurred late in 2025, and it should normalize going forward, particularly in the second half of the year.

Mark R. Altschwager: That is very helpful. Also wanted to ask about the sales team and just any hiring goals you have for 2026. You spoke earlier about the efficiency you are seeing with that team as they build tenure, so trying to better understand the strategy behind further efficiencies relative to expanding the team as you look to fuel supply growth.

Rati Sahi Levesque: Thanks, Mark. On the sales side, the relationships that we have built there are really important with the consignors. It is definitely a combination of art and science. When we think about the growth rate there, we think about hiring healthily in that area as we are growing our business. But it is also finding more efficiencies there too. We measure things like how much value they are bringing in per sales rep, how many appointments per day, and tools like SmartSales or SmartEngine definitely help that experience. So it is definitely a two-pronged approach.

Operator: Our next question will come from Dylan Carden at William Blair. Please go ahead.

Dylan Carden: I think I did that right. I guess I will know. Curious on the MyCloset next phase where you dig deeper into the customer's closet. Is that something happening in 2026? And is there a line of sight into how you might be able to target or get after the balance of what is in the closet beyond what is purchased on The RealReal, Inc. at this point?

Rati Sahi Levesque: Yes, Dylan. Thanks for the question. For those that do not know what MyCloset is, I want to say, first of all, we see ourselves as a personal adviser to the seller already. We are seeing that behavior shift in the seller where they call us to now get better insights into the primary market—what should they buy, what should they sell, what holds its resale value and what does not. How do we leverage that? We are looking into MyCloset and testing our way into that. You saw us launch something called Reconsign that was focused on our flywheelers as well. When people are buying things on our site, how do we target them and get them to consign?

That has been working quite nicely. The next phase of that goes into pricing transparency—again, empowering them with the insights on brands, pricing, what to hold on to, what to trade up, and so forth. By the end of this year, we will have kind of the full build of something like this early going into even early next year. We are testing our way into that. You are going to see improvements in that relationship. The real vision there, like I said, is being that personal adviser to our seller, but really getting them to think about The RealReal, Inc. when they are in the primary market. How do we gain mindshare in that first space?

Dylan Carden: I guess that brings up another question about how tied in your business is to the broader health of the luxury market. I know there have been some mixed signals for the primary market, but how does that flow through your business, if you have a sense?

Rati Sahi Levesque: Definitely some mixed signals. But how I see it is the primary market and resale can coexist. We are seeing the shift into resale happening as resale is becoming more mainstream, driven by the Gen Z and millennial cohorts. We mentioned this last time: almost 50% now prefer resale, and that TAM continues to grow. $200,000,000,000 in closets, and $80,000,000,000 gets added. We have the access to all that inventory. The magical thing about our business at the end of the day is that we are brand-agnostic and channel-agnostic.

We can react to the trends pretty quickly, bring in the right product at the right time for the consumer, and we are definitely opportunistic about even partnerships that you have seen us do in the past as well with the primary markets.

Dylan Carden: Well, and to that end, you keep teeing me up here. Thank you. The new tools from a search functionality—natural language search—and I would be curious if you are using other things to make the overall curation in the discovery process easier. I know it is early days for that. Are you seeing meaningful improvement in conversion, time-on-site, return-to-site, those types of metrics?

Rati Sahi Levesque: Thanks. Yes, for sure. Definitely early days, like you mentioned, but we are testing agentic commerce, testing our way into it. Especially around search and discoverability matching—matching the right product to the right person much faster. We did see conversion go up for new buyers, especially as we are testing our way into that. We will continue to double down there as we see fit and be thoughtful about our approach as we scale up.

Dylan Carden: Really appreciate it. Thank you. Nice work.

Operator: Our next question will come from Jay Daniel Sole at UBS. Please go ahead.

Jay Daniel Sole: Great. Thank you so much. Actually, my question is for you. You are talking about a lot of leverage on OpEx to get the nice EBITDA margin expansion for the year. Can you talk about some of the ways you are going to be able to control expenses as you grow revenue to get that leverage?

Ajay Gopal: Thanks for the question, Jay. We are making good progress towards our medium-term goal of expanding margins to the range of 15% to 20%. In 2025, we delivered 6% adjusted EBITDA margin, and our guidance for 2026 has a midpoint of 8%. We see that as being well on track to that range of 200 to 300 basis points of margin expansion every year to get to that goal. That is being driven by, at the forefront, getting efficiencies in the Operations and Tech line of our P&L. That is where we see the effect of initiatives like Athena, where we are able to leverage AI and automation to drive efficiency gains.

Outside, in other lines—Sales, SG&A—you have heard us talk about how we are bringing other tools to help our sales team be more effective. Things like SmartEngine and SmartSales really help optimize the time that our reps spend dealing with consignors and help them be that much more efficient at unlocking supply. Finally, a key element of our story on operating expense leverage is our fixed cost base as well. We are in a good place, and that continues to be a source of leverage for us as we grow as a business.

Jay Daniel Sole: Got it. Thank you so much.

Operator: Our final question for today comes from Matt Koranda at Roth Capital Partners. Please go ahead.

Matt Koranda: Hey, guys. Hopefully, you can hear me here. Yep. Nice work in the quarter. A lot has been asked and answered. I guess the thing I wanted to hear a little bit more about was how AI can help you on the supply side. I know AI is discussed a lot in terms of Athena, in terms of processing inbound items, in terms of merchandising, and adding assortment customization to your buyers. But what can AI do for you in the supply procurement side of the house? And do you have anything that moves the needle in 2026 on that front?

Rati Sahi Levesque: Great question. Thanks, Matt. We definitely are an AI beneficiary and not new to AI. We have been early adopters there, always focused on our differentiators—whether that is authentication, supply, like you said, and pricing and data, just to zoom out for a second. We are really excited not only about the efficiencies that we believe we will see there and are seeing there, but also around transforming the seller experience as you dig in. SmartEngine is a piece of that, and we have talked a lot about that really gaining traction, converting more of those sellers, and then converting buyers into sellers with a more targeted approach—getting smarter about targeting those areas and getting them in.

Everything we do on the buyer side does feed into the seller side as well, and I think that is really important to remember because as they earn more price for their items, they are happier with the service, and then they come back and consign with us very quickly. So that marketplace approach is really important as well. We talked a little bit about MyCloset. That is another place where we really become that trusted adviser, making sure people understand what to consign and when to consign, and using that data over now more than 50,000,000 items that we have consigned and over 40,000,000 members to create those deep human connections with the seller.

Specifically on the agentic AI side, think about that human and AI technology coming together to create that experience. We are pretty excited about that.

Matt Koranda: Very helpful. Thank you. And then maybe just one other one. On the margin expansion that is planned for the EBITDA guide for 2026, I just wanted to hear you put a finer point on the sources of margin expansion within OpEx. It sounds like that is going to be the biggest driver in terms of margin expansion for 2026. Is it evenly split between O&T and SG&A? Or is it more heavily on the O&T side of things, just given Athena implementation and how that benefits you on O&T?

Ajay Gopal: Thanks for the question. Between those two categories, we do expect Operations and Tech to be the leader in terms of generating operating leverage. That is what we experienced. That is what you see in our results in 2025, and that mix is going to continue going forward as well.

Matt Koranda: Okay. Great. Thanks, guys.

Ajay Gopal: Thank you.

Rati Sahi Levesque: Thank you.

Operator: That concludes the Q&A session and today's call. You may now disconnect.

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