TheRealReal, Inc.

Previous wording

•Consignment revenue. When we sell goods through our online marketplace or retail stores on behalf of our consignors, we retain a percentage of the proceeds, which we refer to as our take rate. Take rates vary depending on the total value of goods sold through our online marketplace on behalf of a particular consignor as well as the category and price point of the items. In the three months ended June 30, 2025 and 2024, our overall take rate on consigned goods was 37.9% and 38.5%, respectively. The decrease in our take rate was due to sales mix into higher value items. Additionally, we earn revenue from our subscription program, First Look, in which we offer buyers early access to the items we sell in exchange for a monthly fee.

Current wording

•Consignment revenue. When we sell goods through our online marketplace or retail stores on behalf of our consignors, we retain a percentage of the proceeds, which we refer to as our take rate. Take rates vary depending on the total value of goods sold through our online marketplace on behalf of a particular consignor as well as the category and price point of the items. In the three months ended September 30, 2025 and 2024, our overall take rate on consigned goods was 37.9% and 38.6%, respectively. The decrease in our take rate was due to sales mix into higher value items. Additionally, we earn revenue from our subscription program, First Look, in which we offer buyers early access to the items we sell in exchange for a monthly fee.

Previous wording

We generate revenue from orders processed through our website, mobile app and retail stores. Our omni-channel experience enables buyers to purchase anytime and anywhere. We have a global base of more than 40.4 million members as of June 30, 2025. A member is any user who has registered an email address on our website or downloaded our mobile app, thereby agreeing to our terms of service.

Current wording

We generate revenue from orders processed through our website, mobile app and retail stores. Our omni-channel experience enables buyers to purchase anytime and anywhere. We have a global base of more than 40 million members as of September 30, 2025. A member is any user who has registered an email address on our website or downloaded our mobile app, thereby agreeing to our terms of service.

Previous wording

We believe there is substantial opportunity to grow our business by having buyers also become consignors and vice versa. As of June 30, 2025, 15% of our buyers during the last twelve months also consigned items, and 49% of our consignors during the past twelve months also made purchases. We believe this approach effectively captures the flywheel effect that strengthens the network dynamics of our online marketplace. Our GMV from buyers who are also consignors has increased over time due to the effectiveness of our flywheel. If we fail to continue to attract and retain our buyer base to our online marketplace, our operating results would be adversely affected.

Current wording

We believe there is substantial opportunity to grow our business by having buyers also become consignors and vice versa. As of September 30, 2025, 16% of our buyers during the last twelve months also consigned items, and 49% of our consignors during the past twelve months also made purchases. We believe this approach effectively captures the flywheel effect that strengthens the network dynamics of our online marketplace. Our GMV from buyers who are also consignors has increased over time due to the effectiveness of our flywheel and more recently through tools to encourage flywheel behavior like the "Reconsign" module on our platform. If we fail to continue to attract and retain our buyer base to our online marketplace, our operating results would be adversely affected.

Previous wording

The key operating and financial metrics that we use to assess the performance of our business are set forth below for the three and six months ended June 30, 2025 and 2024.

Current wording

The key operating and financial metrics that we use to assess the performance of our business are set forth below for the three and nine months ended September 30, 2025 and 2024.

Previous wording

Adjusted EBITDA means GAAP net income (loss) before interest income, interest expense, provision for income taxes, and depreciation and amortization, further adjusted to exclude stock-based compensation, payroll taxes on employee stock transactions, legal settlement charges, restructuring charges, gain on extinguishment of debt, change in fair value of warrant liability and certain one-time expenses. Adjusted EBITDA provides a basis for comparison of our business operations between current, past and future periods by excluding items that we believe are not indicative of our core operating performance. Adjusted EBITDA is a non-GAAP measure. Adjusted EBITDA has certain limitations as the measure excludes the impact of certain expenses that are included in our statements of operations that are necessary to run our business and should not be considered as an alternative to net income (loss) or any other measure of financial performance calculated and presented in accordance with GAAP.

Current wording

Adjusted EBITDA means GAAP net income (loss) before interest income, interest expense, provision for income taxes, and depreciation and amortization, further adjusted to exclude stock-based compensation, payroll taxes on employee stock transactions, legal settlement charges, restructuring charges, gain on extinguishment of debt, change in fair value of warrant liability and restructuring and other expenses. Adjusted EBITDA provides a basis for comparison of our business operations between current, past and future periods by excluding items that we believe are not indicative of our core operating performance. Adjusted EBITDA is a non-GAAP measure. Adjusted EBITDA has certain limitations as the measure excludes the impact of certain expenses that are included in our statements of operations that are necessary to run our business and should not be considered as an alternative to net income (loss) or any other measure of financial performance calculated and presented in accordance with GAAP.

Previous wording

The following table provides a reconciliation of net income (loss) to Adjusted EBITDA (in thousands):

Current wording

The following table provides a reconciliation of net loss to Adjusted EBITDA (in thousands):

Previous wording

(2) The gain on extinguishment of debt for the six months ended June 30, 2025 reflects the difference between the carrying value of the February 2025 Exchanged Notes and the fair value of the 2031 Notes. The gain on extinguishment of debt for the six months ended June 30, 2024 reflects the difference between the carrying value of the 2024 Exchanged Notes and the fair value of the 2029 Notes.

Current wording

(1) The gain on extinguishment of debt for the three and nine months ended September 30, 2025 reflects the difference between the carrying value of the 2025 Exchanged Notes and the fair value of the 2031 Notes. The gain on extinguishment of debt for the nine months ended September 30, 2024 reflects the difference between the carrying value of the 2024 Exchanged Notes and the fair value of the 2029 Notes.

Previous wording

(3) The change in fair value of warrant liability for the three and six months ended June 30, 2025 and June 30, 2024 reflects the remeasurement of the Warrants issued by the Company in connection with the 2024 Note Exchange in February 2024.

Current wording

(2) The change in fair value of warrant liability for the three and nine months ended September 30, 2025 and September 30, 2024 reflects the remeasurement of the Warrants issued by the Company in connection with the 2024 Note Exchange in February 2024.

Previous wording

(1) The restructuring charges for the six months ended June 30, 2024 consist of employee severance related charges.

Current wording

(3) Restructuring and other expenses for the three and nine months ended September 30, 2025 consist of employee severance costs associated with a departmental reorganization, including certain executives, recorded within Marketing and Selling, General and Administrative expenses on the condensed statements of operations. Restructuring and other expenses for the three and nine months ended September 30, 2024 reflect estimated losses related to the fire at one of our New Jersey authentication centers, net of estimated insurance recoveries and employee severance related charges related to the 2023 savings plan, which included the closure of certain retail and office locations and a workforce reduction. See "Note 11 - Commitments and Contingencies" in the notes to the unaudited financial statements for disclosure regarding the fire event.

Previous wording

Consignment revenue increased by $15.9 million, or 14% in the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The increase in revenue was driven primarily by an increase in consignment GMV during the three months ended June 30, 2025. GMV growth during the three months ended June 30, 2025 was driven by an 8% increase in our AOV and 6% increase in the number of orders. Our take rate decreased to 37.9% from 38.5% during the three months ended June 30, 2025 compared to the three months ended June 30, 2024 due to sales mix into higher value items.

Current wording

Consignment revenue increased by $17.5 million, or 15% in the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The increase in revenue was driven primarily by an increase in consignment GMV during the three months ended September 30, 2025. GMV growth during the three months ended September 30, 2025 was driven by an 12% increase in our AOV and 7% increase in the number of orders. Our take rate decreased to 37.9% from 38.6% during the three months ended September 30, 2025 compared to the three months ended September 30, 2024 due to sales mix into higher value items.

Previous wording

Direct revenue increased by $3.8 million, or 23%, in the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The increase was primarily driven by higher sell through of inventory acquired from out of policy returns and high value inventory acquired through the Get Paid Now program. Through this program, select items are evaluated, authenticated and priced and the business or consignor receives payment based on this process in advance of the sale of the item. We recognize direct revenue on a gross basis upon shipment of the purchased good to the buyer. Direct revenue as a percentage of total revenue may vary from period to period primarily based on the growth of consignment revenue.

Current wording

Direct revenue increased by $7.3 million, or 47%, in the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The increase was primarily driven by higher sell through of high value inventory acquired from businesses or individual sellers and inventory acquired from out of policy returns. We recognize direct revenue on a gross basis upon shipment of the purchased good to the buyer. Direct revenue as a percentage of total revenue may vary from period to period primarily based on the growth of consignment revenue.

Previous wording

Shipping services revenue increased by $0.6 million, or 4%, in the three months ended June 30, 2025 compared to the three months ended June 30, 2024 primarily due to a 6% increase in the number of orders in the three months ended June 30, 2025.

Current wording

Shipping services revenue increased by $1.0 million, or 7%, in the three months ended September 30, 2025 compared to the three months ended September 30, 2024 primarily due to a 7% increase in the number of orders in the three months ended September 30, 2025.

Previous wording

Cost of consignment revenue increased by $0.7 million, or 5%, in the three months ended June 30, 2025 compared to the three months ended June 30, 2024, driven by higher consignment volume, partially offset by increased operational efficiencies.

Current wording

Cost of consignment revenue increased by $1.0 million, or 7%, in the three months ended September 30, 2025 compared to the three months ended September 30, 2024, driven by higher consignment volume, partially offset by increased operational efficiencies.

Previous wording

Consignment revenue gross margin increased by 93 basis points in the three months ended June 30, 2025 compared to the three months ended June 30, 2024 due to an increase in consignment revenue and increased operational efficiencies during the three months ended June 30, 2025.

Current wording

Consignment revenue gross margin increased by 75 basis points in the three months ended September 30, 2025 compared to the three months ended September 30, 2024 due to an increase in consignment revenue and increased operational efficiencies during the three months ended September 30, 2025.

Previous wording

Cost of direct revenue increased by $3.4 million, or 25%, in the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The increase was primarily attributable to the increase in direct revenue compared to the prior year.

Current wording

Cost of direct revenue increased by $5.2 million, or 40%, in the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The increase was primarily attributable to the increase in direct revenue compared to the prior year.

Previous wording

Direct revenue gross margin decreased by 157 basis points for the three months ended June 30, 2025, primarily due to category mix of products sold during the three months ended June 30, 2025.

Current wording

Direct revenue gross margin increased by 366 basis points for the three months ended September 30, 2025, primarily due to category mix of products sold during the three months ended September 30, 2025.

Previous wording

Cost of shipping services revenue increased by $1.0 million, or 9%, in the three months ended June 30, 2025 compared to the three months ended June 30, 2024, primarily due to a 6% increase in the number of orders and higher carrier costs.

Current wording

Cost of shipping services revenue increased by $1.4 million, or 13%, in the three months ended September 30, 2025 compared to the three months ended September 30, 2024, primarily due to a 7% increase in the number of orders and higher carrier costs.

Previous wording

Shipping services revenue gross margin decreased by 355 basis points for the three months ended June 30, 2025, primarily due to higher carrier costs.

Current wording

Shipping services revenue gross margin decreased by 438 basis points for the three months ended September 30, 2025, primarily due to higher carrier costs.

Previous wording

Marketing expense increased by $1.8 million, or 13%, in the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The increase was primarily due to an increase in advertising costs.

Current wording

Marketing expense increased by $2.5 million, or 22%, in the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The increase was primarily due to an increase in advertising costs and employee severance related costs.

Previous wording

As a percent of revenue, marketing expense remained flat at 9% in the three months ended June 30, 2025 and 2024. These expenses may vary from period to period as a percentage of revenue, depending primarily upon our marketing investments. We expect these expenses to decrease as a percentage of revenue over the longer term.

Current wording

As a percent of revenue, marketing expense remained flat at 8% in the three months ended September 30, 2025 and 2024. These expenses may vary from period to period as a percentage of revenue, depending primarily upon our marketing investments. We expect these expenses to decrease as a percentage of revenue over the longer term.

Previous wording

Operations and technology expense increased by $3.6 million, or 5%, in the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The increase was driven by higher variable hourly compensation from increased volume compared to the prior period.

Current wording

Operations and technology expense increased by $4.5 million, or 7%, in the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The increase was driven by higher variable hourly compensation from increased volume compared to the prior period.

Previous wording

As a percent of revenue, operations and technology expense decreased to 42% from 45% in the three months ended June 30, 2025 and 2024, respectively. These expenses may vary from period to period as a percentage of revenue, depending primarily upon when we choose to make more significant investments. We expect these expenses to decrease as a percentage of revenue over the longer term.

Current wording

As a percent of revenue, operations and technology expense decreased to 41% from 45% in the three months ended September 30, 2025 and 2024, respectively. These expenses may vary from period to period as a percentage of revenue, depending primarily upon when we choose to make more significant investments. We expect these expenses to decrease as a percentage of revenue over the longer term.

Previous wording

Selling, general and administrative expense increased by $0.9 million, or 2%, in the three months ended June 30, 2025 compared to the three months ended June 30, 2024. The increase was primarily due to higher employee costs, partially offset by lower legal fees.

Current wording

Selling, general and administrative expense increased by $4.1 million, or 9%, in the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The increase was primarily due to higher employee costs and employee severance related costs.

Previous wording

As a percent of revenue, selling, general and administrative expense decreased to 29% from 32% in the three months ended June 30, 2025 compared to the three months ended June 30, 2024. These expenses may vary from period to period as a percentage of revenue. We expect these expenses to decrease as a percentage of revenue over the longer term.

Current wording

As a percent of revenue, selling, general and administrative expense decreased to 30% from 32% in the three months ended September 30, 2025 compared to the three months ended September 30, 2024. These expenses may vary from period to period as a percentage of revenue. We expect these expenses to decrease as a percentage of revenue over the longer term.

Previous wording

The Company issued warrants to acquire an aggregate of up to 7,894,737 shares (subject to adjustment in accordance with the terms of the warrants) of the Company's common stock as part of the Note Exchange in February 2024. The warrant liability is subsequently re-measured to fair value at each reporting date with changes in the fair value included in earnings. During the six months ended June 30, 2025, we incurred a gain of $47.0 million due to the decrease in the fair value of the warrants outstanding at June 30, 2025.

Current wording

The Company issued warrants to acquire an aggregate of up to 7,894,737 shares (subject to adjustment in accordance with the terms of the warrants) of the Company's common stock as part of the 2024 Note Exchange in February 2024. The warrant liability is subsequently re-measured to fair value at each reporting date with changes in the fair value included in earnings. During the three months ended September 30, 2025, we incurred a loss of $43.9 million due to the increase in the fair value of the warrants outstanding at September 30, 2025.

Previous wording

Gain on extinguishment of debt increased by $32.9 million, or over 100% for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The increase was due to the gain recorded from the extinguishment of the Exchanged Notes (as defined below) and the issuance of the 2031 Notes during the three months ended March 31, 2025 (See Note 7 — Convertible Senior Notes, Net).

Current wording

Gain on extinguishment of debt increased by $3.7 million, or 100% for the three months ended September 30, 2025 compared to the three months ended September 30, 2024. The increase was due to the gain recorded from the extinguishment of the August 2025 Exchanged Notes (as defined below) and the issuance of the additional 2031 Notes during the three months ended September 30, 2025 (See Note 7 — Convertible Senior Notes, Net).

Previous wording

Interest income decreased by $1.2 million, or 51%, for the three months ended June 30, 2025 as compared to the three months ended June 30, 2024 due to lower average cash balances.

Current wording

Interest income decreased by $1.1 million, or 58%, for the three months ended September 30, 2025 as compared to the three months ended September 30, 2024 due to lower average cash balances.

Previous wording

Interest expense increased by $1.3 million, or 22% for the three months ended June 30, 2025 compared to the three months ended June 30, 2024 due to the interest expense related to the 2031 Notes issued in February 2025.

Current wording

Interest expense increased by $1.1 million, or 19% for the three months ended September 30, 2025 compared to the three months ended September 30, 2024 due to the interest expense related to the 2031 Notes issued in the 2025 Note Exchanges.

Previous wording

Consignment revenue increased by $24.1 million, or 11%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The increase in revenue was driven primarily by an increase in consignment GMV, a 6% increase in our AOV and 5% increase in the number of orders during the six months ended June 30, 2025 compared to the six months ended June 30, 2024.

Current wording

Consignment revenue increased by $41.6 million, or 12%, in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The increase in revenue was driven primarily by an increase in consignment GMV, a 8% increase in our AOV and 6% increase in the number of orders during the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024.

Previous wording

Our take rate decreased to 38.2% from 38.4% during the six months ended June 30, 2025 compared to the same period last year.

Current wording

Our take rate decreased to 38.1% from 38.5% during the nine months ended September 30, 2025 compared to the same period last year due to sales mix into higher value items.

Previous wording

Direct revenue increased by $11.5 million, or 39%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The increase was primarily driven by higher sell through of inventory acquired from out of policy returns and high value inventory acquired through the Get Paid Now program. We recognize direct revenue upon shipment of the purchased good to the buyer. Direct revenue as a percentage of total revenue may vary from period to period primarily based on the amount of consignment revenue.

Current wording

Direct revenue increased by $18.8 million, or 42%, in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The increase was primarily driven by higher sell through of high value inventory acquired from businesses or individual sellers and inventory acquired from out of policy returns. We recognize direct revenue upon shipment of the purchased good to the buyer. Direct revenue as a percentage of total revenue may vary from period to period primarily based on the amount of consignment revenue.

Previous wording

Shipping services revenue increased by $0.9 million, or 3%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024 primarily due to a 5% increase in the number of orders in the six months ended June 30, 2025.

Current wording

Shipping services revenue increased by $1.9 million, or 4%, in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024 primarily due to a 6% increase in the number of orders in the nine months ended September 30, 2025.

Previous wording

Cost of consignment revenue increased by $0.3 million, or 1%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024, driven by higher consignment volume, partially offset by increased operational efficiencies.

Current wording

Cost of consignment revenue increased by $1.3 million, or 3%, in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, driven by higher consignment volume, partially offset by increased operational efficiencies.

Previous wording

Consignment revenue gross margin increased by 97 basis points in the six months ended June 30, 2025 compared to the six months ended June 30, 2024, driven by the increase in consignment revenue and increased operational efficiencies.

Current wording

Consignment revenue gross margin increased by 90 basis points in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, driven by the increase in consignment revenue and increased operational efficiencies.

Previous wording

Cost of direct revenue increased by $6.4 million, or 24%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The increase was primarily attributable to the increase in direct revenue compared to the prior year.

Current wording

Cost of direct revenue increased by $11.6 million, or 30%, in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The increase was primarily attributable to the increase in direct revenue compared to the prior year.

Previous wording

Direct revenue gross margin increased by 932 basis points for the six months ended June 30, 2025, due to an increase in direct revenue and improved product margins during the six months ended June 30, 2025.

Current wording

Direct revenue gross margin increased by 736 basis points for the nine months ended September 30, 2025, due to an increase in direct revenue and improved product margins during the nine months ended September 30, 2025.

Previous wording

Cost of shipping services revenue increased by $1.8 million, or 8%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024, primarily due to a 5% increase in the number of orders and higher carrier costs.

Current wording

Cost of shipping services revenue increased by $3.2 million, or 10%, in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024, primarily due to a 6% increase in the number of orders and higher carrier costs.

Previous wording

The shipping services revenue gross margin decreased by 378 basis points for the six months ended June 30, 2025, primarily due to higher carrier costs.

Current wording

The shipping services revenue gross margin decreased by 400 basis points for the nine months ended September 30, 2025, primarily due to increased order volume and higher carrier costs.

Previous wording

Our total gross margin increased by 25 basis point for the six months ended June 30, 2025 compared to the six months ended June 30, 2024. Gross margin may vary from period to period.

Current wording

Our total gross margin remained flat at 75% in the nine months ended September 30, 2025 and the nine months ended September 30, 2024. Gross margin may vary from period to period.

Previous wording

Marketing expense increased by $2.4 million, or 8%, in the six months ended June 30, 2025 compared to the six months ended June 30, 2024. The increase was primarily due to increased advertising costs.

Current wording

Marketing expense increased by $4.9 million, or 12%, in the nine months ended September 30, 2025 compared to the nine months ended September 30, 2024. The increase was primarily due to increased advertising costs.