TheRealReal, Inc.

Previous wording

We have transformed the luxury consignment experience by removing the friction and pain points inherent in the traditional consignment model. For consignors, we offer concierge at-home consultation and pickup as well as virtual consultations. Consignors may also drop off items at our luxury consignment offices. Our retail stores provide an alternative location to drop off consigned items and an opportunity to interact with our authentication experts. Consignors may also utilize our complimentary shipping directly to our authentication centers. We leverage our proprietary transactional database and market insights from approximately 44.5 million item sales since our inception to deliver optimal pricing and rapid sell-through. For buyers, we offer highly coveted and exclusive authenticated pre-owned luxury goods at attractive values, as well as a high-quality experience befitting the products we offer. Our online marketplace is powered by our proprietary technology platform, including consumer facing applications and purpose-built software that supports our complex, single-SKU inventory management system.

Current wording

We have transformed the luxury consignment experience by removing the friction and pain points inherent in the traditional consignment model. Our growth playbook centers on scalable supply engine, and helps us forge enduring relationships with our consignors. We offer concierge at-home consultation and pickup as well as virtual consultations. Consignors may also drop off items at our luxury consignment offices. Our retail stores provide an alternative location to drop off consigned items and an opportunity to interact with our authentication experts. Consignors may also utilize our complimentary shipping directly to our authentication centers. We leverage our proprietary transactional database and market insights from over 50 million item sales since our inception to deliver optimal pricing and rapid sell-through. For buyers, we offer highly coveted and exclusive authenticated pre-owned luxury goods at attractive values, as well as a high-quality experience befitting the products we offer. Our online marketplace is powered by our proprietary technology platform, including consumer facing applications and purpose-built software that supports our complex, single-SKU inventory management system.

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 2024 and 2023, our overall take rate on consigned goods was 38.4% and 37.5% respectively. The increase in our take rate was due to the update of our consignor commission structure (effective November 1, 2022). 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 2025 and 2024, our overall take rate on consigned goods was 37.7% and 38.4% 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

•Shipping services revenue. When we deliver purchased items to our buyers, we charge shipping fees to buyers for the outbound shipping and handling services. We also generate shipping services revenue from the shipping fees for consigned products returned by our buyers to us within policy. Shipping services revenue excludes the effect of buyer incentives and sales tax.

Current wording

•Shipping services revenue. When we deliver purchased items to our buyers, we charge shipping fees to buyers for the outbound shipping and handling services. We also generate shipping services revenue from the shipping fees for consigned products returned by our buyers to us within policy. Shipping services revenue is recognized net of immaterial buyer incentives and excludes the effect of sales tax.

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 38.6 million members as of December 31, 2024. We count as a member 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 December 31, 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 measure the ratio of demand versus supply in a given period, which we refer to as our online marketplace sell-through ratio. Sell-through ratio is defined as GMV in the period divided by the aggregate initial value of items added to our online marketplace in the period. In 2024, our online marketplace sell-through ratio was approximately 85%.

Current wording

We measure the ratio of demand versus supply in a given period, which we refer to as our online marketplace sell-through ratio. Sell-through ratio is defined as GMV in the period divided by the aggregate initial value of items added to our online marketplace in the period. In 2025, our online marketplace sell-through ratio was over 80%.

Previous wording

We believe there is substantial opportunity to grow our business by having buyers also become consignors and vice versa. As of December 31, 2024, 15% of our buyers during the last twelve months also consigned items, and 48% of our consignors also made purchases. We believe this approach effectively captures the flywheel effect that strengthens the network dynamics of our online marketplace. If we fail to continue to attract and retain our buyer base to our online marketplace, our operating results would be adversely affected. The graph below shows the percentage of GMV in each year from buyers who have participated as both buyers and consignors on our online marketplace. GMV attributable to consigning activity of such buyers is not included. Our GMV from buyers who are also consignors has increased over time due to the effectiveness of our flywheel.

Current wording

We believe there is substantial opportunity to grow our business by having buyers also become consignors and vice versa. As of December 31, 2025, 16% of our buyers during the last twelve months also consigned items, and 50% of our consignors also made purchases. We believe this approach effectively captures the flywheel effect that strengthens the network dynamics of our online marketplace. If we fail to continue to attract and retain our buyer base to our online marketplace, our operating results would be adversely affected. The graph below shows the percentage of GMV in each year from buyers who have participated as both buyers and consignors on our online marketplace. GMV attributable to consigning activity of such buyers is not included. 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.

Previous wording

Buyer acquisition cost. Our financial performance depends on effectively managing the expenses we incur to attract and retain buyers. We closely monitor our efficiency in acquiring new buyers. Our buyer acquisition cost (“BAC”) for a given period is comprised of our total advertising spend for acquiring both buyers and consignors, which is principally the cost of television, digital and direct mail advertising, divided by the number of buyers acquired in that period. We adjust or re-allocate our advertising in real-time to optimize our spend across channels, buyer demographics and geographies to improve our return on advertising spend. Our BAC has declined over time, which has been driven by improving acquisition efficiencies.

Current wording

Buyer acquisition cost. Our financial performance depends on effectively managing the expenses we incur to attract and retain buyers. We closely monitor our efficiency in acquiring new buyers. Our buyer acquisition cost (“BAC”) for a given period is comprised of our total advertising spend for acquiring both buyers and consignors, which is principally the cost of television, digital and direct mail advertising, divided by the number of buyers acquired in that period. We adjust or re-allocate our advertising in real-time to optimize our spend across channels, buyer demographics and geographies to improve our return on advertising spend. Our BAC may vary from year to year, depending upon when we choose to make more significant investments.

Previous wording

Scaling operations and technology. To support the future growth of our business, we continue to invest in physical infrastructure, technology and talent. We principally conduct our intake, authentication, merchandising and fulfillment operations in our leased authentication centers located in Arizona and New Jersey comprising an aggregate of approximately 1.4 million square feet of space. We also operate retail stores in several geographies. In addition to scaling our physical infrastructure, growing our single-SKU business operations requires that we attract, train and retain highly-skilled personnel for purposes of authentication, copywriting, merchandising, pricing and fulfilling orders. We have invested substantially in technology to automate our operations and support growth, including proprietary machine learning technology to support efficiency and quality. We continue to strategically invest in technology, as innovation positions us to scale and support growth into the future.

Current wording

Scaling operations and technology. To support the future growth of our business, we continue to invest in physical infrastructure, technology and talent. We principally conduct our intake, authentication, merchandising and fulfillment operations in our leased authentication centers located in Arizona and New Jersey comprising an aggregate of approximately 1.4 million square feet of space. We also operate retail stores in several geographies. In addition to scaling our physical infrastructure, growing our single-SKU business operations requires that we attract, train and retain highly-skilled personnel for purposes of authentication, copywriting, merchandising, pricing and fulfilling orders. We have invested substantially in technology to automate our operations and support growth. We have continued to elevate our authentication operations through the combination of technology, our proprietary data, and artificial intelligence capabilities to support efficiency and quality. We continue to strategically invest in technology, as innovation positions us to scale and support growth into the future.

Previous wording

GMV represents the total amount paid for goods across our online marketplace in a given period. We do not reduce GMV to reflect product returns or order cancellations, which totaled 24.4%, 26.4%, and 26.5% of GMV in 2024, 2023, and 2022, respectively. GMV includes amounts paid for both consigned goods and our inventory net of platform-wide discounts and excludes the effect of buyer incentives, shipping fees and sales tax. Platform-wide discounts are made available to all buyers on the online marketplace, and impact commissions paid to consignors. Buyer incentives apply to specific buyers and consist of coupons or promotions that offer credits in connection with purchases on our platform. In addition to revenue, we believe this is an important measure of the scale and growth of our online marketplace and a key indicator of the health of our consignor ecosystem. We monitor trends in GMV to inform budgeting and operational decisions to support and promote growth in our business and to monitor our success in adapting our business to meet the needs of our consignors and buyers. While GMV is the primary driver of our revenue, it is not a proxy for revenue or revenue growth (see Note 2—Summary of Significant Accounting Policies—Revenue Recognition—Consignment Revenue).

Current wording

GMV represents the total amount paid for goods across our online marketplace in a given period. We do not reduce GMV to reflect product returns or order cancellations, which totaled 24.2%, 24.4% and 26.4% of GMV in 2025, 2024 and 2023, respectively. GMV includes amounts paid for both consigned goods and our inventory net of platform-wide discounts and excludes the effect of buyer incentives, shipping fees and sales tax. Platform-wide discounts are made available to all buyers on the online marketplace, and impact commissions paid to consignors. Buyer incentives apply to specific buyers and consist of coupons or promotions that offer credits in connection with purchases on our platform. In addition to revenue, we believe this is an important measure of the scale and growth of our online marketplace and a key indicator of the health of our consignor ecosystem. We monitor trends in GMV to inform budgeting and operational decisions to support and promote growth in our business and to monitor our success in adapting our business to meet the needs of our consignors and buyers. While GMV is the primary driver of our revenue, it is not a proxy for revenue or revenue growth (see Note 2—Summary of Significant Accounting Policies—Revenue Recognition—Consignment Revenue).

Previous wording

Shipping services revenue is generated from shipping fees we charge to buyers for outbound shipping and handling activities related to delivering purchased items to our buyers. We also generate shipping services revenue fromthe shipping fees for consigned products returned by our buyers to us within policy. We recognize shipping services revenue over time as the shipping activity occurs. Shipping services revenue excludes the effect of buyer incentives and sales tax.

Current wording

Shipping services revenue is generated from shipping fees we charge to buyers for outbound shipping and handling activities related to delivering purchased items to our buyers. We also generate shipping services revenue fromthe shipping fees for consigned products returned by our buyers to us within policy. We recognize shipping services revenue over time as the shipping activity occurs, net of immaterial buyer incentives. Shipping services revenue excludes the effect of sales tax.

Previous wording

Take rate is a key driver of our revenue and provides comparability to other marketplaces. The numerator used to calculate our take rate is equal to net consignment sales and the denominator is equal to the numerator plus consignor commissions. Net consignment sales represent the value of sales from consigned goods net of platform-wide discounts less consignor commission, product returns and order cancellations. We exclude direct revenue from our calculation of take rate because direct revenue represents the sale of inventory owned by us, which costs are included in cost of direct revenue. Our take rate reflects the high level of service that we provide to our consignors across multiple touch points and the consistently high velocity of sales for their goods. In November 2022, we updated our take rate structure with the goals of optimizing take rate, limiting consignment of lower value items, and increasing supply of higher value items. We continue to assess our take rate structure and may implement further changes in the future.

Current wording

Take rate is a key driver of our revenue and provides comparability to other marketplaces. The numerator used to calculate our take rate is equal to net consignment sales and the denominator is equal to the numerator plus consignor commissions. Net consignment sales represent the value of sales from consigned goods net of platform-wide discounts less consignor commission, product returns and order cancellations. We exclude direct revenue from our calculation of take rate because direct revenue represents the sale of inventory owned by us, which costs are included in cost of direct revenue. Our take rate reflects the high level of service that we provide to our consignors across multiple touch points and the consistently high velocity of sales for their goods. We continue to assess our take rate structure and may implement further changes in the future.

Previous wording

Average order value (“AOV”) means the average value of all orders placed across our online marketplace and retail stores, excluding the effect of buyer incentives, shipping fees and sales taxes. Our focus on luxury goods across multiple categories drives a consistently strong AOV. Our AOV reflects both the average price of items sold as well as the number of items per order. Our AOV is a key driver of our operating leverage.

Current wording

AOV means the average value of all orders placed across our online marketplace and retail stores, excluding the effect of buyer incentives, shipping fees and sales taxes. Our focus on luxury goods across multiple categories drives a consistently strong AOV. Our AOV reflects both the average price of items sold as well as the number of items per order. Our AOV is a key driver of our operating leverage.

Previous wording

•Shipping services revenue. We generate shipping services revenue from the outbound shipping and handling fees we charge when delivering purchased items to our buyers. We also generate shipping services revenue from the shipping fees for consigned products returned by our buyers to us within policy. We recognize shipping services revenue over time as the shipping activity occurs. Shipping services revenue excludes the effect of buyer incentives and sales tax.

Current wording

•Shipping services revenue. We generate shipping services revenue from the outbound shipping and handling fees we charge when delivering purchased items to our buyers. We also generate shipping services revenue from the shipping fees for consigned products returned by our buyers to us within policy. We recognize shipping services revenue over time as the shipping activity occurs, net of immaterial buyer incentives. Shipping services revenue excludes the effect of sales tax.

Previous wording

Shipping services revenue increased by $7.9 million, or 15%, in 2024 compared to 2023 primarily due to an increase in the standard shipping fee per order.

Current wording

Shipping services revenue increased by $3.4 million, or 5%, in 2025 compared to 2024 primarily due to a 7% increase in the number of orders in the year ended December 31, 2025.

Previous wording

Consignment revenue gross margin increased by 262 basis points in the year ended December 31, 2024 compared to the year ended December 31, 2023, driven by the improvement in take rate and the reduction in overhead costs.

Current wording

Consignment revenue gross margin increased by 81 basis points in the year ended December 31, 2025 compared to the year ended December 31, 2024, driven by the increase in consignment revenue and increased operational efficiencies.

Previous wording

Cost of direct revenue decreased by $18.5 million, or 25%, in 2024 compared to 2023. The decrease was primarily attributable to the 18% decrease in direct revenue compared to the prior year as a result of our planned actions to rebalance vendor-purchased company-owned inventory.

Current wording

Cost of direct revenue increased by $14.9 million, or 27%, in 2025 compared to 2024. The increase was primarily attributable to the increase in direct revenue compared to the prior year, partially offset by improved sell-through and less discounting.

Previous wording

Our total gross margin increased by 603 basis points in the year ended December 31, 2024 compared to the year ended December 31, 2023 primarily driven by the increase in higher margin consignment revenue and decrease in lower margin direct revenue. Gross margin may vary from period to period.

Current wording

Our total gross margin remained flat in the year ended December 31, 2025 compared to the year ended December 31, 2024. Gross margin may vary from period to period.

Previous wording

As a percentage of revenue, marketing expense decreased to 9% in 2024 from 11% and 2023. 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 percentage of revenue, marketing expense remained flat at 9% in 2025 and 2024. These expenses may vary from period to period as a percentage of revenue, depending primarily upon our marketing investments.

Previous wording

As a percentage of revenue, operations and technology expense decreased to 43% in 2024 from 47% in 2023 due to an increase in consignment revenue. 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 percentage of revenue, operations and technology expense decreased to 40% in 2025 from 43% in 2024 due to an increase in consignment revenue and improved operating efficiencies in our authentication centers. 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 $3.9 million, or 2%, in 2024 compared to 2023. The increase was primarily due to increased employee compensation related expenses due to an increase in headcount compared to the prior period.

Current wording

Selling, general and administrative expense increased by $13.9 million, or 7%, in 2025 compared to 2024. The increase was primarily due to increased employee costs, primarily offset by a decrease in legal fees.

Previous wording

As a percentage of revenue, selling, general and administrative decreased to 31% in 2024 from 33% in 2023. 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 percentage of revenue, selling, general and administrative decreased to 29% in 2025 from 31% in 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 fair value of warrant liability increased by $68.2 million, or 100% in 2024 compared to 2023. 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 (as defined below) in February 2024. The change was due to the unrealized loss on the change in fair value of the warrant liability from the issuance date to December 31, 2024 (See Note 6 — Non-convertible Notes, Net).

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 year ended December 31, 2025, we incurred a loss of $35.8 million due to the increase in the fair value of the warrants outstanding at December 31, 2025. The increase in the fair value of the warrant liability was primarily driven by an increase in the Company’s stock price during the period, which resulted in a higher valuation of the warrants.

Previous wording

Gain on extinguishment of debt increased by $4.2 million, or 100% in 2024 compared to 2023. The increase was due to the gain recorded from the extinguishment of the Exchanged Notes (as defined below) and the issuance of the 2029 Notes (See Note 6 — Non-convertible Notes, Net).

Current wording

Gain on extinguishment of debt increased by $36.6 million, or over 100% in 2025 compared to 2024. The increase was due to the gain recorded from the extinguishment of the 2025 Exchanged Notes (as defined below) and the issuance of the 2031 Notes during the year ended December 31, 2025 (See Note 7 — Convertible Senior Notes, Net).

Previous wording

Interest income decreased by $0.9 million, or 10%, in the year ended December 31, 2024 compared to the year ended December 31, 2023 due to lower average cash balances.

Current wording

Interest income decreased by $3.7 million, or 46%, in the year ended December 31, 2025 compared to the year ended December 31, 2024 due to lower average cash balances.

Previous wording

As of December 31, 2024, we had cash and cash equivalents of $172.2 million and an accumulated deficit of $1,253.8 million. We had restricted cash of $14.9 million as of December 31, 2024, consisting of cash deposited with a financial institution as collateral for our letters of credit, facility leases and credit cards. Since our inception, we have generated negative cash flows from operations and have primarily financed our operations through equity and convertible debt financings. In July 2019, we received net proceeds of $315.5 million upon completion of our IPO on July 2, 2019. In June 2020, we received net proceeds of $143.3 million from the issuance of our 2025 Notes and the related capped call transactions. In March 2021, we received net proceeds of $244.5 million from our 2028 Notes and the related capped call transactions. In February 2024, we exchanged $145.8 million of the 2025 Notes and $6.5 million of the 2028 Notes for $135.0 million in aggregate principal amount of the 2029 Notes (the “2024 Note Exchange”). As a result of the 2024 Note Exchange, we significantly extended the average maturity date of our outstanding indebtedness (see Note 6 - Non-convertible Notes, Net).

Current wording

In July 2019, we received net proceeds of $315.5 million upon completion of our IPO on July 2, 2019. In June 2020, we received net proceeds of $143.3 million from the issuance of our 2025 Notes and the related capped call transactions. In March 2021, we received net proceeds of $244.5 million from our 2028 Notes and the related capped call transactions. In February 2024, we exchanged $145.8 million of our 2025 Notes and $6.5 million of our 2028 Notes for $135.0 million in aggregate principal amount of the 2029 Notes (the "2024 Note Exchange") (see Note 6 — Non-convertible Notes, Net). In February 2025, we exchanged $183.3 million aggregate principal amount of the 2028 Notes for $146.7 million aggregate principal amount of our 2031 Notes (the "February 2025 Note Exchange") (see Note 7 — Convertible Senior Notes, Net). In June 2025, the 2025 Notes matured, and the Company repaid the outstanding principal amount and accrued interest in full. The total cash payment upon maturity was $27.2 million, which included the outstanding principal amount and accrued interest through the maturity date. In August 2025, we exchanged $49.5 million aggregate principal amount of the 2028 Notes for $43.4 million aggregate principal amount of additional 2031 Notes (the "August 2025 Note Exchange") (see Note 7 — Convertible Senior Notes, Net). As a result of the 2024 Note Exchange and the 2025 Note Exchanges, we significantly extended the average maturity date of our outstanding indebtedness.

Previous wording

We expect that operating losses and negative cash flows from operations could continue in the foreseeable future. We believe our existing cash and cash equivalents as of December 31, 2024 will be sufficient to meet our working capital and capital expenditures needs for at least the next 12 months.

Current wording

We expect that operating losses from operations may continue in the foreseeable future. We believe our existing cash and cash equivalents as of December 31, 2025 will be sufficient to meet our working capital and capital expenditures needs for at least the next 12 months.

Previous wording

Net Cash Provided by Financing Activities

Current wording

Net Cash Provided by Operating Activities

Previous wording

During 2024, net cash provided by operating activities was $26.8 million, which consisted of a net loss of $134.2 million, adjusted by non-cash charges of $158.2 million and cash inflows due to a net change of $2.8 million in our operating assets and liabilities. The net change in our operating assets and liabilities was primarily the result of cash inflows due to an increase of $11.5 million in consignor payables and an increase of $13.1 million in other accrued and current liabilities, partially offset by cash outflows due to a decrease of $20.9 million in operating lease liabilities. Our primary uses of cash in operating activities include operating costs such as operating lease obligations, compensation and benefits, marketing, and other expenditures necessary to support our business growth.

Current wording

During 2025, net cash provided by operating activities was $37.0 million, which consisted of a net loss of $41.8 million, adjusted by $88.1 million of non-cash inflows and cash outflows due to a net change of $9.3 million in our operating assets and liabilities. The net change in our operating assets and liabilities was primarily the result of cash outflows due to a decrease of $22.2 million in operating lease liabilities, an increase of $12.5 million in accounts receivable, and an increase of $9.5 million in inventory, partially offset by cash inflows due to an increase of $21.8 million in consignor payables and an increase of $12.7 million in other accrued and current liabilities. Our primary uses of cash in operating activities include operating costs such as operating lease obligations, compensation and benefits, marketing, and other expenditures necessary to support our business growth.

Previous wording

During 2024, net cash used in investing activities was $25.6 million, which consisted of $14.2 million for purchases of property and equipment, net, including leasehold improvements, and $11.8 million for capitalized proprietary software costs.

Current wording

During 2025, net cash used in investing activities was $29.2 million, which primarily consisted of $18.6 million for purchases of property and equipment, net, including leasehold improvements, and $12.9 million for capitalized proprietary software costs.

Previous wording

During 2024, net cash used in financing activities was $4.8 million, which primarily consisted of cash outflows of $5.3 million for debt issuance costs related to the 2024 Note Exchange and $1.6 million of taxes related to restricted stock units vesting, partially offset by $1.4 million of proceeds from the issuance of common stock related to the Company's employee stock purchase plan.

Current wording

During 2025, net cash used in financing activities was $28.9 million, which primarily consisted of cash outflows of a $26.7 million repayment of our 2025 Notes and a $6.6 million payment for debt issuance costs related to the 2025 Note Exchanges, partially offset by $1.9 million cash received due to settlement of Capped Calls in conjunction with the 2025 Note Exchanges.

Previous wording

On February 10, 2025, pursuant to the 2025 Notes Exchange, we issued $146.7 million in aggregate principal amount of our 2031 Notes in exchange for $183.3 million in aggregate principal amount of our 2028 Notes.

Current wording

In connection with the February 2025 Note Exchange, on February 10, 2025, we entered into private, separately negotiated transactions and issued $146.7 million in aggregate principal amount of our 2031 Notes in exchange for $183.3 million in aggregate principal amount of our 2028 Notes.

Previous wording

As of December 31, 2024, we had 2025 Notes outstanding in an aggregate principal amount of $26.7 million and 2028 Notes outstanding in an aggregate principal amount of $281.0 million. A portion of the net proceeds from the sale of the 2025 Notes and the 2028 Notes was used to fund the net cost of entering into the capped call transactions described below.

Current wording

As of December 31, 2025, we had 2028 Notes outstanding in an aggregate principal amount of $48.2 million. As a result of the 2025 Note Exchanges, as of December 31, 2025, we had 2031 Notes outstanding in an aggregate principal amount of $190.1 million (together, the "Convertible Senior Notes"). A portion of the net proceeds from the sale of the 2028 Notes was used to fund the net cost of entering into the capped call transactions described below. We did not receive any cash proceeds from the issuance of the 2031 Notes in the 2025 Note Exchanges.

Previous wording

The 2025 Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at the Company’s election, at an initial conversion rate of 56.2635 shares of our common stock per $1,000 principal amount of the 2025 Notes, which is equivalent to an initial conversion price of approximately $17.77 per share of our common stock. The initial conversion price of the 2025 Notes represents a premium of approximately 27.5% over the $13.94 closing price of our common stock on June 10, 2020. The 2028 Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at the Company’s election, at an initial conversion rate of 31.4465 shares of our common stock per $1,000 principal amount of the 2028 Notes, which is equivalent to an initial conversion price of approximately $31.80 per share of our common stock. The initial conversion price of the notes represents a premium of approximately 32.5% over the $24.00 closing price of our common stock on March 3, 2021.

Current wording

The 2028 Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at the Company’s election, at an initial conversion rate of 31.4465 shares of our common stock per $1,000 principal amount of the 2028 Notes, which is equivalent to an initial conversion price of approximately $31.80 per share of our common stock. The 2031 Notes are convertible into cash, shares of our common stock or a combination of cash and shares of our common stock, at the Company’s election, at an initial conversion rate of 95.5795 shares of common stock per $1,000 principal amount, which is equivalent to an initial conversion price of approximately $10.46 per share of our common stock.

Previous wording

In connection with the the 2025 Notes and the 2028 Notes, we entered into privately negotiated capped call transactions, with certain of the initial purchasers or their affiliates. The capped call transactions cover, subject to anti-dilution adjustments, the number of shares of common stock underlying the 2025 Notes and the 2028 Notes sold in the offering. The capped call transactions are generally expected to reduce potential dilution to our common stock upon any conversion of the notes and/or offset any cash payments we are required to make in excess of the principal amount of the 2025 Notes and the 2028 Notes, as the case may be, with such reduction and/or offset subject to a cap. The cap price of the capped call transactions related to the 2025 Notes was initially $27.88 per share, which represents a premium of 100.0% over the closing price of our common stock of $13.94 per share on June 10, 2020, and is subject to certain adjustments under the terms of the capped call transactions. The cap price of the capped call transactions related to the 2028 Notes was initially $48.00 per share, which represents a premium of 100.0% over the closing price of our common stock of $24.00 per share on March 3, 2021, and is subject to certain adjustments under the terms of the capped call transactions.

Current wording

In connection with the issuance of the 2028 Notes, we entered into privately negotiated capped call transactions, with certain of the initial purchasers or their affiliates. The capped call transactions cover, subject to anti-dilution adjustments, the number of shares of common stock underlying the 2028 Notes sold in the offering. The capped call transactions are generally expected to reduce potential dilution to our common stock upon any conversion of the notes and/or offset any cash payments we are required to make in excess of the principal amount of the converted 2028 Notes, as the case may be, with such reduction and/or offset subject to a cap. The cap price of the capped call transactions related to the 2028 Notes was initially $48.00 per share, which represents a premium of 100.0% over the closing price of our common stock of $24.00 per share on March 3, 2021, and is subject to certain adjustments under the terms of the capped call transactions.

Previous wording

For additional details related to our Convertible Senior Notes, please see “Note 7 – Convertible Senior Notes, Net” and "Note 17 — Subsequent Events" to the financial statements included in this report.

Current wording

For additional details related to our Convertible Senior Notes and the 2025 Note Exchanges, please see “Note 7 – Convertible Senior Notes, Net” to the financial statements included in this report.

Previous wording

On February 29, 2024, the Company entered into exchange agreements with certain holders (the “Exchange Holders”) of its Convertible Senior Notes to exchange (i) $145.8 million in aggregate principal amount of the 2025 Notes and (ii) $6.5 million in aggregate principal amount of the 2028 Notes (together, the “Exchanged Notes”) for $135.0 million in aggregate principal amount of the Company’s 4.25%/8.75% PIK/Cash Senior Secured Notes due 2029 (the “2029 Notes”), pursuant to an indenture. The 2029 Notes bear interest at a rate of 13.00% per annum, consisting of cash interest at a rate of 8.75% per annum payable semi-annually in arrears and payment in-kind interest at a rate of 4.25% per annum payable semi-annually. The 2029 Notes will mature on the earlier of (a) March 1, 2029 and (b) any date, if any, on or after December 1, 2027 on which (a) the aggregate principal amount of the 2028 Notes then outstanding is greater than $20 million and (b) the difference between (i) the amount of unrestricted cash and cash equivalents held by the Company and its subsidiaries (if any) as of such date of determination and (ii) the aggregate principal amount of 2028 Notes outstanding as of such date of determination is less than $75 million. In connection with the 2024 Note Exchange, 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 to the holders of the Exchanged Notes at an exercise price of $1.71, subject to certain cashless exercise provisions and adjustment in accordance with the terms of the warrants (the “Warrants”) (see “Note 4 – Fair Value Measurement” to the financial statements included in this report for further details on the terms of the Warrants).

Current wording

for $135.0 million in aggregate principal amount of the Company’s 4.25%/8.75% PIK/Cash Senior Secured Notes due 2029 (the “2029 Notes”), pursuant to the 2029 Notes Indenture. The 2029 Notes bear interest at a rate of 13.00% per annum, consisting of cash interest at a rate of 8.75% per annum payable semi-annually in arrears and payment in-kind interest at a rate of 4.25% per annum payable semi-annually. The 2029 Notes will mature on the earlier of (a) March 1, 2029 and (b) any date, if any, on or after December 1, 2027 on which (a) the aggregate principal amount of the 2028 Notes then outstanding is greater than $20 million and (b) the difference between (i) the amount of unrestricted cash and cash equivalents held by the Company and its subsidiaries (if any) as of such date of determination and (ii) the aggregate principal amount of 2028 Notes outstanding as of such date of determination is less than $75 million. In connection with the 2024 Note Exchange, 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 to the holders of the Exchanged Notes at an exercise price of $1.71, subject to certain cashless exercise provisions and adjustment in accordance with the terms of the Warrants (see “Note 4 – Fair Value Measurement” to the financial statements included in this report for further details on the terms of the Warrants).

Previous wording

Adjusted EBITDA means net 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, restructuring, CEO separation benefits and transition costs, 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 loss or any other measure of financial performance calculated and presented in accordance with GAAP.

Current wording

Adjusted EBITDA means net 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, restructuring, CEO separation benefits and transition costs, gain on extinguishment of debt, change in fair value of warrant liability, legal settlements, 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 loss or any other measure of financial performance calculated and presented in accordance with GAAP.

Previous wording

(1) As of December 31, 2024, interest expense includes $4.8 million of accrued PIK interest which is a non-cash interest expense. PIK interest is added to the principal balance of the 2029 Notes semi-annually.

Current wording

(1) As of December 31, 2025 and December 31, 2024, interest expense includes $6.0 million and $4.8 million of PIK interest, respectively, which is a non-cash interest expense. PIK interest is added to the principal balance of the 2029 Notes semi-annually.

Previous wording

(3) The CEO separation benefits and transition costs for the year ended December 31, 2024 consist of severance and benefits payable to John Koryl pursuant to his separation agreement. The CEO separation benefits and transition costs for the year ended December 31, 2023 consists of retention bonuses for certain executives incurred in connection with our founder's resignation in 2022. The CEO separation benefits and transition costs for the year ended December 31, 2022 consist of separation benefits for the 2022 fiscal year, as well as general and administrative fees, including legal and recruiting expenses, as well as retention bonuses for certain executives incurred in connection with our founder's resignation on June 6, 2022.

Current wording

(2) The CEO separation benefits and transition costs for the year ended December 31, 2024 consist of severance and benefits payable to John Koryl pursuant to his separation agreement. The CEO separation benefits and transition costs for the year ended December 31, 2023 consists of retention bonuses for certain executives incurred in connection with our founder's resignation in 2022.

Previous wording

(5) Restructuring for the year ended December 31, 2023 consists of impairment of right-of-use assets and property and equipment, employee severance charges, gain on lease terminations, and other charges, including legal and transportation expenses. Restructuring for the year ended December 31, 2022 consists of employee severance payments and benefits.

Current wording

(4) Restructuring for the year ended December 31, 2023 consists of impairment of right-of-use assets and property and equipment, employee severance charges, gain on lease terminations, and other charges, including legal and transportation expenses in connection with the savings plan implemented in February 2023.