TheRealReal, Inc.

TheRealReal, Inc. Annual Report - Fiscal Year Ended December 31, 2025

For retail investors seeking a clear picture of TheRealReal's performance, this summary highlights key developments from the fiscal year ended December 31, 2025. The company has confirmed its compliance with SEC reporting requirements and the effectiveness of its internal controls, demonstrating a strong commitment to transparency.

Business Overview TheRealReal, Inc. is a leading online marketplace for authenticated, pre-owned luxury goods. The company connects consignors with buyers globally, facilitating the sale of a wide range of luxury items, including women's and men's fashion, fine jewelry, watches, and home decor. Its business model champions authenticity, sustainability, and a trusted platform for luxury resale.

Financial Performance In fiscal year 2025, TheRealReal reported approximately $520 million in total revenue, a 12% increase year-over-year. This growth was primarily driven by a 12% increase in Gross Merchandise Volume (GMV) to $1.8 billion. While revenue grew, the company continued its focus on profitability, reporting a net loss of $75 million. This marks a substantial improvement from the $110 million net loss in 2024, largely due to enhanced operational efficiencies and a higher take-rate on sales. The gross profit margin also improved to 65%, up from 62% in the prior year, reflecting better inventory management and pricing strategies.

Financial Health The company ended the year with $150 million in cash and cash equivalents, maintaining stable liquidity. In 2025, TheRealReal successfully exchanged approximately $120 million in debt. This involved converting existing convertible notes into new ones with longer maturities and more favorable interest rates. These transactions significantly reduced near-term debt obligations and improved the company's financial flexibility.

Management Discussion & Analysis (MD&A) Highlights TheRealReal's 2025 strategy focused on achieving sustainable profitability through several key initiatives:

• Operational Efficiency: Streamlining authentication and fulfillment processes to reduce costs per item.
• Customer Experience: Investing in technology to improve the seller consignment experience and buyer engagement.
• Category Expansion: Exploring new luxury categories and services to broaden market appeal.
• Brand Partnerships: Strengthening relationships with luxury brands for direct consignment programs.

Key events impacting operations and financial results included:

• Debt Management: The successful debt exchanges, as detailed in the "Financial Health" section.
• Authentication Center Fire Incident: A fire incident occurred at the Secaucus, New Jersey authentication center in early 2025, following a smaller incident in late 2024. Operations were temporarily disrupted, and some inventory was damaged. However, $15 million in insurance recoveries largely mitigated the financial impact. The company has since implemented enhanced safety protocols and diversified its operational footprint to minimize future risks.

Risk Factors TheRealReal faces ongoing risks, including intense competition in the luxury resale market, potential economic downturns affecting consumer spending on luxury goods, challenges in maintaining authentication accuracy at scale, and reliance on third-party logistics providers. Attracting and retaining consignors and buyers is also critical for continued growth. A class-action lawsuit from 2022, related to authentication practices, remains ongoing. While the company vigorously defends itself, it has recorded a $5 million contingency reserve for potential legal costs or settlement. The ultimate outcome and financial impact remain uncertain.

Competitive Position The luxury resale market is highly competitive and fragmented. Competitors range from other online consignment platforms and marketplaces to traditional brick-and-mortar consignment stores, peer-to-peer selling sites, and direct-to-consumer resale programs from luxury brands. TheRealReal differentiates itself through its rigorous authentication process, extensive brand relationships, established logistics infrastructure, and a large, engaged community of luxury buyers and consignors. Its scale and data insights also provide a competitive advantage in pricing and inventory management.

Future Outlook Looking ahead to 2026, TheRealReal aims to continue its path toward profitability by further optimizing operations, expanding its customer base, and leveraging its brand reputation in the luxury resale market. The company anticipates continued revenue growth, though potentially at a moderated pace, as it prioritizes margin expansion and cash flow generation.