Q2 Total Revenue Increased 51% Year over Year to $71.0 millionQ2 Gross Merchandise Value Increased 40% Year over Year to $228.5 million

SAN FRANCISCO, Aug. 13, 2019 (GLOBE NEWSWIRE) -- The RealReal (Nasdaq: REAL)--the world’s largest online marketplace for authenticated, consigned luxury goods--today reported financial results for its second quarter ended June 30, 2019.

Second Quarter Financial Highlights

-- Gross Merchandise Volume (GMV) increased $65.5 million to $228.5 million, up 40% year over year. -- Total Revenue increased $24.0 million to $71.0 million, up 51% year over year. -- Consignment and Service Revenue increased $18.5 million to $60.7 million, up 44% year over year. -- Direct Revenue increased $5.5 million to $10.3 million, up 114% year over year. -- Gross Profit increased $15.3 million to $46.1 million, up 50% year over year. -- Adjusted EBITDA was $(20.9) million or (29.4%) of total revenue. -- GAAP basic and diluted net loss per share was ($2.83). -- Non-GAAP diluted net loss per share was ($2.50). Assuming the pro-forma share count is the outstanding common shares immediately after the IPO, Non-GAAP diluted net loss per share was ($0.28). -- Free cash flow was ($32.1) million. -- At the end of the second quarter, cash, cash equivalents and short-term investments totaled $66.7 million. Our IPO raised $320.9 million in net proceeds after deducting underwriting discounts and commissions. Inclusive of the IPO net proceeds, our pro-forma cash balance was $387.6 million at the end of the second quarter. -- The RealReal’s Registration Statement was declared effective on June 27, 2019. Our IPO closed on July 2, 2019.

“We are thrilled to report our first quarter as a public company. We generated 51% year-over-year revenue growth and 40% year-over-year GMV growth while driving marketing leverage and making progress with key strategic initiatives,” said Julie Wainwright, CEO and founder. “As we continue to unlock supply, invest in our technology platform, and instill trust in our marketplace, we are revolutionizing luxury resale and delivering tremendous value to our consignors and buyers.”

Other Second Quarter Highlights

-- Trailing twelve months active buyers reached 492,440, up 40% year over year. -- Orders reached 504,820, up 40% year over year. -- Average Order Value was $452.61 compared to $453.32 in the second quarter of 2018. -- Take Rate increased 110bps year over year to 36.6%. -- GMV from repeat buyers was 83.1% compared to 82.9% in the second quarter of 2018.

3Q and 2019 Financial OutlookBased on information available as of Aug. 13, 2019, we are providing the following financial guidance for the third quarter and full year 2019.

(In Millions) Third Quarter 2019 Full Year 2019 Expected GMV range $233mn - $239mn $974mn - $988mn Expected EBITDA Margin range (30%) - (28%) (25%) - (24%)

Webcast and Conference CallThe RealReal will host a conference call and webcast to discuss its second quarter 2019 financial results today at 2 p.m. (PDT). Investors and participants can access the call by dialing (866) 996-5385 in the U.S. and (270) 215-9574 internationally. The passcode for the conference line is 9864827. The call will also be available via live webcast at investor.therealreal.com along with supporting slides. An archive of the webcast conference call will be available shortly after the call ends. The archived webcast will be available at investor.therealreal.com

About The RealReal, Inc. The RealReal is the world’s largest online marketplace for authenticated, consigned luxury goods. With an expert behind every item, we provide a safe and reliable platform for consumers to buy and sell their luxury items. We have 100+ in-house gemologists, horologists and brand authenticators who inspect thousands of items available online each day. As a sustainable company, we give new life to pieces by brands from Gucci to Cartier, and hundreds more, supporting the circular economy. We make consigning effortless with free in-home pickup, drop-off service and direct shipping for both individual consignors and estates. At our stores in Los Angeles as well as SoHo and the Upper East Side NYC, customers can shop and consign and meet with our experts to learn more about luxury authenticity and sustainability. At our 11 Luxury Consignment Offices, three of which are located in our retail stores, our expert staff provides free valuations for high-value pieces.

Investor Relations Contact:Paul BieberHead of Investor Relationspaul.bieber@therealreal.com

Press Contact:Erin SantyHead of Communicationspr@therealreal.com

Forward Looking StatementsThis press release contains forward-looking statements within the meaning of federal and state securities laws. All statements other than statements of historical fact contained in this press release, including statements regarding the strength of our product offering, the expansion of our logistics network, our future results of operations and financial position, our business strategy and our plans and objectives of management for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as "may," "will," "should," "expects," "plans," "anticipates," "could," "intends," "target," "projects," "contemplates," "believes," "estimates," "predicts," "potential" or "continue" or the negative of these terms or other similar expressions. Forward-looking statements are based on current expectations of future events. We cannot guarantee that any forward-looking statement will be accurate, although we believe that we have been reasonable in our expectations and assumptions. Investors should realize that if underlying assumptions prove inaccurate or that known or unknown risks or uncertainties materialize, actual results could vary materially from our expectations and projections. Investors are therefore cautioned not to place undue reliance on any forward-looking statements. These forward-looking statements speak only as of the date of this press release and, except as required by applicable law, we undertake no obligation to publicly update or revise any forward-looking statements contained herein, whether as a result of any new information, future events or otherwise. A list and description of risks, uncertainties and other factors that could cause or contribute to differences in our results can be found in our filings with the Securities and Exchange Commission, including our S-1 filing. We qualify all of our forward-looking statements by these cautionary statements.

Non-GAAP Financial MeasuresTo supplement our unaudited and condensed financial statements presented in accordance with generally accepted accounting principles ("GAAP"), this earnings release and the accompanying tables and the related earnings conference call contain certain non-GAAP financial measures, including Adjusted EBITDA, Adjusted EBITDA as a percentage of total net revenue ("Adjusted EBITDA Margin"), free cash flow and non-GAAP net loss and diluted net loss per share. We have provided a reconciliation of these non-GAAP financial measures to the most directly comparable GAAP financial measure in this earnings release.

We do not, nor do we suggest that investors should, consider such non-GAAP financial measures in isolation from, or as a substitute for, financial information prepared in accordance with GAAP. Investors should also note that non-GAAP financial measures we use may not be the same non-GAAP financial measures, and may not be calculated in the same manner, as that of other companies, including other companies in our industry.

Adjusted EBITDA is a key performance measure that our management uses to assess our operating performance. Because Adjusted EBITDA facilitates internal comparisons of our historical operating performance on a more consistent basis, we use this measure as an overall assessment of our performance, to evaluate the effectiveness of our business strategies and for business planning purposes. Adjusted EBITDA may not be comparable to similarly titled metrics of other companies.

We calculate Adjusted EBITDA as net loss before net interest expense, income tax provision, depreciation and amortization, and remeasurement of preferred stock warrant liability included in other expense, further adjusted to exclude stock-based compensation, and certain one-time expenses. 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.

In particular, the exclusion of certain expenses in calculating Adjusted EBITDA and Adjusted EBITDA Margin facilitates operating performance comparisons on a period-to-period basis and, in the case of exclusion of the impact of equity-based compensation and related taxes, excludes an item that we do not consider to be indicative of our core operating performance. Investors should, however, understand that equity-based compensation will be a significant recurring expense in our business and an important part of the compensation provided to our employees. Accordingly, we believe that Adjusted EBITDA and Adjusted EBITDA Margin provide useful information to investors and others in understanding and evaluating our operating results in the same manner as our management and board of directors.

Free cash flow is a non-GAAP financial measure that is calculated as net cash (used in) provided by operating activities less net cash used to purchase property and equipment and capitalized proprietary software development costs. We believe free cash flow is an important indicator of our business performance, as it measures the amount of cash we generate. Accordingly, we believe that free cash flow provides useful information to investors and others in understanding and evaluating our operating results in the same manner as our management.

Non-GAAP diluted net loss per share is a non-GAAP financial measure that is calculated as GAAP net loss plus equity-based compensation expense and related taxes, (benefit from) provision for income taxes, and nonrecurring items divided by weighted average shares. We believe that adding back equity-based compensation expense and related taxes and (benefit from) provision for income taxes, and non-recurring items as adjustments to our GAAP diluted net loss, before calculating per share amounts for all periods presented provides a more meaningful comparison between our operating results from period to period.

THE REALREAL, INC. Statements of Operations (in thousands, except share and per share data) (unaudited) Three Months Ended June 30, Six Months Ended June 30, ---------------------------- ---------------------------- 2019 2018 2019 2018 ------------- ------------- ------------- ------------- Revenue: Consignment and service revenue $ 60,713 $ 42,178 $ 116,950 $ 83,177 Direct revenue 10,263 4,807 23,281 10,267 - --------- - - --------- - - --------- - - --------- - Total revenue 70,976 46,985 140,231 93,444 - --------- - - --------- - - --------- - - --------- - Cost of revenue: Cost of consignment and service revenue 17,200 12,349 33,147 23,926 Cost of direct revenue 7,726 3,857 18,652 8,134 - --------- - - --------- - - --------- - - --------- - Total cost of revenue 24,926 16,206 51,799 32,060 - --------- - - --------- - - --------- - - --------- - Gross profit 46,050 30,779 88,432 61,384 - --------- - - --------- - - --------- - - --------- - Operating expenses (1): Marketing 11,715 9,276 23,448 18,910 Operations and technology 34,320 22,997 65,865 44,329 Selling, general and administrative 25,355 14,377 47,674 27,901 - --------- - - --------- - - --------- - - --------- - Total operating expenses 71,390 46,650 136,987 91,140 - --------- - - --------- - - --------- - - --------- - Loss from operations (25,340 ) (15,871 ) (48,555 ) (29,756 ) Interest income 610 81 1,015 165 Interest expense (380 ) (526 ) (511 ) (723 ) Other expense, net (1,706 ) (1,279 ) (1,987 ) (1,387 ) - --------- - - --------- - - --------- - - --------- - Loss before provision for income taxes (26,816 ) (17,595 ) (50,038 ) (31,701 ) Provision for income taxes 59 — 59 — - --------- - - --------- - - --------- - - --------- - Net loss $ (26,875 ) $ (17,595 ) $ (50,097 ) $ (31,701 ) - --------- - - --------- - - --------- - - --------- - Accretion of redeemable convertible preferred stock to redemption value — $ (1,342 ) $ (3,355 ) $ (2,451 ) - --------- - - --------- - - --------- - - --------- - Net loss attributable to common stockholders $ (26,875 ) $ (18,937 ) $ (53,452 ) $ (34,152 ) - --------- - - --------- - - --------- - - --------- - Net loss per share attributable to common stockholders, basic and diluted $ (2.83 ) $ (2.28 ) $ (5.87 ) $ (4.11 ) - --------- - - --------- - - --------- - - --------- - Shares used to compute net loss per share attributable to common stockholders, basic and diluted 9,494,447 8,314,251 9,102,234 8,307,010 - --------- - - --------- - - --------- - - --------- - (1) Includes stock-based compensation as follows: Marketing 74 39 143 72 Operating and technology 476 263 966 536 Selling, general and administrative (2) 737 379 2,107 618 - --------- - - --------- - - --------- - - --------- - Total 1,287 681 3,216 1,226 - --------- - - --------- - - --------- - - --------- - (2) Includes compensation expense related to stock sales by current and former employees in March 2019.

THE REALREAL, INC. Condensed Balance Sheets (in thousands, except share and per share data) (unaudited) June 30, December 31, 2019 2018 ------------ ------------ Assets Current assets Cash and cash equivalents $ 53,314 $ 34,393 Short-term investments 13,372 27,131 Accounts receivable 9,517 7,571 Inventory, net 12,664 10,355 Prepaid expenses and other current assets 10,563 9,696 - -------- - - -------- - Total current assets 99,430 89,146 Property and equipment, net 40,427 33,286 Restricted cash 11,700 11,234 Other assets 6,573 1,751 Total assets $ 158,130 $ 135,417 - -------- - - -------- - Liabilities, Redeemable Convertible Preferred Stock, Convertible Preferred Stock and Stockholders’ Deficit Current liabilities Accounts payable $ 4,469 $ 5,149 Accrued consignor payable 33,404 35,259 Other accrued and current liabilities 42,475 41,956 Long-term debt, current portion 6,498 5,990 - -------- - - -------- - Total current liabilities 86,846 88,354 Long-term debt, net of current portion — 3,249 Other noncurrent liabilities 10,076 7,304 - -------- - - -------- - Total liabilities 96,922 98,907 - -------- - - -------- - Commitments and contingencies Redeemable convertible preferred stock, $0.00001 par value; 37,403,946 and 31,053,601 shares authorized as of June 30, 2019 and December 31, 2018, respectively; 37,403,946 and 31,053,601 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively 198,228 151,381 Convertible preferred stock $0.00001 par value; 77,781,921 and 73,950,153 shares authorized as of June 30, 2019 and December 31, 2018, respectively; 77,556,411 and 73,724,645 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively 169,102 142,819 Stockholders’ deficit: Common stock, $0.00001 par value; 155,649,887 and 145,467,774 shares authorized as of June 30, 2019 and December 31, 2018, respectively; 9,701,266 and 8,593,077 shares issued and outstanding as of June 30, 2019 and December 31, 2018, respectively 1 — Additional paid-in capital 1,729 — Accumulated comprehensive income (loss) 5 (25 ) Accumulated deficit (307,857 ) (257,665 ) - -------- - - -------- - Total stockholders’ deficit (306,122 ) (257,690 ) - -------- - - -------- - Total liabilities, redeemable convertible preferred stock, convertible preferred stock and stockholders’ deficit $ 158,130 $ 135,417 - -------- - - -------- -

THE REALREAL, INC. Condensed Statements of Cash Flows (unaudited) Six Months Ended June 30, ------------------------ 2019 2018 ----------- ----------- Cash flows from operating activities: Net loss $ (50,097 ) $ (31,701 ) Adjustments to reconcile net loss to cash used in operating activities: Depreciation and amortization 5,993 4,136 Stock-based compensation expense 2,397 1,226 Change in fair value of convertible note derivative liability — 1,248 Bad debt expense 681 333 Compensation expense related to stock sales by current and former employees 819 — Change in fair value of convertible preferred stock warrant liability 2,100 183 Accrued interest on convertible notes — 223 Accretion of unconditional endowment grant liability 44 53 Accretion of debt discounts 9 97 Amortization of premiums on short-term investments 42 15 Changes in operating assets and liabilities: Accounts receivable (2,627 ) 918 Inventory, net (2,309 ) (1,453 ) Prepaid expenses and other current assets (867 ) (3,913 ) Other assets 411 70 Accounts payable 157 (1,480 ) Accrued consignor payable (1,855 ) (3,872 ) Other accrued and current liabilities (1,744 ) 4,516 Other noncurrent liabilities 672 695 - ------- - - ------- - Net cash used in operating activities (46,174 ) (28,706 ) Cash flow from investing activities: Purchases of investments (9,151 ) (2,211 ) Proceeds from maturities of short-term investments 22,898 7,600 Proceeds from sale of short-term investments — 7,023 Capitalized proprietary software development costs (3,887 ) (2,245 ) Purchases of property and equipment (10,042 ) (4,164 ) - ------- - - ------- - Net cash (used in) provided by investing activities (182 ) 6,003 Cash flow from financing activities: Proceeds from issuance of redeemable convertible preferred stock, net of issuance 43,492 86,640 costs Proceeds from issuance of convertible preferred stock, net of issuance costs 26,283 — Proceeds from issuance convertible notes, net of issuance costs — 14,273 Proceeds from exercise of stock options and common stock warrants 1,774 63 Payment of deferred offering costs (3,056 ) — Issuance cost paid related to conversion of convertible notes — (545 ) Repayment of debt (2,750 ) (1,500 ) - ------- - - ------- - Net cash provided by financing activities 65,743 98,931 - ------- - - ------- - Net increase in cash, cash equivalents and restricted cash 19,387 76,228 Cash, cash equivalents, and restricted cash Beginning of period 45,627 20,660 End of period $ 65,014 $ 96,888 - ------- - - ------- -

The following table reflects the reconciliation of net loss to Adjusted EBITDA for each of the periods indicated (in thousands):

Three Months Ended June Six Months Ended June 30, 30, ------------------------ ------------------------ 2019 2018 2019 2018 ----------- ----------- ----------- ----------- Adjusted EBITDA Reconciliation: Net loss $ (26,875 ) $ (17,595 ) $ (50,097 ) $ (31,701 ) Depreciation and amortization 3,185 2,138 5,993 4,136 Stock-based compensation 1,287 681 2,397 1,226 Compensation expense related to stock sales by current and former employees — — 819 — Interest income (610 ) (81 ) (1,015 ) (165 ) Interest expense 380 526 511 723 Other expense, net 1,706 1,279 1,987 1,387 Provision for income taxes 59 — 59 — - ------- - - ------- - - ------- - - ------- - Adjusted EBITDA $ (20,868 ) $ (13,052 ) $ (39,346 ) $ (24,394 ) - ------- - - ------- - - ------- - - ------- -

A reconciliation of GAAP net loss to non-GAAP diluted net loss, the most directly comparable GAAP financial measure, in order to calculate non-GAAP diluted net loss per share, is as follows (in thousands, except per share data):

Three Months Ended June 30, Six Months Ended June 30, ----------------------------- ----------------------------- 2019 2018 2019 2018 -------------- ------------- -------------- ------------- Numerator Net loss $ (26,875 ) $ (17,595 ) $ (50,097 ) $ (31,701 ) Stock-based compensation, including compensation expense related to stock sales by current and 1,287 681 3,216 1,226 former employees Provision for income taxes 59 — 59 — Accretion of redeemable convertible preferred — (1,342 ) (3,355 ) (2,451 ) stock Remeasurement of preferred stock warrant 1,820 79 2,100 183 liability - ---------- - - --------- - - ---------- - - --------- - Non-GAAP net loss attributable to common stockholders per share, basic and diluted $ (23,709 ) $ (18,177 ) $ (48,077 ) $ (32,743 ) - ---------- - - --------- - - ---------- - - --------- - Denominator Weighted-average common shares outstanding used to calculate Non-GAAP net loss attributable to common stockholders per share, basic and diluted 9,494,447 8,314,251 9,102,234 8,307,010 Non-GAAP net loss per share, basic and diluted $ (2.50 ) $ (2.19 ) $ (5.28 ) $ (3.94 ) - ---------- - - --------- - - ---------- - - --------- - Common shares outstanding used to calculate Non-GAAP net loss attributable to common stockholders per share, basic and diluted at the close of the IPO 85,314,872 85,314,872 on July 2nd Non-GAAP net loss per share, basic and diluted $ (0.28 ) $ (0.56 ) - ---------- - - ---------- -

The following table presents a reconciliation of net cash used in operating activities to free cash flow for each of the periods indicated (in thousands):

Three Months Ended June Six Months Ended June 30, 30, 2019 2018 2019 2018 ----------- ----------- ----------- ----------- Net cash used by operating activities $ (23,603 ) $ (13,734 ) $ (46,174 ) $ (28,706 ) Purchase of property and equipment and capitalized (8,500 ) (3,207 ) (13,929 ) (6,409 ) proprietary software development costs Free Cash Flow $ (32,103 ) $ (16,941 ) $ (60,103 ) $ (35,115 ) - ------- - - ------- - - ------- - - ------- -

The following table presents a reconciliation of pro-forma share count as of June 30, 2019:

Pro Forma Adjustments --------------------------- Post-Split Conversion of Issuance Pro Forma 6/30/19 Actual Preferred Stock upon IPO June 30, 2019 -------------- --------------- ---------- ------------- Total Common Stock Issued and Outstanding 9,701,266 58,363,606 17,250,000 85,314,872

Key Financial and Operating Metrics:

March 31, June 30, September December March 31, June 30, 30, 31, 2018 2018 2018 2018 2019 2019 ----------- ----------- ----------- ----------- ----------- ----------- (In thousands, except AOV and percentages) GMV $ 158,378 $ 162,954 $ 170,923 $ 218,495 $ 224,116 $ 228,487 NMV $ 113,347 $ 115,916 $ 123,550 $ 153,775 $ 160,538 $ 164,782 Consignment and Services Revenue $ 40,999 $ 42,178 $ 45,744 $ 55,070 $ 56,236 $ 60,713 Direct Revenue $ 5,460 $ 4,807 $ 6,095 $ 7,023 $ 13,019 $ 10,263 Number of Orders 356 359 409 471 498 505 Take Rate 35.1 % 35.5 % 36.4 % 34.9 % 35.3 % 36.6 % Active Buyers 326 352 379 416 455 492 AOV $ 445 $ 453 $ 418 $ 464 $ 450 $ 453 % of GMV from Repeat Buyers 81.5 % 82.9 % 82.9 % 81.6 % 82.4 % 83.1 %

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