All right, I guess we are live. All right, great. So, thanks, everyone who doesn't know who I am, Ike Boruchow, Softlines Analyst at Wells Fargo at our consumer conference. So I wanted to, you know, sit down with The RealReal, number one luxury resale brand in the U.S. A lot of changes have kind of taken place over the past couple of years. Right. I think it's a good opportunity to talk about that. Yeah. But Rati, let's kinda just start at the highest level in that sense, just can you walk us back the last few years, what have been the biggest changes in, you know, leadership, consignment versus direct strategy, pricing, and those maybe for who are newer to the story and haven't been keeping up, can you kinda walk through the, you know, those changes that have taken place and what, maybe even rank order them, just so we're all kinda like understanding what's been going on? Yeah. Exactly right, there has been a lot of changes over the last few years. I'd say a few years ago, we were all about growth, and it was growth at all costs. I think those are the main things I would say, and it was a different time. We were growing 30%. I'd say over the last few years, we went public in 2019, and after that, we realized that our business model. We need to make some changes in the business models to get to profitability. And we made three big changes, to your point, and in order, they were our take rate, so the percentage that we take in, that The RealReal takes, we increased that percentage. We found that we had a lot more wiggle room because of our service, because of our trust, to take more on our side, so that was number one. Number two was direct versus, we call it direct, but buying inventory. We were buying a lot of inventory to fuel that growth of 30%. That wasn't working. The margins were getting squeezed on that product, whereas our consignment model, the margins don't get squeezed, and that's really the resilience in our business model, so making sure that we kind of got away from that buying business of product. And the last one was really just operating expenses and just discipline around OpEx, so taking a look at our structure, our marketing costs, our operations, our retail locations, what was working and what wasn't working, and we cut back there as well. I'd say those three things, in order, the take rate being the biggest impact on the business, really got us to profitability, over the last couple of years. Can you dig in more on two of those? Like, on the take rate, can you give some more specifics about... You know, because I know the take rate for the overall business has been going up. Right. But was it categories, or how did you kinda look at that? Yeah. So what we did is we kind of broke it out, and we looked at the unit economics of each item. So lower priced items, so items under $100, it made more sense for us to take more. We do take possession of goods, and again, that is one of our moats, because we take possession, we authenticate the item, and it doesn't make sense for us to be taking in all these items under $100. Really, where we want to be focused is mid and high value. And you know, people still send in the items under $100, but now they're profitable for us. That's the difference, because we take 80% of each of those items. And then on the higher end, we're talking Cartier Love bracelets, Hermès bags, Chanel bags. We're taking the same amount, and those have always been highly profitable for us. And if anything, we're the best game in town for those items, the competition for that. You know, we always make sure that the consignor and the seller could earn most on our website, which is really important with the trust that we built and the consumer base we built. They can come and trust us around the authentication piece of every item. Right. And then on the direct source piece, so what kind of got that to balloon up a bit over the past couple of years? And then to that point, have you worked it down to a level that you're comfortable? How do you think about it, like, direct, you know, direct product as a% of revenue or GMV? Are you where you want to be? Does it need to go lower? Yeah. You know, so during COVID, that's when it ballooned up. So we couldn't get into people's homes. So one of the things that we do is we have a sales team of about 500 people that go out into people's homes and bring in products. They bring in millions of dollars a year, each luxury manager. And we couldn't do that during COVID, so we had to figure out how to feed our consumer base and keep the business going, and we bought a lot of product from vendors to keep that going. So hindsight, that was 2020, and we did it to keep the business going at the time, and, you know, would we have made the decision, the same decision? Maybe. But it was important that we kind of moved it out of our system because, again, our margins don't get squeezed on consignment. Consignment is much more profitable, and that's where we're focused, is our core business. And that really was the change, again, to get us to profitability. Are we where we want to be with that, or is there more work to be done? No, we're where we want to be there. Okay. You know, we don't want to completely get away. There is a very small percentage of items that is high gross profit dollars for us, and we're talking about fine jewelry, watches, handbags over $5,000-$10,000, that do make sense. It's a very small portion of our business and not really. It's kind of the exception, not the rule. But, you know, just to get our hands on some of these highly covetable products to make it interesting for our consumer base, we'll continue a little bit of that. Got it. So then, as we talk about those changes, now we kind of sidestep into growth. You know, can you maybe, elaborate on some of like, the bigger growth initiatives you've been working on, say, over the last eighteen months for the business? Yeah. Yeah, for sure. We talk about it as being a three-legged stool around acquisition. So for those that don't know, we're a supply-constrained business, so everything sells through within ninety days. Most items sell through within ninety days because it's all a factor of price at the end of the day, right? And that's the difference between us and a retailer. If I have the supply, I can sell it. And so we're really where we really focus as a company is supply. And how I think about that is sales, marketing, and retail kind of working really well together to bring in the best supply. Over the last couple of years, we've made a lot of changes to fuel that growth in supply. So think about marketing and sales working really well together, better than they ever have in the past, actually. The sales comp being very much aligned with higher value items and mid-value items, so the right product, and making sure that they even have incentives around new consignor growth, and that they have become more of a hunting team versus more reliant on marketing. Secondly, we've gotten even smarter in our marketing, seeing a lot more just opportunity as far as looking at the discipline of the cost. The percentage of revenue has gone down. Getting smarter about who we're looking at, the attribution around marketing. Think about lookalikes. Now I can see who's coming in at that mid and high value that brings us the highest LTV items, and go find more of those people, so the TAM is not a restriction to what we do, and that's the exciting part. You know, there's millions and millions of dollars in people's homes, so it's making sure that we can go find the right consignor and bring them in. Partnerships is another piece, right? Getting stylists and affiliate programs to work with us. These stylists are aggregators of supply, so in addition to our 500 people on the sales team, these people are looking at celebrities, or they've got closets and closets of products that they can go after. So that's the sales side is really important, and the last part is retail. It's really important to say that 25%-30% of our new consignors come from retail. This is also the highest value item comes from here. So think about a luxury consignment office, and now someone can come in with a piece of fine jewelry, watch, and handbag and get it authenticated. So this is also part of our growth strategy. And it's really just all of these three things working together. We're not gonna go spend millions of dollars investing in retail now, but it's really around the experts and the luxury consignment office experience, and that on-demand experience to get that value into The RealReal. And when you put all these things together, the business has been somewhat rebased, you know, reshaped, is there some kind of top-line algorithm or, you know, do you think about the industry growth rate and you guys taking share? Like, how do you guys think about your own multi-year kind of revenue growth opportunities? Like I said, the TAM is very big, and we also look at the serviceable addressable market, and that's also quite nice. I feel like we're just getting started. So, you know, I can't say how many consignors we have, but in the grand scheme of things, we have this consignor base, and there's hundreds of millions of dollars out there still, globally. And so for us, we look at how many people are spending money in the primary market, in the luxury space on a regular basis, 'cause that's our consignor. So they're not just spending, you know, once or twice, they're spending a few times a year, at the Neiman's, at the Saks. So that's how we'll continue to gain wallet share and market share there. And then just really focused on that trust piece. I can't, you know, under or overemphasize that. That's. It's really important to the consignor, and getting the best value for their item. Just, I think you were touching on, like, just competitively, like, how should we think about the competitive landscape? I feel like there's lots of emerging players, large, you know, somewhat scaled players. Like, when you look across the entire spectrum of competition, how do you kind of think about an ability to differentiate, you know, how many of these competitors are real for like, you know- Yeah. No pun, pun intended, versus just kind of fringe and, like, just kind of the whole landscape. It feels very fragmented, and there's always something new kind of popping up. Yeah. Well, I think first it's really important to say that it's good for the industry, that awareness is good for the industry. Secondly, just to kind of again emphasize how we're just getting started and how the industry is just getting started, 50% of our consignors are new to TRR. So they're new to resale, and not just TRR, sorry, resale in general, so they've never consigned anything before. And I think that's really important to understand how kind of nascent this industry is. When I think about our moat in comparison, we're not peer-to-peer, right? We take possession of goods. And really, this again, this trifecta of authentication and experts powered by AI and tools, but let me give you an example of that. Most of our handbags will be authenticated via machine learning by the end of the year. We're processing 10 million items, almost 10 million items a year right now, unique SKUs, and that attribution model of science and art that really comes together to look at that is really interesting, and it's there's a high barrier of entry at this point. So that is really important to understand and all of the kind of machine learning that we've built to kind of, you know, process these items and get them through the system around that 360 view of both the seller and the customer. So that's number one. Pricing, we set the market and the tone for resale pricing. People look to us now to understand what resale looks like for fashion, for shoes, for jewelry, for watches. They'll call us and say: "You know, I'm in Neiman's, should I be buying a Chanel or should I be buying a Louis Vuitton? What has better resale value?" And so that's really important because we let the market set the price, we don't set the price like another retailer would or other reseller would. And then last is our sales team. So, you know, again, those 500 people that have relationships with celebrities, with stylists, with closet organizers, that really powers our system. So these consignors don't wanna let their friends down, right? And so these people, we hire people that have a black book. They know how to find these people. They know how to clientele. They know how to hunt. They're in these social circles. And like I mentioned, they're bringing in a few million dollars each a year. So that those three things really kind of build the trust around our system, the authentication and the scale around the authentication, the pricing, and the sales team. And that's kind of really where we're focused, right? Is that consumer experience and really obsessing over service there. ... Got it. Ajay, to loop you into the conversations that we brought up TAM, we kind of talked about that. Are there more specific, you know, TAM numbers you could speak to when you guys look at your ultimate opportunity? Absolutely, absolutely. Yeah, we think we have access to a really, really large TAM. So when you look at the space, personal luxury items and fashion, you know, most external sources will say there's about $76 billion of these items that were purchased by U.S. consumers, and that was just in 2023. We've done internal studies, and we've seen that people hold on to these items for about five years. So when you extend that math out, we think there's about $200 billion in these items available for sale in just the U.S. alone. Building on Rati's comment earlier, how do you get after this TAM? It's really about unlocking that supply, right? We are... You know, things on our platform sell in record time. We've perfected the art of getting to people that have these items and finding ways to get them to a point where they are interested and want to sell. So I think that's sort of how we think about the TAM. The other angle to the TAM, I would say, if you come at it from a demand perspective, right, there are so many good secular trends playing into this right now. Growing interest in sustainable fashion is a huge deal, right? We see that, we see that in the media so much, and we think that's gonna help. That's gonna help the TAM, that's gonna help pull more items out onto our marketplace, and the last thing I would say, the demographic shifts. You look at the younger generations coming into these items. They are way more open to buying on resale versus new. So I think those forces are going to further amplify what we see as a pretty large TAM in the first place. Got it, and then so Ajay, I think returning to growth, top line growth in twenty twenty-four would be good, good first step, right? In terms of getting the business back where it should be, but then maybe beyond that, like, what are the continued opportunities for scale for the model today? Thanks for that question. I think I'd start with what you said, right? I believe when we look back in time, 2024 will go down as a time when we really stabilized the business, and stabilized it after a lot of changes that we made in 2022 and 2023. It's been really encouraging to see how that's playing out, right? We've seen us getting back to growth. We've seen steady acceleration in our growth rate as well. When I look at the future, I think for me, the growth playbook for us really breaks down to, like, three fundamental pillars, you know, and at the center of it really is our core business. It's that $200 billion in TAM, and it's the expertise we've built between our sales, between our marketing and our retail approach to being able to unlock that TAM. So it's really about going out there, going after this market, and doing what we do today, to be honest, right? Finding those consignors and bringing them onto our platform. When we bring consignors onto our platform, we've got powerful network effects. So if you look at our marketplace, you know, about, I want to say about half of our consignors in the last twelve months are also buyers. So we see this effect where people, once they start participating on both sides of the marketplace, buying and selling, it really increases their lifetime value and gets them into a habit. Running that core playbook, I think, is really central to our growth strategy going forward. The good news is we know how to do it, we're doing it today, and we just need to keep executing on that. We've reset the business on a new foundation, and we're building on that. I think there's two things on the side that flank it. One of them is the point I made earlier on sort of secular trends. Sustainable fashion is gonna help, demographic shifts are gonna help, and that's gonna further add to our growth, and the last thing I would point to is, you know, we're in early stages, but we are looking at ways to unlock supply that we don't currently have access to. We've spoken about drop shipping. So if you think about drop shipping, it really eliminates a big point of friction for professional sellers. These are sellers that have these items, but they're not ready to let go of them, because we wanna take physical possession. They're not quite ready to do that. Drop ship allows us to surface that on our platform, and then if it sells, when it sells, we can then run it through our authentication process. So I think that further increases our sort of ability to get after these items and then adds to our growth rate. And so, talking about all that TAM, the growth, the initiatives, kind of bring it down to the profitability level. Maybe walk us back a couple of years, like, what was, you know, the EBITDA losses then? Remind us maybe your expectations for this year, and then more importantly, over the multi-year period, how should we be thinking about the scale of EBITDA margin and profitability cash flow? Yeah, yeah, totally love to talk about that. You know, to your point about, you know, changes that were made, it's when I've been here about six months, and when I look at the changes that were made in late twenty twenty-two, you know, we made a variety of business decisions, and they were really architected towards getting us to be break even. And it's uncanny how accurately the team executed on that, right? We've it's been nailed. Like, we've been at today's scale, we've been operating at break even pretty consistently when you look at our results in Q1 and Q2. So I think the changes that we've made have really gotten us to where they were originally intended to be. When I look going forward from here, I you know I think we can. You know, I'm confident we can grow EBITDA, both in dollars and in rate, and in margin as well. Where does that come from? Well, the changes that Rati mentioned on take rate, and on focusing in on the more profitable parts of our business, they've really helped our unit economics. So when we look at incremental growth, and you factor in an 88% gross margin, gross profit rate on consignment sales, we see strong flow through going down to the bottom line. So that growth in itself is going to drive good increases in our bottom line profitability. The second thing I would point to is, on unit economics, is just the opportunities we have on being more productive and being more efficient. So we have, you know, as a business, we were focused on scale in the past, and then we focused on our transformation. I think we're now starting to get into getting more productive and more efficient at how we do things. And this really spans the gamut of our business. We can be more efficient with how we acquire supply, so think sales, marketing. We can be more efficient with how we run things through our supply chain. Authentication is a big one. We have incredible data to bring to bear, and you know, combining that with the power of machine learning and AI these days, we have a lot of opportunity in bringing down the cost of doing that, so in addition to growth, we will get better and more profitable at doing things. That will drive EBITDA, and the last thing I would point to is just operating leverage, right? We made changes back in 2023. We rightsized the cost structure of this business. I think we're at a point where we can really start to see operating leverage against our investments in product and technology, our facility footprint, and even our G&A base. This question may be to both of you. Just kind of go top down. You guys kind of run the gamut on, like, price points within the marketplace. You guys, on the last conference call, talked about some price resistance and some things with the U.S. consumer, but can we just talk U.S. consumer, like, what you guys have seen throughout this year, what your outlook is into the back half of this year? Just like all of our companies that have come here, we've kind of been talking about that. So kind of curious your kind of top-down perspective on the macro. Yeah, it's super interesting. We always get this question just because of our space and being the value play that we are. Mm-hmm. I think the thing that we're seeing is our business being quite resilient, is the word that we use, and the reason I say that is because in this type of macro environment, you know, people may trade down a bit, but they're still spending the same amount overall. Mm-hmm. Their wallet share hasn't shifted or changed. If anything, their units per transaction have increased or stayed pretty steady. That's what we've seen in the past, and we continue to see that, so we'll be watching that. You know, we always say we were born out of a recession, and during that time, when the macro was quite hard and the consumer was more mindful, what we did was we made sure people understood that we were a value play. We really kind of prioritized the information around the... We call it MSRP, but that's the retail value in the primary market. Think like a T.J. Maxx, and we actually have a lot of overlap with that consumer because they are looking for that value play. Yeah, and I think I would add to that the inherent sort of structure of our business has advantages when you look at sort of macroeconomic changes. We're not a retailer, right? So we're a marketplace, and the way these pressures show up on us is quite different. So if you just take our revenue streams, around 95% of our GMV is consignment, right? So we're not taking a position in those items. We don't own the inventory. So if it sells for a little less, then you know, it's not like we can sell it below cost, right? We are charging for the service, and our service fees are tied to the item selling. It's not necessarily tied to the price. I mean, there is a relationship, but it's really about the service. So we're more resilient. Our take rate architecture is also set up in a way that if things sell for below a hundred or for lower prices, we've built it in such a way that we have a higher take rate, so it protects our margin structure as well. So the combination of what Rati said, you know, the segment we play in and the inherent setup of our business makes us pretty resilient. Like, we're, you know, we have good insulation. We're not immune to it, is the way I think about it. Sure. And understanding, so your business is resilient. I guess I'm more top-down. Like, just when you take a look to the back half, we've got an election, a shorter holiday. There's been volatility over the last several months across the space. Would you kind of characterize the U.S. consumer as, I don't know, stable, resilient, you know, cautious? I guess I'm just kind of looking more from a top-down perspective. Yeah, I mean, the data, there's so much data, and it's so hard to make sense of it. You know, I'm seeing the same signals as, as you are. You know, we can talk to what we see in our business, but really, it's tough for me to have an objective point of view on what's going to happen with the U.S. consumer. Sure. Yeah. For us, specifically, it's all about supply, like I mentioned. So if we have the supply, we see the demand kind of follow, even in an unstable macro. Yeah. Okay, and then, so Rati, going back to Ajay, some of the comments on growth, profitability, et cetera. If we were to kind of tie it all up into the PNL, like, how do we kind of the next three to five years, how are we, you know, thinking about the business model, the performance, the- Mm-hmm ... the KPIs, the margins, et cetera? Yeah. Do you want to start, or do you want me to start? You should go for it. Yeah. Yeah, you know, back to growth is the motto. So that is really important to us, and we know how to do that. We did that for the last, you know, 10 years outside of getting us to profitability. So we're excited about that, and I think that is the main thing. And so I always say, back to growth, we look at efficiencies and OpEx, and those two things together, while obsessing over service, is going to drive where we need to go over the next, you know, couple of years, for sure. So, you know, we're quite optimistic right now. Yeah. I'd love to expand on that time horizon and maybe say things that Rati has told me, and I'm sure she'll jump in, right? You know, where do we see this business in the longer term, so beyond, like, the first, you know, three or four years? And I think we're on a mission to change the way people shop. What does that mean? Like, it's not buy online versus offline, right? I think we are changing how people approach a decision to buy something in the world of luxury fashion. So there are industries where we see parallels today. So if you look at luxury automobiles, right? When people are buying a luxury car, they're looking at the quality, they're looking at the resale value. Homes is another great example, right? When people are making a decision to buy a home, recent years, you know, platforms for short-term rentals have helped them realize that there is value in this purchase, right? They can unlock that value. And I think The RealReal is trying to do something very similar. Like where, you know, Rati made this comment earlier about our luxury managers getting a call from someone in the primary market saying, "Hey, should I buy, you know, this bag or that bag? Which one's gonna have better resale value?" I mean, that's really at the heart of what we are trying to do. It changes how people approach these decisions, and I think, you know, for me, it's really exciting when I hear stories about people deciding to buy something because they love the way it looks, but more importantly, because they know that they can RealReal it in the future and then, you know, change it for something else. Yeah. That's where I think the business is added. Yeah, the most exciting anecdote of that is I was at Neiman's the other day, and there were two girlfriends talking, and she said, "Should I buy those Manolos?" And the other girlfriend said, "Just buy it and RealReal it after." And I think that was... I was like, "Excuse me. Can I record that?" So that's, you know, really where we're taking this. That's good marketing. Yeah. Yeah, I guess, look, my last question is, given all the volatility we've been talking about over the past several years, there's clearly some misconception in the market about, you know, what this business can be. I guess I'd ask both of you, what do you think the biggest misunderstanding is today, between the business and the market? Yeah, you know, we get asked this question from time to time, and I think, you know, someone said it well the other day. I think people are just not taking the time to listen right now. Mm-hmm. And I think people will start paying attention soon. But I think right now it's just education, right? It is a little bit more complicated because you've got the buyer and seller. People don't quite understand the supply-constrained business, how much growth do you need? There's a misconception that our operating expenses are very high because we take possession of everything. Mm-hmm. If you look at that in the grand scheme of things, that's actually not the case at all. I think once people start paying attention, I think that will, you know, kind of help us tell the story. Okay. Ajay? Yeah. Yeah, thanks for the question. You know, I kind of put myself in the shoes of having gone through this journey six months ago, right? Making a decision to join. And, you know, I would say people are... My sense is people are a little behind on our story, right? When you make so many changes like we've done, it's hard to keep up with where things are going. I mean, there's a lot of companies to watch. I think people are behind, so what are they missing or what have I learned? You know, three things I would point to. One, we are an N of one in this space, like, in a really attractive market. Like, we are so far the market leader in this space, so, you know, that, I think, is makes us truly unique. I think, you know, we've got. We're at such an important inflection point right now. You know, we've made a whole bunch of changes in 2022 and 2023, and I think what I see in 2024 is the business going through a really interesting inflection point, and we're positioned for, you know, big things going forward, and the last thing I think that is a little underappreciated is really the point Rati made about moats around us, right? The combination of our scale, you know, 15,000 items being added to the platform every single day, and these are highly desired, one-of-a-kind, curated items that are showing up on the platform. That's truly unique, hard to replicate, for anybody else. The expertise in the business, you know, I think, most people understand the expertise around authentication, but I actually think there's expertise in how we unlock supply. We've built this engine that knows how to do it. There's expertise in pricing. We know how to price items such that they give you that ideal combination of speed of sale and price at which they sell, so that expertise is really hard to replicate. And then the brand, the brand anchored in customer trust, customer love. We have industry-leading NPS scores. I think there's really strong moats around the business, which I think people are starting to now re-