The RealReal, Inc.

Good day and thank you for standing by. Welcome to the RealReal fourth quarter and full year 2023 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Caitlin Howe, Senior Vice President of Finance. Please go ahead.

Thank you, Operator. Joining me today to discuss our results for the period ended December 31st, 2023, our Chief Executive Officer, John Corral, President and Chief Operating Officer, Rocky Levesque, and Interim Chief Financial Officer and Chief Legal Officer, Todd Zuko. Before we begin, I would like to remind you that during today's call, we will make forward-looking statements which involve known and unknown risks and uncertainties. Our actual results may differ materially from those suggested in such statements. You can find more information about these risks, uncertainties, and other factors that could affect our operating results in the company's most recent Form 10-K and subsequent quarterly reports on Form 10-Q. Today's presentation will also include certain non-GAAP financial measures, both historical and forward-looking, for which historical financial measures we have provided reconciliations to the most comparable GAAP measures in our earnings press release. In addition to the earnings press release, we issued a shareholder letter earlier today, both of which are available on our investor relations website. I would now like to turn the call over to John Corle, Chief Executive Officer of The RealReal.

Thanks, Caitlin, and welcome to our earnings call. Today, we reported financial results for the fourth quarter and full year 2023. For the first time since our IPO in 2019, we reported a full quarter of positive adjusted EBITDA, as well Our Q4 adjusted EBITDA exceeded the high end of our Q4 guidance range, and the Q4 GMV and revenue exceeded the midpoint of our guidance range. Importantly, we announced today a reworking of our capital structure, for which I'll provide further details later in my prepared remarks. Additionally, we recently announced two exciting leadership updates. First, our new CFO, Ajay Gopal, will join us in March. Ajay brings with him a strong background as an e-commerce CFO, as well as an extensive experience with two-sided marketplaces. We look forward to introducing Ajay in the near future. We also announced that Karen Katz, who is a current member of our board and the former CEO at Neiman Marcus Group, is our newly appointed board chairperson. Taken together, we believe that the RealReal is starting off 2024 with solid momentum from a business, operations, and organizational perspective. Our improved financial results in 2023 were driven by our strategic shift to refocus on our core consignment business. We refined our growth model with a focus on profitable supply. As part of these efforts, we reduced direct revenue by half overhauled our consignor commission structure, and revamped our approach to sales and marketing. Looking ahead, our new initiative of dropship consignment, previously referred to as virtual consignment, has the potential to unlock incremental supply from trusted partners. Operationally, our results in 2023 were a significant step forward on our path to profitability. we are beginning to deliver efficiencies from our investments in automation and artificial intelligence. In 2024, we are focused on enhancing our technological capabilities and processes to improve the product flow in our authentication centers and further automating our authentication. While these initiatives require a small investment in Q2 of this year, we are bullish on the long-term benefits. It will enable us to continue to enhance our best-in-class authentication and deliver a superior experience to our customers. Regarding our capital structure, today we announced that we entered into a private, separately negotiated debt exchange transactions with certain holders of our convertible senior notes due in 2025 and 2028. As a result of the debt exchange transactions, We reduced our total indebtedness by more than $17 million, creating substantial runway and capital structure flexibility for us to execute on our strategic vision. Looking forward, we project that we are on track to deliver a break-even adjusted EBITDA year in 2024. Today, we've provided Q1 2024 and full year 2024 financial guidance. Through growing profitable supply, driving operational efficiencies, and delivering exceptional service to our consignors and buyers, we believe we can continue to make significant progress on the bottom line as we re-accelerate growth in 2024. I am excited about the trajectory of our business and believe we will continue to capitalize on our position as the leader in luxury resale. With that, let's open the call for questions.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Mark Altschweger from Baird.

Good afternoon. Thanks for taking my question. And congrats on the results this quarter. So bigger picture here over the past few months, there's been a lot of discussion of the slowdown and the aspirational consumer, a little bit more promotional intensity for luxury apparel, especially online. Do you view these trends as headwinds or tailwinds for your business and resale in general? And we'd love your perspective there, both as it relates to supply and, I should say, quality of supply. supply of quality goods, excuse me, as well as buyer engagement. Thank you.

Yeah, thanks, Mark. This is Rati. So as far as the health of the consumer goes, in Q4, you know, we saw a little blip. I think we spoke about it in October. But after that, it definitely picked up. I will say, you know, we talked about the consumer being slightly more promotional in October. We didn't see that for the rest of the quarter. And then going into Q1, also quite happy with the consumer there, both on the supply and demand side, so both sides of the marketplace. Our top of the funnel looks very healthy. And again, we look at opportunities all the way to appointments, to GMB and revenue or the supply coming in.

Excellent. Thank you. And maybe a follow-up with respect to the guidance. Over the past few years, Q1, I think, has marked the low point of the year from an EBITDA perspective with improvement in the back half, especially Q4. The initial guide here doesn't seem to imply much improvement. I think 4 million lost at the midpoint in Q1, but break even at the midpoint for the full year. Maybe walk us through some of the dynamics this year that are different, especially with the revenue guide, I think, implying some nice acceleration after Q1. Thanks. Thanks.

Yeah, thanks for the question, Mark. This is Caitlin. And so what I would say there is, you know, the midpoint of the Q1 guide is negative six. And so what we're expecting for this year is really a return to our typical cadence, our typical seasonality, which we are more of a back half type of loaded business in terms of both top line and bottom line. And so I think you're going to see that, right? So, you know, historically kind of excluding last year, which had some anomalies because of the changes we were making in the business. When you look back over the course of the time that we've been a public company, Q1 and Q2 are typically pretty even between top line, and bottom line, and then it accelerates kind of throughout the year. And so I think that's kind of how we're thinking about it this year, too. So I think we're feeling good about where we are, but I do think we expect that we would see some acceleration through the year. And then the other factor we have is just, you know, because of our comps, we had kind of a tough comp in Q1 of last year. We brought in a lot of low-value supply that we moved through last right, as we were kind of, you know, minimizing low value, minimizing direct. So I think you're going to see that as we accelerate throughout the year, too.

Very helpful. Thank you, and best of luck.

Thanks.

Thank you. One moment for our next question. Our next question comes from the line of Anna Andreeva from Needham.

Great. Thanks so much, and congrats. on profitability guys. I wanted to check where the biggest upside came in the P&L versus the plan to reach profitability in the second quarter and in the fourth quarter rather. And secondly, what's the timing of the new revenue streams that you guys have discussed as we go through the year? Maybe remind us, where are you with sponsored ads and also the warranty opportunities? Thanks. Thanks, Ana.

This is Caitlin again. Why don't I take the first one and then, you know, Coral and the team can comment on the new revenue streams. So what we saw in Q4 versus our expectations, as Rocky mentioned, you know, October, I think there was some general kind of concern or just watching out for kind of demand trends more broadly. And so we weren't an exception to that. What we did see is we saw a nice acceleration on the top line through Q4. And so I think, you know, from a top line perspective, we were pleased with where we ended up in Q4. And then from, as we think about flow through, you know, I would say the beat versus our expectations was split roughly evenly between gross profit and OPEX. And so let's talk through that. So what helped us from a gross margin perspective in Q4, we had more favorability than expected in this mixed direct and consigned we grew the consignment revenue while shrinking direct a little bit more than 50 in the quarter versus prior year which again is a purposeful change that that we made earlier last year um and then the other thing that helped take rate was favorable uh in the quarter versus where we thought we'd land and that's that's a function of you know the commission structure change that we made in late 2022 combined with the mix of product that we sold within the quarter I would say, you know, and then kind of order of importance, I would say shipping margin was a little bit more favorable than anticipated, and we continue to make progress on efficiencies in terms of inventory control, transportation costs, those types of things. On the OPEX, what I would say is that we were really favorable in terms of just being disciplined on the support OPEX. So, you know, when we talk about support versus sales and ops, we had a nice, healthy supply quarter, and so sales and ops came in. more or less where we expected, maybe even a little bit spending, but that's an area where we like to spend, right, when supply is healthy, and we were just really disciplined on the support office.

And in terms of the new revenue, dropship is a Q1 launching capability, so that didn't impact Q4 at all, what we reported, so you will see a little bit of that. Not a huge impact whatsoever in 2024, but from An advertising perspective, it was not material at all in our Q4 results. We've been learning for probably half a year. And what I've learned is we need to spend all of our time focusing on our core business. It's a nice side business, but at the end of the day, anything that distracts from the core business from a site experience perspective is something that we have to be very careful with. So as much tailwind as we're seeing with our core business right now, we're really just focusing on that. And again, making sure that we're investing in our sales team and investing in marketing in the right way and providing all the operational efficiency needs that we need on the warehouse and authentication side. So this is truly not only Q4, but our 2024 outlook is a story about our core business.

All right.

Thank you so much. Super helpful. Thank you. One moment for our next question. Our next question comes from the line of Rick Patel from Raymond James.

Thank you, and good afternoon, everyone. Can you unpack the opportunity for dropship consignment? Just curious if you can provide any context on how much volume this can touch in the first quarter versus where it can ramp to by the end of the year. And then secondly, just curious if you can help us understand the economics of dropship as you think about the positive contribution towards profitability.

Sure. Hi, Ray. It's Rati again. So like Pearl mentioned, with other revenue streams, that's how we're thinking about dropship as well. It's early. We're learning. It has a very small impact for this year. We're excited about it, and we are confident that this can generate a new channel for us when we think about growth in the next few years. But this year, it really is a test and learn, and you're not going to see a huge forecast baked in in 2024.

Got it. And then can you also help us with the cash flow mechanics following the debt refi? As we think about the impact of the changes in aggregate, what will be the impact on cash interest expense in 2024 and beyond? And is there anything to contemplate from a modeling perspective for the share count going forward?

Yeah, so from a reprivate perspective, and Todd, you know, you led a lot of that, so feel free to jump in here. But, you know, from a modeling perspective, clearly, you know, we had really inexpensive debt. We still have a large portion of that, especially in the 2028s. Those are a 1% coupon. And so, Still, a significant portion of our capital structure and the debt side of our capital structure is very inexpensive debt. But interest rate environment has changed. And so there will be incremental cash expense that we'll have to pay. And Todd, I don't know if you have some commentary around that.

Yeah, the incremental interest expenses, 8.75 cash, 4.25 PIC. And, you know, we think our average weighted cost of debt stays reasonably low at about 4.8% in the first year. I'm not sure if that answers your question.

Yeah, that's helpful context. And anything to think about for the share cap going forward?

Oh, for share cap. So I would just say that the, you know, this is in the agreement, but the total amount of warrants that were issued were 7.9 million approximately, so a little bit over 7% dilution when you use the year-end share count.

And Rick, the only other thing I would add is just we were able to de-lever a little bit the transaction, which we saw as favorable.

Very helpful. Thanks very much, guys. All the best. Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Kunal Madukar from UBS.

Hi, thanks a lot. This is Jason from UBS. A couple of questions. So the first one is on the modeling side of things. I see the footnote in the press release, but could you please provide some details around the underlying components of the $6 million restructuring charge in Q4Q? that pretty much drove the better than expected EBITDA compared to your guidance. And speaking of which, you know, how can we think about this line item for 2024 in terms of dollars and year-on-year change? And I will follow up.

Yeah, so the crux of the restructuring charge that we took in Q4 really had to do with exiting some real estates. And so we did incur additional expenses. So I would characterize it a little bit differently. I don't think that's what drove our favorability. It's, you know, you exclude those types of things when you're spending to exit real estate because it's not part of your ongoing operations. So that's how I would characterize it.

Got it. Thank you. Second question is... How can we think about sort of the inventory levels and gross margin levels compared to 2023 for this year? Any color on that would be really helpful. Thank you.

Yeah, so I assume you're talking there about owned inventory. So our inventory balance at the end of 2023 was about $22 million. And if you remember, we peaked at $75 million of owned inventory 12 to 18 months ago. And so what I would say is, you know, that's really reflective of us minimizing the direct business, minimizing that owned inventory transaction, those transactions. And so I would consider this to be more or less a new normal for us. So there are ways that we still acquire inventory, and it's really through out-of-policy returns. So if somebody returns something, we've already paid out the consignor, then we will take that back onto our balance sheet in certain circumstances for really good repeat buyers. So we assume that will more or less grow with the business. It's a small, obviously, a small dollar amount. And then there are also... There are also some get paid now, which is really, really a customer offering. So in certain circumstances, on very limited brands, high-end categories, think high-end watches, a few categories of high-end bags. There is some situations where we will pay a consigner up front. And we typically pay them less. So we think if you can sign with us, you'll end up earning more. But those are really low risk of having to discount those goods. So those two will continue. But what we did kind of during COVID to go out and buy inventory, that's really minimized and done at this point. So how we're thinking about total inventory and owned inventory going forward is more or less as a percent of revenue. It's 4% to 5% right now. We assume it will stay in that range going forward.

Thank you very much. Appreciate it.

Thank you. One moment for our next question. Our next question comes from the line of Marvin Fong from BTIG LLC.

Good evening. Thanks for taking the questions and congratulations on the quarter. I guess I'd like to circle back to what Rati was saying about, you know, the improvement, you know, after the bumpy October. And I believe you said, you know, you were pretty happy with January, even though there were signs elsewhere that the consumer, you know, kind of pulled back. So I was just curious, you know, if you could, do you have any thoughts on why it is that you guys saw that improvement? Was it something you guys yourselves were doing with marketing or anything like that? Or did you just kind of feel like it's the value proposition resonating with the consumer?

Hey, Marvin, thanks for the question. I think it's an all of the above. I think what people forget is we didn't have a lot of capabilities on how to personalize our relationship with the customer. And something that we've gotten really good at now is a year ago, we couldn't say, hey, we haven't heard from Marvin in a while. Here, let's offer him, you know, something to make it so that he can consign. We now have that capability. We have the exact same capability on the customer side. So that's just one example on the marketing side. On the other side of the coin, we're seeing a lot of efficiency from our sales team. Rothy and team have done an incredible job of increasing the tenure of our sales representatives. We always knew we were in the relationship business, but that's really coming through in the past year. And as that tenure increases, the relationship increases and the stick-to-itiveness of the RealReal's relationship with the consigner and ultimately the customer is really good. We still have a lot of opportunities of turning customers into consigners and even consigners into customers. But a lot of those relationships from a marketing and a sales perspective have made it so we're a lot stickier and we're seeing a lot more continuity as the business goes forward. Anything to add, Rathi?

Well, I would just say, you know, also our investments are working, right? We have the affiliate program. We have a referral program. We're offering more events, our consumer events. So like Coral, like Don mentioned, marketing and sales are working better together, more efficiencies, and then kind of our investments and our tactics are working. And, you know, we look forward to this year because now we have a full year of these investments. And I can't you know, overemphasize the personalized promotions. Now we know what we need and how to get it and who to get it from. And that's been a game changer.

That's terrific. And maybe a follow-up. You know, so you guys, you know, obviously provided full-year guidance. And then, you know, I observed that, you know, the active buyers were down in the fourth quarter. So the first part is, you know, is that just the final flush of kind of the low the low value buyers finally cycling out of the active buyer account. And just secondly, could you just kind of talk about what you're thinking about, you know, active buyer growth versus AOV growth as you, you know, went through providing your full year GMV guidance?

Sure. Yeah, I can take that one, Marvin. So our active buyers did decelerate in Q4. We expected that. This is all the changes that we made, moving out unprofitable inventory, low value, unprofitable categories, moving out of the direct business. So it's something that we had forecasted. You're going to see this kind of turn going into this year and definitely going into the back half of this year. And that's the same way we think about average order value, the quality of the consumer, the quality of the product is really what we're focused on.

Got it. That's great. Thanks, everyone.

Thank you. One moment for our next question. Our next question comes from the line of Ike from Wells Fargo.

Hey everyone. Two questions for me. First on the demand side, just curious, listening to other soft lines and consumer companies thus far this earnings season, have you seen, can you talk to the volatility you've seen intra quarter to start Q1? A lot of companies have talked to softness in late January, early February, some stabilization coming out of February, just not to get too granular, but I'm just kind of curious, does that mirror kind of what you're seeing or I'm just kind of curious how your business has flowed?

Yeah. You know, I think we're going to resist the urge of giving kind of the month-by-month or week-by-week lows. And I think this is Bobby. But, you know, I think the general principle, you know, it is what we saw, right? We saw an acceleration throughout Q4. We've seen good momentum so far in Q1. And I think, you know, overall, we're feeling pretty optimistic, maybe cautiously optimistic about where the business is.

Got it. And then if I can shift just the margins and the guidance on revenue. So just first in the margin, but I think the last call you had said like a low 70s gross margin, I think you said it's like the new normal. You obviously had a great gross margin in 4Q. Should we be kind of expecting low 70s throughout the year? Is there seasonality we should think of as we kind of model the gross margin? And then, Caitlin, just on the revenue versus GMV guide, Can you just help us with, you know, the moving pieces between those two, maybe some take rate guidance for Q1 of the full year or direct revenue? How is that supposed to trend through the year? Any help on those line items would be great.

Yeah, absolutely. Great question. So, you know, if you think about, right, GMV flowing through to total revenue, kind of a couple factors there that you hit on. So take rate and then also mix of products. And so when I say mix, I'm talking about consignment versus direct. Direct flows through dollar for dollar from GMV to revenue. And so you saw a little bit of headwind this year, sorry, last year, 2023, as we exited direct. You know, I still think there's a little bit of that you're going to see in Q1 that direct is still going to, we believe, will shrink. But then, you know, once we start comping that lower percent of total direct, I think you're going to see a more consistent flow through. Bobby from GMB to total revenue. So again, I think Q1, a little bit of noise there just as we continue to exit the direct business, but then I think it should normalize. Take rate going forward, you saw we're up 150 basis points in take rate, and really that was mostly driven by the consignor commission rate card change that we made at the end of 2022. And so, you know, we had to sell through the product that came in under the old rate card in the first half of the year. But then we saw you, so you got to see kind of a clean P&L in the back half of 2023. So what I would say is, you know, take rate is this new normal at a higher level. And now from here, what will change is just the mix of product that sold within a given quarter. And so as ASP or AOV goes a little bit higher, it tends to be higher in Q2, it tends to be the highest out of the year in Q4, you're going to see a little pressure on take rate, but what you end up getting is good flow through on those units. So that's kind of top line. And then the other piece that you asked about was gross margin. And here's what I would say is, you know, we were pretty pleased with our gross margin in Q4. And I think, you know, I think we would say that a 70% plus is kind of, you know, that low 70s is the new normal. Again, it will vary, you know, quarter to quarter based on the mix of products that we sell. But I think we're feeling pretty good about that. You know, consignment business has a high, has a pretty high gross margin inherently. And so as we mix more into that return to growth on the consignment and overall top line, I think we feel pretty good about where the gross margin will be.

Got it. Thanks, Kayla. It's actually Ike. I made the call. Don't worry.

Hey!

Thanks, Ike.

Good talking with you.

Thank you. One moment for our next question. Our next question comes from the line of Ashley Owens from KeyBank Capital Markets. Hi.

Great, thanks. So, you know, we talked about the changes that have been made to the business, really encouraging to see the positive EBITDA this quarter. You know, just given this in the guidance today, do you think the growth trajectory here is a little bit more firm? And what are you seeing on the website in terms of shopper behaviors today that kind of gives you the confidence that we'll see that mid-single digit to low-double digit revenue growth change this year and that momentum will kind of persist? Thanks.

Yeah, sure. Hi, Ashley. I'll start and I'll let John add anything that I missed. We feel pretty confident, I would say, going into the year based on where we are, based on the funnel, like I mentioned earlier, based on the consumer and the health of the consumer. Fine jewelry is quite strong. High value is strong. And then, you know, it all starts with supply for us. So when we look at the supply, we're seeing, you know, really healthy growth going into Q1. You know, I won't give any more guidance than that in Q1, but we are quite optimistic. And then we talked about, you know, all of the programs that we are launching that we've tested in Q4 that worked for us. Those investments, like I mentioned, around marketing and sales, that tenure of the sales rep is quite healthy going into Q1. It all started in Q4. That realignment of value and quality between the sales and marketing team is really working for us. So we're seeing these investments pay off, and we're seeing that kind of growth continue into Q1.

I think it's really well said. We're a supply-constrained business and a The team is doing a really good job of developing supply. We definitely see this as a low double-digit grower. We're up against some pretty tough comps, obviously, in Q1 from last year with a lot of low-value goods and clearing out the direct goods. We even did it at negative margin last year. So the comps in terms of growth aren't going to be easy. But from there, especially in the back half of the year, as we've said, we see this as being the longer-term sustainable you know, much more profitable model of our business than we've been running to date.

Great. Thank you. Thank you. One moment for our next question. Our next question comes from the line of Tom Nickick from Wedbush.

Hey, everybody. Thanks for taking my question. I want to ask about the debt transaction. So now that you've done this, essentially, do you feel like this kind of, you know, like you're good now, like at least like, you know, for a couple of years until, you know, the next big tranches come or is this kind of, you know, step one and then, you know, you kind of need to do another transaction to get the capital structure exactly where you want it to be?

Yeah, Tom, I'll talk about, this is John Corral, from a runway perspective, and then I'll let Todd get into the particulars. But from my perspective, what I challenge the team and our partners with is give us the runway to prove that our model is the right model. And what you've seen in this quarter and the previous, honestly, five quarters is we're on the right path. Give us the time to prove it. Give us the time so that we can be adjusted even to a break even or better. And then what can we do in 25? And how can we build on that? And then you know, what they were able to do was give us three plus years to prove this out. And that is what was incredibly important to me in my role. So the specifics of the transaction, I'll turn that over to Todd, but we got exactly what we wanted out of the deal in terms of the timing of being able to prove this going forward.

Tom, this is Todd. I mean, I think to your question about how do we see the capital structure going forward, I think that, you know, right now we have plenty of flexibility to deal with that in the future. And, you know, as business employers, I think that, you know, we'll have lots of good options for making decisions.

All right, great. And if I could just ask a quick follow-up, I just want to make sure I kind of understand the terms. So the total interest rate on the debt is, eight and three quarters of which four and a quarter is PIC and four and a half is cash?

Is that the way to go about it? No, Tom, it's 8.75 cash and 4.25 PIC. Got it. Okay. All right.

Thank you very much.

Thank you. One moment for our next question. Our next question comes from the line of Edward Iruma from KWMLLC.

Hey, guys. It's Eddie Iruma from Piper Sandler. A couple quick ones for me. Just first a housekeeping question. If I recall, the 25 converts were, I think, 150 notional. So I assume this largely takes them out to 146. And then I guess what triggers a pick versus cash interest? And then maybe a bigger picture question, we've seen easing pricing of kind of hard luxury, even some promotions on things like watches, I guess. Have you seen deterioration in pricing? And I know you're consignment, but has it impacted revenue growth? Thanks.

Yeah, so I'll take the first part. So the face value of the 2025 notes was 172.5, and we took out 145.8 of those. plus another 6.5 of the 28 and replace that with $135 million senior secured note. And that's how we get the $17 million of de-leveraged.

And then I think the second part of that, Edward, the pricing piece of it and where we're seeing the consumer far as squeezing there our average selling price for like for like items have gone up we're getting smarter as far as ML is concerned we've got 13 years of data of attribution and pricing and so we feel really good about you know continuing to kind of test and higher and higher price is better for the consigner it's better for the real real and And our pricing algorithm and models are now expanding over more and more categories throughout this year. So we're happy about the progress there. As far as luxury items and we're seeing the consumer, like I mentioned before, find jewelry is quite healthy, ready to wear it back. We're doing well with high value overall.

Yeah. I have to pile on. I think it's so amazing. I've only been here a year, but in all honesty, the amount of pricing power and knowledge that we have in putting all this data together, seeing a million unique SKUs every month, it's really providing a lot of benefits. Not only the history of the 13 years, but the million unique SKUs per month makes it so we've seen just about everything before, and category by category, we can actually push up the pricing try it, then we get a lot of signal from our website, from our three, three and a half billion website visitors per year. So you have this wonderful combination of you have an algorithm to build on top of, but then you actually have the experience of seeing the actual product perform in the wild, how many people obsess it, how many people add it to their cart, all of those types of things. And I think we've been able to offset a lot of softness with, in all honesty, a lot of competitive intelligence on our side.

And just on the cash versus pick interest, what makes you toggle it? Is it your discretion?

No, it's not discretion. So it's 8.75 cash, and then the pick just accrues.

With 8.7 plus the pick? I'm sorry.

Yes, correct. It's plus the pick. Thank you.

Thank you.

at this time i would now like to turn the conference back over to john coral ceo for closing remarks yeah thank you for joining us today before closing the call we'd like to thank our entire team at the real real for their hard work and dedication and delivering significant progress in our operations and results in 2023 to the team we honestly couldn't have accomplished any of these milestones without your relentless efforts to deliver the preeminent luxury resale experience to our consignors and buyers. I look forward to the next phase of our growth in 2024 and beyond. We'd also like to thank our more than 35 million members as they join us on our mission to extend the life of luxury and make fashion more sustainable. Thank you.

This concludes today's conference call. Thank you for participating. You may now disconnect.