TheRealReal (REAL) risk factors, FY2024 10-K

Risks Relating to Our Business and Industry

1. 01We have a history of losses and we may not achieve or maintain profitability in the future
2. 02In February 2023, we implemented a reduction in workforce of approximately 7% and a reduction in our real estate presence to reduce our operating expenses. See “Note 11 – Restructuring” for further details
3. 03We may not be able to return to historic levels of revenue growth rate or effectively manage growth or new opportunities
4. 04We may not accurately forecast revenue and appropriately plan our expenses
5. 05We have experienced seasonal and quarterly variations in our revenue and operating results
6. 06Greater than expected product returns may exceed our reserve for returns
7. 07We may require additional capital to support business growth. If such capital is not available to us, our business operating results and financial condition may be harmed
8. 08Public health emergencies or outbreaks of epidemics, pandemics, or contagious diseases such as the COVID-19 pandemic have adversely affected, and could in the future, adversely affect our business and the business of our consignors and buyers
9. 09The failure of any bank in which we deposit our funds could reduce the amount of cash we have available to pay distributions and make additional investments

Risks Relating to Our Strategy

1. 10We may be unable to execute on our retail growth strategy
2. 11Expansion of our operations internationally will require significant management attention and resources
3. 12sustainable revenue and profit

Risks Relating to Supply

1. 13We may not be able to obtain sufficient new and recurring supply of pre-owned luxury goods
2. 14We may be unable to attract and retain talented sales professionals
3. 15Our growth and supply of product offerings are enhanced by our ability to maintain our brand partnerships

Risks Relating to Demand

1. 16Our continued growth depends on attracting new and retaining repeat buyers
2. 17National retailers and brands set their own retail prices and promotional discounts on new luxury goods, which could adversely affect our value proposition to consignors and buyers
3. 18We must successfully gauge and respond to changing preferences among our consignors and buyers
4. 19We may be unable to replicate our business model for newer categories of consigned goods or different product mixes of consigned goods
5. 20We rely on consumer discretionary spending, which is adversely affected by economic downturns, including economic recession or depression, and other macroeconomic conditions or trends
6. 21Our industry is highly competitive and we may not be able to compete effectively

Risks Relating to Marketing and Brand Management

1. 22Our success depends on the accuracy and reliability of our authentication processes and methods
2. 23We may not succeed in promoting and sustaining our brand
3. 24Our marketing and advertising activity may fail to efficiently drive growth in consignors and buyers
4. 25We rely on third parties to drive traffic to our website
5. 26Use of social media, emails and text messages may adversely impact our reputation or subject us to fines
6. 27The public disclosure of our Environmental, Social and Governance (“ESG”) metrics and goals may subject us to risks

Risks Related to Our Merchandising and Fulfillment

1. 28We may not be able to attract, train and retain specialized personnel and skilled employees
2. 29We may not be able to identify and lease authentication centers in suitable geographic regions
3. 30We may experience damage or destruction to our authentication centers or retail stores in which we store the majority of the consigned luxury goods we offer through our online marketplace
4. 31Shipping is a critical part of our business and any changes in our shipping arrangements, costs, interruptions in shipping or damage to products in transit could adversely affect our operating results
5. 32We may be unable to successfully leverage technology, including artificial intelligence and machine learning, to automate and drive efficiencies in our operations

Risks Related to Data Security, Privacy and Fraud

1. 33We rely on third parties to host our website and mobile app and to process payments
2. 34Failure of our data or cyber security could cause us to incur unexpected expenses or compromise our data assets
3. 35We may incur significant losses from fraud

Risks Relating to Our Employees

1. 36We may be unable to attract and retain key personnel or effectively manage leadership succession
2. 37Labor-related matters, including labor disputes, may adversely affect our operations

Risks Relating to Our Intellectual Property

1. 38If we cannot successfully protect our intellectual property, our business could suffer

Risks Relating to Litigation and Regulatory Uncertainty

1. 39We are currently, and may be in the future, party to lawsuits and other claims
2. 40Our use and other processing of personal information and other data is subject to laws and obligations relating to privacy and data protection
3. 41consumers with the ability to opt-out of certain profiling or automated decision-making processes
4. 42We pay or collect sales taxes in all jurisdictions which require such taxes
5. 43Failure to comply with applicable laws or regulations may subject us to fines, penalties, loss of licensure, registration, facility closures or other governmental enforcement action
6. 44Application of existing tax laws, rules or regulations are subject to interpretation by taxing authorities
7. 45Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited
8. 46If our internal control over financial reporting or our disclosure controls and procedures are not effective, we may not be able to accurately report our financial results, prevent fraud or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information

Risks Relating to Ownership of Our Common Stock

1. 47The market price of our common stock may be volatile or may decline steeply or suddenly regardless of our operating performance and we may not be able to meet investor or analyst expectations
2. 48Short sellers of our stock may be manipulative and may drive down the market price of our common stock
3. 49Delaware law and provisions in our certificate of incorporation and bylaws could make a merger, tender offer or proxy contest difficult, thereby depressing the trading price of our common stock
4. 50Our certificate of incorporation designates the Court of Chancery of the State of Delaware located within the State of Delaware as the exclusive forum for substantially all disputes between us and our stockholders

Risks Related to Our Outstanding Notes and Warrants

1. 51We have incurred a significant amount of debt and may incur additional indebtedness in the future
2. 52The indentures governing our Notes contain restrictions and other provisions regarding events of default that may make it more difficult to execute our strategy or to effectively compete, or that could materially affect our financial position
3. 53Transactions relating to our Convertible Senior Notes or the Warrants may dilute the ownership interest of our stockholders
4. 54The conversion of the Convertible Senior Notes or the cash conversion of the Warrants, if triggered, may adversely affect our financial condition and operating results
5. 55The accounting method for the Warrants materially affects our reported financial results
6. 56The accounting method for the Convertible Senior Notes materially affects our reported financial results
7. 57The capped call transactions may affect the value of the 2025 Notes, the 2028 Notes and our common stock