REAL - NASDAQ

Good afternoon, everyone. My name is Lennius, and I will be your conference operator today. At this time, I would like to welcome you to The RealReal Fourth Quarter 2025 Earnings Call. [Operator Instructions] At this time, I would like to turn the call over to Caitlin Howe, Senior Vice President of Finance.

Thank you, operator. Joining me today to discuss our results for the period ended December 31, 2025, are Chief Executive Officer and President, Rati Levesque; and Chief Financial Officer, Ajay Gopal. 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. We have provided reconciliations for historical non-GAAP financial measures to the most comparable GAAP measures in our earnings press release, which is available on our Investor Relations website. I would now like to turn the call over to Rati Levesque, Chief Executive Officer of The RealReal.

Thank you, Caitlin, and good afternoon, everyone. Thanks for joining us as we discuss our fourth quarter and full year results. 2025 was a transformative year for The RealReal. We accelerated top line growth throughout the year, culminating in exceptional fourth quarter performance. We delivered $616 million in GMV for the quarter, representing 22% growth while achieving an adjusted EBITDA margin of 11%. During the fourth quarter, we surpassed the $2 billion mark in GMV for the year, a milestone for The RealReal that gives us further confidence in our growth trajectory and our market leadership position. For the full year, we delivered $2.1 billion in GMV and our first year of positive adjusted EBITDA in every quarter, demonstrating our ability to scale profitably while maintaining strong momentum. Before Ajay walks you through our detailed results in a moment, let me provide some context. Our performance in 2025 is the result of years of laying the groundwork for the luxury resale market and refining our business model. We've built a durable and hard-to-replicate foundation that uniquely positions us to lead and create long-term value. We are leading a fundamental shift in the luxury consumers' mindset. Our customers have begun to view their closets as a portfolio of assets to be tracked, actively managed and eventually monetized. With 47% of all consumers considering resale value when making a purchase in the primary market, we are influencing the luxury consumers' behavior in a meaningful way. I see us becoming the personal adviser of the closet, providing tools, access to information and curated insights. Today, we are blending uniqueness, quality and depth with the commercial scale and accessibility that only The RealReal can offer. We are leaning into this vision through disciplined execution of our 3 strategic pillars. First, our growth playbook, which is how we unlock supply through meeting the customer where they are. Second, operational excellence, which is how we drive profitability; and third, obsess over service, where we up-level our experience. These efforts are underpinned by a foundational culture of trust with our community of over 40 million members. Diving into our growth playbook. Our sales team, which we've built over the last 15 years, is a competitive differentiator that anchors our growth playbook. Our model combines art and science, deep personal relationships our team cultivates with consignors, accelerated by data and insights. Last year, we rolled out Smart Sales, our AI-enabled tool that automates lead scoring, ensuring our sales team is mobilized towards the highest value supply opportunities. In Q4, we launched a new tool for our sales team, which leverages our vast data and AI-led pricing algorithms to provide real-time valuation estimates. It allows for a more precise dialogue with consignors about their expected earnings and strengthens our position as a trusted adviser. Sales team tenure reached an all-time high in Q4 with 54% of our team at TRR for 2 years or longer. The longer a sales associate is with TRR, the more productive they become. On average, an experienced sales rep delivered approximately 20% more value than a first year sales professional. Our marketing engine drives our sales execution. Active buyer growth accelerated in Q4 to 9% on a trailing 12-month basis. We aren't just finding shoppers, we are identifying future consignors. Our Q4 results highlight this flywheel in action. 40% of new consignors come from our existing buyer base. By turning buyers into sellers, we're acquiring supply more cost effectively while deepening the loyalty of our community. We accelerated new buyer growth in Q4, and we believe it's a positive catalyst for future supply. Through leveraging social channels and high-impact creative like our holiday influencer campaigns, we've energized our existing customers and attracted a new generation of luxury shoppers. Our second pillar, operational excellence, is centered on scaling our unique technology and operational advantages. Our current industry-leading authentication approach is the result of years of strategic development. To date, we've received 12 patents formally recognizing our innovations in luxury resale and positioning us to capitalize on AI as an enablement tool in authentication and pricing. We continue to lean into our authentication expertise through Athena, our proprietary AI-enabled intake process. Athena is designed to optimize the blend of human expertise and technology. By automating the repetitive data-driven tasks, we are reducing costs and increasing speed to site. A core advantage of our model involves physical possession. When our experts have an item in hand, we verify details that cannot be captured digitally, like the weight of a gemstone or the texture of a fabric. The success of our approach is showing up in our results. We met our goal of exiting 2025 with 35% of all units fully flowing through Athena, a key contributor to the strong leverage we delivered in the quarter. Looking to the future, we are focused on further automation around listings and fulfillment to continue our progress on operational speed, accuracy and efficiency. Our third pillar is obsessing over service, which is focused on up-leveling the experience for our customers. As you may recall, we introduced MyCloset last year. The first phase was Reconsign, which provides a one-click consignment experience for items purchased on TRRR's platform. The next step in the evolution of MyCloset is customer tools to track and capitalize on the value of their closet. We're evolving our consignor interaction to make it less transactional and more relational and enduring. We are the trusted adviser for our customers as they journey through the primary and secondary luxury markets. Currently, we're testing app features that allow consignors to get on-demand valuation and earnings estimates and look forward to expanding MyCloset as we move through 2026. We are obsessing over service in other ways, including leveraging GenAI to transform how our members discover items on our platform. We've launched a new natural language search experience to make discovery more intuitive and are seeing encouraging results. The new search experience drove a notable improvement in new customer conversion during our test period. As we look out through 2026, we will expand these capabilities further, starting with AI recommendations in the near term, followed by visual and agentic conversational search to further create a hyper-personalized high-end shopping experience. In closing, we've proven that our growth playbook is working. By integrating our team's deep expertise with our industry-leading technology, we're building an engine that is designed to scale, win and deliver lasting value. I want to thank our team across the country and our more than 40 million members. The trust you place in us is our most valuable asset. Looking forward, we're excited to continue to drive results together and delivering on our mission to be the definitive authority in luxury resale. Thank you. With that, I'll turn the call over to Ajay.

Thank you, Rati, and good afternoon, everyone. I am pleased to review our financial results for the fourth quarter and full year 2025, a year of transformation and accelerating momentum. In Q4, we delivered double-digit top line growth in both GMV and total revenue, driven by healthy supply and strong buyer engagement. Our disciplined execution against our 3 strategic pillars, the growth playbook, operational excellence and obsessing over service continued to pay off. We delivered 450 basis points of adjusted EBITDA margin expansion, demonstrating the operating leverage in our business model. We also generated free cash flow of $43 million in Q4, up $23 million year-over-year. Turning to our detailed fourth quarter results, beginning with the top line. Q4 GMV of $616 million increased 22% compared to last year. Growth was driven roughly evenly by unit volume and higher average selling prices. Q4 total revenue of $194 million increased 18% with consignment revenue up 16% year-over-year. Direct revenue increased 39% compared to Q4 of 2024. In Q4, active buyers, orders and average order value all increased year-over-year. On a trailing 12-month basis, active buyer growth accelerated to 9% year-over-year. Orders were up 10% and average order value increased 11% versus last year. This growth reflects our success in unlocking supply, particularly in high-value categories like fine jewelry and watches. Q4 take rate of 36.5% declined 120 basis points year-over-year. This was driven by a favorable mix shift into higher-value items and categories. These items carry a lower percentage take rate while generating more profit dollars and improved unit economics. On margins and profitability, fourth quarter gross profit of $145 million increased 19% year-over-year. Gross margin of 74.8% in Q4 increased 40 basis points compared to the prior year period. Breaking this down by channel, consignment gross margin was 89.6% in the fourth quarter, an improvement of 60 basis points year-over-year, reflecting our continued focus on operational efficiency. Direct gross margin was 26% in the fourth quarter, an increase of more than 1,200 basis points year-over-year, driven by favorable mix of products sold. Fourth quarter operating expenses of $139 million leveraged 600 basis points year-over-year as a percentage of revenue. Excluding stock-based compensation, operating expenses leveraged by 550 basis points. These improvements were driven through increased use of AI and automation in our operations, sales team productivity and leverage on fixed costs. Fourth quarter adjusted EBITDA of $22 million or 11.3% of total revenue increased $11 million versus prior year. Adjusted EBITDA margins increased 450 basis points year-over-year. On cash flow and the balance sheet, we ended the quarter with $166 million in cash, cash equivalents and restricted cash. Our operating cash flow in the fourth quarter was $49 million, a $21 million improvement year-over-year. Free cash flow was $43 million in the fourth quarter, a $23 million improvement year-over-year, demonstrating our business model's favorable cash dynamics as we grow. Moving to our full year 2025 results. Full year GMV of $2.13 billion increased 16% versus prior year. Revenue of $693 million was up 15% versus the prior year, driven by strong execution of our growth playbook and our strategic focus on unlocking supply. Full year gross profit of $517 million grew 15% year-over-year. Gross margin of 74.6% increased 10 basis points versus full year 2024. Operating expenses of $541 million leveraged 600 basis points in 2025. This improvement was driven through increased use of AI and automation, sales and retail team productivity and leverage on fixed costs. We delivered adjusted EBITDA of $42 million for full year 2025 or 6.1% of total revenue, an increase of 450 basis points year-over-year. This improvement in profitability translated to $37 million in operating cash flow and free cash flow of $5 million. Over the past 2 years, we have reduced our total indebtedness by over $80 million, demonstrating our commitment to strengthening the balance sheet while delivering profitable growth. Looking back on 2025, we made significant progress across our strategic priorities. We unlocked supply at scale through our growth playbook, expanded adjusted EBITDA margins, generated positive free cash flow and strengthened our balance sheet. These results give us confidence in our momentum as we look to 2026. Now turning to our full year outlook. We are projecting full year GMV growth in the range of 12% to 15%. Revenue growth is expected to be between 10% and 13%. For the full year, we expect gross margin to remain relatively consistent with 2025. Adjusted EBITDA is expected to be in the range of $57 million to $65 million. This represents approximately 8% margin at the midpoint, an expansion of nearly 200 basis points versus 2025, which is aligned to our target of 15% to 20% adjusted EBITDA margins over the medium term. We continue to expect capital expenditures on property, plant and equipment to remain between 2% and 3% of total revenue for the full year. Regarding cash flow timing, similar to 2025, we expect operating cash flow and free cash flow to benefit from our favorable working capital dynamics in the second half of the year. Moving to our outlook for the first quarter. GMV growth is expected in the range of 19% to 22% versus prior year. First quarter revenue growth is expected in the range of 16% to 18%. We expect direct revenue to be in the range of 12% to 15% of total revenue. First quarter adjusted EBITDA is expected to be between $11 million and $13 million, representing approximately 6% to 7% of total revenue and 340 to 430 basis points of margin expansion year-over-year. In closing, our fourth quarter and full year 2025 performance underscores the financial power of our model. By scaling our growth playbook, while leveraging AI-driven efficiencies, we have improved our unit economics and delivered meaningful margin expansion. Our progress on delevering, combined with our ability to translate gains and adjusted EBITDA into free cash flow, strengthens our financial foundation. As we enter 2026, we're focused on continuing to drive operating leverage as we scale. Thank you to the entire RealReal team for your dedication and for driving these outstanding results. With that, I will now turn the call back over to the operator for Q&A.

[Operator Instructions] Our first question comes from Ashley Owens.

Well, first and foremost, congrats on the quarter. I did want to start out. I just noticed that AustinTech accelerated its deleverage. So I did want to touch on Athena. You've talked through the year about how central Athena is to that operational model and you hit the target you gave in November in 4Q. So first and foremost, with the 35 [indiscernible] update here, is that a count of units that are seeing intake fully completed by Athena? And just as importantly, how are you thinking about expanding that penetration across low, mid- and high-value items in 2026?

Thanks for the question, Ashley. Yes, we're pleased with the progress that we've been able to make with Athena. We ended the year with 35% of the units in our fulfillment center being processed through Athena. And that was the primary driver for the operating leverage that you commented on in our ops and tech line. All in ops and tech leveraged 330 basis points for the year. And it was a combination of Athena with other automation efficiencies that we've been able to unlock in that part of the P&L. We're -- 35% was our target for the end of the year, where we will continue to build on that. Going forward, we're excited to extend Athena into the mid-value items, and then we will continue to build on that, taking it into higher-value items. We expect this to take place over multiple quarters, and it will continue to be a source of leverage for us going forward.

And maybe just to follow up quickly on Athena as well. I know it affected the intake to listings spurt. Could you expand on how it affected the intake to listing cycle times in 4Q? You previously stated a long-term goal to cut that timeline meaningfully. How much progress did you see in this quarter? What's the current [ data for base ] count? And what would you consider a reasonable target for 2026 as some of these automation and workflow optimization start to mature?

Yes. Thanks for the follow-up. We are excited about Athena, not just in terms of how it delivers efficiency improvements, but also on how it reduces the cycle time, which leads to a higher consumer satisfaction because we're able to get their items up on the website sooner. When you think about the 35% of items that went through Athena, what essentially happens is the item first goes to photography. And once we've completed taking those images, we're able to pretty much launch the item on the website. So those items are going very quickly through our fulfillment center and not having to go through multiple handoffs as compared to the other items. We'll -- as we build the coverage from Athena, we'll extend that benefit to more and more items in our portfolio.

Our next question comes from Ike Boruchow at Wells Fargo Securities.

Congrats. I guess I was wondering maybe, Ajay, Rati, the guide for Q1 will obviously 4Q much better. But I think 3 months ago, you told us you only expected slightly above [ algo ] growth in the first half, so above low double digits, and you're guiding 22% GMV. So just what are you seeing quarter-to-date? What gives you that confidence to guide those numbers?

Yes, Ike, thanks for the question. A couple of things that we're seeing in the business, right? We're seeing our buyer and seller be quite resilient. We all know it's driven by supply. Our growth playbook is working. So it's important to understand that trifecta of our sales strategy, our marketing strategy and retail strategy kind of coming together there. So we have seen, for example, the sales team and the Smart Engine or Smart Sales that we've called in the past, the conversion is getting better on the sales side. We're able to get more appointments per day, more volume per sales rep. On the marketing side, the flywheel strategy is working. We're turning buyers into consignors in a more impactful way. And then on the demand side, still early, but our AI or agentic testing there on discovery and search is really impacting conversion, especially on the new buyer side. So all of these things, some of these are -- we're testing our way into and they need to scale up throughout the year, but definitely seeing the supply really coming through.

Have you seen a slowdown since the fourth quarter, I guess, is something I'm curious about.

We showed you or we give you your guide for Q1, I would say, as far as macro goes, same trends on buyers and sellers, double-digit growth on both buyers and sellers as well.

Yes. No slowdown, Ike. I would add that when you think about Q4, you've heard us talk about how it's become increasingly more relevant as more and more people turn to resale for gifting. And we saw that play out in Q4, which we believe is one of the drivers for the acceleration from Q3.

Our next question comes from Bobby Brooks at Northland Securities.

I would just be interested to hear first on an update of how testing with drop shipping has gone and maybe what are the plans for it as we go into 2026? And maybe it would be helpful to just take a step back and remind folks what categories you kind of started in and how you've selected those certain vendors who can access the drop shipping beta testing, I guess, I'll call it. And how you expect that to evolve moving forward?

Yes. Bobby, thanks for the question. I'll start; Ajay, if I miss anything, feel free to jump in. Drop ship, we're seeing this year was all about testing and expanding categories. We started in watches. We also launched handbags and fine jewelry. They were very much to specific or targeted partners. So we're continue to expand that to international markets, for example. I'd say the growth rate is healthy, but not the main driver of our growth. So we'll continue to expand to other categories, continue to test and learn in the next couple of quarters.

And then setting aside Smart Sales tool and the rollout -- broader rollout of drop shipping, are there any other exciting initiatives aimed at driving more incremental supply? Obviously, that's like the key part of the growth engine here is unlocking more supply. So I just wanted to hear if there's any other initiatives that folks should be kind of looking forward to. And maybe it's even partnering with direct brands directly.

Yes. I think that's what gives us confidence in the full year guide as well and what we're seeing into Q1. We have many new initiatives that some of them are earlier in days and some of them a little bit later in days, but Smart Sales is one of them for sure. Referrals and affiliate programs, that's another one. I'm really excited about seeing one of the higher growth channels when I look at where supply is coming from. Again, early days, but you can see how this could really scale up. Our retail strategy, again, 1/4 of our new sellers are coming from retail. We're also looking at our marketing ROI, higher LTV is what we're seeing. So as we're reinvesting in marketing, we're seeing -- really seeing that pay off. I would say another is flywheel. We talked a little bit about that in the last quarter's call, our strategy around buyers becoming consignors, and we're seeing that accelerate. Early days on that, but that also gives us confidence headed into full year.

Our next question comes from Anna Glaessgen at B. Riley Securities.

I'd like to turn back to Athena. Nice to see that it met the target of between 30% to 40% of units by year-end. Wondering if you'd be willing to share your outlook for its contribution to unit processing in 2026.

Thanks, Anna. Yes, we're pleased with Athena exiting the year at 35%. It's one of our key use cases of how we are able to leverage our unique data set of 50 million items to combine it with recent developments in the world of AI and unlock real efficiencies in our platform. We'll continue to build on it. As I mentioned earlier, right, 35% is nowhere close to where we could be. In theory, we see that expanding to all the items in our fulfillment center, and we will pace that over the next few quarters.

So safe to say it should continue to increase?

Yes, it will continue to go up.

And then secondly, exciting to hear about the initiatives within agentic search. I guess, when should we expect that to be formally launched on the website?

Yes. Hi, Anna, so we are also very excited about it, just really focused on discovery, matching, getting the right product to the right person. We're seeing it deliver incremental revenue. So we will start to scale that up. But what we are seeing right now, like I mentioned, was new buyer conversion and the testing looks very good. And then we see us kind of moving on to conversational and visual search as well, just to kind of, again, get that flywheel going and continuing that buyer growth at double-digit numbers.

Our next question comes from Marvin Fong at BTIG.

Congratulations on the quarter. A question on just sort of like ASP and product mix. So I believe higher-value items has been really strong for a while now, fine jewelry, handbags, watches. How -- could you address specifically like your supply pipeline visibility? How is that going there? Are you at all sort of reaching a point, where it's getting a little harder to obtain those types of items? And -- or is that pipeline very strong? And just as it's a driver of AOV, I'd love to just get a better understanding. If we break it down kind of like like-for-like, are you seeing ASPs climb? So for instance, even within apparel and other goods, are prices rising? Or what's sort of going on there?

Yes. Thanks, Marvin, and thank you for the question. A few things to unpack there. I think at the start, I would say, when you look at our 22% growth in Q4, it's a healthy balance between volume and price, almost an even 50-50 split between the 2 elements. You had a question about how it shows up in ASPs like-for-like. A large part of what we are seeing has been driven by the shift into higher value items and categories. You heard us highlight fine jewelry as a category that has been experiencing strong growth. In fact, it was one of our strong -- fastest-growing categories in 2025. We have a lot of sophistication built into how we -- how our pricing algorithm manages ASPs, right? So we are always trying to find the highest price on behalf of our consignors. And that pricing algorithm is looking at over 100 data points and trying to figure out exactly what we think a customer would be willing to pay for any given item. The last point I would make is to your question on how does it influence supply. One of the key strengths about The RealReal as a platform is as trends come and go, we are able to quickly respond to them and really capitalize on like consumer preferences shifting. So fine jewelry is a great example of that. We saw that trend start to pick up in late Q4 of 2024, and we've been able to capitalize on that very effectively. And we will continue to do that as a marketplace.

And a follow-up question just on direct. You mentioned margins there are very strong. You mentioned favorable mix. So just to drill down on that, was it a matter of the product mix, again, higher ASP items? Or is it also that, Get Paid Now contributed a bit more? Could you kind of decompose what kind of drove that and how sustainable that is in the first quarter and maybe beyond?

Yes. Thank you for the questions. We are pleased with the margin expansion we've seen in our direct channel. It was 26% gross margin in Q4 and 22% for the full year. Both of those numbers are quite substantial improvements, 880 basis point improvement on a full year basis versus what direct used to look like if you go back a year. We've made a conscious effort to change the mix of what goes through that items. And right now, it's a mix of Get Paid Now and other select supply that we know is incremental to our platform and runs through that channel. Those margins will stay within that fairly wide range of 15% to 25% going forward, and it will vary based on the mix of what we sell.

Our next question will come from Mark Altschwager at Baird.

I guess a couple on the model here. First, you're guiding to revenue growth a couple of 100 basis points below the GMV growth. Obviously, a lot of moving pieces as we go from A to B there. Maybe just what are the key factors we should be thinking about take rate, revenue mix or otherwise that are influencing that this year?

Yes. Thank you for the question. Yes, we are guiding to a revenue growth that is a couple of percentage points lower than GMV. The key driver there really is our take rate. If you look at the second half of 2025, we've seen a favorable shift in our product mix towards higher-value items and categories. Our take rate structure is designed in such a way that when we sell those items, they attract a lower percentage take rate, but they bring in higher absolute dollars and strong unit economics against those items. We do expect that phenomenon to play out in the first half of '26 when we will be lapping sort of the change that occurred late in '25, and it should normalize going forward, particularly in the second half of the year.

That's very helpful. Also wanted to ask about the sales team and just any hiring goals you have for 2026. You spoke earlier about the efficiency you're seeing with that team as they build tenure. So trying to just better understand the strategy behind further efficiencies relative to expanding the team as you look to fuel supply growth.

Yes. Thanks, Mark. So on the sales side, the relationship that we built there is really important with the consignors. It's definitely a combination of art and science there. And when we think about the growth rate there, we think about hiring healthy in that area as we're growing our business, but it's also finding more efficiencies there, too. So we measure things like how much value are they bringing in per sales rep, how many appointments per day are we taking? Things like Smart Sales or Smart Engine definitely help that experience. So it's definitely a two-pronged approach.

Our next question will come from Dylan Carden at William Blair.

I think I did that right. I guess I'll know. Curious on the -- MyCloset, this next phase where you kind of dig deeper into the consumers, the customers' closet. Is that something happening in '26? And I guess, is there a line of sight into how you might be able to sort of target or get after the balance of what's in the closet beyond what's just purchased on RealReal at this point?

Yes, Dylan, thanks for the question. For those that don't know what MyCloset is, I want to say, first of all, we see ourselves as that personal adviser to the seller already. We're seeing that behavior shift in the seller, where they call us to now get better insights into the primary market, what should they buy, what should they sell, what holds its resale value and what doesn't. So how do we leverage that? We're looking into MyCloset and testing our way into that. You saw us launch something called Reconsign that was focused on our flywheelers as well. So when people are buying things on our site, how do we target them and get them to consign. That's been working quite nicely. The next phase of that goes into pricing transparency. So again, empowering them with the insights on brands, pricing, what to hold on to, what to trade up and so forth. So by the end of this year, we'll have kind of the full build of something like this early -- not going into even early next year, but we're testing our way into that. You're going to see improvements into that relationship. And the real vision there, like I said, is being that personal adviser to our seller, but we're really getting them to think about The RealReal when they're in the primary market, right? How do we gain mind share in that first phase.

I guess that brings up another question about how tied in you are -- your business is to the broader health of the luxury market. And I know there's been some sort of mixed signals for the primary market. But how does that sort of flow through your business, if you had a sense?

Yes. Definitely some mixed signals, but how I see it is the primary market and resale can coexist. We are seeing the shift into resale happening as resale is becoming more mainstream, driven by the Gen

Well, then to that end, you keep teeing up here. The new tools from a search functionality, natural language search and I'd just be curious if you're using other things to make the overall curation and discovery process easier. And I know -- I think at least it's early days for that. If you're seeing meaningful improvement in conversion, time on site, return to site, those types of metrics?

Yes, for sure. So definitely early days, like you mentioned, but we are testing agentic commerce and testing our way into it. And I think I mentioned earlier, especially around search and discoverability matching, like I mentioned before, matching the right product to the right person much faster. We did see conversion go up for new buyers, especially as we're testing our way into that. So we'll continue to kind of double down there as we see fit and be thoughtful about our approach, but as we scale up.

Our next question will come from Jay Sole at UBS.

Ajay, my question is for you. You're talking about a lot of leverage on OpEx to get the nice EBITDA margin expansion for the year. Can you just talk about some of the ways you're going to be able to control expenses as you grow revenue to get that leverage?

Yes. Thanks for the question, Jay. We're making good progress towards our medium-term goal of expanding margins to the range of 15% to 20%. In 2025, we delivered 6% adjusted EBITDA margin, and our guidance for 2026 has a midpoint of 8%. We see that as being well on track to that range of 200 to 300 basis points of margin expansion every year to get to that goal. That is being driven by -- I would say that at the forefront, it's really about getting efficiencies in the operations and tech line of our P&L. That's where we see the effect of initiatives like Athena, where we are able to leverage AI and automation to drive efficiency gains. Outside in other lines, sales, SG&A, you've heard us talk about how we are bringing other tools to help our sales team be more effective. Things like Smart Engine and Smart Sales really help optimize the time that our reps spend dealing with consignors and help them be that much more efficient at unlocking supply. And then finally, a key element of our story on operating expense leverage is our fixed cost base as well. We are in a good place, and that continues to be a source of leverage for us as we grow as a business.

Our final question for today comes from Matt Koranda at ROTH Capital Partners.

Nice work in the quarter. A lot have been asked and answered. I guess one of the things I wanted to hear a little bit more about was how AI can help you on the supply side. I know AI has been discussed a lot in terms of Athena, in terms of processing inbound items, in terms of merchandising and sort of adding assortment customization to your buyers. But what can AI do for you, I guess, in the supply procurement side of the house? And do you have anything that moves the needle in '26 on that front?

Yes. Great question. Thanks, Matt. So we definitely are an AI beneficiary and not new to AI and definitely been early adopters there. We've always focused on our differentiators, whether that's authentication; supply, like you said; and pricing and data, just to zoom out for a second. So really excited not only about the efficiencies that we believe that we'll see there and are seeing there, but also around transforming the seller experience as you dig in. So Smart Engine is a piece of that, right? And we've talked a lot about that really gaining traction, converting more of those sellers and then converting buyers into sellers with a more targeted approach. So getting smarter about targeting those areas and getting them in. Everything we do on the buyer side does feed into the seller side as well. And I think that's really important to remember because as they earn more pricing for their items, they're happier with the service, and then they come back and consign with us very quickly. So that marketplace approach is really important as well. And we talked about a little bit about MyCloset. That is another place where we really become that trusted adviser, making sure people understand what to consign and when to get consigned and using that data over now more than 50 million items that we've consigned and over 40 million members to kind of create that deep human connections with the seller specifically on the Agentic AI side. So think about that human and kind of technology coming together to create that experience. And so we're pretty excited about that.

And then maybe just one other one on the margin expansion that's planned for the EBITDA guide for '26. Just wanted to maybe hear you put a finer point on the sources of margin expansion within OpEx. It sounds like that's going to be the biggest driver in terms of margin expansion for '26. Is it evenly split between O&T and SG&A? Or is it more heavily on the O&T side of things, just given Athena implementation and what that -- how that benefits you on O&T?

Yes, Matt, thanks for the question. Between those 2 categories, we do expect operations in tech to be the leader in terms of generating operating leverage. That is what we've experienced. That's what you see in our results in 2025, and that sort of directional mix is going to continue going forward as well.