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In the U.S. alone, there's $200 billion trapped in people's closets of luxury goods. And then every year, $80 billion gets added. Resale is booming. But just a few years ago, used apparel resellers like The RealReal and ThredUp were hanged by a thread. Despite the U S secondhand clothing market reaching $43 billion in 2023, shares in both companies plunged towards record lows. Single SKU item, 50 million items sold, 200 attributes per item. When you get in there and you really start to understand the business, you realize it's much more complex than you think it is. That same year, ultra-fast fashion giant Shein expanded its third-party marketplace to the U.S., further threatening resale on speed, price, and variety. So how did digital secondhand sellers survive? Enter AI. Really what we're doing here is capturing more and more data. The decisions are happening at the speed of machines as opposed to humans. Can AI help resellers compete against the world's biggest, fastest retailers? My AI agents handle level one IT incidents, so I'm free to spend time innovating. Not just here keeping the lights on. Nick, Nick. Sorry, I leaned against a wall. You want me to turn it back on? Yeah. Let there be light. This facility is about 500,000 square feet. Network-wide across East and West Coast, we have about 1.3 million square feet of warehousing space. The RealReal is one of the largest luxury goods resellers on the planet. Yet the company operated at a loss for more than a decade. And the complexity and costs of processing second-hand goods remained a major challenge. If you think about RealReal, you're not sourcing from other brands, right? you're sourcing from individuals. All of these items will be very, very unique. You could have a particular color or a particular style or fabric. You have a significant supply side uncertainty, which makes this whole problem much, much more challenging. Unlike broader resale sites like eBay, The RealReal and ThredUP are responsible for intaking, authenticating, pricing, and shipping millions of items flowing through their inventory. This puts them at a major disadvantage against other online retailers, including ultra-fast fashion giants like Shein, which can drop up to 10,000 new designs daily and ship products within weeks at deep discounts. Today, The RealReal believes AI can change that. So this is our receiving department and we have one of our merchandise operations specialists and he is taking some scanned images of tags, the designer tag, the fabric tag, And this is the start of feeding data into Athena and that is our AI-powered intake platform that helps us to automate the authentication and listing process of these items. And it's essentially going to assign it a counterfeiting score and that's going to help route it to the next phase in the warehouse. The RealReal has been incorporating AI tools across its operations since 2018, significantly cutting processing time through AI-enhanced intake, authentication and pricing. And the strategy is starting to pay off. In 2025, for the first time, the RealReal logged four consecutive quarters with positive adjusted EBITDA. GMV rose 22% in the second quarter of 2026, and operating expense leverage improved by roughly 4.7 percentage points. We really focused how we think about AI on our value props and our moat. Authentication is a big one for us. It's our pricing algorithms. We let the market set the price. We don't set the cost. So it's all of that data. But it's also taking dollars out of the unit economics that it would take to process the items. We can take that money and invest it in acquisition or invest it in other parts of our business. Authentification has long been a challenge for The RealReal. In 2018, Chanel sued the company for selling counterfeit Chanel products. And a few years later, The RealReal settled a class-action lawsuit accusing the company of using under-trained staff to help meet high authentication quotas. Today, TheRealReal's AI-powered intake system, Athena, helps workers price and authenticate SKUs in seconds. The company plans for Athena to process half of all new items by the end of 2026, up from about 20% a year earlier. On the supply side, the decisions are happening at the speed of machines as opposed to humans. So typically, if you think of like a supply chain, right, like it has many, many subsystems. So AI can form that layer or a decision support system which can integrate all of this together and actually do scenario analysis of the speed machines. So now you can have fewer experts or they can be used better way. And secondly, your kind of speed of decision making has significantly improved. We've actually built proprietary technology for our gemologists, our watchmakers, our handbag experts to count the melee on every stone, the weight of our diamonds. It utilizes a highly magnified camera to help us take a high resolution picture. And it's able to come up with the carat weight in a moment, just one or two seconds. And so now, actually, our humans don't need to so much look at that. They're going to be focusing more on grading the actual diamond, which is where their expertise Does this speed up the process? Does it make it more accurate or both? It's both. It adds consistency, of course, and speeds up the process where we can process items much faster for the consigner so it gets on the site faster, but also the technology behind the scenes, making sure that each individual item is authentic, but aussi that the consignor is valid too. The global resale market is still booming. It's expected to reach $393 billion by 2030. And now, second-hand resellers are integrating AI across buying and selling, ranging from one-tap pricing to personalized agentic shopping experiences. Yet as supply, demand, and AI integration increases, critics still point to lasting industry issues around authentication, shipment delays, and low payouts. What are some of the pitfalls of AI where maybe companies lay too much on the back of AI? One of the big challenges that everybody is facing with AI right now is that fundamentally these are non-deterministic systems, what is known as the verification problem. They do tend to hallucinate. It's important for decision makers to understand, especially in the supply chain side. This is sort of mission-critical decisions that you're making. And if you make a wrong decision, it can potentially result in millions of dollars of losses. So when you integrate these things, it's super critical to figure out who is doing the verification, where is the human sitting in the loop. Somebody needs to be accountable for all of these decisions. We've invested millions of dólares over the years and continue to do so as fakes have gotten better over the year, as things have changed. It requires us to continuously learn, continuously evolve our technology. But it is the art and science. Like at the end of the day, you do need that gemologist to come in and look at the item. Or you need that watchmaker to come and open the watch to make sure there's no aftermarket parts. And that's where the art in science is really important, but also makes us defensible to AI. Why does Gen Z like resale so much? You know, I think it's a few things. I think it's authenticity. That's number one, right? Like in a world where everything's starting to look the same and it's algorithms after algorithms. It's the anti-fast fashion at the end of the day. But you know you're going to go somewhere and you're gonna look authentic to who you are and you gonna look unique. Be your own stylist, right. Thank you.