Rent the Runway(RENT) - 2026 Q1 - Quarterly Report

Financial Performance - Total revenue for the three months ended April 30, 2025, was $69.6 million, a decrease of 7.2$75.0 million in the same period of 2024[128] - Gross Profit was $21.9 million, representing a gross margin of 31.5$(26.1) million, with a net loss as a percentage of revenue of (37.5)%, compared to (29.3)% in the prior year[128] - Adjusted EBITDA was $(1.3) million for the three months ended April 30, 2025, down from$6.5 million in 2024, with Adjusted EBITDA margins of (1.9)% and 8.7% respectively[158] - Total revenue, net for the three months ended April 30, 2025, was $69.6 million, a decrease of$5.4 million, or 7.2%, compared to $75.0 million for the same period in 2024[173] - Subscription and Reserve rental revenue was$62.0 million for the three months ended April 30, 2025, a decrease of $4.1 million, or 6.2$66.1 million for the same period in 2024[174] - Other revenue was $7.6 million for the three months ended April 30, 2025, a decrease of$1.3 million, or 14.6%, compared to $8.9 million for the same period in 2024[175] - Total costs and expenses were$89.3 million for the three months ended April 30, 2025, a decrease of $2.2 million, or 2.4$91.5 million for the same period in 2024[176] - General and administrative expenses were $20.7 million for the three months ended April 30, 2025, a decrease of$2.1 million, or 9.2%, compared to $22.8 million for the same period in 2024[183] - Interest expense, net was$(6.3) million for the three months ended April 30, 2025, an increase of $0.7 million, or 12.5$(5.6) million for the same period in 2024[191] Subscriber Metrics - Active Subscribers increased by 1% year-over-year, reaching 147,157 as of April 30, 2025, compared to 145,837 in 2024[128] - Active Subscribers increased to 147,157 as of April 30, 2025, up from 145,837 year-over-year, driven by improved retention and promotional activity[152] Customer Engagement - Customer engagement metrics improved, with Spring 2025 rental products showing a 23% higher share of views and 46% more hearts compared to Spring 2024[128] - The company plans to focus on increasing the quantity and desirability of rental product purchases to enhance customer satisfaction and retention in fiscal year 2025[136] Cash Flow and Liquidity - Cash and Cash Equivalents decreased to $70.4 million from$82.0 million year-over-year[128] - Cash flows from operations for the three months ended April 30, 2025 were $8.3 million, an increase from$4.6 million in the same period of 2024[203] - Total cash and cash equivalents, along with restricted cash, decreased to $79.4 million as of April 30, 2025, down from$86.5 million at the beginning of the period[203] - The cash consumption of the business was $(6.4) million for the three months ended April 30, 2025, compared to$(1.4) million for the same period in 2024, indicating higher operational costs[203] Operational Strategy - The company launched 36 new brands and over 1,000 new styles in the first quarter of fiscal year 2025, with a projected 134% increase in rental product receipts year-over-year[126] - The company expects to double the new rental product added to its site in fiscal year 2025 compared to fiscal year 2024[131] - The company is focused on investing in customer value and improving the customer experience to mitigate inflationary pressures and rising labor costs[147] - The company plans to continue leveraging technology and automation to drive efficiencies and improve margins as it scales its operations[140] - The company plans to significantly increase rental product availability, which may impact cash and cash equivalents in fiscal year 2025[197] Financial Challenges - Net loss for the three months ended April 30, 2025, was $26.1 million, compared to a net loss of$22.0 million for the same period in 2024[172] - The company's accumulated deficit reached $(1,149.1) million as of April 30, 2025, indicating ongoing financial challenges since inception[197] - The macroeconomic environment remains uncertain, impacting consumer discretionary spending, price sensitivity, and overall business operations[145] Cost Management - Transportation costs decreased as a percentage of revenue in fiscal year 2024, attributed to higher revenue per order and a new transportation contract, with expectations to further reduce these costs in fiscal year 2025[147] - Fulfillment expenses were$20.4 million for the three months ended April 30, 2025, representing 29.3% of revenue, compared to 27.5% for the same period in 2024[177] - The January 2024 restructuring plan is expected to generate total annual operating expense savings of approximately $12 million[189] Market and Risk Factors - The company qualifies as an "emerging growth company" under the JOBS Act, allowing it to adopt new accounting guidance within the same time periods as private companies[214] - There were no material changes to the company's quantitative and qualitative disclosures about market risk in the three months ended April 30, 2025, compared to the 2024 Annual Report[215] - The company experienced seasonality in subscriber acquisition, typically peaking in March through May and September through November, with disruptions noted during fiscal year 2022 and 2023 due to pricing changes and inventory levels[143] Asset Management - The company performed an impairment analysis of its long-lived assets as of April 30, 2025, and January 31, 2025, concluding that undiscounted cash flows exceeded carrying values, resulting in no impairment recognized for the respective periods[212]