Rent the Runway(RENT) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company improved its cash position significantly, with a decline of $6.6 million in fiscal year 2024 compared to a decline of$ 70.5 million in fiscal year 2023, resulting in record low cash consumption [5] - Total revenue for Q4 2024 was $76.4 million, an increase of$ 600,000 or 0.8% year over year [31] - Adjusted EBITDA for Q4 2024 was $17.4 million or 22.8% of revenue, compared to$ 11.2 million or 14.8% of revenue in the prior year [33] Business Line Data and Key Metrics Changes - Subscription and reserve rental revenue decreased by 1.2% year over year in Q4 2024, primarily due to lower average subscribers [31] - Other revenue increased by 13.5% or $1.4 million year over year [31] - Fulfillment expenses were$ 20.2 million in Q4 2024, slightly lower than $20.1 million in Q4 2023, with fulfillment expenses as a percentage of revenue at 26.4% [32] Market Data and Key Metrics Changes - Ending active subscribers decreased to 119,778, down approximately 4.9% year over year [29] - Average active subscribers during the quarter were 126,148, a decrease of 2.1% from the prior year [29] - The company plans to double inventory purchases in fiscal year 2025, with 62% of total units expected to come from the share by RTR program [23][36] Company Strategy and Development Direction - The company is focusing on a disciplined growth strategy rather than growth at all costs, emphasizing the importance of inventory investment to unlock customer growth and retention [6][22] - A significant inventory investment is planned for 2025, with a goal to add two times new inventory units year over year and 75% more new styles [16][17] - The company aims to evolve into a discovery engine for consumers to find the latest in designer fashion, leveraging its partnerships with brands [26] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the ability to operate at nearly breakeven levels while maintaining steady revenue, highlighting improvements in cost structure and working capital [28] - The company anticipates increased cash consumption in fiscal year 2025 due to inventory investments, but expects this to lead to subscriber growth and improved customer satisfaction [37] - Management is cautious about external factors such as tariffs and economic conditions but believes renting offers substantial value compared to buying [40] Other Important Information - The company has restructured its customer service team to focus more on proactive engagement, which has led to improved customer satisfaction scores [10] - The company has implemented a 60-day customer promise for new members, providing risk-free renting for the first two months [19] Q&A Session Summary Question: Can you help us understand the cash flow guidance and the drivers of it? - The cash flow guidance reflects a significant increase in inventory, with a CapEx guidance of$ 70 million to $75 million for the year, which is a considerable increase from fiscal year 2024 [43][44] Question: What have you seen more recently regarding consumer reactions to tariffs? - The company believes renting provides considerable value versus buying, and the new inventory addresses the primary pain point for customers, which is expected to improve retention [46][47] Question: How do we think about the customer experience changing in 2025? - The company is doubling the number of new units on the platform, which will significantly enhance the customer experience with more new arrivals and greater brand variety [50][51]