Core Insights - Rent the Runway reported a wider-than-expected quarterly loss of $6.55 per share, exceeding the analyst estimate of $5.48 [1] - Quarterly revenue was $80.9 million, surpassing the analyst estimate of $75.5 million [1] Financial Restructuring - The company announced a recapitalization plan to reduce debt from $340 million to $120 million and extend the maturity of the debt to 2029 [2] - This plan aims to provide financial flexibility for executing a turnaround strategy [3] Subscriber Metrics - The company reported 146,373 ending active subscribers, a 13.4% increase from 129,073 at the end of the second quarter of fiscal year 2024 [5] - Average active subscribers reached 146,765, reflecting a 6.8% increase from 137,455 at the end of the second quarter of fiscal year 2024 [5] - Total subscribers increased to 185,102, marking a 5.7% rise from 175,087 at the end of the second quarter of fiscal year 2024 [5] Stock Performance - Rent the Runway's stock price fell by 26.74% to $5.78 in extended trading following the earnings report [4]

Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $80.9 million, an increase of $2 million or 2.5% year-over-year, and up $11.3 million or 16.2% quarter-over-quarter [17] - Adjusted EBITDA for Q2 2025 was $3.6 million or 4.4% of revenue, compared to $13.7 million or 17.4% of revenue in Q2 2024, primarily due to higher revenue share expenses [19] - Free cash flow for Q2 2025 was negative $26.5 million, a decrease from negative $4.5 million in Q2 2024, mainly due to lower adjusted EBITDA and higher purchases of rental products [20] Business Line Data and Key Metrics Changes - Subscription and Reserve rental revenue increased by $0.7 million or 1% year-over-year in Q2 2025, primarily due to higher average subscribers [18] - Fulfillment costs were $22.5 million in Q2 2025, up from $20.6 million in Q2 2024, reflecting higher transportation and warehouse processing costs [18] - Gross margins decreased to 30% in Q2 2025 from 41.1% in Q2 2024, impacted by higher revenue share costs and fulfillment costs [19] Market Data and Key Metrics Changes - Active subscribers at the end of Q2 2025 were 146,400, a 13.4% year-over-year increase, showing significant growth compared to previous quarters [8][17] - Year-to-date, the company added 2,200 new styles and 56 new brands to the platform, enhancing customer experience [9] Company Strategy and Development Direction - The company announced a recapitalization plan aimed at reducing total debt from over $340 million to approximately $120 million, enhancing financial flexibility [4][5] - The strategy focuses on inventory growth, product innovation, and improving customer experience, with significant investments made in inventory this fiscal year [15][16] - The company plans to continue adding inventory and enhancing customer engagement through organic marketing strategies [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's position, indicating that the recapitalization will allow for sustainable growth and improved customer care [22] - The company expects revenue for Q3 2025 to be between $82 million and $84 million, with adjusted EBITDA margins projected to be between negative 2% and 2% of revenue [20] - Management believes that the business is showing improved momentum, with a focus on prudent investment management to drive growth [22] Other Important Information - The company implemented a price increase for subscription plans, with an average increase of $2 per item, reflecting inflationary pressures [13][14] - Engagement with new inventory has significantly increased, with metrics such as share of views up 84% year-over-year [10] Q&A Session Summary Question: What are the expectations for subscriber growth moving forward? - Management indicated that they expect double-digit growth in ending active subscribers for fiscal year 2025, driven by improved inventory and customer experience [21] Question: How will the recapitalization impact the company's financials? - The recapitalization is expected to significantly reduce debt, lower interest expenses, and extend maturity to 2029, providing a stronger financial position [16]

Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $80.9 million, an increase of $2 million or 2.5% year-over-year, and up $11.3 million or 16.2% quarter-over-quarter [17] - Adjusted EBITDA for Q2 2025 was $3.6 million or 4.4% of revenue, compared to $13.7 million or 17.4% of revenue in Q2 2024, reflecting a decrease primarily due to higher revenue share expenses [19] - Free cash flow for Q2 2025 was -$26.5 million, a decline from -$4.5 million in Q2 2024, mainly due to lower adjusted EBITDA and higher purchases of rental products [20] Business Line Data and Key Metrics Changes - Active subscribers at the end of Q2 2025 reached 146,400, representing a 13.4% year-over-year increase, up from -4.9% in Q4 2024 and 0.9% in Q1 2025 [8][17] - Subscription and Reserve rental revenue increased by $0.7 million or 1% year-over-year in Q2 2025, driven by higher average subscribers [18] - Revenue share units from existing partners increased by 40% year-over-year, while total revenue share units rose by 119% year-over-year [10] Market Data and Key Metrics Changes - Engagement with new inventory in Q2 outperformed the previous year across key metrics, including share of views up 84% year-over-year and hearts per style up 15% year-over-year [10] - Organic channel acquisitions had the best performing quarter in years, with engagement on social media channels up 796% and views up 175% year-over-year [12] Company Strategy and Development Direction - The company announced a recapitalization plan aimed at reducing total debt from over $340 million to approximately $120 million, enhancing financial flexibility [4][5] - The strategy focuses on capturing subscribers through new inventory, increased product innovation, and improved customer experience [6][8] - The company plans to continue adding inventory and enhancing customer experience through personalized recommendations and AI-driven improvements [13][11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the company's position, stating it is in the strongest position in several years and looking forward to sustainable growth [22] - The recapitalization is seen as a validation of the inventory strategy and a key step for continued investment in customer experience [16] - Guidance for Q3 2025 expects revenue between $82 million and $84 million, with adjusted EBITDA margins between -2% and 2% of revenue [20] Other Important Information - The company implemented a price increase for subscription plans, averaging an increase of $2 per item, with the most popular plan rising from $144 to $164 per month, a 14% increase [13][14] - The recapitalization transaction is expected to be completed by December 31, 2025, providing a significant cash infusion and extending debt maturity to 2029 [6] Q&A Session Summary Question: What are the expectations for subscriber growth moving forward? - Management indicated continued confidence in subscriber growth, expecting double-digit growth in ending active subscribers for fiscal year 2025 [21] Question: How will the recapitalization impact the company's operations? - The recapitalization is expected to reduce debt significantly, lower interest expenses, and provide cash for further investments in inventory and customer experience [16] Question: What are the anticipated challenges in the upcoming quarters? - Management acknowledged potential challenges related to free cash flow, projecting it to be lower than -$40 million primarily due to recapitalization costs [21]

Financial Data and Key Metrics Changes - Total revenue for Q2 2025 was $80.9 million, an increase of $2 million or 2.5% year-over-year, and up $11.3 million or 16.2% quarter-over-quarter [17] - Adjusted EBITDA for Q2 2025 was $3.6 million, or 4.4% of revenue, compared to $13.7 million, or 17.4% of revenue in Q2 2024 [19] - Free cash flow for Q2 2025 was negative $26.5 million, compared to negative $4.5 million in Q2 2024 [20] Business Line Data and Key Metrics Changes - Subscriber growth ended Q2 with 146,400 active subscribers, a 13.4% year-over-year increase, accelerating from -4.9% in Q4 2024 and 0.9% in Q1 2025 [8][15] - Subscription and Reserve rental revenue increased by $0.7 million, or 1% year-over-year in Q2 2025, primarily due to higher average subscribers [18] - Revenue share units from existing partners were up 40% year-over-year, and total revenue share units increased by 119% year-over-year [10] Market Data and Key Metrics Changes - Engagement with new inventory in Q2 overperformed last year across every key metric, including share of views up 84% year-over-year and hearts per style up 15% year-over-year [10] - Organic channel acquisitions had the best performing quarter in years, with engagement on social media channels up 796% and views up 175% year-over-year [12] Company Strategy and Development Direction - The company announced a recapitalization plan aimed at reducing total debt from over $340 million to approximately $120 million, which is expected to strengthen the balance sheet and provide financial flexibility [4][5] - The strategy focuses on capturing subscribers through a new inventory strategy, increased product innovation, and improved customer connection [6][8] - The company plans to continue adding inventory and enhancing customer experience, with a focus on organic growth through community engagement [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that the company is on the right track to generate strong medium and long-term performance, with improved momentum evidenced by subscriber growth [21] - The company expects revenue for Q3 2025 to be between $82 million and $84 million, with adjusted EBITDA margins projected to be between negative 2% and 2% of revenue [20] - Management believes the recapitalization transaction is a key step forward for continued investment in customer experience [16] Other Important Information - The company implemented a price increase for subscription plans on August 1, with an average increase of $2 per item, and the most popular plan increasing from $144 to $164 per month, a 14% increase [13][14] - The company is excited about the future and views the recapitalization as a new chapter, akin to an "IPO 2.0" [5][6] Q&A Session Summary Question: What are the expectations for subscriber growth moving forward? - Management indicated that they expect double-digit growth in ending active subscribers for fiscal year 2025 [20] Question: How will the recapitalization impact the company's operations? - The recapitalization is expected to significantly reduce debt, lower interest expenses, and provide cash infusion for continued investment in inventory and customer experience [16] Question: What are the anticipated challenges in the upcoming quarters? - Management acknowledged that free cash flow is expected to be lower than negative $40 million due to costs associated with the recapitalization transaction [20]

Financial Performance - Q2 2025 - Total revenue reached $80.9 million, a 2.5% year-over-year increase[13] - Ending active subscribers increased by 13.4% year-over-year to 146.4K[7, 13] - Gross profit was $24.3 million with a margin of 30.0%, a decrease of 11 percentage points year-over-year[13] - Net loss amounted to $(26.4) million, with a margin of (32.6)%, a decrease of 13 percentage points year-over-year[13] - Adjusted EBITDA was $3.6 million, representing a margin of 4.4%, a decrease of 13 percentage points year-over-year[13] Business Highlights - Aranda Principal Strategies (APS), STORY3 Capital Partners and Nexus Capital Management are partnering to inject $20 million of incremental cash into the company's balance sheet[7] - APS will convert its accreted debt balance in excess of $100 million into common equity[7] - Outstanding debt balance will be reduced to $120 million and maturity will be extended to 2029 upon closing of the transaction[7] - Q2'25 subscription net promoter score was +77% year-over-year[7, 42] - Total Revenue Share Units increased +119% year-over-year[45] Guidance - Q3 2025 total revenue is projected to be between $82 million and $84 million[74] - Q3 2025 adjusted EBITDA margin is expected to range from -2% to +2%[74] - FY2025 ending active subscribers are anticipated to show double-digit growth compared to FY2024[74]

Revenue and Growth - Rent the Runway reported Q2 2025 revenue of $80.9 million, a 2.5% increase from $78.9 million in Q2 2024[7] - Active subscribers reached 146,373, representing a 13.4% year-over-year growth from 129,073 in Q2 2024[7] - Total revenue for the three months ended July 31, 2025, was $80.9 million, a 2.5% increase from $78.9 million in the same period of 2024[28] - Subscription and Reserve rental revenue for the six months ended July 31, 2025, was $131.2 million, down 2.5% from $134.6 million in 2024[28] - The company anticipates double-digit growth in ending active subscribers compared to FY 2024[10] Profitability and Loss - Gross profit was $24.3 million, down 25.0% from $32.4 million in Q2 2024, with a gross margin of 30.0% compared to 41.1% in the prior year[7] - Adjusted EBITDA was $3.6 million, down from $13.7 million in Q2 2024, with an adjusted EBITDA margin of 4.4% compared to 17.4% in the prior year[7] - Net loss for the six months ended July 31, 2025, was $52.5 million, compared to a net loss of $37.6 million in the same period of 2024[30] - Operating loss for the three months ended July 31, 2025, was $20.1 million, an increase from $9.6 million in the same period of 2024[28] - Net loss for the three months ended July 31, 2025, was $(26.4) million, compared to $(15.6) million for the same period in 2024, representing an increase in net loss of 69.9%[34] - Adjusted EBITDA for the six months ended July 31, 2025, was $2.3 million, a decrease of 88.6% from $20.2 million in the same period in 2024[34] - Free Cash Flow for the six months ended July 31, 2025, was $(32.9) million, compared to $(5.9) million in 2024, indicating a significant decline in cash flow[36] - Net Loss as a percentage of revenue for the three months ended July 31, 2025, was (32.6)%, compared to (19.8)% in 2024, indicating a higher loss relative to revenue[34] Financial Position - The company reduced its debt from $340 million to $120 million, extending maturity to 2029, providing financial flexibility for future growth[5] - Total assets as of July 31, 2025, were $219.0 million, down from $240.0 million as of January 31, 2025[26] - Total liabilities increased to $451.1 million as of July 31, 2025, compared to $422.5 million as of January 31, 2025[26] - Cash and cash equivalents at the end of the period were $43.6 million, a decrease from $77.4 million at the beginning of the period[26] - The company incurred $34.3 million in net decrease in cash and cash equivalents and restricted cash during the six months ended July 31, 2025[30] Inventory and Engagement - Engagement with new inventory increased significantly, with share of views up 84% year-over-year and new units at home up 57% year-over-year[7] - Revenue share units from existing partners increased by 40% year-over-year, with total revenue share units up 119% year-over-year[7] - The company plans to add over 80 new brands in FY 2025, with 56 already launched in the first half of the year[7] - Purchases of rental product for the six months ended July 31, 2025, totaled $(42.0) million, compared to $(26.3) million in 2024, showing increased investment in rental inventory[36] - Proceeds from the sale of rental product for the six months ended July 31, 2025, were $11.8 million, down from $13.6 million in 2024, indicating a decline in sales[36] Future Outlook - For Q3 2025, Rent the Runway expects revenue between $82 million and $84 million, with an adjusted EBITDA margin between (2)% and +2%[10] - The company plans to continue focusing on technology and marketing investments to drive future growth[23] - Free Cash Flow Margin for the six months ended July 31, 2025, was (21.9)%, compared to (3.8)% in 2024, reflecting a worsening cash flow situation[36] - Adjusted EBITDA Margin for the three months ended July 31, 2025, was 4.4%, down from 17.4% in the same period in 2024[34] - Non-recurring adjustments for the three months ended July 31, 2025, included $2.0 million of transaction-related costs, impacting overall financial performance[34]

Core Insights - Rent the Runway has announced a transformative recapitalization plan aimed at strengthening its balance sheet and injecting capital into the business [2][3] - The company reported a 13.4% year-over-year increase in active subscribers as of July 31, 2025, indicating continued growth [1][11] - Customer satisfaction, measured by the Net Promoter Score, has improved significantly, achieving a score of +77% year-over-year [1][5] Financial Performance - Revenue for Q2 2025 was $80.9 million, reflecting a 2.5% increase from $78.9 million in Q2 2024 [11] - The company reported a net loss of $(26.4) million for Q2 2025, compared to a net loss of $(15.6) million in Q2 2024 [11] - Adjusted EBITDA for Q2 2025 was $3.6 million, down from $13.7 million in Q2 2024, with an Adjusted EBITDA margin of 4.4% compared to 17.4% in the prior year [11][35] Recapitalization Plan - The recapitalization plan will reduce the company's debt from $340 million to $120 million and extend the maturity to 2029, providing financial flexibility [3][5] - The transaction involves converting over $100 million of debt into common equity and adding $20 million in incremental cash [5] Inventory and Customer Engagement - The company has significantly increased its inventory, posting nearly double the inventory units compared to the previous year, with substantial increases in styles [5] - Customer engagement metrics have improved, with share of views up 84% year-over-year and new units at home up 57% year-over-year [5] Market Position and Strategy - Rent the Runway is positioned to capitalize on growing interest in clothing rental, supported by a bold inventory strategy [2] - The company plans to add over 80 new brands in FY 2025, with 56 already launched in the first half of the year [5]

Company Announcement - Rent the Runway, Inc. plans to release its second quarter 2025 financial results on September 11, 2025, after market close [1] - A conference call and live webcast will be held at 4:30 p.m. Eastern Time on the same day to discuss the results and provide a business update [1] Access Information - The financial results and live webcast will be accessible through the Investor Relations section of Rent the Runway's website [2] - To access the conference call, U.S. callers can dial 1-877-407-3982, while international callers can use 1-201-493-6780 [2] Replay Details - A replay of the conference call will be available shortly after the call for at least fourteen days [3] - U.S. callers can access the replay by dialing 1-844-512-2921, and international callers can use 1-412-317-6671 with access code 13755468 [3] Company Overview - Founded in 2009, Rent the Runway is transforming the fashion industry with its "Closet in the Cloud" concept [4] - The company offers subscription services, a-la-carte rentals, and resale options from hundreds of designer brands, featuring millions of items for various occasions [4] - Under the leadership of CEO Jennifer Hyman, Rent the Runway has received multiple accolades, including being named to CNBC's "Disruptor 50" five times and Fast Company's Most Innovative Companies list four times [4]

Core Viewpoint - Rent the Runway is implementing a recapitalization plan to convert $243 million of debt into common equity, add $20 million to its balance sheet, and extend the maturity of its $120 million outstanding debt to 2029 [1][2]. Group 1: Recapitalization Plan - The recapitalization involves Aranda Principal Strategies (APS) converting part of its debt investment into common equity, with additional capital contributions from APS, STORY3, and Nexus Capital Management [2][5]. - The transaction is expected to close by December 31, subject to customary closing conditions [2]. Group 2: Business Performance and Strategy - The CEO of Rent the Runway highlighted the partnership with APS, STORY3, and Nexus as a means to improve the company's balance sheet and capitalize on the expanding rental market in the U.S. [3]. - The company has achieved nearly free cash flow breakeven in 2024 and is transitioning to an asset-light model [3]. - Rent the Runway reported a record high of 147,000 active subscribers and a four-year high in customer retention at the end of the first quarter [4]. Group 3: Market Challenges and Future Plans - The company announced a restructuring plan in January 2024, following a 2% decline in active subscribers, which included a 10% reduction in corporate employees [5]. - Ongoing inflationary challenges have led subscribers to reconsider their subscriptions, prompting the company to double its inventory this year to maintain subscriber interest [6]. - Rent the Runway is forming agreements with brands to design exclusive apparel or provide apparel at lower costs in exchange for a share of rental revenue [6].

Core Viewpoint - Rent the Runway, Inc. is undergoing a growth recapitalization to strengthen its balance sheet, reduce debt, and enhance financial flexibility, while continuing to operate as a public company under the ticker symbol RENT [1][2][3] Financial Restructuring - The recapitalization will significantly reduce the Company's debt, with APS converting over $100 million of its debt into common equity, resulting in an estimated $243 million of debt converted at an effective price of $9.23 per share, an 80.9% premium to the recent average price [5][6] - The outstanding debt balance will be reduced to $120 million, with maturity extended to 2029 [6] - An additional $20 million in cash will be contributed to the balance sheet, increasing the loan balance equivalently [6] Rights Offering - A rights offering will be initiated, allowing existing stockholders to purchase up to $12.5 million of shares at a price of $4.08 per share, representing a 20% discount to the recent average price [7] Business Strategy and Growth - The Company aims to execute a multi-year transformation plan focused on expanding its customer base and enhancing the product and customer experience, having ended Q1 2025 with a record 147,000 active subscribers [4][5] - The management team has made significant progress towards a differentiated strategy and financial discipline, positioning the Company for long-term value creation [3][4] Market Position and Potential - The partnership with STORY3 and Nexus is expected to leverage their sector expertise to drive growth in the expanding rental market, which has been identified as a significant opportunity for fashion brands [3][4] - The Company has seen improved customer retention and reduced churn rates, indicating a positive trend in customer engagement [5]