Rent the Runway(RENT) - 2025 Q3 - Quarterly Report

Revenue and Growth - Revenue for the three months ended October 31, 2024 was $75.9 million, representing 4.7% year-over-year growth[120] - Revenue for the nine months ended October 31, 2024 was $229.8 million, representing 3.3% year-over-year growth[120] - Total revenue increased by $3.4 million (4.7%) to $75.9 million for the three months ended October 31, 2024, driven by higher Reserve revenue and increased average selling price per unit[160] - Subscription and Reserve rental revenue grew by $1.6 million (2.5%) to $66.3 million, driven by higher Reserve revenue and average revenue per subscriber[161] - Other revenue increased by $1.8 million (23.1%) to $9.6 million, representing 12.6% of total revenue, up from 10.8% in the same period last year[162] - Total revenue increased by $7.4 million (3.3%) to $229.8 million for the nine months ended October 31, 2024, driven by higher units purchased per subscriber[179] - Other revenue increased by $6.0 million (26.2%) to $28.9 million for the nine months ended October 31, 2024, representing 12.6% of total revenue, up from 10.3% in the same period last year[182] Gross Profit and Margin - Gross Profit for the three months ended October 31, 2024 was $26.3 million, with a gross margin of 34.7%[120] - Gross Profit for the nine months ended October 31, 2024 was $87.1 million, with a gross margin of 37.9%[120] - Gross Profit for the three months ended October 31, 2024 was $26.3 million, with a Gross Margin of 34.7%, compared to $25.2 million and 34.8% for the same period in 2023[140] Net Loss and Adjusted EBITDA - Net Loss for the three months ended October 31, 2024 was $(18.9) million, representing (24.9)% of revenue[120] - Net Loss for the nine months ended October 31, 2024 was $(56.5) million, representing (24.6)% of revenue[120] - Adjusted EBITDA for the three months ended October 31, 2024 was $9.3 million, with an Adjusted EBITDA Margin of 12.3%[120] - Adjusted EBITDA for the nine months ended October 31, 2024 was $29.5 million, with an Adjusted EBITDA Margin of 12.8%[120] - Adjusted EBITDA for the three months ended October 31, 2024 was $9.3 million, with a margin of 12.3%, compared to $3.5 million and 4.8% for the same period in 2023[142] - Adjusted EBITDA increased to $29.5 million for the nine months ended October 31, 2024, with a margin of 12.8%, up from $15.7 million and 7.1% in the same period last year[201] - Net loss for the three months ended October 31, 2024 was $(18.9) million, compared to $(31.5) million for the same period in 2023[203] - Adjusted EBITDA for the three months ended October 31, 2024 was $9.3 million, compared to $3.5 million for the same period in 2023[203] - Adjusted EBITDA margin for the three months ended October 31, 2024 was 12.3%, compared to 4.8% for the same period in 2023[203] Subscribers and Retention - Active Subscribers as of October 31, 2024 were 132,518, showing 1% year-over-year growth[120] - Active Subscribers increased to 132,518 as of October 31, 2024, up from 131,725 as of October 31, 2023, driven by improved subscriber retention[136] Costs and Expenses - Total costs and expenses decreased by $4.8 million (5.1%) to $89.6 million, primarily due to cost savings from the January 2024 restructuring plan and improved warehouse labor productivity[163] - Fulfillment expenses decreased by $0.1 million (0.5%) to $21.4 million, representing 28.2% of revenue, down from 29.7% in the same period last year[165] - Technology expenses decreased by $3.4 million (28.1%) to $8.7 million, representing 11.5% of revenue, down from 16.7% in the same period last year[167] - Marketing expenses remained flat at $7.1 million, with non-personnel costs at $6.4 million, representing 8.4% of revenue[169] - General and administrative expenses decreased by $3.2 million (13.1%) to $21.2 million, representing 27.9% of revenue, down from 33.7% in the same period last year[171] - Rental product depreciation and revenue share increased by $2.4 million (9.3%) to $28.2 million, representing 37.2% of revenue, up from 35.6% in the same period last year[173] - Other depreciation and amortization decreased by $0.5 million (14.3%) to $3.0 million for the three months ended October 31, 2024, driven by lower depreciation from machinery and equipment and reusable packaging[174] - Total costs and expenses decreased by $13.5 million (4.8%) to $269.6 million for the nine months ended October 31, 2024, driven by lower share-based compensation and cost savings from the January 2024 restructuring plan[183] - Fulfillment expenses decreased by $3.3 million (5.0%) to $62.6 million for the nine months ended October 31, 2024, representing 27.2% of revenue, down from 29.6% in the same period last year[184] - Technology expenses decreased by $11.1 million (29.1%) to $27.0 million for the nine months ended October 31, 2024, driven by cost savings from the January 2024 restructuring plan[187] - General and administrative expenses decreased by $10.6 million (13.8%) to $66.2 million for the nine months ended October 31, 2024, representing 28.8% of revenue, down from 34.5% in the same period last year[191] - Rental product depreciation and revenue share increased by $13.4 million (20.1%) to $80.1 million for the nine months ended October 31, 2024, representing 34.9% of revenue, up from 30.0% in the same period last year[193] Cash and Liquidity - Cash and Cash Equivalents as of October 31, 2024 was $74.1 million[120] - Cash and cash equivalents as of October 31, 2024 were $74.1 million, with restricted cash of $9.0 million[204] - Net cash provided by operating activities for the nine months ended October 31, 2024 was $11.5 million, compared to $(7.7) million for the same period in 2023[213] - Net cash used in investing activities for the nine months ended October 31, 2024 was $(20.8) million, compared to $(39.6) million for the same period in 2023[213] - The company expects to achieve cash flow break-even in fiscal year 2024[208] - The 2023 Amended Temasek Facility eliminates all interest payments for six full fiscal quarters starting from Q4 2023[207] - The company filed a shelf registration statement allowing it to offer securities up to $40 million[210] - Net cash used in investing activities for the nine months ended October 31, 2023 was $(39.6) million, primarily due to $(56.3) million in rental product purchases and $(3.2) million in fixed and intangible asset purchases[218] - The company had $326.7 million of total debt outstanding as of October 31, 2024, with none maturing within the next 12 months[220] - The 2023 Amended Temasek Facility eliminated all interest for six fiscal quarters starting Q4 2023 and reduced the minimum liquidity covenant from $50 million to $30 million[220] Debt and Interest - Net interest expense decreased by $3.9 million (39.0%) to $6.1 million for the three months ended October 31, 2024, primarily due to reduced PIK and cash interest from the 2023 Amended Temasek Facility[177] - The 2023 Amended Temasek Facility is expected to reduce cash interest payments during fiscal years 2024 and 2025, improving overall liquidity[129] - The 2023 Amended Temasek Facility eliminates all interest payments for six full fiscal quarters starting from Q4 2023[207] - The 2023 Amended Temasek Facility eliminated all interest for six fiscal quarters starting Q4 2023 and reduced the minimum liquidity covenant from $50 million to $30 million[220] Operational Efficiency and Cost Management - The company expects transportation costs to decrease as a percentage of sales in fiscal year 2024 due to transportation efficiencies and a new transportation contract[133] - The company anticipates higher sales projections and the impact of increasing rental product depth to decrease purchases of rental product as a percentage of revenue in fiscal year 2024[127] - The company plans to continue driving fulfillment and operational efficiency gains to offset cost increases and strategically evolve its mix of revenue and product acquisition[140] - The company expects to reduce fixed costs as a percentage of total revenue in fiscal year 2024, with operating costs growing more slowly than total revenue[127] - Purchases of rental product as a percentage of revenue decreased to 26% in fiscal year 2023 from 21% in 2022 and 15% in 2021, with expectations of further decrease in fiscal year 2024[127] - 61% of new items were acquired through non-Wholesale channels in fiscal year 2023, up from 58% in 2022 and 55% in 2021, with plans to further increase this percentage in fiscal year 2024[127] Internal Controls and Financial Reporting - Material weaknesses in internal control over financial reporting were identified as of October 31, 2024, including insufficient evidence of control operation and ineffective IT general controls[230] - Remediation efforts include formalizing control procedures, improving segregation of duties, and implementing IT general controls[232] - The company continues to implement comprehensive access control protocols and program change management controls to address material weaknesses[234] - No changes in internal control over financial reporting during the quarter ended October 31, 2024 materially affected the company's controls[235] - The company concluded no impairment was necessary for long-lived assets as of October 31, 2023, as undiscounted cash flows exceeded carrying values[224]