Core Insights - Rent the Runway, Inc. is on the verge of achieving profitability for the first time in its history [1] Company Overview - The company operates in a highly competitive market where its pricing power appears to be limited [1]

Financial Performance - Q3 2025 - Total revenue reached $87.6 million, a 15% year-over-year increase[9] - Active subscribers increased by 12% year-over-year, reaching 148900[9, 10] - Total subscribers increased by 6% year-over-year, reaching 185200[9] - Gross profit was $25.9 million with a margin of 29.6%, a 5 percentage point decrease year-over-year[9] - Net income was $76.5 million with a margin of 87.3%, which includes a one-time $96.3 million gain on debt restructuring[9] - Adjusted EBITDA was $4.3 million with a margin of 4.9%, a 7 percentage point decrease year-over-year[9] Recapitalization and Debt - A $20 million cash contribution was made to the balance sheet by investors[4] - Total outstanding debt balance was reduced to $120 million and its maturity extended to 2029[4] - An incremental amount of approximately $12.5 million of primary gross proceeds was received in a concurrent rights offering[4] Q4 2025 and FY2025 Guidance - Q4 2025 total revenue is projected to be between $85 million and $87 million[55] - Q4 2025 adjusted EBITDA margin is expected to be between 11% and 13%[55] - FY2025 total revenue is projected to be between $323.1 million and $325.1 million[55]

Core Insights - Rent the Runway reported a 12.4% year-over-year increase in active subscribers and a 15.4% increase in revenue for Q3 2025, indicating strong business growth [1][12] - The company successfully closed a transformative recapitalization plan, which significantly improved its balance sheet by reducing debt and extending maturity dates [2][5] - A community-driven organic growth strategy has been expanded to enhance brand awareness and customer acquisition [5][12] Financial Performance - Revenue for Q3 2025 was $87.6 million, up from $75.9 million in Q3 2024, marking a 15.4% increase [12] - The number of ending active subscribers reached 148,916, a 12.4% increase from 132,518 in the previous year [12] - Net income for Q3 2025 was $76.5 million, compared to a net loss of $18.9 million in Q3 2024, reflecting a significant turnaround [12][30] Strategic Initiatives - The company made its largest inventory investment in history, nearly doubling the new inventory added to its site, which has driven substantial growth [2][5] - Subscriber retention improved, leading to a nearly 30% reduction in inventory-related churn year-over-year [5] - New community-driven initiatives, such as the RTR Muse and City Ambassador programs, were launched to enhance customer engagement and acquisition [5][12] Operational Metrics - Average active subscribers increased by 12.9% year-over-year, reaching 147,645 [12] - Gross profit for Q3 2025 was $25.9 million, with a gross margin of 29.6%, down from 34.7% in Q3 2024 [12] - Adjusted EBITDA for Q3 2025 was $4.3 million, down from $9.3 million in the same quarter last year, with an adjusted EBITDA margin of 4.9% [12][36] Future Outlook - For the fiscal fourth quarter of 2025, Rent the Runway expects revenue between $85 million and $87 million and an adjusted EBITDA margin between 11% and 13% [13] - The company anticipates continued double-digit growth in ending active subscribers compared to fiscal year 2024 [13]

Financial Data and Key Metrics Changes - Reported revenue for Q4 2025 was $712 million, normalized to approximately $660 million when excluding a $52 million benefit from an additional operating week, representing a year-over-year decline of $24 million or 3.5% [13][14] - Adjusted EBITDA for Q4 was $65 million, with an adjusted margin of 9.1%, down from 11.8% in the same quarter last year [16][20] - The effective tax rate for the full year 2025 was 9.2%, with an expected range of 25-30% for fiscal 2026 [15][16] Business Line Data and Key Metrics Changes - Rental revenue decreased by $18 million, while direct sales revenue fell by $5 million, contributing to the overall revenue decline [13][14] - Business retention measured in revenue dollars was 91.8% at the end of Q4, remaining flat compared to the previous quarter [14] Market Data and Key Metrics Changes - The normalized revenue impact from churn or lost business was approximately $60 million compared to the same quarter in the prior year [14] - The company plans to stabilize revenue by implementing strategic pricing and increasing penetration with existing customers [21][67] Company Strategy and Development Direction - The company has initiated a multi-year business transformation plan focused on commercial excellence, operational excellence, and asset and network optimization, expected to be substantially completed by the end of fiscal 2027 [10][18] - The transformation plan aims to generate run-rate operating cost savings of at least $75 million by the end of 2026 [18][19] - The company is committed to improving customer service quality and operational efficiency to drive sustainable, profitable growth [24][25] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the transformation plan, indicating that 2026 will mark the beginning of a stronger, more resilient company [25] - The company acknowledges challenges related to customer churn and aims to improve retention as a key driver of long-term revenue stability [23][66] - The near-term focus is on increasing profitability and cash flow to support stronger financial performance [22] Other Important Information - The company generated $31 million in operating cash flow and $16 million in free cash flow during the quarter, reflecting positive improvement [17] - Net debt at the end of the fiscal quarter was $1.34 billion, with no debt maturities until 2028 [17] Q&A Session Summary Question: Employee engagement levels and turnover trends - Management acknowledged that employee engagement levels are not at their highest due to recent challenges but emphasized the importance of convincing employees that a new day is coming at the company [81] Question: Pricing strategy implementation - The company plans to align pricing decisions with the cost of service to create value, moving away from the previous approach that led to customer churn [86] Question: Capacity consolidation and network optimization - Management indicated that optimizing plant operations is the priority before making decisions on consolidating delivery networks, emphasizing the importance of plant performance [38][60] Question: Free cash flow guidance and capital needs - The company expects free cash flow to be between $50 million and $60 million, with no immediate need to raise capital for planned investments [46][53]

Financial Data and Key Metrics Changes - Reported revenue for Q4 2025 was $712 million, normalized to approximately $660 million when excluding a $52 million benefit from an additional operating week, representing a decline of $24 million or 3.5% year-over-year [12][13] - Adjusted EBITDA for Q4 was $65 million, with an adjusted margin of 9.1%, down from 11.8% in the same quarter last year [16][20] - Full-year effective tax rate for 2025 was 9.2%, with an expected range of 25-30% for 2026 [15][16] Business Line Data and Key Metrics Changes - Rental revenue decreased by $18 million, while direct sales revenue fell by $5 million, contributing to the overall revenue decline [12][13] - Business retention measured in revenue dollars was 91.8% at the end of Q4, flat compared to the previous quarter [13] Market Data and Key Metrics Changes - The normalized revenue impact from churn or lost business was approximately $60 million compared to the same quarter in the prior year [12][13] - The company plans to stabilize revenue by implementing strategic pricing and increasing penetration with existing customers [20][67] Company Strategy and Development Direction - The company has initiated a multi-year business transformation plan focusing on commercial excellence, operational excellence, and asset and network optimization [4][18] - The transformation plan aims to generate run-rate operating cost savings of at least $75 million by the end of 2026 [18][19] - The company is committed to improving customer service quality and operational efficiency to drive sustainable growth [10][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the transformation plan, emphasizing that 2026 will mark the beginning of a stronger, more resilient company [22][24] - The company anticipates revenue for fiscal 2026 to be flat to down 2% compared to normalized fiscal 2025 revenue, with adjusted EBITDA expected to range from $285 million to $315 million [19][20] Other Important Information - The company generated $31 million in operating cash flow and $16 million in free cash flow during the quarter, reflecting improvements over the previous quarter [17] - Net debt at the end of the fiscal quarter was $1.34 billion, with no debt maturities until 2028 [17] Q&A Session Summary Question: Regarding the cultural transformation and team readiness - Management acknowledged the importance of culture in the transformation and expressed confidence in having the right team in place to execute the strategic transformation [26][32] Question: Financial framework for mid to long term growth - Management indicated that more details about financial performance beyond 2026 would be available as the company executes its plans in the early quarters of 2026 [33] Question: Logistics and network rationalization - Management clarified that the focus is on optimizing existing plants before making decisions about consolidating capacity in certain regions [35][36] Question: Free cash flow guidance for fiscal 2026 - Management provided details on the assumptions behind the $50-$60 million free cash flow guidance, including capital expenditures and working capital considerations [46][51] Question: Employee engagement and turnover trends - Management recognized the challenges faced by employees and emphasized the need to improve engagement levels as part of the transformation [78][81] Question: Strategic pricing initiatives - Management highlighted the differences in the new pricing strategy, focusing on aligning service quality with pricing decisions to reduce churn and improve customer retention [70][86]

Core Insights - Rent the Runway, Inc. has successfully completed a recapitalization transaction aimed at improving its financial position by reducing debt and extending maturity [1][2][3] Financial Position - The recapitalization involved converting a significant portion of existing debt into common equity and raising $20 million in cash from an investor group [2] - Following the recapitalization, the total outstanding debt was reduced to $120 million, with maturity extended to 2029 [2] - An additional $12.5 million was raised through a concurrent rights offering [2] Strategic Goals - The CEO of Rent the Runway emphasized that this recapitalization is a crucial milestone for the company's transformation, allowing it to focus on customer service and profitable growth [3] - The company aims to continue its mission of reinventing how women access fashion while maintaining its status as a public company trading under the ticker symbol "RENT" on Nasdaq [3] Company Overview - Founded in 2009, Rent the Runway is disrupting the fashion industry by offering a subscription-based model for renting and purchasing designer items [6] - The platform provides a wide range of products, including evening wear, workwear, and activewear, through its "Closet in the Cloud" concept [6] - The company has received multiple accolades for its innovation and impact in the industry, including being named to CNBC's "Disruptor 50" list five times [7]

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 [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]

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]