Earnings call transcript: Rent the Runway Q4 FY2024 sees revenue growth, stock dips

Rent the Runway Inc. reported its Q4 FY2024 earnings, showcasing a slight revenue increase but facing a decline in stock price during premarket trading. Despite achieving a positive cash flow and improved EBITDA margins, the company experienced a decrease in active subscribers. The stock fell 7.24% in premarket trading, reflecting investor concerns over subscriber decline and future cash consumption projections. According to InvestingPro data, the company operates with a significant debt burden and maintains a "Fair" overall financial health score of 2.05 out of 5.

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Key Takeaways

• Revenue for Q4 FY2024 increased by 0.8% year-over-year to $76.4 million.
• Active subscribers decreased by 4.9% year-over-year, totaling 119,778.
• Positive free cash flow of $2.1 million, a significant turnaround from the previous year’s negative $23 million.
• Stock price dropped by 7.24% in premarket trading following the earnings release.
• Company anticipates double-digit subscriber growth in FY2025 despite projected cash consumption.

Company Performance

Rent the Runway Inc. reported a modest revenue increase for Q4 FY2024, reaching $76.4 million, up 0.8% from the previous year. The company saw a decline in active subscribers, down 4.9% year-over-year. Adjusted EBITDA improved significantly, standing at $17.4 million or 22.8% of revenue, compared to $11.2 million or 14.8% of revenue in the prior year. The company also achieved a positive free cash flow of $2.1 million, marking a significant improvement from the previous year’s negative $23 million. InvestingPro data reveals impressive gross profit margins of 72.94%, though the company carries a substantial total debt of $373.7 million.

Financial Highlights

• Revenue: $76.4 million, up 0.8% year-over-year
• Ending active subscribers: 119,778, down 4.9% year-over-year
• Adjusted EBITDA: $17.4 million, 22.8% of revenue
• Free cash flow: Positive $2.1 million

Market Reaction

Rent the Runway’s stock experienced a 7.24% decline in premarket trading, with the price dropping to $5. This movement contrasts with the company’s 52-week high of $41.81 and low of $3.7, indicating investor concern over the subscriber decline and future cash consumption despite positive cash flow achievements. InvestingPro analysis indicates the stock generally trades with high price volatility, with a beta of 1.34, and has seen a significant 63.38% decline over the past year.

Outlook & Guidance

The company is optimistic about subscriber growth, projecting double-digit increases in FY2025. However, Rent the Runway anticipates cash consumption between $30 million and $40 million. For Q1, the company provides revenue guidance between $68 million and $70 million, with capital expenditures expected to be between $70 million and $75 million.

Executive Commentary

• Jen Hyman, CEO, emphasized the importance of inventory in customer retention, stating, "Inventory is the number one factor in improving customer loyalty."
• Sid Jaegar, CFO, highlighted the value proposition of renting, noting, "We think renting provides considerable value versus buying."
• Jaegar also commented on strategic investments, saying, "We are playing offense and plan to invest prudently where it makes sense for customers."

Risks and Challenges

• Subscriber Decline: The reduction in active subscribers poses a risk to future revenue growth.
• Cash Consumption: Projected high cash consumption could impact financial stability.
• Economic Uncertainty: Consumer behavior amid economic challenges may affect demand.
• Competitive Pressure: Increased competition in the rental market could impact market share.
• Inventory Management: Effective inventory management is crucial for customer satisfaction and retention.

Rent the Runway’s Q4 FY2024 earnings reflect a complex landscape of modest revenue growth, improved cash flow, and strategic challenges, as the company navigates declining subscriber numbers and significant cash consumption projections. For deeper insights into Rent the Runway’s financial health and future prospects, access the comprehensive Pro Research Report available exclusively on InvestingPro, which provides detailed analysis of the company’s performance metrics and growth potential.

Full transcript - Rent the Runway Inc (RENT) Q4 2025:

Conference Operator: Welcome to Rent the Runway’s Fourth Quarter and Fiscal Year twenty twenty four Earnings Results Conference Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the call over to Red Runway’s chief legal and administrative officer, Tara Shembry.

Thank you. You may begin.

Jen Hyman, CEO, Rent the Runway: Good morning, everyone, and thanks for joining us today. During this call, we will make references to our Q4 and fiscal year twenty twenty four earnings presentation, which can be found in the Events and Presentations section of our Investor Relations website. Before we begin, we would like to remind you that this call will include forward looking statements. These statements include guidance and underlying assumptions for the first quarter of twenty twenty five and fiscal year twenty twenty five and statements regarding the impact of our business strategies and plans, our ability to drive subscriber growth and customer loyalty in a cost efficient manner and our planned increases in inventory. These statements are subject to various risks, uncertainties and assumptions that could cause our actual results to differ materially.

These risks, uncertainties and assumptions are detailed in today’s press release as well as our filings with the SEC, including our Form 10 ks that we plan to file later today. We undertake no obligation to update any forward looking statements or information except as required by law. During this call, we will also reference certain non GAAP financial information. The presentation of this non GAAP financial information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Reconciliations of GAAP to non GAAP measures can be found in our press release, slide presentations listed on our investor website and in our SEC filings.

And with that, I’ll turn it over to Jen. Thank you, Tara, and thank you to everyone for joining today. In q four, we officially marked fifteen years since we founded Rent A Runway to disrupt the retail and fashion industry. In those fifteen years, we have not only created a new market category, inspiring competitors and making clothing rental mainstream, but we have built a loyal following of women who we empower every day to our platform. As we’ve shared over the last few quarters, we’ve been executing against a multiyear transformation plan.

And after several years of increased financial discipline, we believe we are now operating from steadier financial footing. Most notably, we’ve proven that we can operate a sustainable, nearly breakeven business. We’ve significantly improved our cash position from a decline of $70,500,000 in fiscal year twenty twenty three to a decline of only $6,600,000 at the end of fiscal year twenty twenty four, resulting in record low cash consumption. It is important to highlight that the timing of certain cash flow items were outside our control and slipped into February. In fact, by the February, our cash position was only $2,800,000 lower than the end of fiscal year twenty twenty three.

With our business operations in a solid position, we believe proving to you and ourselves that we can exercise strong financial discipline, it is now time for Rent the Runway to look to the future. Our data over the last five years has led us to believe that an investment in inventory is the greatest lever to unlocking customer growth and supporting customer retention. While we expect that this investment will impact our cash consumption in the year ahead, we believe this is an important investment we need to make for the future success of Rent the Runway. And by applying the same principles that allowed us to reduce our cash consumption in fiscal year twenty twenty four, we plan to pursue a disciplined growth strategy rather than growth at all costs. Before we walk you through last quarter’s financials, I wanted to take a moment to highlight the progress we have made across the three key pillars of our cultural transformation that underpin our overarching growth strategy.

This includes, one, our rejuvenated and customer obsessed team two, improved customer loyalty and retention and three, stronger cost discipline One, a rejuvenated and customer obsessed team. First, I wanna talk about the talent and culture transformation underway at Rent A Runway. Now more than ever before, our energy is focused on innovation and growth. To this end, I’m focused on steering the culture of this company back to our founder led entrepreneurial and customer obsessed roots. We believe that our data has demonstrated over the past fifteen years that our growth opportunity is directly related to customer satisfaction and loyalty.

And by reinstalling passion and energy for our customer back into everything we do, I am confident in our team’s capability to deliver. To serve our business goals, we’ve reorganized our company structure into four cross functional pods that directly align with our strategy, retention, revenue, customer growth, and inventory. This new structure has allowed us to dramatically simplify our goals and be more agile in the way we launch new products and serve our customers. We’re encouraging a more collaborative and solutions oriented internal culture, so there is synergy between our technical and consumer facing teams. As a result of this new way of working together, I believe that we are identifying and executing innovation opportunities faster and more efficiently than ever before.

With this new alignment, we’re also creating new visuals and avenues to connect with our customers directly, and we are doubling down on our commitment to personal human centered customer service. We’ve always taken great pride in the strength of our customer service, consistently maintaining a CSAT, which is customer satisfaction score, between 8090% over the past three years. We’ve also heard from customers that customer experience is one of their favorite things about RemZoRunway. And yet, with our rejuvenated customer obsessed lens, we believe there’s even more our customer service team can be doing. That’s why we’ve restructured our customer service team from a team that has traditionally spent a % of their time reactively solving customer problems like fit or shipping issues, to a team that now spends 14% of their time on proactive customer engagement and selling in order to drive loyalty.

For instance, about 50% of new customers now get a phone call from customer service after they join to explain the key features of a Rent A Runway subscription and answer questions, as well as mid month and end of month seconds so we can ensure they have a great experience in those crucial early days after sign up. As we push forward, we’ll be working hard to find new ways to reconnect with our customers. In just the first few weeks of 2025, we’ve launched a number of initiatives that are already receiving positive positive feedback and high customer engagement. We’ve invited customers to our company all hands meetings to talk about their experience and invited them to focus groups that we open up to the whole company, so everyone can hear directly from our customers. To build excitement about our new inventory investment, we’ve hosted events online and offline for our customers, including the customer town hall in our New York office and an ask me anything conversation on Reddit.

And recently, over three days in March, every employee, regardless of their role, participated in a phone calling campaign to win back churn customers and get their feedback. Last but not least, I’m particularly proud of the exceptional team that is now in place to help me lead Rent the Runway into this next phase of growth. We have both hired new talent to add new skill sets and strengths to the team, as well as reinvigorated our existing team to ensure everyone is doing the work that taps into their greatest strengths. Today, I firmly believe that we have the most talented team we’ve had in years, and we’re making sure every individual is being fully utilized. I have great conviction in this team.

Two, loyalty and retention. Next, I wanna talk about our laser focused commitment to strengthen customer loyalty and retention. After fifteen years of operations, Reservoir Runway has an extraordinary amount of data and customer feedback, which guides us as we make decisions. The piece of feedback we have heard repeatedly from customers is they want more. They have a clear ask, better inventory, more selection, more depth of style, more new designers, and more clothing they can wear for specific use cases.

Inventory is also cited as the top reason why customers leave Rent A Runway. So in 2024, we began making the calculated investment to improve the depth of our inventory and saw an 8% improvement in customer loyalty. The combination of our underlying data and this uptick in customer loyalty supports our conviction that inventory is the key to unlocking customer loyalty. We also know from our data that customers don’t just want more in the way of quantity. They also want aspirational designer brands like Ula Johnson, Gotti, and Veronica Beard.

Our customers are women who are sophisticated and come to Rent the Runway to find new fashion and exclusive designer collaborations that are only available here. Our rich data shows us the most desired brands on our platform, and these brand partners are incentivized to work with us as a marketing channel to reach their consumers. To that end, I’m thrilled to share that we’ve officially embarked on our largest inventory investment in the company’s history. In 2025, we plan to add two times new inventory units year over year, a three to four times increase in units on average from key brands most desired by customers, including some of the most desired brands in fashion, like Lula Johnson, Veronica Beard, and Staude. An increase in our exclusive design collections, including Ghani, Simon Miller, Agua Benedida, and Rixo.

Seventy five percent more new styles year over year, 83 new brands, and more new arrivals during periods of the year that were previously light on newness, like deep summer and deep winter. The new inventory started flowing on Toronto Runway site in late February, and we officially announced this new investment to customers on March 8 in a campaign called We Heard You. Our launch emphasized that we have listened to our customers and are committed to giving her the inventory options she wants. As part of this campaign, we spoke directly to and with our customers, creating moments of honest engagement with them to gather feedback, both positive and constructive. For example, I gave out my real personal email address and asked customers to send me feedback, and they did.

I received hundreds of emails from customers giving me real feedback on how Rent A Runway has changed their lives and what we can be doing better. Already, customers are feeling the newness. The number of new items in her shipment is expected to increase approximately 75% this year versus last year. And because we are buying new inventory throughout the year, customers can expect to feel this newness every month and see new styles on our site every week. With more inventory, she has a higher probability of getting the items she wants and availability of the items she loves.

In addition to the new inventory and in anticipation of new and returning customers visiting our platform, we rolled out meaningful changes designed to improve the entire customer experience with Reservoir, from the new client onboarding experience to new technology notifications. Our ability to innovate and ship product updates faster than ever before is not only the result of our restructure team, but also the result of our renewed commitment to make sure that everything we do as a company is being driven by customer feedback. In q one twenty twenty five, we’ve launched, one, a more personalized customer onboarding experience where members of our customer service team call new customers personally to provide an overview of their subscription and answer questions. Two, new inventory highlights to make it easier for customers to find new inventory more efficiently. Three, a sixty day customer promise, giving new members risk free renting for their first two months.

And there’s more in our pipeline, including enhancements to our back in stock notifications to send customers a notification when their size in a certain style becomes available. We first launched this in q one twenty twenty five for items customers hearted and are excited about this expansion, which is our number one most requested new feature. Stylist and product launching this week, which connects customers to a stylist over text or Zoom help guide her selection of styles. Personalized recommendations, which allow customers to share specific events coming up in their calendars so Rent A Runway can proactively recommend the best style to meet their needs. Together, we believe that all of these activities reinforce one thing.

Rent the Runway has an important role to play in the lives of our many passionate customers. And if we continue listening to them and delivering on what they want, we will be able to prove we have a best in class customer loyalty and retention strategy. Three, cost discipline. Lastly, I wanna talk about our cost discipline and how we expect to be able to make new investments in our inventory in a sustainable way over the next few years. After fifteen years of pioneering this industry and building deep, long standing partnerships with some of the world’s most recognizable fashion brands, we believe that Rent the Runway is uniquely positioned of developing innovative solutions to acquire new inventory at fraction of traditional procurement costs.

We have developed two key channels to acquire new inventory, a revenue share model and exclusive designs. Again, we are focused on disciplined growth, not growth at all costs, and believe that these cost efficient channels will be the key to how we grow while maintaining our cost discipline. Our revenue share model called share by RTR allows us to acquire inventory from leading designers and brands at zero or low upfront cost and share revenue over time. Designers love this model as rents to runways can serve as a powerful marketing channel for them. Share by RTR units are expected to increase to approximately 62% of total units in fiscal year twenty twenty five, a 2.5 x increase versus fiscal year twenty twenty four, underscoring the popularity with brands and success of the model.

We continue to look to our data to find the new brands that our customers love the most and are excited to be launching new exclusive collaborations with our customers’ favorite designers. Many of our exclusive design brands are high end brands that would normally be cost prohibitive to buy at the quantities we want for our customer base. However, for these collections, we share data with brands and work hand in hand with them on design, fit, and manufacturing, allowing us to buy inventory from them at about half the wholesale price. We’re already working with 15 brands in the first half of twenty twenty five, including customer favorites like Simon Miller, Donnie, Pat Bo, Senior York, and Agua Bandida. It’s important to know that these new exclusive capsule collections for Rent A Runway customers adhere to strict quality standards and grow and go through rigorous design reviews directly with the designers.

Our design partners wanna make sure that the exclusives they put up on Rent the Runway represent their best foot forward to a new customer base. Similar to the share by RTR inventory acquisition program, we truly believe that this model is a win win for the designers and for Rent A Runway. Rent A Runway gets to deliver coveted high quality brands to our customers, while the brands gain a marketing channel to gain visibility with new customers. Through these channels, we’ve been able to source inventory at significantly lower cost than traditional wholesale channels, proving we can use these new models to acquire inventory without drastically increasing cash expenditures. We believe that early signs are showing this strategy is working, and we anticipate our subscriber growth to accelerate in 2025.

While Rent the Runway has inspired many competitors, we believe that the quality and breadth of the designers on our platform is unmatched. Our vision moving forward is to evolve Rent the Runway into a discovery engine for consumers to find the latest and greatest in designer fashion. We know that many of our key brands already see Rent the Runway as an effective and alternative marketing channel, which we are looking forward to leveraging in our ongoing inventory acquisition strategy. As we look towards the future of Rent the Runway, we believe we’re entering a new era, one where we plan to make bold moves to give current and potential members more of what they want. We’re excited for what the future will bring, and I look forward to answering your questions.

With that, I’ll hand it over to Sid.

Sid Jaegar, CFO, Rent the Runway: Thanks, Jen, and thanks, everyone, for joining us. I will focus my remarks today on three areas. First, I will provide some commentary on fiscal twenty twenty four and why we think it was an important year for Rent A Runway. Second, I will outline the financial implications and rationale for what we believe are our bold and trajectory altering plans for fiscal year two thousand and twenty five. Finally, I will provide a high level view of how we think about the business beyond fiscal year two thousand and twenty five.

Let me begin with fiscal year two thousand and twenty four. As Jen outlined in her remarks, we showed that Restaurant Week can operate at close to breakeven levels of cash consumption while maintaining a steady revenue base. This was achieved through improvements in our cost structure, through our ability to purchase inventory on attractive terms, and through improvements in working capital. In particular, we made considerable progress in our ability to source inventory through our share by RCR program with approximately 50% of total inventory purchases coming through the channel. A greater number of brands view us as important to their marketing strategy and to growth in their customer base.

As I will outline shortly, unlocking more share by RTR inventory is the backbone behind our strategy to almost double inventory purchases in fiscal year two thousand and twenty five. I will now review results for the fourth quarter before outlining our plans for fiscal ’twenty five. We ended Q4 ’twenty four with 119,778 ending active subscribers, down approximately 4.9% year over year. Average active subscribers during the quarter was a 26,148 versus 128,840 subscribers in the prior year, a decrease of 2.1%. Ending active subscribers decreased from a 32,518 subscribers at the end of q three two thousand and twenty four due primarily to sequentially lower subscriber acquisitions.

Lower subscriber acquisitions were influenced by a significant reduction in paid marketing spending in addition to normal seasonality. As part of developing our plans for fiscal year twenty twenty five, we reduced marketing spending in the fourth quarter to understand both the effectiveness and incrementality of our paid marketing expenditures. While those reductions did affect short term results, they provided learnings that informed our strategy for fiscal year twenty five. Total revenue for the quarter was $76,400,000, up $600,000 or point 8% year over year and up $500,000 or point 7% quarter over quarter. Subscription and reserve rental revenue was down 1.2% year over year in q four twenty four, primarily due to lower average subscribers, partially offset by higher reserve revenue versus q four twenty three.

Other revenue increased 13.5% or $1,400,000 year over year. Fulfillment expenses were $20,200,000 in Q4 ’twenty four versus twenty point one million dollars in Q4 ’twenty three and $21,400,000 in q three twenty four. Fulfillment expenses as a percentage of revenue were slightly lower year over year at 26.4% of revenue in q four twenty four compared to twenty six point five percent of revenue in q four twenty three. Sulfillment expenses benefited from higher retail revenue and continued warehouse efficiencies, partially offset by higher transportation cost per order. Gross margin was 37.7% in Q4 ’twenty four versus 39.4% in Q4 ’twenty three.

Q4 ’twenty ’4 gross margins reflect higher revenue share costs as a percentage of revenue due to the greater proportion of share by RTR inventory. Q4 ’twenty four gross margins increased quarter over quarter to 37.7% from 34.7% in Q3 ’twenty four due to seasonally lower revenue share payments combined with lower fulfillment costs as a percentage of revenue. Operating expenses in Q4 ’twenty four were 20.8% lower year over year due primarily to lower marketing expenses, the favorable impact of our cost reduction efforts and lower stock based compensation expenses. Total operating expenses, which includes technology, marketing and G and A, were 44% of revenue in Q4 ’twenty four versus 55.9% of revenue in Q4 ’twenty three and forty eight point seven percent of revenue in Q3 ’twenty four. Adjusted EBITDA for the quarter was $17,400,000 or 22.8% of revenue versus $11,200,000 or 14.8% of revenue in the prior year.

Adjusted EBITDA for the twelve months ended 01/31/2025 was approximately $46,900,000 or 15.3% of revenue versus $26,900,000 or 9% of revenue in the prior year. Adjusted EBITDA improvement for q four twenty four versus q four twenty three reflects the impact of lower marketing expenses, our fixed cost reduction efforts, and higher revenue, partially offset by higher revenue share payments due to a greater proportion of revenue share units. Free cash flow for q four twenty four was positive $2,100,000 versus negative $23,000,000 in q four twenty three due primarily to lower cost of rental products and higher profitability. Free cash flow for the twelve months ended 01/31/2025 was negative $7,200,000 versus negative $70,300,000 in the twelve months ended 01/31/2024. While free cash flow for fiscal year twenty twenty four fell short of breakeven, timing of cash flow associated with items such as tax credits and vendor incentive renegotiations played a key role in the shortfall.

In fact, our ending unrestricted cash balance at the February 2025 was $81,200,000 a decline of just $2,800,000 versus unrestricted cash at the end of fiscal year twenty twenty three. I will now discuss the financial implications of and the rationale for our plans for fiscal year twenty twenty five. While we’ve clearly demonstrated that rental run rates can operate at close to breakeven levels with steady revenue, growth in our subscriber base is key to creating significant value. Growth beyond the 132,574 average active subscriber we had in fiscal year twenty twenty four is necessary to leverage our fixed cost base. Importantly, given our strong unit economics, we believe growth produces attractive cash flow.

As Jen outlined in her remarks, we believe improving our customers’ experience with inventory is required to ignite subscriber growth. Further, we believe that a substantial increase in inventory in fiscal year twenty twenty five is required to meaningfully improve customer satisfaction, especially as the inventory will continue to build through the course of the year. The good news is that we utilize that inventory over multiple years, and we believe this year’s inventory investment will continue to pay dividends beyond fiscal year twenty twenty five. Additionally, our brand partners are willing to provide about 62% of these units under share by RTR arrangement, reducing both the risk and cost in fiscal year twenty twenty five. We are accelerating our progress towards a truly capital light business model.

As I will outline shortly, while we expect investment will result in subscriber growth, it will mean increased cash consumption for fiscal year two thousand twenty five. The reason for this is twofold. First, we expect subscribers to build over the course of the year as the new inventory arrives and retention improves. This means average subscribers will lag ending subscribers. Second, we believe that fiscal twenty twenty five will require a step up in our inventory base to improve the experience for current subscribers in addition to purchasing inventory for expected growth in subscribers and replenishing units for existing subscribers.

Going forward, as the inventory base for existing subscribers will already be at satisfactory levels, we will likely only purchase inventory to cater to subscriber growth and to replenish units that are sold or damaged. The combination of an expected higher subscriber base ending fiscal twenty five and future inventory purchases that cater to subscriber growth and replenishment without the presence of step up units will drive future free cash flow. Note also that we expect the inventory experience to continue to improve beyond fiscal twenty twenty five as a result of the considerable investment we are making this year. Moving on to guidance. We expect to deliver double digit ending asset subscriber growth for fiscal year twenty twenty five.

We also expect full year cash consumption to be between negative $30,000,000 and negative $40,000,000 We are providing an indicative range of free cash flow, recognizing that there are many factors that may influence the final result. The message we want to send is that rental runway is playing offense and that we plan to invest prudently where it makes sense for customers even if that results in cash flow outside the provided ranges. There are also unknowns around the economy and tariffs as well as timing of potential customer retention improvements that can further affect actual results for fiscal year twenty twenty five versus expectations. We are not providing revenue and adjusted EBITDA guidance for the year. Our focus is on growing subscribers and on prudently monitoring cash consumption.

Before discussing Q1 guidance, I want to briefly discuss tariffs. This is a rapidly evolving situation, and it is too soon to provide any predictions. Our guidance does not factor in any potential impact from tariffs given all the uncertainties. We believe we are fortunate that we directly import a relatively small portion of inventory and have placed orders for the majority of our inventory receipts for fiscal year twenty five. However, there is no guarantee that this will mitigate any impact.

It is also difficult to predict consumer behavior, but we believe renting does offer substantially greater value for customers versus buying. We are mindful that the environment remains uncertain and plan to operate prudently in the months ahead. For Q1, we expect revenue to be between $68,000,000 and $70,000,000 We expect adjusted EBITDA to be between negative 5% and negative 7% of revenue. Note that Q1 is affected negatively by a lower beginning of period subscriber base as well as higher inventory spending in Q1 versus the previous year. In conclusion, we’re pleased with our progress on profitability in fiscal year twenty twenty four.

We believe it is time for us to invest and take advantage of the significant growth opportunity that we think lies ahead for Rental Runway. We will now take your questions. Thank

Conference Operator: star two to remove your question from the queue. And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that you please limit to one question and one follow-up question. One moment while we poll for questions. Our first question is from Andrew Boone with JMP Securities.

Please proceed.

Andrew Boone, Analyst, JMP Securities: Thanks so much for taking the question. Sid, can you help us understand the cash flow guidance and maybe the drivers of it? It sounds like you guys are leaning increasingly into share by RTR. And so just help us understand what the significant CapEx? Is that an OpEx kind of investment in marketing?

Or what’s behind kind of the range for for free cash flow for ’25?

Sid Jaegar, CFO, Rent the Runway: Yeah. I think the the the few things to call out are, number one, if you just look at the sheer volume of inventory we’re bringing on to the platform, that inventory is almost doubling year over year. So that’s the the first component of it. You’re right that a lot of this 62% is coming via share by RTR program, but you also have to recognize that given that a lot of the new inventory is going to be part of the share by RTR program, you that inventory is going to get utilized, and we’re going to pay for it this year. We have provided in the presentation CapEx guidance for the year of 70,000,000 to $75,000,000 which obviously is a considerable increase from the levels that we have in fiscal twenty twenty four.

So I think it’s a combination of both higher capital expenditure as well as significant increase, almost two and a half x, in the share of our share of inventory, which we believe will get utilized as we grow our subscriber base. The reason there is cash consumption this year is, again, because of the two factors I mentioned. There’s a lag between ending subscribers and average subscribers because subscribers build and and the fact that we do we are buying a considerable considerably greater amount of units to spark growth in the customer base, but we think that will pay dividends in future years.

Andrew Boone, Analyst, JMP Securities: And then can you guys provide a real time update What have you guys seen more recently, just given all the the volatility and the headlines around tariffs and everything else? What how are consumers reacting to that? Are they leaning in bar chart, just given the value prop? Or how how should we think about just the consumer today?

Sid Jaegar, CFO, Rent the Runway: I think if you look at what we are focused on, number one, it’s obviously look. We’re not gonna make any prognostications about the economy, about tariffs, all of that. There’s there’s a tremendous amount of uncertainty. But I think we’re I’m gonna go back to what I said on the on in the script, which is we think renting provides considerable value versus buying. And then the the more important thing for us this year is really listening to our customers.

I mean, the the amount of inventory we’re bringing on addresses the number one pain point that customers have. We we are very excited given everything we know about the business in terms of the retention impact that that amount of inventory can drive. And we think, as I mentioned, we really are on the offense, and and we we think this can make considerable difference to growth in the business this year.

Jen Hyman, CEO, Rent the Runway: Yeah. And just like we said on earnings calls in the past, the people that notice our strategy first are always the consumers who we already have. So the base of subscribers that are on our platform and visiting several times a week are the first ones to notice this doubling of the inventory. They’re seeing that we have three to four x more units from their favorite brands. They see that they have a lot more units that they’re able to have in their baskets that are at home, and their experience is kinda noticeably improving, you know, week over week, month over month.

And it’s that community of subscribers that we expect and we hope will have an even better experience with Run the Runway as evidenced by improved loyalty rates. But we also hope that that restarts this organic flywheel in our business of these women being more excited about what we’re doing, sharing it with their friends and colleagues, and not really starting kind of the growth flywheel for the business in terms of acquisitions. And we feel very good that this is the number one way to do this. Inventory is what we’ve learned over the past five years is inventory is the number one factor in improving customer loyalty.

Andrew Boone, Analyst, JMP Securities: Can you speak to that point? You guys invested in inventory in the past. Is is this just a step function change, or how do we think about the customer experience changing in 2025 that’s definitely been passed

Jen Hyman, CEO, Rent the Runway: in January? A tremendous it’s a tremendous step function change. We’re doubling the number of new units on the platform this year versus last year. The customer is going to an ex the customer experience as a result of that is entirely different. She’s receiving hundreds of new arrivals onto the platform every single week.

So she’s constantly coming and she’s finding newness, which is what she loves about any rental platform. She’s finding way more of the brands that she loves the most. Why is that important? Because when she gets a shipment at home with a blockbuster brand, she perceived that shipment as having higher value to her. That makes her even more loyal.

We are having new arrivals come in, as we said in the script, during times of the year that were previously light on new arrivals, like the middle of summer. And not only are we having those new arrivals come in in the middle of summer, but there are new arrivals that are absolutely appropriate for the use cases that she’s actually doing in the middle of the summer. And so we hope to see continued kind of usage of the product in those periods of time during the year where in the past, we had higher rates of churn. So I think the other thing that we said in the script that I just wanna highlight is she has we expect her to have 75% more newness in her at home basket than she had last year. That is a market change in her experience that our customers are noticing kind of right away, and we feel fantastic about the strategy.

What we did last year is we did make a change in our inventory strategy where we focused on depth rather than breadth of selection. We saw that focusing on depth did improve our loyalty rate by 8%, as we mentioned, but the quantity of units did not increase last year. It was the allocation of those units that changed.

Andrew Boone, Analyst, JMP Securities: Makes sense. Thank you so much.

Conference Operator: With no further questions in the queue, this will conclude today’s conference. You may disconnect your lines at this time, and thank you for your participation.

Sid Jaegar, CFO, Rent the Runway: Thank you everyone for joining us. Appreciate it.

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