Rent the Runway, Inc.

Previous wording

We give customers ongoing access to our “unlimited closet” — with thousands of styles by hundreds of designer brands — through our Subscription offering or the ability to rent a-la-carte through our Reserve offering. We also give our subscribers and customers the ability to buy our products through our Resale offering, which offers customers pre-loved styles from our closet at a discount to retail price, up to 90% off of designer retail value. These offerings allow us to engage and serve our subscribers and customers across diverse use cases from everyday life to special occasions. We have served approximately 3 million lifetime customers across all of our offerings and we had 173,247 ending total subscribers 5 (active and paused) as of January 31, 2024. We had 125,954 active subscribers as of January 31, 2024. The majority of our revenue is highly recurring and is generated by our subscribers. For the years ended January 31, 2024 and 2023, respectively, 88% and 86% of our total revenue (including Reserve and Resale revenue) was generated by subscribers while they were active or paused.

Current wording

We give customers ongoing access to our “unlimited closet” — with thousands of styles by hundreds of designer brands — through our Subscription offering or the ability to rent a-la-carte through our Reserve offering. We also give our subscribers and customers the ability to buy our products through our Resale offering, which offers customers pre-loved styles from our closet at a discount to retail price, up to 90% off of designer retail value. These offerings allow us to engage and serve our subscribers and customers across diverse use cases from everyday life to special occasions. We have served approximately 3 million lifetime customers across all of our offerings and we had 164,004 ending total subscribers 2 (active and paused) as of January 31, 2025. We had 119,778 active subscribers as of January 31, 2025. The majority of our revenue is highly recurring and is generated by our subscribers. For the years ended January 31, 2025 and 2024, respectively, 88% and 88% of our total revenue (including Reserve and Resale revenue) was generated by subscribers while they were active or paused.

Previous wording

The variety, breadth and quantity of products we carry is important to our business, and we strategically manage the capital efficient acquisition of a high volume of items every year. We have successfully disproved the myth that fashion apparel items and accessories only last one season as we are able to rent or “turn” our products multiple times over many years. We price our items at a fraction of their retail or comparable value, creating an attractive price and value proposition for our subscribers and customers.

Current wording

The variety, breadth and quantity of products we carry is important to our business, and we strategically manage the capital efficient acquisition of a high volume of items every year. We have successfully disproved the myth that fashion apparel items and accessories only last one season as we are able to rent or “turn” our products multiple times over many years. We price our rental items at a fraction of their retail or comparable value, creating an attractive price and value proposition for our subscribers and customers.

Previous wording

5 Ending total subscribers represents the number of subscribers with an active or paused membership as of the last day of the period and excludes subscribers who had an active or paused subscription during the period, but ended their subscription prior to the last day of the fiscal period.

Current wording

2 Ending total subscribers represents the number of subscribers with an active or paused membership as of the last day of the period and excludes subscribers who had an active or paused subscription during the period, but ended their subscription prior to the last day of the fiscal period.

Previous wording

•125,954 and 126,712 ending Active Subscribers 6 (excluding paused subscribers), respectively, representing a change of (1)% year-over-year;

Current wording

•119,778 and 125,954 ending Active Subscribers 3 (excluding paused subscribers), respectively, representing a change of (5)% year-over-year;

Previous wording

•173,247 and 171,998 ending Total Subscribers (including paused subscribers), respectively, representing 1% growth year-over-year;

Current wording

•164,004 and 173,247 ending Total Subscribers (including paused subscribers), respectively, representing a change of (5)% year-over-year;

Previous wording

•Gross Profit was $119.7 million and $120.0 million, respectively, representing a gross margin of 40.1% and 40.5%, respectively;

Current wording

•Gross Profit was $115.9 million and $119.7 million, respectively, representing a gross margin of 37.9% and 40.1%, respectively;

Previous wording

•Net Loss was $(113.2) million and $(138.7) million, respectively. Net Loss as a percentage of revenue was (38.0)%, and (46.8)%, respectively, and included $3.1 million and $7.7 million of restructuring and related charges, respectively;

Current wording

•Net Loss was $(69.9) million and $(113.2) million, respectively. Net Loss as a percentage of revenue was (22.8)%, and (38.0)%, respectively, and included $0.2 million and $3.1 million of restructuring and related charges, respectively;

Previous wording

•Adjusted EBITDA was $26.9 million and $6.7 million, respectively, representing an Adjusted EBITDA margin of 9.0% and 2.3%, respectively;

Current wording

•Adjusted EBITDA was $46.9 million and $26.9 million, respectively, representing an Adjusted EBITDA margin of 15.3% and 9.0%, respectively;

Previous wording

•Net cash used in operating activities plus net cash used in investing activities as a percentage of revenue was (23.6)% and (31.0)%, respectively; and

Current wording

•Net cash used in operating activities as a percentage of revenue was 4.2% and (5.3)% and net cash used in investing activities as a percentage of revenue was (6.6)% and (18.3)%, respectively; and

Previous wording

We acquire and monetize products in three ways: Wholesale, Share by RTR and Exclusive Designs. These three product acquisition methods are strategic levers to manage our capital efficiency, profitability and product risk. Our Exclusive Designs channel uses data insights to acquire items at a lower cost, which are designed to generate higher profitability over time. Share by RTR meaningfully reduces our purchases of rental product and de-risks our investment since we pay brands primarily based on item performance. Our Share by RTR arrangements with brands target deliv ering 75% to 100% ofcomparable Wholesale cost to the brand in the first year; however there is no minimum commitment other than the upfront payment, if applicable. Nearly all Share by RTR deals consummated after September 2020 include a cap on total potential payments to the brand partner.

Current wording

We acquire and monetize products in three ways: Wholesale, Share by RTR and Exclusive Designs. These three product acquisition methods are strategic levers to manage our capital efficiency, profitability and product risk. Our Exclusive Designs channel partners with brands to acquire RTR-exclusive items at a lower cost, which are designed to generate higher profitability over time. Share by RTR meaningfully reduces our upfront purchases of rental product and de-risks our investment since we pay brands primarily based on item performance. Our Share by RTR arrangements with brands target deliv ering 75% to 100% ofcomparable Wholesale cost to the brand in the first year; however there is no minimum commitment other than the upfront payment, if applicable. Nearly all Share by RTR deals consummated after September 2020 include a cap on total potential payments to the brand partner.

Previous wording

6 Active Subscribers is defined as ending total subscribers as of period end, excluding paused subscribers.

Current wording

3 Active Subscribers is defined as ending total subscribers as of period end, excluding paused subscribers.

Previous wording

7 Average Active Subscribers represents the mean of the beginning of quarter and end of quarter Active Subscribers for a quarterly period; and for other periods, represents the mean of the Average Active Subscribers of every quarter within that period.

Current wording

4 Average Active Subscribers represents the mean of the beginning of quarter and end of quarter Active Subscribers for a quarterly period; and for other periods, represents the mean of the Average Active Subscribers of every quarter within that period.

Previous wording

The chart below summarizes the percentage of new items acquired via each method. In total, approximately 61% of new items were acquired through the more capital-efficient channels in fiscal year 2023, approximately 58% in fiscal year 2022 and approximately 55% in fiscal year 2021. Both our purchasing power and the diversification into Share by RTR and Exclusive Designs have led to a decrease in rental product capital expenditures (or Purchases of Rental Product as presented in the Consolidated Statement of Cash Flows) as a percentage of revenue over time. We plan to further decrease the percentage of units acquired through Wholesale and increase the percentage of units acquired through our more capital-efficient channels, Exclusive Designs and Share by RTR over time. We expect to incur considerably lower Purchases of Rental Product in fiscal year 2024 relative to fiscal year 2023 due to fiscal year 2023 being impacted by the need to make rental product depth adjustments.

Current wording

The chart below summarizes the percentage of new items acquired via each method. In total, approximately 70% of new items were acquired through the more capital-efficient channels in fiscal year 2024, approximately 61% in fiscal year 2023 and approximately 58% in fiscal year 2022. Both our purchasing power and the diversification into Share by RTR and Exclusive Designs have led to a decrease in rental product capital expenditures (or Purchases of Rental Product as presented in the Consolidated Statement of Cash Flows) as a percentage of revenue over time. We plan to further decrease the percentage of units acquired through Wholesale and increase the percentage of units acquired through our more capital-efficient channels, Exclusive Designs and Share by RTR over time. We expect to incur higher purchases of rental product in fiscal year 2025 relative to fiscal year 2024 in connection with our strategy to approximately double the new rental product added to our site and made available to our customers in fiscal year 2025.

Previous wording

We provide a flexible offering that allows our subscribers to customize their subscription as their everyday life changes, choosing to pause and reactivate their membership as needed. We have also historically seen that many subscribers who cancel their subscription will return and resubscribe when membership again makes sense for their everyday life. Our strategies in fiscal year 2023 were focused on investing in and improving the customer experience to drive growth, including improving rental product in-stock levels, which we believe impacted subscriber growth in the second and third quarters of fiscal year 2023. Our data indicates that newer subscribers were most negatively impacted by lower rental product in-stock levels. We have implemented plans to address these lower in-stock levels through higher levels of rental product depth per style in future rental product purchases. We have seen an improvement to retention in the third and fourth quarters of fiscal year 2023 and expect these changes to have an even greater positive impact during fiscal year 2024. We believe that improving retention in the first 90 days of a subscription, which is when the majority of subscriber churn typically occurs, can increase loyalty and subscriber growth. Further, in the second quarter of fiscal year 2023, we experimented with changes to our initial promotion prices for Subscription, which impacted subscriber acquisition. We further reduced promotions in the third quarter of fiscal year 2023, as we believe that being less promotional going forward will have improved effects on retention and the overall health of the business over the longer-term and enable us to invest these resources into the customer experience. We expect our promotional activities to be below historical averages in the near to medium term, which is anticipated to reduce subscriber acquisition in the near term; however, depending on market conditions and other factors, we will likely conduct additional experiments and may make changes to our promotions strategy in the future, which could impact subscriber acquisition.

Current wording

We provide a flexible offering that allows our subscribers to customize their subscription as their everyday life changes, choosing to pause and reactivate their membership as needed. We have also historically seen that many subscribers who cancel their subscription will return and resubscribe when membership again makes sense for their everyday life. Customer acquisition is dependent on organic growth, the effectiveness of our paid marketing strategy and the availability of and satisfaction with our rental product. Our acquisitions are also reliant on new customer promotions. Our promotional strategy is subject to change depending on business and market conditions. In fiscal year 2024, we have focused, and plan to continue to focus in fiscal year 2025, on improving both the availability of and satisfaction with our rental product for our Reserve and Subscription customers.

Previous wording

We also assess the productivity of our historical customer cohorts by measuring the revenue and profit we generate from all new customers over their lifetime (“LTV”) against customer acquisition costs (“CAC”). We define LTV as cumulative total revenue generated across all of our product offerings (which includes Subscription and Reserve Rental Revenue and Other Revenue) by current or previous subscribers or customers, minus fulfillment expenses, rental product depreciation and revenue share expenses, credit card fees and customer service personnel and related expenses incurred to generate such revenue divided by the number of new customers acquired during that period. Any LTV generated by a customer is assigned to the original cohort year that the customer first joined. We define CAC as total marketing expense, excluding marketing personnel and related costs incurred in a fiscal year divided by the number of new customers acquired in that period. We acquire customers efficiently as evidenced by over 80% of our lifetime customers having joined organically.

Current wording

We also assess the productivity of our historical customer cohorts by measuring the revenue and profit we generate from all new customers over their lifetime (“LTV”) against customer acquisition costs (“CAC”). We define LTV as cumulative total revenue generated across all of our product offerings (which includes Subscription and Reserve Rental Revenue and Other Revenue) by current or previous subscribers or customers, minus fulfillment expenses, rental product depreciation and revenue share expenses, credit card fees and customer service personnel and related expenses incurred to generate such revenue divided by the number of new customers acquired during that period. Any LTV generated by a customer is assigned to the original cohort year that the customer first joined. We define CAC as total marketing expense, excluding marketing personnel and related costs incurred in a fiscal year divided by the number of new customers acquired in that period. We acquire customers efficiently as evidenced by over a majority of our lifetime customers having joined organically.

Previous wording

As seen in the table below, our LTV to CAC ratio has remained relatively consistent for our fiscal year 2018 through fiscal year 2023 customer cohorts, with the exception of our fiscal year 2020 cohort which was impacted by the COVID-19 pandemic. The fiscal year 2021 cohort, which benefited from strong loyalty post-recovery from the pandemic, exhibited an LTV to CAC ratio of 0.7x in its first six months and 1.3x in its first twelve months, implying that we recovered our customer acquisition cost between six months and twelve months for this cohort. Our fiscal year 2023 cohort thus far is exhibiting an LTV to CAC ratio of 0.5x in its first six months. We anticipate that the improvement in our customer experience due to the improved trends of our in-stock rate in fiscal year 2023, and further expected improvement in fiscal year 2024 from our plan to reignite our lifecycle marketing strategy, will benefit the retention and lifetime value of our customer cohorts. Cohorts have continued to grow over time as our most loyal customers continued to spend with us, as demonstrated by the strength in the fiscal year 2018, 2019, 2020 and 2021 cohorts.

Current wording

As seen in the table below, our LTV to CAC ratio has remained relatively consistent for our fiscal year 2018 through fiscal year 2024 customer cohorts, with the exception of our fiscal year 2020 cohort which was impacted by the COVID-19 pandemic. The fiscal year 2021 cohort, which benefited from strong loyalty post-recovery from the pandemic, exhibited an LTV to CAC ratio of 0.7x in its first six months and 1.3x in its first twelve months, implying that we recovered our customer acquisition cost between six months and twelve months for this cohort. Our fiscal year 2024 cohort thus far is exhibiting an LTV to CAC ratio of 0.5x in its first six months. We anticipate that the improvement in customer retention due to the greater satisfaction with our rental product along with product experience improvements will benefit the lifetime value of our customer cohorts. The performance of our historical cohorts has been consistent as our more loyal customers continue to spend with us.

Previous wording

Ability to Acquire, Manage and Monetize Products Efficiently. Our ability to deliver an elevated experience for our subscribers and customers that keeps them loyal to RTR depends on us having the right assortment. For example, in fiscal year 2023 we focused on enhancing the availability of the items on our site and increasing the depth of our buys (i.e., purchasing more units of particular styles). Due to our deep partnerships with brands, flexibility in our buying timelines and ability to react to advantageous retail purchasing environments, we can acquire products directly from brands in multiple cost effective ways. Our expertise in reverse logistics and garment restoration also provides us with the ability to monetize our products effectively over their useful life. Diversifying our product acquisition away from 100% Wholesale has driven higher overall product return on investment and reduced the capital needs of the business. In fiscal year 2023, approximately 61% of new items were acquired through our more capital efficient non-Wholesale channels, compared to 58% in fiscal year 2022 and 55% in fiscal year 2021. We plan to further increase the percentage of units acquired through Exclusive Designs and Share by RTR in fiscal year 2024. We continuously evaluate our product acquisition mix to maximize our strategic priorities.

Current wording

Ability to Acquire, Manage and Monetize Products Efficiently. Our ability to deliver an elevated experience for our subscribers and customers that keeps them loyal to RTR depends on us having the right assortment. For example, beginning in fiscal year 2023, we focused on enhancing the availability of rental product on our site by increasing the depths of our buys (i.e. acquiring more units of particular styles) and continued to pursue this strategy in fiscal year 2024. Due to our deep partnerships with brands, flexibility in our buying timelines and ability to react to advantageous retail purchasing environments, we can acquire products directly from brands in multiple cost effective ways. Our expertise in reverse logistics and garment restoration also provides us with the ability to monetize our products effectively over their useful life. Diversifying our product acquisition away from 100% Wholesale has driven higher overall product return on investment and reduced the capital needs of the business. In fiscal year 2024, approximately 70% of new items were acquired through our more capital efficient non-Wholesale channels, compared to 61% in fiscal year 2023 and 58% in fiscal year 2022. We plan to further increase the percentage of units acquired through Exclusive Designs and Share by RTR on a combined basis in fiscal year 2025. We continuously evaluate our product acquisition mix to maximize our strategic priorities.

Previous wording

Purchases of rental product includes the cost of wholesale products acquired in the period and other ancillary costs such as freight, where applicable. Many factors impact the purchases of rental product including our depth and acquisition mix strategy, the proportion of subscribers to total customers, timing of when those subscribers are acquired, the formality of styles, brand assortment, opportunities in the market and timing of when the rental product is received and paid for. Purchases of rental product as a percentage of revenue in fiscal year 2023 was 26% as a result of lower sales and the impact of the adjustment to our rental product depth in fiscal year 2023. Purchases of rental product as a percentage of revenue was 21% and 15% in fiscal year 2022 and 2021, respectively. We anticipate this percentage to decrease in fiscal year 2024 compared with fiscal year 2023 due to higher sales projections and the impact of the aforementioned adjustment to our rental product depth in fiscal year 2023. Due to seasonality factors, we track our progress on purchases of rental product as a percentage of revenue on a full year basis, as quarterly expenditures are not necessarily reflective of full year trends. In addition, we intend to comply with the mutually agreed upon quarterly and annual spend levels for rental product capital expenditures during fiscal year 2024 in our 2023 Amended Temasek Facility.

Current wording

Purchases of rental product includes the cost of wholesale products acquired in the period and other ancillary costs such as freight, where applicable. Many factors impact the purchases of rental product including our depth and acquisition mix strategy, the proportion of subscribers to total customers, timing of when those subscribers are acquired, the formality of styles, brand assortment, opportunities in the market and timing of when the rental product is received and paid for. Purchases of rental product as a percentage of revenue in fiscal year 2024 was 16% as a result of a greater proportion of rental product acquired through our Share by RTR channel combined with fewer units of rental product purchased compared to fiscal year 2023. Purchases of rental product as a percentage of revenue was 26% and 21% in fiscal year 2023 and 2022, respectively. We anticipate this percentage to increase in fiscal year 2025 compared with fiscal year 2024, despite a greater proportion of Share by RTR units, due to a significant increase in units of rental product purchased. Due to seasonality factors, we track our progress on purchases of rental product as a percentage of revenue on a full year basis, as quarterly expenditures are not necessarily reflective of full year trends. As of January 31, 2025, the quarterly and annual spend levels for rental product capital expenditures for fiscal year 2025 under our 2025 Amended Facility have not yet been finalized. Pursuant to the 2025 Amended Facility, the deadline to agree on such levels was extended from March 31, 2025 to May 30, 2025.

Previous wording

Ability to Achieve Leverage in our Cost Structure. Improving operational efficiency of our platform is imperative to increasing profitability. We expect certain of our operating costs to increase as order volume increases and as we make investments to grow subscribers and revenue and to enhance the customer experience. In September 2022, we announced a restructuring plan that reduced operating expenses by approximately $27 million in the four quarters following the restructuring compared to the annualized run rate for the second quarter of fiscal year 2022. In January 2024, we announced a restructuring plan expected to generate total annual operating expense savings of approximately $12 million, which primarily includes the reduction in force, with some open role closures/reduced backfills, and excludes potential hiring of new employees or other additions to the Company’s costs and expenses. Though we anticipate quarterly fluctuations in operating leverage, with these reductions and continuous improvements to our cost structure, we expect our fixed costs to decrease as a percentage of total revenue in fiscal year 2024, and over time we anticipate that our operating costs will grow more slowly than our total revenue on an annual basis. In addition, we intend to comply with the mutually agreed upon quarterly and annual spend levels relating to our operating costs (i.e., fixed operating expenditures and marketing expenditures) during fiscal year 2024 in our 2023 Amended Temasek Facility.

Current wording

Ability to Achieve Leverage in our Cost Structure. Improving operational efficiency of our platform is imperative to increasing profitability. We expect certain of our operating costs to increase as order volume increases and as we make investments to grow subscribers and revenue and to enhance the customer experience. In September 2022, we announced a restructuring plan that reduced operating expenses by approximately $27 million in the four quarters following the restructuring compared to the annualized run rate for the second quarter of fiscal year 2022. In January 2024, we announced a restructuring plan expected to generate total annual operating expense savings of approximately $12 million, which primarily includes the reduction in force, with some open role closures/reduced backfills, and excludes potential hiring of new employees or other additions to the Company’s costs and expenses. Though we anticipate quarterly fluctuations in operating leverage, we expect our fixed costs to decrease as a percentage of total revenue in fiscal year 2025, and over time we anticipate that our operating costs will grow more slowly than our total revenue on an annual basis. As of January 31, 2025, the quarterly and annual spend levels for rental product capital expenditures for fiscal year 2025 under our 2025 Amended Facility have not yet been finalized. Pursuant to the 2025 Amended Facility, the deadline to agree on such levels was extended from March 31, 2025 to May 30, 2025.

Previous wording

We use Adjusted EBITDA to assess our operating performance and the operating leverage of our business prior to capital expenditures. We also measure the cash consumption of the business including capital expenditures by assessing net cash used in operating activities and net cash used in investing activities on a combined basis. The 2023 Amended Temasek Facility reduces our cash interest payments during fiscal years 2024 and 2025 relative to the original agreement, which we expect to improve our overall liquidity.

Current wording

We use Adjusted EBITDA to assess our operating performance and the operating leverage of our business prior to capital expenditures. We also measure the cash consumption of the business including capital expenditures by assessing net cash used in operating activities and net cash used in investing activities on a combined basis. The 2025 Amended Facility reduced our cash interest payments during fiscal year 2024 and reduces our cash interest payments during fiscal year 2025 relative to the original agreement, which we expect to improve our overall liquidity.

Previous wording

We experience seasonality in our business, which has been impacted and may in the future change due to the effects of COVID-19, the macro environment, and business decisions. For our Subscription rentals, we typically acquire the highest number of subscribers in March through May and September through November, as these are the times customers naturally think about changing over their wardrobes. We generally see a higher rate of subscribers pause in the summer, and in mid-December through the end of January. In the third and fourth fiscal quarters, our Reserve business historically (prior to COVID-19) benefited from increased wedding and holiday events but this seasonality has varied since the onset of COVID-19. In fiscal year 2022, we believe that a price increase of our Subscription programs in April 2022 affected traditional seasonal patterns. In fiscal year 2023, changes in rental product in-stock levels and changes to promotional prices also disrupted typical seasonality. Given continued business changes, our future seasonality may not resemble historical trends.

Current wording

We experience seasonality in our business, which has been impacted due to the effects of COVID-19, the macro environment, and business decisions and may in the future continue to evolve. For our Subscription rentals, we typically acquire the highest number of subscribers in March through May and September through November, as these are the times customers naturally think about changing over their wardrobes. We generally see a higher rate of subscribers pause in the summer, and in mid-December through the end of January. In the third and fourth fiscal quarters, our Reserve offering historically (prior to COVID-19) benefited from increased wedding and holiday events but this seasonality has varied since the onset of COVID-19. For example, in fiscal year 2022, we believe that a price increase of our Subscription programs in April 2022 affected traditional seasonal patterns. In fiscal year 2023, changes in rental product in-stock levels and changes to promotional prices also disrupted typical seasonality. However, in fiscal year 2024, we observed more typical seasonal patterns. Given continued business changes, our future seasonality may not resemble historical trends.

Previous wording

We also experience seasonality in the timing of expenses and capital outlays. Transportation expense, and therefore fulfillment cost, is typically highest in the fourth fiscal quarter, given typical timing of carrier rate increases, higher service levels, such as more costly and expedited shipping, and competition during holidays. Our most significant product capital expenditures typically occur in the first fiscal quarter and the third fiscal quarter, when we acquire product for the upcoming fall and spring seasons. However, the impact on cash is historically dependent on timing of receipt of product.

Current wording

We also experience seasonality in the timing of expenses and capital outlays. Transportation expense, and therefore fulfillment cost, is typically highest in the fourth fiscal quarter, given typical timing of carrier rate increases, higher service levels, such as more costly and expedited shipping, and competition during holidays. Our most significant receipt of rental product typically occurs in the first fiscal quarter and the third fiscal quarter, when we acquire product for the upcoming fall and spring seasons.

Previous wording

There remains significant uncertainty in the current macroeconomic and consumer environment, driven by several factors, including inflationary pressures, higher interest rates, potential risk of recession, ongoing industry-wide supply chain issues, instability in the financial system, the wars in Ukraine and the Middle East and COVID-19. These factors have impacted, and are expected to continue to impact, consumer discretionary spending and purchasing behavior, price sensitivity, wage rates, transportation costs, and other costs associated with our business.

Current wording

There remains significant uncertainty in the current macroeconomic and consumer environment, driven by several factors, including inflationary pressures, global trade policies and tariffs, higher interest rates, potential risk of recession, ongoing industry-wide supply chain issues, instability in the financial system, and the wars in Ukraine and the Middle East. These factors have impacted, and are expected to continue to impact, consumer discretionary spending and purchasing behavior, price sensitivity, wage rates, transportation costs, and other costs associated with our business.

Previous wording

We continue to take actions to adjust to the changing business environment and related inflationary pressure. For example, in light of potential pricing sensitivity in the current macro-economic environment, we are focused on investing in our customer and delivering even more value to her, and emphasizing the value proposition of our offering in our marketing materials. In addition, we increased wage rates during fiscal years 2022 and 2023 to attract and retain talent at our fulfillment centers and we expect to continue to be impacted by rising labor costs in the future. We also expect transportation costs to decrease as a percentage of sales in fiscal year 2024 due to transportation efficiencies and the impact of our new transportation contract with a major national carrier, effective in September 2023. While we expect to be able to reduce transportation costs as a percentage of sales in fiscal year 2024, we plan to continue to mitigate longer-term rising costs by seeking to optimize shipping methods and improve contractual and pricing terms. Although we continue to face a challenging environment, we plan to invest in our customers, manage our staffing and further leverage our transportation partners to help to drive growth and efficiencies in our business.

Current wording

We continue to take actions to adjust to the changing business environment and related inflationary pressure. For example, in light of potential pricing sensitivity in the current macro-economic environment, we are focused on investing in our customer and delivering even more value to her, and emphasizing the value proposition of our offering in our marketing materials. In addition, we increased wage rates during the first quarter of fiscal year 2024, and expect to raise wages in the first quarter of fiscal year 2025, to attract and retain talent at our fulfillment centers. We expect to continue to be impacted by rising labor costs in the future. Transportation costs decreased as a percentage of revenue in fiscal year 2024 due to higher revenue per order and the benefits of our September 2023 transportation contract with a major national carrier. While we expect to be able to reduce transportation costs as a percentage of revenue for fiscal year 2025, we plan to continue to mitigate longer-term rising costs by seeking to optimize shipping methods and improve contractual and pricing terms; however, unpredictable changes in global trade policies and tariffs or other significant macroeconomic or geopolitical developments may negatively impact our ability to meet our current expectations and objectives. Although we continue to face a challenging and unpredictable environment, we plan to invest in our customers, manage our staffing and further leverage our transportation partners to help to drive growth and efficiencies in our business.

Previous wording

Active Subscribers: Active Subscribers represents the number of subscribers with an active membership as of the last day of any given period and excludes paused subscribers. As of January 31, 2024, we had 125,954 Active Subscribers, a change of (1)% year-over-year. Our Active Subscribers decreased year-over-year, which we believe was primarily due to the impact of lower rental product in-stock levels, changes in our promotional strategy and lower marketing spend.

Current wording

Active Subscribers: Active Subscribers represents the number of subscribers with an active membership as of the last day of any given period and excludes paused subscribers. As of January 31, 2025, we had 119,778 Active Subscribers, a decrease from 125,954 as of January 31, 2024. The decrease in active subscribers was driven primarily by lower acquisitions during the year compared to the prior year due to a change in promotional strategy during the second quarter of fiscal year 2024 versus the same quarter last year and a reduction in marketing spend. The decrease in acquisitions was partially offset by improved subscriber retention.

Previous wording

Average Active Subscribers: Average Active Subscribers represents the mean of the beginning of quarter and end of quarter Active Subscribers for a quarterly period; and for other periods, represents the mean of the Average Active Subscribers of every quarter within that period. As of January 31, 2024, we had 135,211 Average Active Subscribers, up from 128,586 as of January 31, 2023 or a 5% increase year-over-year.

Current wording

Average Active Subscribers: Average Active Subscribers represents the mean of the beginning of quarter and end of quarter Active Subscribers for a quarterly period; and for other periods, represents the mean of the Average Active Subscribers of every quarter within that period. As of January 31, 2025, we had 132,574 Average Active Subscribers, a decrease from 135,211 as of January 31, 2024. The decline in average active subscribers was primarily due to lower acquisitions during the year compared to the prior year. The decrease in acquisitions was partially offset by improved subscriber retention.

Previous wording

Gross Profit was $119.7 million for the year ended January 31, 2024 compared to $120.0 million for the year ended January 31, 2023 representing Gross Margins of 40.1% and 40.5%, respectively. Gross Profit and Gross Margin for the year ended January 31, 2024 decreased slightly due to the impact of higher rental product depreciation and revenue share costs as a percentage of sales, partially offset by lower fulfillment costs as a percentage of sales, despite adding an additional unit to all subscription shipments in March 2023. We will seek to continue to drive fulfillment and operational efficiency gains over time and strategically evolve our mix of revenue and product acquisition to offset cost increases.

Current wording

Gross Profit was $115.9 million for the year ended January 31, 2025 compared to $119.7 million for the year ended January 31, 2024 representing Gross Margins of 37.9% and 40.1%, respectively. Gross Profit and Gross Margin for the year ended January 31, 2025 decreased due to the impact of higher revenue share costs and rental product depreciation as a percentage of sales, partially offset by lower fulfillment costs as a percentage of sales.

Previous wording

Adjusted EBITDA and Adjusted EBITDA Margin: We define Adjusted EBITDA as net loss, adjusted to exclude interest expense, rental product depreciation, other depreciation and amortization, share-based compensation expense, write-off of liquidated rental product assets, certain non-recurring or one-time costs (see below footnotes to the reconciliation table), non-ordinary course legal expenses, restructuring charges, loss on asset impairment related to restructuring, income tax (benefit) expense, warrant liability revaluation gains / losses, debt extinguishment gains / losses, other income and expense, and other gains / losses. We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of total revenue, net for a period. Adjusted EBITDA was $26.9 million for the year ended January 31, 2024 compared to $6.7 million for the year ended January 31, 2023, representing margins of 9.0% and 2.3%, respectively. Adjusted EBITDA Margin significantly improved for the year ended January 31, 2024 due to the impact of the September 2022 restructuring plan, and improved operating leverage across technology, marketing and general and administrative expenses even with additional strategic investments. In the third quarter of fiscal year 2022, we launched a two-pronged pilot with Amazon to (1) sell our brand new Exclusive Design products wholesale and (2) launch a new liquidation partnership, which together contributed $5.1 million to Adjusted EBITDA in fiscal year 2022.

Current wording

Adjusted EBITDA and Adjusted EBITDA Margin: We define Adjusted EBITDA as net loss, adjusted to exclude interest expense, rental product depreciation, other depreciation and amortization, share-based compensation expense, write-off of liquidated assets, non-recurring adjustments, non-ordinary course legal expenses, restructuring charges, loss on asset impairment related to restructuring, income tax (benefit) expense, other income and expense, and other gains / losses. Adjusted EBITDA margin as Adjusted EBITDA calculated as a percentage of total revenue, net for a period.

Previous wording

We believe we have the opportunity to improve Adjusted EBITDA and offset cost increases as we increase revenue and drive fulfillment and operational efficiency gains and operating expense leverage. In particular, we continue to expect our January 2024 restructuring plan to significantly reduce fixed costs and improve operating expense leverage in fiscal year 2024 compared to fiscal year 2023.

Current wording

We believe we have the opportunity to improve Adjusted EBITDA and offset cost increases as we increase revenue and drive operating expense leverage.

Previous wording

Our total revenue, net consists of Subscription and Reserve rental revenue and Other revenue. Total revenue is presented net of promotional discounts, credits and refunds and taxes.

Current wording

Total Revenue, Net. Our total revenue, net consists of Subscription and Reserve rental revenue and Other revenue. Total revenue is presented net of promotional discounts, credits and refunds and taxes.

Previous wording

Subscription and Reserve Rental Revenue. We generate Subscription and Reserve rental revenue from subscription and Reserve rental fees. We recognize subscription fees ratably over the subscription period, commencing on the date the subscriber enrolls in a subscription program. These fees are collected upon enrollment and any revenue from an unrecognized portion of the subscription period is deferred to the following fiscal period. We recognize Reserve fees over the rental period, which starts on the date of delivery of the product to the customer. Reserve orders can be placed up to two months prior to the rental start date (formerly four months prior to the rental start date, effective October 2023) and the customer’s payment form is charged upon order confirmation. We defer recognizing the rental fees and any related promotions for Reserve rentals until the date of delivery, and then recognize those fees evenly over the four- or eight-day rental period.

Current wording

Subscription and Reserve Rental Revenue. We generate Subscription and Reserve rental revenue from subscription and Reserve rental fees. We recognize subscription fees ratably over the subscription period, commencing on the date the subscriber enrolls in a subscription program. These fees are collected upon enrollment and any revenue from an unrecognized portion of the subscription period is deferred to the following fiscal period. We recognize Reserve fees over the rental period, which starts on the date of delivery of the product to the customer. Reserve orders can be placed up to four months prior to the rental start date (increased from two months prior to the rental start date beginning in June 2024) and the customer’s payment form is charged upon order confirmation. We defer recognizing the rental fees and any related promotions for Reserve rentals until the date of delivery, and then recognize those fees evenly over the four- or eight-day rental period.

Previous wording

General and Administrative. General and administrative (“G&A”) expenses consist of all other personnel and related costs for customer service, finance, tax, legal, human resources, fashion and photography and fixed operations costs. General and administrative expenses also includes occupancy costs (including warehouse-related), professional services, credit card fees, general corporate and warehouse expenses, other administrative costs, and gains and losses associated with asset disposals and operating lease terminations We expect to incur lower fixed cost G&A expense dollars and as a percentage of total revenue in the short term as a result of our restructuring plan. Over the longer term, these expenses may increase as we grow our infrastructure to support the overall growth of the business. Rent expense and other facilities-related costs may increase in the future due to inflation or to support overall business growth and fulfillment efficiencies. While these expenses may vary from period to period as a percentage of total revenue, we expect them to decrease as a percentage of total revenue over the longer term.

Current wording

General and Administrative. General and administrative (“G&A”) expenses consist of all other personnel and related costs for customer service, finance, tax, legal, human resources, fashion and photography and fixed operations costs. General and administrative expenses also includes occupancy costs (including warehouse-related), professional services, credit card fees, general corporate and warehouse expenses, other administrative costs, and gains and losses associated with asset disposals and operating lease terminations. We expect to incur lower fixed cost G&A as a percentage of revenue in the short term due to higher expected revenue driving operating leverage. Over the longer term, these expenses may increase as we grow our infrastructure to support the overall growth of the business. Rent expense and other facilities-related costs may increase in the future due to inflation or to support overall business growth and fulfillment efficiencies. While these expenses may vary from period to period as a percentage of total revenue, we expect them to decrease as a percentage of total revenue over the longer term.

Previous wording

Interest Income / (Expense). Interest income / (expense) consists primarily of accrued paid-in-kind interest, cash interest and debt issuance cost amortization associated with our 2023 Amended Temasek Facility going forward. The 2023 Amended Temasek Facility eliminates all interest (both payment-in-kind and cash interest) for a period of six full fiscal quarters beginning with the fourth quarter of fiscal year 2023.

Current wording

Interest Income / (Expense). Interest income / (expense) consists primarily of accrued paid-in-kind interest, cash interest and debt issuance cost amortization associated with our 2025 Amended Facility going forward.

Previous wording

Other Income / (Expense). Other income / (expense) consists primarily of proceeds from previous insurance claims, proceeds from monetizing tax credits associated with growth and Irish refundable tax credits.

Current wording

Other Income / (Expense). Other income / (expense) consists primarily of proceeds from monetizing tax credits associated with growth and Irish refundable tax credits.

Previous wording

Total Revenue, Net. Total revenue, net was $298.2 million for the year ended January 31, 2024, an increase of $1.8 million, or 0.6%, compared to $296.4 million for the year ended January 31, 2023. This increase wasprimarily driven by the increase in Average Active Subscribers and units purchased per subscriber.

Current wording

Total Revenue, Net. Total revenue, net was $306.2 million for the year ended January 31, 2025, an increase of $8.0 million, or 2.7%, compared to $298.2 million for the year ended January 31, 2024. This increase was primarily driven by the increase in units purchased per subscriber combined with an increase in Reserve revenue.

Previous wording

In fiscal year 2024, we expect revenue to increase as we grow our customer base, improve the customer experience and continue to focus on our resale revenue.

Current wording

In fiscal year 2025, we expect revenue to increase as we work towards growing our customer base, improving the customer experience and continuing to focus on our resale revenue.

Previous wording

Subscription and Reserve Rental Revenue. Subscription and Reserve rental revenue was $264.9 million for the year ended January 31, 2024, a decrease of $(3.7) million, or (1.4)%, compared to $268.6 million for the year ended January 31, 2023. This decrease was driven by lower reserve revenue and lower add-on rates, and was partially offset by an increase in Average Active Subscribers compared to the same period last year.

Current wording

Subscription and Reserve Rental Revenue. Subscription and Reserve rental revenue was $265.5 million for the year ended January 31, 2025, an increase of $0.6 million, or 0.2%, compared to $264.9 million for the year ended January 31, 2024. This increasewas primarily driven by an increase in Reserve revenue compared to the same period last year.

Previous wording

Other Revenue. Other revenue was $33.3 million for the year ended January 31, 2024, an increase of $5.5 million, or 19.8%, compared to $27.8 million for the year ended January 31, 2023. This increase was primarily driven by an increase in Average Active Subscribers and the items purchased per subscriber. Other revenue represented 11.2% of total revenue, up from 9.4% in the same period last year. During the year ended January 31, 2023, we also recognized $2.3 million of revenue recognized from a pilot to sell our brand new Exclusive Design products wholesale to a third party retailer.

Current wording

Other Revenue. Other revenue was $40.7 million for the year ended January 31, 2025, an increase of $7.4 million, or 22.2%, compared to $33.3 million for the year ended January 31, 2024. This increase was primarily driven by an increase in the items purchased per subscriber and an increase in the average selling price per unit. Other revenue represented 13.3% of total revenue, up from 11.2% in the same period last year.

Previous wording

Costs and Expenses. Total costs and expenses were $378.2 million for the year ended January 31, 2024, a decrease of $(21.8) million, or(5.4)%, compared to $400.0 million for the year ended January 31, 2023. This decrease wasprimarily driven by cost savings from the September 2022 restructuring plan and the implementation of our new transportation contract in September 2023, which reduced costs compared to the same period last year.

Current wording

Costs and Expenses. Total costs and expenses were $353.7 million for the year ended January 31, 2025, a decrease of $(24.5) million, or(6.4)%, compared to $378.2 million for the year ended January 31, 2024. This decrease wasprimarily driven by cost savings from the January 2024 restructuring plan, lower share-based compensation expense, lower marketing expense, improvement in warehouse labor productivity, and lower hosting costs which reduced costs compared to the same period last year, offset by higher rental product depreciation and revenue share.

Previous wording

Fulfillment. Fulfillment expenses were $86.0 million for the year ended January 31, 2024, a decrease of $(6.2) million, or (6.7)%, representing 28.8% of revenue, compared to $92.2 million for the year ended January 31, 2023, representing 31.1%of revenue. The decrease in fulfillment dollars and as a percentage of revenuewas primarily driven by transportation and processing cost efficiencies and higher revenue per shipment that offset an increase in units per shipment due to the 5 item plan and an increase in wage rates during fiscal years 2022 and 2023. During the year ended January 31, 2023, we also recognized $1.2 million of fulfillment expenses related to the pilot to sell our brand new Exclusive Design products wholesale to a third-party retailer.

Current wording

Fulfillment. Fulfillment expenses were $82.8 million for the year ended January 31, 2025, a decrease of $(3.2) million, or (3.7)%, representing 27.0% of revenue, compared to $86.0 million for the year ended January 31, 2024, representing 28.8%of revenue. The decrease in fulfillment dollars and as a percentage of revenue was primarily driven by warehouse processing cost efficiencies and higher revenue per shipment that offset an increase in wage rates during the first quarter of fiscal year 2024.