Rent the Runway, Inc.

3. Liquidity

The Company has incurred net losses from operations of $(69.9) million for the year ended January 31, 2025, has incurred significant recurring net losses since inception, has an accumulated deficit of $(1,123.0) million as of January 31, 2025, and has historically relied on debt and equity financing to fund its operations. The Company’s cash flows from operations for the year ended January 31, 2025 were $12.9 million. Cash out flows from investing activities for the year ended January 31, 2025 were $(20.1) million. As of January 31, 2025, the Company held cash and cash equivalents of $77.4 million and long-term debt of $333.7 million with a maturity date in October 2026.

The Company has experienced year-over-year revenue growth, a reduction in net losses in fiscal years 2024 and 2023 and significantly reduced its cash flows from operations plus cash flows generated (used) in investing during the year ended January 31, 2025. To the extent the Company is impacted by macroeconomic trends, or other factors, including, but not limited to, lower demand for our business, increased rental product spend, the Company plans to reduce fixed and variable costs accordingly and has established plans to preserve existing cash liquidity, which includes additional reductions to labor, operating expenses, and/or capital expenditures. However, these actions may not provide sufficient incremental liquidity to fund the Company’s long-term obligations when they become current.

On March 31, 2025, the Company entered into an Eleventh Amendment to the Credit Agreement with CHS (US) Management LLC (formerly Double Helix Pte Ltd. prior to January 2025) as administrative agent, and CHS US Investments LLC, as lender (as amended, the “2025 Amended Facility”). The 2025 Amended Facility amended the 2023 Amended Temasek Facility (as defined herein) to extend the deadline to mutually agree upon the Company’s fiscal year 2025 expenditure levels – covering rental product capital expenditures, fixed operating expenditures and marketing expenditures – from March 31, 2025 to May 30, 2025. The 2023 Amended Temasek Facility modified the Company’s obligations under the 2022 Amended Temasek Facility (as defined herein) to (i) eliminate 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; (ii) reduce the minimum liquidity maintenance covenant under the 2023 Amended Temasek Facility from $50 million to $30 million; and (iii) provide that the Company may not exceed mutually agreed upon quarterly and annual spend levels for rental product capital expenditures, fixed operating expenditures and marketing expenditures during fiscal year 2024 of $51 million, $100 million (excluding $10 million of specified permitted expenditures), and $30 million, respectively, on an annual basis and to-be-agreed levels for fiscal years 2025 and 2026, subject to the debt holder’s consent and certain exceptions as defined in the agreement. In the event that the Company fails to comply with the covenants specified in the 2023 Amended Temasek Facility, the lender has the right to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable.

The Company’s 2025 Amended Facility matures in October 2026. The Company intends to work constructively with the lender regarding the terms of such debt agreement. If the Company is unable to successfully restructure its long term debt beyond the period of twelve months from the date these financial statements are issued, its liquidity, results of operations, cash flows, and financial condition may be adversely impacted. However, the Company believes that it will have sufficient liquidity from cash on-hand and future operations to sustain its business operations, including interest payments that are scheduled to resume May 1, 2025, and satisfy the $30 million minimum liquidity maintenance covenant for at least the next twelve months from the date these financial statements are issued.