Rent the Runway, Inc.

3. Liquidity

The Company recognized net income from operations of $22.6 million for the year ended January 31, 2026, due to the recognition of a Gain on Debt Restructuring of $96.3 million during the year ended January 31, 2026. Prior to fiscal year 2025, the Company has incurred significant recurring net losses since inception. The Company incurred significant recurring net operating losses since inception and has an accumulated deficit of $(1,100.4) million as of January 31, 2026. The Company has historically relied on debt and equity financing to fund its operations. The Company’s principal sources of liquidity are existing cash and cash equivalents and cash flows from operating activities. There is no remaining borrowing availability under the Company’s New Credit Agreement, as defined below. The Company’s cash flows from operations for the year ended January 31, 2026 were $3.5 million compared to $12.9 million for the year ended January 31, 2025. Cash out flows from investing activities for the year ended January 31, 2026 were $(49.5) million compared to $(20.1) million for the year ended January 31, 2025. As of January 31, 2026, the Company held cash and cash equivalents of $50.4 million and long-term debt of $156.6 million with a maturity date in October 2029.

The Company experienced net operating losses for the last three years and an increase in such losses during the year ended January 31, 2026 as compared to the year ended January 31, 2025. The Company also experienced positive cash flows from operations in fiscal years 2025 and 2024, though it continued to have cash outflows related to its investing activities. The increase in cash flows (used) in investing activities during the year ended January 31, 2026 as compared to the year ended January 31, 2025 was due to a strategic, intentional increase in its investment in rental product purchases, inclusive of additional units, from multiple acquisition channels for fiscal year 2025.The Company experienced year-over-year revenue growth and a reduction in net losses in fiscal years 2024 and 2023 and generated cash flows from operations. 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, or tariffs, the Company plans to preserve liquidity by reducing fixed and variable costs, which may include 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.

On August 20, 2025, concurrent with the Company’s entry into the Exchange Agreement (as defined below), the Company entered into a Fourteenth Amendment to the Credit Agreement with CHS (US) Management LLC, as administrative agent, and CHS US Investments LLC, as lender (the “Fourteenth Amendment”) (the 2023 Amended Temasek Facility, as amended by the Eleventh Amendment, Twelfth Amendment, Thirteenth Amendment and Fourteenth Amendment, the “2025 Amended Facility”). The Fourteenth Amendment provided that, among other things, (i) interest that would otherwise be payable in cash will be capitalized, (ii) the liquidity financial covenant level will temporarily be reduced from $30 million to $15 million until the closing of the transactions contemplated by the Recapitalization Transactions (as defined below), and (iii) the spend levels for fiscal year 2025 are eliminated.

RENT THE RUNWAY, INC.Notes to Consolidated Financial Statements

On October 28, 2025, the Company completed the Recapitalization Transactions to enhance the Company’s financial position and flexibility by significantly reducing its existing indebtedness, improving its borrowing rate and extending the maturity of its remaining indebtedness to October 2029. Under the terms of the Recapitalization Transactions, the Company entered into the New Credit Agreement (as defined below). The Company’s lender exchanged $100 million of existing outstanding indebtedness on a dollar-for-dollar cashless basis for new term loans and exchanged the remaining indebtedness for 26,175,193 newly issued shares of the Company’s Class A Common Stock. The Company also received an additional $20 million of new term loans excluding direct costs related to the transactions, resulting in an aggregate principal amount of $120 million. The Company also received $12.5 million in proceeds from a concurrent Rights Offering (as defined below). Additionally, the Company’s minimum liquidity maintenance covenant was also reduced from $30 million to $15 million until February 20, 2027. On January 28, 2026, the Company entered into the First Amendment to the New Credit Agreement which permanently removed the minimum liquidity maintenance covenant. See “Note 4 - Recapitalization Transactions” for additional information. The Second Amendment was executed on April 1, 2026 and provides the Company with the ability to capitalize interest in lieu of cash payments until May 3, 2027. As a result of the First and Second Amendments to the New Credit Agreement, the Company expects that its existing resources and future cash flows from operations and cash and cash equivalents, will provide it with sufficient liquidity to meet its obligations for at least the next twelve months from the issuance date of these financial statements. The Company plans to explore additional funding sources to increase liquidity and strengthen its balance sheet. However, there can be no assurance plans will be completed.