Rent the Runway (RENT) 7 Jun 232024 Q1 Earnings call transcript

Welcome to the Rent the Runway's First Quarter 2023 Earnings Results Conference Call.

[Operator Instructions]

As a reminder, this conference is being recorded. I would like now to turn the call over to Rent the Runway's General Counsel, Cara Schembri. Thank you.

begin. may You

and the everyone, joining to us Good first thanks quarter Rent Runway's XXXX discuss afternoon, for results.

Sid Joining me Co-Founder, CFO, and are results Thacker. today to Jennifer discuss Hyman; our CEO and

can references call, this QX presentation, the our section we and make Investor be During to Relations in found website. will 'XX our earnings Presentations of Events which

financial targets, statements you to will include call opportunities we we include future growth. are Before our this These begin, and actual assumptions would risks, subject that like could results, expectations our and to results regarding statements. cause materially. our market uncertainties to These guidance that remind statements differ forward-looking and various

with detailed this Form assumptions risks, our release filed the XX-Q and that These will filings the afternoon's SEC, in days. uncertainties next few be including as are press in our well as

update to except no obligation as We by revise law. required information have forward-looking or statements or any

GAAP. information. also considered presentation and with over During on of in release, this be found for will as press financial we isolation in to this financial call, non-GAAP or reference investor presented a The is Reconciliations intended slide I'll in Jen. that's can to to non-GAAP substitute And presentation information of our measures accordance non-GAAP website with filings. our be it SEC our that, not posted information financial GAAP certain turn

Thanks, Cara, everyone, thanks, and joining. for

growth QX line. customer-centric record while against posting XX% beat bottom in momentum areas XXX,XXX, focused growth delivering that call, the most. It's XXXX do last the our on strategy focused customers are evidenced tangible count I As on experience. a for exciting our time them to a new to quarter-over-quarter more our active on delivering our We're To delivered Rent an We on and is shared that, by matter we value executing representing vision of top our in quarter-over-quarter, improving customer results. as subscriber Runway. the strong

Revenue came increase year-over-year. in million, a XX% at $XX.X

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I'm paired investments that ability it profitability metrics the particularly effectively making important strong customer because proud our of the to experience. subscriber progress manage I while growth into on costs believe demonstrates with

that in active and we margins in XX% goals subscribers conviction we over subscriber foundation cash a last reiterating which our fiscal towards have by strong We now, consumption provide XXXX. growth shared ending growing QX and almost quarter, are XX% by reducing the

these confidence focus the goals We maintaining of have laser customer. we're our because in on

agility and on Our focused team is execution. demonstrated has

beginning spend to want said endeavor. this X-quarter and a are feel far call improvements going emphasize our we've key a so experience transforming year. that difference, is to real we're this not made customer to that, I detailing Having customers of Our much some of the also

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to I the Runway share to or Next, their subscribers we've our the a more one-on-one the In with tips Rent most onboard May, membership to or to to for to shipping text early Runway Rent launched we their style fit QX new first service help a want issue. of Concierge luxury the make solving building free the shipment of taken service help from customers. actions in use styling via Runway new seamlessly. subscribers some with Rent easier concierge our out interaction provides team customer get

an program this be the important to believe retention We driver. potential has

twice incredibly of XX% a customers and more Our busy have work, X/X kids them have lives. XX% week. socialize than

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a also her make loyal long-term her her to that days. experience previously, subscribers XX their loyalty, churn know an retention strong majority this of providing who aim first we membership, will shared customer effortless do we so to rental. we've a in We of we've improve but early concierge delight the with By months introduction sooner. customer enjoyed think As in and

the more experience You'll our come. this quarters see offering us integrate deeply to in product into

our and faster. making app we're site Next,

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X improvements to adoption experience end Rent to launched Pickup, end service 'XX. speak made Runway which tool increase QX led to of of further of that X the adoption One, the the has directly a QX returns the level At-Home to points new premium nearly we an drive we our the by 'XX and offers. of delivery service in Last, from in-market percentage of to

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recent to accomplishments than how a typical retailer the strategic find customers related inventory to where going and I'm on to product pillar discovery, our love. best-in-class our goal Finally, share our better they even be is

when during has to First, styles. with on of unavailable we or option members increased particularly in find visually The last product member items launched easily enable a pages. based on late pages landed and display provide to that complete our we shared our outfit introduction Look features styling customers the call March these engagement, Rent the we similar a on similar

increase items on a items this served in among display with members. feature similar substitute leading through Now substitute engagement product directly the she XX% page, to

our passionate in very is more coming AI-driven allow announce data. intuitive personally I'm sites something to we use launch about, weeks, search searching the This customers and we're search fashion to terms plan make and excited intended will or to natural. that to an and Last common cases

months come. tropical or her using For step a the to models in example, launch discovery AI product and relevant Runway write and will in and AI-powered see improve she be will Vibes, our Nantucket to engine motif We this able as in to this quarters on Clambake experience, to we our build inventory. expect and important Rent Miami first serve the

We potential benefit the has more to frequency today. that deliver industry significant directly rents. believe her data on interacts of which two, our one, the to that the site Runway and support she Fashion to of be catalog, XXXX behavior as aisle value because experience endless customer serves e-commerce. leapfrog we from gathered quality is of which positioned strategy uniquely delivering we believe AI the our narrow unique AI and to the from our fit, AI ahead rich frequent and problem the an and her a and occasion Rent we But to beneficiary product; that includes of, she with data of time all with inventory every the of more

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Sid. to I'll it with turn And that, over

Since Thanks, joining questions. key for everyone, X investors XXXX Jen, us. asked again, our us thanks IPO, and have

profitable be? the how First, can company Rent Runway the Second, grow? can

Our progress fronts. on first both results solid demonstrate quarter

over improved plus key we outlined, Active ending XXX,XXX XX% customer growth deeply driving Subscribers are the experience of Jen XXXX. fiscal we just improvements believe subscriber retention faster end As are that QX, active to At and progress the making are we in growth. making at to

profitability cash Our is to focused flow. free path on

expect goal. outlined strong QX progress margins we towards the Last for We for provide believe quarter, XX% 'XX. reduction our we that cash in foundation fiscal consumption almost that a in

me review results. our 'XX QX Let now

Active Total XX.X% up $XX.X was Subscription an was last quarter of revenue year, increase versus We X.X% $XX.X increase million, for $XX.X the an million Active of year-over-year. versus and ending revenue reserve XXX,XXX, with Subscribers million up ended XXX,XXX year-over-year. rental X.X% year-over-year. Average Subscribers, during were the X.X%. XXX,XXX, QX quarter

As rates. offset last products. was in we slightly higher program $X.X year-over-year, of the by growing increased ARPU mix and year, discussed due add-on 'XX partially quarter, see impact to primarily purchases million did due revenue last rental quarter Other was increase, Subscription in the XX.X% weakness reserve business million the April versus of our for changes price to primarily QX. we $X.X in year-over-year

as on 'XX. in depending revenue XX.X% can in costs Other costs QX improved QX Note quarter-to-quarter, $XX.X revenue revenue the revenue of 'XX in purchases to in revenue million 'XX. approximately from million assortment that vary revenue 'XX. 'XX of $XX.X the were in QX of represented Fulfillment a sale. for of versus available X.X% percentage XX% timing Fulfillment QX of versus XX.X% of from these QX

'XX not results QX our did from As benefit 'XX a reminder, April price increase.

increase, X a both Item of to Gross with the impact QX were 'XX gross impact towards price transportation We improvements per the well efficiencies XX.X% in channels. QX as margins and product order 'XX more depreciation higher mix of on above April in launch of reflect were continued due cost acquisition costs. discussed 'XX. XX.X% the efficient the fulfillment as to offset margins in able product impact changes lower units of the QX shipped 'XX versus account processing

As to see were typically plan. we due and the QX lower compensation, our levels expenses impact stock-based acquisition Operating seasonally restructuring expected, 'XX XXXX than before lower of primarily gross to and year-over-year X% due about QX. in lower margins XX% year-over-year QX favorable were higher product

to fiscal 'XX the to million in savings continue $XX expect rate. 'XX in QX about compared restructuring-related run We

margins revenue stock-based and cost improve in for versus negative G&A needs discipline the of XX.X% of Adjusted marketing, revenue compensation was to were or us negative technology, and including XX% prior offset $X.X X.X% of million of reflected quarter year. year. XX% EBITDA $X.X revenue versus revenue expenses, million the operating to strong EBITDA customer last experience. allowed that Adjusted Total investments

flow QX $XX Free $XX QX negative negative in in 'XX, million cash versus was million 'XX.

significant to in in 'XX. fiscal improvement consumption We cash expect continue

to guidance. turn Let's

and For to expect year, continue to in excess the XX%. Active million $XXX full of we $XXX of between ending revenue million Subscriber growth

of full reiterating year guidance of margin also EBITDA X% X% revenue. our are to adjusted We

by consumption on guidance unchanged, expect $XX cash remains we and below Our XX% to million. to almost flow cash reduce

high-quality expectations to million from top $XX We styles discounts. XXXX our million from to are product deep million as million spend we purchase $XX seeing at $XX are to to brands increased updating fiscal $XX opportunities

lower be Finally, year-over-year on expectation is for change margins gross our a to slightly no there basis. to

X% growth and We represents X% versus 'XX, 'XX million $XX about the at guidance growth expect $XX be to QX million. range. QX approximately QX between of midpoint sequentially This and revenue versus the

Let the me talk affecting about factors QX.

and pricing. short with some customer expect offer in allow think We price our being to term, especially improve us of improving in these experimenting First, acquisitions you noticed, reduce as customer this we experiments will may in have to are the lower the retention We less with our new promotional program. do experience. invest

lower right As a QX. We XX% these have plus expect and Subscribers we decisions changes growth. of these versus factored Active subscriber full our result, our for in into think QX ending customers year are the guidance

Second, be the both to expected negatively sequential and impacted year-over-year the growth reserve decline are in business. by

also quarter-over-quarter in first due of relatively Finally, sold quarter the flat we other expect to units higher this be revenues year. to

EBITDA QX base are fixed between versus on 'XX as leverage X% our expect the higher margins improve cost to adjusted of X% base. expected be revenue QX revenue to to we

business, sense trajectory end I'd in of saying confident like a to customer by the of we the our how that improve to remain clear very we and have experience.

product make will and initiatives. to customers for our them see should 'XX experience second and significant make our onboarding noticeable progress be to and believe a and of The inventory across products inventory, it more in changes easier find manner. We seamless fiscal these half us

we it up to happy that, With for are open questions.

[Operator Instructions]

Our question from with Raymond Rick first James. comes Patel

partners? have Does it it. of get do you How better think a inventory leaning we getting customers think that inventory chasing you'll more by on more giving question perspective. I at share it as that what Just high-demand from they mean be this about Does RTR mean they on on an be read when mechanics your the management to want want how about products. buying curious fashion? a you'll

ramping what financial are capital? up ramifications margins a initiative this gross on from the working follow-up, and as And

you've X of QX. early the think addressing there's us QX really in seen ways main I And ways deploy it. we're one far thus and

also data competitive aggressively doing that's season, pretty them respond that to what's And where inventory kind we're held it's styles. but kind So full of signals monetize get, XX because to of a of calendar. continue and against model both of the selling we reorder we the opposed real-time because first season highly in as way business -- week to years being X-plus get that what's data can price we on demanded of number to real-time is well, month these we able have, over kind get of pricing, retailer one, traditional XX top in to the

So one. that's number

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data wants. great what have We on she

for us we're that world special and workwear, post-COVID solidly she's again really now occasions. think I weekends for in this using where for

most. matter And increase so the her styles depth we're that able across to the to

question. for thanks the Rick, Yes,

to we financial for the we part #X spend of easy guidance to trade-off, of metrics? it do more then on find is tremendous this those the depth. we styles going look want many we of site. What for to the because coming inventory want there to right? how that required many significant is do have is that as and units no buy, How each mean, that for when additional optimize of mentioned. importantly, amount product subscriber reason would to improvements that impact on in feel always of provided factor our into year. at items Jen to depth it's we optimizations terms growth breadth very customer I style obviously depth impact and we data of are look, is But relates we in optimistic have very XX% customer of a we the face dollars guidance we think it say these have the I experience So know how And about I to this this move, right? the buy a

Boone comes question Securities. Andrew JMP from next with Our

the to like about guide for I'd talk XXXX.

you for the the confidence XX% the your about about the to XQ hit year, that plus and back given half of can number? subscriber talk Just guidance of growth reacceleration in thinking

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or easy have, number So in easier find is And rent products, the the one, come, changes website right? those the loyalty dividends they I because the easily, be with visit significant to mean if customers are terms the we very to very going it people products think, right? to and ultimately, Runway our to Rent to make retention pay going inventory interact we customers of much love, that

the of other So personalized right? [ the Concierge subscribers this very significant do within improvement today onboarding to that ] XX so site The change Levi's we've of first service, RTR days. or we and that XX% -- the is made all

like we're almost encouraging it's very So points are those from to the -- personal your personal and we customers. a quite it's we results here, think in first And address seeing providing days. XX pain critical it's -- stylist SMS-based been very

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Yes.

working, I the they an organization execution seeing felt what QX agile And think strategic our orientation. by outlined pillars this the you're we are that an results organization in more you're are customer. has think is the year being importantly, that that show seeing and across I

a So the the launched the half was we've experiences actually We've a And of really we would first X up knew majority done iterated a the over the lot. where of We've of year. within product year. a this lot. lot transformative in the that months showing be back plan

good already the about So some next feel months. we exciting And over experiencing we the date. the know lined few that have we really differently Rent to is Runway how customer things up

Jen, I to bit wanted AI last you AI can a more Can Just of that vision the said, across as you you little terms talked to ask incorporated that AI step. about a specifically about beyond first the I be talk about platform? thing more broadly how in think search.

Yes.

the I just it general. and AI industry first, fashion talk So to can about in to want do what

I that e-commerce is cumbersome think most experiences exists. that of fashion customer one the

of You doing like no pages are searching that and pages through and likes to and this. one you find content the pages items

as be AI to products, And so -- fashion is selling major an industry. a beneficiary that going all, to is industry physical as first of an still is be going

Rent like Runway is why positioned the Now here. uniquely

than one in Rent all the traditional is using is, Runway us X time. ways. -- the You she's Number different fashion

experience Rent Runway customer this once through year can we're the her we or the of utility, more. retailer to appreciated is So experience with and if it put the you'll going a be easier that even do much you're up make where experience for twice it. because At a seamless important a a kind will of even more for us slog making to than the

against unique information uses wants set real-time what how she that she's she And on disliked yesterday, how weekend. have, second, the dress we received And think on could power on exactly the of how terms she because of AI. tomorrow, she items liked this we to fit, or highly doing have is frequently how we therefore, we on us, data in

fact appropriately few someone that she's that really We next today about why search, no next Now already come That's one-on-one our on which new weeks could onboarding the the about experience. I are has We discover -- reason utilizing talked you to AI site. over to talked a about if her the product someone years, texting Concierge. about we with even see there fundamentally launching over ways from around AI few would beta the be website.

is marriage way can through there constantly to modality, medium- these however really the taking when any to answering you can Runway, it things that stylist more to of you communicate asynchronously do that time. makes want inventory the The on to a vision can to you long-term new be and you for Rent to you access from everything help it questions, X sense a solving you, to problems, with your own out for

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what is completely Closet You to I search, and the black go a a fact gown. actually to search to brings our able search the going use in my a site bonfire in they of way that Cloud search weekend, Cloud. how about. really be to for The that this for up value to this enable think to is to proposition different beach to items want can all the customers wear Closet it a To we're tie that and

we're So that. excited really by

comes Our next from Fargo. with question Wells Ike Boruchow

post improvements Kate in Ike. the months This Jen, [indiscernible] announcement. X now extra items on just we're QX. for first, guess is I the in Congratulations on

then, back am the I tranche latest if confidence seeing share with And retention lot consumers. in accelerating You improve customer or that color your into a of numbers you cohort, subs obviously what guys from out this are more any behind place the half. active can a in you initiatives basis the to you curious of experience. had Sid, of noted

subs back guys looking you lose seasonality last QX. active the just have perspective, in quarter-over-quarter tended few Just to from years, a

especially anything subscriber these as XQ XQ, consider behind around more and between we confident you're Just some initiatives growth? should of

Yes.

address better we're the of to harder So improvements that And what's part rates QX. better across say the from we we get we first the item Five really rejoin further rates. making it's QX, experience great board, to the about saw better as versus we related to saw away churn, but question, conversion launch, feel in other and through what

Yes. the QX. And right. in product see got we year, look, I we have in look of of a this the terms subs, active feel decline if that XXX% I did necessarily that mean, second you that affected improvement build of Last guide the except year, say and what provided at very QX, I inventory not there the optimistic outlook pacing entirety right? going is to to like to going by positively going we've half growth. confident already is in look sit QX and XX% terms a of plus I'm relative to that, to be to subscriber

that. it at leave we'll So

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next comes Sachs. question with Goldman Our from Eric Sheridan

from you're about headwinds net the that a how of in just themes as go in deeper in and know a we've across events, away rationalization XXXX in We've talked we you where those level adds a shift the want like maybe subscribers return into the of to can around and of of you that could give face spend if operating just environment and or might thinking generally. Can elements the tailwinds I about by sense we purchase of paused yours or behavior? about model. broader big the the consumer possible elements talked talk impact those return work, the purchasing terms we model into past business and before us set of

Yes.

we're by So on evidence we seeing in not based were impacted acquisition that numbers macro first, environment our the QX.

for I that we our pillars reiterating we're with confident progress need are clearly, we care customers with line in and about. year. this strategic guidance our made what that business. know to in mean the do huge We QX, we're the So things

increase our we seeing very we're that Rent some relative things pre-COVID So similar that units very the continuing since into could is for to the for and overpenetrates COVID on Runway has be are for seeing positive active workwear demand to workwear occurred. to demand is first time site,

we our to environment their that this business. is so up for calling similar utilization there, because And we workwear demanding it see very back that more as they're are to positive think great of and the back a CEOs macro workforce saw feels into And than offices tailwind that pre-COVID.

that it's think And in still as go we instance, we data We one, probably two, you impact we out concierge they so we're I up, us the speak. reason about. we're why what are have uncertain think on I I have behind for And told decisions customers. right? many the And -- that have good, addressing we when impacted what have good, our into real-time see the feel that data an these service number number think actually care So people -- obviously, macro, the do about on of signed the environment, helpful, we're biggest how rolling why right? improvements customers making, problems feel

a we just that get that signed that customers that are improvements we're just making a And it's now long will many to reflecting can How right? really, how up? of -- continuation question customer's already it's seeing experience, you're So of the seeing, we data take? the

terms this site. year. she to in know what's visits optimize important we is factor likely the and the inventory, the when of to her we taking, and feel actions available customer a another what Once we're depth very actually Take breadth

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play these again, this improvement, is no out. of these making idea it's an how going that we're all to So something improvements, not are

executing concrete have that of customers a actually care the benefits relatively just the our properly of and matter essentially reaping data. We really about. It's actions we know

customer our as card who or a continues it than offer possibly can rental market Yes. financial you're our see think to value, improve you're a subscribing this ever making tremendous market that's it goal just growing. that are is continuously and where considering whether to on on We to rental We in and as are before. positive quarter-over-quarter as focus more customers a be experience there renting

question with Ashley Helgans next Our from Jefferies. comes

can tell subscribers growth activating subscriber new trends? coming you Anything on more platform? Are us seeing to composition reserve of or you users the the

I what a mean, activation going we've that's first new X weakness year. that that talked that, But up, I rejoiners. and The affecting that, customers business. reserve customers. across mean, a across the is you sign this so is in are rental, is out the called in with Yes. obviously, -- clearly that seeing clearly on, back We're to new activations positive this things about right? very trend the seeing customers bit goes look, performance little we're thing We've So business. right? are embracing seeing are implies

then we're I rest you're all a the QX. making the the driver in rental right? new It's certainly I should a mean the is driver of second right? given to customers pretty that that's a really year, for the and year for retention And changes also And think be given thing of loyalty, the combination really for impact of embracing strong but had acquisitions pretty of really seeing the continue expected. the So people strong been those we X. and rest of are QX strong

Stanley. Our with next Schenk comes Lauren from question Morgan

Two ones quick Feather for me. is for on Lauren. This Nathan

the gap with the or you Plan? fix? do how to anywhere launch right utilization that have mix you trying inventory first, feel of trending of a And material you see X-Item you're So inventory is the

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to we to can And to the to some weeks, kind about I you issue part inventory you there? you want year. a an are facing been by question, then indicated I of guess, on how quickly? launch more. you kind couple implement as first a some guess on of of you're should couple phenomenon? on last down as stepping AI on just market? and of functions rate that but guess the bit just of a of little maybe think being search I I relatively this can going in there. back do I a you do tough know Or Has bring about the I we innovations reserves, which have of compares I click soft obviously know was a through these follow think kind know think it these AI quarter guys

to be improve AI, continue think whatever will and iterate it in we So over do beta time. that and launch in we'll I

is to is make able what in think product continue I everyone. make think data a been how I'm here just to I we've we'll leverage about excited AI think that so is our product better to and difference nice that going recovery, a time. we create and quickly And over new to that

the driving business. it's look, a Difficulty], [Technical right? on focused last And [Technical quarter, very Yes. So we've fascinating I subscription our reserve on Difficulty] business, been think,

not [Technical plans with on and and is that particularly none about reflecting [Technical [Technical we've think just inventory year, subscription, that both Difficulty] pretty reenergizes into QX, our reserve of focus of serve reflected continuation our business, But in on Difficulty]. to So product we feel offering the reenergize that involve on marketing, it all optimistic Difficulty] over on messaging, that ability and business expectations obviously, They're having a right? we have exclusive usually working brand that, grow said continue us Difficulty] opportunity that guidance and we're everything So right? to [Technical business, we the real but for launch time. and quite to the recent internally Item this factored over time, X

for Thank no over time. floor turn back further you. I to this questions to are There closing the at comments. management would like

profitability you our so on for look growth us today. again the our progress about ahead. on us. We and QX continuing runway long excited joining forward joining I'm XXXX plans really thanks our call Thanks and much for our to to for and September accelerate in update

This concludes today's teleconference.

may at you your lines disconnect Thank for You this participation. time. your