wdq-20230430

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

____________________________

FORM 10-Q

____________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended April 30, 2023


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to ________

Commission file number 001-40958

____________________________

RENT THE RUNWAY, INC.

____________________________

(Exact name of registrant as specified in its charter)


Delaware						80-0376379
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification No.)

10 Jay Street Brooklyn, New York 11201						11201
(Address of Principal Executive Offices)						(Zip Code)

(212) 524-6860

(Registrant's telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

____________________________

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Class A common stock, par value $0.001 per share	RENT	The Nasdaq Stock Market LLC

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐

Accelerated filer

☒

Non-accelerated filer

☐

Smaller reporting company

☐

Emerging growth company

☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

The registrant had outstanding 64,236,581 shares of Class A common stock and 3,085,148 shares of Class B common stock as of June 2, 2023.

Table of Contents


		Page
Part I
Item 1.	Financial Statements (Unaudited)	4
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	26
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	41
Item 4.	Controls and Procedures	41

Part II
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	43
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	85
Item 3.	Defaults Upon Senior Securities	85
Item 4.	Mine Safety Disclosures	85
Item 5.	Other Information	85
Item 6.	Exhibits	86
	Signatures	87

Unless the context otherwise requires, we use the terms the “Company,” “RTR,” “Rent the Runway,” “we,” “us” and “our” in this Quarterly Report on Form 10-Q, or Quarterly Report, to refer to Rent the Runway, Inc. and, where appropriate, our consolidated subsidiaries.

Risk Factor Summary

Investing in our Class A common stock involves numerous risks, including the risks described in Part II, Item 1A. “Risk Factors” in this Quarterly Report on Form 10-Q. You should carefully consider these risks before making an investment. Below are some of these risks, any one of which could materially adversely affect our business, financial condition, results of operations, and prospects.

•We have grown rapidly in recent years and have limited experience at our current scale of operations. If we are unable to manage our growth effectively, our brand, company culture, and financial performance may suffer.

•The global fashion industry is highly competitive and rapidly changing, and we may not be able to compete effectively.

•We rely on consumer discretionary spending and have been, and may in the future be, adversely affected by economic downturns and other macroeconomic conditions or trends.

•Our continued growth depends on our ability to attract new, and retain existing, customers, which may require significant investment in paid marketing channels. If we are unable to cost-effectively grow our customer base, our business, financial condition and results of operations would be harmed.

•If we fail to retain customers, our business, financial condition, and results of operations would be harmed.

•If we are unable to accurately forecast customer demand, manage our products effectively and plan for future expenses, our operating results could be adversely affected.

•We face risks arising from the restructuring of our operations, which could adversely affect our financial condition, results of operations, cash flows, or business reputation.

•We rely heavily on the effective operation of our proprietary technology systems and software, as well as those of our third-party vendors and service providers, for our business to effectively operate and to safeguard confidential information.

•The COVID-19 pandemic has had, and may in the future continue to have, a material adverse impact on our business. Other future pandemics or public health crises may have a similar adverse impact on our business.

•Shipping and logistics are a critical part of our business and our supply chain and any changes or interruptions in shipping or logistics operations could adversely affect our operating results.

•We have identified material weaknesses in our internal control over financial reporting. If we are unable to remediate the material weaknesses in a timely manner, identify additional material weaknesses in the future or otherwise fail to maintain effective internal control over financial reporting, which may result in material misstatements of our condensed consolidated financial statements or cause us to fail to meet our periodic reporting obligations, our ability to comply with applicable laws and regulations and our access to the capital markets to be impaired.

•Our business is subject to a large number of U.S. and non-U.S. laws and regulations, many of which are evolving.

•We are subject to U.S. and certain foreign export and import controls, sanctions, embargoes, anti-corruption laws, and anti-money laundering laws and regulations. Compliance with these legal standards could impair our ability to compete in domestic and international markets, and we could face criminal liability and other serious consequences for violations, which could harm our business.

•Failure to adequately maintain and protect our intellectual property and proprietary rights could harm our brand, devalue our proprietary content, and adversely affect our ability to compete effectively.

•We are subject to rapidly changing and increasingly stringent laws and industry standards relating to data privacy, data security, data protection, and consumer protection. The restrictions and costs imposed by these laws, or our actual or perceived failure to comply with them, could subject us to liabilities that adversely affect our business, operations, and financial performance.

•We face risks associated with brand partners from whom our products are sourced or co-manufactured.

•We rely on third parties for elements of the payment processing infrastructure underlying our business. If these third-party elements become unavailable or unavailable on favorable terms, our business could be adversely affected.

•We depend on search engines, social media platforms, mobile application stores, content-based online advertising and other online sources to attract consumers to and promote our website and our mobile application, which may be affected by third-party interference beyond our control and, as we grow, our customer acquisition costs will continue to rise.

•Any failure by us, our brand partners, or our third-party manufacturers to comply with our vendor code of conduct, product safety, labor, or other laws, or to provide safe factory conditions for their workers, may damage our reputation and brand, and harm our business.

•We face risks associated with our indebtedness and potential need for additional capital, including that financing or refinancing may not be available on acceptable terms or at all.

•The dual class structure of our common stock has the effect of concentrating voting control with those stockholders who held our capital stock prior to the listing of our Class A common stock on Nasdaq, including our Co-Founders, and their affiliates, which will limit the ability to influence the outcome of important transactions, including a change of control.

•Our share price may be volatile, and investors may be unable to sell their shares at or above the price they purchased them.

If we are unable to adequately address these and other risks we face, our business may be harmed.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains forward-looking statements. We intend such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact contained in this Quarterly Report may be forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “aims,” “may,” “will,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “targets,” “projects,” “contemplates,” “believes,” “estimates,” “forecasts,” “predicts,” “potential” or “continue” or the negative of these terms or other similar expressions. Forward-looking statements contained in this Quarterly Report include, but are not limited to statements regarding our future results of operations and financial position, industry and business trends, share-based compensation, business strategy and initiatives, the design and expected timing of the launch of an AI-driven search beta, sustainability initiatives, business plans, impact from our September 2022 restructuring plan and other cost savings initiatives, product acquisition expectations, our proposed option exchange, impacts from our five-item base subscription offering, market growth and our objectives for future operations.

The forward-looking statements in this Quarterly Report on Form 10-Q are only predictions. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our business, financial condition and results of operations. Forward-looking statements involve known and unknown risks, uncertainties and other important factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements, including, but not limited to, the important factors discussed in Part II, Item 1A, “Risk Factors” in this Quarterly Report for the quarter ended April 30, 2023. The forward-looking statements in this Quarterly Report are based upon information available to us as of the date of this Quarterly Report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.

You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report and have filed as exhibits to this Quarterly Report with the understanding that our actual future results, levels of activity, performance and achievements may be materially different from what we expect. We qualify all of our forward-looking statements by these cautionary statements. These forward-looking statements speak only as of the date of this Quarterly Report. Except as required by applicable law, we do not plan to publicly update or revise any forward-looking statements contained in this Quarterly Report, whether as a result of any new information, future events or otherwise.

Part I - Financial Information

Item 1. Financial Statements


			Page
Condensed Consolidated Balance Sheets - Unaudited as of April 30, 2023 and January 31, 2023			5
Condensed Consolidated Statements of Operations - Unaudited for the three months ended April 30, 2023 and 2022			6
Condensed Consolidated Statements of Changes in Stockholders’ Equity (Deficit) - Unaudited for the three months ended April 30, 2023 and 2022			7
Condensed Consolidated Statements of Cash Flows - Unaudited for the three months ended April 30, 2023 and 2022			8
Notes to Condensed Consolidated Financial Statements
1. Business			10
2. Summary of Significant Accounting Policies			10
3. Liquidity			15
4. Leases - Lessee Accounting			15
5. Rental Product, Net			16
6. Long-Term Debt			17
7. Income Taxes			19
8. Accrued Expenses and Other Current Liabilities			19
9. Fair Value Measurements			19
10. Stockholders’ Equity			20
11. Share-based Compensation Plans			21
12. Net Loss per Share Attributable to Common Stockholders			23
13. Commitments and Contingencies			24

Table of Contents


RENT THE RUNWAY, INC. Condensed Consolidated Balance Sheets

(In millions, except share and per share amounts, unaudited)


	April 30,		January 31,
	2023		2023
Assets
Current assets:
Cash and cash equivalents	$	141.4	$	154.5
Restricted cash, current	4.2		3.1
Prepaid expenses and other current assets	12.9		14.5
Total current assets	158.5		172.1
Restricted cash	5.8		6.0
Rental product, net	87.8		78.7
Fixed assets, net	41.8		44.7
Intangible assets, net	3.9		4.1
Operating lease right-of-use assets	26.0		26.7
Other assets	3.6		3.9
Total assets	$	327.4	$	336.2
Liabilities and Stockholders’ Equity (Deficit)
Current liabilities:
Accounts payable	$	18.8	$	12.4
Accrued expenses and other current liabilities	21.8		24.4
Deferred revenue	13.6		12.0
Customer credit liabilities	6.5		6.8
Operating lease liabilities	4.5		4.4
Total current liabilities	65.2		60.0
Long-term debt, net	281.2		272.5
Operating lease liabilities	37.1		38.3
Other liabilities	0.5		0.7
Total liabilities	384.0		371.5
Commitments and Contingencies (Note 13)
Stockholders’ equity (deficit)
Class A common stock, $0.001 par value; 300,000,000 shares authorized as of April 30, 2023 and January 31, 2023; 63,602,721 and 61,956,536 shares issued and outstanding as of April 30, 2023 and January 31, 2023, respectively	0.1		0.1
Class B common stock, $0.001 par value; 50,000,000 shares authorized as of April 30, 2023 and January 31, 2023; 3,078,421 and 3,066,251 shares issued and outstanding as of April 30, 2023 and January 31, 2023, respectively	—		—
Preferred stock, $0.001 par value; 10,000,000 shares authorized as of April 30, 2023 and January 31, 2023; 0 shares issued and outstanding as of April 30, 2023 and January 31, 2023	—		—
Additional paid-in capital	913.3		904.5
Accumulated deficit	(970.0)		(939.9)
Total stockholders’ equity (deficit)

SEC Form 10-Q filed by Rent the Runway Inc.