Title

Presentation

Rent the Runway, Inc. beats earnings expectations. Reported EPS is $-6.03, expectations were $-6.56.

Operator: Welcome to Rent the Runway’s First Quarter 2024 Earnings Results Conference Call. At this time all participants are in a listen-only mode, a question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to Rent the Runway’s Chief Legal and Administrative Officer, Cara Schembri. Thank you. You may begin.

Cara Schembri: Good afternoon, everyone, and thanks for joining us today. During this call, we will make references to our Q1 2024 earnings presentation, which can be found in the Events and Presentations section of our Investor Relations website. Before we begin, we would like to remind you that this call will include forward-looking statements. These statements include our future expectations regarding financial results, guidance and targets, market opportunities and our growth. These statements are subject to various risks, uncertainties and assumptions that could cause our actual results to differ materially. These risks, uncertainties and assumptions are detailed in this afternoon’s press release as well as our filings with the SEC, including our Form 10-Q that will be filed today.

We undertake no obligation to revise or update any forward-looking statements or information, except as required by law. During this call, we will also reference certain non-GAAP financial information. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Reconciliations of GAAP to non-GAAP measures can be found in our press release, slide presentation posted on our investor website and in our SEC filings. And with that, I’ll turn it over to Jen.

Jennifer Hyman : Thanks, Cara, and thank you, everyone, for joining. On our Q4 earnings call, I shared that 2024 would be focused on two major goals for Rent the Runway. One, getting to free cash flow breakeven for full year 2024; and two, reigniting the growth flywheel of the business. I’m proud to report that we believe we are well on our way on both fronts. And as a result, we are reiterating our guidance for the year. Q1 2024 was a strong quarter for Rent the Runway. We hit the top end of our guidance on revenue coming in at $75 million for the quarter, and we beat on adjusted EBITDA coming in at $6.5 million or 8.7%. This was our eighth consecutive quarter of positive EBITDA. Most exciting, we reduced free cash flow burn to $1.4 million, a record low.

Our Q1 free cash flow of negative $1.4 million is an $11 million reduction in cash burn versus Q1 2023 and a $27 million reduction in cash burn versus Q1 2022. We’ve come a long way over a short time frame. One way that I look at our evolution from a heavily cash consumptive model to a business that is on the cusp of free cash flow breakeven, is through the lens of operational rigor. We set a goal to be free cash flow breakeven for full year 2024, and we’ve been relentless in inspecting every aspect of our P&L and working to find operational efficiencies and opportunities for margin expansion. But the other way I’d love for you to think about our profitability journey is by digging into the strength of our core business model, brand and position in the fashion industry.

We believe our business model’s competitive advantages have been a big part of getting us closer to breakeven and will enable us to reach our ultimate goal of being a highly cash-generative business in the future. There are two strong examples of the competitive advantages we’ve built over the last several years that we believe have set us up for continued profitability. First, we’ve transformed our inventory model to a more capital-light one, where we acquire nearly half of our inventory at zero or minimal upfront cost and revenue share with our brand partners only when the inventory performs. This eliminates fashion risk from nearly half of our assortment. How have we been able to accomplish this? Rent the Runway provides our brands with a platform to get in front of our young, educated and upwardly mobile customer base.

As customers use Rent the Runway for important everyday and special moments in their life, they try new brands and develop authentic brand love. We encourage brands to think about Rent the Runway, as a cheaper CAC alternative to their paid marketing dollars. One unit of inventory on the Rent the Runway platform can be worn by dozens of women and seen across thousands when our customers post on social media. Our brand partners have shared that many of their full-price customers came to them via having a Rent the Runway experience first. We believe that another important example of the strength of our business model translating into our financial performance is the frequency and loyalty of our customer base. We generate significant revenue and profit per customer because many of our customers use our service frequently.

They view Rent the Runway as a solution to their everyday fashion needs, be it work or a special event. This isn’t by accident. It’s because we’ve invested over many years in excellent operations and customer service that strives to put the customer first and a product experience where we’ve innovated around fit and discovery to earn our customers’ trust. E-commerce of any kind isn’t without significant customer risk as evidenced by the high rates of returns that most apparel retailers suffer from. For most customers, buy and clothing online only works some of the time. But we believe that our loyalty rates and high LTV-to-CAC demonstrate customer trust and show that our business model of providing the dress in two sizes for special events or five items at a time via our subscription works for them.

We’re proud of the trust we’ve built and believe it will continue to support our growth for years to come. Q1 ending active subscribers were 145,837, a record high quarterly ending active subscriber count for Rent the Runway and a 16% increase in ending active subscribers versus Q4 2024. Subscriber growth was fueled by strong rejoiner and retention rates. Our Q1 ’24 loyalty rate was at the highest levels in over 2.5 years, and we maintained strong subscription and total Net Promoter Scores. It makes sense that due to the year-over-year improvements we’ve driven in inventory depth and in-stock rates that our current and former customer base would be the first to notice as these women are still engaged. They’re receiving our marketing communications and are attuned with what’s new with the brand.

We’re confident that the improved experiences that we are delivering to our customers is the first step in reinvigorating our new customer growth. Now let us get into what we’ve been up to since the start of the year. First on marketing. I founded this business with a mission to empower women to feel self-confident every day because I believe that confident women can change the world. Fashion is armor and enabling everyone to access it, express themselves freely through it and have fun with it is game changing. Why? Because designer fashion, i.e. expensive fashion, which is the space Rent the Runway operates in has always been about exclusion and has had the effect of making many women around the world feel like they were never rich enough, fit enough or cool enough to wear it.

The Rent the Runway brand has always stood for inclusion and had a rebellious spirit and the old rules do not apply. The crisis of COVID presented immense business challenges and reduced our ability to put our mission and brand at the center of everything we do. I am so proud that we’re moving forward with a full funnel strategy of building emotional relationships with our customers and prospects so that they not only consider us and love our service, but that they advocate on our behalf. Customers only advocate on behalf of businesses they love and businesses that have values that align with their own. We see a significant untapped audience that is either aware of Rent the Runway and has not tried us or is not aware, and we believe that we have the ability to convince.

We started with the team. I announced last quarter that we had hired a new CMO, who started in early March, and she has very quickly reorganized our team into different pods focused on acquisition, retention, creative and go-to-market and recruited new talent with both deep marketing experience and customer obsession into the company. We’ve moved very quickly. On acquisition, we expanded channels, adjusted some of our keyword tactics and overhauled our creative across all of our bottom and mid-funnel marketing channels. As a result traffic in April was up more than 40% to March and has reached the highest level in years. On retention, we have dedicated a team to segmenting our over 3 million life-time customers and developing unique multichannel life cycle strategies against each segment.

This means that though we have one single threaded view of the customer and strategy for her internally, we are using a multiplicity of channels, including customer service, stylists, text, chat, push, e-mail, phone and in real life events to communicate with her. The goal of life cycle is to drive more revenue from every customer cohort. Our lifecycle team works closely with our tech team to develop strategies that we automate throughout the customer journey and build into the digital product itself. Our early strategies are already seeing success. In April, our pause reactivation rate was 35% higher than our pause reactivation rate over the past 12 months. We are expanding our pause reactivation efforts to include churn win back and recent automations we’ve implemented have seen high rates of customer engagement.

Expect some significant innovations, especially in the back half of the year as it relates to lifecycle marketing. The easiest way to see what’s going on in creative is to go to our app or site. Our Make it a Moment summer campaign launched yesterday, and you’ll see the site loaded up with new photography, coffee and merchandise curations that we believe look significantly more aspirational, bold and alluring than our historical creative. Given the premium nature of the brands we work with and our brand ethos of living an unlimited life, our creative needs to live up to this and do the work of generating demand for the fashion we carry. We believe that the more aspirational or content and creative, the more will convert new customers to rental.

More than the content living on our own services, our summer campaign is social first and taps into creator led content across social platforms with almost 100 fashion influencers across Instagram, TikTok and Meta. Our influencer takeover is targeted to specific geos and sociographics over a concentrated period of time, so that we could have more of a swarm effect for a more focused group of prospects, showing these women that our unlimited closet can help her get dressed for every day and every occasion. For brand, thus far our focus has been on reigniting our in-real-life presence. We believe that in-real-life experiences, stores and pop-ups must be a big part of our brand moving forward to grow. I do not believe that a brand in the fashion space can grow on digital alone.

In April, we invited the New York City Rent the Runway community back to our flagship store to see our spring fashion, get styling advice and interact with the brand again. I was absolutely floored by the line down the block to get in and by the dozens of customers who approached me personally, sharing how meaningful the Rent the Runway retail experience had been in their lives pre-COVID and how much community they felt coming into the store to get dressed before work or to pick out outfits for a night-out at the end of the day. The event also provided an uplift in organic traffic to our site and drove over 22 million impressions across social media, PR and in-real-life. Interestingly, nearly 80% of those that visited the store were new to subscription at Rent the Runway.

This past weekend, we held the second in real-life event in Atlanta, which is one of our fastest-growing and highest potential markets with TikTok, Phenom, Pookie and Jett. We had over 1,000 women attend and the energy was palpable. We’re planning more in-real-life events throughout 2024 geared towards fueling the natural customer virality of the business that we thrived on pre-pandemic. Due to the success of the New York and Atlanta events, we plan to officially reopen our flagship New York City store this month. In our soft opening this summer, we will enable women to try on looks in advance to get comfort on fit and styling. We plan to do a major relaunch of the store in the fall with new technology that will enable same-day rental like we used to do.

Pre-COVID, we had five retail stores and these stores were a significant growth engine and brand building for the markets they were in. We have significant ground to make up, and we plan to execute quickly. For an existing subscriber, the changes she’s experienced over the past few months are significant. We’re bringing our fashion-first brand back to the center of what we do. Imagery and styling has been brought to life with fresh editorial content, custom curations, use case hubs and boutiques. We’ve upgraded our grids and PDPs to be much faster and to provide more filtering and discovery options. In the months to come, our customer can expect to continue to see this creative overhaul come to life across all of our channels. For new customers, we are in the midst of reimagining our prospect flow to provide a clear path from traffic to conversion.

The new flow is meant to create interest first in the fashion we carry on our platform, then get the customer excited about rental overall, and then we follow with guiding her to a new checkout experience that reduces friction and streamlines per checkout. Since its phased rollout that began in April, we’ve seen subscription checkout completion rate already increase by over 20%. I also want to provide an inventory update, which is important to fully understand our growth strategies. We continue to believe that the fashion we have on our platform is the linchpin to our ability to be successful. Our plan for full year ’24 was to increase our average in-stock rates versus 2023 and increase the number of units available to rent per subscriber. Thus far, we have seen success.

Inventory in-stock rates in Q1 ’24 are 24% higher than Q1 ’23, and inventory churn is down 20% versus the same quarter last year. With such a solid inventory foundation in 2024, our team is now focusing on additional improvements to the inventory experience. For example, we are investing in more reserve exclusive inventory with the aim of multiplying the size of our special event rental business, by doing a more comprehensive job targeting customer segments where we can gain more share, such as Gen Z, the young professional and the mother of the bride segment. We continue to focus on psychological comfort around fit as being a growth accelerant. In Q1, we significantly increased the number of customer reviews per style through product improvements and user flow, increasing reviews per unit rented by over 8 times compared to prior years.

We believe that reviews are crucial towards increasing way rate and rental satisfaction. Beyond changing our inventory position, the other major thing that we had control over related to how our customers experience our selection is merchandising. We have a vast array of styles on site, and we know that even long-term subscribers only see a fraction of them because of traditional e-commerce browsing behavior. Our merchandising strategy involves better content inspiration, which I spoke to before and ensuring that our customer is constantly experiencing greater diversity in our assortment, so that it feels fresher to her. We plan to come back with progress against merchandising in future earnings calls. Finally in Q1, we continued to grow our inventory resale business.

Inventory resale drove a 20% increase in other revenue year-over-year. This strategy is customer first, as subscribers view try-before-you-buy as a key value proposition to the subscription program. We plan to continue to utilize inventory resale as a way to generate strong margins, cash flow and get back cash quicker to reinvest in fresh new inventory for our customers. I’m excited by the strong momentum we have coming out of Q1. We spent the last year enhancing our inventory experience and rebuilding our cost structure to drive profitability. Our Q1 results display the remarkable strides we’ve made. I’m energized and excited about the year to come. And with that, I’ll turn it over to Sid.

Siddharth Thacker : Thanks, Jen, and thank you, everyone, for joining us. I’ll begin by underscoring the key message from this quarter. Our business improved in nearly every dimension. Active subscriber growth after being negative for the past two quarters on a year-over-year basis grew versus Q1 2023. We added almost 20,000 subscribers quarter-over-quarter. Our reserve business has shown improved year-over-year trends this quarter relative to the past three quarters. Resales continued to be strong in Q1. Total revenue grew again on a year-over-year basis after declines in Q2 and Q3 of 2023 and 0.5% growth in Q4 2023. As I will discuss shortly, our Q2 guidance implies a further improvement in growth trends next quarter at the midpoint of the guidance range.

We made noticeable progress on profitability. Adjusted EBITDA margins for Q1 2024 were at their highest levels versus Q1 in prior periods. As outlined in our Q2 adjusted EBITDA margin guidance, we expect our highest second quarter adjusted EBITDA margin in the company’s history. Free cash flow also improved this quarter. Free cash flow was just negative $1.4 million in Q1 2024 versus negative $12.1 million in the same period last year. Today, we are reiterating our guidance to be free cash flow breakeven for fiscal year 2024 versus free cash flow consumption of approximately $70 million in fiscal year 2023. Please refer to the detailed bridge we shared with you during last quarter’s earnings call and included in today’s slides for more detail on the path to free cash flow breakeven.

Rental Product purchases continue becoming more capital efficient with almost 50% of new Rental Product units in fiscal year 2024 sourced through a share by RTR platform, requiring no or low upfront cost. Indeed combined with our exclusive design platform, we expect that more than 70% of total new units will be sourced through cost advantage channels in fiscal year 2024. We made progress in our nascent advertising initiatives this quarter. First, we signed several exciting sampling partnerships that will introduce brands to our affluent and highly coveted customer base. We also explored new ways to work with advertising partners, including co-marketing using a network of influencers. We have a powerful brand and engage customers. We believe there is more we can do to build a meaningful advertising business.

In summary, Q1 demonstrates the positive progress and momentum across our business. As Jen outlined in her remarks, there are a number of important marketing, product and customer experience improvement initiatives that we expect will continue to drive progress this year. Let me now review our financial results for the quarter. We ended Q1 ’24 with 145,837 ending active subscribers, up 0.4% year-over-year. Average active subscribers during the quarter were 135,896 versus 135,966 subscribers in the prior year, a decrease of 0.1%. Ending active subscribers increased from 125,954 subscribers at the end of Q4 2023 primarily due to seasonally stronger acquisitions combined with solid and better than expected customer retention. Total revenue for the quarter was $75 million, up $0.8 million or 1.1% year-over-year and down $0.8 million or 1.1% quarter-over-quarter.

Subscription and reserve rental revenue decreased $0.7 million or 1% year-over-year in Q1 ’24, due primarily to a decline in the reserve business. Other revenue increased $1.5 million or 20.3% year-over-year due to increased focus on our retail business, which drove incremental cash flow and customer loyalty. Fulfillment costs were $20.6 million in Q1 ’24 versus $21.9 million in Q1 ’23 and $20.1 million in Q4 ’23. Fulfillment costs as a percentage of revenue were lower year-over-year at 27.5% of revenue in Q1 ’24 compared to 29.5% of revenue in Q1 ’23. Fulfillment costs benefited from a new transportation contract with UPS and continued warehouse efficiencies. Gross margins were 37.9% in Q1 ’24 versus 42.3% in Q1 ’23. Q1 ’24 gross margins reflect higher Rental Product costs due to increased investment in Rental Product in fiscal year ’23 and higher sales through our resale channel.

Increased investment in Rental Product reflects last year’s debt adjustment to increase inventory in stock rates in fiscal ’23 and beyond. These increases were partially offset by the fulfillment benefit discussed earlier. Q1 ’24 gross margin decreased quarter-over-quarter to 37.9% from 39.4% in Q4 ’23, primarily due to higher upfront revenue share payments and seasonally higher promotional spending. Operating expenses were about 15.3% lower year-over-year due to lower stock-based compensation expenses and the favorable impact of our cost reduction efforts. As a reminder, in January of 2024, we announced a restructuring plan that is expected to reduce our workforce by approximately 10% by the end of Q2 ’24. Total operating expenses, which include technology, marketing and G&A were 55.2% of revenue in Q1 ’24 versus 65.9% of revenue in Q1 ’23 and 55.9% in Q4 ’23.

Adjusted EBITDA for the quarter was $6.5 million or 8.7% of revenue versus $4.5 million and 6.1% of revenue in the prior year. Adjusted EBITDA year-over-year reflects lower fulfillment costs and the impact of our fixed cost reduction efforts, partially offset by higher revenue share payments due to a greater proportion of revenue share units. Free cash flow for Q1 ’24 was negative $1.4 million versus negative $12.1 million in the first quarter of fiscal year 2023, primarily due to higher profitability, improved working capital and lower Rental Product expenditure. I will now discuss guidance for Q2 ’24 and fiscal year 2024. Let me start with Q2. We expect revenue to be between $76 million and $78 million and adjusted EBITDA margin to be between 14% and 15% of revenue.

Our full year 2024 guidance remains unchanged. We continue to expect revenue growth of between 1% and 6% versus fiscal year 2023. We also continue to expect adjusted EBITDA margins of between 15% and 16% of revenue. Our guidance for Rental Product acquired remains unchanged at $48 million to $50 million. Finally, we expect to be free cash flow breakeven for fiscal year 2024. As outlined last quarter, there is some seasonality in our Rental Product purchases this year with a greater proportion of Rental Product acquired in the first half of the year versus the second half. This is expected, of course, to have an impact on the timing of free cash flow generation over the year. We will now take your questions.

Operator: Thank you. [Operator Instructions] Our first question is from Andrew Boone with JMP Securities. Please proceed.

Andrew Boone: Thanks so much for taking my question. Jen, I wanted to ask about marketing. It sounds like you guys have a lot of hirings and the [fire] (ph) there. Can you speak to the opportunity with untapped audiences and increasing awareness just across the entirety of the population as well as kind of resurrecting users? And then Sid, you guys had a bunch of qualitatively positive things, as it relates to subscribers for 1Q, 2Q seasonally is typically a step down. Is there any way that we should be thinking about ending active subs for 2Q as it relates to the guide and just the cadence of that for the rest of the year. Thanks so much.

Jennifer Hyman: Thanks Andrew. So first, on marketing. There’s a huge opportunity to increase, first of all general awareness for Rent the Runway. Our offering that we both do special event rental as well as subscription and to go broad in terms of the customer demographics that we are going after because the over 800 brands that we carry have wide appeal. And given the price point, especially for special event rental, where we’re renting at between — around 10% of the retail price, it’s a price point that is accessible to the mass market. So you heard that there are multiple engines that we are building out within marketing. Number one, there is the reignition of our brand and ensuring that our brand is building emotional connections with women is actually doing things in real life, showing up events, stores, building back our ambassador network, all of the things that actually used to drive that organic virality of our business were fueled by actually our brand efforts and by the customer experience that we were delivering.

So making a major investment into shifting our dollars away from bottom of funnel more towards mid-funnel and top of funnel of which brand is an important component is key there. Creative is critical. We now know that whether it’s on a paid channel or whether it’s how creative shows up on your app or on your site, that is what is Number One, increasing the efficacy of our ad spend. It’s Number Two, actually putting a stake in the ground as to what our brand stands for and kind of the psychographic that we are going after. So you’ve seen really what I would call a creative kind of revolution in terms of how we are actually showcasing our inventory to our customers and giving them more inspiration and ideas for how they can actually put together Alpha style themselves, et cetera, and really to just cement our position as the premium player in the space.

Now even we are making strides on the things that we were doing before, like the paid marketing, by nature of changing some of our tactics and strategies on bottom and mid-funnel, we’ve been able to increase traffic like we were saying by 40% month-over-month. So we’re bringing more new customers to the site. We’re engaging them across the entire funnel, and you will see a whole host of new partnerships, new in-real-life experiences, new brand networks, new channels and of course a tremendous investment into lifecycle marketing. So that we are really building very strong relationships with every customer cohort and ensuring that we are driving as much revenue from each customer as possible. So very, very excited by the progress in marketing.

And of course, this is the beginning. But I think we’ll see a lot of things change in the second half of the year in a positive direction.

Siddharth Thacker: Great. And on the second part of your question, Andrew, I’d say three things. The first is we are obviously not guiding specifically to subscriber growth on a quarterly basis. But I will say that the most important takeaway from the guidance that we have issued is that we are confident about the business. We are expecting an improvement in year-over-year growth in Q2 relative to Q1 at the midpoint of the guidance range. And of course, you are right, our business is seasonal. We do expect higher acquisitions in Q1 and Q3, but the important takeaway here is we feel very good about the way the business is trending.

Operator: Our next question is from Ashley Helgans with Jefferies. Please proceed.

Blake Anderson: Hi, it’s Blake on for Ashley. Thanks for taking our questions. So I wanted to follow up on the cadence question of the top-line and subscribers. It sounds like you’ve made a lot of progress on initiatives. Can you talk at all about just the monthly trends you’re seeing perhaps? Or maybe just what gives you confidence those could potentially continue to build to give you maybe at that high end of the revenue guide for the year?

Siddharth Thacker: Yes, we are not going to comment on any particular monthly trends, but I think what you can surmise from the guidance that we’ve issued. I mean, I pointed out earlier that the strength we see in our business isn’t just limited to any one particular area, right? I mean if you think about the reserve business, we’ve called out that we are seeing improved trends in the reserve business year-over-year relative to the past few quarters. We’re obviously seeing very good rejoiner activity. We are seeing very strong retention, and that is providing a lot of confidence in the guidance that we issued. And finally, we are continuing to see subscribers engage with us in a very positive way on the resale business. So all of the key input metrics in the business that we believe contribute to that acceleration in year-over-year growth that we’ve guided to in Q2 make us confident that we are on the right track.

Jennifer Hyman: I mean one of the things that we shared on this call is that we saw significant improvements in our loyalty rates and our rejoiner rates in Q1. And we mentioned that typically, when you change an experience, and this is true for all businesses like ours where there is frequency of behavior. The first people to notice that you’ve improved the experience are your current and former customers. And they are going to give you a glaring signal one way or the other as to whether they like the changes that you’ve made. And the fact that both our current customers who are active, who are paying us as well as former customers who weren’t formally paying us but now are coming back, have really showed us that they think that the inventory experience has improved.

Our inventory churn is down significantly. They’re having those great customer experience as evidenced by very high kind of Net Promoter Scores and Net Promoter Scores that are higher than in many years past, That to us coupled with all of the work that we are doing in marketing to actually drive new customers, really gives us a lot of confidence because I think that we have a signal from our former and current customers that the experience is much improved. So now it feels great to go out to new customers and bring them into this experience. The other really — more qualitative piece, but I think that matters is when we have an event of which we’ve had two over the past six weeks, thousands of people show up. And those thousands of people aren’t just current customers.

80% of the people that showed up in New York were not current customers. They are just people that love the brand that are interested in the brand that want to engage. There is so much latent brand love for Rent the Runway, and we have opportunity to harness it in an entirely new way, which is why we just shared that we’re reopening our flagship store. We are going to make retail a big priority over the next few years. And that’s really not just about the sales that we are going to drive out of these stores. It’s about reigniting the in real-life experience of interacting with our brand, and the virality that, that creates in the markets where we show up.

Blake Anderson: And a follow-up on that would be, how do you think about the importance of word of mouth referrals right now because I know you’re doing a lot of work on digital marketing and for media. But can you talk about the balance of those two sources of growth for acquisition going forward?

Jennifer Hyman: The majority of our growth over the past 15 years has been through word of mouth. It’s been through women sharing this experience authentically with their friends, with their colleagues and them wearing something that they are obsessed with to a party, to work, having conversations with other women and kind of sharing this amazing Rent the Runway like secret that they have. And it used to be a secret. And now it is something that they share openly and broadly, and it goes up on social media as well. So this has been the Number One driver of our business’ growth over time. I believe that it’s the most important driver of every business’ growth because the more customers have an authentic brand connection with you and actually want to advocate on your behalf, like the stronger and healthier your business will be and the more you can invest in customer experience as opposed to just investing in bottom of funnel paid marketing.

So we are very proactively moving our marketing dollars away from bottom of funnel marketing, up the funnel towards mid and top of funnel because we think that, that’s also a healthier way to build relationships with customers and market the brand.

Siddharth Thacker: And I would say that if you followed us over the last year, 1.5 years, you’ll see that a lot of this company’s energy has been focused on making sure that our existing customers and new customers who join have a really terrific experience because that really does fuel the referral behavior and all of the positive word of mouth that you’re referring to. We spend a significant amount of money last year on inventory. We improved debt significantly. We exposed customers to a significantly improved inventory experience. And way beyond inventory, it went into providing styling services. It went into providing a better product experience, more aspirational imagery content and all the things that Jen mentioned. So I think what we’re seeing now is the rewards of all of that investment in the loyalty and improved loyalty and rejoiner rates that we have mentioned.

So we do expect that focus to continue and manifest itself in referrals and positive customer behavior.

Blake Anderson: That’s super helpful. If we could just ask one more Jen, I was curious your thoughts on if we were to just take a step back on fashion trends, anything you could comment on that you are seeing there, what your customers are asking for? And then just casual, I know you’ve talked about that assortment changing a little bit since or during the pandemic, and I think your assortment there had kind of increased. But can you update us where you are on casual use cases as well or what you define as casual?

Jennifer Hyman: Yes. So our use cases have not changed much since 2023, let’s say when life really returned to normal in the sense that roughly about 50% of the use cases are for casual everyday occasions, around a quarter are for what I would call events in the evening where you want to get a little bit more dressed up, that could be a party, it could be a wedding. It could be a gala, and about 25% is for work. So we think that, that’s a really healthy balance in the business. We have assorted ourselves to those use cases. I think that we’ve seen in terms of fashion trends, I would say the most unique thing about our model that I pointed out and I will point out many times again, that nearly half of our inventory, we procure at zero or very little upfront cost, and we revenue share only based on performance.

So if the items don’t rent, we don’t pay for them. That means that for nearly half of our assortment, we have zero fashion risk. So fashion risk is the Number One risky sting, killer of various apparel companies and brands over time. If you miss the trend, you suffer in terms of your financial performance. The fact that nearly half of our inventory, we do not suffer from that same risk, I think dramatically distinguishes our business model and our competitive advantages. So that business model because the other attribute of it is, it is a win-win for us and our brand partners, the more something rents, the more money we make and the more money our brand partners make. Therefore, when things are successful, they’re more likely to give us replenishment units on those units.

They’re more likely to come to us for reorders and to make sure that the very best inventory is on our platform. So we’ve created a business model that mutually incentivizes us to be aligned with our brand partners, which is very different than many others in the space. And I think, that this eliminates fashion risk and allows us to respond very quickly to what’s going on in the market.

Blake Anderson: Makes a lot of sense. Thank you so much. And best of luck for the rest of the year.

Jennifer Hyman : Thank you.

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

Jennifer Hyman: Thanks so much for joining us today. We’re really excited about our performance in Q1. This is going to be a milestone year for Rent the Runway and stay tuned.

Operator: Thank you. This will conclude today’s conference. You may disconnect your lines at this time, and thank you for your participation.