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What changed in Rent the Runway, Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Rent the Runway, Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+649 added−632 removedSource: 10-K (2024-04-11) vs 10-K (2023-04-13)

Top changes in Rent the Runway, Inc.'s 2024 10-K

649 paragraphs added · 632 removed · 488 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeEnsure our workforce remains diverse and for leadership to reflect the population of individual contributors. Maintain on average 40% representation of racial and ethnic minorities for the U.S. corporate workforce through fiscal year end 2026. 10 Our representation of U.S. corporate employees identifying as a racial and ethnic minority was 44% as of January 31, 2023.
Biggest changeEnsure our workforce remains diverse and for leadership to reflect the population of individual contributors. • Maintain on average 40% representation of racial and ethnic minorities for the U.S. corporate workforce through fiscal year end 2026. • Maintain on average 50% representation of individuals identifying as women and non-binary in the U.S. workforce through fiscal year end 2026. • Double representation of LatinX leadership in the new hire classes at our Secaucus warehouse by fiscal year end 2026. • Double representation of Black and LatinX leadership in new hire classes at our Dallas warehouse by fiscal year end 2026. 12 Table of Contents Priority 2.
These include pieces of the customer experience, customer service tools and enterprise resource planning capabilities. Logistics Infrastructure Within our warehouses, we have integrated best-in-class garment care equipment, internally and externally developed software and proprietary cleaning programs to deliver high-end garment processing at massive scale.
These include pieces of the customer experience and service tools and enterprise resource planning capabilities. Logistics Infrastructure Within our warehouses, we have integrated best-in-class garment care equipment, internally and externally developed software and proprietary cleaning programs to deliver high-end garment processing at massive scale.
We leverage this data as a feature in our recommender systems, to cluster styles to inform product acquisition and provide product attributes in our product catalog amongst other uses. Our Technology and Logistics Advantage We have built a cohesive platform that pairs proprietary and third-party software with differentiated infrastructure and hardware all tailored to the sharing economy of physical goods.
We leverage this data as a feature in our recommender systems, to cluster styles to inform product acquisition and provide product attributes in our product catalog amongst other uses. Our Technology and Logistics Platform We have built a cohesive platform that pairs proprietary and third-party software with differentiated infrastructure and hardware all tailored to the sharing economy of physical goods.
Rental Reverse Logistics We designed our patented technology to support the processes in our fulfillment centers and ensure that we can process orders efficiently and extend the useful life of our products. • Garment Science: ◦ Cleaning Intelligence: We have over a decade of data and expertise in optimizing the life of a garment by leveraging different cleaning and care methods. ◦ Cleaning Automation: Automation supports dynamic sorting of items into as many as 23 different cleaning programs. ◦ Garment Care and Restoration: All units undergo one or more quality audits before being available to rent for the next customer. • Intelligent Fulfillment Network : Our unified booking engine, the “brain” of our distribution capabilities, dynamically manages decisions such as which fulfillment center to ship a unit from or which transportation type to select to reduce cost.
Rental Reverse Logistics We designed our technology and reverse logistics operations to support the processes in our fulfillment centers and ensure that we can process orders efficiently and extend the useful life of our products. • Garment Science: ◦ Cleaning Intelligence: We have over a decade of data and expertise in optimizing the life of a garment by leveraging different cleaning and care methods. ◦ Cleaning Automation: Automation supports dynamic sorting of items into as many as 23 different cleaning programs. ◦ Garment Care and Restoration: All units undergo one or more quality audits before being available to rent for the next customer. • Intelligent Fulfillment Network : Our unified booking engine, the “brain” of our distribution capabilities, dynamically manages decisions such as which fulfillment center to ship a unit from or which transportation type to select to reduce cost.
Item 1. Business Overview Our mission is to power women to feel their best every day. Since our f ounding in November 2009, we have built the world’s first and largest shared designer closet with tens of thousands of styles by hundreds of brand partners.
Item 1. Business Overview Our mission is to power women to feel their best every day. Since our f ounding in November 2009, we have built the world’s first and largest shared designer closet with thousands of styles by hundreds of brand partners.
Our differentiated business model enables us to collect substantially more data than others in our space and we use this data to continuously improve the customer experience. Customers learn that providing data enhances their experience on the platform over time, which enables us to collect even more data from them.
We believe that our differentiated business model enables us to collect substantially more data than others in our space and we use this data to continuously improve the customer experience. Customers learn that providing data enhances their experience on the platform over time, which enables us to collect even more data from them.
If a piece is in greater demand, it will drive higher revenue, which could result in brands earning more on the item than if it had been sold through Wholesale, generally subject to a maximum cap. Share by RTR aligns incentives between brands and RTR and alleviates product risk as it is largely a pay-for-performance model.
If a piece is in greater demand, it will drive higher revenue, which could result in brands earning more on the item over time than if it had been sold through Wholesale, generally subject to a maximum cap. Share by RTR aligns incentives between brands and RTR and alleviates product risk as it is largely a pay-for-performance model.
We leverage these personalization scores across the business to: rank products on our subscriber personalized storefront and in search results, recommend a specific size within a style on product pages, compute general product relevance at the subscriber level and inform product acquisition, inform sizing of new apparel designs with our brand partners and more. • Retention Predictive Model: We leverage a retention predictive model to understand the relative importance of various drivers of loyalty and long-term value, at the single customer level to understand which interventions have the highest probability of improving customer retention.
We leverage these personalization scores across the business to: rank products on our subscriber personalized storefront and in search results, recommend a specific size within a style on product pages, compute general product relevance at the subscriber level and inform product acquisition, inform sizing of new apparel designs with our brand partners and more. 9 Table of Contents • Retention Predictive Model: We leverage a retention predictive model to understand the relative importance of various drivers of loyalty and long-term value, at the single customer level to understand which interventions have the highest probability of improving customer retention.
According to our June 2021 Rent the Runway Brand Survey, approximately 91% of our brand partners work with us because we introduce them to new, desirable customers and deepen awareness of their brands. Over the last 13 years, we have fostered strong relationships with our brand partners and have experienced extremely limited voluntary attrition.
According to our June 2021 Rent the Runway Brand Survey, approximately 91% of our brand partners work with us because we introduce them to new, desirable customers and deepen awareness of their brands. Over the last 14 years, we have fostered strong relationships with our brand partners and have experienced extremely limited voluntary attrition.
Our expertise in vertically integrated just-in-time reverse logistics and garment science allows us to achieve multi-year monetization on our garments. We have also built a custom front-end platform that supports all of our consumer-facing offerings.
Our expertise in vertically integrated just-in-time reverse logistics and garment science allows us to achieve multi-year monetization on our garments. We have also built a custom front-end platform that supports all of our consumer-facing offerings on our website and app.
Because we source directly from brands, we can control our assortment and acquire styles in the volumes and sizes we want, we have access to current season items and all of our items are guaranteed authentic without the cost or infrastructure of traditional authentication platforms.
Because we source directly from brands, we also can better control our assortment and acquire styles in the volumes and sizes we want, we have access to current season items and all of our items are guaranteed authentic without the cost or infrastructure of traditional authentication platforms.
The laws and regulations govern many issues related to our business practices, including those regarding consumer protection, worker classification, wage and hour, sick pay and leaves of absence, anti-discrimination and harassment, whistleblower protections, background checks, privacy, data security, intellectual property, health and safety, environmental, competition, fees and payments, pricing, product liability and disclosures, property damage, communications, employee benefits, taxation, unionization and collective bargaining, contracts, arbitration agreements, class action waivers, terms of service, and accessibility of our mobile app or website. 16 Table of Contents These laws and regulations are constantly evolving and may be interpreted, applied, created, superseded, or amended in a manner that could harm our business.
The laws and regulations govern many issues related to our business practices, including those regarding consumer protection, worker classification, wage and hour, sick pay and leaves of absence, anti-discrimination and harassment, whistleblower protections, background checks, privacy, cybersecurity, intellectual property, health and safety, environmental, competition, fees and payments, pricing, product liability and disclosures, property damage, communications, employee benefits, taxation, unionization and collective bargaining, contracts, arbitration agreements, class action waivers, terms of service, and accessibility of our mobile app or website. 13 Table of Contents These laws and regulations are constantly evolving and may be interpreted, applied, created, superseded, or amended in a manner that could harm our business.
With tens of thousands of styles across hundreds of brands in our Closet in the Cloud, Rent the Runway gives customers the ability to always wear something new to them and inspires customers to expand their fashion tastes without risk of buyer’s remorse. • Value.
With thousands of styles across hundreds of brands in our Closet in the Cloud, Rent the Runway gives customers the ability to always wear something new to them and inspires customers to expand their fashion tastes without risk of buyer’s remorse.
We also identify and tag approximately 70 detailed attributes per style. By mapping our interactions with our products’ inherent attributes, we create a strong feedback loop which allows us to optimize the supply of products in ways we believe that would be difficult for traditional retailers to achieve or replicate. This is one of our biggest competitive advantages.
We also identify and tag approximately 75 detailed attributes per style. By mapping our interactions with our products’ inherent attributes, we create a feedback loop which allows us to optimize the supply of products in ways we believe that would be difficult for traditional retailers to achieve or replicate. This is one of our biggest competitive advantages.
Our Share by RTR arrangements with brands target deliverin g 75% to 100% of comparable Wholesale cost to the brand in the first year; however there is no minimum commitment other than the upfront payment if applicable. Nearly all Share by RTR deals consummated after September 2020 include a cap on total potential payments to the brand partner.
Our Share by RTR arrangements with brands target deliverin g 75% to 100% of comparable Wholesale cost to the brand in the first year; however there is no minimum commitment other than the upfront payment if applicabl e. Nearly all Share by RTR deals consummated after September 2020 include a cap on total potential payments to the brand partner.
As our community has grown, Rent the Runway has also benefited from powerful virality and word-of-mouth marketing. 80% of subscribers have shared RTR with at least five people; 43% have shared with over 10 people and 75% of our customers posted themselves wearing Rent the Runway on social media, as indicated by our March 2023 Subscriber Survey. • Sustainability.
As our community has grown, Rent the Runway has also benefited from powerful virality and word-of-mouth marketing. 80% of subscribers have shared RTR with at least five people; 43% have shared with over 10 people and 75% of our customers posted themselves wearing Rent the Runway on social media, as indicated by our March 2023 Subscriber Survey. 6 Table of Contents • Sustainability.
Subscribers can customize their plans to adapt to their changing lifestyles, needs and budgets by adding or removing spots for $27 or $31 per item per month and shipments for $39 - $50 per shipment per month, as they see fit. Choose Items. After picking a plan, subscribers browse our broad assortment of items to build their first shipment.
Subscribers can customize their plans to adapt to their changing lifestyles, needs and budgets by adding spots for $27 or $31 per item per month and shipments for $39 - $50 per shipment per month, as they see fit. Choose Items. After picking a plan, subscribers browse our broad assortment of items to build their first shipment. Wear, Repeat .
For additional information regarding reclassification of our stockholder equity in connection with our IPO, see Note 2 - Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included in Part II, Item 8. Our Class A common stock trades on The Nasdaq Global Select Market (“Nasdaq”) under the symbol RENT.
For additional information regarding reclassification of our stockholder equity in connection with our IPO, see Note 2 - Summary of Significant Accounting Policies in the Notes to the Consolidated Financial Statements included in Part II, Item 8. Our Class A common stock trades on The Nasdaq Capital Market (“Nasdaq”) under the symbol RENT.
Random storage allows for efficient putaway of garments and dynamically created pick paths that save labor cost. • RFID: We tag each unit and all reusable garment bags with RFID tags, which increases throughput, reduces cost, improves rental product control and enables new forms of automation.
Random storage allows for efficient putaway of garments and dynamically created pick paths that save labor cost. 10 Table of Contents • RFID: We tag each unit and all reusable garment bags with RFID tags, which increases throughput, reduces cost, improves rental product control and enables new forms of automation.
We leverage this data to create benefits for our customers, our brand partners and our business. We capture thousands of unique data points per subscriber per year and over 20 unique data points per item each time it is rented across four channels including website data, post-wear data, operations data and customer data.
We leverage this data to create benefits for our customers, our brand partners and our business. 8 Table of Contents We capture thousands of unique data points per subscriber per year and over 20 unique data points per item each time it is rented across four channels including website data, post-wear data, operations data and customer data.
Product longevity data often help our brands increase the life of their garments, which can support their sustainability goals. • Understanding Customer Demand: As our customers wear (or don’t wear) and review items, we can assess demand due to our robust attribution of products (approximately 70 attributes) paired with customer interaction data.
Product longevity data often help our brands increase the life of their garments, which can support their sustainability goals. • Understanding Customer Demand: As our customers wear (or don’t wear) and review items, we can assess demand due to our robust attribution of products paired with customer interaction data.
Information on our website does not constitute part of this Annual Report on Form 10-K or any other report we file or furnish with the SEC. 18 Table of Contents
Information on our website does not constitute part of this Annual Report on Form 10-K or any other report we file or furnish with the SEC. 15 Table of Contents
As we learn more about a customer, our personalized features give us greater ability to direct her towards the items that optimize both customer lifetime value and rental product return on investment for us. 8 Table of Contents Our data advantage benefits brand partners in numerous ways: • Understanding the Garment Life Cycle: We help partners grow their business through the data we provide.
As we learn more about a customer, our personalized features give us greater ability to direct her towards the items that optimize both customer lifetime value and rental product return on investment for us. Our data advantage benefits brand partners in numerous ways: • Understanding the Garment Life Cycle: We help partners grow their business through the data we provide.
We have the flexibility to optimize prices for revenue, gross margin and product return on investment based on the business needs. • Lower Cost Product: We leverage our data to create highly desirable Exclusive Designs in collaboration with our brand partners, influencers and celebrities that we manufacture to be more durable at significantly lower cost. • Longer Product Life: Our feedback to brands helps us customize for higher longevity of our products - we understand how to clean and care for garments to maximize multi-year monetization and incremental turns per unit.
We have the flexibility to optimize prices based on the business needs. • Lower Cost Product: We leverage our data to create highly desirable Exclusive Designs in collaboration with our brand partners, influencers and celebrities that we manufacture to be more durable at significantly lower cost. • Longer Product Life: Our feedback to brands helps us customize for higher longevity of our products - we understand how to clean and care for garments to maximize multi-year monetization and incremental turns per unit.
We source our products directly from our brand partners that include many of the most renowned and relevant names in the fashion industry. The transformative nature of our customer value proposition means our customers are typically younger and different from other audiences our brands are exposed to.
We source our products directly from or in partnership with, our brand partners that include many of the most renowned and relevant names in the fashion industry. The transformative nature of our customer value proposition means our customers are typically younger and different from other audiences our brands are exposed to.
Just like our Subscription offering, we clean and care for items when they are returned. 5 Table of Contents Resale In addition to renting, customers also shop pre-loved styles from our closet at a discount to retail price, up to 90% off of designer retail value (which we calculate using original retail and/or comparable value prices).
Just like our Subscription offering, our customers have the option of leaving a review, and we clean and care for items when they are returned. 5 Table of Contents Resale In addition to renting, customers also shop pre-loved styles from our closet at a discount to retail price, up to 90% off of designer retail value (which we calculate using original retail and/or comparable value prices).
Share by RTR represented 27% of our product acquisition in fiscal year 2022. Increases (or decreases) in the proportion of total items acquired via Share by RTR as well as the usage of Share by RTR items will increase (or decrease) variable expenses recorded in the rental product depreciation and revenue share line item on our consolidated statement of operations.
Share by RTR represented 33% of our product acquisition in fiscal year 2023. Increases (or decreases) in the proportion of total items acquired via Share by RTR as well as the usage of Share by RTR items will increase (or decrease) variable expenses recorded in the Rental product depreciation and revenue share line item on our consolidated statement of operations.
Renting on the RTR platform results in net environmental savings across water, energy and carbon emissions when compared to purchasing new garments even when accounting for two-way shipping, cleaning and other operations. 2 See “Our ESG (Environmental, Social, and Governance) Impact Strategy” below for additional detail.
Renting on the RTR platform results in net environmental savings across water, energy and carbon emissions when compared to purchasing new garments even when accounting for two-way shipping, cleaning and other operations. 2 See “Our ESG (Environmental, Social, and Governance) Impact Strategy” below for our Impact Strategy goals.
As we have grown, our commercial relationships with our brand partners have evolved towards more capital efficient forms of rental product acquisition. • Data Advantage. We capture a vast amount of unique, actionable data on our customers and products.
Over time, our commercial relationships with our brand partners have evolved towards more capital efficient forms of rental product acquisition. • Data Advantage. We capture a vast amount of unique, actionable data on our customers and products.
We have observed that the original retail prices set by the brands are often at a 2.5x mark-up to the wholesale price. As we continue to expand our selection and grow the share of our assortment acquired from a designer, we benefit from greater discounts on product acquisition. Wholesale represented 42% of our product acquisition in fiscal year 2022.
We have observed that the original retail prices set by the brands are often at an approximately 2.5x mark-up to the wholesale price. As we continue to expand our selection and grow the share of our assortment acquired from a designer, we benefit from greater discounts on product acquisition. Wholesale represented 39% of our product acquisition in fiscal year 2023.
We deliver significant financial value to customers, with our average subscriber wearing clothes worth more than 20 times what she pays for a monthly RTR Subscription on an annualized basis (more than $40,000 in designer retail value in fiscal year 2022 1 ). Our tremendous selection is enabled by our designer brand partnerships.
We deliver significant financial value to customers, with our average subscriber wearing clothes worth more than 25 times what she pays for a monthly RTR Subscription on an annualized basis (more than $45,000 in designer retail value in fiscal year 2023 1 ). Our tremendous selection is enabled by our designer brand partnerships.
We have also built large-scale, innovative automation and other processes for garment storage, picking, shipping, receiving and restoration of garments to excellent condition.
We have implemented large-scale, innovative automation and other processes for garment storage, picking, shipping, receiving and restoration of garments to excellent condition.
We have built a custom frontend platform that supports Subscription, Reserve and Resale in one cohesive experience for the customer, which allows us to optimize our product offering for the customer based on her needs.
We have built custom frontend platforms that support Subscription, Reserve and Resale in one cohesive experience for the customer, which allows us to optimize our product offering for the customer based on her needs.
As of January 31, 2023, our at-home pickup offering served 34 markets and covered 60% of our subscriber base. Reserve When customers want to rent items a-la-carte for an upcoming event, they book styles for four or eight days through our Reserve offering. After selecting pieces, they typically select a delivery date one to two days before their event.
As of January 31, 2024, our at-home pickup offering covered 86% of our subscriber base. Reserve When customers want to rent items a-la-carte for an upcoming event, they book styles for four or eight days through our Reserve offering. After selecting pieces, they typically select a delivery date one to two days before their event.
These processes result in labor and other cost savings, while increasing our total shipment capacity and increasing the total lifetime of products, our biggest asset. • Strategic Distribution: We have two fulfillment centers, in Arlington, Texas and Secaucus, New Jersey totaling 540,000 square feet.
These processes have resulted in labor and other cost savings, while increasing our total shipment capacity and increasing the longevity of products, our biggest asset. • Strategic Distribution: We have two fulfillment centers, in Arlington, Texas and Secaucus, New Jersey totaling approximately 486,000 square feet.
As of January 31, 2023, our technology team consisted of 182 employees, across engineering, data analytics, IT, product, software quality assurance, user experience and design, including a team of 63 in Galway, Ireland, primarily in engineering and data analytics.
As of January 31, 2024, our technology team consisted of 140 employees, across engineering, data analytics, IT, product, software quality assurance, user experience and design, including a team of 59 in Galway, Ireland, primarily in engineering and data analytics.
The structured data we collect through our “happiness survey” allows us to both improve her experience as well as optimize our garment care and, therefore, our return on investment of the items returned.
The structured data we collect from customer feedback allows us to both improve her experience as well as optimize our garment care and, therefore, our return on investment of the items returned.
Brand partners are able to tap into our large, engaged community to discover new customers and get unparalleled data insights. All of this helps them grow their businesses and encourages them to partner more closely with us over time.
This leads to deep engagement with our platform as customers discover new brands they love. Brand partners are able to tap into our large, engaged community to discover new customers and get unparalleled data insights. All of this helps them grow and run their businesses and encourages them to partner more closely with us over time.
A flexible taxonomy supports myriad types of products which goes well beyond women’s fashion, and allows us to ingest and manage items at the SKU level, functionality that does not typically exist in off-the-shelf inventory management systems.
Merchandising and Product Control Our proprietary product catalog system is the backbone of our rental product management. A flexible taxonomy supports myriad types of products which goes well beyond women’s fashion, and allows us to ingest and manage items at the SKU level, functionality that does not typically exist in off-the-shelf inventory management systems.
Our most significant product capital expenditures typically occur in the first fiscal quarter and the third fiscal quarter, when we acquire product for the upcoming fall and spring seasons, which can increase rental product depreciation and revenue share and impact our gross margins. However, the impact on cash is typically dependent on timing of receipt of product.
Our most significant product capital expenditures typically occur in the first fiscal quarter and the third fiscal quarter, when we acquire product for the upcoming fall and spring seasons. However, the impact on cash is typically dependent on timing of receipt of product.
Our proprietary software and key integrations with third-parties leverage our vast and unique dataset to optimize key outcomes for RTR. 9 Table of Contents Proprietary and Third-Party Software and Systems We have purpose-built technology to support three key areas of our business: • Customer Facing e-Commerce (including 2-Way e-Commerce) • Rental Reverse Logistics • Merchandising & Products Control Customer Facing e-Commerce (including 2-Way e-commerce) We have a 2-way relationship with our customers — in that nearly every item is returned and the customer provides feedback.
Proprietary and Third-Party Software and Systems We have purpose-built technology to support three key areas of our business: • Customer Facing e-Commerce (including 2-Way e-Commerce) • Rental Reverse Logistics • Merchandising & Products Control Customer Facing e-Commerce (including 2-Way e-commerce) We have a 2-way relationship with our customers — in that nearly every item is returned and the customer provides feedback.
Our analytics teams utilize this data to optimize the styles we need and the quantity per style. • Price Optimization: Our dynamic pricing algorithm optimizes how our products are consumed across Subscription, Reserve rentals and Resale by taking into account demand signals and the expected useful life and turns of each item.
Our analytics teams utilize this data to optimize the styles we need and the quantity per style. • Price Optimization: We optimize pricing on our products across Subscription, Reserve and Resale by using data to take into account demand signals and the expected useful life and turns of each item.
In fiscal year 2022, we made improvements across our technology stack, including completing our migration to the cloud, to enable greater scale, enhanced resiliency and faster site speed. We are focused on continuing to improve the performance of our website and mobile application, including increasing site speed and reliability to improve the customer experience and keep pace with industry standards.
In fiscal year 2023, we made improvements across our technology stack, including continued improvements to our cloud infrastructure, to enable greater scale, enhanced resiliency and faster site speed. We continue to focus on improving the performance of our website and mobile application, including increasing site speed and reliability to improve the customer experience and keep pace with industry standards.
Share by RTR Through Share by RTR, we acquire items directly from brand partners on consignment, at zero to low upfront cost and revenue share with our brands each time an item is rented. Brands also pay us a logistics expense for each rental.
Share by RTR Through Share by RTR, we acquire items directly from brand partners on consignment, at zero to low upfront cost and revenue share with our brands each time an item is rented. The revenue share fees are calculated net of a logistics fee charged to the brands for each rental.
We also register domain names for certain websites that we use in our business, such as www.renttherunway.com, as well as similar variations to protect our brands and marks from cybersquatters.
As of January 31, 2024, we had also registered a total of 15 copyrights. We also register domain names for certain websites that we use in our business, such as www.renttherunway.com, as well as similar variations to protect our brands and marks from cybersquatters.
We also have a small number of products bearing our trademarks, which are non-exclusive designs produced by third party partners at a significantly lower average cost than Wholesale to strategically fill assortment gaps, or our owned brands.
We also have a small number of products bearing our trademarks, which are non-exclusive designs produced by third party partners at a significantly lower average cost than Wholesale to strategically fill assortment gaps. Exclusive Designs accounted for 28% of our product acquisition in fiscal year 2023.
Our culture is underpinned by our Core Values, including that we are all Founders of Rent the Runway, and we all Dream BIG and go after it, adapt and learn from everything we do and debating, honest conversations and collaborating make the company stronger.
Our culture is underpinned by our Core Values, including that we are all Founders of Rent the Runway, and we all Dream BIG and go after it, adapt and learn from everything we do and debating, honest conversations and collaborating make the company stronger. See “Our ESG (Environmental, Social and Governance) Impact Strategy” for more information about our goals.
We also experience seasonality in the timing of expenses and capital outlays. Transportation expense, and therefore fulfillment cost, is typically highest in the fourth fiscal quarter, given higher service levels, such as more costly and expedited shipping, and competition during holidays.
Transportation expense, and therefore fulfillment cost, is typically highest in the fourth fiscal quarter, given typical timing of carrier rate increases, higher service levels, such as more costly and expedited shipping, and competition during holidays.
We further control the use of our proprietary technology and intellectual property through provisions in our terms of service.
We also place limitations on the use of our proprietary technology and intellectual property through provisions in our terms of service.
The portion of our products sourced through Share by RTR and Exclusive Designs - our more capital-efficient sources - has grown from approximately 26% in fiscal year 2019 to approximately 58% in fiscal year 2022.
Our Unique Brand Partner Approach We acquire our products through three channels: Wholesale, Share by RTR and Exclusive Designs. The portion of our products sourced through Share by RTR and Exclusive Designs - our more capital-efficient sources - has grown from approximately 26% in fiscal year 2019 to approximately 61% in fiscal year 2023.
The majority of our new customers have historically come to Rent the Runway organically, a trend that continued in fiscal year 2022. We plan to continue to drive organic growth by focusing on social-first, mid-funnel strategies. Our current marketing initiatives are focused on re-engaging lapsed customers, retaining existing customers and growing our base of new customers.
We plan to continue to drive organic growth by focusing on social-first, mid-funnel strategies. Our current marketing initiatives are focused on growing our base of new customers, re-engaging lapsed customers, and retaining existing customers.
Over 80% of our customers over the last 13 years have been acquired organically. As we have scaled, we have seen the value of the Rent the Runway brand grow and increasingly become a significant point of differentiation with consumers and brand partners.
As we have scaled, we have seen the value of the Rent the Runway brand grow and become a significant point of differentiation with consumers and brand partners.
We intend to pursue additional actions to establish and protect our intellectual property rights to the extent we believe it would be beneficial and cost effective. 17 Table of Contents Employees and Human Capital Resources As of January 31, 2023, we had a total of 880 full-time employees and 135 part-time employees in the United States and Ireland.
We intend to adopt additional measures to establish and protect our intellectual property rights to the extent we believe it would be beneficial and cost effective. 14 Table of Contents Employees and Human Capital Resources As of January 31, 2024, we had a total of 938 full-time employees and 166 part-time employees in the United States and Ireland, the majority of whom are based in our fulfillment centers in New Jersey and Texas.
Our 2023 Strategy Our belief is that we can drive future growth by investing in and improving the customer experience. Unlike traditional e-commerce companies, we are an experience-based company that our subscribers engage with multiple times a week.
We also partner with other service providers in certain markets in order to serve our customers effectively. 11 Table of Contents Our 2024 Strategy Our belief is that we can drive future growth by investing in and improving the customer experience. Unlike traditional e-commerce companies, we are an experience-based company that our subscribers engage with multiple times a week.
We continue to have an opportunity to increase brand awareness and as of January 2023, our unaided brand awareness was 22% among U.S. women ages 18 - 45 with a household income of $50,000 or more, which is an increase of 2% year-over-year compared to fiscal year 2021.
We believe we have an opportunity to increase brand awareness and as of December 2023, our unaided brand awareness was 19% among U.S. women ages 18 - 45 with a household income of $50,000 or more and 27% among U.S. women ages 18 - 45 with a household income of $100,000 or more.
For customers, we unlock freedom of self-expression through access to our “Unlimited Closet” that has a constantly rotating supply of styles for all occasions, seasons, moods and price points. This leads to deep engagement with our platform as customers discover new brands they love.
We have created a two-sided discovery engine: customers find new brands they love and brand partners find new customers they need. For customers, we unlock freedom of self-expression through access to our “Unlimited Closet” that has a constantly rotating supply of styles for all occasions, seasons, moods and price points.
None of our employees are represented by a labor union or covered by collective bargaining agreements and we have not experienced any work stoppages. We strive to make Rent the Runway a diverse, inclusive, and safe workplace, with opportunities for our employees to grow and develop in their careers, supported by competitive compensation and benefits programs.
We strive to make Rent the Runway a diverse, inclusive, and safe workplace, with opportunities for our employees to grow and develop in their careers, supported by competitive compensation and benefits programs.
Our subscribers typically visit our app multiple times per week. Subscribers are asked to give us real-time feedback on the size, fit and quality of the items they rent.
When subscribers select the items they want to return on our app, we allow them to immediately start building their next shipment, maximizing their time with items at home. Our subscribers typically visit our app multiple times per week. Subscribers are asked to give us real-time feedback on the size, fit and quality of the items they rent.
In the third and fourth fiscal quarters, our Reserve business historically (prior to COVID-19) benefited from increased wedding and holiday events but this seasonality has varied since the onset of COVID-19. In fiscal year 2022, our active subscriber count increased sequentially in the first and third quarters and decreased sequentially in the second and fourth quarters.
In the third and fourth fiscal quarters, our Reserve business historically (prior to COVID-19) benefited from increased wedding and holiday events but this seasonality has varied since the onset of COVID-19. In fiscal year 2022, we believe that a price increase of our Subscription programs in April 2022 affected traditional seasonal patterns.
Wear, Repeat . When subscribers place an order, we aim to deliver their order within two to three business days of shipping from our fulfillment centers in our reusable garment bags, cleaned and ready to wear.
When subscribers place an order, we aim to deliver their order within two to three business days of shipping from our fulfillment centers in our reusable garment bags, cleaned and ready to wear. Subscribers keep items for as long as they would like and may choose to return some or all of their items with each new shipment.
Exclusive Designs accounted for 31% of our product acquisition in fiscal year 2022. 7 Table of Contents Our Marketing Strategy Our brand and deeply engaged consumer base have allowed us to acquire customers efficiently. Since our founding, we have spent les s tha n 10% of total revenue on marketing, and our growth has been mostly organic.
Our Marketing Strategy Our brand and deeply engaged consumer base have historically allowed us to acquire customers efficiently. Since our founding, we have spent les s tha n 10% of total revenue on marketing, and our growth has been mostly organic. Over 80% of our customers over the last 14 years have been acquired organically.
The portion of our customers who are subscribers accounted for 86% of our revenue in fiscal year 2022. As of January 31, 2023, we had 126,712 Active Subscribers on Rent the Runway and 171,998 total subscribers including paused subscribers, and during fiscal year 2022, we had 128,586 Average Active Subscribers.
The portion of our customers who are subscribers accounted for 88% of our revenue in fiscal year 2023. As of January 31, 2024, we had 125,954 Active Subscribers and 173,247 total subscribers including paused subscribers, and during fiscal year 2023, we had 135,211 Average Active Subscribers.
Double representation of Black and LatinX leadership in new hire classes at our Dallas warehouse by fiscal year end 2026. 2. Use our platform to support and amplify diversity in fashion. $6 million cumulative spend with Black designers between fiscal year ended 2022 and fiscal year end 2026.
Use our platform to support and amplify diversity in fashion. • $6 million cumulative spend with Black designers between fiscal year 2022 and fiscal year end 2026. • Ensure at least 40% representation of racial and ethnic minorities in our marketing materials and imagery by fiscal year end 2026.
See “Our ESG (Environmental, Social and Governance) Impact Strategy” for more information about our values, goals and human capital measures and objectives. Corporate Information We were incorporated as Rent the Runway, Inc. in Delaware on March 3, 2009. We completed our initial public offering (“IPO”) in October 2021.
Corporate Information We were incorporated as Rent the Runway, Inc. in Delaware on March 3, 2009. We completed our initial public offering (“IPO”) in October 2021.
Eliminate unnecessary plastic in shipments to customers and only utilize reusable, compostable or 100% recyclable content for necessary plastic packaging to customers by fiscal year end 2023. (2023 Update) Eliminate unnecessary single use plastic packaging in shipments to customers and only utilize reusable, compostable or 100% recycled content for necessary plastic packaging to customers by fiscal year end 2023.
Priority 2. Minimize waste from our business. • Divert 90% of waste from our warehouse operations from landfill by fiscal year end 2026. • Eliminate unnecessary plastic in shipments to customers and only utilize reusable, compostable or 100% recyclable content for necessary plastic packaging to customers by fiscal year end 2023. Ambition 2.
We procure virtually 100% of our products directly from or in collaboration with brand partners and our business model has been built on shared success with brands. As they deepen their relationship with us, they get access to more data and more customers. Our partnerships with brands have created a significant product and cost advantage.
We procure virtually 100% of our products directly from or in collaboration with brand partners and our business model has been built on shared success with brands.
The catalog serves as the starting point for products at RTR, and drives many areas of the Rent the Runway website and operation including quality control, search, navigation, and filtering.
The catalog serves as the starting point for products at RTR, and drives many areas of the Rent the Runway website and operation including quality control, search, navigation, and filtering. While we have built the majority of our circular platform, we strategically leverage third-party software for commodity functionality where our problems are not unique.
In fiscal year 2022, we increased paid marketing spend and we saw an increase in the proportion of new customers attributed to paid channels. Our paid efforts have included both middle-of-the-funnel prospecting and bottom-of-the-funnel direct response campaigns which also benefit from our top-of-the-funnel brand marketing efforts that drive awareness.
Our paid efforts have included both middle-of-the-funnel prospecting and bottom-of-the-funnel direct response campaigns which also benefit from our top-of-the-funnel brand marketing efforts that drive awareness. To date, our primary channels for paid marketing have been focused on social media marketing, influencers and our brand ambassadors, programmatic directed spend and affiliate marketing.
To date, our primary channels for paid marketing have been focused on social media marketing, influencers and our brand ambassadors, programmatic directed spend and affiliate marketing. Our Data Advantage One of our significant differentiators is the vast amount of quality, actionable data that we are able to collect on our customers and our products.
Our Data Approach One of our significant differentiators is the vast amount of quality, actionable data that we are able to collect on our customers and our products.
Rent the Runway makes thousands of designer styles accessible through our Subscription offering for a flat monthly price or through our Reserve offering on a per item basis. We deliver significant financial value to customers, with our average subscriber wearing clothes worth more than 20 times what she pays for a monthly RTR Subscription on an annualized basis. • Self-Confidence.
We deliver significant financial value to customers, with our average subscriber wearing clothes worth more than 25 times what she pays for a monthly RTR Subscription on an annualized basis. • Self-Confidence. According to our March 2023 Subscriber Survey, 83% of our subscribers say RTR makes them the most confident version of themselves at work or in social settings.
As of January 31, 2023, we had a total of 26 registered trademarks in the United States and 60 registered trademarks in non-U.S. jurisdictions, as well as certain pending trademark applications. As of January 31, 2023, we had also registered a total of 12 copyrights.
We register our brand names and product names, taglines and logos in the United States to the extent we determine appropriate and cost-effective. As of January 31, 2024, we had a total of 25 registered trademarks in the United States and 68 registered trademarks in non-U.S. jurisdictions, as well as certain pending trademark applications.
We believe that the process improvements we have made have enabled us to expand our capacity to handle approximately 4x our active subscriber count at the end of fiscal year 2022 in our two current facilities with minimal investment. • Transportation Management: We partner with a variety of national, regional and local last mile service providers in order to close the loop between our fulfillment centers and our customers.
We believe that the process improvements we have made have enabled us to expand our capacity to handle at least 4x our active subscriber count at the end of fiscal year 2023 in our two current facilities with minimal additional investment. • Transportation Management: In August 2023, we completed a new transportation deal with a major national carrier to lock in competitive rates and consolidate the vast majority of our shipping needs.
A Subscription is not required for purchase. Our subscribers also have the option to purchase items they already have at home, opening a spot in their next shipment. Prices for our resale items are typically dynamically calculated by our pricing algorithm, which takes in data on rental history, customer trends, and optimizes for lifetime return on investment on each product.
A Subscription is not required for purchase. Our subscribers also have the option to purchase items they already have at home, opening a spot in their next shipment. We plan to increase the focus on our Resale business as a lever to drive customer value.
Our business model aims for customers to substitute purchases with rentals and we have been successful in doing so, as 87% of our subscribers have bought less fast fashion since using RTR 3 and 82% buy fewer clothes than they used to prior to joining RTR 4 . 2 According to the Life Cycle Assessment Study (the “LCA Study”) we commissioned in 2021 with Green Story and SgT, third-party consultants specializing in apparel life cycle assessments. 3 Per our March 2023 Subscriber Survey. 4 Per our November 2022 Subscriber Survey. 6 Table of Contents Our Unique Brand Partner Approach We acquire our products through three channels: Wholesale, Share by RTR and Exclusive Designs.
Our business model aims for customers to substitute purchases with rentals and we have been successful in doing so, as 87% of our subscribers have bought less fast fashion since using RTR 3 and 82% buy fewer clothes than they used to prior to joining RTR 4 .
We have served approximately 3 million lifetime customers across all of our offerings and we had 171,998 total subscribers (active and paused) as of January 31, 2023. We had 126,712 active subscribers as of January 31, 2023 and 141,205 active subscribers as of April 8, 2023.
We have served approximately 3 million lifetime customers across all of our offerings and we had 173,247 total subscribers (active and paused) as of January 31, 2024. We had 125,954 active subscribers as of January 31, 2024. In fiscal year 2023, 88% of our total revenue was generated by subscribers, compared to 86% in fiscal year 2022.
Below is an update on our progress toward this strategy in fiscal year 2022. 12 Table of Contents Ambition 1: We will harness the power of our business model to set the standard for sustainable fashion. Priority Goal Notable Progress in Fiscal Year 2022 1.
We will harness the power of our business model to set the standard for sustainable fashion. Priority 1.
We use our rich customer data to create a personalized storefront for customers based on their style preferences, browsing history and past rentals. Our understanding of our customer improves with each interaction, and we use our personalization algorithm to provide personalized size recommendations to each customer at the item level.
Because there is no commitment to keep an item rented from RTR, we fuel greater self-expression for our customers. • Personalization and Convenienc e . We use our rich customer data to create a personalized storefront for customers based on their style preferences, browsing history and past rentals.
While we believe our patents and patent applications in the aggregate enhance our competitive position, no single patent or patent application is material to us as a whole. We register our brand names and product names, taglines and logos in the United States to the extent we determine appropriate and cost-effective.
As of January 31, 2024, we had five issued patents in the United States that expire between 2031 and 2038 and three issued foreign patents. While we believe our patents in the aggregate generally enhance our competitive position, no single patent is material to us as a whole.
Our customers use the millions of reviews posted by our community to make smarter choices and feel good about their selections.
Our customers are deeply engaged, as evidenced by the 43.0 million customer reviews posted as of January 2024. We continue to make enhancements to our review process designed to allow customers to make smarter choices and feel good about their selections.
By showing customers designs they will love and items that are likely to fit, we continue to drive strong loyalty and monetization. • Customer Experience and Community. Our customers are deeply engaged, as evidenced by the 33.1 million customer reviews submitted through January 2023.
Our understanding of our customer improves with each interaction, and we use our personalization algorithm to provide personalized size recommendations to each customer at the item level. By showing customers designs they will love that are attractively styled, and likely to fit, we continue to drive strong loyalty and monetization. • Customer Experience and Community.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeThe COVID-19 pandemic materially adversely affected our operating and financial results during fiscal year 2020 due to the occurrence of the following events or circumstances, among others: • the global shelter-in-place restrictions significantly reduced our number of Active Subscribers and engagement with all of our offerings because of the decrease in special events, social gatherings and interactions outside the home; • a significant number of subscribers paused or canceled their subscriptions or downgraded to lower-priced plans, and we experienced significant decreased demand for our Reserve offering and customers canceled their existing orders for special events; • subscribers engaged less, which impacted the success of our organic marketing and reduced the volume of our data and business insights; • disruptions of the operations of our brand partners and delays in shipment and delivery of our products; • pausing all of our paid marketing spend and eliminating or significantly reducing investments in growth initiatives; • carrying more products relative to customer demand, negatively impacting gross margins; • performance-based revenue share payments to brands were decreased due to lower total revenue, impacting our brand partner relationships and value proposition; 40 Table of Contents • implementing temporary salary cuts, employee layoffs and furloughs, and pausing recruiting efforts, which negatively impacted employee morale and resulted in an increase in regrettable employee attrition; and • the closure of our brick-and-mortar retail stores, which was perceived negatively by some customers.
Biggest changeThe COVID-19 pandemic materially adversely affected our operating and financial results during fiscal year 2020 in many ways, including a significant reduction in Active Subscribers resulting from the decrease in special events, social gatherings and interactions outside the home, delays in the shipment and delivery of our products due to disruptions of the operations of our brand partners, and the implementation of temporary salary cuts, employee layoffs and furloughs, and pausing recruiting efforts, which negatively impacted employee morale and resulted in an increase in regrettable employee attrition.
If we are not able to continue to expand our customer base through cost-effective methods, we may not meet our revenue and profitability goals and our revenue may grow slower than expected or decline, and investors may lose confidence in our business.
If we are not able to continue to expand our customer base through cost-effective methods, we may not meet our revenue and profitability goals, our revenue may grow slower than expected or decline, and investors may lose confidence in our business.
Voluntary or required standards and research regarding environmental, social, and governance initiatives could change and become more onerous for both for us and our third-party suppliers and vendors to meet successfully.
Voluntary or required standards and research regarding environmental, social and governance initiatives could change and become more onerous for both us and our third-party suppliers and vendors to meet successfully.
These anti-takeover provisions include: • authorization of the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • provide for a dual class common stock structure in which holders of our Class B common stock, which has 20 votes per share, have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our Class B and Class A common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets; • a classified board of directors so that not all members of our board of directors are elected at one time; • a requirement that our directors may only be removed for cause; • the ability of our directors to fill all board vacancies, subject to the rights granted pursuant to the stockholders’ agreement; • a prohibition on stockholder actions by written consent, thereby requiring that all stockholder actions be taken at a meeting of our stockholders; • advance notice procedures for stockholder director nominees and annual meeting matters (other than the parties to our stockholders; agreement for nominations made pursuant to the terms of the stockholders’ agreement); • an inability of our stockholders to call special meetings of stockholders; • the ability of our directors to amend our Amended Bylaws without stockholder consent; • the requirement of a super-majority to amend some provisions in our Amended Charter and Amended Bylaws; and • a prohibition on cumulative voting for directors.
These anti-takeover provisions include: • authorization of the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; • a dual class common stock structure in which holders of our Class B common stock, which has 20 votes per share, have the ability to control the outcome of matters requiring stockholder approval, even if they own significantly less than a majority of the outstanding shares of our Class B and Class A common stock, including the election of directors and significant corporate transactions, such as a merger or other sale of our company or its assets; • a classified board of directors so that not all members of our board of directors are elected at one time; • a requirement that our directors may only be removed for cause; • the ability of our directors to fill all board vacancies, subject to the rights granted pursuant to the stockholders’ agreement; • a prohibition on stockholder actions by written consent, thereby requiring that all stockholder actions be taken at a meeting of our stockholders; • advance notice procedures for stockholder director nominees and annual meeting matters (other than the parties to our stockholders; agreement for nominations made pursuant to the terms of the stockholders’ agreement); • an inability of our stockholders to call special meetings of stockholders; • the ability of our directors to amend our Amended Bylaws without stockholder consent; • the requirement of a super-majority to amend some provisions in our Amended Charter and Amended Bylaws; and • a prohibition on cumulative voting for directors.
We believe our ability to compete effectively depends on many factors within and beyond our control, including: • our ability to normalize fashion rental and change traditional retail shopping habits and norms; 20 Table of Contents • how effectively differentiated our offerings, customer experience and value proposition are from those of our competitors; • how effectively we market and communicate how to use our Subscription, Reserve and Resale offerings and attract and retain customers; • our ability to expand and maintain an appealing depth and breadth of our products to meet customer demand; • the price at which we are able to offer our Subscription, Reserve and Resale offerings; • the amount, diversity, and quality of brands that we or our competitors offer; • our ability to acquire products on favorable and efficient terms, including our ability to attract new brand partners and retain existing brand partners in our Share by RTR and Exclusive Design programs; • the speed and cost at which we can deliver products to our customers and the ease with which they can return our products; • the effectiveness of our customer service; • further developing our data science capabilities for brand partners; • the strength of our brand, including maintaining favorable brand recognition and effectively marketing our services and value proposition to customers; • the success of our reverse-logistics processes in delivering products in good condition to customers; and • anticipating and successfully responding to changing apparel trends and consumer shopping preferences.
We believe our ability to compete effectively depends on many factors within and beyond our control, including: • our ability to normalize fashion rental and change traditional retail shopping habits and norms; 17 Table of Contents • how effectively differentiated our offerings, customer experience and value proposition are from those of our competitors; • how effectively we market and communicate how to use our Subscription, Reserve and Resale offerings and attract and retain customers; • our ability to expand and maintain an appealing depth and breadth of our products to meet customer demand; • the price at which we are able to offer our Subscription, Reserve and Resale offerings; • the amount, diversity, and quality of brands that we or our competitors offer; • our ability to acquire products on favorable and efficient terms, including our ability to attract new brand partners and retain existing brand partners in our Share by RTR and Exclusive Design programs; • the speed and cost at which we can deliver products to our customers and the ease with which they can return our products; • the effectiveness of our customer service; • further developing our data science capabilities for brand partners; • the strength of our brand, including maintaining favorable brand recognition and effectively marketing our services and value proposition to customers; • the success of our reverse-logistics processes in delivering products in good condition to customers; and • anticipating and successfully responding to changing apparel trends and consumer shopping preferences.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses.
We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, as provided in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Estimates.” The results of these estimates form the basis for making judgments about the carrying values of assets, liabilities, and equity, and the amount of revenue and expenses.
Because of the twenty-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively could continue to control a significant percentage of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval until the date of automatic conversion described below, when all outstanding shares of Class B common stock and Class A common stock will convert automatically into shares of a single class of common stock.
Because of the twenty-to-one voting ratio between our Class B and Class A common stock, the holders of our Class B common stock collectively continue to control a significant percentage of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders for approval until the date of automatic conversion described below, when all outstanding shares of Class B common stock and Class A common stock will convert automatically into shares of a single class of common stock.
These service providers may not have adequate security measures and could experience a security incident that compromises the confidentiality, integrity, or availability of the IT Systems they operate for us or the information they process on our behalf and may not be able to contain or recover from such incidents or to notify us in a timely manner.
These service providers may not have adequate security measures and could experience a security incident that compromises the confidentiality, integrity, or availability of the IT Systems they operate for us or the Confidential Information they process on our behalf and may not be able to contain or recover from such incidents or to notify us in a timely manner.
As an e-commerce business, we encounter risks and difficulties frequently experienced by businesses with significant internet operations. The successful operation of our business as well as our ability to provide a positive customer experience that will generate Subscription, Reserve rental and Resale orders depend on efficient and uninterrupted e-commerce order-taking and fulfillment operations.
As an e-commerce business, we encounter risks and difficulties frequently experienced by businesses with significant internet operations. The successful operation of our business as well as our ability to provide a positive customer experience that will generate Subscription, Reserve and Resale orders depend on efficient and uninterrupted e-commerce order-taking and fulfillment operations.
If the quality or convenience of our payment processing infrastructure declines or does not keep pace with industry standards, the attractiveness of our business to customers could be adversely affected. For example, we plan to enhance our payment operations in the future; however, our efforts may be unsuccessful or delayed for various reasons and may fail to meet customer expectations.
If the quality or convenience of our payment processing declines or does not keep pace with industry standards, the attractiveness of our business to customers could be adversely affected. For example, we plan to enhance our payment operations in the future; however, our efforts may be unsuccessful or delayed for various reasons and may fail to meet customer expectations.
We may not be able to prepare, file and prosecute all necessary or desirable patent applications at a commercially reasonable cost or in a timely manner or in all jurisdictions, creating an opportunity for third parties to patent the same technology while preventing us from continuing to use it.
We may not be able to prepare, file and prosecute all necessary or desirable patent applications at a commercially reasonable cost or in a timely manner or in all relevant jurisdictions, creating an opportunity for third parties to patent the same technology while preventing us from continuing to use it.
Our effective tax rate or tax liability could be adversely affected due to several factors, including: • changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates; • changes in the United States or foreign tax laws, tax treaties, and regulations or the interpretation of them; • changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business; • the outcome of current and future tax audits, examinations, or administrative appeals; and • limitations or adverse findings regarding our ability to do business in some jurisdictions.
Our effective tax rate or tax liability could be adversely affected due to several factors, including: • changes in the relative amounts of income before taxes in the various jurisdictions in which we operate that have differing statutory tax rates; • changes in the United States or foreign tax laws, tax treaties, and regulations or their interpretation; • changes to our assessment about our ability to realize our deferred tax assets that are based on estimates of our future results, the prudence and feasibility of possible tax planning strategies, and the economic and political environments in which we do business; • the outcome of current and future tax audits, examinations, or administrative appeals; and • limitations or adverse findings regarding our ability to do business in some jurisdictions.
Our IT Systems and those of our service providers and business partners may be subject to damage or interruption from cyber attacks, power outages or damages, telecommunications problems, data corruption, software errors, network failures, acts of war or terrorist attacks, fire, flood and natural disasters.
Our IT Systems and those of our service providers and business partners may be subject to damage or interruption from power outages or damages, telecommunications problems, data corruption, software errors, network failures, acts of war or terrorist attacks, fire, flood and natural disasters.
The risks we face in connection with partnerships and acquisitions include: • a partnership or acquisition may disrupt our ongoing business, divert resources, increase our expenses, and distract our management; • an acquisition may negatively affect our financial results because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by stockholders and third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition; 41 Table of Contents • we may encounter difficulties or unforeseen expenditures in integrating the business, offerings, technologies, personnel, or operations of any company that we partner with or acquire; and • if we incur debt or issue a significant amount of equity securities to fund such joint venture or acquisition, such debt may subject us to material restrictions on our ability to conduct our business, as well as financial maintenance covenants and such equity securities may cause dilution for our existing stockholders and earning per share may decrease.
The risks we face in connection with partnerships and acquisitions include: • a partnership or acquisition may disrupt our ongoing business, divert resources, increase our expenses, and distract our management; • an acquisition may negatively affect our financial results because it may require us to incur charges or assume substantial debt or other liabilities, may cause adverse tax consequences or unfavorable accounting treatment, may expose us to claims and disputes by stockholders and third parties, including intellectual property claims and disputes, or may not generate sufficient financial return to offset additional costs and expenses related to the acquisition; • we may encounter difficulties or unforeseen expenditures in integrating the business, offerings, technologies, personnel, or operations of any company that we partner with or acquire; and • if we incur debt or issue a significant amount of equity securities to fund such joint venture or acquisition, such debt may subject us to material restrictions on our ability to conduct our business, as well as financial maintenance covenants and such equity securities may cause dilution for our existing stockholders and earning per share may decrease.
Any failure by us to adequately integrate technological developments in our approach to data management could harm our ability to leverage data, including customer data, collected through our technology and our systems, which could have a negative effect on our business.
In addition, any failure by us to adequately integrate technological developments in our approach to data management could harm our ability to leverage data, including customer data, collected through our technology and our systems, which could have a negative effect on our business.
These systems may inadvertently reduce the efficiency of our systems, or may cause unintentional or unexpected outputs that are incorrect, do not match our business goals, do not comply with our policies, or otherwise are inconsistent with our brand, guiding principles and mission.
These systems may inadvertently reduce the efficiency of our IT Systems, or may cause unintentional or unexpected outputs that are incorrect, do not match our business goals, do not comply with our policies, or otherwise are inconsistent with our brand, guiding principles and mission.
Our growth and growth strategies have in the past strained, and could in the future, strain our existing resources, and we could experience ongoing operating difficulties in managing our business across numerous jurisdictions, including difficulties in hiring, training, and managing a diverse and growing employee base.
Our growth and growth strategies have in the past strained, and could in the future strain, our existing resources, and we could experience ongoing operating difficulties in managing our business across numerous jurisdictions, including difficulties in hiring, training, and managing a diverse employee base.
Our inability to respond effectively to competitive pressures, improved performance by our competitors, failure to achieve broad acceptance and changes in the fashion retail markets could result in lost market share and have a material adverse effect on our business, financial condition, and results of operations. 21 Table of Contents 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 inability to respond effectively to competitive pressures, improved performance by our competitors, failure to achieve broad acceptance and changes in the fashion retail markets could result in lost market share and have a material adverse effect on our business, financial condition, and results of operations. 18 Table of Contents 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 .
However, the protective steps we have taken and plan to take may be inadequate to deter infringement, misappropriation or other violations of our intellectual property or proprietary rights and we may be unable to broadly enforce all of our intellectual property rights.
However, the protective steps we have taken and plan to take may be inadequate to deter infringement, misappropriation or other violations of our intellectual property or proprietary rights and we may be unable to enforce all of our intellectual property rights.
We collect, process, store, and use a wide variety of data from current and prospective customers, including personal information, such as home addresses, credit card numbers (through our payment processor) and geolocation.
We collect, process, store, and use a wide variety of data from current and prospective customers, including personal information, such as home addresses, payment card numbers (through our payment processor) and geolocation.
Overall growth of our revenue will depend on a number of factors, including our ability to: • change traditional consumer buying habits and normalize clothing subscription, rental and resale; • price our Subscription, Reserve and Resale offerings so that we are able to attract new customers, and retain and expand our relationships with existing customers; • ensure that we maintain an adequate depth and breadth of available products to meet customer demand and respond swiftly and appropriately to new and changing styles, trends or desired consumer preferences; • accurately forecast our revenue and plan our fulfillment, operating expenses and capital expenditures; 19 Table of Contents • provide customers with a high-quality, seamless user experience and order fulfillment, as well as customer service and support that meets their needs; • acquire customers into varying levels of subscription programs at different price points; • improve our website and app performance and successfully identify and acquire, partner or invest in products, technologies, or businesses that we believe could complement or expand our business; • successfully maintain and grow our relationships with existing and new brand partners, including continuing to maintaining and growing our Share by RTR and Exclusive Design offerings; • avoid disruptions in acquiring and distributing our products and offerings; • be efficient in our paid marketing; • maintain and enhance our reputation and the value of our brand; • hire, integrate and retain talented personnel across all levels of our organization; • successfully compete with other companies that are currently in, or may in the future enter, the industry or the markets in which we operate, and respond to developments from these competitors such as pricing changes and the introduction of new offerings; • comply with existing and new laws and regulations applicable to our business; • successfully expand into new and penetrate existing geographic markets in the United States; • successfully develop new offerings and innovate and enhance our existing offerings and their features, including in response to new trends, competitive dynamics or the needs of customers and subscribers; • effectively manage growth of our business, personnel, and operations, including expanding our shipping and distribution network and fulfillment center operations, as well as our logistics footprint and the number of facilities we operate in the future; • effectively manage our costs related to our business and operations; and • avoid or manage interruptions in our business from information technology downtime, cybersecurity incidents and other factors that could affect our physical and digital infrastructure.
Overall growth of our revenue will depend on a number of factors, including our ability to: • change traditional consumer buying habits and normalize clothing subscription, rental and resale; • price our Subscription, Reserve and Resale offerings so that we are able to attract new customers, and retain and expand our relationships with existing customers; • ensure that we maintain an adequate depth and breadth of available products to meet customer demand and respond swiftly and appropriately to new and changing styles, trends or desired consumer preferences; 16 Table of Contents • accurately forecast our revenue and plan our fulfillment, operating expenses and capital expenditures; • provide customers with a high-quality, seamless user experience and order fulfillment, as well as customer service and support that meets their needs; • acquire customers into varying levels of subscription programs at different price points; • improve our website and app performance and successfully identify and acquire, partner or invest in products, technologies, or businesses that we believe could complement or expand our business; • successfully maintain and grow our relationships with existing and new brand partners, including continuing to maintain and grow our Share by RTR and Exclusive Design offerings; • avoid disruptions in acquiring and distributing our products and offerings; • be effective and efficient in our paid marketing; • maintain and enhance our reputation and the value of our brand; • hire, integrate and retain talented personnel across all levels of our organization; • successfully compete with other companies that are currently in, or may in the future enter, the industry or the markets in which we operate, and respond to developments from these competitors such as pricing changes and the introduction of new offerings; • comply with existing and new laws and regulations applicable to our business; • successfully expand into new and penetrate existing geographic markets in the United States; • successfully develop new offerings and innovate and enhance our existing offerings and their features, including in response to new trends, competitive dynamics or the needs of customers and subscribers; • effectively manage growth of our business, personnel, and operations, including expanding our shipping and distribution capabilities and fulfillment center operations, as well as our logistics footprint and the number of facilities we operate in the future; • effectively manage our costs related to our business and operations; and • avoid or manage interruptions in our business from information technology downtime, cybersecurity incidents and other factors that could affect our physical and digital infrastructure.
In addition, if we are unable to successfully leverage new technology to automate and otherwise drive efficiencies in our operations, our business, results of operations and financial condition could be harmed.
In addition, if we are unable to successfully leverage new technology to automate and otherwise enhance and drive efficiencies in our operations, our business, results of operations and financial condition could be harmed.
We may not be successful in expanding into additional international markets or in generating revenue from foreign operations for a variety of reasons, including: • lower acceptance of our offerings and the concept of renting apparel and accessories and the need to localize our products offerings; • competition from local incumbents that understand the local market and may operate more effectively; • regulatory requirements, taxes, trade laws, trade sanctions and economic embargoes, tariffs, export quotas, custom duties, or other trade restrictions, or any unexpected changes thereto; and • risks resulting from changes in currency exchange rates.
We may not be successful in expanding into additional international markets or in generating revenue from foreign operations for a variety of reasons, including: • lower acceptance of our offerings and the concept of renting apparel and accessories and the need to localize our products offerings; • competition from local incumbents that understand the local market and may operate more effectively; 41 Table of Contents • regulatory requirements, taxes, trade laws, trade sanctions and economic embargoes, tariffs, export quotas, custom duties, or other trade restrictions, or any unexpected changes thereto; and • risks resulting from changes in currency exchange rates.
Although we have opted out of Section 203 of the General Corporation Law of the State of Delaware (the “DGCL”), our Amended Charter contains provisions that are similar to Section 203.
Although we have opted out of Section 203 of the General Corporation Law of the State of Delaware, our Amended Charter contains provisions that are similar to Section 203.
As a result of the complexity involved in complying with the rules and regulations applicable to public companies, our management’s attention may be diverted from other business concerns, which could harm our business, financial condition, and results of operations. Furthermore, several members of our management team do not have prior experience in running a public company.
As a result of the complexity involved in complying with the rules and regulations applicable to public companies, our management’s attention may be diverted from other business concerns, which could harm our business, financial condition, and results of operations. Furthermore, most members of our management team do not have prior experience in running a public company.
If we are unable to obtain adequate financing or financing on terms satisfactory to us, our ability to support our business growth, and respond to business challenges could be significantly impaired, and our business may be adversely affected. Additionally, in recent months, there has been volatility in and disruptions to the global economy, including the equity and debt financial markets.
If we are unable to obtain adequate financing or financing on terms satisfactory to us, our ability to support our business growth, and respond to business challenges could be significantly impaired, and our business may be adversely affected. Additionally, in recent periods, there has been volatility in and disruptions to the global economy, including the equity and debt financial markets.
The implementation of these remediation efforts is in progress, may require additional expenditures to implement, and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles, and as a result, the timing of when we will be able to fully remediate the material weaknesses is uncertain.
The implementation of these remediation efforts is in progress, may require additional expenditures to implement, and will require validation and testing of the design and operating effectiveness of internal controls over a sustained period of financial reporting cycles, and as a result, the timing of when we will be able to fully remediate the material weaknesses described above is uncertain.
If we were to receive a claim of non-compliance with the terms of any of our open-source licenses, we may be required purchase a costly license, to publicly release certain portions of our proprietary source code, limit or prohibit our use of some or all of our software, or expend substantial time and resources to re-engineer some or all of our software.
If we were to receive a claim of non-compliance with the terms of any of our open-source licenses, we may be required purchase a costly license, to publicly release certain portions of our proprietary source code, to limit or cease our use of some or all of our software, or expend substantial time and resources to re-engineer some or all of our software.
We believe that our success and future growth depend largely upon the continued services of our senior management team, including our Co-Founder, Chief Executive Officer and Chair, Jennifer Y. Hyman. From time to time, there may be changes in our executive management team resulting from the hiring or departure of these executives.
We believe that our success and future growth depend largely upon the continued services of our senior management team, including our Co-Founder, Chief Executive Officer and Chair, Jennifer Y. Hyman. From time to time, there have been and may be future changes in our executive management team resulting from the hiring or departure of these executives.
These seasonal effects may become more pronounced over time, which could also cause our operating results and key metrics to fluctuate. 32 Table of Contents 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.
These seasonal effects may become more pronounced over time, which could also cause our operating results and key metrics to fluctuate. 30 Table of Contents 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.
A failure by us to comply with the covenants specified in the 2022 Amended Temasek Facility could result in an event of default under the agreement, which would give the lender the right to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable.
A failure by us to comply with the covenants specified in the 2023 Amended Temasek Facility could result in an event of default under the agreement, which would give the lender the right to declare all borrowings outstanding, together with accrued and unpaid interest and fees, to be immediately due and payable.
For our Exclusive Design arrangements, we must continue to increase the number of brand partners with whom we work, design an assortment of styles that meet customer demand, maintain and enhance our third-party manufacturing capabilities and partners and ensure the products manufactured meets brand partners’, customers’ and our quality standards.
For our Exclusive Design arrangements, we must continue to increase the number of brand partners with whom we work, design an assortment of styles that meet customer demand, maintain and enhance our third-party manufacturing capabilities and partner relationships and ensure the products manufactured meets brand partners’, customers’ and our quality standards.
The terms of our 2022 Amended Temasek Facility include a number of covenants that limit our ability to (subject to negotiated exceptions), among other things, incur additional indebtedness, incur liens on assets, enter into agreements related to mergers and acquisitions, dispose of assets or pay dividends and make distributions.
The terms of our 2023 Amended Temasek Facility include a number of covenants that limit our ability to (subject to negotiated exceptions), among other things, incur additional indebtedness, incur liens on assets, enter into agreements related to mergers and acquisitions, dispose of assets or pay dividends and make distributions.
In the event of interruption, we may not be able to develop alternate or secondary processing without incurring material additional costs and substantial delays. If these companies become unwilling or unable to provide these services to us on acceptable terms or at all, our business may be disrupted.
In the event of interruption, we may not be able to develop alternate or secondary processing without incurring material additional costs and substantial delays. If these providers become unwilling or unable to provide these services to us on acceptable terms or at all, our business may be disrupted.
For our business to be successful and have sufficient product to meet consumer demand, our brand and manufacturing partners must be willing and able to provide us with products in specific quantities and styles of sufficient quality, in compliance with regulatory requirements, at acceptable costs and on a timely basis.
For our business to be successful and have sufficient product to meet consumer demand, our brand and manufacturing partners must be willing and able to provide us with products in specific quantities and styles of sufficient quality, in compliance with regulatory requirements, at acceptable costs and payment schedules and on a timely basis.
Any of these security incidents could result in unauthorized access to, damage to, disablement or encryption of, use or misuse of, disclosure of, modification of, destruction of, or loss of our data or our customers’ data or disrupt our ability to provide our products and offerings, including due to any failure by us to properly configure our cloud environment.
Any of these security incidents could result in unauthorized access to, damage to, disablement or encryption of, use or misuse of, disclosure of, modification of, destruction of, or loss of our data or our customers’ data or disrupt our ability to provide our products and offerings, including due to any failure by us or our service providers to properly configure our cloud environment.
The market price of our Class A common stock has declined significantly since our IPO, has been volatile and is likely to continue to be volatile and could be subject to wide fluctuations in response to the risk factors described in this Annual Report , and others within or beyond our control, including: • actual or anticipated fluctuations in our revenue or other operating metrics; • our actual or anticipated operating performance and the operating performance of our competitors; • changes in the financial projections we provide to the public or our failure to meet these projections; • the perceived adequacy of our ESG efforts; • positive or negative publicity; 56 Table of Contents • failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet the estimates or the expectations of investors; • any major change in our board of directors, management, or key personnel; • the economy as a whole and market conditions in our industry; • rumors and market speculation involving us or other companies in our industry; • announcements by us or our competitors of significant innovations, new products, services, features, integrations, or capabilities, acquisitions, strategic investments, partnerships, joint ventures, or capital commitments; • the legal and regulatory landscape and changes in the application of existing laws or adoption of new laws that impact our business, including changes in e-commerce and tax laws; • legal and regulatory claims, litigation, or pre-litigation disputes and other proceedings; • the pace of the COVID-19 pandemic recovery and its impact on our business or the fashion industry and sharing economy generally; • sales or expected sales of our Class A common stock by us, our officers, directors, principal stockholders, and employees; • if securities or industry analysts publish research about our business, or if they publish unfavorable research; and • other events or factors, including those resulting from war, incidents of terrorism, or responses to these events.
The market price of our Class A common stock has declined significantly since our IPO, has been volatile and is likely to continue to be volatile and could be subject to wide fluctuations in response to the risk factors described in this Annual Report , and others within or beyond our control, including: • actual or anticipated fluctuations in our revenue or other operating metrics; • our actual or anticipated operating performance and the operating performance of our competitors; • changes in the financial projections we provide to the public or our failure to meet these projections; • positive or negative publicity; • failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet the estimates or the expectations of investors; • any major change in our board of directors, management, or key personnel; • the economy as a whole and market conditions in our industry; • rumors and market speculation involving us or other companies in our industry; 56 Table of Contents • announcements by us or our competitors of significant innovations, new products, services, features, integrations, or capabilities, acquisitions, strategic investments, partnerships, joint ventures, or capital commitments; • the legal and regulatory landscape and changes in the application of existing laws or adoption of new laws that impact our business, including changes in e-commerce and tax laws; • legal and regulatory claims, litigation, or pre-litigation disputes and other proceedings; • the impact of COVID-19 on our business or the fashion industry and sharing economy generally; • sales or expected sales of our Class A common stock by us, our officers, directors, principal stockholders, and employees; • if securities or industry analysts publish research about our business, or if they publish unfavorable research; and • other events or factors, including those resulting from war, incidents of terrorism, or responses to these events.
Additionally, oil supply disruptions related to Russia’s invasion of Ukraine have led and could continue to lead to increased fuel and shipping prices.
Additionally, oil supply disruptions related to Russia’s invasion of Ukraine led and could continue to lead to increased fuel and shipping prices.
For example, disruptions in the supply chain as a result of the COVID-19 pandemic and the current inflationary environment increased raw material costs, impacting pricing of our products, and caused shipping delays for certain of our products. Our business is affected by seasonality. Our business is subject to seasonal fluctuations.
For example, disruptions in the supply chain as a result of the COVID-19 pandemic and the recent inflationary environment increased raw material costs, impacting pricing of our products, and caused shipping delays for certain of our products. Our business is affected by seasonality. Our business is subject to seasonal fluctuations.
Although we believe we have had limited voluntary attrition of brand partners to date, a brand partner could choose to no longer work with us or provide less favorable terms for a variety of reasons, including current market and supply chain conditions.
Although we believe we have had limited voluntary attrition of brand partners to date, a brand partner could choose to no longer work with us or provide less favorable terms for a variety of reasons, including current operating, financial, market and supply chain conditions.
In addition to other risk factors discussed in this section, factors that may contribute to the variability of our quarterly and annual results include: • our success in attracting and retaining customers and subscribers; • maintaining successful relationships with brand partners and our ability to acquire products at acceptable prices and offer a compelling mix of products that are available for subscription, a-la-carte rental or purchase at any given time; • the amount and timing of our fulfillment costs, operating expenses and capital expenditures; • the timing and success of product launches, including pricing changes, new services and features we may introduce; • the success of our marketing and promotional efforts; • adverse economic and market conditions and other adverse global events that negatively impact commerce and consumer behavior and that could lead to inflationary pressures and supply chain disruptions; • disruptions or defects in our software or operations, such as privacy or data security incidents, outages, or other incidents that impact the availability, reliability, or performance of our business; • the impact of competitive developments and our response to those developments; • our ability to manage our business and future growth; • our ability to recruit and retain employees including fulfillment center labor to process, itemize, list, pack and ship our products; and • changes to financial accounting standards and the interpretation of those standards, which may affect the way we recognize and report our financial results.
In addition to other risk factors discussed in this Annual Report, factors that may contribute to the variability of our quarterly and annual results include: • our success in attracting and retaining customers and subscribers; • maintaining successful relationships with brand partners and our ability to acquire products at acceptable prices and offer a compelling mix of products that are available for Subscription, Reserve or Resale at any given time; • the amount and timing of our fulfillment costs, operating expenses and capital expenditures; • the timing and success of product launches, including pricing changes, new services and features we may introduce; • the success of our marketing and promotional efforts; • adverse economic and market conditions and other adverse global events that negatively impact commerce and consumer behavior and that could lead to inflationary pressures and supply chain disruptions; • disruptions or defects in our software or operations, such as privacy or data security incidents, outages, or other incidents that impact the availability, reliability, or performance of our business; • the impact of competitive developments and our response to those developments; • our ability to manage our business and future growth; • our ability to recruit and retain employees including fulfillment center labor to process, itemize, list, pack and ship our products; and • changes to financial accounting standards and the interpretation of those standards, which may affect the way we recognize and report our financial results.
Environmental, social and governance matters may impact our business and reputation. There has been increased focus, including by consumers, investors, employees and other stakeholders, as well as by governmental and non-governmental organizations, on environmental, social and governance matters generally and with regard to the fashion industry specifically.
Environmental, social and governance matters may adversely impact our business and reputation. There has been increased focus, including by consumers, investors, employees and other stakeholders, as well as by governmental and non-governmental organizations, on ESG matters generally and with regard to the fashion industry specifically.
In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting in our first annual report required to be filed with the SEC following the date we are no longer an “emerging growth company.” Our compliance with Section 404 will require that we incur substantial expenses and expend significant management efforts.
In addition, our independent registered public accounting firm will be required to attest to the effectiveness of our internal control over financial reporting in our first annual report required to be filed with the SEC following the date we are no longer an “emerging growth company.” At such time, our compliance with Section 404 will require that we incur substantial expenses and expend significant management efforts.
Further, we are subject to the PCI Data Security Standard, which is a multifaceted security standard that is designed to protect credit card account data as mandated by payment card industry entities. We rely on vendors to handle PCI matters for us and to ensure PCI compliance.
Further, we are subject to the PCI Data Security Standard, which is a multifaceted security standard that is designed to protect payment card data as mandated by payment card industry entities. We rely on vendors to handle PCI matters for us and to ensure PCI compliance.
We have hired additional employees and engaged consultants to assist us in complying with these requirements; however we may invest additional resources in our compliance efforts, including hiring more employees or engaging outside consultants, which may increase our operating expenses.
We have hired certain employees and engaged consultants to assist us in complying with these requirements; however we may invest additional resources in our compliance efforts, including hiring more employees or employees with additional credentials or engaging outside consultants, which may increase our operating expenses.
We have experienced many of these factors due to the COVID-19 pandemic and recent volatile macroeconomic environment and have seen negative impacts on customer demand at varying levels as a result. Furthermore, increases in consumer discretionary spending tend to fluctuate and may decrease, particularly if there is a recession and/or higher inflation leading to increased price sensitivity.
We have experienced many of these factors due to the recent volatile macroeconomic environment and have seen negative impacts on customer demand at varying levels as a result. Furthermore, increases in consumer discretionary spending tend to fluctuate and may decrease, particularly if there is a recession and/or higher inflation leading to increased price sensitivity.
Although alternative data center providers could host our business on a substantially similar basis to our current third-party cloud providers, transitioning our cloud infrastructure to alternative providers could potentially be disruptive, and we could incur significant one-time costs.
Although alternative data center providers may be able to host our business on a substantially similar basis to our current third-party cloud providers, transitioning our cloud infrastructure to alternative providers could potentially be disruptive, and we could incur significant one-time costs.
In connection with the preparation of our consolidated financial statements as of January 31, 2021, we identified material weaknesses in our internal control over financial reporting, as described below. As of January 31, 2023, these material weaknesses were still in the process of being remediated.
In connection with the preparation of our consolidated financial statements as of January 31, 2021, we identified material weaknesses in our internal control over financial reporting, as described below. As of January 31, 2024, these material weaknesses were still in the process of being remediated.
Our competitors, some of whom have greater resources than we do, may also be able to benefit from changes in e-commerce technologies or adapt better than us, which could harm our competitive position. 31 Table of Contents Our quarterly and annual results of operations may fluctuate, which may make it difficult to predict our future performance .
Our competitors, some of whom have greater resources than we do, may also be able to benefit from changes in e-commerce technologies or adapt better than us, which could harm our competitive position. Our quarterly and annual results of operations may fluctuate, which may make it difficult to predict our future performance .
Any factors that harm our operating results during these periods, including disruptions in our brand partners’ supply chains or unfavorable econ omic conditions could have a disproportionate effect on our results of operations for our entire fiscal year. 35 Table of Contents We also experience seasonality in the timing of expenses and capital outlays.
Any factors that harm our operating results during these periods, including disruptions in our brand partners’ supply chains or unfavorable econ omic conditions, could have a disproportionate effect on our results of operations for our entire fiscal year. We also experience seasonality in the timing of expenses and capital outlays.
Our ability to generate profit depends on our ability to grow customers and revenue and drive operational efficiencies in our business to generate better margins. In fiscal year 2022, we took significant steps to reduce our operating costs, improve our margins, and make progress towards profitability, which is an important financial goal for us over time.
Our ability to generate profit depends on our ability to grow customers and revenue and drive operational efficiencies in our business to generate better margins. In fiscal years 2022 and 2023, we took significant steps to reduce our operating costs, improve our margins, and make progress towards profitability, which is an important financial goal for us over time.
In some cases, such as our mobile application, errors may only be correctable through updates distributed through slower, third-party mechanisms, such as app stores, and may need to comply with third-party policies and procedures to be made available, which may add additional delays due to app review and customer delay in updating their mobile apps.
In some cases, such as our mobile application, certain errors are only able to be correctable through updates distributed through slower, third-party mechanisms, such as app stores, and may need to comply with third-party policies and procedures to be made available, which may add additional delays due to app review and customer delay in updating their mobile apps.
Any inability to access or delay in accessing these funds could adversely affect our business and financial position. 36 Table of Contents Our level of indebtedness could have a material adverse effect on our ability to generate sufficient cash to fulfill our obligations under such indebtedness, to react to changes in our business and to incur additional indebtedness to fund future needs.
Any inability to access or delay in accessing these funds could adversely affect our business and financial position. Our level of indebtedness could have a material adverse effect on our ability to generate sufficient cash to fulfill our obligations under such indebtedness, to react to changes in our business and to incur additional indebtedness to fund future needs.
Any of the foregoing could be harmful to our business, financial condition, or results of operations and could help our competitors develop offerings that are similar to or better than ours. 47 Table of Contents We are subject to rapidly changing and increasingly stringent laws and industry standards relating to data privacy, data security, data protection, and consumer protection .
Any of the foregoing could be harmful to our business, financial condition, or results of operations and could help our competitors develop offerings that are similar to or better than ours. We are subject to rapidly changing and increasingly stringent laws and industry standards relating to data privacy, data security, data protection, and consumer protection .
Our executive officers are employed on an at-will basis, which means they may terminate their employment with us at any time. The loss of one or more of our executive officers, or the failure by our executive team to effectively work with our employees and lead our company, could harm our business.
Our executive officers are employed on an at-will basis, which means they may terminate their employment with us at any time. The loss of one or more of our executive officers, the failure to appropriately manage executive transitions, or the failure by our executive team to effectively work with our employees and lead our company, could harm our business.
If we are unable to remediate the material weakness in a timely manner, or if additional material weaknesses exist or are discovered in the future, and we are unable to remediate any such material weakness, our reputation, results of operations and financial condition could suffer. 38 Table of Contents The requirements of being a public company may strain our resources, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members .
If we are unable to remediate the material weakness we have identified in a timely manner, or if additional material weaknesses exist or are discovered in the future, and we are unable to remediate any such material weakness, our reputation, results of operations and financial condition could suffer. 37 Table of Contents The requirements of being a public company may strain our resources, divert management’s attention, and affect our ability to attract and retain executive management and qualified board members .
Because the techniques used to circumvent security systems change frequently, are becoming increasingly sophisticated, are designed to evade detection and remove forensic evidence, are often not recognized until launched against a target and may originate from less regulated and remote areas around the world, we may be unable to timely or effectively anticipate, detect or recover from cyberattacks or security incidents in the future.
Because the techniques and tools (including artificial intelligence) used to circumvent security systems change frequently, are becoming increasingly sophisticated, are designed to evade detection and remove forensic evidence, are often not recognized until launched against a target and may originate from less regulated and remote areas around the world, we may be unable to timely or effectively anticipate, detect or recover from cyberattacks or security incidents in the future.
Additionally, if any of our insurance providers becomes insolvent, it would be unable to pay any operations-related claims that we make. 55 Table of Contents Insurance providers have also raised premiums and deductibles for many businesses, including ours, and may do so in the future.
Additionally, if any of our insurance providers becomes insolvent, it would be unable to pay any operations-related claims that we make. Insurance providers have also raised premiums and deductibles for many businesses, including ours, and may do so in the future.
In addition, each share of Class B common stock will convert automatically into one share of Class A common stock upon the date that is the earlier of (i) the transfer of such share to a person that is not in the same Permitted Ownership Group (as defined in the Amended Charter) as such Permitted Class B Holder (as defined in the Amended Charter), (ii) November 1, 2028, or (iii) with respect to any shares held by any person in our Co-Founder’s Permitted Ownership Group, (A) such time as a Co-Founder is removed or resigns from the Board of Directors, or otherwise ceases to serve as a director on the Board of Directors, (B) such time as a Co-Founder ceases to be either an employee, officer or consultant, or (C) the date that is 12 months after the death or disability of a Co-Founder.
In addition, each share of Class B common stock will convert automatically into one share of Class A common stock upon the date that is the earlier of (i) the transfer of such share to a person that is not in the same Permitted Ownership Group (as defined in our Amended and Restated Certificate of Incorporation (“Amended Charter”)) as such Permitted Class B Holder (as defined in the Amended Charter), (ii) November 1, 2028, or (iii) with respect to any shares held by any person in our Co-Founder’s Permitted Ownership Group, (A) such time as a Co-Founder is removed or resigns from the Board of Directors, or otherwise ceases to serve as a director on the Board of Directors, (B) such time as a Co-Founder ceases to be either an employee, officer or consultant, or (C) the date that is 12 months after the death or disability of a Co-Founder.
Our brand partners and manufacturers may be forced to reduce their production, shut down their operations or file for bankruptcy. Our ability to obtain products may also depend on our brand partners’ ability to obtain financing, including through factoring companies and other entities, which may also assess our creditworthiness and procurement ability.
Our brand partners and manufacturers may be forced to reduce their production or operations, shut down their operations or file for bankruptcy. Our ability to obtain products timely and cost effectively may also depend on our brand partners’ ability to obtain financing, including through factoring companies and other entities, which may also assess our creditworthiness and procurement ability.
However, all of those NOLs were available by the year ended January 31, 2017. We may have experienced and may experience in the future additional ownership changes as a result of shifts in our stock ownership, some of which may be outside of our control.
However, all of those NOLs were available by the year ended January 31, 2017. We may have experienced since March 2021 and may experience in the future additional ownership changes as a result of shifts in our stock ownership, some of which may be outside of our control.
Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets. 39 Table of Contents We are an “emerging growth company,” and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies will make our Class A common stock less attractive to investors.
Failure to remedy any material weakness in our internal control over financial reporting, or to implement or maintain other effective control systems required of public companies, could also restrict our future access to the capital markets. 38 Table of Contents We are an “emerging growth company” and a “smaller reporting company,” and we cannot be certain if the reduced reporting and disclosure requirements applicable to emerging growth companies and smaller reporting companies will make our Class A common stock less attractive to investors.
Although we anticipate that our operating results in future fiscal years will begin to reflect a more normal operating environment, the current economic and public health climate has created a high degree of uncertainty and there is no assurance that our scale, number of customers and revenue will return to or surpass pre-pandemic levels for a sustained period of time.
Although we anticipate that our operating results in future fiscal years will reflect a more normal operating environment, the current economic climate has created a high degree of uncertainty and there is no assurance that our scale, number of customers, revenue or growth will return to or surpass pre-pandemic levels for a sustained period of time.
Any actual or perceived non-compliance could result in litigation and proceedings against us by governmental entities, customers or others, fines and civil or criminal penalties, limited ability or inability to operate our business, offer services, or market our business in certain jurisdictions, negative publicity and harm to our brand and reputation, and reduced overall demand for our products and offerings.
Any actual or perceived non-compliance could result in litigation (including class action lawsuits) and proceedings against us by governmental entities, customers or others, fines and civil or criminal penalties, limited ability or inability to operate our business, offer services, or market our business in certain jurisdictions, negative publicity and harm to our brand and reputation, and reduced overall demand for our products and offerings.
This material weakness contributed to the following additional material weaknesses: 37 Table of Contents We did not design and maintain effective controls to ensure (i) the appropriate segregation of duties in the operation of manual controls and (ii) journal entries were reviewed at the appropriate level of precision.
This material weakness contributed to the following additional material weaknesses: We did not design and maintain effective controls to ensure (i) the appropriate segregation of duties in the operation of manual controls and (ii) journal entries were reviewed at the appropriate level of precision.
We have recorded a full valuation allowance against our U.S. deferred tax assets, which includes net operating loss carryforwards. 50 Table of Contents Changes in our effective tax rate or tax liability may have an adverse effect on our results of operations .
We have recorded a full valuation allowance against our U.S. deferred tax assets, which includes net operating loss carryforwards. Changes in our effective tax rate or tax liability may have an adverse effect on our results of operations .
Any errors or vulnerabilities discovered in our code could also result in damage to our reputation, loss of our customers, unauthorized disclosure of personal and confidential information, loss of revenue or liability for damages, any of which could adversely affect our growth prospects and our business.
Any errors or vulnerabilities discovered in our code or IT Systems generally could also result in damage to our reputation, loss of our customers, unauthorized disclosure of personal and confidential information, loss of revenue or liability for damages, any of which could adversely affect our growth prospects and our business.
There are provisions in our Amended Charter and Amended Bylaws that may make it difficult for a third party to acquire, or attempt to acquire, control of our company, even if a change in control were considered favorable by our stockholders.
There are provisions in our Amended Charter and Amended and Restated Bylaws (“Amended Bylaws”) that may make it difficult for a third party to acquire, or attempt to acquire, control of our company, even if a change in control were considered favorable by our stockholders.
We have grown rapidly over the last several years, due in large part to the growth in demand for our Subscription offerings, however, our recent growth rates and financial performance should not necessarily be considered indicative of our future performance.
We have grown rapidly in the last several years, due in large part to the growth in demand for our Subscription offerings; however, our historical growth rates and financial performance should not necessarily be considered indicative of our future performance.
If we are unable to accurately forecast customer demand, acquire and manage our products effectively and plan for future expenses, our operating results could be adversely affected. We are vulnerable to demand and pricing shifts and to suboptimal selection and timing of product purchases.
If we are unable to acquire and manage our products effectively and plan for future expenses, our operating results could be adversely affected. We are vulnerable to demand and pricing shifts and to suboptimal selection and timing of product purchases.
Our compliance efforts are expected to require ongoing investments and may be costly to maintain. 49 Table of Contents Despite our efforts, we may become subject to claims that we have violated such laws and regulations based on past, present, and future practices, which could have an adverse impact on our business and reputation, and be costly for us to defend.
Our compliance efforts are expected to require ongoing investments and may be costly to maintain. Despite our efforts, we may become subject to claims that we have violated such laws and regulations based on past, present, and future practices, which could have an adverse impact on our business and reputation, and be costly for us to defend.
If the steps we take do not remediate the material weaknesses in a timely manner, or if we fail to implement and maintain effective internal control over financial reporting, there could be errors in our annual or interim consolidated financial statements that could result in a restatement of our financial statements, and could cause us to fail to meet our reporting obligations, any of which could diminish investor confidence in us and cause a decline in the price of our Class A common stock.
If the steps we take do not remediate the material weaknesses we have identified in a timely manner, or if our internal control over financial reporting is not effective, there could be errors in our annual or interim consolidated financial statements that could result in a restatement of our financial statements, and could cause us to fail to meet our reporting obligations, any of which could diminish investor confidence in us and cause a decline in the price of our Class A common stock.
We continue to implement measures to remediate the identified material weaknesses.
We continue to implement measures designed to remediate the identified material weaknesses.
We have performed extensive work with personnel responsible for the design and operating effectiveness of internal control over financial reporting in our efforts to ensure that appropriate evidence is maintained.
We have performed extensive work with personnel responsible for the design and operating effectiveness of internal control over financial reporting in our efforts to ensure that appropriate controls are in place and appropriate evidence is maintained.
A decision to close their facilities without adequate notice or other unanticipated problems or disruptions could result in lengthy interruptions to our business. Further, our agreements with our third-party cloud providers do not provide us with an adequate remedy for every scenario that could negatively affect our business.
A decision to close their facilities without adequate notice or other unanticipated problems or disruptions could result in lengthy interruptions to our business. Further, our agreements with our third-party cloud providers do not provide us with an adequate remedy for every scenario that could negatively affect our business and limit our third-party cloud providers’ liability.
The Controlling the Assault of Non-Solicited Pornography and Marketing Act (the “CAN-SPAM”), imposes specific restrictions and requirements on our efforts to send marketing materials via email, including notice obligations that must be included in our marketing emails and the ability for recipients to unsubscribe from such emails.
Likewise, the Controlling the Assault of Non-Solicited Pornography and Marketing Act (the “CAN-SPAM”), imposes specific restrictions and requirements on our efforts to send marketing materials via email, including notice obligations and content requirements that must be addressed in our marketing emails and the ability for recipients to unsubscribe from such emails.
Significant estimates and judgments include the useful life and salvage value of rental product, incremental borrowing rate to determine lease liabilities and right-of-use assets, and the valuation of share-based compensation and warrants.
Significant estimates and judgments include the useful life and salvage value of rental product, incremental borrowing rate to determine lease liabilities and right-of-use assets, valuation of share-based compensation and warrants, and recoverability of long-lived assets.
Our shipping vendors have faced and may continue to face increased volumes which, in turn, has caused and could in the future cause a decrease in their service levels, including shipping delays, or result in an increase of their prices. We have recently experienced increased shipping costs, and these costs may continue to increase in the future.
Our shipping vendors have faced and may continue to face increased volumes which, in turn, has caused and could in the future cause a decrease in their service levels, including shipping delays, or result in an increase in their prices. We have experienced increased shipping costs in recent years, and these costs may increase in the future.
If we are not able to improve our website and mobile app performance, keep pace with technological changes, enhance our current offerings, and develop new offerings to respond to the changing needs of partners and customers, our business, financial performance, and growth may be harmed .
If we are not able to improve our website and mobile app performance, keep pace with technological changes, enhance our current offerings, and develop new offerings in a timely way to respond to the changing needs of partners and customers, our business, financial performance, and growth may be harmed .
The benefits we currently experience from these relationships could be adversely affected if they: • discontinue selling products to us or manufacturing our Exclusive Designs; • enter into arrangements with competitors that could impair our ability to source their products, including by giving our competitors exclusivity arrangements or limiting our access to certain products; • raise the prices they charge us; • are not satisfied with the value proposition we offer them; • do not view our brand favorably; • change pricing terms to require us to pay a significant portion of the cost of items on delivery or upfront; • experience negative publicity or reputational issues; • do not follow our vendor code of conduct and/or violate legal and regulatory requirements; • experience supply chain disruptions that cause lead times to be lengthened or missed entirely; or • fail to execute on the design we have provided for co-manufactured products. 51 Table of Contents Events that adversely impact our brand and manufacturing partners could impair our ability to obtain adequate and timely products.
The benefits we currently experience from these relationships could be adversely affected if they: • discontinue selling products to us or manufacturing our Exclusive Designs; • enter into arrangements with competitors that could impair our ability to source their products, including by giving our competitors exclusivity arrangements or limiting our access to certain products; • raise the prices they charge us; • are not satisfied with the value proposition we offer them; • do not view our brand or financial profile favorably; • change pricing terms to require us to pay a significant portion of the cost of items on delivery or upfront; • experience negative publicity or reputational issues; • do not follow our vendor code of conduct and/or violate legal and regulatory requirements; • experience supply chain disruptions that cause lead times to be lengthened or missed entirely; or • fail to execute on the design we have provided for co-manufactured products.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeItem 2. Properties Our corporate headquarters is located in Brooklyn, New York, which consists of approximately 47,000 square feet of space under a lease that expires in November 2032.
Biggest changeItem 2. Properties Our corporate headquarters is located in Brooklyn, New York, which consists of approximately 47,000 square feet of space under a lease that expires in November 2032. We also lease and operate two fulfillment centers in Secaucus, New Jersey and Arlington, Texas under leases that expire in August 2029 and May 2030, respectively.
Legal Proceedings The information contained in “Note 16 — Commitments and Contingencies” in the Notes to the Consolidated Financial Statements is incorporated by reference into this Item. Item 4. Mine Safety Disclosures Not applicable. 61 Table of Contents Part II
Legal Proceedings The information contained in “Note 16 — Commitments and Contingencies” in the Notes to the Consolidated Financial Statements is incorporated by reference into this Item. Item 4. Mine Safety Disclosures Not applicable. 62 Table of Contents Part II
We believe our facilities are suitable for our current needs. We intend to expand our facilities or add new facilities as we grow and believe that suitable additional or alternative space will be available as needed to accommodate such growth. Item 3.
We also lease commercial spaces in New York City and Galway, Ireland. We believe our facilities are suitable for our current needs. We intend to expand our facilities or add new facilities as we grow and believe that suitable additional or alternative space will be available as needed to accommodate such growth. Item 3.
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We also lease a corporate space and photo studio in New York, New York and lease and operate fulfillment centers in Secaucus, New Jersey and Arlington, Texas totaling approximately 540,000 square feet, under leases that expire in August 2024 and May 2030, respectively. We also lease a corporate space in Galway, Ireland.

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 61 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities 62 Item 6. [Reserved] 63 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 64 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 84 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 62 Part II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 63 Item 6. [Reserved] 64 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 65 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 86 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changePerformance Graph The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, or otherwise subject to the liabilities under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing. 62 Table of Contents The following graph shows a comparison from October 27, 2021 (the date our common stock commenced trading on Nasdaq), through January 31, 2023, of the cumulative total returns for our common stock, the Nasdaq Composite Index and the S&P Retail Select Index.
Biggest changeIssuer Purchases of Equity Securities None. 63 Table of Contents Performance Graph The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, or otherwise subject to the liabilities under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
Use of Proceeds from our IPO The offer and sale of the shares in the IPO was registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-260027), which was declared effective by the SEC on October 26, 2021.
Recent Sales of Unregistered Securities None. Use of Proceeds from our IPO The offer and sale of the shares in the IPO was registered under the Securities Act pursuant to a registration statement on Form S-1 (File No. 333-260027), which was declared effective by the SEC on October 26, 2021.
Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities Market Information Our Class A common stock is listed on the Nasdaq Global Select Market under the symbol “RENT.” Holders of Record As of April 7, 2023, there were approximately 177 stockholders of record of our Class A common stock and seven stockholders of record of our Class B common stock.
Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Market Information Our Class A common stock is listed on the Nasdaq Capital Market under the symbol “RENT.” Holders of Record As of April 5, 2024, there were approximately 159 stockholders of record of our Class A common stock and seven stockholders of record of our Class B common stock.
There has been no material change in the expected use of the net proceeds from our IPO, as described in our final prospectus filed with the SEC on October 27, 2021 pursuant to Rule 424(b) under the Securities Act of 1933. Issuer Purchases of Equity Securities None.
There has been no material change in the expected use of the net proceeds from our IPO, as described in our final prospectus filed with the SEC on October 27, 2021 pursuant to Rule 424(b) under the Securities Act of 1933. As of the date of this filing, all net proceeds have been applied.
Removed
Recent Sales of Unregistered Securities Other than sales previously reported in the Company’s Current Report on Form 8-K filed with the SEC on January 31, 2023, the Company did not sell any unregistered securities during the period covered by this report.
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The following graph shows a comparison from October 27, 2021 (the date our common stock commenced trading on Nasdaq), through January 31, 2024, of the cumulative total returns for our common stock, the Nasdaq Composite Index and the S&P Retail Select Index.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe pilot to sell brand new Exclusive Design products wholesale to a third party retailer and launch of a new liquidation partnership together contributed $5.1 million to Adjusted EBITDA in the year ended January 31, 2023 . 78 Table of Contents The following table presents a reconciliation of net loss, the most comparable GAAP financial measure, to Adjusted EBITDA for the periods presented: Years Ended January 31, 2023 2022 2021 (in millions) Net loss $ (138.7) $ (211.8) $ (171.1) Interest (income) / expense, net (1) 36.8 53.0 46.6 Rental product depreciation 52.9 50.3 69.9 Other depreciation and amortization (2) 16.4 19.4 23.0 Share-based compensation (3) 25.4 26.6 8.2 Write-off of liquidated assets (4) 5.8 4.8 3.3 Non-recurring adjustments (5) 1.3 5.3 4.2 Non-ordinary course legal fees (6) 0.1 — — Restructuring charges (7) 2.4 — — Loss on asset impairment related to restructuring (8) 5.3 — — Income tax (benefit) / expense (0.2) (0.3) — (Gain) / loss on warrant liability revaluation, net (9) — 24.9 (0.4) (Gain) / loss on debt extinguishment, net (10) — 12.2 0.6 Other (income) / expense, net (11) (1.5) (3.9) (6.2) Other (gains) / losses (12) 0.7 0.3 1.6 Adjusted EBITDA $ 6.7 $ (19.2) $ (20.3) Adjusted EBITDA Margin (13) 2.3 % (9.4) % (12.9) % __________ (1) Includes debt discount amortization of $4.3 million in the year ended January 31, 2023, $5.9 million in the year ended January 31, 2022, and $5.0 million in the year ended January 31, 2021.
Biggest changeThe following table presents a reconciliation of net loss, the most comparable GAAP financial measure, to Adjusted EBITDA for the periods presented: Years Ended January 31, 2024 2023 2022 (in millions) Net loss $ (113.2) $ (138.7) $ (211.8) Interest (income) / expense, net (1) 33.7 36.8 53.0 Rental product depreciation 57.1 52.9 50.3 Other depreciation and amortization (2) 14.7 16.4 19.4 Share-based compensation (3) 26.2 25.4 26.6 Write-off of liquidated assets (4) 3.4 5.8 4.8 Non-recurring adjustments (5) 1.7 1.3 5.3 Non-ordinary course legal fees (6) 0.3 0.1 — Restructuring charges (7) 2.0 2.4 — Loss on asset impairment related to restructuring (8) 1.1 5.3 — Income tax (benefit) / expense 0.2 (0.2) (0.3) (Gain) / loss on warrant liability revaluation, net (9) — — 24.9 (Gain) / loss on debt extinguishment, net (10) — — 12.2 Other (income) / expense, net (11) (0.7) (1.5) (3.9) Other (gains) / losses (12) 0.4 0.7 0.3 Adjusted EBITDA $ 26.9 $ 6.7 $ (19.2) Adjusted EBITDA Margin (13) 9.0 % 2.3 % (9.4) % __________ (1) Includes debt discount amortization of $11.7 million in the year ended January 31, 2024, $4.3 million in the year ended January 31, 2023, and $5.9 million in the year ended January 31, 2022.
The non-cash charges were primarily comprised of $50.2 million of rental product depreciation and write-off expenses, $14.3 million of payment-in-kind interest, $25.4 million of share-based compensation, $4.3 million of debt discount amortization, $17.0 million of other fixed and intangible asset depreciation and the loss on the surrender of fixed asset write- offs related to the partial termination of the lease of the corporate headquarters (see “Note 5 - Leases – Lessee Accounting” in the Notes to the Consolidated Financial Statements) and $5.3 million consisting of asset impairment charges related to discontinuing warehouse operations projects in connection with the September 2022 restructuring plan, of which $0.4 million is included in accrued expenses related to the asset impairment (see the Supplemental Cash Flow Information in Part II, Item 8.
The non-cash charges were primarily comprised of $50.2 million of rental product depreciation and write-off expenses, $14.3 million of payment-in-kind interest, $25.4 million of share-based compensation, $4.3 million of debt discount amortization, $17.0 million of other fixed and intangible asset depreciation and the loss on the surrender of fixed asset write-offs related to the partial termination of the lease of the corporate headquarters (see “Note 5 - Leases - Lessee Accounting” in the Notes to the Consolidated Financial Statements) and $5.3 million consisting of asset impairment charges related to the discontinuation of warehouse operations projects in connection with the September 2022 restructuring plan, of which $0.4 million is included in accrued expenses related to the asset impairment (see the Supplemental Cash Flow Information in Part II, Item 8.
Many factors impact the purchases of rental product including our acquisition mix strategy, the proportion of subscribers to total customers, timing of when those subscribers are acquired, the formality of styles, brand assortment, opportunities in the market and timing of when the rental product is received and paid for.
Many factors impact the purchases of rental product including our depth and acquisition mix strategy, the proportion of subscribers to total customers, timing of when those subscribers are acquired, the formality of styles, brand assortment, opportunities in the market and timing of when the rental product is received and paid for.
“Financial Statements and Supplementary Data”). The investment in rental product was to support our growth in customer demand. The majority of the investment in fixed and intangible assets was related to investments in automation assets, additional processing machinery and equipment for our Secaucus and Arlington warehouses.
“Financial Statements and Supplementary Data”). The investment in rental product was to support growth in customer demand. The majority of the investment in fixed and intangible assets was related to investments in automation assets, additional processing machinery and equipment for the Secaucus and Arlington warehouses.
We expect to maintain this valuation allowance until it becomes more likely than not that the benefit of our federal and state deferred tax assets will be realized by way of expected future taxable income in the United States. 75 Table of Contents Results of Operations The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in this Annual Report on Form 10-K.
We expect to maintain this valuation allowance until it becomes more likely than not that the benefit of our federal and state deferred tax assets will be realized by way of expected future taxable income in the United States. 76 Table of Contents Results of Operations The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in this Annual Report on Form 10-K.
Overview We give customers ongoing access to our “unlimited closet” — with tens of thousands of styles by hundreds of designer brands — through our Subscription offering or the ability to rent a-la-carte through our Reserve offering.
Overview We give customers ongoing access to our “unlimited closet” — with thousands of styles by hundreds of designer brands — through our Subscription offering or the ability to rent a-la-carte through our Reserve offering.
(9) Reflects the expense associated with revaluing prior liability classified lender warrants to the respective fair value at period end, or prior to conversion. As of January 31, 2023, all outstanding warrants are equity classified and therefore do not require remeasurement going forward. (10) Includes debt extinguishment costs related to debt paydown in the periods presented.
(9) Reflects the expense associated with revaluing prior liability classified lender warrants to the respective fair value at period end, or prior to conversion. As of January 31, 2022, all outstanding warrants are equity classified and therefore do not require remeasurement going forward. (10) Includes debt extinguishment costs related to debt paydown in the periods presented.
We acquire customers efficiently as evidenced by over 80% of our lifetime customers having joined organically. As seen in the table below, our LTV to CAC ratio has remained relatively consistent for our fiscal year 2018 through fiscal year 2022 customer cohorts, with the exception of our fiscal year 2020 cohort which was impacted by the COVID-19 pandemic.
We acquire customers efficiently as evidenced by over 80% of our lifetime customers having joined organically. As seen in the table below, our LTV to CAC ratio has remained relatively consistent for our fiscal year 2018 through fiscal year 2023 customer cohorts, with the exception of our fiscal year 2020 cohort which was impacted by the COVID-19 pandemic.
To the extent we are successful in becoming more efficient in fulfilling orders, and at a magnitude that is able to offset increasing shipping costs, wage rates and cleaning/packing supply price increases, we would expect these expenses to decrease as a percentage of total revenue over the longer term. Technology.
To the extent we are successful in becoming more efficient in fulfilling orders, and at a magnitude that is able to offset long-term increases in shipping costs, wage rates and cleaning/packing supply price increases, we would expect these expenses to decrease as a percentage of total revenue over the longer term. Technology.
The fair value of our common stock was determined by considering a number of objective and subjective factors, including: the valuation of comparable companies, sales of preferred stock to unrelated third parties, our operating and financial performance, the lack of liquidity of common stock and general and industry specific economic outlook, among other factors. 83 Table of Contents • Expected volatility.
The fair value of our common stock was determined by considering a number of objective and subjective factors, including: the valuation of comparable companies, sales of preferred stock to unrelated third parties, our operating and financial performance, the lack of liquidity of common stock and general and industry specific economic outlook, among other factors. 84 Table of Contents • Expected volatility.
Gain / (Loss) on Warrant Liability Revaluation, Net. Gain / (loss) on warrant liability revaluation is associated with revaluing liability classified warrants to the respective fair value at period end or prior to conversion. As of January 31, 2023, all outstanding warrants are equity classified and therefore do not require remeasurement going forward. Gain / (Loss) on Debt Extinguishment, Net.
Gain / (Loss) on Warrant Liability Revaluation, Net. Gain / (loss) on warrant liability revaluation is associated with revaluing liability classified warrants to the respective fair value at period end or prior to conversion. As of January 31, 2024, all outstanding warrants are equity classified and therefore do not require remeasurement going forward. Gain / (Loss) on Debt Extinguishment, Net.
Discussion of fiscal year 2020 financial condition and results of operations and year-to-year comparisons between fiscal years 2021 and 2020 are included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended January 31, 2022.
Discussion of fiscal year 2021 financial condition and results of operations and year-to-year comparisons between fiscal years 2022 and 2021 are included in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the fiscal year ended January 31, 2023.
The investment in rental product does not include an additional $5.4 million of cost for units received in the current period but not yet paid for, but does include $(6.5) million of cost for units paid for in the current period but received in the prior period (see the Supplemental Cash Flow Information in Part II, Item 8.
The investment in rental product does not include an additional $3.3 million of cost for units received in the current period but not yet paid for, but does include $(5.4) million of cost for units paid for in the current period but received in the prior period (see the Supplemental Cash Flow Information in Part II, Item 8.
The investment in rental product did not include the additional $6.5 million of cost for units received in the current period but not yet paid for but did include $(3.6) million of cost for units paid for in the current period but received in the prior period (see Supplemental Cash Flow Information in Part II, Item 8.
The investment in rental product did not include the additional $5.4 million of cost for units received in the current period but not yet paid for, but did include $(6.5) million of cost for units paid for in the current period but received in the prior period (see Supplemental Cash Flow Information in Part II, Item 8.
For example, over one-third of our revenue in fiscal year 2022 was generated by customers who placed their first order with us in fiscal year 2017 or prior. We also assess the productivity of our historical customer cohorts by measuring the revenue and profit we generate from all new customers over their lifetime (“LTV”) against customer acquisition costs (“CAC”).
For example, approximately one-third of our revenue in fiscal year 2023 was generated by customers who placed their first order with us in fiscal year 2017 or prior. We also assess the productivity of our historical customer cohorts by measuring the revenue and profit we generate from all new customers over their lifetime (“LTV”) against customer acquisition costs (“CAC”).
Description Consolidated Statement of Operations Consolidated Balance Sheets Consolidated Statement of Cash Flows Percent of Items Acquired in FY 2022 / 2021 / 2020 WHOLESALE Items are acquired directly from brands partners, typically at a discount to wholesale price Cost is recognized through straight-line depreciation, with a three-year useful life and 20% salvage value, in the "Rental Product Depreciation and Revenue Share" line ⁽¹⁾ Total cost is capitalized as "Rental Products" in long-term assets Total cost is recognized as a capital expenditure ("Purchases of Rental Product") at time of acquisition 42% / 45% / 46% SHARE BY RTR ⁽²⁾ Items are acquired directly from brand partners on consignment, at zero to low upfront cost, with performance-based revenue share payments to our brand partners over time Upfront and performance-based revenue share payments are expensed as incurred in the "Rental Product Depreciation and Revenue Share" line Items are not capitalized on the balance sheet as we do not own them Upfront revenue share payments flow through Net Income as incurred 27% / 33% / 36% 67 Table of Contents EXCLUSIVE DESIGNS ⁽²⁾⁽³⁾ Items are designed using our data in collaboration with our brand partners We manufacture through third-party partners and pay the brand partner an upfront fee and minimal revenue share payments Upfront and performance-based revenue share payments are expensed as incurred in the "Rental Product Depreciation and Revenue Share" line Manufacturing cost is recognized through straight-line depreciation, with a three-year useful life and 20% salvage value, in the "Rental Product Depreciation and Revenue Share" line ⁽¹⁾ Manufacturing cost is capitalized as "Rental Products" in long-term assets Upfront and revenue share payments flow through Net Income as incurred Manufacturing cost is recognized as a capital expenditure ("Purchases of Rental Product") at time of acquisition 31% / 22% / 18% For additional details, refer to the section titled "Business - Our Unique Brand Partner Approach." ⁽¹⁾ The cost of accessory items, which made up less than 10% of the gross book value of rental product as of January 31, 2023, is recognized through straight-line depreciation with two-year useful life and 30% salvage value. ⁽²⁾ For both Share by RTR and Exclusive Designs, the Company shares a percentage of revenue less a logistics fee with the brand.
Description Consolidated Statement of Operations Consolidated Balance Sheets Consolidated Statement of Cash Flows Percent of Items Acquired in FY 2023 / 2022 / 2021 WHOLESALE Items are acquired directly from brands partners, typically at a discount to wholesale price Cost is recognized through straight-line depreciation, with a three-year useful life and 20% salvage value, in the "Rental Product Depreciation and Revenue Share" line ⁽¹⁾ Total cost is capitalized as "Rental Products" in long-term assets Total cost is recognized as a capital expenditure ("Purchases of Rental Product") at time of acquisition 39% / 42% / 45% SHARE BY RTR ⁽²⁾ Items are acquired directly from brand partners on consignment, at zero to low upfront cost, with performance-based revenue share payments to our brand partners over time Upfront and performance-based revenue share payments are expensed as incurred in the "Rental Product Depreciation and Revenue Share" line Items are not capitalized on the balance sheet as we do not own them Upfront revenue share payments flow through Net Income as incurred 33% / 27% / 33% 68 Table of Contents EXCLUSIVE DESIGNS ⁽²⁾⁽³⁾ Items are designed using our data in collaboration with our brand partners We manufacture through third-party partners and pay the brand partner an upfront fee and minimal revenue share payments Upfront and performance-based revenue share payments are expensed as incurred in the "Rental Product Depreciation and Revenue Share" line Manufacturing cost is recognized through straight-line depreciation, with a three-year useful life and 20% salvage value, in the "Rental Product Depreciation and Revenue Share" line ⁽¹⁾ Manufacturing cost is capitalized as "Rental Products" in long-term assets Upfront and revenue share payments flow through Net Income as incurred Manufacturing cost is recognized as a capital expenditure ("Purchases of Rental Product") at time of acquisition 28% / 31% / 22% For additional details, refer to the section titled "Business - Our Unique Brand Partner Approach." ⁽¹⁾ The cost of accessory items, which made up less than 10% of the gross book value of rental product as of January 31, 2024, is recognized through straight-line depreciation with two-year useful life and 30% salvage value. ⁽²⁾ For both Share by RTR and Exclusive Designs, the Company shares a percentage of revenue less a logistics fee with the brand.
We generate Subscription and Reserve rental revenue from subscription and Reserve rental fees. We recognize subscription fees ratably over the subscription period, commencing on the date the subscriber enrolls in a subscription program. These fees are collected upon enrollment and any revenue from an unrecognized portion of the subscription period is deferred to the following fiscal period.
We recognize subscription fees ratably over the subscription period, commencing on the date the subscriber enrolls in a subscription program. These fees are collected upon enrollment and any revenue from an unrecognized portion of the subscription period is deferred to the following fiscal period.
(13) Adjusted EBITDA Margin calculated as Adjusted EBITDA as a percentage of revenue. 79 Table of Contents Liquidity and Capital Resources Since our founding, we have financed our operations primarily from net proceeds from the sale of redeemable preferred stock, common stock and debt financings.
(13) Adjusted EBITDA Margin calculated as Adjusted EBITDA as a percentage of revenue. Liquidity and Capital Resources Since our founding, we have financed our operations primarily from net proceeds from the sale of redeemable preferred stock, common stock and debt financings.
For the year ended January 31, 2023, net cash used in investing activi ties was $(44.3) million, primarily consisting of $(62.1) million of purchases of rental product incurred in the period and $(8.9) million of purchases of fixed and intangible assets.
For the year ended January 31, 2023, net cash used in investing activities was $(44.3) million, primarily consisting of $(62.1) million of purchases of rental product incurred in the period and $(8.9) million of purchases of fixed and intangible assets .
The amount and proportion of rental product depreciation and revenue share will vary from period to period based on how and when we acquire items as well as the mix of our rental product base. Other Depreciation and Amortization.
The amount and proportion of rental product depreciation and revenue share will vary from period to period based on how and when we acquire items as well as the mix of our rental product base. 75 Table of Contents Other Depreciation and Amortization.
The following discussion focuses on fiscal years 2022 and 2021 financial condition and results of operations and year-to-year comparisons between fiscal years 2022 and 2021.
The following discussion focuses on fiscal years 2023 and 2022 financial condition and results of operations and year-to-year comparisons between fiscal years 2023 and 2022.
Adjusted EBITDA and Adjusted EBITDA Margin are key performance measures used by management to assess our operating performance and the operating leverage of our business prior to capital expenditures. Our Adjusted EBITDA margins have improved from (9.4)% in the year ended January 31, 2022 to 2.3% in the year ended January 31, 2023.
Adjusted EBITDA and Adjusted EBITDA Margin are key performance measures used by management to assess our operating performance and the operating leverage of our business prior to capital expenditures. Our Adjusted EBITDA margins have improved from 2.3% in the year ended January 31, 2023 to 9.0% in the year ended January 31, 2024.
Other depreciation and amortization expenses consist of depreciation and amortization amounts for fixed assets, intangible assets including capitalized software, and financing right-of-use assets. Restructuring Charges . Restructuring charges consist of severance and related costs associated with the September 2022 restructuring plan. Loss on Asset Impairment Related to Restructuring .
Other depreciation and amortization expenses consist of depreciation and amortization amounts for fixed assets, intangible assets including capitalized software, and financing right-of-use assets. Restructuring Charges . Restructuring charges consist of severance and related costs associated with the January 2024 and September 2022 restructuring plans. Loss on Asset Impairment Related to Restructuring .
As of January 31, 2023 and January 31, 2022, the Company had no outstanding warrants classified as liabilities. Recent Accounting Pronouncements See “Note 2 — Summary of Significant Accounting Policies ” in the Notes to Consolidated Financial Statements for a description of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.
As of January 31, 2024 and January 31, 2023, the Company had no outstanding warrants classified as liabilities. 85 Table of Contents Recent Accounting Pronouncements See “Note 2 — Summary of Significant Accounting Policies ” in the Notes to Consolidated Financial Statements for a description of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.
Adjusted EBITDA and Adjusted EBITDA Margin: We define Adjusted EBITDA as net loss, adjusted to exclude interest expense, rental product depreciation, other depreciation and amortization, share-based compensation expense, write-off of liquidated rental product assets, certain non-recurring or one-time costs (see below footnotes to the reconciliation table), restructuring charges, loss on asset impairment related to restructuring, income taxes, warrant liability revaluation gains / losses, debt extinguishment gains / losses, other income and expense, and other gains / losses.
Adjusted EBITDA and Adjusted EBITDA Margin: We define Adjusted EBITDA as net loss, adjusted to exclude interest expense, rental product depreciation, other depreciation and amortization, share-based compensation expense, write-off of liquidated rental product assets, certain non-recurring or one-time costs (see below footnotes to the reconciliation table), non-ordinary course legal expenses, restructuring charges, loss on asset impairment related to restructuring, income tax (benefit) expense, warrant liability revaluation gains / losses, debt extinguishment gains / losses, other income and expense, and other gains / losses.
Restructuring charges of $2.4 million for severance and related costs were recognized during the year ended January 31, 2023 and are reflected in Restructuring charges on our Consolidated Statements of Operations.
Restructuring charges of $2.0 million for severance and related costs were recognized during the year ended January 31, 2024 and are reflected in Restructuring charges on our Consolidated Statements of Operations.
Though we anticipate quarterly fluctuations in operating leverage, with these reductions we expect our fixed costs to decrease as a percentage of total revenue in fiscal year 2023, and over time we anticipate that our operating costs will grow more slowly than our total revenue on an annual basis.
Though we anticipate quarterly fluctuations in operating leverage, with these reductions and continuous improvements to our cost structure, we expect our fixed costs to decrease as a percentage of total revenue in fiscal year 2024, and over time we anticipate that our operating costs will grow more slowly than our total revenue on an annual basis.
For the year ended January 31, 2023, net cash used in operating activities was $(47.7) million, which consisted of a net loss of $(138.7) million, partially offset by non-cash charges of $116.1 million, reclassification of the proceeds from the sale of rental product of $17.9 million and a net change of $(7.2) million in our operating assets and liabilities.
“Financial Statements and Supplementary Data”) . 82 Table of Contents For the year ended January 31, 2023, net cash used in operating activities was $(47.7) million, which consisted of a net loss of $(138.7) million, partially offset by non-cash charges of $116.1 million, reclassification of the proceeds from the sale of rental product of $17.9 million and a net change of $(7.2) million in our operating assets and liabilities.
See “Note 5 – Leases – Lessee Accounting” in the Notes to the Consolidated Financial Statements for our minimum fixed lease obligations under existing lease agreements as of January 31, 2023 . 82 Table of Contents Critical Accounting Estimates Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP.
See “Note 5 – Leases – Lessee Accounting” in the Notes to the Consolidated Financial Statements for our minimum fixed lease obligations under existing lease agreements as of January 31, 2024 , including the discussion of the recent extension of our Secaucus lease. 83 Table of Contents Critical Accounting Estimates Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP.
We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of total revenue, net for a period. Adjusted EBITDA was $6.7 million for the year ended January 31, 2023 compared to $(19.2) million for the year ended January 31, 2022, representing margins of 2.3% and (9.4)%, respectively.
We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of total revenue, net for a period. Adjusted EBITDA was $26.9 million for the year ended January 31, 2024 compared to $6.7 million for the year ended January 31, 2023, representing margins of 9.0% and 2.3%, respectively.
For additional information, see the section of Part I, Item 1A, “Risk Factors — Risks Relating To Our Business and Industry — Our business is affected by seasonality.” Impact of Macro and Consumer Environment on Our Business There remains significant uncertainty in the current macroeconomic and consumer environment, driven by inflationary pressures, potential risk of recession, ongoing industry-wide supply chain issues, instability in the financial system, the war in Ukraine and the COVID-19 pandemic.
For additional information, see the section of Part I, Item 1A, “Risk Factors — Risks Relating To Our Business and Industry — Our business is affected by seasonality.” Impact of Macro and Consumer Environment on Our Business There remains significant uncertainty in the current macroeconomic and consumer environment, driven by several factors, including inflationary pressures, higher interest rates, potential risk of recession, ongoing industry-wide supply chain issues, instability in the financial system, the wars in Ukraine and the Middle East and COVID-19.
In total, approximately 58% of new items were acquired through the more capital-efficient channels in fiscal year 2022, approximately 55% in fiscal year 2021 and approximately 54% in fiscal year 2020.
In total, approximately 61% of new items were acquired through the more capital-efficient channels in fiscal year 2023, approximately 58% in fiscal year 2022 and approximately 55% in fiscal year 2021.
During the year ended January 31, 2023, net cash used in financing activities was $(4.0) million, consisting of other financing payments.
During the year ended January 31, 2024, net cash provided by financing activities was $0.7 million, consisting of other financing payments. During the year ended January 31, 2023, net cash used in financing activities was $(4.0) million, consisting of other financing payments.
The sum of net cash used in operating activities and net cash used in investing activities, as a percentage of revenue, was (31.0)% for the year ended January 31, 2023 and (31.9)% for the year ended January 31, 2022 . Net cash (used in) provided by operating activities .
The sum of net cash used in operating activities and net cash used in investing activities, as a percentage of revenue, was (23.6)% for the year ended January 31, 2024 and (31.0)% for the year ended January 31, 2023 . Net cash (used in) provided by operating activities .
G&A expenses as a percentage of revenue were 36.8%, compared to 51.4% last year as we saw increased operating leverage with higher revenue and a lower cost base post-restructuring. G&A related share-based compensation expense was $19.0 million for the year ended January 31, 2023 and was $21.4 million for the prior year.
G&A expenses as a percentage of revenue were 34.1%, compared to 36.8% last year, as we saw increased operating leverage with higher revenue and a lower cost base post-restructuring. G&A related share-based compensation expense was $20.5 million for the year ended January 31, 2024 and was $19.0 million for the year ended January 31, 2023.
These offerings allow us to engage and serve our subscribers and customers across diverse use cases from everyday life to special occasions. We have served approximately 3 million lifetime customers across all of our offerings and we had 171,998 ending total subscribers 11 (active and paused) as of January 31, 2023.
These offerings allow us to engage and serve our subscribers and customers across diverse use cases from everyday life to special occasions. We have served approximately 3 million lifetime customers across all of our offerings and we had 173,247 ending total subscribers 5 (active and paused) as of January 31, 2024.
A change in the assumption used for useful life or salvage value would either increase or decrease accumulated depreciation and depreciation expense reflected on our consolidated balance sheets within rental product, net and on our consolidated statements of operations within rental product depreciation and revenue share, respectively. Our historical results continue to support the use of these assumptions.
A change in the assumption used for useful life or salvage value would either increase or decrease accumulated depreciation and depreciation expense reflected on our Consolidated Balance Sheets within Rental product, net and on our Consolidated Statements of Operations within Rental product depreciation and revenue share, respectively.
The following tables set forth our results of operations for the periods presented: Years Ended January 31, 2023 2022 2021 (in millions) Revenue: Subscription and Reserve rental revenue $ 268.6 $ 185.8 $ 135.9 Other revenue 27.8 17.5 21.6 Total revenue, net 296.4 203.3 157.5 Costs and expenses: Fulfillment 92.2 61.9 53.0 Technology 55.4 45.3 37.7 Marketing 35.1 26.5 8.1 General and administrative 109.0 104.4 77.2 Rental product depreciation and revenue share 84.2 71.7 89.0 Other depreciation and amortization 16.4 19.4 23.0 Restructuring charges 2.4 — — Loss on asset impairment related to restructuring 5.3 — — Total costs and expenses 400.0 329.2 288.0 Operating loss (103.6) (125.9) (130.5) Interest income / (expense), net (36.8) (53.0) (46.6) Gain / (loss) on warrant liability revaluation, net — (24.9) 0.4 Gain / (loss) on debt extinguishment, net — (12.2) (0.6) Other income / (expense), net 1.5 3.9 6.2 Net loss before income tax benefit / (expense) (138.9) (212.1) (171.1) Income tax benefit / (expense) 0.2 0.3 — Net loss $ (138.7) $ (211.8) $ (171.1) Comparison of the years ended January 31, 2023 and 2022 Total Revenue, Net.
The following tables set forth our results of operations for the periods presented: Years Ended January 31, 2024 2023 2022 (in millions) Revenue: Subscription and Reserve rental revenue $ 264.9 $ 268.6 $ 185.8 Other revenue 33.3 27.8 17.5 Total revenue, net 298.2 296.4 203.3 Costs and expenses: Fulfillment 86.0 92.2 61.9 Technology 49.1 55.4 45.3 Marketing 31.2 35.1 26.5 General and administrative 101.6 109.0 104.4 Rental product depreciation and revenue share 92.5 84.2 71.7 Other depreciation and amortization 14.7 16.4 19.4 Restructuring charges 2.0 2.4 — Loss on asset impairment related to restructuring 1.1 5.3 — Total costs and expenses 378.2 400.0 329.2 Operating loss (80.0) (103.6) (125.9) Interest income / (expense), net (33.7) (36.8) (53.0) Gain / (loss) on warrant liability revaluation, net — — (24.9) Gain / (loss) on debt extinguishment, net — — (12.2) Other income / (expense), net 0.7 1.5 3.9 Net loss before income tax benefit / (expense) (113.0) (138.9) (212.1) Income tax benefit / (expense) (0.2) 0.2 0.3 Net loss $ (113.2) $ (138.7) $ (211.8) Comparison of the years ended January 31, 2024 and 2023 Total Revenue, Net.
In addition, we increased wage rates throughout fiscal year 2022 to attract and retain talent at our fulfillment centers and we expect to continue to be impacted by rising labor costs in fiscal year 2023.
In addition, we increased wage rates during fiscal years 2022 and 2023 to attract and retain talent at our fulfillment centers and we expect to continue to be impacted by rising labor costs in the future.
In the year ended January 31, 2023, Net Loss included $7.7 million of restructuring and related charges; • Adjusted EBITDA was $6.7 million and $(19.2) million, respectively, representing an Adjusted EBITDA margin of 2.3% and (9.4)%, respectively; • Net cash used in operating activities plus net cash used in investing activities was $(92.0) million and $(64.8) million, respectively; • Net cash used in operating activities plus net cash used in investing activities as a percentage of revenue was (31.0)% and (31.9)%, respectively; and • Cash and Cash Equivalents was $154.5 million and $247.6 million, respectively. 12 Active Subscribers is defined as ending total subscribers as of period end, excluding paused subscribers. 13 Average Active Subscribers represents the mean of the beginning of quarter and end of quarter Active Subscribers for a quarterly period; and for other periods, represents the mean of the Average Active Subscribers of every quarter within that period. 66 Table of Contents Our Product Acquisition Strategy We acquire and monetize products in three ways: Wholesale, Share by RTR and Exclusive Designs.
Net Loss as a percentage of revenue was (38.0)%, and (46.8)%, respectively, and included $3.1 million and $7.7 million of restructuring and related charges, respectively; • Adjusted EBITDA was $26.9 million and $6.7 million, respectively, representing an Adjusted EBITDA margin of 9.0% and 2.3%, respectively; • Net cash used in operating activities plus net cash used in investing activities was $(70.3) million and $(92.0) million, respectively; • Net cash used in operating activities plus net cash used in investing activities as a percentage of revenue was (23.6)% and (31.0)%, respectively; and • Cash and Cash Equivalents was $84.0 million and $154.5 million, respectively. 6 Active Subscribers is defined as ending total subscribers as of period end, excluding paused subscribers. 7 Average Active Subscribers represents the mean of the beginning of quarter and end of quarter Active Subscribers for a quarterly period; and for other periods, represents the mean of the Average Active Subscribers of every quarter within that period. 67 Table of Contents Our Product Acquisition Strategy We acquire and monetize products in three ways: Wholesale, Share by RTR and Exclusive Designs.
Marketing expenses include online and mobile marketing, search engine optimization and email costs, marketing personnel and related costs, agency fees, brand marketing, printed collateral, consumer research, and other related costs. We expect marketing expenses to increase as we intend to increase marketing spend to drive the growth of our business and increase our brand awareness.
Marketing expenses include online and mobile marketing, search engine optimization and email costs, marketing personnel and related costs, agency fees, brand marketing, printed collateral, consumer research, and other related costs. Marketing expenses unrelated to personnel costs may increase if we increase marketing spend to drive the growth of our business and increase our brand awareness. General and Administrative.
The liabilities were subject to re-measurement at each balance sheet date until exercised, and any change in fair value was recognized in our consolidated statements of operations. The warrants were valued using the Black-Scholes option pricing model.
Accordingly, we classified the warrants as liabilities at their fair value and adjusted the warrants to fair value at each previous reporting period. The liabilities were subject to re-measurement at each balance sheet date until exercised, and any change in fair value was recognized in our Consolidated Statements of Operations. The warrants were valued using the Black-Scholes option pricing model.
Although we continue to face a challenging environment, we plan to invest in our customers, manage our staffing and further diversify our transportation network in order to drive growth and efficiencies in our business.
Although we continue to face a challenging environment, we plan to invest in our customers, manage our staffing and further leverage our transportation partners to help to drive growth and efficiencies in our business.
Upon grant of awards, we also estimate an amount of forfeitures that will occur prior to vesting. We estimate forfeitures based on the dynamic forfeiture model based on our historical forfeitures of stock options adjusted to reflect future changes in facts and circumstances, if any.
Upon grant of awards, we also estimate an amount of forfeitures that will occur prior to vesting. We estimate forfeitures based on the dynamic forfeiture model based on our historical forfeitures of stock options adjusted to reflect future changes in facts and circumstances, if any. There were no stock options granted during the years January 31, 2024 and 2023.
Th e cash used in investing activities was partially offset by $12.9 million of proceeds from sales of owned rental products and $5.7 million of proceeds from the liquidation of rental product. Net cash provided by (used in) financing activities .
The cash used in investing activities was partially offset by $17.9 million of proceeds from sales of owned rental products and $8.8 million of proceeds from the liquidation of rental product. Net cash provided by (used in) financing activities .
We continue to take actions to adjust to the changing business environment and related inflationary pressure. For example, in light of potential pricing sensitivity in the current macro-economic environment, we are focused on investing in our customer and delivering even more value to her and emphasizing the value proposition of our offering in our marketing materials.
For example, in light of potential pricing sensitivity in the current macro-economic environment, we are focused on investing in our customer and delivering even more value to her, and emphasizing the value proposition of our offering in our marketing materials.
We have the opportunity to improve Adjusted EBITDA and offset cost increases and/or higher units processed per shipment as we increase revenue and drive fulfillment and operational efficiency gains and operating expense leverage. In particular, we expect our restructuring plan to significantly reduce fixed costs and improve operating expense leverage in fiscal year 2023 compared to fiscal year 2022.
We believe we have the opportunity to improve Adjusted EBITDA and offset cost increases as we increase revenue and drive fulfillment and operational efficiency gains and operating expense leverage. In particular, we continue to expect our January 2024 restructuring plan to significantly reduce fixed costs and improve operating expense leverage in fiscal year 2024 compared to fiscal year 2023.
We will seek to continue to drive fulfillment and operational efficiency gains over time and strategically evolve our mix of product acquisition to offset cost increases and/or higher units processed per shipment .
We will seek to continue to drive fulfillment and operational efficiency gains over time and strategically evolve our mix of revenue and product acquisition to offset cost increases .
Gain / (loss) on debt extinguishment is associated with debt extinguishment including the write off of the unamortized debt issuance costs. These are primarily non-cash and are associated with debt payment transactions which are non-recurring. Other Income / (Expense). Other income / (expense) consists primarily of proceeds from previous insurance claims and proceeds from monetizing tax credits associated with growth.
Gain / (loss) on debt extinguishment is associated with debt extinguishment including the write off of the unamortized debt issuance costs. These are primarily non-cash and are associated with debt payment transactions which are non-recurring. Other Income / (Expense).
We source virtually all of our products, which includes apparel and accessories, directly from designer brands. Prior to 2018, we purchased nearly all of our products from our brand partners typically at a discount to wholesale cost, which we refer to as “Wholesale” items. In late 2018, we began to procure products through Share by RTR and Exclusive Designs.
We source virtually all of our products, which includes apparel and accessories, directly from, or in partnership with, designer brands. Prior to 2018, we purchased nearly all of our products from our brand partners typically at a discount to wholesale cost, which we refer to as “Wholesale” items.
We place customers in cohorts based on the fiscal year in which they first transacted with RTR. A significant portion of our total revenue in each fiscal year is generated from customers acquired in previous years.
We partly assess the health of our business by analyzing the performance of our historical customer cohorts over time. We place customers in cohorts based on the fiscal year in which they first transacted with RTR. A significant portion of our total revenue in each fiscal year is generated from customers acquired in previous years.
Adjusted EBITDA Margin significantly improved for the year ended January 31, 2023 due to the improvement in Gross Profit and Gross Margin and improved operating leverage across technology, marketing and general and administrative expenses even with additional strategic investments.
Adjusted EBITDA Margin significantly improved for the year ended January 31, 2024 due to the impact of the restructuring plans, and improved operating leverage across technology, marketing and general and administrative expenses even with additional strategic investments.
We expect these expenses to decrease in dollars and as a percentage of total revenue as a result of our cost reduction plan. Over the medium to long term, these expenses may increase as we continue to improve the customer and subscriber experience and invest in our technology stack and infrastructure to support overall growth in our business.
Over the long term, these expenses may increase (in total dollars) as we continue to improve the customer and subscriber experience and invest in our technology stack and infrastructure to support overall growth in our business.
Income Tax Benefit / (Expense). Income taxes consist primarily of state minimum taxes and Irish refundable tax credits. We have established a valuation allowance for our U.S. federal and state deferred tax assets, including net operating losses.
Other income / (expense) consists primarily of proceeds from previous insurance claims, proceeds from monetizing tax credits associated with growth and Irish refundable tax credits. Income Tax Benefit / (Expense). Income taxes consist primarily of state minimum and foreign taxes. We have established a valuation allowance for our U.S. federal and state deferred tax assets, including net operating losses.
Payment for the sale of products occurs upon order confirmation while the associated revenue is recognized either at the time the sold product is delivered or when purchased, if the item is already at home with the customer.
We offer the ability for subscribers and customers to purchase products at a discount to retail price. Payment for the sale of products occurs upon order confirmation while the associated revenue is recognized either at the time the sold product is delivered or when purchased, if the item is already at home with the customer.
We believe that Active Subscriber levels have been impacted by seasonal changes in consumer behavior and macro factors, such as higher levels of remote work and evolving demand for work wear, inflationary pressures and sensitivity to increased pricing, or other factors, particularly in the second quarter of fiscal year 2022, and may continue to be impacted by these factors in the future.
We believe that Active Subscriber levels have been impacted by seasonal changes in consumer behavior and macro factors, such as higher levels of remote work and evolving demand for work wear, inflationary pressures and sensitivity to increased pricing, or other factors, and may continue to be impacted by these factors in the future. 72 Table of Contents We continue to take actions to adjust to the changing business environment and related inflationary pressure.
In September 2022, the Company announced a restructuring plan to reduce costs, streamline its organizational structure and drive operational efficiencies, which is expected to generate annual operating expense savings of approximately $25 million (relative to the second quarter of fiscal year 2022 run rate) in fiscal 2023.
In September 2022, we announced a restructuring plan to reduce costs, streamline our organizational structure and drive operational efficiencies, which generated annual operating expense savings of approximately $27 million (relative to the second quarter of fiscal year 2022 run rate) in the four quarters following the September 2022 restructuring.
As of January 31, 2023, we had cash and cash equivalents of $154.5 million and restricted cash of $9.1 million ($3.1 million current and $6.0 million noncurrent), and an accumulated deficit of $(939.9) million. On October 29, 2021, we closed our IPO, in which we issued and sold 17,000,000 shares at a public offering price of $21.00 per share.
As of January 31, 2024, we had cash and cash equivalents of $84.0 million and restricted cash of $10.0 million ($5.2 million current and $4.8 million noncurrent), and an accumulated deficit of $(1,053.1) million. On October 29, 2021, we closed our IPO, in which we issued and sold 850,000 shares at a public offering price of $420.00 per share.
Cohorts have continued to grow over time as our most loyal customers continued to spend with us, as demonstrated by the strength in the FY 2018 cohort. Brands and Products Ability to Acquire and Monetize Products Efficiently.
Cohorts have continued to grow over time as our most loyal customers continued to spend with us, as demonstrated by the strength in the fiscal year 2018, 2019, 2020 and 2021 cohorts. 70 Table of Contents Brands and Products Ability to Acquire, Manage and Monetize Products Efficiently.
There are limitations to the use of the non-GAAP financial metrics presented in this Annual Report. For example, our non-GAAP financial metrics may not be comparable to similarly titled measures of other companies. Other companies, including companies in our industry, may calculate non-GAAP financial metrics differently than we do, limiting the usefulness of those measures for comparative purposes.
There are limitations to the use of the non-GAAP financial metrics presented in this Annual Report. For example, our non-GAAP financial metrics may not be comparable to similarly titled measures of other companies.
For the year ended January 31, 2022, net cash used in operating activities was $(42.3) million, which consisted of a net loss of $(211.8) million, partially offset by non-cash charges of $171.3 million, reclassification of the proceeds from the sale of rental product of $12.9 million and a net change of $11.1 million in our operating assets and liabilities.
For the year ended January 31, 2024, net cash used in operating activities was $(15.7) million, which consisted of a net loss of $(113.2) million, partially offset by non-cash charges of $132.5 million, reclassification of the proceeds from the sale of rental product of $23.3 million and a net change of $(11.7) million in our operating assets and liabilities.
Total costs and expenses were $400.0 million for the year ended January 31, 2023, an increase of $70.8 million, or 21.5%, compared to $329.2 million for the year ended January 31, 2022.
Total costs and expenses were $378.2 million for the year ended January 31, 2024, a decrease of $(21.8) million, or (5.4)% , compared to $400.0 million for the year ended January 31, 2023.
Gross Profit was $120.0 million for the year ended January 31, 2023 compared to $69.7 million for the year ended January 31, 2022 representing Gross Margins of 40.5% and 34.3%, respect ively.
Gross Profit was $119.7 million for the year ended January 31, 2024 compared to $120.0 million for the year ended January 31, 2023 representing Gross Margins of 40.1% and 40.5%, respectively.
Right-of-Use Assets and Lease Liabilities Right-of-use (“ROU”) assets and lease liabilities are measured and recognized at the lease commencement date or lease modification date based on the present value of fixed lease payments over the expected lease term.
Our historical results and assessment of any future changes continue to support the use of these assumptions. Right-of-Use Assets and Lease Liabilities Right-of-use (“ROU”) assets and lease liabilities are measured and recognized at the lease commencement date or lease modification date based on the present value of fixed lease payments over the expected lease term.
(5) Non-recurring adjustments for the year ended January 31, 2023 includes $1.3 million of costs related to public company SOX readiness and for the year ended January 31, 2022 includes $5.2 million of costs primarily associated with public readiness preparation.
(5) Non-recurring adjustments for the year ended January 31, 2024 includes $1.7 million of costs primarily related to debt refinancing and related fees and the option exchange and for the year ended January 31, 2023 includes $1.3 million of costs related to public company SOX readiness.
For the years ended January 31, 2023 and 2022, respectively, 86% and 84% of our total revenue (including Reserve and Resale revenue) was generated by subscribers while they were active or paused.
We had 125,954 active subscribers as of January 31, 2024. The majority of our revenue is highly recurring and is generated by our subscribers. For the years ended January 31, 2024 and 2023, respectively, 88% and 86% of our total revenue (including Reserve and Resale revenue) was generated by subscribers while they were active or paused.
In connection with the 2022 Amended Temasek Facility, we also granted warrants to purchase two million shares of Class A Common Stock at an exercise price of $5.00 per share, along with other clarifications and updates. Our total indebtedness as of January 31, 2023 was $272.5 million.
In connection with the 2022 Amended Temasek Facility, we also granted warrants to purchase 100,000 shares of Class A Common Stock at an exercise price of $100.00 per share, along with other clarifications and updates. In December 2023, we entered into the 2023 Amended Temasek Facility.
Of the $(36.8) million total interest expense in the year ended January 31, 2023, $14.3 million was the accrual of paid-in kind (“PIK”) interest, $18.2 million was cash, financing lease interest and other interest and $4.3 million was debt discount amortization, compared to $38.8 million of PIK interest, $8.3 million of cash, financing lease interest and other interest and $5.9 million of debt discount amortization in the year ended January 31, 2022.
Of the $(33.7) million total interest expense in the year ended January 31, 2024, $(22.5) million was the accrual of PIK interest, $(11.7) million was debt discount amortization, and $0.5 million was the net of cash interest, interest earned and financing lease and other interest, compared to $(14.3) million of PIK interest, $(18.2) million net of cash interest, financing lease and other interest and $(4.3) million of debt discount amortization in the year ended January 31, 2023.
The cash used in invest ing activities was partially offset by $17.9 million of proceeds from the sale of owned rental product and $8.8 million of proceeds from the liquidation of rental product.
The cash used in investing activities was partially offset by $23.3 million of proceeds from the sale of owned rental product and $4.6 million of proceeds from the liquidation of rental product.
We continuously evaluate our product acquisition mix to maximize our strategic priorities. 69 Table of Contents Purchases of rental product includes the cost of wholesale products acquired in the period and other ancillary costs such as freight, where applicable.
We plan to further increase the percentage of units acquired through Exclusive Designs and Share by RTR in fiscal year 2024. We continuously evaluate our product acquisition mix to maximize our strategic priorities. Purchases of rental product includes the cost of wholesale products acquired in the period and other ancillary costs such as freight, where applicable.
Personnel and related costs are related to processing inbound and outbound customer orders, cleaning, restoring and repairing items received from customers, tracking and managing items within our fulfillment center network and ingesting new items received from brands. Fulfillment expenses also include costs of packing materials, cleaning supplies, and other fulfillment-related expenses.
This primarily includes shipping costs to/from customers and personnel and related costs, which include salaries and bonuses, and employee benefit costs. Personnel and related costs are related to processing inbound and outbound customer orders, cleaning, restoring and repairing items received from customers, tracking and managing items within our fulfillment center network and ingesting new items received from brands.
The trend and timing of our marketing expenses will depend in part on the timing of marketing campaigns. 74 Table of Contents General and Administrative. General and administrative (“G&A”) expenses consist of all other personnel and related costs for customer service, finance, tax, legal, human resources, fashion and photography and fixed operations costs.
General and administrative (“G&A”) expenses consist of all other personnel and related costs for customer service, finance, tax, legal, human resources, fashion and photography and fixed operations costs.
We have achieved the following operating and financial results for the years ended January 31, 2023 and 2022 , respectively: • Revenue was $296.4 million and $203.3 million, respectively, representing 45.8% growth year-over-year; • 126,712 and 115,240 ending Active Subscribers 12 (excluding paused subscribers), respectively, representing 10% growth year-over-year; • 128,586 and 93,371 Average Active Subscribers 13 , respectively, representing 38% growth year-over-year; • 171,998 and 159,544 ending Total Subscribers (including paused subscribers), respectively, representing 8% growth year-over-year; • Gross Profit was $120.0 million and $69.7 million, respectively, representing a gross margin of 40.5% and 34.3%, respectively; • Net Loss was $(138.7) million and $(211.8) million, respectively.
We have achieved the following operating and financial results for the years ended January 31, 2024 and 2023 , respectively: • Revenue was $298.2 million and $296.4 million, respectively, representing 0.6% growth year-over-year; • 125,954 and 126,712 ending Active Subscribers 6 (excluding paused subscribers), respectively, representing a change of (1)% year-over-year; • 135,211 and 128,586 Average Active Subscribers 7 , respectively, representing 5% growth year-over-year; • 173,247 and 171,998 ending Total Subscribers (including paused subscribers), respectively, representing 1% growth year-over-year; • Gross Profit was $119.7 million and $120.0 million, respectively, representing a gross margin of 40.1% and 40.5%, respectively; • Net Loss was $(113.2) million and $(138.7) million, respectively.
If we are unable to raise additional capital when required, or if we cannot expand our operations or otherwise capitalize on our business opportunities because we lack sufficient capital, our business, results of operations, financial condition, and cash flows would be adversely affected. 80 Table of Contents Cash Flows The following table summarizes our cash flows for the periods presented: Years Ended January 31, 2023 2022 2021 (in millions) Net cash (used in) provided by operating activities $ (47.7) $ (42.3) $ (42.8) Net cash (used in) provided by investing activities (44.3) (22.5) (58.4) Net cash (used in) provided by financing activities (4.0) 215.2 168.5 Net (decrease) increase in cash and cash equivalents and restricted cash (96.0) 150.4 67.3 Cash and cash equivalents and restricted cash at beginning of period 259.6 109.2 41.9 Cash and cash equivalents and restricted cash at end of period $ 163.6 $ 259.6 $ 109.2 We also measure the cash consumption of the business including capital expenditures, by assessing net cash used in operating activities and net cash used in investing activities on a combined basis, which was $(92.0) million for the year ended January 31, 2023 and $(64.8) million for the year ended January 31, 2022 .
Cash Flows The following table summarizes our cash flows for the periods presented: Years Ended January 31, 2024 2023 2022 (in millions) Net cash (used in) provided by operating activities $ (15.7) $ (47.7) $ (42.3) Net cash (used in) provided by investing activities (54.6) (44.3) (22.5) Net cash provided by (used in) financing activities 0.7 (4.0) 215.2 Net (decrease) increase in cash and cash equivalents and restricted cash (69.6) (96.0) 150.4 Cash and cash equivalents and restricted cash at beginning of period 163.6 259.6 109.2 Cash and cash equivalents and restricted cash at end of period $ 94.0 $ 163.6 $ 259.6 We also measure the cash consumption of the business including capital expenditures, by assessing net cash used in operating activities and net cash used in investing activities on a combined basis, which was $(70.3) million for the year ended January 31, 2024 and $(92.0) million for the year ended January 31, 2023 .
From time to time, Other revenue may include revenue generated from pilots and other growth initiatives which may cause quarterly fluctuations in the Other revenue line.
From time to time, Other revenue may include revenue generated from pilots and other growth initiatives which may cause quarterly fluctuations in the Other revenue line. Costs and Expenses Fulfillment. Fulfillment expenses consist of all costs to receive, process and fulfill customer orders.
We provide a flexible offering that allows our subscribers to customize their subscription as their everyday life changes, choosing to pause and reactivate their membership as needed. We have also historically seen that many subscribers who cancel their subscription will return and resubscribe when membership again makes sense for their everyday life.
We have also historically seen that many subscribers who cancel their subscription will return and resubscribe when membership again makes sense for their everyday life.
In the event that additional financing is required from outside sources, we may not be able to negotiate terms acceptable to us or at all.
There can be no assurances that we will be able to raise additional capital which could negatively affect our liquidity in the future. In the event that additional financing is required from outside sources, we may not be able to negotiate terms acceptable to us or at all.
Rent expense and other facilities-related costs may increase in the future due to inflation or to support overall business growth and fulfillment efficiencies. While these expenses may vary from period to period as a percentage of total revenue, we expect them to decrease as a percentage of total revenue over the longer term. Rental Product Depreciation and Revenue Share.
Over the longer term, these expenses may increase as we grow our infrastructure to support the overall growth of the business. Rent expense and other facilities-related costs may increase in the future due to inflation or to support overall business growth and fulfillment efficiencies.
Loss on asset impairment related to restructuring was $5.3 million for the year ended January 31, 2023 and consists of asset impairment charges related to discontinuing two warehouse operations projects in connection with the September 2022 restructuring plan. Interest Income / (Expense), Net.
The loss on asset impairment during the year ended January 31, 2024 related to the discontinuation of a software implementation project in connection with the January 2024 restructuring plan compared to the discontinuation of two warehouse operations projects during the year ended January 31, 2023 in connection with the September 2022 restructuring plan. Interest Income / (Expense), Net.
In future periods, we may exclude similar items, may incur income and expenses similar to these excluded items, and may include other expenses, costs and non-recurring items. Adjusted EBITDA and Adjusted EBITDA Margin.
We encourage reviewing the reconciliation in conjunction with the presentation of the non-GAAP financial metrics for each of the periods presented. In future periods, we may exclude similar items, may incur income and expenses similar to these excluded items, and may include other expenses, costs and non-recurring items. Adjusted EBITDA and Adjusted EBITDA Margin.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeWe have minimal exposure to market risk relating to changes in interest rates as they can affect the amount of interest income we earn on our cash. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure .
Biggest changeWe do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure . As of January 31, 2024, a hypothetical 10% change in interest rates would not have resulted in a material impact on our consolidated financial statements.
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs with increased revenue. Our inability or failure to do so could harm our business, financial condition, and results of operations . 85 Table of Contents
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.” If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs with increased revenue. Our inability or failure to do so could harm our business, financial condition, and results of operations . 86 Table of Contents
As of January 31, 2023, a hypothetical 10% change in the relative value of the U.S. dollar to other currencies would not have had a material effect on our results of operations . Inflation Risk In recent months, inflation has continued to increase significantly in the United States and overseas resulting in rising transportation, wages, rental product and other costs.
As of January 31, 2024, a hypothetical 10% change in the relative value of the U.S. dollar to other currencies would not have had a material effect on our results of operations . Inflation Risk In recent months, persistent inflation has continued to result in rising transportation, wages, rental product and other costs in the United States and overseas .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market risk represents the risk of loss that may impact our financial position because of adverse changes in financial market prices and rates.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market risk represents the risk of loss that may impact our financial position because of adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure resulting from potential changes in inflation .
Accordingly, our results of operations are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the euro. Additionally, fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our consolidated statements of operations.
Additionally, fluctuations in foreign currency exchange rates may cause us to recognize transaction gains and losses in our Consolidated Statements of Operations.
Cash and cash equivalents consist primarily of cash held in financial institutions within the United States and Ireland and cash in transit from third-party credit card providers. Borrowings under the Temasek Facility bear interest at fixed rates.
Interest Rate Risk As of January 31, 2024, we had cash and cash equivalents of $84.0 million and $306.7 million of debt outstanding under the 2023 Amended Temasek Facility. Cash and cash equivalents consist primarily of cash held in financial institutions within the United States and Ireland and cash in transit from third-party credit card providers.
As of January 31, 2023, a hypothetical 10% change in interest rates would not have resulted in a material impact on our consolidated financial statements. Foreign Currency Risk Our net revenue is denominated in U.S. dollars and a portion of our operating expenses are incurred outside the United States, denominated in foreign currencies.
Foreign Currency Risk Our net revenue is denominated in U.S. dollars and a portion of our operating expenses are incurred outside the United States, denominated in foreign currencies. Accordingly, our results of operations are subject to fluctuations due to changes in foreign currency exchange rates, particularly changes in the euro.
Removed
Our market risk exposure is primarily a result of exposure resulting from potential changes in inflation . 84 Table of Contents Interest Rate Risk As of January 31, 2023, we had cash and cash equivalents of $154.5 million and $272.5 million of debt outstanding under the Temasek Facility.
Added
Borrowings under the 2023 Amended Temasek Facility bear interest at fixed rates. We have minimal exposure to market risk relating to changes in interest rates as they can affect the amount of interest income we earn on our cash.

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