Hello, everyone, and thanks for joining us today. During this call, we will make references to our Q3 2025 earnings presentation, which can be found in the events and presentations section of our Investor Relations website. Before we begin, we would like to remind you that this call will include forward-looking statements. These statements include guidance and underlying assumptions for the fourth quarter in fiscal year 2025, and statements regarding the recapitalization transactions in our business initiatives. These statements are subject to various risks, uncertainties, and assumptions that could cause our actual results to differ materially. These risks, uncertainties, and assumptions are detailed in today's press release as well as our filings of the SEC, including our Form 10-Q that we plan to file shortly. We have no obligation to update any forward-looking statements or information except as required by law. During this call, we will also reference certain non-GAAP financial information. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with GAAP. Reconciliations of GAAP to non-GAAP measures can be found in our press release, slide presentations posted on our investor relations website, and our SEC filings. And with that, I'll turn it over to Jen.
Thanks, Cara, and thank you everyone for joining. We've been laser-focused on two clear priorities. First, completing the strategic recapitalization of the business to significantly strengthen our balance sheet. Second, bringing the business back to growth through a new inventory strategy, increased product innovation, and improved connection to our core customers. Now that we are here in Q3, I'm pleased to say we've delivered on both of these goals. We've strengthened our financial foundation by reducing our total debt from approximately $319 million to approximately $120 million and extending the maturity to 2029, giving us years of additional runway. With the recapitalization to highly respected private equity firms with deep experience in the consumer retail space, Nespis and Story 3, alongside our long-term existing lender, contributed new capital to further support the business and its growth initiative. In addition, they will join us in the boardroom to provide their expertise and support. And importantly, the Rent the Runway business is growing again. We are on track for 11 to 14% year-over-year revenue growth in Q4, up from 1% revenue growth year-over-year in Q4 2024. Q3, fiscal year 25, ending active subscribers through 12% year-over-year as our base of inventory has grown and we have enhanced the customer experience. Importantly, despite raising prices in August, we continue to see improvement in both acquisition and retention versus the prior year. We believe that customers are responding positively because the end-to-end experience on our app, discovering inventory, personalization, and getting the inventory you want is better, and that shows up first in retention as existing customers are the first to notice. Inventory-related cancellations, which are related to availability, selection, and quality year-to-date, is down over 20% year-over-year, and in Q3 was down nearly 30% versus last year. We tracked three important input metrics that are indicators of customer engagement, net promoter score, visits, and hearts, all of which are up. Our Q3 subscription net promoter score was up 43% year-over-year, 67% versus Q3 2023, and 100% versus Q3 2022. We believe that this demonstrates a multi-year rebuild of customer trust. Customer engagement is at its highest level in recent years. The average active subscriber visited our app over 20 times per month in Q3, which is 34% higher year-over-year. Parts per subscriber, one of the most important inputs to loyalty, as we see them as proof of the customer finding and loving the inventory, are up 15% year-over-year in Q3. And because she's more engaged, she's willing to spend more money with us. Revenue per subscriber is also up, driven primarily by our August 2025 price increase, changes to our late-day policy, and the accelerated performance of our add-on business. To give our subscription programs even more flexibility, we optimize the add-on experience by clearly displaying to our subscribers that our pricing is prorated based on her billing cycle. This strategic clarity, along with the improved inventory experience, drove a 17% year-over-year increase in the subscription add-on rate in Q3 2025. We also recently launched an instant gratification feature, which transforms in-stock notifications into immediate revenue by allowing one-off orders of inventory when she's out of shipment. We believe that our subscriber base is willing to pay more for immediate access to the inventory she wants when she wants it. In Q3, we rolled out some meaningful changes designed to improve the customer experience, driving growth and customer satisfaction. Key highlights include, one, a personalized homepage redesign on our app aimed at shifting discovery to her preferences. Since launch, engagement with our new homepage is up 57% versus the prior version, a reminder that a major focus this year has been not only on increasing inventory supply on our site, but also making it easier for customers to discover relevant inventory and add to that. Two, a better onboarding experience for early-term subscribers with the aim to increase loyalty. We launched several features for new users to help educate her about RTR and to give us information about her style. RTR 101 is a step-by-step guide for new subscribers to progressively guide and handhold them in her early days. We also added a Harding quiz for her to give us quick feedback on styles she likes or doesn't like, which we use to personalize her experience. Early results show this feature increasing average hearts by 70%. Three, add-on pricing transparency and one-off shipments to drive incremental revenue for subscriber. Creating more visibility around pricing and the value she's getting by adding on items to her order has significantly boosted add-on revenue. One-off shipments is the first time you've ever been able to add one-off items ASAP when you're out of swaps for the month. The goal is to give her more flexibility to rent what she wants when she wants. Number four, better search and discovery experiences. We launched a detailed taxonomy, which provided an incremental 70 pathways for her to explore the inventory. And we leaned into machine learning capabilities to drastically improve similar style recommendations, resulting in a 70% increase in click-through rates. We continue to see that mainstream adoption of secondhand clothing is growing, and women from all geographies and backgrounds are now embracing and considering rental more than ever. The TAM has continued to grow, and I have conviction that Rent the Runway is the brand with the clearest long-term advantage. To sustain this growth, our focus now turns to improving customer acquisitions. First, we are focused on making paid marketing even more efficient through channel diversification and better creative. Our early results show meaningful improvements in CPA and conversion. Second, and more importantly, we are shifting more acquisition towards organic, community-driven channels. Historically, over 80% of Runway's acquisition came from word of mouth. As paid channels have grown more expensive and less efficient, this shift is not only strategic, it is a return to our roots. RTR pioneered the belief that the most powerful marketing channel is an obsessed customer. We bring our model and our brand around that principle. Exceptional customer experience fuels advocacy, our depth and breadth of inventory unlocked moments worth sharing, community behaviors like reviews, photos, events, and referrals scale organically, and our brand identity reflects her aspirations so she sees herself in us. Today we have conviction that we have the building blocks in place to reignite organic growth at scale. We've defined four pillars. One, activate our community so they feel seen and proud to share. Two, make sharing fun and easy. Three, tell authentic personality-driven stories. And four, create and own the cultural conversation around rental. Our Muse program, the community-driven content engine launched this year, has already generated 10 million impressions in Q3. Thousands of posts showcase the product in real life. And when we use this content in paid channels, it delivers a 20% lower CPA and 40% higher conversion than other creatives. Our City Ambassador Program launched in October and scaled rapidly to 875 ambassadors. In just over two months, they've produced over 2,700 reviews and several hundred referrals. Their referral rate is significantly higher than what we see with regular subscribers. These are passionate users acting as on-the-ground evangelists for our brand. We told you we would recapitalize the business and significantly increase our inventory in order to reignite growth. We've done that. And today, our Q3 results are clear. Retention improved, NPS increased, engagement accelerated, community passion is stronger, and subscriber growth was robust, even with a price increase. I'm confident that this is what it looks like when the Red Doorway experience gets better and when the fundamentals of the model begin to re-accelerate. We are focused on building a larger, healthier, and more durable business, one that grows through exceptional customer experience and passionate community advocacy. Thank you for joining us today. With that, I'll turn it over to Sid.
Thanks, Jen, and thank you everyone for joining us. I'd like to discuss three topics before turning to business results. Our continued growth momentum, cash consumption this year, and our recently closed recapitalization transactions. Let's begin with growth. As evidenced by Q3 results, subscriber growth continued to be strong, with 12.4% growth versus Q324, even with the August 1st price increase. Revenue growth improved considerably, from negative 7.2% in Q125 and 2.5% in Q225 to 15.4% in Q325. Subscription growth was the strongest driver of total revenue growth in light of weakness in our reserve business. As outlined in our guidance, we expect continued strong revenue growth in Q4. We believe that our investment in inventory this year is driving accelerated growth and improved customer satisfaction. We are growing without spending significantly more year-over-year in paid marketing, which we believe highlights the strength of the retention improvements we have seen. Second, we've been transparent about our fiscal year 25 goal to invest in inventory to improve customer experience and accelerate growth, which is driving increased cash consumption from near breakeven levels in fiscal year 2024. This rental product investment is directly visible in lower gross margins at approximately 29.6% this quarter versus 34.7% during the same quarter last year. As we discussed over the last two earnings calls, we have nearly doubled our units of inventory purchased this fiscal year. At this time, we do not expect increases in inventory receipts of this magnitude in fiscal year 26. We have continued to make progress in acquiring inventory on better firms, especially through share by RCR programs. We believe our incremental margins are solid, even at current levels. Over time, we expect the combination of growth and these inventory cost improvements to deliver improved cash flow generation. Finally, let me discuss the completion of the recapitalization transactions we announced in August. The transactions provide Rent the Runway with additional financial flexibility to execute on our growth plan by reducing our debt burden and by extending our debt maturity. We also believe that we will benefit from the considerable experience and fresh perspective that new members of our Board of Directors will bring. Let me now review results for the third quarter before turning to Q4 and full year 2025 guidance. We ended Q325 with 148,916 ending active subscribers, off approximately 12.4% year-over-year. Average active subscribers during the quarter were 147,645 subscribers versus 130,796 subscribers in the prior year, an increase of 12.9% year-over-year. Subscriber growth was driven primarily by a higher base of active subscribers at the end of Q2-25 versus the same period in fiscal 2024, higher subscriber acquisitions due to higher promotional activity, and improved subscriber retention versus Q3-24. Ending active subscribers increased 1.7% from 146,373 subscribers in Q2-25. Total revenue for the quarter was $87.6 million, up $11.7 million or 15.4% year-over-year, and up $6.7 million, or 8.3% quarter-over-quarter. Subscription and reserve rental revenue was up $10.7 million, or 16.1% year-over-year, in Q325, primarily due to higher average subscribers and higher average revenue per subscriber due to the subscription price increase effective August 1st, partially offset by lower reserve revenue versus Q324. Other revenue increased $1 million, or 10.4% year-over-year. Fulfillment costs were $24 million in Q325 versus $21.4 million in Q324 and $22.5 million in Q225. Fulfillment costs as a percentage of revenue were 27.4% of revenue in Q325 compared to 28.2% of revenue in Q324. Fulfillment costs declined as a percentage of revenue primarily due to higher revenue per order driven by our August price increase, partially offset by higher transportation costs as a result of carrier rate increases and higher warehouse processing costs. Gross margins were 29.6% in Q325 versus 34.7% in Q324. Q325 gross margins reflect higher revenue share costs as a percentage of revenue due to greater share by RTR inventory levels, partially offset by lower fulfillment and rental product depreciation and write-off costs as a percentage of revenue. Q325 gross margins decreased quarter-over-quarter from 30% in Q225, primarily due to higher revenue share costs as a percentage of revenue. Q325 operating expenses were 7% higher year-over-year, due primarily to higher employee expenses. Total operating expenses, which include technology, marketing, and G&A, were 45.2% of revenue in Q325 versus 48.7% of revenue in Q324 and 51.7% of revenue in Q225. Adjusted EBITDA for Q325 was $4.3 million or 4.9% of revenue versus $9.3 million or 12.3% of revenue in Q324. The decrease in adjusted EBITDA versus the prior year is primarily a result of higher revenue share expenses due to greater share by RTR inventory levels. Pre-cash flow for Q325 was negative $13.6 million versus negative $3.4 million in Q324. Pre-cash flow decreased versus the prior year primarily due to lower adjusted EBITDA and higher purchases of rental product on account of our inventory strategy for fiscal year 2025. I will now discuss guidance for Q4 2025 and fiscal year 2025. For Q4, we expect revenue to be between $85 million and $87 million. We expect adjusted EBITDA margins to be between 11% and 13% of revenue. For fiscal year 2025, we continue to expect double-digit growth in ending active subscribers. We expect fiscal year 2025 revenue to be between $323.1 million and $325.1 million. We expect adjusted EBITDA margins to be between 4.9% and 5.5% of revenue. We continue to expect free cash flow to be lower than negative $40 million, primarily due to costs associated with the recapitalization transactions. We believe our business is showing improved momentum as evidenced by growth in the active subscriber base, and we plan to prudently manage investments to continue to drive growth for the rest of fiscal year 2025. In conclusion, we're pleased with the improved growth momentum we have seen this year. I believe that Rent the Runway is in the strongest position it has been in several years. We look forward to continuing to delight our customers and to driving sustainable growth in the years ahead. Thank you, everyone, for joining us. We look forward to speaking to you next quarter.
