Good afternoon, and welcome to Rent the Runway's Third Quarter 2021 Earnings Conference Call. Today's call is being recorded. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. We have allocated one hour for prepared remarks and Q&A. At this time, I'd like to turn the conference over to Cara Schembri, General Counsel at Rent the Runway. Thank you. You may begin. Good afternoon, everyone, and thanks for joining us to discuss Rent the Runway's third quarter 2021 results. Before we begin, we would like to remind you that this call will include forward-looking statements. These statements include our future expectations regarding financial results and guidance, market opportunities, and our growth. These statements are subject to various risks, uncertainties, and assumptions that could cause our actual results to differ materially. These risks, uncertainties, and assumptions are detailed in this afternoon's press release, as well as our filings with the SEC, including our final prospectus dated October 26 and the Form 10-Q that will be filed in the next few days. We undertake no obligation to revise or update any forward-looking statements or information except as required by law. During this call, we will also reference certain non-GAAP financial information. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as the substitute for financial information presented in accordance with GAAP. Reconciliations of GAAP to non-GAAP measures can be found in our press release, slide presentation posted on our investor website, and in our SEC filings. Joining me on the call today is our Co-founder, Chair, and CEO, Jennifer Hyman, and our CFO, Scarlett O'Sullivan. Following our prepared remarks, we'll open the call for your questions. With that, I'll turn the call over to Jen. Thanks, Cara. Good afternoon, everyone. Thank you for joining Rent the Runway's Q3 2021 earnings call. I'm Jen Hyman, Co-founder, Chair, and CEO. With our IPO on October 27, we raised $357 million in capital, and we believe we have ample cash to invest in our priorities for growth, namely growing subscribers and deepening our competitive moats as we innovate our technology, data, and operating platform. We also used a portion of our IPO proceeds to pay off approximately one-third of our debt. In the third quarter of 2021, we achieved strong active subscriber growth, up 78% year-over-year, revenue growth up 66% year-over-year, and strong margins. At the end of Q3, active subscribers were back at 87% and total subscribers were back at 101% of the level at the end of fiscal 2019. Moreover, growth margins in Q3 were 20 points higher than in the same period of fiscal 2019, demonstrating a significant improvement in the profitability of the business. We believe that our metrics this quarter are a good indication of the continued re-acceleration of our business. We think that rapid consumer behavior shifts towards online commerce, access models, and sustainability, along with our compelling value proposition, will be macro drivers of our growth. Because many of you might be new to the Rent the Runway story, I'd love to share our mission, strategy, and key competitive advantages. 13 years ago, I watched my sister go into debt buying a dress she couldn't afford that she knew she'd only wear once. The feeling of having a closet filled with clothes but nothing to wear is ubiquitous. Driven by the consumer desire for variety and newness, closets have been growing, with the average American buying nearly double what we bought 30 years ago. But as we buy more, we wear less. 55% of the closet is rarely used, filled with items that no longer fit and that we no longer wear. This is financially wasteful and environmentally unsustainable. Our solution is the Closet in the Cloud, the world's first and largest shared designer closet that has transformed the way that women get dressed by letting them wear whatever they want without having to own it. Our mission is to empower women to feel their best every day and to encourage millions of customers to buy fewer clothes and use our shared closet instead. By sharing, we can all have more. More fashion for less money. Our average customer gets $4,000 of clothing per month, 20x the retail value for her spend. More designer brands that many of us couldn't otherwise afford, and more opportunities for self-expression. We carry nearly 19,000 styles and millions of items for almost every use case in a woman's changing life. We are going after a big opportunity. Our goal is to transform an almost $300 billion annual U.S. apparel market in which online, secondhand, and access models are still in early stages of development, but growing much faster than the overall market. 91% of women have purchased or are open to purchasing secondhand clothing. 56% of women believe that they will subscribe to fashion over the next five years. If you apply that 56% to the 38 million women over 25 in the U.S. today who are college-educated and working, that equates to an opportunity set of 21 million women. We only need to capture about 3.5% of this opportunity set to get to 5x our current subscriber base, and we believe we can capture substantially more of this market over time and estimate a long-term durable growth rate in excess of 25%. Another way we think about how big this business can be is by looking at the $120 billion U.S. mass and fast fashion market. Customers go to fast fashion for variety, value, and designer copycats, and many of these items are worn minimal times and end up in landfills. Over the past few years, we have seen the consumer start to rethink fast fashion, given their desire to be more sustainable. Having a subscription to Rent the Runway is a substitute for fast fashion, as 83% of our subscribers buy less of it when they use Rent the Runway. We believe we can capture a significant portion of this market over time. We measure the health and growth of our business by a simple framework, how we grow subscribers and how we grow engagement. When we do these two things well, we grow our revenue and scale profitability. We are a subscription business. 82% of our revenue comes from our subscribers. Our subscribers are extremely high value, given their $100+ per month subscription fee, utility-like usage of our product, high loyalty, and ARPU that generally increases over time. Engagement, measured by the number of items subscribers receive and wear per month, is a leading indicator of retention. As our subscribers learn rental behavior, we see them spend more with us and add additional items into their monthly plans. These additional items allow us to capture higher margin revenue. In Q3 2021, 24% of our subscribers paid for one or more additional items, reflecting strong engagement and driving higher ARPU. This is a strong indicator of the product market fit of our customizable subscription programs rolled out in 2020, where subscribers pay for increased usage. These programs generate significantly higher margins as well as higher loyalty than we were seeing pre-COVID. We are focused both on growing our subscriber base and driving higher monetization from existing subscribers. During 2021, we've been successful at growing and re-engaging customers while we've spun back up our marketing engine. Looking ahead, we will continue to grow subscribers by leveraging Reserve and Resale as strong funnels, scaling our full funnel marketing, and driving conversion funnel improvements. Over the last 12 months, which continued to be impacted by COVID, we've had 400,000 customers, the majority of which were Reserve and Resale customers. This audience of 400,000 recent customers provides a large and growing funnel to acquire new subscribers. Given the backlog of events into 2022 and 2023, we believe our funnel will see an accelerated rate of growth in the coming years. We plan to grow engagement by continued innovation of our customer experience as well as by strategically expanding our product assortment. These strategies are largely proven for us. We've been building an operating platform with deep competitive moats to help enable sustained growth and profitability of the Closet in the Cloud. First is our brand partner advantage. We fully control our supply, given our direct partnerships with over 780 designer brands. We've invested in building deep partnerships with brands so that we can access the newest, most desirable designer fashion to drive customer LTV. As a reminder, we have retained nearly 100% of our brand partners over the past decade. Brands work with us to discover new customers and get unique data, and they see us as being strategic to their businesses. We have been able to leverage our strong brand partnerships to significantly improve our unit economics. Since 2018, we've innovated how we acquire product via two capital-light models that are unique to Rent the Runway. For fiscal year 2021, we are estimating that we will have acquired 56% of our rental product via these capital-light strategies ahead of last year. Share by RTR is our consignment model, where we pay nothing or very little for product upfront, and then revenue share with our designers. Exclusive Designs are collections that we manufacture in collaboration with our key brand partners that cost 50% less than wholesale units and utilize our data to maximize desirability and longevity. We have seen significant cash flow benefits from these models, and we expect further positive impact on free cash flow as they become a larger proportion of our total procurement. Exclusive Designs have the highest profit potential of all of our units, and as a result, we intend to increase penetration of these styles to one-third of our product acquisition over the medium term. Growing our assortment attracts new customer segments and can widen our TAM over time. We onboarded 30 new brands onto our platform in Q3. Some highlights include Altuzarra, LaQuan Smith, Rachel Antonoff, and ROTATE. For Share by RTR, nearly 100% of brands we have worked with in the second half of 2021 are coming back again to do Share by RTR in the first half of 2022. As of Q3 2021, we have over 250 Share by RTR brands on site, which has nearly tripled since 2019. Share by RTR brands are also increasing their units on the Rent the Runway platform by 60% on average between first half 2021 and first half 2022. Second is our continued investment in proprietary technology and data products that power the Closet in the Cloud. We are able to leverage our data and technology infrastructure to drive continuous improvement in our customer experience, in the value we deliver to our brand partners, and in our unit economics. The tens of millions of data points we collect from our customers and within our facilities as we restore these items give us significant advantages as we get smarter every day about what products to put on our platform in the first place, who to show them to, how to price them, and how to turn them more times. We have used our data to develop both a highly personalized experience and to build proprietary products around fit, community, and product discovery, all of which drive higher subscriber growth and engagement. As an example, we launched an algorithm enhancement in Q3, which drove a meaningful improvement in item fit rate, which in turn increases customer loyalty. Third and final is our operational model. We've built the operating system to power the sharing economy of physical goods with deep expertise in single SKU reverse logistics and item restoration. While we're focused on clothes and accessories today, we see our platform as being extensible to many other categories over the medium term. During 2021, we further innovated our operations through the addition of automation that sorts garments into 26 unique cleaning methods to maximize lifetime turns per garment. These innovations allow us to improve operational efficiency and increase the profitability of our garments. In Q3, we also expanded our delivery offerings, including the launch of at-home pickup in five major metros, which makes it easier for our customers to return items to us, and is lower cost to us than traditional return methods. Since launch, we have seen quick adoption with over one-third of customers in these markets using at-home pickup. With that overview, let me turn to what we're seeing in the current market environment, which is factored into our Q4 outlook. We believe we're seeing clear indications that our customers have adapted to a new hybrid world in which COVID is still present, but fashion is as important as ever. We've been successful at diversifying how our subscribers use RTR, as 50% of her use cases are for more casual occasions. We carefully monitored the Delta variant and have been pleased with our growth in Q2 and Q3 as the Delta variant spread and peaked throughout the U.S.. To date, we've seen a similar trend that Omicron is not specifically impacting customer demand or engagement patterns. With fewer holiday and special events due to COVID generally, we also believe we will benefit from pent-up demand for special events and leisure travel that have been backlogged into 2022 and 2023, as well as return to offices that have been pushed to 2022. We are seeing that all major metros throughout the U.S. are back to approximately 90% or more of their pre-COVID subscriber count, with the exception of New York, D.C., and San Francisco. Many major markets in the South Atlantic, South, and Mountain regions are significantly larger than they were pre-COVID, demonstrating our increased relevance to a new audience. The geographic distribution of our subscriber base continues to diversify as subscribers outside of our top 20 markets now comprise 29% of our subscribers, up from 23% pre-COVID. To sum up, we're very excited about what we've built and the opportunities ahead. As of the end of Q3, we have 87% of the active subscribers we had at year-end 2019, and that's at a time when we're still in the very early stages of return to work and the resumption of major social events. We have a larger presence in many more markets than we did in 2019, and our subscription margins are substantially better. We are excited about the significant opportunity ahead because we believe that women care about making more sustainable choices, want to experience more variety and own less, want more convenience, and care about financial value. We only need to capture a very small share of our opportunity set to be a very large business, and we're confident that our value proposition positions us to capture much more than that over time. With that, I'll turn it over to Scarlett. Thanks, Jen, and thanks again, everyone, for joining us. I will provide an overview of our third quarter results for fiscal 2021 and then follow with guidance for the fourth quarter and the full year 2021. Before I get into the numbers, let me remind everyone of our roadmap for how we plan to drive shareholder value. Subscriber growth and engagement will drive revenue growth. The combination of strong unit economics, improving fulfillment efficiencies, and operating leverage from increased scale is expected to drive improving margins and profitability. Margin increases, combined with increasing capital efficiency in our product acquisition, will drive improving free cash flow. Let's start with subscribers. We had a strong Q3 and ended the quarter with 116.8 thousand active subscribers, up 78% year-over-year and up 20% versus the end of Q2. We had 150.1 thousand total subscribers at the end of Q3, representing 101% of total subscribers at the end of fiscal 2019. We continue to see a high proportion of our subscribers joining the $135 8-unit program. Historically, approximately 50% of acquired subs were former Reserve or subscription customers, and this quarter this percentage was 62%, showing our success in reactivating former customers and the stickiness of our subscription product. As is typical in the third quarter, we saw strong seasonal acquisition, which was higher than total acquisition in Q3 of 2019. We saw strength in all channels and were especially strong at reactivating churn subscribers from fiscal 2019 cohorts. Our investments in our content marketing, media, and our referral product have bolstered organic acquisition, which was roughly in line with Q3 2019 levels. We also did a brand awareness campaign in Q3, which drove more than a 10% lift in traffic during the campaign. 22% of total subscribers at the end of Q3 were in a pause mode. Pause subscribers are automatically rebilled in 30 days unless they choose to re-pause, making pausers the very bottom of our acquisition funnel and a great signal of short-term growth. Total revenue was $59 million for Q3, up 66% year-over-year and up 26% from Q2. Rental revenue represented 92% of total revenue and increased 78% versus the same period last year. We continue to see high engagement from our subscribers with average revenue per subscriber higher in Q3 versus Q2, both on rental revenue as well as resale revenue. Reserve is not back to 2019 levels given fewer large events being planned, and we expect this dynamic to persist into Q4. Shifting to our costs and margins. Fulfillment cost is an important way to understand our efficiency in shipping items to and from customers, as well as restoring returned items. We continue to see improvement in this metric. Fulfillment costs were $19.2 million or 33% of revenue in Q3, compared with 31% in the same quarter last year and 52% in the same quarter of 2019. The significant reduction as a percent of revenue since 2019 is largely due to the structural changes we made to our subscription programs and to improve fulfillment efficiencies. When compared to Q3 of 2020, fulfillment cost as a percent of revenue increased 160 basis points as we benefited last year from lower shipments during COVID, while most subscribers were paying the higher price of our prior unlimited program. As we had anticipated, like many companies, we started to see transportation headwinds during Q3 with price increases from national carriers, and we expect to see the full impact of these headwinds in Q4 and fiscal 2022. We have implemented several strategies to mitigate rising transportation costs. The first is reducing our dependence on national carriers and moving towards regional carriers, local couriers, and consolidation plays. At the beginning of 2021, approximately 70% of outbound shipments were sent via national carriers, and we reduced it to 52% in October. You just heard about at-home pickup. Third, in Q3, we opened two inbound consolidation centers in Nashville and San Francisco, where we direct a portion of our return shipments and consolidate them to reduce shipping costs. In terms of rising labor costs, we have been increasing wage rates in our fulfillment centers over the past several years and increased them further in the last two quarters. We expect to continue to be impacted by rising labor costs, as we communicated during our IPO. We have proactively begun to address this over the past 12 months by automating additional elements of our operation and implementing process enhancements to improve productivity. Labor processing cost per unit in Q3 is down significantly versus Q3 of 2019, and we expect to see further improvements as we continue to invest in conveyance, robotics, RFID, and the digitization of garment data. Gross profit during Q3 was $19.9 million, compared with $2.4 million in the same period last year, representing a gross margin of 34% versus 7% in Q3 last year and 14% in Q3 of 2019. This is the result of driving structural subscription program changes, strong fulfillment efficiencies, and total cost, product costs on the P&L at 34% of revenue during Q3, compared with 62% in the same period last year. We increased product spend during the quarter, as Q1 and Q3 are typically when we see our higher purchases. Our lower total product costs as a percent of revenue versus last year reflects revenue being more right-sized relative to product on hand and higher capital-light product acquisition. As Jen mentioned, we expect 56% of units acquired this year to be through non-wholesale channels. Up from 54% in 2020, and meaningfully up from 26% in 2019. We estimate 22% of acquisition to be via Exclusive Designs, up from 11% in 2019. These units are owned and depreciated, similar to the accounting for wholesale units. However, they cost approximately 50% of wholesale cost. We also expect 34% of units acquired this year to be via Share by RTR, up from 15% in 2019. Share by RTR is our consignment model, so these units are not in capital expenditures and instead are paid for over time, primarily through performance-based revenue share reflected on the P&L. Share by RTR provides a significant cash flow benefit compared to wholesale units, which need to be paid for entirely upfront. Our total operating expenses, that includes marketing, technology, and G&A, were $59.4 million for Q3. This includes a $14.4 million one-time non-cash charge associated with the satisfaction of the liquidity-based vesting conditions for certain RSUs upon our IPO. Excluding that charge, our operating expenses were $45 million, representing 76% of revenue, compared with 79% in Q2 and 81% in Q3 of last year, demonstrating our increased ability to absorb our fixed costs at higher revenue. A couple of highlights on some of these line items. In Q3, we spent $8.8 million in marketing, excluding employee-related costs of 15% of total revenue, with the brand campaign impacting marketing as a percent of revenue by four percentage points. We feel confident in our ability to scale marketing spend efficiently given the lifetime value and higher profitability of customers with our new subscription programs. Our plan is to keep marketing spend at approximately 10% of revenue annually, though there may be quarterly fluctuations. We expect continued strong organic acquisition. You may see us lean more on marketing opportunistically to capture market share, and we will be disciplined about our spend. With respect to technology and G&A, we will continue to invest, though we anticipate significant cost leverage as we scale, as these investments are largely fixed. As a reminder, our existing infrastructure has the operational capacity to support 5x today's active subscriber count. We have a lot of runway without significant incremental investment in facilities. We have also begun to incur some new public company costs, most of which will hit in Q4 and in fiscal 2022. Now let's move to adjusted EBITDA, which adds back product depreciation and is how we measure cash profit from operations available to cover operating expenses. This measure excludes the cash cost of our owned rental product, which is captured in capital expenditures and reflected in free cash flow. I'll come back to free cash flow in a minute. Adjusted EBITDA for Q3 was negative $5.6 million versus negative $5.4 million in the same period last year, representing negative 9.5% margin versus negative 15.2% margin last year. We believe we remain on the trajectory to achieve adjusted EBITDA breakeven in 4-6 quarters. In terms of other items to call out in the P&L, in Q3, we incurred a $17.4 million loss on the revaluation of prior lender warrants that were remeasured concurrent with the IPO. This loss was non-cash and non-recurring. We also incurred a non-recurring $12.2 million loss on the extinguishment of debt paid down concurrent with the IPO. This expense was primarily non-cash. Moving over to the balance sheet and cash flow statement. Concurrent with our IPO, we reduced our total debt by a third or $141 million. That includes all of our prior first lien debt and $60 million of principal on our remaining facility. We evaluate on an ongoing basis how we can continue to improve our debt position and terms. We ended the quarter with $279 million in cash and cash equivalents, which includes $181 million in net proceeds from our IPO after the repayment of debt and deal expenses, some of which will get paid in Q4. Note that per GAAP, the product CapEx in our cash flow statement only reflects items that have been paid for during the period. We included supplemental information so you can calculate total product acquired in the period regardless of payment timing and a reconciliation in our earnings deck. Year to date, total purchases of rental product were $24 million, including amounts not paid for in the period or 17% of revenue, compared with $52 million and 42% of revenue in the same period of fiscal 2020. We do note that in fiscal 2021, our total product spend percentage of revenue is benefiting from excess products on hand relative to subscriber count due to COVID, and we expect this percentage to increase in fiscal 2022. Coming back to free cash flow, we define this as net cash used in operating activities plus net cash used in investing activities, and we're focused on reaching free cash flow breakeven in the medium term. Free cash flow as a percent of revenue improved to negative 24% for the first nine months of fiscal 2021, compared with negative 64% in fiscal 2020 and negative 69% in fiscal 2019. Our differentiated business model works to our advantage in the current macro environment, and we believe that this provides a unique growth opportunity. First, we have a large assortment of items, both in terms of quantity and selection, to support customer growth. We are not constrained from an inventory standpoint like many others in the apparel space. We are significantly less exposed to risks from late deliveries because we already have tremendous selection acquired in prior years that we monetize over many years. Given that consumers are challenged finding enough apparel selection in traditional retail and e-commerce channels, we believe they may turn to Rent the Runway, where our selection is as high as ever. Secondly, with pricing across the apparel sector meaningfully higher than it's been in recent years, we believe the relative value proposition to the consumer of a Rent the Runway subscription is better than it's ever been. Taken together, we believe these macro dynamics create even more of a reason for consumers to turn to Rent the Runway and see this as a chance to accelerate market share gain. Now I'd like to shift gears to guidance. We remain focused on driving subscriber growth and increased engagement of our subscriber base and expect to see continued growth in Q4. Our seasonality patterns are back to pre-COVID levels, where subscriber acquisition is typically higher in Q3 versus Q4. As Jen noted, we are seeing fewer large-scale holiday and special events than we typically saw during Q4 pre-COVID, which we expect to impact both subscription and Reserve bookings. Finally, we are closely watching COVID and the Omicron variant and potential impact. For Q4, we expect ending active subscribers of 121,000-122,000, representing 122% year-over-year growth at the midpoint. For revenue, we expect Q4 at $62.8 million-$63.3 million, representing 88% year-over-year growth at the midpoint. For full year 2021, at the midpoint, this represents 28% year-over-year growth and 77% growth for the second half of 2021 versus the second half of 2020. For adjusted EBITDA for Q4, we expect a -8% adjusted EBITDA margin. For the full year of 2021, we expect an adjusted EBITDA margin of -9%. We plan to guide to full year 2022 numbers on our Q4 call next year. Our philosophy continues to be to balance growth and profitability as we invest in the long-term value of Rent the Runway. I'd like to end by introducing our new VP of Investor Relations, Janine Stichter, who just joined us from Jefferies, where she was a senior research analyst covering retail, apparel, and footwear. Welcome, Janine. With that, I'd like to hand it back to Jen. This is the beginning of a new chapter for Rent the Runway. Thank you to our team members, past and present, for building a pioneering company that is poised to capture a market that's inevitable, a more sustainable, affordable, asset-light, and joyful way to get dressed. Thank you. We're looking forward to hearing your questions. At this time, we will be conducting a question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate that your line is in the question queue, and you may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. We ask that you limit yourself to one question and a short follow-up, please. One moment, please, while we poll for questions. Our first question comes from the line of Eric Sheridan with Goldman Sachs. You may proceed with your question. Thanks so much for taking the question, and thanks for all the detail on the conference call. Maybe if we could take a step back and think about the drivers of growth going forward as we move out of 2021 and into 2022. Wanna understand how you're thinking about the levers that are within your control, like allocating marketing dollars and improving funnel conversion, versus the things that maybe are outside of your control, like return to work or return of large events, and how we should be thinking about those variables as we look out over the next sort of 12-24 months, in terms of thinking through, subscriber growth. Thanks so much. I appreciate it. Yeah. Thanks, Eric. There's basically three main ways we grow our subscribers, and we saw strength across all during the quarter. The first way is re-engaging our funnel of former customers and pausers. As we just discussed, we've had 400,000 customers over the past 12 months, and this funnel is growing, and we expect it will continue to grow with events coming back and the macro environment normalizing. We were particularly strong in Q3 at reactivating churned subscribers from our fiscal 2019 cohorts. The second way we grow is organic acquisition. A large majority of our customers come to us organically, and that's not by accident. We've made investments into content, media, and community to ensure organic growth rate remains strong, and we continue to see strong organic acquisition. In fact, in Q3, organic acquisition was roughly flat with Q3 of 2019. The third way we grow is by paid acquisition. We turned back on our marketing engine after the pause we took in 2020, and we continue to see that the marketing investments drove productive results in line with 2019. We also successfully diversified our channel mix and saw early success with OTT and a brand campaign that drove a 10% traffic lift to the site. We intend to make both of these part of our mix going forward. These three channels are largely proven strategies for us. Thanks so much. Our next question comes from the line of Lauren Schenk with Morgan Stanley. You may proceed with your question. Hey, this is Nathan Feather on for Lauren. Just on the at-home pickup offering, can you help contextualize the difference in margin between that and other inbound methods? With customer adoption already above one-third, how high do you think that could go? Lastly, how many markets do you believe you have the subscriber density to roll the program to? Thank you. Thanks, Nathan. From a cost standpoint, we found that the at-home pickup is actually much more cost-effective for us. This is why we're really pleased with the early results that we've seen over this past quarter. We're already in five markets, as you heard us talk about, and we do plan on increasing that. We already have a higher number that we're at today, and we plan to do even more of that, you know, especially as a way to combat some of these increases that we're seeing in the industry from a transportation standpoint. Interestingly, the markets that we launched at-home pickup in, one of those markets being Los Angeles, are not dense markets. We've seen the most success in markets that are not dense because at-home pickup becomes even more convenient for you if you would've otherwise had to drive a few minutes to get to a drop box or a UPS return point. We see application for at-home pickup in not only many cities around the country but also expanding into suburbs and regions as well. Great. Thank you. Our next question comes from the line of Ross Sandler with Barclays. You may proceed with your question. Hey, everybody. It's Ross on for Roth. Just one question, Jen, high level on Exclusive Designs. You said they're 22% of items acquired right now. How big can that figure become long term, and is there, like, a natural limit in terms of the size of how big exclusives could be for you guys? And then the second question, more of a nitpicky near term one for Scarlett. The Q4 sub-guidance, 122K active, assumes like a, you know, pretty small 5,000 net adds, pretty, you know, well below the last three-quarter average. Is there some conservatism in that, or is there, like, some catch-up factor that's happening these last couple of quarters that you don't have in the fourth quarter? We know you're running some holiday promos, so just any color on that, active sub-guide for 4Q. Thanks a lot. Thanks. Thanks, Ross. Why don't I start with the second part of the question first. In terms of our guidance, you know, our seasonality burn patterns, as we said, are back to pre-COVID levels. You know, we've typically seen that subscriber acquisition is higher in Q3 versus Q4. You know, in Q4, the growth of both of our Reserve and our subscription business historically centers around customers having a lot to do in their social lives, you know, gathering for large holiday events, traveling, going to shows and big parties. W e obviously are still showing growth for Q4, but likely not as much as we would have seen if more of these large scale events were happening, you know, which are more typical in this timeframe. We're excited to guide to a 6%-7% quarter-over-quarter revenue growth for Q4. We do expect, as Jen said, that there will likely be a backlog of social events into 2022 and 2023. Then in terms of the guidance around the Exclusive Designs, you know, we like are estimating to be at 22%, as you just heard, for this full year. We do believe, as Jen just mentioned, that we're on a good path to get to a third across our three acquisition channels. We obviously have quite a lot of visibility into our spring 2022 orders already since we've already placed a number of them. We know where our expectations are going to be for 2022, both in terms of overall mix as well as our Exclusive Design partners. We'll share more on that front in our Q4 earnings call. In terms of how big this could be over time, of course, over the long term, if we see continued success in Exclusive Designs, it could be far larger because this is something that's great for our customers, great for our brands, and great for us. Thank you. Our next question comes from the line of Michael Binetti with Credit Suisse. Please go ahead. Your line is open. Hey, guys. Thanks for all the detail and taking our question here. Jen, I wanna hear maybe a little bit on plans for marketing and the reopen in the first half of 2022. I know Eric. I think Eric asked about this a little bit. I know, you know, we talked through the IPO about having a big installed base of 2.5 million customers in your full database that you have versus the, you know, just over 100,000 in the subscriber program. You mentioned a few comments that you've had a lot of luck taking those customers that know you and converting them into the subscriptions. I'm curious how the marketing to them will look in the first half, as we move into the reopening. Then I was also curious on New York being one of the markets you called out at not being quite back at 90% of 2019 levels yet. It just looks like that market is moving back to work and social pretty well. I wonder if there's any pushback that you're seeing that's specific in that market, perhaps, you know, legacy unlimited subscribers, any pushback from them as you pivoted to monthly plans, you know, fixed item monthly plans in the post-COVID world. Thanks. Yeah. First for New York, we have been seeing week-over-week growth in the market, and we feel good about it accelerating back to pre-COVID levels. Certainly, just some external data right now in New York and in San Francisco, on any given weekday, only 25% and 28% of people are in the office on average. They're certainly lagging behind in return to office, which probably also indicates their comfort level with social interactions as well. We do think that we'll benefit from this kind of backlog of events and return to office into 2022 and into 2023. In terms of how we think about, you know, specific near-term growth, of course, there's this kind of funnel of our recent customers. We have been very successful in the past at converting not just recent customers, but even customers from prior cohorts into being subscribers. One of the areas that we're gonna be investing in in 2022 is just continued testing of our conversion funnel to get more of our customers to try subscription. We also have historically been focused on core digital marketing channels in the mid to bottom of funnel, primarily social and Google SEM, and we began diversifying a few years ago into new channels like brand ambassadors and affiliate marketing, which have all been efficient for us. As we've ramped back our efforts this year, we've further diversified our channel mix into YouTube, TikTok, OTT, while also adding top of funnel spend. We feel very good about the results that we're seeing. I think the combination of all of that gives us a lot of confidence in our guidance. That's great. Thanks a lot for the help. And then I- Oh, sorry. Sorry. The one last thing I would say is that our loyalty across the board is higher for our fixed swap programs than we saw with our previous unlimited program. That's not playing a part at all in the macro environment. Okay, great. Thanks so much, Jen. Our next question comes from the line of Erinn Murphy with Piper Sandler. Please go ahead. Your line is open. Great. Thanks. Good afternoon. A couple questions for me. First, maybe just on the guidance for 2021. You guided Scarlett with a very tight band of just $500,000 between the top and bottom end. Can you just share a little bit more about your level of visibility and just the predictability that you have in the model, even with 7-8 weeks left in the quarter? Then if there was some upside, do you see it coming more from the top line or the adjusted EBITDA, just given some of your comments around the fourth quarter and, you know, kind of the lack of social engagement or some of the holiday parties this quarter? Thanks so much. Thanks, Erinn. In terms of the guidance, we do have pretty good visibility. Obviously, we just also went through the Black Friday, Cyber Monday and, you know, saw that perform as we had expected it to. We had good visibility into that, and that baked into our numbers as well. You know, I think the thing I would come back to is what I was saying, which is really more about, you know, these large events and that kind of hampering what we normally see in Q4, historically, you know, more seasonally. Having said that, you know, as in we're really excited about, we have good visibility into is the engagement of the subscribers, right? We're seeing that 24% of our subscribers are adding at least another unit, which has been great from an ARPU standpoint, and we're seeing that behavior continuing. We're really excited about the engagement of the subscribers. Great. Maybe just following up on that point, Scarlett. How should we think about the incremental flow through of that 24% attach rate that are kind of adding that extra item in their cart? Thanks so much. Yeah. The way that you should think about that is that typically when they're adding another item, it's going into an existing shipment. From a gross margin standpoint, it's actually really good for us, right? It allows us to be able to derive more revenue over a base of cost that's already kind of predefined in the shipment that she's already getting. Excellent. Thank you so much. Our next question comes from the line of Ike Boruchow with Wells Fargo. Your line is open. You may proceed with your question. Hey, thank you. Hey, Jen and Scarlett and Janine. Congrats on the first quarter out of the gate. I guess, Scarlett, on fulfillment margin, I mean, I wanted to kind of go through this a little bit. You guys have done this phenomenal job over the last two years, I think 15-20 points of scale just from the shift in the offering and some of the strategic changes you guys made. That's great. I guess two questions is, one, now you're having some year-over-year pressure 'cause of inflation, which we all understand in the third quarter. Should we expect that inflation or that cost pressure to build in the fourth quarter? What kind of fulfillment margin are we thinking there? What are the drivers now that we've seen the benefits from that big strategic shift a year or two ago? What are the drivers now to get fulfillment margins, you know, 70% and above, you know, over the medium term? Thanks. Maybe I'll start. I'll kick it off in terms of some of the pressures on the fulfillment margin. I'd say the two pressures are transportation and the labor wage rate increases, which we just talked about a moment ago. You know, we had anticipated both of those macro trends, and, you know, we did see that start to show up in our numbers. You know, as I mentioned, from a wage rate standpoint, this is something that we have been increasing over the last couple of years, and we continue to do that this year. You should think about the fact that what we're guiding to for EBITDA for this quarter reflects, you know, some of those increases and some of those headwinds. On the labor side, you know, part of the reason that we are. We have already begun doing a lot of process improvements in the warehouse because we're looking for more efficiencies, right? That's something, as you know, that we started to do 12 months ago. We're gonna be doing even more of that, in fact, probably bringing forward some of our plans to do a bit more inbound automation in our warehouse as a way to combat some of those wage pressures. Maybe I'll turn it over to Jen to talk a little about inflation and what we're seeing there. Yeah. We actually believe that the rising prices and inflation in the wider apparel space create a big competitive advantage for Rent the Runway, because it makes our financial proposition even more compelling and the prospect of buying something you're only gonna wear a few times even more nonsensical. We believe, number one, we have pricing power, given the significant value that the customer receives. She's receiving 20x the GMV value for her spend, and there's no other place she can get this kind of value for her money. While we don't have plans at this point to increase our program prices, we'll continue to evaluate that over time. Because we're not increasing pricing, again, we believe this makes us very competitive in the market now to gain share. Great. I guess just a quick follow-up. Because of all the pressures that you guys are calling out, and again, very macro, understood, should we expect fulfillment margins to. Do you have an ability to take them up year-over-year when we get into 2022? Should we expect more pressure? Just kinda curious as to the direction on the margin itself. Yeah. O ver time, we do think that we have an ability to continue to increase fulfillment margins. You know, in the short term, clearly, these macro trends are here, and we are, you know, working on transportation strategies and as well some of the labor strategies in the warehouse as well to combat some of that. You can see that we've been successful this quarter in combating some of those macro trends, and we'll continue to do that. Then obviously from a revenue standpoint, which also impacts fulfillment margin, the fact that ARPU is higher is beneficial to the business as well. Great. Thanks. Our next question comes from the line of Andrew Boone with JMP Securities. Please go ahead. Your line is open. Hi. Good afternoon. Thanks for taking the question. Two, please, from me. First, can you talk about your learnings from the brand marketing campaigns? How do we think about that continuing or perhaps growing into 2022? Secondly, as we think about kind of the assortment and selection being 50% casual, how do you guys think about the assortment for 2022 in a reopening world, right? How do you align yourself with what seemingly could be a very varied assortment of what women could want in 2022, just given the trajectory of Omicron and COVID more broadly? Thank you. In terms of how we align our assortment, because of how much data we're getting from our customers real time, we're able to use that to affect what merchandise we're bringing onto our platform. Because we now have these capital efficient channels with which to increase our selection and our assortment, it gives us a lot of ability to react very quickly to the market. As an example, in Q3, we saw that the customer was favoring very bold styles, very daring styles. She was going out more. She wanted items that were more appropriate for nights out and parties, and we were able to very quickly go to our 780 brand partners and secure the inventory to match her demand patterns. Then on our brand campaign, it was one of the first brand campaigns we've run in many years. It was not only successful in driving additional traffic to the site, 10% incremental traffic, but it also upped overall brand awareness. From that campaign, we are evaluating an always-on top of funnel brand spend that we would add into our marketing mix. In terms of, you know, how we think about marketing overall, Andrew, you know, as we've mentioned, you know, generally speaking, we do intend to see continued strong organic acquisition contributing to growth of subscribers, and we expect to, you know, more or less stay close to that 10% of marketing as a percentage of revenue. Having said that, like you just saw us do in Q3, you know, we will look for opportunities to be able to lean in from time to time. I would also say, you know, that 10%, as I mentioned, is really more of an annual number as you think about it. There will be some quarterly fluctuations, but we will, you know, opportunistically potentially spend a bit more, if it makes sense, obviously continuing to be very disciplined about that. Great. Thank you so much. Our next question comes from the line of Edward Yruma with KeyBanc. You may proceed with your question. Hi. Thanks very much for taking the questions. I guess, first back to this casual point. For those consumers that were loyal customers during COVID and really leaned into casual, are you seeing as she adds more kind of external use cases, going out dresses, that she's kind of trading up in terms of item count, or is it just her mix within that's changing? As a follow-up, from a modeling perspective, the debt repayment, what specific tranche of debt did it come from, and how should we think about interest expense going forward? Thank you. We are certainly seeing our customers trade up in terms of item count. We've been very pleased with the engagement of our subscribers, and we believe that as macro condition improves, it's not that she's gonna stop renting casual, it's just she's gonna add back many of those more special occasion and night out and work-related items that she had rented from us in the past. Now interestingly, we've seen a major difference between 2021 and 2020 in terms of how she uses Rent the Runway to dress for work. As you recall, work prior to the pandemic was a major reason why she used the subscription, and in 2020, the work use case basically minimized. In 2021, she's back to using us for work 25% of the time, even though she is using us within the full context of Zoom. She is still renting. She wants to look great and present herself well, even in the context of working from home. I think that this is even more of a symbol of how she is adjusting to this hybrid world. She continues to work from home. She wants to look good. She's still renting work wear. She is renting. Actually, some 25% of our inventory that's being rented in Q3 was special occasion inventory. Even though she has fewer occasions, she's amping up smaller moments. She's using that special occasion inventory to go out to dinner, to meet friends, and to kind of amp up those casual moments in her life. Ed, in terms of your question related to the debt, you know, we were really happy that we were able to raise $357 million in the IPO, which allowed us to pay down, you know, more debt than we had originally anticipated, and obviously to raise more money for the business. In terms of what we paid down, we paid down all of the first lien debt, which was Ares. That was fully paid out. Then we paid out $60 million of the principal on the remaining debt, that was the Temasek debt, which was, you know, $30 million higher than what we had originally indicated. In terms of, you know, where we are now, you know, we're really focused on running the business. We're optimizing to grow and capture market share. You know, we're gonna continue to evaluate on an ongoing basis how we can improve further our debt position as well as our terms. In terms of what you should be modeling now for your model, you know, from an interest rate standpoint, the remaining debt is at 12%, and that is two components. Seven percent of that is cash, and five percent is payment in kind and non-cash. Thank you. Our next question comes from the line of Dana Telsey with the Telsey Advisory Group. You may proceed with your question. Thank you. Good afternoon, everyone. As you talk about subscriber engagement and the 24% of subscribers adding one or more paid additional items, what are they adding? How are you thinking about attachment rates going forward and where th at's coming from and going to? Just secondly, on Omicron, which is now out here a couple weeks or so, how does it seem different or the same as what you experienced when Delta was first announced? Is there any learnings from Delta that would be informative for this Omicron? Thank you. Hi, Dana. I'm so glad you asked that. A s you know, we've really been through this story of variants before with Delta, and we were really pleased with our growth in Q2 and Q3 as the Delta variant spread and peaked throughout the U.S. We have not seen any impact of Omicron, but this is within the context of, you know, because COVID is present overall, we are seeing, you know, fewer large-scale events, fewer just large-scale social interactions than we typically would in Q4. Our business is continuing to grow really nicely, but we believe that the more COVID dissipates, the higher the slope of growth may be. We feel really great about the fact that the resiliency of the business this year in an entirely COVID environment. Active subs are up 113% year to date, and I think that that's proof of really this diversification that we've intentionally had on how the subscriber uses Rent the Runway. She is using us for this hybrid world, and we think that any normalization is just upside for us. Dana, from an ARPU standpoint, you know, there's not really a call-out in terms of the additional items being different than what she has in her base subscription. She's just really using the add-on as a way to have an ability to wear us more days for the month. Nothing different than kind of her main basket. For us, it's really about engagement and the fact that we're seeing her spend more with us, and it's making her even more loyal as she becomes an even bigger daily utility. We become an even bigger daily utility in her life. In terms of Q4, we expect ARPU to be pretty similar. You know, we don't anticipate any significant changes relative to Q3. Jen, anything else you would add on the add-ons? I would just say that the add-ons are no different than the normal basket. However, the normal basket has actually changed in 2021. She is favoring bolder, more colorful, more printed, more fashion-forward styles across the board. That is great for our business, because our business is a fantastic platform to have more fun with fashion, to experiment with fashion without the inevitable buyer's remorse of buying something that you would only wear once or twice. This, the trends that we're seeing in the overall apparel market towards, you know, new kinds of bottoms that people are wearing and new categories of clothing and faux leather and Lurex and metallics, like, that is, I think, a fantastic tailwind for our business and really helps us drive share, especially because the selection that we have right now has never been better. We have really faced no supply chain issues. Given our unique business model, where we monetize our inventory over multiple years, that puts us at an advantage versus other retailers who lack selection right now. The selection they do have, they're raising prices on it. Thank you. At this time, we have reached the end of the question and answer session, and this also concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation, and have a great day.