Welcome to Rent the Runway's fourth quarter and full year 2021 results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to Vice President of Investor Relations, Janine Stichter. Thank you. You may begin. Good afternoon, everyone, and thanks for joining us to discuss Rent the Runway's fourth quarter and fiscal year 2021 results. Before we begin, we'd like to remind you that this call will include forward-looking statements. These statements include our future expectations regarding financials 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 Form 10-K 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 a substitute for financial information presented in accordance with GAAP. Reconciliations of GAAP to non-GAAP measures can be found in our press release, slide presentation posted on our investor website and our SEC filings. With that, I'll turn it over to Jen. Hi, everyone. Thanks for joining us today. Our team executed very well in Q4 despite a very challenging macro environment driven by a significant and unanticipated COVID resurgence, event cancellations, as well as offices remaining closed. We exceeded our revenue guidance, exceeded our average revenue per subscriber expectation, grew subscribers 110% year- over- year, and drove better than expected bottom line performance. Scale improves our model, and we saw it in the strong progression on our gross margins, Adjusted EBITDA, and free cash flow throughout 2021. Even better, this momentum continues to carry over into fiscal 2022. Before we move forward, I want to affirm that my top priority as CEO is to bring Rent the Runway to profitability while continuing to grow our business and the unique value we deliver to our customers. Specifically, we believe that we can produce positive free cash flow with the cash we currently have. We have developed a number of levers we can and are pulling to attain this goal, and we're focused on managing the growth of our business to hit this target. While I'm pleased with our strong growth and anticipate that continuing, I recognize the world for what it is, and path to profitability is our number one priority in addition to serving our customers. In 2021, in addition to going public, we had five significant priorities. First, to meet or exceed our financial expectations, which I'm happy to say we did. Second, to broaden our subscription offerings and deliver more value to a growing subscriber base. Throughout 2021, our subscription programs drove increased customer engagement and loyalty. Third, to translate the aforementioned increased value we provided our customers into improved financial performance, namely higher margins, improving ARPU, and higher profit per subscriber. Fourth, to add more technology, automation, and use of data into our warehouses to improve non-transportation fulfillment expenses, which helped us mitigate the impact of industry-wide labor and transportation challenges. Last, to increase the efficiency of our rental product investments by further shifting spend into lower cost channels, like consignment and exclusive designs, that are equally, if not more desired by our customers. The strategic priorities that we put in place are paying off, and we believe will continue to positively impact our top and bottom line in 2022. I want to thank our team who stayed focused throughout this very challenging time and delivered on some incredible improvements, which we believe set Rent the Runway up for an even bigger future. I'd like to provide a bit more context around these accomplishments. First, on our subscription plans and how they translated into financial value for us. Last year, we completed the full rollout of our personalized subscription programs. These plans are built to give our subscribers complete flexibility in how they use their chosen plan. The result has been that customers increase spend per month and retain longer. As an example, a subscriber who needs an extra outfit in a given month can now seamlessly add additional paid items into their subscription and can upgrade to more shipments per month, which increases the value to them and increases their value to us. In Q4 2021, over 30% of our subs added incremental paid items into their subscription, which increased ARPU and improved our profitability. It's clear that our customers are seeing increased value and becoming even more loyal in our new plans. The best example of this is how even during the Omicron surge, many subscribers who suddenly were sheltering at home chose to pause rather than cancel their subscriptions, which is a great indication of how important Rent the Runway is in our customers' lives. Midway through Q4, our momentum was strong, and we had exceeded our active subscriber expectations for the quarter. After the unanticipated impact of Omicron, we ended the quarter with more subscribers and pauses than planned. Even then, we saw the strength of add-ons and Resale in driving ARPU and revenue. Importantly, the Omicron disruption was short-lived, and we've seen strong momentum as this variant has subsided. As it relates to our fulfillment expenses, we drove innovation within our operation in 2021, which we plan to build upon in 2022 and beyond. This innovation deepens our moat in logistics and enhances our ability to mitigate some of the macro increases in cost of transportation and labor. Within transportation, we launched at-home pickup in nine markets, covering a quarter of our subscriber base. At-home pickup is less expensive than shipping with a national carrier, and it greatly improves the customer experience by dramatically simplifying the returns process. On the non-transport cost side, we launched RFID, automation, and other projects, which reduced non-trans fulfillment costs per unit more than 30% year-over-year in fiscal 2021, with room to further reduce over time. Last, regarding increasing the efficiency of our rental product investment, our focus has been on expanding product selection to meet growing demand while reducing use of cash. Happy to say we did that. Via our consignment channel, Share by RTR, we significantly reduced the amount of cash spent upfront, which allows us to acquire more overall product at low risk, given payments are largely performance-based. Via Exclusive Designs, we use our data advantage to develop collections with our designer partners that our customers love, are around 50% lower cost than wholesale, and have higher ROI than other styles on our site. In 2021, we drove these non-wholesale channels to represent 55% of our rental product acquisition. In addition, we continue to advance our garment science expertise, and our 2021 initiative showed a 30% reduction in the product deactivation rate year-over-year, which means we are extending the useful life of units and will lead to fewer total units needing to be procured in the future. Our priority in 2022 is to grow revenue 45%-50% and to progress on our path to profitability. I view free cash flow profitability as a way station rather than a destination, and I'm confident that Rent the Runway will be a high free cash flow margin business as well as a high-growth business over the long term. We believe the key to attaining free cash flow profitability, then delivering attractive and expanding free cash flow margins, is primarily through scale via a higher subscriber count. We've built an OpEx cost base intended to support a multiple of our current subscriber base. We built this OpEx base because we're confident that we will attract a multiple of our current subscriber base over time. While we believe subscriber growth alone can get us to our goals, we are focused on a lot more than subscriber growth. We believe that these other initiatives will get us to our goals faster and can lead to even more attractive long-term margins. One of these other initiatives is to increase the value of our subscription programs, and therefore our revenue and loyalty per customer, by making it easier for customers to use our service and to discover great products that fit them well. Another key initiative is focused on driving moderate year-over-year improvements in fulfillment expenses as a percent of revenue through increased labor productivity, automation, and use of data and technology in our warehouses. Another key initiative is increasing the efficiency of our rental product investments by shifting a greater percentage of our assortment into consignment and our Exclusive designs. We plan to host an Analyst Day over the next year to provide more detail around the concepts I've discussed today. Now that COVID rates have subsided, we also are looking forward to bringing investors on a regular basis to our distribution facilities to see firsthand the unique and significant moat we've built. In 2022, we plan to continue to execute on our core priorities from 2021 and capitalize on some key trends and investments. We have three key business strategies intended to impact the top line and three impacting the bottom line. I'll start with our strategies related to top-line growth and engagement. First, 2022 is expected to be a banner year for special events, and we plan to capitalize on it. We think that there will be unprecedented demand for going-out clothes and event dressing this year, with 2.6 million weddings planned, a new office wardrobe, and closets that need a serious refresh after two years at home. We believe that 2022's record number of events can directly translate into extremely attractive and cost-efficient subscriber acquisition. Over 50% of Rent the Runway's traffic comes to our site because they have an upcoming occasion, and we've proven our ability to convert this would-be one-off renter into a long-term subscriber. As an example, we've successfully positioned our subscription as a value-oriented way to dress for multiple events in a month and are leaning into this more in our marketing. We're increasing the amount of content and creative geared towards events with 2 to 3x the volume across social, CRM, performance media, and SEO-optimized on-site content. We are also focused on strengthening our funnel from one-time rentals into subscriptions. Second, we will continue to make important investments into our customer experience to make it faster and easier for customers to find clothing they love by improving search and product discovery on our site and app. Because our subscribers visit our app multiple times per week, we wanna make it easier for them to browse and find what they're looking for quickly. These efforts are long-term in nature, but we believe we can make annual progress to increase customer discovery, acquisition, and retention. Third, we plan to improve how well our clothing fits our customers. Fear of receiving items that won't fit is one of the top reasons why new traffic doesn't convert. We plan to enhance our tools to improve fit confidence and success, which should in turn drive conversion. Examples of this include expanding our customer reviews to cover more products and prioritizing the best-fitting items for new customers. We introduced a proprietary fit algorithm in 2021 that recommends sizes to customers that are most likely to fit. This has already driven 40% lower fit issues, higher customer satisfaction, and fewer customer service calls among customers who take our recommendations. As our top line scales, we're focused on making our bottom line even more efficient. First, we intend to increase the penetration of at-home pickup and expect more than half of our subscriber base to have access to at-home pickup by year-end. At-home pickup is an important cost mitigation strategy against rising transportation costs as we shift shipments towards cheaper and more nimble last mile and regional carriers. Second, we plan to continue to build on top of the technology and automation we put into our facilities in 2021 to drive further productivity gains and reduction in labor costs. Third, we plan to make deeper investments to grow Exclusive Designs while maintaining Share by RTR at around 30% of units acquired. For Exclusive Designs, we have a strong lineup of nearly 20 designer partners, around half of which are new for 2022, including Esteban Cortázar, Busayo, Atlein, and our first celebrity design collection launching later this year. I'm happy to share that we launched our impact strategy last month, which builds on years of work and has been core to our mission. We conducted a third-party lifecycle assessment in 2021 that found that renting clothes on our platform drives net environmental savings across water, energy, and carbon emissions compared to purchasing new clothes, even when accounting for shipping, cleaning, and our other operations. Based on these findings, we estimate that our model has displaced the need for production of over 1.3 million new garments since 2010. This matters because clothing production accounts for the vast majority of negative environmental impact in the apparel industry. Our impact strategy's hero goal is to encourage customers to rent, not buy, and to displace the need for production of 500,000 new garments by full year 2026. We also have a goal to divert 90% of waste from landfill from our warehouse operations, which includes continuing to divert 100% of unusable clothing from landfill. Last month, we began offsetting 100% of carbon emissions from shipments to and from customers. We have also committed to achieving net zero carbon emissions by 2040. We plan to report progress against our goals beginning in 2023's annual report. To sum up, we believe we're in the early innings of a huge market for fashion subscription and rental, and our goal is to invest behind the strategies that will continue to improve customer value and experience while simultaneously improving our margins. We're excited about the opportunities in the year ahead to grow our business significantly, a back-to-life, back-to-work macro environment that's more conducive for us, and the plans we have in place to capitalize on these opportunities. 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 fourth quarter results for fiscal 2021 and then follow with guidance for the full year and the first quarter of 2022. Before I get into the numbers, I want to reiterate what Jen said around our focus on growing revenue while driving Rent the Runway towards profitability. This is the financial framework we use for our business. We are focused on growing revenue by growing subscribers and growing ARPU from both add-ons and mid-single-digit price actions from time to time as we increase subscriber value. We also derive revenue from our à la carte Reserve rental and our Resale businesses, both of which are important customer funnels into Subscription. We continue to move towards free cash flow profitability by increasing expense leverage in our three major cost buckets, which are fulfillment, that includes transportation and non-transportation expenses, operating expenses, and investments in rental products. Phase I is to cover our OpEx, which we plan to do in the next three to five quarters. I will highlight progress in all of these areas. Q4 revenue of $64.1 million was up 91% year-over-year and came in above our guidance. We achieved this by generating higher revenue per subscriber via paid add-on slots, which are higher margin, and we had higher resale revenue than planned. The unanticipated effect of Omicron negatively impacted us in Q4 in three key ways. One, by significantly decreasing revenue from our Reserve business as most holiday events were canceled. By reducing subscriber acquisition in the back half of the quarter, and three, by driving a higher rate of subscriber pause. As a result, as of January 31, the end of our fiscal Q4, we had 115,000 active subscribers. Total subscribers increased to 160,000 subs, up 6% quarter-over-quarter and up 68% year-over-year. For the year, we generated $203.3 million in total revenue, up 29% versus 2020. Average monthly subscription rental revenue per subscriber, or ARPU, for the year was $135 and higher in H2 versus H1 due to strong subscriber add-on rates. Our Q4 gross margin rose 24 points year-over-year to 37%. For the full year, gross margin was 34% versus 10% in 2020. The significant improvement in Q4 versus last year is due to higher revenue per shipment, higher subscription gross margins, and product costs. That's the rental product depreciation and revenue share line item at 32% of revenue versus 59% in Q4 of last year. We entered 2021 with a high supply of products due to COVID and benefited from products being better matched to demand throughout the year. We were able to achieve this improvement in gross margin even with fulfillment costs higher at 32% of revenue in Q4, compared with 27% in Q4 last year, largely due to the transportation price increases we had anticipated. We mitigated this with shipping diversification and with significant productivity improvements in our warehouses. Our total operating expenses, marketing, technology, and G&A, represented 76% of revenue, compared with 85% in Q4 2020 and 87% for full year 2021, demonstrating our ability to absorb fixed costs with higher revenue even as we invest in the business. Adjusted EBITDA for Q4 was -$5.5 million versus -$4.3 million in Q4 last year, representing -8.6% margin and a 4-point improvement versus -12.8% last year. For the year, we had an Adjusted EBITDA margin of -9.4% versus -12.9% in 2020. We chose to spend slightly more than originally anticipated on marketing in Q4 to set up the business for a significant ramp into 2022, resulting in higher than planned marketing expense, excluding employee-related costs, at 10% of revenue. Moving to free cash flow. Rental product CapEx is our largest investment and cash expenditure. The clothing and accessories we procure can be monetized over multiple years, which is a key competitive advantage versus traditional retail. We've significantly reduced our upfront cost of units from $111 to $95, or 14%, between 2019 and 2021. This is due to a mix shift towards more capital-efficient channels, which represented 55% of our product acquisition in 2021. We assess total cash outlay for products by looking at both purchases of rental products and Share by RTR revenue share payments. On that basis, as you see on slide 23 of our earnings deck, we spent $52 million or 26% of revenue on products in fiscal 2021 versus $127 million and 50% in fiscal 2019. That's a significant reduction in cash outlay. This results in free cash flow, or CFO plus CFI, improving to negative 32% for fiscal 2021 compared with negative 64% in fiscal 2020. This significant improvement reflects our product acquisition shift and a reduced need to invest in product in 2021, and more importantly, showcases our ability to manage costs and drive towards profitability even with a difficult environment backdrop. We ended the year with $248 million in cash and cash equivalents. As you look at 2022, here are a few things to think about, and then I'll end with guidance. First, as it relates to revenue, we expect continued high subscriber engagement. Last week, we announced a price increase for new customers, which will go into effect for existing customers in Q2. The impact of this increase is incorporated in our subscriber acquisition and retention expectations for this year and in our guidance. We expect ARPU for full year 2022 to be up approximately 5% versus fiscal 2021. We anticipate gross margin for the year to be flat to slightly up versus 2021, with pressure in Q1 due to seasonal product acquisition. We expect that higher ARPU and fulfillment productivity will be largely offset by approximately 200 basis points of pressure on annual fulfillment cost of revenue versus Q4 2021 due to continued transportation headwinds. In addition, we expect higher rental product depreciation and revenue share expense in dollars due to growth in assortment. As we drive a higher percentage of consignment, revenue share is expected to represent a higher percentage of revenue in 2022 versus 2021. Adjusted EBITDA is how we gauge our ability to cover operating expenses, and we maintain our previously stated estimate of Adjusted EBITDA breakeven in the next 3-5 quarters. Q1 is typically our lowest profitability quarter, and we expect this again this year. We plan to keep marketing spend at about 10% of revenue for the year, excluding employee-related costs. Though we anticipate a higher proportion in the first half as we pull forward spend to drive subscriber growth and higher recurring revenue earlier in the year. We expect higher technology expense as a percentage of revenue in Q1 due to strategic investments such as headcount for search, discovery, and fit. This should result in some OpEx deleveraging in Q1, but we anticipate significant leverage over the year. Over time, we believe G&A and tech, which are largely fixed, could represent less than 30% of revenue with scale. In terms of free cash flow, we maintain our focus on reaching free cash flow breakeven in the medium term and believe we can get there with approximately 300,000 average active subscribers. We intend to further lower the upfront cost of acquired products in fiscal 2022 by acquiring approximately 60% through non-wholesale channels, and we remain on our midterm path to drive over two-thirds of product acquisitions through these channels. As anticipated, due to more normalized investments in product in fiscal 2022 compared to 2021, we expect the free cash flow percentage of revenue for the year to be slightly lower than in 2021. We measure ourselves on free cash flow on a yearly rather than quarterly basis due to seasonal fluctuations. Before we go into guidance, I want to clarify the seasonal patterns that impact Rent the Runway. Subscriber acquisition is typically highest March through May and September through November, when customers naturally think about changing over their wardrobes. We see higher pause rates in the summer and mid-December to end of January, so Q4 active subs usually peak mid-quarter before we see an uptick in pause by the end of the quarter. Transportation expense, and therefore fulfillment cost, is typically highest in Q4, given higher service levels and competition during the holidays. Finally, Q1 and Q3 is when we typically invest in rental products, so you'll see that impact gross margin and investing activities on the cash flow statement. The impact on cash could be with a lag, depending on timing of receipts. This means that you should expect higher overall spend in Q1 and Q3, which negatively impacts margins in those quarters. As subscriber count grows through the year, later quarters benefit from more operational leverage due to higher revenue scale to absorb earlier investments. Shifting to guidance. The midpoint of the range reflects our current base case, with the low reflecting more COVID impact and the high reflecting a more normalized environment. We're generally focused on margins and percentages of revenue rather than dollars, and we may choose to reinvest dollars into the business. We are anticipating a return to normalized seasonality patterns starting in the second half of Q1 as Omicron started to abate. The business has shown progressively greater resilience to COVID variants over the last 24 months, though we will continue to closely watch BA.2, other variants, and potential impact. We expect full year revenue for fiscal 2022 at $295 million-$305 million, representing 45%-50% growth versus full year 2021. This year, we anticipate benefiting from a COVID bounce back, and longer term, we believe we can sustainably grow revenue in excess of 25% annually. For Q1 2022, we expect revenue of $63.5 million-$64.5 million, representing 91% year-over-year growth at the midpoint. Though we enter the year with a lower sub count than expected, we recently experienced a quick bounce back coming out of Omicron, and we expect ending active subscribers of 130-132 thousand at the end of Q1, representing 77% year-over-year growth at the midpoint. For full year 2022, we are actively managing to overall free cash flow dollars and margin as moving towards profitability is our top goal. We are prioritizing investments in OpEx for technology and customer experience and are able to invest less into CapEx this year due to our successful product acquisition shift. Fulfillment continues to be a headwind. Therefore, for Adjusted EBITDA for fiscal 2022, we expect a range of -6%-5% margin. For Q1 2022, we expect Adjusted EBITDA of -$11 million-$10.5 million. This is a result of higher fulfillment expense, early investments in marketing, and higher technology expenses against the lower revenue at the beginning of the year. We are intently focused on balancing robust growth with profitability and will seek to strike the right balance to attain both objectives and maximize the long-term value of Rent the Runway. Finally, I want to note that we have provided guidance on a few more metrics on slide 25 of our earnings deck. With that, we are happy to open it up for questions. Thank you. We will now 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 your line is in the question queue. 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. In the interest of time, we ask that participants limit themselves to one question and one follow-up. One moment please while we poll for questions. Thank you. Our first question is from Lauren Schenk with Morgan Stanley. Please proceed with your question. Great. Thanks so much for the color. Two questions. One, is there anything you can comment on in terms of more of the short term, any potential headwinds that you've seen from BA.2 thus far? Just curious if there's been any notable change. And then secondly, you know- Rising risk of a slowing consumer backdrop in the back half of the year. How do you think about this business performing in that sort of macro environment? Is this a service that people, you think will continue to hold on to, as its value is very important to it, to them? Just any color, that would be really helpful. Thank you. Sure. Hi, Lauren. We haven't seen any impact to date of BA.2, and the business continues to get more and more resilient when it comes to variants. As it relates to our growth this year, we feel very confident. That's why we issued full year revenue guidance. We're benefiting from an events boom. You know, people have talked a lot about 2.6 million weddings, but that means 2.6 million rehearsal dinners, bachelorette parties, honeymoons, Sunday brunches. We're benefiting from people returning to the office, even in a hybrid manner, and we're seeing that they are actually dressing even more fashionably for the office. Inflation for us is a competitive advantage because it actually increases the value that the subscriber is getting from Rent the Runway. Even prior to inflation, she's paying about $140 a month and receiving 20x the value. She's getting $4,000 worth of designer product. As costs of products are going up, she's seeing even more value, which is why we've seen higher geographic diversity in our sub base, higher age diversity, and we anticipate that continuing. I'll also note that, you know, our business is very different and hasn't tracked with apparel or retail peers. Over the last two years, for instance, we didn't see any stimulus benefits that others got because, number one, we're not something that you can purchase today and use later. Number two, 80% of our customer base had a household income over $100K, so they didn't even receive the stimulus. Our business does track to spend on services and experiences. When things like Uber rides, concerts, restaurant bookings, more people returning to offices, more vacations, as those things resume and go up, our business benefits. We feel really good about the year. Very helpful. Thank you. Thank you. Our next question comes from Ike Boruchow with Wells Fargo. Please proceed with your question. Hey there. Scarlett, two questions for you. The price increases go through to your existing customers in Q2. Are you baking in any expectation for some customers to drop off that maybe wouldn't be okay with that, with the price increase? Just the second question is, can you just elaborate on how you get to free cash flow breakeven over the medium term on the 300,000 active subs that you referenced earlier? Thanks. Sure. Thanks for the question, Ike, or the questions I should say. Yes, happy to give you a little bit more detail. On the price increase, yes, we have incorporated some assumptions around impact on acquisition, impact on retention as well, so that's all reflected in our expectations and also in our guidance that we've provided for the year. Okay. Then in terms of the 300,000 average subscribers and really the path to profitability. First let me say that there are really a number of levers that we can use to get to free cash flow profitability in the midterm, and we'll go into a lot more detail on that at Analyst Day. To give you a framework on the math now, at an average of 300,000 subscribers, let's use the 2022 expected ARPU and moderate growth in refill and reserve, that would result in total revenue of over $600 million. The way that I would think about it, there really are five key assumptions in this exercise. The first one is ARPU, right? So I just said to you that we've not included an increase, but we would anticipate increases in ARPU, so revenue would be even higher than that. For simplicity, let's just use the $600 million. The second is fulfillment. We feel confident that we can reduce overall fulfillment costs as a percentage of revenue by a few percentage points over the next few years, putting us lower than where we were in 2021, which was about 30% of revenue. The way that we get there is we assume that trans prices continue to go up, right? We partly offset the way that we've been doing that, which is with diversification. On the non-trans side, we believe that we can continue to improve that slightly every single year. The third is revenue share. I mentioned that we anticipate that higher this year. We do expect that to normalize at 10%-12%, as we had said in the IPO. The fourth is OpEx. There on the more fixed parts. Let's talk through technology and G&A, you know, and I would say excluding stock comp, right? Because we're really trying to understand cash here. Our OpEx base currently supports a much larger subscriber count. We expect these two lines to grow moderately in 2023 and beyond. You know, I talked through what we think will happen this year, and it's certainly slower than revenue growth. At $600 million in revenue, we expect tech and G&A to be about 30% or less of revenue. Then on the marketing, we're confident we can continue to spend at 10% or less of revenue. That results in an Adjusted EBITDA margin, which is basically again, the ability to cover our operating expenses of around 20%. That leads us to the final item and really the largest CapEx, which is the product CapEx. We expect that to be, as you saw in the guidance, at about 20% of revenue this year, and that's with non-wholesale at 60% of acquisition. You just heard me say that our goal is for non-wholesale to be more than two-thirds in the midterm. That would put product CapEx below 20%, making us free cash flow profitable. Now, a reminder that I haven't included the ARPU increases, which we do anticipate and will be margin accretive, driving, you know, higher free cash flow profitability. Maybe what I'll do is I'll turn it over to Jen to talk a little bit about, you know, revenue per customer and ARPU and how we think about that. Yeah. You know, ARPU for us is from two things. One are price actions, which we could take from time to time as we increase subscriber value, but the second is through continued engagement. One of the things we've done really well with these personalized subscription programs is we've increased the level of customer engagement and loyalty. They're adding more paid items and more paid shipments into their subscription. What that means in real terms are they're actually using us more days of the month. They're deciding, "I need an extra outfit this week. I need an extra few outfits because I'm traveling this month." We saw the highest rate of paid incremental items into our subscription in Q4 at 30% of our subs in a quarter where 6-7 weeks of our quarter was impacted by Omicron and people were sheltered at home. We feel great about ARPU going up, primarily, actually due to increased customer engagement, which is why we're focused on continuous improvement to the customer experience. We have the ability to also take price actions from time to time. Awesome. Thanks so much. Thank you. Our next question comes from Michael Binetti with Credit Suisse. Please proceed with your question. Hey, good afternoon. This is Daniel Silverstein on for Michael. Congrats on the progress. Just two quick questions from us. Firstly, you've noted in the past there's been some really solid progress extending Rent the Runway's geographic reach beyond the major coastal cities like L.A. or New York. Can you speak to how your subscriber demographics have evolved recently in terms of geography and how your customer acquisition strategy might be different in these markets to capture all the pent-up rental demand in 2022. Secondly, it's very encouraging to see the progress on the supply acquisition front from the non-wholesale channels, especially from Exclusive. Is there anything that would hold back Exclusive from reaching over one-third of supply longer term, given such strong progress so far? You know, in other words, are there any constraints or limiting factors to onboard more brands over the next few years, if any? Thanks. On geography, our business has certainly diversified. We're seeing more subs in the South and Southeast, and that's great because those places also have less reaction to COVID case rates. For example, in places like Texas, Georgia, Florida, active sub counts are approximately 135% larger for us than they were pre-COVID, and they continue to grow really fast. One of our kind of big strategies this year is local marketing and focusing on sunshine states and areas that are always on and have been more resilient during COVID. You'll see us kind of just focus more of our paid marketing dollars and our owned and earned channels into some of those geographies. We're finding that that kind of geographic diversification and growth is continuing at a nice pace. Maybe I'll kick it off on the Exclusive designs, Dan, and answer the question there. You know, if you look at last year, meaning 2021, our Exclusive design penetration for acquisition was already at 22%. We've stated that, you know, we think that will be approximately 30% for this year. You know, as you can imagine, we have to plan for this quite a bit ahead of time, so the 30% we feel very confident in, and we're really close to that a third goal that we have in mind in terms of overall, you know, two-thirds of the business going on wholesale. We feel really good about getting to a third. Yeah. Just as a reminder, in 2018, we basically had 0% of our business that was consignment for Exclusive Designs, and this year we'll be at 60%. We drove tremendous change in how we acquire our product in a very short period of time. I see no reason why we will not kind of continue to build upon these winning strategies. Our designers also really benefit from Exclusive Designs and consignment and love this. We're excited about kind of the new designers that we're bringing on the platform. These are some of the most prestigious and coveted brands that we have, and we're actually excited for all of you to visit us in our facilities and kind of show off some of the new styles for the year and have you see how amazing kind of the quality is and the trends, and we think it's gonna continue to be great. Thanks a lot. Thank you. Our next question is from Eric Sheridan with Goldman Sachs. Please proceed with your question. Thanks for taking the question. Maybe if I can follow up. On the last earnings call, we talked about those growth investments you wanted to make into the back part of calendar 2021 and into 2022, and then the variant played out. Can you talk a little bit about the extent to which you executed on those growth investments, what your key learnings were from those investments, and how should we be thinking more broadly about growth investments, building on some of the answers so far against the reopening dynamics and the special occasion dynamic, as we proceed through 2022? Thanks so much. Yeah. We have really strong plan for what we're doing to capitalize on this market environment. Like, let's talk specifically about events for a moment. Across earned, paid, and owned channels, we are doing things like increasing our event-focused content and creative by 2-3x across social, CRM, paid media, SEO-optimized content. Why are we doing this? Because we have a track record already of being able to convert would-be one-off event rental renters into long-term subscribers. Utilizing this period of time to cost efficiently increase the funnel into Rent the Runway will not only drive our growth for this year, but we believe for many years to come. We've also started in our marketing to very intentionally position our subscription as a cost-efficient way to get dressed for multiple events in a month. We recently launched a wedding concierge so that you can call us and very easily, you know, have a stylist help you book looks for all of your upcoming wedding events, even if you're just a guest. We're trying to do everything that we can to make it really easy for people to think about us as a high-value way to get dressed this year. We're seeing really strong kind of momentum and success in a lot of these efforts. I think that we're also seeing that we're kind of being buttressed by a group of customers that is going back to the office and hasn't bought workwear in two years. Now there's kind of a new dress code for work. I think that there's a dress code that is certainly more fashionable than it ever was before. I think there's been a myth that offices have gone super casual. We're actually finding that, you know, she's still wearing blazers to work. Actually, blazer usage is up 166% year-over-year. She's renting blazers in pastel colors and with floral prints, and she's willing to take more fashion risks at work, and she certainly doesn't have this stuff in her closet. Whenever trends change, whenever sizes change, customer preferences change, we are a more value-oriented solution. That's when we really hold the most value to customers. We're really trying to just capitalize on this environment. Another thing that is interesting is that a third of Americans have changed size since the pandemic. We view that as another opportunity for us as well. You've probably already seen this in some of our targeted marketing that we've been sending out that's focused on events, that's focused on return to work, a focus on kind of how to dress for travel, and it's been very successful, and we're gonna continue it. Eric, I think one of your questions was also in the beginning around, you know, the productivity of these investments. You know, we continue to operate at a really efficient overall blended CAC, and we, you know, we break even on customer acquisition costs within months. As a reminder, you know, our subscribers are generating approximately $500 on average in cumulative revenue in just six months. Thank you. Our next question comes from Ross Sandler with Barclays. Please proceed with your question. Hey guys. I wanted to ask about the slides had 50% or the goal to reach 50% of subs with at-home pickup in 2022. I guess first question is just, how is that a game changer from a frequency or retention or just behavior standpoint for a sub? Do they order more? Do they kind of, you know, do more à la carte, et cetera? How does that change like the per unit transportation costs on your side? Scarlett, it sounded like a good amount of the EBITDA deleverage in 2022 is coming from that transportation inflation we're seeing everywhere in the system. Can you just elaborate a little bit on how much of that is relative to, you know, marketing or other cost items, in terms of the EBITDA deleverage this year? Thanks. Yeah. First on at-home pickup, it is really a win-win. It's cheaper for us than working with national carriers, and it dramatically simplifies the customer experience because she no longer has to pack up her clothes in the blue bag and drive to a UPS depot and drop it off. We have seen that our customers love this. Right now, it is not integrated into our app or site experience, so it's a fairly clunky experience, and we're still seeing crazy adoption. What we're doing over the next few months is seamlessly integrating this into our product experience, so you can't miss it, that you have this option to schedule a pickup and people can come to your home. We're feeling very excited about this, you know, reducing friction from the experience which we think has impacts on customer loyalty and is just one of the many things we're doing to improve that customer experience. Now, it's not leading to more shipments because remember, these personalized subscription programs that we fully rolled out last year, you're paying for your shipments. Every time that you might want to add a shipment, it's higher margin for us, and it's more revenue for us. It's certainly reducing the friction, and the CSAT scores on at-home pickup are, you know, off the charts. We set this goal of 50% of subs having access. Of course, we're gonna try to beat that goal, and we think integrating it into our product experience will, you know, be a no-brainer, and hopefully, we'll see higher adoption. Great. In terms of your question, Ross, on Adjusted EBITDA and how we're planning for this year. You know, a couple of things. Just again, you know, I just wanna be really clear that we are managing to overall free cash flow dollars for this year and margin. In terms of our Adjusted EBITDA targets and being breakeven, you know, we are maintaining that, you know, in three to five quarters. The way that you should think about this year is we've shifted dollars, right? We're spending slightly more on OpEx, but we are able to invest less in CapEx for product, you know, as a result of the successful shift in our acquisition and product. In terms of what's going on, you know, on the income statement part. Yes, fulfillment expense is one of the reasons that we see, you know, some of that, impact on Adjusted EBITDA. As I said, we expect to see a couple of hundred basis points of pressure for the whole year versus Q4. That's really largely due to transportation. Of course, you know, we deflect some of that with what Jen just talked about. You know, we did mention that we are investing in technology. In fact, we started doing that in Q4, and really want to make sure that we set up the business with the investments to be able to really invest in the customer experience. Those are really strategic investments for us. You'll see that actually, earlier in Q1 as well, you know, and that's reflected in headcount, really, again, search, discovery, and fit as we just talked about. Marketing, you know, should stay reasonably close in terms of the percentage of revenue. There, you know, there's not much of a change there. It's really those two items. Do take a look at the overall business and the overall free cash flow, margin, and dollars. You know, that's really what we're focused on first. Thank you. Our next question comes from Andrew Boone with JMP Securities. Please proceed with your question. Hi, guys. Thanks for taking my question. Two, please. The first is, as we think about the strong calendar for this summer and for many consumers and increasing activity, can you talk about any strategies specific to resurrecting past customers? Then second, just more on marketing. Can you double-click on customer personalization? Maybe this is more of a product question, I guess. Where can you take this process, and then help us understand in terms of how this relates back to financials. Is it more add-ons? Is it just a better overall consumer experience, more loyalty? Just help bring it back to the model. Thanks so much. Sure. Let me just start with personalization. You know, one of the top drivers of loyalty is whether customers wear the items that you rent. Very simply, whether the items fit you when you receive them. A major driver of conversion, as I mentioned on the call, is your confidence in these items fitting you. You'll see that we're investing a lot into fit, both from an algorithmic perspective, but also, making it easier for customers to, kind of submit photo reviews and putting those photo reviews in front of the customer. We know that when she rents our recommended styles, she's over 40% less likely to have an issue with fit. You'll see product features roll out over the next few quarters that are going to, especially for unconverted traffic and for new customers, kind of prompt her into the stuff that we know is most likely to fit her, give her more confidence that the things will fit her, and we view that as being a critical part of personalization. Kind of what items show up for you in the very early days of your journey, most important part of that initial personalization is stuff that you'll love that'll fit you. That's why we're investing in fit, search, and discovery this year. Then on reactivation of former customers, you know, we continue to see that 50% of our acquired subscribers are former Reserve or Subscription customers, so the business is and this reactivation has always been fairly organic. You know, our former Reserve customers, like, we don't need to spend paid dollars to get them back. They come back organically. What we are doing and investing in is we're building an even better funnel from Reserve into Subscription. We're testing out a lot of ways to do this this year, from on-site product experience to offers, because we do think that the amount of people coming to Rent the Runway with an event in mind is just gonna be higher given the macro environment. We wanna use this to kind of fuel subscription growth this year and for years to come. Thank you. Thank you. Our next question comes from Dana Telsey with Telsey Advisory Group. Please proceed with your question. Thank you. Good afternoon, everyone. As you think about the paused percentage of total subscribers, which I think was around 28% in this fourth quarter, what's the, how do you see the cadence in bringing them back? What kind of investments do you need to do to bring them back? What have you seen or what's the trajectory of subscribers who were paused then comes back? What do you see and how is it different this time post the Omicron incident than what you see in the past? Thank you. Thanks Dana. I think as you can see from the, you know, strong Q1 sub-guidance, that we've already seen a really nice and quick bounce back. Some of that's due to great organic pause reactivation. You know, Scarlett mentioned when she was talking about seasonality that already, like, there's some seasonality to when people pause. There's higher rates of pause even in a normal year between December fifteenth and end of January, because people have slightly less going on in their lives, especially in January. This year, that was obviously heightened by Omicron. As soon as things kind of pick up and as the environment normalizes as they have things, you know, going on, we see pause reactivations, and we've certainly seen that momentum, you know, this quarter. Thank you. Thank you. Our next question comes from Ashley Helgans with Jefferies. Please proceed with your question. Hi. Thanks for taking our question. With the 2.6 million weddings this year, do you expect higher growth from Reserve users than and those users to evolve to subscribers over time? Then when you see a Reserve user convert to a subscriber, what's the typical timeline of that conversion? Thanks. We feel really fortunate that our brand has always been synonymous with event rental, and especially with weddings and wedding guests. As I said, you know, more than 50% of our traffic comes to the site because they have an upcoming event or occasion. Now, we've done a better and better job over time at getting that traffic to convert directly into a subscription. I actually think the sheer quantity of wedding-oriented events that customers have this year are making it even more kind of financially logical for them to convert into a subscription right away, because in any given month, you might have two weddings, two rehearsal dinners, a few, you know, other kind of wedding-associated events. You might have seen in our marketing, you know, over the last few months that we are positioning the Subscription as this value-oriented way to get dressed for more events. We actually think that the events boom this year is going to drive Subscription just as much as it drives Reserve rental. I think that you'll see that the larger kind of events boom is reflected in our full year revenue guidance of 45%-50% growth, which we feel very good about. In terms of the kind of trajectory from converting Reserve customers into Subscription, 50% of our subscribers come from former customers. I think that we have opportunity here, though. Like, we can do a better job via the on-site experience, via offers, via getting to a customer right after she's had a successful Reserve experience when she's still excited about us and getting her to try Subscription. You're gonna see us test over the next few quarters, a lot of different types of offers, a lot of different types of on-site experiences in order to convert her. We see interestingly that it doesn't necessarily just have to be recent, though. We see that even older customers who rented a few years ago for a special event are still coming back to convert into Subscription. This is where we really kind of leverage the fact that we have a very large first-party database. We have lots of data and information on our customers. We're able to highly target our kind of marketing communications to this customer base in order to convert them. Great. Thanks so much. Thank you. There are no further questions at this time. I'd like to turn the floor back over to management for any closing comments. Yeah. Thank you guys all so much for everyone who joined today, and thank you especially to the Rent the Runway team. I'm really proud of our execution in a year that proved to be anything but normal. As I look ahead, I'm excited about our momentum and the opportunity we have to capitalize on the macro tailwinds for rental that we see forming. We look forward to updating you on our progress on our Q1 2022 call. Thanks again for joining us. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.