Welcome to the Rent the Runway's first quarter 2023 earnings results conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. 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 like to now turn this call over to Rent the Runway's General Counsel, Cara Schembri. Thank you. You may begin. Good afternoon, everyone, thanks for joining us to discuss Rent the Runway's first quarter 2023 results. Joining me today to discuss our results are CEO and Co-Founder, Jennifer Hyman, and CFO, Sid Thacker. During this call, we will make references to our Q1 2023 earnings presentation, which can be found in the Events and Presentation section of our investor relations website. Before we begin, we would like to remind you that this call will include forward-looking statements. These statements include our future expectations regarding financial results, guidance and targets, market opportunities, and our growth. These statements are subject to various risks, uncertainties, and assumptions that could cause our actual results to differ materially. These risks, uncertainties and assumptions are detailed in this afternoon's press release, as well as our filings with the SEC, including our Form 10-Q, that will be filed in the next few days. We have 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 that's 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 in our SEC filing. With that, I'll turn it over to Jen. Thanks, Cara. Thanks everyone for joining. As I shared on our last call, our 2023 growth strategy is focused on improving our customer experience. To do that, we are focused on delivering more value to customers quarter-over-quarter in the areas that matter to them most. It's an exciting time for Rent the Runway. We're delivering tangible momentum in executing against our customer-centric vision, as evidenced by our strong Q1 results. We delivered a new record active subscriber count of 145,220, representing 15% growth quarter-over-quarter, while posting a beat on the top and bottom line. Revenue came in at $74.2 million, a 10% increase year-over-year. We continued to hold our gross margin above 40% at 42.3% and posted a strong adjusted EBITDA margin of 6.1%, well above guidance. I'm particularly proud of the progress on profitability metrics, paired with strong subscriber growth, because I believe that it demonstrates our ability to manage costs effectively while making important investments into the customer experience. We have conviction that our subscriber growth and margins in Q1 provide a strong foundation towards the goals we shared last quarter, which we are reiterating now. Growing ending active subscribers by over 25% and reducing cash consumption by almost 50% in fiscal 2023. We have confidence in these goals because of the laser focus we're maintaining on our customer. Our team has demonstrated agility and is focused on execution. Our customers are beginning to feel a real difference. We're going to spend much of this call detailing some of the key improvements we've made so far this year. Having said that, I also want to emphasize that transforming our customer experience is not a one-quarter endeavor. We will be updating you on impact over the next several quarters. Our goal is to maximize customer love and retention. We'll do that by making their experience easier, more valuable, and more fun. We'll know that we're successful if we inspire more women to buy less clothes and rent instead. We see that the market for fashion rental is growing all over the world and believe our opportunity has never been greater. I want to talk to you about what our team has already accomplished related to our three customer-centric strategic pillars, which are, one, getting her the inventory she wants when she wants it. Two, providing an efficient and easy-to-use experience, and three, offering best-in-class product discovery. These pillars are key due to the frequency with which our subscribers use Rent the Runway. This is what we have to get more and more right over time. As a reminder, the majority of our team is focused on customer-facing initiatives this year. We kicked off the year by permanently adding an extra item to every shipment of our subscription programs. We've been happy with the results of our launches since then. One, on inventory she wants when she wants it. In support of getting her the inventory she wants when she wants it, inventory availability continues to be a top priority. We know our customer is here for the fashion, and her ability to access it is one of the key ways she evaluates the value of her subscription. We've expanded and grown an ongoing strategy to acquire more of the styles our customers are telling us they want in real time. Because of real-time data signals we get on actual and unmet demand, we are one of the few retailers that is structured to chase and refresh inventory mid-season. This gives our buying team significant leverage on pricing. We believe the next step in this effort will be felt deeply by our customers in the back half of the year, as we are focused on significantly increasing depth in the key styles and trends we know our customers want. Next, I want to share some of the actions we've taken in Q1 to make Rent the Runway easier to use for our customers. In early May, we launched a luxury style concierge service to help new subscribers onboard with Rent the Runway more seamlessly. Rent the Runway Concierge provides free one-on-one interaction via text with our customer service team to help new subscribers get the most out of their membership, from building their first shipment, to styling tips, or solving a fit or shipping issue. We believe this program has the potential to be an important retention driver. Our customers have incredibly busy lives. 90% of them work, a third have kids, and 85% socialize more than twice a week. The easier we make the experience, the more it can be cemented into her life. We've shared previously, we've enjoyed strong, long-term customer loyalty. We also know that the majority of subscribers who churn do so in their first 90 days. By providing a concierge experience in her early months of membership, we aim to delight her with an effortless introduction to rental. We think this will improve retention and make her a loyal customer sooner. You'll see us integrate this offering more deeply into our product experience in the quarters to come. We're making our site and app faster. As an example, we drove a 48% improvement in average load time on a key entry point into our conversion funnel, which resulted in an 89% lift in conversion on that page. We made two improvements to our delivery and returns experience that directly speak to the premium level of service Rent the Runway offers. One, we launched a new tool to drive further adoption of at-home pickup, which has led to an increase in in-market adoption of the service by nearly four percentage points from the end of Q4 2022 to the end of Q1 2023. Second, last week, we launched Saturday delivery to more than half of our subscribers, a big unlock for customers who can now receive their deliveries on the weekend. We plan to continue to enhance all aspects of our experience to make it as easy as possible for customers to navigate their subscription. Finally, I'm going to share recent accomplishments related to our strategic pillar on best-in-class product discovery, where our goal is to be even better than a typical retailer in how our customers find the inventory they love. First, we shared during our last call that we launched Rent the Look and Similar Items in late March to enable customers to easily find a complete outfit or a visually similar option based on the styling we provide on our product display pages. The introduction of these features has increased member engagement, particularly when members landed on pages with unavailable styles. She's served similar substitute items through this feature directly on the product display page, leading to a 34% increase in engagement with substitute items among members. Something I'm personally very passionate about, we're excited to announce that in the coming weeks, we plan to launch an AI-driven search beta. This will allow customers to search common fashion terms or use cases, and is intended to make searching our site more intuitive and natural. For example, she will be able to write, Miami vibe, Clam Bake in Nantucket, or Tropical Motif, and our AI-powered discovery engine will serve her relevant inventory. We see this as a first and important step in Rent the Runway, using AI models to improve our product experience, and we expect to build on this launch in the months and quarters to come. We believe that AI has the potential to directly support our 2023 strategy of delivering more value to the customer, and leapfrog ahead of the experience that we deliver today. Fashion, as an industry, serves to benefit from AI to narrow the endless aisle problem of e-commerce. We believe that Rent the Runway is uniquely positioned to be a significant beneficiary of AI because of, one, the frequency with which she interacts with our product, and two, our unique and rich data catalog, which includes her frequent site behavior and all of the data we gathered from her on fit, inventory, quality, occasion, and more every time she rents. The majority of subscribers are reviewing 10-plus items per month. This data set gives us a head start on any future innovation we'll endeavor in the AI space. We also believe that our opportunity in AI is bigger than product discovery. We are exploring how it can impact our concierge experience and onboarding to deliver an even more personalized experience to enhance customer loyalty. And we have the team to do this. We've been harnessing machine learning for a decade, employing data to power personalization within our consumer experience, our operation, and across our business. We're looking forward to continuing to build this muscle at Rent the Runway. I'm truly energized about the progress we've made so far this year and everything that lies ahead. Most of all, I'm looking forward to continuing to deliver for our customers. With that, I'll turn it over to Sid. Thanks, Jen, thanks again, everyone, for joining us. Since our 2021 IPO, investors have asked us two key questions: First, can Rent the Runway grow? Second, how profitable can the company be? Our first quarter results demonstrate solid progress on both fronts. As Jen outlined, we believe deeply that the customer experience improvements we are making are key to driving improved retention and faster growth. At just over 145,000 ending active subscribers at the end of Q1, we are making progress to 25%-plus active subscriber growth in fiscal 2023. Our path to profitability is focused on free cash flow. Last quarter, we outlined the almost 50% reduction in cash consumption we expect for fiscal 2023. We believe that our margins in Q1 provide a strong foundation for progress towards that goal. Let me now review our Q1 2023 results. We ended Q1 with 145,220 ending active subscribers, up 7.6% year-over-year. Average active subscribers during the quarter were 135,966, versus 125,119, an increase of 8.7% year-over-year. Total revenue for the quarter was $74.2 million, up 10.6% year-over-year. Subscription and reserve rental revenue was $66.8 million, versus $61.4 million last year, an increase of 8.8%. As we discussed last quarter, we did see weakness in our reserve business in Q1. Subscription ARPU for the quarter was slightly higher year-over-year, primarily due to the impact of the April 2022 price increase, partially offset by changes in program mix and add-on rates. Other revenue was $7.4 million, versus $5.7 million last year, growing 29.8% year-over-year, due primarily to increased purchases of rental products. Note that the timing of these purchases can vary from quarter-to-quarter, depending on the assortment available for sale. Other revenue represented approximately 10% of revenue, versus 8.5% of revenue in Q1 2022. Fulfillment costs were $21.9 million in Q1 2023, versus $22.9 million in Q1 2022. Fulfillment cost as a percentage of revenue improved from 34.1% of revenue in Q1 2022, to 29.5% of revenue in Q1 2023. As a reminder, Q1 2022 results did not benefit from our April 2022 price increase. We were able to offset the impact of higher shipped units per order on account of a 5-Item launch, with efficiencies in both processing and transportation costs. Gross margins were 42.3% in Q1 2023, versus 33.5% in Q1 2022. Q1 2023 Gross margins reflect the impact of the April 2022 price increase, the fulfillment cost improvements discussed above, as well as lower product depreciation due to the continued impact of product acquisition mix changes towards more efficient channels. As expected, Gross margins were lower than Q4 2022 levels due to seasonally higher product acquisition we typically see in Q1 and Q3. Operating expenses were 5% lower year-over-year, and about 13% lower year-over-year before stock-based compensation, primarily due to the favorable impact of our 2022 restructuring plan. We continue to expect about $25 million in restructuring-related savings in fiscal 2023, compared to the Q2 2022 run -rate. Total operating expenses, including technology, marketing, G&A, and stock-based compensation, were 66% of revenue, versus 77% of revenue last year. Adjusted EBITDA for the quarter was $4.5 million or 6.1% of revenue, versus - $8.8 million and - 13.1% of revenue in the prior year. Adjusted EBITDA margins reflected strong cost discipline that allowed us to offset investments made to improve customer experience. Free cash flow was - $12 million in Q1 2023, versus - $28 million in Q1 2022. We continue to expect significant improvement in cash consumption in fiscal 2023. Let's turn to guidance. For the full year, we continue to expect revenue of between $320 million-$330 million, and ending active subscriber growth in excess of 25%. We are also reiterating our full year adjusted EBITDA margin guidance of 7%-8% of revenue. Our guidance on cash flow remains unchanged, and we expect to reduce cash consumption by almost 50% to below $50 million. We are updating our fiscal 2023 product spend expectations to $74 million-$76 million, from $69 million-$72 million, as we are seeing increased opportunities to purchase high-quality styles from top brands at deep discounts. There is no change to our expectation for growth margins to be slightly lower on a year-over-year basis. We expect Q2 revenue to be between $77 million and $79 million. This represents about 5% growth sequentially versus Q1 2023, and approximately 2% growth versus Q2 2022 at the midpoint of the guidance range. Let me talk about the factors affecting Q2. As some of you may have noticed, we are experimenting with being less promotional with our new customer offer pricing. We think this will improve retention and allow us to invest in improving the customer experience. We do expect these experiments to reduce acquisitions in the short term, especially in our lower priced programs. We expect lower ending active subscribers in Q2 versus Q1. We think these are the right decisions for our customers and have factored these changes into our full year guidance of 25%+ subscriber growth. Second, both sequential and year-over-year growth are expected to be negatively impacted by the decline in the reserve business. Finally, we also expect other revenue to be relatively flat quarter-over-quarter due to higher units sold in the first quarter of this year. Q2 2023 adjusted EBITDA margins are expected to be between 7%-8% of revenue, as we expect the higher revenue base versus Q1 to improve leverage on a fixed cost base. I'd like to end by saying that we remain confident in the trajectory of our business, and we have a very clear sense of how to improve the customer experience. The second half of fiscal 2023 should see us make significant progress across inventory, onboarding, and product initiatives. We believe these changes will be noticeable to our customers and make it easier for them to find and experience our inventory and products in a more seamless manner. 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 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 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. So that we may address questions from as many participants as possible, we ask that you limit yourself to one question and one follow-up. If you have additional questions, you may re-queue, and time permitting, those questions will be addressed. one moment, please, while we poll for questions. Thank you. Our first question comes from Rick Patel with Raymond James. Please proceed with your question. Thank you, good afternoon, everyone. I have a question on getting better at giving customers what they want, when they want it. How do we think about this from an inventory management perspective? Does it mean that you'll be buying more inventory as you get a read on fashion? Does it mean that you'll be leaning more on your Share by RTR partners? Just curious how to think about the mechanics of chasing high-demand products. As a follow-up, what are the financial ramifications from ramping up this initiative on gross margins and working capital? I think there's two main ways we're addressing it. You've seen us really deploy one of the ways thus far in Q1 and early Q2. The first way is, we get these real-time data signals in season on what's doing well, what's highly demanded. Number one, we're able to respond to them in season, get competitive pricing, reorder pretty aggressively against top styles. That's kind of because of both the real-time data that we get, but it's also because of the business model that we have, where we can continue to monetize inventory over three plus years, as opposed to being held to kind of a traditional retailer, 12 months, 12 week of full price selling kind of calendar. That's number 1. The second aspect of this is really focusing on depth. We know that our customers come to Rent the Runway, they heart styles that they love, and we want to give them more ability to get those products that they heart, way more frequently and way more often. We are making significant changes to the depth of the styles that we acquire from our partners, and that's gonna really start to show up in the second half of this year, and we think that it'll make a noticeable impact on customer experience. We have great data on what she wants. I think that we're solidly in now this post-COVID world, where she's really using us again for work wear, for weekends, and for special occasions, and so we're able to increase the depth across the styles that matter to her most. Yeah, Rick, and thanks for the question. I think in terms of the financial impact of this move, look, it's obviously, number one, factored into the guidance that we have provided for product spend this year. More importantly, I would say we always face this trade-off, right? How many styles do we wanna buy, and then how many units of each style do we wanna buy, right? There is no additional dollars that are required to optimize for depth. I mean, we have a tremendous amount of data when we look at, you know, how easy it is for a customer to find items on our site. What is the impact of depth going to do to those metrics? Part of the reason we feel very optimistic about the 25% subscriber growth guidance is we know we have very significant improvements in the customer experience coming as it relates to inventory because of these optimizations on depth and breadth that Jen mentioned. Thanks very much. All the best. Thank you. Our next question comes from Andrew Boone with JMP Securities. Please proceed with your question. Good afternoon, and thanks for taking my questions. I'd like to talk about the guide for 2023. Just given the guidance for Q2 and thinking about the back half of the year, can you talk about your confidence in the re-acceleration of subscriber growth to hit that 25%-plus number? Sure. Look, I think, this year was always supposed to be a year of two halves, right? When we provided guidance last last quarter, we had said revenue growth in the back half of the year was supposed to be significantly stronger than the first half of the year, right? We still believe that's going to be the case. I think fundamentally, what underpins our confidence on the growth for this year is, of course, number one, we've had a strong start to the year. Secondly, it's our confidence in the data that we have behind all of the key initiatives that we have lined up for the back half, right? We think, number one, the inventory changes are going to be significant because ultimately, people come, customers visit Rent the Runway to rent the products they love, right? If we make it very easy or much easier to find those products, to interact with our website very easily, I mean, that is going to pay dividends in terms of the retention and the loyalty customers have, right? The other very significant change that we, or the improvement that we've made to the site is, this personalized onboarding and RTR Concierge Service, right? 55% of all subscribers who leave us do so within the first 90 days. We think it's quite critical to address the pain points those first 90 days, and here we are providing a very personal SMS-based, you know, it's almost like your personal stylist, and we're seeing very encouraging results from customers. I think, you know, fundamentally, we have very significant product improvements that we always had planned for this year, that give us a lot of confidence that we're going to get to 25% subscriber growth. Yeah, I think our results in Q1 show that the strategic pillars that we outlined this year are working, and they are being felt by the customer. I think more importantly, what you're seeing across the organization, is you're seeing an agile organization that has an execution orientation. We've actually done a lot over the first four months of the year. We've launched a lot, we've iterated a lot, and this was within a plan where we knew that the majority of the transformative product experiences would really be showing up in the back half of the year. We already feel good about how the customer is experiencing Rent the Runway differently, you know, to date, and we know that we have some really exciting things lined up over the next few months. Jen, I wanted to ask specifically about AI to that last thing that you said. I think you talked about AI as a first step. Can you talk about the vision in terms of how AI can be incorporated more broadly across the platform, just a little bit more beyond search? Thanks so much. Yeah. First, I just want to talk about, you know, AI and what it can do to the fashion industry in general. I think that fashion e-commerce is one of the most cumbersome customer experiences that exists. You are searching through pages and pages and pages of content to find the items that you like, and no one likes doing this. First of all, as an industry that still is selling physical products, Fashion is going to be a major beneficiary as an industry. Why is Rent the Runway, like, uniquely positioned here? Rent the Runway is different than traditional fashion in two ways. Number one is, she's using us all the time, so making the experience much easier for her is even more important for us to do, than a retailer that you're going to once or twice a year, where you'll slog through the experience as a customer and kind of put up with it. At Rent the Runway, if we can make this a seamless experience because we're a utility, it'll be appreciated even more. Second, because of how frequently she uses us, we have real-time information on what she's doing tomorrow, on how she liked or disliked the item she received yesterday, on fit, on how exactly she wants to dress this weekend. Therefore, the data -set that we have, we think is highly unique in terms of how we could power against AI. If we are utilizing AI appropriately over the next few years, I see no reason why someone even has to come to our website. We talked about the fact that she's already texting one-on-one with someone from concierge. That's really today about her onboarding experience. We talked about a beta launching over the next few weeks around AI search, which would be fundamentally about new ways that you could discover product on the site. The, you know, more medium to long-term vision is really the marriage of these two things. That there can be, through any modality, however you want to communicate to Rent the Runway, a way for you to constantly access a stylist that can help you with everything from picking out new inventory to you, to solving problems, to answering questions, and you can do it asynchronously when it makes sense for you on your own time. We're really excited about the progress that we've made towards this beta that will go live over the next few weeks. It's really interesting because I think that across all fashion sites, you know, all over the world, the way that people are searching for product is fairly vanilla, it's fairly functional, right? You can go to a site and search for a t-shirt. You can go to a site and search for a black -tie gown. The fact that we're going to be able to enable our customers to search how they actually want to use this closet in the cloud, to search for, you know, items to wear to my beach bonfire, you know, this weekend, that is a completely different way to search. I think that it really brings out the value proposition of what a closet in the cloud is all about. We're really excited by this. Thank you. Thank you. Our next question comes from Ike Boruchow with Wells Fargo. Please proceed with your question. Yeah. Hi, good evening, everyone. This is Kate on for Ike. Congratulations in the improvements in the business in Q1. I guess, just, first, Jen, you know, we're now, you know, three months post the extra items announcement. You guys obviously had a lot of, a lot of initiatives in place to improve the customer experience. I am curious, with this, you know, latest cohort, if you can share any more color or numbers behind what you are seeing from a retention basis, you know, out of that tranche of consumers? Then, Sid, you know, you noted your confidence in the active subs accelerating into the back half. Just from a seasonality perspective, you know, just looking back the last few years, you guys have tended to lose active subs quarter-over-quarter in Q4. You know, just anything we should consider between Q3 and Q4, you know, especially as you're more confident behind some of these initiatives around subscriber growth? Thank you. Yeah. To address the first part of the question, through Q1, we saw better churn, better rejoin rates and better conversion rates. As we get further away from the launch, it's harder to say what's related to Buy Item versus other experience improvements that we're making across the board. We feel really great about what we saw in Q1. In terms of active subs, look, you're 100% right. You know, last year we did see a decline in Q4. I mean, if I look at the pacing of product improvements and the inventory build that we have this year, I feel very optimistic that, you know, the entirety of the second half is going to be positively affected by that, right? I'm not going to sit there and guide necessarily to what Q4 is going to look like relative to Q3, except to say that, you know, we've already provided confidence, you know, a confident outlook in terms of +25% subscriber growth. We'll leave it at that. That's what we expect to hit, and I think we feel, given the product improvements we have, you know, very confident in that, in that outlook. Great. Thanks very much. Thank you. Our next question comes from Eric Sheridan with Goldman Sachs. Please proceed with your question. Thanks so much for taking the question. I want to know if we could maybe just talk about the broader environment that you're operating in generally. We've talked in the past about return to work, the return of big events, you know, elements of possible rationalization of spend by the consumer and shift into a model like yours and away from a purchase model. Can you just give us a sense of where we can level set in terms of the thinking around the headwinds and tailwinds you face in the business as we go deeper into 2023 across those themes that we've talked about before, and how those might impact elements of pause subscribers or net adds or purchasing behavior? Thanks. Yeah. First, we're not seeing evidence based on our acquisition numbers that we were impacted by the macro environment in Q1. We're confident that we know what we need to do with this business. The strategic pillars are in line with things that our customers care about. We made huge progress in Q1, clearly, we're reiterating our guidance for the year. Some things that we are seeing that could be very positive for Rent the Runway is we're seeing demand for workwear is continuing to increase, and demand over-penetrates into workwear relative to active units on our site, very similar to pre-COVID, for, you know, the first time since COVID has occurred. We think that because of the macro environment, as CEOs are calling their workforce back into offices and demanding more that they're there, that this is a very positive tailwind for our business. It feels great to see workwear back up to, you know, similar utilization than we saw pre-COVID. I think that, you know, it's helpful, I think, when you go into. What about the macro? We're obviously in an uncertain environment, why do we still feel good, right? I think probably the biggest reason why we feel good are, number one, we're addressing these problems that customers have told us they care about, and number two, we actually have data behind the impact of the decisions we're making, right? For instance, we're rolling out the Concierge service as we speak. We see real-time data on how many people have signed up, what impact did that, you know, improvement have on our customers. You're seeing now it's just a question of: how many customers can we get signed up? How, you know, how long will that take? Really, it's just a continuation of the data that we're already seeing, reflecting the improvements that we are making to that customer's experience, right? Take inventory, another very important factor this year. Once we actually optimize for breadth and depth and, you know, the actions we're taking, we know what a customer is likely to feel in terms of what's available to her when she visits the site. Now, we also know, based on historical data and evidence, how that customer is likely to react, how loyal is that customer going to be, because she sees that item more available. It's much more pleasurable and easier to interact with our site. Again, these are all of these improvements. This is not, you know, something that we're making an improvement, no idea how it's going to play out. We actually have relatively concrete data. It's really just a matter of executing properly and essentially reaping the benefits of the actions that we know our customers care about. Yeah, we just see this as a market that's growing. We think that rental continues to offer tremendous financial value, whether you're renting a la carte or you're subscribing. Our goal is to focus on making our customer experience as positive as it can possibly be and to continuously improve it quarter-over-quarter in a market where there are more customers who are considering rental than ever before. Great. Thank you for the color. Thank you. Our next question comes from Ashley Helgans with Jefferies. Please proceed with your question. Hey, thanks for taking our question. Anything you can tell us on the composition of subscriber growth trends? Are you activating more reserve users or seeing, you know, new subscribers coming to the platform? Thanks so much. Yeah, I mean, obviously, look, we've called out the weakness in the reserve business. We've talked about, you know, that is affecting performance this year. What that implies is we're clearly seeing activation across rejoiners. We're clearly seeing activations across new customers. I mean, this goes back a little bit to two things that are going on, right? The first thing is, customers are embracing rental, right? With that, you know, you are seeing new customers sign up, and that's a very positive trend in the business. Then the second thing you're seeing is really this impact of loyalty, right? I mean, that's been a pretty strong driver for Q1, and given all of the changes we're making for the rest of the year, should continue to be a pretty strong driver for the rest of the year, right? I think those are the two. It's really a combination of certainly acquisitions and new customers given, you know, people are embracing rental, but also really strong retention that we had in Q1 and expecting. Thanks. Thank you. Our next question comes from Lauren Schenk with Morgan Stanley. Please proceed with your question. Hey, this is Nathan Feather for Lauren. two quick ones for me. First, how is inventory utilization trending with the launch of the 5-Item plan, and do you feel you have the right mix of inventory, or anywhere you see a material gap that you're trying to fix? Thank you. As expected, inventory utilization is higher because of the launch of 5 -Item. We do feel that we're seeing an opportunity in work wear. We're actually increasing purchases in work wear this year, 50% versus last year. Utilization is in line with where we assumed it would be before 5 -Item. We're also seeing really nice utilization in weekend wear and accessories, and all of these areas were the areas that we really looked to where we deployed kind of our reorder dollars and access more styles. Great, thanks. Good to hear the action about improving return and return rates. I guess just thinking about the split between existing and new cohorts, was there any big divergence in trends between those two? Well, look, I mean, ultimately the way we think about our business is retention is very, very important to us in terms of ensuring the long-term growth of this business. You got to remember, 80% of all our customers come to us because they come to us organically, right? 60% of all our customers come to us because they heard about us from somebody they know. I mean, fundamentally, what everything, all our strategies are geared to do is to improve that customer's experience so that they are delighted, and they talk about us. I think, you know, obviously, that has a very mathematical impact on growing subscribers this year. Over time, that feeds through, right? We will get our share of growth in organic acquisition simply because those customers go out and tell others they had a great experience. I mean, that is fundamentally the core to the experience. The nice thing about loyalty and the initiatives is that we got a lot of data behind what we're doing. Great. Thank you. Thank you. Our next question comes from Ross Sandler with Barclays. Please proceed with your question. Hey, guys. How do we feel about where we are with the kind of super high demand in season and the SKU depth and availability? Is that, at this point, fully optimized and fully built out, or Sid mentioned second-half investments around that, but when do we think that'll be in the right place to kind of match the size of the subscriber business with your inventory? Yeah, I think- Kind of related to that, but the second part would be: How does AI kind of improve discovery of, like, hot items that maybe, you know, aren't being personalized to the user today and help, like, solve some of that availability issue? Thanks a lot. Yeah. I think the customer is going to start to feel a major difference as it relates to in-inventory availability starting in August, because we've made a significant change in our depth strategies for the second half of the year. That's when she's going to feel that she's getting more of her parts. She's finding that more of the items are in stock for her, and we think it's going to make a possible difference from her experience. In terms of AI, you know, you're correctly pointing out that AI, for us, helps to even further leverage the long tail. If you think about, you know, what I mentioned, how cumbersome any e-commerce experience is of just passing through many, many pages of results, and on Rent the Runway, there's, you know, hundreds of pages, search results that you could see for if you clicked into dresses, if you clicked into blazers, etc. To be able to actually have a query that's related to something you have going on in your life, like what to wear to the University of Michigan tailgate this weekend? Like, you're going to see this long tail of styles that might have taken you many pages of looking at hundreds and hundreds of products the other way. I think that this could help in product discovery. Thank you. Our next question comes from Edward Yruma with Piper Sandler. Please proceed with your question. Hey, good afternoon, guys. Thanks for taking the questions. I guess first, on reserve, just want to click on that a little bit more. I know you guys are obviously facing some tough compares there. Has inventory been an issue there? I know it was through part of last year. I guess just stepping back and maybe as a follow-on to the AI question, I guess, how do we think about the rate at which you can bring some of these innovations to the market? Like, you know, I know you indicated you're going to have kind of a soft launch in a couple of weeks, but should we think about this as being kind of a couple-quarter phenomenon, or do you think you can implement some of these AI search functions relatively quickly? Thank you. In terms of AI, I think that whatever we do launch will be in beta, and then we'll continue to iterate and improve it over time. I think AI is so new to everyone, and I think that what I'm excited about is how quickly we've been able to leverage our data here and create a product that we think is going to make a nice difference to product discovery, and we'll just continue to make that better over time. Yeah. On the reserve business, I think, look, it's a fascinating question, right? I think we indicated last quarter, we've been very focused on driving our subscription business. You know, everything we do, we've done on marketing, on brand messaging, it's all reflecting that focus on subscription, particularly with the recent 5- Item launch in Q1, right? Having said that, we think internally, it is a real opportunity to grow our reserve business over time. These are not mutually exclusive businesses, right? We're working on plans that involve both inventory and product to re-energize this offering. Obviously, none of that's factored into the guidance and the expectations for this year. We've just reflected a continuation of trends. Over time, we feel pretty optimistic about our ability to re-energize that business and have it continue to serve us, quite broadly, actually. Thank you. Thank you. There are no further questions at this time. I would like to turn the floor back over to Kara for closing comments. Thanks so much for joining us today. I'm really excited about our plans to accelerate our path to profitability and the long runway for growth ahead. We look forward to continuing to update you on our progress on our Q2 2023 call in September. Thanks again for joining us. This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.