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United States securities and exchange commission logo
August 13, 2021
Jennifer Y. Hyman
Chief Executive Officer
Rent the Runway, Inc.
10 Jay Street
Brooklyn, New York 11201
Re: Rent the Runway,
Inc.
Draft Registration
Statement on Form S-1
Submitted July 16,
2021
CIK No. 0001468327
Dear Ms. Hyman:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form S-1 Submitted July 16, 2021
Prospectus Cover
1. Please revise the
disclosure on your prospectus cover and in your prospectus summary
regarding the ownership
of your Class B common stock to clarify that your founders,
executive officers,
directors, and their affiliates will hold Class B common stock, as you
have disclosed in your
risk factors.
Risk Factors, page 20
2. We note your disclosure
on page 161 that your Amended Charter will waive the corporate
opportunity doctrine
with respect to your non-employee directors. Please provide risk
factor disclosure
related to the conflicts of interest and any other risks to investors related
Jennifer Y. Hyman
Rent the Runway, Inc.
August 13, 2021
Page 2
to this provision.
Our Amended Charter will designate the Court of Chancery of the State of
Delaware..., page 64
3. We note your disclosure that your exclusive forum provision will
require Securities Act
claims to be litigated in U.S. federal court, yet you also note that
Section 22 of the
Securities Act creates concurrent jurisdiction for federal and state
courts over all
Securities Act claims. Please revise your disclosure to state that
there is uncertainty as to
whether a court would enforce such provision, given this concurrent
jurisdiction.
Management's Discussion and Analysis of Financial Condition and Results of
Operations, page
75
4. With a view to helping investors understand your total, active and
paused subscriber
numbers, please clarify the durations for which customers are
permitted to pause their
subscriptions, and whether the terms of your paused subscriber program
have changed over the years, including in response to the COVID-19
pandemic. For
example, we note that you disclose that in response to the COVID-19
pandemic you
[m]ade it easy for customers to pause, rather than cancel, their
subscriptions to encourage
retention during the COVID-19 pandemic; however, it is unclear if
you extended the
time customers could pause their subscriptions. In addition, tell us
whether management
tracks paused subscribers, and what consideration you gave to
disclosing any related
metrics in the filing.
Key Factors Affecting Our Performance
Subscribers and Customers, page 82
5. We note that your growth is in part dependent on retaining existing
customers and that
you "assess the strong retention of [y]our subscribers and customers
by analyzing the
individual performance of [y]our historical customer cohorts over
time." However, it is
not clear from your current presentation how customer retention is
reflected. Please
quantify the number of customers comprising each cohort for each year
presented and the
retention by cohort by year. In your presentation of Subscriber
Cohorts, please quantify
the number of current and previous subscribers and tell us why you
have not included the
2016 and 2017 cohorts that you have included in the Cumulative Revenue
Per Customer
By Cohort graph on page 83.
6. Please balance your subscriber cohort discussion with a discussion of
subscription
cancellations, or tell us why this not material information. Please
discuss any known
trends or uncertainties regarding customer retention and subscription
cancellation that
FirstName LastNameJennifer Y. Hyman
have had or that you reasonably expect will have a material favorable or
unfavorable
Comapany NameRent
impact the Runway,
on net sales Inc.or income from continuing operations.
See Item
or revenues
August303(b)(2)(ii) of 2Regulation S-K.
13, 2021 Page
FirstName LastName
Jennifer Y. Hyman
FirstName LastNameJennifer Y. Hyman
Rent the Runway, Inc.
Comapany
August 13, NameRent
2021 the Runway, Inc.
August
Page 3 13, 2021 Page 3
FirstName LastName
Impact of COVID-19 on Our Business, page 85
7. We note your disclosure that consumer demand decreases were closely
tied to COVID-19
positivity rates and social distancing and shelter-at-home
restrictions and that as COVID-
19 restrictions have been relaxed and virus positivity rates have
declined, you have seen
increased demand for your offerings. Please discuss if, and to what
extent, the recent rise
in positivity rates due to circulation of the Delta variant has
changed management s
expectations with respect to demand for your offerings.
Agility and Resilience During COVID-19, page 86
8. Given the significant reduction in your operating expenses and
workforce in response to
the COVID-19 pandemic, please discuss whether management expects
difficulties
meeting the expected increased demand for your offerings.
Key Business and Financial Metrics, page 88
9. Please balance your discussion of your key business and financial
metrics by identifying
material risks or limitations in using those particular metrics, as
applicable.
10. In an appropriate place in your prospectus, clearly define the term
"total subscribers," and
tell us whether the term includes those who initially subscribe and
cancel within the same
fiscal year, but cancel prior to the last day of that year.
Non-GAAP Financial Metrics
Adjusted EBITDA, page 94
11. Please tell us how you determined that the write-off of liquidated
assets is not a normal,
recurring cash operating cost since this appears to represent the
remaining capitalized
costs for products sold at the end of their lifecycle. Refer to
Question 100.01 of the SEC
Staff's Compliance and Disclosure Interpretations on Non-GAAP
Financial Measures.
Quantitative and Qualitative Disclosure About Market Risk, page 98
12. Please revise your discussion of your exposure to interest rate risk
so that it is presented in
one of the suggested formats outlined in Item 305(a)(1) of Regulation
S-K.
Share-Based Compensation, page 100
13. Your disclosure on page 100 indicates that certain RSUs will vest only
upon satisfaction
of both time-based service and performance-based conditions. You also
indicate that in
the period in which a qualifying event, such as an initial public
offering becomes
probable, you will record a cumulative one-time share-based
compensation expense
determined using the grant-date fair values. Please revise to disclose
the amount of
compensation expense that will be recognized in your financial
statements once your
initial public offering is determined to be probable.
Jennifer Y. Hyman
Rent the Runway, Inc.
August 13, 2021
Page 4
Business, page 102
14. Where you present certain business metrics in this section, please
include figures for both
fiscal years 2019 and 2020. For example, you disclose that in fiscal
year 2019, you were
in the top 30% of distribution partners, by revenue, for 64% of your
brands, but you do
not provide comparable disclosure for 2020. This is just one example.
Trends in Our Favor, page 104
15. Please balance this disclosure with disclosure regarding the trends
that may continue as a
result of the COVID-19 pandemic. For example, you disclose on page 26
that as a result
of changes to daily life due to the COVID-19 pandemic, including
increased rates of
working remotely from home, many customers demand for a variety of
apparel was, and
in the future may be, reduced or eliminated.
Our Unique Brand Partner Approach, page 112
16. We note your disclosure that you are shifting to acquire more products
through Share by
RTR and Exclusive Designs and that you sourced approximately 54% of
your products
from Share by RTR and Exclusive Designs in fiscal year 2020 compared
to 26% in fiscal
year 2019. Please include more detailed disclosure regarding the
general revenue sharing
arrangements with your brand partners under these sourcing strategies
and how the shift to
revenue sharing may impact your revenues in future periods.
Our Technology and Logistics Advantage, page 117
17. We note your disclosure on page 33 that the substantial majority of
your inbound
shipments from customers are currently returned through a single
vendor. Please disclose
whether you have any agreements with that vendor, the material terms
of any agreement,
and file the agreement as an exhibit to the registration statement.
Alternatively, please tell
us why you are not required to do so. Refer to Item 601(b)(10) of
Regulation S-K.
Rent The Runway, Inc. Consolidated Financial Statements
Notes to Consolidated Financial Statements
11. Redeemable Preferred Stock, page F-30
18. Your disclosure in Note 11 indicates that you have various series of
outstanding
redeemable preferred shares that have carrying values which differ from
their liquidation
values as of January 31, 2021. Please revise your financial statements
to explain how you
FirstName LastNameJennifer Y. Hyman
plan to account for differences between the carrying values and the
liquidation values in
Comapany NameRent
the event the Runway,
it becomes probableInc.
your preferred shares will be redeemed.
Refer to the
guidance in paragraph
August 13, 2021 Page 4 15 of ASC 480-10-S99-3A.
FirstName LastName
Jennifer Y. Hyman
FirstName LastNameJennifer Y. Hyman
Rent the Runway, Inc.
Comapany
August 13, NameRent
2021 the Runway, Inc.
August
Page 5 13, 2021 Page 5
FirstName LastName
Exhibits
19. We note that you commissioned the LCA Study conducted by SgT Group and
Green
Story Inc. and cite that study in your filing. Please file consents
from SgT Group and
Green Story Inc. as exhibits to the registration statement in
accordance with Rule 436, or
tell us why you do not believe you are required to do so.
General
20. Please supplementally provide us with copies of all written
communications, as defined in
Rule 405 under the Securities Act, that you, or anyone authorized to
do so on your behalf,
present to potential investors in reliance on Section 5(d) of the
Securities Act, whether or
not they retain copies of the communications. Please contact the staff
member associated
with the review of this filing to discuss how to submit the materials,
if any, to us for our
review.
You may contact Blaise Rhodes at 202-551-3774 or Linda Cvrkel at
202-551-3813 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Taylor Beech at 202-551-4515 or Jacqueline Kaufman at 202-551-3797 with
any other
questions.
Sincerely,
Division of
Corporation Finance
Office of Trade
& Services
cc: Marc D. Jaffe, Esq.