Loading...
01/11 18:02
Loading...
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Despite positive developments like subscriber growth and debt reduction, the company faces significant challenges. The decline in gross margins, negative cash flow, and increased operating expenses indicate financial strain. Additionally, the forecasted negative EBITDA margin and reduced cash flow guidance suggest ongoing struggles. While the debt recapitalization plan offers potential relief, its success is uncertain. The market may react negatively to these financial pressures and uncertainties, outweighing the positive aspects of subscriber growth and debt maturity extension.
Ending Active Subscribers 146,400, a 13.4% year-over-year increase. This growth was driven by higher subscription acquisitions, higher promotional activity, and improved subscriber retention.
Average Active Subscribers 146,765, a 6.8% year-over-year increase. This was primarily due to higher subscription acquisitions and improved retention.
Total Revenue $80.9 million, up $2 million or 2.5% year-over-year. The increase was driven by higher average subscribers and other revenue growth.
Subscription and Reserve Rental Revenue Up $0.7 million or 1% year-over-year, primarily due to higher average subscribers, partially offset by lower average revenue per subscriber.
Other Revenue Increased $1.3 million or 12.5% year-over-year.
Fulfillment Costs $22.5 million, up from $20.6 million in Q2 2024. This increase was due to higher transportation costs and warehouse processing costs.
Gross Margins 30% in Q2 2025, down from 41.1% in Q2 2024. The decline was due to higher revenue share costs and fulfillment costs as a percentage of revenue.
Operating Expenses 8% higher year-over-year, primarily due to transaction-related expenses.
Adjusted EBITDA $3.6 million or 4.4% of revenue, down from $13.7 million or 17.4% of revenue in Q2 2024. The decrease was primarily due to higher revenue share expenses.
Free Cash Flow Negative $26.5 million, down from negative $4.5 million in Q2 2024. The decline was due to lower adjusted EBITDA and higher purchases of rental product.
New Inventory Strategy: Significant increase in inventory with 2,200 new styles and 56 new brands added year-to-date. Engagement with new inventory overperformed across key metrics, including a 57% year-over-year increase in new units at home.
Product Innovation: Launched personalized home screen, rewards program, and features like previewing upcoming styles. Future improvements include AI-driven recommendations and review summaries.
Subscriber Growth: Active Subscribers grew by 13.4% year-over-year to 146,400 in Q2 2025. Retention rates also improved compared to the prior year.
Social Media Engagement: Engagement with social media channels increased by 796% year-over-year, with acquisitions from organic channels performing the best in years.
Recapitalization Plan: Reduced total debt from $340 million to $120 million, extended debt maturity to 2029, and secured new capital from private equity firms.
Revenue Growth: Total revenue increased by 2.5% year-over-year to $80.9 million in Q2 2025.
Shift to Organic Marketing: Focused on organic growth through social media and community events, hosting 12 events with over 1,200 attendees.
Price Adjustment: Increased subscription plan prices by an average of $2 per item to address inflationary pressures.
Debt burden and financial restructuring: The company has been burdened with an unsustainable amount of debt, which has been a significant obstacle to its recovery post-COVID. Although a recapitalization plan is in place to reduce debt from $340 million to $120 million, the success of this plan is contingent on meeting closing conditions and securing new capital.
Fulfillment costs and gross margins: Fulfillment costs have increased due to higher transportation and warehouse processing costs, leading to a decline in gross margins from 41.1% in Q2 2024 to 30% in Q2 2025. This could impact profitability if not managed effectively.
Free cash flow challenges: Free cash flow for Q2 2025 was negative $26.5 million, a significant decline from negative $4.5 million in Q2 2024. This is attributed to higher purchases of rental products and lower adjusted EBITDA, raising concerns about cash management.
Subscription price increase: The company raised subscription prices by 14% to address inflationary pressures and tariffs in the fashion industry. While the impact has been in line with expectations so far, there is a risk of customer attrition if subscribers perceive the price increase as too high.
Inventory strategy costs: The company has significantly invested in inventory to improve customer experience, but this has led to higher revenue share expenses and fulfillment costs. The long-term return on this investment remains uncertain.
Economic and market conditions: The company operates in a competitive and economically sensitive market. Inflationary pressures and tariffs in the fashion industry could further strain operations and customer retention.
Revenue Guidance for Q3 2025: Expected revenue to be between $82 million and $84 million.
Adjusted EBITDA Margin for Q3 2025: Expected to be between negative 2% and 2% of revenue.
Fiscal Year 2025 Subscriber Growth: Double-digit growth in Ending Active Subscribers is expected.
Free Cash Flow for Fiscal Year 2025: Expected to be lower than negative $40 million, primarily due to costs associated with recapitalization transactions.
Inventory Strategy Impact: Continued investment in inventory is expected to drive sustainable revenue growth and free cash flow generation.
Debt Maturity Extension: Debt maturity extended to 2029, providing financial flexibility for future growth.
The selected topic was not discussed during the call.
The earnings report shows mixed signals: positive revenue growth, subscriber increase, and debt reduction contrast with declining margins and cash flow challenges. Despite optimistic guidance, the significant debt load and economic uncertainties pose risks. The lack of clear management responses in the Q&A section leaves some concerns unaddressed. Overall, these factors suggest a neutral stock price movement, as positive aspects are balanced by financial and operational challenges.
The earnings call reveals mixed signals: moderate revenue growth, increased subscriber numbers, and a significant debt reduction plan are positives. However, declining gross margins, increased fulfillment costs, and negative free cash flow raise concerns. The Q&A section lacked clarity, providing no additional positive insights. The company's guidance is mixed, with expected revenue growth but negative adjusted EBITDA margins and cash flow. Given these factors, the stock is likely to remain neutral in the short term, with potential volatility due to economic uncertainties and execution risks of the recapitalization plan.
Despite positive developments like subscriber growth and debt reduction, the company faces significant challenges. The decline in gross margins, negative cash flow, and increased operating expenses indicate financial strain. Additionally, the forecasted negative EBITDA margin and reduced cash flow guidance suggest ongoing struggles. While the debt recapitalization plan offers potential relief, its success is uncertain. The market may react negatively to these financial pressures and uncertainties, outweighing the positive aspects of subscriber growth and debt maturity extension.
The earnings call presents a mixed outlook. Positive aspects include a strategic plan for growth, improved cash flow, and a new subscription plan. However, the company missed EPS expectations, faces cash flow timing issues, and subscriber numbers declined. Despite optimistic guidance, uncertainties around tariffs and economic conditions pose significant risks. The doubling of inventory investment, while potentially beneficial long-term, may strain finances in the short term. The Q&A reveals management's uncertainty about economic impacts. Overall, the negatives outweigh the positives, predicting a stock price decline in the short term.
All transcripts are sourced directly from the official live webcast or the company’s official investor relations website. We use the exact words spoken during the call with no paraphrasing of the core discussion.
Full verbatim transcripts are typically published within 4–12 hours after the call ends. Same-day availability is guaranteed for all S&P 500 and most mid-cap companies.
No material content is ever changed or summarized in the “Full Transcript” section. We only correct obvious spoken typos (e.g., “um”, “ah”, repeated 10 times”, or clear misspoken ticker symbols) and add speaker names/titles for readability. Every substantive sentence remains 100% as spoken.
When audio quality is poor or multiple speakers talk over each other, we mark the section instead of guessing. This ensures complete accuracy rather than introducing potential errors.
They are generated by a specialized financial-language model trained exclusively on 15+ years of earnings transcripts. The model extracts financial figures, guidance, and tone with 97%+ accuracy and is regularly validated against human analysts. The full raw transcript always remains available for verification.
