Rent the Runway, Inc.RENT
Rent the Runway, Inc. Stock Compensation Disclosure
Share-based Compensation Plans
2009 Stock Incentive Plan and 2019 Stock Incentive Plan
In 2009, the Company adopted its stock incentive plan (the “2009 Plan”) to grant equity to employees and service providers. In 2019, the Company adopted a new stock incentive plan (the “2019 Plan”) which replaced the 2009 Plan. The Company has granted RSUs and stock options, each of which is settleable in shares. Options are generally granted for a 10-year term, and generally vest and become fully exercisable over four years of service. RSU awards have both service-based and liquidity-based vesting conditions. The liquidity-based vesting condition was satisfied in connection with the effectiveness of the Company’s IPO. The service-based requirement of RSUs was typically satisfied over four years. While no shares are available for future issuance under the 2009 Plan or the 2019 Plan, they continue to govern outstanding equity awards granted thereunder. Outstanding awards granted under the 2009 Plan and 2019 Plan are exercisable for or settled in shares of Class A common stock, or, if approved by the board of directors, shares of Class B common stock.
Amended and Restated 2021 Incentive Award Plan
The Company's Amended and Restated 2021 Incentive Award Plan (the "2021 Plan") was adopted by its board of directors and approved by stockholders in October 2021 and became effective upon the effective date of the IPO. The 2021 Plan replaced the 2019 Plan and no further grants will be made under the 2019 Plan. The terms of equity awards granted under the 2021 Plan in the year ended January 31, 2022 were generally consistent with those granted under the 2019 Plan, as described above. RSUs granted under the 2021 Plan in the year ended January 31, 2022 generally vest over four years and do not have liquidity-based vesting conditions. RSUs granted under the 2021 Plan during the years ended January 31, 2025 and 2024 have a shorter vesting period of to two years. As of January 31, 2025, there were 387,783 shares of Class A common stock available for issuance under the 2021 Plan. There will not be any further equity grants of Class B common stock.
The grant date fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. The option pricing model considers several variables and assumptions in estimating the fair value of share-based awards. Because the Company’s shares are only recently publicly traded and there is a lack of historical company-specific data available, the expected term is estimated under the simplified method using the vesting and contractual terms, and expected volatility is estimated based on the average historical volatility of similar entities with publicly traded shares. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve at the date of grant. There were no stock options granted during the years ended January 31, 2025, 2024, and 2023.
Stock Options
Stock option activity during the period indicated is as follows:
| Number of Shares | Weighted Average Exercise Price | Weighted Average Remaining Contract Term (in years) | Aggregate Intrinsic Value | ||||||||||||||||||||
Balances as of January 31, 2024 | 42,613 | $ | 157.80 | 4.79 | $ | — | |||||||||||||||||
Granted | — | — | |||||||||||||||||||||
Exercised | — | — | |||||||||||||||||||||
Forfeited | (9,075) | 146.32 | |||||||||||||||||||||
Balances as of January 31, 2025 | 33,538 | $ | 160.84 | 3.88 | $ | — | |||||||||||||||||
Exercisable as of January 31, 2025 | 32,941 | $ | 159.80 | 3.86 | $ | — | |||||||||||||||||
There were no options exercised during the year ended January 31, 2024. The total intrinsic value of stock options exercised for the year ended January 31, 2023 was nominal.
As of January 31, 2025, there was $0.1 million of unrecognized compensation cost related to stock options granted that is expected to be recognized over a weighted average period of 0.68 years.
During the year ended January 31, 2024, the Company completed an option exchange designed to incentivize and retain employees, directors and other service providers by providing the ability to exchange outstanding stock options for RSUs representing the right to receive Class A common stock. Stock options relating to 331,370 shares of Class A and Class B common stock were forfeited in exchange for 132,546 RSUs which generally vest over two years. The Company will recognize $0.8 million of incremental stock compensation expense from the RSUs granted as a result of the option exchange which will be recognized over the two year vesting period.
The Company currently uses authorized and unissued shares to satisfy the exercise of stock option awards.
RSUs
RSUs activity during the period indicated is as follows:
| Number of Shares | Weighted Average Grant-Date Fair Value per Share | ||||||||||
Unvested and outstanding as of January 31, 2024 | 404,965 | $ | 59.40 | ||||||||
Granted | 390,484 | 8.45 | |||||||||
| Vested/Released | (371,417) | 46.56 | |||||||||
Forfeited | (90,133) | 24.39 | |||||||||
Unvested and outstanding as of January 31, 2025 | 333,899 | $ | 22.20 | ||||||||
The weighted average grant date fair values of RSUs granted for the years ended January 31, 2024 and 2023 were $49.80 and $96.60 per share, respectively.
As of January 31, 2025, there was $4.5 million of unrecognized compensation cost related to RSUs granted that is expected to be recognized over a weighted average period of 1.1 years. Of the total unrecognized compensation cost, $1.0 million related to RSUs granted as a result of the option exchange.
As of January 31, 2025 and 2024, there were zero and 43,518 vested and unreleased shares, respectively, included in unvested and outstanding shares in the table above.
Share-Based Compensation Summary
The classification of share-based compensation for the years ended January 31, 2025, 2024 and 2023, respectively, presented within each line item of the Consolidated Statements of Operations is as follows:
Year Ended January 31, | |||||||||||||||||
| 2025 | 2024 | 2023 | |||||||||||||||
Technology | $ | 1.9 | $ | 5.5 | $ | 5.9 | |||||||||||
Marketing | 0.1 | 0.2 | 0.5 | ||||||||||||||
General and administrative | 7.7 | 20.5 | 19.0 | ||||||||||||||
Total share-based compensation | $ | 9.7 | $ | 26.2 | $ | 25.4 | |||||||||||
The Company recognized $2.4 million of incremental share-based compensation expense in General and administrative expenses during the year ended January 31, 2024 due to equity award modifications related to the transition of the Chief Financial Officer role.
The Company recognized $1.6 million and $1.5 million of share-based compensation expense during the years ended January 31, 2025 and 2024, respectively, including incremental share-based compensation expense as a result of the option exchange discussed aboveFree Sentinel
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About Stock Compensation Disclosures
Stock-based compensation disclosures detail the equity awards granted to employees and executives — including stock options, restricted stock units (RSUs), and performance shares — along with the valuation methods and assumptions used to expense them. This section reveals the true cost of talent retention and the alignment between management incentives and shareholder interests.
Key signals: total unrecognized compensation expense and its expected recognition period signal future earnings headwinds from already-granted awards. For stock options, examine Black-Scholes assumptions — expected volatility, risk-free rate, and expected term — as understating any of these reduces reported compensation expense. Compare stock compensation expense as a percentage of revenue against peers to assess dilution cost. Watch vesting schedules for acceleration clauses tied to change-of-control events. Performance-based awards with undemanding targets may indicate weak governance. Add back stock compensation to operating cash flow to calculate a more conservative free cash flow figure.