• Hinge Health and Omada Health sparked fresh hope for digital health IPOs after their strong debuts.
• Some top startups are now preparing for IPOs in 2026 as market uncertainties remain.
• These are the 9 digital health startups that could knock on the IPO door next.

After a long drought, digital health is finally seeing signs of life in the public markets.

In May, physical therapy startup Hinge Health became the first digital health startup to go public in years. Two weeks later, diabetes-focused Omada Health followed with its own IPO.

Both Hinge and Omada saw their shares jump on debut, signaling that investors might be warming up to new digital health public listings. That's welcome news for the late-stage healthcare startups that have been stuck in IPO limbo since the last window slammed shut in 2022.

To get a better sense of which digital health startups might go public next, Business Insider spoke with half a dozen bankers and investors. Those people requested anonymity to speak freely about potential IPO candidates.

The reopening appears more like a crack than a floodgate. Bankers told Business Insider in June that many late-stage healthcare companies are now eyeing IPOs in 2026 or later, due in part to continued market uncertainties.

Some startups are pushing their plans even further out, including Sword Health, a close rival to Hinge Health. CEO Virgilio Bento told TechCrunch last year that a 2025 IPO was a possibility for Sword. But in June, he told the publication his preferred IPO timeline was "maybe 2028."

"We believe market conditions currently lack the stability needed for an IPO to be the kind of accelerator we're looking for," Bento said in a statement to BI.

Whether or not startups decide to take the plunge this year, though, Barclays' head of Americas equity capital markets Rob Stowe told BI in June that Hinge Health's and Omada Health's IPOs send positive signals for the IPO market.

"The market is pretty robust. It's not going to be for all companies, but conditions feel as strong as I've seen them in a while," he said.

Here are 9 healthcare startups that could be knocking on the IPO door next, in alphabetical order.

Aledade

Healthcare startup Aledade could be an important proof point for the public markets on the viability of value-based care enablement technologies, bankers and investors told BI.

Founded in 2014 by former national coordinator for health IT Dr. Farzad Mostashari, Aledade sells data-driven software to independent primary care practices to help them deliver value-based care, improving patient outcomes while lowering costs. The company has steadily grown its presence across Medicare, Medicaid, and commercial insurance programs, now working with over 2,400 practices to support 3 million patients.

To date, Aledade has raised about $660 million in funding from investors like Lightspeed Venture Partners and Venrock, most recently grabbing a $260 million Series F round in June 2023. The company didn't share its valuation at the time.

Aledade said in 2022 that it had been bringing in more earnings than losses, before subtracting for expenses like taxes, for the past two years. In 2023, after its Series F raise, the company said it brought in $475 million in revenue the previous year. Its high revenue and apparent profitability could help position the company for an IPO, although the company will have to differentiate itself from prior value-based care tech listings such as Agilon Health and Privia Health, which have seen their shares decline on the public markets since their 2021 IPOs.

"Aledade is focused on building our business and doing what is good for patients, practices and society, as well as for shareholders, consistent with our public benefit mission. An initial public offering in the future is always possible, based on timing, conditions and financial needs," said Aledade senior VP of communications Julie Bataille in a statement to BI. "However, we don't comment on specific plans and remain focused on the important work of advancing efforts to support independent primary care organizations and their success in value-based care."

Datavant

Health data startup Datavant has been deal hunting this year, and its acquisition spree could hint at a coming IPO.

Datavant, which manages patient data exchanges between providers, payers, and life sciences organizations, spun out of Vivek Ramaswamy's Roivant Sciences in 2017. Datavant last shared its valuation when it merged with Ciox Health in June 2021 in a $7 billion deal, giving it the highest valuation of the startups on this list.

In the past year, Datavant has made four acquisitions, most recently buying health records retrieval company Ontellus in June. Datavant previous acquired venture-backed real-world-evidence startup Aetion in May, and picked up data privacy organization Trace Data and two data analytics products from healthcare AI startup Apixio in September.

Private equity firm New Mountain Capital is Datavant's controlling shareholder. Flare Capital Partners' Parth Desai told Business Insider in December that he expects private-equity-backed healthcare companies to make tuck-in acquisitions in 2025 as they look ahead to potential IPOs in 2026.

"With New Mountain Capital's support as a longtime shareholder that is bullish on our business, we are fortunate to have flexibility as we continue to grow and diversify for our clients," said Datavant CEO Kyle Armbrester in an email to BI. "If market conditions are right, and there's a need for cash to continue to grow the business, a public offering is a potential option we would consider in the future."

Lyra Health

Founded in 2015, Lyra Health is the highest valued startup in mental health. The company was last valued at $5.58 billion in January 2022, when it raised $235 million in Series G funding.

The startup provides mental health services to employers like Morgan Stanley and Zoom, aiming to help clients save thousands of dollars in healthcare claims with its evidence-based treatment. Newly public Hinge Health and Omada Health also contract with employers with similar cost-cutting aims, and their public market debuts could bring Lyra's IPO prospects into focus.

In December, Lyra Health said its cofounder, David Ebersman, would transition from the role of CEO to board chairman following the death of his son in 2024. Jennifer Schulz, most recently the CEO of Experian's North American division, joined Lyra as its new CEO.

Bankers said Schulz's experience in a leadership role at publicly traded Experian could be a boon to Lyra, though the startup may wait until she's further settled in the role to accelerate IPO plans.

Lyra has raised more than $900 million in funding to date from investors including Dragoneer, Coatue, and Salesforce Ventures.

Lyra declined to comment for this story.

Medline

Medline is a long-standing healthcare company, not a startup. But its IPO could make waves across the industry.

Medline was founded in 1966 to manufacture and sell medical supplies to hospitals and clinics. In December, it said it had confidentially filed its S-1 to go public.

Bankers told BI that Medline's IPO would be an important example for the markets of private equity buying a healthcare company and taking it public at a premium. Blackstone, Carlyle, and Hellman & Friedman acquired Medline in 2021 for $34 billion. Reuters reported in December that Medline's IPO could raise over $5 billion and value the company at up to $50 billion.

However, President Donald Trump's shifting tariffs policies could force Medline to delay its public market debut further. Robert Stowe, head of Americas equity capital markets at Barclays, told BI in June that public investors are sensitive to businesses that could be exposed to tariffs. Medline manufactures many products in China, which has been aggressively targeted by Trump's tariff proposals.

Medline didn't respond to requests for comment for this story.

Maven Clinic

Maven, which provides care for women and families through employers and health plans, could provide critical evidence for the market viability of women's health companies with a potential IPO.

Founded in 2014, Maven is backed by leading VC firms including General Catalyst, Sequoia, and Oak HC/FT. The company last raised $125 million in Series F funding in October, led by the private equity firm StepStone Group at a $1.7 billion valuation. The raise boosted Maven's total funding to over $425 million.

The company now says it works with over 2,000 employers and health plans to provide fertility benefits, maternity care, menopause support, and related care.

Investors previously told BI that Maven's IPO, if successful, could help validate the women's health sector for investors and pave the way for more women's health startups to raise funding and find exits.

Maven's strongest signal of its IPO ambitions can be found in its C-Suite. In the first half of the year, the company hired multiple executives with experience guiding companies through public listings.

BI reported in October that Maven let go of its chief financial officer to bring in a new CFO with public market experience. The company said in June it had hired Katie Rooney as its CFO, who previously served as CFO and COO at Alight Solutions through its divestiture from Blackstone-owned Aon Hewitt and its public listing in 2021 via SPAC merger.

Maven also said it had hired a new chief commercial officer, chief legal and administrative officer, and chief communications officer. Maven's new chief legal and administrative officer, Susan Stick, most recently served as general counsel at Life360, leading the company through its 2024 IPO.

Maven declined to comment for this story.

Spring Health

Spring Health has long sought to separate itself from the pack with its AI-powered approach to precision mental healthcare.

Spring Health's algorithms help tailor care plans to an individual's needs, with various types of care provided through its app, such as coaching therapy, psychiatry, and meditation exercises. The company sells its services to employers including Microsoft, Pfizer, and the Coca-Cola Company, as well as health plans.

The Tiger Global-backed startup raised $100 million in Series E funding in July 2024 at a $3.3 billion valuation. According to PitchBook, Spring Health has raised about $466 million since its 2016 founding.

As AI takes off in digital health, Spring says it's embedded AI in its electronic health record system, its patient app, and its real-time analytics for employers. The startup has also expanded the range of its mental health services over the years, most recently digging deeper into pediatric care and support for substance use disorders.

Per Rock Health, mental health was the top-funded clinical indication in 2024 for the sixth year straight, with mental health startups bringing in $1.4 billion last year. Despite high fundraising levels, however, the sector hasn't seen an IPO since 2021. Bankers said Spring Health and Lyra Health are consistently discussed as the most likely two candidates for the next mental health public listings.

Spring Health didn't respond to requests for comment for this story.

Transcarent

Transcarent contracts with employers to provide health navigation and virtual care to employees. The startup looks a lot closer to an exit after a big acquisition earlier this year.

The startup bought the public health benefits company Accolade in a $621 million deal that closed in April. The acquisition looks to have significantly increased Transcarent's customer base and thus made a big contribution to its top line — before the Transcarent deal, Accolade said it contracted with over 1,400 employers and health plans, and the company reported $414 million in revenue in the fiscal year 2024. Now, with Accolade on board, Transcarent says it works with over 1,700 employers and health plans. Transcarent hasn't publicly shared its revenue.

The Accolade acquisition was financed by Transcarent investors including General Catalyst and CEO Glen Tullman's 62 Ventures, cash on Transcarent's balance sheet, and debt provided by JP Morgan. Transcarent has raised about $450 million since its 2020 founding, including $126 million in a Series D funding round in May 2024 at a $2.2 billion valuation.

Tullman has by far the most experience with taking companies public of the CEOs on this list. Before Transcarent, he led three companies through public listings — Livongo, Allscripts, and Enterprise Systems. His success with Livongo, the diabetes care company he founded, stands out as a rare example of blockbuster digital health returns; Livongo went public in 2019 at a $2.5 billion valuation, before being acquired by Teladoc the next year for $18.5 billion, at the time the biggest deal ever in the digital health market.

That experience could set Transcarent up to pursue an IPO when market conditions look favorable. Tullman told MedCity News in May 2024 that he had "no interest" in selling the company, but would consider an IPO in the future.

Transcarent will have to separate itself from previous care navigation IPOs, however, including Health Catalyst, whose stock has declined more than 85% since its 2019 IPO. It'll also need to contend with Accolade's cash burn, since the health benefits company reported a net loss of $100 million in the fiscal year 2024.

In a statement to BI, Tullman said Transcarent is focused on integrating its solutions to bring its AI-powered platform, called WayFinding, to more members and employers to make healthcare more accessible and affordable.

"At Transcarent, our priority is meeting the needs of our Members and delivering measurable results for our clients. If we do those things well, the rest will follow," Tullman said.

Virta Health

Omada Health's June IPO could set up diabetes care peer Virta Health to follow in its footsteps.

Founded in 2014, Virta Health made its name in virtual diabetes care, helping patients reverse type 2 diabetes through personalized, low-carb nutrition plans. It's expanding quickly into obesity treatment and added GLP-1 prescriptions like Ozempic for weight loss in January. The company previously prescribed GLP-1s only for diabetes.

CEO Sami Inkinen told Business Insider in January that Virta was bringing in over $100 million in annual recurring revenue, up 60% from the year before. He said he expected even faster growth in 2025, driven by surging demand for Virta's weight-loss care.

"An IPO is the next milestone for us," Inkinen said at the time. He declined to provide details on Virta's potential IPO timing, but said the company wants to be profitable before it braves the public markets.

Virta was last valued at $2 billion in 2021, when it raised $133 million in Series E funding led by Tiger Global. Inkinen said in January that Virta would be profitable by the end of 2025.

In a conversation with BI at the end of June, Inkinen declined to share specifics about a potential Virta IPO or a likely timeline for its public listing. However, he said it's always been his plan for Virta to be an independent public company, adding that Virta is tracking towards that goal.

Inkinen said Virta's growth rate is accelerating and that the company is ahead of its financial targets for the year. He's not stressing about timing the market, he said.

"The very best investor relations is fantastic financials. If you have those as a company, that's the best marketing before IPO, and for the IPO and beyond. Build a great business, and the rest will take care of itself," he said.

Zelis

Zelis was started 30 years ago under the name Stratose, later merging with GlobalCare and Pay-Plus Solutions to create Zelis Healthcare. The company now sells healthtech software to payers and providers to manage medical claims and process electronic payments.

Bankers told Business Insider that Zelis's business is stable with strong economics that could position it well for an IPO.

Zelis's profile isn't too dissimilar from Waystar, a private-equity-backed healthcare payments company that went public in June 2024 with an initial market cap of about $3.5 billion. Since then, Waystar's stock has risen about 88%, and as of late June, the company boasts a $6.7 billion market cap. That success could set Zelis up to follow in Waystar's footsteps.

Zelis announced it had sold a minority stake for an undisclosed price in December, led by Mubadala Capital and including Norwest and HarbourVest. The recent capital raise could push Zelis's IPO back if the company doesn't see a significant financial benefit to going public, bankers said.

Zelis declined to comment for this story.

Now that Meta has largely beaten an AI training copyright lawsuit raised by 13 book authors—including comedian Sarah Silverman and Pulitzer Prize-winning author Junot Diaz—the only matter left to settle in that case is whether Meta violated copyright laws by torrenting books used to train Llama models.

In an order that partly grants Meta's motion for summary judgment, judge Vince Chhabria confirmed that Meta and the authors would meet on July 11 to "discuss how to proceed on the plaintiffs’ separate claim that Meta unlawfully distributed their protected works during the torrenting process."

Chhabria's order suggested that authors may struggle to win this part of the fight, too, due to a lack of evidence, as there has not yet been much discovery on this issue that was raised so late in the case. But he also warned that Meta was wrong to argue its torrenting was completely "irrelevant" to whether its copying of books was fair use.

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• After years of juggling parenting and working from home, I decided to leave my full-time job.
• I loved my career, but I needed more flexibility to take care of our two young kids.
• After seven months, it has already been one of the best decisions we've ever made.

Last year, I quit my dream job to be a stay-at-home dad while my wife worked full time. It was the best decision for our family, and I've loved every minute of it.

My wife has always been the primary breadwinner of the family, so we decided I could step back from my career to work part time as a freelance writer and — most importantly — take care of our two little ones, a 3-year-old girl and a 5-year-old boy.

It has been challenging in ways I couldn't have predicted, but I wouldn't have it any other way.

We spent years trying to build two careers and a family

I have been a healthcare journalist for nearly a decade, mostly working as a full-time editor or staff writer for various media companies. I have always loved this kind of work, and every new opportunity felt like a dream job. But everything started to change after my wife and I had our first kid at the end of 2019.

The COVID-19 pandemic turned me into a work-from-home dad with a 4-month-old boy. I was suddenly a full-time editor and a full-time caretaker.

In those days, my wife worked on the front lines of the pandemic as a physician assistant, while my son and I were trapped in a small two-bedroom apartment in New Rochelle, NY. It was the first time I had to suffer through the split focus of working and parenting full time.

Even after the pandemic began to subside, my wife continued to work more than 50 hours a week at the hospital. So, I eventually settled into my role as a stay-at-home, work-from-home dad, with the help of grandparents and a local day care.

But this was only the beginning of my work-life struggles.

Working and caring for my kids only got more stressful

By the end of 2022, a lot had changed for my family. We relocated to the Atlanta area. My wife took a new job at a local hospital that demanded slightly fewer hours. I landed an exciting new position as a medical reporter for a national publication, while our little girl was turning 1 year old.

It was a happy time for our family, but the pressure to be a successful reporter and an always-available father started to become too much for me. Even though my wife's new role offered better hours, she still didn't have the flexibility to leave work at a moment's notice. We always knew it would be my responsibility to take care of any sudden, unexpected issues for the family.

On sick days, I would balance trips to the pediatrician's office with phone interviews with sources. When holiday calendars between day care and work didn't match, I would serve snacks in between typing up paragraphs for my next article.

It was a difficult balancing act. My new job required much of my mental energy, and the kids always needed more attention than I could give during workdays. It became clear that our family needed to make a change.

It was time to put my family and my wife's career first

After two years of balancing work and family needs with mixed success, my wife and I decided it was time for me to quit my job to focus on our family. The change had an immediate impact on all our lives.

Now, I no longer have to split my attention between my kids and my work. When they get sick, I can drop everything to take them to the doctor, then bring them home to take care of them.

I also have plenty of time to focus on chores to keep the house clean, cook healthy meals, and spend time with my kids and my wife without worrying about falling behind at work. I never have to worry about misaligned holiday schedules or hiding in my office to finish work assignments.

It was nerve-racking to leave full-time employment after nine years, but after seven months of being a stay-at-home dad, I can't imagine doing it any other way.

• When my partner and I were in our 20s, we moved in with Billy and Fern, a couple in their 50s.
• It was a great living situation, and we became close during our time renting a room from them.
• Though we've since moved on, we've remained lifelong friends.

When we were in our 20s, my partner Sam and I decided to do a working holiday in Banff, Canada.

Initially, we rented a room in a three-bedroom share house with two other couples who were close in age to us. It was loads of fun, but nobody did much cleaning, and there was a fair amount of drinking and partying.

Sam got a job with the town of Banff and soon he befriended this Canadian guy named Billy. Billy is one of those larger-than-life personalities; he's high energy and extremely likeable. Everyone in town knows him, and he's affectionately known as "Billy Banff."

One day, Billy mentioned that he and his wife had a room available in their cozy two-bedroom property. After chatting with me about it, Sam told Billy we'd love to take it.

We lived together well

I'll never forget the day we moved in. I met Billy's wife, Fern, who's a wonderfully warm, very calm, grounded person. She's the yin to Billy's yang in a lot of ways, and the pair complements each other beautifully.

As we talked through the finer details of the rental arrangement, I asked her if I could have a set of keys for the property.

"Oh, honey, we don't even know where they are," she said, smiling. "We never bother locking the house!" That's the kind of trusting, beautiful people Billy and Fern are. Their house is always open and full of loved ones.

When they showed us our room, they'd left a bottle of Yellow Tail merlot from Australia on the dresser for us, as a nod to our home. We felt so welcome.

At that point, Billy and Fern were in their 50s, while Sam and I were 29 and 26. Despite the age difference, the living arrangement worked really well. Fern and Bill were fun and young at heart, but also very caring and nurturing. We all helped out with cleaning and often shared meals together.

I used to love coming home after a waitressing shift to find Fern on the veranda, relaxing and taking in nature. We'd have deep conversations about love, life, and everything in between.

Sometimes, if Billy was home, we'd crank "Moves Like Jagger" by Maroon 5 and dance around the living room like kids. I also played "A Horse With No Name" by America over and over; it had been featured by our favorite TV show at the time, "Breaking Bad," and Billy and I often sang it together. It became a bit of a theme song for that chapter of my life.

We moved out, but we've stayed in touch all these years

When we eventually decided it was time to move on from Banff, the feeling was bittersweet. It was springtime when we left. The deer were out in full force and the sun was still shining at 9 p.m. As a final farewell, Fern made an amazing feast for us and we sat around the fire drinking wine. It really felt like home.

After we left Banff, we moved to London for a year and then returned to Australia. As fate would have it, Fern and Billy's daughter Penny lives on the Gold Coast, where my family is based, so we've been lucky enough to catch up with them over the years. In 2019, we even took our kids to Canada to show them Banff, which still feels like our "happy place."

On our most recent catch-up on the Gold Coast earlier this year, I was walking through a beachside park when I heard someone singing a familiar tune with a thick Canadian accent. "I've been through the desert on a horse with no name. It felt good to be out of the rain," they sang. I could not wipe the grin off my face as I turned and saw Billy standing nearby, his arms outstretched and ready for a bear hug.

Whenever we get together with Fern and Billy, it's always like old times. They're more than lifelong friends. To us, they're family and always will be.

• For Love & Money is a column from Business Insider answering your relationship and money questions.
• This week, a reader's husband feels he's "doing it all" and wants her to get a remote job so she can take on more responsibilities.
• Our columnist suggests they work together to find ways to better balance responsibilities, without ending anyone's career.
• Have a question for our columnist? Write to For Love & Money using this Google form.

Dear For Love & Money,

My husband and I are in our mid-40s with two young children. My husband is a veteran and is currently self-employed as a carpenter. He receives a monthly disability benefit, which has allowed him to have a more flexible career, working intermittently for a few months or a year to build up a "safety net" and taking time off to travel and focus on hobbies. I have a stable federal career as a social worker with the Department of Veterans Affairs, which includes excellent benefits, a pension, and family health insurance. We both make good incomes and have money set aside. We keep our finances separate and split our bills 50/50. This has worked until recently.

Up until about four months ago, I worked remotely, which gave me the flexibility to walk the kids to and from childcare. Then I received the federal return-to-office order, and I lost that flexibility. My husband took over mornings and after school with the kids, leaving him about five to six hours to work when he has a paying carpentry job. Even though it seems like a small adjustment, it's becoming a big issue — I miss my flexibility and ability to have that extra time with the kids, and my husband wants a few more hours each day to work on carpentry projects without worrying about the kids' schedules. He has also expressed feeling like a stay-at-home dad who's "doing it all," and feeling like I take this setup for granted.

We recently got into a heated discussion, and he asked me to consider leaving my stable career and benefits to find another job that's either remote or part-time to take back the stay-at-home parent role, so he can focus on building his business. I've no intention of leaving my job — the pay is great, I enjoy what I do, and there's opportunity for growth. I also don't feel comfortable losing that stability for myself and for our kids. I've suggested adjusting the 50/50 split to decrease the pressure on his carpentry business, but he hasn't shown interest in that, and truthfully, I know my income alone won't cover our monthly expenses.

How do we maintain enough flexibility for one parent to be able to walk the kids to and from school without having to pay someone else to do it and, more importantly, not sacrifice career stability or opportunities?

Sincerely,

Standing for Stability

Dear Standing,

The term "stay-at-home-parent" refers to someone whose exclusive job is staying home and providing childcare for their children. To be clear, your husband is not a stay-at-home dad any more than you were the stay-at-home parent when you were working remotely or if you were to get a new remote job. I don't say this to be pedantic; I clarify this point because, as convenient as it may feel for one parent to work from home and be on hand for their child's needs, these are two separate, time-consuming jobs.

You mentioned that your husband feels he is "doing it all", which makes sense if he is the one at the house all day, surrounded by the responsibilities of your lives. He may be struggling to balance everything more than you did when you were working from home due to being self-employed and not reporting to a boss or having hard deadlines; I myself know how easy it is for my other responsibilities to creep up my to-do list when there's no external source forcing me to prioritize my paid work.

At the same time, he has to recognize that what you're asking of him isn't impossible; in fact, when you were working from home, you were taking on these responsibilities that he feels overwhelmed by. It's possible he took for granted that you were "doing it all" without even realizing it, and the answer to your problems isn't simply making things go back to the way they were.

Quitting your job in the hopes that you can find something remote seems like a vast overreaction to inconvenient pick-up and drop-off times. Your solution will be found in the details of your daily routine, which will be hard to negotiate if you've both mentally reduced your schedules to: "You have time. You're home all day," and "I don't. I'm in the office or doing carpentry all day."

Instead, address your husband's logistical obstacles directly. Ask him what specifically isn't working for him. Maybe he'll tell you he feels like every time he gets into the flow, it's time to pick the kids up from school, or every time he drops them off, his day gets derailed by tasks. Working from home can be challenging because personal and professional boundaries often become blurred; you walk past the kitchen and notice the trash needs to be taken out, and then the dishwasher's clean light pops on, and suddenly, two hours have passed, and you haven't even started working on the projects you've planned for the day.

If he feels that drop-off regularly triggers a series of rolling tasks, create a standing chore schedule. If your husband knows you will get the dishwasher after dinner, he won't need to worry about taking care of it during the day.

Support your husband in creating boundaries around a workflow that feels productive and doable for him. Perhaps there are strategies you learned when you were working from home that he could incorporate into his daily workflow. Another way to help balance the workflow might also be to ask your boss about any potential flexibility; if you can change your hours from 9 to 6, for instance, you may be able to add dropping your kids off back into the mix.

As a work-from-home, self-employed person, I know that when someone says they feel like they're doing it all, what they're really saying is "Does anyone appreciate how hard I'm working? Will they help?" You talked about adjusting how you divide your bills, but adjusting how you distribute the labor in your home and making sure everyone feels they have the tools they need to succeed could be a more effective way of meeting everyone's needs without ruining anyone's career.

Rooting for you,

For Love & Money

Looking for advice on how your savings, debt, or another financial challenge is affecting your relationships? Write to For Love & Money using this Google form.

Image source: The Motley Fool.

DATE

Thursday, June 5, 2025 at 4:30 p.m. ET

CALL PARTICIPANTS

Chief Executive Officer — Jennifer Hyman

Chief Financial Officer — Siddharth Thacker

Need a quote from one of our analysts? Email [email protected]

RISKS

CFO Siddharth Thacker stated that gross margins (GAAP) decreased to 31.5% in Q1 FY2025, down from 37.9% a year earlier and 37.7% in the previous quarter, due to higher revenue share costs and increased fulfillment costs.

Adjusted EBITDA was negative $1.3 million, down from $6.5 million a year ago, as a result of both declining revenue and higher revenue share expenses.

Free cash flow was negative $6.4 million, compared to negative $1.4 million a year ago, due to lower adjusted EBITDA and higher inventory investment.

Fulfillment costs rose to 29.3% of revenue in Q1 FY2025, up from 27.5% a year ago, driven by increased transportation costs and a shift to maintaining more inventory for subscribers.

TAKEAWAYS

Ending Active Subscribers: There were 147,157 ending active subscribers in Q1 FY2025, representing a 1% year-over-year increase and the highest quarter-end subscriber count in company history.

Average Active Subscribers: Average active subscribers totaled 133,468, down 1.8% from 135,896 a year ago.

Revenue: Total revenue was $69.6 million, a decrease of $5.4 million, or 7.2% year over year, and down $6.8 million, or 8.9%, quarter over quarter.

Gross Margin: Gross margin was 31.5%, down from 37.9% a year ago and 37.7% in the previous quarter, reflecting both higher revenue share and fulfillment costs.

Fulfillment Costs: Fulfillment costs were $20.4 million, nearly flat year over year, but rose to 29.3% of revenue from 27.5% a year ago due to higher transportation costs.

Adjusted EBITDA: Adjusted EBITDA was negative $1.3 million, or negative 1.9% of revenue, compared to $6.5 million and 8.7% of revenue a year earlier.

Free Cash Flow: Free cash flow was negative $6.4 million, compared to negative $1.4 million a year ago, primarily due to increased rental product purchases supporting the inventory strategy.

Inventory Investment: Inventory volume received in Q1 FY2025 rose 24% year over year, with 36 new brands and over 1,000 new styles launched during the quarter.

Inventory Engagement: Spring 2025 inventory recorded a 23% higher share of use, 46% more 'hearts,' and a 14% higher 'love rate' compared to the prior year. April add-on gross bookings increased 11% year over year (all metrics as reported for FY2025).

Revenue Mix Shift: Exclusive designs and revenue share are projected to account for 70% of acquired items in FY2025, up from 20% in FY2019.

Q2 and FY2025 Guidance: Q2 FY2025 revenue is projected between $76 million and $80 million, with adjusted EBITDA margin guidance at negative 22%. The company maintains a double-digit subscriber growth target for FY2025 and expects full-year cash consumption of negative $30 million to negative $40 million, but may invest beyond that range if prudent.

Product and Service Innovation: Introduced back-in-stock notifications with 25% subscriber adoption and a 48% completion rate since launch; stylist support reduced first-month churn by 27%; the 60-day customer promise dropped churn by 34%; and RTR Concierge lowered churn by up to 18% so far.

Customer Retention: Achieved the strongest quarterly retention in four years. Churn improvement in Q1 FY2025 was the best year over year and quarter over quarter since the pandemic recovery period.

Marketing and Engagement: Organic social engagement rate rose 163% since the April and May branding shift (compared to the two months prior). New member-driven events attracted over 350 attendees and expanded virtual community channels.

Upcoming Initiatives: The company plans to launch more than 40 new brands and add over 2,700 new styles in FY2025, expand into 19 new brands in Q2 FY2025, and continue scaling customer experience enhancements and a new rewards program.

SUMMARY

Rent the Runway delivered record quarter-end active subscribers and demonstrated sequential subscriber growth in Q1 FY2025, despite reporting a year-over-year decline in both average active subscribers and total revenue. The company faced compression in gross margin and negative free cash flow due to higher revenue share expenses, increased inventory investment, and rising fulfillment costs. Management reaffirmed double-digit subscriber growth guidance for FY2025 and outlined plans for rapid inventory expansion, differentiated merchandising, and further investment in customer innovations through the year.

CFO Siddharth Thacker said, "Our full-year guidance remains unchanged." indicating that major strategic and financial targets are intact despite short-term margin pressures.

The exclusive design and revenue share model is anticipated to account for 70% of inventory sourced in FY2025, a shift management identifies as central to brand partnerships and value creation.

Engagement with newly launched inventory in spring FY2025—measured by digital interaction 'hearts,' share-of-use, and add-on bookings—suggests an early positive response to increased assortment and category depth.

Operational discipline continues, with leadership stating willingness to "invest prudently when it makes sense for our customers, even if that results in free cash flow outside the provided ranges."

INDUSTRY GLOSSARY

Revenue Share Inventory: Merchandise supplied by brands or designers where Rent the Runway, Inc. pays a share of rental revenue rather than purchasing outright.

Share by RTR Inventory: Items procured through Rent the Runway, Inc.'s revenue share agreements rather than traditional wholesale purchase.

Hearts/Love Rate: User engagement metrics specific to Rent the Runway, Inc., tracking customer preference and interaction with inventory selections.

RTR Concierge: A program providing direct outreach and customer support to new and returning subscribers to boost retention and education.

Full Conference Call Transcript

Jennifer Hyman: Thank you, Cara, and thank you all for joining today. On our last earnings call, we walked you through our plan to transform Rent the Runway, Inc. as we increase the breadth and depth of our inventory, innovate on our product to give customers what they want, and get back to our customer-obsessed roots. In the past quarter, we've put this plan into action and we've seen very positive results.

We drastically increased the desirability and quantity of inventory on the platform, with much more to come, launched some of the most highly requested features from our members, including back-in-stock notifications, and a customer promise for new and rejoining subscribers, and restored our relationship with customers through a revitalized authentic approach to organic social and customer service. And as I speak with you today, I'm happy to report that our transformation strategy is working. We've seen a return to subscriber growth in Q1, ending the quarter with over 147,000 active subscribers, the most ending subscribers at the end of a quarter in company history.

We've also seen the strongest quarterly customer retention in four years, with improved churn rates for both early-term and long-term subscribers. Today, I'll walk through strategy and the results we're seeing in more detail as we show our community and the world that Rent the Runway, Inc. is back.

First and foremost, our bold inventory strategy. Rent the Runway, Inc. provides our customers with a valuable offering: a risk-free way to try new styles and brands that may have previously not been on their radar or in their closet. This ability to discover newness is a key reason why so many women love our service. And with the rejuvenated inventory this year, we're giving her an even greater opportunity to discover new brands and items that she loves. As we detailed on our last earnings call, we are planning our largest-ever investment in new inventory this year. Our new brands and styles have already started to roll out on our site and into the hands of our customers.

Throughout this transformation, we have been guided by our customer feedback and data, so that we can be more specific about the aesthetic of the styles we offer on Rent the Runway, Inc. with the ultimate goal of attracting new customers and retaining existing customers. We've been focused on building an assortment that resonates with our feminine, polished, and playful core customer. And we're building depth across categories that we know our customers desire, like denim, outerwear, day dresses, casual everyday clothing, handbags, and workwear. I truly believe that we've not only created visual differentiation between us and our competitors, but we're also well on our way to significantly improving customer loyalty.

Q1 inventory volume received was up 24% year over year. We launched 36 new brands and over 1,000 new styles that align with what we know our customer is looking for. And we've been right. Our customers are more engaged with our selection than ever before. Our spring 2025 inventory has a 23% higher share of use, 46% more hearts, and a 14% higher love rate than our spring buy last year. She's also adding more to her shipment, with April add-on gross bookings up 11% year over year.

We've identified several pillar brands like Veronica Beard, AL Ola Johnson, and Stodd, which drive a higher perception of the value of Rent the Runway, Inc. when a customer has one of them in her order. To double down on these pillar brands, we've considerably increased our buys from them. We've also released four new collaborations with Sea New York, Plan C, Ghani, and Simon Miller, and they are leading the way in customer engagement. The new Simon Miller collection alone drove almost 3 million views. And from a cost perspective, I want to remind you that these collections deliver comparable quality at approximately 40% lower cost on average.

We're excited and proud to be giving customers more styles from pillar brands they covet and introducing new brands that excite them. And we are just getting started. We expect that the remainder of the year will be significantly more impactful. In Q2 alone, new receipts are expected to be up over 420% year over year. And for the rest of the year, we expect new receipts to be up 134% year over year. We're also planning to launch over 40 new brands and post over 2,700 new styles. For the designers and brands themselves, we believe that Rent the Runway, Inc. is now well established as a core marketing channel.

We've delivered brands an opportunity to reach new customers outside of traditional paid marketing channels. We've done this by spending the last fifteen years building trust with brands and connecting them to our customers. The growth of our revenue share and exclusive design channels are unique to Rent the Runway, Inc. and a testament to the excitement that brands have to partner with us during a time in which they are losing confidence in other retail channels. About 20% of items acquired in fiscal year 2019 were exclusive designs and revenue share. This fiscal year, it's expected to be around 70%. And this momentum is expected to continue.

In Q2 alone, we're planning to expand into 19 new brands, launch three new exclusive collections, introduce fresh use cases like beach and tennis, and double down on the summer categories our customers crave most when temperatures rise. We expect that the new inventory will continue to have a dramatic effect as more of it hits the site over the course of the year.

Now let's walk through our recent product innovations, all of which are in response to direct customer feedback and are designed to make the experience with Rent the Runway, Inc. best in class for every customer. We know that inventory alone isn't everything. We want our customers to feel that they are getting the white glove experience they expect from a luxury brand, and we're investing in the product and customer service experiences designed to deliver on that vision. We've introduced enhancements to the product for both new members and for customers who've been with us for a while, including back-in-stock notifications, our number one most requested new feature.

Now a subscriber can set a notification if she has her eye on a style but it is not available at the time she is building her order. If it's back in stock, she gets notified and can add it to her next order. People are really excited about this feature. 25% of all subscribers have engaged with it since launch, and 48% of those who've engaged with it have successfully added a back-in-stock item to their bag after getting a notification. Secondly, we launched personalized styling support for our early-term customers, where stylists help build hearts lists, place orders, and provide personalized suggestions.

We believe that this is a very valuable service to our subscribers, many of whom are professional women that value the extra assistance with discovery and ordering. We provide a complimentary first thirty-minute session and have seen a 27% reduction in first-month churn when subscribers talk to stylists. We've also introduced a sixty-day customer promise for all new and rejoining customers. If a customer doesn't like any of the items in her order during the first sixty days, we'll send her new items at no cost. We've seen that this leads to a 34% reduction in churn.

RTR Concierge, where new and rejoining customers receive a call from us to explain the service and answer any questions, is another new initiative that members love. So far, we've seen an 18% reduction in churn for those who answered our call, and a 14% reduction in churn for those who didn't answer. This has been so successful that we're planning to scale it from 50% of new and rejoining subscribers to 100% by the end of Q2. And lastly, we've launched a more personalized homepage and browse experience, tailored to what she has happening that month. A key focus for the remainder of the year is to scale these improvements to as many of our subscribers as possible.

And we have even more in store. In Q2, we're planning to launch a new rewards program that will give subscribers perks and rewards to celebrate break points. We're also planning to introduce Harding Progression and more personalized feeds to provide a more curated and personalized subscriber browsing and picking experience. All of this innovation is rooted in the pod structure we have developed for our teams at Rent the Runway, Inc. Our four pods—retention, revenue, customer growth, and inventory—map directly to our strategy and are designed to enable us to simplify and be more agile in the way we introduce new products and serve customers.

This has allowed us to shift new features rapidly, respond quickly to customer needs, and operate much more efficiently overall.

The third area we've been focused on has been restoring the relationship with our customers through authentic, transparent branding and communications, along with member experiences for our community. We know that Rent the Runway, Inc. is an emotional and aspirational product. It's not purely about renting and purchasing clothing items. In Q1, we significantly shifted the tone of our marketing towards transparency and community, showing customers we heard you and getting back to the basics of what this brand is all about. This wasn't about deploying more marketing dollars. Rather, we employed a customer-centric, radically authentic strategy ensuring customers felt valued, informed, and excited about the changes.

We also launched a brand new organic strategy that broke the fourth wall, meaning we acknowledged the presence of the audience and spoke directly to them through our channel. We engaged with our most opinionated community on Reddit, and through a very active Reddit AMA. Launched new social features like Instagram Q&A and Gen Reacts, and introduced a new face of Rent the Runway, Inc. social channels. And it's working. The engagement rate on social channels is up 163% since we launched our new strategy in April and May, as compared to the two months prior. I am also personally still responding to customer emails and feedback that comes my way and very actively engaging with our customers regularly.

Lastly, we reintroduced member-first experiences, engaging hundreds of members both online and in real life. We kicked off the We Heard You hybrid webinar, which allowed our community to hear directly from our leadership team on what's to come. We also hosted a Women at Work styling event, a Wixow exclusive design preview, a meet-the-drop event that drew over 350 attendees. All of these are examples of how we are bringing the power of our community back in person and virtually. In conclusion, we are confident that our new strategy is working. Thanks to the new inventory and product innovation, our quarterly customer retention is the strongest it's been in four years.

In Q1 2025, we experienced our greatest year-over-year and quarter-over-quarter Q1 churn improvement since the pandemic recovery period. We're incredibly excited about the early signals that this inventory strategy is driving results and believe the best is yet to come. I think this is only the beginning. We're optimistic and excited. We created this category and we know where it's going. With that, I'll hand it over to Siddharth Thacker.

Siddharth Thacker: Thanks, Jen, and thank you everyone for joining us. As Jen outlined in her remarks, the key message in this quarter's results is that we believe our inventory and product strategies are working. Our teams are energized and we are finding ways to improve our customers' experience every day. We believe our significant inventory investment this year will continue to drive retention as customers experience the full impact of the new arrivals in May and in the months to follow. Let me spend a few minutes discussing why it's taken until fiscal year 2025 to put these plans into action and how we expect fiscal 2025 to unfold.

Over the past two months, I've been asked by new and existing investors why it's taken us so long to implement the strategies we're executing on in fiscal 2025. Indeed, some investors have indicated that for the first time they feel like Rent the Runway, Inc. wants to grow. Let me begin in fiscal 2022. We had emerged from COVID with a similar-sized subscriber base as existed before COVID, but with a relatively small amount of inventory purchased in the intervening period. Over time, we focused on increasing depth and exiting older inventory within the context of managing our cash consumption and our balance sheet.

In order to continue funding improvements to our customer experience, we substantially reduced costs in fiscal 2022 and fiscal 2023 and made significant strides in moving to an asset-light inventory acquisition model. In fiscal 2024, we brought the business to almost free cash flow breakeven to demonstrate to stakeholders both the strength of our underlying revenue base as well as our sound unit economics. Finally, in fiscal 2025, armed with the right-sized cost structure, brands willing to provide more than double the amount of share by RTR inventory and having already demonstrated progress on cash flow, in fiscal 2024, we are ready to invest.

While it hasn't been easy, we're proud of the considerable progress made over the past three years. And yes, we are ready to grow.

Let me discuss fiscal 2025. Jen has already outlined how fiscal 2025 is off to a good start with the fastest sequential growth in ending active subscribers in Q1 versus Q4 over the last four years. An important driver of that growth is significantly improved retention on both a sequential and year-over-year basis. We believe we can improve retention further in fiscal 2025 given the planned buildup of inventory throughout the year as well as new product launches. We also expect subscriber acquisitions to benefit from our investments in fiscal 2025 albeit with a lag to retention improvements, as customers tell others about the positive changes they are seeing at Rent the Runway, Inc.

We expect acquisition improvements to also be driven by improved organic marketing as well as higher levels of promotional spending to expose more customers to our improved offering. Our results for Q1 demonstrated these trends. Improved subscriber growth, with revenue growth lagging subscriber growth due to higher promotional spending. The good news is that we've reactivated both paused and former customers' success in Q1. And so far, retention for those subscribers is better than we've seen historically. We expect continued improvement in ending active subscriber growth throughout the fiscal year. As I will also outline shortly, we will not hesitate to invest further in the customer proposition if we think it is prudent.

I will now review results for the first quarter before providing Q2 and full year 2025 guidance. We ended Q1 2025 with 147,157 ending active subscribers, up approximately 1% year over year. Average active subscribers during the quarter were 133,468 subscribers versus 135,896 subscribers in the prior year, a decrease of 1.8%. Ending active subscribers increased from 119,778 subscribers at the end of Q4 2024 due primarily to sequentially higher subscriber acquisitions, higher promotional spending, a decrease in paused subscribers, and improved retention. Total revenue for the quarter was $69.6 million, down $5.4 million or 7.2% year over year and down $6.8 million or 8.9% quarter over quarter.

Subscription and reserve rental revenue was down 6.2% year over year in Q1 2025 primarily due to lower average revenue per subscriber driven by increased promotional spend and lower average subscribers versus Q1 2024. Other revenue decreased 14.6% or $1.3 million year over year. Fulfillment costs were $20.4 million in Q1 2025 versus $20.6 million in Q1 2024 and $20.2 million in Q4 2024. Fulfillment costs as a percentage of revenue were 29.3% of revenue in Q1 2025 compared to 27.5% of revenue in Q1 2024. Fulfillment costs primarily reflect higher transportation costs as a result of carrier rate increases. Gross margins were 31.5% in Q1 2025 versus 37.9% in Q1 2024.

Q1 2025 gross margins reflect higher revenue share costs as a percentage of revenue due to greater share by RTR inventory in addition to higher fulfillment costs as a percentage of revenue. Q1 2025 gross margins decreased quarter over quarter to 31.5% from 37.7% in Q4 2024 due primarily to seasonally higher revenue share payments combined with higher fulfillment costs as a percentage of revenue. Sequentially higher fulfillment costs as a percentage of revenue reflect lower revenue per order as we chose to sell less inventory this quarter to increase inventory available for subscribers. Operating expenses were 6% lower year over year due primarily to lower stock-based compensation expenses.

Total operating expenses, which include technology, marketing, and G&A, were 55.9% of revenue in Q1 2025 versus 55.2% of revenue in Q1 2024 and 44% of revenue in Q4 2024. Adjusted EBITDA for Q1 2025 was negative $1.3 million or negative 1.9% of revenue versus $6.5 million or 8.7% of revenue in Q1 2024. The decrease in adjusted EBITDA versus the prior year is primarily a result of lower revenue and higher revenue share expenses. Free cash flow for Q1 2025 was negative $6.4 million versus negative $1.4 million in Q1 2024.

Free cash flow decreased versus the prior year primarily due to lower adjusted EBITDA and higher purchases of rental product on account of our inventory strategy for fiscal year 2025.

I will now discuss guidance for Q2 2025 and fiscal year 2025. Our full-year guidance remains unchanged. We continue to expect double-digit growth in ending active subscribers for fiscal year 2025. We also continue to expect full-year cash consumption to be between negative $30 million and negative $40 million. As I outlined last quarter, I want to emphasize that this free cash flow range is indicative with many factors that may influence the final result. The overarching message remains that Rent the Runway, Inc. is playing offense and that we intend to invest prudently when it makes sense for our customers, even if that results in free cash flow outside the provided ranges.

Let me now discuss Q2 guidance. For Q2 2025, we expect revenue to be between $76 million and $80 million. We expect adjusted EBITDA margins to be between negative 22% of revenue. Finally, let me reiterate my comments on tariffs from our April earnings call. Our guidance does not factor in any potential impact from tariffs given all the uncertainties. We believe we are fortunate that we directly import a relatively small portion of inventory and have placed orders for the majority of our inventory receipts for fiscal year 2025. However, there is no guarantee that this will mitigate any impact.

It's also difficult to predict customer behavior, but we believe renting does offer substantially greater value for consumers versus buying. We are mindful that the environment remains uncertain and plan to operate prudently in the months ahead.

In conclusion, we're pleased to see customers respond enthusiastically to our significant investment in inventory in fiscal 2025. The energy from both our customers and employees is palpable. Our brand messaging is authentic. We have more to do, but believe we are firmly on the right track.

Jennifer Hyman: Thanks for the call today, and we look forward to continuing to update you on Rent the Runway, Inc. Great. Thank you. And with that, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time.

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• I always pictured a two-parent household for my daughter.
• But a year after becoming a single mom, I realized it was the best thing that could've happened.
• I get to make parenting decisions by myself and can focus all my energy on my daughter.

I never pictured myself as a single mom. As a little girl, I knew I wanted to be a mother more than anything, but I also knew I never wanted to bring a child into a situation similar to my own. Coming from a single-parent household and having had a traumatic childhood, it was more important to me than anything that I give my children a better start in life than my own.

So, I waited. I waited so long that I'd even started coming to terms with never becoming a mother. And when I had my daughter at 36, I'd never been happier in my life. But despite my best efforts, I became a single mother after leaving my partner when she was just six months old. Our relationship was unhealthy, and we do not co-parent together.

I'll be the first to admit the circumstances weren't easy. I'd planned to stay home and work as a freelance writer to supplement our income. That was no longer an option financially. I had new trauma to process and a relationship to mourn, with no time to do it. Like many other single moms, I didn't exactly have an abundance of downtime. And, also like many parents in the US these days, I had no village nearby to help. I was staring down my worst fear: raising my daughter in a childhood that looked like mine.

But looking back nearly a year after becoming a single mother, I see it as the best thing that could have happened.

I can parent exactly how I want to

I often hear other moms vent about how their partners approach certain parenting situations completely differently from how they would. Maybe one parent leans more toward gentle parenting while the other prefers another style. Perhaps they have different timelines in mind for weaning, or different priorities.

As a single parent, I don't have to worry about these conflicts. There are no unexpected fights because of how I respond at any moment, or how my co-parent does. I can simply respond to normal situations like tantrums (which my toddler just started having this month) without the added stress of managing my partner's emotions, too. At the end of the day, I can simply do what I feel is best for my child without the added drama.

I don't have to split myself between my child and a partner

There have been many nights where I've plopped on the couch after getting my toddler down for the night, exhausted both mentally and physically, with barely enough energy to wash my face, start the dishwasher, and make it to bed. One thought that always creeps in is, "How on Earth could I manage the needs of a relationship on top of all this?"

I've always loved love, relationships, and all that comes with those things. But even the best relationships require work. While having a partner to help with tasks like putting my toddler to bed and loading the dishwasher would be nice, I also like being able to do things my way, and the energy I expend doing those things is not more than the energy it takes to keep up a healthy relationship. Right now, as a new parent, I just don't feel I have that energy.

While I always dreamed of a two-parent household for my family, I also find gratitude in the fact that I haven't had to split myself between my child and my relationship — especially an unhealthy one. I haven't had to struggle to muster more of myself to give because there's no competition: I can simply give all of myself to my daughter.

I've been able to soak up every moment of my daughter's childhood

Despite a rather rough year, I live in immense gratitude. I've spent nearly every moment with my daughter. I don't mean just physically, either. I've been able to be mentally and emotionally present for every single moment, every single milestone, and every single stage of development.

How lucky am I that I've been able to soak up every moment of my child's life so far? It may not have been the version of motherhood I imagined, but it's one for which I am extremely grateful.