Rent the Runway, Inc. (RENT)·Q3 2025 Earnings Summary

Executive Summary

• Q3 FY2025 results are not yet published as of Nov 20, 2025; management guided Q3 revenue to $82–$84M and Adjusted EBITDA margin to between -2% and +2% of revenue, framing expectations into the print .
• Operating momentum improved: ending active subscribers grew 13.4% YoY in Q2 to 146,373, but gross margin contracted to 30.0% from 41.1% YoY due to higher revenue share mix and elevated fulfillment costs, pressuring profitability .
• Balance sheet de-risked: the recapitalization closed Oct 28, 2025, cutting debt to $120M, extending maturity to 2029, temporarily reducing the minimum liquidity covenant to $15M until Feb 20, 2027, and resulting in a change of control and board reconstitution—key stock catalysts into and beyond Q3 .
• Pricing action took effect Aug 1: average +$2 per item; the 2‑SWAP plan increased 14% to $164/month, creating ARPU tailwinds but potential churn risk; management said the impact was in line with expectations so far .
• H1 FY2025 free cash flow was -$32.9M as inventory investment stepped up; management now expects FY2025 FCF to be “lower than $(40)M” given recap-related costs (guide down from prior $(30)M to $(40)M) .

What Went Well and What Went Wrong

• What Went Well

  • Subscriber momentum and engagement: Q2 ending active subscribers +13.4% YoY to 146,373; new inventory lifted engagement across all key metrics (share of views +84% YoY; hearts/style +15%; new units at home +57%); CEO: “swift progress… strategy continues to show strong signals that it's working” .
  • Inventory strategy execution: posted 2–3x more styles vs prior year months (May +323%, Jun +235%, Jul +253%) and added 56 brands YTD, with revenue-share units +119% YoY, deepening brand relationships .
  • Balance sheet reset: debt reduction to ~$120M, maturity to 2029, and new capital from existing and new sponsors; CEO called it “IPO 2.0,” positioning RTR with “years of additional runway” .

• What Went Wrong

  • Margin pressure: Q2 gross margin fell to 30.0% (vs 41.1% YoY) from higher revenue-share mix and elevated fulfillment/transportation costs; Adjusted EBITDA margin declined to 4.4% (vs 17.4% YoY) -.
  • Profitability deterioration: Q2 net loss widened to $(26.4)M (vs $(15.6)M YoY); net loss/share $(6.55); operating expenses +8% YoY partly on transaction-related costs .
  • Cash burn: H1 FY2025 FCF was -$32.9M driven by inventory investment and lower EBITDA; management now expects FY2025 FCF to be below $(40)M (lower than prior guide) .

Financial Results

Note: Q3 FY2025 not yet reported. Below shows latest actuals and YoY context.

Revenue, earnings, margins (YoY and sequential context)

Segment revenue mix

Key KPIs

Cash flow (year-to-date)

Guidance Changes

Earnings Call Themes & Trends

(“Current” reflects the latest available call—Q2 FY2025—as Q3 is not yet reported)

Management Commentary

• CEO (recapitalization and growth): “Reduce our total debt from over $340 million to approximately $120 million… extend the maturity… to 2029… I view this as our IPO 2.0… significantly stronger and healthier balance sheet” .
• CEO (customer and inventory): “There is a large amount of new inventory hitting the platform… engagement… overperformed… NPS at the highest level in three years” .
• CFO (margin and mix): “Gross margins were 30% in Q2 2025 versus 41.1% in Q2 2024… reflect higher revenue share costs… in addition to higher fulfillment costs” .
• CFO (FCF and guidance): “Free cash flow for Q2 2025 was negative $26.5 million… primarily due to lower adjusted EBITDA and higher purchases of rental product… For Q3, revenue $82–$84 million; adjusted EBITDA margin -2% to +2%. For FY2025… free cash flow lower than negative $40 million… costs associated with recapitalization” .

Q&A Highlights

The available Q2 FY2025 transcript comprises prepared remarks and does not include a published Q&A section; guidance clarifications, margin drivers, and recapitalization mechanics were addressed in management’s prepared commentary -.

Estimates Context

• Wall Street consensus (S&P Global) for Q3 FY2025 (EPS/revenue) was unavailable at the time of research due to data access limits; as such, we cannot benchmark the pre-guided ranges or upcoming results to consensus at this time. Values retrieved from S&P Global would normally appear here, but were unavailable.

Key Takeaways for Investors

• Into Q3 print, the bar is set at $82–$84M revenue and -2% to +2% Adjusted EBITDA margin; pricing action plus subscriber growth are tailwinds, while revenue-share mix and fulfillment costs are key swing factors for margins -.
• Structural de-risking is material: debt cut to $120M, extended maturity to 2029, and relaxed liquidity covenant near term (to $15M until Feb 20, 2027), creating financial flexibility for inventory and product investment .
• Inventory-led strategy is working: deeper assortment, new brands, and higher engagement metrics should support acquisition/retention and ARPU (especially with new pricing), but near-term gross margin may remain pressured by revenue-share economics and logistics costs .
• Guide-down on FY2025 FCF to “lower than $(40)M” reflects recap costs and elevated inventory spend; watch cash balances and covenant compliance as the transformation continues .
• Near-term catalyst stack: (1) Q3 results and color on pricing elasticity/churn; (2) updated margin trajectory amid higher revenue-share mix; (3) post-recapitalization investor messaging and potential re‑rating as balance sheet risk declines .
• Medium-term thesis: If RTR converts engagement and assortment into sustained subscriber growth and operating leverage while normalizing fulfillment and optimizing inventory mix, margin recapture is plausible; balance sheet reset improves the odds of executing that plan - .

Appendix – Additional Context

• Recent pricing change: 2‑SWAP plan raised from $144 to $164/month (+14%); average increase of $2 per item; impact “in line with expectations” to date .
• Board/governance changes with recap close and a change of control; Nasdaq audit committee compliance cure underway -.