Executive Summary

Q4 FY2024 (reported April 15, 2025) delivered modest topline growth and strong profitability: Revenue $76.4M (+0.8% y/y; +0.7% q/q), gross margin 37.7% (up 300 bps q/q), and Adjusted EBITDA $17.4M (22.8% margin), with positive free cash flow of $2.1M .
Versus consensus, RENT posted an EPS beat and a slight revenue miss in Q4; Q2 and Q3 showed EPS beats with mixed revenue outcomes (see Estimates Context) (Values retrieved from S&P Global).
FY2025 pivot to offense: largest inventory acquisition in company history (doubling new units; ~62% of units via capital-light Share by RTR), guiding double‑digit ending active subscriber growth and FY2025 free cash flow of $(30)M to $(40)M; no full-year revenue/Adj. EBITDA guidance .
Near-term catalyst/risk mix: significant CapEx step-up ($70–$75M) to fund inventory depth; management flagged tariff uncertainty and plans prudence; Q1 FY2025 revenue guide $68–$70M and Adj. EBITDA of (5)%–(7)% of revenue .

What Went Well and What Went Wrong

What Went Well
- Record cost discipline drove margin and cash improvements: Operating expenses down 20.8% y/y; Adjusted EBITDA margin expanded to 22.8% in Q4; Q4 free cash flow positive $2.1M .
- Customer experience upgrades and inventory depth underpin retention: 8% retention improvement in FY2024; launch of 60‑day customer promise, stylist access, and back‑in‑stock notifications; largest inventory plan announced for FY2025 .
- Strategic inventory sourcing: Share by RTR expected to reach ~62% of units in FY2025, supporting capital-light growth; exclusive design collections at ~half wholesale cost .
What Went Wrong
- Subscriber base dipped into year-end: Ending active subscribers fell to 119,778 in Q4 (−4.9% y/y; down q/q) amid reduced paid marketing and seasonality .
- Gross margin down y/y: 37.7% in Q4 vs 39.4% y/y due to higher revenue share mix; though improved q/q to 37.7% from 34.7% .
- FY2025 cash consumption guide reflects growth investment: Management now expects FY2025 FCF of $(30)M–$(40)M and CapEx $70–$75M to fund inventory step-up; tariff uncertainty flagged with no mitigation guarantee .

Financial Results

Quarterly performance (oldest → newest):

Metric	Q2 FY2024	Q3 FY2024	Q4 FY2024
Revenue ($USD Millions)	$78.9	$75.9	$76.4
GAAP Net Loss per Share ($)	$(4.17)	$(4.94)	$(3.44)
Gross Margin (%)	41.1%	34.7%	37.7%
Adjusted EBITDA ($USD Millions)	$13.7	$9.3	$17.4
Adjusted EBITDA Margin (%)	17.4%	12.3%	22.8%
Free Cash Flow ($USD Millions)	$(4.5)	$(3.4)	$2.1

Q4 comparison vs prior periods:

Metric	Q4 FY2023	Q3 FY2024	Q4 FY2024
Revenue ($USD Millions)	$75.8	$75.9	$76.4
GAAP Net Loss per Share ($)	$(7.02)	$(4.94)	$(3.44)
Gross Margin (%)	39.4%	34.7%	37.7%
Adjusted EBITDA ($USD Millions)	$11.2	$9.3	$17.4
Adjusted EBITDA Margin (%)	14.8%	12.3%	22.8%

Segment breakdown:

Revenue Segment ($USD Millions)	Q2 FY2024	Q3 FY2024	Q4 FY2024
Subscription and Reserve rental revenue	$68.5	$66.3	$64.6
Other revenue	$10.4	$9.6	$11.8
Total Revenue	$78.9	$75.9	$76.4

KPIs and operating metrics:

KPI / Metric	Q2 FY2024	Q3 FY2024	Q4 FY2024
Ending Active Subscribers	129,073	132,518	119,778
Average Active Subscribers	137,455	130,796	126,148
Ending Total Subscribers	175,087	174,511	164,004
Fulfillment Expense ($M)	$20.6	$21.4	$20.2
Fulfillment Expense (% of Revenue)	26.1%	28.2%	26.4%

Key drivers and reconciliations:

Q4 gross margin down y/y on higher revenue share mix, but up q/q on seasonally lower revenue share payments and lower fulfillment cost as % of sales .
Operating expenses fell to 44% of revenue in Q4 from 55.9% y/y and 48.7% q/q on lower marketing and cost reductions .
FY2024 cash and equivalents at Jan 31, 2025: $77.4M; unrestricted cash end-Feb 2025: $81.2M (down $2.8M vs FY2023 end) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Revenue ($M)	Q1 FY2025	n/a	$68–$70	New
Adjusted EBITDA (% of Revenue)	Q1 FY2025	n/a	(5)%–(7)%	New
Ending Active Subscribers	FY2025	n/a	Double‑digit growth y/y	New
Free Cash Flow ($M)	FY2025	FY2024: Breakeven reiterated in Q3	$(30)–$(40)	Lower vs prior-year posture
Capital Expenditure ($M)	FY2025	n/a	$70–$75 (inventory step-up)	New
Revenue/Adj. EBITDA (Full year)	FY2025	n/a	Not provided	Maintained “no guide” stance
Tariff assumptions	FY2025	n/a	Not included due to uncertainty	New disclosure

Earnings Call Themes & Trends

Topic	Q2 FY2024 (Q-2)	Q3 FY2024 (Q-1)	Q4 FY2024 (Current)	Trend
AI/Technology initiatives	Major site performance upgrades (10x faster grids; lower bounce) and checkout simplification; planned SEO investment	Continued tech/UX upgrades; faster grids led to +61% add‑to‑bag; Apple Pay; improved SEO (↑53% non‑branded impressions)	New personalization features, stylist access; proactive CX calls; back‑in‑stock notifications pipeline	Ongoing product velocity; personalization ramp
Supply chain/Logistics	UPS contract lowered fulfillment costs	Warehouse throughput improvements; buffer removal increasing turns	Lower fulfillment costs as % revenue supporting margins	Efficiency improving
Tariffs/Macro	n/a	n/a	Management flagged tariff uncertainty; excluded from guidance	Emerging risk
Product performance (Reserve/Resale)	Reserve orders up ~10–20% y/y by mid‑Q3; rejoin rates strong	Reserve orders up ~23%; resale units/sold per subscriber +38%; other revenue +23% y/y	Other revenue +13.5% y/y; inventory strategy to deepen top brands	Reserve momentum; resale supportive
Marketing/Brand	Diversifying channels; reigniting brand via campus tour	“Own Nothing, Have Everything” 15‑yr campaign; marketing efficiencies (TAC ↓23%)	Reduced paid marketing in Q4 to test incremental effectiveness	Shift to efficient spend; brand-led
Inventory strategy	2025 plan to increase breadth/depth of pillar brands; capital-light via rev-share/exclusives	Reiterated focus on top 25 pillar brands; high utilization/velocity	Doubling new units; 62% via Share by RTR; 75% more new styles; 83 new brands	Aggressive step-up
Subscriber retention/onboarding	Focused pods on onboarding; early initiatives	60‑day promise; styling team to improve first shipment	Proactive customer calls; increased newness in at‑home baskets (+75%) expected	Improving retention funnel

Management Commentary

“We’ve significantly improved our cash position...proven that we can operate a sustainable nearly breakeven business.”
“In 2025 we plan to add 2x new inventory units year-over-year...75% more new styles...83 new brands.”
“Share by RTR units are expected to increase to approximately 62% of total units in fiscal year 2025.”
“We expect to deliver double-digit ending active subscriber growth for fiscal year 2025...and full year cash consumption between negative $30 million and negative $40 million.”
“We have provided...CapEx guidance for the year of $70 million to $75 million...”

Q&A Highlights

Cash flow drivers clarified: FY2025 FCF consumption reflects nearly doubling inventory and ~2.5x increase in Share by RTR units, plus lag between ending vs average subs; CapEx planned at $70–$75M .
Consumer backdrop/tariffs: Management avoided macro predictions; emphasized rental value vs buying; expects inventory depth to drive loyalty and organic acquisition despite uncertainty .
Inventory strategy is a step-function change: Customers to see ~75% more newness in at‑home baskets; deeper units in blockbuster brands to elevate perceived shipment value and retention .
Marketing efficiency tests: Q4 reductions assessed incrementality of paid channels; learnings inform prudent FY2025 growth investments .

Estimates Context

Consensus vs actuals (S&P Global values; asterisk denotes SPGI data).

Metric	Q2 FY2024 Estimate*	Q2 Actual*	Delta	Q3 FY2024 Estimate*	Q3 Actual*	Delta	Q4 FY2024 Estimate*	Q4 Actual*	Delta
Revenue ($USD)	$77.2M*	$78.9M*	+$1.7M (Beat)	$76.1M*	$75.9M*	−$0.2M (Miss)	$77.6M*	$76.4M*	−$1.2M (Miss)
Primary EPS ($)	−5.47*	−3.80*	+$1.67 (Beat)	−4.985*	−4.603*	+$0.382 (Beat)	−3.28*	−2.641*	+$0.639 (Beat)

Values retrieved from S&P Global.

Implications: Street may need to temper near-term revenue trajectory (Q4 miss; Q1 guide $68–$70M) while revising margins/EBITDA higher given sustained cost discipline and capital-light inventory sourcing .

Key Takeaways for Investors

FY2025 is a deliberate growth investment year: expect higher CapEx ($70–$75M) and FCF usage ($(30)M–$(40)M) to fund a step‑function inventory expansion focused on top designer brands; subscriber growth targeted double‑digit .
Profitability foundation is stronger: Q4 Adjusted EBITDA margin expanded to 22.8% and fulfillment ratio improved; cost discipline persists even as growth investments begin .
Inventory model de‑risks capital: ~62% of FY2025 units via Share by RTR and expanded exclusives at roughly half wholesale cost support margin resilience while scaling assortment .
Near-term setup: Q1 revenue guide ($68–$70M) and negative Adj. EBITDA suggest margin dip before benefits of inventory/retention accrue; watch sequential subscriber rebuild and conversion .
Tariff uncertainty is an external swing factor; RENT imports a relatively small portion directly, but impact is uncertain and excluded from guidance—monitor policy headlines .
Strategic narrative: a founder‑led, customer‑obsessed reset; proactive CX and personalization initiatives plus deeper inventory should revive organic growth/loyalty—key stock catalysts as KPIs turn .
Balance sheet watchlist: cash $77.4M at FY-end; net debt remains high—execution on subscriber growth and capital-light sourcing will be critical for medium‑term thesis .

Rent the Runway, Inc. (RENT)·Q4 2025 Earnings Summary