Rent The Runway, Inc. ((RENT)) has held its Q3 earnings call. Read on for the main highlights of the call.
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Rent The Runway, Inc. recently held its earnings call, reflecting a generally positive sentiment with notable achievements in subscriber and revenue growth, debt reduction, and customer experience enhancements. However, the company faces challenges with decreased gross margins, higher operating expenses, and negative free cash flow.
Debt Reduction and Recapitalization
Rent The Runway, Inc. has made significant strides in reducing its total debt, bringing it down from approximately $319 million to $120 million. This was achieved through a strategic recapitalization with new capital from two private equity firms, extending the debt maturity to 2029.
Subscriber Growth
The company reported a robust 12% year-over-year growth in ending active subscribers, reaching 148,916. Average active subscribers also saw a 12.9% increase, underscoring the strong subscriber growth.
Revenue Growth
Rent The Runway, Inc. experienced a 15.4% increase in total revenue for Q3 2025, amounting to $87.6 million. The company anticipates continued growth with expectations of 11% to 14% year-over-year revenue growth in Q4.
Improved Customer Engagement
Customer engagement has improved significantly, with the Net Promoter Score increasing by 43% year-over-year. Metrics such as visits and heart rates are up, with average active subscribers visiting the app 34% more year-over-year.
Enhanced Inventory and Customer Experience
The company has successfully decreased inventory-related cancellations by nearly 30% year-over-year. New features introduced to enhance customer experience have resulted in a 57% increase in engagement with the app’s new homepage.
Decreased Gross Margins
Gross margins have decreased from 34.7% in Q3 2024 to 29.6% in Q3 2025. This decline is primarily attributed to higher revenue share costs from increased inventory levels.
Higher Operating Expenses
Operating expenses rose by 7% year-over-year, mainly due to higher employee expenses. However, they decreased as a percentage of revenue, indicating some operational efficiency.
Negative Free Cash Flow
The company reported a negative free cash flow of $13.6 million in Q3 2025, compared to negative $3.4 million in Q3 2024. This was due to lower adjusted EBITDA and higher inventory purchases.
Forward-Looking Guidance
Rent The Runway, Inc. provided optimistic guidance for the future, highlighting significant progress in financial and operational metrics. The company is on track for 11% to 14% year-over-year revenue growth in Q4, with expectations for fiscal year 2025 revenue to range between $323.1 million and $325.1 million. Adjusted EBITDA margins are projected to be between 4.9-5.5% of revenue.
In summary, Rent The Runway, Inc.’s earnings call presented a positive outlook with strong growth in subscribers and revenue, alongside successful debt reduction. While challenges remain with gross margins and cash flow, the company’s forward-looking guidance indicates continued progress and potential for future growth.