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RENT
Earnings call · Jul 2026 (Q2 FY27)

Rent the Runway Q2 FY27 earnings call RENT

Sep 11, 2026 Source

Executive summary

Rent the Runway Q2 FY27 — Record Revenue and Margin Improvement Amidst Leadership Transition

Rent the Runway delivered record revenue and significant margin expansion in Q2 FY27, driven by operational efficiencies and strategic pricing, despite a decline in ending active subscribers. The company announced a new CEO, Paige Thomas, and is refocusing its strategy on core rental and selling, pausing non-core pilots. Management is reinforcing its financial foundation with new capital, aiming for continued profitability and customer growth through disciplined execution.

Highlights

5

  • Achieved record revenue of $97.7 million in Q2 FY27, up 20.8% year-over-year and 8.7% quarter-over-quarter.

  • Gross profit margin improved by 609 basis points to 36.1% in Q2 FY27.

  • Adjusted EBITDA reached $12.6 million, or 12.9% of revenue, in Q2 FY27, up from $3.6 million (4.4% of revenue) last year.

  • Total operating expenses as a percentage of revenue decreased to 42% in Q2 FY27 from 51.7% last year.

  • Year-to-date free cash flow improved to negative $21.6 million in FY26, compared to negative $32.9 million in FY25.

Concerns

4

  • Ending active subscribers decreased 3.8% year-over-year to 140,826 in Q2 FY27.

  • Q3 FY27 revenue guidance is $87 million to $90 million, representing flat to 3% growth year-over-year, impacted by lapping prior-year price increases.

  • Q3 FY27 Adjusted EBITDA is expected to be negative 3% to negative 6% of revenue due to normal seasonality and product costs.

  • Free cash flow remains negative for the year-to-date period.

Guidance & targets

CategoryTargetConfidence
Full-year 2026 Revenue Growth
double-digit growth
high materiality
High
Full-year 2026 Adjusted EBITDA Margin
4% to 7% of revenue
high materiality
High
Full-year 2026 Free Cash Flow
improved compared to last year
medium materiality
High
Full-year 2026 Rental Product Investment
$53 million to $55 million
medium materiality
High
Q3 2026 Revenue
$87 million and $90 million
high materiality
High
Q3 2026 Adjusted EBITDA Margin
negative 3% and negative 6% of revenue
high materiality
High
Active Subscribers
roughly flat
medium materiality
High
Resale Revenue Growth
continue to grow
medium materiality
High
Reserve Orders Growth
grow
medium materiality
High

RENT operating KPIs by quarter

RENT operating KPIs stated on its earnings calls, by fiscal quarter
KPI Apr 2026 Q1 FY27This call Jul 2026 Q2 FY27Change vs prior quarter
Paid subscription members
155.692K We ended Q1 '26 with 155,692 ending active subscribers, up 5.8% year-over-year. Source transcript
140.826K We ended the second quarter with 140,826 active subscribers, down 3.8% year-over-year. Source transcript
-9.5%
Average active subscribers
149.744K Average active subscribers during the quarter were 149,744 subscribers versus 133,468 subscribers in the prior year, an increase of 12.2% year-over-year. Source transcript
148.259K Average active subscribers during the quarter were 148,259, an increase of 1% year-over-year. Source transcript
-1%

Operating figures the company states on every call, checked against each call's transcript. Click a figure to read the sentence. A dash means it was not stated that quarter.

Deals & partnerships

Investor Group (STORY3 Capital Partners, Nexus Capital Management, Aranda Principal Strategies) Rights Offering $15M

Plan to launch an equity raise in the amount of $15 million to further bolster liquidity position and support ongoing growth, backstopped by the investor group that led the 2025 refinancing.

Investor Group Term Loan $10M

Secured a $10 million term loan as detailed in the third amendment to the credit agreement with the same investor group that led the 2025 refinancing.

Risks & headwinds

Active Subscriber Decline Q2 FY27

Ending active subscribers down 3.8% year-over-year to 140,826.

Mitigation:Focusing marketing spend and promotions to drive profitable customers; reduced stronger promotional activity from 2025; focusing on core rental and selling services.

Seasonality Impact on Q3 Revenue and EBITDA Q3 FY27

Q3 Adjusted EBITDA expected to be negative 3% to negative 6% of revenue.

Mitigation:Anticipated and factored into guidance; driven by normal seasonality of higher subscription pause activations and product cost impact of revenue share inventory.

Lapping Prior Year Price Increases Q3 FY27

Q3 revenue growth expected to be flat to 3% year-over-year.

Mitigation:Acknowledged as a factor impacting year-over-year growth comparisons; focus on driving profitable customer growth and increasing reserve orders.

What to watch in Q3 FY27

Active Subscriber Trend

back half of 2026
Current 140,826 ending active subscribers (down 3.8% YoY)
Target roughly flat

Why it matters

Subscriber growth is key to the company's stated objective of total customer growth and long-term revenue expansion.

Note that our guidance reflects our expectation that active subscribers will be roughly flat in the back half of 2026 and resale revenue will continue to grow in the second half.

1 min read 4 chapters

Detailed narrative

Leadership Transition and Strategic Direction

Rent the Runway announced the appointment of Paige Thomas as its new Chief Executive Officer, President, and Board Member, effective September 14. Teri Bariquit, the Interim CEO, will transition to Non-Executive Chair of the Board. This leadership change is intended to accelerate the company's strategy, focusing on total customer growth, profit expansion, and operational excellence. The company aims to deepen relationships with existing customers, acquire new ones, and execute with discipline.

Refocusing on Core Business

The company is concentrating resources on improving execution for its core rental and selling services. This strategic refocus led to pausing select pilots, including the marketplace, on-site advertising and monetization, and new B2B dry cleaning partnerships. These decisions are aimed at streamlining operations and ensuring resources are directed towards the most impactful areas for customer experience and profitability.

Enhanced Customer Experience and Product Offerings

Rent the Runway continues to invest in its fashion authority and customer experience. Efforts include expanding brand partnerships and categories, such as beach cover-ups which grew 75% over last year. The company also launched new discovery features like outfit generation, which saw 35% engagement and led to customers adding 12% more items to their bags. Piloting avatars and virtual try-ons further aims to enhance product discovery and engagement.

Strengthening Financial Foundation

To bolster its liquidity and support operational plans, Rent the Runway announced a $15 million rights offering to Class A common stock holders, backstopped by its investor group (STORY3 Capital Partners, Nexus Capital Management, and Aranda Principal Strategies). Additionally, the company secured a $10 million term loan from the same investor group, providing further operating flexibility and investment capacity.

AI-generated summary of the company's earnings call. Not investment advice.