Rent the Runway, Inc. Q1 FY2026 earnings call

Leadership Transition and New Appointments

• Co-founder and long-time CEO Jennifer Hyman stepped down in mid-May 2026 and will remain an advisor through January 2027 to support a smooth transition.
• Carrie Barrett, a former Nordstrom chief merchandising officer and RTR board member since October 2025, stepped into the role of Interim CEO and President.
• Two new senior leaders are added to strengthen the executive bench: Paige Thomas, a 25+ year retail veteran, joined as Chief Commercial Officer on June 1, and Dave Loretta will join as Interim CFO and Treasurer on June 8 while a permanent CFO is recruited.

Core Business Strategy and Progress

• Management confirms confidence in the core business strategy, centered on putting customers first with the right brands and inventory quantities, built from the 2025 inventory transformation initiative.
• Q1 2026 results beat consensus guidance, with nearly 30% year-over-year total revenue growth, confirming the 2025 inventory strategy is working.
• Add-on product adoption is strong: 70% year-over-year revenue growth reflects high customer satisfaction with the updated assortment and flexible membership terms.

AI-Enhanced Product Discovery Initiatives

• 2026 strategic focus is improving product discovery for customers, primarily through AI deployments.
• In April 2026, personalized content carousels were launched for all subscribers, resulting in an 11% increase in user engagement (hearting behavior).
• AI-generated updated imagery launched in May 2026 increased views on updated styles by 129% by providing more relatable, true-to-life visuals.
• Internal testing of AI-powered complete outfit generation began in May 2026, with full launch expected in the coming months to improve discovery.

Early-Stage New Revenue Streams

• The RTR Marketplace resale pilot, launched last quarter, was expanded to all customers directly from the RTR homepage in April 2026. Early performance signals are positive, with near-term focus on integrating the marketplace with the core rental experience for seamless single-transaction checkout.
• The advertising and media business is seeing strong momentum with major brand partners, offering dual value: incremental media revenue from brands targeting RTR's valuable customer demographic, and a low-cost new channel for organic subscriber acquisition.
• A B2B dry cleaning service pilot launched in Q1 2026, leveraging existing RTR logistics infrastructure; management believes the infrastructure can become a meaningful standalone revenue stream over time.

Total Q1 2026 revenue was $89.9 million, an increase of 29.2% year-over-year. Subscription and reserve rental revenue grew 25.3% year-over-year to $68.3 million, representing 76% of total revenue; growth was driven by higher average active subscribers and higher average revenue per user from an August 2025 price increase, partially offset by year-over-year declines in reserve business. Other revenue, which is led by resale and add-on revenue, grew 60.5% year-over-year to $12.2 million, representing 14% of total revenue. Add-on revenue grew 70% year-over-year and 11% quarter-over-quarter. Fulfillment costs totaled $23.6 million (26.2% of revenue) in Q1 2026, down from 29.4% of revenue in Q1 2025. Gross margin was 25.9% in Q1 2026, down from 31.5% year-over-year due to higher revenue share costs for RTR-owned inventory, partially offset by lower depreciation, write-offs, and fulfillment costs as a share of revenue. Total operating expenses were 45.4% of revenue in Q1 2026, down from 55.9% year-over-year. Adjusted EBITDA was negative $0.8 million (-0.9% of revenue), an improvement from negative $1.3 million (-1.9% of revenue) in Q1 2025. Free cash flow was negative $13.6 million in Q1 2026, compared to negative $6.4 million in Q1 2025, driven by working capital timing and higher cash interest expenses, partially offset by lower inventory capital expenditures. Ending active subscribers totaled 155,692, up 5.8% year-over-year and 8.3% quarter-over-quarter, while average active subscribers grew 12.2% year-over-year to 149,744.

• Management maintains full fiscal year 2026 guidance, reiterating double-digit year-over-year total revenue growth.
• Full year 2026 adjusted EBITDA guidance is maintained at 4% to 7% of total revenue.
• Full year 2026 rental product acquisition guidance is maintained at $45 million to $50 million.
• Q2 2026 revenue guidance is set at $91 million to $95 million, representing 12% to 17% year-over-year growth, with the range reflecting intentional inventory prioritization for the core rental business, tough comparisons to Q2 2025's high resale growth, ongoing expected decline in the reserve business, subscriber growth timing, and uncertainty around customer reaction to newly passed-through fuel surcharges.
• Q2 2026 adjusted EBITDA is projected to be between 5% and 8% of revenue.
• Management continues to expect full year 2026 free cash flow will improve compared to fiscal 2025, as temporary Q1 timing-related headwinds will abate over the full year.

• The macroeconomic and geopolitical environment remains highly uncertain, with potential negative impacts on transportation costs, fuel surcharges, and consumer confidence.
• Guidance is based on current assumptions, and does not account for material deterioration in macro conditions, customer rejection of passed-through fuel surcharges, or significant volatility in key input costs, which could lead to actual results differing materially from guidance.
• Year-over-year active subscriber growth decelerated in Q1 2026 due to tough comparisons against 2025's strong promotional activity and inventory launch, and higher year-over-year increases in paused subscribers partially offset stronger subscriber acquisition.

No questions were asked or answered during this earnings call; the conference concluded after management's prepared remarks.