Rent the Runway, Inc. Q4 FY2026 earnings call

Inventory Strategy - 2026 Plan

• Opportunistic procurement: Access high-cost categories and elevated brands at attractive economics due to premium brands seeking inventory liquidation.
• Exclusive design momentum: Expand exclusive design partnerships, with collections offering brands at ~40% lower cost on average.
• Revenue share growth: Increase number of brands and percentage of inventory in Share by RTR program, aiming to revolutionize customer exploration via AI-driven enhancement.

Customer Experience Initiatives

• Outfit groupings: Transform experience to help customers discover complete looks and curated aesthetics.
• Robust PDP: Transform product detail pages with more visual versatility, AI-driven styling and fit advice.
• Conversational search: Improve use case search functionality for better discovery.

Back-End Operations with AI

• Quality control: Integrate AI for computer vision in quality control to optimize quality and cost.
• Dynamic pricing: Leverage machine learning for more efficient dynamic pricing.
• Team productivity: Infuse AI into work, e.g., AI-assisted coding to increase technical team velocity.

Brand Expansion and Community Focus

• Reallocate paid marketing budget to scale organic community-led channels, e.g., Muse Program with over 13M impressions in Q4, City Ambassador Program with over 1,000 evangelists.
• Optimize for discovery on social media and AI search interfaces.

Membership Flexibility and Revenue Optimization

• Expand resale and reserve businesses with smarter pricing and discounting.

Revenue Diversification

• Launch Rent the Runway marketplace pilot to fill wardrobe gaps with purchase options. 86% of members interested in purchasing complementary items.
• Scale advertising and media business, e.g., 360-degree brand partnerships.
• Monetize logistics infrastructure via B2B dry cleaning services launched in March.

In Q4 2025, ending active subscribers were 143,796, up 20.1% year-over-year. Average active subscribers during the quarter were 146,356, up 16% year-over-year. Total revenue was $91.7 million, up 20% year-over-year. Subscription and reserve rental revenue was up $13.2 million or 20.4% year-over-year. Other revenue increased $2.1 million or 17.8% year-over-year. Fulfillment costs were $21.6 million in Q4 '25, 23.6% of revenue. Gross margins were 38.6% in Q4 '25. Operating expenses were 37.9% of revenue. Adjusted EBITDA for Q4 '25 was $18.3 million or 20% of revenue. Free cash flow for Q4 '25 was $0.5 million.

Q1 2026 Guidance

• Revenue expected between $85 million and $87 million, up 22%-25% vs Q1 '25. Sequential decline due to lower resale revenue.
• Adjusted EBITDA margins expected between negative 5% and negative 7% of revenue, down from negative 1.9% in Q1 '25 due to higher revenue share expenses.

Fiscal Year 2026 Guidance

• Double-digit revenue growth vs fiscal year 2025.
• Adjusted EBITDA expected 4%-7% of revenue, down from 7.5% in fiscal year 2025 due to higher revenue share units mix.
• Rental products acquired in fiscal year 2026 expected between $45 million and $50 million, down from $74.9 million in fiscal year 2025.

Risks

• Macroeconomic and geopolitical environment uncertainty, which could impact transportation costs, fuel surcharges and consumer confidence. Our guidance is based on current conditions and does not contemplate material deterioration or volatility in these factors, so actual results may differ materially if such conditions change.