Strong Revenue Growth and Guidance Beat
Total revenue of $89.9M in Q1'26, up 29.2% year-over-year, and above guidance ($85M-$87M). Company reiterates double-digit revenue growth guidance for fiscal year 2026.
Rent the Runway
· RENT
June 3rd, 2026
Summary
- Earnings Call Date:
- 2026-06-03
- Change Since:
- -13.48%
- Next Earnings Date:
- 2026-09-16
Earnings Call Sentiment
PositiveThe earnings call conveyed strong top-line momentum: nearly 30% revenue growth, meaningful add-on and retail strength, improving adjusted EBITDA, and promising early returns from AI-driven discovery and new revenue pilots. These positives are tempered by notable margin compression, worsening free cash flow in the quarter, a deceleration in ending subscriber growth versus prior periods, and exposure to transportation/fuel cost volatility and leadership transitions. Management reiterated full-year revenue and adjusted EBITDA guidance and outlined initiatives to improve discovery and diversify revenue, suggesting confidence in a continued recovery trajectory despite near-term operational headwinds.
Company Guidance
Management reiterated double‑digit revenue growth for fiscal 2026 and an adjusted EBITDA target of 4%–7% of revenue for the full year, with rental product acquired expected to be $45–50M; for Q2 they guided revenue of $91–95M (up 12%–17% vs Q2 ’25) and Q2 adjusted EBITDA of 5%–8% of revenue. For context, Q1 revenue was $89.9M (+29.2% YoY), beating prior guidance of $85–87M, with ending active subscribers of 155,692 (+5.8% YoY) and average active subscribers of 149,744 (+12.2% YoY). Management highlighted strong product engagement—add‑on revenue +70% YoY and +11% QoQ, a personalized carousel driving an 11% increase in hearting behavior for active subscribers, and AI imagery lifting views on updated styles by 129%. Q1 unit economics included fulfillment costs of $23.6M (26.2% of revenue), gross margin of 25.9%, operating expenses 45.4% of revenue, adjusted EBITDA of –$0.8M (–0.9% of revenue), and free cash flow of –$13.6M, with the company expecting improved free cash flow over fiscal 2026 (and an April 2026 debt amendment allowing PIK interest through April 2027).
Subscriber Base Expansion
Ending active subscribers of 155,692, up 5.8% year-over-year and up 8.3% quarter-over-quarter; average active subscribers 149,744, up 12.2% year-over-year.
Rapid Add-On Revenue Growth
Add-on revenue grew 70% year-over-year and 11% sequentially, driven by higher percentage of subscribers engaging with add-on products.
Other Revenue and Retail Strength
Other revenue increased $4.6M, or 60.5% year-over-year, primarily due to significantly higher retail revenue.
Improved Cost Efficiency in Fulfillment
Fulfillment costs as a percentage of revenue declined to 26.2% in Q1'26 from 29.4% in Q1'25, reflecting higher revenue per order and greater retail mix.
Adjusted EBITDA Improvement and Positive Outlook
Adjusted EBITDA improved to negative $0.8M (‑0.9% of revenue) in Q1'26 versus negative $1.3M (‑1.9%) in Q1'25. Company reiterates FY adjusted EBITDA guidance of 4%–7% of revenue and Q2 adjusted EBITDA of 5%–8%.
Product Discovery and AI Initiatives Showing Early Impact
Launched personalized carousel (11% increase in hearting behavior for active subscribers), AI imagery updates (129% increase in views on updated styles), and internal outfit generation testing; these improvements are positioned to boost discovery and engagement.
New Growth Streams and Pilots
Expanded and launched the RTR Marketplace to customers, seeing encouraging early signals; advertising/media business showing momentum with brand interest; B2B dry cleaning pilot launched with underlying tech investments to scale logistics as standalone revenue.
Strengthened Leadership Bench
Interim CEO Teri Bariquit (retail veteran) in place, Paige Thomas hired as Chief Commercial Officer, and Dave Loretta joining as Interim CFO, adding deep retail and finance experience to support commercialization and growth.
Operator
Greetings, and welcome to Rent the Runway's First Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. I'd now like to turn the conference over to your host, Cara Schembri, General Counsel. Please go ahead.
Cara Schembri
Hello, everyone, and thanks for joining us today. Before we begin, we would like to remind you that this call will include forward-looking statements. These statements include guidance and underlying assumptions for the second fiscal quarter of 2026 and the fiscal year 2026, and statements regarding the impact of our business strategies and plans, our ability to drive subscriber growth and customer loyalty in a cost-efficient manner and our planned increases in inventory. These statements are subject to various risks, uncertainties and assumptions that could cause our actual results to differ materially. These risks, uncertainties and assumptions are detailed in today's press release and our Form 10-Q. We have no obligation to update any forward-looking statements or information except as required by law. During this call, we will also reference certain non-GAAP financial information. The presentation of this non-GAAP financial information is not intended to be considered in isolation or as a substitute for financial information presented in accordance with GAAP.
Reconciliations of GAAP to non-GAAP measures can be found in our press release and in our SEC filings. With that, I'll turn it over to Teri Bariquit, our Interim CEO.
Teri Bariquit
Thank you, Cara, and thank you all for joining today. I want to take a moment to acknowledge what ...
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