Earnings call transcript: Warby Parker Q2 2025 misses EPS forecasts, revenue grows

Warby Parker Inc. reported its second-quarter 2025 results, revealing a revenue increase to $214.5 million, surpassing forecasts of $212.94 million. The company posted a loss per share of $0.01, missing the expected earnings per share (EPS) of $0.08. This resulted in a negative surprise of 112.5%. Despite the earnings miss, Warby Parker’s stock saw a pre-market rise of 10.37%, reaching $26.82, indicating investor optimism driven by revenue growth and strategic initiatives. According to InvestingPro analysis, the company is currently trading above its Fair Value, with analysts setting price targets between $16 and $30.

Key Takeaways

• Warby Parker’s revenue increased by 13.9% year-over-year.
• The company missed EPS expectations, reporting a loss of $0.01 per share.
• Stock surged 10.37% in pre-market trading despite the earnings miss.
• Strategic partnerships and innovation, including AI initiatives, highlighted.

Company Performance

Warby Parker demonstrated strong revenue growth in the second quarter of 2025, with a 13.9% increase compared to the previous year. The company’s retail revenue rose by 19.3%, while e-commerce saw a modest 2% growth. Warby Parker’s focus on expanding its store footprint and enhancing its product offerings, including new eyewear collections and AI-driven tools, played a crucial role in driving performance.

Financial Highlights

• Revenue: $214.5 million, up 13.9% year-over-year.
• Earnings per share: -$0.01, missing the forecast of $0.08.
• Adjusted EBITDA: $25 million, representing an 11.7% margin.
• Active customers: 2.6 million, a 9% increase from the previous year.

Earnings vs. Forecast

Warby Parker’s actual EPS of -$0.01 fell short of the forecasted $0.08, marking a significant negative surprise of 112.5%. The revenue, however, slightly exceeded expectations with a 0.73% surprise, indicating strong sales performance despite the earnings shortfall.

Market Reaction

Following the earnings announcement, Warby Parker’s stock experienced a pre-market increase of 10.37%, reaching $26.82. This positive market reaction suggests that investors were encouraged by the company’s revenue growth and strategic initiatives, despite the EPS miss. With a beta of 2.1 and an impressive one-year return of 72.83%, the stock has shown significant volatility and momentum. The stock’s performance is notable given its 52-week range, with a high of $29.73 and a low of $12.46. InvestingPro subscribers can access comprehensive valuation metrics and momentum indicators to better understand these price movements.

Outlook & Guidance

Warby Parker maintains a positive outlook, projecting full-year revenue between $880 million and $888 million, reflecting a growth rate of 14-15%. The company plans to open 45 new stores, including collaborations with Target, and aims for an adjusted EBITDA between $98 million and $101 million.

Executive Commentary

Co-CEO Dave Gilboa emphasized the potential of glasses as the next major computing platform, highlighting the company’s partnership with Google for AI-powered eyewear. Co-CEO Neil Blumenthal reiterated Warby Parker’s commitment to providing value through competitive pricing and quality.

Risks and Challenges

• Supply chain disruptions could impact product availability.
• Market saturation in certain regions may limit growth potential.
• Economic downturns could affect consumer spending on discretionary items.
• Intensifying competition in the eyewear industry poses a challenge.
• Dependence on retail expansion could strain resources.

Q&A

During the earnings call, analysts inquired about the Google AI glasses partnership, tariff mitigation strategies, and the potential of the insurance business. Warby Parker’s leadership addressed growth opportunities in contacts and progressives, emphasizing their strategic focus on innovation and market expansion.

Full transcript - Warby Parker Inc (WRBY) Q2 2025:

Bailey, Conference Call Moderator: Hello, and thank you for joining today’s Warby Parker Second Quarter twenty twenty five Earnings Conference Call. Today’s call will begin in just a few moments’ time. Thank you for your patience. Hello, and welcome to today’s Warby Parker Second Quarter twenty twenty five Earnings Conference Call. My name is Bailey, and I will be your moderator for today.

I’d now like to pass the conference over to Jacqueline Berkley, Head of Investor Relations to begin. Please go ahead when you’re ready.

Jacqueline Berkley, Head of Investor Relations, Warby Parker: Thank you, and good morning, everyone. Here with me today are Neil Blumenthal and Dave Gilboa, our Co Founders and Co CEOs alongside Steve Miller, Senior Vice President and Chief Financial Officer. Before we begin, we have a couple of reminders. Our earnings release and slide presentation are available on our website at investors.warbyparker.com. During this call and in our presentation, we will be making comments of a forward looking nature.

Actual results may differ materially from those expressed or implied as a result of various risks and uncertainties. For more information about some of these risks, please review the company’s SEC filings, including the section titled Risk Factors in the company’s latest annual report on Form 10 ks. These forward looking statements are based on information as of 08/07/2025, and except as required by law, we assume no obligation to publicly update or revise our forward looking statements. Additionally, we will be discussing certain non GAAP financial measures. These non GAAP financial measures are in addition to and not a substitute for measures of financial performance prepared in accordance with U.

S. GAAP. A reconciliation of our non GAAP measures to the most directly comparable U. S. GAAP measures can be found in this morning’s press release and our slide deck available on our IR website.

And with that, I’ll pass it over to Dave to kick us off.

Dave Gilboa, Co-Founder and Co-CEO, Warby Parker: Thank you, Jacqueline, and good morning, everyone. 2025 has already been a busy and eventful year, and we’re excited by the progress we’re making toward Warby Parker’s ambitious near and long term objectives. Our team delivered strong results in Q2, growing revenue 14% year over year and expanding adjusted EBITDA margin 130 basis points, both above the high end of our guidance while delivering our eighth straight quarter of accelerating customer growth. These results reflect the team’s disciplined execution and ability to adapt in a dynamic environment like we saw in April, including taking decisive actions to mitigate the impact of tariffs. We continue to lay a strong foundation for long term growth by investing strategically, driving innovation and forging key partnerships.

In particular, we’d like to highlight some recent milestones that demonstrate progress against key pillars of our strategy to drive sustainable growth while creating positive impact along the way. In July, we opened our three hundredth store at Brookfield Place in Downtown Manhattan. And just a few days ago, we opened our very first Target shop in shops in Willowbrook, Illinois and Bloomington, Minnesota. We’re only onethree of the way to our long term opportunity of more than 900 stand alone stores across North America, underscoring the significant white space ahead. With additional scale, we are able to serve more customers than ever while having even greater impact.

In Q2, we announced that we surpassed 20,000,000 pairs of glasses distributed to people in need through our Buy Pair, Give a Pair program, a powerful reminder of the impact we’re having on communities across the world. These milestones also reflect a natural evolution in how we are serving our customers today and in the future, one led by a highly productive store footprint and supported by increasingly personalized AI driven digital tools and experiences. We’ll speak more to how AI is transforming the way we serve customers later in this call, but we also wanted to highlight how excited we are to be developing devices that will enable our customers to engage AI seamlessly wherever they go. In May, we announced a long term partnership with Google to develop AI powered intelligent eyewear designed for all day use, marking a transformative step for our brand and significantly expanding our TAM beyond traditional glasses. We believe glasses are the perfect form factor to leverage AI, enabling the delivery of real time personalized insights tailored to what the wearer sees and hears as they move through the world.

Glasses allow AI to understand the wearer’s environment and surface relevant information without forcing someone to pull out their phone or look at a separate screen. Imagine the world’s smartest assistant, ready with answers when you need them and invisible when you don’t, embedded in a beautifully designed pair of glasses made for all day wear. We’re thrilled to partner with Google, an AI innovator renowned for technology that powers lives around the globe. Coupled with Warby Parker’s capabilities in product design, eye care, retail operations, customer experience, and tech enabled innovation, we believe our partnership is uniquely positioned for this rapidly evolving space. We see tremendous potential in what Warby Parker and Google can achieve together and look forward to sharing more in the coming months.

It’s been an active and productive first half, and we’re pleased with our momentum heading into the rest of the year, which gives us confidence to raise our full year guidance. Before Steve talks through our financials and guidance, Neil and I will recap the drivers of our Q2 performance. I’ll start first with our eighth consecutive quarter of accelerating active customer growth. We ended Q2 with 2,600,000 active customers, an increase of 9% on a trailing twelve month basis, with average revenue per customer up 4.6%. Our retail channel remains our primary growth engine, and we continue to see strong growth in active customers generated through our stores.

In Q2, we invested across a broad mix of paid media channels to drive brand awareness and acquire new customers. As we shared in February, a key focus this year has been leveraging even more advanced analytics, including media mix modeling to optimize core spend and scale into newer high potential channels. This approach has proven especially valuable in the first half, allowing us to adapt quickly and sustain momentum in a dynamic environment. We’re also seeing encouraging results from new streaming and localized campaigns, whether through in store events or targeted local media aimed at driving awareness for our stores and eye exams. Complementary to our core marketing efforts is strong growth within our Insurance business, and we’re especially encouraged by the continued ramp of Versant Health.

Insurance customers are some of our highest value customers, spending more on their initial purchases, selecting progressive lenses at a higher rate and returning more frequently. We believe insurance will remain a long term tailwind as we drive broader awareness of our in network and out of network benefits. We’re pleased to report consistency in our revenue retention metrics across cohorts with revenue retention rates of approximately 50% over twenty four months and over 100% over forty eight months. And now I’ll pass it over to Neil to walk through the remaining drivers. Thanks, Dave.

Neil Blumenthal, Co-Founder and Co-CEO, Warby Parker: Next, we saw strong demand across Glasses supported by ongoing product and Lens innovation as well as our continued focus on delivering exceptional value to our customers. Glasses grew approximately 11% year over year with progressives accounting for approximately 23% of prescription units sold. In Q2, we launched five new collections and continue to expand our Lens portfolio. Highlights include the launch of Transitions extra active Lenses, the introduction of our kids assortment online and a collaboration with LA based streetwear brand Market Studios, featuring musician and producer RZA that generated strong engagement. These initiatives help us reach new audiences while deepening loyalty with existing customers.

As part of our tariff mitigation strategies, we moved forward with a handful of price increases focused on select lens types and add ons, while still preserving our entry level $95 price point. Overall, these pricing actions had minimal impact to mix and conversion. In some cases, product mix for higher value add ons and lens treatments trended above our expectations. We believe this is evidence of the considerable value gap that still exists in the industry. We aim to offer high quality products and services at an accessible price point and we continue to believe that combining design, quality and service is a key differentiator for our brand.

The third driver of our Q2 growth was the strength of our highly productive store base complemented by continued innovation in our digital experience. Retail revenue grew 19% year over year, driven by new store expansion and continued healthy growth of our stores opened twelve months or more, consistent with color we’ve provided on prior calls. We opened 11 new stores in Q2, entering six new suburban markets and expanding our presence in five existing ones, including areas outside of Boston, Philadelphia, Washington DC and Charlotte. Looking ahead, we expect the majority of our new store growth to come from building out underpenetrated suburban markets like these. Over 50% of the major metropolitan areas we operate in only have one store and we believe we have significant potential to expand our presence in existing markets while also entering new markets.

We’re also seeing clear benefits from our densification strategy in that markets with the highest number of stores frequently have the highest e commerce growth driven by greater brand awareness and customer engagement across channels. Stores opened longer than twelve months averaged $2,200,000 in revenue with four wall margins in line with our target of approximately 35% and newer stores are tracking in line with our targets. As our physical footprint scales, we’re also evolving the way we serve customers across channels. We launched Warby Parker without retail stores during a time when less than 2.5% of glasses were sold online. And our first of its kind home try on program offered a unique convenient way for customers to try on five glasses for five days at home, completely free of charge.

For many years and especially during the pandemic, Home Try On was a novel way to help customers shop for glasses online. Today, our differentiated in store experience across 300 locations combined with increasingly personalized digital tools like our industry leading first true to scale virtual try on have transformed the way people engage with our brand and shop for eyewear. The vast majority of recent Home Tryon customers live within thirty minutes of a Warby Parker store. As we’ve scaled and Home Tryon has become a less meaningful driver of our e commerce business and as we have seen strong growth from customers directly purchasing glasses online and in our stores, we’ve decided to sunset the program at the end of this year. We’re confident we can serve customers effectively and efficiently through our stores, our leading digital experience and by leveraging proprietary AI powered technology.

Given home try on costs are included in our total marketing spend, we’ll now be able to reallocate resources toward brand awareness and customer acquisition. This quarter, we also redesigned our customer experience team structure to reflect the evolution in how we serve customers given our growing store footprint and the sunset of our home try on program. Even with this transition, we continue to expect e commerce growth in the low to mid single digits this year and believe the channel remains on a path to long term sustainable growth. While Q2 growth was at the lower end of this range due to a slower April, we saw a sequential improvement throughout the quarter, which continued through July. As part of our continued investment in the online experience, we launched Advisor in Q2, a personalized AI driven recommendation tool within our app designed to replicate the guided retail experience.

Early results are encouraging and we’re seeing strength in AI powered tools like Advisor, partially offset by headwinds from Home Tryon. Going forward, we believe Advisor will play a meaningful role in driving product discovery and conversion. Lastly, we continue to expand our holistic Vision Care offerings as part of our broader strategy to serve all of our customers’ needs. Contacts remained a healthy contributor to growth in Q2 supported by strong adoption from both new and returning customers. Contacts grew 28% year over year and now represents 11.5% of revenue.

Yet our penetration remains well below the approximately 20% industry average, highlighting the significant runway ahead. Eye exams were another key driver of growth. We expanded exam capacity across our growing retail footprint and in Q2 our eye exam business grew 44% year over year to account for 6% of total revenue. Eye exams drive traffic, conversion and average revenue per customer given roughly 75% of glasses are purchased at the same location as the exam. Today, the majority of our customers still bring prescriptions external providers, underscoring a significant long term opportunity to capture more of the Vision Care journey.

We also continued scaling retinal imaging across more locations, an offering that enhances the clinical experience and reflects our commitment to accessible high quality vision care. Our performance this quarter reflects the successful execution of our near term strategy, as well as our team’s ability to balance that execution with a focus on our long term vision. By strengthening our core business and strategically expanding both access and convenience, we are not only meeting customer demand, but also shaping the future of our category. We’ve laid the groundwork for sustainable growth and we’re poised to lead our business and more broadly our industry into its next chapter. Before I pass it over to Steve, I want to share a leadership update.

After fourteen incredible years at Warby Parker, Steve has made the decision to step down from his role as Chief Financial Officer at the end of this quarter to pursue an opportunity outside of the industry. Steve was our inaugural CFO. He started as a team of one and worked tirelessly to build a rigorous strategic financial organization. His leadership has been instrumental in achieving Warby Parker’s countless milestones, in particular, our transition to life in the public markets. Steve’s deep commitment to the company’s success and to his team and our impact efforts has created a strong foundation that will be felt throughout our stores, offices and optical labs for years to come.

He leaves our team, operations and systems in the best place they have ever been. Until a successor is named, Dave will assume the roles of principal financial officer and principal accounting officer on an interim basis. He will work in close partnership with our tenured financial and accounting leadership teams to ensure a seamless transition. And now Steve, I’ll pass it over to you.

Steve Miller, Senior Vice President and Chief Financial Officer, Warby Parker: Thanks Neil and Dave. Before I dive into financials, I want to express a tremendous amount of gratitude to Neil and Dave, our Board, the finance team and the broader Warby Parker team for giving me the opportunity to be in the arena with you. I’ll now be cheering you on, but from another arena. When I joined Warby Parker fourteen years ago, we were a small private company with roughly 30 employees, no stores, no factories. Today, we’re operating as a public company at scale with over 300 stores, two optical labs, nearly 4,000 employees and this is our sixteenth earnings call.

We have our eight core values printed throughout our spaces to remind us what’s important. They include phrases like do good, take action and lead with integrity. My favorite is learn, grow, repeat. I plan to carry these with me. Now on to our financials.

I’ll begin with a detailed review of our second quarter performance. Then I’ll outline our updated guidance for the full year and our outlook for the 2025. Starting first with Q2, we’re pleased to deliver both revenue and adjusted EBITDA above the high end of our guidance despite meaningful tariff related uncertainty throughout the quarter. These results reflect the flexibility of our model and the team’s ability to move quickly. Over the course of the quarter, we made significant and timely adjustments to the business, which contributed to our strong financial performance and highlight the levers we have to drive results in a dynamic environment.

Revenue for the second quarter came in at $214,500,000 up 13.9% year over year. Retail revenue increased 19.3% year over year with store count up 16.4% and e commerce revenue up 2% year over year. Looking at customers, we finished Q2 with 2,600,000 active customers on a trailing twelve month basis, representing a consistent acceleration in growth to 9% year over year. We’ve now seen sequential improvements in year over year active customer growth for the past eight quarters, reflecting the positive returns from both new and existing stores, marketing investments and a range of strategic initiatives. We also continue to see strength in average revenue per customer, which increased 4.6% year over year on a trailing twelve month basis to $316 This was driven by factors including our selective pricing increases in glasses at the April, the higher mix of premium lenses like progressives and continued growth in both contact lens and eye exam sales.

By products, glasses revenue grew roughly 11% year over year and we saw continued strength in our holistic vision care offerings with contact lenses up 28% and eye exams up 44% year over year. Contacts increased from 10.2% of revenue in Q2 twenty twenty four to 11.5% in Q2 twenty twenty five. Eye exams increased from 4.8% of revenue in Q2 twenty twenty four to 6% in Q2 twenty twenty five. From a channel mix perspective, retail represented approximately 73% of our overall business in Q2. We opened 11 new stores in the quarter ending the period with two ninety eight stores.

This represents 42 net new stores opened over the course of the last twelve months. Retail productivity was 101.7 versus the same period last year. As a reminder, we define retail productivity as the year over year change in retail sales per store for the average number of stores open in the period. This metric covers all stores and is impacted by factors like opening cadence and doctor hiring. Our stores that have been opened greater than twelve months, we observed an acceleration in year over year growth in Q2.

Our new stores continued to deliver strong unit economics performing in line with our target of thirty five percent four wall margin and twenty month paybacks. For stores opened more than twelve months, average revenue per store was $2,200,000 and performance was in line with our target 35% full wall margins. Overall, we continue to be pleased with the performance, growth and productivity of our store fleet. Over the course of the past year, nearly every new store included an eye exam suite, bringing our total number of stores with eye exam capabilities to two fifty nine stores or 87% of our total fleet. Moving on to gross margin.

As a reminder, our gross margin is fully loaded and accounts for a range of costs including frames, lenses, optical labs, customer shipping, optometrist salaries, store rents and the depreciation of store build outs. Our gross margin also includes stock based compensation expense for our optometrists and optical lab employees. For comparability, I will speak to gross margin excluding stock based compensation and one time items in the quarter, including the write down of inventory related to our Home Try On program. Second quarter adjusted gross margin came in at 54.3%, in line with expectations and compared to 56.1 in the year ago period. The year over year decrease was driven by tariff related headwinds in glasses, sales growth of contact lenses and increased doctor headcount and store occupancy related to our store count growth.

These impacts were partially offset by increased penetration of our higher priced lenses and frames as well as the select price increases implemented at the April that impacted May and June. Shifting gears to SG and A. As a reminder, adjusted SG and A excludes non cash costs like stock based compensation expense. Adjusted SG and A in the second quarter came in at $104,800,000 or 48.9% of revenue. This compares to Q2 twenty twenty four adjusted SG and A of $98,200,000 or 52.2% of revenue representing three thirty basis points of leverage year over year.

Within adjusted SG and A, marketing spend was $26,000,000 or 12.1% of revenue compared to $22,400,000 or 11.9% of revenue in Q2 twenty twenty four. With roughly consistent marketing spend as a percent of revenue, disciplined expense management drove leverage across our non marketing adjusted SG and A categories, which include salaries for our stores and customer experience employees and general corporate expenses, including our headquarter salaries and general operating expenses to support the business. Non marketing SG and A improved by three sixty basis points from 40.3% of revenue in Q2 twenty twenty four to 36.7% of revenue in Q2 twenty twenty five. Non marketing adjusted SG and A grew just 4% year over year. This reflects our commitment to continued cost discipline and drove our higher flow through in Q2 above the high end of our guidance range.

Turning now to adjusted EBITDA. In the second quarter, we generated adjusted EBITDA of $25,000,000 representing an adjusted EBITDA margin of 11.7%. This compares to adjusted EBITDA of $19,600,000 or 10.4% of revenue in the year ago period, reflecting expansion of 130 basis points. This was driven by significant non marketing SG and A leverage. Turning now to our balance sheet.

We generated $24,000,000 in free cash flow in Q2 twenty twenty five, ending the quarter with a strong cash position of $286,000,000 We will continue to deploy capital deliberately to support our growth and operations. We also have a credit facility of $120,000,000 expandable to $175,000,000 that is undrawn other than $4,000,000 outstanding for letters of credit. Turning to our outlook for 2025. Given our strong first half performance and continued execution across the business, we are updating our full year guidance, which I’ll summarize in just a moment. Let me begin with an update as it relates to tariffs.

As we discussed last quarter, we outlined three primary mitigation strategies, including shifting our global supplier mix, selectively raising prices and closely managing operating expenses, all of which we’ve now implemented with positive results. As tariff rates have evolved, we’ve continued to adapt our approach, demonstrating our team’s ability to respond with agility in near real time. The gross impact of tariffs has moderated since our last call and that combined with the actions we’ve taken have resulted in incremental EBITDA flow through in our Q2 results and our raised full year adjusted EBITDA guidance. And now I’ll provide additional color on our three key strategies spanning gross margin and non marketing SG and A. First, we continue to shift our sources of supply to optimize our global vendor mix.

Our flexible supply chain has allowed us to quickly adapt production in response to changing tariff rates. Based on our latest plan, we now expect China to account for approximately a low teens percentage of our total cost of goods sold by year end and we will continue to diversify our country mix to optimize for the most cost effective outcome. While China tariffs have come down since our May call, rates for the rest of the world have increased and we continue to make adjustments in response to these changes. Second, we implemented strategic price increases at the April on a handful of Lens types and add ons, while still preserving our core value proposition. Third, we will remain disciplined on costs while continuing to invest in growth.

Through the first two quarters of the year, we’ve delivered an average of 300 basis points of leverage within non marketing adjusted SG and A, an area that will continue to be a source of leverage moving forward. At the same time, we’ve kept marketing spend in the low teens as a percentage of revenue. As the tariff and general business landscape evolves, we will remain disciplined and continue to reassess and optimize spend. Taking all these factors into account and the acceleration we saw in the business throughout Q2 and into Q3, we are raising our outlook for the full year 2025. We now expect net revenue between $880,000,000 and $888,000,000 representing approximately 14 to 15% growth year over year.

The high end of our range implies approximately 17% growth in the second half, which is consistent with the acceleration we’ve seen in the business since May. Adjusted EBITDA of 98,000,000 to $101,000,000 representing an adjusted EBITDA margin of 11.1% to eleven point four percent and one hundred and seventy to 190 basis points of year over year expansion 45 new store openings, including the five previously announced shop in shops within Target stores. We are projecting gross margins to remain in the mid-50s with adjusted gross margin in Q2 as a good reference point for the full year. We’re pleased to continue to guide toward gross margin in the mid-50s despite operating in a dynamic tariff environment. Finally, we expect stock based compensation as a percentage of net revenue to be in the 2% to 4% range for the full year.

For Q3 twenty twenty five, we’re guiding to the following: net revenue between $223,000,000 and $225,000,000 which represents growth of approximately 16% to 17% year over year adjusted EBITDA of $24,000,000 to $25,500,000 representing an 11% margin at the midpoint of our range or two ten basis points of year over year expansion. Similar to the first half, we anticipate adjusted EBITDA margin expansion in Q3 will be driven by leverage within non marketing SG and A supported by ongoing efficiencies in staffing our store and customer experience teams and achieving continued leverage in corporate expenses, while keeping marketing spend consistent as a percentage of revenue in the low teens. Now, Dave, I’ll pass it back to you.

Dave Gilboa, Co-Founder and Co-CEO, Warby Parker: Thanks, Steve, and thank you all for joining us on the call today. I wanted to echo Neil’s thoughts and thank Steve for a tremendous fourteen years at Warby Parker. We look forward to seeing all that you’ll accomplish in this next chapter. With that, Neil, Steve and I are pleased to take your questions. Operator, please open the line for Q and A.

Bailey, Conference Call Moderator: We’ll now take our first question. Our first question comes from Brook Roach, Goldman Sachs. Please go ahead. Your line is now open.

Brook Roach, Analyst, Goldman Sachs: Good morning and thank you for taking our question. Neil, Dave, I’d love to hear your thoughts on the latest views of the health of the eye care consumer and your confidence in driving continued sequential growth in this mid to high teens range on a go forward basis? And then for Steve, can you just help us a little bit with the magnitude of potential SG and A leverage on a go forward basis? Understood that there’s some really nice gains over the course of the next couple of quarters associated with some of these tariff savings actions. But what’s the opportunity for that over the next couple of years?

Thank you.

Neil Blumenthal, Co-Founder and Co-CEO, Warby Parker: Thanks, Brooke. We can we continue to feel fortunate that we operate in a care in a category that is a health need. So while we sell a fashion accessory, it’s also a health product, as you know. And we do see stability, in in our customer base, and we see that consistency, whether it’s in repeat purchasing or, in sort of our product mix. We did see some choppiness earlier in the quarter.

You know, as you’ve heard from many companies, April was challenging. We have sort of recovered and have strong trends now that give us confidence for the remainder of of the year. But as we’ve demonstrated over the last few years that irrespective of the macro environment, we’re gonna continue to grow at a rapid clip and in a consistent and predictable way, by delivering exceptional value, and incredible customer experiences. And one inherent advantage whenever there’s a crisis, as a lot of companies face in in April, we tend to adapt and move faster than many of our competitors, and that puts us in a competitive better position. So as an example, we were able to quickly roll out select and strategic price increases that have sort of benefited our our growth.

Now those have enabled us to still maintain, incredible value for our customers as we saw competitors, raise prices higher than we have and as they have, you know, for the the past fifteen years. So we think we’re actually even offering more value than we did when we first launched in 02/2010, which again gives us confidence, again, irrespective of the how the market is behaving. And now I’ll pass it over to Steve.

Steve Miller, Senior Vice President and Chief Financial Officer, Warby Parker: And thanks for your question on leverage from adjusted SG and A, non marketing adjusted SG and A in particular. So I’ll first just by providing a reminder of what is in our adjusted SG and A stack. So for q two, roughly a $105,000,000 in expense, 26,000,000 was marketing. The remainder of that is really split into a few categories. It’s salaries for our retail store teams, our customer experience teams, and then a range of corporate expenses.

As it relates to retail, we continue to make strides to better and more efficiently staff to match staffing in stores with demand that we’re seeing from customers. For our customer experience team, we talked specifically this quarter, for example, about a restructuring change that we’ve made to that team due to the fact that we’re enabled to enabling ourselves to better leverage AI technology and increase our level of outsourcing. That’s that $1,300,000 charge that we’ve disclosed. And our ability to more efficiently staff customer experience has certainly been a source of leverage. The next category is really corporate expenses.

So headquarter salaries, what we pay to our vendors, what we pay to our consultants, and we take a very disciplined approach to how we allocate capital to all of those areas. Year to date, we’ve seen roughly 300 basis points of leverage from non marketing SG and A. And on a historical basis, just to set the stage, in 2023, two forty bps of improvement. Last year, 170 bps of improvement this year, if the trend continues, 300 basis points of improvement. So across those categories, we feel very, very confident that we’ll continue to drive adjusted SG and A leverage, which will certainly be a part of our adjusted EBITDA margin story this year and for years to come.

Brook Roach, Analyst, Goldman Sachs: Great. Thanks so much. I’ll pass it on.

Bailey, Conference Call Moderator: Our next question today comes from the line of Dana Telsey from Telsey Advisory Group. Please go ahead. Your line is now open.

Dana Telsey, Analyst, Telsey Advisory Group: Hi, good morning everyone. And Steve, best of luck on your next chapter. As you think about the Google announcement that was made earlier, where are you on the progress there? How do you think about that development given the importance of those glasses to the overall ecosystem going forward? Tell us a little bit about that.

And then with the Target shop in shops, I think, what is it, three days or whatever that you’re open? I know the first five this year, how are you thinking about next year? And just lastly, the price increases that you took selectively response to that, what are you seeing from the end consumer? Thank you.

Dave Gilboa, Co-Founder and Co-CEO, Warby Parker: Great. Thanks, Dana. We’re really excited to partner with Google for a number of reasons. But, first and foremost, because they’re the the global leader in AI, and their DeepMind team and broader organization continue to push the boundaries of what the latest Gemini models can do. And, we anticipate that smart glasses adoption will dramatically accelerate when consumers are able to use their glasses, not only for photos and audio, but when they become the primary interface with which they engage, with AI.

And we believe that Google has very unique capabilities, in terms of how advanced their AI is, not to mention the scaled assets they they have from the Android operating system to Gmail, Maps, Search, YouTube, and so much more that will give Wares incredible value when when paired with Gemini. And since our our founding in 02/2010, we’ve been a technology innovator in in the optical industry, and to design products that fund fashion, health, and and personal identity. And and by combining that foundation with, Google’s cutting edge AI and and and software, we believe we can unlock entirely new levels of of utility while making sure that our glasses wearers continue to to look good and and and feel their best. And so, it’s we believe this is a a massive, new new opportunity, and we’ve seen computing evolve from desktops to laptops to to phones. And we’re, incredibly excited that as we enter the AI era, glasses are poised to be the next major computing platform.

So it’s hard to overstate the the size of this potential market opportunity, and we’re pleased by the the progress that, that we’re making and and look forward to sharing more about our our product road map and and timeline in in future calls.

Neil Blumenthal, Co-Founder and Co-CEO, Warby Parker: And, Damon, just to share a little bit about our Target shop in shops. It’s been great partnering, with the Target team. They have a great appreciation for brands and for customer experiences, and we’ve been able to literally design a Warby Parker and plop it within Target. So you walk into the threshold of the Warby at Target, and it feels like any other Warby Parker store. It’s staffed by Warby Parker team members, leveraging Warby Parker technology.

And so far, we’re on track, and we’ve gotten a great response that we’re excited about. We’ve been able to leverage and promote internally, from Warby to staff the Warby Parker at Target Target stores, and this has been a strength of ours, across the organization. It’s just our great talent pipeline, that, just having a great retention enables us to do. And it’s particularly important in our category, as one needs to develop expertise around our product assortment, around prescriptions, around opticianry. So we’re able to to leverage that for our Target shop in shop.

So the early reception has been very positive. The remaining stores will open this month in in August. So, yeah, we’re we’re excited. With respect to the selective price increases that that we took, overall, well received. We’ve seen minimal impact to conversion and and mix.

And in some cases, we actually saw a stronger uptake on higher value lens upgrades. So, as we look across our assortment, again, we’re providing, greater value in terms of price to quality than we think we have, within a competitive landscape for the entire fifteen years that we’ve been in business as we’ve seen competitors, take take price. And this is one of the first times that we’ve actually increased prices over the last fifteen years, whereas a lot of our competitors are increasing prices of frames and lenses on an annual basis. So we continue to hear from our customers, just how much value that they get, from, what our premium products sold at a very accessible price.

Dana Telsey, Analyst, Telsey Advisory Group: Thank you.

Bailey, Conference Call Moderator: The next question today comes from the line of Mark Otschwager from Baird. Please go ahead. Your line is now open.

Mark Otschwager, Analyst, Baird: Thanks for taking my question. And then Steve, best wishes in your next chapter. So first, I was hoping you could help us understand the drivers to the revenue growth acceleration you’re seeing into July. Is that happening across channels? And then how should we think about the contribution from customer growth versus revenue per customer in Q3, Q4?

I guess where are you seeing the biggest change in trend there? Thank you.

Steve Miller, Senior Vice President and Chief Financial Officer, Warby Parker: Sure. And thank you for the good wishes, Mark. I’m excited to be able to talk more openly about my next opportunity at some point. It’s been wonderful working with you and and everyone on the call. As As it relates to your question around growth that we’re seeing across channel, so really starting in May through to July, as Neil called out, we’ve seen an acceleration in growth across retail and across e commerce.

So we’ve been pleased to see that it’s been an omnichannel lift across the business, in some ways, supported by the pricing changes that we enacted at the April, that are only reflected in May and June for the quarter, but the positive momentum has really carried through to July. As it relates to how we think about growth from active customers versus average revenue per customer, as Dave called out, we’re pleased that this is our eighth consecutive quarter reporting LTM active active customer growth, up 9%. We continue to see a positive trajectory as it relates to that number with healthy growth in average revenue per customer. This quarter that number came in at $316 up 4.6. On our last call, talked about there might be a slight rebalancing in how we see the interaction of growth driven by those two numbers, where we might see moderately higher growth driven by average revenue per customer driven by the small set of price increases we implemented and moderately lower growth from active customers, but we would still contextualize the path that we’re seeing for both active customers and average revenue per customers as positive and strong.

Mark Otschwager, Analyst, Baird: Thank you. And then separately, can you talk a bit more about the Warby advisor? You called out in the release this morning? What are the key capabilities? How are consumers interacting with it?

And just any thoughts on the impact that could have on conversion and revenue per customer as that rolls out? Thanks again.

Steve Miller, Senior Vice President and Chief Financial Officer, Warby Parker: Yes. So, this is

Dave Gilboa, Co-Founder and Co-CEO, Warby Parker: a new feature that we introduced on ecom that, uses, AI driven personalized recommendations, that, recommends frames based on the user’s face shape and features, along with, their their preferences around, different styles and and colors and and materials. And the intent here, was really to bring the best parts of our retail shopping experience online where if you walk into one of our stores, one of our expert style advisers can look at that customer, their their face shape and contours, ask them a few questions around what they’re looking for, and then help provide personalized recommendations. And now we’re able to do that online using AI and and all the the best elements of our virtual try on experience. And so we introduced that that feature in in q two, and we’re seeing very strong adoption in terms of engagement in sales. And and that gives us, you know, confidence to move beyond what has been a big driver of our e com business historically, our home try on program.

And the new features that we’ve introduced are driving strong year over year growth in direct e com glasses purchases that don’t involve a home try on. And now we’ll have one less message on our site, in in in our marketing materials, and we can more effectively reallocate those resources to driving customers to the newer parts of our business that are driving higher incremental returns, namely to our 300 plus stores and our AI driven, digital features on our site.

Mark Otschwager, Analyst, Baird: Great. Thanks for all the detail.

Bailey, Conference Call Moderator: Thank you. The next question today comes from the line of Oliver Chen from TD Cowen. Please go ahead. Your line is now open.

Oliver Chen, Analyst, TD Cowen: Thanks a lot. Steve, congrats and it’s been wonderful to partner with you. Steve, Dave and Neil, the Google partnership is really exciting. Would love thoughts on as you see competitive differentiation versus the current offerings in the market and also your take on the evolution of distribution. I’m sure that you’ll do this in a very customer centric way.

Second question is on all the progress you’re making with insurance and reducing friction as well as growing awareness. What’s ahead there in terms of how you’re thinking about the multiyear opportunity and different things that can happen to further enhance that, especially as your awareness grows? And finally, Steve, as we think about contacts and progressives, they’re both nice opportunities with different margin complexions. Could you help highlight the longer term impact there and also your vision for mix given that they both have nice TAMs as well? Thank you.

Neil Blumenthal, Co-Founder and Co-CEO, Warby Parker: Thanks, Oliver. We couldn’t be more excited, to be partnering with Google as we think about creating the future. These AI glasses are being developed for all day, everyday wear. And what’s so powerful about this form factor is that it can see what you see, and you can engage with AI in a different way that’s generally possible right now. And by partnering with somebody with Google who literally wrote the research on artificial intelligence, by which, other folks have have built their tools, Right?

We’re sort of, going to the the originator of, all all of this amazing innovation. I mean, if you think about all of the incredible products, that the Google ecosystem has that, can be leveraged to make all of our lives better, and more productive and enable us, to leverage our curiosity in in ways that, we haven’t been able to before, frankly. It’s something that gets us, just incredibly excited and and motivated. So the key differentiator, we think, is that these are being designed for all day use and that the AI is something that will be incredibly useful. The term that we tend to use is helpfulness, and we can’t wait until we’re in a position to to show you the product and and for you to to try it.

In terms of distribution, this is a device and a category that needs to be eyewear first. And the same principles that go into selling and shopping for traditional eyeglasses, are gonna need to be applied for this new wearable device. In that it’s unlike other devices or consumer electronics, and that, it does it sits on your face. And as we know, we all have different facial features from different pupillary distances to nose bridges, and we think that we’re uniquely positioned to provide an exceptional shopping experience. Our staff is trained in helping everyone find the absolute best pair of glasses for them that best represents their identity.

And we think that we’re also best positioned to enable people to test and try and demo this new product that will be, you know, different from what people have experienced in in the past. So our distribution of now 300 stores, our ability to provide best in class primary eye care through eye exams and retinal imaging, our cohort of some of the best opticians and optometrists in in the country, the locations of our stores in some of the best streets and malls and lifestyle centers across the country really put us in, we think, an incredible position to help develop, and and grow this nascent market.

Dave Gilboa, Co-Founder and Co-CEO, Warby Parker: As it relates to insurance, we’re we’re seeing significant year over year growth in our in network insurance business, and continue to be pleased by the early signs from our Versant MetLife integration. We’re seeing the the cohorts of our newly integrated Versant members ramp in line or ahead of, prior insurance cohorts, and, we really view this as a multiyear tailwind. And if you look at our longest standing insurance relationships, we continue to see increasing utilization and increasing revenue per member per year even several years after our initial integrations, and and we expect the same with Versant. And we continue to find that our insurance customers spend more in each transaction and repeat more frequently. And so we’re eager to make it even easier for for people to use their in network and out of network benefits with us so that so that their dollars go further.

And in that vein, we do continue to pirate pilot relationships with with other carriers and and look forward to unlocking additional relationships over time.

Steve Miller, Senior Vice President and Chief Financial Officer, Warby Parker: And, Oliver, regarding your questions about contacts and progressives as long term tailwinds supporting growth for the business, I’ll talk about each one separately. So contacts is a $12,000,000,000 market. If you annualize our most recent results, our contact business is order of magnitude 95 to a $100,000,000. So just a drop in the bucket is what we have in terms of the broader market share. The typical contacts retailer at scale sells roughly 20% of their business mix in the form of contacts.

Contacts are just an 11% portion of our mix. And so we see a dramatic opportunity just to continue to take share of this large market and see that proportion of our business mix increase over time. I will also say one of the nice things about the contact lens purchase. It’s the most subscription like purchase of all of the products that we sell. We have talked about contact lenses having a lower gross margin profile from a percentage perspective.

But given the subscription like nature and regularity of the purchase, the gross margin dollar profile is certainly very appealing and accretive to our gross margin dollars. Moving to progressives, we’ll also lay out the backdrop from a market size perspective. So progressives, trifocals and bifocals make up roughly 40% of all prescription units sold. Just 23% of our business today is made up of progressives. As a reminder, progressives are our highest priced and highest margin glasses products, and that’s certainly been a continued driver of increase in average revenue per customer and an increased driver of our gross margin.

As a reminder, we’ll also say that progressives are largely purchased at retail given the progressive customer is slightly older and there’s a more complex measurement that needs to be taken called seg height, which can be taken with more accuracy in store. And so sales of Progressive’s in store are higher and will be supported by our continued rollout of retail stores. So as we open up more stores, that business line will continue to grow, and we certainly see both Contacts and Progressive’s as long term tailwinds supporting growth over the coming years. Thanks for all that detail. Best regards.

Bailey, Conference Call Moderator: The next question today comes from Paul Juarez from Citi. Please go ahead. Your line is now open.

Brandon Cheatham, Analyst, Citi: Hey, everyone. This is Brandon Cheatham on for Paul. Steve, I want to add my congratulations. It’s been great working with you and best of luck on your future opportunity. Can you talk a little bit about sunsetting your home triumph program?

How much of that is getting reallocated in marketing or elsewhere versus providing potential margin upside in the future? And then just about how much of your direct business is initiated through the home trial program?

Dave Gilboa, Co-Founder and Co-CEO, Warby Parker: Thanks, Brandon. The day we launched Orbe Parker in in 02/2010, GQ published an article calling us the Netflix of iWARE comparing our our home try on program to the DVDs that Netflix mailed at the time. And and just like Netflix has evolved their their business model, we’ve evolved ours over the last fifteen years to the point that that home try on is is no longer necessary as part of our our core core offering. And while we’re grateful for how much impact our our own program has had, we’re excited to be entering a new era for for the business that’s centered around our 300 plus stores and AI driven personalized digital tools. And, really, the home try on program was designed to enable people to try on glasses before we had stores and and before technology existed to enable a true to scale virtual try on.

And now we’re frankly able to solve that fitting problem better using using our stores and digital capabilities. And we we have included our home trial costs historically as part of our marketing line item. And as we wind down this program, we’re we’re excited to be able to wrap reallocate those those resources and that capital to awareness driving activities and and customer acquisition that we believe will will drive higher returns and that we have evidence of higher ROI.

Brandon Cheatham, Analyst, Citi: Okay. And if you’re able to share, like, when might you be able to go to market with your Google AI glasses, or when do you anticipate having a prototype ready that you could, share with us?

Dave Gilboa, Co-Founder and Co-CEO, Warby Parker: So we’re very excited by the progress that we’re making. We don’t have a timeline to share yet, but we look forward to sharing a lot more in future calls.

Bailey, Conference Call Moderator: Thank you. This concludes today’s question and answer session and concludes today’s call. Thank you all for your participation. You may now disconnect your lines.

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