WRBY - Earnings call transcript Q4 2021

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Operator

Hello, everyone and welcome to the Warby Parker Fourth Quarter and Fiscal Year Financial Results Conference Call. My name is Victoria and I will be calling into call today. [Operator Instructions] I will now pass over to your host, Tina Romani, Head of Investor Relations to begin. Please go ahead.

Tina Romani

Thank you and good morning everyone.

are alongside and President Steve Financial today Co-Founders Gilboa, and me Officer. Co-CEOs, and Miller, with Neil Dave Blumenthal our Chief Here Senior Vice

couple begin, reminders. have we a Before we of

slide presentation Our earnings release are on at our available investors.warbyparker.com. website and

and or call we presentation, result and various implied a as our comments differ materially uncertainties. will results risks nature. a Actual in may making from of this During be forward-looking those expressed of

SEC risks, For XX-Q the we filings, as or more and XX-K assume XXXX company’s our about statements review information information statements. in filings latest based March forward-looking are update upcoming including revise forward-looking these titled company’s please no Factors of the Risk filing. obligation section These XX, publicly of on the some the and to

measures discussing financial accordance Additionally, not and performance these to GAAP in Dave on release A substitute our With measures. non-GAAP certain can found U.S. kick to in to items are we addition the off. nearest prepared to press financial call that, available will GAAP. things IR website. financial measures of to These be turn over slide of our in my for this and measures pleasure a reconciliation with deck morning’s it’s be non-GAAP the

Dave Gilboa

morning beyond. full and XXXX XXXX year results Thanks, joining us as you quarter and outlook Warby good Thank for Tina bright and discuss for as everyone. fourth and early Parker’s to our well

to pairs families. to That Before use they Pair, and than distributed Give a Pair need team now million partners XX to and on glasses for people to our more through thank in we means work need public Give learn, of have their provide XX the dive Pair, to our a Pair people we a a our in, program. wanted glasses see, to million Buy to this congratulate forum surpassing Buy

wake to and employees and our while We more we years growth deliver our for impairments This our is that you Team enable pandemic-related will many results. particular, experiences, resilience. track driven are to score for decades of significant promoter shareholders X.X%, and year strategic to our spite customers for season. turning these saw XXXX who year making perseverance long-term come. delighting was financial team XXX XX% having people delivering in in And in another to adjusted for sustainable challenges revenue X.X% above to it us are we with year most the that possible. us growth. and team grateful retain We everyday couldn’t and and team our impact incredibly was see enables customers the and delivered be strong impact turn those for now who partners record motivating and curious passionate, proud up and hugely also obsessed are and Warby of to Parker Warby while in a sustainable of our proud continued results, when exceptional significant lead we We in QX, in while XX%, selling your thank achieved to peak points margin during results strides resulting million, expanding against basis EBITDA making to with a another This $XXX grew up customer initiatives from achieved and XXXX. net helping

milestones it XXXX, As alongside to Warby. incredibly on was many back look we exciting Team celebrate so

pre-COVID. people, nearly benefit distributed, in happy public first customer year grew the the XXX We line performance became to are we a In a year the listing. year, new X.X the public a launched have by of corporation with we stores ending through XXXX XXX,XXX new in the We stores our base and pairs XX opened we to ever XX ever most customers. stores, performance million first addition in million with XX to active most these go of the direct stores opened

new economics entire our opened years Tortoise SE care constructions of consistent in product Mexico integrated the second Sarasota, best-in-class to also supply recall, new built hiring very S-X, XX discussed we in lower maintain four-wall new in vision provider. collections and targeting and expanded XX,XXX through have our doubled strengthens primarily markets innovative chain a than contacts exceed In first And us our and margins we continued evolution an markets, lab, more new business stores we XXXX, Collage with of being Vegas and New our opened from facility progress first-to-market entering enables progressive you dozens of locations when XX% profile we Florida growth company lenses. of over Las quality on optical opening a opened our optometrists. growing the XX in further of year X a launching that We size eyewear and holistic by to costs. We penetration the increasing square average and under Richmond, Albuquerque, while edition, designs highest and like the As in care we made expectations assortment from vertically standards, to while the our meaningful eye and the eyewear customer may foot unit Virginia our XX over XXX market in paybacks We introduced months. a see in store.

We XXXX, just less true-to-scale Virtual category of adoption an renew allows both continued app, minutes of XX from eligible virtual telehealth and also anywhere on technologies continue to our test a into to first and groundbreaking its classes leading lens innovation users kind like in e-commerce we our digital time launched which vision Try-On. In focus tools. our experience prescriptions contact in than any at iPhone using

customers, of North metric all has maintaining industry-leading than Warby’s for X. As It more which I ensures in are us Team experiences these XX. turn Maintaining above since score we with are day and those than and accomplished ever. spending mentioned, And this our growth. more and continuing fuels we while an beyond to net is our Star promoter happy been milestones customers deliver products

largest $XX XX% since of seen from versus come more hasn’t year That or XXXX, revenue buying prices. XX factors: customer have from launch. increase years $XXX, our average was It’s Our the multiple increase in raising customers our per two us. come first, of for we up ever from the categories products

For higher in and increase of addition an progressive frames. contacts the example, price lenses glasses; eye exams penetration and second, to and in point

point and customer-friendly changed because in $XX introduced a significantly and much started some as the hence area their their talk prescription new selling market. price under As of many margin average Parker we And rest plus products have by not are you price and companies there demand. are have since and We customers. we a impact product to introduced over lot we getting alternative. years over We Warby we relative at launched economics an and opportunistically a this time. our the the But glasses are expense increase are in value these more where the progressives the about were highest points, high improving wanted customer XX of we remains have point reminder, frustrated points ourselves years, them margins seen prices, we have the price highest launch. part led of this have know and at and increasing order because large different seeing glasses inflation price that to for penetrated not many of create price is We some to squeezed other

to advantage our we delivering wholesale value structural always of controlling savings leverage pass our and will great focus licensing to As chain, fees while customers. eliminating and on on will our supply such, markups

We increases. economics resorting are able to are sweeping excited price maintain that margins our continue high we and our improve to to customer without gross

advantage. our raise even continue will time, even proposition will greater prices, to in which category sustainable we others to As value lead stronger over expect our become competitive

waves our the outbreak. XX% see to the efforts impactful they to all than we of days of recent has peaked we during highest continue a work. how engaged. from course, these our year prouder of and New given to more markets. Parker in the due positive Warby sales great seasonality utilization most work Omicron biggest particularly be our insurance typically Warby Omicron And Christmas survey, members multiple tireless Parker are a recent end, couldn’t year, This at highly our to business. employees the XX% of especially place many who Because in our of said In managed window they the of are visual between proud results would pandemic, the that FSA that be recommend unique as for team year and team said X,XXX Omicron was Years. Of through and of spending same

staffing-related traffic, foot significantly exams. As a and retail we result, fewer saw closures eye lower store

the often followed customers summer, The to shopping improvement productivity that shopping This all We exams and prescriptions of store them appeared. we closed twice lag time other stores. the neighboring following from and decline is this QX need as fewer as with people turn Delta. days saw productivity weeks store COVID getting traffic severe in optical most immediately retailers for in the prior and so, QX a exams shoppers not from people nearly significant from over be back fewer shops $X the XXXX, is Omicron-related switch or of in sales bounce us. Omicron does their do productivity for decline fewer at $XX and believe period stores also for to importantly, seen and time. by immediately scheduled. eye led customers until in our preventing in emerged there relative in have in variant steady or We lost don’t to retail X our stores, Delta in from searches nearly To Omicron that months When many was million saw valid resulted subsequent several same new stemming million to What shopping at and we online.

our are to months. by points As is we weeks, of in impacted we that from the saw experiencing a major recent and curve setback. X surges. as revenue reacceleration about coming ever recovery This began was with result, the our headwinds. of growth other And growth XX% we pandemic as QX in growth In what most temporary our remain confident a and negatively our plans estimate we a a long-term similar QX

access XX%. pandemic grow U.S. disruptive feel even our take been consumers X% from had has and has share our business, doctors enabled us comfortable more in when to over grew our to In omnichannel advantaged the and The continue been customer category. eye X shopping. This to to more has disruptive XXXX, easy material our market last it years. fully While differentiated while we eyewear and XXXX market to model, grew it’s prescriptions others the base to

behavior we through our and believe consumer returned as stores regained productivity, XXX unique we while our in our rebounds category, digital leading beyond. traffic benefit to As serve I plus full e-commerce excited we And foot continue Co-CEO differentially rest with pass and will that, customers for will to talk remain and and of it XXXX tools Neil, over we through the why Co-Founder, to platform. to and so industry my

Neil Blumenthal

Thanks, Dave and good everyone. morning,

We about ago. when and our as years first are category business as we excited started XX

know, other is you our consumer categories. of many As from different category

Our combination health of a core is eyewear, product, fashion and a product a accessory.

unique to responsibility amplifying while style. one’s and have a provide identity We vision

in weak in and provides contribute in purchased alone billion a $XXX globally this essential U.S. and operate growing large products to fortunate that that durability. and are Several the market, both factors and growth to and environment. one billion are economic services and strong $XX We

need people form XXXX. XX% most of using in adults of some vision correction with First, correction, vision

optical Parker. to of or factors Despite Second, growth that accelerate grow macro to change there $XXX XXXX approach. market. that retailers replenishment prescriptions as exciting a continue of XX% people our vision there who for influx represent to of and in an revenue, telehealth. Further, in usage is become These at of to and then more still trends X% customers are prominence and penetration contributing as just natural support reaching their favorable the correction the increased being to population vision million of steady omni-channel is preferences. one exceptional we grow experience needs acceleration the several This only and and screen fashion to update in care XXXX, increasing a industry to continue Warby us will expectations obviously U.S. e-commerce expect new rising aging time from an cycle the

and them. model shops Another served optical frames industry dynamic that appealing that business makes the our to their optical market purchase resell is particularly roughly then by and integrated eye it doctors XX% lenses wholesale of that independent and is vertically

The glasses, are of them is market significantly optical come Customers often or stores, retail roughly that an half independent company. that owned by their Warby on either to other Parker they XX% optometry the the chain because is And chains. one one-third chain of of spending overpriced by practice. served more from after an bought market

prescription The other is industry interesting nature dynamic of the the of our product.

You glasses benefits approximately they up of contacts need we buy and XX% a us optometrists. This to suites and as same buy people and location in exam. open with eye the an contacts. prescription valid Industry-wide, glasses more exam stores have

However, when or sales to are their due customers able Omicron optometrists prescriptions negatively other us or to variants. impacted not are local from obtain

COVID, GDP, up XXXX eyewear normal other repeated than of leads by to categories there that one entry While you the of than offices If surge. a spite the in the with outlook times, COVID of XXXX. sustainable barriers is faster incumbents prescription growth. in dynamic is a providing market its grow slower protects after CAGR poised it to continue ramp to to X.X% an Warby Parker, hear from a phrase to In

management while growth. expanding and is drive ensure exceptional growth predictable customer to Our experiences delivering future margins philosophy to

and We healthy to basis gross EBITDA the points more, XXX XX% leverage plan XX% margins of XX% XXX revenue expand margins to remains outlook long-term XX%, consistently same: grow at Our achieve adjusted to EBITDA year per maintain adjusted plus margins. to or gain

XX. appropriately promoter consistent anticipate in technology exceptional sustainable than customer that We also XXXX, sized with to of our result a we in investments continue plan net team our continued In to greater growth experiences to philosophy in ensure score growth. make and

QX current million line a least Omicron, estimated arrived in growth framework of from of to $XXX onset productivity on direct of levels revenue at after the XX% XX% of our expect based QX XX% We XXXX top we $XX QX in Ahead grow account from growth and million. and we XX%. and XX% to the observed XX% September pre-pandemic of impact the Delta. in to our emergence our in $XXX COVID reach taking assuming into of Omicron the We the to to stores million curves of of net at listing onset provided recovery range full from before

of expect we remain net to And adjusted to prescription maintain We tremendous And a margins have promoter gross see score at or launched that improve our by XXX will above basis points. expect fueled of consistent the just XX. anticipate XXX course, online business – XX% at We as we EBITDA natural we we XX%. having glasses. front to opportunity a tailwinds in selling us purely vision single to

urban We expect whose XX currently particularly as our retail by to our and traffic XX suburban most driven locations. of productivity channel our rebound, lower our XXXX be locations is points for sales than productivity growth

retail over This stores in the that locations also fraction third-party expand Last room in still We study today. best-in-class to locations. economics. XX a with plan new the XXXX is while XXX maintaining to XX,XXX four-wall shops retail optical a end open exists our that to has and of U.S. footprint we concluded year commissioned XXX our year, the

expand omnichannel believe will Having our model we our and continue our As both has be footprint in serve grow to make will convenient, forward. Try-On faster we unique expand e-commerce shopping and to to than others significantly And using store experience going to to service a advantage continue the us flexible and we structural our offline product online customers continue a of like this tools via and competitive offering, fun enabled category channel leading course, our Virtual opportunity. will also

Glasses top product penetration with to the customers in is product driving and gross see increase, for margin lenses years the progressive a up to growth front, XX It’s enable expect we older. distance customers continue line close. progressives will On and expansion. our generally that and

versus $XXX at product single $XX. start glasses that progressive starts Our our vision at

the progressives margin. In a ASP, higher higher addition to significantly have gross

of sold prescription XX% just making continue XX% glasses of today, business, to XX% the it’s with We in prescription the while versus XXXX. up progressives industry highly from up be underpenetrated U.S. in approximately our all

purchases skew excited the demographic. towards that older customer particularly to fact nature the the and by bricks progressive prescription mortar more given of are and today tend complex the We

to as this and compounding we growth return our we stores So, expect scale footprint product. full see retail of our to productivity,

expect gross increased ASP our price We to single will thanks that expand, vision progressive to and given glasses. eyewear margin our glasses the our $XXX between and our continue penetration progressive differential

our billion typically contacts which contacts market to year which expect to We in X% and contacts business, will we alone and of XXXX. business invest $X.X also XX% new optical an relatively similar to account retailer XX% of at sales. in last continue is grow The over our a to pace for doubled

So, ahead of us. many years we believe of have we high growth

to accounted our $X.X progressive, for in will To also We of will XXX our eye in less exam invest the providing of year up XX% ending eye Like an continue contact XXXX. new XXX while sales, XXXX. the e-commerce growth, for optical our to in testing And of over XXXX and exams eye sales stores, exam exam ours XX The billion. vision XX% offer than X% business. in we exams retailer and are eye in under-penetrated our typically is market eye account all We stores in exams. from drive given market beginnings. anticipate

customer We recognize existing to optometrists which cannot model, transition the experience control enable states revenue. exam to and will greater PC also give us in the will XX where a us stores employ we directly over

expand telehealth our capabilities continue and of test. will to we Lastly, awareness lead in way virtual the vision the and

Despite highly team’s our have ability dependency not model privacy platforms higher we Several we marketing Of IDFA limit ago, confident to are spend less we media significantly offline of to unique diverse a decision our navigate currently ours costs. channels. mix recognized acquisition total businesses instead experienced facing years X% to like we and of budget them. customer marketing in than the update through paid through course, Apple’s made social feel on our but changes, by strategic and challenges, our media leverage reducing and online flexible

are Given sales March our customer in the stimulus lapping we did a base of generally an more bump. federal not detect because increase and last in year skews affluent, one-time not therefore

not customer that majority where a in carriers, have shipping, price shipments fuel Regarding include of surcharges. we are our do agreement made negotiated fixed the multiyear through place

our expanded opening we mentioned, enables leads Dave greater year. to in in-house, U.S. delivery As quality footprint lab which Vegas more to last This Las us second and by optical times. the a manufacturing higher in gross make faster margins, glasses

We have scale been operations the than able talent to faster to hire planned. required

attract corporate the retain continue financial well as In is brand, of which good pandemic our offices. has employer facilities to our organization stronger our actions to talent efforts. the thanks and to the health, employees during only gotten stores, safety our as across fact, great protect our to our manufacturing we from to our well-being of This due because and

Our milestone team of pairs million of need. XX recent in people our glasses distributing to in takes immense pride

is on While Warby prepared outlook. over Team results along Steve color continue fully the about that, turn sustainable it our I these talk XXXX to to energized financial provide well growth. times, will and and to are extraordinary our With of path

Steve Miller

increase to We everyone. robust in. million, Revenue year and power model with XXXX. XX% of year-over-year. Thanks, Jumping continued which versus of Good The our up in versus XX% an million Neil up and active finished XXXX the from $XXX.X customer customers, full for XX% the Dave. strengthen. X.X XXXX economics, year stems financial came right at morning,

per we $XXX. customer year, average by the revenue During XX% grew to

continue rates these our with the of unique Additionally, form opportunity year, against uncertainty continued optical to strength we demonstrate through to of which ahead industry. brand most execute the the underscore our relationship strategies. navigating is demonstrate our as through Despite in the customers, results for the our XXXX able and long-term retention believe growth we’re we

unique to year-over-year of November our came and given aspects seasonality quarter, XXXX. up end a $XXX.X the fourth meaningful the up through. at at The the XX% business For talked impact Dave has QX compared revenue million onset Omicron XX% of had in on

year. within twofold. take we through let business, of moment walk me Omicron start QX the to have industry in optical the disruption Given importance January the and to from was the of our a The seen the trends you since

to lower our million with and of $XX impact QX top First, dollars the December to the into XXXX, resulted in February and in for deferral for the historically largely of impact view business $X stores. We million addition and estimate and January. the levels the in we variant end a traffic dampen up QX than across which XXXX January in in softer of lost lead seen revenue Omicron to the expiration split QX as to December at FSA continuing line and top QX we’ve and in most line

customer of Given impact seasonality do of these With outlook. this reflected we we and have the we recapture demand December, in to the offset not purchases weeks quarter lost majority e-commerce fourth performance the experienced unique last optical trends. full in did not quarter, regards increase of traffic sales in e-commerce year decline the expect usage retail X while FSA it behavior, over and and saw the our to first an in

such it online need purchasing consumer our as the for For be for comfort may for the time. levels retail the valid categories were prescriptions apparel, immediate as as e-commerce or and other first given shift eyewear not is and natural varying business, around between

XX% XX% the e-commerce overall versus XXXX XXXX. quarter, our of For in fourth business represented and XX% in

was XXXX. and the in penetration XXXX. fourth XX% XX% XX% versus during For the e-commerce year, E-commerce in full of XX% grew XXXX quarter

such, a XX%. down versus QX CAGR X-year XXXX, is e-commerce XX% up XXXX but of representing As XX%

XX%. growth representing For year, X-year CAGR of on grew year, the full e-commerce X% top a XX% last of

important of demand, generally and higher revenue as include I to and QX quarter. lowest margin about customer support questions. well that to orders make the and well is we experience increasing you as the in our holiday quarter as support given with gross flexible investments seasonality customer our as volume related support store some demand meet spoke increasing as quarter hours selling traffic shipping staffing accommodate wanted dynamics marketing expedite to and and to to of investments we These holiday extended to generate fourth expiry elevated several timing benefit as I SG&A, call reiterate margin higher season and the gears the deferral shifting spending to investments Before to store benefits. FSA staff last

So fluctuate. while saw added quarter will to profitability long-term growth we the believe to XXXX going our view We’ve outlook high may improving an on of basis steadily we a and also quarter-to-quarter historical by show annual as back picture in XXXX. consistent as our earnings slides revenue

you equal is quarters growth significant from As revenue can the QX. distribution in QX in the with sequential see, fairly to across year up same step a

post the that pandemic We continue move business in many let’s over seen expect in this With to mind, on cycle to years our prior. margin. consistency gross we’ve given

depreciation our store gross reminder, the shipping, a store accounts customer is doctors, for of frames, unloaded a range and margin As build-outs. rents including and optical of labs, eye costs, lenses,

employees. includes expense lab also margin gross for Our compensation and stock-based optometrists our optical

be comparability, For and XX.X% adjusted margin, XXXX will gross to gross I quarter and XX.X% respectively. margin to compensation. in XX.X% came XXXX, in Fourth speaking compared at excluding stock-based

For in XXXX. XXXX the XX.X% and in full gross XX.X% to adjusted came XX.X% compared in at year, margin

talk well we that have costs some quarter, puts impacting I’ll several as and as the takes For through. operational comparability benefits and unique

a basis from benefited First, approximately XX of points. QX rebate XXXX tariff

gross have expanded. Excluding this margin benefit, would adjusted

was the total of gross in margin. slight quarter of Next, contacts of as the percentage primary acceleration driver the and fourth a penetration moderation our business

a and part offering of key care driver expanding scaling our a our is average core contact mentioned, holistic increasing customer. offering of revenue per Neil As vision

of accretive purchase dollars and higher subscription-like a contact versus the lower product. other margin margin gross gross While product have they lenses frequency to our cycle given purchase are offerings, this

retention higher ability the typically Warby sales their meet ecosystem. that Parker eye the to care all rates given contacts Additionally, for within needs customers we experience purchase of

about optical quarter, moderate we As was in lab margin gross second as on capacity. ramps drag XXX% last there Vegas operating Las a our to you with talked

more us West which ultimately within in XXXX, will the to customers back reach We to half expect allow of margin. our efficiently gross lab serve the supporting scale Coast leverage

progressives continued of to gross inventory higher-margin strategy as Lastly, our we saw expansion the a from well product as benefit margin optimization and business.

For tariff margin from of a approximately basis rebate the points. gross benefited year, full XXXX XX

and business Excluding benefit lap media planned gross to leverage as support investment. margin pre-pandemic as the by leverage XXXX, on was overhead offset gears investments deleverage primarily scale sales, Adjusted last the employees; in customers. occupancy by have spend, in to program; would quarter increased spend our SG&A and for contacts XXXX, of business store SG&A. headquarters, of three as marketing a SG&A the deliver experience expansion or the our Shifting year Home-Try-On greater customer been we business, penetration and make closures experience percentage for our demand continue this increased components: during levels in with quarter including remarkable year. line corporate and our million retail partially acceleration salary expenses. XX.X% higher-margin we retail $XX.X as general to driven progressives our net adjusted to fourth came driver at during we our in of expense includes and The primary main

intent response given in about on season dollars those strategically December as to behind well we customers’ pulled redeploy reengage in business. the variant top other learnings Delta brand the of the annual variant the less At during opportunity to than in our of than selling November, existing invest marketing spend our a with brand awareness, We customers. the customers in back the the the fourth the made to we as continue importance first spoke the introduce want after be each late presented and prime we you potentially November, gained the the FSA When to we’ve quarter, Omicron new when strategic with XX% is having marketing, unaided at navigated expiry is to higher the by decision with to seasons. third As intention emerged in minds to uncertainty quarter. to variant season purchase

an and year, a on XX.X% improvement investments of when as $XXX by net compared in XXXX came full the to both salaries million G&A, on sales, realized XXXX basis, adjusted offset and or as flat to percentage marketing. SG&A at we leverage about For points in an partially X.X of

fourth For margin year about negative negative the in was just last our X.X%, EBITDA with adjusted versus XXXX. X.X% line and quarter, in investments spoke the driven I X.X% guidance, by

the investments $X realized been of would the quarter nature flow-through described, sales have fixed of we we healthy would adjusted and QX lost the already EBITDA in believe have the higher. on Given million

last leverage cost EBITDA and in year, deploy $XXX sheet, realizing support margin reflecting a our For operations. We will to which cash, across adjusted the growth with X.X% discipline year was year reflecting to X.X% balance and X.X% strong the million SG&A continued deliberately finished XXXX, continue versus full categories. and in

Looking confident consumers algorithm likely uncertainty, global communicated we headwinds impacted near-term optical growth is and our by macro to healthy and ahead, growing, Investor the we at in be Day in long-term and remain industry September. continue will while sustainable the

year about $XX of XX%. impact the represents lost quarter to of million, revenue the This we million it reflects to the As XXXX, to outlook relates full are $XXX previously. first of and an growth in guiding spoke that XX% I million estimated which approximately $XXX between sales

our basis, we given the to guide While quarterly wanted not XXXX we and impact the start to on Omicron to color. the of to year provide the corresponding do of year additional plan a disruption full guidance,

which sequential top XX% to QX we’re to $XXX.X This XXXX, XX% XXXX of revenue represents year-over-year. to represents XX% million, from growth to line QX approximately QX XXXX. of between $XXX For growth guiding million

a sequential see year, QX pre of our Omicron. pandemic, if this can have for similar and As seen XX% slides, we QX you plus have in from would expected not step-ups to dynamic typically

pre-pandemic approximately levels year-end. year XX% in reaching retail Our recovery, continued of full QX assumes productivity guidance by and full

million months stores For average. context, in for XXXX, in XX $X.X more, opened generated on or our revenue

While broader we productivity to the of to of we the alongside environment remain faster, recovery ramp will facing known macro both as changes COVID and timing consumer and the impacted unknown. maintaining optimistic rate economy, and stance back the conservative full in will continue we a by some the are be headwinds

openings with results our we of and we expect adjusted for to to reflects from store year the line expect in In expect also XX% occur full margin XX% our QX representing X.X% in to in earlier for Similar to adjusted quarters margin X the range third EBITDA X half second sustainable gross growth, accelerated than long-term consistent the points, to our EBITDA growth to more XXXX full outlook and XXXX. of Our and of expectations with new outlook delivered underpins X.X% be openings. improvement forward. year for and XXXX, timing XXXX margin of

deployment you of In spend of experience optimization and sources corporate with to expect SG&A opportunity about highlights of front summary, outpacing very a excited to want our we the customer recovery from retail growth in from we continue We growth us. marketing the disciplined of leverage stores come spend. of revenue To business, continued the the of overhead call. and in to away and teams, recap continued are post-COVID take our the quickly some today’s

during timing its by share to First, FSA ability given our Omicron, and as exams new eye customers’ disruption season grew prescriptions. business materially impacted as significantly, profitability its obtain being and of expanded well despite gain

updates by privacy is costs, labor our Apple’s increased stimulus. shortages, Second, shipping impacted lapping or significantly business not

excited for year to I and Dave serve open the energy higher, our currently ahead. Neil, our and Third, as your the Q&A. business channel from and the our the reopening enthusiasm our our coworkers take Fourth, productivity underway our been With of has please communities for we our success shareholders, Operator, are customers, mix normalize. that, and never questions. for benefits the and excited we’re retail line

Operator

Instructions] [Operator Altschwager Baird. our And you. Thank go from from question ahead. Mark comes Please first

open. is line Your

Mark Altschwager

Thanks questions your start of progressive – on you you. price you’re an update morning. single us competition? more consumers. glasses. at and the thinking do you on about and the specifically, the on related Good opportunities for here. the of the front. bit And on give guess could you I does Warby’s the compares was remind Thank maybe end have competition vision to to same a And the us competitive with gap inflationary hoping I backdrop that there, Can talked taking see how about off, lot you increasing pressures you how pricing point then a Great. that the how progressive some my lower

Dave Gilboa

dynamic, on step-up to typically in our our customers intent for this as still from was able Similarly, progressive skew the First, we $XXX so high-end per at product more would are cost. $XXX pair spending coming your value, at optometric mentioned, fraction the glasses that from find our at competitive a you level single much so And they of see is from question. optical and $XXX, provide from a still to Thanks to tend a what or more customers the which we progressives get practices. are of and product, start us they us then glasses price When $X,XXX same frequently shops we vision exceptional come of $XX. to to affluent and

We just significant customers. more to inflationary market. of and competitive have becomes pressure think the more from compelling We and environment, pricing in competitive not the power lower seen this our end our

Mark Altschwager

That’s for follow-up great. quick A Thank you. Steve.

a you color to XX% in the on the XX% disruption, plus a of Omicron maybe million, outlook. If could the midpoint, couple $XX XX%, the current us even more points the little give bit just the the prior prior between adjusting bridge below outlook for

could little would a you again. more Thanks great? be bit us that give there, detail If

Steve Miller

And of pricing just the Thanks on on the part, question the for Mark. your Sure. progressive versus question, our competition. last

is average on So anywhere frame price depending to if for a quality you’re our $XXX progressive retailer. the lens, talking similarly $XXX, from and $X,XXX,

to the frame. type pricing offer still be lens on there quality we of believe tremendous we that continues and specific advantage our So that based a

X it in million In terms also for regarding stores of as XX% relates growth, from roughly roughly of XXXX, attribute we assumptions guide gets conservative of the our which to Omicron, productivity. full QX $XX our accounts modeled for recovery down you We’ve XX%. lost full in business question which of some XXX% to so guide to points to

we would are all model. of that still it in we’re optimistic we incremental not is And And of although we’ve point uncertainty built era, we’re the There officially that environment. X that our a the just a before level in think is are their in and our we XXX% account so is wanted flexibility for COVID conservatism to through stores the to optimistic back path yet. get QX, build recovery that on while of prudent. done level in they to will XX% year-end And and

Mark Altschwager

Great. luck. Best of

Steve Miller

Thank you.

Operator

your you for Thank so much question.

Kimberly from Greenberger from Morgan go comes question next ahead. Please Stanley. Our

Kimberly Greenberger

so Mark’s to Steve, much. Good Thank on your I if there. morning. could Mark, we you there, just start question just wanted to answer follow-up

embedded guidance on stores? retrace your of their and On you’re understand suburban their you the productivity? your have us XXXX, pre are in habits I’m you improved of XXXX recover other recovery onset of all, urban revenue wondering the your full of seen have back the productivity, can in productivity XXXX, of XXXX In in back you urban workers get that back in-office have level the help to post stores office to assuming if, you that recovery levels? stores if the urban then seen to COVID And in the spring back store to productivity first pandemic store words, original in for you order go urban the

Neil Blumenthal

Thanks, Is Kimberly. This Neil.

reached full are than So productivity. XX our And stores have stores points our suburban below not again, that. urban more yet

we we’re a we’re York business, out our what our days sort mandatory own headquarters back assuming week. April are is returning We of of the X calling also office And which in seeing starting X New X. are to

our not pre to not urban eye And to increased impaired, in in reduced be tourism traffic anticipate part stores because are by pandemic many progressive neighborhoods reduce rebound. our increases will of levels. traffic penetration we that sales, ramp office So necessarily exams, full as to we a assuming full productivity driven of have worker been but continued productivity, well just contact but

slightly our pace a return So that locations. than urban will we stores to suburban the do anticipate full slower productivity at

Kimberly Greenberger

really XXXX just you to color. much. ways insured who talk for sort or either might to the Parker that’s proposition Any have Neil, so consumers second XXXX Great, you. in step in I back wanted market? or strategies have you And vision strategies that enhance a Okay. Thank of of Thank Warby incremental that and to new the great insurance. tackling place about

Neil Blumenthal

it Thanks think for opportunity a remains distinct of opportunities. Kimberly. question, the insurance that, Sure. really for believe three We within And as us. massive

So the first expanding is relationships. in-network our

news XX We like have are well currently covers this more Boeing later you that which million deepen continue in and and share in-network relationships on employers will being offering benefits lives to large and like we see as year. GE network with to to roughly us as front UnitedHealthcare, this will

that optometrists most then create of and our industry. world awareness Parker, aspects consumers And pocket have insurance to of of consumers a Warby and out did the they – they out-of-network $XXX Warby into those continuing of recent over would their the at to are massive how in parts the to dollars the to we building vision hire is they spending same survey is believe in when those business, out-of-network to and expanding open consumers to vision in continuing use innovate But And will rooms there us here we a of opportunity found to other a purchase And that Parker. if industry-wide, all less our within contacts investing continuing a pay out exam benefits. is all expansion can category category period. use as would longer a of country, about that consumers create benefits. our thousand provider insurance the zero we we single-vision even second the benefits throughout enable third create foundation around couple rethinking came really in care the The more spend in-network time telehealth, online holistic innovation glasses. to of pocket education, have both And believe stores

Kimberly Greenberger

very That’s much. so you Thank clear.

Operator

question. very you for your Thank much

next comes from go Please from Our Citigroup. Paul question ahead. Lejuez

open. is line Your

Paul Lejuez

average active in also of Hi. about you running And Thanks construction talk could guys. front. just then in you of the the you ‘XX, And open markets stores F per guys. staffing versus just customer? that on getting then sales customer stores front Thanks versus about growing in are into the last, number drivers new ‘XX. existing bottlenecks Curious if for terms your spend assumption curious of growth any markets that or are

Dave Gilboa

the first of to question then answer I will part turn Paul. Cool. Neil. the the over and it question, Thanks for

consistent In the call in customers have been increase zone, seen has have aspects terms grown one with on active of customer XX% the revenue per and consistency And consistent which to our our of we we it of customer coupled that, basis. financial really sales active so model really assumptions drivers around ability average around growth, low-XXs. nice the the a

talked have to how that’s XX% We $XXX. year-over-year up about

with be And we growth have XX%, to not to perspective, deliver so to believe in we certainly that as very underpin with done as to able past. in continue generation From increases average we how customers. line consistent we we factors way really we are active but And believe our a revenue the have also there so to consistent continue a will will customer that in drive in that. demand in few acquire high how maybe ability customer, keep mind that per a done

spend. and accelerating QX, to the deploy year. So, disciplined very XX of one our really to them open We plan plan are over this growth new stores is opening targets stores. to we up underpin continue And in the new XX QX year. up of marketing course which

conscious and want our We to than revenue appreciably and between and year previous revenue equation is CAC. growing growth the CAC make years, this we growth that of very sure to similar faster are

and profit basis. are contribution And margin a contribution so customer on increasing per ultimately, we

model. go So, factors into that our customer those and drivers some of the are acquisition

Neil Blumenthal

And is Paul this Neil.

seeing sort new targeted wall bottlenecks line so towards that with inabilities or paybacks are four our EBITDA. expectations XX% in stores complete at trending to timeline. construction stores any maintain us and our performing first with not and launched these of month in the for are opening line pre-COVID, and XX we We store performance year our And

Dave Gilboa

XX year plan existing proportion. to opened are that The the a this markets. is similar and new Paul nine of sort the we be is rough of in ‘XX be split markets opened of in in open markets XX will we will up new markets opening in thing sort five stores XXXX, markets, added and new we to other continue stores new And in

more will towards So as to year as a little this Neil that similar the existing. indexing indicated last split to very year

Paul Lejuez

Thank it. you, Got guys. Good luck.

Dave Gilboa

Thank you.

Operator

question. Thank you your for very much

from Our comes Roach question go Please from Brooke Goldman next ahead. Sachs.

Brooke Roach

markets question. for drive to Dave, much love I taking into XXXX for that beyond. insights hear more that and brand that any Warby’s bit seeing plans and morning markets a can thank strategy noticeable new and to awareness Are campaigns your brand? growth you our customer the are share on there Good you so efficiency for and any differences you or marketing little Neil, marketing the new about existing would between

Neil Blumenthal

start. will Sure. Neil. This I is

companies first, think a we that marketing know we our And talk I lot are seeing should changes. IDFA probably little of just challenges a about bit because efficiency. of the

season, very sales opening in that made platforms, week, growing ways awareness media customers We And one to elevated sales anticipation channel. by Omicron. average benefit if spend – retail customer peak our it’s Tampa. sorry, increased It of percentage starting our And CAC marketing to believe our the of model them in we said, our attention that we fundamentals in the we productivity it’s of and by location we stores these is due vehicles, because due store CAC. That making a We this believe we I e-commerce to third in sort see reduce impacted generating, of that’s revenue, new as our super remains on increased in already being our and decrease exterior. really higher up tend Park location Tampa stores, deliberate have QX in strong. related are several faster raise think was ago stores and beautiful. is just And in see now to community. I’m in that in opening our the vis-à-vis our Having media Also and the Village of second acquisition CAC Tampa. social to Hyde and a we a lot a did are than It’s indeed less our was of X% decision not spend. to years dependency it CAC represents than

that we course, of just to exist. our customers good in continue us. mix see performance with of So, a that And you will to and fall enables love brand know marketing

Dave Gilboa

that just marketing. dependent paid never have standpoint, I marketing on from a And add we would overly been

customers our through have continue to are Score. been learn of we day, marketing about and customers this we of be the to Promoter our best mouth, continue the Our channel remain expect into us and case. industry-leading and excited And word to our to maintain majority Net that

Brooke Roach

the hear far. questions Thank seeing the of to the signals would you. bit you have I Omicron so some I one in ask a Thanks are follow-up that color more regarding that But the could all about impact. business. of of to provided just you little for February stores stores truly Maybe if Thank love relative function the And consumer maybe prior confidence that the that in store given just is quick you consumer’s that lower on you. productivity end urban backdrop the of seeing to suburban challenging give versus the Omicron you are through the inflationary the a a wallet. more the pressures

Neil Blumenthal

then are geography, back seen multiple reinforcement One customers is seeing like there the increase Net is provide. outbreaks sort see not in or any pandemic, sort thing there COVID stable around and lived If where again, to prescription or the when not of we of traffic. pricing. immediate other our is to retail sort we stores through you nature we patterns drop consumer bounce of from in some are and is in anything, about sort also sort necessarily our concern add – of hearing the of of because certain increased see conversion a This have value an to ways Promoter immediate an of there we are of that we and And might hearing have we now product, continue our Score. similar And continue in categories.

And will coming that continue recovery and are we increase. so us that give confidence productivity have store out curves, consistent to we patterns seeing seen multi-month Omicron of

Dave Gilboa

in curve numbers to adding shared with trying Omicron. the that we are at some we of our that just spotlight And investor the onset where of the on slides, to recovery

quickly over the how we beginning can XX% and timeframes you year. believe rebounded And curve, are at occurred. have the how from the stores That project informed year-end. rebounded be at see by the of year. December, XXX% course of things and recovered mid-XXs the XX% And pandemic, seen the of impact the that stores reminder, they we the our through of one the all full we stores that will the our QX, various now pretty of of rapidly of rather is have the we and onset our have curve by Delta recovery as dropped the productivity quickly Omicron think as XX% to Omicron at and And is I our onset it. to by through interesting original now a onset and the recovery by of

Brooke Roach

it Thanks I on. pass much. so will

Operator

Thank for your you much very questions.

Oliver Cowen. go Chen Our ahead. comes from next from question Please

Oliver Chen

Hi.

Thank mentioned how should and I control, as are other you. roadmap. technology catalysts your and the customer the Regarding and holistic some And what out the vision vision we how And And looks FSA of macro impact are app as of sensitive thoughts also – the factors? which factors, them are changes and as traffic then in think your many on more and virtual which of most guidance? care, what’s monitoring be legislation, store FSA terms would but in you to in well embedded curious love business testing telehealth ahead ones key to that near-term, we was there. may profile about with your

Neil Blumenthal

the telehealth questions. will start the Thanks, with for Oliver, I one.

excited seeing are capabilities easier incredible will bring and market. customers ago, will extend contacts new very prescribe get from from that positioned from for us use reach a patients this technology to virtual cheaper it year and we features renew months So, test. about prescriptions. home. our to of vision getting few results prospect see us for our are even product. telehealth positive introduce we in their believe And few it new to to a we making of the for And customers make additional feedback new still and We renew our this incredibly remain new introduced the to doctors. a it and we uniquely you minutes easier, And some faster, glasses it that but of prescriptions prescriptions just are products and who It’s

eye our more stores. in of invest easier including potential drive are make telehealth, also doctors technology efficiency it to for serve in We using about other the that business. of to in excited part and continuing And forms of our that our patients

Dave Gilboa

makes the be being I said, just FSA or sort is welcome use funds we on legislation found date That pretty perception if their customers flexible. to that think even an that. we of December changing XXst. from a There those expiration uninformed perspective, legislation more tend that is of of not

years many So, while and catastrophic may changes high the deductible to is expect a vision protect of in don’t these significantly but FSA risk. sort some a insurance, plans even prepayment doesn’t customer don’t to this how ahead, immediately our we the with effect. changes impact that take so it significantly influence that will understand fact year. And seasonality plan think almost may fully years it their vision often that’s dynamic, against effectively similar a but – impact it for it insurance where take We several customers works behavior

Oliver Chen

And Okay. love but happening. side, Thank about your on there news lastly, would you. hopefully, no new scale variants, there macro is always And take. really are just the things

thoughts future to ways are with long-term the strategy? business there longer of your to think your dynamic? evaluate respect this you term, you you. love as As Thank proof Would

Neil Blumenthal

Thanks.

in things see the stores, conversion our our of significantly. traffic that One our did increased as business we in declined

categories reach environment need full We more a plans, model think optical XXX% industry. in and other the grows traffic like achieve think higher in and we back don’t to our particular, retail we productivity or higher rate than industry even as our productivity to tends about Historically, macro GDP. feel than to ‘XX, at in get to the optical to plans. So, the order impact we

traffic into neighboring right, token, On decreased increases the traffic stores. stores, same to our

continue we monitor. So, that something will that’s to

safety employee from to benefit an the businesses it with usual managing and then when in employees, think and that our to engagement us employee in we in pandemic, and talent. and ability our were customers XXXX lower our think and And I – earned XXXX. our seen turnover in and mover recruit we top turnover than seen rates retain That’s our that today scores. continue saw that’s all variant and quickly. elevated churn, in protocols comes implemented we goodwill to That early through the health

stable. relatively was Ours

to employer of because really social continue about we And just be our great So, feel because innovation. a we preferred of that. our culture,

Dave Gilboa

serve And that also to take market variants to just the serve to of will what that regardless of in business our happens capabilities our flexibility customers digital terms we continue course unique we are ensure share throughout the and kind when customers pandemic of our the category, have of us future in to other that have to enabled to us it we had close meaningful has or surprises and all to stores. continue enabled of

are of serve kind that investments kind we to continue they in unexpected model we ensure And that to up. will better have regardless omnichannel positioned customers so those events that the of pop of

Oliver Chen

regards. Very helpful. Thank you. Best

Operator

you ahead. final Evercore. Mahaney Thank for Please today from much. question And comes go Mark our very from

Mark Mahaney

Thank you.

gap, that those don’t. productivity the the to to going idea capability. you. all the existing XX stores the new retrofitting feasible And it’s have eye of stores versus that just what us large a are and year have have mentioned eye Thank rolling the you difference Can is? of or that? if this have many out exam You all that exam of the your are you appealing And capability remind is how stores stores possibility

Steve Miller

refer recognize to doctor. of today from question. stores we the for doctor exam Roughly have our we Sure. the XXX Approximately employed Hi and employ of revenue capabilities. those the Thanks the Mark. ODs, XX where as eye

another XX customer our got we independent from to eye track that where optimistic, the so We it ODs adjacent places those amount the but are have an examine the not or do order can’t lease a gets recognize store. typically and we exams, small of store. our an although We doctor space, we in revenue

reminder, an is at purchased all eyewear for gets eye the same higher place XX% an number of individual exam. prescription our where As roughly That a is stores.

control partner we year, PC exam us conversion to So, are revenue, roll our are reminder, with planning just to a comes out for into model be exam roughly we capabilities be today, OD intents elevated conversion a stores that sale. bit Neil will will where everywhere. revenue an not will X% eye employer sale are about that eye continue relationship of an that this all rate to with benefiting we market from as from of exam experience. And exams in we a of eye the but as PC where over to we business the optimistic roll an have OD the those a from out There roughly customer prepared to, a the needed his able that The eye enable just more XX have and another recognize and remarks, XX independent like exams. and from and model purposes in talked

sell we him or our terms versus to eye pays of generally to that appointment books. XX-minute than costs virtue in by eye fact more for the add eye book an him incremental exams are eye tend slots XX-minute doctor, or increments and In We herself, the herself increments. the of doctor,

Warby to the a and a build of out doctors makes accounts versus reason. the space for to competitor an eye that with understandable believe and The do is without moderately at factor doctor manageable more that, revenue negligible. our and well more eye that square feet square of XXX Stores than for It’s pleasant work feet. XXX we stores store $XXX,XXX south approximately generate So, store. a a is cost for itself in bit environment at

and very In where consistent also this stores have stores our capability. terms for applies we seen paybacks months eye that at payback, to of below, XX doctor add or we

Mark Mahaney

you, Steve. Thank

Operator

Neil session pass for much. brings to call today. our Q&A remarks. like would And the final very back to us you Thank now I over this to of end the any

Neil Blumenthal

and of questions ahead. and and excited have Great. Steve Thank so in years team months for XXXX, I proud the the great incredibly accomplished all you are today. your and we he what are for Dave,

follow-ups, you. out to feel If you investors@warbyparker.com, we you have at chatting free any Relations to all or questions and May. again Tina look forward Thank please our additional to inbox or reach Investor in with

Tina Romani

Everyone left call. else have the

Operator

you for Thank today’s joining everybody call.

disconnect now your lines. may You

Warby Parker (WRBY) 17 Mar 222021 Q4 Earnings call transcript