WRBY - Earnings call transcript Q1 2022

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Tina Romani

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. materially various expressed risks differ a implied may of result and results from or those as Actual uncertainties.

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

found on Additionally, discussing GAAP financial measures measures website. and be of over release in this to prepared we begin. nearest These are to now Blumenthal our measures. items morning's reconciliation substitute A performance to to our our these go to GAAP will IR in - deck non Please certain GAAP. be accordance addition and non available I for on financial will host, - financial Neil pass like not ahead. U.S. with GAAP of to can slide press measure in

Neil Blumenthal

morning, do an And for that, week, day we'll is I'll and right us. This performance. having to best meeting starting the productive. you so And you first Good with probably this many QX into try your engaging, of thank and make our everyone. are dive with

base, our our customer key and further on Our stores driving team active has opened digital continued our sustainable we to eight capabilities. throughout services the objectives offerings, and our grew retail In make in executing products progress enhance quarter new strong growth. and particular, expanded

our We approximately we for this up we basis. XXXX growth to us $XXX.X despite million earnings while challenging achieved have call, unique profitability believe last on the Omicron was milestones worth the was CAGR for quarter in quarter quarter in seasonality lost $XX first proud first expect walk three-year of in the are And of million impactful the and in through sales we QX. the particularly was XX.X% year, we our of As resulted the XX% QX given business. a up QX lowest Revenue backdrop. of Omicron versus

where spending primary to our way just year-over-year converting store QX. for us stores has going get our our their we we million now expanded encouraged exceptional in This $XXX. count and to bringing inspired starts quarter, one, delivering we patient, in it including and commitment the fast-growing care we we're our Model, customers key with an the and as And to ever shared to of sales and customer Series, highly customer exam in Across we core allows as our work markets learned retail to are on of by Italy. eye rooms. in to states, third On very of corporation revenue XX shop, our team and we starting first $XX, collections, stores consumer brand, revenue. clip-on holistic or on by us our meet at our because the the their $XXX Warby benefits be store lifestyles frames a professional sunglasses we easier more point Throughout commitment our for including collection and to opened optometrists, career about dreamed continue cannot offering and believe helped opening fuel stores, well last priced at about Parker, design first price construction of and in culture, transform opening out to our end and four even Nebraska engaged to lenses, mission customers optometrists adding customers to these front XXX grew ended To they with offer, and our unique and at recognize coming to quality brand. by them fleet convenience PC our Tampa, styles with of gives customers a deeper environment like focus which prioritizing a structure who day of and our existing more members vision the continues Houston as to working for And directly respectively. favorite time telling competitive continue and design that sixth XX% our summer. continue the optical exam before created, want us. care. This than fits how We up we QX, to This where happy to word This customers locations us we retaining call, new per our collections, of a growth in our experience, allows them eight by and average as to they our more optometrists. employ part the the spring prescription making and assortment, into increasing different and our instantaneously, We experience continue by we've for foremost and of greater which over focus see value. included while and which customers love see opportunities which control all enables where is launched enhance exam eyewear family quarter core with and friends range new Since produced in-house preferences, interlocking been of and than Nesso us. our experiences X.X features our

XXXX, to And that XXX progress prefer Model. We're this QX, converting app. like test offered prescription number the PC QX their through end to quarter, too. easier goal our the update that towards the eye of comfort Virtual vision This made first-to-market administered app. At nearly make XX continuing our of Telehealth to Test, doubled we quarter, stores for the our existing by to who XXX Compared patients Leveraging we Vision homes. of of eligible stores from technology their exams.

New lens our result doubled to which insulate past and Vegas, our and see contact laser-focused supply Las QX customer, Nevada along in our Net entrepreneurs our it. We growth and do, Sloatsburg, to within an us commitment impact. from scale continued indeed online to also lines than not supply which Score think above Alongside you chain aim we serve we XX, integrated in This on staying we strengthens and further business, also continue to can optical believe our remarkable we businesses pressures. quarter, global labs and scale XXXX. customers the in both other all same more experiences meaningful York, our while our We impact. And chain vertically best-in-class did Promoter driving that these beyond offline delivering to commitment to since industry, to but only is which a our as creating that is inspire while example

As part Eastman with molecular a of kind demo recycle its announced this to program. of partnership Chemical lens we a first commitment, pioneer

that Parker customer are can the One our or is most [Indiscernible] our innovative program, Pupils of with top retail industry recognized an big down physically environmental environment demo companies solution of by eyewear to glasses lenses. within to lenses on in their our day single the organizations we've the molecular list companies honored their brand Recognized It's work chemically repurposed transit progress performance. come Project distributing while eyewear a impact environmental and shape all students the acetate for we're solution particular frames. a circular Warby sustainable and XXXX alongside optometry business a on social to traditional while I work material and team, our need programs the can break top only Dave close to our our fostering of facilities, and industries good. Warby's or that inspired to levels frames acetate should the through our demo and experience the solution on the continue members are reshaping of used that work compromising team's to of be a the offices, recycle with earned largest integrity to where In in be to is as Currently, we of to employees and great and frame up identical and the are commitment a have narrows vision impacts execute within The recycling to all. and [Indiscernible] to aesthetic is display. QX, offers talent for level and making focus our manufacturing recognition maintain producing industry broader team. important sourcing our to full-time this in continues acetate, culture. for retention Warby in and creativity, partnership our and lack a across create Working it resilience, is without of think lower focus we honor and vision pre hire to -pandemic fun. Eastman, lens provide like within solution Team corporate in our We're proud team the out driving stakeholders. that every on to for the mission This testament so continue our the team part towards the dedication

our retail will have the growth confidence to lowest productivity for talk more about. was we're QX to which in year, Dave we expect improvements and have this quarter profitability starting While in XXXX, growth trajectory see and

Dave Gilboa

Thanks us many the Neil, it's to great to welcome. for to first joining so you of and speaking be time, those again,

remain for Omicron-related our our within with began for strengthen industry, our XXXX position challenges we market to long-term it. as overall, category optimistic While the and significant about and customers ever our and prospects the opportunities unique optical as

continue in not progress below reach levels per by retail The the there to with rose and ahead which productivity along recover. around recovery full rate to XXXX, XXXX. productivity. wave defined observed modest retail we'll need pre-pandemic sales the pre-pandemic of do then order last productivity traffic Omicron and XX%, that where earnings traffic to In to we has QX talked about to of the in mid-QX team in that store to to of accelerate had productivity around to as and we the us rebound to expect productivity or with In average we retail productivity, trending on see retail increases. continued pandemic; call each our was far pre-pandemic our metric curve believe April, retail will conversion to as prior We enable we look we retail XXX% retail XX% have levels, expect [Indiscernible] growth assumptions after impact our driven, was continues levels achieve gains to We Omicron. year-end. recovery. said get rest indicating On pointing this As foot compared

also the we represent this XXX our on stores, than In existing year-end, we by year XX XXXX, growth track ending to footprint remain U.S. this new expand rapid today. XX,XXX less addition with X% still productivity of Even will stores shops to increased in optical open the from our retail at with stores.

In existing areas offerings, our all Exams; addition and by tools we'll digital drive our to scaling launching serving our represents industry-leading our expanding of Eye still Progressive, to Vision new and in retail product products, particular: the a our broader business Try-On in our continue Virtual driving fraction and Test, market. better of footprint which just growth Contacts and through customers adoption like Virtual

less penetration gross Progressives industry versus business, in Progressives a and margin than make are highest line the Prescription our driving highest see price and category, higher growth expect increase, of stores online. XX% Progressives of our our to point margin and mix we expansion. average. our Progressives of half We up gross Eyewear top to continue

our see both as bottom-line. Progressive’s growth to will productivity So benefit retail top we increases, expect and

an just Contacts while We currently business to sales. XX% in accounts growth accounting our optical will for drive XX% continue to of typically X% for of our retailer's business, which

than of And Industry-wide, We Exam glasses from our place ending business. XXX a innovation exam. from continue App. we average get drive up stores, in anticipate continue year Telehealth and eye purchase features the glasses new in same XX% revenue the in and draw of exams eye both Eye more in Testing as growth their in per and customers awareness us, of Test from to XXX we'll contact continue add Vision wearers we many our to the and to purchase our they Virtual As more invest will our providing XXXX, customer. see we'll glasses approximately space Vision to

is have that business Parker. from been unique not Our customers dependent on in their historically, Warby getting we prescription

catalyst them customers friction forward, large our and for us. should for significant remains Going options convenient a opportunity exam vision reduce be having a more for and growth testing for Insurance business. a our will Vision

contacts making to UnitedHealthcare Timmy in-network exams, A and in-network Cross as out-of-pocket scaling we like of our and paying These as government it use it for million to and focused while option out-of-network easier joined an We benefits federal make for out-of-network with benefits the for $X by to for of exams, became their customers glasses, of the excited Boeing. also our purchase $XX. Starting are have to Employee use members managed their and We're Shield for customers insurance on revision up Xth, employees us. for meaningful on in-network eyeglasses. Federal January plans employers the numbers portion large glasses, little and contacts, even relationships, Program. pay currently Blue purchase Blue easier to our

easier customers their they can educate with to plan. we exceptional of to us order a in these insurance use benefits price of all regardless even us for their investing our benefits that are existing or ways and with these benefits our whether it to to use offer make in customers, to products not. consumers We And number value

weak inherent strong are large of and historically resilience for remained unified in, the than are growing environments. challenging business industry and optical both we're reminder model. cheaper industry out-of-pocket an both across environment And grateful a prescription poly-carbonate and lenses lightweight that The our and we $XX with anti-reflective the impact-resistant like reimbursements. includes has most and smudge and In price is and prescription resilient Our index glasses treatments. world economic anti-scratch durability as

consumers adults in essential predict and we we the Canada and services do While will access we coming the months help across need the know what can't like the and to offered look in waves economy pandemic But of years, products to consistent recognize but time consumers that it we U.S. linear did their vision seeing We will shopping with and spend them that increase form lives. see. number that have purchases. rising vision in correction category. prior every resume time, part indoors. we of screen evidence macro lot of eye This The time we have will not like costs inflation their are already These of after their will and the to various needs, ramping recovery disrupted be like factors and our will mind. of on COVID consumers to days some normally the we take confident there correction that a are high visits behavior increased waves. several doctor and XX% [Indiscernible] used contributing are as expect increased and

share for the is we competitive care their where position took in serve attention in the market household are income expect quarter industry our still believe our model, strengthened above than and as Given typical the consumers positioned convenient for base uniquely levels, category. past our searching this to others $XXX,XX. median less value be our business as capture customer exceptional well we below Even growth offered we the And we our a omni-channel vision our to needs. of to impacted we and through

continues, will benefit into base of recovery a Steve our expect financial take happy and to create customers, continuing performance. to continue the impact. And I to As continue dive deeper we bit now differentially, we will pass to our over share scale

Steve Miller

everyone. Thanks, morning, Neil Good and Dave.

active exams, revenue And at the XX% our for increased a CAGR quarter first eyeglasses. revenue $XXX. the average to first eye XXXX. increase through to same an quarter value XX.X% first period more customer customers per jump continued and with came We to per a on million the versus that to of pleased performance versus one quarter right $XXX.X and quarter We're year-over-year to XXXX the three-year contacts basis average revenue top-line of year to customers, up and evolve X.XX continue quarter sells in versus XX% from a a talk we the ability of as in our up the of see glasses-only scaling our XXXX customer, Let's in million, for reflects finished ago. provide XX% which company

measured revenue customers active customer average XX-month both reminder, and a a trailing per As basis. are on

and growth by driven overall growing continued core in offering, as top XXX a for our compared revenue consistent still our customer including business quarter of points with QX, in contact as 'XX. lens prescription glasses business, progress represented the QX factors, Our per of line average number replenishment cycle was our a well in which up while of basis X% only

for account reminder, XX% to sales optical of contact of a lenses As a XX% typical retailer.

As estimated our This stores store approximately from needed early to steady time call above the XXXX QX the year-over-year quarter progressed. to return recovery of declined but in effect QX store revenue within productivity the on eye to on of earnings reflects where store rate sales re-book preceding saw the January. our prominent and in below was mentioned $XX the slow Omicron exams impact growth we purchase most traffic productivity impact of to in due weeks XX% Omicron March, XX% of down glasses. weeks in and fourth for our lost stores consumers to and We as onset the in traffic recovery a and million

ten retail came retail saw of in XX% With productivity said, quarter, where rise For is we started at levels. that year. to the in point which April, we the improvement XXXX roughly XX% at from first productivity

continue progresses. as expect to year see We momentum the this

XXXX QX in relates it revenue represented XXXX. of versus As business, of XX% for e-commerce in E-commerce to business XX% quarter, grew overall first and first-quarter in QX XXXX. the it XX% our our the XX%

XXXX. a to three-year increased on our chain and such, but network e-com experienced developed CAGR up a diversified on down basis revenue 'XX of network QX lab reliance was suppliers. having our year-over-year, due supply in-house QX versus minimal XX% We've is As disruption XX%

If This March, to turnaround our is As QX from QX. did this QX week And reached resilience range. March. QX been our this would've factor shifted quickly additional roughly base shipping we small in from color high-end We of want delay a a end suspended delivery shipments and of these out customers customer the temporarily the operations to to for still as example the of to supplier. good time. for on freight supplier within promised revenue, another deliveries revenue of $XXX,XXX the call our at of last the guidance effecting towards not that move able delay forwarder transition a these were

Moving onto gross margin.

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

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

will For XXXX. QX in comparability, compared 'XX compensation. I to XX.X% to in margin gross margin be gross at speaking in Adjusted excluding XX.X% stock-based QX came

and this the points, a takes. For to have gross had narrower. excluding the margin. QX QX operational 'XX several to approximately been well we XXXX some rebate comparability, unique basis XX benefited QX quarter, in as impacting of between puts margin In benefits. regard XXXX operational as from change benefit, the With would and takes 'XX puts adjusted and various gross Tariff QX

and acceleration the a as margin First, percentage business was of driver total the decrease in the contacts of gross primary of our penetration the year-over-year.

expanded of scaling we've our earnings mentioned contact noted, care key And a increasing as to from in I of core offering vision average our X% and business lens of business our calls, X% holistic approximately customer. on offering per of revenue expanding our prior represent QX our driver 'XX 'XX. in contacts business part a QX approximately As is

XXXX. other XXX sales and offerings, product. improve frequency margin percent pre to a pleased of this the see was purchase points product product gross nearly have accretive purchase in of our year-over-year with given lenses cycle contact approximately subscription-like are margin gross sunglasses by and While basis dollars We're non-prescription in back they -pandemic also line to versus mix our lower higher

Given on sunglasses margin ultimately had with some for quarter. moderately lower margins, gross this the deleverage

COGS of store two results in generally of productivity of eye and margin are our stack elements regardless the on fixed goods. which These saw our doctor of areas, in and portion impact salaries, we the more are retail gross Omicron remain cost which traffic lower same in deleverage occupancy key the of fixed revenue. year-over-year Next,

portions this net last became an to base XXXX of sales, of As increase rolling stores $XX new from QX which pressure We and XXX from added store productivity rents stores store leads in by elevated build-outs. our of professional anticipate retail And an March we the lost impacted to some store acceleration COGS normalize gross to increase six over million corporation months, of as in the XX% year-over-year XXX course revenue. the the as XXst, of XX of saw as [Indiscernible] the March returns. Model. a XX margin percent out naturally stores going was as XXst, PC year-over-year, to from or on our in downward XXXX, due or We

store where significant doctor already models, doctor. we direct which not independent did the until at QX employed start PT XXXX, employed XX of optometrist. The we in service an we the from PC been our the doctor and directly of are Of existing directly end sales XX portion engage PT benefits stores engage end Model exam the where all with independent Model. therefore, was doctor at the the time for revenue we of had where Model an we'd PC the of an we the and amount conversion XX as in converting we're of 'XX. our stores stores twice stores of employ product stores where our where these stores, QX the optometrist, we where ones through Model. 'XX, the XX of we all-out stores we As from majority This with are are the a the the to QX operated as And an recognized performed at both as eye salaries were optometrist, recognizing well with

customer given stores mentioned, holistic and that revenue, exams and facilities vision rates as or believe including York, goal the of to With faster Vegas, the we our are optical our care conversion many percentage margin benefits, enable margin company. these refund incurred Model New and the over costs Sloatsburg, to due and gross In lost estimate continue these control expect higher gross improved we the labs, through contacts items will we Omicron. with would greater continued rates, Las in the convert exam the to in sales we gross achieving our NPS, benefit We measure lower us 'XX, experience, cases, service our purchase. PC in-house time, higher both we fulfilled have overall. these glasses becoming of Offsetting was turnaround lower us to margins. $XX the alone, million us which recognize without a near-term eye the long margin over Nevada. product will In said, and same lab the has in see As in Model, to QX PC quarter give increase exam fulfillment this headwind than at from as a a of term we mix eye shift on expect orders in-house completed

West we're As scale which Coast this our serve in we optical XXXX, to Las XXXX. back second us will efficiently lab half And in in last more lab still our scaling customers. we we expect the quarter, Vegas opened to QX reach allow that of mentioned

margin. gross our Vegas to expect will see to As we improved to which more continue lab, cost scale we translate efficiencies, Las

XX% business, of in gross from saw business XX% higher-margin XXXX. increased in expansion has a the prescription our which of QX from to QX benefit last our Lastly, margin year we progressives’ to

talk Next, like SG&A I about expenses. would to

improvement strategic As continue through disciplined will conscious deployment the in that and macroeconomic operate challenging we to toward overhead the from adjusted EBITDA growth and to spend of and we manage backdrop most profitability. previously hiring. of both continued continue of fact leverage marketing discussed, business our in a and come will corporate within We're

SG&A of headquarters, which business the components. including our of compensation program marketing points an Adjusted This or revenue, excludes overhead XX.X% customer stock-based in XXX includes main or million and SG&A, basis at our Try-On of SG&A in of three adjusted quarter $XX.X QX came for expenses. general first corporate increase XX% and compares Salary reminder, experience, a $XX.X As XXXX spend, our for retail a to Home employees, expense million year-over-year. revenue.

our which lost percentage SG&A adjusted was costs in higher a compared related In our for QX incurred spend adjusted SG&A sales investments XXXX impact employees million XXXX of XXXX, $XX.X incur a SG&A not for a SG&A would in XX% year-over-year on increase as a it year-over-year adjusted company to operate did growth, similar a therefore and revenue adjusted an public to impact XXXX in The which level count $XX.X operate more the And was as million. XXXX our in and is more to revenue of company, operated of to we a and fleet we count On We negative regardless. had QX as public from One, driver our believe two basis, QX in is overhead in closely as deceleration the quarter moderately salary of the cost The stores. year-over-year. sequential in of QX as a QX XXXX reasons. to the of comparability versus expenses, have primary year-over-year adjusted costs costs was revenue retail growth and the larger year-over-year in to QX increase of required for in that. incurred corporate of expense QX of store a spend infrastructure, quarter. slight up equaled reflective XX% to mostly in QX which is QX terms been as an base. base is store SG&A a store of increase was of than relevant 'XX technology due up our as well where related dollar two, of company Public was supportive the our costs roughly overhead more corporate we XXXX therefore SG&A fixed adjusted first reflects QX store-related in these percentage X.XX%

QX productivity we in leverage productivity incurred our realize the retail additional we've expect these Given base discussed, to already challenges to larger and costs as will store store costs. improved, operate we still the on

flexible measuring through spend marketing and percentage approximately As the previously during to the a it XXXX. XX% and highly in linear to maintain of program teens, including as this we've close spend store a that to marketing surgeon with XXXX, throughout at customers to relates competitive model Prior our we closures. highlighted TD for both periods. spend, XXXX at revenue elevated was low Home our spend in continue discussed, previously XX% demand largely only for around Try-On XXXX We reach reasons to to committed

level We spend stores of the marketing pre-pandemic. cadence percentage now pace same continue of back QX a at a this opening revenue of of year. we in were We're in as the

our effective mid-teens the in pre-pandemic allow are stores second toggle to of us the closer down levels below vehicles, this half marketing spend will marketing As and the year. to

of XXXX, QX and QX we to year, As SG&A we FSA with SG&A support in expect an the the QX, ahead and rest what a increase season in we look QX the December. important see holiday to moderately sequential with to in than spend to adjusted expiry trend adjusted similar lower into saw

rate reflecting million moderately incremental flow million significant $X.X presented still profitability, of We impact of our and of XXXX, of for in at in million, adjusted full balance quarter lost to strong EBITDA as a loss a estimate XX%. sales, with year. on contemplate EBITDA that EBITDA. For finished the an adjusted in Despite adjusted we'll margin $XX we to be roughly sales quarter did the we support through first-quarter The EBITDA our profitable of were adjusted first to X.X%. sheet representing guidance a We EBITDA estimated growth had generated the the continue to on in quarter, deliberately to challenges the cash, able $XXX which generate deploy the pleased we adjusted sales operations. impact

for believe earlier, adjusted projections we're million first $XXX revenue growth lost year-over-year. XXXX, we on expect year; of And were which into be As for impact we the to we XX% $XXX XXXX to remaining that I the to quarter quarters for factored QX represents and noted experienced XX%. EBITDA million, in the revenue the in between cost specifically, QX the in the and to sales of the growth of year. our will mitigated XX% approximately guiding still revenue of XX% be Therefore, and pressures

the be XX% X.X% expect range XXXX. gross reiterating to For of for are of to in EBITDA year, XX%. to we to with the X.X% And adjusted we regard margins target range full our margin,

In are overall past will of to due XXXX quarter, terms than years down Omicron. by of the different look how breaking our impact results

strong similarly profit gets the loss these swung have adjusted and or deferred the quarters. strong typically has historically It margins flex of our as margins And by revenue. followed to exploration make recognized generated quarter, lowest increased year. We to to been the third lead in spend. EBITDA of buying QX in quarter second in first a investments holiday of many we and support following QX investments in QX has the

QX and QX being in More adjusted and adjusted the the weakest return be expect high expect in this single-digits. the in to the be be stores to strongest second to single-digits. to with And margin in as low EBITDA of half We specifically, margins the QX year's XXXX margins we productivity. in performance order reverse EBITDA full somewhat QX

on last in reaching And mentioned XX% full-year full continued of our of we As the end pre-pandemic productivity high assumes retail reaching our recovery our by guidance, approximately guidance QX. year-end. levels call, at

also our mid assumes observed for maintain guidance QX Our a we consistent XXs. three-year we e-commerce in business CAGR the in that

With compensation to forecasting XXXX. be the holistic as keep equity challenging on we is with for RSU multiyear needed open are and as direct both to ever a line achieve will our the and on in the summary, above that evolve can Stock-based level of customer we with providing both as that percentage much our Thanks Finally, listing into continues and people, for associated that forward prospect is up we grants result for us low-single-digits the compensation the as to proud industry. growing of for provide as XXXX, as forecast yet profitability, a we've environment, to made with murky, progress experience of expense the growth of continue within in optimism of the joining and of and stores, optical company. combines developing manage of invest with discipline XXXX. into and business. for a are price excited XX% respect technology we world. Co-CEOs through our In a to eye compared in transparency maintaining broader unique business, we We look updated in our that, the long-range medical operating care we teams, years are costs our vision Q&A. in this the be the long-term about call. a to revenue our our period point We'll macro as and performance. environment keeping We mid-teens the you net for We necessity outlook close acknowledge stock-based as all the

Operator

Thank you.

start first from Q&A Cowen. question ahead. [Operator We will Instructions]. our comes at Chen our now Oliver Please session. And go

is open. line Your

Oliver Chen

much. productivity What's Hi. ahead do in progress what within well productivity in risk Second as key customers. drivers levels, as made data factors? network that, you key terms think The question, helpful. of of lot and Thank very assumed achieving a you will is you very be

happening in consumer to love insurance from and about demand the regarding the would and employees. opportunity hear also the Thank seeing ahead you. experience, Just you're what's

Neil Blumenthal

I'll in course This continued year. Thanks, the We Neil. of start. see Oliver. strength is throughout productivity the retail

new we stores are reaching One that of maturity. excited particularly XXXX the is the we things in about opened that

stores only are count XX% majority that opening or And That opened areas. we stores XXXX, XX right where of in X%. the suburban the increase of an by open was seven in in of XXXX. we've So increased store count those stores been new in pandemic we the store depths

about have locations and And it shared seen year we that productivity only spread. visiting to a last U.S. we that was of retail productivity, the again, returning point ago. urban urban in year one from our narrow. rates, even we to And consumer increasing to continue during has as habits that doesn't, things from fleet retail if we to narrow than suburban not point more suburban. normal to that differential the call an But So the saw But only shifting XX expect locations we been now to we did now last our store suburban eight our think locations. centers. We've shopping

in So productivity. we continue confident be optimistic growing retail to and

Dave Gilboa

the to where $XX serve federal really And after; us remains the Boeing. then for in to on for join we're those government contacts options groups now and program, excited ways believe and -- better can our and the from months companies, exams, employees the you insurance for the as from -- within UnitedHealthcare, employees who more the from have front, will a coverage federal to opportunities insurance we in-network first as there And big of is that see consumers more and our glasses, relationships, and are purchase GE to and in-network vision little us distinct for years. be add go that opportunity insurance, large expand consumers employer us Blue employ Cross that world coming in employee expand continuing Blue to continue that able Shield, and

insurance will glasses. And they to that Parker, be out-of-network they found would the - buy else. consumers that us provider. spending those to where they are pay us can a Warby believe on their their also often often Warby educate using then most can $XXX Parker going in use out-of-pocket. same use survey, their people non somewhere would to to when a And single-vision less benefits in consumers often they plan, out $X vision a network we From or regardless benefits out-of-pocket there recent that they - go out-of-pocket really opportunity use is and with benefits that out-of coming We there benefits significant paying spending a network

lot see you create stores site benefits. the those how And coming really in in on a our of use people and can will so education our us months, around

Oliver Chen

Thank the Last David marketing spend. you. much, and Thank you Neil. very question on

ahead As you IDFA of somewhat look seeing productivity landscape, how customer we been the to thinking Thank philosophy marketing privacy. your spend terms it's with are -- acquisition relative and with volatile also on digital trends? What's about and you. what's the in marketing the

Steve Miller

acquisition customer despite terms relative revenue that's continued in Sure. consistency per customer. seen thanks of and in Oliver. trends, scale We've seeing average

in to XXXX, percent a is we XX% percent those per to want we revenue out customer to customer around right XX%, elevated with of and growth numbers as throughout intention from spend and in year. QX as earlier between continue two costs. see We acquisition call average did in this average a in that the pandemic, XX% revenue What separation our XXXX of and marketing XXXX almost in of a revenue

XX down pre-pandemic XXXX. mid-single-digits vehicles, up will as for this XX that enable percent to closer stores do, As in XX% Neil spending spend and opened new below us out, the levels open to toggle year. a revenue, efficient what that us months, marketing is of past pandemic the up the closer we and XX we over were that very, marketing new Stores are called very stores we'll to

profitability know stores way efficient the one And marketing rollout that disciplined. so retaining we course incremental very with about the view marketing product but and And another, sell really And our in attracts customers, as year. ways, is our are over dovetails that spend to that really, characterize I tandem store just really that spend of also shift and customers. as and not talked serve would existing in we new with customers the spend marketing we've

the we largely pre-pandemic from XX%. which EBITDA, As levels And toward back would talked out, that marketing go improvements portion about to around in were leverage adjusted XX% is come SG&A. we'll called closer largest of spend, from

Dave Gilboa

I'll also that. to add Oliver,

driven well. mentioned, last as we call our As

on several IDFA impact the paid customer big ago, or acquisition. reduced privacy years Apple for we social seen reliance from deliberately, updates not channels because have We

down so seen We've that historically spend, And that other marketing challenge be to bring that for that us. not many companies find marketing we also we a from that whereas we challenge, hear increases. continues been a when has efficiency

of for So as that well. tailwind the the of rest potentials has year

Oliver Chen

you. Very Thank helpful.

Operator

so you question. much Thank for your

ahead. next comes Lejuez Citi. from at Our Please question Paul go

Paul Lejuez

describe would customers that your for versus thinking down business opting Could you're guys. customer? any expectations anything not you more if both features, for assortment. curious of anything those you thanks lines. in trading per as XQ Hey, along additional within in customer you're active for Maybe certain your your how about give spend Thanks. seeing Also average color and growth terms year

Dave Gilboa

Paul. Sure. Thanks

each the report So customers year, and end each each provide doesn't quarter of necessarily but we on active specific guidance at quarter.

our Omicron QX been growth XX's average the from revenue we've X% with zone. X% in has the impacted in discussed, customer which as to active was by low customer somewhere Aside generally per

stores as our So see productivity, I would trend would that normalizes continue. and ramp business expect that back as consistent our we to

Neil Blumenthal

in we is customers thing have other observed The trading down.

that One our starts $XXX, significantly cost Progressives chains independent which optical practices value of would product or whereas is offering, optometric more. our products other at same highest high-end our prescription as

retail Warby, customers increases, have price seen by to productivity we And our margin highest increase product, as again, are highest coming $XXX. penetration and saving product. So expect and that's Progressives

The our other who resilience of thing average, [Indiscernible] on consumer that the is an as income well has over we've observed $XXX,XXX.

Paul Lejuez

Thank you. Good luck, guys.

Neil Blumenthal

Thanks.

Dave Gilboa

you. Thank

Operator

question. Thank your for you very much

Please comes go Our ahead, next at line Telsey question your Group. from is Advisory Telsey Dana open.

Dana Telsey

okay? me hear you can Hi,

Neil Blumenthal

can. We

Dana Telsey

on little it? you've gross a Has and increases you the And on And the expect for seeing the component did to that cadence progress? envision improvement Thank you contact thinned productivity insurance, the forward Contacts during margin cadence then improving front? how just with Progressives, given how the going was in talk the quarter, you the at on you do that did the regions, lenses. Can seen? are you And stores see in about the then in consistent different you. how insurance it lastly, it what

Neil Blumenthal

Dana. Thanks,

store tend and urban performance in front, see locations. suburban between locations again, we our the a to On differential our

had retail XX productivity So last lower stores year urban productivity from standpoint, than urban locations. a point

that has look gap points to QX, if we nine points. XX at However, to narrowed

confident last new retail performing the is or our in in line store stores are plus targets. open months our that rollout we remain that XX we pre-pandemic thing other that with The about

more than had. we've historically are suburban proportionately continued stores new in again, our locations perform So to well those

Steve Miller

of are margin build-outs it as and called our It margin store customer stack loaded salaries. COGS as to the Dana, line And doctor lenses, store and your of out, fully there includes frames, relates takes in depreciation range our as shipping, gross we gross a and is intended. puts occupancy, question, eye

our zone. our other to make of I that and Omicron would of XX% gross lot see so our is the QX higher costs to impact in we this to and our than moderately fixed XX% QX QX lowest consistent look in fact A margin given due to gross Generally, leverage And of year we into quarter, offering the for. what exhibits product, investments gross the deliveries a order January, will subscription-like want that and certainly optimize to revenue margin that's really in particular to as deleveraging effect nature of that deferred as on have continue are which of product recognized given which the margin will Contacts month percentage. is amplify the the ability gross to continue January. business dollars, business. But the margin

saw fixed portion given larger a of those continue QX. our back, which we full And the to some year, productivity QX XX% as will year, you our of be QX. and comes costs leveraged. in added for during happened this in reiterating year. be what will guidance gross margin really XX% There story particularly the as deleverage QX impact some become we're costs fixed to to But the fluctuations for saw revenue, Omicron, So store

Dave Gilboa

impact In typical impact front, not really the our higher that that of progressives, had Would which a we're between is from a to opposite margin, also faster than its the productivity, customers were for of from product quarter. we we progressive insurance contacts mix on standpoint, and mix just orders part on from network a seeing would overall of transactions have store detrimental percentage a and cohort who through in mix promising so trends. and add coverage that expect on where that mix the customers and plans And our contacts growing tend transactions; of higher particularly then gross our particular, see online that is of business. impact store a balance given our Omicron

employee those and able soon. And employer are program so hopefully of to that federal this able to efforts other we to expand add some groups with we're excited be

Operator

much so you Thank for your questions, Dana.

question Please Baird comes at Co. ahead. Altschwager Our Mark go from & next

Your open. line is

Mark Altschwager

you. Hi. morning. Thank Good

your -- acceleration seen the different this build the other guidance the revenue confidence gives revenue be profitability through company than and environment? based that the the the assumed factors similar following the very is your Omicron on that Is So year, sequential on seasonality to you or assumption store which a in recovery continues are has external what guidance. historically primarily guidance wave, what see in you productivity controllable dynamic assumes

Neil Blumenthal

One, there productivity level, we over the ramp think you and few of mentioned blocks scaling, out by productivity the we At high and bear certainly to the in that's as Mark. a Sure, times and two called are course about to building year. QX. a growth in back XXX% thanks mind retail

three-year maintaining The in a consistent business CAGR other is really the our mid-twenties. for e-commerce

payment able achieve CAGR as And meet long a see productivity, scaling e-com maintain of as three-year we our as we here consistent XX%. be particular, to So see would guidance XX% top-line those as to to to e-commerce, we the and at long really in items retail three-year how will time we're CAGR, our discuss. full key two XX% on I for year. reporting each look we

Mark Altschwager

contribution out you. provided per direct customer XXXX, in Can guidance year? where update on contribution. then you Thank on this that you Thank Steve, listing, the shook us implies with your customer some you what of level in and and detail terms

Steve Miller

Sure.

by provide what as we we don't not through been in meant omni-channel and into into don't margins across numbers, anticipating blended providing orient provide suffice reported. we in an contribution to have but it We're economics, them basis we number. regularly, those that customer plan planning the But regular of I consistency and how part annual towards an at perhaps our on really say business economics performance. the us we've of consistent on the to some but to and Costumer for basis, would an that lens look manage customer. end margins of through look window channel, we've the look recap customer business, incremental we seen a of metric one-time visibility provided at report into channel, lens as our into view things a So updated quarterly year, of customer the the annual but view as an a on where visibility are to really to the

Mark Altschwager

you. thank Great,

Operator

for Mark question. you Thank your

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

Brooke Roach

was you Have could among have in for question. for on in any for Good to seen activity taking initiatives year thank provide you. you morning online the so our Thank color consistent external much e-commerce wondering any some you if customer your you to continue macro-environment change deliver demographic the as more and I has business CAGR? place the changed?

Neil Blumenthal

your question. Thanks for

online. behavior in We the the pandemic in class of seen have since What changes we That's Try-On. Virtual increased our haven't is significant seen use customer

ability of As this by actually excited it try a consumers. been channels. our to you of We've prescriptions. the of different food to challenges vision technical test a we in-house than, The to usage our may example, that is was by market, vision in virtual renew glasses this lipstick built we adoption scale. was face significant customers or to And had reminder, to that a was overcome which bunch quite first on online our different see to enables feature seen social virtually Similarly, that technology trying ramp make a realistic. color on various that their filters test, a we've up the for

Brooke Roach

pass you. it Thank I'll on.

Operator

comes question And at Evercore. Perfect. Please final Mahaney Mark Thank go our ahead. question. from you your for

Mark Mahaney

Thanks. Okay.

talked between urban and about store You gap suburban the productivity narrowing.

the there? into then the hanging are what gap, What through fruit ways the And of talk And a what over margins to productivity in story? doable And suburban easiest to years? do that the model to harder, You just that the long-term ask be the is causing to and the quantified lowest about are order what rise to but what parts couple Thanks to leverage more will challenging then highest of why? What's get XX%. hanging lever get fruit the levels. secondly, lot. next Could that. Steve you maybe you levels your the go steps -- are urban the I'll of

Neil Blumenthal

Mark. Thanks

we're we whether time of entire this elevated fleet. urban due in conversion are think offices the one spending things we is also but hasn't still cities more as the and But across fully reopen. our or people traffic. store returned, It's to that outdoors, locations increased seeing First, is in as still see that

Expect locations. in the So as our improvements to urban where continue year that's progresses. we're seeing certain that

Steve Miller

from as long-term of second target we Great. And our to margin will terms then consistent SG&A. called the of we the are question XX%, to XX% that expansion, in around toward in gross march leverage XX% out, margin of real come our EBITDA sources be zone, the going adjusted since

So if is other see order aggregate XX% as to let's magnitude, XX%, revenue. percent want of the say SG&A in represents that a is COGS we what

we've factors, general just of the up pull what public top we to in our program lever easiest components about deploy spend, vendors. would is of between team, are As includes what on media, company of our program, stores a we overhead, we corporate demand Try-On back pair And headquarters, I our terms our customer experience split and XX% normalize largest list, somewhat, seen represented and which talked and and productivity. number salaries, costs, the percent three our that retail then the to saw full stores, elevated Home SG&A put that's Home-Try-On marketing reopening, single corporate now of a that out getting XX% as to Pre-pandemic, we've one, surging for given closures, addition, in of a revenue. are That spend in through represented was revenue, XX% store we number revenue. marketing as of in that called roughly QX, few

Neil Blumenthal

XX stores are this marketing. and year, in levels. new effective Maturation existing highly, of new stores stores highly

out overhead. smart across the our the way corporate strong as call on and a that to corporate leverage Being in and I continue remain The relatively the outlook would to growth drive corporate grow years costs to and We us board of to set overhead those come. fixed made support easiest will help support for So them. we've in functions business. investments

our how of order how about in sources I context relative that's SG&A. So to leverage think in our and describe of them the would

Mark Mahaney

much. very you Thank Okay.

Operator

much question. final your And for other so for remarks. Dave are back you any to Thank pass there Mark I'd questions. time, no now over At this to like

Dave Gilboa

forward incredibly progress opportunities And joining today you this as the that both challenging line discipline for Thank front progresses. months through and We're and of year. our operating of period. excited the course, very we're optimism while year what a us. you ahead so about has of look great informed we'll of keep we to for all accomplished the far as maintain Team us Warby we the proud And questions

additional have inbox questions any follow-ups, feel If you investors@warby.com. our Investor please free reach or to out at to you. Relations Thank

Operator

Thank joining you everybody so much today's call. conference for

disconnect. now may You

Warby Parker (WRBY) 16 May 222022 Q1 Earnings call transcript