Warby Parker (WRBY) 11 Aug 222022 Q2 Earnings call transcript

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.

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

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

behavior Welcome category remote quarter thank to trends. in was predictable morning. In after But and the creating historical and thank steady in of million it you also help we'd our overwhelmingly it's customer adjusted plus progress QX core in a commitment strategic experiences positive our $XXX.X Warby people against collaborate our exceptional growth back generated continue their with delighted Parker shopping where million strong team brought EBITDA range person delivered share gained corporate like normally customers, where guidance. to net another work. We products made Warby of that from our this continued $X.X start, quarter To and revenue for see. all and market initiatives. for joining guidance to and deviate line of ahead the been in office, to years was our QX, to we and two teams

productivity a steady decline call XXXX early Omicron which XX% below in in of and of earnings retail before on after our trend XX% call, seen we to retail mid-May optimism we discussed levels like in positive had resulted recovery COVID approximately in of recovery last a us lost which ways. our business, time our share at continued sales productivity During led previous levels about This mid-May, last in April. the impact QX a into reached extended the

the deterioration by weakness However how in as spending this their consumers in a of well eyeglasses starting money began headwinds overall see in effects, industry-wide is for back we lingering retail are shift demand and to productivity half We as in driven demand. time. inflation pandemic May, believe in

are we consumers. macro to factors, While not proposition and delivery continue with immune that from we value brands, model these confident remain our resonate

ever, Our QX. $XXX customers spending average revenue high per us with more are new in a of with reaching customer than

sales, of of mouth are as month purchasing Score observe the year began XX rate Net corporate roughly demand corporate in reduced four repeat Warby and headcount. want QX our beyond. XXXX in from XX business, Our growth as enable to base reflective improvement to our we sustainable trends These as and the weakening we team, resulted also we Those margin best-in-class word expected are and rates XX% expenses a ever, cohorts of customer making us roles people half of our our having seen. repurchase several strong of the retention areas XXX% XXXX to and When highest elimination including ever of have we we to first more see with recent the positive most notwithstanding from and trends back. our base customers We experience try enable commitment to restructure come of rationalize half our and These Promoter in the happy quickly move love drive decision ended our to back XX. Parker, to fixed customer are difficult scale. a streamline with which when leverage to they the expense of of expense actions

earnings spend we in as have adjusted call, of our our revenue. percentage marketing also a As last mentioned

our more marketing spend a with reminder, we increased pre-pandemic business, a In XXXX limiting percentage support revenue to levels. were to deliberate which due of during to into revenue XXXX a QX, when our we As as of as were marketing brought in percentage traffic e-commerce line our XX.X%, stores when is investments them. or and closed

Now in that to placed those online to ratio stores relative our levels. of placed returned pre-pandemic orders has

for acquisition customers tools. us to as they highly our great stores, scale and which opened and us to Between new much XX brands, our base without also enable showcase offer serve customer have our as will top XXXX, support. XXXX only line not and stores customer allow experiences Our efficient marketing we'll

in marketing our result, a increased growth As top XX.X%. to compared QX spend X% just year-over-year of line

in market total us acquisition XX% more and relative Many why able in we other results. were U.S. in XX%. pause these of one we these omnichannel at in the second expect how to margins It Therefore, adjusted in which to us both grow early changes CACs Flexibility temporarily XXXX. QX, lowest to customer industry EBITDA in operate. our customers speed to are Steve shortly. XXXX QX competitive we and with serve cuts and customers in and acquire to model more in agility eyewear is came over efficiently. we our our adjusted half be seen G&A than the and detail strengths, higher reflected across first customers have speak these to meaningfully half, the changes of level others EBITDA enabling will accelerate we've not Our costs And when serve expansion to QX, declined continuously is were since positioning operations down XXXX. the our

This than As is others category also shifts better quickly. costs us in period operating in gain. fare in flexible rapid and volatility inherent to enable consumer we operate flexibility us believe of behavior, enables our this what our our result current to through adjust with continued share will model we

rest Given year the a in deteriorating XXXX, we guidance. into is view of of the which are conservative reflected rest macro environment, taking our more

We we to demand continue and headwinds be the of longer are optimism we see or until no the recovery resilience in it materialize. on temporary, but optical industry to expect believe counting these

We in are customers less meaningful expect intensely increases focused drive a on what experiences consumer And we so, doing that our love. demand. face off base, is in delivering EBITDA to of and adjusted even the products by smaller expense control,

to and will and to in committed we these And improvements We of expect XXXX, years primary our continue which begin in drivers, over back enable it turn driving to that expand Neil beyond. months and half with will to realized to I'll and are margin through walk adjusted the expansion XXXX ahead. the share EBITDA that, scale market in growth to be further us

Dave. Thanks,

commitment While we growth continue we four even navigate an invest plan margin initiatives. key strategically the to current greater to to lower expansion, environment growth with in

QX, on nine are remain an to to track average we're stores stores our First, on scale XX on to million continuing with by and stores. stores year-end. open our we retail traffic, omnichannel line in in stores, generating track revenue consistent to operate $X.X open target on lower opened continuing in our an environment remain months. new our In experience with annualized opened basis is historical including continue back on across our fleet, cohort of XX%. This These average, to wall a in stores pay in performance four margins newer target within of XX of with XXXX. Despite

anti-fatigue which to a Series core continue whether collection, which for optical we lens, glasses as total. design it's Second, consistently $XXX; percent expand Everywhere add new love frame our our customers to introduce can $XXX. our collection Progressive continued We at first to an and is additional to business. priced glasses also our customers that or grow any our

reminder, a gross highest highest and our Progressive are As category. margin point price

margin as drive So we penetration growth gross and increases, expect line Progressive expansion. top to

see to other customer these initiatives, without AOV rise impacting Given demand. and ASP and we continue

building Contacts business. year-over-year than in XXXX. to XXXX our to XXX% more growing from we're X% our in QX Contacts continue of Third, QX business X% scale,

XX% contact us. customers customers. business our brand areas fuels of exam business, reminder, also an our who more XX% for our eye investing other to glasses tend typically from optical lenses up of In than Fourth, contact contact we're glasses-only a spend in the the to sales new As account buying retailer. of are business. our These to and customers of XX%

virtual continues offering four quarter customer We XXX more we are completed model, recognize provide gives to eye of continue experience expanding These through ended sustainable research. exams greater in the to to our retail prescriptions revenue. test by strategic comprehensive year-over-year. goal the with and telehealth the than over hire are around annual control QX, XX year-end. our supported to XXX% but exam us stores us are the offering line QX, more which exam app track than PC We we our vision grow. increased only stores XX% consumer In requested of our growth our initiatives to our and enables philosophy in of long-term retain consistently number talented incredibly capacity, more stores by on in our optometrists. remain eye in-person and In converting Not and exams than

their Warby needs. eye that not show the store to viewed that Parker as having of a nearby, able biggest being include not all being place an to purchase barriers surveys and from not care Our exam, get a serves vision

in confident trended recovery our economic share long-term has our any the in While ability of type category our lower growth in our of to year to we remain this and targets, gain market continue than climate.

we We and during to value services overall XX%, reaccelerates we margins. believe expense the believe others For pandemic and differentially we and newly it X%. now our will customer demand grew When incremental superior to our people sales meaningful result over the future well across to a industry. in to to base growth while unparalleled our pass products XXXX, offer we from XXXX benefit offer of need is positioned revenue expected industry, Steve. relative experience to and reset optical grew be see, I'll market in And example, we

are Ahead quarter, into second line performance and environment increasingly that quarter in detail Dave. EBITDA with for adjusted and Thanks, challenging. wanted top everyone. that Good especially line was our the became of our Neil slightly I getting was market mention to expectations, as the morning, ahead, we pleased

recent adopted macroeconomic outline in results. Dave business. have view we more and reviewing year second trends the outlook new and the our of reflect I'll the revenue. to our with current specifics conditions the Starting a Neil conservative remainder after noted, As of quarter on

of quarter XX.X% our We the The finished company and revenue customers of XXXX increased CAGR X% continued XX% second XXXX, ago, $XXX.X of X% the average versus in in scaling basis to per guidance provide to at a versus evolve the year average versus same below per XXXX came contacts increase $XX. the from and quarter an of of into ability we This our a customers, up to customer year quarter about XX.X%. period the million active glasses-only second three a revenue with more that year-over-year increased our second eye midpoint one of just million, On sells exams, to customer quarter our reflects revenue XX%. and X.XX as eyeglasses. value

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

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

product, business, continued to see year CAGR reached quarter, below up sold We second healthy XX%. basis of market for our QX From in we versus well perspective, XX% versus e-commerce saw with in prescription XX% a XXXX, nearly XXXX. three a in XX% year business QX and three of average the represented lens of glasses 'XX e-commerce growth QX on a overall e-commerce QX our the business on basis mix revenue of total still which XX% mid-XXs yet in continue XX% Within the 'XX. our progressive also scaling QX

last and we primarily productivity the in XX% that spoke since April, of the which driven retail retail We goods a from retail retail observed economics third durable it roughly of to year. to by approximately of our decelerated focus May, end strong. the year. of percentage, is on week on the the we spend start roughly We XX-point year May, consumer believe and remained had lower we improvement of the store retail noted was rest productivity productivity the rise retail of scaling our for continued coincides shared range spend start as were it we a in June, secondarily, of productivity pullback pullback a slowdown in As a when relates which of the including performance, encouraged by the where Starting modestly, factors, stabilized the continued XX%. stores productivity unit increase in expectations Despite the marketing we and that has in through profitability. in with the at saw

As average margins in of had on opened $X.X or we with on revenue more. and in line XX XXX generated QX four basis, for target XX%. of stores million These XXXX, stores wall an annualized our months

We driving have managing performance lower achieved team store our increased match these to is top store consistent in through And across line. AOV results this fleet. by rates conversion schedules and in strong

Despite the May payback. remaining productivity XX that the our quarter. stores Our of retail were on able XX% XXXX our in deliver revenue XX were we have for for with paid XXXX decline track months into up stores XX have still similar back the and XX opened of paid back guidance and in within to the June, half results back to XX% of in within

Moving on gross to margin.

done range customer of depreciation each rent our that everyone gross before we the margin including accounts build-outs. salaries, frames, labs, we to a I would on loaded store like store fully costs, As dive and lenses, remind for and call of in, is optical shipping, optometrist have

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

and expenses stability general with costs. pleased including a thoughtfully of chain, note, seen costs been throughout our As as frames, our lenses input the shipping we in have supply we've managed products the we've

is in I was be the XXXX driver primary compared in offering speaking XXXX. compensation. of XX.X% key decrease to X% customer. growth contact QX scaling care contact margin X% per Expanding lenses of comparability, gross part excluding margin, our as in came increasing vision continued a to our a QX and in total offering Adjusted stock-based at core from gross For will to business. revenue driver percentage of holistic XX.X% gross in of margin The our the average a year-over-year

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

salaries, of areas, margin two stores which period. base Next, XXXX, last growth from an which as deleveraging stack, same in more going cost our of rent an generally XXXX, increase which goods. of year-over-year our retail we the XX the added optometrist XXX XX from revenue in stores or regardless the These gross of the and XXX of saw the in June course of remain to revenue. XX, same naturally elements to our count store and This store depreciation XX, portion over COGS store to are fixed our new stores fixed of store XX% months occupancy We total XX% year-over-year, as of compares XX% in leads June of over increase build-outs. net increase

optometry the optometrists PC for salaries Professional our new increase significantly and also overall expanded in stores We rollout year-over-year a we or Corporation, pressure of as our gross margin model. downward an on from saw hired

model. XX stores store start we XXXX, did PC XX both already the rollout where conversion PC we QX stores an significant are until at of the As of optometrist been XXXX. to doctor end of portion with and an The stores to sales model therefore, revenue These at of our independent optometrist independent ones our of time employment relationship converting recognizing as QX stores salaries. not we majority exams which we doctor. direct had engage And therefore, of the PC model where product models and with from QX directly are our we stores the with the XX from operated a were compared existing all XXXX, recognize XX at end an

model as results will PC to from margin fulfilled As gives increase our customer the lower benefits, overall. control margins. enables us orders greater expect and long continue faster and lab percentage that many are the facilities us us we recognize we headwind gross the optical than York the mentioned turnaround higher NPS to and gross to model, in-house the in experience exam of these and exam shift was eye contacts stores conversion exam purchase. mix margins margin through the fulfillment QX With service glasses said, in PC the near-term in to alone In which gross product New Offsetting over on convert benefit of revenue labs, it items in-house completed expect the has given at term our including refund higher rates, time lower rates continued we XXXX, improved our and the Nevada. we

As reach we XXXX, back half improved Vegas Las believe lab, scale our efficiencies of translate gross will cost that expect in we to margin. scale to to expect more we which continue to we see the

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

XX% like Next, year-over-year. $XX.X came points which the adjusted of excludes I second $XX.X in at about QX stock-based of Adjusted of increase SG&A expenses. XXXX in talk basis compares of XXX This to compensation revenue revenue, revenue. or to approximately SG&A, of million an million quarter or would SG&A XX.X%

compared to basis and is QX points million revenue. basis. SG&A of of growth, terms on QX sequential down a XXX sequential SG&A XX% revenue HX, a QX up adjusted of In reduction represented versus In dollar adjusted $X year-over-year approximately XXXX. was a XX% basis, adjusted of SG&A On

a on the about section, planning as be of talk percent revenue. SG&A HX in we'll a in to percentage shortly basis we're mid-XXs for As guidance of the revenue

headquarters, general including This program not in salary Home employees, and largely company, our for revenue three a we Try-On overhead expenses, or and includes SG&A of marketing improvement incurred overhead expenses. corporate retail adjusted the areas, main same our the million primary reminder, represented concentrated customer costs increase infrastructure. expense in percentage experience operating a was revenue year come company detail. $X.X our Most from more of components: QX, through business year-over-year will we our for an these which corporate adjusted As in increase which as and main SG&A a EBITDA public driver I'll which of revenue. walk in these a in The to in increase did On areas: the technology QX approximately approximately related spend, investments increased in we ago. than X.XX% noted to public faster approximately costs costs, public our quarter. level of two of related company QX, In in as incur was

to initiatives invest well systems to We for will and compare were provide period number QX when to Salary continue company public retail where experience year category we company expect customer-facing a we will of year continue expense we a our spend within customer to a both internal year-over-year employees. On until ago platforms. enhance headquarters, investments, company. this benefits public costs in SG&A as key deleverage wages of as our a and technology includes

these As a as year. of optimize are salary salary sales. expense of doctors a optical the our included seeing remainder continue teams for consistency our as percent reminder, retail of time to employees expenses schedule throughout expense service revenue to retail for plan cost lab anticipate customer in and our in we eye this and and all We

current structure full-time talk people the the and our with we forward XX% XX with to approximately we'll force our of environment, of moved team. in guidance or cost about corporate As align a reduction in section

around we've with largely only previously competitive spend, relates maintained highlighted it model a flexible to highly TV that As the linear during periods. we spend committed marketing

by the of with year. our we've a teens QX in to percent in quarter, marketing to of and QX sequential stabilized last spend spend significant from On made by to see as levels make in needed. at XXXX. a marketing full QX points almost year-end. a as decline QX line low changes reduced discussed XX.X% in continue X-point of we targets Almost this XX.X% to revenue came of revenue basis, marketing marketing as spend expect to spend As versus seven we've a percent

second balance to end we're margin. generate Despite XXXX, EBITDA adjusted our with the the $X.X the an For EBITDA was guidance high increasingly representing basis single-digit deliver finished We EBITDA generated and equivalents challenges adjusted the quarter presented X%, million deploy an EBITDA growth support which just of to in to on operations. balance strong cash quarter continue we plan of to reflecting Shifting above cash our low of margin next of deliberately a year. our range of year million, in our line with able We profitability $XXX quarter, to for positive which still cash range and $XXX will adjusted the the pleased guidance. in across be outlook near sheet, adjusted for of to and see spend and manage to remain business. the and the the million we guidance as quarter full

provided through I'll EBITDA year continued line and our will We adjustments we'll economy are make to see a basis of changes adjusted industry the for continue we us business. on we anticipate U.S. light revising differences up top margin to talk have incremental EBITDA the HX expansion and full and second and highlight XXXX. this in the between changes set bottom both On year line this first the HX guidance, and optical continued talk guidance year that and I'll targets earlier in this the end to talk year the adjusted high the through made full facing comparisons we the a of end high I'll and basis, challenges today. we're of of to providing to believe of top making in then year. versus in guidance half also our ensure will through be

guide million in bridge to XX% to down $XXX guide. X% a top and revenue XXXX revenue full the annual of to differences current line XX% million of line to of $XXX for walk growth XX% and million. range prior guidance million. We're prior year over through $XXX the year-over-year the range growth to a to Our $XXX I'll taking guidance reflected top for to

to top two that line discussed. continue main we've We ways project

and on based active revenue customer. per is first The customers average

The and how store store about I'll second have they is on based talk productivity changed. growth. e-commerce count, both and

projected see we retail reported we In case, productivity our pre-pandemic by business. levels when our a bounce to to to XXX% mid-May, our see XX% the store back QX return of results, For QX. of we continue

with productivity our to And due three roughly mid-May. XX% by returned reminder, in early a We're and As in XX% of We our productivity occurred, July. has the XX%. in December to leveled marketing has mid-XXs. to in recovery year at of Omicron e-commerce in but consistent with dropped recovered off to trends category, has that with CAGR now were We spend, year projecting our retail reflected not revising seeing XX% targets the XX%. our general in and softness March back pullback continued productivity consistent last approaching are productivity CAGR retail three-year XX% then in combined to retail recent productivity, at also which instead e-commerce

the with We for to store remained unchanged. still despite Unit count our decline strong economics year open remain revenue. stores finishing in new plan plans XXX. Our XX stores, the for

increase revenue on for active in details an and these specific provided projecting our today's X% to metrics. customer of customer year-over-year on We of share and haven't historically per XX% year-over-year. we average customer While we average revision, revenue some additional two growth, given active roughly want view growth guidance were customer

million are million This active of X.X active our million $XXX, purchased $X.X the X%. that we customers level similar growth We're seen to will customer XXX,XXX the achieve still or for Given full our on revenue track the customers approximately us that approximately revenue from increase we months per projecting retention $X.XX active year to are customers trends revenue X% as customer and cohort prior XX we're average total anticipate for and XXXX. compares business to growth from average customer estimate for increase that. We've the an an of show increase earnings XX% strong of XX,XXX to in projections of a XXXX for first implies of from our per seeing customers the we in our year-over-year. full over the of of This year. we existing a are that first slide reducing in the projecting or continued now, in customers business half

been to with of New margin pullback XX% customer some quarter the shifts a in we've on mix. fluctuations amplified an some has by XX% We a gross by given guided most basis in marketing trends impacted toward by growth annual the previously of product spend. discussed,

Our original of XX%. assumes expecting now guidance closer full XX% the margin margin year gross for gross XX% We're year. to full to

We growth a positive. business, in as contact we which lens view faster-than-anticipated have seen continued our

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adjusted the full of for previously primarily stock XX% be we in forward SG&A of spend SG&A XXXX we now projecting structure. XX.X% have of back revenue. We XXXX. of we about a moved current the changes the and of at our Next, number adjusted SG&A XXX revenue costs expense for came revenue. adjusted believe lower the managing deployment XX%, in at a spend be driven with of now by is as be to percent at the points We're half percent to We as in came overhead. XXXX the to roughly in SG&A previous manage To up XX.X% in leverage of in driven marketing HX actions. lower, SG&A revenue year with line in than a in of environment, basis corporate expect SG&A which spend our revenue to year our projected adjusted comp spend made talk with by will cost mid-XXs at as expectations. Adjusted QX dollar lower will and

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with to to We We have structure These remainder also will $XX throughout EBITDA anticipate a these to cost continued cost line this in that more lower corporate margin $XX savings We year. year into points previously and be top the ramp line our XXX million reduced next our EBITDA of initiatives all X.X% continue of vendors to and corporate $X next cost to better the a for by year. either up pull headcount closer at with XX% to million million adjusted spend us prior on cost dollars based economics basis reductions to top or these of include where are taking we believe $XX spend guided We XXXX savings possible. million initiatives and of year. year our versus negotiate reducing back will range line. look set improvement lead adjusted next this XXX $XX to on with profitability million to aggregate, In expected adjusted reduction EBITDA these to of guidance. $X million

a $XX EBITDA million we adjusted the the or to the guiding million impact at year to are EBITDA We would Omicron, in had QX. to EBITDA margins. X.X% which have revenue includes full $X.X of X.X% now of positive believe $XX This estimated $XX million in of million impact an the lost from year for to start adjusted

for half first QX, the EBITDA on that EBITDA we year, the margin in revenue and QX the to seen generate roughly from see important that year, spend and In positivity X% our of we basis we $XX.X average adjusted defer HX. implies year. EBITDA is improvement year, sales in decline point in HX years. half X.X%. projecting a than will end XXX continuing adjusted from we we're in we QX the a different of This ramp EBITDA high HX QX to of X.X%. as million adjusted in to second and roughly million adjusted This million to an look adjusted Historically, HX, range, into At generated margin pattern EBITDA and margin HX reflecting of of previous EBITDA the adjusted QX then following the of in adjusted EBITDA For of adjusted strong EBITDA from sequential year margin of the understand for have step-up were of $XX QX lower this $X.X with X.X%. of plan It's revenue. pleased a we

our We expect of to expected initiatives and QX. lower representing $X.X we're drive X.X% to are approximately to higher little a $XXX of respect incremental core growth guiding adjusted of this to savings margin X.X%. to adjusted or enacted million margin of the EBITDA The in X.X% we $XXX cost million, to third a net revenue quarter, X.X% and both With EBITDA little revenue in ability $X.X HX generate to million and to QX in be to that million in have profitability, XXXX.

and on of price performance-based us result invest our for in Thank based be XXXX, Finally, RSU digits $XX.XX of The compensation with stock-based for this both with in and majority years single associated to net with XXXX a mid-teens as grants co-CEOs XX% is stock equity compared joining starting our and morning. long-term our compensation to direct the listing low you targets of our of to revenue respect is forecast percentage to $XXX.XX. a XXXX stock-based above from in outlook expense are we for XXXX. multiyear as in which forecasting

for executing focused what forward, our As industry for vision Q&A. updated to in we open adjusted drive the control, face EBITDA while is we'll of provide headwinds. our base macroeconomic line forward mission to all, With we're you to that, on up even We improvements today, of the in on doing look expense significant a the we've by along moving and smaller discussed and expect keeping way. so

from Cowen. Oliver, comes Oliver Our first please ahead. Instructions] Chen [Operator go question of

Hi, thank you very much.

how also thinking spend that's your key much attributable Would love how pulling productivity, and marketing traffic? in impacting store are and lower back to that about thoughts reacceleration demand how you Regarding and of be may your marketing on category terms happened you you. the to the variables what curious very future? there, Thank is in this forward we're to factors see and do but do time look in acceleration you of spend just durable, about think what key the

in thanks survey have We've last your customers depressed they that and since they from glasses Oliver, the not Council months. mean six purchased Vision when question. at has onset of for data significantly pandemic, that example First, seen when the improved. of we I we'll the start with sort the question for demand the look

in of things the Omicron different eye of of we season One year folks it see the the big of exams. lots with that was get right the during timing FSA was when surge

So, what that customers exams the found we we between older sort first drives year. differences of surveys, and we getting for some And impaired motivations the eye purchasing customers think through younger conduct and glasses half behavior. when and actually of that

customer's temporary happened and workplace. every the example, doctors older important. as optometric pandemic, is experience, get a year during incredibly anecdotally closed there closures pandemic, optical of permanently and and and in some to it the practices this optometrists. shops were half they exam is inconvenient Omicron have sick throughout but every And health been because more the an were particular frankly, for the we've called lot customer's optometric younger retirements very practices also eye of So during of across out shops And optical eye or heard early convenience it's as that first of industry in important,

exams durable This were haven't have necessarily glasses folks point. your are glasses exams we've And product replenished. durability that, getting without income as seen our business be that certainly a buying $XXX,XXX. and to there people - gotten in would a to lens contact normally to household eye long aren't and median go is that periods disposable that eye buy that and not category contact that going believe will our we So, didn't customer over need lenses has

to And to continue be so, we quite durable. expect that

higher see question and with marketing is much business and performance of Oliver. that general, more that where versus mix thanks don't why, have to spend that correlated We by in is in serve percentage are our that stores regard portion support. being revenue looks first XXXX dollars. stores productivity when our then terms spend. our XXXX online. of your it to e-commerce And a marketing sales marketing a e-com. around our that's confidence like And marketing highly more as is our tend much of how Yes, in do as of And spend impacted did shift we in placed in as and were orders being we need In with now XXXX elevated generated from it store billboards marketing

the we marketing. us of did We've - traffic so be can while pullback. foot We that started portion back kind to lower so a And certainly attributable demand of seen response believe slowdown. that really to softening, before in demand - on pulling

Very helpful.

say, Sure, I was just going Oliver. to

that to XX% level of of to XX.X%. getting the in XX% back HX were at Just spending revenue XX% year pre-pandemic. we we about of The that marketing for contextualize is dropping to the of the percent half and the really talked magnitude target roughly a as spend

think observed mix. normalizing are back business that So level to pre-pandemic that we a we the matches we

and much Steve. very you Thank

very on those know model the a gross how of revenue Thank about we that items to terms margin. and the leverage growth much. occupancy As in should salary, follow-up and commercial should you what we

Yes, for sure good question.

is roughly really we've is given three stack the as rents. And then the our of salaries of there up pieces, those and fixed is Most depreciation the come COGS of that So we color optometrist rent, which made costs store store in the And there you two of component optometric occupancy, embed goods is labs, which just build-outs well. which are store of majority mentioned costs of there's costs. store XX% is our from that optical cost fixed. of

a we growth our more either we we versus our seeing. from PC PC time our a eye to exams coming employer employ stores, We're that both of amount still this where As But with eye business, XX% overall we're of scaling eye number with got Model. and OD, we've and eye of optometric the quarter through that practice business. think last relationship business exam happy like our X% perspective ramp new up employed over to or dollar represent an online. the exam doctors about It have directly year-over-year. have pace XX we In takes is X% quarter, and

do this deleverage is, into of seen to the What customers and tap tremendously from the we've to purchase. In a a our from purchase conversion at rate product customers products and is making employed term, near eye things helpful serve anticipate - $X.X one term provide the set is, doctor two billion And second stores margin us to observed the where to will doctor an also eye to decision. progressives eye a market. is input higher mix to where we continue And customers. we from and our anti-fatigue stores up lenses an better will gross it an increased perspective. we've those So long while exam

regards. Thank Best you.

Altschwager of Mark, comes ahead. question please Mark from Baird. next Our go

does Neil, factors it just temporary perhaps Good morning, your year mean, pandemic the This just the some comments on to maybe spending more sound on not depressed lower related ago there. drivers following power intention you. to some consumer behavior the conditions. up necessarily moment Thank I a so and curious lower to spend, are like

maybe adjusted we expansion? growth thoughts about margin you more relative expect to the at targets some profitability you EBITDA you just adjusted - more? just If pent-up up the any you year. the how thinking of this outlined? next sets growth algorithm EBITDA and medium-term consumer of maybe kind think little then pulling think on And expect point reflective should or bit and would I that said demand back some you've be is margin Steve, Or a prior

I'll the is and inflationary beginning Sure. in first behavior some other what seen over a the of the Thanks. Neil. had the we've the is of question. Yes, the eye impact I believe that the first spending half lot Omicron the dips of think course pressures and year first exams that take part the sort half year, pandemic, of of category. This and did depressed back definitely sort to consumer towards of due of the we but the half of

positive. we looking quite retail XXXX. productivity trend all So you had to when in last we to April, mid-May, spoke the XX% was compared

The then we dips. And that sort first was of saw half of trend. continuing May

we know So long last. will this don't how period

retail And low a rest of look a if look deterioration sort we assumes and at the for continues of so guidance this As year current the The look XX% end there point, deterioration. it to at productivity, end trend be consistent retail macro of the range the of XX% growth of XX%. the in environment. full was assumes at that to range, high the at productivity at our then we felt year, prudent

year what we that some a some confident discretionary always those is and demand of discretionary also category is begin back and do And this through at become delayed portion point, that we've but necessity is spending to a system. perspective, flow seeing from that purchases we're nature, temporal the customer remain to being this a known will is what clear and portion of but in due and behavior acute quite has in

we're in we assumptions conservative that. counting see our demand on to up As really might that And we're being show pent-up mentioned, our not in around Neil when forecast.

profitability, setting little margin your color EBITDA I'll little talk can about adjusted we're further about bit and And Mark, question then of how to bit profitability. as versus to HX thinking for provide as ourselves HX on it relates a first a up incremental

more future as or margins generated and half first QX year, roughly of adjusted in a in a QX. in we'll provide reminder, on and we the X.X% guidance so the Next adjusted in this year, of at But context X% that EBITDA X.X% color EBITDA time. margin,

$XX in the headcount decision look SG&A. We've cost to reduction talked half X.X% projecting XX%. taken vendors, that's million adjusted of One changes taking understand next that's we a to within within spend in second structure million this changes few to renegotiating reduce can EBITDA to difficult we've talked about related pulling our expenditures driven by And a T&E, year We in And G&A more adjusting is to at back million equate make with of across in contracts SG&A. the spend are roughly then in $XX $X are to embedded million a expenditures virtually which really we've policies what roughly year. made a look by thorough the to factors, in year. line our And on $X those every permanent we terms consulting margin and spend, about.

So of out that there for numbers we have a high degree put in we confidence HX. the

year what margin we have In terms hit we target plus. talked profitability of XXX of basis algorithm, historically improvement adjusted until EBITDA our to XX% a each incremental long-term about of adding points is XXX XX%

a in in EBITDA X.X% there HX at some which will look roughly high our end a If you both adjusted take it's quarters, guide, variation. be what $XX.X and EBITDA quarters, the million the of average margin is across assume that is

we'll adjustments we provide And and as off would about and based of basis set so made baseline XXX adding points of XXXX. the up model, we're we've our we're feel year, changes that to still do we to transparency the X.X% refining later profitability that more but think business. the in are XXX we on to like which And the into

Yruma comes Sandler. next of Edward, ahead. Edward Our from question Piper please go

Thanks guys. morning. good questions Hi, taking for the

impact level XX% kind some tweaks the of 'XX store revenue make 'XX gate? the efficiency First, you've lower just guidance, upper of you. does to give maybe can trend, kind you softer the there that Are a size and out to a view on you your store higher-level from the how perspective? Thank right, of seen, footprint efficiency or productivity help a question. lower that question, then increase of Or picture and just go the And the bigger a bounds bounds me that as that does you've quick as modeling imply there. the understand of below observed?

Sure. I'll of address the the question. first part

X% full lower a from today, we productivity down XX%, of is of half for the up are terms of In roughly year XX%. to per assumes store the implies That back and decline X% year-over-year growth in our where guidance, range which quarter. is which

And the part so the I'll of we over baked in that Neil. a full to question, five second point decline. hand And on

that believe to a up to capital. continue sense open good use it's we So stores of and it makes

that stores continue pay Our stores been recently, up irrespective to cohort, right, we've example, for the opening of XX the within months. back

So productivity. a depressed even at retail

XXXX margins, be historical to of our store. over per million We're So per grow anticipate target wall four per $X.X levels XX% store that We $XXX,XXX XX% is time. over of achieving so we'll still store. able that revenue

continue at is know But strong, to that even when that these to going environment, the we're store and stores open we don't be. levels, lots forward. the going up performance we Given macro of believe will

if other may. one I Maybe quick follow-up,

that some you've half? side I contacts guys impact coin. You the I and the highlighted in the here margin. color other margin understand PC. progressive. great on gross know wanted of gave of to I know higher business how the a progressive lift is and the out the in much were back you much Thank even of to they How quarter was you. baked the in, called in opportunity

of as Sure. it where a The highest certainly to the progressive relates category are and color be we've margin we our the that gross they market. versus to rest continue significantly is given product underpenetrated

our up So for product last QX QX us of roughly points almost year. of in XX% from two mix represented progressive

that our that haven't and higher-margin an the we're they are deleverage gross out seen seen In occupancy between highest percent stack fixed we've takes our two broken and gross talked we lot, we've COGS that margin specific the in terms the underpenetrated products products contact progressive about in the being and the it offset progressive. puts like from the certainly roughly portion to It's margin two, through split color relates margin, doctors. of the evenly categories we've giving as impact a of and and of eye selling terms lenses beyond

that point deleverage. some to of leverage So been offset the of nice margin has certainly a

you. Thank

Our of please go Brooke Sachs. ahead. Goldman Brooke, next question Roach comes from

can then thank in to locations? bit with that traffic And so seeing that little in store you Thank price have you Can what and your you. in half mix? between PC morning be outlook, higher collections metrics and more urban you you provide the that the demand question. driving results that progressive increased taking store versus point your and trends in follow-up, that Good understand recent split our benefits us a a given as stores any from help should are much maybe you're can suburban model seeing for you're business talk you second additional the stores conversion, ticket detail, increased embedded optometrists the

roughly spread XX-point thoughtful perspective asking quarter, a previously suburban differences roughly little some our in stores. Sure. we've to of of described consistent productivity of And two we between stores, store stores and with X productivity from XX-ish the about prior a we're seeing main for the points. bit that's We'll a XX fleet. anywhere calls points we've across talked question, Brooke. levels and XX% suburban types is we've the Thanks talk XX%, the percent in on urban of of those stores, urban where XX spread that What seen saw from productivity versus to what about

about. that dimension one certainly we talked is that So

suburban have a Our higher continue stores. than stores to productivity urban our

have in also newer early fleet we a in our areas urban We the start opening stores got suburban days. as

people more We by areas urban less having of time it's are a number people relocated suburbs to spending the traffic or seeing in still areas, factors, populated macro urban office driven whether depressed in to buildings. densely

In than what and specific in of the like, to lower would we while seen seen of traffic XX% we've than certainly that regards productivity number we ticket have lower published. traffic, store we've terms

One traffic which we're reported with and bridging progressive rate we increase intentional appreciably conversion a eye increase they're given contacts lower seeing an indicating which factors. seen two the higher buying continued increase AOV our bridging and ends is in necessarily between but up customers conversion, are traffic XX% AOV, and as glasses a than have We exams, that higher other on and there's productivity levels, in than an buying lever, we're more in gap haven't together.

number would strong Yes. that stores. eye and increase to of XX PC to in And days, see benefit. the and doctors, AOV even those have an in note doctors just tend It's sales. we early first with I seen days But addition a the conversion, we still the within of also traffic, conversion

enable outlook, do taking - sales better a and we that we're customers so us investments in And to create both profitability. will experience near we drive and the us will believe term for cautious and these while our benefit a longer-term

much. on. so pass you Thank I'll it

go comes question Lejuez next Paul, ahead. please from Paul Our Citi. of

about for guidance. a active helpful. on on everyone. store to questions. is you XX%. Hi dig that It's But that in bit thank taking This that Paul. Thanks for and Cheatham providing customers indicates store per our for active Brandon little wanted I is customers per very

- as line So bit in if customers you little Is could kind growth? little I bit, legacy there. parse maybe a ramping about and out new And to performing seeing similarly slower? you that that a forward, that store think Are Thanks. should was with new think do your you then what stores active stores of it wondering you're broad-based? should grow you stores average going

continue Yes, few some a we to stores ways. for metrics see different that our sure. I'll talk the in at of about

been margins about a four target for that the have more, are consistently stores we've first we is wall to is over target months that maintained just line in The years. lot the metric or talk a XX% Our XXX reiterate with opened the this that XX

our of stores opened opened out stores last XXXX with the on cohorts in and we've year XXXX, addition, have we XX seen back have activity back XX-month less. of recent in payback. we where them we the that XX XX for stores of paid the the in track called In new rest from XXXX, months XX our most And of paid some all and payback or

it's the e-commerce active about which across our we active customers our blend and for both customers, think business, channel stores. really As we

highest to half earnings our that shows revenue our is our retained cohort the across the cohorts XX% that certainly a XXXX, those the this a strength time QX revenue at seen as customers, active website, don't blend help updated point for lot of purposes, in have from our is we've any this both across of it out and is we've up stores. just so metrics where report in customer posted we're split And in and X%, separately of which an up and included online and to which roughly purchased their to We channels. X% provide actually which retention, returning of on and continue we'll business. purchased year, on of both per first that back We to that that's view customers modeling for observed a in customers we've that revenue our slide we

we'll aggregate channel active do active to that at as to growth, level. So customer average and continue the to in per provide transparency revenue it as relates customer We'll revenue growth. customer the customers, opposed average per

Evercore. final from Our question go comes of ahead. Mark please Mark, Mahaney

questions, Two In XX%. have. still slides, awareness thanks. please. Okay, low that brand It's you you roughly talked this about the relatively

Just long your term, talk thoughts. about

wonderful second how what cohort Just cohort XX-month maybe that was that you higher? that want or the a ask data it do you remind awareness XXXX And can't And us pandemic? what thing the basis like was I a a a tell where brand two data. And basis, I Steve, trend of has to been then year - to would then ago, like disclosure. it or just, that get odd. little XX-month just a on is well, whether outlier you on that's It mentioned in one is The it's class go?

on out joking. in thoughts do What at happened. that But if their they why what was any those just rate? retention of So look cohort, Thanks. stick with you wrong terms people? I'm

Yes.

thinking I XXXX first, pandemic question. That the glasses. effect getting were in most not about exams second really address was the buying So people when or to can due

can our cohorts. recent in We see rebound, a you have as most seen

to specific see kind XXXX numbers really that of coincide more really depressed that's so with you are activity. And specific

front, tick upward. awareness And continue on to the awareness see we

raise we'll perceived exams to one-stop as activities that eye word new our customers meaningful as last anticipate exceptional that enable we're be expect We great of experiences driven believe Our our into awareness mouth because significantly. recognize going the XX of that value just that and forward. the contacts to marketing growth care and rate, A have. even and further over vision growth. we word as lot a the and a well holistic also I to store a continue categories at expanding company is mouth. of leads the by shop to And continue they years us

Okay. Thank you very much.

for back the hand remarks. I'll closing

time All you. of your all challenging team Thank we questions day. with that remains works today make you single a we're but Parker happy for us. thank and Warby tirelessly leadership and to customers want you. environment, spending every Thank to This the macro the grateful entirety for

for concludes This call. Thank joining. today's you

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