Warby Parker Inc. (NYSE:WRBY) Q2 2022 Earnings Conference Call August 11, 2022 8:00 AM ET Company Participants Neil Blumenthal - Co-Founder and Co-CEO Dave Gilboa - Co-Founder and Co-CEO Steve Miller - SVP and CFO Conference Call Participants Oliver Chen - Cowen Mark Altschwager - Baird Edward Yruma - Piper Sandler Brooke Roach - Goldman Sachs Brandon Cheatham - Citi Mark Mahaney - Evercore Operator Thank you, and good morning everyone. Here with me today are Neil Blumenthal and Dave Gilboa our Co-Founders ...

Part I. Financial Information [Condensed Consolidated Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) Warby Parker reported **$153.2 million** revenue and a **$34.1 million** net loss for Q1 2022, with assets at **$544.7 million** and cash at **$230.3 million** [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets reached **$544.7 million** due to ASC 842 lease asset recognition, with liabilities at **$263.8 million** and equity at **$280.9 million** Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $230,324 | $256,416 | | Inventory | $64,253 | $57,095 | | Right-of-use lease assets | $109,737 | $— | | **Total Assets** | **$544,666** | **$440,646** | | **Liabilities** | | | | Total current liabilities | $128,742 | $118,104 | | Non-current lease liabilities | $132,824 | $— | | **Total Liabilities** | **$263,783** | **$154,648** | | **Total Stockholders' Equity** | **$280,883** | **$285,998** | [Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20(Loss)%20Income) Q1 2022 net revenue grew to **$153.2 million**, but increased SG&A expenses led to a **$33.7 million** operating loss and **$34.1 million** net loss Q1 2022 vs Q1 2021 Statement of Operations (in thousands, except per share data) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net revenue | $153,218 | $138,973 | | Gross profit | $89,646 | $83,781 | | Selling, general, and administrative expenses | $123,386 | $80,760 | | (Loss) income from operations | $(33,740) | $3,021 | | Net (loss) income | $(34,133) | $3,011 | | Net loss per share, basic and diluted | $(0.30) | $(0.03) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations was **$10.3 million** and investing **$16.1 million**, resulting in a **$26.1 million** decrease in cash and equivalents Cash Flow Summary (in thousands) | Cash Flow Activity | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net cash used in operating activities | $(10,296) | $(3,277) | | Net cash used in investing activities | $(16,060) | $(8,686) | | Net cash provided by (used in) financing activities | $180 | $(5,907) | | **Net decrease in cash and cash equivalents** | **$(26,092)** | **$(18,064)** | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) Notes detail ASC 842 adoption, revenue disaggregation, **$27.1 million** stock-based compensation, and an undrawn **$50 million** credit facility - The company adopted the new lease accounting standard ASC 842 as of January 1, 2022, resulting in the recognition of **$109.4 million** in right-of-use assets and **$146.2 million** in lease liabilities on the balance sheet[51](index=51&type=chunk)[54](index=54&type=chunk) Revenue by Channel (in thousands) | Channel | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | E-commerce | $67,005 | $78,182 | | Retail | $86,213 | $60,791 | - Stock-based compensation expense increased significantly to **$27.1 million** in Q1 2022 from **$1.3 million** in Q1 2021. This includes **$20.1 million** related to the 2021 Founders Grant and **$5.3 million** for RSUs where the performance condition was met by the Direct Listing[79](index=79&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses **10.3%** revenue growth to **$153.2 million**, gross margin decline, and a **52.8%** SG&A surge leading to a **$34.1 million** net loss [Key Business Metrics and Non-GAAP Measures](index=25&type=section&id=Key%20Business%20Metrics%20and%20Certain%20Non-GAAP%20Financial%20Measures) Key metrics show active customer growth to **2.23 million** and **169** stores, but Adjusted EBITDA sharply declined to **$0.8 million** Key Performance Indicators | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Active Customers (in millions) | 2.23 | 1.89 | | Store Count | 169 | 134 | Adjusted EBITDA Reconciliation (in thousands) | Metric | Q1 2022 | Q1 2021 | | :--- | :--- | :--- | | Net (loss) income | $(34,133) | $3,011 | | Adjustments | $34,907 | $6,253 | | **Adjusted EBITDA** | **$774** | **$9,264** | | Adjusted EBITDA margin | 0.5% | 6.7% | [Results of Operations](index=28&type=section&id=Results%20of%20Operations) Q1 2022 revenue grew **10.3%** to **$153.2 million**, but gross margin declined and SG&A expenses surged **52.8%**, resulting in an operating loss - Net revenue increased by **$14.2 million (10.3%)** in Q1 2022 compared to Q1 2021, driven by a larger Active Customer base and a higher Average Order Value (AOV) due to a greater mix of progressive lenses[141](index=141&type=chunk) - Gross margin decreased by **180 basis points**, primarily due to sales growth of lower-margin contact lenses, increased store occupancy costs from store expansion (from **134 to 169 stores**), and a prior year tariff rebate benefit[144](index=144&type=chunk) - Selling, general, and administrative (SG&A) expenses rose by **$42.6 million (52.8%)**, primarily driven by a **$25.9 million** increase in stock-based compensation and related taxes following the company's Direct Listing[145](index=145&type=chunk) [Liquidity and Capital Resources](index=31&type=section&id=Liquidity%20and%20Capital%20Resources) The company holds **$230.3 million** in cash and a **$50 million** credit facility, deemed sufficient for operations despite anticipated losses - The company has a revolving credit facility of up to **$50.0 million** with Comerica Bank. As of March 31, 2022, there were no borrowings outstanding other than **$4.0 million** in letters of credit[154](index=154&type=chunk)[155](index=155&type=chunk) - Net cash used in operating activities was **$10.3 million** for Q1 2022, primarily consisting of a net loss of **$34.1 million** offset by non-cash charges like **$27.1 million** in stock-based compensation[157](index=157&type=chunk) - Net cash used in investing activities was **$16.1 million**, mainly for property and equipment purchases related to the build-out of new retail stores[159](index=159&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risks include foreign exchange, interest rate, and inflation, with current impacts deemed immaterial but future cost pressures acknowledged - The company is exposed to foreign exchange risk from its Canadian operations and suppliers in Japanese yen and euros, but does not believe the effect is material[169](index=169&type=chunk) - Interest rate risk is considered low, as the company's **$230.3 million** in cash and cash equivalents are held in short-term instruments with a primary goal of liquidity and capital preservation[170](index=170&type=chunk) - Inflation is identified as a potential risk that could impact costs for raw materials, transportation, labor, and rent, which the company may not be able to fully offset with increased revenue[171](index=171&type=chunk) [Controls and Procedures](index=35&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls were ineffective due to material weaknesses in IT general controls and financial reporting processes, with remediation underway - Management concluded that disclosure controls and procedures were not effective as of March 31, 2022, due to ongoing material weaknesses[174](index=174&type=chunk) - The material weaknesses relate to (i) IT general controls over key systems and (ii) process controls within financial reporting, including segregation of duties and timely reconciliation[176](index=176&type=chunk) - Remediation efforts are underway, including selecting and implementing a new ERP system, developing IT controls, implementing additional review processes, and hiring more accounting personnel[177](index=177&type=chunk)[178](index=178&type=chunk) Part II. Other Information [Legal Proceedings](index=37&type=section&id=Item%201.%20Legal%20Proceedings) The company is not subject to any pending legal matters expected to materially impact its financial condition or operations - The company is not currently subject to any pending legal matters that would materially impact its financial condition[103](index=103&type=chunk)[183](index=183&type=chunk) [Risk Factors](index=37&type=section&id=Item%201A.%20Risk%20Factors) No material changes to the company's risk factors have occurred since the prior Annual Report on Form 10-K - There have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K[184](index=184&type=chunk)

| --- | --- | --- | |-------|-------|-------| | | | | | | | | FORWARD- LOOKING STATEMENTS / NON-GAAP FINANCIAL MEASURES ............... This presentation contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements may relate to, but are not limited to, expectations of future operating results or financial performance, including expectations regarding achieving profitabili ...

Warby Parker Inc. (NYSE:WRBY) Q1 2022 Earnings Conference Call May 16, 2022 8:00 AM ET Company Participants Neil Blumenthal – Co-Founder and Co-Chief Executive Officer Dave Gilboa – Co-Founder and Co-Chief Executive Officer Steve Miller – Senior Vice President and Chief Financial Officer Tina Romani – Vice President of Investor Relations Conference Call Participants Oliver Chen – Cowen & Co. Paul Lejuez – Citigroup Dana Telsey – Telsey Advisory Group Mark Altschwager – Robert W. Baird & Co. Brooke Roach – G ...

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