Warby Parker Inc. (NYSE:WRBY) Q3 2022 Earnings Conference Call November 10, 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 Edward Yruma - Piper Sandler Brandon Cheatham - CITI Dana Telsey - Telsey Advisory Group Operator Thank you and good morning everyone. Here with me today are Neil Blumenthal, Dave Gilboa our Co-Founders and Co-CEOs alongside Steve Miller, Senior Vice President and Ch ...

| --- | --- | --- | |-------|-------|-------| | | | | | | | | FORWARD-LOOKING STATEMENTS / NON-GAAP FINANCIAL MEASURES 2 .............. 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 ...

[Special Note Regarding Forward Looking Statements](index=4&type=section&id=Special%20Note%20Regarding%20Forward%20Looking%20Statements) This section contains forward-looking statements about future results, financial position, industry trends, business strategy, and market growth, which involve substantial risks and uncertainties - This section contains forward-looking statements about future results, financial position, industry trends, business strategy, and market growth, which involve substantial risks and uncertainties[6](index=6&type=chunk) - Investors should not rely on these statements as predictions of future events, as actual results could differ materially due to various risks, including managing growth, cost fluctuations, supply chain issues, competition, inventory management, customer engagement, brand awareness, COVID-19 impacts, seasonal trends, regulatory compliance, intellectual property protection, reliance on third parties, public benefit corporation duties, co-founder influence, stock price volatility, and increased public company expenses[7](index=7&type=chunk) [Part I. Financial Information](index=5&type=section&id=Part%20I.%20Financial%20Information) [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents the unaudited condensed consolidated financial statements, including balance sheets, statements of operations and comprehensive loss, statements of changes in equity, and statements of cash flows, along with detailed notes explaining significant accounting policies, financial instrument details, and other relevant disclosures for the periods ended June 30, 2022 and 2021 [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) | Metric | June 30, 2022 (in thousands) | December 31, 2021 (in thousands) | | :--------------------------------- | :----------------------------- | :------------------------------- | | Cash and cash equivalents | $211,603 | $256,416 | | Total current assets | $295,808 | $327,980 | | Total assets | $543,557 | $440,646 | | Total current liabilities | $119,860 | $118,104 | | Total liabilities | $261,526 | $154,648 | | Total stockholders' equity | $282,031 | $285,998 | - Total assets increased by **$102.9 million**, or **23.4%**, from December 31, 2021, to June 30, 2022, primarily due to increases in property and equipment, and the recognition of right-of-use lease assets[13](index=13&type=chunk) - Total liabilities significantly increased by **$106.9 million**, or **69.1%**, mainly driven by the recognition of non-current lease liabilities upon the adoption of ASC 842[13](index=13&type=chunk)[59](index=59&type=chunk) [Condensed Consolidated Statements of Operations and Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20and%20Comprehensive%20Loss) | Metric (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenue | $149,624 | $131,560 | $302,842 | $270,533 | | Gross profit | $86,347 | $78,053 | $175,993 | $161,834 | | Loss from operations | $(32,081) | $(8,808) | $(65,821) | $(5,787) | | Net loss | $(32,166) | $(10,307) | $(66,299) | $(7,295) | | Net loss per share | $(0.28) | $(0.35) | $(0.58) | $(0.38) | - Net revenue increased by **13.7%** for the three months ended June 30, 2022, and by **11.9%** for the six months ended June 30, 2022, compared to the respective prior periods[14](index=14&type=chunk)[143](index=143&type=chunk)[152](index=152&type=chunk) - Net loss significantly widened to **$(32.2) million** for Q2 2022 from **$(10.3) million** for Q2 2021, and to **$(66.3) million** for YTD 2022 from **$(7.3) million** for YTD 2021, primarily due to increased selling, general, and administrative expenses, including higher stock-based compensation[14](index=14&type=chunk)[148](index=148&type=chunk)[156](index=156&type=chunk) [Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders' (Deficit) Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Redeemable%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20(Deficit)%20Equity) | Metric (in thousands) | December 31, 2021 | June 30, 2022 | | :-------------------- | :---------------- | :------------ | | Additional Paid-In Capital | $779,212 | $841,699 | | Accumulated Deficit | $(493,241) | $(559,540) | | Total Stockholders' Equity | $285,998 | $282,031 | - Stockholders' equity decreased from **$285.998 million** at December 31, 2021, to **$282.031 million** at June 30, 2022, primarily due to the net loss of **$(66.3) million**, partially offset by **$53.9 million** in stock-based compensation and **$3.3 million** in non-cash charitable contributions[17](index=17&type=chunk)[24](index=24&type=chunk) - The accumulated deficit increased from **$(493.2) million** to **$(559.5) million** during the six months ended June 30, 2022[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(14,624) | $(5,095) | | Net cash used in investing activities | $(31,869) | $(21,215) | | Net cash provided by (used in) financing activities | $1,982 | $(27,235) | | Net decrease in cash and cash equivalents | $(44,813) | $(53,413) | - Net cash used in operating activities increased to **$(14.6) million** for YTD 2022 from **$(5.1) million** for YTD 2021, driven by a larger net loss and increased inventory[24](index=24&type=chunk)[167](index=167&type=chunk)[168](index=168&type=chunk) - Net cash used in investing activities increased to **$(31.9) million** for YTD 2022 from **$(21.2) million** for YTD 2021, primarily due to increased purchases of property and equipment for new retail stores and capitalized software[24](index=24&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk) - Net cash provided by financing activities was **$2.0 million** for YTD 2022, a significant change from net cash used of **$(27.2) million** for YTD 2021, which included substantial stock repurchases and tender offer payments[24](index=24&type=chunk)[171](index=171&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. Description of Business](index=10&type=section&id=1.%20Description%20of%20Business) - Warby Parker Inc. is a founder-led, mission-driven lifestyle brand offering eyewear products and optical services directly to consumers through retail stores and e-commerce, operating as a public benefit corporation[27](index=27&type=chunk) - The Company completed a direct listing of its Class A common stock on the NYSE on September 29, 2021, incurring **$4.1 million** and **$4.4 million** in related fees for the three and six months ended June 30, 2021, respectively[28](index=28&type=chunk) [2. Summary of Significant Accounting Policies](index=10&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP, with certain information condensed or omitted per SEC regulations[29](index=29&type=chunk) - The Company adopted ASC 842 (Leases) on January 1, 2022, using a modified retrospective approach, resulting in the recognition of **$109.4 million** in right-of-use assets and **$146.2 million** in lease liabilities on the balance sheet[56](index=56&type=chunk)[59](index=59&type=chunk) Revenue Source | Revenue Source | Three Months Ended June 30, 2022 (in thousands) | Three Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | | :--------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | Eyewear products | $142,985 | $127,618 | $290,304 | $262,292 | | Services and other | $6,639 | $3,942 | $12,538 | $8,241 | | Total Revenue | $149,624 | $131,560 | $302,842 | $270,533 | Revenue Channel | Revenue Channel | Three Months Ended June 30, 2022 (in thousands) | Three Months Ended June 30, 2021 (in thousands) | Six Months Ended June 30, 2022 (in thousands) | Six Months Ended June 30, 2021 (in thousands) | | :-------------- | :-------------------------------------------- | :-------------------------------------------- | :------------------------------------------ | :------------------------------------------ | | E-commerce | $58,448 | $58,478 | $125,452 | $136,660 | | Retail | $91,176 | $73,082 | $177,390 | $133,873 | | Total Revenue | $149,624 | $131,560 | $302,842 | $270,533 | [3. Property and Equipment, Net](index=15&type=section&id=3.%20Property%20and%20Equipment,%20Net) Category | Category (in thousands) | June 30, 2022 | December 31, 2021 | | :---------------------- | :------------ | :---------------- | | Leasehold improvements | $123,570 | $110,948 | | Computers and equipment | $27,622 | $23,084 | | Furniture and fixtures | $20,790 | $17,473 | | Capitalized software | $17,039 | $13,389 | | Construction in process | $13,435 | $10,992 | | Total P&E, net | $128,472 | $112,195 | Depreciation & Amortization Expense | Depreciation & Amortization Expense (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of goods sold | $4,906 | $3,685 | $9,554 | $7,096 | | Selling, general, and administrative expenses | $2,974 | $1,433 | $5,463 | $2,727 | | Total depreciation and amortization expense | $7,880 | $5,118 | $15,017 | $9,823 | [4. Accrued Expenses](index=15&type=section&id=4.%20Accrued%20Expenses) Accrued Expense Category | Accrued Expense Category (in thousands) | June 30, 2022 | December 31, 2021 | | :-------------------------------------- | :------------ | :---------------- | | Unvested early exercised stock options | $11,068 | $14,396 | | Payroll related costs | $9,742 | $11,851 | | Optical laboratory and inventory costs | $5,033 | $5,325 | | Charitable contributions | $4,670 | $5,639 | | Marketing expenses | $4,572 | $12,061 | | Other accrued expenses | $14,753 | $11,568 | | Total accrued expenses | $49,838 | $60,840 | - Total accrued expenses decreased by **$11.0 million**, or **18.1%**, from December 31, 2021, to June 30, 2022, primarily due to reductions in unvested early exercised stock options and marketing expenses[66](index=66&type=chunk) [5. Income Taxes](index=15&type=section&id=5.%20Income%20Taxes) Income Tax Metric | Income Tax Metric (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax expense | $47 | $1,059 | $586 | $1,202 | | Effective tax rate | (0.1)% | (11.5)% | (0.9)% | (19.7)% | - Income tax expense decreased significantly for both the three and six months ended June 30, 2022, compared to 2021, primarily due to the change in pre-tax loss and the tax effects of stock-based compensation expense[69](index=69&type=chunk)[151](index=151&type=chunk)[158](index=158&type=chunk) [6. Redeemable Convertible Preferred Stock and Stockholders' Equity](index=16&type=section&id=6.%20Redeemable%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20Equity) - As of June 30, 2022, the Company's common stock structure includes Class A (one vote), Class B (ten votes), and Class C (no voting rights) shares, with **95.6 million** Class A and **19.0 million** Class B shares outstanding[70](index=70&type=chunk)[71](index=71&type=chunk) - All outstanding redeemable convertible preferred stock was converted to Class A common stock in September 2021 during the Direct Listing, with no preferred shares outstanding as of June 30, 2022[72](index=72&type=chunk) - In May 2022, the Company issued **178,572** shares of Class A common stock to the Warby Parker Impact Foundation, recognizing **$3.3 million** in charitable expense[76](index=76&type=chunk) [7. Stock-Based Compensation](index=17&type=section&id=7.%20Stock-Based%20Compensation) - The 2021 Incentive Award Plan authorized **11,076,515** shares of Class A common stock, with an annual increase of **5%** of outstanding common stock, resulting in **16,794,213** shares available for future issuance as of June 30, 2022[78](index=78&type=chunk)[79](index=79&type=chunk) - The 2021 Employee Stock Purchase Plan (ESPP) initially reserved **2,215,303** shares, increasing annually by **1%** of outstanding common stock, with **3,244,066** shares available as of June 30, 2022[80](index=80&type=chunk)[82](index=82&type=chunk) Stock-Based Compensation Expense | Stock-Based Compensation Expense (in thousands) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of goods sold | $231 | $0 | $457 | $0 | | Selling, general, and administrative expenses | $26,533 | $11,670 | $53,451 | $11,670 | | Total stock-based compensation expense | $26,764 | $11,670 | $53,908 | $11,670 | - Total stock-based compensation expense increased significantly to **$26.8 million** for Q2 2022 and **$53.9 million** for YTD 2022, primarily due to the 2021 Founders Grant (PSUs and RSUs) whose performance-based vesting condition was satisfied by the Direct Listing[85](index=85&type=chunk)[96](index=96&type=chunk)[97](index=97&type=chunk) [8. Leases](index=21&type=section&id=8.%20Leases) Lease Assets/Liabilities | Lease Assets/Liabilities (in thousands) | June 30, 2022 | | :------------------------------------ | :------------ | | Right-of-use assets | $115,463 | | Current lease liabilities | $18,737 | | Non-current lease liabilities | $139,735 | | Total lease liabilities | $158,472 | Net Lease Expense | Net Lease Expense (in thousands) | Three Months Ended June 30, 2022 | Six Months Ended June 30, 2022 | | :------------------------------- | :------------------------------- | :----------------------------- | | Operating lease expense | $6,280 | $12,293 | | Variable lease expense | $937 | $1,875 | | Net lease expense | $7,217 | $14,168 | - The weighted average remaining lease term is **5.9 years**, with a weighted average discount rate of **3.5%** as of June 30, 2022[107](index=107&type=chunk) [9. Commitments and Contingencies](index=22&type=section&id=9.%20Commitments%20and%20Contingencies) - The Company has a revolving credit line of up to **$50.0 million** with Comerica Bank, with **$4.1 million** in letters of credit outstanding as of June 30, 2022, and no other borrowings[108](index=108&type=chunk)[109](index=109&type=chunk) - As of June 30, 2022, the Company is not subject to any pending legal matters or claims that could materially adversely affect its financial position, results of operations, or cash flows[111](index=111&type=chunk) [10. Net Loss Per Share Attributable to Common Stockholders](index=23&type=section&id=10.%20Net%20Loss%20Per%20Share%20Attributable%20to%20Common%20Stockholders) EPS Metric | EPS Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :--------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss attributable to common stockholders | $(32,166) | $(18,831) | $(66,299) | $(20,432) | | Weighted average shares, basic and diluted | 114,679,892 | 54,019,802 | 114,393,420 | 53,986,670 | | Net loss per share, basic and diluted | $(0.28) | $(0.35) | $(0.58) | $(0.38) | - Potentially dilutive shares, including stock options, RSUs, and PSUs, were excluded from diluted EPS calculations for all periods presented because their inclusion would have been antidilutive due to the net loss[113](index=113&type=chunk) [11. Related-Party Transactions](index=23&type=section&id=11.%20Related-Party%20Transactions) - Secured promissory notes issued to certain senior management members, collateralized by stock, had a balance of **$3.1 million** at both June 30, 2022, and December 31, 2021[114](index=114&type=chunk)[115](index=115&type=chunk) - Executive officers repaid their promissory notes in full prior to the Direct Listing in August 2021, but several notes remain outstanding with other senior management members[114](index=114&type=chunk) [12. Subsequent Events](index=23&type=section&id=12.%20Subsequent%20Events) - In August 2022, the Company initiated a restructuring plan, including a reduction in force of **63** corporate positions, to reduce costs and drive operational efficiencies[116](index=116&type=chunk) - The Company estimates incurring approximately **$1.7 million** in cash charges for employee severance and related costs, expected to be recognized in the third quarter of 2022[116](index=116&type=chunk) [Item 2. 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) This section provides management's perspective on the Company's financial condition and results of operations, highlighting key business metrics, the impact of COVID-19, and a detailed comparison of financial performance for the three and six months ended June 30, 2022 and 2021. It also discusses liquidity, capital resources, and critical accounting policies [Overview](index=24&type=section&id=Overview) - Warby Parker is a direct-to-consumer, mission-driven lifestyle brand at the intersection of design, technology, healthcare, and social enterprise, offering eyewear and optical services through an integrated multichannel presence[118](index=118&type=chunk)[119](index=119&type=chunk) - The Company focuses on high-quality, affordable products (glasses starting at **$95**), a seamless shopping experience (website, app, **170+** retail stores), holistic vision care (contacts, tests, exams, insurance), and a 'Buy a Pair, Give a Pair' program that has distributed over **10 million** glasses[119](index=119&type=chunk) [Financial Highlights](index=25&type=section&id=Financial%20Highlights) Metric | Metric (in millions) | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenue | $149.6 | $131.6 | $302.8 | $270.5 | | Gross profit | $86.3 | $78.1 | $176.0 | $161.8 | | Net loss | $(32.2) | $(10.3) | $(66.3) | $(7.3) | | Adjusted EBITDA | $5.9 | $10.8 | $6.7 | $20.1 | - Gross profit margin decreased to **57.7%** for Q2 2022 (from **59.3%** in Q2 2021) and to **58.1%** for YTD 2022 (from **59.8%** in YTD 2021)[124](index=124&type=chunk) - Adjusted EBITDA margin declined significantly to **4.0%** for Q2 2022 (from **8.2%** in Q2 2021) and to **2.2%** for YTD 2022 (from **7.4%** in YTD 2021)[123](index=123&type=chunk) [Impact of COVID-19](index=25&type=section&id=Impact%20of%20COVID-19) - The Company continues to monitor COVID-19 developments and adjust policies, experiencing minimal supply chain disruptions through the first half of 2022 due to new suppliers and enhanced inventory planning[121](index=121&type=chunk) - The full financial impact of the pandemic on future results remains uncertain due to its unpredictable nature[121](index=121&type=chunk) [Key Business Metrics and Certain Non-GAAP Financial Measures](index=25&type=section&id=Key%20Business%20Metrics%20and%20Certain%20Non-GAAP%20Financial%20Measures) Metric | Metric | Three Months Ended June 30, 2022 | Three Months Ended June 30, 2021 | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Active Customers (in millions) | 2.26 | 2.08 | 2.26 | 2.08 | | Store Count | 178 | 145 | 178 | 145 | | Adjusted EBITDA (in thousands) | $5,936 | $10,810 | $6,710 | $20,075 | | Adjusted EBITDA margin | 4.0% | 8.2% | 2.2% | 7.4% | - Active Customers increased to **2.26 million** as of June 30, 2022, from **2.08 million** as of June 30, 2021, reflecting expanded reach and brand awareness[123](index=123&type=chunk)[125](index=125&type=chunk) - Store Count grew to **178** retail stores as of June 30, 2022, from **145** stores as of June 30, 2021, with **127** stores offering in-person eye exams[123](index=123&type=chunk)[126](index=126&type=chunk)[127](index=127&type=chunk) [Components of Results of Operations](index=28&type=section&id=Components%20of%20Results%20of%20Operations) - Net revenue is primarily derived from sales of eyewear products, optical services, and accessories through retail stores, website, and mobile apps, recognized upon customer possession or service rendering, net of returns and discounts[137](index=137&type=chunk) - Cost of goods sold includes product, freight, optical laboratory, customer shipping, store occupancy, depreciation, and employee-related costs, expected to fluctuate with product mix, demand, and new store openings[138](index=138&type=chunk) - Selling, general, and administrative (SG&A) expenses comprise employee costs, marketing, IT, credit card fees, charitable donations, facilities, legal, and Home Try-On program costs; the Company anticipates reducing SG&A through headcount reductions and cost control actions in H2 2022[140](index=140&type=chunk) [Comparison of the Three Months Ended June 30, 2022 and 2021](index=29&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030,%202022%20and%202021) Metric | Metric (in thousands) | Q2 2022 | Q2 2021 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Net Revenue | $149,624 | $131,560 | $18,064 | 13.7% | | Cost of Goods Sold | $63,277 | $53,507 | $9,770 | 18.3% | | Gross Profit | $86,347 | $78,053 | $8,294 | 10.6% | | Gross Margin | 57.7% | 59.3% | -1.6% pts | | | SG&A Expenses | $118,428 | $86,861 | $31,567 | 36.3% | | Interest & Other Income, net | $(38) | $(440) | $402 | -91.4% | | Provision for Income Taxes | $47 | $1,059 | $(1,012) | -95.6% | - Net revenue growth was driven by an increase in Active Customers and Average Order Value (AOV), primarily from a higher mix of progressive lenses[143](index=143&type=chunk)[144](index=144&type=chunk) - Gross margin decreased by **160 basis points** due to increased contact lens sales (lower margin), higher store occupancy and depreciation costs from new stores, and increased prescription services costs, partially offset by progressive lens sales and optical laboratory leverage[147](index=147&type=chunk) - SG&A expenses increased significantly due to a **$16.2 million** rise in stock-based compensation, charitable expenses, higher compensation costs from retail workforce growth, public company operating costs, and technology investments, partially offset by reduced Direct Listing costs and Home Try-On program utilization[148](index=148&type=chunk) [Comparison of the Six Months Ended June 30, 2022 and 2021](index=31&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030,%202022%20and%202021) Metric | Metric (in thousands) | YTD 2022 | YTD 2021 | Change ($) | Change (%) | | :-------------------- | :----------- | :----------- | :----------- | :----------- | | Net Revenue | $302,842 | $270,533 | $32,309 | 11.9% | | Cost of Goods Sold | $126,849 | $108,699 | $18,150 | 16.7% | | Gross Profit | $175,993 | $161,834 | $14,159 | 8.7% | | Gross Margin | 58.1% | 59.8% | -1.7% pts | |\ | SG&A Expenses | $241,814 | $167,621 | $74,193 | 44.3% | | Interest & Other Income, net | $108 | $(306) | $414 | -135.3% | | Provision for Income Taxes | $586 | $1,202 | $(616) | -51.2% | - Net revenue growth for the six-month period was driven by an increase in Active Customers and AOV, similar to the quarterly trend[152](index=152&type=chunk) - Gross margin decreased by **170 basis points** due to similar factors as the quarterly trend: higher contact lens sales, increased store occupancy and depreciation, and prescription services costs, partially offset by progressive lens sales and optical laboratory leverage[155](index=155&type=chunk) - SG&A expenses increased substantially due to a **$42.1 million** rise in stock-based compensation, higher compensation costs, charitable expenses, increased insurance costs as a public company, technology investments, and marketing costs in Q1 2022, partially offset by reduced Home Try-On program utilization[156](index=156&type=chunk) [Seasonality](index=33&type=section&id=Seasonality) - Historically, the business has not experienced material seasonal fluctuations in net revenue, but observes moderately higher demand in December due to customer usage of health and flexible spending benefits[159](index=159&type=chunk) - Costs tend to be higher in later quarters due to business growth, new store openings, and employee compensation, with the fourth quarter historically experiencing the highest costs[160](index=160&type=chunk) [Liquidity and Capital Resources](index=33&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2022, the Company had **$211.6 million** in cash and cash equivalents and an accumulated deficit of **$559.5 million**[161](index=161&type=chunk) - Existing cash, credit facility, and operating cash flows are expected to be sufficient for operations for at least the next **12 months**, despite anticipated continued operating losses[162](index=162&type=chunk) - Future capital requirements depend on retail store growth, optical laboratory and distribution network needs, product expansion, and technology investments; the Company may seek additional equity or debt financing, with potential risks from global financial market disruptions[163](index=163&type=chunk) [Cash Flows](index=34&type=section&id=Cash%20Flows) Cash Flow Activity | Cash Flow Activity (in thousands) | Six Months Ended June 30, 2022 | Six Months Ended June 30, 2021 | | :-------------------------------- | :----------------------------- | :----------------------------- | | Net cash used in operating activities | $(14,624) | $(5,095) | | Net cash used in investing activities | $(31,869) | $(21,215) | | Net cash provided by (used in) financing activities | $1,982 | $(27,235) | | Net decrease in cash and cash equivalents | $(44,813) | $(53,413) | - Operating cash outflow increased due to a higher net loss and increased inventory, while investing cash outflow rose due to property and equipment purchases for growth[167](index=167&type=chunk)[169](index=169&type=chunk) - Financing activities shifted from a net cash outflow in 2021 (due to stock repurchases) to a net cash inflow in 2022 (from ESPP and stock option exercises)[171](index=171&type=chunk) [Contractual Obligations and Commitments](index=34&type=section&id=Contractual%20Obligations%20and%20Commitments) - There have been no material changes to the Company's contractual obligations from those described in the Annual Report[172](index=172&type=chunk) [Critical Accounting Policies and Estimates](index=34&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) - The Company's critical accounting policies and estimates are consistent with those in the Annual Report, with the exception of new accounting pronouncements adopted as described in Note 2[175](index=175&type=chunk) [Recent Accounting Pronouncements](index=35&type=section&id=Recent%20Accounting%20Pronouncements) - Further information regarding recent accounting pronouncements is provided in Note 2 to the condensed consolidated financial statements[176](index=176&type=chunk) [JOBS Act](index=35&type=section&id=JOBS%20Act) - As an 'emerging growth company' under the JOBS Act, the Company has elected to use the extended transition period for new accounting guidance, which may affect comparability with other companies[177](index=177&type=chunk) - The Company will qualify as a 'large accelerated filer' as of December 31, 2022, and will no longer be an emerging growth company, subjecting it to enhanced disclosure requirements like auditor attestation under Sarbanes-Oxley Section 404 starting January 1, 2023[178](index=178&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=36&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section discusses the Company's exposure to market risks, including foreign exchange risk, interest rate risk, and inflation risk, and management's assessment of their potential impact on financial position and results of operations - The Company is exposed to foreign exchange risk from international operations and suppliers (Japanese yen and euros), but does not believe it has a material effect on its business[181](index=181&type=chunk) - Interest rate risk is limited due to the short-term nature of its cash and cash equivalents (**$211.6 million** as of June 30, 2022), with a focus on liquidity and capital preservation, and no use of derivative financial instruments[182](index=182&type=chunk) - Inflation has had a limited impact to date, but significant inflationary pressures on raw materials, transportation, labor, and other costs could adversely affect the business if not offset by increased revenue[183](index=183&type=chunk) [Item 4. Controls and Procedures](index=37&type=section&id=Item%204.%20Controls%20and%20Procedures) This section reports on the effectiveness of the Company's disclosure controls and procedures, identifying material weaknesses in internal control over financial reporting and outlining the remediation measures being undertaken - As of June 30, 2022, the Company's disclosure controls and procedures were not effective at the reasonable assurance level due to identified material weaknesses[186](index=186&type=chunk) - Material weaknesses relate to (i) information technology general controls (user access, program change management) and (ii) certain process and application controls (segregation of duties, error prevention/detection, timely reconciliation, manual journal entry review)[188](index=188&type=chunk) - Remediation efforts include developing IT general controls, implementing a new ERP system, adding review controls, improving segregation of duties, and hiring additional accounting personnel, with full remediation expected to be time-consuming and costly[189](index=189&type=chunk) [Part II. Other Information](index=39&type=section&id=Part%20II.%20Other%20Information) [Item 1. Legal Proceedings](index=39&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to the disclosures regarding legal proceedings found in Note 9 to the condensed consolidated financial statements - Information on legal proceedings is incorporated by reference from Note 9 of the condensed consolidated financial statements[195](index=195&type=chunk) [Item 1A. Risk Factors](index=39&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously disclosed in the Annual Report on Form 10-K, but advises careful consideration of all factors discussed - No material changes to risk factors affecting the business, financial condition, or future results from those set forth in the Annual Report on Form 10-K[196](index=196&type=chunk) - Investors should carefully consider all risk factors discussed in both the Annual Report and this Quarterly Report[196](index=196&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=39&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section reports on recent unregistered sales of equity securities, specifically a stock donation, and confirms no issuer purchases of equity securities - In May 2022, the Company issued **178,572** shares of Class A common stock to the Warby Parker Impact Foundation, relying on the Section 4(a)(2) exemption from registration[197](index=197&type=chunk) - There were no issuer purchases of equity securities during the period[198](index=198&type=chunk) [Item 3. Defaults Upon Senior Securities](index=39&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This section states that there were no defaults upon senior securities - None[198](index=198&type=chunk) [Item 4. Mine Safety Disclosures](index=39&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section indicates that mine safety disclosures are not applicable to the Company - Not applicable[198](index=198&type=chunk) [Item 5. Other Information](index=39&type=section&id=Item%205.%20Other%20Information) This section states that there is no other information to report - None[198](index=198&type=chunk) [Item 6. Exhibits](index=40&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, stock certificates, certifications, and XBRL-related documents - Exhibits include the Twelfth Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, specimen common stock certificates, CEO and CFO certifications (pursuant to Rule 13a-14(a)/15d-14(a) and 18 U.S.C. Section 1350), and Inline XBRL documents[200](index=200&type=chunk) [Signatures](index=41&type=section&id=Signatures) - The report was duly signed on August 11, 2022, by Neil Blumenthal (Co-Chief Executive Officer), Dave Gilboa (Co-Chief Executive Officer), and Steve Miller (Chief Financial Officer)[203](index=203&type=chunk)[204](index=204&type=chunk)[205](index=205&type=chunk)

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 ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2021 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For transition period from to Commission File Number 001-40825 Warby Parker Inc. (Exact name of registrant as specified in its charter) Delaware 80-0423634 (I.R.S. Employer Identification Number ...

Warby Parker Inc. (NYSE:WRBY) Q4 2021 Earnings Conference Call March 17, 2022 8:00 AM ET Company Participants Tina Romani - Vice President, Investor Relations Neil Blumenthal - Co-Founder and Chief Executive Officer Dave Gilboa - Co-Founder and Chief Executive Officer Steve Miller - Senior Vice President and Chief Financial Officer Conference Call Participants Mark Altschwager - Baird Kimberly Greenberger - Morgan Stanley Paul Lejuez - Citigroup Brooke Roach - Goldman Sachs Oliver Chen - Cowen Mark Mahaney ...

Warby Parker Inc. (NYSE:WRBY) Q3 2021 Results Earnings Conference Call November 12, 2021 8:00 AM ET Company Participants Tina Romani - Vice President, Investor Relations Neil Blumenthal - Chief Executive Officer Dave Gilboa - Chief Executive Officer Steve Miller - Senior Vice President and Chief Financial Officer Conference Call Participants Oliver Chen - Cowen Paul Lejuez - Citi Brooke Roach - Goldman Sachs Mark Mahaney - Evercore ISI Sarah Goldberg - Baird Dana Telsey - Telsey Advisory Group Operator Good ...