Warby Parker(WRBY) - 2025 Q2 - Quarterly Report

Special Note Regarding Forward Looking Statements Forward-Looking Statements Disclaimer This section outlines the nature of forward-looking statements within the report, emphasizing that they involve substantial risks and uncertainties - Forward-looking statements are identified by words such as "anticipate," "believe," "expect," and relate to future operations, financial position, industry trends, and business strategy[6] - Key risks and uncertainties include managing future growth, cost of goods sold, gross margin, supply chain changes, trade policies, reliance on IT systems, AI investment risks, customer engagement, insurance network expansion, new retail store plans, economic downturns, competition, inventory management, brand awareness, and regulatory compliance[7] - The company operates in a competitive and rapidly changing environment, with new risks emerging, and undertakes no obligation to update forward-looking statements unless required by law[7][9] Part I. Financial Information Item 1. Financial Statements This section presents the unaudited condensed consolidated financial statements for Warby Parker Inc. and its subsidiaries, along with detailed notes explaining significant accounting policies and financial components Condensed Consolidated Balance Sheets - Total assets increased by $25.4 million (3.8%) from December 31, 2024, to June 30, 2025, primarily driven by an increase in cash and cash equivalents[12] - Total stockholders' equity increased by $21.4 million (6.3%) over the same period[12] Condensed Consolidated Balance Sheet Highlights (Amounts in thousands) | Metric | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :------------------ | | Assets | | | | Cash and cash equivalents | $286,384 | $254,161 | | Total current assets | $346,097 | $326,046 | | Total assets | $701,899 | $676,490 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $135,533 | $130,354 | | Total liabilities | $340,448 | $336,417 | | Total stockholders' equity | $361,451 | $340,073 | Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) - Net revenue increased by 13.9% for the three months ended June 30, 2025, and by 12.9% for the six months ended June 30, 2025, compared to the prior year periods[13] - The company reported a net loss of $1.8 million for Q2 2025, a significant improvement from a $6.8 million net loss in Q2 2024, and achieved a net income of $1.7 million for the six months in 2025, reversing a $9.4 million net loss in 2024[13] Condensed Consolidated Statements of Operations Highlights (Amounts in thousands, except per share data) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenue | $214,475 | $188,222 | $438,257 | $388,225 | | Gross profit | $113,609 | $105,382 | $239,589 | $218,841 | | Loss from operations | $(4,525) | $(8,956) | $(2,054) | $(14,083) | | Net (loss) income | $(1,752) | $(6,762) | $1,720 | $(9,441) | | Basic EPS | $(0.01) | $(0.06) | $0.01 | $(0.08) | | Diluted EPS | $(0.01) | $(0.06) | $0.01 | $(0.08) | Condensed Consolidated Statements of Changes in Stockholders' Equity - Total stockholders' equity increased from $340.1 million at December 31, 2024, to $361.5 million at June 30, 2025, primarily due to net income and stock-based compensation[14] Changes in Stockholders' Equity (Amounts in thousands) | Item | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Balance as of December 31 | $340,073 | $301,787 | | Stock option exercises | $333 | $4,084 | | Shares withheld for taxes | $(6,361) | $0 | | Employee stock purchase plan | $1,169 | $1,069 | | Stock-based compensation | $21,517 | $29,804 | | Non-cash charitable contributions | $2,821 | $2,196 | | Net income (loss) | $1,720 | $(9,441) | | Balance as of June 30 | $361,451 | $329,390 | Condensed Consolidated Statements of Cash Flows - Net cash provided by operating activities increased by $18.0 million (34.9%) for the six months ended June 30, 2025, compared to the same period in 2024[18] - Cash and cash equivalents at the end of the period increased by $32.2 million in 2025, reaching $286.4 million[18] Condensed Consolidated Statements of Cash Flows Highlights (Amounts in thousands) | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :----------------------------- | :----------------------------- | | Net cash provided by operating activities | $69,557 | $51,550 | | Net cash used in investing activities | $(32,438) | $(34,088) | | Net cash (used in) provided by financing activities | $(5,075) | $3,707 | | Net change in cash and cash equivalents | $32,223 | $21,064 | | Cash and cash equivalents, end of period | $286,384 | $237,958 | Notes to Condensed Consolidated Financial Statements These notes provide detailed explanations and breakdowns of the figures presented in the condensed consolidated financial statements, covering business description, accounting policies, and specific asset and liability categories Note 1. Description of Business - Warby Parker Inc. is a founder-led, mission-driven public benefit corporation founded in 2010, operating at the intersection of technology, design, healthcare, and social enterprise[21] - The company offers holistic vision care, selling eyewear products and providing optical services directly to consumers through retail stores and e-commerce, and implements a 'Buy a Pair, Give a Pair' program[21] Note 2. Summary of Significant Accounting Policies - The financial statements are prepared in accordance with U.S. GAAP, with certain information condensed or omitted per SEC regulations[22] - Significant estimates include inventory valuation, useful lives of long-lived assets, income taxes, and stock-based compensation[25] - In Q2 2025, Warby Parker partnered with Google to develop AI-powered glasses, with Google committing up to $75 million for product development and commercialization costs, and an additional $75 million investment option for Google[47] Revenue Disaggregation by Product (Amounts in thousands) | Product | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Eyewear | $201,503 | $179,210 | $412,348 | $369,853 | | Vision care | $12,972 | $9,012 | $25,909 | $18,372 | | Total Revenue | $214,475 | $188,222 | $438,257 | $388,225 | Revenue Disaggregation by Channel (Amounts in thousands) | Channel | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | E-commerce | $58,884 | $57,753 | $125,216 | $120,612 | | Retail | $155,591 | $130,469 | $313,041 | $267,613 | | Total Revenue | $214,475 | $188,222 | $438,257 | $388,225 | Note 3. Property and Equipment, Net Property and Equipment, Net (Amounts in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------------- | :------------ | :------------------ | | Leasehold improvements | $203,690 | $189,890 | | Computers and equipment | $55,817 | $46,186 | | Furniture and fixtures | $39,314 | $36,037 | | Capitalized software | $44,179 | $36,534 | | Construction in process | $13,897 | $20,460 | | Less: accumulated depreciation and amortization | $(179,741) | $(158,643) | | Property and equipment, net | $177,156 | $170,464 | Depreciation and Amortization Expense (Amounts in thousands) | Expense Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of goods sold | $8,719 | $7,374 | $17,414 | $14,475 | | Selling, general, and administrative expenses | $3,767 | $3,747 | $7,234 | $7,229 | | Total depreciation and amortization expense | $12,486 | $11,121 | $24,648 | $21,704 | Note 4. Accrued Expenses - Total accrued expenses increased by $8.9 million (17.4%) from December 31, 2024, to June 30, 2025, primarily due to increases in product and fulfillment, payroll, marketing, and professional services[52] Accrued Expenses (Amounts in thousands) | Category | June 30, 2025 | December 31, 2024 | | :-------------------- | :------------ | :------------------ | | Product and fulfillment | $20,883 | $15,273 | | Payroll related | $11,719 | $10,409 | | Marketing | $10,980 | $9,333 | | Professional services | $3,900 | $2,193 | | Legal | $3,324 | $2,338 | | Retail related | $3,293 | $5,929 | | Charitable contributions | $2,649 | $3,315 | | Other | $3,823 | $2,819 | | Total accrued expenses | $60,571 | $51,609 | Note 5. Income Taxes - The effective tax rate for Q2 2025 was 31.1%, compared to (5.8%) in Q2 2024, primarily due to changes in pre-tax income (loss) and the tax effects of stock-based compensation and depreciation[55] Income Tax Provision and Effective Tax Rate | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Income tax provision | $(789) | $373 | $665 | $481 | | Effective tax rate | 31.1% | (5.8)% | 27.9% | (5.4)% | Note 6. Stockholders' Equity - The Company's Certificate of Incorporation authorizes 1,050,000 shares of common stock, divided into Class A (one vote), Class B (ten votes), and Class C (no voting rights)[56] Common Stock and Equity Awards Outstanding (as of June 30, 2025, in thousands) | Category | Class A | Class B | Class C | | :------------------------------------------------------------------------------------------------ | :------ | :------ | :------ | | Common stock outstanding | 104,885 | 16,946 | — | | Stock options outstanding | 233 | 1,422 | — | | Restricted stock units ("RSUs") outstanding | 2,726 | 1,132 | — | | Performance stock units ("PSUs") outstanding | — | 4,633 | — | | Employee stock plans – available | 35,742 | — | — | | Shares of Class A common stock issuable upon conversion of all outstanding Class B common stock, stock options, RSUs, and PSUs | 24,133 | — | — | | Total common stock – outstanding or issuable | 167,719 | 24,133 | — | Note 7. Stock-Based Compensation - Total stock-based compensation expense decreased by $4.9 million (35.7%) for Q2 2025 and by $6.6 million (23.8%) for the six months ended June 30, 2025, primarily due to the 2021 Founders Grant awards finishing expensing[65][66] - As of June 30, 2025, unrecognized stock-based compensation expense for RSUs and PSUs was $46.2 million and $8.5 million, respectively, to be recognized over weighted-average periods of 1.6 years and 1.3 years[69] - In March 2025, the Company granted 236 PSUs and 236 RSUs (2025 Founders Grant) to Co-CEOs, with PSUs vesting based on TSR relative to the Russell 2000 Growth Index and RSUs vesting monthly over three years[71][73] Stock-Based Compensation Expense (Amounts in thousands) | Expense Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Cost of goods sold | $286 | $271 | $531 | $509 | | Selling, general, and administrative expenses | $8,610 | $13,560 | $20,698 | $27,370 | | Total stock-based compensation expense | $8,896 | $13,831 | $21,229 | $27,879 | Note 8. Leases - The weighted average remaining lease term is 6.1 years, with a weighted average discount rate of 5.7% as of June 30, 2025[83] Net Lease Expense (Amounts in thousands) | Expense Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Operating lease expense | $9,443 | $8,485 | $18,799 | $16,576 | | Variable lease expense | $187 | $138 | $542 | $322 | | Net lease expense | $9,630 | $8,623 | $19,341 | $16,898 | Future Lease Payments (Operating Leases, Amounts in thousands) | Year | Amount | | :--------- | :------- | | 2025 | $17,812 | | 2026 | $46,072 | | 2027 | $51,396 | | 2028 | $46,805 | | 2029 | $37,897 | | Thereafter | $77,834 | | Total | $277,816 | Note 9. Segment Information - The Company operates as one operating and reportable segment: holistic vision care, which includes eyewear products and optical services through retail and e-commerce platforms[87] - The Co-Chief Executive Officers, as the chief operating decision makers, evaluate performance and allocate resources based on consolidated net income[86][89] Segment Profit and Loss (Amounts in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $214,475 | $188,222 | $438,257 | $388,225 | | Segment and consolidated net (loss) income | $(1,752) | $(6,762) | $1,720 | $(9,441) | Note 10. Commitments and Contingencies - The 2024 Credit Facility provides a $120.0 million five-year revolving credit facility, with an option to increase to $175.0 million, for working capital and general corporate purposes[91] - The credit facility includes a financial maintenance covenant requiring a maximum consolidated senior net leverage ratio of 3:1 when total borrowings exceed $30.0 million[95] - The Company reached an agreement in principle to settle a class action and related lawsuits alleging California wage and hour law violations for $1.95 million, with preliminary court approval in June 2025[98] Note 11. Earnings Per Share - Potentially dilutive shares, including stock options, unvested RSUs, unvested PSUs, and ESPP purchase rights, were excluded from diluted EPS computation for Q2 2025 and Q2 2024 due to their antidilutive effect[102] Earnings Per Share (EPS) Calculation | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income (Numerator) | $(1,752) | $(6,762) | $1,720 | $(9,441) | | Weighted average shares, basic (Denominator) | 122,565 | 120,086 | 122,257 | 119,615 | | Weighted average shares, diluted (Denominator) | 122,565 | 120,086 | 125,719 | 119,615 | | Basic EPS | $(0.01) | $(0.06) | $0.01 | $(0.08) | | Diluted EPS | $(0.01) | $(0.06) | $0.01 | $(0.08) | Note 12. Related-Party Transactions - The Company has secured promissory notes, collateralized by stock purchased by certain executives, with a balance of $2.2 million at both June 30, 2025, and December 31, 2024[103][104] - No loans are outstanding with named executive officers, and no new promissory notes have been issued since 2021[104] Note 13. Subsequent Events - Subsequent to June 30, 2025, the Company entered into 3 new operating lease agreements and extended 4 existing ones for retail space, totaling approximately $3.8 million in commitments[106] - The One Big Beautiful Bill Act (OBBBA) was enacted on July 4, 2025, introducing changes to U.S. tax law, including provisions for bonus depreciation and R&D expenditures, which the Company is currently evaluating for financial statement impact[107] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations, analyzing key financial metrics, factors affecting performance, and liquidity Overview - Warby Parker is a mission-driven lifestyle brand focused on design, technology, healthcare, and social enterprise, generating revenue from eyewear sales and optical services[109][110] - The company emphasizes an integrated omnichannel presence with 298 retail stores (as of June 30, 2025) and digital platforms, offering high-quality products at lower prices (glasses starting at $95) and leveraging technology like Virtual Try-On and Virtual Vision Test[111] - As a public benefit corporation, Warby Parker has distributed over 20 million pairs of glasses to people in need through its 'Buy a Pair, Give a Pair' program[111] Financial Highlights - Net revenue increased by 13.9% for Q2 2025 and 12.9% for the six months ended June 30, 2025, year-over-year[116] - The company achieved net income of $1.7 million for the six months ended June 30, 2025, compared to a net loss of $9.4 million in the prior year period[116] - Adjusted EBITDA grew by 27.7% for Q2 2025 and 29.2% for the six months ended June 30, 2025, year-over-year[116] Financial Highlights (Amounts in millions) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :-------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net revenue | $214.5 | $188.2 | $438.3 | $388.2 | | Gross profit | $113.6 | $105.4 | $239.6 | $218.8 | | Gross margin | 53.0% | 56.0% | 54.7% | 56.4% | | Net (loss) income | $(1.8) | $(6.8) | $1.7 | $(9.4) | | Adjusted EBITDA | $25.0 | $19.6 | $54.2 | $42.0 | Factors Affecting Our Financial Condition and Results of Operations - The company's performance is influenced by the overall economic environment, including consumer sentiment, inflation, and interest rates, despite some insulation due to the medical necessity of its products[114] - Tariffs on imported goods, particularly eyewear, exert pressure on the cost structure, and the company is diversifying its supplier base and implementing strategic price adjustments to mitigate these impacts[114][115] - Ongoing efforts to diversify and expand the supply chain network, both internationally and domestically, aim to insulate the company from disruptions and meet growing customer demand[115] Key Business Metrics and Certain Non-GAAP Financial Measures This section defines and presents key operational metrics and non-GAAP financial measures used to evaluate business performance, including Active Customers, Store Count, and Adjusted EBITDA Key Performance Indicators and Non-GAAP Financial Measures - Active Customers increased by 9.0% to 2.6 million as of June 30, 2025, compared to the prior year[118] - Store Count grew to 298 retail stores as of June 30, 2025, up from 256 in the prior year, with 259 stores offering in-person eye exams[118][122] Key Performance Indicators and Non-GAAP Financial Measures | Metric | June 30, 2025 | June 30, 2024 | | :-------------------------- | :------------ | :------------ | | Active Customers (in thousands) | 2,602 | 2,386 | | Store Count | 298 | 256 | | Adjusted EBITDA (in thousands) | $25,014 (Q2) / $54,221 (YTD) | $19,583 (Q2) / $41,961 (YTD) | | Adjusted EBITDA Margin | 11.7% (Q2) / 12.4% (YTD) | 10.4% (Q2) / 10.8% (YTD) | Adjusted EBITDA and Adjusted EBITDA Margin - Adjusted EBITDA is defined as net (loss) income before interest, taxes, depreciation, and amortization, further adjusted for asset impairment, stock-based compensation, cloud software amortization, non-cash charitable donations, certain legal matters, restructuring, and major system implementation costs[123] - Adjusted EBITDA Margin is Adjusted EBITDA divided by net revenue, used by management to evaluate operating performance, plan budgets, and assess business expansion capacity[123][124][127] Adjusted EBITDA Reconciliation (Amounts in thousands) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net (loss) income | $(1,752) | $(6,762) | $1,720 | $(9,441) | | Interest and other income, net | $(1,984) | $(2,567) | $(4,439) | $(5,123) | | Provision for income taxes | $(789) | $373 | $665 | $481 | | Depreciation and amortization expense | $12,486 | $11,121 | $24,648 | $21,704 | | Asset impairment charges | $175 | $22 | $486 | $421 | | Stock-based compensation expense | $9,162 | $14,097 | $22,163 | $28,412 | | Non-cash charitable donation | $2,821 | $2,196 | $2,821 | $2,196 | | Amortization of cloud-based software implementation costs | $752 | $935 | $1,489 | $2,008 | | System implementation costs | $346 | — | $346 | — | | Inventory write-downs | $2,456 | — | $2,456 | — | | Other costs | $1,341 | $168 | $1,866 | $1,303 | | Adjusted EBITDA | $25,014 | $19,583 | $54,221 | $41,961 | | Adjusted EBITDA Margin | 11.7% | 10.4% | 12.4% | 10.8% | Results of Operations This section provides a detailed comparison of the Company's financial performance for the three and six months ended June 30, 2025, versus 2024, analyzing changes in net revenue, cost of goods sold, gross profit, and expenses Components of Results of Operations - Net revenue is primarily derived from sales of eyewear products, optical services, and accessories through stores, website, and mobile apps, recognized upon customer possession of product or rendering of service[133] - Cost of goods sold includes material acquisition, assembly, and selling costs, optical laboratory costs, customer shipping, store occupancy/depreciation, and employee-related costs for eye exams[134] - Selling, general, and administrative expenses (SG&A) primarily consist of employee-related costs, marketing, IT, credit card fees, charitable donations, facilities, and legal/administrative costs[136] Comparison of the Three Months Ended June 30, 2025 and 2024 - Net revenue growth was driven by a 9.0% increase in Active Customers and higher Average Revenue per Customer ($316 vs $302), benefiting from price increases, precision progressive adoption, and higher-priced frames[139] - Gross margin decreased by 300 basis points due to a $2.5 million inventory write-down for the Home-Try On program, lower margins on contact lenses, increased store occupancy, doctor headcount, and tariff-related costs, partially offset by price increases and higher-priced frames/lenses[142] - SG&A expenses increased 3.3% but decreased by 570 basis points as a percentage of revenue, primarily due to slower growth in corporate expenses and reduced stock-based compensation[143] Q2 2025 vs Q2 2024 Financial Performance (Amounts in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :------------------------------------ | :----- | :----- | :------- | :------- | | Net revenue | $214,475 | $188,222 | $26,253 | 13.9% | | Cost of goods sold | $100,866 | $82,840 | $18,026 | 21.8% | | Gross profit | $113,609 | $105,382 | $8,227 | 7.8% | | Gross margin | 53.0% | 56.0% | | (3.0)% | | Selling, general, and administrative expenses | $118,134 | $114,338 | $3,796 | 3.3% | | Interest and other income, net | $1,984 | $2,567 | $(583) | (22.7)% | | Provision for income taxes | $(789) | $373 | $(1,162) | (311.5)% | Comparison of the Six Months Ended June 30, 2025 and 2024 - Net revenue increased by 12.9% for the six months, driven by a 9.0% increase in Active Customers and higher Average Revenue per Customer, similar to quarterly trends[146] - Gross margin decreased by 170 basis points for the six months, primarily due to lower margins on contact lenses and increased store occupancy/doctor headcount, partially offset by higher-priced frames/lenses and selective price increases[149] - SG&A expenses increased 3.7% but decreased by 490 basis points as a percentage of revenue, mainly due to slower corporate expense growth and reduced stock-based compensation[150] YTD Q2 2025 vs YTD Q2 2024 Financial Performance (Amounts in thousands) | Metric | 2025 | 2024 | $ Change | % Change | | :------------------------------------ | :----- | :----- | :------- | :------- | | Net revenue | $438,257 | $388,225 | $50,032 | 12.9% | | Cost of goods sold | $198,668 | $169,384 | $29,284 | 17.3% | | Gross profit | $239,589 | $218,841 | $20,748 | 9.5% | | Gross margin | 54.7% | 56.4% | | (1.7)% | | Selling, general, and administrative expenses | $241,643 | $232,924 | $8,719 | 3.7% | | Interest and other income, net | $4,439 | $5,123 | $(684) | (13.4)% | | Provision for income taxes | $665 | $481 | $184 | 38.3% | Seasonality - The Company historically observes moderately higher seasonal demand in December due to customer usage of health and flexible spending benefits[153] - Revenue from year-end orders may be recognized in the following year due to delivery-based recognition policy, leading to sequential revenue increases from Q4 to Q1[153] - Costs tend to increase in subsequent quarters as the year progresses, with the fourth quarter typically experiencing the highest costs to support business demand and new store openings[154] Liquidity and Capital Resources This section discusses the Company's financial resources, including cash and cash equivalents, its credit facility, and cash flow activities Liquidity Overview - As of June 30, 2025, the Company had $286.4 million in cash and cash equivalents, primarily for working capital, and an accumulated deficit of $685.5 million[155] - Management expects existing cash, the credit facility, and operating cash flows to be sufficient to fund operations for at least the next 12 months, despite anticipated operating losses from business expansion[156] 2024 Credit Facility - The 2024 Credit Facility is a $120.0 million five-year revolving credit facility, with an option to increase to $175.0 million, used for working capital and general corporate purposes[157] - Borrowings bear interest based on prime rate or adjusted SOFR plus an applicable margin, and an unused commitment fee applies[158] - The facility includes a financial maintenance covenant requiring a maximum consolidated senior net leverage ratio of 3:1 when total borrowings exceed $30.0 million[159] Cash Flows - Operating cash flow increased to $69.6 million in 2025, driven by net income and non-cash adjustments like depreciation and stock-based compensation[162] - Investing activities used $32.4 million in 2025, primarily for property and equipment purchases for new retail stores and capitalized software[164] - Financing activities used $5.1 million in 2025, mainly due to cash paid for shares withheld for taxes on stock-based compensation, partially offset by ESPP proceeds[166] Summary of Cash Flows (Six Months Ended June 30, Amounts in thousands) | Cash Flow Activity | 2025 | 2024 | | :------------------------------------ | :----- | :----- | | Net cash provided by operating activities | $69,557 | $51,550 | | Net cash used in investing activities | $(32,438) | $(34,088) | | Net cash (used in) provided by financing activities | $(5,075) | $3,707 | | Net change in cash and cash equivalents | $32,223 | $21,064 | Critical Accounting Policies and Estimates - The Company's critical accounting policies and estimates are consistent with those reported in the Annual Report on Form 10-K for the fiscal year ended December 31, 2024, with no significant changes during the six months ended June 30, 2025[169][170] Recent Accounting Pronouncements - The Company is evaluating the impact of ASU 2023-09 (Income Taxes) and ASU 2024-03 (Expense Disaggregation Disclosures), which are effective for annual periods beginning after December 15, 2024, and December 15, 2026, respectively[48][49][171] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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 Foreign Exchange Risk - The Company is exposed to foreign currency rate changes due to Canadian operations and international suppliers (Japanese yen and euros), impacting revenue and cost of goods sold[173] - Management believes foreign exchange rates do not have a material effect on the business, financial condition, or results of operations[173] Interest Rate Risk - Cash and cash equivalents of $286.4 million as of June 30, 2025, are held in interest-earning instruments, carrying interest rate risk[174] - The Company's investment policy prioritizes liquidity and capital preservation, avoiding trading or speculative purposes, and does not use derivative financial instruments for interest rate exposure[174] - Due to the short-term nature of cash and cash equivalents, the Company believes it does not have a material exposure to changes in fair value from interest rate fluctuations[174] Inflation Risk - Inflation, including from geopolitical unrest, has had a limited impact on the Company's business, financial condition, and results of operations to date[175] - Significant inflationary pressures on raw materials, transportation, labor, construction, and rent could materially impact operations, and an inability to offset higher costs with increased revenue could harm the business[175] Item 4. Controls and Procedures This section addresses the effectiveness of the Company's disclosure controls and procedures and reports on any changes in internal control over financial reporting Limitations on Effectiveness of Controls and Procedures - Management acknowledges that controls and procedures, regardless of design, can only provide reasonable assurance of achieving control objectives due to inherent limitations and resource constraints[176] Evaluation of Disclosure Controls and Procedures - As of June 30, 2025, the co-principal executive officers and principal financial officer concluded that the Company's disclosure controls and procedures were effective at the reasonable assurance level[177] Changes in Internal Control Over Financial Reporting - There were no changes in internal control over financial reporting during the quarter ended June 30, 2025, that materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting[178] Part II. Other Information Item 1. Legal Proceedings This section incorporates by reference the details of legal proceedings from Note 10 of the condensed consolidated financial statements - Information regarding legal proceedings is incorporated by reference from Note 10 to the condensed consolidated financial statements[181] Item 1A. Risk Factors This section updates the risk factors, specifically highlighting the adverse effects of changes in U.S. and other countries' trade policies and tariff regulations on the Company's business, financial condition, and results of operations - No material changes to risk factors were reported, except for an update on the adverse effects of changes to U.S. or other countries' trade policies and tariff/import/export regulations[182][183] - New or heightened tariffs on imports from countries like China, Italy, Vietnam, and Japan increase product costs, potentially reducing margins or forcing price increases[183][184] - The Company's mitigation efforts, including supplier diversification and strategic price adjustments, may not fully offset the financial impacts of current or future tariffs, and deteriorating macroeconomic conditions could further negatively affect the business[184] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section reports on the unregistered sale of equity securities, specifically the donation of Class A common stock to the Warby Parker Impact Foundation - In April 2025, the Company issued 178,572 shares of Class A common stock for no consideration to the Warby Parker Impact Foundation, a 501(c)(3) nonprofit organization[185] - The shares were issued under the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933[185] Item 3. Defaults Upon Senior Securities This section states that there were no defaults upon senior securities - There were no defaults upon senior securities[187] Item 4. Mine Safety Disclosures This section indicates that mine safety disclosures are not applicable to the Company - Mine safety disclosures are not applicable to the Company[188] Item 5. Other Information This section confirms that there is no other material information to report and no Rule 10b5-1 trading arrangements were adopted or terminated by directors or officers during the quarter - No director or officer adopted or terminated a Rule 10b5-1 trading arrangement or a 'non-Rule 10b5-1 trading arrangement' during the quarter ended June 30, 2025[190] Item 6. Exhibits This section provides a comprehensive list of exhibits filed with the Quarterly Report on Form 10-Q, including organizational documents, stock certificates, certifications, and XBRL-related documents - The report includes various exhibits such as the Twelfth Amended and Restated Certificate of Incorporation, Amended and Restated Bylaws, specimen common stock certificates, and certifications from the Chief Executive Officer and Chief Financial Officer[192] - Interactive Data Files, formatted as Inline XBRL, are also included as exhibits[192] Signatures Report Signatures This section contains the duly authorized signatures of the registrant's Co-Chief Executive Officers, Neil Blumenthal and Dave Gilboa, and Chief Financial Officer, Steve Miller, affirming the filing of the report - The report is signed by Neil Blumenthal (Co-Chief Executive Officer), Dave Gilboa (Co-Chief Executive Officer), and Steve Miller (Chief Financial Officer) on August 7, 2025[195]