Warby Parker(WRBY) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Warby Parker reported Q3 2024 net revenue of $192.4 million, reflecting a 13.3% year-over-year growth and a 250 basis points adjusted EBITDA margin expansion, the highest of the year [6][41] - Adjusted EBITDA for Q3 was$ 17.3 million, representing an adjusted EBITDA margin of 9%, compared to $11 million or 6.5% in the same period last year [41] - The company ended Q3 with approximately$ 251 million in cash and generated $13 million in free cash flow, marking the sixth consecutive quarter of positive free cash flow [42] Business Line Data and Key Metrics Changes - Retail revenue increased approximately 20% year-over-year, while e-commerce revenue grew by about 1% [31][22] - The glasses business grew approximately 10% year-over-year, driven by marketing investments and product innovation [14] - Contact lens sales grew approximately 35% year-over-year, accounting for almost 11% of total revenue, while eye exam revenue increased approximately 40% year-over-year, making up over 5% of revenue [27][28] Market Data and Key Metrics Changes - The company ended Q3 with 2.4 million active customers, a 5.6% increase on a trailing 12-month basis, with average revenue per customer growing by 7.5% to$ 305 [8][36] - Retail represented 70% of overall business, up from 67% in Q3 2023 [35] - The company opened 13 new stores in Q3, bringing the total to 269 stores, with plans to expand to over 900 stores in the long term [22][32] Company Strategy and Development Direction - Warby Parker is focused on expanding its omni-channel experience, leveraging both retail and e-commerce to drive growth [20] - The company aims to scale holistic vision care, with a strategic emphasis on increasing eye exam capabilities and contact lens sales [28][29] - The management is optimistic about the potential of smart glasses and plans to leverage advancements in AI to enhance customer engagement [55][57] Management's Comments on Operating Environment and Future Outlook - Management noted sequential momentum in customer growth and e-commerce velocity, with expectations for Q4 to be the strongest for active customer growth [50][64] - The company raised its full-year guidance, expecting revenue between $765 million and$ 768 million, representing approximately 14% to 15% year-over-year growth [43] - Management expressed confidence in maintaining gross margin stability in the mid-50s percentage range despite challenges from increased hiring and new store openings [44][68] Other Important Information - The company has expanded its in-network insurance relationships, notably with Versant Health, which is expected to provide long-term revenue growth opportunities [12][77] - Warby Parker's marketing spend increased to 12.3% of revenue in Q3, reflecting a disciplined approach to customer acquisition [40][52] Q&A Session Summary Question: Can you elaborate on the drivers of sequential momentum and marketing efficiency? - Management observed sequential strength building since July, attributing it to disciplined marketing efforts and active customer growth [49][50] Question: How do you view the impact of tariffs and the opportunity for smart glasses? - Management has reduced exposure to Chinese goods and is confident in managing current tariff challenges. They are excited about the potential of smart glasses, particularly with advancements in AI [54][55] Question: What are the long-term implications of hiring optometrists on gross margin? - Hiring optometrists is viewed as a strategic investment to enhance customer acquisition, with expectations for gross margin to remain stable in the mid-50s [60][61] Question: How is the e-commerce channel performing and what are the expectations for 2025? - E-commerce is showing positive momentum, with expectations for growth as the company continues to enhance customer experience and marketing efforts [73][70] Question: What strategies are in place to raise awareness of in-network options? - The company focuses on training staff and partnering with insurance carriers to increase awareness of in-network benefits [80][81]