Warby Parker(WRBY) - 2025 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In fiscal 2025, the company achieved a revenue growth of 13%, totaling $871.9 million, with retail revenue increasing by 17.3% and e-commerce revenue by 3.1% year-over-year [32][34] - Adjusted EBITDA for the full year was $95 million, reflecting a 30% increase year-over-year, and the company reported its first full year of positive net income [9][34] - The fourth quarter revenue was $212 million, up 11.2% year-over-year, with adjusted EBITDA margin at 7.2% [29][30] Business Line Data and Key Metrics Changes - The company opened 47 new stores in 2025, the highest in a single year, contributing to high single-digit customer growth and mid-single digit average revenue per customer growth [8][32] - Eye exams grew by 37% in 2025, accounting for approximately 6% of the business, with plans to scale this further in 2026 [16][18] - E-commerce revenue was $241 million for the full year, with a low single-digit growth rate, impacted by the sunsetting of the Home Try-On program [32][38] Market Data and Key Metrics Changes - The company holds approximately 1.3% market share of the $70 billion U.S. eyewear market, with expectations for growth driven by the introduction of AI glasses [11][12] - The overall eyewear market is projected to decline low single digits in 2026, impacting the company's planning and guidance [36][38] - The company experienced softness in retail traffic and contact lens growth, particularly among the 25 to 34-year-old demographic [10][11] Company Strategy and Development Direction - The company plans to introduce AI glasses in partnership with Google and Samsung, aiming to capture a significant new total addressable market (TAM) [5][11] - Strategic priorities for 2026 include expanding the omni-channel model, increasing insurance penetration, and enhancing customer experience [14][23] - The company aims to open 50 new stores in 2026, focusing on existing markets to drive convenience and brand awareness [15][18] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term durability of the eyewear category despite recent volatility and softness in demand [6][11] - The company is planning conservatively for the near term while remaining optimistic about the potential of AI glasses to expand market reach [12][36] - Management acknowledged the impact of historic winter weather on store traffic and sales, particularly in high-volume locations [13][39] Other Important Information - The company ended 2025 with a strong cash position of $286 million and generated approximately $44 million in free cash flow [34][35] - The board authorized up to $100 million in share repurchases to offset dilution and support capital allocation priorities [35] Q&A Session Summary Question: Can you elaborate on the softness that you're seeing with your younger customer? - Management indicated that the softness reflects broader industry pressures, with younger consumers feeling financial strain impacting their purchasing behavior. Actions include increasing media spend on platforms popular with younger demographics and enhancing visibility of insurance benefits [48][50] Question: Can you speak to the unit capacity that you're preparing for in launch year for AI glasses? - Management highlighted the vertically integrated brand's ability to respond to customer demands and emphasized ongoing investments in optical labs to ensure capacity for the new product [51][52] Question: How are you thinking about growth rates going forward, especially with weather impacts? - Management remains committed to low double-digit growth for the year, noting that despite weather-related challenges, the fundamentals of the business remain healthy, with strong growth in non-weather impacted areas [59][60]