NEW YORK / Feb 28, 2023 / Business Wire / Warby Parker Inc. (NYSE: WRBY) (the “Company”), a direct-to-consumer lifestyle brand focused on vision for all, today announced financial results for the fourth quarter and full year ended December 31, 2022.

“Our team’s accomplishments in 2022, Warby Parker’s first full year as a public company, reflect our commitment to growing sustainably while taking market share, delivering remarkable customer experiences, and creating impact,” said Co-Founder and Co-CEO Neil Blumenthal. “In the face of economic uncertainty and a depressed consumer environment, we delivered strong Q4 results and aim to bring that same momentum, powered by rigorous discipline, into 2023.”

“As we enter a new year, our team continues to focus on aspects of our business within our control, taking decisive action, and delivering on our value proposition while positioning our brand to continue to outpace industry growth. We’re committed to expanding profitability while making strategic investments in areas of the business that will drive brand awareness and create even more value for our millions of customers,” added Co-Founder and Co-CEO Dave Gilboa.

Fourth Quarter and Full Year 2022 Highlights

• Full year net revenue increased $57.3 million, or 10.6%, to $598.1 million compared to full year 2021.
• Fourth quarter net revenue increased $13.6 million, or 10.2%, to $146.5 million compared to fourth quarter 2021.
• Active Customers increased 3.6% to 2.28 million year over year.
• Average Revenue per Customer increased 6.9% year over year to $263.
• Q4 2022 GAAP net loss of $20.3 million, a decrease of $25.7 million from the fourth quarter of 2021.
• Q4 2022 adjusted EBITDA⁽¹⁾ of $8.6 million and an adjusted EBITDA margin⁽¹⁾ of 5.8%, an increase of $15.0 million and 10.6 points from the fourth quarter of 2021.
• Second half of 2022 adjusted EBITDA margin⁽¹⁾ of 6.9%, a 4.7 point improvement over 2.2% in the first half of 2022.
• Opened 40 new stores during the year, ending 2022 with 200 stores.
• Contact lens revenue increased to 7.2% of our business in 2022, up from 4.3% in 2021.
• Eye exam revenue increased to 2.9% of our business in 2022, up from 1.7% in 2021.

Fourth Quarter 2022 Financial Results

For the fourth quarter of 2022, compared to the fourth quarter of 2021:

• Net revenue increased $13.6 million, or 10.2%, to $146.5 million.
• Active Customers increased by 78,000, or 3.6%, to 2.28 million.
• Gross profit increased 5.8% to $80.7 million.
• Gross margin was 55.1% compared to 57.4% in the prior year. The decline in gross margin was primarily driven by an increase in salary and benefit costs associated with optometrists as we scale our eye exam offering across our fleet, to 150 exam locations, up from 102 in the prior year period, the impact of the growth in the Company's store count driving higher store occupancy and depreciation costs, and the increased penetration of contact lenses, which carry lower gross margins than eyeglasses, reflecting Warby Parker’s strategy to grow its contact lens offering. This was partially offset by leverage from the Company’s in-house optical laboratory network and the scaling of higher margin progressive lenses.
• Selling, general and administrative expenses (“SG&A”) decreased $19.8 million to $102.4 million, or 69.9% of revenue, primarily driven by lower marketing costs, as we have reduced our online advertising spend and are leveraging our expanding retail footprint to drive brand awareness, and lower stock-based compensation costs, which represented 13.6% of revenue compared to 24.6% in Q4 2021. Adjusted SG&A⁽¹⁾ decreased from 67.3% to 55.6% of revenue.
• GAAP net loss decreased $25.7 million to $20.3 million, primarily as a result of the decrease in SG&A described above.
• Adjusted EBITDA⁽¹⁾ increased $15.0 million to $8.6 million.
• Adjusted EBITDA margin⁽¹⁾ increased 10.6 points to 5.8%.

Full Year 2022 Financial Results

For the full year 2022, compared to the full year 2021:

• Net revenue increased $57.3 million, or 10.6%, to $598.1 million.
• Active Customers increased by 78,000, or 3.6%, to 2.28 million.
• Gross profit increased 7.3% to $341.1 million.
• Gross margin was 57.0% compared to 58.8% in the prior year. The decline in gross margin was primarily driven by the increased penetration of contact lenses which are sold at a lower margin than glasses, reflecting Warby Parker’s strategy to grow its contact lens offering, increases in store occupancy costs as a percent of revenue primarily due to increased depreciation and rent expense as we grew our store base to 200 stores, and an increase in salary and benefit costs associated with optometrists as we scale our eye exam offering across our fleet, to 150 exam locations, up from 102 in the prior year period. This was partially offset by the scaling of higher margin progressive lenses and leverage from the Company’s in-house optical laboratory network.
• SG&A decreased $9.1 million to $452.3 million, or 75.6% of revenue, primarily driven by a decrease in stock-based compensation and related payroll taxes and professional costs incurred in 2021 related to the Company’s direct listing. Adjusted SG&A⁽¹⁾ increased $32.5 million to $348.5 million primarily driven by higher compensation costs, primarily from growth in our retail workforce, increased insurance costs related to operating as a public company, and increased depreciation and amortization costs, mainly related to capitalized software and office build-outs. These decreases were partially offset by a reduction in marketing expenses and Home Try-On program costs. Adjusted SG&A remained flat as a percent of revenue.
• GAAP net loss decreased $33.9 million to $110.4 million, primarily as a result of the increase in gross profit and the decrease in SG&A described above.
• Adjusted EBITDA⁽¹⁾ increased $2.3 million to $27.2 million.
• Adjusted EBITDA margin⁽¹⁾ of 4.5% was flat as compared to 2021, however, the second half of 2022 adjusted EBITDA margin⁽¹⁾ was 6.9%, a 4.7 point improvement over 2.2% in the first half of 2022.

Balance Sheet Highlights

Warby Parker ended 2022 with $208.6 million in cash and cash equivalents.

2023 Outlook

For the full year 2023, Warby Parker is providing the following guidance:

• Net revenue of $645 to $660 million, representing growth of 8% to 10% versus full year 2022.
• Adjusted EBITDA⁽¹⁾ of approximately $51.5 million, or adjusted EBITDA margin⁽¹⁾ of approximately 7.9%.
• 40 new store openings bringing the total projected store count at year end to approximately 240.

“We are pleased with our strong fourth quarter performance, in particular the profitability expansion we were able to achieve with an adjusted EBITDA margin of 2.2% in the first half of 2022 up to 6.9% in the second half despite economic headwinds,” said Chief Financial Officer Steve Miller. “Our 2023 outlook reflects our team’s commitment to maintaining discipline across the topline and bottomline while continuing to invest in our omnichannel business model, for example by opening 40 new stores. As we work to capture greater market share while providing vision for all, we’re as committed as ever to delivering value to shareholders,” said Chief Financial Officer Steve Miller.

The guidance and forward-looking statements made in this press release and on our conference call are based on management's expectations as of the date of this press release.

⁽¹⁾ Please see the reconciliation of non-GAAP financial measures to the most comparable GAAP financial measure in the section titled “Non-GAAP Financial Measures” below.

Webcast and Conference Call

A conference call to discuss Warby Parker’s fourth quarter and full year 2022 results, as well as first quarter and full year 2023 outlook, is scheduled for 8:00 a.m. ET today. To participate, please dial 844-200-6205 from the U.S. or 929-526-1599 from international locations. The conference passcode is 045225. A live webcast of the conference call will be available on the investors section of the Company’s website at investors.warbyparker.com where presentation materials will also be posted prior to the conference call. A replay will be made available online approximately two hours following the live call for a period of 90 days.

Forward-Looking Statements

This press release and the related conference call, webcast and presentation contain 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 profitability, delivering stakeholder value, growing market share, and our GAAP and non-GAAP guidance for the quarter ending March 31, 2023 and year ending December 31, 2023; expectations regarding the number of new store openings during the year ending December 31, 2023; management’s plans, priorities, initiatives and strategies; and expectations regarding growth of our business. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantified. In some cases, you can identify forward-looking statements because they contain words such as “anticipate,” “believe,” “contemplate,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “plan,” “potential,” “predict,” “project,” “should,” “target,” “toward,” “will,” or “would,” or the negative of these words or other similar terms or expressions. You should not put undue reliance on any forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved, if at all.

Forward-looking statements are based on information available at the time those statements are made and are based on current expectations, estimates, forecasts, and projections as well as the beliefs and assumptions of management as of that time with respect to future events. These statements are subject to risks and uncertainties, many of which involve factors or circumstances that are beyond our control, that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this press release may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. These risks and uncertainties include our ability to manage our future growth effectively; our expectations regarding cost of goods sold, gross margin, channel mix, customer mix, and selling, general, and administrative expenses; planned new retail stores in 2023 and going forward; an overall decline in the health of the economy and other factors impacting consumer spending, such as recessionary conditions, inflation and government instability; increases in component and shipping costs and changes in supply chain; our ability to compete successfully; our ability to manage our inventory balances and shrinkage; our ability to engage our existing customers and obtain new customers; the growth of our brand awareness; the effects of the ongoing COVID-19 pandemic or a future outbreak of disease or similar public health concern; the effects of seasonal trends on our results of operations; our ability to stay in compliance with extensive laws and regulations that apply to our business and operations; our ability to adequately maintain and protect our intellectual property and proprietary rights; our reliance on third parties for our products, operation and infrastructure; our duties related to being a public benefit corporation; the ability of our Co-Founders and Co-CEOs to exercise significant influence over all matters submitted to stockholders for approval; the effect of our multi-class structure on the trading price of our Class A common stock; and the increased expenses associated with being a public company. Additional information regarding these and other risks and uncertainties that could cause actual results to differ materially from the Company's expectations is included in our most recent reports filed with the SEC on Form 10-K and Form 10-Q. Except as required by law, we do not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments, or otherwise.

Additional information regarding these and other factors that could affect the Company’s results is included in the Company’s SEC filings, which may be obtained by visiting the SEC's website at www.sec.gov. Information contained on, or that is referenced or can be accessed through, our website does not constitute part of this document and inclusions of any website addresses herein are inactive textual references only.

Glossary

Active Customer is defined as a unique customer that has made at least one purchase of any product or service in the preceding 12-month period.

Average Revenue per Customer is defined as net revenue for a given period divided by the number of Active Customers as of the end of that same period.

Non-GAAP Financial Measures

We use adjusted EBITDA, adjusted EBITDA margin, adjusted net income, adjusted earnings per share, adjusted cost of goods sold (“adjusted COGS”), adjusted gross profit, and adjusted selling, general, and administrative expenses (“adjusted SG&A”) as important indicators of our operating performance. Collectively, we refer to these non-GAAP financial measures as our “Non-GAAP Measures.” The Non-GAAP Measures, when taken collectively with our GAAP results, may be helpful to investors because they provide consistency and comparability with past financial performance and assist in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results.

Adjusted EBITDA is defined as net income (loss) before interest and other income, taxes, and depreciation and amortization as further adjusted for asset impairment costs, stock-based compensation expense and related employer payroll taxes, amortization of cloud-based software implementation costs, non-cash charitable donations, and non-recurring costs such as restructuring costs, major system implementation costs, and direct listing or other transaction costs. Adjusted EBITDA margin is defined as adjusted EBITDA divided by net revenue.

Adjusted net income (loss) is defined as net income (loss) adjusted for stock-based compensation expense and related employer payroll taxes, non-cash charitable donations, and non-recurring costs such as restructuring costs, major system implementation costs, and direct listing or other transaction costs, and as further adjusted for estimated income tax on such adjusted items.

Adjusted earnings (loss) per share is defined as adjusted net income (loss) divided by adjusted weighted average shares outstanding.

Adjusted COGS is defined as cost of goods sold adjusted for stock-based compensation expense and related employer payroll taxes.

Adjusted gross profit is defined as net revenue minus adjusted COGS.

Adjusted SG&A is defined as SG&A adjusted for stock-based compensation expense and related employer payroll taxes, non-cash charitable donations, and non-recurring costs such as restructuring costs, major system implementation costs, and direct listing or other transaction costs.

The Non-GAAP Measures are presented for supplemental informational purposes only. A reconciliation of historical GAAP to Non-GAAP financial information is included under “Selected Financial Information” below.

We have not reconciled our adjusted EBITDA margin guidance to GAAP net income (loss) margin, or net margin, or adjusted EBITDA guidance to GAAP net income (loss) because we do not provide guidance for GAAP net margin or GAAP net income (loss) due to the uncertainty and potential variability of stock-based compensation and taxes, which are reconciling items between GAAP net margin and adjusted EBITDA margin and GAAP net income (loss) and adjusted EBITDA, respectively. Because such items cannot be reasonably provided without unreasonable efforts, we are unable to provide a reconciliation of the adjusted EBITDA margin guidance to GAAP net margin and adjusted EBITDA guidance to GAAP net income (loss). However, such items could have a significant impact on GAAP net margin and GAAP net income (loss).

About Warby Parker

Warby Parker (NYSE: WRBY) was founded in 2010 with a mission to inspire and impact the world with vision, purpose, and style–without charging a premium for it. Headquartered in New York City, the co-founder-led lifestyle brand pioneers ideas, designs products, and develops technologies that help people see, from designer-quality prescription glasses (starting at $95) and contacts, to eye exams and vision tests available online and in its 200 retail stores across the U.S. and Canada.

Warby Parker aims to demonstrate that businesses can scale, do well, and do good in the world. Ultimately, the brand believes in vision for all, which is why for every pair of glasses or sunglasses sold, they distribute a pair to someone in need through their Buy a Pair, Give a Pair program. To date, Warby Parker has worked alongside its nonprofit partners to distribute more than 10 million glasses to people in need.

Selected Financial Information