Warby Parker Inc.

Hello everyone and welcome to the Warby Parker fourth quarter and fiscal year financial results conference call. My name is Victoria and I will be calling you to call today. If you would like to ask a question during the presentation, you may do so by pressing star one on your telephone keypad. If you wish to withdraw your question, please press star two. When preparing to ask your question, please ensure that your line is unmuted locally. I'll now pass over to your host, Tina Romani, Head of Investor Relations, to begin. Please go ahead.

Thank you, and good morning, everyone. Here with me today are Neil Blumenthal and Dave Gilbella, our co-founders and co-CEOs, alongside Steve Miller, Senior Vice President and Chief Financial Officer. Before we begin, we have a couple of reminders. Our earnings release and slide presentation are available on our website at investors.wardenparker.com. During this call and in our presentation, we will be making comments of a forward-looking nature. Actual results may differ materially from those expressed or implied as a result of various risks and uncertainties. For more information about some of these risks, please review the company's SEC filings, including the section titled Risk Factors, and the company's latest 10-key filing and the upcoming 10-K filing. These forward-looking statements are based on information as of March 17, 2022, and we assume no obligation to publicly update or revise our forward-looking statements. Additionally, we will be discussing certain non-GAAP financial measures. These non-GAAP financial measures are in addition to and not a substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation of these items to the nearest US GAAP measure can be found in this morning's press release and our slide deck available on our IR website. With that, it's my pleasure to turn the call over to Dave to kick things off.

Thanks, Tina. And good morning, everyone. Thank you for joining us bright and early to discuss Warby Parker's fourth quarter and full year 2021 results, as well as our outlook for 2022 and beyond. Before we dive in, we wanted to use this public forum to thank our Buy a Pair, Give a Pair partners and congratulate our team on surpassing 10 million pairs of glasses distributed to people in need through our Buy a Pair, Give a Pair program. That means more than 10 million people now have the glasses they need to see, to learn, to work, and to provide for their families. We're incredibly proud of the impact our team and partners are having, and we couldn't be more grateful to our customers and shareholders for making it possible. This impact is hugely motivating for our team and enables us to attract and retain the most passionate, curious, driven employees who wake up every day obsessed with delighting customers and helping people see. and who in turn enable us to deliver strong financial results. And now turning to those results. 2021 was a record year for Warby Parker, and we're proud that our team delivered another year of sustainable growth. We grew revenues 37% to $541 million, while expanding adjusted EBITDA margin 270 basis points to 4.6%, up from 1.9% in 2020. This was achieved while delivering exceptional customer experiences, resulting in another year with a Net Promoter Score above 80, while also making significant strides against our long-term strategic initiatives that will lead to sustainable growth for years and decades to come. We achieved these results in spite of many pandemic-related challenges, and in particular in Q4 when we saw significant impairment during our peak selling season. Thank you for your continued perseverance and resilience. As we look back on 2021, it was incredibly exciting to celebrate so many milestones alongside Team Warby. In addition to the 10 million pairs distributed, we became the first public benefit corporation to go public through a direct listing. We grew our active customer base by nearly 400,000 people, the most ever in a year to 2.2 million happy customers. We opened 35 new stores, the most 2021 with 161 stores. And the performance of these 35 new stores are in line with the first-year performance of stores we launched pre-COVID. As you may recall, in our S-1, we discussed best-in-class unit economics targeting four-wall margins of 35% and paybacks in under 20 months. In 2021, we opened stores in nine new markets, from Sarasota, Florida, to Albuquerque, New Mexico, and Richmond, Virginia, and we continue to see a very consistent growth profile when entering new markets, with the entire market growing over 250% on average in the first year of opening a new store. We expanded our product assortment by launching 21 eyewear collections and introduced innovative first-to-market designs and constructions like our Tortoise Collage and Eshy Edition, while also increasing our penetration of progressive lenses. And we made meaningful progress in our evolution from being primarily an eyewear company to a holistic vision care provider. We more than doubled the size of our contacts business and opened 36 new eye exam locations while hiring dozens of optometrists. We opened our second optical lab, a 69,000 square foot facility in Las Vegas that further strengthens the vertically integrated supply chain we've built over the years and enables us to maintain the highest quality standards, exceed customer expectations, and lower costs. We also continue to focus on innovation in our category-leading e-commerce experience and digital tools. In 2021, we launched groundbreaking technologies like our virtual vision test telehealth app, which allows eligible users to renew both glasses and contact lens prescriptions from anywhere at any time using just an iPhone in less than 10 minutes. Android continued adoption of our first-of-its-kind true-to-scale virtual try-on. As I mentioned, we accomplished all these milestones while maintaining an industry-leading Net Promoter Score of more than 80. Maintaining this metric is Team Warby's North Star and has been since day one. It ensures we're continuing to deliver above and beyond products and experiences for our customers, which in turn fuels our growth. And those happy customers are spending more with us than ever. Our average revenue per customer for the year was $246, up $28, or 13% versus 2020, the largest increase we've ever seen in our 12 years since launch. That increase hasn't come from raising prices. It's come from two factors. First, more of our customers buying multiple categories of products from us. For example, eye exams and contacts in addition to glasses. And second, an increase in the penetration of progressive lenses and higher price point frames. As a reminder, progressives are our highest price point and highest margin product, and this remains an area where we are significantly underpenetrated relative to the rest of the market. We launched selling prescription glasses for $95, and we have not changed this price point in the 12 plus years since launch. But over the years, we have introduced many other products at different price points that have led to increasing average order value and improving customer economics over time. And as we have introduced these new price points, we have not seen them impact demand. We know there's a lot of talk about inflation, and you're seeing many companies increase prices. some because their margins are getting squeezed and some opportunistically at the expense of their customers. We started Warby Parker in large part because we were frustrated by the high price of glasses ourselves and wanted to create a much more customer-friendly alternative. As such, we will always focus on delivering great value and will leverage our structural advantage of controlling our supply chain while eliminating wholesale markups and licensing fees to pass savings on to our customers. We are excited that we're able to maintain our high growth margins and continue to improve our customer economics without resorting to sweeping price increases. As others in our category continue to raise prices, our value proposition will become even stronger over time, which we expect will lead to even greater sustainable competitive advantage. Of course, all of these positive results are due to the tireless efforts from our more than 3,000 team members who continue to be highly engaged. In a recent survey, 87% of employees said that they are proud to work for Warby Parker and 88% said they would recommend Warby Parker as a great place to work. And we couldn't be prouder of how our team had managed through the multiple waves of the pandemic, especially the most recent Omicron outbreak. Omicron was particularly impactful given the unique seasonality in our business. Because of FSA spending and vision insurance utilization at year end, we typically see our highest sales days of the year between Christmas and New Year's. This year, Omicron peaked during that same window in many of our biggest markets. As a result, we saw significantly lower retail foot traffic, staffing-related store closures, and fewer eye exams. We also saw many other retailers and optical shops close several or all of their stores for days or weeks at a time. This, in turn, led to fewer shoppers at neighboring stores and, importantly, fewer people getting eye exams, preventing them from shopping with us. We believe Omicron resulted in nearly $5 million of lost sales in Q4 and over $15 million in Q1, stemming from fewer people shopping in our stores. What we've seen from prior COVID surges is that store traffic and productivity does not immediately bounce back, and most customers don't immediately switch to shopping online. To do so, our customers need valid prescriptions, and there's often a time lag for new exams to be scheduled. When the Delta variant emerged this summer, we saw significant decline in store productivity relative to the same period in 2019, followed by steady improvement for the following four months until Omicron appeared. The subsequent Omicron-related decline in retail productivity was nearly twice as severe as that from Delta. As a result, we estimate that our Q4 revenue growth of 18% was negatively impacted by about four points, and our Q1 began with major headwinds. This is a temporary setback. In the most recent weeks, we're experiencing a similar recovery curve to what we saw from other pandemic surges, and we remain as confident as ever in our long-term growth plans and a reacceleration of our growth in the coming months. While the pandemic has been disruptive to our business, it has been more disruptive to others in our category. This has enabled us to continue to grow our customer base and take material market share over the last two years. The US eyewear market grew 5% from 2019 to 2021, while we grew 46%. In our differentiated omni-channel model, it's even more advantaged when consumers have easy access to eye doctors and prescriptions and feel fully comfortable shopping. As consumer behavior rebounds in our category, we believe we will benefit differentially as our 160-plus stores regain foot traffic and return to full productivity while we continue to serve customers through our unique and industry-leading digital tools and e-commerce platform. And with that, I'll pass it over to my co-CEO and co-founder, Neil, to talk through why we remain so excited for the rest of 2022 and beyond. Thanks, Dave, and good morning, everyone. We're as excited about our business and category as when we first started 12 years ago. As many of you know, our category is different from other consumer categories. Our core product, eyewear, is a combination of a health product and a fashion accessory. We have a unique responsibility to provide vision while amplifying one's identity and style. We are fortunate to operate in a large and growing market, $160 billion globally and $44 billion in the U.S. alone, and one that provides essential products and services that are purchased in both strong and weak economic environments. Several factors contribute to this growth and durability. First, most people need vision correction, with 76% of adults using some form of vision correction in 2021. Second, there's a natural replenishment cycle as prescriptions change or as people update their fashion preferences. Further, there are several macro factors contributing to rising vision correction needs and a steady influx of new customers who expect an exceptional vision care experience, from an aging population and increased screen time usage to the acceleration of e-commerce penetration and increasing prominence of telehealth. These trends support expectations that the industry will continue to grow and continue to become more favorable to our omnichannel approach. This is obviously exciting for us at Warby Parker. Despite being one of the only optical retailers to grow in 2020 and then accelerate that growth to 37% in 2021, reaching $541 million in revenue, we still just represent 1% of the U.S. market. Another optical industry dynamic that makes it particularly appealing to our vertically integrated business model is that roughly 50% of the market is served by independent eye doctors and their optical shops that purchase frames and lenses wholesale and then resell them. The other half of the market is served by retail chains. And of that 50% of the market that are chain stores, roughly one-third is owned by one company. Customers come to Warby Parker often after spending significantly more on their glasses because they either bought them from an overpriced optical chain or an independent optometry practice. The other interesting dynamic of our industry is the prescription nature of the product. You need a valid prescription to buy glasses and contacts. Industry-wide, approximately 70% of people buy glasses and contacts in the same location they have an eye exam. This benefits us as we open up more stores with exam suites and optometrists. However, sales are negatively impacted when customers are not able to obtain prescriptions from us or their local optometrist due to Omicron or other variants. While the prescription dynamic protects incumbents by providing barriers to entry in normal times, it leads to a slower ramp up in other categories after a COVID surge. In spite of COVID, the Iowa market is poised to continue to grow faster than GDP with an outlook of a 5.3% CAGR from 2022 to 2025. If there's one phrase that you hear repeated in the offices of Warby Parker, it's sustainable growth. Our management philosophy is to drive predictable growth while expanding margins and delivering exceptional customer experiences to ensure future growth. Our long-term outlook remains the same. We plan to grow revenue consistently at 20% or more, maintain healthy gross margins at 58% to 60%, gain leverage and expand adjusted EBITDA margins 100 to 200 basis points per year to achieve 20-plus percent adjusted EBITDA margins. We also plan to continue to make appropriately sized investments in technology and in our team to ensure exceptional customer experiences that result in a net promoter score greater than 80. In 2022, we anticipate growth consistent with our philosophy of continued sustainable growth. We expect to grow top line 20 to 22% to 650 million to 660 million. Ahead of our direct listing in September, before the onset of Omicron, we provided a framework of 2022 net revenue growth of at least 25%. We arrived at our current range of 20% to 22% growth after taking into account the estimated $15 million impact from Omicron in Q1 and assuming our stores reached 90% of pre-pandemic levels in Q2 and full productivity in Q4. based on the recovery curves we observed from the onset of COVID and from the emergence of Delta. We expect our growth margins to remain consistent at 58% to 60%, and we anticipate that we will improve adjusted EBITDA 100 to 200 basis points. And, of course, we expect to maintain a net promoter score at or above 80. We see tremendous opportunity in front of us, fueled by the natural tailwind we have as a business having launched purely online, selling just single vision prescription glasses. We expect most of our 2022 growth to be driven by our retail channel as traffic and sales productivity rebound, particularly for our 63 urban locations whose productivity is currently 15 points lower than our suburban locations. We also plan to open 40 new stores in 2022 and end the year with 201 locations. Last year, we commissioned a third-party study that concluded our retail footprint has room to expand to over 900 retail locations in the U.S., while maintaining our best-in-class four-wall economics. This is still a fraction of the 41,000 optical shops that exist today. As we continue to expand our product and service offering, we believe this will also expand our store footprint opportunity. And of course, we'll continue to serve customers via our leading e-commerce channel, using unique tools like our virtual try-on to make the shopping experience fun and convenient, both online and offline. Having a flexible omnichannel model has enabled us to grow significantly faster than others in our category. and will continue to be a structural competitive advantage going forward on the product front we expect our progressives penetration will continue to increase driving top line growth and gross margin expansion glasses with progressive lenses enable customers to see in the distance and up close it's a product that is generally for customers 45 years and older Our progressive glasses start at $295 versus our single vision product that starts at $95. In addition to the significantly higher ASP, progressives have a higher gross margin. We continue to be highly underpenetrated versus the industry, with progressives making up approximately 45% of all prescription glasses sold in the U.S. today, while it's just 20% of our prescription business, up from 16% in 2020. We're particularly excited by the fact that today, progressive purchases tend to skew more towards bricks and mortar, given the complex nature of the prescription and the older customer demographic. So as we scale our retail footprint and our stores return to full productivity, we expect to see compounding growth of this product. We expect that our eyewear ASP and gross margin will continue to expand thanks to our increased progressive penetration given the $200 price differential between our single vision glasses and our progressive glasses. We'll also continue to invest in our relatively new contacts business, which doubled last year to 4% of our business and which we expect to grow at a similar pace in 2022. The contacts market alone is over $5.5 billion, and contacts typically account for 15% to 20% of an optical retailer's sales. So we believe we have many years of high growth ahead of us. We'll also continue to invest in our eye exam and vision testing business. Like contacts and progressives, we are under-penetrated in the eye exam market, given our e-commerce beginnings. The eye exam market is over $6.5 billion, and while exams typically account for 10% to 15% of an optical retailer's sales, ours accounted for less than 2% of our sales in 2021. To drive growth, all 40 of our new 2022 stores will offer eye exams. We anticipate ending the year providing eye exams in 154 stores up from 107 in 2021. We'll also transition 4D existing stores in states where we cannot directly employ optometrists to a PC model, which will give us greater control of the customer experience and enable us to recognize the exam revenue. Lastly, we'll continue to lead the way in telehealth and expand the capabilities and awareness of our virtual vision tests. Of course, we recognize businesses like ours are currently facing unique challenges, but we feel confident in our team's ability to navigate through them. Despite Apple's IDFA update and privacy changes, we've not experienced significantly higher customer acquisition costs. Several years ago, we made the strategic decision to limit our dependency on paid social media platforms by reducing spend to less than 5% of our total media budget and instead leverage our highly flexible marketing model through a diverse mix of online and offline marketing channels. Given our customer base generally skews more affluent, we did not detect an increase in sales last year because of the federal stimulus in March and are therefore not lapping a one-time bump. Regarding shipping, the majority of our customer shipments are made through carriers where we have a negotiated fixed price multi-year agreement in place that do not include fuel surcharges. As Dave mentioned, we expanded our manufacturing footprint in the U.S. by opening a second optical lab in Las Vegas last year. This enables us to make more glasses in-house, which leads to greater gross margins, higher quality, and faster delivery times. we've been able to hire the talent required to scale operations faster than planned. In fact, we continue to attract and retain great talent across the organization, from our manufacturing facilities to our stores to our corporate offices. This is thanks to our employer brand, which has only gotten stronger because of our actions during the pandemic to protect the health, safety, and financial well-being of our employees, as well as our do-good efforts. our team takes immense pride in our recent milestone of distributing 10 million pairs of glasses to people in need. While these are extraordinary times, Team Warby is well-prepared and fully energized to continue along the path of sustainable growth. With that, I'll turn it over to Steve to talk about our results and provide color on our 2022 financial outlook. Thanks, Neil and Dave. Good morning, everyone. Jumping right in. Revenue for the full year of 2021 came in at $540.8 million, up 37% versus 2020 and up 46% versus 2019. We finished the year with 2.2 million active customers, an increase of 22% year-over-year. The power of our financial model stems from robust customer economics, which continue to strengthen. During the year, we grew average revenue per customer by 13% to $246. Additionally, our retention rates through 2021 continue to demonstrate the long-term relationship we're able to form with our customers, which we believe is unique in the optical industry. Despite navigating through continued uncertainty for most of the year, these results demonstrate the strength of our brand and underscore the opportunity ahead as we execute against our growth strategies. For the fourth quarter, revenue came in at 132.9 million, up 18% year over year, and up 42% compared to Q4 2019. The onset of Omicron at the end of November has had a meaningful impact on our business given the unique seasonality aspects they've talked through. Given the importance of Q1 within the optical industry and to our business, let me take a moment to walk you through the trends we've seen since the start of the year. The disruption from Omicron in January was twofold. First, the softer end to December resulted in a lower revenue deferral than we've historically seen, in addition to the variant continuing to dampen traffic levels into January and February in our stores. We estimate the impact of Omicron at $5 million in top line for Q4 2021 and $15 million in top line for Q1 2022, most of which we view as lost business in the lead up to the expiration of FSA dollars with the impact split across Q4 and Q1 and largely in December and January. Given the unique seasonality of optical purchases and customer FSA usage behavior, we do not expect to recapture the majority of these lost sales and have reflected this impact in our first quarter and full-year outlook. With regards to e-commerce performance in the fourth quarter, while we saw an increase in e-commerce demand over the last two weeks of December, it did not offset the decline we experienced in retail traffic trends. For our business, the shift between retail and e-commerce may not be as natural or immediate as it is for other categories, such as apparel, given the need for valid prescriptions and varying consumer comfort levels around purchasing eyewear online for the first time. For the fourth quarter, e-commerce represented 41% of our overall business versus 56% in 2020 and 34% in 2019. For the full year, e-commerce penetration was 46%, versus 60% in 2020 and 35% in 2019. E-commerce grew 96% during the fourth quarter of 2020. As such, Q4 2021 e-commerce is down 14%, but up 69% versus 2019, representing a two-year CAGR of 30%. For the full year, e-commerce grew 5% on top of 83% growth last year, representing a two-year CAGR of 39%. Before shifting gears to gross margin and SG&A, I wanted to reiterate some of the fourth quarter seasonality dynamics that I spoke with you about last quarter. Q4 is generally our lowest margin quarter given the revenue deferral to support the important holiday selling season, as well as the expiry of FSA benefits. These investments include marketing to support and generate customer demand, investments in shipping as we expedite orders to meet holiday timing, increasing store staffing to accommodate higher traffic and extended store hours, and increasing our customer experience staffing to support higher demand, as well as elevated call volume related to flexible spending benefit questions. So while we believe our long-term outlook will show consistent high growth and steadily improving profitability on an annual basis, as we saw in 2021, the quarter-to-quarter picture may fluctuate. We've also added to our earnings slides a historical view of revenue by quarter going back to 2016. As you can see, the revenue distribution is fairly equal across quarters in the same year, with a significant step-up in sequential growth from Q4 to Q1. We expect this cycle to continue post-pandemic, given the consistency we've seen in our business over many years prior. With that in mind, let's move on to gross margin. As a reminder, our gross margin is fully loaded and accounts for a range of costs, including frames, lenses, optical labs, customer shipping, eye doctors, store rent, and the depreciation of store build-outs. Our gross margin also includes stock-based compensation expense for our optometrists and optical lab employees. For comparability, I will be speaking to gross margin excluding stock-based compensation. Fourth quarter adjusted gross margin came in at 57.5% compared to 57.8% and 57.0% in 2020 and 2019, respectively. For the full year, adjusted gross margin came in at 59.0% compared to 58.9% in 2020 and 60.2% in 2019. For the quarter, we have some unique costs and benefits impacting comparability as well as several operational puts and takes that I'll talk through. First, Q4 2020 benefited from a tariff rebate of approximately 70 basis points. Excluding this benefit, adjusted gross margin would have expanded. Next, the acceleration and penetration of our contact business as a percentage of the total was the primary driver of slight moderation in fourth quarter gross margin. As Neil mentioned, expanding our contacts offering is a core part of scaling our holistic vision care offering and a key driver of increasing average revenue per customer. While contact lenses have a lower gross margin versus our other product offerings, they are accretive to gross margin dollars given the higher purchase frequency and subscription-like purchase cycle of this product. Additionally, we typically experience higher sales retention rates for customers that purchase contacts given the ability to meet all of their eye care needs within the Warby Parker ecosystem. As we talked with you about last quarter, there is a moderate drag on gross margin as our second optical lab in Las Vegas ramps to 100% operating capacity. We expect the lab to reach scale in the back half of 2022, which will allow us to more efficiently serve our West Coast customers, ultimately supporting leverage within gross margin. Lastly, we saw a benefit to gross margin from continued inventory and product strategy optimization, as well as the expansion of our higher margin progressives business. For the full year, 2020 gross margin benefited from a tariff rebate of approximately 40 basis points. Excluding this benefit in 2020, adjusted gross margin expansion would have been greater in 2021, primarily driven by leverage on retail occupancy as we lapped store closures last year, and leverage as we continue to scale our higher margin progressives business, partially offset by the acceleration and penetration of our contacts business during the year. Shifting gears to SG&A. SG&A for our business includes three main components, salary expense for our headquarters, customer experience and retail employees, marketing spend, including our home try-on program, and general corporate overhead expenses. Adjusted fourth quarter SG&A came in at $89.4 million, or 67.3% as a percentage of net sales, in line with pre-pandemic spend levels as we make investments to support increased demand and deliver remarkable experience to our customers. The primary driver of the plan deleverage during the quarter was increased media investment. As we spoke with you about in November, during the third quarter, we pulled back on marketing spend in response to the uncertainty presented by the Delta variant with the intention to strategically redeploy those dollars in the fourth quarter. When the Omicron variant emerged in late November, we made the strategic decision to continue to invest behind marketing given the learnings we've gained after having navigated the first variant, as well as the importance of the December selling season to our business. At less than 15% unaided brand awareness, each annual FSA expiry season is a prime opportunity to introduce new customers to the brand and re-engage with existing customers. We want to be at the top of our customers' minds when purchase intent is potentially higher than in other seasons. For the full year, on an adjusted basis, SG&A came in at $316 million, or 58.4% as a percentage of net sales, an improvement of 3.2 points when compared to 2020, and about flat to 2019 as we realized leverage on both salaries and G&A, partially offset by investments in marketing. For the fourth quarter, adjusted EBITDA margin was negative 4.8%, in line with our guidance, driven by the investments I just spoke about, versus 0.9% last year and negative 5.4% in 2019. Given the fixed nature of the Q4 investments already described, we believe we would have realized a healthy flow-through on the $5 million of lost sales in the quarter and adjusted EBITDA would have been higher. For the full year, adjusted EBITDA margin was 4.6% versus 1.9% last year and 5.9% in 2019, reflecting continued cost discipline and realizing leverage across SG&A categories. We finished the year with a strong balance sheet reflecting $256 million in cash, which will continue to deploy deliberately to support our growth and operations. Looking ahead, while consumers will likely continue to be impacted by near-term macro headwinds and global uncertainty, the optical industry is healthy and growing, and we remain confident in the long-term sustainable growth algorithm we communicated at our Investor Day in September. As it relates to the full year 2022, we are guiding to revenue between $650 and $660 million, which represents growth of approximately 20% to 22%. This outlook reflects the impact of an estimated 15 million of lost sales in the first quarter that I spoke about previously. While we do not plan to guide on a quarterly basis, given the disruption of Omicron to the start of the year and the corresponding impact to our full year 2022 guidance, we wanted to provide additional color. For Q1 2022, we're guiding to revenue between 153 to 154.5 million, which represents growth of 10 to 11% year-over-year. This represents sequential top-line growth of approximately 17% from Q4 2021 to Q1 2022. As you can see in our slides pre-pandemic, we typically have seen sequential step-ups of 25% plus from Q4 to Q1 and would have expected a similar dynamic this year if not for Omicron. Our full-year guidance assumes continued retail recovery, reaching approximately 90% of pre-pandemic levels in Q2 and full productivity by year-end. For context, in 2019, our stores opened for 12 months or more, generated $2.6 million in revenue on average. While we remain optimistic we will ramp back to full productivity faster, we are maintaining a conservative stance as the timing and rate of recovery will continue to be impacted by changes in the COVID environment alongside some of the broader macro headwinds facing the consumer and the economy, both known and unknown. Our outlook also reflects our expectations for earlier timing of new store openings, Similar to 2021, we expect more than half of our openings to occur in the second and third quarters and underpins accelerated growth from Q2 forward. In line with the results delivered in 2021 and consistent with our long-term outlook for sustainable growth, we expect full-year 2022 gross margin to be in the range of 58% to 60% and expect adjusted EBITDA margin improvement of 1 to 2 points, representing 5.6% to 6.6% adjusted EBITDA margin for full-year 2022. We continue to expect sources of leverage to come from continued optimization of our retail and customer experience teams, a disciplined deployment of marketing spend and corporate overhead, with revenue growth outpacing SG&A spend. In summary, we are very excited about the growth in the business, the continued recovery of our stores post-COVID, and the opportunity in front of us. To quickly recap some of the highlights we want you to take away from today's call, First, our business grew significantly, expanded profitability, and gained share despite being materially impacted by Omicron given its timing during FSA season, as well as its disruption of customers' ability to obtain eye exams and new prescriptions. Second, our business is not significantly impacted by increased shipping costs, labor shortages, Apple's privacy updates, or lapping stimulus. Third, our business benefits from the reopening currently underway as our retail productivity and our channel mix normalize. Fourth, our enthusiasm and energy for the success of our customers, our shareholders, our coworkers, and the communities we serve has never been higher, and we're excited for the year ahead. With that, Neil, Dave, and I are excited to take your questions. Operator, please open the line for Q&A.