Warby Parker Inc.

Thank you and good morning, everyone. Here with me today are Neil Blumenfall and Dave Gilboa, 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.walbyparker.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 in the company's latest annual report on form 10 K. These forward looking statements are based on information as of August 11th, 2022, and we assume no obligation to publicly update or revise our forward looking statements. Additionally, we'll 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 U.S. 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. And with that, I'll pass it over to Dave to kick us off.

Welcome and thank you all for joining this morning. To start, we'd like to thank Team Orbi for their continued commitment to creating exceptional products and customer experiences that help people see. In Q2, we brought our corporate teams back to the office, and it's been overwhelmingly positive to collaborate in person after two-plus years of remote work. Q2 was another quarter where Warby Parker delighted customers, gained market share, and made strong progress against our core strategic growth initiatives. We delivered net revenue of $149.6 million in line with our guidance range and generated $5.9 million in adjusted EBITDA ahead of our guidance. But it was also a quarter where the normally steady and predictable shopping behavior in our category continued to deviate from historical trends. During our last earnings call in mid-May, we discussed the impact of Omicron on our business, which resulted in lost sales and a decline in retail productivity below 80% of 2019 levels in early Q1, before a steady recovery reached approximately 90% retail productivity levels in April. This positive trend extended into mid-May at the time of our last call, which led us to share optimism about a continued recovery like we had seen after previous COVID waves. However, starting in the back half of May, we began to see a deterioration in retail productivity as well as headwinds for overall eyeglasses demand. We believe this weakness in demand is industry-wide, driven by lingering pandemic effects, inflation, and shifts in how consumers are spending their money and time. While we are not immune from these macro factors, we remain confident that our brand, value proposition, and delivery model continue to resonate with consumers. Our customers are spending more with us than ever, with average revenue per customer reaching a new high of $254 in Q2. Our repeat purchasing trends are as strong as ever, with four-year sales retention rates of 100%, and our most recent 12-month customer cohorts from the first half of 2021 having the highest repurchase rate we have ever seen. When people try Warby Parker, they love the experience and want to come back. Those happy customers also drive word of mouth, and we ended Q2 with a best-in-class net promoter score of 81. These positive customer trends notwithstanding, when we began to observe demand weakening, we quickly moved to rationalize our expense base to enable margin improvement as we scale. These actions are reflective of our commitment to sustainable growth and are expected to enable us to see more leverage from our fixed expense base in the back half of 2022 and beyond. We reduced expenses in several areas of our business, including making the difficult decision to restructure and streamline our corporate team, which resulted in the elimination of 63 roles, roughly 15% of our corporate headcount. As mentioned in our last earnings call, we have also adjusted our marketing spend as a percentage of revenue. As a reminder, Our marketing spend as a percentage of revenue increased during 2020 and 2021 due to deliberate investments to support our e-commerce business when our stores were closed or when we were limiting traffic into them. In Q2, we brought marketing as a percentage of revenue to 13.8%, which is more in line with pre-pandemic levels now that our ratio of orders placed in stores relative to those placed online has returned to pre-pandemic levels. Our stores not only enable us to offer great experiences for our customers and showcase our brands, they also serve as highly efficient customer acquisition tools. Between 2021 and 2022, we'll have opened 75 new stores, which will allow us to scale our customer base and top line without as much marketing support. As a result, marketing spend increased just 1% year over year in Q2 compared to our top line growth of 13.7%. Our customer acquisition costs came down over 25% relative to Q1, enabling us to acquire customers more efficiently. And in Q2, these CACs were at the lowest level we've seen since early 2020. Steve will speak to these changes and other G&A cuts in more detail shortly. Many of these changes are not reflected in our Q2 results. Therefore, we expect second half adjusted EBITDA margins to be meaningfully higher than the first half. positioning us to accelerate adjusted EBITDA expansion in 2023. Flexibility is one of our competitive strengths, both in how we serve customers across our omni-channel model and in the agility and speed with which we operate. It is why we were able to continuously serve customers and grow in 2020 when others in our industry had to temporarily pause operations and the total US eyewear market declined 15%. As we operate through this current period of volatility with rapid shifts in consumer behavior, we believe our flexible model will enable us to fare better than others in our category and result in continued share gain. This inherent flexibility is also what enables us to adjust our operating costs quickly. Given the deteriorating macro environment, we are taking a more conservative view into the rest of 2022, which is reflected in our rest of year guidance. We continue to believe in the resilience of the optical industry and expect these headwinds to be temporary, but we are no longer counting on optimism or demand recovery until we see it materialize. We are intensely focused on what is in our control, delivering products and experiences that customers love. And by doing so on a smaller expense base, we expect to drive meaningful adjusted EBITDA increases, even in the face of less consumer demand. We expect that these adjusted EBITDA improvements will begin to be realized in the back half of 2022, and we are committed to driving further margin expansion in 2023 and beyond. And with that, I'll turn it over to Neil to walk through our primary growth drivers, which will enable us to continue to scale and expand market share in the months and years ahead. Thanks, Dave.

While we navigate the current lower growth environment with an even greater commitment to margin expansion, we plan to continue to strategically invest in four key growth initiatives. First, we're continuing to scale our omnichannel experience and open stores. In Q2, we opened nine new stores and remain on track to open 40 stores by year end. Despite continuing to operate in an environment with lower retail traffic, Our stores are generating 2.1 million in revenue on average on an annualized basis with four wall margins in line with our historical target of 35%. This performance is consistent across our fleet, including a cohort of stores opened in 2021. These newer stores on average continue to remain on track to pay back within our target of 20 months. Second, we continue to expand our core glasses business. We consistently design and introduce glasses that our customers love, whether it's our Everywhere series collection, which is our first collection priced at $175, or our new anti-fatigue lens, which customers can add to any optical frame for an additional $100. Progressives also continue to grow as a percent to total. As a reminder, Progressives are our highest price point and highest gross margin category. So as Progressives penetration increases, we expect to drive top line growth and gross margin expansion. Given these and other initiatives, we continue to see ASP and AOV rise without impacting customer demand. Third, we're building our contacts business. Contacts continue to scale, growing more than 100% year over year, from 3% of our business in Q2 2021 to 7% in Q2 2022. As a reminder, contact lenses typically account for 15 to 20% of a sales of an optical retailer. And our contact business fuels other areas of our business. 30% of contact customers who are new to the brand end up buying glasses from us. These customers also tend to spend more than our glasses-only customers. Fourth, we're investing in our eye exam business. We continue to hire and retain incredibly talented optometrists. We ended the quarter offering exams in more than 70% of our retail stores and remain on track to provide eye exams in more than 150 stores by year end. In Q2, we completed our annual goal of converting 40 stores to our PC model, which gives us greater control over the customer experience and enables us to recognize exam revenue. Not only are we expanding our in-person comprehensive eye exam capacity, but our telehealth offering continues to grow. In Q2, the number of prescriptions requested through our virtual vision test app increased more than 100% year over year. These four strategic initiatives are in line with our philosophy around long-term sustainable growth and are consistently supported by consumer research. Our surveys show that the biggest barriers to purchase from Warby Parker include not having a store nearby, not being able to get an eye exam, and not being viewed as a place that serves all of their vision care needs. While our growth this year has trended lower than our long-term targets, we remain confident in the recovery of our category and in our ability to continue to gain market share in any type of economic climate. For example, during the pandemic from 2019 to 2021, we grew revenue 46%, while the overall optical market grew sales 5%. We offer products and services people need to see, and we believe we offer unparalleled value and a superior customer experience relative to others in our industry. When demand re-accelerates across our industry, we believe we will be well positioned to differentially benefit. And future growth off our newly reset expense base is expected to result in meaningful incremental margins. And now I'll pass it over to Steve.