Warby Parker Inc.

Hello everyone and welcome to the Warby Parker third quarter 2022 earnings conference call. We will begin shortly. If you would like to register a question for today's call please press star followed by one on your telephone keypad. Thank you for your patience. We'll be right back. Thank you. Thank you. Thank you and good morning, everyone. Here with me today are Neil Blumenfall, 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.wolbyparker.com. During this call and in our presentation, we'll 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 findings, 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 November 10, 2022, and except as required by law, we assume no obligation to public 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 US GAAP. A reconciliation of these items to the most directly comparable US GAAP measures can be found in this morning's press release and our slide deck available on our IR website. And with that, I will pass over to Neil to kick us off. Neil, please go ahead.

Neil, please go ahead.

Welcome and thank you all for joining this morning to discuss Warby Parker's third quarter 2022 results. I'm pleased to share that in the third quarter we achieved results moderately above the high end of our guidance range. Despite an increasingly difficult and uncertain macro environment, we delivered net revenue of approximately $149 million, an increase of 8.3% over the same period last year, and nearly $3 million above the high end of our revised guidance. We believe this is because of our brand, our value proposition, our omnichannel model that continues to resonate with consumers and drive incremental demand, even as consumers' wallets remain pressured. We ended the quarter with 2.26 million active customers, an increase of 5.1% versus last year, as we continue to gain share of the $44 billion vision care market and the nearly 200 million adults in the U.S. using some form of vision correction. Equally important, as we expand our product and service offering, customers are spending more with us than ever. Average revenue per customer increased nearly 7% year over year, reaching a new high of $258 in the third quarter. From a channel perspective, we saw a slight uptick in our retail performance as the third quarter progressed. Store productivity as a percent of our 2019 base level was 82% for Q3, which was ahead of our projection. And we saw incremental monthly gains throughout the quarter, exiting September with productivity at approximately 85% of 2019 levels. Our e-commerce growth moderated versus the first half of the year, but is still up 19% on a three-year CAGR basis. We view this positively given our intentional pullback in marketing spend, which was down 26% year over year, as well as the softness we've observed in the overall online eyewear market. The combination of a stronger top line, the actions we took to right-size our corporate cost structure to align with a slower growth environment, and reducing our marketing expense percentage to pre-pandemic levels resulted in an improvement in adjusted EBITDA year over year. Our focus has always been on driving profitable growth. We're pleased to have generated $11.9 million in adjusted EBITDA, which is up 6% from last year and ahead of our most recent guidance. We are proud to deliver these results, even as we face some gross margin headwinds from the fixed portion of our COGS due to long-term investments, namely the expansion of our store fleet and our optometric team. While we are encouraged with our results this quarter, we're maintaining a cautious view of the near term. Industry-wide demand softness driven by lingering pandemic effects, inflation, and shifts in how consumers are spending their money and time continue to disrupt the normally steady and predictable shopping behavior in our category. We continue to believe in the resilience of and the long-term growth outlook for the optical industry and expect these headwinds to be temporary. We also continue to believe in our more than 3,000 incredible team members who, in the face of volatility, continue to embrace flexibility, delight customers, drive innovation, and create impact. Until a demand recovery materializes, we'll remain focused on what is in our control, driving increased operating leverage through diligent expense management and smart investments in future growth. The opportunity for Warby Parker within the $44 billion vision care market remains tremendous. and we're confident that continuous focus and execution against our strategies will position us well for sustainable long-term growth. Steve will walk through the specifics of our guidance in a moment, but we are raising our projected full-year revenue range to $590 to $596 million. We're also raising the low end of our previous full-year adjusted EBITDA range by $3 million and the high end by $1 million. So we now expect adjusted EBITDA for the year to be between $25 to $27 million. And with that, I'll turn it over to Dave to walk through the progress we've made against our primary growth drivers this quarter.