Q4 2023 Warby Parker Inc Earnings Call
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Neil: Ladies and gentlemen, welcome to the Warby Parker fourth quarter and full year 2023 results. My name is Neil, and I will be coordinating your call today. If you would like to ask a question during the presentation, you may do so by pressing star 1 on your telephone keypad. I will now hand over to Jacqueline Berkley, head of the Investors Relations Division. Jacqueline, please go ahead.
This is our ladies and gentlemen, welcome to the <unk> fourth quarter and full year 2023 results. My name is Neil and I will be co oriented infill core today. If you would like to ask a question. During your presentation. You may do so by pressing star one on your telephone keypad now.
I'll hand over to Jack Meehan Barclays head of the Investor relation to begin Jackman. Please go ahead.
Jacqueline Berkley: Thank you, and good morning, everyone. Here with me today are Neil Blumenthal 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.warbyparker.com. During this call and in our presentation, we will be making comments of a forward-looking nature. However, 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 10-2.
Thank you and good morning, everyone here with me today are Neil Blumenthal, 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 thought worthy Parker dotcom.
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.
Jacqueline Berkley: These forward-looking statements are based on information as of February 28, 2024, and, except as required by law, 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 U.S. GAAP. A reconciliation of our non-GAAP measures to the most directly comparable U.S. GAAP measures 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.
These forward looking statements are based on information as of February 'twenty, eight 'twenty 'twenty, four and except as required by law, we assume no obligation to publicly update or revise our forward looking statements.
Additionally, we will be discussing certain non-GAAP financial measures.
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.
<unk> of our non-GAAP measures to the most directly comparable U S. GAAP measures 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.
Dave: Welcome, everyone, and thank you for joining us this morning. We'll spend the majority of today's call speaking about our 2024 plan and looking forward, but first, I want to take a moment to reflect on 2023. It's a year that we have a lot to be proud of, and I'd like to start by recognizing our team's hard work and dedication to delivering the best eye care products and experiences for our customers while improving our financial results and making progress against our mission to provide vision for all.
Welcome everyone and thank you for joining us this morning.
We'll spend the majority of today's call speaking to our 2024 plan and looking forward, but first wanted to take a moment to reflect on 2023 it's.
It's a year that we have a lot to be proud of and I'd like to start by recognizing our team's hard work and dedication to delivering the best eye care products and experiences for our customers, while improving our financial results and making progress against our mission to provide vision for all.
Dave: Last year, we delivered consistent double-digit revenue growth each quarter, closing the year up 12% year-over-year, while growing adjusted EBITDA more than 90% and expanding adjusted EBITDA margin nearly 330 basis points. We are pleased to have achieved a full year of positive free cash flow while we continue to make significant investments in our long-term strategic initiatives, including opening 40 new stores, scaling Contacts and iExam to approximately 9% and 4% of revenue, respectively, and introducing new innovative products like Precision Progressive. We are also proud to have surpassed a major milestone of distributing more than 15 million pairs of glasses to people in need through our Buy a Pair, Give a Pair program. But what we hope you'll take away from today's call is that we're not content.
Last year, we delivered consistent double digit revenue growth each quarter closing the year up 12% year over year, while growing adjusted EBITDA more than 90% and expanding adjusted EBITDA margin nearly 330 basis points.
We are pleased to have achieved a full year of positive free cash flow, while we continue to make significant investments in our long term strategic initiatives, including opening 40, new stores scaling contacts and eye exam to approximately 9% and 4% of revenue, respectively, and introducing new innovative products like precision progresses.
We are also proud to have surpassed a major milestone of distributing more than 15 million pairs of glasses to people in need through our bioterror, giving up their program.
Well, we hope you'll take away from today's call is that we're not content.
Dave: We have higher ambitions, in particular for top-line growth and for serving more customers, all while maintaining operational discipline and expanding profitability. A focus for 2024 and beyond will be to improve our top-line growth rate, and we are pleased with the positive momentum we have seen so far this year. Turning to our plan, you'll hear a lot of consistency in our priorities from last year, but we also want to make it clear where we are leaning into opportunities or making adjustments in response to recent learning. There are three key areas in 2024 that we expect will be meaningfully different from the last two years.
We have higher ambitions in particular for topline growth and preserving more customers.
Maintaining operational discipline and expanding profitability.
Our focus for 2024 and beyond will be to improve our top line growth rate and we are pleased with the positive momentum we have seen so far year to date.
Turning to our plant and you'll hear a lot of consistency in our priorities from last year, but we also want to make it clear where we are leaning into opportunities are making adjustments in response to recent learnings.
There are three key areas in 2024 that we expect will be meaningfully different than the last two years.
Dave: One, we plan to increase our marketing and brand spend on a full year basis for the first time since 2021. Two, we expect to drive positive, sustained e-comm growth, also for the first time since 2021. And three, we will take a leap forward in our ability to serve insurance customers.
One we plan to increase our marketing and brand spend and on a full year basis for the first time since 2021.
Two we expect to drive positive sustained E. Comm growth also for the first time since 2021.
And three we will take a leap forward in our ability to serve insurance customers.
Dave: Alongside these three areas, we plan to continue driving best-in-class retail economics and outsize growth in product categories like progressives, contacts, and exams. We believe these actions will re-accelerate active customer growth and overall growth in 2024 and beyond. We also expect to drive incremental operating efficiencies and profitability as we gain leverage from the strong foundation that we have invested in over the last few years. We've been pleased with recent efficiencies in this area, which gives us confidence to reinvest in both brand awareness and new customer growth. This year, we expect to keep marketing spend in the low teens as a percent of revenue and higher than 2023 levels on an absolute basis, coming off two years of decreasing spend in response to lower demand signals in the category.
Alongside these three areas we plan to continue driving best in class retail economics, and outsized growth in product categories like progressive contacts and exams. We believe these actions will reaccelerate active customer growth and overall glass's growth in 2024 and beyond.
We also expect to drive incremental operating efficiencies and profitability as we gain leverage from the strong foundation that we invested in over the last few years.
We will start by discussing marketing spend we've been pleased with recent efficiencies in this area, which gives us confidence to reinvest in both brand awareness and new customer growth.
This year, we expect to keep marketing spend in the low teens as a percent of revenue and higher than 2023 levels on an absolute basis coming off two years of decreasing spend in response to lower demand signals in the category.
Dave: We continue to see opportunity to drive awareness and customer growth through linear TV and SEM and also expect to scale other channels where we've seen strong returns, including direct mail, streaming, and influencer. To drive top-of-funnel awareness, we plan to launch unique partnerships, collaborations, and awareness initiatives to expand our audience and reach a variety of demographics. For example, in 2023, we launched a collaboration with style icon and glasses connoisseur Emma Chamberlain, who has worn Warby Parker since she first visited our Hayes Valley store eight years ago.
We continue to see opportunity to drive awareness and customer growth through linear TV and SCM and also expect to scale other channels, where we've seen strong returns, including direct mail streaming and influencer.
To drive top of funnel awareness, we plan to launch unique partnerships collaborations and awareness initiatives to expand our audience and reach a variety of demographics.
For example in 2023, we launched a collaboration with style icon and glasses contour and my Chamberlain, who has worn worthy Parker since he first visited our Hayes Valley story eight years ago.
Dave: Following the success of last year's collaboration, we're excited to work with her again in 2020. Our stores serve as billboards and act as efficient customer acquisition vehicles, and we believe the 40 openings that we have planned this year will also help drive awareness. To amplify our retail channel, we plan to allocate a portion of our media budget towards driving local store awareness and store traffic in a more intentional manner than in prior years. These efforts include expanding exam awareness to drive exam utilization as well.
Following the success of last year's collaboration we're excited to work with her again in 2024.
Our stores serve as Billboards and act as efficient customer acquisition vehicles, and we believe the 40 openings that we have planned. This year will also help drive awareness.
To amplify our retail channel, we plan to allocate a portion of our media budget towards driving local store awareness and store traffic in a more intentional manner than in prior years.
These efforts include expanding exam awareness to drive exam utilization as well.
Dave: Due in part to these efforts, we expect to drive more balanced growth between active customers and average revenue per customer in 2024 than we saw last year. We ended 2023 with 2.3 million active customers, an increase of 2.5% on a trailing 12-month basis. However, given the backward-looking nature of this metric, it is still being impacted by the first half of 2023, when marketing spend was down 26% year over year.
Due in part to these efforts, we expect to drive more balanced growth between active customers and average revenue per customer in 2024 than we saw last year.
We ended 2023 with $2 3 million active customers an increase of two 5% on a trailing 12 month basis, given the backward looking nature of this metric it is still being impacted by the first half of 2023, and which marketing spend was down 26% year over year.
Dave: As we've mentioned previously, some of these customer accounts represent households or multiple individuals. Later in the call, Steve will provide an update on the number of unique individuals we are serving. Importantly, whether it's individuals or households, we continue to see strong customer retention metrics and repeat purchasing patterns across cohorts, including a revenue retention rate of roughly 50% over 24 months and 105% over 48 months for the 2018 cohort. We believe the power of our brand and our ability to delight customers continue to differentiate us within the industry. As a second area of focus, we plan to further invest in scaling our industry-leading omnichannel experience, meeting customers where and how they want to shop. Our fully integrated omni-channel experience is unique in our category and has enabled us to effectively serve customers over the last few years as shopping behavior between channels fluctuates.
As we've mentioned previously some of these customer accounts represent households, or multiple individuals' later in the call Steve will provide an update on the number of unique individuals we are serving.
Importantly, whether it's individuals' households, we continue to see strong customer retention metrics and repeat purchasing patterns across cohorts, including our revenue retention rate of roughly 50% over 24 months and 105% over 48 months for the 2018 cohort.
We believe the power of our brand and our ability to delight customers continue to differentiate us within the industry.
And the second area of focus we plan to further invest in scaling our industry, leading omnichannel experience meeting customers, where and how they want to shop.
Our fully integrated omni channel experience is unique in our category and has enabled us to effectively serve customers over the last few years as shopping behavior between channels fluctuated in.
Dave: In 2020 and 2021, we were forced to operate our stores at a limited capacity, and in 2022 and 2023, our econ channel was negative, creating a drag for the overall business. We're excited this year to see both channels contribute positive growth, and we expect this to be the case going forward. In 2024, we anticipate our e-commerce channel will be up low single digits on a full-year basis and positive for the first time since 2021 due to a few underlying drivers. Additionally, as just discussed, the channel will benefit from our first full-year increase in marketing spend since 2021. Our e-Commerce channel requires more marketing support to drive growth in our stores, and we observed the impact of our pullback on marketing in the last couple of years. The second is channel shift renormalization coming out of the pandemic.
In 2020 in 2021, we are forced to operate our stores in a limited capacity and in 2022 and 2023, our E Com channel was negative creating a drag for the overall business.
We're excited this year to see both channels contribute positive growth and we expect this to be the case going forward.
In 2024, we anticipate our e-commerce channel will be up low single digits on a full year basis and positive for the first time since 2021 due to a few underlying drivers.
As just discussed the channel benefit from our first full year increase in marketing spend since 2021, our E. Com channel requires more marketing support to drive growth in our stores and we observe the impact of our pullback on marketing in the last couple of years.
The second is channel shift re normalization coming out of the pandemic.
Our E Comm business grew at a compounded annual growth rate of 15% from 2019 to 2023, but that growth was heavily front loaded during the pandemic.
Dave: Our e-com business grew at a compounded annual growth rate of 15% from 2019 to 2023, but that growth was heavily front-loaded during the pandemic. We have now returned to our pre-pandemic transaction mix between e-com and retail and expect more stability between channels and positive e-com growth going forward. Third, within our EcomGlasses business, we have seen shifting dynamics between customers purchasing after completing a home try-on versus those purchasing directly. Home Try-on has been driving a smaller percent of purchases than in the past, and we expect this trend to continue. Our free home try-on has been a core part of our offering since launch in 2010 and was designed as a novel service to enable potential customers to try on glasses.
We have now returned to our pre pandemic transaction mix between E com and retail and expect more stability between channels at positive E comm growth going forward.
Third within our E com glasses business, we have seen shifting dynamics between customers purchasing after completing at home try on versus those purchasing directly.
Home trying to and has been driving a smaller percent of purchases than in the past and we expect this trend to continue.
Our freedom try on has been a core part of our operating since launch in 2010.
And was designed as a novel service to enable potential customers to try on glasses.
Now that we have over 230 stores in our virtual try on on web iOS and Android customers at the other convenient methods to try on our frames.
While we still see high conversion rates and strong ROI from home try on led purchases direct glasses purchases lead to shorter timelines from trying to purchase while requiring less inventory shipping and operating costs.
Dave: Now that we have over 230 stores in our virtual try-on on the web, iOS, and Android, customers have other convenient methods to try on our frames. While we still see high conversion rates and strong ROI from home try-on-led purchases, direct glasses purchases lead to shorter timelines from try-on to purchase, while requiring less inventory, shipping, and operating costs. Going forward, you'll see us invest further in virtual experiences and advanced personalization while being more intentional in where and how we lead with home triumph. Fourth, key tailwinds for the e-commerce channel include our growing contact business, the majority of which is online, and our strong customer retention and repeat purchase trends as many of our returning customers opt to transact online. Finally, as we've discussed before, opening stores in new markets generally creates a temporary headwind for local e-commerce sales in the store's first year of operations, after which this effect abates.
Going forward, you'll see us invest further in virtual experiences and advanced personalization, while being more intentional in where and how we lead with home trial.
Fourth key tailwind for the E. Commerce channel include our growing contract business. The majority of which is online and our strong customer retention and repeat purchase trends as many of our returning customers opt to transact online.
Finally, as we've discussed before opening stores in new markets generally creates a temporary headwind for local E. Commerce sales in the stores first year of operations after which this effect abates.
With planned center 10, new markets in 2024 versus <unk> 17 in 2023, we expect to see less pressure on overall e-commerce growth in the coming year.
Now shifting to retail where we expect to see the majority of our growth come from in 2024.
We ended 2023 with 237 stores and longer term. We believe we can open more than 900 stores in the U S. Highlighting a significant opportunity for further penetration of both new and existing markets for years to come while still representing a small fraction of the 45000 optical shops in the U S.
Dave: With plans to enter 10 new markets in 2024 versus 17 in 2023, we expect to see less pressure on overall e-commerce growth in the coming year. Now, shifting to retail, where we expect to see the majority of our growth come from in 2024. We ended 2023 with 237 stores, and, longer term, we believe we can open more than 900 stores in the US, highlighting a significant opportunity for further penetration of both new and existing markets for years to come, while still representing a small fraction of the 45,000 optical shops in the US. We plan to open another 40 new stores this year with a continued focus on suburban expansion. Of these stores, 29 are expected to be in suburban markets and the remaining 11 stores in urban centers, including in our largest market of New York City.
We plan to open another 40, new stores. This year with a continued focus on suburban expansion of these stores 29 are expected to be in suburban markets and the remaining 11 stores in urban centers, including in our largest market of New York City.
For these 40, new stores, we continue to target, 35% four wall margins and payback within 20 months, we remain confident in our store growth strategy given the consistent returns we see across cohorts.
Our stores that were opened for the full 12 months in 2023 generated approximately $2 1 million in revenue on average and four wall margins in line with our target of 35%.
Over half of our 2022 stores payback and an average of 16 months in the cohort overall is on track to payback in line with our target of 20 months.
Dave: For these 40 new stores, we continue to target 35% poor wall margins and paybacks within 20 months. We remain confident in our store growth strategy, given the consistent returns we see across cohorts. The stores that were open for the full 12 months in 2023 generated approximately $2.1 million in revenue on average and four wall margins in line with our target of 35 percent. Additionally, over half of our 2022 stores paid back in an average of 16 months, and the cohort overall is on track to pay back in line with our target of 20 months.
I want to quickly highlight our store teams in particular, our store leaders and optometrists, who provided more eye exams last December than in any month during the company's history driving conversion and <unk> throughout <unk>.
<unk> fortunate to have a tenured store leadership team many of whom have been promoted from within the company.
We believe our ability to grow and retain talent is differentiated within the market and will remain a critical component of our retail strategy in 2024 and going forward.
This year, we plan to drive store productivity through active customer growth and growth in average revenue per customer driven by higher utilization and increased purchasing a progressive contact lenses and higher price frames.
Dave: I want to quickly highlight our store teams, in particular, our store leaders and optometrists who provided more eye exams last December than in any month during the company's history, driving conversion and AOD throughout. We are fortunate to have a tenured store leadership team, many of whom have been promoted from within the company. We believe our ability to grow and retain talent is differentiated within the market and will remain a critical component of our retail strategy in 2024 and going forward. This year, we plan to drive store productivity through active customer growth and growth in average revenue per customer driven by higher eye exam utilization and increased purchasing of progressive contact lenses and higher priced frames. And now I'll pass it over to Neil to talk more about our Holistic Vision Care offering, which will continue to be another key area of focus for us in 2024. Thanks, Dave. And good morning, everyone.
And now I'll pass it over to Neil to talk more about our holistic vision care offering which will continue to be another key area of focus for us in 2024.
Thanks, Dave and good morning, everyone. This year will continue to expand our holistic vision care, offering, which is attracting new customers and driving higher customer lifetime value.
Starting first with our core glasses business since launching <unk> Parker in 2010.
We've intentionally maintained our core $95 price point are simple affordable pricing structure has been an integral part of our value proposition and we believe it continues to attract new customers.
And while we will continue to expand our $95 offering we plan to launch nearly 20 collections. This year, many of which will incorporate our 145 or 175, and our $195 price points, while introducing innovative frame construction, new lens types sizes and more.
Neil: This year, we'll continue to expand our holistic vision care offering, which is attracting new customers and driving higher customer lifetime value. Starting first with our core glasses business, since launching Warby Parker in 2010, we've intentionally maintained our core $95 price point.
In addition, we will look to build upon the momentum in our progressive business with me.
Made great strides in expanding our progressive penetration to 22, 6% of prescription glasses sold in 2023 up from 21, 4% in 2022.
Neil: Our simple, affordable pricing structure has been an integral part of our value proposition, and we believe it continues to attract new customers. And while we'll continue to expand our $95 offering, we plan to launch nearly 20 collections this year, many of which will incorporate our $145, our $175, and our $195 price points, while introducing innovative frame constructions, new lens types, sizes, and more. In addition, we'll look to build upon the momentum in our progressive system.
Key driver here has been customer receptivity to precision progressive or premium progressive lands that we introduced in Q2 2023.
It's a great example of our team's ability to quickly innovate in response to customer feedback while delivering exceptional value.
It's the highest price point product, we've ever introduced at $395, it's still well below what a similar product often cost elsewhere.
We continue to believe there is significant white space for future growth as progressive represent approximately 40% of their prescription eyeglass market overall.
Progressives are closely tied to store expansion as progressive penetration is higher and our retail channel.
Neil: We've made great strides in expanding our progressives penetration to 22.6% of prescription glasses sold in 2023, up from 21.4% in 2022. A key driver here has been customer receptivity to precision progressives, our premium progressive lens that we introduced in Q2 2023. It's a great example of our team's ability to quickly innovate in response to customer feedback while delivering exceptional value. While it's the highest price point product we have ever introduced at $395, it's still well below what a similar product often costs elsewhere.
In addition to being efficient customer acquisition vehicles, our stores are integral to advancing our goal of providing holistic eyecare.
Like 2023, nearly every new store that we opened in 2024 will include our exam capabilities industry wide nearly 75% of prescription glasses are purchased at the same location an exam takes place.
I am excited to share that this year, we're planning to further integrate our omni channel experience by offering our precision progressive online for the first time.
Moving onto our other products and services, including contact and eye exams.
Neil: We continue to believe there is significant white space for future growth as progressives represent approximately 40% of the prescription eyeglass market overall. Progressives are closely tied to store expansion as progressive penetration is higher in our retail channel. In addition to being efficient customer acquisition vehicles, our stores are integral to advancing our goal of providing holistic eye care. Like 2023, nearly every new store that we open in 2024 will include eye exam capability. Industry-wide, nearly 75% of prescription glasses are purchased at the same location where the exam takes place.
Last year contact lens sales grew 35% year over year to approximately 9% of revenue in 2023, yet our contacts penetration remains well below the 20% industry average.
In 2024, we plan to continue to invest and grow this portion of our business as it not only attracts new customers, but also some of our highest value customers given the replenishment nature of the product.
Approximately 30% of context customers in 2023 were new customers to war be Parker.
Adding to this trend we continue to see many of these customers go onto purchase glasses from us and.
In 2023 over 50% of contact customers also purchased classes from us and we see an opportunity to expand this over time.
Neil: And I'm excited to share that this year, we're planning to further integrate our omnichannel experience by offering our precision progressives online for the first time. Moving on to our other products and services, including contacts and eye exams. Last year, contact lens sales grew 35% year over year to approximately 9% of revenue in 2023, yet our contact penetration remains well below the 20% industry average. In 2024, we plan to continue to invest in and grow this portion of our business as it attracts not only new customers but also some of our highest-value customers, given the replenishment nature of the product. Approximately 30% of Contacts customers in 2023 were new customers to Warby Parker.
Similar to progressive a big contributor to the growth in context has been the growth of our eye exam business.
In 2023 eye exams grew 63% year over year to approximately 4% of revenue yet our exam penetration remains well below the approximately 15% industry average.
Today, the majority of our customers are still getting their eye exams elsewhere, and bringing their prescriptions towards Parker highlighting the opportunity in front of us.
As we've increased the number of stores offering eye exams, we have seen strong growth in average revenue per customer driven by eye exam revenue a higher penetration of progressive lenses contact lenses.
We find that exam stores drive higher sales conversion and gross margin and non exam stores, while offering a more seamless experience for our customers and patients.
Neil: Added to this trend, we continue to see many of these customers go on to purchase glasses from us. In 2023, over 50% of contact lens customers also purchased glasses from us, and we see an opportunity to expand this over time. Similar to progressives, a big contributor to the growth in contacts has been the growth of our eye exam business. In 2023, iExams grew 63% year-over-year to approximately 4% of revenue, yet our exam penetration remains well below the approximately 15% industry average. Today, the majority of our customers are still getting their eye exams elsewhere and bringing their prescriptions to Warby Parker, highlighting the opportunity in front of them.
A key part of our strategy. This year is focused on supporting our existing optometrists we.
We plan to invest in growing exam awareness among customers and see opportunities to optimize exam coverage, where we see the highest demand, which we expect will help further leverage this fixed cost component of gross margin.
We are also expanding innovative eyecare services like video assisted <unk> exams, which are comprehensive eye health exams in our stores using live remote doctors. In addition, we plan to continue rolling out retinal imaging, an exam suites, which enables advanced disease diagnostics without pupil dilation, resulting in a.
Better patient experience.
While we have only introduce both technologies in a small number of stores. We are seeing many patients to opt into the services and provide positive feedback.
As we've shared in our slide presentation, our 2021 cohort of holistic vision care customers continues to show higher lifetime value over a longer period of time.
Neil: As we've increased the number of stores offering eye exams, we have seen strong growth in average revenue per customer driven by eye exam revenue, and higher penetration of progressive lenses and contact lenses. We find that exam stores drive higher sales, conversion, and growth margin than non-exam stores, while offering a more seamless experience for our customers and patients. A key part of our strategy this year is focused on supporting our existing optometrists. We plan to invest in growing exam awareness among customers and see opportunities to optimize exam coverage where we see the highest demand, which we expect will help further leverage this fixed-cost component of gross margin. We are also expanding innovative eye care services like video-assisted eye exams, which are comprehensive eye health exams in our stores using live remote doctors. In addition, we plan to continue rolling out retinal imaging and exam suites, which enable advanced disease diagnostics without pupil dilation, resulting in a better patient experience.
Customers, who completed an eye exam with us and bought glasses and contacts spent one four times more with us at their initial purchase than glasses only customers to two times more with us after 12 months and two six times more with us after 24 months.
And we're encouraged to see our 2022 cohorts spend even more with us than the 2021 cohort.
Over the course of 2024, we'll aim to make it easier than ever for customers to access these products and services using their vision insurance benefit.
Or be Parker ended 2023 with over $19 million in network lives.
Throughout the year, we saw higher utilization of insurance, both from our in network customers and from customers seeking out of network reimbursement.
Today, we're announcing the expansion of our relationship with <unk> health, a wholly owned subsidiary of Metlife, which will bring an additional 15 million lives in network with <unk> Parker and nearly double the number of lives with in network access with us to over $34 million.
Neil: While we have only introduced both technologies in a small number of stores, we are seeing many patients opt into these services and provide positive feedback. As we've shared in our slide presentation, our 2021 cohort of holistic vision care customers continues to show higher lifetime value over a longer period of time. For example, customers who completed an eye exam with us and bought glasses and contacts spent 1.4 times more with us at their initial purchase than glasses-only customers. 2.2 times more with us after 12 months and 2.6 times more with us after 24 months, and we're encouraged to see our 2022 cohort spend even more with us than the 2021 cohort. Over the course of 2024, we'll aim to make it easier than ever for customers to access these products and services using their Vision Insurance Benefits.
After a phased integration we expect that these new 15 million members will be able to access their benefits fully later this year.
This is an exciting step forward in making it easier than ever for customers to use their benefits with us.
In parallel we continue to think there is an opportunity to educate customers about using their out of network benefits at war be Parker.
Right now we estimate around 60% of our customers have vision insurance and most out of network plans cover an average of $100 reimbursement for a pair of glasses or contacts meaning that these customers often paid $0 out of pocket for their eyewear purchase at worthy Parker.
Neil: Warby Parker ended 2023 with over 19 million in network live. Throughout the year, we saw higher utilization of insurance both from our in-network customers and from customers seeking out-of-network reimbursement. Today we're announcing the expansion of our relationship with Versant Health, a wholly owned subsidiary of MetLife, which will bring an additional 15 million lives in-network with Warby Parker and nearly double the number of lives with in-network access with us to over 34 million.
We're eager to build upon the momentum in this part of our business and believe it can be an exciting unlock in terms of growing brand awareness, attracting new customers and delivering even better value to our existing customers.
We often get asked about the optical industry and one we expect customer behavior to normalize.
While we have seen some positive signals and remain confident in the long term health and durability of the category.
Our 2024 plan does not assume a meaningful improvement in industry trends.
Neil: After a phased integration, we expect that these new 15 million members will be able to access their benefits fully later this year. This is an exciting step forward in making it easier than ever for customers to use their benefits with us. In parallel, we continue to think there is an opportunity to educate customers about using their out-of-network benefits at Warby Parker. Right now, we estimate around 60% of our customers have vision insurance, and most out-of-network plans cover an average of $100 reimbursement for a pair of glasses or contacts, meaning that these customers often pay $0 out-of-pocket for their eyewear purchase at Warby Parker.
We expect to continue to gain share regardless of the backdrop.
As Dave mentioned at the start of the call we have high expectations for ourselves and our team. The foundation, we've laid for worthy Parker 14 years ago was one built around delivering both exceptional value and service to our customers all while growing our company sustainably.
We believe we have the right tools strategic plan and operational discipline in place to execute this year and beyond.
And now I'll turn it over to Steve to review the details of our financial performance.
Thanks, Neil and Dave I'll begin with a detailed review of our 2023 fourth quarter performance along with some call outs on our full year results.
Neil: We're eager to build upon the momentum in this part of our business and believe it can be an exciting breakthrough in terms of growing brand awareness, attracting new customers, and delivering even better value to our existing customers. We often get asked about the optical industry and when we expect customer behavior to normalize. While we have seen some positive signals and remain confident in the long-term health and durability of the category, our 2024 plan does not assume a meaningful improvement in industry trends. We expect to continue to gain share regardless of the backdrop. As Dave mentioned at the start of the call, we have high expectations for ourselves and our team.
Then I'll outline our guidance for the full year and first quarter of 2024, while sharing some trends, we're seeing Q1 to date.
Let's jump into Q4, and our full year results.
Revenue for the fourth quarter and full year 2023 came in above the high end of our guidance ranges at $161 9 million up 10, 5% year over year, and $669 8 million up 12% year over year, respectively.
From a channel perspective in Q4 retail revenue increased 17, 1% year over year, while E Commerce revenue decreased 1% versus Q4 of 2022.
For full year 2023, retail revenue increased 21, 7% year over year, while e-commerce decreased three 1% year over year due largely to impact from marketing pullbacks in each one but the channel returned to growth in <unk> 2023 versus H two of 2022.
Steve: The foundation we laid for Warby Parker 14 years ago was one built around delivering both exceptional value and service to our customers, all while growing our company sustainably. We believe we have the right tools, strategic plan, and operational discipline in place to execute this year and beyond. Now, I'll turn it over to Steve to review the details of our financial performance. Thanks, Neil and Dave.
As a reminder, every year, we see a revenue deferral from Q4 into Q1, depending on the timing of when orders are delivered and when we recognize revenue. This.
Steve: I'll begin with a detailed review of our 2023 fourth quarter performance, along with some call outs on our full year results. Then I'll outline our guidance for the full year and first quarter of 2024 while sharing some trends we're seeing in Q1 to date. Let's jump into Q4 and our full year results. Revenue for the fourth quarter and full year 2023 came in above the high end of our guidance ranges at $161.9 million, up 10.5% year over year, and $669.8 million, up 12% year over year, respectively. From a channel perspective, in Q4, retail revenue increased 17.1% year over year while e-commerce revenue decreased 1% versus Q4 of 2022. For full year 2023, retail revenue increased 21.7% year over year while e-commerce revenue decreased 3.1% year over year, due largely to the impact from marketing pullbacks in H1, but the channel returned to growth in H2 2023 versus H2 of 2022.
This year a larger portion of our late December orders were delivered in January which shifted more revenue recognition into January than we initially expected and will be reflected in our Q1 results. We estimate we deferred 2 million more than anticipated from December into January with a similar channel split of two thirds retail and.
130 ecommerce.
This higher revenue deferral was driven by strong demand in the final weeks of the year. This momentum has carried through into Q1 to date, including a strong recovery in reacceleration. After the weather related store closures in mid January.
Turning to our stores, we added 37 net new stores over the course of the last 12 months ending the year with 237 stores up from 200 at the end of 2022.
This 18, 5% increase in our store count compares to retail revenue growth of 22% over the same period. So we continue to be pleased with the productivity and growth of our more mature store cohorts.
Retail productivity in Q4 was 101% versus the same period last year and 101% for the full year 2023.
As a reminder, we define retail productivity of sales per average number of stores opened in the period, including newly opened stores. So even as we continue to add an average of 40, new stores per year or more mature store cohorts continue to perform strongly to offset the new stores that are ramping.
Steve: As a reminder, every year we see revenue deferral from Q4 into Q1, depending on the timing of when orders are delivered and when we recognize revenue. This year, a larger portion of our late December orders were delivered in January, which shifted more revenue recognition into January than we initially expected and will be reflected in our Q1 results. We estimate we deferred $2 million more than anticipated from December into January, with a similar channel split of two-thirds retail and one-third e-commerce.
All 40, new stores include an eye exam capabilities, which brought the number of locations offering eye exams in the quarter to 194 or 82% of our total fleet.
As Dave mentioned in 2023, our stores that were opened 12 months or more generated approximately $2 1 million in revenue on average with four wall margins in line with our target of 35%.
Steve: This higher revenue deferral was driven by strong demand in the final weeks of the year. This momentum has carried through into Q1 to date, including a strong recovery and re-acceleration after the weather-related store closures in mid-January. Turning to our stores, we added 37 net new stores over the course of the last 12 months, ending the year with 237 stores, up from 200 at the end of 2022. This 18.5% increase in our store count compares to retail revenue growth of 22% over the same period. So we continue to be pleased with the productivity and growth of our more mature store cohort. Retail productivity in Q4 was 101% versus the same period last year, and 101% for the full year 2023. As a reminder, we define retail productivity as sales per average number of stores opened in the period, including newly opened stores. So even as we continue to add an average of 40 new stores per year, our more mature store cohorts continue to perform strongly to offset the new stores that are ramping up. All 40 new stores included iExam capabilities, which brought the number of locations offering iExams in the quarter to 194, or 82% of our total fleet.
From a channel mix perspective for the fourth quarter E. Commerce represented 33% of our overall business in line with our pre pandemic mix. This compares to 37% in Q4, 2022 and 34% in Q4 2019.
From a customer perspective, we finished 2023 with 233 million active customer accounts, which represents an increase of two 5% versus last year.
Over the same time period, we dropped marketing spend by 7% as we rebalance marketing to the low teens as a percent of revenue.
Since Anniversarying marketing spend pullbacks in Q2 of last year, we were pleased to see sequential improvements in year over year active customer growth <unk>.
Starting in Q3 of 2024, we will no longer be comping customer growth off a period that included significant marketing spend pullbacks given we report this metric on a trailing 12 month basis, we anticipate seeing this metric continue to inflect upward as we move past the 26% pullback in marketing spend we observed.
H one of 2023.
As mentioned on our last two earnings calls one other factor that's impacting our active customer metric is that in the second half of 2022, we added new functionality to make it easier for multiple members of the household to transact with us under a single customer account.
As a reminder, we define active customers based on unique email addresses which is more reflective of active households since.
Steve: As Dave mentioned, in 2023, our stores that were open 12 months or more generated approximately $2.1 million in revenue on average, with full wall margins in line with our target of 35%. From a channel mix perspective, for the fourth quarter, e-commerce represented 33% of our overall business, in line with our pre-pandemic expectations. This compares to 37% in Q4 2022 and 34% in Q4 2019. From a customer perspective, we finished 2023 with 2.33 million active customer accounts, which represents an increase of two and a half percent versus last year. Over the same time period, we dropped marketing spend by 7% as we rebalanced marketing to the low teens as a percent of revenue.
Since implementing these new features we've observed increases in multi personal account purchasing and we wanted to provide visibility into the number of unique individuals we actually serve.
In Q4 2022, we served an additional approximately 80000 individuals and in Q4 2023 and additional approximately 120000 individuals within these multi user customer accounts.
This translates to four 2% growth at the individual level on a trailing 12 month basis.
We continue to see strength in average revenue per customer of $287 in Q4 up nine 3% year over year and the comparable average revenue per individual customer of $273 up seven 5% year over year.
Steve: Since anniversary marketing spend pullbacks in Q2 of last year, we are pleased to see sequential improvements in year-over-year active customer growth. Starting in Q3 of 2024, we will no longer be comping customer growth off a period that included significant marketing spend pullbacks. Given we report this metric on a trailing 12-month basis, we anticipate seeing this metric continue to inflect upward as we move past the 26% pullback in marketing spend we observed in H1 of 2023. As mentioned on our last two earnings calls, one other factor that's impacting our active customer metric is that in the second half of 2022, we added new functionality to make it easier for multiple members of a household to transact with us under As a reminder, we define active customers based on unique email addresses, which is more reflective of active households.
This was driven by a few factors, including an increase in progressive as a percentage of our business mix and continued ramping of both contact lens and eye exam sales.
Moving onto 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 optometry salaries store rent and depreciation of store build outs.
Our gross margin also includes stock based compensation expenses 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 54% compared to 55, 2% in the year ago period.
Full year adjusted gross margin was 54, 7% compared to 57, 2% in 2022.
There are a number of drivers of this deleverage in gross margin that I'll walk through the.
The primary driver of the decrease in gross margin was the continued growth in contact lenses from seven 7% in Q4 2022 to nine 5% in Q4, 2023 and from seven 2% and full year 2022 to eight 6% and full year 2023, as a percentage of our.
Steve: Since implementing these new features, we've observed increases in multi-person account purchasing, and we wanted to provide visibility into the number of unique individuals we actually serve. In Q4 2022, we served an additional approximately 80,000 individuals, and in Q4 2023, an additional approximately 120,000 individuals within these multi-user customer accounts. This translates to 4.2% growth at the individual level on a trailing 12-month basis. We continue to see strength in average revenue per customer of $287 in Q4, up 9.3% year over year, and the comparable average revenue per individual customer of $273, up 7.5% year over year. This was driven by a few factors, including an increase in progressives as a percentage of our business mix and continued growth of both contact lens and eye exam sales.
Total business.
Expanding our contacts offering as a core part of scaling our holistic vision care offering and a key driver of increasing average revenue per customer while.
While contact lenses have a lower gross margin percent versus our other product categories. They are accretive to gross margin dollars given their higher purchase frequency and subscription like purchase cycle.
Contact lenses represent a $12 billion market and account for almost 20% of the optical market.
Next we saw year over year deleverage in gross margin in two areas, which represent the more fixed portion of our cost of goods.
Steve: Moving 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, optometrist salaries, store rent, and the depreciation of the store build-out. Our gross margin also includes stock-based compensation expenses 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 54% compared to 55.2% in the year-ago period. Full year adjusted gross margin was 54.7% compared to 57.2% in 2022. There are a number of drivers of fee leverage and gross margin that I'll walk through.
These six elements of our cost of goods stack, our retail occupancy in optometry salaries, which generally remain the same regardless of revenue.
The first is from growing our store base 18, 5% over the course of 2023, which naturally leads to an increase in store rent and depreciation from store build outs.
Second is from an increase in overall optometry salaries as we hired optometrists for our new stores.
As of the end of 2023, we operated with a 150 stores, where we engage directly with an optometrist and therefore recognized both revenue from exams and expense from optometrists salaries.
150 stores compared to 114 stores at the end of 2022.
We expect that our investment in eye exam capabilities in store will benefit us in the long term as it gives us greater control over the customer experience enables us to recognise exam revenue and results in higher product sales conversion and gross margin and non exam stores.
Steve: The primary driver of the decrease in gross margin was the continued growth in contact lenses from 7.7% in Q4 2022 to 9.5% in Q4 2023 and from 7.2% in full year 2022 to 8.6% in full year 2023 as a percentage of our total business. Expanding our contact lens 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 percent versus our other product categories, they are accretive to gross margin dollars given their higher purchase frequency and subscription-like purchase cycle. Contact lenses represent a $12 billion market and account for almost 20% of the optical market.
Offsetting a portion of these dilutive factors are a few accretive tailwind to margin.
We continue to scale, our progressive business, which includes our highest price and highest margin products.
Secondly, we continue to scale the portion of prescription glasses orders that we in source at our two owned optical labs in New York and Nevada.
As discussed there are many benefits we see from in sourcing orders at our labs, including higher NPS lower refund rates faster turnaround time and improved gross margin.
Shifting gears to SG&A.
As a reminder, SG&A for our business includes three main components salary expense for our headquarters customer experience and retail employees.
Marketing spend including our home trial and program.
In general corporate overhead expenses adjusted.
Adjusted SG&A, excluding noncash costs like stock based compensation expense.
Adjusted SG&A in the fourth quarter came in at $91 4 million or <unk> 56, 4% of revenue.
Steve: Next, we saw year-over-year deleverage and gross margin in two areas which represent the more fixed portion of our cost of goods. These fixed elements of our cost of goods stack are retail occupancy and optometrist salaries, which generally remain the same regardless of revenue. The first is from growing our store base 18.5% over the course of 2023, which naturally leads to an increase in store rent and depreciation from store build out. The second is from an increase in overall optometry salaries as we hire optometrists for our new stores. As of the end of 2023, we operated with 150 stores where we engaged directly with an optometrist and therefore recognized both revenue from exams and expense from optometrist salaries. These 150 stores compared to 114 stores at the end of 2022. We expect that our investment in iExam capabilities in-store will benefit us in the long term as it gives us greater control over the customer experience, enables us to recognize exam revenue, and results in higher product sales, conversion, and gross margin than non-exam stores.
This compares to Q4 2022, adjusted SG&A of $81 5 million or 55, 6% of revenue the.
The primary sources of deleverage in SG&A, where an increase in media spend as well as labor associated with our store expansion, which were partially offset by leverage in general corporate overhead expenses.
Marketing spend for the quarter came in at $20 3 million or 12, 5% of revenue.
This is up from $17 6 million and 12% of revenue in the same period last year.
In response to strong demand at the end of December we Opportunistically increased customer acquisition spend which has contributed to positive momentum we're seeing in Q1.
For the full year on an adjusted basis SG&A of $358 6 million was up just two 9% year over year as.
As a percentage of net revenue adjusted SG&A was at 53, 5% versus 58, 3% of revenue in 2022, representing leverage of 470 basis points year over year.
Turning now to adjusted EBITDA.
In the fourth quarter, we generated adjusted EBITDA of $9 4 million, representing an adjusted EBITDA margin of five 8%, which compares to adjusted EBITDA of $8 6 million or five 8% of revenue in the year ago period.
Steve: Offsetting a portion of these dilutive factors are a few accretive tailwinds to margin. First, we continue to scale our progressive business, which includes our highest price and highest margin product. Secondly, we continue to scale the portion of prescription glasses orders that we insource at our two owned optical labs in New York and Nevada. As discussed, there are many benefits we see from insourcing orders at our labs, including higher NPS, lower refund rates, faster turnaround time, and improved gross margin.
For the full year 2023, we generated adjusted EBITDA of $52 4 million, representing an adjusted EBITDA margin of seven 8%, which compares to adjusted EBITDA of $27 2 million or four 5% of revenue for the full year 2022.
This represents margin improvement of approximately 330 basis points, a meaningful increase on an annual basis.
Steve: Shifting gears to SG&A. As a reminder, SG&A for our business includes three main components, salaries spent on our headquarters, customer experience, and retail employees, marketing spend, including our home try-on program, and general corporate overhead expenses. Adjusted SG&A excludes non-cash costs like stock-based compensation.
Our adjusted EBITDA margin was partially impacted by a moderate increase in media spend in December in response to strong customer demand. That's continued into Q1 of this year.
Turning now to our balance sheet, we were free cash flow positive in 2023 and ended with a strong balance sheet position, reflecting approximately $217 million in cash, which we will continue to deploy deliberately to support our growth and operations.
Steve: Adjusted SG&A in the fourth quarter came in at $91.4 million, or 56.4% of revenue. This compares to Q4 2022 adjusted SG&A of $81.5 million, or 55.6% of revenue. The primary sources of de-leverage in SG&A were an increase in media spend, as well as labor associated with our store expansion, which were partially offset by leverage in general corporate overhead expenses. Marketing spend for the quarter came in at $20.3 million, or 12.5% of revenue.
We also have a new upsized credit facility of $120 million up from $100 million that we can increase to $175 million.
Turning to 2024 before I get into the specifics of our outlook I want to point out that we expect the quarterly cadence of our results to look similar to 2023 with Q1, our most profitable quarter in Q4, our least profitable quarter as we spend into holiday and FSA demand.
The one difference year over year relates to the profitability between Q2 to Q3 in 2024, we expect Q3 to be more profitable than Q2, given the outsized impact last year's brand campaign spend had on the third quarter.
Steve: This is up from $17.6 million and 12% of revenue in the same period last year. In response to strong demand at the end of December, we opportunistically increased customer acquisition spend, which has contributed to the positive momentum we're seeing in Q1. For the full year, on an adjusted basis, SG&A of $358.6 million was up just 2.9% year-over-year.
Now to guidance, while we are encouraged by our momentum at the start of this year, we still are maintaining a conservative stance on guiding our business given the broader macroeconomic environment.
Steve: As a percentage of net revenue, adjusted SG&A was at 53.5% versus 58.3% of revenue in 2022, representing leverage of 470 basis points year-over-year. Turning now to Adjusted DBDA. In the fourth quarter, we generated adjusted EBITDA of $9.4 million, representing an adjusted EBITDA margin of 5.8%, which compares to adjusted EBITDA of $8.6 million, or 5.8% of revenue in the year-ago period. For the full year 2023, we generated adjusted EBITDA of $52.4 million, representing an adjusted EBITDA margin of 7.8%, which compares to adjusted EBITDA of $27.2 million, or 4.5% This represents a margin improvement of approximately 330 basis points, a meaningful increase on an annual basis. Our just-to-leave-at-down margin was partially impacted by a moderate increase in media spend in December in response to strong customer demand that's continued into Q1 of this year.
For the full year 2024, we're guiding to the following <unk>.
Revenue of $748 million to $758 million, representing approximately 12% to 13% year over year growth.
Adjusted EBITDA of $67 million, which equates to an eight 9% adjusted EBITDA margin at the midpoint of our revenue range.
Gross margin in the mid fifties as a percent of revenue.
40, new store openings.
Looking at our channels our revenue guidance at both the low and high end is based on our plan to open 40, new stores in 2024 with an opening cadence similar to 2023.
We're guiding gross margin to remain stable in the mid fifties as a percent of revenue consistent with last year. We plan to continue to drive growth from both contacts and eye exams and offset the dilutive impact of these newer offerings by continuing to scale, our glasses business and our progressive business in particular as well as.
Efficiencies achieved through our in house optical labs.
We also expect to see lower year over year growth from some of the more fixed components of our Cogs stack, including optometrist salaries and store rent as the pace of dollar growth of these expense lines will naturally slow as we keep new store openings consistent at 40, new stores per year and as we continue to see utilization of eye exam.
Steve: Turning now to our balance sheet, we were free cash flow positive in 2023 and ended with a strong balance sheet position reflecting approximately $217 million in cash, which we will continue to deploy deliberately to support our growth and operations. We also have a new sized credit facility of $120 million, up from $100 million that we can increase to $175 million.
<unk> ramp and mature.
For 2024, we plan to see marketing remain in the low teens as a percent of revenue and we will continue to maintain a disciplined approach to operating expenses, which we expect will be reflected in SG&A continuing to drop as a percentage of revenue.
We remain committed to expanding our adjusted EBITDA margin by approximately 100 basis points. This year at the midpoint of our revenue guidance, which equates to $67 million and we plan to preserve flexibility to either allow incremental revenue to flow through to EBITDA or to reinvest in the business including into customer.
Steve: Turning to 2024, before I get into the specifics of our outlook, I want to point out that we expect the quarterly cadence of our results to look similar to 2023, with Q1 being our most profitable quarter and Q4 our least profitable quarter as we spend on the holiday and FSA. The one difference year-over-year relates to the profitability between Q2 and Q3. In 2024, we expect Q3 to be more profitable than Q2, given the outsized impact last year's brand campaign spend had on the third quarter. Now to guidance.
Acquisition.
Finally, with respect to our outlook for 2024, we are forecasting stock based compensation as a percentage of net revenue to be approximately 6% compared with 10, 5% in 2023.
Talk based compensation for both years is above our long term forecast as a result of the multi year equity grants to our co Ceos in 2021.
Steve: While we are encouraged by our momentum at the start of this year, we still are maintaining a conservative stance on guiding our business given the broader macroeconomic environment. For the full year 2024, we're guiding to revenue of $748 to $758 million, representing approximately 12 to 13% year-over-year growth. Adjusted EBITDA of $67 million, which equates to an 8.9% adjusted EBITDA margin at the midpoint of our revenue range, and gross margin in the mid-50s as a percent of revenue. 40 News Store
We still anticipate stock based compensation to normalize in the 2% to 4% range as a percent of revenue next year.
For Q1 2024, we're guiding to the following revenue between $195 5 million and $197 million, which represents growth of 13, 7% to 14, 6% year over year.
This represents sequential topline growth of approximately 21% to 22% from Q4 2023 for Q1 2024.
Steve: Looking at our channels, our revenue guidance at both the low and high end is based on our plan to open 40 new stores in 2024 with an opening cadence similar to 2023, and gross margin to remain stable in the mid-50s as a percent of revenue consistent with last year. We plan to continue to drive growth for both contacts and eye exams and offset the dilutive impact of these newer offerings by continuing to scale our glasses business and our progressives business, in particular, as well as efficiencies achieved through our in-house optical lab. We also expect to see lower year-over-year growth from some of the more fixed components of our COG stack, including optometrist salaries and store rent, as the pace of dollar growth of these expense lines will naturally slow as we keep new store openings consistent at 40 new stores per year and as we continue to see utilization of iExams ramp and mature.
Through February we've observed 106% productivity in our retail stores on a trailing 28 day basis as compared to 2023.
From a bottomline perspective in Q1 2024, we're guiding to adjusted EBITDA of $19 5 million, representing a margin of approximately 10% at the midpoint of our revenue guidance.
Thank you again for joining us. This morning, we believe are unmatched value proposition our ability to innovate our multichannel approach and our strategic investments in both our brand and holistic vision care offering position us for long term sustainable growth and margin expansion with that Neil Dave and I are pleased to take.
Your questions operator, please open the line for Q&A.
Thank you very much ladies and gentlemen, if you would like to ask a question. Please press star.
Followed by one on the telephone keypad now.
Steve: For 2024, we plan to see marketing remain in the low teens as a percent of revenue, and we will continue to maintain a disciplined approach to operating expenses, which we expect will be reflected in SG&A continuing to drop as a percentage of revenue. We remain committed to expanding our adjusted EBITDA margin by approximately 100 basis points this year at the midpoint of our revenue guidance, which equates to $67 million, and we plan to preserve flexibility to either allow incremental revenue to flow through to EBITDA or to reinvest in the business, including customer acquisition. Finally, with respect to our outlook for 2024, we are forecasting stock-based compensation as a percentage of net revenue to be approximately 6% compared with 10.5% in 2023. Stock-based compensation for both years is above our long-term forecast as a result of the multi-year equity grants to our co-CEOs in 2021. We still anticipate stock-based compensation to normalize in the 2-4% range as a percent of revenue next year. For Q1 2024, we're guiding to the following.
Changed your mind. Please press star followed by two to withdraw question when preparing to ask a question. Please ensure your phone is on mute it locally.
We now have our first question from Mark our swagger from Baird. Please go ahead.
Great. Good morning, everyone. Thanks for taking the question.
First for neither day I'm, hoping you could give us a little bit more perspective.
The eye care category backdrop, where do you think we are in the replacement cycle.
You said youre not anticipating any major inflection this year, but maybe you're seeing some green shoots given your commentary on the December period, and the January activity. So just.
Any more color there would be great.
Great.
Thanks Mark.
We're encouraged by some of the demand signals that we're seeing including at year end and so our year to date.
Other than when we had to close many of our stores due to extreme weather in January.
We have yet to see a flood of pent up demand and over the last couple of years, we've seen periods of fluctuating demand.
Steve: Revenue between $195.5 million and $197 million, which represents growth of 13.7% to 14.6% year over year. This represents sequential top line growth of approximately 21 to 22% from Q4 2023 to Q1 2024. Through February, we've observed 106% productivity in our retail stores on a trailing 28-day basis as compared to 2023. From a bottom-line perspective, in Q1 2024, we're guiding to adjusted EBITDA of $19.5 million, representing a margin of approximately 10% at the midpoint of our revenue guidance. Thank you again for joining us this morning.
So we continue to guide and plan conservatively, while while remaining and positioned to capture increased demand as it materializes.
And as mentioned we are.
We're seeing strong efficiency in our marketing spend and plan to do.
To deploy dollars.
As we see opportunity.
Great.
Thank you and then maybe just a follow up as we think about kind of the medium term growth algorithm here.
Real estate.
Planning to open 40 stores this year.
At the right pace, we should be thinking about medium term or any opportunity to accelerate and then guidance. This year 100 basis points roughly of EBITDA margin expansion I know previously you've spoken to a target of one to 200 per year.
Just kind of any change to how we should think about that.
That growth and margin algorithm. Thank you.
Okay. Thanks.
Thanks, Mark this is Neil.
Operator: We believe our unmatched value proposition, our ability to innovate, our multi-channel approach, and our strategic investments in both our brand and holistic vision care offering position us for long-term sustainable growth and margin expansion. With that, Neil, Dave, and I are pleased to take your questions. Operator, please open the line for Q&A. Thank you very much, ladies and gentlemen. If you'd like to ask a question, please press star followed by one on the telephone keypad now. If you change your mind, please press star followed by two to withdraw your question. When preparing to ask your question, please ensure that your phone is unmuted locally.
40 stores is a good algorithm for now.
We're finding that that is a nice steady structure, where we continue to open up stores.
On time on budget and continued to see.
Strong paybacks.
Strong four wall margin.
So.
We've been through.
Planning for that.
Level of store investment going forward.
And from an EBITDA margin perspective, I think the range that we've given for the foreseeable future is to drive adjusted EBITDA margin improvement of approximately 100 to 200 basis points each year and so we're targeting roughly 110 basis points of adjusted EBITDA margin improvement.
Mark R. Altschwager: We now have our first question from Mark Altschwager from Baird. Please go ahead. Good morning, everyone.
This year from seven 8% to eight 9% the majority of that improvement will really be driven within SG&A.
Dave: Thanks for taking the question. Maybe first for Neeler, Dave, I'm hoping you could give us a little bit more perspective on the eye care category backdrop, where you think we are in the replacement cycle. I know you said you're not anticipating any major inflections this year, but maybe you're seeing some green shoots given your commentary on the December period and the January activity, so just any more color there would be great.
Within corporate expenses and within some of the other expenses associated with servicing the customer.
Retail salaries and customer service salaries, given we're projecting gross margin will stabilize in the mid <unk> similar to the guidance that we gave last year for gross margin.
Dave: Great. Thanks, Mark. I'd say we're encouraged by some of the demand signals that we're seeing, including at year-end and so far year-to-date, other than when we had to close many of our stores due to extreme weather in January. However, we've yet to see a flood of pent-up demand, and over the last couple years, we've seen periods of fluctuating demand. So we continue to guide and plan conservatively while remaining in position to capture increased demand as it materializes. And, as mentioned, we're seeing strong efficiency in our marketing spend and plan to diversify, to deploy dollars as we see opportunity. Great, thank you.
Thank you best of luck this year.
Yeah.
Thank you very much we are now have our next question from Edward <unk> from Piper Sandler. Please go ahead.
Hey, Good morning, guys. A couple of quick ones for me first I know you guys have been adding more premium frame mixed material, we would love to understand kind of what the uptake has been there and it doesn't give you a kind of the same lift and you get I think with progressive from a margin perspective for dollar perspective, and then also just a quick follow up on the <unk>.
Structuring charge I just wanted to make sure I think it was just a $1 million is that I think that kind of fell from the restructuring earlier in the year, but would love to understand that and kind of why it fell in the fourth quarter. Thanks.
Neil: And then maybe just a follow-up as we think about kind of the medium-term growth algorithm here. Real estate, you're planning to open 40 stores this year. Is that the right pace we should be thinking about in the medium term, or any opportunity to accelerate? And then guidance this year, 100 basis points roughly on EBITDA margin expansion. I know previously you've spoken to a target of one to 200 per year. So any kind of change to how we should think about that growth and margin algorithm? Thank you. Thanks, Mark. This is Neil.
Thanks, Ed.
First of all sort of tackle the question about our assortment plan too.
We have 20 collections. This year as you mentioned, we continue to introduce innovative.
Innovative designs and different materials and different lens options.
We have seen.
Our customers gravitate towards these and haven't seen any sort of price resistance.
We look at the market according to the vision counsel.
Neil: Forty stores is a good algorithm for now; we're finding that that is a nice steady structure where we continue to open up stores on time, on budget, and continue to see strong paybacks and strong four-wall margin. We've been planning for that level of SOAR investment going forward. And from the EBITDA margin perspective, I think the range that we've given for the foreseeable future is to drive an adjusted EBITDA margin improvement of approximately 100 to 200 basis points each year. And so we're targeting roughly 110 basis points of adjusted EBITDA margin improvement for this year from 7.8% to 8.9%. The majority of that improvement will really be driven within SG&A, within corporate expenses, and within some of the other expenses associated with servicing the customer, retail salaries, and customer service salaries, given we're projecting gross margin will stabilize in the mid-50s, similar to the guidance that we gave last year for gross margin. Thank you. Best of luck to you this year.
Average out of pocket spend for even those vision insurance customers is $203 right, which is higher than.
Our glasses ISP. So we also even have room to increase our glasses AFP and even four.
Out of network customers they'll still continue to save with US I just use that as an example of how we continue to provide exceptional value.
So as we've introduced higher price point items, we still work off of the algorithm of how can somebody pay a fraction of what it would cost elsewhere.
And that $1 million restructuring charge. It really is an aggregate of our reserves to cover various legal cases that we're in the process of dealing with are settling so it's a round number that we estimate will cover them all.
All.
All of those various cases.
Thank you.
Okay. Thank you very much we now have our next question from Mark Mahaney from Evercore. Please go ahead.
Steve: Thank you very much. We now have our next question from Edward Ruma from Piper Santler. Please go ahead. Hey, good morning, guys. A couple quick ones for me.
Okay two questions. Please.
Neil: First, I know you guys have been adding more premium frames. We'd love to understand, you know, kind of what the uptake has been there. Do they give you kind of the same lift as you get, I think, with progressives from a margin perspective or dollar perspective? And then also, just a quick follow-up on the restructuring charge. I just want to make sure that it was just a million. Does that kind of fell from the restructuring earlier in the year, but we'd love to understand that and kind of why it fell in the fourth quarter. Thanks, Ed.
Marketing spend our intensity seems to be pretty consistent in 24 versus 23, I know you talked about increasing your marketing spend I assume that means just in absolute dollars any change in your thinking on channels that may be more or less effective than what you did this last year or two and then secondly, your guidance. So you've got this kind of deal.
Celebrating growth in your guidance.
Your Q1 outlook is faster growth than your full year.
Guidance implies I don't think its a issue of tougher comps. So if you were able to hit your Q1 numbers why would growth decelerate as you go through the year. Thank you very much.
Neil: First of all, sort of tackle the question about our assortment. We'll plan to have 20 collections this year. As you mentioned, we continue to introduce, you know, innovative designs and different materials and different lens options. We have seen our customers gravitate towards these and haven't seen any sort of price resistance. You know, when we look at the market, according to the Vision Council, the average out-of-pocket spend for even those vision insurance customers is $203, right, which is higher than our glasses ASP.
Sure I'll start off with the marketing spend as a percent of revenue question.
Manning to keep marketing spend as a percent of revenue consistent in the low teens and that will naturally let us see marketing spend dollars comp up year over year nine.
<unk> $90 million at the high end of our guidance, assuming 12% of revenue, which is fairly consistent with where marketing spend landed for the full year here, but for us marketing spend in the low teens means somewhere between 11% to 13% to 12% would be.
Steve: So, we also even have room to increase our glasses ASP. And even for out-of-network customers, they'll still continue to save with us. So, I just use that as an example of how we continue to provide exceptional value. So, as we've introduced higher price point items, we still work off of the algorithm of how can somebody pay a fraction of what it would cost elsewhere. And that $1 million restructuring charge is really an aggregate of reserves to cover various legal cases that we're in the process of dealing with or settling. So it's a round number that we estimate will cover all of those various cases.
A safe number to use for now in terms of our guide we are.
Still projecting the business with some level of conservatism because we think it's the prudent thing to do in this macro environment we.
We are guiding to 11% to 13% for the full year, but we're seeing very positive trends in the business through Q1, so that gives us comfort.
Our guidance range that is appreciably higher than the full year guide. So we're guiding to 13, 7% to 14, 7% for the quarter.
And as the year progresses, we will hopefully look to revisit our full year outlook, but for now and we're guiding conservatively and field.
Steve: Thank you. Thank you very much. We now have our next question from Mark Mahaney from Evercore. Please go ahead. Okay, two questions, please.
Feel very confident with the numbers that we're putting out for Q1, which are a notch higher than the full year.
Okay. Thank you Steve.
Steve: The marketing spend or intensity seems to be pretty consistent at 24 versus 23. I know you talked about increasing your marketing spend, but I just assume that means just in absolute dollars.
And then as we just think about our marketing mix. We've been pleased by the returns that we've seen from our increased marketing investment and we'll continue to deploy dollars opportunistically.
Hum.
Steve: Any change in your thinking on channels that may be more or less effective than what you did in the last year or two? And then secondly, your guidance. So you've got this kind of decelerating growth in your guidance. You know, your Q1 outlook has faster growth than your full year guidance implies. I don't think it's an issue of tougher comps.
During sort of the periods of lower demand in the category.
<unk> sort of shift those out of our marketing towards paid search and towards <unk>.
Our television.
And then over the past year right, we'd start to redeploy dollars into paid social and streaming into influencer and create or marketing.
Steve: So if you're able to hit your Q1 numbers, why would growth decelerate as you go through the year? Thank you very much.
Good success, so youll see us continue to diversify and invest more in those channels, which we did vis vis <unk>.
Steve: I'll start off with the marketing spend as a percent of revenue question. We're planning to keep marketing spend as a percent of revenue consistent in the low teens, and that will naturally let us see marketing spend dollars go up year over year. Ninety million dollars at the high end of our guidance, assuming 12 percent of revenue, which is fairly consistent with where marketing spend landed for the full year here. But for us, marketing spend in the low teens means somewhere between 11 to 13 percent, so 12 percent would be a safe number to use for now. In terms of our guide, we are still projecting the business with some level of conservatism because we think it's the prudent thing to do in this macro environment.
2019 and prior.
Okay.
Thank you.
Thank you very much.
Our next question from Dana Telsey from Telsey Group. Please go ahead.
Hi, good morning, everyone.
You think about the gross margin component Steve.
Hudson takes especially as more eye exams are added and the benefit from attachment sales. How do you think about the buckets of expenses.
Growth for each of them as we go through 2024 is there any difference in cadences as we move through the year. Thank you.
Steve: We are guiding to 11 to 13 percent for the full year, but we are seeing very positive trends in the business through Q1, so that gives us comfort giving a guidance range that is appreciably higher than the full year guide. So we're guiding to 13.7 to 14.7 percent for the quarter, and as the year progresses, we'll hopefully look to revisit our full year outlook. But for now, we're guiding conservatively and feel very confident with the numbers that we're putting out for Q1, which are a notch higher than the full year. Okay, thank you, Steve.
Yeah.
Thanks for the question Dana we plan to see consistency in growth from our glasses category.
I think we've observed in 2023, we saw a moderate reacceleration in growth or glasses, while we continued to scale, both contact and eye exam significantly.
We plan.
For a more moderate growth, but still strong growth within contact lenses and eye exams as we scale. These still new product categories, while we maintain a very consistent glass's growth profile and as we scale progressive and.
Dave: And then as we just think about our marketing mix, we've been pleased by the returns that we've seen from our increased marketing investment, and we'll continue to deploy dollars opportunistically. During periods of lower demand in the category, we did sort of shift a lot of our marketing towards paid search and towards linear TV. And then over the past year, right, we've started to redeploy dollars into paid social, into streaming, into influencer, and creator marketing with good success. So you'll see us continue to diversify and invest more in those channels, which we did, you know, vis-a-vis 2019 and prior. OK.
Precision progressives in particular, we think that the puts and takes of higher glasses margin will help to stabilize some of the deleverage that we've seen from contacts and eye exams and within the other elements of our cost of goods the more fixed components I E optometry salaries and store rent expense given we're open.
A consistent number of stores I E 40, new stores per year, we'll naturally see a slowdown in year over year dollar growth in eye Doctor salaries and store rent. So we'll see less deleverage from those categories. In addition, we're projecting for the first time since 2021 that E com will comp positive in the low single.
Steve: Thank you. Thank you very much. We will now take our next question from Dana Telsey from the Telsey Group. Please go ahead. Hi, good morning, everyone. As you think about the gross margin components, Steve, and the puts and takes, especially as more eye exams are added and the benefit from attachment sales, how do you think about the buckets of expenses and growth for each of them as we go through 2024? Is there any difference in cadence as we move through the year?
Digits, so that will no longer be a source of deleverage, which really accentuates the fixed cost nature of our Cogs stack as we calculate gross margin.
Thank you.
Thank you very much we now have our next question from Oliver Chen from TD Cowen. Please go ahead.
Hi, there this is Katie on for Oliver.
Just kind of on that nursing health.
Dana Lauren Telsey: Thank you. Yeah, thanks for the question, Dana. We plan to see consistency in growth from our glasses category, and as I think we've observed in 2023, we saw a moderate re-acceleration in growth for glasses while we continued to scale both contacts and eye exams significantly. We plan for more moderate growth but still strong growth within contact lenses and eye exams as we scale these still new product categories while we maintain a very consistent growth profile for glasses. And as we scale progressives and precision progressives in particular, we think that the puts and takes of higher glasses margin will help to stabilize some of the de-leverage that we've seen from contacts and eye exams. And within the other elements of our cost of goods, the more fixed components, i.e.
Then what is the long term revenue opportunity.
The number of people that are that are in network for worthy Parker and then I've got a follow up as well. Thank you.
Okay.
Yeah.
Yes.
We're excited to announce this new partnership with <unk> health.
To add $50 million incremental lives later this year and overall, we've seen a lot of strength from our insurance business.
Increasing utilization.
In part.
Stemming from some of the tools that we've built like our universal eligibility checks and education for consumers on how they can use their insurance benefits with us and so.
They are existing insurance business has been a source of strength.
Steve: Optometrist salaries and store rent expense. Given we're opening a consistent number of stores, i.e., 40 new stores per year, we'll naturally see a slowdown in year-over-year dollar growth in eye doctor salaries and store rent, so we'll see less de-leverage from those categories. In addition, we're projecting for the first time since 2021 that e-commerce will come positive in the low single digits, so that will no longer be a source of de-leverage, which really accentuates the fixed cost nature of our COGS stack as we calculate gross margin. Thank you. Thank you very much. We now have our next question from Oliver Chen of TD Cohen. Please go ahead. Hi there, this is Katie on behalf of Oliver.
Strengthened.
And where.
<unk>.
Excited to it.
Nearly double the number of people who can use their in network benefits.
Right now we kind of Havent.
Modeled in the positive impact.
From those future lives and into our projections and guidance for the year the.
Our plan to update you.
And in the coming quarters.
Okay got it. Thank you so much and then my follow up is really around traffic and conversion during the quarter could you just talk a little bit about the cadence that you saw.
Dave: Just kind of on that person's health announcement, you know, what is the long-term revenue opportunity with doubling the number of people that are in network for Warby Parker, and then I've got a follow-up. Great. Yeah, we're very excited to announce this new partnership with Burson Health to add 15 million incremental lives later this year. And overall, we've seen a lot of strength from our insurance business due to increasing utilization, in part, stemming from some of the tools that we've built, like our universal eligibility check and education for consumers on how they can use their insurance benefits with us. And so, say our existing insurance business has been a source of strength, and we're excited to nearly double the number of people who can use their in-network benefits. Right now, we kind of haven't modeled the positive impact from those future lives into our projections and guidance for the year, but plan to update you all in the coming quarter. Okay, I got it.
Sure so.
We're excited about sort of the growth and the momentum that we're seeing in sort of Q1. Today then we can see some of that in our Q1 guide.
But.
We are seeing.
Liberate customer.
We saw some of the return to normalcy, a little bit during the FSA period, and we continue to see those.
Customers are coming into our stores mirror with the brand.
Excited about the.
Our assortment that we have and taking more and more advantage of our sort of holistic vision care offering including exams and contacts.
So we continue to see strength in conversion.
And then at least here in Q1 have seen.
Some improvements to traffic.
Thank you.
Thank you very much we now have our next question from Merck Roche from Goldman Sachs. Please go ahead.
Dave: Thank you so much. And then my follow-up is really around traffic and conversion during the quarter. Could you just talk a little bit about the cadence that you saw?
Good morning, and thank you for taking our question I was hoping you could elaborate on your priorities for driving accelerated topline growth versus optimizing efficiency on marketing spend and other investments.
Dave: Sure. So we're excited about sort of the growth and the momentum that we're seeing in sort of Q1 so far, and you can see some of that in our Q1 guide. But we are seeing deliberate customers. We saw some of the return to normalcy a little bit during the FSA period, and we continue to see those customers sort of coming into our stores, familiar with the brand, excited about the assortment that we have, and taking more and more advantage of our sort of holistic vision care offering, including exams and contacts. So we continue to see strength and conversion and, at least here in Q1, we have seen some improvements in traffic. Thank you. Thank you very much. We now have our next question from Brooke Roach from Goldman Sachs. Please go ahead, morning, and thank you for taking our question.
We will go ahead, what factors are underpinning your decision to reinvest some of those top line outperformance quarters into additional investments, including marketing versus flowing that through to the bottom line. Thank you.
Yeah.
So as we think about our growth priorities.
Alright.
One is opening up the stores that we know are our higher highly productive. The second is deploying marketing dollars more efficiency.
Deploying marketing dollars.
Dave: I was hoping you could elaborate on your priorities for driving accelerated top-line growth versus optimizing efficiency on marketing spend and other investments. As you look ahead, what factors are underpinning your decision to reinvest some of those top-line outperformance quarters into additional investments, including marketing, versus flowing that through to the bottom line? Thank you.
Efficiently.
And we're comping off of a period last year, where we cut marketing pretty substantially.
And as we've reinvested in marketing.
We're seeing them.
Good efficiency and as we continue to see.
Dave: So, as we think about our growth priorities, right, one is opening up these stores that we know are highly productive. The second is deploying marketing dollars more efficiently. And we're coming off of a period last year where we cut marketing pretty substantially, and as we've reinvested in marketing, we're seeing good efficiency. And as we continue to see very consistent repeat purchase behavior and even expanding customer lifetime value, we recognize that every new customer is a good investment.
Very consistent repeat purchase behavior, and even expanding customer lifetime value we recognize that.
Every new customer.
The good investment so you'll see us invest more in marketing this year and have that flywheel sort of going as we sort of reinvigorate growth and start to return to a growth profile.
That we had pre pandemic.
Dave: So you'll see us invest more in marketing this year and have that flywheel sort of going as we sort of reinvigorate growth and start to return to a growth profile that we had pre-pandemic. So you'll continue to see us experiment more from a marketing perspective. You'll continue to see us deploy across these multiple channels. The advantage to the structure, the marketing sort of structure that we've built is that those dollars can be increased or decreased on a very short-term basis, so we're able to respond very dynamically to market conditions.
So youll continue to see us.
Jeremy more from marketing perspective, you'll continue to see us deploy.
Boy.
Across these multiple channels.
The advantage to the structure of the marketing.
Structure that we've built is that those dollar.
Can be sort of.
Increase or decrease in a very short term basis. So we're able to respond very dynamically to market conditions.
And we've also found just.
Dave: And we've also found just incremental margins through higher growth, right? Especially as we look at our gross margins and the fixed components of those, including store rent and optometry salaries. And as we just look at expanding our adjusted EBITDA margins, right? That's really going to come from leverage over operating expenses, in particular corporate expenses. So we think that investments in marketing will continue to drive margin expansion. Great, thanks.
Incremental margins through higher growth rate, especially as we look at our gross margins in the fixed components of those including store rent and optometry salaries.
And as we just look at expanding.
Our adjusted EBITDA margin rate, that's really going to come from leverage over operating expenses in particular corporate expenses. So.
We think that investments in marketing will continue to drive margin expansion.
Great. Thanks, and just a quick follow up are you seeing any notable differences between your urban and suburban market locations, whether that's customer acquisition retention our marketing efficiency.
Dave: A quick follow-up, are you seeing any notable differences between your urban and suburban market locations? whether that's customer acquisition, retention, or marketing. We're starting to see the gap narrow from what we saw, for example, a couple of years ago. That being said, we are investing more in suburban areas. And in suburban areas, right?
Okay.
We're starting to see the gap narrow from what we saw for example, a couple of years ago that being said.
We are investing more in suburban areas.
And in suburban areas right, we tend to see more families. We tend to see.
Dave: We tend to see more families. We tend to see higher progressive penetration. I should also note that our new stores have exam capabilities. So the exam capabilities are also driving higher AOV, right? We have more exam sales, more contact sales, more progressive penetration. So there's a little noise in that.
Higher progressive penetration.
It should also note that our new stores have exam ability. So the exam capabilities are also driving.
Higher fee right.
Right.
The more exam sales more contacts sales more progressive penetration, so there's a little noise in that but.
Dave: But the good news is that we're seeing strength both in suburban and urban locations. Thank you so much. I'll pass it on.
Good news is that we're seeing strength, both in suburban and urban location.
Thanks, So much I'll pass it on.
Okay.
Dave: Thank you very much. We will now take the last question from Alex Stradin from Morgan Stanley. Please go ahead.
Thank you very much we will now take the last question from Alex <unk> from Morgan Stanley. Please go ahead.
Steve: Perfect. Thanks for taking the question. I wanted to talk a little bit about the store and the e-com opportunity going forward. I think you said stores were doing about $2 million a box or so. I'm just wondering, where do you think that goes over the long term?
Okay.
Perfect. Thanks for taking the question I wanted to talk a little bit about the store and the E com opportunity going forward. I think you said stores are doing about $2 million a box or so I'm, just wondering where do you think that goes over over the long term and then with E. Comm returning to growth. This year I think that's what you said.
Steve: And then, with e-com returning to growth this year, I think that's what you said, how do you think about the right size of that business over time? Thanks a lot.
How do you think about the right size of that business over time, thanks a lot.
So.
Steve: For stores, right, we've seen a lot of consistency, and we continue to see sort of growth. So we plan to continue to see expansion from that, two million, 2.1 million going forward. Again, we have these tailwinds at our backs from exams, from contacts, from progressive penetration, and now also from insurance and nearly doubling the number of in-network lives. And we know that those customers tend to spend more than non-insurance customers, as we think about our e-commerce business, right?
Four stores right, we've seen a lot of consistency and we continue to see sort of growth. So we plan to continue to see expansion from that.
$2 million to 1 million.
Millions going going forward again, we have these tailwind at our back from exams from contacts from progressive penetration and now also from.
Insurance and nearly doubling the number of in network lives and we know that those customers tend to spend more than non insurance customers.
As we.
Think about our e-commerce business right that we'll be comping positive going forward and no longer sort of be a drain.
Steve: That will be a comping positive going forward and no longer sort of be a drain from a top line perspective, but also from a bottom line perspective, as we've seen growth normalized there from the outsized growth that we saw during the pandemic. The category will always have lower e-commerce penetration than many other categories because of the prescription nature of the product because of the infrequent purchase process because of just the unique challenges of buying glasses. But we'll continue to be a leader in driving overall penetration in the category and continue to roll out new products and features, whether it was, you know, the first of its kind true-to-scale virtual try-on that we have that we continue to deploy, or whether it's our virtual vision tab that will just continue to make it easier and easier to shop online.
From a topline perspective, but also from a bottom line perspective, as we've seen growth normalize there from the outsized growth that we saw during the pandemic.
The category.
We'll always have a lower e-commerce penetration in many other categories because of the prescription nature because of the infrequent purchase process because of <unk>.
The unique challenges.
Buying glasses.
But we'll continue to be a leader in driving overall penetration in the category and continue to rollout new products and features whether it was the first of its kind.
<unk> scale virtual try on that we have that we continue to deploy whether its our virtual vision tap that will just continue to make it easier and easier to shop online and at the end of the day.
Steve: You know, at the end of the day, we view our business in an omnichannel manner, and we see folks go back and forth between channels. So, for example, you may see increasingly more repeat purchase behavior online from folks that may have gone to the stores to start, in particular, right, we see that a lot with contacts, but we also see it with glasses as well.
We view our business in an omnichannel manner, and we see folks go back and forth between channels. So you may see.
Increasingly more repeat purchase behavior online from folks that may have gone in the stores.
Start in particular, right, we see that a lot with contacts, but we also see it with.
With glasses as well.
Steve: So, you'll continue to see some sort of growth in e-commerce. Thanks a lot. Good luck. Thank you very much. This is the end of the Q&A session. Ladies and gentlemen, this concludes today's call. Thank you for joining us. You may now disconnect your line. Moravian College
So.
Youll continue to see sort of growth in e-commerce.
Thanks, a lot good luck.
Okay.
Thank you very much is at the end of the Q&A session, Ladies and gentlemen. This concludes today's call. Thank you for joining you may now disconnect your lines.
Yeah.
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Okay.
Yes.
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Yes.
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