Q2 2024 Warby Parker Inc Earnings Call and Business Update

August 8, 2024

Speaker Change: Hello everyone and welcome to the Warby Parker second quarter 2024 earnings call.

Unknown Attendee: He's cool.

Seb: My name is Seb, and I will be the operator for your call today. If you would like to ask a question during the Q&A session, please press star one on your telephone keypad. If you would like to withdraw your question, please press star two.

Seb: My name is Seb, and I will be the operator for your call today. If you would like to ask a question during the Q&A session, please press star 1 on your telephone keypad. If you would like to withdraw your question, please press star 2.

Seb: My name is Seb and I will be the operator for your call today. If you would like to ask a question during the Q&A session, please press star 1 on your telephone keypad. If you would like to withdraw your question, please press star 2.

Jaclyn Berkley: I will now hand the floor over to Jaclyn Berkley to begin. Please go ahead.

Jaclyn 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.

Jaclyn Berkley: Thank you and good morning, everyone.

Seb: I will now hand the floor over to Jaclyn Berkley to begin. Please go ahead. 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.

Jaclyn Berkley: Here with me today are Neil Blumenthal and Dave Gilboa, 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. Actual results may differ materially from those expressed or implied as results 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.

Jaclyn Berkley: For more information about some of these risks, please review the company's SEC filings, including the section titled Risk Factors in the company's latest annual report on Form 10-K. These forward-looking statements are based on information as of August 8, 2024, and, except as required by law, we assume no obligation to publicly update or revise these 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.

Speaker Change: 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.

Speaker Change: Actual results may differ materially from those expressed or implied as a result of various risks and uncertainties.

Speaker Change: 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 .

Jaclyn Berkley: These forward-looking statements are based on information as of August 8, 2024, and, except as required by law, we assume no obligations 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.

Speaker Change: These forward-looking statements are based on information as of August 8, 2024, and acceptance required by law, we assume no obligation to publicly update or revise our forward-looking statements.

Speaker Change: 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.

Jaclyn Berkley: A reconciliation of our non-GAAP measures to the most directly comparable US GAAP measures can be found in this morning's press release and our slide deck available on our IR website.

Jaclyn Berkley: And with that, I'll pass it over to Dave to kick us off.

Speaker Change: 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.

David Gilboa: And with that, I'll pass it over to Dave to kick us off. Thank you, Jacqueline, and good morning, everyone. We're pleased to share that our team executed another strong quarter in Q2, delivering net revenue and adjusted evita ahead of the high end of our guidance, while making strong progress against our key long-term strategic initiatives. On a year-rear basis, we grew net revenue 13.3% to 188.2 million in improved gross margin, 140 basis points to approximately 56%. We also grew adjusted evita nearly 40% to 19.6 million, representing a 10.4% margin, and generated $14 million of free cash flow in the quarter.

Dave Gilboa: Thank you, Jaclyn, and good morning everyone. We're pleased to share that our team executed another strong quarter in Q2, delivering net revenue and adjusted EBITDA ahead of the high end of our guidance while making strong progress against our key long-term strategic initiatives. On a year-over-year basis, we grew net revenue 13.3% to $188.2 million and improved gross margin 140 basis points to approximately 56%. We also grew Adjusted EBITDA nearly 40% to $19.6 million, representing a 10.4% margin, and generated $14 million of free cash flow in the quarter. When we introduced our 2024 plan, we called out three notable differences that we expected this year relative to the previous couple of years.

Dave Gilboa: Thank you Jaclyn, and good morning everyone. We're pleased to share that our team executed another strong quarter in Q2, delivering net revenue and adjusted EBITDA ahead of the high end of our guidance, while making strong progress against our key long-term strategic initiatives.

Dave Gilboa: On a year-over-year basis, we grew net revenue 13.3% to $188.2 million and improved gross margin 140 basis points to approximately 56%.

Dave Gilboa: We also grew Adjusted EBITDA nearly 40% to $19.6 million, representing a 10.4% margin, and generated $14 million of free cash flow in the quarter.

David Gilboa: When we introduced our 2024 plan, we called out three notable differences that we expected this year relative to the previous couple of years. The first was increased marketing spend to drive in acceleration and customer growth. The second was returning our e-commerce channel to positive growth. And the third was to significantly expand our insurance offering. Halfway through the year, we feel great about our progress against these goals and are happy to report our fourth consecutive quarter of improving active customer growth. Our highest quarterly e-commerce growth since Q1 of 2021 and progress on our insurance expansion, which we will speak to short.

Dave Gilboa: The first was increased marketing spend to drive acceleration and customer growth. The second was returning our e-commerce channel to positive growth, and the third was to significantly expand our insurance offering. Halfway through the year, we feel great about our progress against these goals and are happy to report our fourth consecutive quarter of improving active customer growth, our highest quarterly e-commerce growth since Q1 of 2021, and progress on our insurance expansion, which we will speak to shortly.

Dave Gilboa: When we introduced our 2024 plan, we called out three notable differences that we expected this year relative to the previous couple years.

Dave Gilboa: The first was increased marketing spend to drive an acceleration in customer growth. The second was returning our e-commerce channel to positive growth. And the third was to significantly expand our insurance offering.

Dave Gilboa: Halfway through the year, we feel great about our progress against these goals and are happy to report our fourth consecutive quarter of improving active customer growth, our highest quarterly e-commerce growth since Q1 of 2021, and progress on our insurance expansion, which we will speak to shortly.

David Gilboa: Emily. Amidst the challenging consumer and optical backdrop, our Q2 performance indicates we're continuing to take share in drive consumer demand. Importantly, our results also demonstrate our ongoing commitment to driving sustainable growth as we continue investing in customer acquisition and brand building while expanding both adjusted EBITDA and pre-cash flow.

Dave Gilboa: Amidst the challenging consumer and optical backdrop, our Q2 performance indicates we're continuing to take share and drive consumer demand. Importantly, our results also demonstrate our ongoing commitment to driving sustainable growth as we continue investing in customer acquisition and brand building while expanding both adjusted EBITDA and pre-cash flow. Based on our second quarter performance, we are raising our full-year guidance for both net revenue and adjusted EBITDA and now expect to deliver $72.5 million in adjusted EBITDA at the midpoint of our guidance, which represents 170 basis points of margin expansion. Before Steve provides more detail on that later in the call, Neil and I will review the key drivers of our Q2 results.

Dave Gilboa: Amidst the challenging consumer and optical backdrop, our Q2 performance indicates we're continuing to take share and drive consumer demand.

is cool.

Operator: My name is Seb, and I will be the operator for your call today. If you would like to ask a question during the Q&A session, please press star one on your telephone keypad. If you would like to withdraw your question, please press star two.

Dave Gilboa: Importantly, our results also demonstrate our ongoing commitment to driving sustainable growth as we continue investing in customer acquisition and brand building while expanding both adjusted EBITDA and pre-cash flow.

Jaclyn Berkley: I will now hand the floor over to Jaclyn Berkley to begin. Please go ahead. Thank you and good morning everyone.

David Gilboa: Based on our second quarter performance, we are raising our full-year guidance for both net revenue and adjusted EBITDA and now expect to deliver $72.5 million in adjusted EBITDA at the midpoint of our guidance, which represents 170 basis points of margin expansion. Before Steve provides more detail on that later in the call, Neil and I will review the key drivers of our Q2 results. First, we continue to see positive momentum in our glasses business, with an acceleration and growth versus Q2 of last year. We attribute the improvement in glasses growth to many of our core strategic investments, including marketing, expanding our store fleet and our exam business, and our product innovation.

Jaclyn Berkley: There with me today are Neil Blumenthal and Dave Gilboa are co-founders and co-cedos alongside Steve Miller, Senior Vice President and Chief Financial Officer.

Dave Gilboa: Based on our second-quarter performance,

Dave Gilboa: We are raising our full year guidance for both net revenue and adjusted EBITDA and now expect to deliver $72.5 million in adjusted EBITDA at the midpoint of our guidance, which represents 170 basis points of margin expansion.

Jaclyn Berkley: 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. Actual results may differ materially from those expressed or implied as results of various risks and uncertainties. For more information about some of these risks, please review the company's SEC violence, including the section titled risk factors in the company's latest annual report on form 10k. These forward-looking statements are based on information as of August 8th, 2024, and except as required by law, we assume no obligations publicly update or revise our forward-looking statements.

Dave Gilboa: Before Steve provides more detail on that later in the call, Neil and I will review the key drivers of our Q2 results.

Dave Gilboa: First, we continue to see positive momentum in our glasses business with an acceleration in growth versus Q2 of last year. We attribute the improvement in glasses growth to many of our core strategic investments, including marketing, expanding our store fleet and our exam business, and our product innovation. Given that glasses are our highest-margin product, improved growth in glasses is also an important driver of gross margin expansion in the quarter. On a year-over-year basis, we drove an acceleration in the growth of single-vision glasses, which represent the majority of our prescription glasses business, driven by our marketing investments within channels like Paid Social, Streaming, and Influencer, which cater to our single-vision customers.

Neil Blumenthal: First, we continue to see positive momentum in our glasses business, with an acceleration in growth versus Q2 of last year.

Speaker Change: We attribute the improvement in GLASSES growth to many of our core strategic investments, including marketing, expanding our store fleet and our exam business, and our product innovation.

David Gilboa: Given that glasses are our highest margin product, improved glasses growth is also an important driver of gross margin expansion in the quarter. On a year-over-year basis, we drove an acceleration in the growth of single-vision glasses, which represent the majority of our prescription glasses business, driven by our marketing investments within channels like paid social, streaming, and influencer, which cater to our single-vision customer. Glasses growth also continues to benefit from progressive penetration and the adoption of more complex lens types. Progressives overall still only represent 23% of our prescription glasses sold in Q2, and we believe there's a significant opportunity to increase penetration over time.

Unnamed Speaker: Given that glasses are our highest-margin product, improved growth in glasses is also an important driver of gross margin expansion in the quarter. On a year-over-year basis, we drove an acceleration in the growth of single-vision glasses, which represent the majority of our prescription glasses business, driven by our marketing investments within channels like Paid Social, Streaming, and Influencer, which cater to our single-vision customers. While we expect Progressive's penetration to remain higher in our stores than in e-comm, we only recently launched Precision Progressive Online this quarter to provide a more seamless experience for our customers.

Dave Gilboa: Given that glasses are our highest margin product, improved glasses growth is also an important driver of gross margin expansion in the quarter.

Dave Gilboa: On a year-over-year basis, we drove an acceleration in the growth of single-vision glasses, which represent the majority of our prescription glasses business, driven by our marketing investments within channels like Paid Social, Streaming, and Influencer, which cater to our single-vision customer.

Jaclyn Berkley: Additionally, we will be discussing certain non-gap financial measures. These non-gap financial measures are in addition to and not a substitute for measures of financial performance prepared in accordance with U.S. Gap. A reconciliation of our non-gap measures to the most directly comparable U.S. Gap measures can be found in this morning's press release and our slide deck available on our IR website.

Dave Gilboa: Glass's growth also continues to benefit from progressive penetration and the adoption of more complex lens types. However, progressives overall still only represent 23% of our prescription glasses sold in Q2. And we believe there's a significant opportunity to increase penetration over time. Within the progressive category, we have seen strong uptake of precision progressives, which start at $395, including frames, lenses, and coatings, and offer customers better visual quality and comfort at a fraction of the price of what similar products often cost elsewhere.

Dave Gilboa: Glasses growth also continues to benefit from progressive penetration and the adoption of more complex lens types.

Dave Gilboa: Progressives overall still only represent 23% of our prescription glasses sold in Q2 and we believe there's a significant opportunity to increase penetration over time.

David Gilboa: Within the progressive category, we have seen strong uptake of precision progressives, which start at $395, including frames, lenses, and coatings, and offer customers better visual quality and comfort at a fraction of the price of what similar products often cost elsewhere. While we expect progressive penetration to remain higher in our stores than in ECOM, we only recently launched precision progressives online this quarter to provide a more seamless experience for our customers. We also continue to expand our lens options to give customers more choice. Within our Sun business, we recently introduced the option to add polarized and custom lens colors to non-prescription sunglasses and the ability to add additional anti-reflective coatings to prescription sunglasses.

Dave Gilboa: And with that, I'll pass it over to Dave to kick us off. Thank you, Jacqueline, and good morning, everyone. We're pleased to share that our team executed another strong quarter in Q2, delivering net revenue and adjusted evita ahead of the high end of our guidance, while making strong progress against our key long-term strategic initiatives. On a year-rear basis, we grew net revenue 13.3% to 188.2 million in improved gross margin 140 basis points to approximately 56%. We also grew adjusted evita nearly 40% to 19.6 million representing a 10.4% margin in generated $14 million of free cash flow in the quarter.

Dave Gilboa: Within the progressive category, we have seen strong uptake of precision progressives, which start at $395, including frames, lenses, and coatings, and offer customers better visual quality and comfort at a fraction of the price of what similar products often cost elsewhere.

Dave Gilboa: While we expect Progressive's penetration to remain higher in our stores than in e-com, we only recently launched Precision Progressive online this quarter to provide a more seamless experience for our customers. We also continue to expand our lens options to give customers more choice. For example, within our sun business, we recently introduced the option to add polarized and custom lens colors to non-prescription sunglasses and the ability to add additional anti-reflective coatings to prescription sunglasses.

Dave Gilboa: While we expect Progressive's penetration to remain higher in our stores than in e-comm, we only recently launched Precision Progressive online this quarter to provide a more seamless experience for our customers.

Dave Gilboa: We also continue to expand our lens options to give customers more choice.

Dave Gilboa: Within our sun business, we recently introduced the option to add polarized and custom lens colors to non-prescription sunglasses and the ability to add additional anti-reflective coatings to prescription sunglasses.

David Gilboa: Options like these, in addition to lens enhancements like anti-fatigue, blue light, and light responsive, that contributed nicely to average revenue per customer. We're not only seeing customers buy more complex lens types, we're also seeing them select higher price frames with more complex constructions like those in our recently launched Italian-made diamond cut collection starting at $195. While the response to our new frames across multiple price points has been very positive, the majority of our frames are still sold at our accessible, all-inclusive $95 price.

Dave Gilboa: Options like these, in addition to lens enhancements like anti-fatigue, blue light, and light responsive, have contributed nicely to average revenue per customer. We're not only seeing customers buy more complex lens types, but we're also seeing them select higher priced frames with more complex constructions, like those in our recently launched Italian-made diamond cut collection, starting at $195. While the response to our new frames across multiple price points has been very positive, the majority of our frames are still sold at our accessible, all-inclusive $95 price. The second key driver of our strong Q2 results was active customer growth, which has now improved for four consecutive quarters.

Dave Gilboa: When we introduced our 2024 plan, we called out three notable differences that we expected this year relative to the previous couple of years. The first was increased marketing spend to drive in acceleration and customer growth. The second was returning our e-commerce channel to positive growth and the third was to significantly expand our insurance offering. Halfway through the year, we feel great about our progress against these goals and are happy to report our fourth consecutive quarter of improving active customer growth, our highest quarterly e-commerce growth since Q1 of 2021 and progress on our insurance expansion, which we will speak to short.

Dave Gilboa: Options like these, in addition to lens enhancements like anti-fatigue, blue light, and light responsive, have contributed nicely to average revenue per customer.

Dave Gilboa: We're not only seeing customers buy more complex lens types, we're also seeing them select higher priced frames with more complex constructions, like those in our recently launched Italian made Diamond Cut Collection, starting at $195.

Dave Gilboa: While the response to our new frames across multiple price points has been very positive, the majority of our frames are still sold at our accessible, all-inclusive $95 price point.

David Gilboa: Dispoint. The second key driver of our strong Q2 results with active customer growth, which has now improved for four consecutive quarters. Similar to Q1, we've been scaling our media spend across a variety of channels, and we've been pleased with the efficiencies we're seeing while maintaining marketing in the low double digits as a percent of revenue. We believe our diversified media model affords a significant flexibility, including the ability to stay disciplined while leaning into certain channels where we're seeing strong results. Looking ahead at the remainder of the year, we'll continue testing and scaling certain channels to drive store and exam awareness, as these are the top reasons that customers who are aware of Warby Parker have not yet shopped with us.

Unnamed Speaker: The second key driver of our strong Q2 results was active customer growth, which has now improved for four consecutive quarters. Similar to Q1, we've been scaling our media spend across a variety of channels, and we've been pleased with the efficiencies we're seeing while maintaining marketing in the low double digits as a percent of revenue. While average revenue per customer grew 8.8%. Complimentary to our core marketing efforts, we're excited to be able to serve even more customers through in-network and out-of-network insurance plans.

Dave Gilboa: The second key driver of our strong Q2 results was active customer growth, which has now improved for four consecutive quarters.

Dave Gilboa: Similar to Q1, we've been scaling our media spend across a variety of channels, and we've been pleased with the efficiencies we're seeing while maintaining marketing in the low double digits as a percent of revenue. We believe our diversified media model affords us significant flexibility, including the ability to stay disciplined while leaning into certain channels where we're seeing strong results. Looking ahead to the remainder of the year, we'll continue testing and scaling certain channels to drive store and exam awareness, as these are the top reasons that customers who are aware of Warby Parker have not yet shopped with us.

Dave Gilboa: Amidst the challenging consumer and optical backdrop, our Q2 performance indicates we're continuing to take share in drive consumer demand. Importantly, our results also demonstrate our ongoing commitment to driving sustainable growth as we continue investing in customer acquisition and brand building while expanding both adjusted EBITDA and pre-cash flow.

Dave Gilboa: We believe our diversified media model affords us significant flexibility, including the ability to stay disciplined while leaning into certain channels where we're seeing strong results.

Dave Gilboa: Based on our second quarter performance, we are raising our full year guidance for both net revenue and adjusted EBITDA and now expect to deliver $72.5 million in adjusted EBITDA at the midpoint of our guidance, which represents 170 basis points of margin expansion. Before Steve provides more detail on that later in the call, Neil and I will review the key drivers of our Q2 results. First, we continue to see positive momentum in our glasses business with an acceleration in growth versus Q2 of last year.

David Gilboa: Direct Madele has shown promising results in this regard to complement our broader linear search, streaming, and influencer spend. As a result of our strategic investments in marketing and new stores, we ended Q2 with 2.4 million active customers, an increase of 4.5% on a trailing 12-month basis, while average revenue per customer grew 8.8%. We anticipate seeing active customer growth continue to inflict upward throughout the year. We know once we acquire a customer and deliver an exceptional Warby Parker experience, we see consistent retention metrics and repeat purchasing patterns across cohorts. For the most recent cohort, we had a revenue retention rate of roughly 50% over 24 months and roughly 100% over 48 months.

Dave Gilboa: Direct mail has shown promising results in this regard to complement our broader linear search, streaming, and influencer spend. As a result of our strategic investments in marketing and new stores, we ended Q2 with 2.4 million active customers, an increase of 4.5% on a trailing 12-month basis, while average revenue per customer grew 8.8%.

Dave Gilboa: Direct mail has shown promising results in this regard to complement our broader linear search, streaming, and influencer spend.

Dave Gilboa: We attribute the improvement in glasses growth to many of our core strategic investments, including marketing, expanding our store fleet and our exam business and our product innovation. Given that glasses are our highest margin product, improved glasses growth is also an important driver of gross margin expansion in the quarter. On a year-over-year basis, we drove an acceleration in the growth of single-vision glasses, which represent the majority of our prescription glasses business, driven by our marketing investments within channels like paid social, streaming, and influencer, which cater to our single-vision customer.

Dave Gilboa: As a result of our strategic investments in marketing and new stores, we ended Q2 with 2.4 million active customers, an increase of 4.5% on a trailing 12-month basis, while average revenue per customer grew 8.8%.

Dave Gilboa: We anticipate seeing active customer growth continue to inflect upward throughout the year. We know once we acquire a customer and deliver an exceptional Warby Parker experience, we see consistent retention metrics and repeat purchasing patterns across cohorts. For the most recent cohort, we had a revenue retention rate of roughly 50% over 24 months and roughly 100% over 48 months.

Dave Gilboa: We anticipate seeing active customer growth continue to inflect upward throughout the year.

Dave Gilboa: We know once we acquire a customer and deliver an exceptional Warby Parker experience, we see consistent retention metrics and repeat purchasing patterns across cohorts.

Speaker Change: For the most recent cohort, we had a revenue retention rate of roughly 50% over 24 months and roughly 100% over 48 months.

Dave Gilboa: Complementary to our core marketing efforts, we're excited to be able to serve even more customers through in-network and out-of-network insurance plans. Earlier this year, we announced an expanded in-network relationship with Versant Health, a wholly owned subsidiary of MetLife, which, once fully integrated, will bring millions of additional lives into the network with Warby Parker. Our integration with Burson Health is expected to be complete before our busy period at the end of the year. Given the time it takes for in-network awareness to grow and for customers to realize they can use their benefits at Warby Parker, we have not incorporated this into our guidance and expect it to be a longer-term tailwind over the next several years.

David Gilboa: Complementary to our core marketing efforts, we are excited to be able to serve even more customers through in-network and out-of-network insurance plans. Earlier this year, we announced an expanded in-network relationship with VersaN Health, a wholly owned subsidiary of MetLife, which, once fully integrated, will bring millions of additional lives in network with Warby Parker. Our integration with VersaN Health is expected to be complete before our busy period at the end of the year. Given the time it takes for in-network awareness to grow and for customers to realize they can use their benefits at Warby Parker, we have not incorporated this into our guidance and expect it to be a longer-term tailwind over the next several years.

Dave Gilboa: Complementary to our core marketing efforts, we're excited to be able to serve even more customers through in-network and out-of-network insurance plans.

Dave Gilboa: Glasses growth also continues to benefit from progressive penetration and the adoption of more complex lens types. Progressives overall still only represent 23% of our prescription glasses sold in Q2, and we believe there's a significant opportunity to increase penetration over time. Within the progressive category, we have seen strong uptake of precision progressives, which start at $395, including frames, lenses, and coatings, and offer customers better visual quality and comfort at a fraction of the price of what similar products often cost elsewhere.

Speaker Change: Earlier this year, we announced an expanded in-network relationship with Versant Health, a wholly owned subsidiary of MetLife, which once fully integrated, will bring millions of additional lives in-network with Warby Parker.

Speaker Change: Our integration with Burson Health is expected to be complete before our busy period at the end of the year. Given the time it takes for in-network awareness to grow and for customers to realize they can use their benefits at Warby Parker, we have not incorporated this into our guidance and expect it to be a longer-term tailwind over the next several years.

David Gilboa: In parallel to our in-network insurance initiatives, we continue to leverage our universal eligibility check tool in stores and online to help customers easily locate their in-network insurance coverage and average out-of-network benefits. 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.

Dave Gilboa: In parallel to our in-network insurance initiatives, we continue to leverage our universal eligibility check tool in stores and online to help customers easily locate their in-network insurance coverage and average out-of-network benefits. For example, most Adam 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 Park.

Dave Gilboa: While we expect progressive penetration to remain higher in our stores than in ECOM, we only recently launched precision progressives online this quarter to provide a more seamless experience for our customers. We also continue to expand our lens options to give customers more choice. Within our sun business, we recently introduced the option to add polarized and custom lens colors to non-prescription sunglasses and the ability to add additional anti-reflective coatings to prescription sunglasses, options like these in addition to lens enhancements like anti-tig, blue light, and light responsive that contributed nicely to average revenue per customer.

Speaker Change: In parallel to our in-network insurance initiatives, we continue to leverage our universal eligibility check tool in stores and online to help customers easily locate their in-network insurance coverage and average out-of-network benefits.

Speaker Change: Most Adam 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.

Neil Blumenthal: And now I'll pass it over to Neil to talk about additional growth drivers. Thanks, Dave. The third driver of our Q2 growth was our highly productive store base, complemented by an improving e-commerce channel. Retail revenue increased approximately 18% year-over-year, coupled with e-commerce growth of over 4% year-over-year. The channel's highest quarter growth since Q1 2021. Since Q2 of last year, we've added 39 net-new stores, including 11 in Q2. Five new stores were in new markets, including Savannah, Georgia; Wilmington, North Carolina; and Thousand Oaks, California. Six new stores were expansions within existing markets, including D.C., Pittsburgh, and New York City.

Neil Blumenthal: And now I'll pass it over to Neil to talk about additional growth drivers.

Dave Gilboa: And now I'll pass it over to Neil to talk about additional growth drivers.

Neil Blumenthal: The third driver of our Q2 growth was our highly productive store base, complemented by an improving e-commerce channel. Retail revenue increased approximately 18% year over year, coupled with e-commerce growth of over 4% year over year, the channel's highest quarterly growth since Q1 2021. Since Q2 of last year, we've added 39 net new stores, including 11 in Q2. Five new stores were in new markets, including Savannah, Georgia; Wilmington, North Carolina; and Thousand Oaks, California.

Neil Blumenthal: Thanks Dave. The third driver of our Q2 growth was our highly productive store base complemented by an improving e-commerce channel.

Dave Gilboa: We're not only seeing customers buy more complex lens types, we're also seeing them select higher price frames with more complex constructions like those in our recently launched Italian-made diamond cut collection, starting at $195. While the response to our new frames across multiple price points has been very positive, the majority of our frames are still sold at our accessible, all-inclusive $95 price.

Neil Blumenthal: retail revenue increaseed approximately eighteen percent year-over-year coupled with e-commerce growth of over four percent year-over-year the channe' highest quarter growth since q one two thousand and twenty-one

Neil Blumenthal: Six new stores were expansions within existing markets, including DC, Pittsburgh, and New York City. With an ending store count of 256 in Q2, we still have a long runway before reaching our longer-term 900 plus store potential, which would still represent a small fraction of the 45,000 optical shops in the U.S. Within our e-commerce channel, we saw an improvement in our single vision glasses business, consistent with Q1, as well as strength in contact lenses from both new and returning customers.

Speaker Change: since q two of last year we've added thirty-nine net new stores including eleven in q two

Neil Blumenthal: Five new stores were in new markets, including Savannah, Georgia, Wilmington, North Carolina, and Thousand Oaks, California.

Dave Gilboa: Dispoint. The second key driver of our strong Q2 results with active customer growth, which has now improved for four consecutive quarters. Similar to Q1, we've been scaling our media spend across a variety of channels and we've been pleased with the efficiencies we're seeing while maintaining marketing in the low double digits as a percent of revenue. We believe our diversified media model affords a significant flexibility, including the ability to stay disciplined while leaning into certain channels where we're seeing strong results.

Neil Blumenthal: Six new stores were expansions within existing markets, including D.C., Pittsburgh, and New York City.

Neil Blumenthal: With an ending store count of 256 and Q2, we still have a long-rome way before reaching our longer-term 900-plus store potential, which would still represent a small fraction of the 45,000 optical shops in the U.S. Within our e-commerce channel, we saw an improvement in our single-vision glasses business, consistent with Q1, as well as strength in contact lenses from both new and returning customers. As we've shared previously, overall channel growth is benefiting from a positive inflection in glasses purchases, which is partially offset by an ongoing but diminishing headwind from our home triumph program. What's been particularly encouraging to see is that e-commerce growth was highest in many of our largest and most mature markets like New York, Chicago, and Dallas, where we also continue to see strong retail growth.

Neil Blumenthal: With an ending store count of 256 in Q2, we still have a long runway before reaching our longer-term 900-plus store potential, which would still represent a small fraction of the 45,000 optical shops in the U.S.

Neil Blumenthal: Within our e-commerce channel, we saw an improvement in our single vision glasses business, consistent with Q1, as well as strengthened contact lenses from both new and returning customers. As we've shared previously, overall channel growth is benefiting from a positive inflection in glasses purchases.

Dave Gilboa: Looking ahead at the remainder of the year, we'll continue testing and scaling certain channels to drive store and exam awareness, as these are the top reasons that customers who are aware of Warby Parker have not yet shopped with us. Direct Madele has shown promising results in this regard to complement our broader linear search, streaming, and influencer spend. As a result of our strategic investments in marketing and new stores, we ended Q2 with 2.4 million active customers, an increase of 4.5% on a trailing 12 month basis, while average revenue per customer grew 8.8%.

Neil Blumenthal: As we've shared previously, overall channel growth is benefiting from a positive inflection in glasses purchases, which is partially offset by an ongoing but diminishing headwind from our Home Triumph program. What's been particularly encouraging to see is that e-commerce growth was highest in many of our largest and most mature markets, like New York, Chicago, and Dallas, where we also continue to see strong retail growth.

Neil Blumenthal: which is partially offset by an ongoing but diminishing headwind from our Home Triumph program.

Neil Blumenthal: What's been particularly encouraging to see is that e-commerce growth was highest in many of our largest and most mature markets like New York, Chicago, and Dallas.

Neil Blumenthal: We believe this underscores the meaningful opportunities ahead of us to drive omnichannel growth, as we both infill existing markets and expand to new markets, as we see overall market growth benefit from greater brand awareness and store density. Our omnichannel experience remains unique in our category, and we continue to invest in technologies that enhance and personalize the online customer experience. In Q2, we piloted two features within our award-winning virtual trion tool, which enables customers to try on all of our eye glasses and sunglasses on their digital devices with lifelike accuracy. One of these features is called Glasses Eraser.

Neil Blumenthal: We believe this underscores the meaningful opportunities ahead of us to drive omnichannel growth as we both infill existing markets and expand to new markets, as we see overall market growth benefit from greater brand awareness and store density. Our omnichannel experience remains unique in our category, and we continue to invest in technologies that enhance and personalize the online customer experience. In Q2, we piloted two features within our award-winning virtual try-on tool, which enables customers to try on all of our eyeglasses and sunglasses on their digital devices with lifelike accuracy.

Neil Blumenthal: where we also continue to see strong retail growth. We believe this underscores the meaningful opportunities ahead of us to drive omni-channel growth as we both infill existing markets and expand to new markets, as we see overall market growth benefit from greater brand awareness and store density.

Dave Gilboa: We anticipate seeing active customer growth continue to inflict upward throughout the year. We know once we acquire a customer and deliver an exceptional Warby Parker experience, we see consistent retention metrics and repeat purchasing patterns across cohorts.

Neil Blumenthal: Our omni-channel experience remains unique in our category, and we continue to invest in technologies that enhance and personalize the online customer experience.

Dave Gilboa: For the most recent cohort, we had a revenue retention rate of roughly 50% over 24 months and roughly 100% over 48 months. Complementary to our core marketing efforts were excited to be able to serve even more customers through in-network and out-of-network insurance plans. Earlier this year, we announced an expanded in-network relationship with VersaN Health, a wholly owned subsidiary of MetLife, which once fully integrated will bring millions of additional lives in network with Warby Parker. Our integration with VersaN Health is expected to be complete before our busy period at the end of the year.

Neil Blumenthal: One of these features is called Glasses Eraser. Many of our customers have strong prescriptions requiring them to keep their glasses on to be able to see when looking at screens, including seeing themselves when using our virtual try-on. Glasses Eraser uses computer vision and generative AI to digitally erase the glasses users wear on their face, enabling them to virtually try on new glasses while keeping their current pair on. The second feature is an AI-powered styling tool that makes frame recommendations for users. It's like a virtual stylist at your fingertips. After testing throughout Q2, both of these features are now live in our iOS app.

Neil Blumenthal: In Q2, we piloted two features within our award-winning virtual try-on tool, which enables customers to try on all of our eyeglasses and sunglasses on their digital devices with lifelike accuracy.

Neil Blumenthal: Many of our customers have strong prescriptions requiring them to keep their glasses on to be able to see when looking at screens, including seeing themselves when using our virtual trion. Glasses Eraser uses computer vision and generative AI to digitally erase the glasses users wear on their face, enabling them to virtually try on new glasses while keeping their current pair on. The second feature is an AI-powered styling tool that makes frame recommendations for our users. It's like a virtual stylist at your fingertips. After testing throughout Q2, both of these features are now live in our iOS app.

Neil Blumenthal: one of these features is called glasses a racer

Speaker Change: Many of our customers have strong prescriptions, requiring them to keep their glasses on to be able to see when looking at screens, including seeing themselves when using our virtual try-on. Glasses Eraser uses computer vision and generative AI to digitally erase the glasses users wear on their face.

Dave Gilboa: Given the time it takes for in-network awareness to grow and for customers to realize they can use their benefits at Warby Parker, we have not incorporated this into our guidance and expected to be a longer-term tailwind over the next several years. In parallel to our in-network insurance initiatives, we continue to leverage our universal eligibility check tool in stores and online to help customers easily locate their in-network insurance coverage and average out-of-network benefits. 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 eye-ware purchase at Warby Parker.

Speaker Change: enabling them to virtually try on new glasses while keeping their current pair on.

Speaker Change: The second feature is an AI-powered styling tool that makes frame recommendations for our users. It's like a virtual stylist at your fingertips.

Unnamed Speaker: It's like a virtual stylist at your fingertips. After testing throughout Q2, both of these features are now live in our iOS app. We find that exam stores drive higher sales than non-exam stores, and industry-wide, approximately 75% of prescription glasses are purchased at the same location as an eye exam takes place, and delivering on these four growth strategies has enabled us to have an even greater impact.

Speaker Change: After testing throughout Q2, both of these features are now live in our iOS app.

Neil Blumenthal: We also continue to invest in leading retail tools to enhance the customer experience while making our team more productive. Team Orbis' commitment to leveraging data and technology is one of the reasons we're able to continue exceeding customer expectations.

Neil Blumenthal: We also continue to invest in leading retail tools to enhance the customer experience while making our team more productive. Team Warby's commitment to leveraging data and technology is one of the reasons we're able to continue exceeding customer expectations. The fourth and final growth strategy I'll dive into this quarter is our effort to scale holistic vision care and drive higher customer lifetime value. In Q2, contact lens sales grew approximately 45% year over year to a little over 10% of revenue, which remains well below the 20% industry average.

Speaker Change: We also continue to invest in leading retail tools to enhance the customer experience while making our team more productive. Team Warby's commitment to leveraging data and technology is one of the reasons we're able to continue exceeding customer expectations.

Neil Blumenthal: The fourth and final growth strategy I'll dive into this quarter is our effort to scale holistic vision care and drive higher customer lifetime value. In Q2, contact lens sales grew approximately 45 percent year over year to a little over 10 percent of revenue, which remains well below the 20 percent industry average. We plan to continue growing 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 and their propensity to go on to purchase glasses. In the quarter, I exam revenue grew approximately 40 percent year over year to approximately 5 percent of revenue, which remains well below the approximately 15 percent industry average.

Neil Blumenthal: And now I'll pass it over to Neil to talk about additional growth drivers. Thanks Dave. The third driver of our Q2 growth was our highly productive store base, complemented by an improving e-commerce channel. Retail revenue increased approximately 18% year-over-year, coupled with e-commerce growth of over 4% year-over-year. The channel's highest quarter growth since Q1 2021. Since Q2 of last year, we've added 39 net-new stores, including 11 in Q2. Five new stores were in new markets, including Savannah, Georgia, Wilmington, North Carolina, and Thousand Oaks, California.

Speaker Change: the fourth and final growth strategy i'll dive into this quarter is our effort to scale holistic vision care and drive higher customer lifetime value

Speaker Change: In Q2, contact lens sales grew approximately 45% year-over-year to a little over 10% of revenue, which remains well below the 20% industry average.

Neil Blumenthal: We plan to continue growing 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 and their propensity to go on to purchase glasses. In the quarter, iExam revenue grew approximately 40% year-over-year to approximately 5% of revenue, which remains well below the approximately 15% industry average.

Speaker Change: We plan to continue growing 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 and their propensity to go on to purchase glasses.

Speaker Change: In the quarter, iExam revenue grew approximately 40% year-over-year to approximately 5% of revenue, which remains well below the approximately 15% industry average.

Neil Blumenthal: Six new stores were expansions within existing markets, including DC, Pittsburgh, and New York City. With an ending store count of 256 and Q2, we still have a long-run way before reaching our longer-term 900-plus store potential, which would still represent a small fraction of the 45,000 optical shops in the U.S. Within our e-commerce channel, we saw an improvement in our single-vision glasses business, consistent with Q1, as well as strength and contact lenses from both new and returning customers, as we've shared previously, overall channel growth is benefiting from a positive inflection in glasses purchases, which is partially offset by an ongoing but diminishing headwind from our home triumph program.

Neil Blumenthal: Today, the majority of our customers still get their eye exams elsewhere and bring their prescriptions to Warby Parker, highlighting the opportunity in front of us to broaden awareness of this service and capture more share of the $11 billion segment of the industry. In Quater's past, we referenced our commitment to delivering best-in-class patient experiences by piloting technologies like video-assisted eye exams and retinal imaging. Our patients continue to provide great feedback about these services, so we roll them out to several new stores throughout Q2, and we'll continue expanding them in Q3. Scaling our eye exam business, including exam utilization, has had and we'll continue to have a direct impact on our glasses business.

Neil Blumenthal: Today, the majority of our customers still get their eye exams elsewhere and bring their prescriptions to Warby Parker, highlighting the opportunity in front of us to broaden awareness of this service and capture more share of the $11 billion segment of the industry. In past quarters, we referenced our commitment to delivering best-in-class patient experiences by piloting technologies like video-assisted eye exams and retinal imaging. Our patients continue to provide great feedback about these services, so we rolled them out to several new stores throughout Q2, and we'll continue expanding them in Q3.

Speaker Change: today the majority of our customers still get their eye exams elsewhere and bring our prescriptions to warby parker highlighting the opportunityin front of us brad en awareness of this service and capture more share of the eleven billion dollars segment of the industry

Speaker Change: In quarters past, we referenced our commitment to delivering best-in-class patient experiences by piloting technologies like video-assisted eye exams and retinal imaging.

Speaker Change: Our patients continue to provide great feedback about these services, so we roll them out to several new stores throughout Q2, and we'll continue expanding them in Q3.

Neil Blumenthal: Scaling our eye exam business, including exam utilization, has had and will continue to have a direct impact on our glasses business. We find that exam stores drive higher sales than non-exam stores, and industry-wide, approximately 75% of prescription glasses are purchased at the same location as an eye exam takes place. As we've increased the number of stores offering eye exams, we've seen strong growth in average revenue per customer driven by eye exam revenue, and higher penetration of progressive lenses and contact lenses.

Speaker Change: scaling our i business including exam utilization has had and will continue to have a direct impact on our glasses business

Neil Blumenthal: What's been particularly encouraging to see is that e-commerce growth was highest in many of our largest and most mature markets like New York, Chicago, and Dallas, where we also continue to see strong retail growth. We believe this underscores the meaningful opportunities ahead of us to drive omnichannel growth, as we both infill existing markets and expand to new markets, as we see overall market growth benefit from greater brand awareness and store density.

Neil Blumenthal: We find that exam stores drive higher sales than non-exam stores, and industry-wide approximately 75% of prescription glasses are purchased at the same location as an eye exam takes place. As we've increased the number of stores offering eye exams, we've seen strong growth in average revenue per customer driven by eye exam revenue, a higher penetration of progressive lenses and contact lenses. Similarly, as we've added doctors to stores that previously did not have coverage, we see a top-line benefit as we not only capture the exam revenue, but also the glasses purchased post-exam.

Speaker Change: We find that exam stores drive higher sales than non-exam stores, and industry-wide, approximately 75% of prescription glasses are purchased at the same location as an eye exam takes place.

Speaker Change: As we've increased the number of stores offering eye exams, we've seen strong growth in average revenue per customer driven by eye exam revenue, a higher penetration of progressive lenses, and contact lenses.

Neil Blumenthal: Our omnichannel experience remains unique in our category, and we continue to invest in technologies that enhance and personalize the online customer experience. In Q2, we piloted two features within our award-winning virtual trion tool, which enables customers to try on all of our eye glasses and sunglasses on their digital devices with lifelike accuracy. One of these features is called Glasses Eraser. Many of our customers have strong prescriptions requiring them to keep their glasses on to be able to see when looking at screens, including seeing themselves when using our virtual trion.

Neil Blumenthal: Similarly, as we've added doctors to stores that previously did not have coverage, we see a top-line benefit as we not only capture the exam revenue but also the glasses purchased post-exam. When we launched Warby Parker, we committed to building a business that could scale while doing good, and delivering on these four growth strategies has enabled us to have an even greater impact. This quarter, we finalized plans to expand our Pupils Project initiative to two new cities, Austin, Texas, and Las Vegas, Nevada.

Speaker Change: Similarly, as we've added doctors to stores that previously did not have coverage, we see a top-line benefit as we not only capture the exam revenue but also the glasses purchased post exam.

Neil Blumenthal: When we launched Warby Parker, we committed to building a business that can scale while doing good, and delivering on these four growth strategies has enabled us to have an even greater impact. This quarter, we finalized plans to expand our pupils project initiative to two new cities, Austin, Texas, and Las Vegas, Nevada. Through this school-based vision program, we work with local organizations and government agencies to get free vision screenings, eye exams, and glasses to school children in the US. For many of whom, this is their first pair. Since we launched the program, we've distributed more than 240,000 pairs of glasses to students.

Warby Parker: When we launched Warby Parker, we committed to building a business that can scale while doing good. And delivering on these four growth strategies has enabled us to have an even greater impact.

Neil Blumenthal: Glasses Eraser uses computer vision and generative AI to digitally erase the glasses users wear on their face, enabling them to virtually try on new glasses while keeping their current pair on. The second feature is an AI-powered styling tool that makes frame recommendations for our users. It's like a virtual stylist at your fingertips. After testing throughout Q2, both of these features are now live in our IOS app. We also continue to invest in leading retail tools to enhance the customer experience while making our team more productive. Team Orbis' commitment to leveraging data and technology is one of the reasons we're able to continue exceeding customer expectations.

Speaker Change: This quarter, we finalized plans to expand our Pupils Project initiative to two new cities, Austin, Texas, and Las Vegas, Nevada.

Neil Blumenthal: Through this school-based vision program, we work with local organizations and government agencies to give free vision screenings, eye exams, and glasses to school children in the U.S., for many of whom this is their first pair of glasses. Since we launched the program, we've distributed more than 240,000 pairs of glasses to students. We fulfill Pupils Project orders out of our optical lab in Las Vegas, so the team there is particularly excited to impact students in their own community. It's initiatives like these that continue to attract exceptional talent and motivate the team every day. And now I'll turn it over to Steve to review the details of our financial performance.

Speaker Change: Through this school-based vision program, we work with local organizations and government agencies to give free vision screenings, eye exams, and glasses to schoolchildren in the U.S.

Speaker Change: for many of whom this is their first pair.

Speaker Change: Since we launched the program, we've distributed more than 240,000 pairs of glasses to students.

Neil Blumenthal: We fulfill pupils' project orders out of our optical lab in Las Vegas, so the team there is particularly excited to impact students in their own community. It's initiatives like these that continue to attract exceptional talent and motivate the team every day.

Speaker Change: We fulfill Pupils Project orders out of our optical lab in Las Vegas, so the team there is particularly excited to impact students in their own community.

Speaker Change: It's initiatives like these that continue to attract exceptional talent and motivate the team every day.

Steve Miller: And now I'll turn it over to Steve to review the details of our financial performance. Thanks, Neil and Dave. Revenue for the second quarter came in at 188.2 million, up 13.3% year-over-year. From a channel perspective, retail revenue increased 17.8% year-over-year, while e-commerce revenue increased 4.4% versus Q2 of 2023. Turning to our stores, we added 39 net new stores over the course of the last 12 months, ending the quarter with 256 stores, up from 217 at the end of Q2 2023. Looking at Q2 retail performance on a blended basis, including both new stores and stores open greater than 12 months, retail productivity was 99% as compared to the same period last year.

Speaker Change: And now I'll turn it over to Steve to review the details of our financial performance.

Steve Miller: Thanks, Neil and Dave. Revenue for the second quarter came in at $188.2 million, up 13.3% year over year. From a channel perspective, retail revenue increased 17.8% year over year, while e-commerce revenue increased 4.4% versus Q2 of 2023. Turning to our stores, we added 39 net new stores over the course of the last 12 months, ending the quarter with 256 stores, up from 217 at the end of Q2. Looking at Q2 retail performance on a blended basis, including both new stores and stores open greater than 12 months, retail productivity was 99% as compared to the same period last year.

Steve Miller: Thanks Neil and Dave. Revenue for the second quarter came in at $188.2 million, up 13.3% year-over-year.

Neil Blumenthal: The fourth and final growth strategy I'll dive into this quarter is our effort to scale holistic vision care and drive higher customer lifetime value. In Q2, contact lens sales grew approximately 45% year over year to a little over 10% of revenue, which remains well below the 20% industry average. We plan to continue growing 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 and their propensity to go on to purchase glasses.

Steve Miller: From a channel perspective, retail revenue increased 17.8% year over year, while e-commerce revenue increased 4.4% versus Q2 of 2023.

Speaker Change: Turning to our stores, we added 39 net new stores over the course of the last 12 months, ending the quarter with 256 stores, up from 217 at the end of Q2 2023.

Unnamed Speaker: Looking at Q2 retail performance on a blended basis, including both new stores and stores open greater than 12 months, retail productivity was 99% as compared to the same period last year. As a reminder, we define retail productivity as the year-over-year change in retail sales per store for the average number of stores open in the period, including our new store openings. This was driven by a few factors, including a higher mix of our premium lenses, such as progressives, continued ramping of both contact lens and eye exam sales, and continued uptake of our higher priced frame prices. As previously noted, we have multi-user accounts in which one person in the household places an order on behalf of others.

Speaker Change: Looking at Q2 retail performance on a blended basis, including both new stores and stores open greater than 12 months, retail productivity was 99% as compared to the same period last year.

Neil Blumenthal: In the quarter, I exam revenue grew approximately 40% year over year to approximately 5% of revenue, which remains well below the approximately 15% industry average. Today, the majority of our customers still get their eye exams elsewhere and bring their prescriptions to Warby Parker, highlighting the opportunity in front of us to broaden awareness of this service and capture more share of the $11 billion segment of the industry. In quarter's past, we referenced our commitment to delivering best-in-class patient experiences by piloting technologies like video assisted eye exams and retinal imaging.

Steve Miller: As a reminder, we define retail productivity as the year-over-year change in retail sales per store for the average number of stores open in the period, including our new store openings. As is the case in most quarters, we see this metric fluctuate throughout the quarter, as it can be impacted by a number of factors, including the timing and composition of store openings year-over-year, as well as the timing of doctor hiring for new stores. For stores that have been open greater than 12 months, we continue to observe strong year-over-year growth. Our new stores continue to deliver strong unit economics, performing in line with our target of 35% full-wall margins and in 20-month paybacks.

Speaker Change: As a reminder, we define retail productivity as the year-over-year change in retail sales per store for the average number of stores open in the period, including our new store openings.

Speaker Change: As is the case in most quarters, we see this metric fluctuate throughout the quarter, as it can be impacted by a number of factors, including the timing and composition of store openings year over year, as well as the timing of doctor hiring for new stores.

Steve Miller: For stores that have been open greater than 12 months, we continue to observe strong year-over-year growth. Additionally, our new stores continue to deliver strong unit economics, performing in line with our target of 35% fall wall margins and 20 month payback. Our stores have been open for more than 12 months. Average revenue per store was $2.2 million, consistent with Q1, and performance was in line with our target 35% four-wall adjusted EBITDA margin. Over the course of the past year, we added 46 net new eye exam locations, bringing our stores with eye exam capabilities to 215 stores, or 84% of our total fleet.

Speaker Change: For stores that have been open greater than 12 months, we continue to observe strong year-over-year growth.

Neil Blumenthal: Our patients continue to provide great feedback about these services, so we roll them out to several new stores throughout Q2 and we'll continue expanding them in Q3. Scaling our eye exam business, including exam utilization, has had and we'll continue to have a direct impact on our glasses business. We find that exam stores drive higher sales than non-examestores and industry-wide approximately 75% of prescription glasses are purchased at the same location as an eye exam takes place.

Speaker Change: Our new stores continue to deliver strong unit economics, performing in line with our target of 35% four-wall margins and 20-month paybacks.

Steve Miller: For stores open more than 12 months, average revenue per store was $2.2 million, consistent with Q1, and performance was in line with our target 35% full-wall-adjusted EBITDA margins. Over the course of the past year, we added 46 net new eye exam locations, bringing our stores with eye exam capabilities to 215 stores or 84% of our total fleet. From a channel mixed perspective, for the second quarter, retail represented 69% of our overall business, consistent with Q1 of this year, and up 260 basis points versus 67% in Q2 2020-23. From a customer perspective, we finished Q2 with 2.39 million active customers, which we believe is more reflective of active households and represents an increase of 4.5% on a trailing 12-month basis.

Speaker Change: For stores open more than 12 months, average revenue per store was $2.2 million, consistent with Q1, and performance was in line with our target 35% four-wall adjusted EBITDA margins.

Speaker Change: Over the course of the past year, we added 46 net new iExam locations, bringing our stores with iExam capabilities to 215 stores, or 84% of our total fleet.

Neil Blumenthal: As we've increased the number of stores offering eye exams, we've seen strong growth in average revenue per customer driven by eye exam revenue, a higher penetration of progressive lenses and contact lenses. Similarly, as we've added doctors to stores that previously did not have coverage, we see a top line benefit as we not only capture the exam revenue, but also the glasses purchased post-exam.

Steve Miller: From a channel mix perspective, for the second quarter, retail represented 69% of our overall business, consistent with Q1 of this year and up 260 basis points versus 67% in Q2 2023. From a customer perspective, we finished Q2 with 2.39 million active customers, which we believe is more reflective of active households and represents an increase of 4.5% on a trailing 12-month basis. We've been pleased to see sequential improvements in year over year active customer growth for the past four quarters, as we've now fully recovered anniversary periods that were impacted by reduced marketing.

Speaker Change: From a channel mix perspective, for the second quarter, retail represented 69% of our overall business, consistent with Q1 of this year, and up 260 basis points versus 67% in Q2 2023.

Speaker Change: From a customer perspective, we finished Q2 with 2.39 million active customers, which we believe is more reflective of active households and represents an increase of 4.5% on a trailing 12-month basis.

Neil Blumenthal: When we lost Warby Parker, we committed to building a business that can scale while doing good and delivering on these four growth strategies has enabled us to have an even greater impact. This quarter, we finalized plans to expand our pupils project initiative to two new cities, Austin, Texas and Las Vegas, Nevada. Through this school-based vision program, we work with local organizations and government agencies to give free vision screenings, eye exams and glasses to school children in the U.S. For many of whom, this is their first pair.

Steve Miller: We've been pleased to see sequential improvements in year-over-year active customer growth for the past four quarters, as we've now fully anniversary periods that were impacted by reduced marketing spend. Looking ahead, we anticipate seeing this metric continue to inflect upward throughout the year. We also continue to see strength in average revenue per customer, which came in at $302.00 in Q2, up 8.8% year-over-year. This was driven by a few factors, including a higher mix of our premium lenses such as progressives, continued ramping of both contact lens and eye exam sales, and continued uptake of our higher priced frame price points.

Speaker Change: We've been pleased to see sequential improvements in year-over-year active customer growth for the past four quarters, as we've now fully anniversary periods that were impacted by reduced marketing spend.

Steve Miller: Looking ahead, we anticipate seeing this metric continue to inflect upward throughout the year. We also continue to see strength in average revenue per customer, which came in at $302 in Q2, up 8.8% year over year. This was driven by a few factors, including a higher mix of our premium lenses, such as progressives, continued ramping of both contact lens and eye exam sales, and continued uptake of our higher priced frame range. As previously noted, we have multi-user accounts in which one person in the household places an order on behalf of others.

Speaker Change: Looking ahead, we anticipate seeing this metric continue to inflect upward throughout the year.

Speaker Change: We also continue to see strength in average revenue per customer, which came in at $302 in Q2, up 8.8% year-over-year.

Neil Blumenthal: Since we launched the program, we've distributed more than 240,000 pairs of glasses to students. We fulfill pupil's project orders out of our optical lab in Las Vegas, so the team there is particularly excited to impact students in their own community.

Speaker Change: This was driven by a few factors, including a higher mix of our premium lenses, such as progressives, continued ramping of both contact lens and eye exam sales, and continued uptake of our higher-priced frame price points.

Steve Miller: As previously noted, we have multi-user accounts in which one person in the household places an order on behalf of others. If we look at our customers on an individual basis, we serve 2.52 million individuals, which is up 5.5% on a trailing 12-month basis and reflects average revenue per individual of $286, up 7.8%.

Steve Miller: It's initiatives like these that continue to attract exceptional talent and motivate the team every day, and now I'll turn it over to Steve to review the details of our financial performance. Thanks, Neil and Dave. Revenue for the second quarter came in at 188.2 million, up 13.3% year-over-year. From a channel perspective, retail revenue increased 17.8% year-over-year while e-commerce revenue increased 4.4% versus Q2 of 2023. Turning to our stores, we added 39 net new stores over the course of the last 12 months, ending the quarter with 256 stores up from 217 at the end of Q2 2023.

Speaker Change: As previously noted, we have multi-user accounts in which one person in the household places an order on behalf of others,

Steve Miller: And if we look at our customers on an individual basis, we serve 2.52 million individuals, which is up 5.5% on a trailing 12-month basis and reflects average revenue per individual of $286, up 7.8%. Moving on to gross margins, 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 rents, and the depreciation of store build out. Our gross margin also includes stock-based compensation expense for our optometrists and optical lab employees.

Unnamed Speaker: And if we look at our customers on an individual basis, we serve 2.52 million individuals, which is up 5.5% on a trailing 12-month basis and reflects average revenue per individual of $286, up 7.8%. We're pleased to report that gross profit dollars increased 16% year over year in Q2, our second consecutive quarter, reflecting the benefit of revenue growth paired with gross margin expansion. Partially offsetting gross margin leverage in Q2 was continued strength in contact lenses and eye exams, which have lower gross margin profiles than eyeglasses but, over the medium and long term, are accretive to gross profit dollars, which were up 16% year over year in Q2, as previously noted, and higher optometrist salaries as the number of stores offering eye exams grew.

Speaker Change: And if we look at our customers on an individual basis, we serve 2.52 million individuals, which is up 5.5% on a trailing 12-month basis and reflects average revenue per individual of $286, up 7.8%.

Steve Miller: 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 rents, and the depreciation of store buildouts. Our gross margin also includes stock-based compensation expense for our optometrist and optical lab employees. For comparability, I will be speaking to gross margin, excluding stock-based compensation. Second quarter adjusted gross margin came in at 56.1% compared to 54.7% in the year-ago period, up approximately 140 basis points year-over-year. We're pleased to report that gross profit dollars increased 16% year over year in Q2, our second consecutive quarter, reflecting the benefit of revenue growth paired with gross margin expansion.

Speaker Change: Moving on to gross margin.

Speaker Change: 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 rents, and the depreciation of store build-outs.

Speaker Change: Our gross margin also includes stock-based compensation expense for our optometrists and optical lab employees. For comparability, I will be speaking to gross margin, excluding stock-based compensation.

Steve Miller: For comparability, I will be speaking to gross margin. Excluding stock-based compensation, second quarter adjusted gross margin came in at 56.1 percent compared to 54.7 percent in the year-ago period, up approximately 140 basis points year over year. We're pleased to report that gross profit dollars increased 16% year over year in Q2, our second consecutive quarter, reflecting the benefit of revenue growth paired with gross margin expansion. The increase in gross margin was driven by continued growth in our glasses business, which is our highest gross margin product category, lower outbound customer shipping costs as a percent of revenue, and efficiencies in our owned optical laboratory.

Steve Miller: Looking at Q2 retail performance on a blended basis, including both new stores and stores open greater than 12 months, retail productivity was 99 percent as compared to the same period last year. As a reminder, we define retail productivity as the year-over-year change in retail sales per store for the average number of stores open in the period, including our new store openings. As is the case in most quarters, we see this metric fluctuate throughout the quarter, as it can be impacted by a number of factors including the timing and composition of store openings year-over-year, as well as the timing of doctor hiring for new stores.

Speaker Change: Second quarter adjusted gross margin came in at 56.1% compared to 54.7% in the year-ago period, up approximately 140 basis points year-over-year.

Speaker Change: We're pleased to report that gross profit dollars increased 16% year-over-year in Q2, our second consecutive quarter, reflecting the benefit of revenue growth paired with gross margin expansion.

Steve Miller: The increase in gross margin was driven by continued growth in our glasses business, which is our highest gross margin product category, lower outbound customer shipping costs as a percent of revenue, and efficiencies in our own optical laboratories. As expected, we saw stability within the fixed portion of our cost of goods, including retail occupancy, as we've continued to scale our store base, partially offsetting gross margin leverage in Q2. Were continued strength in contact lenses and eye exams, which have lower gross margin profiles than eyeglasses, but over the medium and long term are creative to gross profit dollars, which were up 16% year over year in Q2, as previously noted, and higher up top comatress salaries as the number of stores offering eye exams grew.

Speaker Change: The increase in gross margin was driven by continued growth in our glasses business, which is our highest gross margin product category, lower outbound customer shipping costs as a percent of revenue, and efficiencies in our owned optical laboratories.

Steve Miller: For stores that have been open greater than 12 months, we continue to observe strong year-over-year growth. Our new stores continue to deliver strong unit economics, performing in line with our target of 35% fall-all margins and in 20-month paybacks. For stores open more than 12 months, average revenue per store was $2.2 million, consistent with Q1, and performance was in line with our target 35% fall-all adjusted EBITDA margins. Over the course of the past year, we added 46 net new eye exam locations, bringing our stores with eye exam capabilities to 215 stores or 84% of our total fleets.

Steve Miller: As expected, we saw stability within the fixed portion of our cost of goods, including retail occupancy, as we've continued to scale our store base. Partially offsetting gross margin leverage in Q2 was continued strength in contact lenses and eye exams, which have lower gross margin profiles than eyeglasses but, over the medium and long term, are accretive to gross profit dollars, which were up 16% year over year in Q2, as previously noted, and higher optometrist salaries as the number of stores offering eye exams grew.

Speaker Change: As expected, we saw stability within the fixed portion of our cost of goods, including retail occupancy as we've continued to scale our store base.

Speaker Change: Partially offsetting gross margin leverage in Q2 were continued strength in contact lenses and eye exams, which have lower gross margin profiles than eyeglasses, but over the medium and long term are accretive to gross profit dollars, which were up 16% year over year in Q2, as previously noted, and higher optometrist salaries as the number of stores offering eye exams grew.

Steve Miller: Expanding our contact lens offering is a core part of scaling our holistic vision care offering and the key driver of growing average revenue per customer. In addition, contact lenses have a higher purchase frequency and a subscription-like purchase cycle.

Steve Miller: Expanding our contacts offering is a core part of scaling our holistic vision care offering and a key driver of growing average revenue per customer. In addition, contact lenses have a higher purchase frequency and subscription-like purchase cycle, shifting years to SGNA. As a reminder, SGNA for our business includes three main components: salary expense for our headquarters, customer experience, and retail employees; marketing spend, including our home trion program; and general corporate overhead expenses. Adjusted SGNA excludes non-cash costs like stock-based compensation expense. Adjusted SGNA in the second quarter came in at 98.2 million or 52.2% of revenue. This compares to Q2 2023 adjusted SGNA of 86.8 million, or 52.2% of revenue.

Steve Miller: From a channel mixed perspective, for the second quarter, retail represented 69% of our overall business, consistent with Q1 of this year, and up 260 basis points versus 67% in Q2 2020-23. From a customer perspective, we finished Q2 with 2.39 million active customers, which we believe is more reflective of active households, and represents an increase of 4.5% on a trailing 12-month basis. We've been pleased to see sequential improvements in year-over-year active customer growth for the past four quarters, as we've now fully anniversary periods that were impacted by reduced marketing spend.

Speaker Change: Expanding our contacts offering is a core part of scaling our holistic vision care offering and a key driver of growing average revenue per customer.

Speaker Change: In addition, contact lenses have a higher purchase frequency and subscription-like purchase cycle.

Steve Miller: 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 try-on program; and general corporate overhead expenses. Adjusted SG&A excludes non-cash costs like stock-based compensation expenses.

Unnamed Speaker: 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 try-on program; and general corporate overhead expenses. Turning now to our balance sheet, we were free cash flow positive for the fifth consecutive quarter, generating $14 million in Q2, and ended with a strong balance sheet position, reflecting approximately $238 million in cash, which we will continue to deploy carefully to support our growth and operations.

Speaker Change: 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 try-on program, and general corporate overhead expenses.

Speaker Change: Adjusted SG&A excludes non-cash costs like stock-based compensation expense.

Steve Miller: Adjusted SG&A in the second quarter came in at $98.2 million, or 52.2% of revenue. This compares to Q2 2023 Adjusted SG&A of $86.8 million, or 52.2% of revenue. Within Adjusted SG&A, marketing spend increased from $18.2 million, or 11% of revenue, to $22.4 million, or 11.9% of revenue. The de-leverage for marketing was offset by disciplined expense management and leverage in corporate expenses, as non-marketing adjusted SG&A declined as a percent of revenue from 41.2% to 40.3%.

Steve Miller: Looking ahead, we anticipate seeing this metric continue to inflect upward throughout the year. We also continue to see strength and average revenue per customer, which came in at $302.00 in Q2, up 8.8% year-over-year. This was driven by a few factors, including a higher mix of our premium lenses, such as progressives, continued ramping of both contact lens and eye exam sales, and continued uptake of our higher priced frame price points. As previously noted, we have multi-user accounts in which one person in the household places an order on behalf of others, and if we look at our customers on an individual basis, we serve 2.52 million individuals, which is up 5.5% on a trailing 12-month basis, and reflects average revenue per individual of $286, up 7.8%.

Speaker Change: Adjusted SG&A in the second quarter came in at $98.2 million or 52.2% of revenue. This compares to Q2 2023 Adjusted SG&A of $86.8 million or 52.2% of revenue.

Steve Miller: Within adjusted SG&A, marketing spend increased from 18.2 million or 11% of revenue to 22.4 million or 11.9% of revenue. The de-leverage for marketing was offset by disciplined expense management and leverage in corporate expenses as non-marketing adjusted SGNA declined as a percent of revenue from 41.2% to 40.3%.

Speaker Change: With an adjusted SG&A, marketing spend increased from $18.2 million, or 11% of revenue, to $22.4 million, or 11.9% of revenue.

Speaker Change: The de-leverage for marketing was offset by disciplined expense management and leverage in corporate expenses as non-marketing adjusted SG&A declined as a percent of revenue from 41.2 percent to 40.3 percent.

Steve Miller: Turning now to adjusted EBITDA, in the second quarter we generated adjusted EBITDA of 19.6 million, representing an adjusted EBITDA margin of 10.4%, which compares to adjusted EBITDA of 14.2 million or 8.5% of revenue in the year-ago period. This represents approximately 190 basis points of adjusted EBITDA margin expansion.

Steve Miller: Turning now to Adjusted EBITDA. In the second quarter, we generated Adjusted EBITDA of $19.6 million, representing an Adjusted EBITDA margin of 10.4%, which compares to Adjusted EBITDA of $14.2 million, or 8.5% of revenue in the year-ago period. This represents approximately 190 basis points of adjusted EBITDA margin expansion. Turning now to our balance sheet, we were free cash flow positive for the fifth consecutive quarter, generating $14 million in Q2, and ended with a strong balance sheet position, reflecting approximately $238 million in cash, which we will continue to deploy carefully to support our growth and operations.

Speaker Change: Turning now to Adjusted EBITDA. In the second quarter, we generated Adjusted EBITDA of $19.6 million, representing an Adjusted EBITDA margin of 10.4%, which compares to Adjusted EBITDA of $14.2 million, or 8.5% of revenue in the year-ago period.

Steve Miller: We're pleased to report that gross profit dollars increased 16% year-over-year in Q2 are second consecutive quarter reflecting the benefit of revenue growth paired with gross margin expansion. The increase in gross margin was driven by continued growth in our glasses business, which is our highest gross margin product category, lower outbound customer shipping cost as a percent of revenue and efficiencies in our own optical laboratories. As expected, we saw stability within the fixed portion of our cost of goods, including retail occupancy as we've continued to scale our store base.

Speaker Change: This represents approximately 190 basis points of adjusted EBITDA margin expansion.

Steve Miller: Turning now to our balance sheet, we were free cash flow positive for the fifth consecutive quarter, generating 14 million in Q2 and ended with a strong balance sheet position, reflecting approximately 238 million in cash, which we will continue to deploy deliberately to support our growth and operations. We also have an undrawn credit facility of 120 million that we can increase to 175 million.

Speaker Change: Turning now to our balance sheet, we were free cash flow positive for the fifth consecutive quarter, generating $14 million in Q2, and ended with a strong balance sheet position, reflecting approximately $238 million in cash, which we will continue to deploy deliberately to support our growth and operations.

Unnamed Speaker: We also have an undrawn credit facility of $120 million that we can increase to $175 million. Warby Parker operates in a durable category, providing healthcare products and services, and our team is encouraged by the momentum we're seeing year to date. Revenue of $757 to $762 million, representing approximately 13% to 14% year-over-year growth. We still anticipate stock-based compensation to normalize to a range of 2 to 4% of net revenue next

Steve Miller: We also have an undrawn credit facility of $120 million that we can increase to $175 million. Now to our outlook. Warby Parker operates in a durable category, providing healthcare products and services, and our team is encouraged by the momentum we're seeing year to date.

Speaker Change: We also have an undrawn credit facility of $120 million that we can increase to $175 million.

Steve Miller: Turning now to our output. Warby Parker operates in a durable category, providing healthcare products and services, and our team is encouraged by the momentum we're seeing year to date. That being said, we are maintaining a conservative stance on guiding our business, given the broader macroeconomic environment.

Speaker Change: Now to our Outlook.

Speaker Change: Warby Parker operates in a durable category, providing healthcare products and services, and our team is encouraged by the momentum we're seeing year to date.

Steve Miller: Partially offsetting gross margin leverage in Q2 were continued strength in contact lenses and eye exams, which have lower gross margin profiles than eyeglasses, but over the medium and long term are creative to gross profit dollars, which were up 16% year-over-year in Q2 as previously noted. And higher optometrist salaries as the number of stores offering eye exams grew. Expanding our contacts offering is a core part of scaling our holistic vision care offering and the key driver of growing average revenue per customer. In addition, contact lenses have a higher purchase frequency and subscription-like purchase cycle.

Steve Miller: That being said, we are maintaining a conservative stance on guiding our business, given the broader macroeconomic environment. Given our performance in Q2, we're revising our full year 2024 guidance higher to the following. Revenue of $757 to $762 million, representing approximately 13% to 14% year-over-year growth, adjusted EBITDA of $72.5 million at the midpoint of our revenue range, which equates to an adjusted EBITDA margin of 9.5% or approximately 170 basis points of year-over-year expansion. Stability and Gross Margin in the Mid-50s as a Percent of Revenue and 40 New Store Opens

Speaker Change: That being said, we are maintaining a conservative stance on guiding our business given the broader macroeconomic environment.

Steve Miller: Given our performance in Q2, we're revising our full-year 2024 guidance higher to the following. Revenue of 757 to 762 million, representing approximately 13 to 14% year-over-year growth; adjusted EBITDA of 72.5 million at the midpoint of our revenue range, which equates to an adjusted EBITDA margin of 9.5%, or approximately 170 basis points of year-over-year expansion. Stability and gross margin in the mid-50s as a percent of revenue, and 40 new store openings. We anticipate adjusted EBITDA margin expansion over the remainder of the year will be driven by leverage within SG&A, supported by ongoing efficiencies in staffing our store and customer experience teams, and achieving continued leverage in corporate expenses, while keeping marketing spend consistent as a percent of revenue in the low teams. We're still forecasting stock-based compensation as a percentage of net revenue in 2024 to be approximately 6% compared with 10.5% in 2023.

Speaker Change: Given our performance in Q2, we're revising our full year 2024 guidance higher to the following.

Speaker Change: Revenue of $757 to $762 million, representing approximately 13 to 14% year-over-year growth.

Speaker Change: Adjusted EBITDA of $72.5 million at the midpoint of our revenue range which equates to an adjusted EBITDA margin of 9.5% or approximately a hundred and seventy basis points of year-over-year expansion.

Speaker Change: Stability and gross margin in the mid-50s as a percent of revenue and 40 new store openings.

Steve Miller: We anticipate adjusted EBITDA margin expansion over the remainder of the year will be driven by leverage within SG&A, supported by ongoing efficiencies in staffing our store and customer experience teams and achieving continued leverage in corporate expenses, while keeping marketing spend consistent as a percent of revenue in the low team. We're still forecasting stock-based compensation as a percentage of net revenue in 2024 to be approximately 6% compared with 10.5% in 2023.

Speaker Change: We anticipate adjusted EBITDA margin expansion over the remainder of the year will be driven by leverage within SG&A, supported by ongoing efficiencies in staffing our store and customer experience teams and achieving continued leverage in corporate expenses while keeping marketing spend consistent as a percent of revenue in the low teams.

Speaker Change: We're still forecasting stock-based compensation as a percentage of net revenue in 2024 to be approximately 6% compared with 10.5% in 2023.

Steve Miller: Shifting gears to SGNA. As a reminder, SGNA for our business includes three main components. Salary expense for our headquarters customer experience and retail employees, marketing spend, including our home trion program, and general corporate overhead expenses. Adjusted SGNA excludes non cash costs like stock based compensation expense. Adjusted SGNA in the second quarter came in at 98.2 million or 52.2% of revenue. This compares to Q2 2023 adjusted SGNA of 86.8 million or 52.2% of revenue.

Steve Miller: Stock-based compensation for both periods is above our long-term forecast as a result of the multi-year equity grants to our COCEOs in 2021. We're still forecasting stock-based compensation as a percentage of net revenue in 2024 to be approximately 6% compared with 10.5% in 2023. Stock-based compensation for both periods is above our long-term forecast as a result of the multi-year equity grants to our COCEOs in 2021. We still anticipate stock-based compensation to normalize to a range of 2 to 4% of net revenue next year.

Steve Miller: Stock-based compensation for both periods is above our long-term forecast as a result of the multi-year equity grants to our co-CEOs in 2021. However, we're still forecasting stock-based compensation as a percentage of net revenue in 2024 to be approximately 6% compared with 10.5% in 2023. Stock-based compensation for both periods is above our long-term forecast as a result of the multi-year equity grants to our co-CEOs in 2021. However, we still anticipate stock-based compensation to normalize to a range of 2 to 4% of net revenue next year.

Speaker Change: stock-basaseed compensation for both periods is above our long-term forecast as a result of the multiyear equity grantss to our coceos in two thousand and twenty-one

Speaker Change: We're still forecasting stock-based compensation as a percentage of net revenue in 2024 to be approximately 6% compared with 10.5% in 2023.

Speaker Change: Stock-based compensation for both periods is above our long-term forecast as a result of the multi-year equity grants to our co-CEOs in 2021.

Steve Miller: Within adjusted SGNA, marketing spend increased from 18.2 million or 11% of revenue to 22.4 million or 11.9% of revenue. The de-leverage for marketing was offset by disciplined expense management and leverage in corporate expenses as non-marketing adjusted SGNA declined as a percent of revenue from 41.2% to 40.3%.

Speaker Change: We still anticipate stock-based compensation to normalize to a range of two to four percent of net revenue next year.

Steve Miller: For Q3 2024, we're guiding to the following: revenue between 188 and 190 million, which represents growth of approximately 11 to 12% year over year. From a bottom-line perspective in Q3, we're guiding to adjusted EBITDA of approximately 17 million, representing a margin of approximately 9% at the midpoint of our range. Given our outperformance in Q2, we now expect Q3 adjusted EBITDA to be lower than Q2, consistent with the shape of last year, while we still expect to expand adjusted EBITDA margin by approximately 250 basis points year over year.

Steve Miller: For Q3 2024, we're guiding to the following revenue between $188 and $190 million, which represents growth of approximately 11 to 12% year over year. From a bottom-line perspective, in Q3, we're guiding to adjusted EBITDA of approximately $17 million, representing a margin of approximately 9% at the midpoint of our range. Given our outperformance in Q2, we now expect Q3 adjusted EBITDA to be lower than Q2, consistent with the shape of last year, while we still expect to expand adjusted EBITDA margin by approximately 250 basis points year over year.

Speaker Change: for q three two thousand and twenty-four we' guiding to the following revenue between one hundred and eighty-eight and one hundred and ninety million which represents growth of approximately eleven to twelve percent year-over-year

Speaker Change: From a bottom-line perspective in Q3, we're guiding to adjusted EBITDA of approximately 17 million, representing a margin of approximately 9% at the midpoint of our range.

Steve Miller: Turning now to adjusted EBITDA. In the second quarter, we generated adjusted EBITDA of 19.6 million representing an adjusted EBITDA margin of 10.4%, which compares to adjusted EBITDA of 14.2 million or 8.5% of revenue in the year ago period. This represents approximately 190 basis points of adjusted EBITDA margin expansion. Turning now to our balance sheet, we were free cash flow positive for the fifth consecutive quarter, generating 14 million in Q2 and ended with a strong balance sheet position, reflecting approximately 238 million in cash, which we will continue to deploy deliberately to support our growth and operations. We also have an undrawn credit facility of 120 million that we can increase to 175 million.

Speaker Change: Given our outperformance in Q2, we now expect Q3 adjusted EBITDA to be lower than Q2, consistent with the shape of last year, while we still expect to expand adjusted EBITDA margin by approximately 250 basis points year over year.

Jaclyn Berkley: Thank you again for joining us this morning. With that, Neil, Dave, and I are pleased to take your questions.

Operator: Thank you again for joining us this morning. With that, Neil, Dave, and I are pleased to take your questions. Operator, please open the line for Q&A. Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, please press star 2. Our first question is from Mark Altschwager from...

Neil, Dave: Thank you again for joining us this morning. With that, Neil, Dave, and I are pleased to take your questions. Operator, please open the line for Q&A.

Unknown Attendee: Operator, please open the line for Q&A. Thank you. If you would like to ask a question, please press star one on your telephone keypad. If you would like to withdraw your question, please press star two.

Speaker Change: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, please press star 2.

Mark Altschwager: Our first question is from Mark Altschwager from Baird. Please go ahead.

Operator: Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, please press star 2. Our first question is from Mark Altschwager from Baird. Please go ahead.

Mark Ultschroger: Our first question is from Mark Ultschroger from Bed. Please go ahead. Good morning, thank you for taking my question. I guess first, Neil Day, would be great to hear your views on the health of the broader industry where we are in the replenishment cycle.

Speaker Change: Our first question is from Mark Altschwager from Baird. Please go ahead.

Mark Altschwager: Good morning. Thank you for taking my question. I guess first, Neil, Dave, it would be great to hear your views on the health of the broader industry.

Steve Miller: Now to our outputs. Warby Parker operates in a durable category, providing healthcare products and services, and our team is encouraged by the momentum we're seeing near to date. That being said, we are maintaining a conservative stance on guiding our business, given the broader macroeconomic environment. Given our performance in Q2, we're revising our full year 2024 guidance higher to the following. Revenue of 757 to 762 million, representing approximately 13 to 14% year over year growth, adjusted EBITDA of 72.5 million at the midpoint of our revenue range, which equates to an adjusted EBITDA margin of 9.5%, or approximately 170 basis points of year over year expansion.

Mark Ultschroger: And then Steve, I'm the guy you're, you're guiding to Q3 revenue that's slightly above Q2 but margins that are about 140 basis points lower than Q2. Was hoping you could just walk us through the puts and takes there. Thank you.

Speaker Change: where we are in the replenishment cycle.

Steve Miller: And then Steve, I'm a guy, you're guiding to Q3 revenue that's slightly above Q2, but margins that are about 140 basis points lower than Q2. I was hoping you could just walk us through the puts and takes there. Thank you.

Dave Gilboa: Thanks, Mark. On the industry demand side, we've yet to see signs of pent-up demand in the category, and we haven't seen a major change in trend this year. Now, given that our business is at the intersection of consumer products, fashion, and healthcare, we're subject to two largely independent macro forces. The first being overall consumer discretionary spending, and the second being essential health-related activity. And on the discretionary spending side, we're certainly not immune to the challenges that many companies are experiencing, but we do benefit from the fact that, in spite of our low prices, we serve mainly high-income consumers with a median household income north of $100,000 who seem to be in better shape than lower-income households, and those customers continue to opt in to some of our higher-priced items, resulting in higher average revenue per customer, as we discussed.

Neil Blumenthal: Thanks, Mark. So, on the industry demand side, we'd yet to see signs of pent-up demand in the category and haven't seen a major change in trend this year. Now, given that our businesses at the intersection of consumer products, fashion, and healthcare, we're subjected to largely independent macro forces, the first being overall consumer discretionary spending and the second being essential, I helped related activity. And on the discretionary spending side, what we're certainly not immune to the challenges that many companies are experiencing, but what we do benefit from the fact that inside of our low prices, we serve mainly high income consumers with a median household income north of $100,000 who seem to be in better shape than lower income households. Those customers continue to opt in to some of our higher price items, resulting in higher average revenue per customer as we discussed.

Speaker Change: Thanks, Mark. So, on the industry demand side, we've yet to see signs of pent-up demand in the category and haven't seen a major change in trend this year.

Speaker Change: Now, given that our business sits at the intersection of consumer products, fashion, and healthcare, we're subject to two largely independent macro forces, the first being overall consumer discretionary spending, and the second being essential IT.

Steve Miller: Stability and gross margin in the mid 50s as a percent of revenue, and 40 new store openings. We anticipate adjusted EBITDA margin expansion over the remainder of the year will be driven by leverage within SG&A, supported by ongoing efficiencies in staffing our store and customer experience teams, and achieving continued leverage in corporate expenses, while keeping marketing spend consistent as a percent of revenue in the low teams. We're still forecasting stock based compensation as a percentage of net revenue in 2024 to be approximately 6% compared with 10.5% in 2023.

Speaker Change: hel related activity and on the discretionary spending side what we're certainly not immune to the challenges that many companies are experiencing we do benefit from the fact that

Steve Miller: Stock based compensation for both periods is above our long term forecast as a result of the multi-year equity grants to our COCEOs in 2021. We're still forecasting stock based compensation as a percentage of net revenue in 2024 to be approximately 6% compared with 10.5% in 2023. Stock based compensation for both periods is above our long term forecast as a result of the multi-year equity grants to our COCEOs in 2021. We still anticipate stock based compensation to normalize to a range of 2 to 4% of net revenue next year.

Speaker Change: In spite of our low prices, we serve mainly high-income consumers with a median household income north of $100,000 who seem to be in better shape than lower-income households.

Steve Miller: and those customers continue to opt into some of our higher price items resulting in higher average revenue customer as we discussed

Steve Miller: Here, we've yet to see a significant shift in patterns and have not seen meaningful differences in the category trends year-to-date. Overall, this results in us continuing to see more intentional traffic, a smaller percentage of shoppers that are carrying bags from other stores nearby, and a higher percentage of our patients and customers are beginning their journey with an exam and with Warby Parker as their only kind of shopping visit. But we also do know that if some of that discretionary spending in our categories is put off long enough, it does turn into required health-related spending.

Neil Blumenthal: On the eye health side, we benefit from serving essential eye health related conditions, including when people's prescriptions change. Here, we've yet to see a significant shift in patterns and have not seen meaningful differences in the category trends year to date.

Speaker Change: On the iHELP side, we benefit from...

Speaker Change: serving essential eye health related conditions, including when people's prescriptions change. Here we've yet to see a significant shift in patterns and have not seen meaningful differences in the category trends year to date. And so overall this results in us continuing to see more intentional traffic, a smaller percentage of shoppers that are carrying bags from other stores nearby, a higher percentage of our patients and customers.

Neil Blumenthal: And so overall, this result in us continuing to see more intentional traffic and a smaller percentage of shoppers that are carrying bags from other stores nearby. A higher percentage of our patients and customers are beginning their journey with an exam and with Warby Parker as their only kind of shopping visit. But we also do know that if some of that discretionary spending in our categories put off long enough, it does turn into required health-related spend. So, at some point, we are expecting category demand to increase, but are not counting on that this year and believe we can hit our guidance targets without an improvement in category demand.

Speaker Change: are beginning their journey with an exam and with Warby Parker as their only kind of shopping visit.

Steve Miller: But we also do know that if some of that discretionary spending in our category is put off long enough, it does turn into required health-related spend.

Steve Miller: For Q3 2024, we're guiding to the following. Revenue between 188 and 190 million, which represents growth of approximately 11 to 12% year over year. From a bottom line perspective in Q3, we're guiding to adjusted EBITDA of approximately 17 million, representing a margin of approximately 9% at the midpoint of our range.

Steve Miller: So at some point, we are expecting category demand to increase, but we are not counting on that this year and believe we can hit our guidance targets without an improvement in category demand. E.C. Hi Mark, this is Steve.

Steve Miller: Hi, Mark. This is Steve. Thanks for your question as it relates to Key three. So I'll unpack a little bit of what went into our projections for Key three.

Steve Miller: Thanks for your question as it relates to Q3. So I'll unpack a little bit of what went into our projections for Q3. As a reminder, we are comparing the top line off of our strongest growth last year, where we were up a little north of 14% year over year. But turning to gross margin, we've seen two consecutive quarters of gross margin expansion. We're projecting that this moderates in Q3 and would point you toward the midpoint of our mid-50s range as it relates to gross margin and would point to Q3 of last year as a good reference point.

Steve Miller: Given our outperformance in Q2, we now expect Q3 adjusted EBITDA to be lower than Q2, consistent with the shape of last year, while we still expect to expand adjusted EBITDA margin by approximately 250 basis points year over year. Thank you again for joining us this morning. With that, Neil Dave and I are pleased to take your questions.

Steve Miller: Hi Mark, this is Steve. Thanks for your question as it relates to Q3.

Speaker Change: so i'll unpack a little bit of what went into our projections for q three as a reminder we are compping top line off of our strongest growth last year where we were up a little north of fourteen percent year-over-year

Steve Miller: As a reminder, we are comping top line off of our strongest growth last year, where we were up a little north of 14% year over year, but turning to gross margin. And we've seen two consecutive quarters of gross margin expansion; we're projecting that that moderates in Q3 and would point you toward the midpoint of our mid-50s range as it relates to gross margin and would point to Q3 of last is a good reference point. So we're not planning for the same level of expansion that we've seen to date and would point you towards really that the mid 50s and Q3 of last year as reference points as it relates to marketing, stepping down the income statement within SG&A. We're planning for marketing spend really consistent as a percent of revenue with what you saw on Q2.

Speaker Change: But turning to gross margin, we've seen two consecutive quarters of gross margin expansion. We're projecting that that moderates in Q3 and would point you toward the midpoint of our

Operator: Operator, please open the line for Q&A. Thank you. If you would like to ask a question, please press star 1 on your telephone keypad. If you would like to withdraw your question, please press star 2.

Speaker Change: mid-50s range as it relates to gross margin and would point to Q3 of last year, which is a good reference point. So we're not planning for the same level of expansion that we've seen to date and would

Steve Miller: So we're not planning for the same level of expansion that we've seen to date and would point you towards really the mid-50s and Q3 of last year as reference points. As it relates to marketing, stepping down the income statement within SG&A, we're planning for marketing spend really consistent as a percent of revenue with what you saw in Q2. In the low teens as a percent of revenue, with really Q2 as a good reference point.

Mark Ultschroger: Our first question is from Mark Ultschroger from Bed. Please go ahead. Good morning. Thank you for taking my question. I guess first, Neil Day would be great to hear your views on the health of the broader industry where we are in the replenishment cycle. And then Steve, I'm a guy you're you're guiding to Q3 revenue that's slightly above Q2 but margins that are about 140 basis points lower than Q2 was hoping you could just walk us through the puts and takes there. Thank you. Thanks, Mark.

Speaker Change: point towards that the id and q three of last year as reference poinas a relates to marketing steping down the income statement withinan s g a were planned from marketing spend really consistent as a percent of revenue with what you saw in q two in the lowad team does a percent of revenue with really q two as a good reference point and s g a spend x marketing as a percent of revenue as we called out came in at roughly forty point three percent and we're projecting a simil similar level of spend for s g a x marketing and sothat's howwe unpacked the quarter consistent gross margin as opposed to an expansion and then we' leverage coming from s a x market

Steve Miller: In the low team does a percent of revenue with really Q2 is a good reference point and SGNA spend X marketing as a percent of revenue as we called out came in at roughly 40.3%, and we're projecting a similar a similar level of spend for SGNA X marketing. And so that's how we unpack the quarter consistent gross margin as opposed to an expansion, and then we'll leverage coming from SGNA X marketing with consistent marketing spend as a percent of revenue. and you.

Neil Blumenthal: So on the industry demand side, we've yet to see signs of pent up demand in the category and haven't seen a major change in trend this year. Now, given that our businesses at the intersection of consumer products, fashion and healthcare, we're subjected to largely independent macro forces, the first being overall consumer distance. Discretionary spending and the second being essential, I helped related activity and on the discretionary spending side, what we're certainly not immune to the challenges that many companies are experiencing, but we do benefit from the fact that inside of our low prices, we serve mainly high income consumers with a median household income north of $100,000 who seem to be in better shape than lower income households.

Steve Miller: And SG&A spend X marketing as a percent of revenue, as we called out, came in at roughly 40.3%, and we're projecting a similar level of spend for SG&A X marketing. And so that's how we unpack the quarter. Consistent gross margin as opposed to an expansion and then real leverage coming from SG&A X marketing with consistent marketing spend as a percent of revenue.

Mark Ultschroger: So very helpful. Thank you.

Speaker Change: with Consistent Marketing Spend as a Percent of Revenue.

Oliver Chen: Our next question is from Oliver Chen at TD Cowan. Please go ahead. Hi, Neil, Dave, and Steve. You've been bucking the trends as peers or others in the industry have been seeing weakness and ending Q2, and some weaker commentary. I would love your thoughts on that. It sounds like a lot of innovation is taking hold. Also, as you mentioned, contacts and exams and the big opportunities going for there.

Speaker Change: it

Operator: Our next question is from Oliver Chen at TD Cowan. Please go ahead.

Speaker Change: very helpful thank you

Speaker Change: Our next question is from Oliver Chen at TD Cowan. Please go ahead.

Neil Blumenthal: Hi Neil, Dave, and Steve. You've been bucking the trends as peers or others in the industry have been seeing weakness and ending Q2 and some weaker commentary. I would love your thoughts on that. It sounds like a lot of innovation is taking hold. Also, as you mentioned, contacts and exams and the big opportunities going forward there. What are you doing to drive that awareness factor and initiatives to distinguish yourself and drive differentiation? Also, the optical lab efficiencies have been encouraging. Do you expect those to continue? What inning are you in with making some nice, nice benefits there as well? Thank you.

Oliver Chen: Bye, Neil, Dave, and Steve.

Oliver Chen: you've been bucking the trends as peers or or others than the industry have been seeing

Oliver Chen: I would love your thoughts on that. It sounds like a lot of innovation is taking hold.

Neil Blumenthal: And those customers continue to opt into some of our higher price items, resulting in higher average revenue per customer as we discussed. On the eye health side, we benefit from serving essential eye health related conditions, including when people's prescriptions change. Here we've yet to see a significant shift in patterns and have not seen meaningful differences in the category trends year to date. And to overall this result in us continuing to see more intentional traffic and a smaller percentage of shoppers that are carrying bags from other stores nearby, a higher percentage of our patients and customers are beginning their journey with an exam.

Oliver Chen: Also, as you mentioned, contacts and exams and the big opportunities going forward there. What are you doing to drive that awareness factor and initiative to distinguish yourself and drive differentiation?

Oliver Chen: What are you doing to drive that awareness factor and initiatives to distinguish yourself and drive differentiation? Also, the optical lab efficiencies have been encouraging.

Oliver Chen: Do you expect those to continue? What ending are you in with making some nice, nice benefits there as well?

Speaker Change: Also, the optical lab efficiencies have been encouraging. Do you expect those to continue? What inning are you in with making some nice...

Neil Blumenthal: Thank you. Thanks, Oliver.

Speaker Change: Nice benefits there as well. Thank you.

Neil Blumenthal: Thanks, Oliver. This is Neil.

Neil: Thanks, Oliver. This is Neil. Uh, you know.

Neil Blumenthal: This is Neil. Well, we're continuing to see pay off from our increase investment in marketing. So we've gone back to sort of our pre-pandemic strategy of diversifying across multiple channels. You have a lot of creative output out in the market, and that's paying off to attract new customers and, of course, engage existing customers as well. This is all in the backdrop of a much larger network of stores that many of which have been built and opened in the last couple of years that continue to ramp. So we're sort of taking advantage of increased awareness and, of course, just increased access through our larger footprint.

Speaker Change: Thanks, Oliver. This is Neil.

Neil Blumenthal: What we're continuing to see is payoffs from our increased investment in marketing. So we've gone back to sort of our pre-pandemic strategy of diversifying across multiple channels, you know, having a lot of creative output out in the market, and that's paying off to attract new customers and, of course, engage existing customers as well. And this is all on the backdrop of a much larger sort of network of stores that, you know, many of which have been sort of built and opened in the last couple of years that continue to expand.

Speaker Change: What we're continuing to see is payoffs from our increased investment in marketing, so we've gone back to sort of our pre-pandemic strategy of diversifying across multiple channels, you know,

Neil Blumenthal: And with Warby Parker as their only kind of shopping visit. But we also do know that if some of that discretionary spending in our categories put off long enough, it does turn into required health related spend. So at some point we are expecting category demand to increase, but are not counting on that this year and believe we can hit our guidance targets without an improvement in category demand.

Speaker Change: I have a lot of creative output out in the market and that's paying off to attract new customers and of course and engage existing customers as well, and this is all on the backdrop of a much larger sort of network of stores that you know

Speaker Change: many of which have been sort of built and opened in the last couple years that continue to ramp. So we're sort of taking advantage of increased awareness and, of course, just increased access through our larger footprint. We continue to invest in innovation. As we mentioned, we're really excited about this latest feature, our Glasses Eraser, right, that makes our virtual try-on, which was already sort of best-in-class and sort of the first to have a true-to-scale virtual try-on, now enables people to use that tool while wearing their existing glasses, because we know many of our customers can't see without them.

Neil Blumenthal: So we're sort of taking advantage of increased awareness and, of course, just increased access through our larger footprint. We continue to invest in innovation, as we mentioned. We're really excited about this latest feature, our glasses eraser, right, that makes our virtual try-on, which was already sort of best in class and sort of the first to have a true-to-scale virtual try-on, now enables people to use that tool while wearing their existing glasses, because we know many of our customers can't see without their existing glasses.

Steve Miller: Hi Mark, this is Steve. Thanks for your question as it relates to key three. So I'll unpack a little bit of what went into our projections for key three. As a reminder, we are comping top line off of our strongest growth last year, where we were up a little north of 14% year over year. But turning to gross margin, we've seen two consecutive quarters of gross margin expansion. We're projecting that that moderates in Q3 and would point you toward the mid point of our mid 50s range as it relates to gross margin and would point to Q3 of last is a good reference point.

Neil Blumenthal: We continue to invest in innovation. As we mentioned, we're really excited about this latest feature. Our class is a racer. Right? That makes our virtual trion, which was already sort of best in class and sort of the first to have a true to scale virtual trion, now enables people to use that tool while wearing their existing glasses because we know many of our customers can't see without their existing glasses. So it's tools like this that constantly enhance the customer experience that make our returning customers want to come back to us, and our customers tell their friends and family about us.

Neil Blumenthal: So it's tools like this that constantly enhance the customer experience that make our returning customers want to come back to us, and our customers tell their friends and family about us. From a contact perspective, we continue to see good productivity there. These are some of our highest-value customers, and we have, you know, existing customers that have been shopping with us for a while that then learn that we offer contacts and start buying from us, and then new to Warby Parker contacts that then end up going to buy glasses.

Speaker Change: their existing glasses. So it's tools like this that constantly enhance the customer experience that make our returning customers want to come back to us and our customers tell their friends and family about us.

Steve Miller: So we're not planning for the same level of expansion that we've seen to date and would point you towards really that the mid 50s and Q3 of last year as reference points as it relates to marketing. Stepping down the income statement within SGNA, we're planning for marketing spend really consistent as a percent of revenue with what you saw on Q2 in the low team does a percent of revenue with really Q2 is a good reference point and SGNA spend X marketing as a percent of revenue as we called out came in at roughly 40.3% and we're projecting a similar similar level of spend for SGNA X marketing. And so that's how we unpack the quarter consistent gross margin as opposed to an expansion and then we'll leverage coming from SGNA X marketing with consistent marketing spend as a percent of revenue, and you.

Neil Blumenthal: From a contact perspective, we continue to see good productivity there. These are some of our highest value customers, and we have existing customers. I've been shopping with us for a while that they learn that we offer contact and start buying from us and then new to Warby Parker contact that then end up going to survive classes. And I think what we find is that our customers are just finding it really easy to purchase with us and are continually surprised by the exceptional value. And that creates this customer acquisition pliwheel given the added investment with marketing.

Speaker Change: From a contact perspective, we continue to see good productivity there. These are some of our highest value customers, and we have existing customers that have been shopping with us for a while, but then learned that we offer contacts and started buying from us, and then new to Warby Parker contacts.

Mark Ultschroger: So, very helpful.

Neil Blumenthal: And I think what we find is that our customers are just finding it really easy to purchase with us and are continually surprised by the exceptional value, and that, you know, creates this customer acquisition flywheel, given the added investment in marketing. From an optical lab perspective, you know, we continue to scale our two optical labs. As in the past, we find that when we do things ourselves, we do them faster, at higher quality, and at lower cost. So it's been great to see, you know, leverage from our sort of investments in those two optical labs.

Speaker Change: um

Speaker Change: that then end up going to buy glasses and i think what we find is that our customers are just finding it really easy to purchase with us and are continually surprised by the exceptional value and you know creates a customer acquisition ply wheelall given the added investment with with marketing

Mark Ultschroger: Thank you.

Neil Blumenthal: From an optical lab perspective, we continue to scale our two optical labs. As in the past, we find when we do things ourselves, we do it faster, at higher quality, and at lower cost. So it's been great to see, you know, leverage from our sort of investment in those two optical labs.

Speaker Change: From an optical lab perspective, you know, we continue to scale our two optical labs.

Oliver Chen: Our next question is from Oliver Chen at TD Cowan. Please go ahead. Hi, Neil, Dave and Steve. You've been bucking the trends as peers or others in the industry have been seeing weakness in ending Q2 and some weaker commentary. I would love your thoughts on that. It sounds like a lot of innovation is taking hold. Also, as you mentioned, contacts and exams and the big opportunities going for there, what are you doing to drive that awareness factor and initiatives to distinguish yourself and drive differentiation?

Speaker Change: As in the past, we find when we do things ourselves, we do it faster, at higher quality, and at lower cost. So it's been great to see leverage from our investments in those two optical labs.

Oliver Chen: That's very good. Thank you.

Neil Blumenthal: Best regards. Thank you. Our next question comes from Janine Stichter from BTIG. Janine, please go ahead. Hi, good morning. A question for Steve on the growth margin.

Janine Stichter: Our next question comes from Janine Stichter from BTIG.

Speaker Change: that's regard thank you

Operator: Our next question comes from Janine Stichter from BTIG. Janine, please go ahead. Hi, good morning. Question for

Janine Stichter: Janine, please go ahead. Hi, good morning. Questions for Steve on the gross margins. So, I understand you're kind of positioning them right back after you're right in the middle of that mid-50s guidance. But can you help us think about the range of outcomes if we continue to see single-vision glasses outperform? And then maybe some of the other drivers. What could the upside case look like both to the back half of the year?

Speaker Change: our next question comes from jenine stitcher from btilogy t n please go ahead

Oliver Chen: Also, the optical lab efficiencies have been encouraging. Do you expect those to continue what ending are you in with making some nice benefits there as well? Thank you. Thanks, Oliver. This is Neil. Well, we're continuing to see as payoffs from our increase investment in marketing. So, we've gone back to sort of our pre-pandemic strategy of diversifying across multiple channels. I have a lot of creative output out in the market and that's paying off to attract new customers and of course engage existing customers as well.

jenine stitcher: hi good warning on question for steve on the gross margin

jenine stitcher: So I understand you're kind of positioning them, right, for the back half of the year, right in the middle of that mid-50s guidance, but can you help us think about the range of outcomes if we continue to see single-vision glasses outperform?

Steve Miller: And then, you know, how are you thinking longer term about where gross margins could settle if we continue to see that growth in single-vision glasses?

jenine stitcher: and then maybe some of the other drivers. What could the upside case look like both for the back half of the year and then how are you thinking longer term about where gross margins could settle if we continue to see that growth in single vision glasses? Thank you.

Steve Miller: Thank you. Yeah, sure.

Steve Miller: Yeah, sure. There are a number of puts and takes within the gross margin. And the easiest way to think about the main factors impacting margin would just be product mix. We've seen a lot of strength in glass growth in Q1 and Q2, and that certainly helped gross margin inflect upward. In Q2, we saw meaningful efficiencies in our optical lab network, which we just talked about, and very strong efficiencies with shipping and the mix of shipping carriers that we chose to work with during the quarter.

Steve Miller: There are a number of puts and takes within gross margin, and the easiest way to think about the main factors impacting margin would just be product mix. We've seen a lot of strength in glasses growth, Q1 and Q2. And that certainly helps gross margin in flat upward and Q2. We saw meaningful efficiencies in our optical lab network, which we just talked about. And very strong efficiencies with shipping and mix of shipping carriers that we chose to work with during the quarter. As we think about the back half of this year, we are seeing continued strength in eye exams and contacts.

Speaker Change: Yeah, sure. There are a number of puts and takes within gross margin and

Speaker Change: easiest way to think about the main factors impacting margin would just be product mix

jenine stitcher: We've seen a lot of strength in glasses growth, Q1 and Q2, and that certainly helps.

Speaker Change: gross margin in flat upward. In Q2 we saw meaningful efficiencies in our optical lab network which we just talked about.

Oliver Chen: And this is all in the backdrop of a much larger network of stores that many of which have been built and opened in the last couple of years that continue to ramp. So, we're sort of taking advantage of increased awareness and of course just increased access through our larger footprint. We continue to invest in innovation as we mentioned. We're really excited about this latest feature, our class as a racer. Right, that makes our virtual try-on, which was already sort of best in class and sort of the first to have a true to scale virtual try-on now enables people to use that tool while wearing their existing glasses because we know many of our customers can't see without their existing glasses.

Steve Miller: As we think about the back half of this year, we are seeing continued strength in eye exams and contacts. And so we're creating the space to continue to see those two offerings ramp significantly in the back half of this year. And we are taking a conservative stance as it relates to projecting growth in glasses. So there could be some upside to gross margin as it relates to growth in glasses coming in higher than anticipated.

Speaker Change: and very strong efficiencies with shipping and mix of shipping carriers that we chose to work with during the quarter

Speaker Change: As we think about the back half of this year, we are seeing continued strength in eye exams and contacts, and so we're creating the space to

Steve Miller: And so we're creating the space to continue to see those two offerings ramp significantly the back half of this year.

Speaker Change: but continue to see those two

Steve Miller: And we are taking a conservative stance as it relates to projecting glasses growth. So there could be some upside to gross margin as it relates to glasses growth coming in higher than anticipated. For the full year, we are still projecting really the mid 50s, the midpoint of that range. And based on the relative mix of the business in terms of glasses, contacts, and exams that really represents where we've embedded potential upside. Perfect.

Speaker Change: offerings ramp significantly the back half of this year, and we are taking a conservative stance as it relates to projecting glasses growth, so there could be some upside to gross margin as it relates to glasses growth coming in higher than anticipated. For the full year we are still projecting really the mid-50s, the midpoint of that range, and

Steve Miller: For the full year, we are still projecting revenue in the mid-50s, the midpoint of that range. And based on the relative mix of the business in terms of glasses, contacts, and exams, that really represents where we've embedded potential upside.

Speaker Change: based on the relative mix of the business in terms of glasses, contacts, and exams that really represents where we've embedded potential upside.

Oliver Chen: So, it's tools like this that constantly enhance the customer experience that make our returning customers want to come back and our customers tell their friends and family about us. From a contacts perspective, we continue to see good productivity there. These are some of our highest value customers and we have existing customers. I've been shopping with us for a while that they learn that we offer contacts and serve buying from us and then new to Warby Parker contact that then end up going to survive classes.

Steve Miller: Thanks for all the color at the box.

Speaker Change: perfect s for the color at meesaba

Dylan Cardin: Our next question is from Dylan Cardin at William Blair.

Operator: Our next question is from Dylan Carden at William Blair. Please go ahead.

Dylan Cardin: Please go ahead. Thanks a lot.

Speaker Change: Our next question is from Dylan Carden at William Blair. Please go ahead.

Unnamed Speaker: Thanks a lot. I'm curious, now that you've added all these doctors, how that's sort of showing up in the model. And I don't know if the way to do that is to think about kind of the industry rule of thumb that 80% of glasses happen with an exam, maybe how that relates to your business, and if there's some lag effect as those doctors ramp up.

Neil Blumenthal: Thanks a lot. I'm curious now that you've added all these doctors, how that's sort of showing up in the model. And I don't know if the way to do that is to think about kind of the industry rule of thumb that 80% of glasses happen with an exam, maybe how that relates to your business, and if there's some lag effect as those doctors ramp up. And, kind of a related question, any update on where the penetration rates are from sort of the major categories, progressives, exams, contacts, versus where you were kind of at the direct

Dylan Cardin: Curious, now that you've added all these doctors, how that sort of showing up in the model. And I don't know if the way to do that is to think about kind of the industry rule of thumb that 80% of glasses happen with an exam.

Dylan Carden: Thanks a lot. I'm curious, now that you've added all these doctors, how that's sort of showing up in the model. And I don't know if the way to do that is to think about kind of the industry rule of thumb that 80% of glasses happen with an exam. Maybe how that relates to your business and if there's some lag effect as those doctors ramp.

Neil Blumenthal: Maybe have that relates to your business and if there's some lag effect as those doctors ramp and kind of related question any update on where the penetration rates are from sort of the major categories progresses exams, contacts versus where you were kind of a direct listing. Thanks. So, on the eye care front, we continue to hire more and more optometrists and continue to be a preferred place of employment for our eye doctors, given the location of our stores, given the design of the stores, given the new and cutting-edge equipment and technology that we use especially.

Speaker Change: and kind of related quite a jny update on where the penetration rates are from sort the major categories progressive exams context versus where you were kind of direct listing

Oliver Chen: And I think what we find is that our customers are just finding it really easy to purchase with us and are continually surprised by the exceptional value. And that creates this customer acquisition pli-wheel given the added investment with marketing. From an optical lab perspective, we continue to scale our two optical labs. As in the past, we find when we do things ourselves, we do it faster at higher quality and at lower cost. So, it's been great to see leverage from our sort of investments in those two optical labs. That's very good. Thank you.

Neil Blumenthal: So on the eye care front, we continue to hire more and more optometrists and continue to be a preferred place of employment for our eye doctors given the location of our stores, given the design of the stores, given the new and cutting-edge equipment and technology that we use, especially those that enable our doctors to focus on clinical care rather than administrative tasks. And we are at the early innings of our sort of journey into eye care. We still find that many of our customers and the general public don't realize that we offer eye exams. So it's something that we continue to focus on. It's just raising awareness about this offering.

Speaker Change: so on the i care front we continue to

Speaker Change: highire more and more toometrth and continue to be a preferred placeice of employment for our i doctors given the location of our stores given the design of the stores given the new and cutting edge equipment and technology that we use especially those that ennaable our doctors to focus on clinical care rather than administrative task

Neil Blumenthal: Those that enable our doctors to focus on clinical care rather than administrative tasks. And we are at the early innings of our sort of journey into eye care. We still find that many of our customers and the general public don't realize that we offer eye exams. So it's something that we continue to focus on: raising awareness about this offering. We still only a small fraction of our customers are purchasing where we park our glasses and contacts with prescription that we've given them after an exam. We expect that to ramp, but this is a multi-year and really a mid- and long-range strategy for us to eventually get to the 15% revenue that most optical retailers get through exam revenue.

Speaker Change: And we are at the early innings of our sort of journey into eye care.

Speaker Change: We still find that many of our customers, in general, pop.

Janine Stichter: Our next question comes from Janine Stichter from BTIG. Janine, please go ahead. Hi, good morning.

Neil Blumenthal: We still only a small fraction of our customers are purchasing Warby Parker glasses and contacts with a prescription that we've given them after an eye exam. We expect that to ramp, but this is a multi-year and really a mid and long-range strategy for us to eventually get to, you know, the 15 percent of revenue that most optical retailers get through exam revenue. And we still see in the market, yeah, that 75 to 80 percent of customers are buying glasses where they got their eye exam.

Speaker Change: public don't realize that we offer eye exams. So it's something that we continue to focus on. It's just raising awareness about this offering. We still, only a small fraction of our customers are purchasing Warby Parker glasses and contacts with a prescription that we've given them after an eye exam. We expect that to ramp, but this is a multi-year and really a mid and long-range program.

Janine Stichter: Questions for Steve on the gross margins. So, I understand you're kind of positioning them right, so back after you're right in the middle of that mid-50s guidance, but can you help us think about the range of outcomes if we continue to see single vision glasses that perform, and then maybe some of the other drivers, what could the upside case look like, both to the back half of the year, and then how are you thinking longer term about where gross margins could settle if we continue to see that growth in single vision glasses?

Speaker Change: strategy for us to eventually get to, you know, the 15% of revenue that most optical retailers get through examined revenue.

Janine Stichter: Thank you. Yeah, sure. There are a number of puts and takes within gross margin, and easiest way to think about the main factors impacting margin would just be product mix. We've seen a lot of strength in glasses growth, Q1 and Q2, and that certainly helps gross margin in flat upward. In Q2, we saw meaningful efficiencies in our optical lab network, which we just talked about and very strong efficiencies with shipping and mix of shipping carriers that we chose to work with during the quarter.

Neil Blumenthal: And we still see in the market, yeah, that 75 to 80% of customers are buying glasses where they got their eye exam. And again, we're just a fraction of that. So we see this as early innings, and this will be a continued tailwind for us for, you know, the next decade, as we continue to raise awareness about our eye exam offering, as we continue to expand our sort of avail, exam availability and stores. So it's something that we're really excited about. You know, every new store we open has at least one exam lane, and we continue to make investments in that business, expanding video assisted eye exams, for example, that will enable us to continue to scale in the years ahead.

Speaker Change: And we still see in the market, yeah, that 75% to 80% of customers are buying glasses where they got their eye exam. And again, we're just a fraction of that. So we see this as early innings, and this will be a continued tailwind for us for, you know, the next decade, as we continue to raise awareness about our eye exam offering, as we continue to expand our

Neil Blumenthal: And again, we're just a fraction of that. So we see this as the early innings, and this will be a continued tailwind for us for, you know, the next decade as we continue to raise awareness about our eye exam offering and as we continue to expand our sort of exam availability in stores. So it's something that we're really excited about. You know, every new store we open has at least one exam lane, and we continue to make investments in that business, expanding video-assisted eye exams, for example, and that will enable us to continue to scale in the years ahead.

Janine Stichter: As we think about the back half of this year, we are seeing continued strength in eye exams and contacts, and so we're creating the space to continue to see those two offerings ramp significantly the back half of this year, and we are taking a conservative stance as it relates to projecting glasses growth, so there could be some upside to gross margin as it relates to glasses growth coming in higher than anticipated. For the full year, we are still projecting really the mid-50s, the mid-point of that range, and based on the relative mix of the business in terms of glasses, contacts, and exams, that really represents where we embedded potential upside.

Speaker Change: sortof of ail exam availability and stores so it's something that we're really excited about you know every new store we open as at least one examlane and we continue to make investments in that business

Speaker Change: expanding video-assisted eye exams, for example, and that will enable us to continue to scale in the years ahead.

Neil Blumenthal: And to your question about opportunity to expand contacts and exams and where we are in that journey. So, as we talked about, contacts make up roughly 10% of our business for a more mature optical retailer, with a large network of stores that numbers closer to 20% in terms of our exam that makes up roughly 5% of our business. We talked about that number being 15% for national optical retailers in terms of our market share of these particular categories within the optical industry. Very early earnings, we've got about half a percent of the 12 billion dollar contacts market and under half a percent of the roughly 11 billion dollar eye exam market, not to mention prescription glasses, which is our largest category and our most profitable category.

Neil Blumenthal: And to your question about the opportunity to expand contacts and exams and where we are in that journey. So, as we talked about, contacts make up roughly 10 percent of our business for a more mature optical retailer with a large network of stores. That number is closer to 20 percent in terms of eye exams, and it makes up roughly 5 percent of our business. We talked about that number being 15 percent for national optical retailers.

Speaker Change: And to your question about opportunity to expand contacts and exams and...

Speaker Change: where we are in that journey so as we talked about contacts make up roughly ten percent of our business for a more mature optical retailer with the large network of stories that numbers closer to twenty percent in terms of v them that makes up roughly five percent of our business

Janine Stichter: Perfect, thanks for all the color at rest of us.

Dylan Cardin: Our next question is from Dylan Cardin at William Blair. Please go ahead. Thanks a lot.

Speaker Change: We've talked about that number being 15% for...

Neil Blumenthal: In terms of our market share of these particular categories within the optical industry, in the very early innings, we've got about half a percent of the $12 billion contacts market and under half a percent of the roughly $11 billion eye exam market, not to mention prescription glasses, which is our largest category and our most profitable category. That still represents just 2 percent of the market share if you look at our glasses business versus that of the prescription glasses market at large.

Speaker Change: National Optical Retailers. In terms of our market share of these particular categories within the optical industry, very early innings we've got about half a percent of the 12 billion dollar contact market and under half a percent.

Dylan Cardin: Curious now that you've added all these doctors, how that sort of showing up in the model, and I don't know if the way to do that is to think about the industry rule of thumb that 80% of glasses happen with an exam. Maybe how that relates to your business, and if there's some lag effect as those doctors ramp. And kind of a related question, any update on where the penetration rates are from sort of the major categories, progressives, exams, contacts, versus where you were kind of at the direct listing.

Speaker Change: of the roughly $11 billion eye exam market, not to mention prescription glasses, which is our largest category and our most profitable category. That still represents just 2% market share if you look at our glasses business versus that of the prescription glasses market at large.

Neil Blumenthal: That still represents just 12, just 2% market share if you look at our glasses business versus that of the prescription glasses market at large.

Dylan Cardin: Thank you.

Dylan Cardin: I'm curious if I can squeeze on what kind of that I know that you have to grow some awareness of these new offerings and the sort of more medium term but and any thoughts is to kind of the marketing leverage when you might start being able to kind of utilize the retail channel to take down some of your marketing spend from a timing standpoint. We don't anticipate sort of lowering marketing from where it is today; if anything, we might invest more in the coming months and years, and we think that we can continue to expand EBITDA while maintaining or even investing more in marketing as we gain increased leverage over other corporate expenses and other S.U.N.A.

Neil Blumenthal: Curious if I could squeeze one in. With kind of that, I know that you have to grow some awareness of these newer offerings in the sort of more medium term, but any thoughts on kind of the marketing leverage when you might start being able to kind of utilize the retail channel to take down some of your marketing spend from a timing standpoint?

Dylan Cardin: Thanks. So on the eye care front, we continue to hire more and more optometrist and continue to be a preferred place of employment for our eye doctors given the location of our stores, given the design of the stores, given the new and cutting edge equipment and technology that we use, especially those that enable our doctors to focus on clinical care rather than administrative tasks. And we are at the early innings of our sort of journey into eye care.

Speaker Change: Thank you. Curious if I could squeeze one in.

Speaker Change: With kind of that, I know that you have to grow some awareness of these newer offerings in the sort of more medium term, but and any thoughts just to kind of the marketing leverage when you might start being able to kind of utilize the retail channel to take down some of your marketing spend from a timing standpoint?

Neil Blumenthal: We don't anticipate any sort of lowering marketing from where it is today. In fact, we might invest more in the coming months and years. We think that we can continue to expand EBITDA while maintaining or even investing more in marketing as we gain increased leverage over other corporate expenses and other SG&A.

Unnamed Speaker: We don't anticipate any sort of lowering marketing from where it is today. In fact, we might invest more in the coming months and years. We think that we can continue to expand EBITDA while maintaining or even investing more in marketing as we gain increased leverage over other corporate expenses and other SG&A.

Speaker Change: it

Speaker Change: We don't anticipate lowering marketing from where it is today. If anything, we might invest more in the coming months and years. We think that we can continue to expand EBITDA while maintaining or even investing more in marketing as we gain increased leverage over other corporate expenses and other SG&A.

Dylan Cardin: We still find that many of our customers in the general public don't realize that we offer eye exams. So it's something that we continue to focus on. It's just raising awareness about this offering. We still only a small fraction of our customers are purchasing where we park our glasses and contacts with prescription that we've given them after an eye exam. We expect that to ramp, but this is a multi-year and really a mid and long-range strategy for us to eventually get to the 15% revenue that most optical retailers get through exam revenue.

Dylan Cardin: Okay. Thank you very much.

Operator: Okay, thank you very much.

Brooke Roach: Our next question is from Brooke Roach at Goldman Sachs. Please go ahead. Good morning, and thank you for taking our question. I was hoping to get your thoughts on the sustainability of the strong revenue per customer trends that you've been seeing in recent quarters. Are you seeing any signs of price sensitivity in the customer, or any changes to basket size or AUR as you've moved into the back half of this year?

Operator: Our next question is from Brooke Roach at Goldman Sachs. Please go ahead. Good morning and thank you.

Speaker Change: Okay, thank you very much.

brookke roach: our next question is from brookke roach at goldman facts please go ahead

Operator: Good morning, and thank you for taking our question. I was hoping to get your thoughts on the sustainability of the strong revenue per customer trends that you've been seeing in recent quarters. Are you seeing any signs of price sensitivity in the customer or any changes to basket size or AUR as you've moved into the back half of this year?

Operator: Good morning, and thank you for joining us today.

Speaker Change: Good morning and thank you for taking our question. I was hoping to get your thoughts on the sustainability of the strong revenue per customer trends that you've been seeing in recent quarters. Are you seeing any signs of price sensitivity in the customer or any changes to basket size or AUR as you've moved into the back half of this year?

Neil Blumenthal: Thanks, Brooke. We continue to see very encouraging trends in terms of average revenue per customer that we're seeing, and it's coming from a combination of factors, including an increase adoption of some of our newer products like precision progressives that come in a higher price point. I have a percentage of our customers who are not only buying glasses from us but are starting their journey with an exam, and the patients have a very high saturated by other products from us and increasing percentage of our customers who are buying glasses and contacts and often buying annual supplies of contacts, which tend to be kind of high dollar purchases.

Dave Gilboa: Brooke, we continue to see very encouraging trends in terms of the average revenue per customer that we're seeing, and it's coming from a combination of factors, including increased adoption of some of our newer products like precision progressives that come in at a higher price point. I employ a percentage of our customers who are not only buying glasses from us but are starting their journey with an exam. And those patients have a very high attach rate to buy other products from us.

Unnamed Speaker: Brooke, we continue to see very encouraging trends in terms of the average revenue per customer that we're seeing, and it's coming from a combination of factors, including increased adoption of some of our newer products like precision progressives that come in at a higher price point. I higher percentage of our customers who are not only buying glasses from us but are starting their journey with an exam, and those patients have a very high fat rate to buy other products from us.

Speaker Change: Thanks, Brooke. We continue to see very encouraging trends in terms of the average revenue per customer that we're seeing, and it's coming from a combination of factors, including

Dylan Cardin: And we still see in the market, yeah, that's 75 to 80% of customers are buying glasses where they got their eye exam. And again, we're just a fraction of that. So we see this as early innings and this will be a continued tailwind for us for the next decade as we continue to raise awareness about our eye exam offering as we continue to expand our sort of exam availability in stores. So it's something that we're really excited about.

Speaker Change: increased

Speaker Change: adoption of some of our newer products like precision progressives that come in at a higher price point, a higher percentage of our customers.

Unnamed Speaker: An increasing percentage of our customers who are buying glasses and contacts and often buying annual supplies of contacts, which tend to be kind of high dollar purchases. And so we see a lot of runway ahead as a higher percentage of our customers move from being glasses only to purchasing multiple products and services from us. And in general, as we've introduced some higher price point items, whether those are new frame collections or different lens offerings, we price them at a significant value relative to where people can buy comparable products, the price point at which people can buy comparable products elsewhere. And our customers tend to appreciate that value. And so we haven't seen any price resistance, as we've introduced products at a multitude of price points. That's very helpful.

Speaker Change: who are not only buying glasses from us but are starting their journey with an exam and those patients have a very high attach rate to buy other products from us.

Dave Gilboa: An increasing percentage of our customers who are buying glasses and contacts and often buying annual supplies of contacts, which tend to be kind of high dollar purchases. And so we see a lot of runway ahead as a higher percentage of our customers move from being glasses only to purchasing multiple products and services from us. And in general, as we've introduced some higher price point items, whether those are new frame collections or different lens offerings, we price them at a significant value relative to where people can buy comparable products, the price point at which people can buy comparable products elsewhere. And our customers tend to appreciate that value. And so we haven't seen any price resistance as we've introduced products at a multitude of price points. That's very helpful.

Dylan Cardin: Every new store we open has at least one exam lane and we continue to make investments in that business and expanding video assisted eye exams. For example, that will enable us to continue to scale in the years ahead. And to your question about opportunity to expand contacts and exams and where we are in that journey. So as we talked about contacts make up roughly 10% of our business for a more mature optical retailer with a large network of stores that numbers closer to 20% in terms of our exams that makes up roughly 5% of our business.

Speaker Change: in increasing percentage of our customers who are buying crosses and contacts and often buying annual supply of contacts which tend to eat kind of high dollar

Neil Blumenthal: And so we see a lot of runway ahead as a higher percentage of our customers move from being glasses only to purchasing multiple products and services from us, and in general, as we've introduced some higher price point items, whether those are new frame collections or different lens offerings. We price them at significant value relative to where people can buy comparable products, the price point that people can buy comparable products elsewhere, and our customers tend to appreciate that value. And so we haven't seen any price resistance as we've introduced a product at a multitude of the price points.

Speaker Change: purchases, and so...

Speaker Change: We see a lot of runway ahead as a higher percentage of our customers move from

Speaker Change: being losses only to purchasing multiple products in services from us

Speaker Change: and in general as we've introduced some higher price point items whether those are new frame collections or different lens offerings

Dylan Cardin: We talked about that number being 15% for national optical retailers in terms of our market share of these particular categories within the optical industry, very early inings we've got about half a percent of the 12 billion dollar contacts market and under half a percent of the roughly 11 billion dollar eye exam market, not to mention prescription glasses which is our largest category and our most profitable category. That still represents just 12 just 2% market share if you look at our glasses business versus that of the prescription glasses market at large.

Speaker Change: We priced them at significant value relative to

Speaker Change: where people can buy comparable products, the price point that people can buy comparable products elsewhere. And our customers tend to appreciate that value. And so we haven't seen any price resistance as we've introduced products at a multitude of price points.

Brooke Roach: That's very helpful.

Neil Blumenthal: That's very helpful. As a follow-up, can you elaborate on the current maturation trends that you're seeing within your store fleet today? How are sales in each cohort maturing relative to your prior expectations? What four-wall EBITDA trends are you seeing by cohort today? And what are the biggest levers of profitability improvement from here?

Brooke Roach: As a fellow, can you elaborate on the current maturation trends that you're seeing within your store fleet today? How are sales in each cohort maturing relative to your prior expectations? What formal EBITDA trends are you seeing by cohort today?

Speaker Change: That's very helpful. As a follow-up, can you elaborate on the current maturation trends that you're seeing within your store fleet today? How are sales in each cohort maturing relative to your prior expectations? What four-wall EBITDA trends are you seeing by cohort today? And what are the biggest levers of profitability improvement from here?

Neil Blumenthal: And what are the biggest levers of profitability improvement from here? The biggest, this is Neil Brook, the biggest opportunity for continued sort of expansion of profitability is really leverage over S.G.N.A. in our corporate expenses. Our stores continue to be very profitable. We continue to see payback periods at our targets of 20 months. We continue to see 4-wall margin at our target at 35 percent. We're finding new stores maturing similar rates, previous cohorts. So we're finding consistent performance from our retail replication strategy. So that's why we'll continue to see us open. We're on track to open 40 stores this year.

Dylan Cardin: Thank you. I'm curious if I can squeeze on what kind of that I know that you have to grow some awareness of these new offerings and the sort of more medium term but and any thoughts is to kind of the marketing leverage when you might start being able to kind of utilize the retail channel to take down some of your marketing spend from a timing standpoint. We don't anticipate sort of lowering marketing from where it is today if anything we might invest more in the coming months and years and we think that we can continue to expand EBITDA while maintaining or even investing more in marketing as we gain increased leverage over other corporate expenses and other S.U.N.A. Thank you very much.

Neil Blumenthal: This is Neil Brooke. The biggest opportunity for continued sort of expansion of profitability is really leverage over SG&A and our corporate expenses. Our stores continue to be very profitable, we continue to see payback periods at our targets of 20 months, and we continue to see four wall margin at our target at 35%. We're finding new stores maturing at a similar rate to previous cohorts. So we're finding consistent performance from our retail replication strategy, so that's why I continue to see us open. We're on track to open 40 stores this year, and we'll continue to do that in the years ahead. And I'm just adding the

Speaker Change: The biggest, this is Neil Brooke, the biggest opportunity for

Neil Brooke: continued sort of expansion of profitability is really leverage over SG&A and our corporate expenses. Our stores continue to be very profitable. We continue to see payback periods at our targets of 20 months. We continue to see four wall margin at our target at 35%. We're finding new stores maturing.

Neil Brooke: similar rate to previous cohorts. So we're finding consistent performance from our retail replication strategy. So that's why I continue to see us open. We're on track to open 40 stores this year and we'll continue to do that in the years ahead.

Brooke Roach: Our next question is from Brooke Roach at Goldman Sachs. Please go ahead. Good morning and thank you for taking our question.

Neil Blumenthal: And we'll continue to do that in the years ahead.

Brooke Roach: I was hoping to get your thoughts on the sustainability of the strong revenue per customer trends that you've been seeing in recent quarters. Are you seeing any signs of price sensitivity in the customer or any changes to basket size or AUR as you've moved into the back half of this year? Thanks Brooke. We continue to see very encouraging trends in terms of average revenue per customer that we're seeing and it's coming from a combination of factors including an increase adoption of some of our newer products like precision progressives that come in a higher price point.

Unnamed Speaker: I'm just adding a little bit more color as it relates to the store-specific P&L. As we've talked about from a product mix perspective, our stores skew more progressive than online. Progressive glasses are our highest priced and highest gross margin product. And so, as we think of the leverage within the store P&L, we really point to gross margin driven by progressives. The second is really the biggest controllable expense within the store, which is labor management. And every single quarter, every single year, we develop more sophisticated tools and labor management models just to make sure that we're optimizing staffing within stores.

Steve Miller: I'm just adding a little bit more color as it relates to the store-specific P&L. As we talked about from a product mix perspective, our stores skew more progressive than online. Progressive glasses are our highest-priced and highest gross margin product, and so as we think of the leverage within the store P&L, we really point to gross margin driven by progressives. The second is really the biggest controllable expense within the store, which is labor management. And every single quarter, every single year, we develop more sophisticated tools and labor management models just to make sure that we're optimizing staffing within the stores.

Neil Blumenthal: Just adding a little bit more color as it relates to the store specific P&L. As we talked about from a product mix perspective, our stores skew more progressive and online. Progressive glasses are highest priced and highest gross margin products. And so, as we think of the leverage within the store P&L, we really point to gross margin driven by progressives. The second is really the biggest controllable expense within the store, which is labor management, and every single quarter, every single year. We develop more sophisticated tools and labor management models just to make sure that we're optimizing staffing within the stores.

Speaker Change: I'm just adding a little bit more color as it relates to the store-specific P&L as we've talked about from a product mix perspective.

Speaker Change: Our stores skew more progressive than online. Progressive glasses.

Speaker Change: are our highest priced and highest gross margin product.

Speaker Change: And so as we think of the leverage within the store P&L, we really point to gross margin driven by progressives.

Speaker Change: The second is really the biggest controllable expense within the store, which is labor management. And every single quarter, every single year, we develop more sophisticated tools and labor management models just to make sure that we're optimizing staffing within the stores.

Steve Miller: Lastly, I'll talk a little bit about eye exams. As we mentioned earlier in the call, about 75% to 80% of all prescription glasses are bought at the same time and at the same store where there is an eye doctor. We have seen that stores that have eye doctors are moderately higher from a top-line perspective, but they also increase our ability to sell more complex lenses. If there's a doctor in the store who can talk to the customer about those lenses, which include photochromic lenses, blue light lenses, and anti-fatigue lenses, all of which are accretive to margin.

Neil Blumenthal: And lastly, I'll talk a little bit about items. As we mentioned earlier on the call, about 75 to 80 percent of all prescription glasses are bought at the same time and at the same store where there was an eye doctor. We have seen that stores that have eye doctors are moderately higher from the top line perspective, but also amplify our ability to sell more complex lenses. If there's a doctor in the store who can talk to the customer about those lenses, and that includes both the Chronic lenses, blue light lenses, and the key lenses, all of which are accreted to margin.

Unnamed Speaker: Lastly, I'll talk a little bit about eye exams. As we mentioned earlier in the call, about 75 to 80 percent of all prescription glasses are bought at the same time and at the same store where there is an eye doctor. We have seen that stores that have eye doctors are moderately higher from a top line perspective, but they also increase our ability to sell more complex lenses. There is a doctor in the store who can talk to the customer about those lenses, and that includes photochromic lenses, blue light lenses, and anti-fatigue lenses, all of which are accretive to margin.

Brooke Roach: I have a percentage of our customers who are not only buying glasses from us but are starting their journey with an exam and the patients have a very high saturated by other products from us and increasing percentage of our customers who are buying glasses and contacts and often buying annual supplies of contacts which tend to be kind of high dollar purchases. And so we see a lot of runway ahead as a higher percentage of our customers move from being glasses only to purchasing multiple products and services from us and in general, as we've introduced some higher price point items whether those are new frame collections or different lens offerings.

Speaker Change: Lastly, I'll talk a little bit about eye exams. As we mentioned earlier on the call, about 75 to 80 percent of all prescription glasses are bought at the same time and at the same store where there was an eye doctor. We have seen that stores that have eye doctors are moderately higher from a top-line perspective, but also amplify our ability to sell more complex lenses. There's a doctor in the store who can talk to the customer about those lenses, and that includes photochromic lenses, blue light lenses, anti-fatigue lenses, all of which are accretive to margin.

Neil Blumenthal: Thanks so much. I'll pass it on.

Operator: Thanks so much. I'll pass it on. Our next question is...

Alex Stratton: Our next question is from Alex Stratton at Morgan Stanley. Please go ahead.

Operator: Our next question is from Alex Straton at Morgan Stanley. Please go ahead.

Speaker Change: Thanks so much, I'll pass it on.

Speaker Change: Our next question is from Alex Stratton at Morgan Stanley. Please go ahead.

Operator: on, um... Waters, Err...

Operator: So outside of... Bye, and others. Thank you. Thank you.

Brooke Roach: We price them at significant value relative to where people can buy comparable products, the price point that people can buy comparable products elsewhere and our customers tend to appreciate that value and so we haven't seen any price resistance as we've introduced products at a multitude of price points.

Speaker Change: So outside of the current industry trend,

Operator: Thank you so much for joining us today. Thank you. Thank you.

Speaker Change: Thank you.

Speaker Change: as

Speaker Change: teen kind of looded out peoplebefore hearing

Alex Stratton: I'm fortunately we can't hear your line. Could you please try speaking a bit closer to the microphone? Sorry about that. So there's been a lot of talk in the market now around consumer health. I wanted to ask out of the broader industry trends.

Operator: Unfortunately, we can't hear your line. Could you please try speaking a bit closer to the microphone?

Speaker Change: i coloron

Speaker Change: sale trin

Speaker Change: Unfortunately, we can't hear your line. Could you please try speaking a bit closer to the microphone?

Operator: Oh, sorry about that. Um, so there's been a lot of talk in the market now about consumer health. Outside of the broader industry trends, could you provide any color on how you're thinking about the health of the consumer? And then also, can you provide any color on how sales have trended throughout the quarter?

Speaker Change: ' sorry about that

Speaker Change: So there's been a lot of talk in the market now around consumer health. Outside of the broader industry trends, could you provide any color on how you're thinking about the health of the consumer? And then also, could you provide any color on how sales have trended throughout the quarter?

Neil Blumenthal: That's very helpful. As a follow-up, can you elaborate on the current maturation trends that you're seeing within your store fleet today? How are sales in each cohort maturing relative to your prior expectations? What formal EBITDA trends are you seeing by cohort today? And what are the biggest opportunities? This is Neil Brook. The biggest opportunity for continued sort of expansion of profitability is really leverage over S.G, and A in our corporate expenses.

Neil Blumenthal: Could you try any color on how you're thinking about health of the consumer and then also be trying to color on how sales have turned it throughout the quarter?

Neil Blumenthal: Sure. We've been living through the last few years of choppiness and fear that the consumer environment's going to worsen. It's been, frankly, a roller coaster for every operator of the last few years, and it's unfortunately become the norm. It's just been the environment that we're now accustomed to and realize that we have to continue to manage through.

Neil Blumenthal: Sure. Yeah.

Neil Blumenthal: We've been living through the last few years of choppiness and sort of fear that the, you know, consumer environment is going to worsen. It's been, frankly, a roller coaster ride for every operator the last few years. And it's unfortunately become the norm.

Speaker Change: sureum you know

Speaker Change: We've been living through the last few years of shoppiness and sort of fear that

Speaker Change: that

Speaker Change: you know.

Speaker Change: Consumer environments going to worsen. It's been, frankly, a roller coaster for every operator the last few years. And it's unfortunately become the norm, and it's just been the environment that...

Neil Blumenthal: And it's just been the environment that we're now accustomed to and realize that we have to continue to manage through. So the way that we manage through is to continue to provide exceptional value so that we have more customers coming to us from competitors in the space where, you know, they can get the same, if not better quality, for a fraction of the price. How do we bring those offerings closer to them to make them more convenient by opening up more stores, by ensuring that our website and our apps are sort of best in class and available, and by increasing our marketing to raise awareness that we're the place to go to save money and have a delightful customer experience? So, as we sort of look to the future,

Neil Blumenthal: Our stores continue to be very profitable. We continue to see payback periods at our target of 20 months. We continue to see four-wall margin at our target at 35% where finding new stores maturing, similar rates, previous cohorts. So we're finding consistent performance from our retail replication strategy. So that's why I'll continue to see us open. We're on track to open 40 stores this year and I will continue to do that in the years ahead.

Neil Blumenthal: So the way that we manage through is continuing to provide exceptional value so that we have more customers coming to us from competitors in the space where they can get the same, if not better, quality for a fraction of the price. How do we bring those offerings closer to them to make it more convenient by opening up more stores and by ensuring that our website and our apps are sort of best in class and available, and by increasing our marketing to raise awareness that we are the place to go to save money and to have a build light full customer experience.

Speaker Change: we're now accustomed to and realize that we have to continue to manage through so the way that we manage through is

Speaker Change: continue to provide exceptional value so that we have more customers coming to us from competitors in space where

Unnamed Speaker: They can get the same, if not better quality, for a fraction of the price. How do we bring those offerings closer to them to make them more convenient? By opening up more stores, by ensuring that our website and our apps are the best in class and available, and by increasing our marketing to raise awareness that we're the place to go to save money and have a delightful customer experience.

Speaker Change: They can get

Speaker Change: You know, the same if not better quality for a fraction of the price, how do we bring those offerings closer to them to make it more convenient by opening up more stores, by, you know, ensuring that our website and our apps are sort of the best in class and available.

Neil Blumenthal: I'm just adding a little bit more color as it relates to the store-specific K&L. As we talked about from a product mix perspective, our stores skew more progressive and online. Progressive glasses are highest priced and highest gross margin products. And so as we think of the leverage within the store, K&L would really point to gross margin driven by progressives. The second is really the biggest controllable expense within the store, which is labor management and every single quarter, every single year, we develop more sophisticated tools and labor management models just to make sure that we're optimizing staffing within the stores.

Speaker Change: And by increasing our marketing to raise awareness that we're the place to go to save money and to have a delightful customer experience. So, you know, as we sort of.

Unnamed Speaker: So, as we sort of look to the future, we're gonna continue to do what we do, which is deliver great value, create great customer experiences, and market to folks so that way, we can grow in these sort of more dynamic and potentially sort of challenging environments.

Neil Blumenthal: So, as we sort of look to the future, we're going to continue to do what we do, which is deliver great value, create great customer experiences, and market to folks so that way we can grow in these sort of more dynamic and potentially sort of challenging environment.

Speaker Change: look to the future we're going to continue to do what we do which is deliver great value crereek greatek customer experiences and market to folks to that way we can grow in these sort of more dynamic and potentially sort of challengingand

Neil Blumenthal: Lastly, I'll talk a little bit about IGSIMS as we mentioned earlier on the call about 75 to 80% of all prescription glasses are bought at the same time and at the same store where there was an eye doctor. We have seen that stores that have eye doctors are moderately higher from a top line perspective, but also amplify our ability to sell more complex lenses as there's a doctor in the store who can talk to the customer about those lenses and that includes both the Chromic lenses, Blue Light lenses, Anpety lenses, all of which are accreted to margin.

Speaker Change: Great, thank you.

Brooke Roach: Thanks so much. I'll pass it on.

Unknown Attendee: So in that case, this mail concludes the conference call as well as the Q&A session. Thank you all very much for joining. Thank you.

Speaker Change: So in that case, this now concludes the conference call as well as the Q&A session. Thank you all very much for joining.

Alex Straton: Our next question is from Alex Stratten at Morgan Stanley. Please go ahead.

Alex Straton: Unfortunately, we can't hear your line. Could you please try speaking a bit closer to the microphone? Oh, sorry about that. So there's been a lot of talk in the market now around consumer health. I started the broader industry trends.

Neil Blumenthal: Could you try any color on how you're thinking about health as a consumer and then also define the color on how sales have trended throughout the quarter? Sure. We've been living through the last few years of choppiness and sort of fear that the consumer environment's going to worsen. It's been frankly a roller coaster for every operator the last few years and it's unfortunately become the norm and it's just been the environment that we're now accustomed to and realize that we have to continue to manage through.

Neil Blumenthal: So the way that we manage through is continuing to provide exceptional value so that we have more customers coming to us from competitors in the space where they can get the same if not better quality for a fraction of the price. How do we bring those offerings closer to them to make it more convenient by opening up more stores, by ensuring that our website and our apps are sort of best in class and available and by increasing our marketing to raise awareness that where the place to go to save money and to have a build lightfall customer experience.

Neil Blumenthal: So as we sort of look to the future we're going to continue to do what we do which is deliver great value, create great customer experiences and market to folks so that way we can grow in these sort of more dynamic and potentially sort of challenging environment.

Operator: So in that case this now concludes the conference call as well

Q2 2024 Warby Parker Inc Earnings Call and Business Update

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