Q3 2024 Warby Parker Inc Earnings Call
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Bailey: Hello and welcome to today's Warby Parker third quarter 2024 earnings call. My name is Bailey and I will be your moderator for today.
All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question please press star followed by one on your telephone keypad.
Bailey: I'd now like to pass the conference over to our host today, Jaclyn Berkley, Head of Investor Relations. Please go ahead when you're ready. Thank you and good morning everyone. Here with me today are Neil Blumenthal and Dave Gilboa, our co-founders and co-CEOs.
Jaclyn Berkley: 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.
Jaclyn Berkley: During this call and in our presentation, we will be making comments of a forward-looking nature. Actual results may differ materially from those expressed or implied as a result of various risks and uncertainties.
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.
Jaclyn Berkley: These forward-looking statements are based on information as of November 7, 2024, and except as required by law, we assume no obligation to publicly update or revise our forward-looking statements.
Additionally, we will be discussing certain non-GAAP financial measures.
Jaclyn Berkley: 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: 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 Neil to kick us off.
Thank you, Jaclyn, and good morning, everyone.
Neil Blumenthal: We are pleased to deliver Q3 results ahead of our guidance with net revenue of $192.4 million.
Neil Blumenthal: representing 13.3% growth year-over-year along with 250 basis points of adjusted EBITDA margin expansion, our highest of the year.
Speaker Change: Driving these strong results is our team's unwavering commitment to delivering on our mission while taking share, growing sustainably, and accelerating growth.
Speaker Change: We are encouraged by our team's progress against the strategic initiatives we laid out at the beginning of 2024, and believe our year-to-date results, in particular the momentum in active customers and glasses growth, are evidence that our strategy is working.
Speaker Change: We drove accelerating top line and active customer growth in each month of Q3, and continue to see momentum into October, positioning us favorably as we head into our busiest month of the year.
Speaker Change: Based on our third quarter performance, we are raising our full year guidance and now expect to deliver approximately 14 to 15 percent revenue growth and approximately 73 million dollars in adjusted EBITDA.
Speaker Change: Before Steve provides more detail on that later in the call, Steve and I will review the key drivers of our Q3 performance.
Speaker Change: Underpinning our Q3 results was our highest active customer growth of the year with strength in both new and returning customers.
Speaker Change: We ended Q3 with 2.4 million active customers, an increase of 5.6% on a trailing 12-month basis, while average revenue per customer grew 7.5%.
Speaker Change: As expected, active customer growth has improved each quarter this year, even as we've maintained marketing spend as a consistent percent of revenue, and we anticipate Q4 being our highest active customer growth year over year.
Speaker Change: While our active customer count captures purchases across channels, we're seeing the highest customer growth come from our stores, which we believe remain highly efficient customer acquisition vehicles as they continue to deliver compelling unit economics.
Speaker Change: Similar to the first half of the year, we've been pleased with the efficiency of our marketing spend and the consistency in customer acquisition costs despite a dynamic media environment.
Speaker Change: We believe our diversified media model affords us significant flexibility and the ability to stay disciplined while testing channels and marketing messages.
Speaker Change: For example, to drive greater store awareness, we've tested new creative across Linear, Streaming, and Influencer that focuses on the in-store shopping experience.
Speaker Change: This not only helps to drive awareness with new customers, but also longtime customers who think of Warby Parker as an online only business.
Speaker Change: We're also seeing promising results from direct mail campaigns, especially as a way to highlight our eye exam capabilities, annual exam reminders, and new store openings.
Speaker Change: We continue to 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.
Speaker Change: Complementary to our core marketing efforts, we've made progress in being able to serve even more customers through in-network and out-of-network insurance plans.
Speaker Change: Earlier this year, we announced an expanded in-network relationship with Versant Health, a wholly owned subsidiary of MetLife. I'm happy to share that the integration is largely complete, bringing millions of additional lives in-network with Warby Parker.
Speaker Change: Given our experience with UnitedHealthcare and other large employer plans, we expect that average revenue per member will expand over a multi-year period as in-network awareness grows and as members realize they can use their benefits at Warby Parker.
Speaker Change: As a result, we have not incorporated this into our guidance and expect it to be a longer-term tailwind over the next several years.
Speaker Change: In parallel to our in-network insurance initiatives, we continue to leverage our universal eligibility check tool to help customers easily locate their in-network insurance coverage and average out-of-network benefits across channels.
Speaker Change: We launched an updated version of the tool for our retail teams this quarter, making it easier than ever for customers to use their benefits with us.
Speaker Change: As a reminder, 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.
Speaker Change: Second, we continue to see positive momentum in our glasses business.
Speaker Change: We attribute the improvement in Glass's growth to many of our core strategic investments, including marketing, expanding our store fleet, and our exam business, and our product innovation.
Speaker Change: In Q3, glasses grew approximately 10% year over year, and we believe our marketing investments within channels like Paid Social, Streaming, and Influencer drove an acceleration in single vision glasses, which represent the majority of our prescription eyewear business.
Speaker Change: Glass's growth also continues to benefit from progressive penetration and the adoption of more complex lens types.
Speaker Change: Progressives overall still only represent approximately 22% of our prescription glasses sold in Q3 and we believe there's a significant opportunity to increase penetration over time.
David Gilboa, David Gilboa, David Gilboa,
Speaker Change: Within the progressives category, we've seen a 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.
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Speaker Change: We also continue to expand our lens options to give customers more choice. The ability to customize lens colors, polarization, and anti-reflective coatings, as well as enhancements like anti-fatigue, blue light, and light responsive have contributed nicely to average revenue per customer.
For more information, visit www.fema.gov
Speaker Change: As a style authority, we offer a tighter, more curated assortment than our competitors and focus on building out franchise styles with new sizes, colors, and materials.
Speaker Change: We are also one of the few retailers to offer extended sizes in the same style.
Speaker Change: 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 super concentric collection starting at $195.
Speaker Change: Handcrafted in Italy, this limited edition release brings a tricolor construction to a selection of our most sought-after shapes.
This quarter, we launched our editions collection.
Speaker Change: An assortment of frames designed in partnership with seven notable fans, each of whom reimagined their favorite Warby Parker frames.
Collaborators included chef and restauranteur David Chang
Speaker Change: actor, writer, and director Natasha Lyonne, MBA star Jordan Poole, and more. Our launch captured the attention of culturally relevant media outlets like Interview Magazine and garnered some of the highest engagement on our social media channels to date.
Speaker Change: Just last week we launched our first ever foldable sunglasses engineered for pocket-sized portability and constructed with stainless steel and premium cellulose acetate.
Speaker Change: 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.
Speaker Change: And now I'll pass it over to Dave to talk about additional growth drivers.
Thanks, Neil.
Dave Gilboa: The third driver of our Q3 growth was our highly productive store base complemented by an improving e-commerce channel.
Speaker Change: Our omni-channel experience remains unique in our category, and we continue to benefit in how our channels support one another. Many of our largest and most mature markets, like New York, Boston, Dallas, and Chicago, continue to see strong retail growth while also delivering some of our highest econ year-over-year growth.
Speaker Change: We believe this underscores the meaningful opportunities ahead of us to drive omnichannel growth as we see greater brand awareness and store density benefit overall market growth.
Speaker Change: In Q3, we opened 13 new stores, 10 of which were expansions within existing markets, including Seattle, Dallas, Milwaukee, and New York. Three new stores were in new suburban markets, including Akron, Ohio, Huntsville, Alabama, and Springfield, Missouri.
Speaker Change: Over 50% of the major metropolitan areas we operate in only have one store and we believe we have significant potential to expand our presence in existing markets while also entering new markets.
Speaker Change: Since Q3 of last year, we've added 42 net new stores and ended the quarter with 269 stores, well below our longer-term 900-plus store potential, which would still represent a small fraction of 45,000 optical shops in the U.S.
Speaker Change: Retail revenue increased approximately 20% year-over-year driven by a new store growth and consistent performance within our existing stores.
Steve will go into more detail on this shortly.
Speaker Change: I want to take a moment to highlight our store teams.
Speaker Change: We're fortunate to have tenured store leadership teams, approximately 60% of whom have been promoted from within the company.
Speaker Change: Just last month, we brought together our store leaders, district leaders, optometrists, and more in Dallas for a three-day summit where we focused on planning, training, and team building as we prepare to serve more customers than ever this holiday and FSA season.
Speaker Change: We believe our ability to grow and retain talent is differentiated within the market and will remain a critical component of our retail strategy going forward.
Speaker Change: Within our e-commerce channel, revenue increased approximately 1% year-over-year, as we lapped our highest quarterly revenue growth last year.
Speaker Change: We continue to see positive momentum in our e-commerce channel. As with any period, orders we received at the end of one quarter are recognized as revenue the next quarter upon delivery to the customer.
Speaker Change: In Q3, we saw e-commerce velocity increase each month with a strong end to the quarter in September that has continued into Q4.
Speaker Change: Our year-over-year growth in e-commerce sales order value in Q3 was up mid-single digits.
David Gilboa,
The
Speaker Change: Within our eCom channel, we continue to see an improvement in our single vision glasses business, as well as strength and contact lenses from both new and returning customers.
Speaker Change: As we've shared previously, overall channel growth is benefiting from a positive inflection in direct glasses purchases, which is partially offset by an ongoing but diminishing headwind from home try-on driven purchases.
Speaker Change: We continue to invest in technologies that enhance and personalize the online customer experience, including leveraging AI to enable faster and more seamless prescription capture and transcription, along with more personalized product recommendations.
Speaker Change: In Q3 in particular, we focused on personalizing and enhancing the lens shopping experience for our customers and saw promising results.
Speaker Change: The fourth and final driver I'll dive into is our effort to scale holistic vision care and expand customer lifetime value.
Speaker Change: In Q3, contact lens sales grew approximately 35% year over year to almost 11% of revenue, which remains well below the 20% industry average.
Speaker Change: Contact lenses represent a 12 billion dollar segment of the industry and 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 over 5% of revenue, which remains well below the approximately 15% industry average.
Speaker Change: 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 this $11 billion segment of the industry.
Speaker Change: Scaling our holistic vision care customers is a core part of our growth strategy and gives us confidence to continue to invest in customer acquisition.
Speaker Change: As we've consistently seen across cohorts, customers who complete an eye exam with us and buy glasses and contacts spend more with us in their initial purchase than glasses-only customers and become our highest lifetime value customers over time.
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 rolled them out to several new stores throughout Q3 and will continue expanding them in Q4.
Speaker Change: Scaling our eye exam business, including exam utilization, has had, and we believe will continue to have, a direct impact on our glasses business.
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 an 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.
Speaker Change: And now, I'll turn it over to Steve to review the details of our financial performance.
Speaker Change: Thanks Neil and Dave. Revenue for the third quarter came in at $192.4 million, up 13.3% year-over-year.
Speaker Change: From a channel perspective, retail revenue increased approximately 20% year-over-year, while e-commerce revenue increased approximately 1% versus Q3 of 2023.
Jaclyn Berkley: As Dave mentioned, our e-commerce channel grew in the mid-single digits on a sales order value basis.
Jaclyn Berkley: Turning to our stores, we added 42 net new stores over the course of the last 12 months, ending the quarter with 269 stores, up from 227 at the end of Q3 2023.
Jaclyn Berkley: Looking at Q3 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.
Jaclyn Berkley: 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.
Jaclyn Berkley: This metric covers all of our stores, including newer stores and stores open 12 months or more. As such, this metric is 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.
Jaclyn Berkley: For stores that have been open greater than 12 months, we continue to observe strong year-over-year growth.
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Speaker Change: Our new stores continue to deliver strong unit economics, performing in line with our target of 35% four-wall margin and 20-month paybacks.
Speaker Change: For stores open more than 12 months, average revenue per store was $2.2 million, consistent with the first half of the year, and performance was in line with our target 35% fall wall margin.
Jaclyn Berkley: Over the course of the past year, we added 45 net new eye exam locations, bringing our stores with eye exam capabilities to 228 stores or 85% of our total fleet.
Jaclyn Berkley: From a channel mix perspective, retail represented 70 percent of our overall business, consistent with last quarter, and up 365 basis points year over year, versus 67 percent in Q3 2023.
Jaclyn Berkley: From a customer perspective, we finished Q3 with 2.43 million active customers, which we believe is more reflective of active households and represents an increase of 5.6% on a trailing 12-month basis.
Jaclyn Berkley: We've been pleased to see sequential improvements in year-over-year active customer growth for the past five quarters as we benefit from the positive returns we're seeing from our marketing investments.
Jaclyn Berkley: We anticipate Q4 will be our highest year-over-year growth in active customers.
Jaclyn Berkley: We also continue to see strength in average revenue per customer, which came in at $305 in Q3, up 7.5% year-over-year.
Jaclyn Berkley: 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 frames.
Jaclyn Berkley: 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,
Jaclyn Berkley: We serve 2.56 million individuals, which is up 6.2% on a trailing 12-month basis, and reflects average revenue per individual of $290, up 6.8%.
Jaclyn Berkley: 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 build-outs.
Jaclyn Berkley: Our gross margin also includes stock-based compensation expense for our optometrists and optical lab employees.
Jaclyn Berkley: For comparability, I will be speaking to gross margin, excluding stock-based compensation.
Jaclyn Berkley: Third quarter adjusted gross margin was 54.6%, compared to 54.8% in the year ago period, down approximately 13 basis points year over year, and in line with the color we provided on our last earnings call.
The End
Jaclyn Berkley: On a year-over-year basis, efficiencies in customer shipping and our owned optical labs driven by glasses growth offset the 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.
Speaker Change: Within the more fixed portion of our cost of goods, we took advantage of a strong pipeline of candidates and hired more optometrists than our original plan for the quarter.
Speaker Change: That strategic decision in addition to occupancy associated with our store rollout, where the primary sources of modest deleverage on a year over year basis.
Speaker Change: That strategic decision, in addition to occupancy associated with our store rollout, were the primary sources of modest de-leverage on a year-over-year basis.
Speaker Change: Investing in doctors and holistic vision care as a core part of scaling our holistic vision care offering and a key driver of lifetime value and customer retention over time.
Speaker Change: Investing in doctors and holistic vision care is a core part of scaling our holistic vision care offering and a key driver of lifetime value and customer retention over time.
Speaker Change: On a sequential basis Q3 gross margin decreased by 150 basis points, reflecting anticipated deleverage in the fixed portion of our cost of goods driven by increased occupancy from opening 13, new stores and a strong hiring quarter for optometrists as well as from a higher mix of contacts and eye exams representing.
The
on a sequential basis.
Q3 gross margin decreased by 150 basis points.
Speaker Change: reflecting anticipated de-leverage in the fixed portion of our cost of goods.
Speaker Change: Driven by increased occupancy from opening 13 new stores and a strong hiring quarter for optometrists as well as from a higher mix of contacts and eye exams Representing the continued growth in these business lines
Speaker Change: The continued growth in these business lines.
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 in retail employees marketing spend including our home try on program and general corporate overhead expenses adjusted.
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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: SG&A excludes noncash costs like stock based compensation expense.
Adjusted SG&A excludes non-cash costs like stock-based compensation expense.
Speaker Change: Adjusted SG&A in the third quarter came in at $100.6 million or 52, 3% of revenue.
Speaker Change: Adjusted SG&A in the third quarter came in at $100.6 million or 52.3% of revenue.
Speaker Change: This compares to Q3 2023, adjusted SG&A of $93 4 million or 55% of revenue.
Speaker Change: This compares to Q3 2023 adjusted SG&A of $93.4 million or 55% of revenue.
Speaker Change: Then adjusted SG&A marketing spend increased from $19 7 million or 11, 6% of revenue to $23 7 million or 12, 3% of revenue as we reinvested a portion of our revenue upside into customer acquisition, given strong demand signals in September that have.
Speaker Change: Within adjusted SG&A, marketing spend increased from $19.7 million, or 11.6% of revenue, to $23.7 million, or 12.3% of revenue.
Speaker Change: as we reinvested a portion of our revenue upside into customer acquisition given strong demand signals in September that have continued into Q4.
Speaker Change: Renewed into Q4.
Speaker Change: The deleverage from 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 43, 3% to 40%.
Speaker Change: The de-leverage from 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 43.3 percent to 40 percent.
Speaker Change: Total adjusted SG&A was up seven 8% with non marketing adjusted SG&A up just four 5% year over year.
Speaker Change: Total adjusted SG&A was up 7.8%, with non-marketing adjusted SG&A up just 4.5% year-over-year.
Speaker Change: Turning now to adjusted EBITDA.
Speaker Change: Turning now to Adjusted EBITDA. In the third quarter, we generated Adjusted EBITDA of $17.3 million, representing an Adjusted EBITDA margin of 9%, which compares to Adjusted EBITDA of $11 million, or 6.5% of revenue in the year-ago period.
Speaker Change: In the third quarter, we generated adjusted EBITDA of $17 3 million, representing an adjusted EBITDA margin of 9%, which compares to adjusted EBITDA of $11 million or six 5% of revenue in the year ago period.
Speaker Change: This represents approximately 250 basis points of adjusted EBITDA margin expansion, our highest year to date.
Speaker Change: This represents approximately 250 basis points of adjusted EBITDA margin expansion, our highest year to date.
Speaker Change: Turning now to our balance sheet, we were free cash flow positive for the sixth consecutive quarter generating $13 million in Q3 and ended the quarter with a strong balance sheet position, reflecting approximately $251 million in cash, which we will continue to deploy deliberately to support our growth and operations.
Turning now to our balance sheet.
Speaker Change: We were free cash flow positive for the sixth consecutive quarter, generating $13 million in Q3, and ended the quarter with a strong balance sheet position reflecting approximately $251 million in cash, which we will continue to deploy deliberately to support our growth and operations.
Speaker Change: We also have an undrawn credit facility of $120 million that we can increase to $175 million.
Speaker Change: We also have an undrawn credit facility of $120 million that we can increase to $175 million.
Speaker Change: Now to our outlook.
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Now to our Outlook.
Speaker Change: Based on our strong third quarter performance and trends in the fourth quarter so far.
Speaker Change: Based on our strong third quarter performance and trends in the fourth quarter so far, we're revising our full year 2024 guidance higher to the following.
Speaker Change: We're revising our full year 2024 guidance higher to the following.
Speaker Change: Revenue of $765 million to $768 million representing.
Speaker Change: Revenue of $765 million to $768 million, representing approximately 14% to 15% year-over-year growth.
Speaker Change: Approximately 14% to 15% year over year growth.
Speaker Change: Adjusted EBITDA of approximately $73 million at the midpoint of our revenue range, which equates to an adjusted EBITDA margin of nine 5% or approximately 170 basis points of year over year expansion.
Speaker Change: Adjusted EBITDA of approximately 73 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: And we're still on track to open 40, new stores this year.
Speaker Change: and we're still on track to open 40 new stores this year.
Speaker Change: As it relates to gross margin, we're still guiding to stability in gross margin in the mid fifties as a percent of revenue.
Speaker Change: As it relates to gross margin, we're still guiding to stability in gross margin in the mid-50s as a percent of revenue.
Speaker Change: Regarding Q4 gross margin, as a reminder, we typically see a seasonal sequential decline in gross margin from Q3 to Q4 driven by a significant deferral of revenue from the last two weeks of December into Q1 of the following year.
Speaker Change: Similar to Q3, we anticipate adjusted EBITDA margin expansion in Q4 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 teens.
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: The company and how do we ensure that we're deploying the right dollars across the right channels to make sure that.
Speaker Change: We're acquiring the right customers and.
Speaker Change: We're really happy with our marketing performance and our ability to scale our marketing spend.
Speaker Change: Enables us to do that really over the last year and a half are very effectively on which gives us confidence for the rest of the year and in the future.
Speaker Change: And just building off of that book in terms of the momentum that we've seen in the business.
Speaker Change: We've really seen momentum in a few areas that we've called out one is active customer growth and we're pleased to see sequential increases every quarter. The last five quarters and active customer growth, which is a very important metric to us as we look ahead to Q4, we certainly expect that quarter to be the strongest for us from an active customer growth.
Speaker Change: We've also seen continued velocity and ecommerce, which we called out in some of our prepared remarks, and our stores continue to perform very strongly certainly in line with the targets that we put out there at 35% overall margins and trending towards 20 months paybacks from a marketing efficiency perspective, just building on what Neil.
Speaker Change: <unk> said, we have a very disciplined approach, where we want to see marketing spend as a percent of revenue be in the low teens.
Speaker Change: <unk> seen an increase in that year over year from 11, 6% Q3 of last year to 12, 3% Q3. This year I would anticipate seeing that moderately increase in Q4, as we seasonally spend into holiday demand and FSA expiration, but will still plan on being within that.
Speaker Change: Mid teens as a percent of revenue so I wanted to add that additional color.
Speaker Change: Great. Thank you so much I'll pass it on.
Speaker Change: The next question today comes from the line of Dana Telsey from Telsey group.
Speaker Change: Go ahead. Your line is now open.
Dana Telsey: Hi, Good morning, everyone as you think about it.
Speaker Change: Pages that are happening.
Speaker Change: With the election, Carl how do you think about cash I think you saw some components from China what percent of goods are directly imported how much from China and how do you think about adjusting in regard to sourcing and pricing to the consumer.
Speaker Change: On another note smart glasses.
Speaker Change: What about it lately, what do you see as the opportunity for worthy Parker. Thank you.
Speaker Change: Thanks Dana.
Speaker Change: We've been planning internally and have experienced sort of navigating this situation before vis vis the increased tariffs from China and it's obviously early days and not much known at this time, but over the last five years, we've materially reduced our exposure to Chinese.
Speaker Change: Used goods and we'll continue to do so.
Speaker Change: And.
Speaker Change: We believe we have the ability to flex even further into other regions and work with our vendors to offset tariffs as much as possible.
Speaker Change: We've been trending lower in each of the loss.
Speaker Change: Five years and this year.
Speaker Change: Well be around 20% of Cogs.
Speaker Change: So we feel very confident.
Speaker Change: And our ability to sort of match.
Speaker Change: Manage.
Speaker Change: The current environment.
Speaker Change: Okay.
Speaker Change: And then.
Speaker Change: On smart glasses smart glasses were.
Speaker Change: Excited about the potential that smart glasses have to.
Speaker Change: Really transform how we engage with technology and enable us to stop staring at our phones all day.
Speaker Change: And over the last decade, plus we've been in discussions with various companies.
Speaker Change: And researchers that have been working to miniaturize battery speakers cameras and other hardware components.
Speaker Change: And other technologies are advancing but what we believe will be a bigger catalyst for the adoption of smart glasses in the coming years as the opportunity to embed always available AI that can provide context and useful information to the way in real time.
Speaker Change: AI and smart glasses are uniquely complementary to each other given the amount and complexity of information avail.
Speaker Change: Available answer we've been particularly excited to see how quickly AI capabilities are advancing.
Speaker Change: But we also know that regardless.
Speaker Change: How good any of the SEC is any form of smart glasses and still need to look good on People's faces consumers will continue to have a very high bar for the look feel and weight.
Speaker Change: Anything they put on their face and they are only willing to wear prescription glasses.
Speaker Change: The original wearable because they provide so much utility by enabling site and so.
Speaker Change: As we look ahead, we believe the investments there.
Speaker Change: These will be insurance and how might we further raise awareness.
Speaker Change: About in network options, there's a few ways that we do this one is through training our teams given that we are sort of outside.
Speaker Change: Traffic to our stores and website and apps relative to others in the category.
Speaker Change: But we also tend to partner with our in network.
Speaker Change: Insurance carriers, and we do things.
Speaker Change: Yeah, inviting brokers in for events in our stores now that we have.
Speaker Change: 270, plus stores across the country. So we will do in person events, we tend to get highlighted in a lot of our insurance partners materials.
Speaker Change: As they kind of view us as a preferred partner.
Speaker Change: Frankly, a sex.
Speaker Change: Sexy partner with which they used to.
Speaker Change: Tried to attract new business and something that.
Speaker Change: Benefits managers within companies.
Speaker Change: Can speak to on how they're providing great benefits to their employees and co workers.
Speaker Change: It is something that we do think a lot about and it is a portion.
Speaker Change: A focus of our marketing teams.
Speaker Change: Thank you.