Q2 2025 Warby Parker Inc Earnings Call

Hello, and thank you for joining. Today's call will be Parker's second quarter 2025 earnings conference. The call will begin in just a few moments, and if you would like to ask a question, please press star followed by 1 on your telephone keypad. Once again, today's...

The conference call will begin in just a few moments. Thank you for your patience.

I don't like to pass the conference over to Jacqueline Berkeley head of investor relations to begin. 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 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 a result of various risks and uncertainties.

For more information about some of these risks, please review, the company's SEC filings, including the section titled risk factors, and the company's latest annual report on form 10K.

these forward-looking statements are based on information as of August, 7th, 2025, and except as required, by law, we assume no obligation to publicly update or revise, our forward-looking statements,

additionally, we will be discussing certain non-gaap Financial measures these non-gaap Financial measures are in addition to and not a substitute for measures of financial performance prepared in accordance with us, gaap,

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.

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

Thank you, Jacqueline, and good morning everyone.

2025 has already been a busy and eventful year and we're excited by the progress. We're making toward Warby Parker's and vicious near and long-term objectives.

Our team delivered strong results in Q2 growing Revenue, 14% year-over-year And expanding adjusted. Evita margin 130 basis points. Both above the high end of our guidance, while delivering our Eighth Street quarter of accelerating customer growth.

These results, reflect the team's disciplined execution and ability to adapt in a dynamic environment. Like we saw in April, including taking decisive actions to mitigate the impact of tariffs,

We continue to lay a strong foundation for long-term growth by investing, strategically driving Innovation, and forging key Partnerships.

In particular, we'd like to highlight some recent Milestones that demonstrate progress against key pillars of our strategy to drive sustainable growth while creating positive impact along the way.

In July, we opened our 300th store at Brookville place in downtown Manhattan. In just, a few days ago, we opened our very first Target chop and chops in Willowbrook, Illinois, in Minnesota.

We're only 1 third of the way to our long-term opportunity of more than 900 Standalone stores across North America. Underscoring, the significant white space ahead

With additional scale. We are able to serve more customers than ever, while having even greater impact in Q2. We announced that we surpassed 20 million pairs of glasses distributed to people in need through our bip pair, give a pair program.

A powerful reminder of the impact we're having on communities across the world.

these Milestones also reflect a natural evolution in how we are serving our customers today and in the future,

1 led by a highly productive storefront and supported by increasingly personalized, AI driven digital, tools and experiences.

Will speak more to how AI is transforming. The way we serve customers later in this call, but we also wanted to highlight how excited we are to be developing devices that will enable our customers to engage, AI seamlessly wherever they go.

In may, we announced a long-term partnership with Google to develop AI powered. Intelligent eyewear designed for all-day. Use marking a transformative step for our brand and significantly expanding our Tam Beyond traditional glasses.

We believe glasses are the perfect form factor to leverage AI, enabling the delivery of real-time personalized insights tailored to what the wearer sees and hears as they move through the world.

Glasses. Allow AI to understand the wear's environment, and surface relevant information. Without forcing someone to pull out their phone or look at a separate screen.

Imagine the world's smartest assistant, ready with answers when you need them and invisible when you don't, embedded in a beautifully designed pair of glasses made for all-day wear.

We're thrilled to partner with Google and AI innovator renowned for technology that powers lives around the globe.

That enabled innovation. We believe our partnership is uniquely positioned for this rapidly evolving space.

We see tremendous potential in what orbi Parker and Google can achieve together and look forward to sharing more in the coming months.

It's been an active and productive first half, and we're pleased with our momentum. Heading into the rest of the year gives us confidence to raise our full-year guidance.

Before, Steve talks through our financials and guidance, Neil and I will recap the drivers of our Q2 performance.

I'll start first with our eighth consecutive quarter of accelerating active customer growth.

We handed Q2 with 2.6 million active customers, an increase of 9%, on a trailing 12-month basis, with average revenue per customer up 4.6%.

Our retail channel remains our primary growth engine, and we continue to see strong growth in active customers generated through our stores.

In Q2, we invested across a broad mix of paid. Media channels to drive brand awareness and acquire new customers.

As we shared in February, the key Focus, this year has been leveraging even more advanced analytics, including media, mix modeling to optimize Course Bend and scale into newer high potential channels.

This approach has proven especially valuable in the first half allowing us to adapt quickly and sustain momentum in a dynamic environment.

We're seeing encouraging results from new streaming and localized campaigns whether through in-store events or targeted, local media aimed at driving awareness for our stores and eye exams.

Complimentary to our core. Marketing efforts is strong growth within our insurance business. And we're specially encouraged by the continued ramp of Versant health.

Insurance customers are some of our highest value customers spending more on their initial purchases, selecting progressive lenses at a higher rate and returning more frequently.

We Believe insurance will remain a long-term Tailwind as we drive broader awareness of our in network and out of network benefits.

We're pleased to report consistency in our Revenue retention metrics across cohorts with Revenue. Retention rates of approximately 50% over 24 months, and over 100% over 48 months.

And now I'll pass it over to Neil to walk through the remaining drivers.

Thanks Dave.

Next we saw strong demand across classes supported by ongoing product and lens Innovation as well as our continued. Focus on delivering exceptional value to our customers.

Glasses grew approximately 11% year-over-year, with progressives accounting for approximately 23% of prescription units sold.

In Q2, we launched 5 new Collections and continue to expand our lens portfolio.

Highlights include the launch of transitions extra active lenses, the introduction of our kids, assortment online, and a collaboration with LA based Street. Wear brand Market Studios, featuring musicians and producer Rize, that generated strong engagement.

These initiatives help us. Reach new audiences. While deepening loyalty with existing customers.

As part of our tariff mitigation strategies.

We moved forward with a handful of price increases focused on select lens types and add-ons while still preserving our entry-level 95 price point.

Overall, these pricing actions had minimal impact to mix and conversion.

In some cases product mix for higher value, add-ons and lens treatments. Trended above our expectations,

We believe this is evidence of the considerable value Gap that still exists in the industry.

We aim to offer high-quality products and services at an accessible price point and we continue to believe that combining design quality and service is a key differentiator for our brand.

The third driver of our Q2 growth was the strength of our highly productive store. Base complemented by continued innovation in our digital experience.

Retail Revenue, grew 19% year-over-year driven by new store, expansion and continued Healthy Growth of our stores. Open 12 months, or more consistent with color. We've provided on prior calls,

We opened 11 new stores in Q2 entering 6, new Suburban markets and expanding our presence in 5 exists, ones, including areas outside of Boston, Philadelphia, Washington DC and Charlotte.

come from building out under penetrated, Suburban markets like these

Over 50% of the major metropolitan areas. We operate in only have 1 store.

And we believe we have significant potential to expand our presence in existing markets while also entering new markets.

We're also seeing clear benefits from our densification strategy in that markets with the highest number of stores frequently have the highest e-commerce growth driven by Greater brand awareness and customer engagement across channels.

Stores open longer than 12 months. Average 2.2 million in Revenue with 4 wall margins in line with our Target of approximately 35%

and newer stores are tracking in line with our targets.

As our physical footprint scales, we're also evolving the way. We serve customers across channels, we launched Warby Parker without retail stores during a time. When less than 2.5% on glasses were sold online.

And our first of its kind home Tryon programs offered a unique convenient way for customers to try on 5 glasses for 5 days at home, completely free of charge.

For many years. And especially during the pandemic home Tryon was a novel way to help customers shop for glasses online.

Today, our differentiated in-store experience across 300 locations combined with increasingly personalized, digital tools like our industry-leading first true to scale. Virtual Tryon have transformed the way people engage with our brand and shop for eyewear

the vast majority of recent home Tryon customers live within 30 minutes of a Warby Parker store

As we've scaled and home, Tryon has become a less meaningful driver of our e-commerce business. And as we have seen strong growth, from customers directly purchasing glasses online, and in our stores,

We've decided to Sunset the program at the end of this year.

We're confident we can serve customers effectively, and through our stores.

Our leading digital experience and by leveraging proprietary AI, powered technology.

Given home try on costs are included in our total marketing, spend will now be able to reallocate resources toward brand awareness and customer acquisition.

This quarter, we also redesigned our customer experience team structure to reflect the evolution, in how we serve customers, given our growing storefront, and the sunset of our home Tryon program.

Even with this transition, we continue to expect e-commerce growth in the low to mid single digits this year.

And believe the channel remains on a path to long-term sustainable growth.

while Q2 growth was at the lower end of this range due to a slower April, we saw a sequential Improvement throughout the quarter which continued through July,

As part of our continued investment in the online experience. We launched advisor in Q2 a personalized, ai-driven recommendation tool within our app, designed to replicate the guided retail experience.

Early results are encouraging and we're seeing strength in AI powered tools. Like advisor, partially offset by headwinds from home Triad.

Going forward, we believe advisor will play a meaningful role in driving product Discovery and conversion.

Lastly, we continue to expand our holistic Vision Care offerings as part of our broader strategy to serve all of our customers needs.

Contacts remain a healthy contributor to growth in Q2 supported by strong adoption. From both new and returning customers.

Contact sales grew by 28% year-over-year and now represents 11.5% of revenue.

Yet, our penetration remains well below the approximately 20% industry average, highlighted the significant Runway ahead.

Exams were another key driver of growth. We expanded exam capacity across our growing retail footprint. In Q2, our eye exam business grew 44% year-over-year to account for 6% of total revenue.

I exams Drive traffic conversion and average revenue per customer given roughly 75% of glasses are purchased at the same location as the exam.

Capture more of the Vision Care Journey.

We also continued scaling retinal Imaging across more locations and offering that enhances the clinical experience and reflects our commitment to accessible, high-quality Vision Care.

Our performance, this quarter reflects the successful execution of our near-term strategy, as well as our team's ability to balance that execution with a focus on our long-term vision.

By strengthening our core business and strategically expanding both access and convenience.

We are not only meeting customer demand but also shaping the future of our category.

We believe the groundwork for sustainable growth.

And we're poised to lead our business and more broadly. Our industry into its next chapter.

Before I pass it over to Steve I want to share our leadership update after 14. Incredible years at Warby Parker, Steve has made the decision to step down from his role as Chief Financial Officer at the end of this quarter to pursue an opportunity outside of the industry.

Steve was our inaugural CFO.

He started as a team of 1 and worked tirelessly to build a rigorous strategic Financial organization.

His leadership has been instrumental in Warby Parker's countless milestones, in particular, our transition to life in the public markets.

Steve's deep commitment to the company's success and to his team. And our impact efforts has created a strong Foundation that will be felt throughout our stores offices and Optical labs for years to come.

He leaves our team operations and systems in the best place they have ever been.

Until a successor is named Dave will assume the roles of Principal Financial Officer and principal accounting officer on an interim basis.

He will work in close partnership with our tenure financial and accounting leadership teams to ensure a seamless transition.

And now Steve, I'll pass it over to you.

Thanks Neil and Dave.

Before I dive into financials, I want to express a tremendous amount of gratitude to Neil and Dave, our board, the finance team and the broader Warby Parker team for giving me the opportunity to be in the arena with you.

I'll now be cheering you on, but from another Arena.

When I joined Warby, Parker, 14 years ago, we were a small private company with roughly, 30 employees know stores, no factories today, we're operating as a public company at scale with over 300 stores, 2 Optical Labs nearly 4,000 employees and this is our 16th earnings call.

We have our eight core values printed throughout our spaces to remind us what's important.

They include phrases, like do good, take action and lead with integrity.

My favorite is learn grow repeats. I plan to carry these with me.

Now, on to our financials.

I'll begin with a detailed review of our second quarter performance.

Then I'll outline our updated guidance for the full year and our outlook for the third quarter of 2025

Starting first with Q2.

We are pleased to deliver both revenue and adjusted EBITDA above the high end of our guidance, despite meaningful tariff-related uncertainty throughout the quarter.

These results reflect the flexibility of our model and the team's ability to move quickly.

Over the course of the quarter. We made significant and timely adjustments to the business which contributed to our strong financial performance and highlight the levers. We have to drive results in a dynamic environment.

Revenue for the second quarter came in at 214.5%. Year-over-year retail Revenue, increased 19.3% year-over-year with store count up 16.4% and e-commerce, Revenue up 2% year-over-year.

We finished Q2 with 2.6 million active customers on a trailing 12-month basis, representing a consistent acceleration in growth to 9% year-over-year.

We now seen sequential improvements in year-over-year, active customer growth for the past 8, quarters reflecting the positive returns from both new and existing stores, marketing Investments and a range of strategic initiatives.

Year-over-year on a trailing 12-month basis to 316.

this was driven by factors including our selective pricing increases in glasses at the end of April,

The higher mix of Premium lenses like progressives and continued growth in both contact lens and eye exam sales.

By products.

Glasses, Revenue, grew roughly 11% year-over-year.

And we saw continued strength in our holistic Vision Care offerings with contact lenses up 28% and eye exams up. 44% year-over-year

Increase increased from 10.2% of revenue in Q2 2024 to 11.5% in Q2 2025.

I exams increased from 4.8% of Revenue in Q2 2024, to 6% in Q2 2025.

From a channel mix perspective, retail represented approximately 73% of our overall business in Q2.

We opened 11 new stores in the quarter. Ending the period with 298 stores. This represents 42. Net new stores opened over the course of the last 12 months.

Retail productivity was 101.7% versus 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.

This metric covers all stores and is impacted by factors like opening Cadence, and Doctor hiring.

For stores that have been opened greater than 12 months. We observed an acceleration in year-over-year growth in Q2.

Our new stores continue to deliver strong. Unity economics performing in line with our Target of 35% 4 wall, margin and 20-month. Paybacks for stores. Open more than 12 months. Average, revenue per store was 2.2 million and performance was in line with our Target. 35% for Walmart margins.

Overall, we continue to be pleased with the performance growth and productivity of our store Fleet.

Over the course of the past year, nearly every new store included. An eye exam Suite, bringing our total number of stores with eye exam capabilities to 259 stores or 87% of our total fleets.

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 bills.

Our gross margin also includes stock-based compensation expense for our optometrists and optical lab employees.

for comparability, I will speak to gross margin, excluding, stock-based, compensation, and 1 time items in the quarter, including the right down of inventory related to our home Tryon program,

Second quarter adjusted gross. Margin came in at 54.3% in line with expectations and compared to 56.1% in the year ago. Period.

The year-over-year decrease was driven by tariff related, headwinds, and glasses sales, growth of contact, lenses and increased doctor, headcount and store occupancy related to our store. Count growth.

These impacts were partially offset by increased penetration of our higher priced lenses and frames as well as the select pricing increases implemented at the end of April that impacted May and June.

Shifting gears to sgna.

As a reminder adjusted sgna excludes non-cash costs like stock-based compensation expense.

Adjusted sgna and the second quarter came in at 104.8% of Revenue.

This compares to Q2 2024, adjusted SG&A of $98.2 million or 52.2% of revenue, representing a 330 basis points of leverage year-over-year.

With then adjusted sgna marketing, spend was 26 million or 12.1% of Revenue compared to 22.49% of Revenue in Q2 20224.

With roughly consistent marketing spend as a percent of revenue, disciplined expense management drove leverage across our non-marketing, adjusted SG&A categories, which include salaries for our stores and customer experience employees, as well as general corporate expenses.

Including our headquarter, salaries and general operating expenses to support the business.

24% to 36.7% of revenue in Q2 2025.

Non-marketing adjusted sgna grew, just 4% year-over-year.

To continue cost discipline and drive our higher flow-through in Q2 above the high end of our guidance range.

Turning now to adjusted ebita.

In the second quarter we generated adjusted ebit da of 25 million representing in the adjusted ebitda margin of 11.7%.

This compares to adjusted Evita of 19.6 million or 10.4% of Revenue. In the year ago, period reflecting expansion of 130 basis points

This was driven by significant non-marketing SG&A leverage.

turning now, to our balance sheet,

We generated 24 million in free cash flow in Q2 2025, ending the quarter with a strong cash position of 286 million.

We will continue to deploy Capital deliberately to support our growth and operations. We also have a credit facility of 120 million expandable to 175 million. That is undrawn, other than 4 million outstanding for letters of credit.

Turning to our outlook for 2025.

Given our strong first half performance and continued execution across the business. We are updating our full year guidance which I'll summarize in just a moment.

Let me begin with an update as it relates to tariffs as we discussed last quarter, we outlined 3, primary mitigation strategies, including shifting, our Global supplier, mix selectively, raising prices and closely managing operating expenses all of which we've now implemented with positive results.

As tariff rates have evolved with continue to adapt our approach demonstrating, our team's ability to respond with agility in near real time.

The gross impact of tariffs has moderated since our last call and that combined with the actions, we've taken have resulted in incremental ibida flow through in our Q2 results and our raised full year adjusted IBA. Doc guidance.

And now I'll provide additional color on our 3. Key strategies spanning gross margin and non-marketing sgna.

First, we continue to shift our sources of Supply to optimize our Global vendor mix.

Our flexible supply chain has allowed us to quickly adapt production in response to changing tariff rates.

Based on our latest plan. We now expect China to account for approximately a low teens percentage of our total cost of goods sold by year end, and we will continue to diversify our country mix to optimize for the most cost-effective outcome.

While China tariffs have come down since our may call rates for the rest of the world have increased, and we continue to make adjustments in response to these changes.

Second, we implemented strategic price increases at the end of April, on a handful of lens types and add-ons while still preserving our core value proposition.

Third, we will remain disciplined on costs while continuing to invest in growth.

Through the first 2 quarters of the year, we've delivered, an average of 300 basis, points of Leverage within non-marketing, adjusted sgna an area that will continue to be a source of Leverage moving forward.

At the same time, we've kept marketing, spend in the low teens as a percentage of Revenue.

as the Tariff and general business landscape evolves, we will remain disciplined and continue to reassess and optimize spend

Taking all these factors into account and the acceleration we saw in the business throughout Q2 and into Q3, we are raising our outlook for the full year 2025. We now expect net revenue between $880 million and $888 million, representing approximately 14% to 15% growth year-over-year.

In the second half which is consistent with the acceleration we've seen in the business since May.

Adjusted ebitda of 98 to 101. Million representing, an adjusted ebitda margin of 11.1 to 11.4%, and 170 to 190 basis points of year-over-year expansion.

45 new store, openings including the 5ly announced shop and shops within Target stores.

Mid-50s with adjusted gross margin in Q2 as a good reference point for the full year.

We're pleased to continue to guide toward gross margin in the mid-50s, despite operating in a dynamic tariff environment.

Finally, we expect stock-based compensation as a percentage of net revenue to be in the 2 to 4% range for the full year.

For Q3 2025, we're guiding to the following.

Net revenue between $200 million and $223 million and $225 million, which represents growth of approximately 16% to 17% year-over-year.

But de of 24 to 25.5 million representing an 11% margin at the midpoint of our range for 210 basis points of year-over-year extension.

Similar to the first half we anticipate adjusted, Evita margin expansion in Q3 will be driven by leverage with a non-marketing sgna 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 percentage of Revenue in the low teams.

Now Dave, I'll pass it back to you.

Thanks, Steve, and thank you all for joining us on the call. Today, I wanted to Echo Neil's, thoughts, and thank Steve for a tremendous 14 years at Warby Parker

We look forward to seeing all that you'll accomplish in this next chapter.

With that meal. Steve and I are pleased to take your questions. Operator, please open the line for Q&A.

That question please press star followed by.

Again, to ask a question please press star, followed by 1.

We will now take our first question.

Our first question comes from Brooke Broach of Goldman Sachs. Please go ahead. Your line is now open.

Good morning and thank you for taking our question. Neil Dave, I'd love to hear your thoughts on the latest views of the health of the Eye Care consumer and your confidence in driving continued sequential growth. In this mid to high teens range on a go forward basis. And then Prestige can you just help us a little bit with the magnitude of potential sgna leverage on a go forward basis? Understood that there's some really nice gains over the course of the next couple of quarters associated with some of these tariff savings actions. But what's the opportunity for that over the next couple of years? Thank you.

Thanks Brooke.

We can, we continue to feel fortunate that we operate in a care in a category that is a health need. So while we sell a fashion accessory, it's also a health product as you know, um, and we do see stability, um, in in our customer base and we see that consistency, um, whether it's in repeat purchases or um, in sort of our product mix. Um, we did see some choppiness earlier in the quarter, you know, as you've heard from many companies, um, April was challenging, um, we have a sort of recovered and have a strong Trends now that give us confidence for the remainder of of, of the year. Um, but as we've demonstrated over the last few years, that irrespective of the macro environment. Um, we're going to continue to grow at a rapid clip and in a consistent and predictable way, um,

By delivering exceptional value, um, and incredible customer experiences. Um and 1 inherent Advantage, whenever there's a crisis um um, as a lot of companies face in in April, um, uh, we tend to adapt and move faster than many of our competitors and that puts us in a competitive, uh, a better position.

so, as an example, we were able to, uh, quickly roll out uh, select and strategic price increases um, that have

Again, irrespective of um the how the market is behaving. And I'll pass it over to Steve.

And thanks for your question on um, leverage from adjusted sgna non-marketing, adjusted sgna in particular. So I'll first just by providing a reminder of what is in our uh, adjusted sgna stack. Uh, so for Q2 roughly 105 million dollars in expense, 26 million was marketing. The remainder of that is really split into a few categories. It's salaries for our retail store teams, our customer experience, teams, and then a range of corporate expenses. Um, as it relates to retail, we continue to make strides, um, to better and more efficiently staff to match Staffing in stores with um demand that we're seeing from customers for our customer experience team. We talked um specifically this quarter for example, uh, about a restructuring change that, we've made to that team. Um due to the fact that we're unable to uh enabling ourselves to better leverage, AI technology and increase.

Our level of Outsourcing, um, that's that 1.3 million dollar charge that we've disclosed and our ability to more efficiently staff, customer experience has certainly been a source of Leverage. Uh the next category is really corporate expenses. So um headquarter salaries, what? We pay to our vendors, what we pay to our consultants and

Uh, we take a very disciplined approach to how we allocate Capital to all of those areas um year to date. We've seen roughly um, 300 basis points of Leverage from non-marketing, sgna, uh, and on a historical basis, just to set the stage in 2023 240 bips of improvement. Last year 10070, bits of improvement, this year of the trend continues 300 basis points of improvement. So across those categories, we feel very, very confident that we'll continue to drive adjusted sgna leverage, which will certainly be a part of our adjusted e, but uh, margin story this year. And for years to come

Great. Thanks so much. I'll pass it on.

Our next question, today comes from the line of Donna tells you from TY Advisory Group. Please go ahead. Your line is now open.

Hi, good morning everyone and Steve. Best of luck on your next next chapter. As you think about the Google announcement that was made earlier. Where are you on the progress there? How do you think about that development? Given the importance of those glasses to the overall ecosystem? Going forward? Tell us a little bit about that. And then with the Target shop and shops, I think, what is a 3 days or whatever that you're open

So I know the first 5 this year, how are you thinking about next year and just, lastly, the price increases that you took selectively response to that? What are you seeing from the end consumer? Thank you.

Great. Uh, thanks Dana. Um, we're really excited to partner with Google for a number of reasons but, uh, first and foremost because they're the, the global leader in Ai and their Deep Mind team and broader organization continue to push the boundaries of what the latest Gemini models can do. And um, we anticipate that smart classes adoption will dramatically accelerate. When consumers are able to use their glasses, not only for photos and audio, but when they become the primary interface with, which they engage, uh, with AI and we believe that Google has very unique capabilities, um, in terms of how advanced their AI is, um, not to mention the scaled assets. They they have from the Android operating system to Gmail Maps, search YouTube. Um, and so much more that will give where incredible value when when paired with Gemini, um, and uh, since our, our founding in 2010 uh

Where, uh, incredibly excited. That as we enter the AI era glasses are poised to be the next major Computing platform. Um, so it's hard to overstate the the size of this potential Market opportunity and we're pleased by the the progress that um that we're making and and look forward to sharing more about our our product roadmap and timeline and future calls.

And data just to share a little bit about our Target shop and shops. That's been great partnering, uh, with the target team. Um, they have a great appreciation for Brands and for customer experience, and we've been able to, uh, literally design, a Warby Parker and plop it within, uh, Target. So you walk into the threshold of the Warby at Target, um, and it feels like any other Warby Parker store, um, and it's staffed by Warby, Parker team members leveraging, Warby Parker technology. Um, and so far, uh, we're on track and we've gotten a great response that we're excited about. Um, we've been able to, uh, leverage and promote, sort of internally, um, from Warby to staff the Warby Parker at Target Target Target stores. Um, and this is been a strength of ours uh, across the organization. It's just our great talent pipeline, um, that um, just having

Great retention enables us to do and it's particularly important in our category, um, as 1 needs to develop expertise around our product assortment around prescriptions, um, uh, around opticianry. Um, so, um, we're able to to leverage that for our Target shop and Shop. So, the early reception, um, has been very positive. The remaining stores will open this month and in August. Um, so yeah, we're we're excited. Um, with respect to the selective pricing increases that that we took, um, overall, uh, well-received, um, we've seen, uh, minimal impact to conversion, and, and mix. And in some cases, we actually saw a stronger uptake, on higher value lens upgrades. Um, so, um, as we look across our assortment again, we're providing, um, greater value in terms of price to Quality. And we think we have

Um, within a competitive landscape for the entire 15 years that we've been in business as we've seen competitors, um, take take price. Um, and uh, this is 1 of the first times that we've actually increased prices over the last 15 years, whereas, a lot of our competitors, um, are increasing, um, prices of frames and lenses on an annual basis. So we continue to hear from our customers. Um, just how much value that they get, um, from

Um, what are premium products? Sold at a very accessible price.

Thank you.

The next question, today comes from the line of Mark ovar from bed. Please go ahead. Your line is now open

Thanks for taking my question, and Steve, best wishes in your next chapter.

So first, I was hoping you could help us understand the drivers to the revenue growth acceleration. You're seeing into July, um, is that happening across channels and, and how should we think about the contribution from customer growth versus Revenue per customer in Q3 Q4? I guess, where are you seeing the biggest change in Trend there. Thank you.

Um, sure and thank you for the good wishes, Mark, I'm excited to be able to talk more openly about my next opportunity at some point. It's been wonderful, uh, working with you. And, and everyone on the call, um, as, um, as it relates to your question on growth that we're seeing across Channel. Um, so really starting in May through to July, as Neil called out. Um, we've seen an acceleration in growth across retail and across e-commerce. So we've been pleased to see that it's been an omni Channel lift across the business, uh, in some ways, um, supported by the pricing changes that we enacted at the end of April um, that are only reflected in May and June for the quarter, but the POS

Positive momentum is really uh, carried through to July.

On our last call, we talked about uh there might be a a slight rebalancing in how we see the interaction of growth driven by those 2 numbers, where we might see moderately, higher growth driven by average revenue per customer driven, by the small set of price increases, we implemented and moderately lower growth from active customers. But we would still contextualize, um, the path that we're seeing for both active customers and average revenue per customers, as positive and strong.

Thank you. And then separately, can you talk a bit more about the Warby advisor you called on in in the release this morning? What are the key capabilities? How are consumers interacting with it? And just any thoughts on the impact that could have on on conversion and revenue for customers that rolls out?

Thanks again.

Yes, so uh, this is a new feature that we introduced on Ecom that.

Um, uses, uh, AI driven personalized, uh, recommendations, um, that, uh, recommends frames based on a user's face, shape and features, um, along with, uh, their their preferences around, uh, different styles and colors, and, and materials. Um, and the intent here, um, was really to bring the best parts of our retail shopping experience online. Where, um, if you walk into 1 of our stores, 1 of our experts um style advisors um can

Uh, uh, look at that, uh, customer, um, their their face shape and Contours. Um, ask them a few questions around what they're looking for and then, um, help provide personalized recommendations and now we're able to do that. Um,

Online using Ai and and all the the best elements of our virtual Tryon experience. Um and so we introduced uh that that feature in in Q2 and we're seeing very strong adoption in terms of Engagement and um, in sales and

Um, and, uh, that gives us, you know, confidence, um, uh, to move beyond what has been a big driver of our e-com business. Historically, our home Tryon program, um, and um, the new features that we've introduced are driving, um, strong year-over-year growth in direct Ecom classes purchases that don't involve a home Tryon. Um, and uh, now we'll have 1 less, uh, message on our site, um, in in, in our marketing materials. And we can more effectively reallocate those resources to driving customers to the newer parts of our business that are driving higher incremental, returns, uh, namely to our 300 Plus stores and our AI driven, uh, digital features on our site

Great. Thanks for all the detail.

Thank you. The next question today comes from the line of Oliver Chen from TD Cowen. Please go ahead; your line is now open.

Thanks a lot, Steve congrats and it's been wonderful to partner with you. Uh, Steve Dave and Neil the Google partnership is really exciting, would love thoughts on as you, uh, see, competitive differentiation versus the current offerings in the market and also, your take on the evolution of of distribution, I'm sure that you'll do this in a very, uh, customer Centric. Way. Second question is on all the progress you're making with insurance and reducing friction, as well as growing awareness.

And what's ahead there in terms of how you're thinking about the multi-year opportunity and and different. Um,

Different things that can happen to to further, enhance that especially as your awareness grows. And finally, um, Steve as we think about contacts and progressives, they're both nice opportunities with different margin complexions. Could you help highlight uh, the the longer term impact there and also um your vision for mix given that they both have nice uh Tams as well. Thank you.

and then, if you think about all of the incredible products,

That.

the Google ecosystem has that um, can be uh, leveraged to make all of our Lives better, um, and more productive and enable us um, to

Leverage our curiosity, um, in in ways that um, we haven't been able to before frankly um, it's something that gets us um, just incredibly excited and and motivated. Um, so uh, the key differentiator we think is that um, these are, um, being designed for all day use, um, and that the AI, um, is something that will be incredibly useful. Um, the term that we tend to use is helpfulness,

And um, we can't wait until we're in a position uh to to show you the product and and for you to, to try it.

um, in terms of distribution, um,

This is a device and a category that needs to be eyewear first. Um, and the same principles that go in to selling, um, and shopping for traditional eyeglasses. Um, are going to need to be, uh, applied, for this, uh, new wearable device. Um, in that it's unlike other devices.

Cases are a consumer electronics in that. Um, it does it sits on your face and as we know um we all have different facial features from different pupil distances to nose Bridges. Um and we think that we're uniquely positioned um to provide an exceptional shopping experience. Our staff is trained in helping everyone find the absolute best pair of glasses, um, for them that best represents their, uh, identity. Um, and we think that we're also best positioned, um, to, uh, enable people to test and try and demo, uh, this new product. Um, that will be, you know, different from what people have experienced in in the past. So our distribution of now, um, 300 stores are um, ability to provide uh, Best in Class, um, primary. I

Care through I exams and retinal Imaging. Um, our uh,

uh, cohort of some of the best Opticians and optometrists in, in the country, um, the locations of our stores in, um, some of the best streets and malls, um, and lifestyle centers across the country, um, uh, really, uh, put us and we think, um, an incredible position

To help develop. Um, and and grow this nent Market.

As it relates to Insurance. Uh, we're we're seeing significant year-over-year growth in our in network Insurance business.

Um, and continue to be pleased by the early signs from our recent MetLife integration. Uh, we're seeing the, the cohorts of our newly, integrated, versent members ramps, in line, or ahead of, uh, prior Insurance cohorts. And, uh, we really view this as a multi-year Tailwind.

Um, and if you look at our longest standing Insurance relationships, we continue to see uh, increasing utilization and increasing Revenue per member per year, even several years after our initial Integrations and, and we expect the same with person.

Uh, and we continue to find that our insurance customers spend more in each transaction and repeat more frequently. Uh, and so we're eager to make it even easier for for people to use their in network and out of network benefits with us. So that so that their dollars go further and, um, in that vein, uh, we do continue, uh, to Pirate pilot, uh, relationships with with other carriers. And, uh, and look forward to unlocking additional relationships over time.

Uh, and Oliver regarding your questions about contacts and progressives as long-term, Tailwinds supporting growth for the business, I'll talk about each 1 separately. Uh, so contacts is a 12 billion dollar market, if you uh annualize our most recent results. Um our contact business is order magnitude 95 to 100 million dollars. So just a drop in the bucket is what we have in terms of the broader market share.

Of their business. Next, in the form of contacts, contacts are just an 11%, uh, portion of our mix. And so we see a dramatic opportunity just to continue to take share of this large market and see that uh, proportion of our business makes increase over time. I will also say, 1 of the nice things, about the contact lens purchase, it's the most subscription, like purchase of all of the products that we sell, we have talked about contact lenses, having lower growth, gross margin profile from a percentage perspective, but given the subscription like nature and regularity of the purchase, um, the gross margin dollar profile is certainly very appealing and accredited to our gross margin dollars.

Moving to progressives, um, will also lay out the backdrop from the market size perspective. So progressives trifocals, and bifocals make up roughly. 40% of all prescription units. Sold just 23% of our business today is made up of uh, Progressive as a reminder Progressive or highest priced um and highest margin glasses products and that's certainly been a continued driver of increase in average revenue per customer and an increase driver of our gross margin.

Um, as a reminder, we'll also say that progressives are largely purchased at retail, given the Progressive customer is slightly older and there's a more complex measurement. Uh, that needs to be taken called seg height, uh, which can be taken with more accuracy in store. And so, uh, sales are progressives in store are higher and will be supported by our continued rollout of retail stores. So as we open up more stores, that business line will continue to grow. And we certainly see both contacts and progressives as long-term Tailwinds supporting growth over the coming years.

Thanks for all that detail. That's regards.

The next question, today comes from Paul who has from City, please go ahead, your line is now open.

Hey everyone. This is Brandon cheetah 1 for Paul Steve. I want to add my congratulations and great working with you and best of luck on your future opportunity.

Um, can you talk a little bit about sun-setting, your home? Try on program? Um, you know, how much of that is due to the reallocated and marketing or elsewhere versus providing potential margin upside in the future. And then just about, you know, how much of your Direct business is initiated through the home trial program.

Uh, thanks Brandon. Um, the the day we launched orbi Parker Inn in 2010. Uh, GQ published an article calling us the Netflix of eyewear. Um, comparing our, our home try-on program, uh, to the DVDs that Netflix male that at the time and and just like Netflix has evolved, uh, their their business model. Um, we've evolved ours over the last 15 years. Um, to the point that that home Tryon is is no longer necessary as part of our our, uh, core core offering. Um, and while we're grateful for uh, how much impact our our I'm trying to program has had uh, we're excited to be entering a new era. Um for for the business that's been around our 300 Plus stores and AI driven, uh personalized uh digital tools.

Um, and really the home try-on program was designed uh, to enable people to try on glasses, uh, before we had stores and and before technology existed, uh, to enable a true to scale virtual try on. And now, we're frankly able to solve that fitting problem better um, using using our stores and and digital capabilities

Uh and uh we we have included our home Tryon costs historically um as part of our marketing line item. Um and as we wind down uh this program we're uh we're excited to be able to reallocate um uh those those resources in that Capital uh to awareness driving activities and and customer acquisition um that we believe uh

Will drive higher returns. And that we have evidence, uh, uh, uh, uh, higher Roi,

Okay. Thanks. And um,

If you're able to share like we might be able to go to market with your Google AI glasses or when do you anticipate having a prototype ready that you could share with us?

But we look forward. Um, to sharing a lot more in future calls.

Thank you.

This concludes today's Q&A session and today's call. Thank you all for your participation. You may now disconnect your lines.