WRBY earnings call transcript, November 5, 2026

Alongside the launch of Intelligent Eyewear, we remain focused on scaling our omni-channel business and delivering exceptional customer experiences. In Q3, we continue to expand our retail footprint, grow eye exams, and introduce new products and services to better serve our customers. We opened 12 net new stores during the quarter. Bringing our total to 364. We've now opened 41 net new stores year to date ahead of last year's pace and remain on track for 50 openings this year, our most ever. Our growing retail presence continues to make Warby Parker more accessible to customers while positioning us well for the introduction of intelligent eyewear. Across retail, we've continued to see. Strong conversion and higher average order values. At the same time, traffic continues to be softer than we'd like. Looking more broadly, industry data shows us softer unit growth across eyewear categories with greater pressure. On cash pay consumers. We're seeing some of these dynamics in our business, even as customers who shop with us convert at healthy rates and spend more per order. One way we're working to drive. More customers into our stores is by growing exams with eye exams now available in over 90% of our stores. Growing awareness of this offering has been a major focus this year, and we're pleased with the progress we're making. In July. We launched a new marketing campaign highlighting our comprehensive eye care services and eye exams grew 30% year over year in Q3.

We're incredibly proud of the more than 500 doctors on our team and we're continuing. We're looking to invest in technology that helps them deliver exceptional patient care. Advanced imaging tools give our doctors greater visibility into eye health, helping them identify potential issues earlier. Our proprietary electronic health record system streamlines workflows so they can spend less time on documentation and more time with patients. Together, these investments are helping us deliver consistent, high- quality clinical care as we scale. We've also added newness to our assortment, introducing five collections during the quarter, including our collaboration with filmmaker Spike Jones. A longtime friend of the brand. The collection brought back five iconic frames from our archives, while our broader fall assortment introduced new styles and shapes that have resonated particularly well with younger consumers. We've driven strong assortment productivity by building on our best selling styles with new colors while continuing to introduce fresh designs that resonate with customers. We launched Warby Parker Care in September, our first paid protection program, and have been encouraged by early adoption. Starting at just $20, this highly requested offering gives customers added peace of mind with one year of coverage for accidental. Damage, scratches, and everyday wear and tear. And just today, we announced a collaboration with Rare Beauty, our first major collection with a beauty brand. There's a natural connection between beauty and eyewear.

Both of which are forms of personal style and self-expression. The collection reimagines some of our best-selling frames and colors inspired by Rare Beauty's Signature Soft Pinch Liquid Blush, with prices starting at $95. We're also partnering with global pop group Cat's Eye on the campaign, introducing Warby Parker to new audiences at the intersection of fashion and beauty. Following the successful introduction. of Warby Parker Sport earlier this year, we're launching our second collection of performance eyewear in December. We've been encouraged by the response to our first collection and we're looking forward to building on that momentum with new styles later this year. Turning to e-commerce, revenue growth accelerated to 5% in Q3, up from negative 2% in the first half of 2026, with a headwind from the home try-on sunset diminishing and set to fully roll off. At the end of this year. Excluding home try-on, online glasses and contacts sales order volume grew in the high single digits. We've seen healthy momentum in online glasses throughout the year, supporting our intentional shift in marketing spend from contacts to glasses. Our third strategic priority is driving brand awareness and customer acquisition, including capturing vision insurance spend. In the third quarter, active customers grew 3% over the trailing 12 months, while average revenue per customer increased 6.7% year over year. We're pleased with the consistent growth.

In average revenue per customer, supported by eye exams and higher penetration of progressive and other lens enhancements. As expected, based on industry unit growth trends this year, active customers... ...growth moderated in the quarter, and as we lapped our highest quarterly growth last year. We're seeing consistent retention from returning customers, and our biggest opportunity remains attracting new customers to the brand. We are trending to a positive... ...inflection in the trailing 12-month active customer growth in the fourth quarter, even before a meaningful contribution from Intelligent Eyewear. We're also preparing for a significant increase in... ...Marketing Spend in Q4, with major campaigns launching alongside Intelligent Eyewear pre-orders on November 12th. We expect this increased visibility to introduce Warby Parker to new audiences, drive awareness... ...of our broader offerings and support customer acquisition over time. As we think about reaching more customers, insurance remains a significant opportunity for growth and one of the biggest differences between Warby Parker and the broader optical industry. Approximately 70% of U.S. adults who recently purchased eyewear used vision insurance, and for many, their benefits determine where they get their eye exams and subsequently purchase glasses. We're seeing healthy growth among our insured customers, while cash pay customers have been more impacted by the broader softness in the category.

This year, we've made meaningful progress in making it easier. Easier for customers to use their insurance benefits at Warby Parker. We saw over 20% growth year-over-year in our in-network business, with in-network insurance penetration reaching 8.4%, up from 7%. 7.4% a year ago. Today, Warby Parker can serve over 35 million people through in-network insurance plans. And for anyone with out-of-network benefits, our automatic claim submission tool now makes filing for reimbursement seamless for the customer. We're encouraged by the adoption we're seeing. We believe there's significant runway to broaden access to Warby Parker and capture a greater share of the overall vision care market. We've spent years investing in the infrastructure systems and customer experience to make insurance a more seamless part of shopping with us. Insured customers are among our most. valuable spending more on their initial purchase, selecting progressive lenses at higher rates, and returning more frequently over time. As we make it easier for more people to use their benefits at Warby Parker, we believe insurance. can become a much larger driver of customer growth. And now I'll hand it over to Adrian to cover our financial results and guidance.

Good morning, everyone. Before diving in. to the numbers, I want to recognize the tremendous amount of work that's gone into this year. We've been preparing for the launch of intelligent eyewear while continuing to invest in and manage our core business through a challenging industry backdrop. I'm proud of how our teams have navigated these priorities balancing disciplined execution every day with strategic investments that position us to scale this new category in 2027 and beyond. With that, I'll walk through our third quarter results and our outlook for the remainder of the year. Let's start with the third quarter revenue. Third quarter revenue was $244.7 million, up 10.4% to last year and within our guidance range. Retail revenue increased 12.4% year over year. And e-commerce revenue was $61.7 million, up 4.8% year over year. Turning to gross margin. In the third quarter, adjusted gross margin was $133.6 million. Or 54.6% of revenue, 40 basis points above last year. The increase in gross margin was primarily driven by reduced tariffs, customer shipping optimizations, optical lab efficiencies, and increased penetration of progressives. And other lens treatments. These benefits were partially offset by deleverage from growth in our eye care business, which has a lower margin than glasses, and in fixed expenses related to occupancy costs, which grew faster than revenue as we opened 12 net new.

Now, shifting to SG&A. As a reminder, adjusted SG&A excludes non-cash costs like stock-based compensation expenses, non-cash charitable donations, and non-recurring expenses. Third quarter adjusted SG&A expenses were $120.8 million, or 49.4% of revenue, 70 basis points higher than last year, primarily driven by retail compensation and corporate. Expenses, including higher technology costs. The increase was partially offset by lower marketing spend as a percent of revenue. Marketing expense in the quarter was $29.5 million, or 12.1% of revenue, down 100. As Neil shared, we expect marketing activities to increase around the Intelligent Eyewear launch this quarter. Third quarter adjusted EBITDA was $28.6 million. The percent of revenue adjusted EBITDA was 11.7% or 10 basis points above last year. Now shifting to capital allocation, we ended the third quarter in a strong cash position of $288 million. We continued to prioritize reinvestment in the business while maintaining optionality through our $100 million share repurchase authorization. Free cash flow during the quarter was impacted by investments related to launching Intelligent Eyewear. Including higher capital expenditures to prepare our retail stores and optical labs for the launch, as well as the timing of partner reimbursements. In October, we also invested $5.6 million in an optical lens. Lens technology company and committed to funding research and development of new lenses and new lens technologies over the next two years. This reflects our continued focus on innovation and supports our multi-year intelligent eyewear products.

Now, let's turn to our outlook for 2026. As we approach year end, we're taking a prudent approach to our fourth quarter outlook, reflecting current trends in the core business and now including a modest contribution from Intel. At the same time, we're preparing for significant growth opportunities in 2027 and beyond as we scale intelligent eyewear. Our guidance includes up to one percentage point contribution to full year revenue. Revenue growth and several percentage points to Q4 revenue growth from intelligent eyewear, along with related launch and operating expenses. For the full year of 2026, we're narrowing our prior guidance and now expect revenue of 960. to $976 million, representing approximately 11% to 12% year-over-year growth. Adjusted EBITDA of $117 to $119 million, which equates to an adjusted EBITDA margin of 12.2% and 130 basis points of expansion year-over-year at the midpoint of our range. Turning to the fourth quarter, regarding to revenue of $243 million, to $253 million, or growth of approximately 15% to 20% year-over-year. Adjusted EBITDA of $26 to $28 million, or a 10.9% adjusted EBITDA. Adjusted EBITDA margin at the midpoint of the range. With that, I'll now pass it back to Neil for closing comments.

It's been an incredibly busy few months across Warby Parker. I want to thank our entire team for their tremendous work that's gone into preparing for this launch. For Warby Parker, the launch of Intelligent Eyewear expands both what our glasses can do and the role we can play in our customers. It gives existing customers new reasons to engage with us and new customers another reason to discover our brand. This first collection begins a multi-year product roadmap and we see a meaningful long term opportunity to build on it as the technology advances and the category grows. We're just days away from welcoming customers into our stores to demo the product. We hope you'll be one of them. Don't forget to book your intelligent eyewear demo on our site.

Your first question comes from the line of Brooke Roach with Goldman Sachs. Your line is now open. Please go ahead.

Your line is now open. Please go ahead.