Warby Parker Inc. Q1 FY2025 earnings call

Key Points

• Team delivered strong start to 2025 with 12% revenue growth, adjusted EBITDA margin of 13.1%, and first quarter of positive GAAP net income as a public company.
• Focus on customers with 7 straight quarters of accelerating active customer growth. Plan to invest in marketing in low-teens as percent of revenue and leverage analytics to optimize media spend.
• Versant integration ramping in line to slightly ahead of expectations. Launched 7 collections including first rimless collection and new premium light responsive lens.
• Opened more stores this quarter than any prior Q1, on track to open 45 new stores including shop-in-shops with Target. Innovating and investing in online experience with AI-powered personalization features rolling out later.
• Mitigated tariff impact through supply chain adjustments, selective price adjustments, and strategic expense reductions.

Supply Chain

• Accelerated supply chain diversification, reducing China sourcing from 20% of COGS to less than 10% by year-end. Reallocated frame production and moved lens sourcing to U.S. partners.

Pricing

• Made targeted price adjustments to some lens types and accessories, estimating low single-digit price increase across glasses business while maintaining entry $95 price point.

Expenses

• Disciplined approach to expense management, preserving investments in growth-driving initiatives while reducing other corporate expenses. Realizing productivity gains from AI and automation.

Revenue for the first quarter was $223.8 million, up 11.9% year-over-year. Retail revenue increased 14.8% year-over-year and e-commerce revenue increased 5.5% year-over-year. Glasses revenue grew 9.1% year-over-year, contact lens revenue grew 25.1% year-over-year, and eye care revenue grew approximately 40% year-over-year. Contact increased from 9.2% of revenue in Q1 '24 to 10.3% in Q1 '25. Eye care increased from 4.7% of revenue in Q1 '24 to 5.8% in Q1 '25. Retail represented approximately 70% of the overall business in Q1. Adjusted gross margin was 56.4% in Q1 2025 compared to 56.9% in the year ago period. Adjusted SG&A in Q1 2025 was $110.3 million or 49.3% of revenue, representing 240 basis points of leverage year-over-year. Adjusted EBITDA was $29.2 million, with an adjusted EBITDA margin of 13.1%.

Full Year 2025

• Net revenue between $869 million and $886 million, ~13%-15% growth year-over-year.
• Adjusted EBITDA of $91 million to $97 million, adjusted EBITDA margin ~10.5%-11%.
• 45 new store openings including shop-in-shops with Target in second half.

Q2 2025

• Net revenue between $211 million and $214 million, ~12%-14% growth year-over-year.
• Adjusted EBITDA of $20 million to $22 million, ~10% margin at midpoint.

• Dynamic macro environment including global trade policies and potential impact on consumer sentiment.
• Tariff impacts which could have a significant gross margin impact if not mitigated effectively.

Q: Give more color on change in revenue outlook for the year and driving factors, including consumer behavior and price increases.

A: Took more conservative approach due to uncertain macro environment, consumer sentiment erosion, potential elongation in purchase cycle. Originally projected 14%-16% growth, now 13%-15% with midpoint reflecting continuation of recent trends.

Q: Shape of year from EBITDA perspective and margin guide beyond 2025.

A: Anticipate similar shape to last year with highest margin first quarter and lowest in final quarter. Still confident in long-term adjusted EBITDA margin improvement of 100-200 basis points annually, currently ranging 100-150 basis points depending on factors.

Q: Customer traffic, consumer confidence, and e-commerce guidance.

A: Seeing pockets of strength and volatility, but value proposition benefits from disruption. E-com had highest quarterly growth since 2021, benefiting from contact lens business and digital capabilities. Traffic and conversion holding up.

Q: Thoughts on Target stores, store locations, and model impact.

A: Excited about Target partnership, stores strategically positioned, learnings from initial cohort will help growth, complementary to stand-alone stores.

Q: Marketing spend efficiency and impact on bottom line.

A: Pleased with marketing efficiency, fluid media mix, opportunistically leaning in during advertiser pullback, focusing on highlighting value proposition.

Q: Insurance paying vs noninsurance customers and penetration.

A: Pleased with progress in making it easier to use insurance benefits, Versant integration showing early positive signs, insurance customers spend more and repeat more frequently, still an opportunity.

Q: Sources of EBITDA leverage in second half and impact of tariffs and demand trends.

A: Leverage expected from non-marketing SG&A. Tariff mitigation through supply chain reallocation, selective pricing, and expense control, plan to mitigate majority of tariff exposure.

Q: Consumer behavior of new cohorts and March-April trends.

A: Consistent behavior across new and existing cohorts, March was strongest month in Q1, April had variability then strong exit rate continuing into May, no evidence of pull forward of demand.

Q: Consumer behavior of new cohorts and acceleration in active customers.

A: Consistent behavior across new and existing cohorts, acceleration in active customers from existing markets, large opportunity in U.S. optical shop market.