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Warby Parker Announces First Quarter 2024 Results
Warby Parker Inc. (NYSE: WRBY) ("Warby Parker" or the "Company"), a direct-to-consumer lifestyle brand focused on vision for all, today announced financial results for the first quarter ended March 31, 2024.
"We entered 2024 with higher ambitions for delivering on our key metrics and are proud of what the team accomplished in Q1-we drove our highest revenue quarter growth since 2021, up 16.3% year over year, while making significant progress to improve profitability," said Co-Founder and Co-CEO Neil Blumenthal.
"Earlier this year, we set out to reaccelerate both glasses and active customer growth. We're encouraged to see strength in single-vision glasses as well as efficiencies across media channels, driven by our team's strong marketing execution. In Q2 and beyond, we'll continue to invest in customer acquisition while scaling our holistic vision care offering to drive higher customer lifetime value," added Co-Founder and Co-CEO Dave Gilboa.
First Quarter 2024 Highlights
Net revenue increased $28.0 million, or 16.3%, to $200.0 million, as compared to the prior year period. GAAP net loss of $2.7 million. Gross margin increased 1.6 points to 56.7%, as compared to the prior year period. Adjusted EBITDA(1) of $22.4 million and adjusted EBITDA margin(1) of 11.2%. Net cash provided by operating activities of $19.9 million. Free cash flow of $5.5 million. Opened 8 net new stores during the quarter, ending Q1 with 245 stores.
First Quarter 2024 Year Over Year Financial Results
Net revenue increased $28.0 million, or 16.3%, to $200.0 million. Average Revenue per Customer increased 9.6% to $296. Active Customers increased 3.2% to 2.36 million. Gross profit increased 19.7% to $113.5 million. Gross margin was 56.7% compared to 55.1%. The increase in gross margin was primarily driven by faster growth in glasses, which is our highest margin product, efficiencies in our owned optical laboratories, and lower outbound customer shipping costs as a percent of revenue, partially offset by increased doctor salaries, as the number of stores offering eye exams grew, and sales growth of contact lenses which are sold at a lower margin. Selling, general, and administrative expenses ("SG&A") were $118.6 million, up $11.4 million from the prior year, and represented 59.3% of revenue, down from 62.3% in the prior year period. The primary drivers of growth in SG&A spend were investments in marketing and higher payroll-related costs from growth in our retail team associated with store expansion, partially offset by reduced stock-based compensation costs. Adjusted SG&A(1) was $103.4 million, or 51.7% of revenue, versus $87.2 million, or 50.7% of revenue in the prior year period. GAAP net loss improved $8.1 million to $2.7 million, primarily as a result of the increase in revenue described above. Adjusted EBITDA(1) increased $4.6 million to $22.4 million, and adjusted EBITDA margin(1) increased 0.9 points to 11.2%.
Balance Sheet Highlights
Warby Parker ended the first quarter of 2024 with $220.4 million in cash and cash equivalents.
2024 Outlook
For the full year 2024, Warby Parker is raising its guidance as follows:
Net revenue of $753 to $761 million, representing growth of approximately 12.5% to 13.5% versus full year 2023. Adjusted EBITDA(1) of $70.0 million at the midpoint of our revenue range, which equates to an adjusted EBITDA margin(1) of 9.2%. On track for 40 new store openings this year.
"Our Q1 results are evidence of the returns we are starting to see from many of our recent investments. Going forward, we plan to maintain a balanced approach to delivering both efficient growth and incremental profitability," said Chief Financial Officer Steve Miller.
The guidance and forward-looking statements made in this press release and on our conference call are based on management's expectations as of the date of this press release.
(1) Please see the reconciliation of non-GAAP financial measures to the most comparable GAAP financial measure in the section titled "Non-GAAP Financial Measures" below.
Webcast and Conference Call
A conference call to discuss Warby Parker's first quarter 2024 results, as well as second quarter and full year 2024 outlook, is scheduled for 8:00 a.m. ET on May 9, 2024. To participate, please dial 833-470-1428 from the U.S. or 404-975-4839 from international locations. The conference passcode is 976307. A live webcast of the conference call will be available on the investors section of the Company's website at investors.warbyparker.com where presentation materials will also be posted prior to the conference call. A replay will be made available online approximately two hours following the live call for a period of 90 days.
Forward-Looking Statements
This press release and the related conference call, webcast and presentation contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements may relate to, but are not limited to, expectations of future operating results or financial performance, including expectations regarding achieving profitability and growth in our e-commerce channel, delivering stakeholder value, growing market share, and our guidance for the quarter ending June 30, 2024 and year ending December 31, 2024; expectations regarding the number of new store openings during the year ending December 31, 2024; management's plans, priorities, initiatives and strategies; and expectations regarding growth of our business. Forward-looking statements are inherently subject to risks and uncertainties, some of which cannot be predicted or quantiied. In some cases, you can identify forward-looking statements because they contain words such as "anticipate," "believe," "contemplate," "continue," "could," "estimate," "expect," "intend," "may," "plan," "potential," "predict," "project," "should," "target," "toward," "will," or "would," or the negative of these words or other similar terms or expressions. You should not put undue reliance on any forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results and will not necessarily be accurate indications of the times at, or by, which such performance or results will be achieved, if at all.
Forward-looking statements are based on information available at the time those statements are made and are based on current expectations, estimates, forecasts, and projections as well as the beliefs and assumptions of management as of that time with respect to future events. These statements are subject to risks and uncertainties, many of which involve factors or circumstances that are beyond our control, that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. In light of these risks and uncertainties, the forward-looking events and circumstances discussed in this press release may not occur and actual results could differ materially from those anticipated or implied in the forward-looking statements. These risks and uncertainties include our ability to manage our future growth effectively; our expectations regarding cost of goods sold, gross margin, channel mix, customer mix, and selling, general, and administrative expenses; increases in component and shipping costs and changes in supply chain; our reliance on our information technology systems and enterprise resource planning systems for our business to effectively operate and safeguard confidential information; our ability to engage our existing customers and obtain new customers; planned new retail stores in 2024 and going forward; an overall decline in the health of the economy and other factors impacting consumer spending, such as recessionary conditions, inflation, government instability, and geopolitical unrest; our ability to compete successfully; our ability to manage our inventory balances and shrinkage; the growth of our brand awareness; our ability to recruit and retain optometrists, opticians, and other vision care professionals; the spread of new infectious diseases; the effects of seasonal trends on our results of operations; our ability to stay in compliance with extensive laws and regulations that apply to our business and operations; our ability to adequately maintain and protect our intellectual property and proprietary rights; our reliance on third parties for our products, operation and infrastructure; our duties related to being a public benefit corporation; the ability of our Co-Founders and Co-CEOs to exercise significant influence over all matters submitted to stockholders for approval; the effect of our multi-class structure on the trading price of our Class A common stock; and the increased expenses associated with being a public company. Additional information regarding these and other risks and uncertainties that could cause actual results to differ materially from the Company's expectations is included in our most recent reports filed with the SEC on Form 10-K and Form 10-Q. Except as required by law, we do not undertake any obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future developments, or otherwise.
Additional information regarding these and other factors that could affect the Company's results is included in the Company's SEC filings, which may be obtained by visiting the SEC's website at www.sec.gov. Information contained on, or that is referenced or can be accessed through, our website does not constitute part of this document and inclusions of any website addresses herein are inactive textual references only.
Glossary
Active Customers is defined as unique customer accounts that have made at least one purchase in the preceding 12-month period.
Average Revenue per Customer is defined as the sum of the total net revenues in the preceding 12-month period divided by the current period Active Customers.
Non-GAAP Financial Measures
We use adjusted EBITDA, adjusted EBITDA margin, adjusted cost of goods sold ("adjusted COGS"), adjusted gross margin, adjusted gross profit, adjusted selling, general, and administrative expenses ("adjusted SG&A"), and free cash flow as important indicators of our operating performance. Collectively, we refer to these non-GAAP financial measures as our "Non-GAAP Measures." The Non-GAAP Measures, when taken collectively with our GAAP results, may be helpful to investors because they provide consistency and comparability with past financial performance and assist in comparisons with other companies, some of which use similar non-GAAP financial information to supplement their GAAP results.
Adjusted EBITDA is defined as net income (loss) before interest and other income, taxes, and depreciation and amortization as further adjusted for asset impairment costs, stock-based compensation expense and related employer payroll taxes, amortization of cloud-based software implementation costs, non-cash charitable donations, and non-recurring costs such as restructuring costs, major system implementation costs, charges for certain legal matters, and transaction costs. Adjusted EBITDA margin is defined as adjusted EBITDA divided by net revenue.
Adjusted COGS is defined as cost of goods sold adjusted for stock-based compensation expense and related employer payroll taxes.
Adjusted gross profit is defined as net revenue minus adjusted COGS. Adjusted gross margin is defined as adjusted gross profit divided by net revenue.
Adjusted SG&A is defined as SG&A adjusted for stock-based compensation expense and related employer payroll taxes, non-cash charitable donations, and non-recurring costs such as restructuring costs, major system implementation costs, charges for certain legal matters, and transaction costs.
Free Cash Flow is defined as net cash provided by operating activities minus purchases of property and equipment.
The Non-GAAP Measures are presented for supplemental informational purposes only. A reconciliation of historical GAAP to Non-GAAP financial information is included under "Selected Financial Information" below.
We have not reconciled our adjusted EBITDA margin guidance to GAAP net income (loss) margin, or net margin, or adjusted EBITDA guidance to GAAP net income (loss) because we do not provide guidance for GAAP net margin or GAAP net income (loss) due to the uncertainty and potential variability of stock-based compensation and taxes, which are reconciling items between GAAP net margin and adjusted EBITDA margin and GAAP net income (loss) and adjusted EBITDA, respectively. Because such items cannot be reasonably provided without unreasonable efforts, we are unable to provide a reconciliation of the adjusted EBITDA margin guidance to GAAP net margin and adjusted EBITDA guidance to GAAP net income (loss). However, such items could have a significant impact on GAAP net margin and GAAP net income (loss).
About Warby Parker
Warby Parker (NYSE: WRBY) was founded in 2010 with a mission to inspire and impact the world with vision, purpose, and style-without charging a premium for it. Headquartered in New York City, the co-founder-led lifestyle brand pioneers ideas, designs products, and develops technologies that help people see, from designer-quality prescription glasses (starting at $95) and contacts, to eye exams and vision tests available online and in our 245 retail stores across the U.S. and Canada.
Warby Parker aims to demonstrate that businesses can scale, do well, and do good in the world. Ultimately, the Company believes in vision for all, which is why for every pair of glasses or sunglasses sold, it distributes a pair to someone in need through its Buy a Pair, Give a Pair program. To date, Warby Parker has worked alongside its nonprofit partners to distribute more than 15 million glasses to people in need.
Selected Financial Information
Warby Parker Inc. and Subsidiaries
Consolidated Balance Sheets (Unaudited)
(Amounts in thousands, except share data)
March 31, December 31,
2024 2023
------------------------------------------------ ------------------------------------------------
Assets
Current assets:
$ 220,384 $ 216,894
Cash and cash equivalents
1,167 1,779
Accounts receivable, net
56,450 62,234
Inventory
18,116 17,712
Prepaid expenses and other current assets
-------------------- -------- -------------------- -------------------- -------- --------------------
Total current assets 296,117 298,619
Property and equipment, net 156,722 152,332
Right-of-use lease assets 129,561 122,305
Other assets 10,492 7,056
-------------------- -------- -------------------- -------------------- -------- --------------------
Total assets $ 592,892 $ 580,312
==================== ======== ==================== ==================== ======== ====================
Liabilities and Stockholders' Equity
Current liabilities:
$ 26,699 $ 22,456
Accounts payable
43,200 46,320
Accrued expenses
21,240 31,617
Deferred revenue
24,462 24,286
Current lease liabilities
2,939 2,411
Other current liabilities
-------------------- -------- -------------------- -------------------- -------- --------------------
Total current liabilities 118,540 127,090
Non-current lease liabilities 156,988 150,171
Other liabilities 1,177 1,264
-------------------- -------- -------------------- -------------------- -------- --------------------
Total liabilities 276,705 278,525
-------------------- -------- -------------------- -------------------- -------- --------------------
Commitments and contingencies
Stockholders' equity:
12 12
Common stock, $0.0001 par value; Class A: 750,000,000 shares authorized at March 31, 2024 and December 31, 2023, 99,005,197 and 98,368,239 issued and outstanding at March 31, 2024 and December 31, 2023, respectively; Class B: 150,000,000 shares authorized at March 31, 2024 and December 31, 2023, 19,734,125 and 19,788,682 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively, convertible to Class A on a one-to-one basis
987,305 970,135
Additional paid-in capital
(669,510 ) (666,831 )
Accumulated deficit
(1,620 ) (1,529 )
Accumulated other comprehensive loss
-------------------- -------- -------------------- -------------------- -------- --------------------
Total stockholders' equity 316,187 301,787
-------------------- -------- -------------------- -------------------- -------- --------------------
Warby Parker Inc. and Subsidiaries
Consolidated Statements of Operations (Unaudited)
(Amounts in thousands, except share and per share data)
Three Months Ended March 31,
------------------------------------------------------------------------------------------------------------------
2024 2023
-------------------- ------- -------------------- -------------------- ------- --------------------
Net revenue $ 200,003 $ 171,968
Cost of goods sold 86,544 77,177
-------------------- ------- -------------------- -------------------- ------- --------------------
Gross profit 113,459 94,791
Selling, general, and administrative expenses 118,586 107,221
-------------------- ------- -------------------- -------------------- ------- --------------------
Loss from operations (5,127 ) (12,430 )
Interest and other income, net 2,556 1,879
-------------------- ------- -------------------- -------------------- ------- --------------------
Loss before income taxes (2,571 ) (10,551 )
Provision for income taxes 108 261
-------------------- ------- -------------------- -------------------- ------- --------------------
Net loss $ (2,679 ) $ (10,812 )
==================== ======= ==================== ==================== ======= ====================
Net loss per share attributable to common stockholders, basic and diluted $ (0.02 ) $ (0.09 )
Warby Parker Inc. and Subsidiaries
Consolidated Statements of Cash Flows (Unaudited)
(Amounts in thousands)
Three Months Ended March 31,
-------------------------------------------------------------------------------------------------------------------------
2024 2023
-------------------- ------- -------------------- -------------------- -------------- --------------------
Cash flows from operating activities
$ (2,679 ) $ (10,812 )
Net loss
Adjustments to reconcile net loss to net cash provided by operating activities:
10,583 9,140
Depreciation and amortization
14,048 19,780
Stock-based compensation
399 395
Asset impairment charges
1,073 363
Amortization of cloud-based software implementation costs
Change in operating assets and liabilities:
612 473
Accounts receivable, net
5,784 4,442
Inventory
(2,913 ) (657 )
Prepaid expenses and other assets
3,327 (921 )
Accounts payable
(108 ) (7,826 )
Accrued expenses
(10,377 ) (6,744 )
Deferred revenue
528 119
Other current liabilities
(263 ) 988
Right-of-use lease assets and current and non-current lease liabilities
(87 ) (97 )
Other liabilities
-------------------- ------- -------------------- -------------------- -------------- --------------------
Net cash provided by operating activities 19,927 8,643
Cash flows from investing activities
(14,437 ) (12,385 )
Purchases of property and equipment
(2,000 ) --
Investment in optical equipment company
-------------------- ------- -------------------- -------------------- -------------- --------------------
Net cash used in investing activities (16,437 ) (12,385 )
Cash flows from financing activities
91 81
Proceeds from stock option exercises
-------------------- ------- -------------------- -------------------- -------------------- -------------- --------------------
Net cash provided by financing activities 91 81
Effect of exchange rates on cash (91 ) (662 )
-------------------- ------- -------------------- -------------------- -------------- --------------------
Net change in cash and cash equivalents 3,490 (4,323 )
Cash and cash equivalents, beginning of period 216,894 208,585
-------------------- ------- -------------------- -------------------- -------------- --------------------
Cash and cash equivalents, end of period $ 220,384 $ 204,262
==================== ======= ==================== ==================== ============== ====================
Supplemental disclosures
$ 69 $ 97
Cash paid for income taxes
76 50
Cash paid for interest
10,400 10,849
Cash paid for amounts included in the measurement of lease liabilities
Non-cash investing and financing activities:
Warby Parker Inc. and Subsidiaries Reconciliation of GAAP to Non-GAAP Measures (Unaudited)
The following table reconciles adjusted EBITDA and adjusted EBITDA margin to the most directly comparable GAAP measure, which is net loss:
Three Months Ended March 31,
--------------------------------------------------------------------------------------------------------------------------------
2024 2023
-------------------- -------------- -------------------- -------------------- -------------- --------------------
(unaudited, in thousands)
Net loss $ (2,679 ) $ (10,812 )
Adjusted to exclude the following:
(2,556 ) (1,878 )
Interest and other income, net
108 261
Provision for income taxes
10,583 9,140
Depreciation and amortization expense
399 395
Asset impairment charges
14,315 19,866
Stock-based compensation expense(1)
1,073 363
Amortization of cloud-based software implementation costs(2)
-- 403
ERP implementation costs(3)
1,135 --
Other costs(4)
-------------------- -------------- -------------------- -------------------- -------------- --------------------
Adjusted EBITDA $ 22,378 $ 17,738
(1) Represents expenses related to the Company's equity-based compensation programs and related employer payroll taxes, which may vary significantly from period to period depending upon various factors including the timing, number, and the valuation of awards granted, and vesting of awards including the satisfaction of performance conditions. For the three months ended March 31, 2024 and 2023, the amount includes $0.3 million and $0.1 million, respectively, of employer payroll taxes associated with releases of RSUs and option exercises. Represents expenses related to the Company's equity-based compensation programs and related employer payroll taxes, which may vary significantly from period to period depending upon various factors including the timing, number, and the valuation of awards granted, and vesting of awards including the satisfaction of performance conditions. For the three months ended March 31, 2024 and 2023, the amount includes $0.3 million and $0.1 million, respectively, of employer payroll taxes associated with releases of RSUs and option exercises.
(2) Represents the amortization of costs capitalized in connection with the implementation of cloud-based software. Represents the amortization of costs capitalized in connection with the implementation of cloud-based software.
(3) Represents internal and external non-capitalized costs related to the implementation of our new Enterprise Resource Planning ("ERP") system. Represents internal and external non-capitalized costs related to the implementation of our new Enterprise Resource Planning ("ERP") system.
Warby Parker Inc. and Subsidiaries Reconciliation of GAAP to Non-GAAP Measures (Unaudited)
The following table presents our non-GAAP, or adjusted, financial measures for the periods presented as a percentage of revenue. Each cost and operating expense is adjusted for stock-based compensation expense and related employer payroll taxes, non-cash charitable donations, and non-recurring costs such as restructuring costs, major system implementation costs, charges for certain legal matters, and transaction costs.
Reported Adjusted
Three Months Ended March 31, Three Months Ended March 31,
------------------------------------------------------------------------------------------------------------------ -----------------------------------------------------------------------------------------------------------------
2024 2023 2024 2023
-------------------- ------- -------------------- -------------------- ------- -------------------- -------------------- ------- -------------------- -------------------- ------ --------------------
(unaudited, in thousands) (unaudited, in thousands)
Cost of goods sold $ 86,544 $ 77,177 $ 86,300 $ 76,979
% of Revenue 43.3 % 44.9 % 43.1 % 44.8 %
Gross profit $ 113,459 $ 94,791 $ 113,703 $ 94,989
% of Revenue 56.7 % 55.1 % 56.9 % 55.2 %
Selling, general, and administrative expenses $ 118,586 $ 107,221 $ 103,380 $ 87,150
Warby Parker Inc. and Subsidiaries Reconciliation of GAAP to Non-GAAP Measures (Unaudited)
The following table reflects a reconciliation of each non-GAAP, or adjusted, financial measure to its most directly comparable financial measure prepared in accordance with GAAP:
Three Months Ended March 31,
--------------------------------------------------------------------------------------------------------------------------------
2024 2023
-------------------- -------------- -------------------- -------------------- -------------- --------------------
(unaudited, in thousands)
Cost of goods sold $ 86,544 $ 77,177
Adjusted to exclude the following:
244 198
Stock-based compensation expense(1)
-------------------- -------------- -------------------- -------------------- -------------- --------------------
Adjusted cost of goods sold $ 86,300 $ 76,979
Gross profit $ 113,459 $ 94,791
Adjusted to exclude the following:
244 198
Stock-based compensation expense(1)
-------------------- -------------- -------------------- -------------------- -------------- --------------------
Adjusted gross profit $ 113,703 $ 94,989
Selling, general, and administrative expenses $ 118,586 $ 107,221
Adjusted to exclude the following:
14,071 19,668
Stock-based compensation expense(1)
-- 403
ERP implementation costs(2)
1,135 --
Other costs(3)
-------------------- -------------- -------------------- -------------------- -------------- --------------------
Adjusted selling, general, and administrative expenses $ 103,380 $ 87,150
Net cash provided by operating activities $ 19,927 $ 8,643
Purchases of property and equipment (14,437 ) (12,385 )
-------------------- -------------- -------------------- -------------------- -------------- --------------------
(1) Represents expenses related to the Company's equity-based compensation programs and related employer payroll taxes, which may vary significantly from period to period depending upon various factors including the timing, number, and the valuation of awards granted, and vesting of awards including the satisfaction of performance conditions. For the three months ended March 31, 2024 and 2023, the amount includes $0.3 million and $0.1 million, respectively, of employer payroll taxes associated with releases of RSUs and option exercises. Represents expenses related to the Company's equity-based compensation programs and related employer payroll taxes, which may vary significantly from period to period depending upon various factors including the timing, number, and the valuation of awards granted, and vesting of awards including the satisfaction of performance conditions. For the three months ended March 31, 2024 and 2023, the amount includes $0.3 million and $0.1 million, respectively, of employer payroll taxes associated with releases of RSUs and option exercises. (2) Represents internal and external non-capitalized costs related to the implementation of our new ERP system. Represents internal and external non-capitalized costs related to the implementation of our new ERP system.
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SOURCE: Warby Parker Inc.
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Investor Relations: Jaclyn Berkley, Head of Investor Relations Brendon Frey, ICR investors@warbyparker.com Media: Ali Weltman ali@derris.com
COMTEX_452111109/1006/2024-05-09T06:45:04