Warby Parker Inc. Q4 FY2025 earnings call

• 2025 was eventful with double-digit revenue growth each quarter, first full year of positive net income. • 2026 priorities: expand retail footprint (plan to open 50 new stores in 2026), increase revenue within existing fleet through eye exams and product mix, enhance online experience. • Preparing for AI glasses launch in 2026, including expanding manufacturing capacity, readying stores and teams, advancing technology roadmap. • Scaling eye exams as a core lever, with eye exams growing 37% in 2025 to ~6% of business. • Launching new collections and entering new categories like sport collection in 2026. • Increasing insurance penetration, with in-network insurance penetration up to 8% in 2025, planning to expand covered lives and utilization in 2026. • Investing in marketing to drive awareness and acquire customers, reallocating spend towards higher-return channels.

In fiscal 2025, revenue grew 13% driven by 47 new store openings, high single-digit customer growth, and mid single-digit average revenue per customer growth. Full-year adjusted EBITDA was $95 million, up 30% year over year. Fourth quarter revenue grew 11%, adjusted EBITDA margin was 7.2%. Retail revenue increased 15.2% year over year in Q4, e-commerce revenue was $56.8 million, up 1.6% year over year. Full-year 2025 retail revenue increased 17.3% year over year, e-commerce revenue was $241 million, up 3.1% year over year. Adjusted gross margin in Q4 was 52.5%, down 170 basis points from last year. Full-year adjusted gross margin was 54.4%, down 110 basis points. Adjusted SG&A in Q4 was $110.3 million, or 52% of revenue, 200 basis points lower than last year. Full-year adjusted SG&A was $433.3 million, 49.7% of total revenue, 280 basis points lower than last year. Marketing as a percent of revenue was 12.9% in Q4, flat to last year, and 12.6% in full-year 2025, 20 basis points higher than last year.

• 2026 revenue guidance: $959 million to $976 million, ~10% to 12% year-over-year growth. • Adjusted EBITDA guidance: $117 million to $119 million, ~12.2% margin, 130 basis points expansion year over year. • Q1 2026 revenue guidance: ~$238 million to $240 million, adjusted EBITDA guidance: $27 million to $28 million, ~11.5% margin at midpoint. • E-commerce expected to grow in low single-digits for full year 2026, with impact of sunsetting home try-on program more concentrated in first half and moderating in second half. • Retail expected to be ~75% of Q1 revenue, with retail showing high-teens growth in early January but impacted by weather in some areas.

• Weather impacts on Q1 performance, especially in East Coast stores with high volume. • Tariff volatility, with Supreme Court ruling on tariffs still being analyzed, and administration responding with new global surcharges. • Softness in younger consumer cohort, with younger and lower-income consumers being more cautious and under financial stress, impacting category demand. • Uncertainty around the launch and adoption of AI glasses, including supply chain and market reception risks.

Q: Can you elaborate on the softness that you are seeing with your younger customer? Are you losing share with that age cohort, or is that simply a function of the broader industry pressure? And what actions are you taking to shore up this part of the business in 2026?

A: David Gilboa said it's reflective of category pressure, believe continuing to outperform category, but younger and lower-income people are conscious about spending. Actions include adding incremental media dollars on channels younger consumers spend time, investing in efforts to make vision insurance benefits go further, rolling out pilot for out-of-network benefits reimbursement more broadly.

Q: Neil, you spoke in the prepared remarks about supply chain readiness for the upcoming launch of AI glasses. Can you speak to the unit capacity that you are preparing for in launch year, and how quickly you might be able to scale the supply chain should demand follow a similar cadence of growth as the broader industry?

A: Neil Blumenthal said vertically integrated brand has robust and resilient supply chain, team ensures ability to respond, store fleet and tech-forward team members will help sell, market, and serve AI glasses customers.

Q: As you think about the cadence of this year—and, obviously, we have the weather impacts, and hopefully the snow will be ending, but who knows what—how are you thinking about growth rates going forward? And I noticed you are opening 50 stores this year. Include the five Targets. How are those Target shop-in-shops doing? What are the learnings? And how are you thinking about the volatility that is currently going on and what pricing looks like for 2026?

A: Neil Blumenthal said Target shop-in-shops are performing well with slightly older demographics, seeing share growth after pilot. Adrian Mitchell said growth is healthy, comparing to industry growth, expecting acceleration and return to normalized trends. Josh Trupo said analyzing Supreme Court ruling on tariffs, not assuming refunds in margins or cash flow plan, monitoring go-forward tariffs. Steve Miller said Supreme Court ruling removed emergency tariffs but administration responded with new surcharges, not incorporating benefit into 2026 guidance.

Q: Good morning. Thank you, and welcome, Adrian. You were clear that you are not incorporating any revenue from the smart glasses, but curious if you are making any assumptions regarding how the launch may impact traffic and conversion for the core business. Following up on the revenue guidance and the acceleration after Q1, more on the margin front, can you help us reconcile the acceleration in store openings with the dip you are seeing in average retail productivity? Specifically, what are the other components that are enabling you to sustain the target four-wall profitability?

A: Neil Blumenthal said not factoring in halo effect from AI glasses launch in guidance. Adrian Mitchell said Q4 non-marketing SG&A up 200 basis points, discussing gross margin and store performance. David Gilboa said e-commerce evolving with sunsetting home try-on program, seeing strong volumes in Q1, confident in serving customers effectively, retail stores have healthy dynamics.

Q: Hi. Thanks a lot. Hi, Neil, David, and Adrian. Neil and David, as you know from our Wharton days, a lot of the large language models rely on unsupervised and supervised training models. What are your views on personalization and some unlocks that will set you apart? What might be proprietary to Gemini and Google versus LLM training and other comp levers? Adrian, as we look at guidance going forward, what is unique to Warby Parker Inc. that is incorporated in your guidance view? What are your thoughts on units relative to traffic and conversion for the core business?

A: Neil Blumenthal said excited about transition to intelligent eyewear, Google is best partner for AI leadership and suite of products, will develop IP around eyewear, prescription lenses, and fulfilling, have short feedback loop. Adrian Mitchell said outlook for 2026 starts with healthy brand proposition, will outperform market, opportunities in exams, contacts, glasses, expansion of 50 points of distribution, new categories and collections, healthy mix of units, ASP, and new customers.

Q: Curious if you think that customers are putting off purchases because of higher prices in the assortment. Do you think it is just more of an issue across the retail environment, maybe specific to the categories you called out, and some weaker industry trends all year in the fourth quarter? When we think about that increase in active customer accounts versus revenue per customer, if you can frame that for us—sort of what underpins your revenue guidance for next year for 2026. The second is, I just want clarity on what you are saying about the revenue assumed from the Google partnership. Are you assuming that there is no incremental revenue to the business this year? Or are you saying at this point you are kind of pretending like those glasses do not even hit the assortment, and so there will be zero revenue from Google glasses?

A: Neil Blumenthal said not including incremental revenue from AI glasses in guidance, including expenses to prepare and launch, plan to share more later, not baking into guidance. David Gilboa said planning for core business as it stands today, expecting launch to drive benefits. Neil Blumenthal said seeing some customers putting off purchases due to category volatility, younger consumers being cautious, but best positioned, progressive penetration is area of strength. Adrian Mitchell said thinking about units, ASP, and new customers, expansion of 50 points of distribution, sport and athletic introductions, healthy mix of comp stores and new stores.