Warby Parker Inc.

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the Securities and Exchange Commission (“SEC”) on February 27, 2025 (the “Annual Report”). Data as of and for the three months ended March 31, 2025 and 2024 has been derived from our unaudited condensed consolidated financial statements. Results for any interim period should not be construed as an inference of what our results would be for any full fiscal year or future period. This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements, such as those relating to our plans, objectives, expectations, intentions, and beliefs, which involve risks and uncertainties. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section titled “Special Note Regarding Forward-Looking Statements” in this Quarterly Report on Form 10-Q and in Part I, Item 1A, Risk Factors, in the Annual Report.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the Securities and Exchange Commission (“SEC”) on February 27, 2025 (the “Annual Report”). Data as of and for the three and six months ended June 30, 2025 and 2024 has been derived from our unaudited condensed consolidated financial statements. Results for any interim period should not be construed as an inference of what our results would be for any full fiscal year or future period. This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements, such as those relating to our plans, objectives, expectations, intentions, and beliefs, which involve risks and uncertainties. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the sections titled “Special Note Regarding Forward-Looking Statements” and “Part II, Item 1A. Risk Factors" in this Quarterly Report on Form 10-Q and in Part I, Item 1A, Risk Factors, in the Annual Report.

Previous wording

•We’ve built a seamless shopping experience that meets customers where and how they want to shop, whether that’s on our website, on our mobile app, or in our 287 retail stores as of March 31, 2025.

Current wording

•We’ve built a seamless shopping experience that meets customers where and how they want to shop, whether that’s on our website, on our mobile app, or in our 298 retail stores as of June 30, 2025.

Previous wording

•We are a public benefit corporation focused on positively impacting all stakeholders, and hope to inspire other entrepreneurs and businesses to think along the same lines. Working closely with our nonprofit partners, we have distributed glasses to people in need in more than 80 countries globally and many parts of the United States. Over 15 million more people now have the glasses they need to learn, work, and achieve better economic outcomes through our Buy a Pair, Give a Pair program.

Current wording

•We are a public benefit corporation focused on positively impacting all stakeholders, and hope to inspire other entrepreneurs and businesses to think along the same lines. Working closely with our nonprofit partners, we have distributed glasses to people in need in more than 80 countries globally and many parts of the United States. Over 20 million more people now have the glasses they need to learn, work, and achieve better economic outcomes through our Buy a Pair, Give a Pair program.

Previous wording

•we generated net revenue of $223.8 million and $200.0 million, respectively;

Current wording

•we generated net revenue of $214.5 million and $188.2 million, respectively;

Previous wording

•we generated gross profit of $126.0 million and $113.5 million, respectively, representing a gross margin of 56.3% and 56.7%, respectively;

Current wording

•we generated gross profit of $113.6 million and $105.4 million, respectively, representing a gross margin of 53.0% and 56.0%, respectively;

Previous wording

•we generated Adjusted EBITDA of $29.2 million and $22.4 million, respectively.

Current wording

•we generated Adjusted EBITDA of $25.0 million and $19.6 million, respectively.

Previous wording

•we generated net income of $3.5 million and net loss of $2.7 million, respectively; and

Current wording

•we generated net income of $1.7 million and net loss of $9.4 million, respectively; and

Previous wording

(2)Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. For more information regarding our use of these measures and a reconciliation of net income (loss) to Adjusted EBITDA and Adjusted EBITDA Margin, see the section titled "Adjusted EBITDA and Adjusted EBITDA Margin” below.

Current wording

(2)Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. For more information regarding our use of these measures and a reconciliation of net (loss) income to Adjusted EBITDA and Adjusted EBITDA Margin, see the section titled "Adjusted EBITDA and Adjusted EBITDA Margin” below.

Previous wording

As of March 31, 2025, 247 out of our 287 retail stores offered in-person eye exams.

Current wording

As of June 30, 2025, 259 out of our 298 retail stores offered in-person eye exams.

Previous wording

We define Adjusted EBITDA 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, charges for certain legal matters outside the ordinary course of business, and non-recurring costs such as restructuring costs and major system implementation costs. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net revenue. We caution investors that amounts presented in accordance with our definitions of Adjusted EBITDA and Adjusted EBITDA Margin may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate these measures in the same manner. We present Adjusted EBITDA and Adjusted EBITDA Margin because we consider these metrics to be important supplemental measures of our performance and believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. Management believes that investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations.

Current wording

We define Adjusted EBITDA as net (loss) income 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, charges for certain legal matters outside the ordinary course of business, and non-recurring costs such as restructuring costs and major system implementation costs. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net revenue. We caution investors that amounts presented in accordance with our definitions of Adjusted EBITDA and Adjusted EBITDA Margin may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate these measures in the same manner. We present Adjusted EBITDA and Adjusted EBITDA Margin because we consider these metrics to be important supplemental measures of our performance and believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. Management believes that investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations.

Previous wording

The following table reconciles Adjusted EBITDA and Adjusted EBITDA Margin to the most directly comparable GAAP measure, which is net income (loss):

Current wording

The following table reconciles Adjusted EBITDA and Adjusted EBITDA Margin to the most directly comparable GAAP measure, which is net (loss) income:

Previous wording

(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, as well as the issuance of 26,832 and 48,486 Class A common stock to charitable donor advised funds in February 2025 and February 2024, respectively. For the three months ended March 31, 2025 and 2024, the amount includes $0.7 million and $0.3 million, respectively, of employer payroll taxes associated with releases of RSUs and option exercises.

Current wording

(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 both the three months ended June 30, 2025 and 2024, the amount includes $0.3 million of employer payroll taxes associated with releases of RSUs and option exercises. For the six months ended June 30, 2025 and 2024, the amount includes $0.9 million and $0.5 million, respectively, of employer payroll taxes associated with releases of RSUs and option exercises.

Previous wording

(2) Represents charges for certain legal matters outside the ordinary course of business.

Current wording

(5) Represents restructuring costs incurred in the second quarter of 2025 and charges for certain legal matters outside the ordinary course of business.

Previous wording

Net revenue increased $23.8 million, or 11.9%, for the three months ended March 31, 2025 compared to the same period in 2024. Active Customers increased 8.7% and Average Revenue per Customer increased to $310 from $296 in the prior year period. Average Revenue per Customer growth was primarily driven by our glasses business, which saw strong adoption of precision progressives, our highest priced lens option, and continued uptake of our higher priced frames, an increase in customers purchasing contacts or eye exams along with glasses in the same transaction, and growth in our lens replacement service.

Current wording

Net revenue increased $26.3 million, or 13.9%, for the three months ended June 30, 2025 compared to the same period in 2024. Active Customers increased 9.0% and Average Revenue per Customer increased to $316 from $302 in the prior year period. Average Revenue per Customer growth was primarily driven by our glasses business, which benefited from selective price increases during the quarter, strong adoption of precision progressives, and continued uptake of our higher priced frames, as well as an increase in customers purchasing contacts or eye exams along with glasses in the same transaction.

Previous wording

Gross profit, calculated as net revenue less cost of goods sold, increased by $12.5 million, or 11.0%, for the three months ended March 31, 2025 compared to the same period in 2024, primarily due to the increase in net revenue over the same period.

Current wording

Gross profit, calculated as net revenue less cost of goods sold, increased by $8.2 million, or 7.8%, for the three months ended June 30, 2025 compared to the same period in 2024, primarily due to the increase in net revenue over the same period.

Previous wording

Selling, general, and administrative expenses increased $4.9 million, or 4.2%, for the three months ended March 31, 2025 compared to the same period in 2024. This increase was primarily driven by higher payroll-related costs from growth in our retail workforce and investments in marketing, partially offset by lower stock-based compensation, mostly related to the 2021 Founders Grant (which is described in Note 7 to our condensed consolidated financial statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q). As a percentage of revenue, SG&A decreased by 410 basis points, primarily driven by slower growth in corporate expenses and reduced stock-based compensation.

Current wording

Selling, general, and administrative expenses increased $3.8 million, or 3.3%, for the three months ended June 30, 2025 compared to the same period in 2024. This increase was primarily driven by higher payroll-related costs from growth in our retail workforce and investments in marketing, partially offset by lower stock-based compensation, mostly related to the 2021 Founders Grant as award tranches finish expensing. As a percentage of revenue, SG&A decreased by 570 basis points, primarily driven by slower growth in corporate expenses and reduced stock-based compensation.

Previous wording

Provision for income taxes increased $1.3 million, or 1,246.3%, for the three months ended March 31, 2025 compared to the same period in 2024, primarily due to the change in pre-tax income (loss) in addition to the tax effects of stock-based compensation expense, depreciation expense, and differences in tax rates in state jurisdictions.

Current wording

Provision for income taxes decreased $1.2 million, or 311.5%, for the three months ended June 30, 2025 compared to the same period in 2024, primarily due to the change in pre-tax income (loss) in addition to the tax effects of stock-based compensation expense, and depreciation expense.

Previous wording

Cost of goods sold increased by $11.3 million, or 13.0%, for the three months ended March 31, 2025 compared to the same period in 2024, and increased as a percentage of revenue over the same period, from 43.3% of revenue to 43.7% of revenue. The increase in cost of goods sold was primarily driven by increased product and fulfillment costs associated with our sales growth, particularly related to the growth in our contact lens offering, as well as increases in store occupancy costs and doctor headcount due to new retail stores opened in 2024 and the first three months of 2025.

Current wording

Cost of goods sold increased by $29.3 million, or 17.3%, for the six months ended June 30, 2025 compared to the same period in 2024, and increased as a percentage of revenue over the same period, from 43.6% of revenue to 45.3% of revenue. The increase in cost of goods sold was primarily driven by increased product and fulfillment costs associated with our sales growth, particularly related to the growth in our contact lens offering, as well as increases in store occupancy costs and doctor headcount due to new retail stores.

Previous wording

Gross margin, expressed as a percentage and calculated as gross profit divided by net revenue, decreased by 40 basis points for the three months ended March 31, 2025 compared to the same period in 2024. The decrease in gross margin was primarily driven by the sales growth of contact lenses, which are sold at a lower margin than our other eyewear, and increased store occupancy costs as the number of stores grew from 245 at March 31, 2024 to 287 at March 31, 2025. These impacts were partially offset by increased penetration of our higher priced frames and lenses and lower outbound customer shipping costs as a percent of revenue.

Current wording

Gross margin, expressed as a percentage and calculated as gross profit divided by net revenue, decreased by 170 basis points for the six months ended June 30, 2025 compared to the same period in 2024. The decrease in gross margin was primarily driven by the sales growth of contact lenses, which are sold at a lower margin than our other eyewear, and increased store occupancy costs and doctor headcount as the number of stores grew from 256 at June 30, 2024 to 298 at June 30, 2025. These impacts were partially offset by increased penetration of our higher priced frames and lenses and selective price increases during the second quarter.

Previous wording

Interest and other income, net decreased $0.1 million, or 4.0%, for the three months ended March 31, 2025 compared to the same period in 2024, primarily due to lower interest rates on our increased cash and cash equivalents balance.

Current wording

Interest and other income, net decreased $0.7 million, or 13.4%, for the six months ended June 30, 2025 compared to the same period in 2024, primarily due to lower interest rates on our increased cash and cash equivalents balance.

Previous wording

Since inception, we have financed our operations primarily from net proceeds from the sale of redeemable convertible preferred stock and cash flows from operating activities. As of March 31, 2025, we had cash and cash equivalents of $265.1 million, which was primarily held for working capital purposes, and an accumulated deficit of $683.7 million. As of December 31, 2024, we had cash and cash equivalents of $254.2 million, which was primarily held for working capital purposes, and an accumulated deficit of $687.2 million.

Current wording

Since inception, we have financed our operations primarily from net proceeds from the sale of redeemable convertible preferred stock and cash flows from operating activities. As of June 30, 2025, we had cash and cash equivalents of $286.4 million, which was primarily held for working capital purposes, and an accumulated deficit of $685.5 million. As of December 31, 2024, we had cash and cash equivalents of $254.2 million, which was primarily held for working capital purposes, and an accumulated deficit of $687.2 million.

Previous wording

Net cash provided by operating activities was $29.4 million for the three months ended March 31, 2025, consisting of net income of $3.5 million adjusted for $25.5 million of non-cash expenses and $0.4 million of net cash used as a result of changes in operating assets and liabilities. The non-cash charges included $12.3 million of stock-based compensation, $12.2 million of depreciation and amortization, $0.7 million of amortization of cloud-based software implementation costs, and $0.3 million of asset impairment charges. The changes in operating assets and liabilities were primarily driven by a decrease in deferred revenue, partially offset by increased accounts payable and decreased inventory and prepaid expenses and other assets.

Current wording

Net cash provided by operating activities was $69.6 million for the six months ended June 30, 2025, consisting of net income of $1.7 million adjusted for $50.7 million of non-cash expenses and $17.2 million of net cash used as a result of changes in operating assets and liabilities. The non-cash charges included $24.6 million of depreciation and amortization, $21.2 million of stock-based compensation, $2.8 million of non-cash charitable contributions, $1.5 million of amortization of cloud-based software implementation costs, and $0.5 million of asset impairment charges. The changes in operating assets and liabilities were primarily driven by a decrease in inventory and an increase in accrued expenses and leasehold liabilities, partially offset by a decrease in deferred revenue.

Previous wording

Net cash provided in operating activities was $19.9 million for the three months ended March 31, 2024, consisting of net loss of $2.7 million, adjusted for $26.1 million of non-cash expenses and $3.5 million of net cash used as a result of changes in operating assets and liabilities. The non-cash charges included $14.0 million of stock-based compensation, $10.6 million of depreciation and amortization, $1.1 million of amortization of cloud-based software implementation costs, and $0.4 million of asset impairment charges. The changes in operating assets and liabilities were primarily driven by a decrease in deferred revenue and increased prepaid expenses and other assets, partially offset by a decrease in inventory and increase in accounts payable.

Current wording

Net cash provided in operating activities was $51.6 million for the six months ended June 30, 2024, consisting of net loss of $9.4 million, adjusted for $54.2 million of non-cash expenses and $6.8 million of net cash used as a result of changes in operating assets and liabilities. The non-cash charges included $27.9 million of stock-based compensation, $21.7 million of depreciation and amortization, $2.2 million of non-cash charitable contributions, $2.0 million of amortization of cloud-based software implementation costs, and $0.4 million of asset impairment charges. The changes in operating assets and liabilities were primarily driven by a decrease in inventory and an increase in accrued expenses, partially offset by a decrease in deferred revenue.

Previous wording

For the three months ended March 31, 2025, net cash used in investing activities was $16.2 million related to purchases of property and equipment to support our growth, primarily related to the build-out of new retail stores and investments in capitalized software development costs.

Current wording

For the six months ended June 30, 2025, net cash used in investing activities was $32.4 million related to purchases of property and equipment to support our growth, primarily related to the build-out of new retail stores and investments in capitalized software development costs.

Previous wording

For the three months ended March 31, 2024, net cash used in investing activities was $16.4 million related to purchases of property and equipment to support our growth, primarily related to the build-out of new retail stores, investments in capitalized software development costs, and an investment in a private optical equipment company.

Current wording

For the six months ended June 30, 2024, net cash used in investing activities was $34.1 million related to purchases of property and equipment to support our growth, primarily related to the build-out of new retail stores, investments in capitalized software development costs, and an investment in a private optical equipment company.

Previous wording

For the three months ended March 31, 2025, net cash used in financing activities was $2.3 million, which was primarily related to cash paid for shares withheld for taxes for stock-based compensation.

Current wording

For the six months ended June 30, 2025, net cash used in financing activities was $5.1 million, which was primarily related to cash paid for shares withheld for taxes for stock-based compensation, partially offset by proceeds from shares issued in connection with our ESPP.

Previous wording

For the three months ended March 31, 2024, net cash provided by financing activities was $0.1 million, which was primarily related to proceeds from stock option exercises.

Current wording

For the six months ended June 30, 2024, net cash provided by financing activities was $3.7 million, which was primarily related to proceeds from stock option exercises and shares issued in connection with our ESPP.