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, 2025 filed with the Securities and Exchange Commission (“SEC”) on February 26, 2026 (the “Annual Report”). Data as of and for the three months ended March 31, 2026 and 2025 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 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, 2025 filed with the Securities and Exchange Commission (“SEC”) on February 26, 2026 (the “Annual Report”). Data as of and for the three and six months ended June 30, 2026 and 2025 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 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 337 retail stores as of March 31, 2026.

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 352 retail stores as of June 30, 2026.

Previous wording

•we generated net revenue of $242.4 million and $223.8 million, respectively;

Current wording

•we generated net revenue of $235.5 million and $214.5 million, respectively;

Previous wording

•we generated gross profit of $131.0 million and $126.0 million, respectively, representing a gross margin of 54.0% and 56.3%, respectively;

Current wording

•we generated gross profit of $136.5 million and $113.6 million, respectively, representing a gross margin of 57.9% and 53.0%, respectively;

Previous wording

•we generated net income of $3.2 million and $3.5 million, respectively; and

Current wording

•we generated net income of $7.8 million and $1.7 million, respectively; and

Previous wording

•we generated Adjusted EBITDA of $29.6 million and $29.2 million, respectively, representing an Adjusted EBITDA Margin of 12.2% and 13.1%, respectively.

Current wording

•we generated Adjusted EBITDA of $62.4 million and $54.2 million, respectively, representing an Adjusted EBITDA Margin of 13.1% and 12.4%, respectively.

Previous wording

For a definition of Adjusted EBITDA and Adjusted EBITDA Margin, a non-GAAP measure, and a reconciliation to the most directly comparable GAAP measure, see the section titled “Key Business Metrics and Certain Non-GAAP Financial Measures.”

Current wording

For definitions of Adjusted EBITDA and Adjusted EBITDA Margin, non-GAAP financial measures, and reconciliations to the most directly comparable GAAP measure, see the section titled “Key Business Metrics and Certain Non-GAAP Financial Measures.”

Previous wording

In the second quarter of 2025, we announced a partnership with Google to develop AI-enabled glasses intended for all-day wear. We are working closely with Google on the development of AI glasses and intend to launch a series of products over time. As part of this collaborative arrangement, Google has committed up to $75 million for our product development and commercialization costs. In addition, Google has committed to investing up to $75 million in Warby Parker, at our option and subject to reaching certain collaboration milestones. During the three months ended March 31, 2026, the Company reduced selling, general, and administrative expenses by $2.0 million related to costs which are reimbursable by Google and are thus fully offset within the period. To date, we have incurred $5.3 million of reimbursable costs.

Current wording

In the second quarter of 2025, we announced a partnership with Google to develop AI-enabled glasses intended for all-day wear. We are working closely with Google on the development of AI glasses and intend to launch a series of products over time. As part of this collaborative arrangement, Google has committed up to $75 million for our product development and commercialization costs. In addition, Google has committed to investing up to $75 million in Warby Parker, at our option and subject to reaching certain collaboration milestones. During the three and six months ended June 30, 2026, the Company reduced selling, general, and administrative expenses by $4.4 million and $6.4 million, respectively, related to costs which are reimbursable by Google and are thus fully offset within the period. To date, the Company has incurred $9.7 million of reimbursable costs.

Previous wording

In February 2026, the U.S. Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). The U.S. presidential administration subsequently invoked additional tariffs under other laws resulting in a rapidly changing tariff environment. In April 2026, the U.S. Customs and Border Protection agency launched a platform to allow for the submission of IEEPA tariff refund requests. The timing of claim acceptance and payment remains uncertain and we are in the process of estimating the potential financial impact of this ruling. We will continue to monitor the refund process and will recognize a refund when the right to receive any amounts becomes probable.

Current wording

In February 2026, the U.S. Supreme Court issued a ruling striking down certain tariffs previously imposed under the International Emergency Economic Powers Act ("IEEPA"). The U.S. presidential administration subsequently invoked additional tariffs under other laws resulting in a rapidly changing tariff environment. In April 2026, the U.S. Customs and Border Protection agency launched a platform to allow for the submission of IEEPA tariff refund requests. The Company is accounting for any claims as loss recoveries and recognizes receivables when receipt of the claims become probable. Recoveries are reflected as a reduction of cost of goods sold for inventory previously sold, or as a reduction of inventory for goods that remain unsold.

Previous wording

We have expanded our retail store footprint over the past several years. During the three months ended March 31, 2026 and 2025, we opened 14 and 11 net new retail stores, respectively. As of March 31, 2026, 299 out of our 337 retail stores offered in-person eye exams, representing 88.7% of our fleet, compared to 86.1% as of March 31, 2025.

Current wording

We have expanded our retail store footprint over the past several years. During the three months ended June 30, 2026 and 2025, we opened 15 and 11 net new retail stores, respectively. As of June 30, 2026, 315 out of our 352 retail stores offered in-person eye exams, representing 89.5% of our fleet, compared to 86.9% as of June 30, 2025.

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. For the three months ended March 31, 2026 and 2025, the amount includes $0.6 million and $0.7 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 the three months ended June 30, 2026 and 2025, the amount includes $0.4 million and $0.3 million, respectively, of employer payroll taxes associated with releases of RSUs and option exercises. For the six months ended June 30, 2026 and 2025, the amount includes $1.0 million and $0.9 million, respectively, of employer payroll taxes associated with releases of RSUs and option exercises.

Previous wording

(3) 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

Selling, general, and administrative expenses, or SG&A, primarily consist of employee-related costs including salaries, benefits, bonuses, and stock-based compensation for our corporate and retail employees, marketing, information technology, credit card processing fees, donations in connection with our Buy a Pair, Give a Pair program, facilities, legal, and other administrative costs associated with operating the business. Marketing, which consist of both online and offline advertising, includes sponsored search, online advertising, Home Try-On program costs, and other initiatives. We expect SG&A to increase in absolute dollars over time and to fluctuate as a percentage of revenue due to the anticipated growth of our business, intentional investments in marketing, and changing prices of goods and services caused by inflation and other macroeconomic factors. SG&A is expensed in the period in which it is incurred.

Current wording

Selling, general, and administrative expenses, or SG&A, primarily consist of employee-related costs including salaries, benefits, bonuses, and stock-based compensation for our corporate and retail employees, marketing, information technology, credit card processing fees, donations in connection with our Buy a Pair, Give a Pair program, facilities, legal, and other administrative costs associated with operating the business. Marketing, which consists of both online and offline advertising, includes sponsored search, online advertising, Home Try-On program costs, and other initiatives. We expect SG&A to increase in absolute dollars over time and to fluctuate as a percentage of revenue due to the anticipated growth of our business, intentional investments in marketing, and changing prices of goods and services caused by inflation and other macroeconomic factors. SG&A is expensed in the period in which it is incurred.

Previous wording

Net revenue increased $18.7 million, or 8.3%, for the three months ended March 31, 2026 compared to the same period in 2025. Active Customers increased 4.8% and Average Revenue per Customer increased to $331 from $310 in the prior year period. Average Revenue per Customer growth was primarily driven by our eyewear business, which benefited from selective price increases implemented during the second quarter of 2025 and the recognition of sales placed in the last few days of 2025 that were delivered in 2026, as well as an increase in customers purchasing eye exams along with glasses or contacts.

Current wording

Net revenue increased $21.0 million, or 9.8%, for the three months ended June 30, 2026 compared to the same period in 2025. Active Customers increased 4.1% and Average Revenue per Customer increased to $336 from $316 in the prior year period. Average Revenue per Customer growth was primarily driven by our eyewear business, which benefited from increased penetration of premium lenses and enhancements, like our precision progressives, as well as an increase in customers purchasing eye exams along with glasses or contacts.

Previous wording

Gross profit, calculated as net revenue less cost of goods sold, increased by $5.1 million, or 4.0%, for the three months ended March 31, 2026 compared to the same period in 2025, 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 $22.8 million, or 20.1%, for the three months ended June 30, 2026 compared to the same period in 2025, primarily due to the increase in net revenue over the same period as well as a benefit from IEEPA tariff refunds.

Previous wording

Interest and other income, net decreased $0.1 million, or 5.1%, for the three months ended March 31, 2026 compared to the same period in 2025, primarily due to lower interest rates on our increased cash and cash equivalents balance.

Current wording

Interest and other income, net increased $0.1 million, or 5.0%, for the three months ended June 30, 2026 compared to the same period in 2025, primarily due to favorable fluctuations in foreign currency rates, partially offset by lower interest rates on our increased cash and cash equivalents balance.

Previous wording

Cost of goods sold increased by $13.6 million, or 13.9%, for the three months ended March 31, 2026 compared to the same period in 2025, and increased as a percentage of revenue over the same period, from 43.7% of revenue to 46.0% 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 optical laboratory and lens costs, and increases in store occupancy costs and doctor headcount due to new retail stores.

Current wording

Cost of goods sold increased by $11.8 million, or 5.9%, for the six months ended June 30, 2026 compared to the same period in 2025, and decreased as a percentage of revenue over the same period, from 45.3% of revenue to 44.0% of revenue. The increase in cost of goods sold was primarily driven by increases in store occupancy costs and doctor headcount due to new retail stores, as well as increased product and fulfillment costs associated with our sales growth, partially offset by the benefit from IEEPA tariff refunds.

Previous wording

Gross margin, expressed as a percentage and calculated as gross profit divided by net revenue, decreased by 230 basis points for the three months ended March 31, 2026 compared to the same period in 2025. The decrease was primarily driven by deleverage in the fixed expenses portion of gross margin, which includes doctor headcount and occupancy, the impact of tariff costs related to glasses, and increased optical laboratory and customer shipping costs. These impacts were partially offset by selective price increases implemented during the second quarter of 2025, and increased penetration of higher margin progressive lenses and other lens enhancements.

Current wording

Gross margin, expressed as a percentage and calculated as gross profit divided by net revenue, increased by 130 basis points for the six months ended June 30, 2026 compared to the same period in 2025. The increase was primarily related to a 250 basis point benefit from IEEPA tariff refunds. These benefits were partially offset by deleverage in the fixed portion of gross margin, which includes doctor headcount and occupancy.

Previous wording

Selling, general, and administrative expenses increased $5.9 million, or 4.7%, for the three months ended March 31, 2026 compared to the same period in 2025. This increase was primarily driven by higher payroll-related costs from growth in our retail workforce and higher corporate expenses, mainly related to technology costs, partially offset by lower stock-based compensation, mostly related to the 2021 Founders Grant as award tranches became fully expensed. As a percentage of revenue, SG&A decreased by 180 basis points, primarily driven by leverage from marketing costs related to our now retired Home-Try-On program, stock-based compensation, and corporate expenses, partially offset by deleverage from our retail workforce.

Current wording

Selling, general, and administrative expenses increased $21.0 million, or 8.7%, for the six months ended June 30, 2026 compared to the same period in 2025. This increase was primarily driven by higher payroll-related costs from growth in our retail workforce and higher corporate expenses, mainly related to technology costs. As a percentage of revenue, SG&A was flat, as customer experience efficiencies, marketing costs related to our now retired Home Try-On program, and stock-based compensation were partially offset by deleverage from our retail workforce.

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. We also have access to cash from our 2024 Credit Facility, as described below, which remains undrawn as of March 31, 2026. We had cash and cash equivalents of $288.2 million, which was primarily held for working capital purposes, and an accumulated deficit of $682.4 million as of March 31, 2026. As of December 31, 2025, we had cash and cash equivalents of $286.4 million, which was primarily held for working capital purposes, and an accumulated deficit of $685.6 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. We also have access to cash from our 2024 Credit Facility, as described below, which remains undrawn as of June 30, 2026. We had cash and cash equivalents of $292.7 million, which was primarily held for working capital purposes, and an accumulated deficit of $677.8 million as of June 30, 2026. As of December 31, 2025, we had cash and cash equivalents of $286.4 million, which was primarily held for working capital purposes, and an accumulated deficit of $685.6 million.

Previous wording

Under the 2024 Credit Facility, borrowings under the revolving credit facility bear interest on the principal amount outstanding, at the Company’s election, at (a) the greater of the prime rate (as defined in the credit agreement) or 2.5%, plus an applicable margin of 0.65% to 0.90% depending on the Company’s leverage ratio or (b) adjusted SOFR (as defined in the credit agreement), plus an applicable margin of 1.65% to 1.90% depending on the Company’s leverage ratio. The Company is charged an unused commitment fee of 0.20% to 0.25% depending on the Company's leverage ratio. Both interest on principal and commitment fees are included in interest expense on the condensed consolidated statements of operations.

Current wording

Under the 2024 Credit Facility, borrowings under the revolving credit facility bear interest on the principal amount outstanding, at the Company’s election, at (a) the greater of the prime rate (as defined in the credit agreement) or 2.5%, plus an applicable margin of 0.65% to 0.90% depending on the Company’s leverage ratio or (b) adjusted SOFR (as defined in the credit agreement), plus an applicable margin of 1.65% to 1.90% depending on the Company’s leverage ratio. The Company is charged an unused commitment fee of 0.20% to 0.25% depending on the Company's leverage ratio. Both interest on principal and commitment fees are recorded as a reduction to interest and other income, net on the condensed consolidated statements of operations.

Previous wording

The 2024 Credit Facility contains a financial maintenance covenant which only applies while total borrowings exceed $30.0 million, which requires the Company to maintain a maximum consolidated senior net leverage ratio of 3:1. The 2024 Credit Facility contains customary affirmative and negative covenants, including limits on indebtedness, liens, capital expenditures, asset sales, investments and restricted payments, in each case subject to negotiated exceptions and baskets, as well as representations, warranties and event of default provisions. The obligations of the Borrowers under the 2024 Credit Agreement are secured by first-lien security interests in substantially all of the assets of the Borrowers. In addition, the obligations are required to be guaranteed in the future by certain additional domestic subsidiaries of the Company.

Current wording

The 2024 Credit Facility contains a financial maintenance covenant which only applies while total borrowings exceed $30.0 million, which requires the Company to maintain a maximum consolidated senior net leverage ratio of 3:1. The 2024 Credit Facility contains customary affirmative and negative covenants, including limits on indebtedness, liens, capital expenditures, asset sales, investments and restricted payments, in each case subject to negotiated exceptions and baskets, as well as customary representations, warranties and event of default provisions. The obligations of the Borrowers under the 2024 Credit Agreement are secured by first-lien security interests in substantially all of the assets of the Borrowers. In addition, the obligations are required to be guaranteed in the future by certain additional domestic subsidiaries of the Company.

Previous wording

In February 2026, the Company’s Board of Directors authorized a share repurchase program to purchase up to $100.0 million of the Company’s Class A common stock (the “Share Repurchase Program”). Repurchases under the Share Repurchase Program may be made in the open market, in privately negotiated transactions, or otherwise, with the amount and timing of repurchases to be determined at the Company’s discretion, depending on market conditions and corporate needs. Open market repurchases will be structured to occur in accordance with applicable federal securities laws, including within the pricing and volume requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The Company may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of its shares under this authorization. The Share Repurchase Program does not have a fixed expiration date, does not obligate the Company to acquire any particular amount of Class A common stock, and may be modified, suspended, or terminated at any time at the discretion of the Company’s Board of Directors. During the three months ended March 31, 2026, the Company did not purchase any shares under the Share Repurchase Program.

Current wording

In February 2026, the Company’s Board of Directors authorized a share repurchase program to purchase up to $100.0 million of the Company’s Class A common stock (the “Share Repurchase Program”). Repurchases under the Share Repurchase Program may be made in the open market, in privately negotiated transactions, or otherwise, with the amount and timing of repurchases to be determined at the Company’s discretion, depending on market conditions and corporate needs. Open market repurchases will be structured to occur in accordance with applicable federal securities laws, including within the pricing and volume requirements of Rule 10b-18 under the Securities Exchange Act of 1934, as amended. The Company may also, from time to time, enter into Rule 10b5-1 plans to facilitate repurchases of its shares under this authorization. The Share Repurchase Program does not have a fixed expiration date, does not obligate the Company to acquire any particular amount of Class A common stock, and may be modified, suspended, or terminated at any time at the discretion of the Company’s Board of Directors. During the three and six months ended June 30, 2026, the Company did not purchase any shares under the Share Repurchase Program.

Previous wording

Net cash provided by operating activities was $24.5 million for the three months ended March 31, 2026, consisting of net income of $3.2 million adjusted for $26.6 million of non-cash expenses and $5.3 million of net cash used as a result of changes in operating assets and liabilities. The non-cash charges included $13.8 million of depreciation and amortization, $11.4 million of stock-based compensation, $1.0 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 deferred revenue, partially offset by an increase in prepaid expenses and other assets and inventory.

Current wording

Net cash provided by operating activities was $54.1 million for the six months ended June 30, 2026, consisting of net income of $7.8 million adjusted for $55.8 million of non-cash expenses and $9.5 million of net cash used as a result of changes in operating assets and liabilities. The non-cash charges included $27.8 million of depreciation and amortization, $21.3 million of stock-based compensation, $4.0 million of non-cash charitable contributions, $2.1 million of amortization of cloud-based software implementation costs, and $0.6 million of asset impairment charges. The changes in operating assets and liabilities were primarily driven by an increase in prepaid expenses and other assets and a decrease in deferred revenue, partially offset by increases in accounts payable and accrued expenses.

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 generated 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 generated 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

For the three months ended March 31, 2026, net cash used in investing activities was $16.1 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, 2026, net cash used in investing activities was $39.0 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, 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, 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, 2026, net cash used in financing activities was $8.5 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 and option exercises.

Previous wording

For the three months ended March 31, 2026, net cash used in financing activities was $6.2 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.