Warby Parker Inc.

1. Description of Business

Warby Parker Inc., a public benefit corporation founded in 2010 (together with its wholly owned subsidiaries, the “Company”), is a mission-driven, lifestyle brand that operates at the intersection of design, technology, healthcare, and social enterprise. The Company provides holistic vision care by offering eyewear, contacts, and eye care directly to consumers through its integrated, omnichannel platform. For every pair of glasses or sunglasses sold, the Company helps distribute a pair of glasses to someone in need through its Buy a Pair, Give a Pair program. The Company is headquartered in New York, New York.

2. Summary of Significant Accounting Policies

Basis of Presentation

The Company’s unaudited condensed consolidated financial statements have been prepared and are presented in accordance with United States generally accepted accounting principles (“U.S. GAAP”). Certain information and disclosures normally included in consolidated financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to the applicable rules and regulations of the Securities and Exchange Commission. Accordingly, these condensed consolidated financial statements should be read in conjunction with the Company’s audited consolidated financial statements for the year ended December 31, 2025 and the related notes. The December 31, 2025 condensed consolidated balance sheet was derived from the Company’s audited consolidated financial statements as of that date. The unaudited interim condensed consolidated financial statements include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the condensed consolidated financial statements. Certain prior period amounts were reclassified to conform to the current period presentation. There have been no significant changes in accounting policies during the nine months ended September 30, 2026 from those disclosed in the audited consolidated financial statements for the year ended December 31, 2025 and the related notes.

Principles of Consolidation

The condensed consolidated financial statements include the financial statements of Warby Parker Inc., and its wholly owned subsidiaries. The Company consolidates certain variable interest entities that it is the primary beneficiary of. The inclusion of these entities does not have a material impact on its condensed consolidated financial statements. Intercompany balances and transactions have been eliminated in consolidation.

Use of Estimates

U.S. GAAP requires management to make certain estimates and assumptions during the preparation of its condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.

Management’s estimates are based on historical experience and various other market-specific and relevant assumptions that management believes to be reasonable. Significant estimates underlying the condensed consolidated financial statements include, but are not limited to, the valuation of inventory, including the determination of the net realizable value, the useful lives and recoverability of long-lived assets, income taxes and valuation allowances, and assumptions related to the determination of stock-based compensation.

Concentration of Credit Risk

Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains its cash and cash equivalents in various accounts, which, at times, may exceed the limits insured by the Federal Deposit Insurance Corporation of $250 thousand per institution and the Canada Deposit Insurance Corporation of $100 thousand Canadian dollars. At September 30, 2026 and December 31, 2025, uninsured cash balances were approximately $286.6 million and $284.9 million, respectively. The Company has not experienced any concentration losses related to its cash and cash equivalents to date. The Company seeks to minimize its credit risk by maintaining its cash and cash equivalents with high-quality financial institutions and monitoring the credit standing of such institutions.

Cash and Cash Equivalents

The Company considers all highly liquid short-term investments with an original maturity of three months or less to be a cash equivalent. Cash and cash equivalents include deposits with banks and financial institutions, money market funds, and receivables from credit card issuers and payment processors, which are typically converted into cash within two to four days of capture. As such, these receivables are recorded as a deposit in transit as a component of cash and cash equivalents on the condensed consolidated balance sheets. The balance of cash and cash equivalents for these items was $5.1 million and $11.1 million as of September 30, 2026 and December 31, 2025, respectively.

Inventory

Inventory consists of approximately $14.5 million and $12.6 million of finished goods, including ready-to-wear sun frames and eyeglass cases as of September 30, 2026 and December 31, 2025, respectively, and approximately $31.8 million and $31.9 million of component parts, including optical frames and prescription optical lenses, as of September 30, 2026 and December 31, 2025, respectively. Inventory is stated at the lower of cost or net realizable value, with cost determined on a weighted average cost basis.

The Company continuously evaluates the composition of its inventory and makes adjustments when the cost of inventory is not expected to be fully recoverable. The estimated net realizable value of excess and obsolete inventory is determined based on an analysis of historical sales trends, the impact of market trends and economic conditions, a forecast of future demand, and the estimated timing of product retirements. Adjustments for damaged inventory are recorded primarily based on actual damaged inventory. Adjustments for inventory shrink represent the physical loss of inventory and are adjusted based upon physical inventory counts. Unforeseen adverse future economic and market conditions could result in actual results differing materially from estimates.

Investments

In 2023 and 2024, the Company invested a total of $3.0 million in a private optical equipment company. In connection with this investment, the Company will automatically receive shares of the entity or cash based on a conversion price dependent upon an ultimate conversion event. The investment is recorded within other assets on the condensed consolidated balance sheets and is measured at cost less impairment, if any. No impairment has been recorded for the nine months ended September 30, 2026 and 2025.

Cloud-Based Software Implementation Costs

The Company enters into cloud-based software hosting arrangements for which it incurs implementation costs. Certain costs incurred during the application development stage are capitalized and included within prepaid expenses and other current assets or other assets, depending on their long or short-term nature. All other related costs are expensed as incurred. Capitalized cloud-based software implementation costs are amortized on a straight-line basis, from the date the related software or module is ready for its intended use through the end of the contractual term of the hosting arrangement, inclusive of any reasonably certain renewal periods, as a component of selling, general, and administrative expenses, the same line item as the expense for the associated hosting arrangement.

As of September 30, 2026, the Company had $27.2 million of gross capitalized cloud-based software implementation costs and $12.7 million of related accumulated amortization, for a net balance of $14.5 million, made up of $4.2 million recorded within prepaid expenses and other current assets and $10.3 million recorded within other assets on the condensed consolidated balance sheet.

As of December 31, 2025, the Company had $20.3 million of gross capitalized cloud-based software implementation costs and $9.6 million of related accumulated amortization, for a net balance of $10.7 million, made up of $4.1 million recorded within prepaid expenses and other current assets and $6.6 million recorded within other assets on the condensed consolidated balance sheet.

During the three and nine months ended September 30, 2026, the Company incurred $1.0 million and $3.0 million of amortization of capitalized cloud-based software implementation costs, respectively. During the three and nine months ended September 30, 2025, the Company incurred $0.9 million and $2.4 million of amortization of capitalized cloud-based software implementation costs, respectively.

Asset Impairment

Long-lived assets, such as property and equipment, right-of-use (“ROU”) lease assets, and capitalized cloud-based software implementation costs, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset group may not be recoverable. Recoverability of asset groups to be held and used is evaluated by a comparison of the carrying amount of an asset group to estimated undiscounted future cash flows expected to be generated by the asset group. If the carrying amount of an asset group exceeds its estimated undiscounted future cash flows, an impairment charge is recognized as a component of selling, general, and administrative expenses in the amount by which the carrying amount exceeds the fair value of the asset group. The Company considers each store location to be its own asset group when evaluating for impairment.

Asset impairment charges, recorded as a component of selling, general, and administrative expenses, were $0.4 million and $1.0 million for the three and nine months ended September 30, 2026, respectively, primarily related to the write-off of capitalized software costs no longer being used, and were immaterial and $0.5 million for the three and nine months ended September 30, 2025, respectively, primarily related to the write-off of assets at retail stores and corporate offices and the write-off of capitalized software costs no longer being used.

Revenue Recognition

The Company primarily derives revenue from the sales of eyewear, contacts, and eye care through its stores, website, and mobile apps. Revenue generated from eyewear includes the sales of prescription and non-prescription optical glasses and sunglasses, eyewear accessories, lens replacements, paid protection plans, and customer charges for optional expedited shipping. Revenue generated from eye care consists of in-person eye exams and prescriptions issued through the Virtual Vision Test app. All revenue is reported net of sales taxes collected from customers on behalf of taxing authorities and variable consideration, including returns and discounts.

Revenue is recognized when performance obligations are satisfied through either the transfer of control of promised goods or the rendering of services to the Company's customers. Control transfers once a customer has the ability to direct the use of, and obtain substantially all of the benefits from, the product, which is generally determined to be the point of delivery or upon rendering of the service in the case of eye exams. This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance. In the normal course of business, payment may be collected from the customer prior to recognizing revenue and such cash receipts are included in deferred revenue until the order is delivered to the customer. Substantially all of the deferred revenue included on the balance sheet at December 31, 2025 was recognized as revenue in the first quarter of 2026 and the Company expects substantially all of the deferred revenue at September 30, 2026 to be recognized as revenue in the fourth quarter of 2026.

The Company’s sales policy allows customers to return merchandise for any reason within 30 days of receipt, generally for an exchange or refund. An allowance is recorded for expected future customer returns which the Company estimates using historical return patterns and its expectation of future returns. Any difference between the actual return and previous estimates is adjusted in the period in which such returns occur. Historical return estimates have not materially differed from actual returns in any of the periods presented. The allowance for returns was $2.7 million and $3.6 million at September 30, 2026 and December 31, 2025, respectively, and is included in other current liabilities on the condensed consolidated balance sheets.

The Company offers non-expiring gift cards to its customers. Proceeds from the sale of gift cards are initially deferred and recognized within deferred revenue on the condensed consolidated balance sheets, and are recognized as revenue when the product is received by the customer after the gift card has been tendered for payment. Based on historical experience, and to the extent there is no requirement to remit unclaimed card balances to government agencies under unclaimed property laws, an estimate of the gift card balances that will never be redeemed is recognized as revenue in proportion to gift cards which have been redeemed. While the Company will continue to honor all gift cards presented for payment, management may determine the likelihood of redemption to be remote for certain card balances due to, among other things, long periods of inactivity. The balance of unredeemed gift cards was $2.6 million and $3.5 million as of September 30, 2026 and December 31, 2025, respectively.

The following table disaggregates the Company’s revenue by product:

The following table disaggregates the Company’s revenue by channel:

Recent Developments

Intelligent Eyewear

In the second quarter of 2025, the Company announced a partnership with Google to develop AI-enabled glasses intended for all-day wear. The Company is working closely with Google on the development of intelligent eyewear and intends to launch a series of products over time. As part of this collaborative arrangement, Google has committed up to $75 million for the Company’s product development and commercialization costs. In addition, Google has committed to investing up to $75 million in Warby Parker, at the Company’s option and subject to reaching certain collaboration milestones. During the three and nine months ended September 30, 2026, the Company reduced selling, general, and administrative expenses by $12.7 million and $19.0 million, respectively, related to costs which are reimbursable by Google and are thus fully offset within the period. To date, the Company has incurred $22.3 million of reimbursable expenses, of which $9.8 million has been collected from Google as of September 30, 2026 and $12.5 million remains outstanding and is presented in prepaid expenses and other current assets on the condensed consolidated balance sheets.

Strategic Investment

In October 2026, the Company invested $5.6 million in a private optical lens technology company in exchange for shares of its preferred stock. Concurrently, the Company entered into a commercial agreement with the optical lens technology company pursuant to which the Company committed to funding a total of $5.6 million over approximately 24 months towards various research and development programs for new lenses and lens technology.

Supreme Court Tariff Ruling

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 becomes 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.

During the second quarter of 2026, the Company determined that the receipt of refunds totaling $14.4 million of IEEPA tariffs was probable and recorded an $11.8 million benefit to cost of goods sold for inventory sold through June 30, 2026 and a $2.6 million reduction to inventory. During the three months ended September 30, 2026, $1.6 million of the $2.6 million was recognized through cost of goods sold as inventory turned, and substantially all of the remainder is expected to be recognized in the fourth quarter of 2026. During the three and nine months ended September 30, 2026, the Company recorded interest income of $0.4 million and $0.6 million, respectively, related to IEEPA tariffs which is included in interest and other income. As of September 30, 2026, all of the cash had been collected.

Recently Issued Accounting Pronouncements

In November 2024, the FASB issued ASU 2024-03, Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures. The guidance requires disaggregated disclosure of income statement expenses for public entities. The ASU does not change the expense captions an entity presents on the face of the income statement; rather, it requires disaggregation of certain expense captions into specified categories in disclosures within the footnotes to the financial statements. This ASU is effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. The Company is currently evaluating the impact of the new guidance on its condensed consolidated financial statements.

In September 2025, the FASB issued ASU 2025-06, Intangibles - Goodwill and Other - Internal Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software. The guidance clarifies and enhances the accounting for costs incurred in connection with the development, implementation, and maintenance of internal-use software, including cloud-based arrangements, by removing the previous project stage model for capitalization and introducing a principles-based framework. This ASU is effective for fiscal years beginning after December 15, 2027 and can be applied either prospectively or retrospectively. Early adoption is permitted. The Company is currently evaluating the impact of the new guidance on its condensed consolidated financial statements.

3. Property and Equipment, Net

Property and equipment, net consists of the following:

Depreciation and amortization expense consists of the following:

4. Accrued Expenses

Accrued expenses consist of the following:

5. Income Taxes

The Company uses the estimated annual effective tax rate approach to determine the provision for income taxes. The estimated annual effective tax rate is based on forecasted annual results and may fluctuate due to differences between the forecasted and actual results, changes in valuation allowances, and any other transactions that result in differing tax treatment.

The Company's income tax provision and effective tax rate were as follows:

The Company’s estimated annual effective income tax rate for the three and nine months ended September 30, 2026 and 2025 differed from the statutory rate primarily due to the valuation allowance, non-deductible executive compensation, stock-based compensation, state taxes, and other permanent items.

6. Stockholders’ Equity

Common Stock

As of September 30, 2026, the Company’s Twelfth Amended and Restated Certificate of Incorporation authorizes the issuance of up to 1,050,000 shares of common stock, par value of $0.0001 per share, of which 750,000 shares are designated Class A common stock,150,000 shares are designated Class B common stock, and 150,000 shares are designated Class C common stock. Class A common stock receivesone vote per share, Class B common stock receivesten votes per share, and Class C common stock hasno voting rights except as required by Delaware law. Common stock is not redeemable at the option of the holder.

As of September 30, 2026, outstanding shares of common stock as well as shares of common stock attributable to equity awards are as follows:

Preferred Stock

As of September 30, 2026,50,000 preferred shares were authorized andno shares were outstanding.

Share Repurchase Program

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 nine months ended September 30, 2026, the Company did not purchase any shares under the Share Repurchase Program.

7. Stock-Based Compensation

Plans and Awards

The Company’s eligible employees participate in various stock-based compensation plans, which are provided by the Company directly.

In August 2021, the Board of Directors approved the 2021 Incentive Award Plan (the “2021 Plan”), which became effective on September 28, 2021. The Company no longer grants equity awards under its 2010 Equity Incentive Plan, 2011 Stock Plan, 2012 Milestone Stock Plan, or 2019 Founder Stock Plan (collectively, the “Prior Plans”, and together with the 2021 Plan, the “Plans”), and shares available for issuance under the Prior Plans were made available for issuance under the 2021 Plan. The shares authorized under the 2021 Plan will increase annually, beginning on January 1, 2022 and continuing through 2031, by the lesser of (i)5% of the outstanding common stock (on an as-converted basis) as of the last day of the immediately preceding fiscal year, or (ii) a smaller amount as agreed by the Board of Directors. Awards granted under the 2021 Plan generally vest over four years. In addition, the shares authorized under the 2021 Plan will increase, among other things, to the extent that an award (including an award under the Prior Plans) terminates, expires, or lapses for any reason or an award is settled in cash without the delivery of shares.

In January 2026, the shares authorized for issuance under the 2021 Plan automatically increased by 6,116 shares, and 34,128 shares remained available for future issuance pursuant to new awards as of September 30, 2026.

Employee Stock Purchase Plan

In August 2021, the Board of Directors adopted and the stockholders of the Company approved the 2021 Employee Stock Purchase Plan (the “ESPP”). The shares authorized under the ESPP will increase annually on the first day of each fiscal year beginning in 2022 and ending in 2031, by the lesser of (i) 1% of the shares of the Company’s outstanding common stock (on an as converted basis) on the last day of the immediately preceding fiscal year, or (ii) a smaller amount as agreed by the Board of Directors; provided, however, no more than 16,615 shares of common stock may be issued under the ESPP.

In January 2026, the shares authorized for issuance under the ESPP automatically increased by 1,223 shares, and there were 7,252 shares available for future issuance pursuant to ESPP purchases as of September 30, 2026.

Stock-based Compensation Expense

Stock-based compensation expense consists of the following:

Stock-based compensation expense for the three and nine months ended September 30, 2026 primarily consists of $6.0 million and $22.4 million from RSUs and $2.1 million and $5.4 million from PSUs, respectively. Stock-based compensation expense for the three and nine months ended September 30, 2025 primarily consists of $5.9 million and $23.6 million from RSUs and $0.9 million and $3.2 million from PSUs, respectively.

Restricted Stock Units

A summary of RSU activity for the nine months ended September 30, 2026 is as follows:

(1) There were a total of 894 and 904 RSUs that were vested but not yet released as of September 30, 2026 and December 31, 2025, respectively, primarily related to the 2021 Founders Grant, as described below.

The total value of unrecognized stock-based compensation expense related to outstanding RSUs granted under the Plans was $47.4 million as of September 30, 2026 which is expected to be recognized over a weighted-average period of 1.3 years. Stock-based compensation for RSUs is recognized on a straight-line basis over the vesting period.

Performance Stock Units

A summary of PSU activity for the nine months ended September 30, 2026 is as follows:

The total value of unrecognized stock-based compensation expense related to outstanding PSUs granted under the Plans was $15.3 million as of September 30, 2026 which is expected to be recognized over a weighted-average period of 1.0 years.

Relative Total Shareholder Return (“TSR”) PSU Grants

In March 2025, the Company granted 236 PSUs for Class A common stock, and in February and March 2026, the Company granted 310 PSUs for Class A common stock under the 2021 Plan. Vesting of the PSUs will occur after the end of the applicable performance period, which begins on January 1 of the award year and ends on the earlier of a change of control or December 31 of the third year of the award, in each case based on the Company’s TSR relative to the TSRs of the companies in the Russell 2000 Growth Index. The final settlement of the PSUs is subject to continued employment with the Company through the end of the performance period. The number of shares to be issued on vesting is based on the linear interpolation of the achievement factors set forth in the table below.

The Company used a Monte Carlo simulation to calculate the grant date fair value of the PSUs granted in 2025 of $9.6 million and of the PSUs granted in 2026 of $13.9 million. The PSUs contain a single vesting tranche and expense will be recognized on a straight-line basis over the applicable performance period.

2021 Founders Grant

In June 2021, the Company granted 4,398 PSUs to the Co-CEOs, in the aggregate, under the 2019 Founder Stock Plan (the “2021 Founders Grant”). The PSUs had a grant-date fair value of $128.8 million, as determined by a Monte Carlo simulation, and vest in eight equal tranches upon the satisfaction oftwo performance conditions, (i) a qualified public offering, which was satisfied upon the Company’s direct listing on September 29, 2021, and (ii) the price of the Company’s Class A common stock reaches stock price hurdles, ranging from $47.75 to $103.46, over a period often years, as defined by the terms of the award. If the PSUs vest, the Company will deliverone share of Class B common stock for each PSU on the settlement date, and unvested PSUs will expire in June 2031. Vesting of the PSUs is subject to the Co-CEOs’ continued employment with the Company through the applicable vesting dates. Shares underlying vested 2021 Founders Grant PSUs will be issued to the Co-CEOs on a specified quarterly date following the second anniversary of the vesting date, except for an amount necessary to cover any taxes due in connection with the vesting, which will be withheld or sold to cover, or issued to offset, such taxes.

Stock Options

A summary of stock option activity for the nine months ended September 30, 2026 is as follows:

All outstanding options were vested and fully expensed as of March 31, 2025. The Company has not granted stock options since 2021.

8. Leases

The Company leases retail, office, optical laboratory, and distribution center space under operating leases from third parties. As of September 30, 2026, the total lease terms of the various leases range from 1 to 12 years. The leases generally contain renewal options and rent escalation clauses, and from time to time include contingent rent provisions. Renewal options are exercisable at the Company’s sole discretion and are included in the lease term if they are reasonably certain to be exercised. In general it is not reasonably certain that lease renewals will be exercised at lease commencement and as such, lease renewals are not included in the lease term.

Net lease expense consists of the following:

(1) Variable lease expense primarily consists of contingent rent.

The following table presents future lease payments:

(1)The years 2026 and 2027 include $3.1 million and $9.2 million, respectively, of expected cash inflows from tenant improvement allowances. Operating lease payments exclude $6.5 million of legally binding minimum lease payments related to executed leases for which the Company has not yet taken possession of the leased premises.

The following tables present other relevant lease information:

9. Segment Information

Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”), who makes decisions about allocating resources and assessing performance. The Company’s CODM is its Co-Chief Executive Officers.

The Company identifiedone operating segment andone reportable segment, holistic vision care, which is aligned with how the CODM views the business as a holistic vision care brand with complementary vision care products and services. The holistic vision care segment sells eyewear products and provides optical services directly to customers through its retail and e-commerce platform. The Company derives revenues in the U.S. and Canada and manages business activities on a consolidated basis using the same technology and supply chain infrastructure across channels, products, and geographies.

The accounting policies of the holistic vision care segment are the same as those described in the summary of significant accounting policies.

The CODM assesses performance for the holistic vision care segment and decides how to allocate resources based on net income that is also reported on the income statement as consolidated net income. The measure of segment assets is reported on the balance sheet as total consolidated assets. The CODM uses net income when determining whether to reinvest profits into the holistic vision care segment or to use them for acquisitions or other transactions. Net income is also used in the evaluation of budget versus actual performance.

Segment profit for the holistic vision care segment consists of the following:

10. Commitments and Contingencies

2024 Credit Facility

In February 2024, the Company and its wholly owned subsidiary, Warby Parker Retail, Inc. (together, the “Borrowers”) entered into a Credit Agreement with JPMorgan Chase Bank, N.A. and the lenders party thereto (the “2024 Credit Facility”), which replaced a previous credit facility. The 2024 Credit Facility consists of a $120.0 million five-year revolving credit facility with sublimits of $15.0 million for letters of credit and $10.0 million for swingline loans. The 2024 Credit Facility includes an option for the Company to increase the available amount by up to $55.0 million, for a maximum borrowing capacity of $175.0 million, subject to the consent of the lenders funding the increase and certain other conditions. Proceeds of the borrowings under the 2024 Credit Facility are expected to be used for working capital and other general corporate purposes in the ordinary course of business. The Company is permitted to repay borrowings under the 2024 Credit Facility at any time, in whole or in part, without penalty.

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.

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.

Other than letters of credit outstanding of $4.3 million as of both September 30, 2026 and December 31, 2025 used to secure certain leases in lieu of a cash security deposit, there were no other borrowings outstanding.

Litigation

During the normal course of business, the Company may become subject to legal proceedings, claims and litigation. Such matters are subject to many uncertainties and outcomes cannot be predicted with certainty.

Accruals for loss contingencies are recorded when a loss is probable, and the amount of such loss can be reasonably estimated.

In 2023, three related lawsuits were filed against the Company in California alleging violations of various state wage and hour laws and seeking wages, statutory penalties, and attorneys' fees (Pham v. Warby Parker Inc., et al., Case No. 5:23-cv-01884-NC; N.D. Cal.; Chery v. Warby Parker Inc., et al., Case No. 23CV417693; Cal. Super. Ct.; Jacobsen, et al. v. Warby Parker Inc., et al., Case No. 23CV421588; Cal. Super. Ct.). Following a voluntary mediation with the plaintiffs, the court granted final approval of a settlement of the foregoing matters for a total of $1.95 million in February 2026, which was paid in March 2026. A final accounting hearing is scheduled for December 2, 2026, after which the cases are expected to be closed.

In addition to the matters described above, as of September 30, 2026, the Company is currently involved in other legal proceedings which, in the opinion of the Company’s management, will not materially affect the Company’s financial position, results of operations, or cash flows should such litigation be resolved unfavorably.

11. Earnings Per Share

Basic and diluted net income per share is presented in conformity with the two-class method required for participating securities. Under the two-class method, net income is attributed to common stockholders and participating securities based on their participation rights. The Company’s Class A and Class B common stock have, in effect, the same economic rights and share equally in undistributed net income, and as such, net income is allocated proportionately between them.

The computation of earnings per share is as follows:

The following potentially dilutive shares were excluded from the computation of diluted earnings per share because including them would have been antidilutive:

12. Related-Party Transactions

As a private company, the Company issued secured promissory notes collateralized by the stock purchased by certain Company executives in relation to the exercise of employee stock options. As the promissory notes are secured by the underlying shares they have been treated as non-recourse notes in the condensed consolidated financial statements. The promissory notes were issued with a term of 8.5 years and an interest rate equal to the minimum applicable federal mid-term rate in the month the loan was issued. The secured promissory notes were recorded as a reduction to equity offsetting the amount in additional paid-in-capital related to the exercised options funded by the notes.

The loans had a balance of $2.2 million at both September 30, 2026 and December 31, 2025 related to 120 underlying shares of Class A common stock. No loans are outstanding with any of the Company’s executive officers, and no new promissory notes have been issued since 2021. The loans outstanding had a weighted average remaining term of 2.9 years at September 30, 2026.

During each of the three and nine months ended September 30, 2026 and 2025, the outstanding loan balance increased by an immaterial amount due to interest.