Thank you. And good morning, everyone, here with me today are Neil Blumenthal and Dave Gilboa, our Co-Founders and Co-CEOs, alongside Steve Miller, Senior Vice President and Chief Financial Officer. Before we begin, we have a couple of reminders. Our earnings release and slide presentation are available on our website at investors.warbyparker.com. During this call and in our presentation, we will be making comments of a forward-looking nature. Actual results may differ materially from those expressed or implied as a result of various risks and uncertainties. For more information about some of these risks, please review our company’s SEC filings, including the section titled Risk Factors in the company's latest annual forms on Form 10-K. These forward-looking statements are based on the information as of May 16th, 2022 and we assume no obligation to publicly update or revise our forward-looking statements. Additionally, we will be discussing certain non - GAAP financial measures. These non - GAAP financial measures are in addition to and not to substitute for measures of financial performance prepared in accordance with GAAP. A reconciliation of these items to our nearest U.S. GAAP measure can be found in this morning's press release and on our slide deck available on our IR website. I will now like to pass over to host, Neil Blumenthal to begin. Please go ahead.

Good morning, everyone. And thank you for starting your day with us. This is probably the first meeting many of you are having this week, so we'll try and do our best to make an engaging, and productive. And with that, I'll dive right into Q1 performance. Our team has continued to make strong progress throughout the quarter in executing on our key objectives and driving sustainable growth. In particular, we grew our active customer base, expanded our products and services offerings, opened eight new retail stores and further enhance our digital capabilities. As we walk through our last earnings call, Omicron was particularly impactful for us in Q1 given the unique seasonality of our business. We believe Omicron resulted in approximately $15 million worth of lost sales in Q1. Revenue for the first quarter was $153.2 million up 10.3% versus the first quarter of 2021 and up 18% on a three-year CAGR basis. And while Q1 was the lowest growth in profitability quarter we expect to have this year, we are proud of the milestones we achieved despite the challenging backdrop. This quarter, we launched four eyewear collections, including our spring core collection starting at our core price point of $95, including prescription lenses, as well as our Nesso Series, which is priced at $195 and features a unique interlocking construction dreamed up by our in-house design team and produced in Italy. Across our collections, we continue to focus on delivering a range of styles and fits for different consumer lifestyles and preferences, all while prioritizing exceptional quality and value. This commitment to design and convenience inspired our new clip-on assortment, which allows customers to transform their favorite optical frames into sunglasses instantaneously, and just in time for summer. We ended the quarter with more than 2.2 million happy…

Thanks Neil, it's great to be speaking to so many of you again, and to those joining us for the first time, welcome. While 2022 began with significant and unique Omicron-related challenges for our customers and the optical industry, overall, we remain as optimistic as ever about the long-term prospects for our category and our opportunities to strengthen our market position within it. As we look ahead to the rest of 2022, we expect to see our growth rate accelerate as retail productivity continues to recover. On our last earnings call we talked about the impact that Omicron had on retail productivity, which we defined as average sales per store compared with pre-pandemic levels in 2019. In Q1 retail productivity was around 82% of pre-pandemic levels, far below where this metric was trending in mid-Q4 prior to Omicron. In April, retail productivity rose to 90%, indicating progress along the recovery curve we have observed after each wave of the pandemic; and pointing to continued recovery. We said then and continue to believe that we'll reach full retail productivity by year-end. We do not need or expect retail foot traffic to rebound to pre-pandemic levels in order to achieve 100% retail productivity. The conversion and [Indiscernible] gains our team has driven, will enable us to get there with modest assumptions around traffic increases. In addition to increased productivity from our existing stores, we also remain on track to expand our retail footprint by 40 new stores this year ending 2022, with 201 stores. Even with this rapid growth at year-end, we will still represent less than 1% of the 41,000 optical shops open in the U.S. today. In addition to serving our customers better through our expanding retail footprint and driving adoption of our industry-leading digital tools like our Virtual Try-On…

Thanks, Neil and Dave. Good morning, everyone. Let's jump right in and talk through top-line performance for the quarter revenue for the first quarter of 2022 came in at a $153.2 million, up 10.3% versus the first quarter of 2021 and up 18% on a three-year CAGR basis versus the first quarter of 2019. We finished the quarter with 2.23 million active customers, an increase of 18% versus the same period a year ago. And our average revenue per customer increased 11% year-over-year to $249. We're pleased to see continued scaling in average revenue per customer, which reflects our ability to continue to provide more value to our customers as we evolve from a glasses-only company to one that sells eye exams, contacts and eyeglasses. As a reminder, both active customers and average revenue per customer are measured on a trailing 12-month basis. Our growth in top line and average revenue per customer for the quarter was driven by a number of factors, including a consistent replenishment cycle of our core prescription glasses offering, as well as continued progress in growing our contact lens business, which while up 400 basis points compared with Q1, still only represented 7% of our business overall in Q1 '22. As a reminder, contact lenses account for 15% to 20% of sales of a typical optical retailer. As we mentioned on our fourth quarter earnings call in March, our Q1 2022 revenue and year-over-year growth rate reflects the impact of approximately $15 million in estimated lost sales due to the effect of Omicron on store traffic and the recovery time needed for consumers to re-book eye exams and return to stores to purchase glasses. This impact was most prominent within our stores where store traffic and productivity declined from above 90% in the weeks preceding…

Thank you. We will now start our Q&A session. [Operator Instructions]. And our first question comes from Oliver Chen at Cowen. Please go ahead. Your line is open.

Hi. Thank you very much. The productivity data is very helpful. What's assumed ahead in terms of productivity levels, and what do you think will be key drivers in achieving that, as well as key risk factors? Second question, you made a lot of progress within network customers. Just would love to hear about the opportunity ahead regarding insurance and what's happening in the consumer experience, and also the demand you're seeing from employees. Thank you.

Thanks, Oliver. I'll start. This is Neil. We see continued strength in retail productivity throughout the course of the year. One of the things that we are particularly excited about is the new stores that we opened in 2021 reaching maturity. So we opened 35 stores in 2021. That was an increase of store count by 28% in 2020, right in the depths of the pandemic where we only open seven stores or increased store count 6%. And the majority of those new stores that we've been opening are in suburban areas. So as we think about retail productivity, increasing rates, not only the U.S. consumer returning to normal habits and visiting shopping centers. But our store fleet has been shifting from urban to suburban. And one of the things that we shared during the last call was that we saw last year 15 point differential in retail productivity from our urban locations to our suburban locations. We've now seen that narrow to only an eight point spread. And we expect that to continue to narrow. But again, even if it doesn't, we now have more suburban locations than we did a year ago. So we continue to be optimistic and confident in growing retail productivity.

And then on the insurance front, we continue to believe that insurance remains a really big opportunity for us and within the world of vision insurance, that there are distinct opportunities for us to go after; the first is continuing to expand our in-network relationships, that we're excited to add Blue Cross Blue Shield, the federal employee program, and be able to serve federal government employees in better ways where -- that those consumers can now purchase exams, glasses, contacts for as little as $10 and join the consumers who have coverage from UnitedHealthcare, employees from large employ -- from GE and Boeing. And you will see us expand our in-network options for more and more companies, and employer groups in the coming months and years. We also believe that there is a really significant opportunity to educate consumers that they can use their vision insurance benefits with us regardless the plan, and that there often they will often be spending less coming to Warby Parker, paying out-of-pocket or using their out-of - network benefits then they would go on to use in network benefits somewhere else. And in a recent survey, we found out that most consumers are spending $130 out-of-pocket when they use their out-of-network benefits going to a non - Warby Parker provider. And those same people can often buy a single-vision glasses. From us where they would pay $0 out-of-pocket. And so in the coming months, you will see us really create a lot of education on our site and in our stores around how people can use those benefits.

Thank you. Thank you very much, David and Neil. Last question on the marketing spend. As we look ahead on the digital marketing landscape, it's been somewhat volatile with IDFA and privacy. What's your philosophy in terms of thinking about the marketing spend relative to productivity and also how -- what's you are seeing with the customer acquisition trends? Thank you.

Sure. thanks Oliver. We've seen relative consistency in terms of customer acquisition trends, and that's despite seeing continued scale in average revenue per customer. We continue to want to see a separation between those two numbers in average revenue per customer and average growth in customer acquisition costs. What we did call out earlier is that we elevated with intention throughout the pandemic, our marketing spend as a percent of revenue from 13% in 2019 to almost 20% in 2020 and 2021, and right around 20%, as a percent of revenue in Q1 of this year. As Neil called out, we opened up 35 new stores over the past 12 months, we'll open up 40 new stores this year. Stores for us are very, very efficient marketing vehicles, and what that will enable us to do, is toggle down the marketing spend as a percent of revenue, closer to pre-pandemic pandemic levels below the mid-single-digits and closer to that 13% that we were spending in 2019. And so I would characterize our marketing spend as very disciplined. And the way that we view marketing spend and store rollout is really in tandem with one another, as we know that stores are really, really efficient ways, not just to sell product and serve customers, but attracts new customers and retaining existing customers. And that shift in marketing spend also dovetails with our incremental profitability that we've talked about over the course of the year. As we talked about adjusted EBITDA, leverage were largely come from improvements in SG&A. And the largest portion of that is marketing spend, which would called out, we'll go from around 20% back toward pre-pandemic levels closer to 13%.

Oliver, I'll also add to that. As we mentioned, driven our last call as well. We have not seen big impact from IDFA or the Apple privacy updates because we deliberately, several years ago, reduced reliance on paid social channels for customer acquisition. And so whereas we hear from many other companies that that continues to be a challenge, that has not been a challenge for us. We've also historically seen that when we bring down marketing spend, we find that marketing efficiency increases. So that has potentials of tailwind for the rest of the year as well.

Very helpful. Thank you.

Thank you so much for your question. Our next question comes from Paul Lejuez at Citi. Please go ahead.

Hey, thanks guys. Could you give any more color in terms of your expectations for active customer growth for both 2Q and year versus how you're thinking about average spend per customer? Also curious if you're seeing anything in your business that you would describe as customers trading down within your assortment. Maybe not opting for certain additional features, anything along those lines. Thanks.

Sure. Thanks Paul. So we report on active customers at the end of each quarter and each year, but doesn't necessarily provide specific guidance each quarter. Aside from Q1 which was impacted by Omicron as we've discussed, our active customer growth has generally been in the low 20's with average revenue per customer somewhere in the 5% to 8% zone. So I would expect as our business normalizes and as our stores ramp back to productivity, that we would see that consistent trend continue.

The other thing is we have in observed customers trading down. One of our highest value products as our prescription is our Progressives offering, which starts at $295, whereas other high-end optical chains or independent optometric practices that same product would cost significantly more. So by coming to Warby, customers are saving $100. And again, as retail productivity increases, we expect and have seen Progressives penetration increase and that's highest price product, our highest margin product. The other thing that we've observed as well is the resilience of our consumer who has [Indiscernible] an income on average, over $100,000.

Thank you. Good luck, guys.

Thanks.

Thank you.

Thank you very much for your question. Our next question comes from Dana Telsey at Telsey Advisory Group. Please go ahead, your line is open.

Hi, can you hear me okay?

We can.

Can you talk a little about the improving productivity at the stores that you've seen? Has it thinned in different regions, was it consistent during the cadence for the quarter, how did you see it? And then on the gross margin component with Contacts and Progressives, how did you envision the cadence going forward given the improvement in the increases in contact lenses. And then just lastly, on insurance, what are you seeing on the insurance front? And how do you expect that to progress? Thank you.

Thanks, Dana. On the store front, again, we tend to see a differential between performance in our suburban locations and our urban locations. So last year from a retail productivity standpoint, urban stores had 15 point lower productivity than urban locations. However, if we look at Q1, that gap has narrowed to 11 points to nine points. The other thing that we remain confident about our retail store or rollout is that our new stores that we open in the last 12 plus months are performing in line with pre-pandemic targets. So our new stores continued to perform well again, those are proportionately more in suburban locations than historically we've had.

And Dana, as it relates to your gross margin question, as we called out, there are a range of puts and takes in our gross margin line and our COGS stack is fully loaded as intended. It includes frames, lenses, customer shipping, store occupancy, the depreciation of store build-outs and eye doctor salaries. And so I would look to see our gross margin consistent in the 58% to 60% zone. Generally, Q1 exhibits higher gross margin other than Q1 of this year due to the impact of Omicron and our ability to leverage fixed costs and Q4 is moderately our lowest quarter, given the fact that we make investments in the business. A lot of which are deferred as order deliveries into January, and that's recognized as revenue in the month of January. Contacts will certainly continue to have a deleveraging effect on our gross margin percentage. But given the subscription-like nature of that particular product, that product offering will amplify gross margin dollars, which is really what we want to continue to optimize the business for. So we're really reiterating our 58% to 60% gross margin guidance for the full year. There will be some fluctuations during the year, particularly in Q1 and Q4. And as you saw what happened in Q1 this year, given the impact of Omicron, we saw fixed costs become a larger portion of revenue, which added some deleverage to our story for Q1. But as store productivity comes back, those fixed costs will continue to be leveraged.

Would also just add that from a product mix standpoint, we tend to see a higher percentage of contacts mix from our online orders and a higher progressive mix from our store transactions; and so given the impact of Omicron and its particularly detrimental impact on store productivity, that balance between contacts and progressives, which had opposite impact on gross margin, is not the mix of transactions that we would expect in a typical quarter. And then on the insurance front, we're seeing really promising trends. In particular, for our customers who have a network coverage through plans that were part of where that cohort of customers is growing faster than our overall business. And so we're excited to be able to expand some of those efforts with this federal employee program and other employer groups that we are hopefully able to add soon.

Thank you so much for your questions, Dana. Our next question comes from Mark Altschwager at Baird & Co. Please go ahead. Your line is open.

Hi. Good morning. Thank you. So your revenue guidance -- your guidance assumes revenue acceleration through the year, which is different than the seasonality the company has seen historically and similar on the profitability guidance. Is this assumption based primarily on the assumed store productivity recovery following the Omicron wave, or what are the other controllable factors you see that gives you confidence in that sequential build in what continues to be a very dynamic external environment?

Sure, thanks Mark. At a high level, there are two building blocks to bear in mind as we think about scaling, growth and productivity over the course of the year. One, we called out a few times and you certainly mentioned and that's the ramp in retail productivity back to 100% by Q4. The other is really maintaining a consistent three-year CAGR for our e-commerce business in the mid-twenties. So e-commerce, our three-year CAGR payment at 24%. And as long as we see scaling retail productivity, and as long as we really maintain a consistent e-com three-year CAGR, we will be able to achieve our top-line guidance of 20% to 22% for the full year. I would look to see how we're reporting on those two key items in particular, each time we meet here to discuss.

Thank you and then Steve, with the direct listing, you provided some detail on customer level contribution. Can you update us on where that shook out in 2021, and what your guidance implies in terms of per customer contribution this year? Thank you.

Sure. So we provided a window into our customer economics, really meant as a one-time view in how we orient and manage the business as an omni-channel business, where we really look at blended margins by customer across channel, and we don't look at things through the lens of the channel, but through the lens of the customer. Costumer contribution margins have been consistent to what we've reported. We're not anticipating providing visibility into that metric on a regular quarterly basis, but I would look for us to provide some incremental visibility into our customer economics towards the end of the year, and perhaps as part of an annual recap of performance. But suffice it to say we've seen consistency in those numbers, we don't plan to report on them regularly, but on an annual basis are planning to provide an updated view into that number.

Great, thank you.

Thank you Mark for your question. Our next question comes from Brooke Roach at Goldman Sachs. Please go ahead.

Good morning and thank you so much for taking our question. I was wondering if you could provide some more color on the initiatives you have in place to continue to deliver consistent for year e-commerce CAGR? Have you seen any change in the customer activity among any demographic for your online business as the external macro-environment has changed? Thank you.

Thanks for your question. We haven't seen significant changes in the customer behavior online. What we have seen since the pandemic is increased use of our That's in class Virtual Try-On. As a reminder, this was feature that we built in-house that was food to scale. And we had to overcome a bunch of technical challenges to actually make it realistic. The ability to try on glasses virtually is quite different than, for example, trying a lipstick color or different face filters that you may see on various social channels. We've been excited by the adoption of this technology by our consumers. Similarly, we've seen a significant ramp up in usage of our virtual vision test, which was a first to the market, online vision test that enables our customers to renew their prescriptions.

Thank you. I'll pass it on.

Perfect. Thank you for your question. And our final question comes from Mark Mahaney at Evercore. Please go ahead.

Okay. Thanks. You talked about the store productivity gap between urban and suburban narrowing. You quantified that. Could you just go into the why? What's causing that gap, the suburban productivity levels to rise to urban levels. And then secondly, talk about the steps to get through your long-term margins of 20%. And maybe Steve what I'll ask you to do is -- what are the lowest hanging fruit and what are the highest hanging fruit in order to get there? What are the easiest ways to lever the model over the next couple of years? And then what will be the harder, the more challenging but doable parts of that leverage story? Thanks a lot.

Thanks Mark. First, one of the things that we're seeing in our urban locations is increased traffic. It's still hasn't fully returned, and we still see elevated conversion across the entire store fleet. But we think this is due to that or whether as people in cities are spending more time outdoors, but also as offices reopen. So that's where we're seeing certain improvements in our urban locations. Expect that to continue as the year progresses.

Great. And then in terms of the second question around margin expansion, as we march toward our long-term adjusted EBITDA target of 20%, we called out, that since gross margin will be consistent in the 58% to 60% zone, the real sources of our leverage are going to come from SG&A. So if COGS in aggregate is order magnitude, let's say 40%, the other 40% that we want to see is what SG&A represents as a percent of revenue. As we've talked about the three largest components of SG&A are salaries, and that's split between our corporate headquarters, our retail stores, our customer experience team, marketing spend, which includes our Home-Try-On program and what we deploy on media, and then just general corporate overhead, public company costs, what we pair vendors. I would put up the top of list, in terms of the single easiest lever to pull is marketing spend as a percent of revenue, as we called out in Q1, that represented 20% of revenue. Pre-pandemic, that number represented roughly 13% of revenue. That number was elevated to 20% for a few factors, one, through store closures, we saw a surging demand in our Home Try-On program, and we've seen that normalize somewhat, given stores are now reopening, getting back to full productivity. And in addition,

40 new stores this year, stores are highly, highly effective marketing. Maturation of stores in new and existing levels. So I would call out that as the easiest and investments we've made in our corporate overhead. The strong set of corporate functions across the board to support growth outlook for years to come. Being in corporate overhead and a smart way to support the business. We grow those costs will remain relatively fixed and continue to help us drive leverage on them. So that's how I would describe our sources of leverage and how to think about them in relative order in the context of our SG&A.

Okay. Thank you very much.

Thank you so much Mark for your question. At this time, there are no other questions. And now I'd like to pass back over to Dave for any final remarks.

Thank you all for joining us today and for the great questions we're very proud of what Team Warby has accomplished so far this year. And we look forward to the months ahead as we maintain both discipline and optimism while operating through a challenging period. We're incredibly excited about the opportunities that line front of us. And of course, we'll keep you informed of our progress as the year progresses. If you have any additional questions or follow-ups, please feel free to reach out to our Investor Relations inbox at investors@warby.com. Thank you.

Thank you everybody so much for joining today's conference call. You may now disconnect.