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 the company's SEC filings, including the section titled Risk Factors in the company's latest annual report on Form 10-K. These forward-looking statements are based on information as of August 11, 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 a substitute for measures of financial performance prepared in accordance with U.S. GAAP. A reconciliation of these items to the nearest U.S. GAAP measure can be found in this morning's press release and our slide deck available on our IR website. And with that I'll pass it over to Dave to kick us off.

Welcome and thank you all for joining this morning. To start, we'd like to thank team Warby for their continued commitment to creating exceptional products and customer experiences that help people see. In Q2, we brought our corporate teams back to the office, and it's been overwhelmingly positive to collaborate in person after two plus years of remote work. Q2 was another quarter where Warby Parker delighted customers, gained market share and made strong progress against our core strategic growth initiatives. We delivered net revenue of $149.6 million in line with our guidance range and generated $5.9 million in adjusted EBITDA ahead of our guidance. But it was also a quarter where the normally steady and predictable shopping behavior in our category continue to deviate from historical trends. During our last earnings call in mid-May, we discussed the impact of Omicron on our business, which resulted in lost sales and a decline in retail productivity below 80% of 2019 levels in early Q1 before a steady recovery reached approximately 90% retail productivity levels in April. This positive trend extended into mid-May at the time of our last call, which led us to share optimism about a continued recovery like we had seen after previous COVID ways. However starting in the back half of May, we began to see a deterioration in retail productivity as well as headwinds for overall eyeglasses demand. We believe this weakness in demand is industry-wide driven by lingering pandemic effects, inflation and shift in how consumers are spending their money in time. While we are not immune from these macro factors, we remain confident that our brands, value proposition and delivery model continue to resonate with consumers. Our customers are spending more with us than ever, with average revenue per customer reaching a new high of…

Thanks, Dave. While we navigate the current lower growth environment with an even greater commitment to margin expansion, we plan to continue to strategically invest in four key growth initiatives. First, we're continuing to scale our omnichannel experience in open stores. In Q2, we opened nine new stores and remain on track to open 40 stores by year-end. Despite continuing to operate in an environment with lower retail traffic, our stores are generating $2.1 million in revenue on average on an annualized basis with four wall margins in line with our historical target of 35%. This performance is consistent across our fleet, including a cohort of stores opened in 2021. These newer stores, on average, continue to remain on track to pay back within our target of 20 months. Second, we continue to expand our core glasses business. We consistently design and introduce glasses that our customers love whether it's our Everywhere Series collection, which is our first collection priced at $175; or our new anti-fatigue lens, which customers can add to any optical frame for an additional $100. Progressive also continued to grow as a percent to total. As a reminder, Progressive are our highest price point and highest gross margin category. So as Progressive penetration increases, we expect to drive top line growth and gross margin expansion. Given these and other initiatives, we continue to see ASP and AOV rise without impacting customer demand. Third, we're building our Contacts business. Contacts continue to scale, growing more than 100% year-over-year from 3% of our business in Q2 2021 to 7% in Q2 2022. As a reminder, contact lenses typically account for 15% to 20% of the sales of an optical retailer. In our contact business fuels other areas of our business, 30% of contact customers who are new to…

Thanks, Neil and Dave. Good morning, everyone. Ahead of getting into detail for the quarter, I wanted to mention that we are pleased that our second quarter top line performance was in line with our expectations, and adjusted EBITDA was slightly ahead, especially as the market environment became increasingly challenging. As Neil and Dave noted, we have adopted a more conservative view on the remainder of the year to reflect the current macroeconomic conditions and recent trends in our business. I'll outline the specifics of our new outlook after reviewing second quarter results. Starting with revenue. The second quarter of 2022 came in at $149.6 million, up 13.7% versus the second quarter of 2021 and just below the midpoint of our guidance of about 13% to 15%. On a three year CAGR basis versus the second quarter of 2019, revenue increased 19.1%. We finished the quarter with 2.26 million active customers, an increase of 9% versus the same period a year ago, and our average revenue per customer increased 8% year-over-year to $25. This continued scaling in average revenue per customer reflects our ability to provide more value to our customers as we evolve from a glasses-only company into 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 is up 400 basis points compared with Q2 2021 still only represented 7% of our business in Q2 2022. We also saw continued scaling of our progressive lens product, which reached nearly…

[Operator Instructions] Our first question comes from Oliver Chen of Cowen. Oliver, please go ahead.

Hi, thank you very much. Regarding store productivity, how much of that may be attributable to lower marketing spend and how are you thinking about marketing spend in pulling back and how that's impacting your traffic? Would also love your thoughts on demand reacceleration and key factors there, the category is very durable, but we're just curious about what do you think happened this time and what do you look forward to in terms of key variables to see the acceleration in the future? Thank you.

First, thanks for your question. Oliver, we'll start with the demand question and when we look at data from the Vision Council for example when they survey glasses customers have they purchased in the last six months. We've seen that significantly depressed since the onset of the pandemic, I mean that has sort of not improved. One of the things that was different with Omicron surge was the timing of it right during FSA season in the big of the year when we see lots of folks get eye exams. So, we think that sort of impaired glasses purchasing through the first half of the year. And when we conduct surveys, we actually found some differences between younger customers and older customers and motivations for getting eye exams and what drives that behavior. So for example, the younger customer's convenience is incredibly important, older customer's eye health is more important. And frankly, it's been very inconvenient to get an eye exam during throughout the pandemic, but in particular in the first half of this year because of Omicron a lot of optometric practices and optical shops experience, temporary closures or doctors called out as they were sick as it happened across every industry and every workplace. And also we've heard anecdotally that optical shops and optometric practices have permanently closed during the pandemic, and there were some early retirements of optometrists. So, we believe that - there were folks that would have normally gotten eye exams that haven't that didn't necessarily buy glasses and will to your point. This is a durable category and people aren't going to go long periods without getting eye exams and buying glasses certainly not our customer that has a median household income over $100,000. And we've seen durability in our contact lens business as contact lenses are disposable product that, need to be replenished. And so, we expect that to continue to be quite durable.

Yes, thanks Oliver. And then with regard to your first question around store productivity and how much of that is impacted by marketing spend. In general, we tend to see that our e-commerce business is more highly correlated with marketing spend and performance marketing dollars. And that's why, we elevated our marketing spend as a percentage of revenue in 2020 in 2021 when a higher portion of our sales were being generated from e-com. And now that our mix shift is it looks more like it did in 2019 in terms of where orders are being placed in stores versus online. We do have confidence that our stores serve as billboards and don't need as much marketing support. And so while - we believe a portion of the demand slowdown. We've seen can certainly be attributable to us pulling back on marketing. We really did so in response to kind of softening, demand lower foot traffic - that started before that pullback.

Very helpful.

Sure, I was just going to say, Oliver. Just to contextualize the magnitude of the spend we talked about spending roughly 17% of marketing as a percent of revenue in H1 20% and dropping to 13.8%. The target really for the back half of the year is getting to that 12% level that we were at pre-pandemic. So we are normalizing back to a level that we observed pre-pandemic that we think matches the business mix.

Thank you very much and Steve. As a follow-up on occupancy and commercial salary, what should we know about the revenue growth to leverage those items in terms of how we should model that and the gross margin. Thank you very much.

Yes, for sure good question. So the color that we've given is roughly 40% of our COGS stack is fixed. And that fixed component is really made up of three pieces, the majority of which you just mentioned there's store occupancy, which is store rent, the depreciation of store build-outs there is optometric costs. And then there are the costs of our two optical labs, which we embed in cost of goods as well. Most of those costs come from optometrist salaries and store rents. As we think about scaling our optometric business we have 50 more stores, this quarter versus last quarter, where we have an employer like relationship with the OD, we either employ directly or through our PC Model. We're happy with the pace of growth that we're seeing. In our eye exam business, eye exams still represent 2% to 3% of our overall business. But from a dollar perspective that amount is up over 50% year-over-year. It takes time to ramp and eye exam practice and we've got a number of new both employed and PC eye doctors coming online. So while we anticipate this will continue to provide - deleverage from a gross margin perspective. In the near term and the long term, it will set us up to do two things one is to tap into the $6.5 billion eye exam market. And the second is, to better serve our customers. What we've observed is, a higher conversion rate from stores where we employed an eye doctor to customers and making a product purchase. And we've also seen an increased mix of products at those stores progressives and anti-fatigue lenses where input from an eye doctor is tremendously helpful to our customers purchase decision.

Thank you. Best regards.

Our next question comes from Mark Altschwager of Baird. Mark, please go ahead.

Thank you. Good morning, Neil, maybe just following up on your comments a moment ago on the drivers to the more depressed conditions. This year I mean, it does sound like some perhaps some temporary factors related to the pandemic and consumer behavior are not necessarily lower spending power lower intention to spend, so just curious there. If you think that sets up some pent-up demand at some point or maybe this is just reflective of the consumer pulling back a little bit more? And then - Steve, I think you said you expect adjusted EBITDA profitability next year. would you expect adjusted EBITDA growth and margin expansion? Or just maybe any more thoughts on how we should be thinking about the medium-term kind of growth and margin algorithm relative to the prior targets you've outlined?

Sure. Thanks. This is Neil. I'll take the first part of the question. Yes, what I think we've seen over the course of the first half of the year is that the beginning definitely had sort of depressed eye exams and behavior a lot due to Omicron and pandemic, but towards the back half of the first half of the year, we believe that some of the inflationary pressures and other sort of dips in consumer spending did impact the category. So when we spoke to you all last in mid-May, the trend was looking quite positive. April, we had 90% retail productivity compared to 2019. The first half of May was continuing that trend. And then we saw sort of dips. So we don't know how long this period will last. As we look at guidance for the rest of the year, the high end of the range, 10% assumes consistent retail productivity at 80%. The low end of the range of full year growth assumes 75% retail productivity, so a deterioration. And at this point, we felt that it was prudent to sort of look at our current trend and then look at if there continues to be a deterioration in the macro environment.

And what we've always known and what has become quite clear this year is that a portion of customer behavior and spending in this category is due to necessity and is acute in nature, but a portion is also discretionary from a temporal perspective, and we're seeing some of those discretionary purchases being delayed but we do remain confident that at some point, that demand will begin to flow back through the system. As Neil mentioned, we're really being conservative in our assumptions around when we might see that. And we're not counting on that pent-up demand to show up in our forecast.

And Mark, on your question as it relates to adjusted EBITDA margin profitability, I'll first talk a little bit about H1 versus H2 and then can provide a little bit of color as to how we're thinking about setting ourselves up for further incremental profitability. Next year, we'll provide more color and guidance on that at a future time. But in the context of adjusted EBITDA margin, as a reminder, we generated 2.2% adjusted EBITDA margins in the first half of this year, roughly 4% in Q2 and 0.5% or so in Q1. We are projecting 6.7% in adjusted EBITDA margin in the second half of the year. And that's really driven by a few factors, which we've talked about. One is a reduction in expenditures within SG&A. We've talked about the difficult decision we made to reduce headcount by 15%. And then we've taken a thorough look across our cost structure to understand what are more permanent changes we can make to our G&A spend in terms of renegotiating contracts with vendors, pulling back on consulting spend, adjusting policies related to T&E, taking a look at virtually every line that's embedded within SG&A. And those changes equate to roughly $8 million to $9 million in spend this year and roughly $15 million to $17 million in expenditures next year. So we have a high degree of confidence in the numbers that we put out there for H2. In terms of our incremental profitability algorithm, what we have talked about historically is adding 100 to 200 basis points of adjusted EBITDA margin improvement each year until we hit a 20% long-term target of 20% plus. If you take a look at the high end of our EBITDA guide, which is $19.5 million in H2 and assume what that average is across the quarters, it's roughly a 6.5% adjusted EBITDA margin in both quarters, there will be some variation. And so we are still refining our model, and we'll provide more transparency later in the year, but we would think about that 6.5% as the baseline off of which we're adding 100 to 200 basis points of profitability into 2013. And we feel like we're set up to do that based on the changes and adjustments we've made to the business.

Our next question comes from Edward Yruma of Piper Sandler. Edward, please go ahead.

Hi, good morning. Thanks for taking the questions guys. First, just a quick modeling question. the lower bounds of the revenue increase guidance, does that imply that the efficiency go below that 80% level you've observed? Or kind of help me understand the upper and lower bounds there. And then just as a bigger picture question, as you've seen, right, some of the softer productivity trend, how does that impact your view on kind of '23 and '24 from a store perspective? Are there tweaks you can make to the store footprint or size to maybe give you a higher-level efficiency out of the gate? Thank you.

Sure. I'll address the first part of the question. In terms of the lower range of our guidance, which is up 8% for the full year and implies back half growth of roughly 4% year-over-year per quarter. That assumes a decline in store productivity from 80%, which is where we are today, down to 75%. And so we baked in a full five point decline. And on the second part of the question, I'll hand that over to Neil.

So we continue to believe that it makes sense to open up stores and it's a good use of capital. Our stores irrespective of the cohort, right, the stores that we've been opening up recently, for example, continue to pay back within 20 months. So even at a depressed retail productivity. So 80% of 2019 levels is $2.1 million per store. We're still achieving our historical target of 35% four wall margins, so over $730,000 per store. We anticipate that we'll be able to grow that revenue per store over time. Given the macro environment, we don't know when that will be. But even at these levels, we believe that the store performance is strong, and we're going to continue to open up lots of stores going forward.

Maybe one other quick follow-up, if I may. You guys gave some great color on the gross margin impact of contacts and PC. I wanted to understand the other side of the coin. I know you've highlighted the opportunity in progressive. I know you even called out here that they were higher margin. How much of a lift was progressive to the business in the quarter and how much is baked in, in the back half? Thank you.

Sure. The color we've given as it relates to progressive is that they are certainly our highest gross margin product and a category where we continue to be significantly underpenetrated versus the rest of the market. So progressive for us in Q2 represented roughly 22% of our product mix up almost two points from Q2 of last year. In terms of the puts and takes in gross margin, we haven't broken out the specific gross margin percent impact from progressive beyond giving the color that we're underpenetrated and they are our highest margin products in terms of the deleverage that we've seen as it relates to the two categories that we've talked about a lot, contact lenses and the fixed portion of our COGS stack being occupancy and eye doctors. It's split roughly evenly between the two, and we've certainly seen an offset through selling higher-margin products like progressive. So that has certainly been a nice point of leverage to offset some of the margin deleverage.

Thank you.

Our next question comes from Brooke Roach of Goldman Sachs. Brooke, please go ahead.

Good morning and thank you so much for taking our question. Can you talk to the recent demand trends that you're seeing in your stores business with a little bit more detail, any split that you can provide between ticket traffic results that you're seeing in suburban versus urban locations? And then maybe as a follow-up, can you help us understand what store metrics are embedded in your second half outlook, given the increased benefits that you have from the PC model conversion, additional optometrists in the stores and higher price point collections and progressive that should be driving increased store mix? Thank you.

Sure. Thanks for asking the thoughtful question, Brooke. We'll talk a little bit about some of the differences that we're seeing from a productivity perspective across our store fleet. What we've talked about previously is productivity levels of urban versus suburban stores. And in the quarter, we saw a roughly 10-point spread in productivity between those two main types of stores of roughly 10 points of urban stores, 73-ish percent and suburban stores, 83% to 84%, and that's consistent with what we've described on prior calls where we've seen the spread anywhere from 7 to 10 points. So that is certainly one dimension that we talked about. Our suburban stores continue to have a higher productivity than our urban stores. We also have a newer suburban fleet as we got our start opening stores in urban areas in the early days. We are still seeing traffic more depressed to urban areas, driven by a number of macro factors, whether it's people having relocated to the suburbs or people spending less time in densely urban populated areas in office buildings. In terms of what we've seen store specific in regards to ticket and traffic, while we have seen lower traffic than we would like, certainly lower than the productivity number of 80% that we've published. We have seen an increase in two factors. One is an increase in conversion rate and a continued increase in AOV, which ends up bridging the gap we're seeing between traffic levels, which we haven't necessarily reported on other than indicating they're appreciably lower than our 80% productivity lever, but we're bridging that with higher conversion, given there's more intentional traffic and a higher AOV as customers are buying progressive and buying eye exams, contacts and glasses together.

Yes. And I would just also note that with the addition of eye doctors and the conversion to PC doctors, we have seen strong benefit. It's still early days in a number of those stores. But even within the first 30 days, we tend to see an increase in traffic, conversion, AOV and sales. And so we - while we're taking a cautious outlook, we do believe that these investments will benefit us both in the near term and will enable us to create a better experience for our customers and drive longer-term sales and profitability.

Thank you so much. I'll pass it on.

Our next question comes from Paul Lejuez of Citi. Paul, please go ahead.

Hi everyone. This is Brandon Cheatham on for Paul. Thanks for taking our questions. I wanted to dig in a little bit on active customers per store and thank you for providing that guidance. It's very helpful. But that indicates that active customers per store is about 18%. So I was wondering if you could maybe parse that out a little bit, what you're seeing there. Is it broad-based? Are your legacy stores performing similarly to new stores and new stores ramping a little bit slower? And then as you think about that going forward, should you - do you think that active customers should kind of grow in line with average store growth? Thanks.

Yes, for sure. I'll talk about some of the metrics that we continue to see at our stores in a few different ways. The first is just to reiterate that for the 141 stores that have been opened 12 months or more, this is a metric we talk about a lot Our four wall target margins are in line with the 35% target that we've consistently maintained over the years. In addition, our stores payback in 20 months or less. And we called out some of the activity we've seen from our most recent cohorts of new stores in 2020 and 2021, where all the stores we opened in 2020, 10 of them have paid back and 24 of the 35 we opened last year have paid back with the rest on track for that 20-month payback. As we think about active customers for the business, it's active customers, really which we blend across both our e-commerce channel and our stores. And so active customers we're up roughly 9% and revenue per customer up 8%, and that's a blend across both channels. We don't split that out and report on it separately and we'll continue to provide those as metrics just to help for modeling purposes, where we've certainly seen a lot of strength is in returning customers, both online and to stores. We included an updated view on our revenue retention, which is a slide in our earnings back that we posted to our website, which shows that for the cohort of customers that purchased the first half of 2021, we've retained 26% of their revenue in Q2 this year, which is actually the highest we've observed at this point in time from any of our cohorts that have purchased across our business. So we'll continue to provide transparency as it relates to active customers, active customer growth, average revenue per customer and average revenue per customer growth. We'll do that in the aggregate as opposed to at the channel level.

Our final question comes from Mark Mahaney of Evercore. Mark, please go ahead.

Okay, thanks. Two questions, please. In the slides, you talked about this relatively low brand awareness that you still have. It's roughly 15%. Just talk about long term, your thoughts. Just remind us what the trend has been like what was that brand awareness a year or two ago, maybe pandemic? And then where would you like it to go? And how do you get it higher? And then the second thing I want to ask is just, Steve, you just mentioned that cohort data. It was a wonderful disclosure. The one outlier in that cohort data is that class of 2019 on a 12-month basis or on a 24-month basis, I can't tell whether that's - well, it's a little odd. So just any thoughts on what happened. What was wrong with those people? I'm joking. But if you look at that cohort, why do they stick out in terms of their retention rate? Thanks.

Yes. So first, I can address the second question. That was really due to the pandemic effect in 2020 when most people were not thinking about getting exams or buying glasses. We have seen a rebound, as you can see in our most recent cohorts. And so that's really kind of specific more depressed numbers that you see are really specific to coincide with 2020 activity.

And on the awareness front, we continue to see awareness tick upward. Our marketing activities as well as store growth. We anticipate we'll continue to raise awareness significantly. I also believe that the new categories that we're expanding into at a meaningful rate, contacts and eye exams enable us to be perceived as a holistic vision care company and a one-stop shop and just leads to even further word of mouth. A lot of our growth over the last 12 years is driven by word of mouth because our customers recognize the exceptional value and the great experiences that they have. And we expect that to continue going forward.

Okay. Thank you very much.

I'll hand back for the closing remarks.

Thank you. All we want to thank you all for your questions today and spending time with us. This remains a challenging macro environment, but we're grateful for the leadership team and the entirety of Warby Parker that works tirelessly to make customers happy every single day. Thank you.

This concludes today's call. Thank you for joining. You may now disconnect your lines.