Thank you and good morning everyone. Here with me today are Neil Blumenthal, 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 November 10, 2022, and except as required by law, 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 most directly comparable 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 Neil to kick us off. Neil, please go ahead.

Welcome and thank you all for joining this morning to discuss Warby Parker’s third quarter 2022 results. I’m pleased to share that in the third quarter we achieved results moderately above the high end of our guidance range. Despite an increasingly difficult and uncertain macro environment we delivered net revenue of approximately $149 million an increase of 8.3% over the same period last year and nearly $3 million above the high end of our revised guidance. We believe this is because of our brand, our value proposition, our omni channel model that continues to resonate with consumers and drive incremental demand even as consumer’s wallets remain pressured. We ended the quarter with 2.26 million active customers, an increase of 5.1% versus last year as we continue to gain share of the $44 billion vision care market and the nearly 200 million adults in the U.S. using some form of vision correction. Equally important as we expand our product and service offering customers are spending more with us than ever. Average revenue per customer increased nearly 7% year-over-year, reaching a new high of $258 in the third quarter. From a channel perspective, we saw a slight uptick in our retail performance as the third quarter progressed. Store productivity as a percent of our 2019 base level was 82% for Q3, which was ahead of our projection, and we saw incremental monthly gains throughout the quarter exiting September with productivity at approximately 85% of 2019 levels. Our e-commerce growth moderated versus the first half of the year, but it's still up 19% on a three year CAGR basis. We view this positively given our intentional pullback and marketing spend, which was down 26% year-over-year, as well as the softness we've observed in the overall online eyewear market. The combination of a stronger…

Thanks, Neil. I'm excited to share the progress we made in Q3 against each of our long term strategic initiatives. The investments we have made over the last few years to expand our unique omni channel and holistic eye care offering are resulting in enhanced customer experiences and improved customer economics, which in turn, have positioned us to continue to take market share and set us up for future scale and profitability. By making our channels more accessible and by expanding our range of products and services, we are able to better serve both new and returning customers. Evidence of this is best reflected in our average revenue per customer, which as Neil mentioned increased to a record high $258 in Q3 up 7% year-over-year. Importantly, the primary driver of this increase was not due to price increases, but rather due to a higher percentage of customers purchasing multiple products. from customers opting in to higher price point offerings like progressive and annual supplies of contacts. We continue to believe that our unique value proposition will hold up well in a challenging economy, as consumers are more conscious about where to spend their dollars. Now we'll talk through each of our four primary growth strategy starting with scaling our omni channel presence. In Q3, we opened 13 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 the cohort of stores opened in 2021. The stores on average remain on track to pay back within our target of 20 months. We also…

Thanks, Neil and Dave. Good morning, everyone. We're pleased to report Q3 results ahead of expectations for both top line and bottom line, despite the difficult macroeconomic backdrop in which we continue to operate. We intend to stay laser focused on expense management and driving incremental profitability while making smart investments to strengthen the customer experience and support the long term growth of the business. I'd like to walk you through our Q3 2022 results starting with revenue. Revenue for the quarter came in at $148.8 million, up 8.3% year-over-year and above our guidance range of $143 million to $146 million. On a three year CAGR basis versus the third quarter of 2019, revenue increased 16.2%. At a high level we saw store [ph] productivity come in at 82% when compared to the same period in 2019 moderately above the high end of 80% we were projecting which we shared on our last earnings call. This was partially offset by our e-commerce three year CAGR coming in at 19%, which was moderately lower than the high case projection of 21% we provided on our Q2 call. We've finished the quarter with 2.26 million active customers, an increase of 5% versus the same period a year ago, and our average revenue per customer increased 7% year-over-year to $258. This continued scaling and average revenue per customer reflects our ability to provide more value to our customers as we continue to expand our product and service set. 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 an increase in orders from our active customer base, as well as an increase in average…

Thank you. Our first question today comes from Ed Yruma from Piper Sandler. Ed, your line is open. Please go ahead.

Hi, good morning. Thanks for taking the questions. I guess first, I actually happy to note that my 10-year old had her first eye exam and glasses that were being great experience. I guess just thinking about your model.

Amazing.

Thanks. First, on the PC model, help us understand the leverage points. Obviously, I know you've got a deleverage in the near term, just as you have, obviously continue to ramp but as you think about that longer term, I guess how does that change the economics of the box, both of the higher penetration of contacts and progressives? And then I guess as a follow up, I know you don't want to provide next year's guidance yet, but how should we think about some of the changes you've affected? And you've obviously given a different rhythm for adjusted EBITDA this year. Is the 4Q to 1Q going to be a fairly similar in a kind of progression, as we've seen in years past understanding that I know with Flex spending, that kind of maybe straddles both quarters. Thank you.

Thanks, Ed. So maybe we'll start with the last part of your question is that we do anticipate that some of the irregularities that we saw during the pandemic should hopefully be coming to a close, and that Q4 and Q1 and the rest of 2023 should revert to typical patterns where we do see accelerated spend, and customer behavior at the end of Q4, particularly those last days of December between Christmas and New Year's. And, as a reminder, we recognize revenue once customers receive their glasses. So orders placed in those final days of the year, it gets recognized as revenue in January. And we do anticipate that people will return to their sort of normal habits of lots of eye exams, as they are seeking other medical treatment right at the, at the beginning of the year. We did start to see a more normalized back-to-school behavior this year, which was promising. So we do anticipate next year, certainly quarter-by-quarter to be more in line with sort of pre pandemic behavior.

And, and just adding on to that we have a slide in our earnings slides in the back, which has an EBITDA, adjusted EBITDA reconciliation back to 2016. So you can have all of the back data to see the patterns of EBITDA that we saw pre pandemic. Most recently, I would look to the pattern that we saw in 2021 as a reference point, with good profitability the first three quarters of the year, and then lower profitability in Q4 as we spend into holiday and FSA demand will provide a lot more visibility on our Q4 call in March.

And into your first question about leverage in our model. Over the course of the last several months, we have been in an investment period as we convert more of our stores and doctors to the PC model, as we invest in our nascent contact lens business. And so we're adding to our exam and contacts, investments in a period where there is overall there are headwinds on demand in our category and they're signs of that across kind of all data points. And so as we start to see demand recover in the category as we start to see traffic overall, recover into our stores. The increased shopping behaviors spread across that store fleet will allow us to reignite the leverage that we have in the fixed nature, of some of our cost base.

Thank you.

Thank you. Our next question is from Oliver Chen from Cowen. Oliver, your line is open. Please go ahead.

Hi, there. This is Katie on for Oliver. Thanks so much for taking our question. And great, great quarter guys. I guess our first question is kind of on sort of what you're seeing in terms of customer health, is there any sort of promotional pressure, whether it's in the glasses segment or contact segment that you're seeing? And sort of how do you think that might translate into the holiday season? And sort of what are your expectations around there? And then our second question is more on how traffic progressed through the quarter? And does that correlate pretty well with the productivity? Or was it productivity, more hinging on the actual sales product and exams? Thank you.

Thanks for the questions. On the traffic front, we saw that progress in line with productivity. So we saw kind of moderate increases throughout the quarter, which was encouraging. And then, on the promotional front, we currently have two offers for our customers, but they're not really designed as blanket discounts on our products, but are really designed to encourage customers to purchase multiple products with us. And so the first is a $50 credit for customers who purchase an annual supply of contacts with us. And then they can use that credit to purchase a pair of prescription glasses. And as our contacts business is new, the percentage of our customers who are buying annual supplies is still relatively low. And so this is an opportunity for us to encourage people to increase their basket size. But also to think about cross shopping for glasses as well, we find that customers who buy contacts and glasses from us tend to be some of our most valuable customers. We also have an offer, add a pair and save where customers who purchase multiple prescription glasses from us get 15% off their order. Glasses are most of our customers have not thought about buying multiple pairs of prescription glasses in the past because they cost several hundred dollars at most other places. And so this is really designed for, for people to think about purchasing glasses and thinking of them as an accessory. This is an offer that we actually first introduced in 2020. And we found that customers who took advantage of that offer ended up then coming back and buying additional pairs more frequently since then. And so we're not attracting kind of bargain hunters who are just looking for the best deal and then not coming back to the brand. But we're finding that these types of offers are encouraging people to buy more products. And then those customers end up becoming more loyal and make more subsequent purchases. And going forward, we don't anticipate additional promotional activity through the holiday or the end of the year.

Thank you.

And just adding a few comments onto what Dave just described. In terms of retail productivity and some of the increases that we've seen quarter-over-quarter, so we exited Q2 at approximately 80% store productivity versus 2019 levels. We're now running at roughly 85%. And most of that increase is really driven by increased conversion and increased AOV as opposed to increase traffic at stores. And to provide a little bit of additional color what we've seen across our store bases has come up on a few earnings calls is just the difference in productivity levels we continue to see between suburban stores and urban stores. It's approximately running at a 10 point difference, where suburban stores are at roughly 90% of 2019 levels. And urban stores are at 80% of 2019 levels. So just wanted to round out with a few additional points of color that help understand what's happening as it relates to store productivity.

That's very helpful. Thank you.

Thank you. Our next question is from Paul Lejuez from CITI. Your line is open. Please go ahead.

Hey everyone this is Brandon Cheatham on for Paul. So I just kind of want to talk about kind of your active customer count. Seems like that's, somewhat plateaued despite, store openings. So I was wondering, how do you all think about, your active customer count versus store openings going forward? If it continues to lag your store opening cadence, like, would you consider pulling back on store openings, or rethink the speed at which you're opening stores?

Thanks for the question. What we see is we are operating in an environment where, for the first time and a very long time, the optical industry, right, it's not as predictable, and is based on the data that we're seeing is actually declining. So the fact that right, we're growing these, we're gaining market share, but in this environment, it has been more challenging to engage newer customers, right, as traffic to stores has been lower than typical. One of the things that we also did in Q3, right, is that we deliberately and intentionally pulled back marketing spend, given what we were seeing sort of in the industry. Now that resulted in lower COGS, right, our COGS are down 50%, from q1. And as we approach Q4, we do expect sort of marketing spend to normalize and the low double digits are similar to sort of pre pandemic levels. And we expect that to sort of accelerate customer growth. But in general, right, our stores continue to have high ROIC, we our, our new stores are in performing in line with older stores, and are paying back within 20 months. So as long as we're able to get that return on that capital, and also have for wall margins, or have our target of 35% plus, and then we'll continue to open up stores.

Got it. Thanks. And one follow up if I can, thanks for sharing, you have 60 million lives covered under insurance. What do you think the opportunity could be there? Is there any difference in shopping behavior between customers that are in network versus shopping you out in network? Thanks guys.

Yes, we continue to be excited about opportunities to make it even easier for people to use their existing insurance benefits with us, we will continue to add to that 16 million life total. We're also pursuing opportunities to directly integrate with out of network options so people can look up their eligibility and reimbursement. I had to making a purchase and making that as seamless as possible. In general, we, we haven't found major differences in kind of our insurance customers and non-insurance customers. As a reminder, our average median household income for our customer base is over $100,000. The majority of our customers do have vision insurance. Whether we're in network option, or not, tends not to be the primary driver of whether they're purchasing with us or not. And as we cited, people who have visited insurance and use those in network benefits, are spending over $220 out of pocket. So more than they'd spend out of pocket coming to us for similar products. And so we haven't seen insurance be a barrier to customer purchasing from us, but we're always looking to make things even easier for our customer base.

Appreciate it. Thanks. Good luck.

Thank you. In the interest of time, our last question today comes from Dana Telsey from Telsey Advisory Group. Dana, your line is open. Please go ahead.

Good morning, everyone. Nice to see the progress. Given last year's impact of Omicron at the end of the year, impacting the FSA spend. Can you expand on the opportunity to maximize the revenue this year from this end of year time period and potentially into January? Do you look at it more like it could be 2019, or is there anything we should be watching for that that you're doing? And also nice to see the update on the retail productivity, which is even increasing? How do you think of that balancing act of the online revenue versus the store the store revenue, and how you're planning going forward? Thank you.

Thanks, Dana. Yes, just on the on the first topic, we're certainly hope, hoping that this holiday season looks more like 2019. And then last year, and barring another pandemic surge or some unexpected event, we are expecting shopping trends, to look more similar to, to pre pandemic patterns. And then certainly what we've seen over the last couple years and given the depressed activity we saw last year, we are expecting kind of a nice, a nice bump on a on a yearly basis on that front.

And as we just think about retail productivity, it was sort of nice to see that expand throughout the quarter, right. We came into the quarter, about 80% of 2019 levels exited at 85% for sort of an average of 82%. So feel like we have strong momentum going into Q4. On the e-commerce front, we continue to sort of invest in sort of new phase features that delight customers, as they've mentioned. Right, we now offer virtual Try-on on our browser, we were the first to launch a true to scale, virtual Try-on. And we'll continue to sort of launch new features. In general, what we've observed market wide, is that sort of online glasses sales have been negatively impacted more than sort of bricks and mortar from an industry wide perspective. So we’re very satisfied with sort of e-commerce sort of performance for Warby Parker, and expect that sort of just to sort of grow from here going forward in 2023 and beyond.

And to support the demand that we expect to see in December and to help stoke that demand a little bit as we typically do. We do ramp marketing spend in Q4, and so in Q3 of this year marketing spend, as a percent of revenue came in at roughly 10%. And we've talked about seeing marketing spend as a percent of revenue, normalize in the low double digits. And I would expect us to see an elevated marketing spend within the range of 100 to 200 basis points, as we head into Q4 to make sure that we're doing everything we can to capture those holiday orders and FSA orders.

Right. And then just one just quick follow up. As you think about the number of new store openings and how you think about it for next year. Should we assume it will be similar to this year or do you see foresee any change?

It's safe to assume that will be similar to this year.

Thank you.

Thank you -- and for closing remarks.

Great. Thank you all for joining our call today. We look forward to keeping you posted on progress heading into the holiday season and year-end. Thanks again for participating and all of your thoughtful questions and we'll see you in March.

Thank you everyone for joining today's call. You may now disconnect your lines and have a lovely day.