Thank you, and good morning, everyone. Here with me today are Neil Blumenthal and Dave Gilboa, our Co-Founders and 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 the 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 SEC filings, including its annual report on Form 10-K, which will be filed later today. These forward-looking statements are based on information as of February 28, 2023, and except are required by law, we assume no obligation to publicity updates 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 the U.S. GAAP in reconciliation of these items to most directly comparable to U.S. GAAP measures can be found in this morning's press release on our slide deck available on our IR website. And with that, I'll pass over to Dave to kick off.

Welcome, everyone, and thank you for joining us this morning to discuss Warby Parkers Fourth Quarter and Full Year 2022 results. As we reflect back on our first full year as a public company, Neil and I feel a deep sense of gratitude in particular to our team for how they adjusted to the unique set of headwinds that 2022 presented. Team Warby's decisive actions last year enabled us to delight millions of customers, continue to take market share, and distribute millions of pairs of losses to people in need. We closed the year with a strong fourth quarter and believe the actions we took in 2022 have set us up for meaningful profitability improvement in 2023. But it was also a year where we learned many important lessons. One of our core values is learn, grow, repeat. We are driven by constant improvement, whether that comes from areas of strength that we can further leverage or from setbacks that we want to correct. In that sense, 2022 was a great teacher. When we set our forecast last year, we had just emerged from the acute impact of Omicron and assume that demand would recover along similar curves to prior pandemic waves. We managed our marketing and expense base accordingly and plan for accelerating growth and recovery in the optical industry. We underappreciated the unique demand tailwinds that we benefited from in 2021 and the confluence of headwinds we were about to face that would continue to disrupt the normally steady and predictable consumer behavior in our category. We subsequently made a series of adjustments in the middle of 2022, some of them difficult, which enabled us to operate in a more flexible and nimble manner and drive adjusted EBITDA improvement. A lesson for us is not that we should…

Thanks, Dave, and good morning, everyone. Our integrated omni-channel approach is unique in the optical industry, and we intend to leverage our inherent advantages to design and deliver remarkable and remarkably priced products, services, and experiences that help people see. Our commitment to delivering sustainable growth is unwavering, and we expect 2023 to instill confidence in our ability to execute and fulfill this promise. To do so, we'll focus on four strategic priorities. We'll continue to scale our omni-channel presence by meeting our customers where and how they want to shop. We plan to open another 40 new stores this year with a continued focus on suburban expansion. Of these stores, 36 will be in suburban markets and more than 10 markets will be new for us. The remaining four stores will be in urban centers, most notably in the New York market. In Q4, our suburban stores had a retail productivity versus 2019 that was 12 points higher than our urban locations. For these 40 new stores, we'll continue to target 35% 4-wall margins and paybacks within 20 months. We expect the productivity of our existing stores to improve from 2022 levels as traffic continues to rebound, and we drive further growth in average revenue per customer. We'll also continue to serve customers through our e-commerce channel and plan to drive innovation and enhancements throughout the year. While we're projecting e-commerce growth to be down in the first half of the year, we plan to return to e-commerce growth in H2. Second, we plan to further expand our core glasses business. Since launching Warby Parker in 2010, we've intentionally maintained our core $95 price point. Our simple, affordable pricing structure has been an integral part of our value proposition and continues to attract new customers. And while we'll continue…

Thank you, Neil. Jumping right in. Revenue for the fourth quarter came in above the high end of our guidance range at $146.5 million, up 10.2% year-over-year. This better-than-expected finish to the year brought 2022 revenue to $598.1 million, representing growth of 10.6% versus full year 2021 in a year marked by macroeconomic challenges that pressured industry demand. We're encouraged by our top line performance as well as our ability to increase average revenue per customer and adjusted EBITDA over the course of the year. From a customer perspective, we finished 2022 with 2.28 million active customers, an increase of 3.6% year-over-year and grew average revenue per customer from $246 to $263, representing an increase of 6.9% year-over-year. This increase in average revenue per customer was driven by a few factors, including an increase in Progressive as a percentage of our business mix and continued ramping of both contact lens and eye exam sales. Progressives represented 21.7% of total prescription glasses sold in Q4 2022, up from 20.1% when compared to the fourth quarter of 2021. This is still well below the market average of approximately 40%, leaving a substantial runway for product category growth. Progressives are also our highest gross margin and highest price point products starting at $295. On our Q3 earnings call in November, we called out that for Q4, we anticipated store productivity levels to be in the mid-80s versus the same period in 2019 and that we expected the 3-year CAGR for our e-commerce business to be in the high 'teens, consistent with trends observed at the end of Q3 2022. We're pleased to report that store productivity for Q4 came in moderately higher than anticipated at 88% of 2019 levels. This was above the 82% we achieved in the third quarter and also higher…

[Operator Instructions]. The first question we have today from the phone lines comes from Dana Tesley of Tesley Group. You may proceed.

Nice to see the progress. As you think about the first half and second half of the year that you mentioned, Steve, how do you think about the go forward? Is it going to continue to be in this type of balance with adjusted EBITDA? And then Dave and Neil, as you think about store openings and you opened the Union Square store right near my house, it looks like it's doing terrific. As you think about new store openings, markets that you're going in new versus existing markets? And how do you think of the return profile given the spend on new stores from what it had been in the past?

Thanks for the question, Dana. I'll take the first part and then we'll kick it over to Neil and Dave for the second part. In terms of your question as it relates to the cadence of adjusted EBITDA -- for this year, we believe that the cadence will look more similar to 2021 and to pre-pandemic years. So last year, due to some of the cost adjustments we made to the business, we generated the majority of our adjusted EBITDA in the second half of the year. That story will be different this year, where we expect to recognize more adjusted EBITDA in the first half of this year than in the second half of this year. So we're projecting strong profitability in Q1 and Q2, a little bit less so in Q3 and our lowest profitability quarter will be Q4, consistent with prior years where we spend into FSA demand and holiday buying. So that's how we would describe the shape of our adjusted EBITDA curve this year versus last year, with the main change really being due to the cost adjustments we made to the business in August, which really allowed us to generate incremental EBITDA. We saw adjusted EBITDA H1 go from approximately 2% to almost 7% in the second half of the year.

Dana, this is Neil. I'll touch a little bit on how we're allocating capital towards our store fleet, and we're going to open another 40 stores this year because we found that we're able to open these stores within sort of our targets of paybacks of less than 20 months and 4-wall margins of 35%. I'm so excited that you have a chance to visit our Union Square location. This is an example of a store that does high volume, has great metrics, but also sort of brand accretive, where we were able to get a corner location with exterior flag. And this is an example of a real estate strategy where, we look at the entire run of Lower Fifth, for example. And while there's slightly higher foot traffic, maybe three blocks further north, there's real significant differences in rent. So here at Real Estate Committee, we sort of make that trade-off and know that for our category, people are willing to walk that extra block, and this is a neighborhood store that has a very deliberate customer base. We continue to be very disciplined in our retail rollout this year. As we're opening, we'll continue to sort of fill in existing markets but open up a bunch of new markets and really focus a lot more on suburban locations. As we look at sort of Q4 and 2022, the delta between our suburban and urban locations was about 9 percentage points when we compare to retail productivity in 2019. We expect that to continue to narrow over time. But given our journey into retail was very focused on urban locations, we have lots of opportunity in suburban locations that will take advantage this year.

Got it. Just lastly, any update on contacts on Progressive and pricing, how you're thinking about it for 2023?

Yes. So we continue to see lots of strength in the contacts and progressive category. We noted that we saw north of 80% year-over-year growth in our contacts business and are really excited by the trends and the feedback that we're seeing there; both in converting existing Warby Parker customers who were contacts to enable them to buy those contacts from us and also in attracting new customers to Warby, where their first purchase is contacts. That is a product category that has a very different purchase dynamics than our glasses-only customers, and we're really encouraged to see not only strong repeat purchasing behavior from those contact customers but also to see a substantial portion of those customers then go on to purchase classes and also get exams from us. And we're finding that those holistic customers who buy glasses, get an exam and buy contacts from us, are not only more valuable with that first transaction. But over time, they become even more valuable. So one of the slides in our materials shows that after 12 months, they spend more than 2.2x as much as our glasses-only customers. And so we continue to be excited by that product category progresses. Similarly, we continue to increase the percentage of our overall prescription mix that was Progressives customers. This past year and expect that to continue as we roll out more stores, we tend to see a higher percentage of Progressives transactions in our retail stores versus online and are excited to be able to serve more of that demographic.

Thank you.

Your next question comes from Mark Altschwager from Baird.

So you're guiding to about a 15% sequential lift in sales for the first quarter. That's, I think, a bit below the seasonality from pre-COVID. It does look more like last year, but that's when you had the Omicron disruption through that key FSA period. So wondering if you could talk a bit more about what you saw in terms of customer engagement around that key FSA period this year, how that affected your approach. I think you called out some strong productivity numbers in February, if I heard that correctly. And then more broadly, has the expansion of the holistic offering and other initiatives affected the seasonality of the business versus what you've seen historically?

Mark, thanks for your question. It's a little early to see sort of impacts on seasonality, especially given sort of the disruptions over the last few years. We believe that we're entering a period where there should be sort of more consistency and more predictability, more similar to sort of years pre-pandemic, and that's exciting to us. That being said, when we look at projections by the Vision Council, they're projecting that the industry overall will be down approximately 0.6% in 2023. So we're approaching sort of our guidance with some cautiousness as we want to continue to grow under our philosophy of sustainable growth while expanding margin as well. But one of the nice things about building out our eye care business is that it does support increased predictability as we see eye exams scheduled in advance.

And we did see some strength in more predictable behavior around the FSA expiration to close the year, which was encouraging. But if we learned anything last year that we shouldn't read too much into short-term trends. And so we're proceeding with caution in the short term.

And Mark, the other factor to keep in mind -- the other factor to keep in mind as it relates to the sequential change year-over-year is just our rebalancing of marketing spend as a percent of revenue. So in the quarter, our marketing spend in Q4 is down approximately 40% year-over-year. When we report on Q1, we'll see a similar level of trend downward in marketing spend year-over-year, and that is having a direct impact on our e-com channel. And so that's what we're baking into our results as well.

And a quick follow-up on the product front. You're expanding the core collection and I was wondering if you could contextualize that a bit more. How many unique styles do you have today? Where do you expect that to go? You currently have that nice balance between the $95 price point and the higher price points. I'm curious how you expect that price mix to evolve as you expand the core.

So as you know, we're sort of known for that $95 price point and our general philosophy around pricing for frames and lenses is how can we deliver exceptional value -- so charge a fraction of what our competitors charge. And we find we're able to do that, whether it's at $95, $145, $175, $195. -- you'll continue to see sort of more of a distribution across those price points. We now have roughly 1,000 SKUs and continue to launch new collections. We anticipate launching 20 new collections this year. One of the nice things about having direct relationships with our customers is that we're not beholden to the fashion calendar. So, we're able to sort of launch collections when we think it will have the biggest impact on our customers. And similarly, having sort of central fulfillment across our two labs in Sloatsburg, New York and Las Vegas also enables us to be really thoughtful around inventory, given that we don't need to maintain large inventories in our optical shops for our customers to take away products like an apparel retailer. We'll continue to introduce newness. And when we think about newness, it's both new styles, but also new color ways and sort of the existing sort of beloved styles that we've created over the years and our merchandising and planning team is just focused every single day on the customer data that we have at our disposal, thanks to our direct-to-consumer model.

Thanks again.

Thank you. We now have Oliver Chen from Cowen.

Hi Neil, David and Steve. Nice quarter. Regarding the marketing spend, it's been remarkable in terms of the efficiency you've driven there. As we look forward, what are you seeing in terms of marketing effectiveness and performance marketing and things that you're monitoring as that interplays with what you're getting out of customer acquisition when you grow stores? A second question, you mentioned an opportunity to increase younger customers, would love you to elaborate on that and what you see ahead and why. And third question, on the product assortment, it sounds like you're offering a lot more value to the earlier question, what might happen with customer lifetime value and/or acquisition relative to retention.

Thanks, Oliver. And yes, we've been excited to see some of the efficiency gains that we've achieved on the marketing front. It's really coming from a few areas. So one is that as we pulled back on spend, we've allocated those dollars to the most efficient channels. And as a direct-to-consumer brand, we get immediate signals from our customers around what's working and what's not, and we can constantly optimize our tactics and strategies. The second is that media rates have declined. And so for the same dollars that we're spending for video ads or display or SEM we're reaching more customers for the same dollars. And then I think our team has just done a great job on the creative front with new interesting collections, new collaborations that generate a lot of excitement and ensure that we're finding efficiency as we're spending dollars to promote those new products and collabs. One recent example, which also fits in the vein of reaching younger customers. We just did a collab with the rapper A$AP Nast, that just generated lots of excitement amongst younger demos. I got a lot of great press and enabled us to amplify our messaging around that collection in a really capital-efficient way.

Thank you. We now have Alex Straton of Morgan Stanley.

I just wanted to get your input on kind of the divergence between the recent store growth. I think it's sitting at over 20% just versus the active customer growth and the revenue per customer sitting at about 4% and 7% and then total revenue, I think, at 11%. I'm trying to understand that gap and kind of how you guys are thinking about a potential path back to 20%.

Sure. Thank you for your question. The difference in terms of growth at the total company level of up 10% versus store growth of up 24% is really explained by growth at the channel level and channel mix. So if we were to double click into that 10.6% revenue growth, we have a business split that's approximately, at this point; 2/3 retail, 1/3 e-commerce, with our retail channel; up 25%, growing in line with store growth, while e-com revenue was down 6%, really in many ways, driven by the fact that over the course of the full year, we've dropped marketing spend by 15% in the most recent quarter by 40% year-over-year. So the way to understand the bridge between total company growth is if you look at the growth in both of our channels, retail growth, very healthy e-com growth under pressure directly related to our rebalancing of marketing spend in line with pre-pandemic levels. In terms of how we're thinking about that in terms of active customer growth, our active customers were up roughly 3.6% year-over-year and average revenue per customer up almost 7%. So more of our growth being driven by price appreciation versus customers. We expect to see that thematic trend continue this year, although we are projecting a moderate uptick in growth coming from active customers and a very consistent profile in terms of our year-over-year growth in terms of average revenue per customer. So I hope that helps kind of walk through how to bridge growth across channels and some commentary as it relates to how we're thinking about growth from active customers versus average revenue per customer.

Thanks, Alex. And just the other part of your question around how we get back to our longer-term growth targets. As we look at industry data, it's clear that the last year was an abnormal year for the optical industry. Vision counsel indicates that prescription glasses market declined, which is consistent with other market data that those transaction volumes declined across the category, and that comes on the heels of an abnormally strong 2021. So over time, we expect that these swings will become less extreme and the normally steady and predictable behavior in our category will return. Over time, that category growth will provide tailwinds instead of the headwinds that we've been experiencing over the last year. And we sell products and services that help people see and believe that these offerings will become more important than ever over time. Myopia is growing around the world. A recent study estimated that, on average, 30% of the world is currently myopic, but that's going to grow to 50% by 2050. And so we remain energized by our mission to provide vision for all and believe the foundation that we're building now to enable omni-channel holistic care will set us up for long-term growth and are expecting that at some period, this abnormal behavior we've seen in our category will abate, but we're not counting on that in terms of our guidance and our expectations for 2023.

Final question on the line comes from Paul Lejuez from Citi.

This is Brandon Cheatham on for Paul. I just wanted to dig in a little bit on the SG&A expense savings. I was wondering if you could quantify how much do you think the impact is to top line growth from our reduced marketing spend? And then any additional tweaks that you're thinking of making to marketing spend or other SG&A expenses in 2023.

Sure. There's certainly an impact to top line growth as it relates to marketing spend. It's tough to quantify with specific science dollar for dollar what that is. What we do know is this year, we dropped total marketing spend by 15%, but we still grew revenue by 10.6% year-over-year. And our focus is to really make sure that we're driving incremental profitability while we're bringing marketing spend back to pre-pandemic levels, closer to the low teens from where it had been at almost 20%. In terms of what we're seeing reflected in our customer acquisition costs, as Neil talked about previously, we've seen a nice deleverage or drop in our customer acquisition costs that's coincided with our drop in marketing spend and what we're focused on is making sure that we can continue to grow. But while we're growing, growing profitably and a big part of our incremental adjusted EBITDA story really is bringing marketing spend in line with pre-pandemic levels to that low-teens percentage basis.

Got it. Thank you, and good luck.

Thank you. I would like to turn it back to Dave for any final remarks.

Thank you all for listening in this morning and for the thoughtful questions. We continue to be excited about the opportunity in front of us and look forward to sharing progress against our strategic priorities on our next call.

Thank you all for joining. That does conclude today's call. You may now disconnect your lines, and have a lovely day.