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.waybyparker.com. During this call and in our presentation we will be – will be making comments on 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 session titled, Risk Factors, the company's latest annual report on Form 10-K. These forward-looking statements are based on information as of May 9, 2023, and expect 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 US GAAP. A reconciliation of these items to the most direct comparable US GAAP measures can be found in this morning's press release and our slide deck available on our IR website. And with that I will pass it over to Neil to kick us off.

Welcome, and thank you all for joining this morning to discuss Warby Parkers’ first quarter 2023 results. 2023 is off to an encouraging start as many of the positive trends we experienced across our business late last year accelerated in the first quarter, driving operating results that surpassed expectations. Q1 revenue increased 12% to $172 million compared to our forecasted range for revenue growth between 7% to 9% and an acceleration in growth compared to the second half of 2022. Q1 results were built off of a strong December, which was highlighted by the return to a more normalized FSA shopping period late in the month. While the optical industry continues to face demand pressures and our growth has been impacted by our pullback in marketing spend, we are capturing market share gains through our focus on the customer experience, product innovation and store expansion. A combination of double-digit revenue growth, along with the actions we took midway through last year to right-size our corporate cost structure and a more efficient use of marketing dollars fueled significant leverage and a sizable improvement to adjusted EBITDA margins in the quarter. Q1 adjusted EBITDA of $17.7 million, represents a quarterly record for the company and was $17 million higher compared to last year and $2.7 million above our guidance range. By channel stores led the way, with average productivity reaching 103% of Q1 2022 levels. This solid performance helped offset expected softness in e-commerce demand compared with a year ago, as we are in the final stages of realigning marketing spend with pre-pandemic levels, a process that began in the second quarter of last year. We also opened six new stores in the first quarter including one new market. All six stores include eye exam capabilities, which brought the number of locations…

Good morning, everyone. As Neil just outlined, we are pleased with the positive financial results we delivered in Q1 in light of the current demand environment. While we have seen some positive consumer trends to start the year, we remain cautious with our forecast. The Vision Council is projecting the overall optical market to contract a little less than 1% in 2023 after only growing 0.5% in 2022. This compares to the industry's historical growth rate of 3% to 5% between 2011 to 2019. We are clearly outpacing the industry with revenue up double-digits in Q1 despite reducing marketing spend by 35% year-over-year. We believe our approach to balancing long-term strategic investments in the business with disciplined cost management, position the company to accelerate growth and continue to deliver enhanced profitability as market conditions normalize. Opening new stores and advancing our omnichannel presence remains a key focus. Two of main reasons consumers who are aware of Warby Parker have not purchased from us, it's because we don't have a store nearby and they can't get an eye exam. Stores remain capital efficient with compelling returns even in the current demand environment. New stores continue to pay back within 20 months and generate strong four-wall adjusted EBITDA margins in line with our target of 35%. And stores are integral to advancing our holistic EyeCare ecosystem through their eye exam capabilities. We find that exam stores drive higher sales to non-exam stores, while offering a more seamless experience for our customers and patients. Industry-wide nearly 80% of prescription glasses are purchased at the same location and eye exam takes place and our store channel represents the gateway to increase penetration of progressive lenses our highest ASP and highest margin products while attracting new and existing customers to our burgeoning contact offerings. We…

Thanks, Neil and Dave. Good morning, everyone. Starting with revenue, we generated revenue of $172 million, up 12.2% year-over-year and above the high end of our guidance range of $164 million to $167 million. Deferred revenue recognized in January from the strong FSA expiration period in late December combined with improving store performance contributed to our strong start to 2023. From a channel perspective retail revenue increased approximately 28%, while e-commerce revenue declined approximately 8% versus Q1 of 2022. For the first quarter, e-commerce represented 36% of our overall business compared to 44% in 2022 and in line with our pre-pandemic channel mix. The decline in e-commerce revenue was in line with our expectations and driven by an intentional reduction in marketing spend by 35% year-over-year, as we bring marketing spend as a percent of revenue back to pre-pandemic levels in the low teens. We expect e-commerce revenue to begin comping positive in H2 of this year as we anniversary the pullbacks we've made in marketing spend and begin to increase marketing spend dollars year-over-year. We finished Q1 2023 with 204 stores, an increase of 35 stores and an increase in our store count of approximately 21%, which compares favorably to retail revenue of about 28% year-over-year. Retail productivity in Q1 was 103% versus the same period last year. From a customer perspective, we finished the quarter with 2.29 million active customers an increase of 2.5% versus the same period a year ago, and our average revenue per customer increased 8.4% year-over-year to $270. It's worth noting that our revenue growth follows a similar pattern to our growth in active customers, where active customers are increasing in retail driven by new store openings and decreasing in our e-commerce channel as we rebalance marketing spend. We're pleased with our increase in…

[Operator Instructions] Our first question comes from Dana Telsey from Telsey Group. Dana, your line is now open.

Thank you. Good morning, everyone. And very nice to see the progress. When you're seeing the opportunity with contact lenses, the eye exams, Progressive, how do you see – when you gave the guidance Steve on the revenue firm for the year guidance for the second quarter, what percentage of the business do you expect Progressive and contacts to get to, given the improvement this quarter? And how do you see the impact on gross margin going forward? And lastly, with the improvement in growth rate above the industry growth rate, do you expect us to do more collaborations? How big a part of it was those the Jimmy Fallon that seemed to drive sales seem to drive sales and traffic? Thank you.

Sure. Hi, Dana, this is Steve. Thanks for the question. I'll take the first part of the question, and then we'll have Dave or Neil will respond to the second part of the question related to collaboration. As it relates to how we think about projecting contacts and Progressive for Q2, we haven't given specific guidance around projected business mix for specific product categories. We have reported on contact as a percent of our revenue, Progressive as a percent of our prescription glasses units. Eye care as a percent of revenue, after the fact so it's possible to understand what proportion and what growing proportion of our business these growth drivers account for, so it's possible to understand the growth rates and the percentages. We continue to see a very positive uptake both in contact lenses, eye exams, which are relatively newer products to us as well as from progressive lenses, which we've offered for quite some time but we're we've typically seen improvement on a year-over-year basis anywhere in the one to two percentage zone or one to two point zone. And so I would anticipate to see consistency in our business mix, as we continue to report on these numbers. And so we can provide color and amplify how excited we are about the strong runway for growth in all of these categories. Progressive account for 44%, so roughly 40% of the market and just 22% of our business, contact lenses likewise, a $17-plus billion market in a very small portion of our business, eye exams, a $12 billion-plus market and a very small portion of our business. So we remain excited about the tailwinds that from a growth perspective that will accrue to us across these product categories. And so that's the color that we would provide versus providing specific guidance in Q2 across these product categories.

And then on the collaboration front, you can expect to continue to see us do thoughtful and interesting collaborations that help elevate and energize the brand. We've always viewed Warby Parker as a lifestyle brand and being able to have our second collaboration with Jimmy Fallon. The first one was Spinnies, and then the second one was Flippies, these fun reversible sunglasses. And while they gained a lot of attention and drove the excitement, I wouldn't characterize it as one that has sort of a meaningful impact on our sales trajectory. That being said you'll continue to see us do things to activate and energize the brand. So this past quarter we also had a collaboration with A$AP Nast, who's a fashion icon and hip hop artist part of the A$AP group. We also had a really exciting spring 2023 launch. And we had a campaign that featured Christin Ricci and Henry Eikenberry and writer, Jeremy O'Hare. So you'll continue to see us do sort of really fun things to elevate the brand. We also launched a store in New York that we call the museum of the Blue-Footed Booby and it is right across the street from the museum of natural history on the upper west side here in Manhattan. The Blue-Footed Booby is sort of our unofficial mascot and it's been sort of a component of the brand and sort of you walk into the store and it's – we believe sort of the most fun optical store and eyewear store in the world to encourage everyone to come and check it out.

Thank you.

Yeah.

Thank you. Our next question comes from Oliver Chen from TD Cowen. Oliver, your line is now open.

Hi Neil, Dave and Steve, nice quarter, I wanted to know what were some of the aspects that led to the better-than-expected quarter also as we look at April and May, we're seeing a more cautious environment. I was curious about, what you expect within your guidance for store productivity and some assumptions there. Second question on the optical market, more broadly. What do you think might be the catalyst for reacceleration back to long-term trends? And last and third question, active customer growth. Just given the lapping of the marketing spend, do you expect it to still be low single-digit growth and then, reaccelerate after that in the back half? Thanks a lot.

Sure. Thanks Oliver. I'll take the first part of the question. In terms of our performance above expectations in the first quarter it was largely driven by retail productivity coming in moderately higher than we projected. And we were able to maintain e-comm declines relatively in line with expectations, despite the fact that we pulled back on marketing spend by 35% plus year-over-year. I would point to those as the drivers. We also saw a nice increase in active revenue per customer, up over 8% year-over-year which has been part of our growth story for quite some time. We provide new products, additional products and services to customers which are either introduced at a larger price or there's a bundling effect where a customer gets an eye exam buys contact lenses and glasses from us which -- all of which elevate AOV. As it relates to store activity, store productivity trends that we've seen quarter-to-date, the number that we gave as part of our prepared remarks is quarter-to-date we've seen store productivity versus the same period last year in the range of 99% to 102%. As a reminder, on our Q2 earnings call, we called out the fact that, April we saw store productivity as we were covered out of Omicron approach almost 90%. So we view April as one of our tougher retail comps from last year. And so, we wanted to give color what we're seeing over the course of the quarter, as we're starting to lap that strong April into early May comp. And the numbers we're seeing there again have ranged from 99% to 102% and that range that is informing our guidance for Q2.

And thanks, Oliver. Just to get your second question about, the industry data. And what's going to provide catalysts. As we look at the category data, it's clear that last year was a really, abnormal year for the optical industry and those trends have largely continued into 2023. So we have seen some times of more regular consumer behavior in the category, FSA spending this past year was a bit more in line with expectations and maybe a sign of more expected consumer behavior in the category. We've also seen higher utilization of vision insurance benefits. But if we learned anything over the last couple of years it's not to place too much weight on a short-term trend. That said we do expect that, consumers in our category can't delay exams or glasses purchases indefinitely. And we expect that many people who got exams and bought glasses in 2021, when there was a lot of activity in the category will cycle back at some point in the future. On average, people prior to the pandemic bought a new pair of glasses every 2.2 years. And we have seen kind of muted activity in the category for well over a year now. So we're not counting on a major rebound this year. And that's certainly not what Vision Council is projecting, but we are confident in the resilience and the durability of our category and do expect to disproportionately benefit when some of the industry headwinds turn tailwinds. And as that relates to kind of active customer growth this year, we are maintaining a fairly cautious outlook, until we see signs of a major rebound. And I believe that kind of level of caution is reflected in our guidance for Q2 and for the rest of the year.

And just to add a little, Oliver, this is Neil. On the active customer growth, right, this is not where we've been historically or where we expect to be in the future. We are seeing more strength in our retail channel, retail revenue up 28% year-over-year off of an increase in store count of 21% with our e-commerce channel down 8%, which we think is quite strong given everything that's been happening both across e-commerce, across all categories in U.S. retail right as there's been a sort of real adjustment and alignment from the highs of 2020 that seems to continue through most categories as you probably know better than me. I mean, in particular if you look at optical if you look at the Vision Council data, they projected last year that the eyewear market -- the online eyewear market contract is 17% from a sales perspective and 26% from a units perspective. So we believe that we continue to outperform right from both channel perspective. And then given that our marketing spend our demand creation spend is down 35% this quarter, but we'll end up comping positive on the back half of the year. We should see active customer growth and our e-commerce channel sort of accelerate in the back half of the year.

Very helpful. Nice job on that. Best regards.

Thank you.

Thank you. We have our next question comes from Edward Yruma from Piper Sandler. Edward.

Hey, good morning guys. Thanks for taking the question. I guess, first, I know on the last call you announced that you're going to have some higher price point more premium frames. I noticed you've started to roll some of those out. I guess kind of any early impressions from a sales perspective and maybe more importantly given all the moving pieces in the gross margin line kind of any context as to how much some of these higher price point frames may have helped gross margin? And then I guess second on the e-comm environment, I know you guys have obviously deliberately pulled back marketing spend, but kind of how would you assess the competitive environment particularly for kind of the value price point frames? Thanks.

Thanks so much for your question. On some of our higher price point frames and lens options, we've seen a nice uptick. I mean, it's one of the reasons why we're confident in our full year gross margin guidance. As you know there are some puts and takes as contacts and exams sort of increase. But similarly we continue to drive eyewear sales and higher sort of ASPs for those products, which tend to have higher margins as well.

And then on the question around the e-comm environment. As Neil mentioned, as we look at category data, there has been a real shift from the pandemic is e-commerce shopping in the category back into stores. And if anything we believe that our e-comm business is holding up pretty well against the kind of other sites that are selling glasses online. There certainly are places where consumers can shop for the lower price frames. That's always been the case, but we believe that the quality and the customer experience and the omni-channel offering that we have is unparalleled in the category and we really haven't seen a competitive impact from those other sites.

Thank you.

We have our next question comes from Brooke Roach from Goldman Sachs. Brooke, your line is now open.

Good morning and thank you for taking our question. As you begin to cycle the profit improvement initiatives from last year, can you speak to the opportunity to improve adjusted EBITDA margin in the back half of the year and then into early 2024? Do we need to see a reacceleration in top line growth to the long-term algorithm to get back to the pace of 100 to 200 basis points of margin expansion per year, now that these initiatives are in the rearview mirror? Thank you.

Hi Brooke, this is Steve. Thank you for your question. In terms of the first part of the question, we anticipate the pattern of adjusted EBITDA this year to look more similar to previous years. So last year, we generated the majority of our adjusted EBITDA in the back half of the year in H2 directly attributable to the cost reductions we made to our corporate cost structure built on top of some of the pullback in marketing spend that we began really in the April, May time frame. As we think about this year, the color that we've given is that we'll generate the majority of our adjusted EBITDA in H1 versus H2, but we plan to be profitable every quarter this year, as we add incremental adjusted EBITDA margin this year versus last year to certainly be in line with our guide of 7.9% adjusted EBITDA margins up from the mid-4s last year. As it relates to continuing to drive adjusted EBITDA margin improvement, we'd certainly like to see top line get back to that 20% growth level. We're confident we'll get back there at some point it's unclear when that will actually be. But regardless of the time frame for that, we are committed to maintain our ability to add an incremental 100 to 200 basis points of adjusted EBITDA margin improvement every year. So, I would expect to see that continue beyond this year.

Thanks, Steve. And if I could just ask one follow-up. Can you provide some more context on the insurance initiatives that you're implementing in this quarter? What revenue benefit are you anticipating as a result of that? And how will that help the out-of-network insurance patients shop at Warby Parker? Thank you.

Sure. Brooke, we're focused on both growing our managed Vision Care direct integrations and enabling broader usage of insurance benefits, whether we're in or out of network. And we find that, as we expand our retail footprint and our network of eye doctors we become a more attractive partner, both to insurance carriers and large employers. Last year, we expanded the number of consumers who can use Warby Parker through their in-network insurance by 30% and we have a pipeline of additional integrations that will go live this year that we'll be able to speak to in subsequent calls. And then, we're also focused on making it easier for consumers, who are out of network to still use their benefits with us and have been piloting some direct out-of-network integrations that enable customers to only pay their net out-of-pocket costs at checkout and also a simpler eligibility check for customers to understand their benefits. And so we do find that our customers who use insurance, we tend to see a higher percentage of new customers that are using their insurance benefits with us. And so, it's a way to both attract new people to Warby Parker and then also enable customers who are already shopping with us to get even more value. And so, we are excited by some of the initiatives that we have in place and really to speak to the impact that those are having later this year.

Thank you, very much. I’ll pass it on.

Thank you. Our next question comes from Mark Altschwager from Baird. Mark, your line is now.

Great. Good morning. Thanks for taking my question. A couple of quick ones for me. First, Steve, you outlined a number of the puts and takes on gross margin. I guess, do you see any of the factors that impacted the gross margin this quarter changing materially as we progress through the year, or is this roughly 55% range a good run rate to think about short to medium term?

So, the guidance that we've given for full year gross margin is to be in the mid-50s. And I think from a modeling perspective, it would be safe to assume relative consistency across quarters going forward. There are various puts and takes which can always change the picture, i.e. the acceleration of contact lens sales, the acceleration of eye exam sales. We are experimenting with a couple of offers that Neil referenced, which involve incenting people to bundle purchases to view the purchase of eyeglasses more as a fashion accessory versus a medical device depending on the degree to which we see consumer adoption that could affect the picture. We are also continuing to add capacity to our optical lab network, which we're very excited about as it relates to the gross margin improvement that in-sourcing versus outsourcing brings to our overall cost structure. And so we might see some continued leverage there over the course of the year. But absent any one of those items providing meaningful inflection points, I think it would be a safe assumption to view gross margin as consistent with the number that we reported this quarter so in the low 50s -- in the mid-50s.

Very helpful. Thank you. And then just one other point of clarification. I believe you opened six stores this quarter but it looks like that was 4% on a net basis. I guess if I have that right could you give us some additional color on the two stores that you closed in the quarter? And just more generally targeting 40 for the year, is that gross versus net? And I think it does imply a pretty healthy acceleration in the pace of openings over the course of the year. So, just any more color on your plans there would be helpful. Thank you.

Sure. Thanks so much for the question. The 40 new stores is on a gross basis. The two stores that we closed this quarter are very much sort of in line with our real estate strategy and frankly, our philosophy on bricks-and-mortar in general. One of the stores that closed the lease ended and we didn't renew because the rent was going to increase really substantially. This was an experimental store that was a short-term lease in which the landlord covered the build-out and we were on a percentage rent deal so it was an experiment, which we often do. And for us we view that as sort of low-risk low-capital investment with potential for very high rewards and it stayed off in a lot of places. In this case, it didn't make sense to continue. The other store that we closed the landlord was in violation of the lease namely that there was some water and flooding damage that wasn't going to be repaired in a timely manner. But in general, our retail rollout continues to proceed on plan. And we opened 40 stores last year. We'll open 40 this year. Store cohort performance continues to be consistent and in line with our target 35% four-wall of margins and 20-month payback.

Thanks again.

Thank you. We have our last question from Mark Mahaney from Evercore. Mark, your line is now open.

I'm sorry, can you hear me? Hello.

Now, we can hear you.

Two questions please. And in the overall environment of super low unemployment levels or record lows, could you just talk about any challenges you've had in terms of being able to hire for the stores both for the general people within the store and for the eye exam specialists? And then secondly, the rolling out of eye exam capability seems to be such a great unlock for your business in terms of revenue productivity and in terms of gross margins. As you've done more and more of this have you figured out learnings that have allowed you to accelerate the build-out either the retrofit or the rollout of eye exam capabilities within stores? thank you.

Thanks so much for the questions. So, one of the things that we pride ourselves on is the work environment at Warby Parker and invest a lot in our employer brand. We found that we continue to be able to attract and retain great talent. And we've actually seen sort of attrition decline across the company more recently. So even though we're in this super low unemployment environment, we are able to staff every part of our business from corporate to our manufacturing facilities to our stores where this low unemployment environment actually impacts us most is that sometimes our next door neighbors in shopping centers may be poorly staffed and sometimes need to close early. And then we think that that impacts overall traffic to a shopping center for example. But we're seeing that a little bit less than we did sort of last year and the year before. We agree that the opportunity to continue to expand our EyeCare business is really exciting. All of our new stores, we tend to build at least one exam suite, if not additional rooms for contact lens insertion and removal training or areas for retinal imaging. And similarly, we continue to sort of go back to some of our existing fleet and see how we can retrofit at exam. So for an example this past weekend I was down in Miami and was visiting our Wynwood store and that was a store that we recently added an eye exam and our doctor. Dr. Tina Thomas there was fantastic out there before the store opened and the 10 a.m. sort of patient also arrived right before the store opened. And it was just a great example of how we can leverage this eye exam offering to help drive additional business to our existing stores.

It also dovetails with some of the commentary that we've given as it relates to gross margin for stores where we offer eye exams versus non-eye exams we do see some differences in product mix which are margin accretive. So stores that have eye exams have a higher mix of progressive glasses which are our highest starting price point and highest gross margin products. There's also a higher penetration of photochromic lenses which we charge more for those are the lenses that go from black to dark in the sun and there's also a higher penetration of Blue Light lenses which help protect the eyes at certain times of the day. And so in addition to being able to serve the customer and capture the order because there's a high conversion rate from getting an exam to actually making a product purchase. If you look at the basket of what customers actually purchased there are elements which are quite higher margin and would call out progressive so the chronic and Blue Light three examples of that effect.

Okay. Thank you, Steve.

Thanks, Mark.

Thank you, I will now hand the floor back to the management team for closing remarks.

Just want to thank you all for participating this morning and look forward to speaking with you all on our next earnings call. Thanks so much.

Thank you. Ladies and gentlemen, this concludes today's call. Thank you for joining. You may now disconnect your lines.