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Warby Parker Inc. (WRBY)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 revenue and profitability exceeded internal expectations: revenue came in above the high end of guidance at $190.6M (+17.8% y/y), with adjusted EBITDA of $13.8M (7.3% margin); active customers and ARPC continued to improve, and gross margin expanded y/y on richer lens/frame mix and lower shipping costs .
  • 2025 outlook targets 14–16% revenue growth ($878–$893M) and 11% adjusted EBITDA margin ($97M) alongside 45 store openings (including 5 Target shop‑in‑shops), positioning WRBY for continued share gains and margin expansion (management reiterates 100–200 bps annual EBITDA margin expansion as a multiyear framework) .
  • Mix headwinds from contacts and exams (lower % margins, accretive to gross profit dollars) and higher optometrist staffing continued; sequential adjusted EBITDA margin stepped down vs Q3 as WRBY leaned into marketing (12.9% of revenue in Q4) to capture strong demand into year‑end/JAN .
  • Strategic catalysts: Target partnership (incremental and complementary to omnichannel strategy), continued insurance penetration (Versant Health) driving higher‑value new customers, and rollout of AI‑powered digital experiences expected to lift e‑commerce conversion in 2025 .

What Went Well and What Went Wrong

  • What Went Well

    • Revenue ran above guidance with the strongest y/y Q4 revenue growth since 2021; retail +23.9% y/y and e‑commerce +5.3% y/y, reflecting effective marketing and store expansion .
    • Gross margin improved y/y to 54.1% on higher‑margin frames/lenses, lower outbound shipping costs, and efficiencies in owned labs; adjusted gross margin 54.2% .
    • Active customers +7.8% (2.51M) and ARPC +6.8% ($307) TTM; contacts +30% and exams +45% in Q4; free cash flow positive FY ($34.7M) and cash balance $254M .

  • What Went Wrong

    • Sequential margin compression: adjusted EBITDA margin fell to 7.3% (vs 9.0% in Q3) as WRBY reinvested revenue upside in customer acquisition and carried mix headwinds from contacts/exams .
    • Gross margin mix headwinds persisted (contacts/exams lower % margin), and optometrist staffing delevered near‑term; 2025 also contemplates a 20–40 bps tariff GM headwind despite diversified sourcing (China ~20% of COGS) .
    • GAAP remains in loss (Q4 net loss $6.9M; EPS -$0.06), though significantly improved y/y; SG&A still elevated at 59.0% of revenue despite adjusted leverage .

Financial Results

MetricQ4 2023Q3 2024Q4 2024
Revenue ($M)$161.9 $192.4 $190.6
GAAP Net Loss ($M)$(19.0) $(4.1) $(6.9)
Diluted EPS ($)$(0.16) $(0.03) $(0.06)
Gross Margin (%)53.8% 54.5% 54.1%
Adjusted EBITDA ($M)$9.4 $17.3 $13.8
Adjusted EBITDA Margin (%)5.8% 9.0% 7.3%

Notes:

  • Q4 revenue exceeded the high end of management guidance .
  • Mix remained favorable for glasses; contacts/exams grew faster but carry lower % margins .

Channel performance (y/y):

MetricQ2 2024Q3 2024Q4 2024
Retail revenue growth y/y+17.8% +20% +23.9%
E‑commerce revenue growth y/y+4.4% +1% +5.3%

KPIs and mix:

KPIPeriodValue
Active Customers (TTM)FY 20242.51M (+7.8% y/y)
Average Revenue per Customer (TTM)FY 2024$307 (+6.8% y/y)
Stores (end of period)FY 2024276 (+41 opens in 2024)
Stores with Eye ExamsFY 2024236 (vs 194 in 2023)
Retail Mix of RevenueFY 202470% (up ~360 bps y/y)
Contacts as % of businessQ4 202410.5% (vs 9.5% Q4’23)
Eye Exams as % of revenueFY 2024~5%
Retail productivity (per store)Q4 2024102.1% y/y; 101.4% FY

Estimates vs Actuals:

  • S&P Global consensus estimates could not be retrieved at this time due to provider rate limits; therefore, versus‑consensus comparisons are unavailable. Values would ordinarily be retrieved from S&P Global.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net RevenueFY 2025N/A$878–$893M (+14–16% y/y) New
Adjusted EBITDAFY 2025N/A~$97M (~11% margin) New
Gross MarginFY 2025N/AMid‑50s % (incl. 20–40 bps tariff headwind) New (color)
New Store OpeningsFY 2025N/A45 (incl. 5 Target shop‑in‑shops) New
Marketing SpendFY 2025N/ALow‑teens % of revenue (framework) New (framework)
RevenueQ1 2025N/A$223.5–$225.5M (+12–13% y/y; +13–14% ex‑leap‑year/$2M deferral comp) New
Adjusted EBITDAQ1 2025N/A$27–$28M (~12% margin) New

Earnings Call Themes & Trends

TopicQ2 2024 (Prev‑2)Q3 2024 (Prev‑1)Q4 2024 (Current)Trend
AI/personalization & VTOLaunched “glasses eraser” + AI styling in iOS app E‑comm velocity improving; personalization focus AI‑powered recommendation engine rolling out in months; 75% of iOS users engage with VTO Scaling AI features to lift conversion
Supply chain/tariffs—China ~20% of COGS; diversification underway 2025 GM headwind 20–40 bps from tariffs; continued sourcing diversification Managing exposure; modest planned headwind
Insurance (Versant/MetLife)Integration expected before busy period Integration largely complete, millions in‑network Utilization tracking in line/slightly ahead; higher % new customers Multiyear tailwind building
Product mix/progressivesProgressives 23% of Rx glasses ~22% of Rx glasses ~22% of Rx glasses (2024) Stable; room to increase penetration
E‑commerce/store densityHighest e‑comm growth in mature markets Omni halo; mid‑single digit e‑comm SOV growth Store density boosts e‑comm; local marketing aids traffic Positive halo strengthening
Holistic vision careContacts +45% to >10% rev; exams +40% to ~5% Contacts ~35% to ~11%; exams ~40% to >5% Contacts +30% Q4; exams +45% Q4; ~5% FY mix Scaling; GM% headwind, GM$ accretive
Retail expansion256 stores 269 stores 276 stores; 2025 plan: 45 more + Target Accelerating expansion

Management Commentary

  • “Our strong 2024 results highlight… accelerating revenue growth, customer growth and glasses growth… while maintaining operational discipline and expanding profitability.” – Co‑CEO Dave Gilboa .
  • “We plan to… scale our insurance business, introduce products that offer unbeatable value and deliver exceptional customer experiences.” – Co‑CEO Dave Gilboa .
  • “We are set to open more stores than ever before with plans for 45 new locations, including… 5 shop‑in‑shops [at Target]… incremental and complementary to our broader omnichannel strategy.” – Co‑CEO Neil Blumenthal .
  • “We remain committed to expanding our adjusted EBITDA margin by approximately 150 basis points this year… and plan to preserve flexibility to either allow incremental revenue to flow through or reinvest.” – CFO Steve Miller (2025 plan) .
  • “A key priority will be introducing the next era of our digital experience that leads with AI and personalization… rolling out in a few months.” – Co‑CEO Neil Blumenthal .

Q&A Highlights

  • Growth algorithm shifting to more customer‑led growth in 2025; Q4 marked the sixth straight quarter of accelerating active customer growth .
  • Versant Health: early utilization trends tracking in line/slightly ahead of prior integrations; viewed as a multiyear customer acquisition and ARPC tailwind .
  • Target partnership: 5 shop‑in‑shops in 2H25; negligible 2025 P&L contribution (test phase); same assortment/pricing, staffed by WRBY employees; strategic for awareness and access .
  • New stores: consistent format/unit economics (35% 4‑wall margins, ~20‑month paybacks); skew suburban and densification of existing markets .
  • SG&A leverage: management confident in sustaining 100–200 bps annual adjusted EBITDA margin expansion via non‑marketing SG&A efficiencies; marketing to remain low‑teens of revenue .
  • Smart glasses: WRBY positioning to partner/participate as AI utility and hardware mature, leveraging brand, prescription supply chain, and omnichannel distribution .

Estimates Context

  • Wall Street consensus (S&P Global) for Q4 2024 EPS/revenue could not be retrieved due to provider rate limits at the time of analysis; accordingly, beat/miss versus consensus is unavailable. We will update versus‑consensus comparisons upon successful retrieval from S&P Global.

Key Takeaways for Investors

  • Momentum intact: Q4 revenue above guidance, accelerating store‑led and insurance‑supported customer growth, and continued y/y gross margin expansion despite mix headwinds .
  • 2025 setup constructive: +14–16% revenue growth and ~150 bps adjusted EBITDA margin expansion targeted alongside 45 openings and AI‑driven e‑comm enhancements .
  • Mix dynamics: faster growth in contacts/exams lowers % gross margin but increases gross profit dollars and lifetime value; expect this mix to persist as insurance integrations scale .
  • Tariffs manageable: management embeds a 20–40 bps GM headwind and has diversified sourcing (China ~20% of COGS) .
  • Capital and cash: balance sheet strength ($254M cash) and positive FCF ($34.7M FY) provide flexibility to reinvest in growth while expanding profitability .
  • Near‑term trading lens: catalysts include Target pilot execution/expansion, AI rec engine rollout (conversion uplift), Q1 cadence (seasonally strongest margin), and ongoing insurance utilization ramp; watch sequential margins as marketing/investments flex .