Warby Parker raises adjusted EBITDA margin outlook to 11.3%-11.6% for 2025 amid AI innovation and retail expansion

Earnings Call Insights: Warby Parker (WRBY) Q3 2025

MANAGEMENT VIEW

* Neil Blumenthal, Co-Founder, President, Co-CEO & Co-Chair, highlighted that "Q3 was a strong quarter on many fronts, reflecting both top line acceleration and significant progress towards our long-term profitability goals." He reported net revenue growth of 15.2% year-over-year, driven by 20% growth in retail revenue, and adjusted EBITDA growth of approximately 50% to $25.7 million, representing an 11.6% adjusted EBITDA margin. Blumenthal also described the launch of Warby Parker's "third act," focusing on innovation through AI, including the development of AI glasses and enhanced customer experience tools, and announced a new partnership with Samsung to complement the previously announced Google collaboration for intelligent eyewear.
* Blumenthal stated that Warby Parker opened 15 new stores in Q3, including the first 5 Target shop-in-shops, marking the highest number of openings in a single quarter, and completed a major system upgrade in their optical labs to support growth and future AI glasses fulfillment.
* David Gilboa, Co-Founder, Co-CEO & Co-Chair and Principal Financial Officer and Accounting Officer, reported ninth consecutive quarter of accelerating active customer growth, ending Q3 with 2.7 million active customers, a 9.3% increase year-over-year, and average revenue per customer of $320, up 4.8%.
* Gilboa emphasized that "glasses grew 13% year-over-year, up from approximately 10% in the first half of 2025, driven by both healthy unit growth and average selling price," and that the retail channel remains the primary growth engine, while contacts grew 21% year-over-year and eye exams grew 41%.
* Josh Truppo, VP of Financial Planning and Analysis, stated, "Revenue for the third quarter came in at $221.7 million, up 15.2% year-over-year. Retail revenue increased 20.2% year-over-year with store count up 16.4% and e-commerce revenue up 3.2% year-over-year."

OUTLOOK

* The company is reaffirming its 2025 adjusted EBITDA outlook and raising its adjusted EBITDA margin expectations, reflecting "continued operational discipline and AI-driven productivity gains even as we take a more measured view on revenue given the current macro environment" (Blumenthal).
* Warby Parker now expects net revenue between $871 million and $874 million for the full year 2025, representing approximately 13% growth year-over-year, adjusted EBITDA of $98 million to $101 million, and an adjusted EBITDA margin of 11.3% to 11.6%, with 180 to 210 basis points of year-over-year margin expansion.
* For Q4 2025, guidance is net revenue between $211 million and $214 million, representing growth of approximately 11% to 12% year-over-year, and adjusted EBITDA of $18 million to $21 million, with a 9.2% margin at the midpoint.

FINANCIAL RESULTS

* Third quarter revenue was reported at $221.7 million, up 15.2% year-over-year. Retail revenue increased 20.2%, store count rose 16.4%, and e-commerce revenue was up 3.2%.
* Adjusted gross margin came in at 54.2%, with margin pressure from tariff-related headwinds, contacts sales growth, and customer shipping, partially offset by selective price increases and increased penetration of progressive lenses and lens enhancements.
* Adjusted SG&A was $108 million or 48.7% of revenue, down from 52.3% of revenue in Q3 2024, with non-marketing adjusted SG&A improving by 440 basis points to 35.6% of revenue.
* The company ended the quarter with $280 million in cash and reported $36 million in free cash flow year-to-date.

Q&A

* Mark Altschwager, Baird: Asked about the mix shift between single-vision and progressives and its impact on ASP. Gilboa responded that moderation in basket size was mainly seen in younger demographics and single-vision glasses, but "within our older demographic and our progressives customers and higher-income consumers, we're seeing consistent behavior."
* Altschwager followed up on the growth algorithm for 2026. Blumenthal replied, "We're still aligned to our long-term growth algorithm...we continue to have more confidence in our ability to expand the EBITDA." He emphasized ongoing high growth expectations.
* Oliver Chen, TD Cowen: Inquired if mix shifts are driving product roadmap changes, AI initiatives, and insurance customer opportunities. Blumenthal replied that the current softness among younger customers is "really not driving changes for our product road map." Gilboa highlighted strong adoption of AI-powered tools like Advisor and ongoing pilots with larger insurance carriers.
* Savannah Sommer, Goldman Sachs: Asked about early performance of Target shop-in-shops and plans for 2026. Blumenthal stated, "expectations --our performance are in line with expectations" and expansion will continue at a similar pace.
* Anthony Chukumba, Loop Capital: Questioned optometrist retention and recruitment. Blumenthal described the hiring environment as favorable and emphasized Warby Parker's reputation as an employer for doctors.
* Brandon Cheatham, Citi: Asked about active customer growth and sales per customer for Q4. Gilboa responded that the main shift was in basket size for younger demographics, and a conservative outlook was adopted for Q4.
* Janine Hoffman Stichter, BTIG: Queried about impacts from sunsetting the Home Try-on program and Scout contacts. Gilboa indicated that sunsetting these programs will allow for greater flexibility and more nimble operations with minimal impact expected on the P&L.
* Matt Koranda, ROTH Capital: Questioned the selective pricing strategy and potential for more price increases. Blumenthal affirmed commitment to sustainable growth and exceptional value, and that the $95 price point has remained unchanged since 2010.

SENTIMENT ANALYSIS

* Analysts posed several questions concerning consumer demand volatility, mix shifts, pricing strategies, and channel transitions, with a tone that was neutral to slightly cautious, especially regarding sales per customer and product mix trends.
* Management remained confident and positive in both prepared remarks and Q&A, emphasizing adaptability, cost discipline, and long-term growth, using phrases such as "we continue to have faith and confidence in the category and in our customers" (Blumenthal) and "we're confident in our ability to navigate the near-term environment" (Blumenthal).
* Compared to Q2, both analyst and management tone shifted slightly more cautious on near-term demand but maintained strong confidence in long-term growth and margin expansion.

QUARTER-OVER-QUARTER COMPARISON

* The Q3 call reflected a more measured revenue outlook amid macro uncertainty compared to Q2, with a raised adjusted EBITDA margin outlook and continued focus on cost discipline and AI-driven productivity.
* Both quarters highlighted the importance of retail expansion and omnichannel strategy, but Q3 placed greater emphasis on AI innovation and the transition to intelligent eyewear partnerships, now including Samsung.
* Active customer growth remained strong, with a slight increase in year-over-year growth rate and continued focus on leveraging insurance and product mix.
* Management showed steady confidence in long-term growth, while analysts maintained a watchful tone regarding market conditions and product mix headwinds.

RISKS AND CONCERNS

* Management cited shifting consumer trends, particularly among younger single-vision and contacts customers, and noted that "contacts growth decelerated as broader consumer sentiment softened."
* Executives acknowledged the impact of tariff-related headwinds but emphasized successful mitigation strategies, including supplier diversification and selective price adjustments.
* Analysts raised concerns about potential pressure on average selling price, customer growth, and the impact of sunsetting programs like Home Try-on and Scout.
* The company is taking a more conservative top-line outlook for the remainder of the year, assuming that "September and October trends persist."

FINAL TAKEAWAY

Warby Parker reported robust Q3 results, highlighted by strong retail revenue and accelerating active customer growth, while demonstrating adaptability through selective pricing, cost discipline, and the launch of AI-driven initiatives. The company reaffirmed its full-year adjusted EBITDA outlook, raised margin expectations to 11.3%-11.6%, and is advancing its intelligent eyewear strategy with new partnerships. Management remains confident in the long-term opportunity for sustainable growth, continued market share gains, and operational leverage, even as near-term revenue guidance becomes more conservative amid macroeconomic uncertainty.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/wrby/earnings/transcripts]

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