Warby Parker Inc. [WRBY] Conference call transcript for 2022 q2
2022-08-11 11:55:04
Fiscal: 2022 q2
Operator: 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.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 August 11, 2022, and 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 nearest 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 Dave to kick us off.
Dave Gilboa: Welcome and thank you all for joining this morning. To start, we'd like to thank team Warby for their continued commitment to creating exceptional products and customer experiences that help people see. In Q2, we brought our corporate teams back to the office, and it's been overwhelmingly positive to collaborate in person after two plus years of remote work. Q2 was another quarter where Warby Parker delighted customers, gained market share and made strong progress against our core strategic growth initiatives. We delivered net revenue of $149.6 million in line with our guidance range and generated $5.9 million in adjusted EBITDA ahead of our guidance. But it was also a quarter where the normally steady and predictable shopping behavior in our category continue to deviate from historical trends. During our last earnings call in mid-May, we discussed the impact of Omicron on our business, which resulted in lost sales and a decline in retail productivity below 80% of 2019 levels in early Q1 before a steady recovery reached approximately 90% retail productivity levels in April. This positive trend extended into mid-May at the time of our last call, which led us to share optimism about a continued recovery like we had seen after previous COVID ways. However starting in the back half of May, we began to see a deterioration in retail productivity as well as headwinds for overall eyeglasses demand. We believe this weakness in demand is industry-wide driven by lingering pandemic effects, inflation and shift in how consumers are spending their money in time. While we are not immune from these macro factors, we remain confident that our brands, value proposition and delivery model continue to resonate with consumers. Our customers are spending more with us than ever, with average revenue per customer reaching a new high of $234 in Q2. Our a repeat purchasing trends are as strong as ever, with four year sales, retention rates of 100% and our most recent 12 month customer cohorts from the first half of 2021 having the highest repurchase rate we have ever seen. When people try Warby Parker, they love the experience and want to come back. Those happy customers also drive word of mouth and we ended Q2 with a best-in-class Net Promoter Score of 81. These positive customer trends notwithstanding when we began to observe demand weakening we quickly move to rationalize our expense base to enable margin improvement as we scale. These actions are reflective of our commitment to sustainable growth and are expected to enable us to see more leverage from our fixed expense base in the back half of 2022 and beyond. We reduced expenses in several areas of our business, including making the difficult decision to restructure and streamline our corporate team, which resulted in the elimination of 63 roles roughly 15% of our corporate headcount. As mentioned in our last earnings call, we have also adjusted our marketing spend as a percentage of revenue. As a reminder, our marketing spend as a percentage of revenue increased during 2020 and 2021 due to deliberate investments to support our e-commerce business, when our stores were closed or when we were limiting traffic into them. In Q2, we brought marketing as a percentage of revenue to 13.8%, which is more in line with pre-pandemic levels. Now that our ratio of orders placed in stores relative to those placed online has returned to pre-pandemic levels. Our stores not only enable us to offer great experiences for our customers and showcase our brands, they also serve as highly efficient customer acquisition tools. Between 2021 and 2022, we'll have opened 75 new stores, which will allow us to scale our customer base and top line without as much marketing support. As a result, marketing spend increased just 1% year-over-year in Q2 compared to our top line growth of 13.7%. Our customer acquisition costs came down over 25% relative to Q1, enabling us to acquire customers more efficiently. And in Q2, these CACs were at the lowest level we've seen since early 2020. Steve will speak to these changes and other G&A cuts in more detail shortly. Many of these changes are not reflected in our Q2 results. Therefore, we expect second half adjusted EBITDA margins to be meaningfully higher than the first half, positioning us to accelerate adjusted EBITDA expansion in 2023. Flexibility is one of our competitive strengths, both in how we serve customers across our omnichannel model and in the agility and speed with which we operate. It is why we were able to continuously serve customers and grow in 2020 when others in our industry have to temporarily pause operations and the total U.S. eyewear market declined 15%. As we operate through this current period of volatility with rapid shifts in consumer behavior, we believe our flexible model will enable us to fare better than others in our category and result in continued share gain. This inherent flexibility is also what enables us to adjust our operating costs quickly. Given the deteriorating macro environment, we are taking a more conservative view into the rest of 2022, which is reflected in our rest of year guidance. We continue to believe in the resilience of the optical industry and expect these headwinds to be temporary, but we are no longer counting on optimism or demand recovery until we see it materialize. We are intensely focused on what is in our control, delivering products and experiences that customers love. And by doing so, off a smaller expense base, we expect to drive meaningful adjusted EBITDA increases even in the face of less consumer demand. We expect that these adjusted EBITDA improvements will begin to be realized in the back half of 2022, and we are committed to driving further margin expansion in 2023 and beyond. And with that, I'll turn it over to Neil to walk through our primary growth drivers, which will enable us to continue to scale and expand market share in the months and years ahead.
Neil Blumenthal: Thanks, Dave. While we navigate the current lower growth environment with an even greater commitment to margin expansion, we plan to continue to strategically invest in four key growth initiatives. First, we're continuing to scale our omnichannel experience in open stores. In Q2, we opened nine 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 a cohort of stores opened in 2021. These newer stores, on average, continue to remain on track to pay back within our target of 20 months. Second, we continue to expand our core glasses business. We consistently design and introduce glasses that our customers love whether it's our Everywhere Series collection, which is our first collection priced at $175; or our new anti-fatigue lens, which customers can add to any optical frame for an additional $100. Progressive also continued to grow as a percent to total. As a reminder, Progressive are our highest price point and highest gross margin category. So as Progressive penetration increases, we expect to drive top line growth and gross margin expansion. Given these and other initiatives, we continue to see ASP and AOV rise without impacting customer demand. Third, we're building our Contacts business. Contacts continue to scale, growing more than 100% year-over-year from 3% of our business in Q2 2021 to 7% in Q2 2022. As a reminder, contact lenses typically account for 15% to 20% of the sales of an optical retailer. In our contact business fuels other areas of our business, 30% of contact customers who are new to the brand and up buying glasses from us. These customers also tend to spend more than our glasses-only customers. Fourth, we're investing in our eye exam business. We continue to hire and retain incredibly talented optometrists. We ended the quarter offering exams in more than 70% of our retail stores and remain on track to provide eye exams in more than 150 stores by year-end. In Q2, we completed our annual goal of converting 40 stores to our PC model, which gives us greater control over the customer experience and enables us to recognize the exam revenue. Not only are we expanding our in-person comprehensive eye exam capacity, but our telehealth offering continues to grow. In Q2, the number of prescriptions requested through our virtual vision test app increased more than 100% year-over-year. These four strategic initiatives are in line with our philosophy around long-term sustainable growth and are consistently supported by consumer research. Our surveys show that the biggest barriers to purchase from Warby Parker include not having a store nearby, not being able to get an eye exam, and not being viewed as a place that serves all of their vision care needs. While our growth this year has trended lower than our long-term targets, we remain confident in the recovery of our category and in our ability to continue to gain market share in any type of economic climate. For example, during the pandemic from 2019 to 2021, we grew revenue 46%, while the overall optical market grew sales 5%. We offer products and services people need to see, and we believe we offer unparalleled value and a superior customer experience relative to others in our industry. When demand reaccelerates across our industry, we believe we will be well positioned to differentially benefit and future growth of our newly reset expense base is expected to result in meaningful incremental margins. And now I'll pass it over to Steve.
Steve Miller: Thanks, Neil and Dave. Good morning, everyone. Ahead of getting into detail for the quarter, I wanted to mention that we are pleased that our second quarter top line performance was in line with our expectations, and adjusted EBITDA was slightly ahead, especially as the market environment became increasingly challenging. As Neil and Dave noted, we have adopted a more conservative view on the remainder of the year to reflect the current macroeconomic conditions and recent trends in our business. I'll outline the specifics of our new outlook after reviewing second quarter results. Starting with revenue. The second quarter of 2022 came in at $149.6 million, up 13.7% versus the second quarter of 2021 and just below the midpoint of our guidance of about 13% to 15%. On a three year CAGR basis versus the second quarter of 2019, revenue increased 19.1%. We finished the quarter with 2.26 million active customers, an increase of 9% versus the same period a year ago, and our average revenue per customer increased 8% year-over-year to $25. This continued scaling in average revenue per customer reflects our ability to provide more value to our customers as we evolve from a glasses-only company into one that sells eye exams, contacts and eyeglasses. 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 a consistent replenishment cycle of our core prescription glasses offering as well as continued progress in growing our contact lens business, which is up 400 basis points compared with Q2 2021 still only represented 7% of our business in Q2 2022. We also saw continued scaling of our progressive lens product, which reached nearly 22% of total prescription glasses sold in Q2 2022, yet still well below the market average of 45%. Within our e-commerce business, we continue to see healthy growth on a three year CAGR basis in the mid-20s with Q2 e-commerce revenue up 24% on a three year basis versus Q2 2019. From a business mix perspective, for the second quarter, e-commerce represented 39% of our overall business versus 44% in Q2 '21 and 34% in Q2 '19. As it relates to retail store performance, when we last spoke in May, we noted that we saw retail productivity rise to approximately 90% in April, which was a roughly 10-point improvement from the start of the year. We were encouraged by the increase we had observed since the start of the year and shared our expectations for continued scaling of retail productivity the rest of the year. Starting in the third week of May, retail productivity decelerated modestly, which continued through the end of June, where it has stabilized at roughly 80%. We believe that the slowdown in retail productivity coincides with and is primarily driven by a range of factors, including a pullback in consumer spend on durable goods and secondarily, a pullback in marketing spend as we focus on profitability. Despite the lower retail productivity percentage, the unit economics of our stores remained strong. As of Q2 2022, we had 141 stores opened for 12 months or more. These stores generated on average on an annualized basis, $2.1 million in revenue and four wall margins in line with our target of 35%. We have achieved these results by driving increased conversion rates in AOV in store and through managing team schedules to match lower top line. And this strong performance is consistent across our store fleet. Our 2020 stores have paid back within 20 months and 24 of our 35 stores opened in 2021 have paid back with the remaining 11 on track for similar payback. Despite the decline in retail productivity in the back half of May and into June, we were still able to deliver revenue results that were within our guidance of up 13% to 15% for the quarter. Moving on to gross margin. As we have done on each call before we dive in, I would like to remind everyone that our gross margin is fully loaded and accounts for a range of costs, including frames, lenses, optical labs, customer shipping, optometrist salaries, store rent and the depreciation of store build-outs. Our gross margin also includes stock-based compensation expense for our optometrists and optical lab employees. As a general note, we've been pleased with the stability we've seen in the input costs of our products as we have thoughtfully managed expenses throughout our supply chain, including frames, lenses and shipping costs. For comparability, I will be speaking to gross margin, excluding stock-based compensation. Adjusted gross margin in Q2 2022 came in at 57.9% compared to 59.3% in Q2 2021. The primary driver of the decrease in gross margin was the continued growth in contact lenses from 3% to 7% year-over-year as a percentage of our total business. Expanding our contact offering is a core part of scaling our holistic vision care offering and a key driver of increasing average revenue per customer. While contact lenses have a lower gross margin percent versus our other product offerings, they are accretive to gross margin dollars given their higher purchase frequency and subscription-like purchase cycle. Next, we saw year-over-year deleveraging gross margin in two areas, which are the more fixed portion of our cost of goods. These fixed elements of our COGS stack, our retail occupancy and optometrist salaries, which generally remain the same regardless of revenue. We added 33 net new stores over the course of the last 12 months going from 145 stores as of June 30, 2021, to 178 stores as of June 30, 2022, or an increase in our store base of 23% year-over-year, which naturally leads to an increase in store rent and depreciation from store build-outs. This 23% increase in store count compares to total revenue growth of 14% over the same period. We also saw a downward pressure on gross margin year-over-year from an increase in overall optometry salaries as we hired optometrists for our new stores and significantly expanded the rollout of our Professional Corporation, or PC model. As of the end of Q2 2022, we operated with 87 stores where we engage directly with an optometrist and therefore, recognize both revenue from exams and optometrist salaries. These 87 stores compared to 37 stores at the end of Q2 2021, all of which at the time were direct employment models as we did not start our PC model rollout until Q4 2021. The majority of our 40 PC model stores are ones where we are converting an existing store with an independent doctor relationship to the PC model. And therefore, we had already been recognizing a significant portion of product conversion sales at our stores from the independent doctor. As we convert these stores to the PC model, we expect near-term margin headwind given the gross margins on the exam service alone are lower than our glasses and contacts gross margins. With that said, we expect the PC model will benefit us in the long term as it gives us greater control over the customer experience enables us to recognize exam revenue and results in higher conversion rates from eye exam to product purchase. Offsetting the items mentioned was the continued mix shift of optical lab fulfillment completed at our in-house facilities in New York and Nevada. In Q2 2022, we continue to increase the percentage of orders fulfilled through our in-house labs, which has many benefits, including higher NPS and lower refund rates, faster turnaround time and improved gross margin overall. As we continue to scale our Las Vegas lab, which we expect to reach scale in the back half of 2022, we expect to see more cost efficiencies that we believe will translate to improved gross margin. Lastly, we saw a benefit to gross margin from the expansion of our higher-margin progressive business, which, as we mentioned, has increased from 20% of our prescription business in Q2 last year to 22% in Q2 this year. Next, I would like to talk about SG&A expenses. Adjusted SG&A, which excludes stock-based compensation in the second quarter came in at $88.5 million or 59.2% of revenue. This compares to Q2 2021 adjusted SG&A of $72.4 million or 55% of revenue, an increase of approximately 420 basis points of revenue year-over-year. In terms of year-over-year dollar growth, adjusted SG&A was up 22% compared to Q2 2021. On a sequential basis, Q2 adjusted SG&A is down approximately $8 million versus Q1 and a reduction of 360 basis points of revenue on a sequential basis. In H1, adjusted SG&A represented 61% of revenue. As we'll talk about shortly in the guidance section, we're planning for H2 SG&A as a percent of revenue to be in the mid-50s on a percentage basis of revenue. As a reminder, SG&A for our business includes three main components: salary expense for our headquarters, customer experience and retail employees, marketing spend, including our Home Try-On program and general corporate overhead expenses. Most of our improvement in adjusted EBITDA will come from these areas, which I'll walk through in more detail. The primary driver of the increase in adjusted SG&A as a percentage of revenue year-over-year was related to an increase in corporate overhead expenses, which increased faster than revenue. This increase was largely concentrated in two main areas: public company costs and investments in our technology infrastructure. On public company costs, we noted in Q1, these represented approximately 1.65% of Q1 revenue or approximately $2.5 million in the quarter. In Q2, we incurred approximately the same level of costs related to operating as a public company, which we did not incur a year ago. We expect public company costs will continue to provide deleverage year-over-year until Q4 of this year where we will compare to a period a year ago when we were a public company. On technology spend and investments, we continue to invest in a number of key company initiatives to enhance both internal systems as well as customer-facing platforms. Salary expense within our SG&A category includes wages and benefits for our headquarters, customer experience retail employees. As a reminder, salary expense for our eye doctors and optical lab employees are all included in our cost of sales. We plan to continue to optimize retail salary expense as a percent of revenue as we schedule time for our retail and customer service teams and anticipate seeing consistency in these expenses throughout the remainder of this year. As we'll talk about in the guidance section and to align our cost structure with the current environment, we moved forward with a reduction in force of 63 people or approximately 15% of our full-time corporate team. As it relates to marketing spend, we've highlighted previously that we maintained a highly flexible model with the only committed spend largely around linear TV during competitive periods. As we discussed last quarter, we've made and expect to continue to make significant changes to marketing spend levels as needed. Q2 marketing spend as a percent of revenue came in at 13.8% versus 15.6% in Q2 of 2021. Almost a full 2-point decline in line with our targets to see marketing spend as a percent of revenue stabilized in the low teens by year-end. On a sequential basis, we've reduced marketing spend by almost seven points from Q1 to Q2 of this year. For the second quarter of 2022, we generated adjusted EBITDA of $5.9 million, representing an adjusted EBITDA margin of 4%, which was just above the high end of our guidance range of low single-digit margin. Despite the challenges presented in the quarter, we're pleased to still be able to generate increasingly positive adjusted EBITDA and to deliver profitability on an adjusted EBITDA basis in line with the range of our guidance. We finished the quarter with a strong balance sheet, reflecting $212 million in cash and cash equivalents which will continue to deploy deliberately to support our growth and operations. We plan to see our cash balance remain near $200 million for the year as we manage spend across the business. Shifting to guidance and outlook for next quarter and the full year. We are revising top and bottom line targets in light of the challenges facing the optical industry and the U.S. economy and our business. I'll first talk through the changes in our top line guidance, and then we'll talk through adjustments we have made and will continue to make to ensure continued incremental adjusted EBITDA in the second half of this year that we believe will set us up for continued adjusted EBITDA margin expansion in 2023. I'll talk through changes on both a full year basis and to highlight the differences we anticipate to see between H1 and H2 of this year. On a full year basis, I'll also be making comparisons to the high end of guidance provided earlier this year versus the high end of guidance we're providing today. Our prior top line annual guidance for revenue reflected growth of 20% to 22% over 2021 and a range of $650 million to $660 million. We're taking full year guidance for revenue growth down to 8% to 10% year-over-year and a range of $584 million to $595 million. I'll walk through the differences in top line to bridge the prior guide to the current guide. We continue to project top line two main ways that we've discussed. The first is based on active customers and average revenue per customer. The second is based on store count, store productivity and e-commerce growth. I'll talk about both and how they have changed. For the 22% case, we projected to see our store productivity return to 100% of pre-pandemic levels by Q4. In mid-May, when we reported our Q1 results, we continue to see a bounce back of our retail business. As a reminder, our retail productivity has returned to 90% in early December of last year and dropped back to 80% of productivity by March due to Omicron and then recovered to approaching 90% productivity in mid-May. We reflected that continued recovery in retail productivity, which has not occurred, but instead has leveled off at roughly 80% in July. We're now projecting retail productivity consistent with recent trends at 80%. We were also seeing our three-year e-commerce CAGR consistent in the mid-20s. And with our pullback in marketing spend, combined with general softness in the category, are revising our three year e-commerce CAGR targets to 21%. Our plans for store count remain unchanged. We still plan to open 40 new stores, finishing the year with 201. Unit economics for our stores remained strong despite the decline in revenue. While we historically haven't provided specific guidance on active customer and average revenue customer growth, given today's revision, we want to share some additional details on our view for these two metrics. We were projecting active customer growth of roughly 15% year-over-year and an increase in average revenue per customer of 7% year-over-year. Given the trends we are seeing in the business now, we're projecting a similar level of average revenue per customer growth of 6% and are reducing our projections for active customer growth to 3%. This implies that we anticipate that the total active customers for the business will increase from $2.2 million in 2021 to $2.27 million an increase of approximately 70,000 customers year-over-year. This compares to our prior estimate of 2.5 million customers or an increase of approximately 330,000 active customers for the full year. We're still projecting a full year average revenue per customer of $262, and we are on track to achieve that. We've seen continued strong revenue retention from existing customers as we show in our earnings slide or 26% over the first 12 months for our cohort that purchased from us in the first half of 2021. New customer growth has been impacted the most by some of the trends we've discussed, amplified by a pullback in marketing spend. We previously guided toward a gross margin of 58% to 60% on an annual basis with some fluctuations by quarter given shifts in product mix. Our original guidance assumes full year gross margin of 58% to 59%. We're now expecting gross margin closer to 57% for the full year. We have seen continued faster-than-anticipated growth in our contact lens business, which we view as a positive. As contact lenses have lower margins, this will continue to have a delevering effect on gross margin. Roughly 40% of our COGS are fixed in nature, the majority of which are made up of store rent and eye doctor salaries. In an environment with slowing top line these investments in our store fleet and optometry will continue to have a delevering effect on margins in the medium term as exam offerings ramp, store and e-com growth returned to higher levels and as we scale high-margin products like progressive. We're modeling the effects to gross margin of approximately 1.5 to 1.7 points of deleverage from the items above, taking gross margin from 58% in H1, closer to 56% in H2. Next, we will talk about the changes made to the deployment of spend and managing our cost structure. SG&A adjusted for stock comp expense came in at 58.4% of our spend in 2021. We previously projected 2022 full year SG&A as a percent of revenue to be up to 200 basis points lower, driven by leverage in marketing spend and corporate overhead. We now expect adjusted SG&A to be roughly in line with 2021 at 58%, which is primarily driven by lower revenue as we believe adjusted SG&A dollar spend will be lower than our previous expectations. Adjusted SG&A in H1 came in at 61% of revenue with Q2 at 59.2% of revenue. We're now projecting adjusted SG&A for the back half of the year in the mid-50s as a percent of revenue. To manage costs in the current environment, we have moved forward with a number of actions. We have brought down marketing spend as a percent of revenue. Marketing spend in H1 came in at 17% of revenue, and we plan for this to be closer to 12% to 13% of revenue in H2. This equates to a reduction in marketing spend of roughly $12 million versus our prior plan, most of which is reflected in the second half of the year. We have also reduced our corporate cost structure to be more in line with lower top line. We anticipate that these cost savings will continue to ramp throughout the remainder of this year and into next year. These initiatives include reducing corporate headcount by 15% and taking a closer look at all the dollars we spend with vendors to either pull back on spend or negotiate better economics where possible. We believe these cost reductions will set us up for continued adjusted EBITDA profitability next year. In aggregate, these cost reduction initiatives are expected to lead to savings of $8 million to $9 million this year and $15 million to $18 million next year. We previously guided to adjusted EBITDA margin improvement of 100 to 200 basis points versus our 2021 adjusted EBITDA of 4.6% with a range of $38 million to $44 million based on our prior top line guidance. We are now guiding to adjusted EBITDA for the full year of $22 million to $26 million or 3.8% to 4.4% adjusted EBITDA margins. This includes the impact of an estimated $15 million in lost revenue at the start of the year from Omicron, which we believe would have had a $7.5 million positive impact to EBITDA in Q1. For the first half of the year, we generated adjusted EBITDA of $6.7 million and adjusted EBITDA margin of 2.2%. In Q2, we were pleased to see a sequential step-up in adjusted EBITDA margin to 4% of revenue. At the high end of our range, we're projecting adjusted EBITDA of roughly $19.5 million in the second half of the year, reflecting H2 margin of 6.7%. This implies a 450 basis point improvement in adjusted EBITDA from H1 to H2 on revenue that is roughly $10 million lower than H1. It's important to understand that the pattern of adjusted EBITDA this year will look different from previous years. Historically, we have seen adjusted EBITDA strong in Q1 with positivity continuing in Q2 and Q3 and then a decline as we ramp spend for Q4 and defer sales we generate from Q4 into the following year. This year, in H2, we plan for an average adjusted EBITDA margin of 6.5%. We expect this margin to be a little higher in Q3 and a little lower in Q4. The core cost savings initiatives that we have enacted are expected to drive our ability to generate incremental profitability, both in H2 and in 2023. With respect to the third quarter, we're guiding to net revenue of $143 million to $146 million or revenue growth of 4.1% to 6.3% and adjusted EBITDA of $7.9 million to $9.5 million, representing adjusted EBITDA margin of approximately 5.5% to 6.5%. Finally, with respect to our outlook for 2022, we are forecasting stock-based compensation as a percentage of net revenue to be in the mid-teens compared with 20% in 2021 and stock-based compensation for both years is above our long-term forecast of low single digits starting in 2024 as a result of RSU expense associated with our direct listing and multiyear equity grants to our co-CEOs in 2021. The majority of which is performance-based and invest based on stock price targets from $47.75 to $103.46. Thank you for joining us this morning. As we've discussed today, we're focused on what is in our control, while executing on our mission to provide vision for all, and by doing so of a smaller expense base moving forward, we expect to drive significant adjusted EBITDA improvements even in the face of macroeconomic and industry headwinds. We look forward to keeping you updated along the way. With that, we'll open up the line for Q&A.
Operator: [Operator Instructions] Our first question comes from Oliver Chen of Cowen. Oliver, please go ahead.
Operator: Our next question comes from Mark Altschwager of Baird. Mark, please go ahead.
Operator: Our next question comes from Edward Yruma of Piper Sandler. Edward, please go ahead.
Operator: Our next question comes from Brooke Roach of Goldman Sachs. Brooke, please go ahead.
Operator: Our next question comes from Paul Lejuez of Citi. Paul, please go ahead.
Operator: Our final question comes from Mark Mahaney of Evercore. Mark, please go ahead.
Operator: I'll hand back for the closing remarks.
Neil Blumenthal: Thank you. All we want to thank you all for your questions today and spending time with us. This remains a challenging macro environment, but we're grateful for the leadership team and the entirety of Warby Parker that works tirelessly to make customers happy every single day. Thank you.
Operator: This concludes today's call. Thank you for joining. You may now disconnect your lines.
