NEW YORK—Warby Parker Inc. (NYSE: WRBY) reported revenue increases, an improvement in revenue per customers and reduced losses for the first quarter ended March 31, 2023. In year-over-prior-year highlights, Warby reported revenue reached $172 million for the three-month period, an increase of $18.8 million, or 12.2 percent. GAAP net loss improved by $23.3 million to $10.8 million. Adjusted EBITDA increased $17.0 million to $17.7 million while average revenue per customer increased 8.4 percent to $270. Warby stated that its active customers increased 2.5 percent in the period to 2.29 million.

“Our first quarter performance represents a solid start to 2023,” said Dave Gilboa, co-founder and co-CEO. “We achieved double digit revenue growth, ahead of expectations and well above the current industry forecasted growth rate. We are particularly pleased to be driving strong market share gains while expanding adjusted EBITDA margin.

"Our teams are doing an excellent job of capturing demand in the current environment through our compelling value proposition, expanding portfolio of products and services, and delivering world class customer service,” Gilboa said.

“While we continue to be cautious about near-term trends given the uncertain macroeconomic outlook, we remain optimistic about Warby Parker’s future,” added Neil Blumenthal, co-founder and co-CEO. “We are still in the early stages of building our store footprint and developing our holistic vision offering and see a long runway for sustained, profitable growth in the years ahead.”

For the first quarter, Warby Parker's gross margin was 55.1 percent compared to 58.5 percent in the prior year. The company said, "The decline in gross margin was primarily driven by the impact of the growth in store count driving higher store occupancy and depreciation costs, an increase in salary and benefit costs associated with optometrists as we scale our eye exam offering across our fleet, to 155 exam locations, up from 114 in the prior year period, and the increased penetration of contact lenses, which carry lower gross margins than eyeglasses, reflecting Warby Parker’s strategy to grow its contact lens offering."

The company opened six new stores during the quarter, ending with 204 stores. Warby Parker ended the first quarter of 2023 with $204.3 million in cash and cash equivalents.

For 2023, the company anticipated to make 40 new store openings in total, which would bring the total projected store count at year end to approximately 240.

On a call with financial analysts after the numbers were released, Blumenthal stated, "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." 

He added, "This solid performance helped offset the 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."  Blumenthal added, "As we've increased the number of stores offering eye exams, we have seen a nice uptick in average revenue per customer, driven by both eye exam revenue and a higher penetration of progressive lenses."

Gilboa told analysts, "Longer term, we believe we can open 900-plus stores in the U.S., a significant opportunity for further penetration of new and existing markets for years to come." 

Gilboa also stated, "In addition, stores act as an accelerator of progressive lens sales. As our store footprint has expanded, so have progressives. Progressives' penetration was up 210 basis points year over year to 22.9 percent of prescription eyeglass units in Q1."

Gilboa added, "Our omnichannel experience remains unique in our category. And while e-com growth has been disproportionately impacted by a reduction in marketing spend, we are excited to continue to evolve our digital experience by increasing accessibility and capability of our virtual try-on, enhancing frame recommendations, and making it easier than ever to reorder contacts or book an eye exam."

Gilboa also discussed Warby Parker's goal to expand its involvement with insurance, "which remains a big opportunity for us, both in attracting new customers and enabling us to deliver even better value," he said. "More than 60 percent of our customers have vision insurance, a mix in line with the overall market. A portion of those customers are leveraging their benefits with us, while others recognize that their out-of-pocket spend is still lower at Warby Parker than if they were to go to a different in-network provider. 

"We have a number of efforts underway to make insurance reimbursement more seamless for our customers. First, we are continuing to develop contracted reimbursement relationships with a range of managed vision care plans. In Q1, we saw strong growth from in-network insurance customers. More customers than ever can seamlessly apply their benefits with us, paying just their net price at checkout.

"And those who do spend more than those who don't apply their benefits at checkout. In parallel, we plan to introduce new features this quarter that will make it faster and easier for all of our customers to look up their benefits regardless if they are in or out of network," Gilboa said.

For the full year 2023, Warby Parker said it maintained its guidance as stated in the fourth quarter, which was anticipating net revenue of $645 million to $660 million, representing growth of 8 percent to 10 percent versus full year 2022. It expected adjusted EBITDA of approximately $51.5 million.

“Both our top and bottom line exceeded guidance in the first quarter highlighted by our adjusted EBITDA margin of 10.3 percent,” said Steve Miller, chief financial officer, in the company's Q1 announcement.

“Our disciplined and balanced approach to driving growth and profitability is fueling solid overall results despite the macroeconomic headwinds that continue to pressure the market. We believe we are well positioned to continue advancing our business in 2023 and remain confident that the strategic course we have set for the company will yield meaningful benefits for consumers and our shareholders over the long term,” Miller said.