Hi. Good afternoon, everyone. Thank you for joining us on day one of the conference. I'm Jenna Giannelli, the Head of Retail and Consumer Credit research here at Morgan Stanley. I am helping to fill in for Alex Straton, our equity analyst, that covers Warby, who will soon be having a baby. We're very excited. I'm happy to be filling in for her. I'm really excited and happy to be here with you and hosting Warby. Joined today by Warby's Co-Founder and Co-CEO, Dave Gilboa. Thank you for coming and joining us, and welcome to the conference. Yeah, thanks for having me. Of course, of course. So just some disclosures, housekeeping items for Morgan Stanley research disclosures. Please see morganstanley.com/researchdisclosures or reach out to your Morgan Stanley representative. I'm going to start off fireside chat, Q&A, a lot of investor questions that have been most frequently asked and on investors' minds of late. And then if there's time at the end, we can get to some investor audience questions. So let's start off. You've been a public company now for about four years. Looking back at your IPO vision kind of versus today's, maybe just walk us through some of the strategic pivots, what that journey has looked like for you, and maybe what has kind of surprised you most about that journey. Yeah, maybe I'll start a bit further back, so we've been now in business for 15 years, and when we look at the trajectory of Warby Parker, we can really break it into three acts, so Act One was launching by selling glasses online and pioneering the direct-to-consumer brand model, and we introduced a lot of novel concepts to the category in that act, like our home try-on, all-in pricing, so you could buy a pair of glasses like the ones I'm wearing for $95, including prescription lenses, including all the coatings that you need, and just have kind of much more transparency than the rest of the category was used to, offering high-quality glasses for a fraction of what they would cost elsewhere, but we realized that there was a lot of friction for our customers. We were making our customers do a lot of work. They had to go somewhere else to get their eye exam. If they wore contacts, they had to go somewhere else to buy contacts. We didn't offer kind of the broad array of products and services that they were looking for. And so Act Two was expanding into an omnichannel retailer and becoming a holistic eye care business. So we went from operating zero stores to now over 300 stores. We now employ hundreds of eye doctors and make it really easy for you to get eye exams. In addition to offering single-vision glasses, now we have multiple types of progressive lenses, lots of different lens options, frame options, a large and growing contact lens business. It really focused on making it more convenient for our customers to meet all of their eye care needs at Warby Parker and choose whether they want to engage with us for any part of that customer journey online or offline. So you can get your prescription using telemedicine or in our stores. You can buy glasses online or offline, buy contacts online or offline. And that's been kind of the main areas of investment over the last few years. And now as we enter Act Three, that's all about AI and really focusing on introducing AI products that our customers can wear, also infusing AI into every part of the customer experience and every part of our business to drive efficiency. And I'd say if there's one kind of thing that's been surprising to us, it's just the speed of AI advancement. We know we're not the only ones that are surprised by that, but we have been interested in the prospect of launching smart glasses for quite some time. We've had conversations with potential technology partners really going back to almost the beginning of the company. And we never kind of felt comfortable putting our name and brand on products and developing the products because we thought they were too bulky and they didn't do enough for customers. And really what we were waiting for was battery technology to advance. Batteries could be smaller, cameras to shrink, sensors to shrink, and other things have happened. But I think what has been really surprising and compelling more recently is just how quickly AI has advanced in ways that can enable glasses to be the kind of primary computing device for this next AI era. And so we're really excited to be developing products with Google and Samsung that we'll be introducing soon, but also just infusing AI into every part of our journey, including on our digital tools, a feature called Advisor, where we can scan your face and based on your face shape and contours, we recommend frames that we know are going to fit your face and can make more personalized product recommendations. And then infusing AI into kind of every part of our operating business, every department from how we do kind of photography and creative shoots to our supply chain team and inventory allocation and really kind of finding efficiencies using the latest technology in every part of the business. Wow. It sounds like there's a lot of exciting things on the horizon. I do want to circle back to the AI component because there's a lot to dive into right there. As you talked about that evolution and kind of becoming a more holistic eye provider, a soup to nuts for the consumer, I guess as the company stands today, what are those most differentiating factors when you think that here's what really kind of stands out and sets us apart for the consumer? Yeah. So I think first and foremost, we're really the only eyewear retailer and brand at scale that has a true omnichannel offering. So the category really hasn't changed much since we launched it in 2010. It's made up roughly 50/50 of large retail chains. And then half of the category is independent optometric practices. Now those optometric practices, really, they haven't invested in technology. They don't have. It's primarily individual doctors that kind of run their own practice. They don't have an e-commerce offering. Most of the large chains really haven't invested in e-commerce and omnichannel offerings. And so I think first and foremost, consumers are able to shop with us the same way that they're used to shopping for every other consumer product, whether that's buying their Lululemon gear, workout gear, or kind of any other consumer product. They can come to us and shop across channels. Second is just the value proposition that we offer. So the glasses that I'm wearing now cost $95, including prescription lenses and all the coatings you need, the same price that we introduced in 2010. And this is a category where most of our peers consistently raise prices every single year. And so the gap between our pricing and the value we provide now is greater than it's ever been since we've launched, and that especially in times now where there are certain consumer segments that are being kind of more thoughtful and choiceful around where they're spending and how they're spending, we're just kind of the smarter choice and offer more value for your dollars. And then we're a brand, so we design our own products that you can only find at Warby Parker locations and on our website. Because we're direct to consumer, we get so much feedback from customers and so much data in real time that we can use to continuously develop products that we know that consumers like and be able to test them and get immediate feedback. And that places us at a competitive advantage relative to the rest of the category where things operate on much slower kind of wholesale cycles. And being a brand also gives us unique opportunities, whether that's partnering with someone like Arch Manning, who's been a customer of ours and a Warby Parker wearer since he was 12 years old, and launching campaigns together, or partnering with companies like Google to develop products in ways that kind of other standalone retailers can't do. So you set out kind of the value proposition. Maybe just a little bit on the category as a whole. I think last year at the conference, you kind of gave an update on what the trends were looking like, especially coming out of the COVID era. I guess maybe give us a lay of the land on what the optical landscape looks like right now and what are some of the puts and takes. Yeah. So what attracted us to the category is that it's a massive category, well over $60 billion and growing. The products that we offer help people see. So there's medical necessity. There's also a fashion element or fashion component. So there's kind of some discretionary aspect to it, but the majority of activity is driven by healthcare needs, which means that it tends to be a category that is resilient regardless of economic climate, and we've seen that over the years. I'd say COVID was an exception where there was lots of disruption in unique ways that impacted our category and had kind of a hangover for some years, but we're largely through that, and what we started to see in kind of the back half of last year was return to kind of normal shopping behavior in the category. And this year, we've seen some periods of disruption, including in April after tariffs were announced, and that kind of put a chilling effect on consumers in general. But I'd say as a whole, we've seen relatively steady shopping behavior in the category and expect that to continue. Got it. And let's go back then to driving growth in the category because I know that there was a lot of excitement from investors earlier on in the year when you rolled out or started talking about the Google partnership. So maybe just tell us a little bit about what you think that opportunity could look like. Is it more of a marketing and brand-building initiative, a real revenue driver, both ideally, right? And I guess how are you thinking about profitability of that growth over time? Yeah. This is going to be a massive new business for us. I think it's hard to overstate the TAM. Really, if you think about kind of going back 20 years, people didn't understand how powerful the internet and kind of always-on connectivity was going to be when everyone was using desktop computers. It took smartphones to showcase kind of the power of always-on internet and always-on connectivity. And the mobile smartphone was really kind of a native device for this last era. And we believe that AI glasses are going to be the native form factor for the AI era and really showcase how powerful AI can be for consumers. And we believe that we're partnering with the best companies out there, including Google, who has been an innovator and leader in AI in general. They also have such a powerful ecosystem of products that billions of people are using on a daily basis that we'll be able to seamlessly integrate with. And then partnering with Samsung on the hardware manufacturing aspect, they built billions of consumer devices and really believe that we're bringing together the kind of the best of three worlds with hardware, consumer electronics hardware expertise, software and AI expertise from Google, and then design and customer experience and prescription supply chain for Warby Parker. And these are going to be really remarkable products that we believe are going to rapidly change the nature of our business and the nature of the category. And if you look at kind of the success of some of the existing products on the market today that are selling millions of units a year, I think they show that consumers are ready to purchase glasses that if they look pretty similar to normal glasses, but add additional functionality. And I think the existing products do certain things really well, like take pictures and the audio is pretty good and can replace AirPods. And it's a nice feeling not to have your ear canal blocked all the time to the world. But they don't provide that much utility beyond that. And we believe that our products are going to be really differentiated and have remarkably good AI that will provide utility to consumers that is really mind-blowing, from having a smart assistant that can answer any question about any topic, that understands what you're looking at, understands what you're hearing, that can provide you an instant instruction manual on how to grill a piece of meat or how to fix your kid's toy or what's going on with your broken dishwasher, to be able to ask, "When was my last meeting with Morgan Stanley?" and have it sync with your calendar and your previous experiences, to asking things like, "Where did I leave my keys this morning?" or, "What was the name of the book on my nightstand yesterday?" And just provide just really massive utility to consumers in ways that existing technology can't. Wow. I need those already. So I guess let's talk about it. It gives a lot of great context on what the kind of sales growth could look like over time. Maybe just to kind of bring you back to 2025, you did update the 2025 revenue guidance in the earnings print back in November. Maybe just walk us through that, what were kind of some of the puts and takes on your sales growth algorithm for 2025? Yeah. So I think we reported a pretty strong Q3 with north of 15% top-line growth. It was our ninth consecutive quarter of accelerating active customer growth, which I think is pretty unique in our category where we talked about how we've seen kind of steady behavior and steady growth in the category. But if you look kind of outside of Warby Parker, really all of that growth is coming from price and units are flat to down and customer growth is flat to down. And for us, it's been the opposite where we've really focused on having customer growth be the engine for our overall growth as a business. And in an environment like this where you do have some consumers that are being more choiceful around where they're spending, I think they realize that our value proposition stands out very strongly and we're taking meaningful market share on a customer basis and a revenue basis from the rest of the category. Now, when we guided in August, we were coming off some of our strongest growth that we'd seen in quite some time. We had really strong back to school. And shortly after that, in September, we did start to see some trend shift. So we continued to see pretty steady traffic and customer growth. But within our younger consumer demo, we started to see smaller basket sizes. So kind of a trade-down where people that were buying contacts instead of buying an annual supply were buying maybe a one or three-month supply of contacts, fewer single-vision orders where people were buying multiple pairs of glasses at the same time. And then within single-vision, also people kind of a higher mix of $95 frames versus some of our higher price point frames. And we continue to see steady behavior from our older customers and our progressive business. But because of some of those basket-size dynamics that we weren't expecting to change, we did bring down our revenue outlook for the year just to take a more conservative view. We kind of maintained our profitability outlook. We've been pleased with the efficiencies that we've been able to drive throughout the SG&A portion of our business outside of marketing spend. A lot of that is really coming from infusing AI into every part of the business and starting to see real efficiencies there. That's great. I'll jump around on my questions then and kind of ask you to elaborate a little bit more. I guess what are the extent of some of those efficiencies? Because you were able to maintain that earnings and that EBITDA outlook. So I guess you talked a bit about it before using AI and driving margins over time. But I guess how should we think about that trend in 2026 and beyond on that line and really leveraging the SG&A? Yeah. So over the last few years, we've built up a lot of capability on our team side and within our systems that will enable us to support additional growth without our expense base scaling in line with top-line. So we went through an ERP migration. We added significant capabilities throughout our tech stack, throughout our team that enables us to continue to grow, to add stores, to continue to add revenue while maintaining meaningful efficiencies throughout the P&L. And what we've said is that we want to continue to invest in marketing and that will stay relatively steady in the kind of low teens percent of revenue. But in every other part of our SG&A base, we should see meaningful leverage. And I think we've demonstrated that this year and expect that to continue. There are certain areas like we're saving millions of dollars a year in photo shoots by leveraging AI. Our design team is using AI just to rapidly speed up the prototype and design process and reduce reliance on third-party suppliers. Really kind of every part of the business is just getting faster and more efficient. We expect that to continue. Awesome. I want to ask you a little bit about channels and stores relative to online as you think about growth over time. So maybe just on stores, what are you hoping for from that channel, whether it's in terms of store count or square footage? And then how are you balancing that with online digital penetration and where you could see that going over time? Yeah. So we have a little over 300 stores now out of about 45,000 optical shops in the U.S. And we still see massive opportunity to continue to expand our store footprint. When we survey consumers who are familiar with Warby Parker, who haven't shopped with us yet, the number one reason is that there's not a store nearby. And another top reason is that they don't have a valid prescription. We can solve both of those problems by just opening more stores and making them more community located. And this year, we opened more stores than we ever had before between our own stores and then also five within Target locations. That just gives us another opportunity to scale beyond kind of our stated goal of having 900+ freestanding stores. We view the kind of Target locations as incremental to that because they enable us to tap into communities that we probably otherwise wouldn't open a freestanding store in that exact place. And we're finding that our stores are working. They're really capital efficient. They cost us less than $1 million to build. They pay back in under 20 months, have 35% four-wall margins, and are really efficient ways for us to capture customer demand and also retention over time. We also believe that the best place to showcase our new AI glasses is going to be by demoing them in our stores. We now have more stores than Apple does in the U.S. and are just going to have very convenient locations for consumers to understand the power of this new technology. In our last quarter, we reported some of the highest retail productivity that we reported as a public company, and so we are continuing to see our stores scale well and are seeing really consistent economics from our newest cohort of stores and strong performance from our existing stores that have been open for more than 12 months, and then within our e-com business, there, we've seen, I'd say, some shifting dynamics. We announced recently that we were sunsetting our Home Try-On program, which had been a major driver of growth really through the company's history. When we launched, there was an article that called us the Netflix of eyewear, comparing us to Netflix back when Netflix was shipping DVDs back and forth, and much like their business has evolved, so has ours. And now we can frankly serve customers better through our store footprint and through our digital tools, including our AI capabilities online that enable you to digitally try on glasses and get personalized recommendations in faster and more efficient ways than our Home Try-On can. But as that Home Try-On business has been winding down, that has been creating some headwinds to growth. The other parts of our e-com business that will persist over time are direct frame purchases, so people buying glasses without doing a Home Try-On. There we're seeing very strong and steady year-over-year growth. And then our contacts business is also very healthy online. And so once we get past kind of the headwind from the Home Try-On business, we believe that our e-com business is also set up for accelerating growth over time. Are you seeing nice uplift on the e-com business in the markets and areas where you're opening stores? Is there a correlation there a bit? Yeah. So we tend to see if you look at our cities that have the highest density of retail locations like New York, Chicago, Boston, Dallas, they tend to be the areas, the cities that also have the highest e-com growth. And so we do tend to find really nice synergies. And we tend to have really happy customers. We have the highest NPS in our category. And when we have a concentration of customers in an area, they tend to tell other people about it. And it tends to just kind of drive more growth for that region. Great. Let's shift back toward kind of profitability and margins. If we could talk a little bit about gross margins and down the P&L. Maybe just, we're in this kind of mid-50s range of margins. I guess talk to us how that's evolved over time and where you see that going, perhaps with changes in the product or premiumization. Could there be an opportunity there? I guess when you're thinking about gross margin over the next few years, what does that trajectory look like? Yeah. So our gross margin has stayed relatively steady in the mid-50s. And we believe that that enables us to drive 1 basis points to 200 basis points of Adjusted EBITDA improvement year over year for the next several years and get us to being a 20% + Adjusted EBITDA margin business. Within gross margin, there are a number of different components. And we have fully loaded COGS that includes store rent and depreciation of store buildouts. It includes our optometrist costs in addition to kind of a lot of the standard components that most companies include in COGS. And if you look at the areas that we've been investing in over the last few years, as described in Act Two of becoming an omnichannel holistic eye care provider, we really ramped up store growth. So, taking on a lot of store buildout costs and a lot of store occupancy costs, even for kind of new stores that are still taking time to ramp. We've really invested in eye exam capabilities and hiring lots of doctors and bringing them on board even before they're kind of fully utilized and driving as much efficiency as possible and absorbing kind of the full cost of those optometrists in our COGS line. We've been investing in our contact lens business, which has been growing quickly and is margin accretive, and our contact customers tend to be some of our highest value customers, but it's a lower gross margin category. And so some of those factors have been headwinds to gross margin, but I think in spite of those significant investments, we're pleased that we've been able to maintain gross margins in the mid-50s%. Part of that is from the strength that we're seeing in our glasses growth, in our progressives growth, and some of our higher price point items. We're also starting to see more efficiency from our eye exam business as our doctor utilization increases. We're anticipating that our gross margins will remain relatively steady. Now, as we enter kind of new categories like AI glasses, those, as consumer electronics, tend to have lower margins on a percentage basis relative to traditional glasses. But these are going to be higher price point items. On a dollars basis, certainly be accretive. Understood. We can't really talk about gross margins without talking about tariffs, which is something you guys have been managing through quite well. So maybe walk us through some of the levers that you've been able to pull to offset those headwinds, anything that's proven to be a little bit more or less successful than one strategy over another? Yeah. So when tariffs were announced, we have a global supply chain, and so we were certainly impacted immediately, and we set out to fully offset the impact of tariffs, and we've successfully done that, and it was really kind of through three strategies, so one was shifting production, the second was through selective price increases on a subset of products, and the third was kind of finding other areas to cut expenses, and through kind of a combination of those actions, we have successfully mitigated the full impact of tariffs. On the first piece of shifting production, we have very healthy relationships with all of our suppliers. We don't go through agents or any kind of third-party brokers. We have very strong, we've built very strong relationships with kind of the owners of all of our suppliers, and we tend to be viewed as a great customer. And so we found ourselves kind of first in the queue of all the folks that wanted to shift production and were able to do that successfully in a number of cases. We did then look through all of our products and found a subset of products that primarily lens types where we thought we could bring up prices by a small margin and still offer an exceptional value to our customers relative to our peers. And so we put those pricing actions in place in Q2 and really didn't see impact from a conversion standpoint as a result of those changes. And then we kind of forensically went through every part of the P&L and just tried to find other areas that we could get more efficient. And we're able to successfully do that. It was really important to us. We knew that our peers, even in areas where there are not tariffs and there are not kind of external factors that raise costs, our peers tend to raise prices liberally. And we have seen them do that this year. We think it's really important to maintain the trust with our customers and continue to offer tremendous value. And I think we've been able to do that successfully in spite of some of the impact to our cost base. That's great. That's great. I was going to ask you about your pricing philosophy, but I think I got it right there. So no, that's helpful. We're coming a little bit down on time. And we did have three questions that we asked all companies that attended and participated in the conference. So I do want to get to those. And then if we have time, audience questions. So I'm going to dive into those if I can. Kind of so the first one, kind of just when we think about the next 12 months relative to recent trends, do you expect consumer demand to accelerate, remain stable, or decelerate? I'd expect it to be relatively stable, yeah, to kind of neutral. I think there, as we discussed in our last call, we had seen kind of some shift towards the end of Q3 where younger consumers were kind of changing their basket size and buying kind of smaller quantities, and we expect that kind of lower income and younger consumers will continue to be challenged, but I also think there's stimulus coming next year that will help that demographic specifically, and it seems like high-income, wealthier segments continue to be in good shape, so I would expect kind of relatively steady behavior next year. Okay. Perfect. Similar question on margins over the next 12 months. Do you expect margins to face more tailwinds, a balance of tailwinds and headwinds, so neutral or more headwinds? I'd say neutral to fewer headwinds. Hopefully, there are fewer new tariffs that are announced and fewer surprises than this year. Okay. Great. And then just on capital allocation, how are you thinking about priorities there in terms of investing in the business versus shareholder returns, M&A, any kind of possible capital allocation thinking about priorities? Yeah. I think we expect to be more active there than we have been historically. We have a very healthy balance sheet, about $300 million in cash, no debt. We're consistently generating cash and expect to do so for the foreseeable future. We are making significant investments into AI glasses. But one of the reasons we're excited to partner with Google is that they agreed to fund $75 million of our initial cost for that product development. And going forward, I think we are excited to explore opportunities both to kind of return capital to shareholders and explore strategic opportunities with our balance sheet. Excellent. Toward the audience, if there are any questions, yes? I wonder, you're getting to the point now where you've got enough stores and brands established enough that you're affording national, and things like that. I wonder whether the growth algorithm, whether you can kind of start to rethink that. It's been a few years, and the company's maybe more durable and more capable of a little bit higher growth algorithm and to push just a little bit harder, and certainly, the brands there and the retail fleet. Thanks. Yeah. We certainly have ambitions of driving what we call sustainable growth and continue to drive much higher growth than the rest of the category. We believe that there is an opportunity within our core business as it stands today to drive growth and certainly in the teens and continue to add 1 basis points -200 basis points of Adjusted EBITDA expansion per year. And then we'll be launching this entirely new category of AI glasses that we believe will have a really meaningful impact on our growth overall and also just create a halo, drive lots of people into our stores, lots of people into our exam rooms, and drive a lot of new customer growth. And so we are yeah, we do see a path to driving accelerated growth over the next few years. Absolutely. That's great. And just one last one, maybe if we could wrap kind of an open-ended question. If there's anything we didn't cover today or any key message that you want to leave investors with today, the floor is yours. I guess one topic we didn't cover was insurance that we are also excited to be making progress on. Last year, we nearly doubled the number of people that can use their in-network insurance benefits with us. We continue to have additional pilots with the other large carriers and see a path to driving much more insurance adoption in our business. It's an area that we're massively underpenetrated relative to the rest of the category. And I think the fact that we've been able to grow to the size that we have without more insurance coverage is a testament to the value proposition that we offer. But we still want to make it as easy as possible for people to get value out of their benefits and an area that we're also investing in and believe that there's a lot of potential upside over time. Yeah, we're very excited about 2026 as a transformational year for the business. I think these AI glasses are really going to blow people away. And I think we have a very unique opportunity partnering with Google in particular to launch the best product out there. And I think there's going to be massive demand for them. Excellent. Excellent. Well, thank you so much. We really appreciate the time today. Great. Thank you.