Hello, everyone. Thank you for joining us, and welcome to the Warby Parker Third Quarter 2026 Earnings Conference Call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. I will now hand the conference over to Jaclyn Bradbury, Head of Investor Relations. Please go ahead.

Thank you and good morning everyone. Here with me today are Neil Blumenthal and Dave Gilboa, our co-founders and co-CEOs, alongside Adrian Mitchell, our 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. 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 November 5, 2026, and except as required by law, 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 our non-GAAP measures to the most directly comparable U.S. GAAP measures 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.

Thank you, Jaclyn, and good morning. Throughout 2026, we've made significant investments in our most important long-term growth initiatives while continuing to execute against the core business. In the third quarter, we delivered revenue growth of 10.4% and adjusted EBITDA above our guidance, even as we lapped our strongest revenue growth and highest margin expansion of last year. We delivered this level of profitability while balancing a number of investments and initiatives across the business, and we're continuing to focus on opportunities that we believe could drive stronger top line growth in the years ahead. We're already seeing progress across several of these areas. We've opened 41 net new stores year to date ahead of last year's pace, further expanding the reach of our brand and holistic eye care offering. E-commerce growth accelerated to 5%, its strongest quarterly growth since we sunset home try-on, while eye exams and insurance grew 30% and 22% year-over-year respectively. These are areas we've been investing in for years, and we're encouraged by the momentum we're seeing as they become increasingly meaningful contributors to our growth. We're also introducing newness to our assortment, including today's launch of our collaboration with Rare Beauty by Selena Gomez, which enables us to reach new audiences. And we're continuing to invest behind the next generation of opportunities that will expand our addressable market and accelerate our growth profile over the long term. We're quickly approaching one of our most anticipated milestones. One week from today, we'll begin accepting pre-orders on our first intelligent eyewear collection with initial customer deliveries beginning mid-December. In anticipation of launching pre-orders starting today, we invite you to visit our website and schedule a demo at the closest Warby Parker store so you can experience intelligent eyewear for yourself. Demos start next week. Over time, we believe intelligent eyewear will become a significant driver of both revenue growth and profitability for Warby Parker, creating a step function change in our business. What makes this moment so remarkable is the extraordinary pace of AI innovation and how quickly it's becoming part of people's everyday lives. In partnership with Google and Samsung, we plan to be at the forefront of that movement. We're living through one of the most significant technology shifts in our lifetimes. desktop computers brought computing into our homes, smartphones put the internet in our pockets, and we believe glasses will be the next major computing form factor. Up until now, most interactions with AI have taken place through a phone or a computer screen, forcing our attention away from the real world. Intelligent eyewear has the potential to change that, bringing technology into our lives in a much more human way, allowing us to look up and stay connected to the world around us. and we're only at the beginning of what's possible. This first collection is an important step with much more to come as we advanced our multi-year product roadmap. As we prepare for launch, our near-term focus is on getting these glasses into customers' hands, building awareness and giving people the opportunity to experience intelligent eyewear for themselves. Looking ahead to 2027, we anticipate a rapid acceleration and growth as we meaningfully scale intelligent eyewear production and sales. Throughout this year, our financial outlook has excluded revenue from Intelligent Eyewear. We now have greater visibility into the timing of initial customer deliveries this holiday, which is reflected in our updated guidance. Based on our year-to-date results and current trends in the core business, we're narrowing our full-year revenue growth guidance to 11% to 12%, including a modest contribution from Intelligent Eyewear given the limited delivery window. As a reminder, we recognize revenue when products are delivered to customers, not when orders are placed. We expect Intelligent Eyewear will transform Warby Parker's growth profile beginning in 2027, marking the start of a much larger multi-year growth opportunity for our business. Today, we'll share more about our Intelligent Eyewear launch plans before walking through the drivers of third quarter performance and the progress we're making against our strategic priorities. First, on intelligent eyewear. Since the start of this year, our top priority has been to deliver an exceptional product and customer experience while building the foundation to scale this category over time. Neil, Adrian, and I just returned from Nashville, where we brought together nearly 700 Warby retail leaders and optometrists for our annual One Vision Summit. It is one of our favorite events of the year. We always leave inspired and energized by our teams, and this year was no exception. Much of this year's summit was dedicated to intelligent eyewear. Our team spent time continuing to explore the product and its growing range of functionality, learning how to introduce it to different types of customers and preparing to deliver a remarkable demo experience in our stores. We highlight this as an example of why we're uniquely positioned to deliver this product and expand this new category. From the beginning, we believed that our team members who are responsible for our leading customer satisfaction would be a core competitive advantage in this category, alongside our beloved brand, eyewear design expertise, vertically integrated optical labs, and our omnichannel approach. Culture and technology have been central to how we've served customers since day one, helping us attract passionate, tech-forward employees who have grown with us over the years. Our stores operate very differently from other optical shops and traditional consumer electronics retailers. Our teams are accustomed to managing appointments, waitlist and high foot traffic, guiding customers through complex purchases, explaining different lens options and enhancements, and working closely with our doctors throughout the customer journey. We believe that a combination of hospitality, product expertise and clinical knowledge will be especially important as we help customers navigate an entirely new category. One of the most encouraging things we saw at this year's summit was the enthusiasm for getting these glasses into customers' hands. The more time our teams spend with the product, the more use cases they discover, and the more possibilities they see. It's a reminder of the opportunity ahead of us, both with this first collection and the products and experiences we'll introduce in the years to come. Across the company, our teams have been hard at work pouring over every detail to prepare for launch, from designing immersive spaces and engaging in-store demos, to training our retail teams and building seamless online shopping experiences. Behind the scenes, we're expanding capacity in our labs, along with the technology and systems needed to support this new category. And we're getting ready to launch our marketing campaigns, including new commercials that we can't wait to share. Next Thursday, November 12th, we'll unveil our full intelligent eyewear collection, including pricing, and customers will be able to pre-order their frames for the first time. They'll be able to experience the glasses firsthand in 65 stores next week before we quickly expand demos across our full fleet of more than 360 locations the following week. Demos will also be available at our new immersive pop-up at Broadway and Bond Street in Soho. Thank you, Dave.

Alongside the launch of Intelligent Eyewear, we remain focused on scaling our omnichannel business and delivering exceptional customer experiences. In Q3, we continue to expand our retail footprint, grow eye exams, and introduce new products and services to better serve our customers. We opened 12 net new stores during the quarter, bringing our total to 364. We've now opened 41 net new stores year to date ahead of last year's pace and remain on track for 50 openings this year, our most ever. Our growing retail presence continues to make Warby Parker more accessible to customers while positioning us well for the introduction of intelligent eyewear. Across retail, we've continued to see strong conversion and higher average order values. at the same time, traffic continues to be softer than we'd like. Looking more broadly, industry data shows a softer unit growth across eyewear categories with greater pressure on cash pay consumers. We're seeing some of these dynamics in our business, even as customers who shop with us convert at healthy rates and spend more per order. One way we're working to drive more customers into our stores is by growing exams. With eye exams now available in over 90% of our stores, growing awareness of this offering has been a major focus this year, and we're pleased with the progress we're making. In July, we launched a new marketing campaign highlighting our comprehensive eye care services, and eye exams grew 30% year over year in Q3. We're incredibly proud of the more than 500 doctors on our team and we're continuing to invest in technology that helps them deliver exceptional patient care. Advanced imaging tools give our doctors greater visibility into eye health, helping them identify potential issues earlier, while our proprietary electronic health record system streamlines workflows so they can spend less time on documentation and more time with patients. Together, these investments are helping us deliver consistent, high-quality clinical care as we scale. We've also added newness to our assortment, introducing five collections during the quarter, including our collaboration with filmmaker Spike Jones, a longtime friend of the brand. The collection brought back five iconic frames from our archives. while our broader fall assortment introduced new styles and shapes that have resonated particularly well with younger consumers. We've driven strong assortment productivity by building on our best selling styles with new colors while continuing to introduce fresh designs that resonate with customers. We launched Warby Parker Care in September, our first paid protection program and have been encouraged by early adoption. Starting at just $20, this highly requested offering gives customers added peace of mind with one year of coverage for accidental damage, scratches, and everyday wear and tear. and just today we announced a collaboration with Rare Beauty, our first major collection with a beauty brand. There's a natural connection between beauty and eyewear, both of which are forms of personal style and self-expression. The collection reimagines some of our best-selling frames and colors inspired by Rare Beauty's signature soft pinch liquid blush with prices starting at $95. We're also partnering with global pop group Cat's Eye on the campaign, introducing Warby Parker to new audiences at the intersection of fashion and beauty. Following the successful introduction of Warby Parker Sport earlier this year, we're launching our second collection of performance eyewear in December. We've been encouraged by the response to our first collection, and we're looking forward to building on that momentum with new styles later this year. and many more. We've seen healthy momentum in online glasses throughout the year, supported by our intentional shift in marketing spend from contacts to glasses. Our third strategic priority is driving brand awareness and customer acquisition, including capturing vision insurance spend. In the third quarter, active customers grew 3% over the trailing 12 months, while average revenue per customer increased 6.7% year over year. We're pleased with the consistent growth in average revenue per customer supported by eye exams and higher penetration of progressive and other lens enhancements. As expected, based on industry unit growth trends this year, active customer growth moderated in the quarter and as we lapped our highest quarterly growth last year. We're seeing consistent retention from returning customers and our biggest opportunity remains attracting new customers to the brand. We are trending to a positive inflection in the trailing 12-month active customer growth in the fourth quarter, even before a meaningful contribution from intelligent eyewear. We're also preparing for a significant increase in marketing spend in Q4, with major campaigns launching alongside intelligent eyewear pre-orders on November 12th. We expect this increased visibility to introduce Warby Parker to new audiences, drive awareness of our broader offerings, and support customer acquisition over time. As we think about reaching more customers, insurance remains a significant opportunity for growth and one of the biggest differences between Warby Parker and the broader optical industry. Approximately 70% of US adults who recently purchased eyewear used vision insurance. And for many, their benefits determine where they get their eye exams and subsequently purchase glasses. We're seeing healthy growth among our insured customers, while cash pay customers have been more impacted by the broader softness in the category. This year, we've made meaningful progress in making it easier for customers to use their insurance benefits at Warby Parker. We saw over 20% growth year over year in our in-network business, with in-network insurance penetration reaching 8.4%, up from 7.4% a year ago. today Warby Parker can serve over 35 million people through in-network insurance plans and for anyone with out-of-network benefits our automatic claim submission tool now makes filing for reimbursement seamless for the customer we're encouraged by the adoption we're seeing We believe there's significant runway to broaden access to Warby Parker and capture a greater share of the overall vision care market. We've spent years investing in the infrastructure, systems and customer experience to make insurance a more seamless part of shopping with us. Insured customers are among our most valuable, spending more on their initial purchase, selecting progressive lenses at higher rates and returning more frequently over time. As we make it easier for more people to use their benefits at Warby Parker, we believe insurance can become a much larger driver of customer growth. And now I'll hand it over to Adrian to cover our financial results and guidance.

Thanks, Neil. Good morning, everyone. Before diving into the numbers, I want to recognize the tremendous amount of work that's gone into this year. We've been preparing for the launch of Intelligent Eyewear, while continuing to invest in and manage our core business through a challenging industry backdrop. I'm proud of how our teams have navigated these priorities, balancing disciplined execution every day with strategic investments that position us to scale this new category in 2027 and beyond. With that, I'll walk through our third quarter results and our outlook for the remainder of the year. Let's start with the third quarter revenue. Third quarter revenue was $244.7 million, up 10.4% to last year and within our guidance range. Retail revenue increased 12.4% year over year and e-commerce revenue was $61.7 million, up 4.8% year over year. Turning to gross margin. In the third quarter, adjusted gross margin was $133.6 million, or 54.6% of revenue, 40 basis points above last year. Thank you for joining us. Now, shifting to SG&A. As a reminder, adjusted SG&A excludes non-cash costs like stock-based compensation expenses, non-cash charitable donations, and non-recurring expenses. Third quarter adjusted SG&A expenses were $120.8 million or 49.4% of revenue, 70 basis points higher than last year, primarily driven by retail compensation and corporate expenses, including higher technology costs. and many more. Third quarter adjusted EBITDA was $28.6 million. As a percent of revenue, adjusted EBITDA was 11.7% or 10 basis points above last year. Now shifting to capital allocation, we ended the third quarter in a strong cash position of $288 million. We continue to prioritize reinvestment in the business while maintaining optionality through our $100 million share repurchase authorization. Free cash flow during the quarter was impacted by investments related to launching intelligent eyewear, including higher capital expenditures to prepare our retail stores and optical labs for the launch, as well as the timing of partner reimbursements. In October, we also invested $5.6 million in an optical lens technology company and committed to funding research and development of new lenses and new lens technologies over the next two years. This reflects our continued focus on innovation and supports our multi-year intelligent eyewear product roadmap. Now, let's turn to our outlook for 2026. As we approach year end, we're taking a prudent approach to our fourth quarter outlook, reflecting current trends in the core business and now including a modest contribution from Intelligent Eyewear. At the same time, we're preparing for significant growth opportunities in 2027 and beyond as we scale Intelligent Eyewear. Our guidance includes up to one percentage point contribution to full year revenue growth and several percentage points to Q4 revenue growth from Intelligent Eyewear, along with related launch and operating expenses. For the full year of 2026, we're narrowing our prior guidance and now expect revenue of $966 to $976 million, representing approximately 11% to 12% year-over-year growth. Adjusted EBITDA of $117 to $119 million, which equates to an adjusted EBITDA margin of 12.2% and 130 basis points of expansion year over year at the midpoint of our range. Turning to the fourth quarter, we're guiding to revenue of $243 to $253 million, or growth of approximately 15% to 20% year over year. Thank you, Adrian. It's been an incredibly busy few months across Warby Parker, and I want to thank our entire team for their tremendous work that's gone into preparing for this launch. For Warby Parker,

The launch of Intelligent Eyewear expands both what our glasses can do and the role we can play in our customers' lives. It gives existing customers new reasons to engage with us and new customers another reason to discover our brand. This first collection begins a multi-year product roadmap and we see a meaningful long-term opportunity to build on it as the technology advances and the category grows. We're just days away from welcoming customers into our stores to demo the product. We hope you'll be one of them. Don't forget to book your intelligent eyewear demo on our site. Thank you for your time this morning. We couldn't be more excited for what's ahead. With that, operator, please open the line for Q&A.

Thank you. We will now begin the question and answer session. Please limit yourself to one question and one follow-up. To raise your hand, please press star followed by the number one on your telephone keypad. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, Please remember to unmute your device. Your first question comes from the line of Brooke Roach with Goldman Sachs. Your line is now open. Please go ahead. Please remember to unmute your device. Your next question comes from the line of Mark Altschwager with Baird. Your line is now open. Please go ahead. Your line is now open. Please go ahead. This question comes from Mark Altschwager with Baird. We are currently experiencing technical difficulties. Please stand by while we address the matter. Thank you for your patience. We will now continue with the question and answer session. Your next question comes from the line of Dana Telsey with Kelsey Group. Your line is now open. Please go ahead. We are currently experiencing technical difficulties. Please stand by while we address the matter. Thank you for your patience. We will now continue with the question and answer session. Our first question comes from the line of Anthony Shakamba with Luke Capital Markets. Your line is now open. Please go ahead.

Good morning. Thank you so much for taking my question, and I am really looking forward to getting my preorder in. I guess first question, just any commentary in terms of the cadence of sales over the course of the third quarter? And I guess just as a quick follow-up, any early indication on fourth quarter? Thank you.

Thanks, Anthony. What we saw was some consistency throughout the year, frankly. We're operating in an uneven optical environment. We did see a slight C-cell in September, which has since moderated. We're operating in an environment where There is a little bit of dislocation, which gives us the opportunity to take more market share. So when we look at industry data, the little growth there is tends to come from price and units are down at our competitors. So as we take market share, we think of it as something that we can take from a dollars perspective. But more importantly, we can take it from a units and customers perspective. So we're able to take advantage of our traffic in our stores where we're seeing high levels of conversion and some of our highest AOV. We're seeing continued strength in our customer satisfaction and similarly strength in e-commerce as we sunset our home try-on program. So this presents us with an opportunity now in Q4 as we double down on marketing with some really exciting launches. Today, we launch our collaboration with Rare Beauty by Selena Gomez. First collaboration with a beauty brand. We think that there's an inherent tie between beauty and optical and that this is part of your morning routine and core to your identity, frankly. So we have some amazing styles that we customize to match. Rare Beauty's sort of favorite soft pinch liquid blush. We're really excited to let the world know about this. This collaboration will be available across all of our stores. And then in select stores, there'll also be samples of the soft pinch liquid blush. So we couldn't be more excited. And then, of course, with the launch of Intelligent Eyewear, You'll see our largest campaign ever launch next week.

That's helpful. Thank you. Looking forward to the launch.

Your next question comes from the line of Brooke Roach with Goldman Sachs. Your line is now open. Please go ahead.

Good morning and thank you for taking our question. Neil, Dave, Adrian, I'd love to hear your thoughts on the capacity of how many demos and the opportunities that you have to get additional customers into your store this holiday season as you launch Intelligent Eyewear. How did you get to the assumptions for about a point of contribution for Intelligent Eyewear to your guidance for this quarter? And how should we be thinking about the opportunity to scale that into next year? And then Adrian, just one quick clarification. Are you assuming any halo effects on your base business within the guide from the intelligent eyewear traffic within your updated results? Thank you.

Thanks, Brooke, and apologies for the technical difficulties earlier. I'll start with the question around intelligent eyewear. The most powerful thing we can do to introduce this product is to put them on people's faces. As we've been wearing the products themselves, as we've been starting demos internally, we just get remarkable feedback. And it's a product that you really have to try to understand its capabilities. And also, we continue to get remarkable feedback around how Thank you so much for joining us. and many more. to have a very busy holiday season. In terms of the contribution to revenue this year, it will be modest just given that customer deliveries will begin in mid-December, so there are only so many days left in the year. We're anticipating a pretty robust pre-order period before then, and then for production and sales to scale meaningfully in 2027. Right now, our priorities are really to introduce this product in the right way to enable people to try the product, to deliver the customer experience that we know is inherent around introducing an entirely new category and new devices that people have not worn before and believe we're really well equipped to do that. given our store footprint and the capabilities of our team that is used to handling complex customer and patient interactions that is tech forward and that has consistently delivered the best customer experience in our category.

Good morning, Brooke. To answer your question, our guidance for the balance of the year does not include any halo from intelligent eyewear. We are taking a prudent approach to the guidance because we simply recognize that there will be unknowns as we're pursuing this new product launch of this scale. But do keep in mind that our modest approach would assume several points of growth in the fourth quarter and up to a point of growth for the full year, driven by the impact of intelligent eyewear.

Great. Thanks so much. I'll pass it on.

Your next question comes from the line of Mark Altschwager with Baird. Your line is now open. Please go ahead.

Great. Good morning. Thanks for taking the question. Sticking with the intelligent eyewear topic, I was hoping you could give us a bit more perspective on the ramp there. Just with deliveries starting mid-December, production building through 2027, what are the gating factors on supply as you move through the first half of next year? and how should we think about the pace of deliveries relative to pre-orders? And then Adrian, on the guide EBITDA reaffirmed after the Q3 beat implied Q4 margin around 11%. Can you just unpack a bit how much of that reflects one time launch costs versus the Q4 marketing step up versus any considerations on the margin on the glasses revenue in the quarter?

Thanks, Mark. Yep, we're, as we've mentioned time and time again, so excited about this product launch and every day we're finding sort of new ways to use these glasses. I mean, just on my walk to the office today, I passed by a house that was for sale and looked up how much it costs, the size of the house, how many bedrooms. I don't think I'm going to tell my wife about this particular house. But I also had an opportunity to prepare for the day, understanding what meetings I had, my external meeting outside of the office, how long it would take me to get there, whether I walked or took a taxi. But most importantly, I was able to do all of this by looking up and enjoying this beautiful fall day and actually seeing some of the foliage on my way to the office. We think as soon as people get into our stores and demo this and this will be available in 364 stores across the country. which will have multiple demo stations. We know that people are going to fall in love with this product. We'll also have special brand immersive experiences which we've been testing and we find that the feature that gets the most oohs and aahs is live translation. So we've also been preparing some of our multilingual staff members to be able to do this in person, whether our team members speak Spanish or Polish or Korean. We'll be working hard to generate a lot of demand. Our primary focus this quarter is really on achieving product acceptance and perfecting that customer experience. Next year is really about scaling up production. This year we'll have A couple weeks of delivery. We recognize revenue once those products are received by our customers and we're expecting significant growth from Intelligent Eyewear next year. We're not providing specifics at this time, but look forward to sharing more on the combined business in February.

Good morning, Mark. Just to answer your question around EBITDA, you know, the approach we've taken to the guidance is to maintain as much flexibility to be able to respond to any potential additional needs or investments as we encounter activities as we go through launch this year. As you know, year to date, we've had a combination of ongoing and one-time investments. in launching Intelligent Eyewear. But now we're beginning to pivot more to the operating expenses as we get to post-launch. Some of that will include staffing in stores, staffing in our labs, investments in brand, investments in media, all of which are reflected in our guidance. But we are very encouraged and very excited to enter this new chapter as we enter the fourth quarter and enter into next year.

Thank you.

Your next question comes from the line of Dana Telsey with Kelsey Group. Your line is now open. Please go ahead.

Hi.

Good morning, everyone. As you think about the intelligent glasses, what is the pricing going to look like? And how do you think of at all cannibalization with existing glasses? And then just on the stores, and you think about you mentioned how you're training the associates. New stores, is square footage size changing? Is the number of labor costs of the store changing? How do you see that? And just as you move forward into 2027, overall new collections have been very successful for you. Are you seeing any change in the number of new collections or type or style? Thank you.

Thanks, Dana. Starting with your questions around intelligent eyewear, we'll be sharing pricing in the full collection next week. So more to come very shortly there. But at a high level, our philosophy will be the same as it's always been with every product that we offer, including are existing eyewear and collections in that we want to deliver exceptional value for high quality products. And we believe these are really remarkable products that will Be able to do things that other competitive products can't. They're going to look great. They're going to be comfortable. And we believe that value will be really inherent in how we price these products. We're also going to give our customers lots of choice in terms of Not only the style of the frames themselves, but also the lenses that they choose. These will be designed for prescription from day one. We'll also enable people to select a range of sun lenses, photochromics, and make them their own. and we believe that the majority of our customers of these products will wear them alongside traditional eyewear. That's how we've been using them ourselves. So while intelligent eyewear has become my primary pair of glasses, for example, I still have a number of other glasses that I use from time to time and we're expecting that to be the case here. We're also anticipating that intelligent eyewear customers, many of them will seek eye exams at our stores. Some of them may purchase contacts alongside this new category of products. And so we are anticipating that this is going to enable us to attract many new customers to the brand who will also be interested in the other products and services that we offer.

And then Dana, to respond to your question about stores, we're going to learn a lot in the next few weeks as we're focused on product acceptance and the customer journey. And like everything at Warby Parker, we learn, become expert at it, and then scale. One of our main competitive advantages and our amazing team members that staff those stores and serve those customers. And we're accustomed to high volume stores, high traffic stores. We've built systems that enable us to scale, whether it's our point of sale that we call a point of everything. And we nickname it PO for short after Edgar Allan Poe. because of the literary heritage of the brand and because this is much more than a point of sale. It's literally a point of everything and enables us to serve our customers and our patients in a differentiated way from the entire industry. So those tools and those team members will ensure incredible customer experiences for IntelliJ All of our associates are being trained on the functionality of this product and how to demo it. And that's something that we've been working on the last couple months. And again, something that we think we have unique capabilities of. Our team members self-select to come to Warby Parker because we're a tech-enabled brand. because we have great technology in our stores, whether that is a retail advisor, an optician, or an optometrist who leverages some of our homegrown systems like our own electronic health records platform that we launched earlier this year. In fact, when you walk into our stores, often either in the middle there's a round reference desk or in the back there's a regular style desk which is modeled after a reference desk in a library where you go to ask questions and get answers to how to navigate the library and find the particular book or whatever knowledge that you seek and this construct is Right, inspired by libraries because the literary heritage of the brand, because the name Warby Parker comes from two early Jack Kerouac characters that we discovered in the New York Public Library. Why it serves us when we're introducing a new product like this, where we know there's going to be lots of questions and we have the physical space for it. We have the mentality for it. You know, those reference desks were also inspired by Apple's Genius Bar. And literally, we've been spending 16 years Perfecting it for this exact moment. Now, might we step a little bit higher so that way we can administer these demos? Absolutely. And we baked in those labor costs into this quarter's guidance. We also have the advantage of a large sum of capital in the form of reimbursements from our partners that we can use to defray some of these costs as this program gets to scale. Moving to your next question on collections. Yes, our new collections are super successful and we're so excited about the ones that we're launching this quarter, but also have seen a ton of success in completely new products for us. like our sport line that we launched earlier this year on which we'll be launching some additional styles in December. This is a new category for us that is really additive. We don't see any cannibalization, right? Because it's a completely different use case but we do see high AOVs because one thing that enables us to do which is unique in the category provide affordable, high-performance prescription sunglasses for sport. So you're going to see us continue to expand that collection as well.

Thank you. Your next question comes from the line of Janine Stickter with BTIG. Your line is now open. Please go ahead.

Hi, good morning. Thanks for taking my questions. With the higher marketing on Q4, curious how much of that is Intelligent Eyewear versus other initiatives, and can you give us any update on the marketing that won't show up on the P&L, how much you have left of the $75 million that was funded by Google, and how much of that will be deployed in Q4? And then just, Adrian, as you think about the core business, it feels like you've been very focused since you joined about finding ways to drive better profitability and efficiency just as the environment stays choppy. Maybe can you share some of the opportunities you're most excited about? Thank you.

Thanks for the question. From a marketing perspective, you're going to see marketing as a percent of revenue roughly be in line where we feel that our investments in marketing, like our collab with Rare Beauty, for example, drives traffic and benefits the Intelligent Eyewear launch. Similarly, investments in our Intelligent Eyewear launch will no doubt have impact on brand awareness and driving traffic to our stores in general but what's not captured in sort of marketing as a percent of revenue is that incremental investment that will be reimbursed by our partners and again we're launching our largest campaign ever across multiple channels the highest numbers of commercials that we've ever launched at a single time. So we're pretty excited here. In terms of how much is left in the reimbursement, the vast majority, over $50 million of that $75 million.

Good morning, Janine. Just building on Neil's comment and answering your question, you know, as we've gone through the year, there's been quite a bit of choppiness. You know, as Dave brought up a little bit earlier, the second half of September was a little bit softer than we had anticipated. We also recognize that the category, you know, for really approaching two years now has had continued traffic and unit growth headwinds. And we're certainly not immune to that, but we've certainly reflected those challenges within our guidance. In terms of what we're really excited about, we're incredibly excited about the marketing campaign that we spoke to earlier. The commercials are fantastic and there's a whole host of things that the team will be bringing to the market. Rare Beauty collaboration launching today also excites me as a CFO. and as we spoke about a little bit earlier, some really fantastic product launches, particularly as you think about the extension of Sport is Water, some of the things that we're very excited about. As we think about the rest of the year, we're just, again, being prudent with our guidance. We have a number of activations that are happening, but again, we just want to be prudent given the backdrop, but also the excitement we have about what's ahead of us.

Great, thanks so much.

Your next question comes from the line of Robbie Ohms with Bank of America. Your line is now open. Please go ahead.

Oh, thanks for taking my question. I think, you know, maybe a follow up just on eye exam and the in and out of network insurance awareness. Can you and I might have missed it, but just, you know, how did that improve a lot in the third quarter would be kind of the first question. And then given the launch of intelligent eyewear and everything, what how much could that help? You know, eye exam awareness and insurance penetration. We'd love to get your thoughts on that for fourth quarter, but also your thoughts on what that could do in 2027 to really help you guys offset, you know, I guess the weaker industry units and things that you're talking about.

We're excited by the progress that we're seeing in both eye exams and in enabling our customers and patients to use their insurance benefits with us. And in Q3, in spite of some of the category headwinds, we saw pretty strong growth in both of those categories. Parts of the business, eye exams grew 30% year over year. Insurance was up 22% year over year. And that doesn't include the customers who are using their out of network benefits with us. And we've worked hard over the last year to make it much easier for people to use their in or out of network benefits. We believe that there's still massive opportunity in both of these areas. We're significantly under penetrated in terms of the percentage of our customers who get an eye exam with us as opposed to getting their exam elsewhere. We're also significantly under penetrated in terms of insurance usage relative to the rest of the category. We're We're pleased with the progress that we're making with existing insurance partners. We continue to see stronger penetration of those carriers the longer that we're in network. and that remains a big opportunity for us. As we launch Intelligent Eyewear, we believe that this is going to bring lots of new customers to us. It's going to cause people that have not shopped with Warby Parker before to book demos, to come into our stores, to understand that we offer eye exams that may not those patients who may not have considered us previously. And while they're in our store on our website, they'll also learn how easy it is to get value from their in or out of network benefits. And so we view all these opportunities as synergistic and believe that they'll continue to drive growth across the business.

That sounds great. Thank you.

Your next question comes from the line of Andrew Boone with Citizens JMP. Your line is now open. Please go ahead.

Thanks so much for taking the question. I wanted to go back to marketing and follow up on that line of questioning. What are the expectations from Google as a partner to also support the line? How should we think about the broader halo effect of what they are trying to do on their end as it benefits Warby? and then I'd love to come back to the gross profit margin question. Understood, we'll get pricing soon, but is there any way that we should be thinking about gross profit margins as we start to model those out for 2017? Thank you.

Thanks, Andrew. We're excited about our own campaigns that were launched. These are going to be some of the most significant marketing investments we've ever undertaken as a business. And the creative and the content really highlights the performance of these products, the capabilities of the products. in a very warby way and so we're excited to share the commercials and other creative shortly. Google is also really excited about this category and they're committed over both at launch and over the long run to make significant investments in building awareness. And so there's gonna be a lot more to share starting with the pre-order period. But this is truly a committed long-term relationship where both organizations will make significant investments over time. And on the gross profit profile of these products, and we'll share pricing next week, you'll find that these are very advanced, complex computing devices, and so they'll be priced higher than our traditional eyewear. and what we're really focused on is generating gross profit dollars per order and we believe that we'll be set up to generate meaningful gross profit dollars that will flow through down to EBITDA and free cash flow generation. The Margin profile on a percentage basis for consumer electronics is different than traditional eyewear, but what we're focused on is total gross profit dollars. We are also expecting that a significant percentage of our orders will involve prescription lenses, photochromics, sun lenses that have margins that are comparable to our existing products.

Your final question comes from the line of Dylan Hardin with William Blair. Your line is now open. Please go ahead.

I really appreciate that. Thank you. Just two things for me. One, how should we think about distribution here? Are you totally in control of distribution of this product as it relates to sort of taking pre-orders or will Samsung and Google... be able to ship on their own, and then just what to make of the unit still being so weak this far into the cycle. I'd just love to hear some thoughts on that. Thank you.

Thanks, Dylan. Yes, we're a vertically integrated brand, and just as we control the distribution of our core product, our glasses, our contacts, our eye exams, we control the distribution of products of Intelligent Eyewear. One of the things that we've been investing in this year is increasing the capacity and the capability of our two optical labs in Sloatsburg, New York, and in Las Vegas, Nevada, to enable us to fulfill prescription lenses into Intelligent Eyewear to serve customers quickly in the highest quality possible. If we look across the industry, what do we make of weak units? I think it's reflective of the state of the consumer in the country that's seeing pressure from higher prices, whether that's gas or oil. grocery prices and that can elongate the purchase cycle for products like glasses and contacts you know I think we're fortunate in that we provide tremendous value to our customers and patients so we are seeing consistency in our own retention where we're seeing sort of from the macro is really around traffic and new customers. And we expect some of the new collections and products like Intelligent Eyewear to be significant growth drivers for the industry and a bright spot.

Excellent. Thank you very much.

Good luck.

thank you for your questions this concludes today's call thank you for attending you may now disconnect