Warby Parker Inc. — FY2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing; the supplied filing text does not provide a clear standalone Q4 income statement or cash-flow comparison.
Business context
Warby Parker sells eyewear and provides optical services through its e-commerce channels and company-owned retail stores. At year-end it operated 237 stores (232 in the U.S. and five in Canada), 194 of which offered in-person eye exams. Its strategy emphasizes expanding stores and vision-care services, growing customer engagement, and investing in technology and supply-chain capacity.
Financial performance and liquidity
| Metric | FY2023 | FY2022 |
|---|---|---|
| Revenue | $669.8 million | $598.1 million |
| Gross profit / margin | $365.2 million / 54.5% | $341.1 million / 57.0% |
| Operating loss | $72.0 million | $111.2 million |
| Net loss | $63.2 million | $110.4 million |
| Adjusted EBITDA / margin | $52.4 million / 7.8% | $27.2 million / 4.5% |
| Operating cash flow | $61.0 million | $10.4 million |
| Investing cash flow | $(54.7) million | $(60.2) million |
| Cash and cash equivalents at year-end | $216.9 million | $208.6 million |
Revenue grew 12.0%, while active customers increased 2.5% to 2.33 million. Management attributed growth mainly to average revenue per customer rising to $287 from $263, including more units per order and purchases of contacts or exams alongside glasses. Retail revenue increased to $443.1 million from $364.2 million; e-commerce revenue declined to $226.7 million from $234.0 million.
Gross margin fell 250 basis points. The filing cites lower-margin contact lens growth, higher doctor salaries, and store occupancy costs, partly offset by greater progressive-lens penetration, improved owned-lab efficiencies, and lower outbound shipping costs as a share of revenue. SG&A declined 3.3% to $437.2 million, reflecting lower stock-based compensation and first-half marketing costs, partly offset by ERP implementation and retail workforce costs.
The company reported no borrowings under its credit facility at December 31, 2023. In February 2024, it replaced its prior facility with a $120 million five-year revolving facility, with an option to increase capacity to $175 million; no borrowings were outstanding under the new facility. The company reported $208.5 million of current liabilities and $174.5 million in present-value operating lease liabilities. Management said cash, expected operating cash flows, and available credit were expected to fund operations for at least 12 months.
Changes, outlook, and risks
- Net loss narrowed by $47.2 million year over year; adjusted EBITDA improved, but remains a non-GAAP measure and does not represent discretionary cash available.
- Operating cash flow improved substantially, supported in part by noncash expenses, including $70.5 million of stock-based compensation, and working-capital changes. Capital spending and other investing uses were $54.7 million.
- Management reported slower sales growth than historically, citing consumer activity in optical not having recovered to pre-pandemic growth levels, elevated inflation and interest rates, and changing commuting habits. The filing provides no specific financial guidance for FY2024.
- Key risks include competition and customer-acquisition costs; margin pressure and inflation in labor, freight, and inputs; supplier concentration and exposure to international supply chains and tariffs; inventory forecasting; and dependence on third-party manufacturers, logistics providers, payment processors, and AWS.
- Legal and regulatory exposures include healthcare, optometry, telehealth, medical-device, and privacy requirements. A 2018 credential-stuffing incident remains subject to an unresolved OCR investigation; possible outcomes could include a settlement, corrective action plan, or penalties. The company accrued an estimated immaterial loss for California wage-and-hour and related representative lawsuits, which it intends to contest.
- Management and the independent auditor concluded internal control over financial reporting was ineffective at December 31, 2023 because of two material weaknesses: IT general controls and financial-reporting process and review controls. The auditor issued an adverse opinion on ICFR but an unqualified opinion on the financial statements. Remediation is ongoing, and completion and effectiveness are not assured.
- Other notable items include $3.2 million of asset impairment charges, primarily related to store closures or impairments and software no longer in use, and $1.0 million invested in a private optical-equipment company. The company is a public benefit corporation; its board must balance stockholder interests with stakeholder interests and stated public benefits.
Important facts for investors to verify
- Whether revenue growth, customer gains, and retail expansion can continue without further gross-margin deterioration.
- Whether operating cash flow is sustainable after considering ongoing store, laboratory, technology, and lease-related investment.
- Progress in remediating the two material weaknesses, including the ERP rollout and auditor assessment in subsequent filings.
- Developments in the OCR investigation and California employment litigation, including any change in estimated exposure.
- Use and terms of the new revolving credit facility, including borrowing levels, covenant headroom, and collateral obligations.
- Inventory valuation and demand assumptions, given inventory of $62.2 million and the auditor’s designation of excess and obsolete inventory as a critical audit matter.