Warby Parker Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This filing reports annual results, not standalone fourth-quarter results; it does not provide a clear Q4-only financial summary.
Business context
Warby Parker is a direct-to-consumer eyewear and vision-care company, selling through e-commerce and company-operated stores, with services including eye exams and vision tests. At year-end it had 161 stores (158 in the U.S. and 3 in Canada), up from 126 a year earlier. It reported 2.20 million active customers, compared with 1.81 million in 2020.
Financial performance and liquidity
| Metric | FY2021 | FY2020 | Change |
|---|---|---|---|
| Net revenue | $540.8 million | $393.7 million | +37.4% |
| Gross profit / margin | $317.7 million / 58.8% | $231.9 million / 58.9% | Margin down 0.1 percentage point |
| Operating loss | $143.7 million | $55.6 million | Loss widened |
| Net loss | $144.3 million | $55.9 million | Loss widened |
| Adjusted EBITDA | $24.9 million / 4.6% margin | $7.7 million / 1.9% margin | Improved |
| Cash from operating activities | $(32.0) million | $32.8 million | Turned negative |
| Cash used in investing activities | $(48.5) million | $(20.1) million | Higher investment |
Revenue growth reflected a 21.7% increase in active customers and a 12.8% increase in average revenue per customer, which management attributed mainly to a higher mix of progressive-lens purchases. E-commerce revenue was $249.3 million versus $237.4 million; retail revenue was $291.5 million versus $156.3 million, with the prior-year retail channel affected by pandemic-related store closures.
SG&A rose 60.5% to $461.4 million, or 85.3% of revenue versus 73.0%. Drivers included higher stock-based compensation and related payroll taxes, workforce and marketing costs, $28.3 million of direct-listing costs, and a $7.8 million non-cash charitable stock donation. GAAP stock-based compensation expense was $107.1 million. Adjusted EBITDA is a non-GAAP measure and excludes specified items; it should not be treated as cash flow or a substitute for GAAP results.
Cash and cash equivalents were $256.4 million at year-end, down from $314.1 million. Current assets were $328.0 million and current liabilities $118.1 million. The company had no outstanding borrowings under its $50 million revolving credit facility; it had $4.0 million of letters of credit outstanding. Management said cash, available facility capacity, and operating cash flows were expected to fund operations for at least the next 12 months, while noting future capital needs are uncertain.
Operating lease commitments totaled $173.3 million, including $28.5 million due within one year. The company expected adoption of lease accounting standard ASC 842 in 2022 to add approximately $140–155 million of right-of-use assets and lease liabilities to its balance sheet.
Material changes and unusual items
- Revenue growth accelerated from 6.3% in 2020 to 37.4% in 2021; gross margin remained nearly flat year over year after declining from 60.2% in 2019.
- Net loss widened substantially, with the direct listing triggering recognition of performance-based equity compensation. The filing also reports a $13.1 million deemed dividend related to preferred-stock redemption in calculating net loss attributable to common stockholders.
- Operating cash flow shifted from positive $32.8 million to negative $32.0 million, partly reflecting inventory growth and other working-capital movements. Capital spending increased to $48.5 million, primarily for stores, supply-chain infrastructure, and software.
- The September 2021 direct listing converted outstanding redeemable convertible preferred stock into Class A common stock. Warby Parker became a Delaware public benefit corporation in June 2021.
Outlook, risks and contingencies
The filing provides no quantified revenue, earnings, or margin guidance. Management expects continued investment in stores, marketing, technology, supply chain, and vision-care services, and says operating losses could continue in the foreseeable future. It cites growth opportunities in existing customers, store expansion, contacts, eye care and insurance services, and possible international markets.
- Supply chain and cost pressures: The company relies on a limited supplier and manufacturing base, including a single supplier for more than half of the cellulose acetate used in many frames. It warns that shortages, shipping delays, tariffs, inflation, wages, and higher logistics costs could pressure fulfillment and margins.
- COVID-19 and demand: Pandemic effects continued to disrupt suppliers, logistics, stores, and consumer shopping patterns; the duration and financial impact were uncertain.
- Regulatory and privacy matters: The FDA stated that the Virtual Vision Test app requires 510(k) clearance; the company was marketing it under temporary COVID-19 enforcement guidance and planned a submission. The company also continued working toward resolution of an OCR investigation into a 2018 credential-stuffing incident and HIPAA compliance.
- Financial reporting controls: Management concluded disclosure controls were not effective as of December 31, 2021 because of previously identified material weaknesses in IT general controls and financial-reporting processes. Remediation was underway; the independent auditor did not opine on internal-control effectiveness.
- Governance and dilution: The dual-class structure gives Class B shares ten votes per share, concentrating voting power with the co-founders. The company also disclosed authorized future charitable share issuances and substantial outstanding equity awards.
- Other exposures: The company cited competition, customer-acquisition costs, inventory management, healthcare and optometry regulation, and data security as material risks. It reported no pending legal matters expected to have a material adverse effect at year-end.
Investor facts to verify
- Whether customer and average-order economics continue to support revenue growth, particularly as the retail footprint expands.
- Whether the operating cash outflow, inventory build, and capital spending improve, and how much cash remains available after lease and other commitments.
- How much of the GAAP loss and adjusted EBITDA trend reflects recurring operations versus stock-based compensation, direct-listing costs, and other adjustments.
- Progress on remediating material weaknesses and whether future filings report effective financial controls.
- The status and timing of FDA 510(k) clearance for Virtual Vision Test and resolution of the OCR investigation.
- The impact of supplier concentration, inflation, tariffs, and pandemic-related disruptions on product availability and gross margin.