Warby Parker reported 10.4% revenue growth in the third quarter, with gains in both its active customer base and average revenue per customer. Profitability improved modestly on a gross-margin basis, while net income was nearly flat as operating expenses rose. The company also expanded its store base and is preparing to launch its first Intelligent Eyewear collection.
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Revenue and customers: Revenue rose $23.1 million to $244.7 million. Active customers increased 3.0% to 2.74 million on a trailing 12-month basis, while average revenue per customer climbed 6.7% to $342.
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Margins and earnings: Gross profit was $133.2 million, or 54.4% of revenue, up from $119.9 million and 54.1% a year earlier. The improvement reflected lower tariff costs, customer shipping savings, optical lab efficiencies, and greater sales of progressive lenses and other lens treatments. Those gains were partly offset by growth in eye care and higher store occupancy costs.
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Expenses: Selling, general and administrative expenses rose $13.2 million to $129.6 million. As a share of revenue, they increased 50 basis points, mainly because of retail compensation and higher corporate and technology costs; lower marketing expense as a share of revenue provided a partial offset.
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Profit measures: Net income was $5.6 million, down $0.3 million from a year earlier. Adjusted EBITDA increased $2.8 million to $28.6 million, with its margin up 10 basis points to 11.7%.
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Stores and product launch: Warby Parker opened 12 net new stores during the quarter, bringing its total to 364. Pre-orders for its first Intelligent Eyewear collection are set to begin November 12, with customer orders expected to be delivered during the holiday season. The co-CEOs also cited the rollout of Warby Parker Care and continued investment in services such as eye exams and insurance.
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Cash flow: The company ended the quarter with $287.9 million in cash and cash equivalents. Operating cash flow was $24.7 million, while free cash flow was negative $2.0 million, which the company attributed to investments related to the Intelligent Eyewear launch.
The quarter showed growth from both a larger active customer base and higher spending per customer. Gross margin edged higher, but increased operating costs left net income slightly below the year-earlier level. Free cash flow was negative despite positive operating cash flow, with the company linking the difference to launch-related investment.