Warby Parker Inc.: Form 10-Q for the period ended Sep 30, 2025

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the Securities and Exchange Commission (“SEC”) on February 27, 2025 (the “Annual Report”). Data as of and for the three and nine months ended September 30, 2025 and 2024 has been derived from our unaudited condensed consolidated financial statements. Results for any interim period should not be construed as an inference of what our results would be for any full fiscal year or future period. This discussion and other parts of this Quarterly Report on Form 10-Q contain forward-looking statements, such as those relating to our plans, objectives, expectations, intentions, and beliefs, which involve risks and uncertainties. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the sections titled “Special Note Regarding Forward-Looking Statements” and “Part II, Item 1A. Risk Factors" in this Quarterly Report on Form 10-Q and in Part I, Item 1A, Risk Factors, in the Annual Report.

Overview

We are a mission-driven, lifestyle brand that operates at the intersection of design, technology, healthcare, and social enterprise.

Since day one, our focus on delighting customers and doing good has created a foundation for continuous innovation:

• We aim to provide customers with the highest-quality product possible by designing glasses at our headquarters in New York City, using custom materials, and selling direct to the customer. By cutting out the middleman, we are able to sell our products at a lower price than many of our competitors and pass the savings on to our customers. In addition to lower prices, we introduced simple, unified pricing (glasses starting at $95, including prescription lenses) to the eyewear market.
• We’ve built a seamless shopping experience that meets customers where and how they want to shop, whether that’s on our website, on our mobile app, or in our 313 retail stores as of September 30, 2025.
• We’ve crafted a holistic vision care offering that extends beyond glasses to include contacts, vision tests and eye exams, vision insurance, and more. We leverage leading (and in many cases proprietary) technology to enhance our customers’ experiences, whether it’s to help them find a better-fitting frame using our Virtual Try-On tool, or to update their prescription from home using Virtual Vision Test, our telehealth app.
• We recruit and retain highly engaged, motivated team members who are driven by our commitment to scaling a large, growing business while making an impact and are excited to connect their daily work back to our mission.
• We are a public benefit corporation focused on positively impacting all stakeholders, and hope to inspire other entrepreneurs and businesses to think along the same lines. Working closely with our nonprofit partners, we have distributed glasses to people in need in more than 80 countries globally and many parts of the United States. Over 20 million more people now have the glasses they need to learn, work, and achieve better economic outcomes through our Buy a Pair, Give a Pair program.

We generate revenue through selling our wide array of prescription and non-prescription eyewear, including glasses, sunglasses, and contact lenses. We also generate revenue from providing eye exams and vision tests, and selling eyewear accessories. We maintain data across the entire customer journey that allows us to develop deep insights, informing our innovation priorities and enabling us to create a highly personalized, brand-enhancing experience for our customers. We have built an integrated, omnichannel presence that we believe deepens our relationship with existing customers while broadening reach and accessibility. And while we have the ability to track where our customers transact, we’re channel agnostic to where the transaction takes place and find that many of our customers engage with us across both digital and physical channels; for example, many customers who check out online also visit a store throughout their customer journey, while others choose to browse online before visiting one of our stores.

Financial Highlights

For the three months ended September 30, 2025 and 2024:

• we generated net revenue of $221.7 million and $192.4 million, respectively;
• we generated gross profit of $119.9 million and $104.9 million, respectively, representing a gross margin of 54.1% and 54.5%, respectively;
• we generated net income of $5.9 million and net loss of $4.1 million, respectively; and
• we generated Adjusted EBITDA of $25.7 million and $17.3 million, respectively.

For the nine months ended September 30, 2025 and 2024:

• we generated net revenue of $659.9 million and $580.7 million, respectively;
• we generated gross profit of $359.5 million and $323.7 million, respectively, representing a gross margin of 54.5% and 55.7%, respectively;
• we generated net income of $7.6 million and net loss of $13.5 million, respectively; and
• we generated Adjusted EBITDA of $80.0 million and $59.3 million, respectively.

For a definition of Adjusted EBITDA, a non-GAAP measure, and a reconciliation to the most directly comparable GAAP measure, see the section titled “Key Business Metrics and Certain Non-GAAP Financial Measures.”

Recent Business Developments

In the second quarter of 2025, we announced a partnership with Google to develop AI-powered glasses intended for all-day wear. We are working closely with Google on the development of future smart glasses and intend to launch a series of products over time. As part of this collaboration, Google has committed up to $75 million for our product development and commercialization costs. In addition, Google has committed to investing up to $75 million in Warby Parker, at our option and subject to reaching certain collaboration milestones. This partnership has not resulted in a material financial impact during the three and nine months ended September 30, 2025.

Factors Affecting Our Financial Condition and Results of Operations

We believe that our performance and future success depend on a variety of factors that present significant opportunities for our business but also present risks and challenges that could adversely impact our growth and profitability, including those discussed below and throughout this Quarterly Report on Form 10-Q as well as in Part I, Item 1A. “Risk Factors” of the Annual Report.

Overall economic environment

The nature of our business, which involves the sale of products and services that are a medical necessity for many consumers, provides some insulation from swings in consumer sentiment and general economic conditions. However, our performance and growth are still impacted by these factors. Elevated inflation, interest rates, and government actions may affect consumer sentiment, while tariffs on imported goods, particularly eyewear sourced internationally, exert pressure on our cost structure. Furthermore, the uncertainty surrounding international trade policies and tariffs adds volatility and risk to our operations and financial results.

These factors, individually or collectively, may contribute to the softness in consumer demand, contribute to cost headwinds impacting gross margin, and affect our ability to attract and retain customers. We believe our business model, focused on providing an exceptional value and experience to our customers, along with mitigating measures we are taking, will help offset the impact of many of these macroeconomic factors. However, the extent of such mitigation and the impact on future results is uncertain. Our ongoing efforts to diversify and expand our supply chain network, both internationally with our frame manufacturers and domestically with our wholly owned and partner optical laboratories, has been a key strategy which we believe has helped to insulate us from supply chain disruption and allowed us to continue to meet growing customer demand over the last several years while maintaining our exceptional quality and customer satisfaction standards. We have implemented additional mitigation plans to offset the impact of increasing tariffs, including by continuing to diversify our supplier base in locations outside of China, making strategic price adjustments, and reducing planned expenses. However, given the complexity and fluidity of the global trade environment, these measures may not fully insulate the business from the financial impacts of current or future tariffs, the full extent and timing of which are difficult to predict.

Key Business Metrics and Certain Non-GAAP Financial Measures

In addition to the measures presented in our condensed consolidated financial statements, we use the following key business metrics and certain non-GAAP financial measures to evaluate our business, measure our performance, develop financial forecasts, and make strategic decisions. The following table summarizes our key performance indicators and non-GAAP financial measures for the periods period presented, which are unaudited.

(1) Store Count number at the end of the period indicated.

(2) Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. For more information regarding our use of these measures and a reconciliation of net income to Adjusted EBITDA and Adjusted EBITDA Margin, see the section titled "Adjusted EBITDA and Adjusted EBITDA Margin” below.

Active Customers

The number of Active Customers is a key performance measure that we use to assess the reach of our physical retail stores and digital platform as well as our brand awareness. We define an Active Customer as a unique customer account that has made at least one purchase in the trailing 12-month period. We determine our number of Active Customers by counting the total number of customer accounts that have made at least one purchase in the trailing 12-month period, measured from the last date of such period. Given our definition of a customer is a unique customer account that has made at least one purchase, it can include either an individual person or a household of more than one person utilizing a single account. We define Average Revenue per Customer as the sum of the total net revenues in the trailing 12-month period divided by the current period Active Customers.

Store Count

Store Count is a key performance measure that we track as we grow our retail footprint. Stores drive customer awareness of our brand and generate incremental demand for our products. We define Store Count as the total number of retail stores open at the end of a given period. We believe our retail stores embody our brand, drive brand awareness, and serve as efficient customer acquisition vehicles. Our results of operations have been and will continue to be affected by the timing and number of retail stores that we operate.

As of September 30, 2025, 275 out of our 313 retail stores offered in-person eye exams.

Adjusted EBITDA and Adjusted EBITDA Margin

We define Adjusted EBITDA as net income before interest and other income, taxes, and depreciation and amortization as further adjusted for asset impairment costs, stock-based compensation expense and related employer payroll taxes, amortization of cloud-based software implementation costs, non-cash charitable donations, charges for certain legal matters outside the ordinary course of business, and non-recurring costs such as restructuring costs and major system implementation costs. We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net revenue. We caution investors that amounts presented in accordance with our definitions of Adjusted EBITDA and Adjusted EBITDA Margin may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate these measures in the same manner. We present Adjusted EBITDA and Adjusted EBITDA Margin because we consider these metrics to be important supplemental measures of our performance and believe they are frequently used by securities analysts, investors, and other interested parties in the evaluation of companies in our industry. Management believes that investors’ understanding of our performance is enhanced by including these non-GAAP financial measures as a reasonable basis for comparing our ongoing results of operations.

Management uses Adjusted EBITDA and Adjusted EBITDA Margin:

• as a measurement of operating performance because they assist us in evaluating the operating performance of our business on a consistent basis, as they remove the impact of items not directly resulting from our core operations;
• for planning purposes, including the preparation of our internal annual operating budget and financial projections;
• to evaluate the performance and effectiveness of our operational strategies; and
• to evaluate our capacity to expand our business.

By providing these non-GAAP financial measures, together with a reconciliation to the most directly comparable GAAP measure, we believe we are enhancing investors’ understanding of our business and our results of operations, as well as assisting investors in evaluating how well we are executing our strategic initiatives. Adjusted EBITDA and Adjusted EBITDA Margin have limitations as analytical tools, and should not be considered in isolation, or as an alternative to, or a substitute for net loss or other financial statement data presented in our condensed consolidated financial statements as indicators of financial performance. Some of the limitations are:

• such measures do not reflect our cash expenditures, or future requirements for capital expenditures, or contractual commitments;
• such measures do not reflect changes in, or cash requirements for, our working capital needs;
• such measures do not reflect the interest expense, or the cash requirements necessary to service interest or principal payments on our debt;
• such measures do not reflect our tax expense or the cash requirements to pay our taxes;
• although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future and such measures do not reflect any cash requirements for such replacements; and
• other companies in our industry may calculate such measures differently than we do, limiting their usefulness as comparative measures.

Due to these limitations, Adjusted EBITDA and Adjusted EBITDA Margin should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP measures only supplementally. Each of the adjustments and other adjustments described in this paragraph and in the reconciliation table below help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations.

The following table reconciles Adjusted EBITDA and Adjusted EBITDA Margin to the most directly comparable GAAP measure, which is net income:

(in thousands)

(in thousands)

(1) Represents expenses related to the Company’s equity-based compensation programs and related employer payroll taxes, which may vary significantly from period to period depending upon various factors including the timing, number, and the valuation of awards granted, and vesting of awards including the satisfaction of performance conditions. For the three months ended September 30, 2025 and 2024, the amount includes $0.3 million and $0.2 million, respectively, of employer payroll taxes associated with releases of RSUs and option exercises. For the nine months ended September 30, 2025 and 2024, the amount includes $1.2 million and $0.7 million, respectively, of employer payroll taxes associated with releases of RSUs and option exercises.

(2) Represents charitable expense recorded in connection with the donation of 178,572 shares of Class A common stock in both May 2025 and May 2024 to the Warby Parker Impact Foundation.

(3) Represents costs related to the implementation of major new enterprise software systems.

(4) Represents one-time inventory write-downs primarily related to the decision to sunset our Home-Try On program at the end of this year.

(5) Represents restructuring costs incurred in the second quarter of 2025 and charges for certain legal matters outside the ordinary course of business.

Results of Operations

The results of operations presented below should be reviewed in conjunction with the condensed consolidated financial statements and notes included elsewhere in this Quarterly Report on Form 10-Q. The following tables set forth our results of operations for the periods presented in dollars and as a percentage of net revenue:

(in thousands)

(in thousands)

26

Components of Results of Operations

Net Revenue

We primarily derive revenue from the sales of eyewear products, optical services and accessories. We sell products and services through our stores, website, and mobile apps. Revenue generated from eyewear includes the sales of prescription and non-prescription optical glasses and sunglasses, contact lenses, eyewear accessories, lens replacements, and customer charges for optional expedited shipping. Revenue generated from vision care consists of in-person eye exams and prescriptions issued through the Virtual Vision Test app. Revenue from products is recognized when the customer takes possession of the product, either at the point of delivery or in-store pickup, and is recorded net of returns and discounts. Revenue for services is recognized when the service is rendered and is recorded net of discounts.

Cost of Goods Sold

Cost of goods sold includes the costs incurred to acquire materials, assemble, and sell our finished products. Such costs include (i) product costs, including freight and import costs and adjustments to the lesser of cost and net realizable value, (ii) optical laboratory costs, (iii) customer shipping, (iv) occupancy and depreciation costs of retail stores, and (v) employee-related costs associated with eye exams, which includes salaries, benefits, bonuses, and stock-based compensation. We expect our cost of goods sold to fluctuate as a percentage of net revenue primarily due to product mix, customer preferences and resulting demand, the cost and management of inventory, tariffs, shipping costs, laboratory utilization, and the scaling of our eye exam and contacts businesses. Cost of goods sold also may change as we open or close retail stores because of the resulting change in related occupancy and depreciation costs.

Gross Profit and Gross Margin

We define gross profit as net revenues less cost of goods sold. Gross margin is gross profit expressed as a percentage of net revenues. Our gross margin has remained steady historically, but may fluctuate in the future based on a number of factors, including the cost at which we can obtain, transport, and assemble our inventory, the rate at which we open new retail stores, the mix of products we sell, and how effective we can be at controlling costs, in any given period.

Selling, General, and Administrative Expenses

Selling, general, and administrative expenses, or SG&A, primarily consist of employee-related costs including salaries, benefits, bonuses, and stock-based compensation for our corporate and retail employees, marketing, information technology, credit card processing fees, donations in connection with our Buy a Pair, Give a Pair program, facilities, legal, and other administrative costs associated with operating the business. Marketing, which consist of both online and offline advertising, includes sponsored search, online advertising, Home Try-On program costs, and other initiatives. We expect SG&A to increase in absolute dollars over time and to fluctuate as a percentage of revenue due to the anticipated growth of our business, intentional investments in marketing, and changing prices of goods and services caused by inflation and other macroeconomic factors. SG&A is expensed in the period in which it is incurred.

Interest and Other Income, Net

Interest and other income, net, consists primarily of interest generated from our cash and cash equivalents balances net of interest incurred on borrowings and fees on our undrawn line of credit, and is recognized as incurred. We expect our interest and other income costs to fluctuate based on our future bank balances, credit line utilization, and the interest rate environment.

Provision for Income Taxes

Provision for income taxes consists of income taxes related to foreign and domestic federal and state jurisdictions in which we conduct business, adjusted for allowable credits, deductions, and valuation allowance against deferred tax assets.

Comparison of the Three Months Ended September 30, 2025 and 2024

Net Revenue

(in thousands)

Net revenue increased $29.2 million, or 15.2%, for the three months ended September 30, 2025 compared to the same period in 2024. Active Customers increased 9.3% and Average Revenue per Customer increased to $320 from $305 in the prior year period. Average Revenue per Customer growth was primarily driven by our glasses business, which benefited from selective price increases implemented during the second quarter and strong adoption of precision progressives, as well as an increase in customers purchasing contacts or eye exams along with glasses in the same transaction.

Cost of Goods Sold, Gross Profit, and Gross Margin

(in thousands)

Cost of goods sold increased by $14.2 million, or 16.2%, for the three months ended September 30, 2025 compared to the same period in 2024, and increased as a percentage of revenue over the same period, from 45.5% of revenue to 45.9% of revenue. The increase in cost of goods sold was primarily driven by increased product and fulfillment costs associated with our sales growth, particularly related to the growth in our contact lens offering, and increases in store occupancy costs and doctor headcount due to new retail stores.

Gross profit, calculated as net revenue less cost of goods sold, increased by $15.1 million, or 14.4%, for the three months ended September 30, 2025 compared to the same period in 2024, primarily due to the increase in net revenue over the same period.

Gross margin, expressed as a percentage and calculated as gross profit divided by net revenue, decreased by 40 basis points for the three months ended September 30, 2025 compared to the same period in 2024. The decrease in gross margin was primarily driven by the impact of tariffs on glasses, sales growth of contact lenses, which are sold at a lower margin than our other eyewear, and increased customer shipping costs. These impacts were partially offset by selective price increases in the second quarter and increased penetration of precision progressives and other lens enhancements.

Selling, General, and Administrative Expenses

(in thousands)

Selling, general, and administrative expenses increased $4.9 million, or 4.4%, for the three months ended September 30, 2025 compared to the same period in 2024. This increase was primarily driven by investments in marketing and higher payroll-related costs from growth in our retail workforce, partially offset by lower stock-based compensation, mostly related to the 2021 Founders Grant as award tranches finish expensing. As a percentage of revenue, SG&A decreased by 540 basis points, primarily driven by leverage from corporate expenses and our customer experience team, as well as lower stock-based compensation, partially offset by growth in marketing.

Interest and Other Income, Net

(in thousands)

Interest and other income, net decreased $0.7 million, or 23.3%, for the three months ended September 30, 2025 compared to the same period in 2024, primarily due to unfavorable fluctuations in foreign currency rates and lower interest rates on our increased cash and cash equivalents balance.

Provision for Income Taxes

(in thousands)

Provision for income taxes decreased $0.4 million, or 141.5%, for the three months ended September 30, 2025 compared to the same period in 2024, primarily due to the change in pre-tax income (loss) in addition to stock based compensation and the tax effects related to depreciation expense and research and development costs resulting from OBBBA.

Comparison of the Nine Months Ended September 30, 2025 and 2024

Net Revenue

(in thousands)

Net revenue increased $79.3 million, or 13.7%, for the nine months ended September 30, 2025 compared to the same period in 2024. Active Customers increased 9.3% and Average Revenue per Customer increased to $320 from $305 in the prior year period. Average Revenue per Customer growth was primarily driven by our glasses business, which benefited from strong adoption of precision progressives, selective price increases during the second quarter, and continued uptake of our higher priced frames, as well as an increase in customers purchasing contacts or eye exams along with glasses in the same transaction.

Cost of Goods Sold, Gross Profit, and Gross Margin

(in thousands)

Cost of goods sold increased by $43.4 million, or 16.9%, for the nine months ended September 30, 2025 compared to the same period in 2024, and increased as a percentage of revenue over the same period, from 44.3% of revenue to 45.5% of revenue. The increase in cost of goods sold was primarily driven by increased product and fulfillment costs associated with our sales growth, particularly related to the growth in our contact lens offering, as well as increases in store occupancy costs and doctor headcount due to new retail stores.

Gross profit, calculated as net revenue less cost of goods sold, increased by $35.8 million, or 11.1%, for the nine months ended September 30, 2025 compared to the same period in 2024, primarily due to the increase in net revenue over the same period.

Gross margin, expressed as a percentage and calculated as gross profit divided by net revenue, decreased by 120 basis points for the nine months ended September 30, 2025 compared to the same period in 2024. The decrease in gross margin was primarily driven by the sales growth of contact lenses, which are sold at a lower margin than our other eyewear, and increased store occupancy costs and doctor headcount as the number of stores grew from 269 at September 30, 2024 to 313 at September 30, 2025. These impacts were partially offset by increased penetration of our higher priced frames and lenses and selective price increases during the second quarter.

Selling, General, and Administrative Expenses

(in thousands)

Selling, general, and administrative expenses increased $13.6 million, or 4.0%, for the nine months ended September 30, 2025 compared to the same period in 2024. This increase was primarily driven by higher payroll-related costs from growth in our retail workforce and investments in marketing, partially offset by lower stock-based compensation, mostly related to the 2021 Founders Grant as award tranches finish expensing. As a percentage of revenue, SG&A decreased by 510 basis points, primarily driven by slower growth in corporate expenses and reduced stock-based compensation.

Interest and Other Income, Net

(in thousands)

30

Interest and other income, net decreased $1.3 million, or 16.9%, for the nine months ended September 30, 2025 compared to the same period in 2024, primarily due to lower interest rates on our increased cash and cash equivalents balance and unfavorable fluctuations in foreign currency rates.

Provision for Income Taxes

(in thousands)

Provision for income taxes decreased $0.2 million, or 30.9%, for the nine months ended September 30, 2025 compared to the same period in 2024, primarily due to the change in pre-tax income (loss) in addition to stock based compensation and the tax effects related to depreciation expense and research and development costs resulting from OBBBA.

Seasonality

Historically, we have observed moderately higher seasonal demand during the month of December due in part to customer usage of health and flexible spending benefits in the final week of the year. Consistent with our policy to recognize revenue upon order delivery, any orders placed at the end of December are recognized as revenue on delivery, which may occur in the following year, and as such we typically see revenue increase sequentially from the fourth quarter to the first quarter of the following year.

Our business has historically experienced a higher proportion of costs in each subsequent quarter as a year progresses due to the overall growth of the business and operating costs to support that growth, including costs related to the opening of new retail stores and employee-related compensation to support growth. The fourth quarter, in particular, has historically experienced the highest amount of costs in a year to support the business demand in the quarter, even though a portion of the net revenue from that demand is not recognized until January of the following year, as discussed above. In the future, seasonal trends may cause fluctuations in our quarterly results, which may impact the predictability of our business and operating results.

Liquidity and Capital Resources

Since inception, we have financed our operations primarily from net proceeds from the sale of redeemable convertible preferred stock and cash flows from operating activities. As of September 30, 2025, we had cash and cash equivalents of $280.4 million, which was primarily held for working capital purposes, and an accumulated deficit of $679.6 million. As of December 31, 2024, we had cash and cash equivalents of $254.2 million, which was primarily held for working capital purposes, and an accumulated deficit of $687.2 million.

We expect that operating losses could continue in the foreseeable future as we continue to invest in the expansion of our business. We believe our existing cash and cash equivalents, funds available under our existing credit facility, and cash flows from operating activities will be sufficient to fund our operations for at least the next 12 months.

2024 Credit Facility

In February 2024, the Borrowers entered into a Credit Agreement with JPMorgan Chase Bank, N.A. and the lenders party thereto (the “2024 Credit Facility”), which replaced a previous credit facility. The 2024 Credit Facility consists of a $120.0 million five-year revolving credit facility with sublimits of $15.0 million for letters of credit and $10.0 million for swingline loans. The 2024 Credit Facility includes an option for the Company to increase the available amount by up to $55.0 million, for a maximum borrowing capacity of $175.0 million, subject to the consent of the lenders funding the increase and certain other conditions. Proceeds of the borrowings under the 2024 Credit Facility are expected to be used for working capital and other general corporate purposes in the ordinary course of business. The Company is permitted to repay borrowings under the 2024 Credit Facility at any time, in whole or in part, without penalty.

Under the 2024 Credit Facility, borrowings under the revolving credit facility bear interest on the principal amount outstanding, at the Company’s election, at (a) the greater of the prime rate (as defined in the credit agreement) or 2.5%, plus an applicable margin of 0.65% to 0.90% depending on the Company’s leverage ratio or (b) adjusted SOFR (as defined in the credit agreement), plus an applicable margin of 1.65% to 1.90% depending on the Company’s leverage ratio. The Company is charged an unused commitment fee of 0.20% to 0.25% depending on the Company's leverage ratio. Both interest on principal and commitment fees are included in interest expense on the condensed consolidated statements of operations.

The 2024 Credit Facility contains a financial maintenance covenant which only applies while total borrowings exceed $30.0 million, which requires the Company to maintain a maximum consolidated senior net leverage ratio of 3:1. The 2024 Credit Facility contains customary affirmative and negative covenants, including limits on indebtedness, liens, capital expenditures, asset sales, investments and restricted payments, in each case subject to negotiated exceptions and baskets, as well as customary representations, warranties and event of default provisions. The obligations of the Borrowers under the 2024 Credit Agreement are secured by first-lien security interests in substantially all of the assets of the Borrowers. In addition, the obligations are required to be guaranteed in the future by certain additional domestic subsidiaries of the Company.

Other than letters of credit outstanding of $4.3 million as of both September 30, 2025 and December 31, 2024 used to secure certain leases in lieu of a cash security deposit, there were no other borrowings outstanding.

Cash Flows

The following table summarizes our cash flows for the periods presented:

(in thousands)

Cash Flows from Operating Activities

Net cash provided by operating activities was $87.5 million for the nine months ended September 30, 2025, consisting of net income of $7.6 million adjusted for $71.2 million of non-cash expenses and $8.7 million of net cash used as a result of changes in operating assets and liabilities. The non-cash charges included $37.2 million of depreciation and amortization, $28.3 million of stock-based compensation, $2.8 million of non-cash charitable contributions, $2.4 million of amortization of cloud-based software implementation costs, and $0.5 million of asset impairment charges. The changes in operating assets and liabilities were primarily driven by a decrease in inventory and an increase in accrued expenses and leasehold liabilities, partially offset by decreases in accounts payable and deferred revenue.

Net cash provided in operating activities was $78.8 million for the nine months ended September 30, 2024, consisting of net loss of $13.5 million, adjusted for $77.8 million of non-cash expenses and $14.5 million of net cash used as a result of changes in operating assets and liabilities. The non-cash charges included $38.7 million of stock-based compensation, $33.5 million of depreciation and amortization, $2.9 million of amortization of cloud-based software implementation costs, $2.2 million of non-cash charitable contributions, and $0.5 million of asset impairment charges. The changes in operating assets and liabilities were primarily driven by an increase in accounts payable and a decrease in inventory, partially offset by increased deferred revenue.

Cash Flows from Investing Activities

For the nine months ended September 30, 2025, net cash used in investing activities was $51.9 million related to purchases of property and equipment to support our growth, primarily related to the build-out of new retail stores and investments in capitalized software development costs.

For the nine months ended September 30, 2024, net cash used in investing activities was $48.3 million related to purchases of property and equipment to support our growth, primarily related to the build-out of new retail stores, investments in capitalized software development costs, and an investment in a private optical equipment company.

Cash Flows from Financing Activities

For the nine months ended September 30, 2025, net cash used in financing activities was $9.7 million, which was primarily related to cash paid for shares withheld for taxes for stock-based compensation, partially offset by proceeds from shares issued in connection with our ESPP.

For the nine months ended September 30, 2024, net cash provided by financing activities was $3.8 million, which was primarily related to proceeds from stock option exercises and shares issued in connection with our ESPP.

Contractual Obligations and Commitments

There have been no material changes to our contractual obligations from those described in the Annual Report.

Critical Accounting Policies and Estimates

Our condensed consolidated financial statements and the related notes thereto included elsewhere in this Quarterly Report on Form 10-Q are prepared in accordance with GAAP. The preparation of condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from our estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

Our critical accounting policies are described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in the Annual Report and the notes to the audited consolidated financial statements appearing elsewhere in the Annual Report, and in Note 2 to our condensed consolidated financial statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q. There were no significant changes to our critical accounting policies and estimates as reported in the Annual Report.

Recent Accounting Pronouncements

See Note 2 to our condensed consolidated financial statements included in Part 1, Item 1 of this Quarterly Report on Form 10-Q for more information regarding recent accounting pronouncements.

Market risk represents the risk of loss that may impact our financial position because of adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure resulting from potential changes in currency rates, interest rates, or inflation.

Foreign Exchange Risk

We are exposed to changes in foreign currency rates as a result of our foreign operations and international suppliers from whom we purchase in Japanese yen and euros. Revenue and income generated by our operations in Canada and our foreign denominated cost of goods sold are impacted by changes in foreign currency exchange rates. We do not believe that foreign exchange rates have a material effect on our business, financial condition or results of operations.

Interest Rate Risk

Our cash and cash equivalents as of September 30, 2025 consisted of $280.4 million in cash and money-market funds. Such interest-earning instruments carry a degree of interest rate risk. The goals of our investment policy are liquidity and capital preservation. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate exposure. We believe that we do not have a material exposure to changes in the fair value of these assets as a result of changes in interest rates due to the short-term nature of our cash and cash equivalents.

Inflation Risk

We believe that inflation, including from geopolitical unrest and other macroeconomic factors, has had a limited impact on our business, financial condition, and results of operations. Inflation may, however, have an impact on raw materials, transportation, labor, construction, rent, and other costs which materially impact operations. If our costs become subject to significant inflationary pressures, we may not be able to fully offset such higher costs with increased revenue. Our inability or failure to do so could harm our business, financial condition, and results of operations.

Limitations on Effectiveness of Controls and Procedures

In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures must reflect the fact that there are resource constraints and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our co-principal executive officers and principal financial officer, evaluated, as of the end of the period covered by this Quarterly Report on Form 10-Q, the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act). Based on that evaluation, our co-principal executive officers and principal financial officer concluded that, as of September 30, 2025, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) during the quarter ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Except for the risk factor set forth below in this Item 1A, there have been no material changes to the risk factors affecting our business, financial condition, or future results from those set forth in Part I, Item 1A, Risk Factors, in the Annual Report. You should carefully consider the factors discussed in the Annual Report and in this Quarterly Report on Form 10-Q, which could materially affect our business, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

Changes to U.S. or other countries' trade policies and tariff and import/export regulations may have an adverse effect on our business, financial condition, and results of operations.

We source components that go into the manufacturing of our products from suppliers located in China, Italy, Vietnam and Japan. In recent months, the U.S. government has announced new or heightened tariffs on product imports from certain countries, including China, Italy, Vietnam and Japan, and, as a result, there is an increase in costs with respect to our products subject to these tariffs. These additional tariffs, and the threat of future tariffs, have introduced significant uncertainty into the market.

If our mitigation efforts to offset the full impact of current and future tariffs are not successful, or if there is a further escalation of tariffs, costs on a significant portion of our products may increase further, which could reduce our margins or force us to further raise prices, and our financial results may be negatively affected. Additionally, deteriorating macroeconomic conditions, including escalating tariffs, could result in increased uncertainty and lead to reduced consumer spending, an economic slowdown or recession, which could in turn negatively affect our business, results of operations and financial condition.