Warby Parker Inc. and Subsidiaries
Condensed Consolidated Balance Sheets (Unaudited)
(Amounts in thousands, except share data) | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Assets | | | |
Current assets: | | | |
Cash and cash equivalents | $ | 230,324 | | | $ | 256,416 | |
Accounts receivable, net | 830 | | | 992 | |
Inventory | 64,253 | | | 57,095 | |
Prepaid expenses and other current assets | 16,746 | | | 13,477 | |
Total current assets | 312,153 | | | 327,980 | |
| | | |
Property and equipment, net | 121,253 | | | 112,195 | |
Right-of-use lease assets | 109,737 | | | — | |
Other assets | 1,523 | | | 471 | |
Total assets | $ | 544,666 | | | $ | 440,646 | |
| | | |
Liabilities and Stockholders’ Equity | | | |
Current liabilities: | | | |
Accounts payable | $ | 32,535 | | | $ | 30,890 | |
Accrued expenses | 56,317 | | | 60,840 | |
Deferred revenue | 19,424 | | | 22,073 | |
Current lease liabilities | 18,518 | | | — | |
Other current liabilities | 1,948 | | | 4,301 | |
Total current liabilities | 128,742 | | | 118,104 | |
| | | |
Deferred rent | — | | | 36,544 | |
Non-current lease liabilities | 132,824 | | | — | |
Other liabilities | 2,217 | | | — | |
Total liabilities | 263,783 | | | 154,648 | |
Commitments and contingencies (see Note 9) | | | |
Stockholders’ equity: | | | |
Common stock, $0.0001 par value; Class A: 750,000,000 shares authorized at March 31, 2022 and December 31, 2021, 95,114,017 and 94,901,623 issued and outstanding at March 31, 2022 and December 31, 2021, respectively; Class B: 150,000,000 shares authorized at March 31, 2022 and December 31, 2021, 18,854,555 and 18,719,184 shares issued and outstanding as of March 31, 2022 and December 31, 2021, respectively, convertible to Class A on a one-to-one basis | 11 | | | 11 | |
Additional paid-in capital | 808,222 | | | 779,212 | |
Accumulated deficit | (527,374) | | | (493,241) | |
Accumulated other comprehensive income | 24 | | | 16 | |
Total stockholders’ equity | 280,883 | | | 285,998 | |
Total liabilities and stockholders’ equity | $ | 544,666 | | | $ | 440,646 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Warby Parker Inc. and Subsidiaries
Condensed Consolidated Statements of Operations and Comprehensive (Loss) Income (Unaudited)
(Amounts in thousands, except share and per share data) | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
| | | |
Net revenue | $ | 153,218 | | | $ | 138,973 | |
Cost of goods sold | 63,572 | | | 55,192 | |
Gross profit | 89,646 | | | 83,781 | |
| | | |
Selling, general, and administrative expenses | 123,386 | | | 80,760 | |
(Loss) income from operations | (33,740) | | | 3,021 | |
| | | |
Interest and other income, net | 146 | | | 134 | |
| | | |
(Loss) income before income taxes | (33,594) | | | 3,155 | |
Provision for income taxes | 539 | | | 144 | |
Net (loss) income | $ | (34,133) | | | $ | 3,011 | |
| | | |
Deemed dividend upon redemption of redeemable convertible preferred stock | $ | — | | | $ | (4,613) | |
Net loss attributable to common stockholders | $ | (34,133) | | | $ | (1,602) | |
| | | |
Net loss per share attributable to common stockholders, basic and diluted | $ | (0.30) | | | $ | (0.03) | |
Weighted average shares used in computing net loss per share attributable to common stockholders, basic and diluted | 114,103,766 | | | 53,946,980 | |
| | | |
Other comprehensive (loss) income | | | |
Foreign currency translation adjustment | $ | 8 | | | $ | (224) | |
Total comprehensive (loss) income | $ | (34,125) | | | $ | 2,787 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Warby Parker Inc. and Subsidiaries
Condensed Consolidated Statements of Changes in Redeemable Convertible Preferred Stock and Stockholders’ (Deficit) Equity (Unaudited)
(Amounts in thousands) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Redeemable Convertible Preferred Stock | | | Common Stock | | Class A and Class B Common Stock | | Additional Paid-In Capital | | Accumulated Other Comprehensive Income (Loss) | | Accumulated Deficit | | Total Stockholders’ (Deficit) Equity |
| Shares | | Amount | | | Shares | | Amount | | Shares | | Amount | |
Balance as of December 31, 2020 | 54,042 | | | $ | 506,510 | | | | 53,944 | | | $ | 5 | | | — | | | — | | | $ | 127,179 | | | $ | 109 | | | $ | (325,390) | | | $ | (198,097) | |
Stock option exercises | — | | | — | | | | 64 | | | — | | | — | | | — | | | 157 | | | — | | | — | | | 157 | |
Stock repurchases | (220) | | | (790) | | | | (27) | | | — | | | — | | | — | | | — | | | — | | | (5,274) | | | (5,274) | |
Stock-based compensation | — | | | — | | | | — | | | — | | | — | | | — | | | 1,261 | | | — | | | — | | | 1,261 | |
Other comprehensive income | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | (224) | | | — | | | (224) | |
Net loss | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | 3,011 | | | 3,011 | |
Balance as of March 31, 2021 | 53,822 | | | $ | 505,720 | | | | 53,981 | | | $ | 5 | | | $ | — | | | $ | — | | | $ | 128,597 | | | $ | (115) | | | $ | (327,653) | | | $ | (199,166) | |
| | | | | | | | | | | | | | | | | | | | |
Balance as of December 31, 2021 | — | | | $ | — | | | | — | | | $ | — | | | 113,621 | | | 11 | | | $ | 779,212 | | | $ | 16 | | | $ | (493,241) | | | $ | 285,998 | |
Stock option exercises | — | | | — | | | | — | | | — | | | 201 | | | — | | | 1,866 | | | — | | | — | | | 1,866 | |
Restricted stock unit releases | — | | | — | | | | — | | | — | | | 147 | | | — | | | — | | | — | | | — | | | — | |
Stock-based compensation | — | | | — | | | | — | | | — | | | — | | | — | | | 27,144 | | | — | | | — | | | 27,144 | |
Other comprehensive income | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | 8 | | | — | | | 8 | |
Net loss | — | | | — | | | | — | | | — | | | — | | | — | | | — | | | — | | | (34,133) | | | (34,133) | |
Balance as of March 31, 2022 | — | | | $ | — | | | | — | | | $ | — | | | 113,969 | | | $ | 11 | | | $ | 808,222 | | | $ | 24 | | | $ | (527,374) | | | $ | 280,883 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Warby Parker Inc. and Subsidiaries
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Amounts in thousands) | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Cash flows from operating activities | | | |
Net (loss) income | $ | (34,133) | | | $ | 3,011 | |
Adjustments to reconcile net (loss) income to net cash provided by operating activities: | | | |
Depreciation and amortization | 7,137 | | | 4,704 | |
Stock-based compensation | 27,144 | | | 1,261 | |
| | | |
Change in operating assets and liabilities: | | | |
Accounts receivable, net | 163 | | | 83 | |
Inventory | (7,147) | | | (2,027) | |
Prepaid expenses and other assets | (4,316) | | | (1,253) | |
Accounts payable | 751 | | | (627) | |
Accrued expenses | (2,158) | | | (2,088) | |
Deferred revenue | (2,654) | | | (9,418) | |
Other current liabilities | 129 | | | 1,777 | |
Deferred rent | — | | | 1,302 | |
Right-of-use lease assets and current and non-current lease liabilities | 2,571 | | | — | |
Other liabilities | 2,217 | | | (2) | |
Net cash used in operating activities | (10,296) | | | (3,277) | |
Cash flows from investing activities | | | |
Purchases of property and equipment | (16,060) | | | (8,686) | |
Net cash used in investing activities | (16,060) | | | (8,686) | |
Cash flows from financing activities | | | |
Proceeds from stock option exercises | 180 | | | 157 | |
| | | |
| | | |
Stock repurchases | — | | | (6,064) | |
| | | |
| | | |
| | | |
Net cash provided by (used in) financing activities | 180 | | | (5,907) | |
Effect of exchange rates on cash | 84 | | | (194) | |
Net decrease in cash and cash equivalents | (26,092) | | | (18,064) | |
Cash and cash equivalents | | | |
Beginning of year | 256,416 | | | 314,085 | |
End of year | $ | 230,324 | | | $ | 296,021 | |
Supplemental disclosures | | | |
Cash paid for income taxes | $ | 34 | | | $ | 131 | |
Cash paid for interest | 35 | | | 42 | |
Non-cash investing and financing activities: | | | |
Purchases of property and equipment included in accounts payable and accrued expenses | $ | 4,241 | | | $ | 3,824 | |
Related party loans issued in connection with stock option exercises | — | | | 13,827 | |
The accompanying notes are an integral part of these condensed consolidated financial statements.
Warby Parker Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Amounts in thousands, except share data)
1. Description of Business
Warby Parker Inc., a public benefit corporation founded in 2010 (together with its wholly owned subsidiaries, the “Company”), is a founder-led, mission-driven lifestyle brand that sits at the intersection of technology, design, healthcare, and social enterprise. The Company offers holistic vision care by selling eyewear products and providing optical services directly to consumers through its retail stores and e-commerce platform. For every pair of glasses or sunglasses sold, the Company helps distribute a pair of glasses to someone in need through its Buy a Pair, Give a Pair program. The Company is headquartered in New York, New York.
Direct Listing
On September 29, 2021, the Company completed a direct listing of its Class A common stock (the “Direct Listing”) on the New York Stock Exchange (“NYSE”). The Company incurred fees related to financial advisory services, audit, and legal expenses in connection with the Direct Listing which are recorded in selling, general, and administrative expenses of $0.3 million for the three months ended March 31, 2021.
2. Summary of Significant Accounting Policies
Basis of Presentation
The Company’s unaudited condensed consolidated financial statements have been prepared and are presented in accordance with United States generally accepted accounting principles (“U.S. GAAP”). Certain information and disclosures normally included in consolidated financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to the applicable rules and regulations of the Securities and Exchange Commission. Accordingly, these condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements for the year ended December 31, 2021 and the related notes. The December 31, 2021 condensed consolidated balance sheet was derived from our audited consolidated financial statements as of that date. Our unaudited interim condensed consolidated financial statements include, in the opinion of management, all adjustments, consisting of normal and recurring items, necessary for the fair presentation of the condensed consolidated financial statements. There have been no significant changes in accounting policies during the three months ended March 31, 2022 from those disclosed in the audited consolidated financial statements for the year ended December 31, 2021 and the related notes, except for the adoption of new accounting pronouncements as noted under the heading Recently Adopted Accounting Pronouncements below.
Principles of Consolidation
The condensed consolidated financial statements include the financial statements of Warby Parker Inc., and its wholly owned subsidiaries. The Company has consolidated certain entities meeting the definition of a variable interest entity as the Company concluded that it is the primary beneficiary of the entities. The inclusion of these entities does not have a material impact on its condensed consolidated financial statements. Intercompany balances and transactions have been eliminated in consolidation.
Use of Estimates
The Company prepares its condensed consolidated financial statements in conformity with U.S. GAAP. These principles require management to make certain estimates and assumptions during the preparation of its condensed consolidated financial statements and accompanying notes. Actual results could differ from those estimates.
Management’s estimates are based on historical experience and on various other market-specific and relevant assumptions that management believes to be reasonable under the circumstances. Significant estimates underlying the accompanying condensed consolidated financial statements include, but are not limited to (i) the valuation of inventory, including the determination of the net realizable value, (ii) reserves for sales returns, (iii) the useful lives and recoverability of long-lived assets, (iv) shipment times included in the calculation of deferred revenue, (v) the determination of deferred income taxes, including related valuation allowances, (vi) allowances for doubtful accounts, and (vii) assumptions related to the valuation of common stock and determination of stock-based compensation.
Emerging Growth Company Status
The Company is an emerging growth company, as defined in the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”). Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act, until such time as those standards apply to private companies.
Warby Parker Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Amounts in thousands, except share data)
The Company has elected to use this extended transition period for complying with new or revised accounting standards that have different effective dates for public and private companies. As a result, the Company’s condensed consolidated financial statements may not be comparable to financial statements of issuers who are required to comply with the effective dates for new or revised accounting standards based on public company effective dates.
Segment Information
Operating segments are defined as components of an enterprise for which separate financial information is evaluated regularly by the chief operating decision maker (“CODM”), who makes decisions about allocating resources and assessing performance. The Company defines its CODM as its co-Chief Executive Officers. The Company has identified one operating segment. When evaluating the Company’s performance and allocating resources, the CODM relies on financial information prepared on a consolidated basis.
Concentration of Credit Risk and Major Suppliers
Financial instruments that potentially subject the Company to significant concentrations of credit risk consist principally of cash and cash equivalents. The Company maintains its cash and cash equivalents in various accounts, which, at times, may exceed the limits insured by the Federal Deposit Insurance Corporation of $250 thousand per institution and the Canada Deposit Insurance Corporation of $100 thousand Canadian dollars. At March 31, 2022 and December 31, 2021, uninsured cash balances were approximately $229.0 million and $255.0 million, respectively. The Company has not experienced any concentration losses related to its cash and cash equivalents to date. The Company seeks to minimize its credit risk by maintaining its cash and cash equivalents with high-quality financial institutions and monitoring the credit standing of such institutions.
The Company’s top five inventory suppliers accounted for approximately 23% and 22% of cost of goods sold for the three months ended March 31, 2022 and 2021, respectively.
Cash and Cash Equivalents
The Company considers all highly liquid short-term investments with an original maturity of three months or less to be a cash equivalent. Cash and cash equivalents include both deposits with banks and financial institutions and receivables from credit card issuers, which are typically converted into cash within two to four days of capture. As such, these receivables are recorded as a deposit in transit as a component of cash and cash equivalents on the condensed consolidated balance sheets. At March 31, 2022 and December 31, 2021, the balance of receivables from credit card issuers included within cash and cash equivalents was $3.4 million and $6.3 million, respectively.
Inventory
Inventory consists of approximately $14.3 million and $14.1 million of finished goods, including ready-to-wear sun frames, contact lenses, and eyeglass cases, as of March 31, 2022 and December 31, 2021, respectively, and approximately $50.0 million and $43.0 million of component parts, including optical frames and prescription optical lenses, as of March 31, 2022 and December 31, 2021, respectively. Inventory is stated at the lower of cost or net realizable value, with cost determined on a weighted average cost basis.
The Company continuously evaluates the composition of its inventory and makes adjustments when the cost of inventory is not expected to be fully recoverable. The estimated net realizable value of inventory is determined based on an analysis of historical sales trends, the impact of market trends and economic conditions, and a forecast of future demand. Adjustments for damaged inventory are recorded primarily based on actual damaged inventory. Adjustments for inventory shrink, representing the physical loss of inventory, include estimates based on historical experience, and are adjusted based upon physical inventory counts. However, unforeseen adverse future economic and market conditions, such as those resulting from disease pandemics and other catastrophic events, could result in actual results differing materially from estimates.
COVID-19
The COVID-19 pandemic caused personal and business disruption worldwide beginning in January 2020, and continues to impact global economies and supply chains. Early on in the pandemic, we temporarily closed our retail stores, transitioned our Corporate and Customer Experience teams to remote work, and implemented robust safety and sanitization protocols. In the first quarter of 2022, our business continued to experience disruption caused by the pandemic, including changes to consumer shopping patterns as well as varying levels of restrictions in our physical locations implemented by national, state, and local authorities. Although the Company continues to monitor the situation and may adjust its current policies as more information and public health guidance become available, precautionary measures that have been adopted have and will negatively affect the Company’s ability to sell its
Warby Parker Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Amounts in thousands, except share data)
products and fulfill customer orders and the operations of its suppliers and fulfillment partners. More generally, the continued outbreak of COVID-19 and its variants could adversely affect economies and financial markets globally, contributing to an economic downturn, which could decrease consumer spending and adversely affect demand for the Company’s products and services. It is not possible at this time to estimate the impact that COVID-19 could have on the Company’s business, as the impact will depend on future developments, which are highly uncertain and cannot be predicted.
Revenue Recognition
The Company primarily derives revenue from the sales of eyewear products, optical services and accessories. The Company sells products and services through its stores, website, and mobile apps. Revenue generated from eyewear products includes the sales of prescription and non-prescription optical glasses and sunglasses, contact lenses, eyewear accessories, and expedited shipping charges, which are charged to the customer, associated with these purchases. All revenue is reported net of sales taxes collected from customers on behalf of taxing authorities and variable consideration, including returns and discounts.
Revenue is recognized when performance obligations are satisfied through either the transfer of control of promised goods or the rendering of services to the Company's customers. Control transfers once a customer has the ability to direct the use of, and obtain substantially all of the benefits from, the product, which is generally determined to be the point of delivery or upon rendering of the service in the case of eye exams. This includes the transfer of legal title, physical possession, the risks and rewards of ownership, and customer acceptance. In the normal course of business, payment may be collected from the customer prior to recognizing revenue and such cash receipts are included in deferred revenue until the order is delivered to the customer. Substantially all of the deferred revenue included in the balance sheet at December 31, 2021 was recognized as revenue in the first quarter of 2022 and the Company expects substantially all of the deferred revenue at March 31, 2022 to be recognized as revenue in the second quarter of 2022.
The Company’s sales policy allows customers to return merchandise for any reason within 30 days of receipt, generally for an exchange or refund. An allowance is recorded within other current liabilities on the condensed consolidated balance sheets for expected future customer returns which the Company estimates using historical return patterns and its expectation of future returns. Any difference between the actual return and previous estimates is adjusted in the period in which such returns occur. Historical return estimates have not materially differed from actual returns in any of the periods presented. The allowance for returns was $1.9 million and $1.8 million at March 31, 2022 and December 31, 2021, respectively.
The Company offers non-expiring gift cards to its customers. Proceeds from the sale of gift cards are initially deferred and recognized within deferred revenue on the condensed consolidated balance sheets, and are recognized as revenue when the product is received by the customer after the gift card has been tendered for payment. Based on historical experience, and to the extent there is no requirement to remit unclaimed card balances to government agencies under unclaimed property laws, an estimate of the gift card balances that will never be redeemed is recognized as revenue in proportion to gift cards which have been redeemed. While the Company will continue to honor all gift cards presented for payment, management may determine the likelihood of redemption to be remote for certain card balances due to, among other things, long periods of inactivity.
Warby Parker Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Amounts in thousands, except share data)
The following table disaggregates the Company’s revenue by product: | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Eyewear products | $ | 147,318 | | | $ | 134,674 | |
Services and other | 5,900 | | | 4,299 | |
Total Revenue | $ | 153,218 | | | $ | 138,973 | |
The following table disaggregates the Company’s revenue by channel: | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
E-commerce | $ | 67,005 | | | $ | 78,182 | |
Retail | 86,213 | | | 60,791 | |
Total Revenue | $ | 153,218 | | | $ | 138,973 | |
Leases
The Company records a lease liability and corresponding right-of-use (“ROU”) asset at lease commencement. The lease liability is measured at the present value of non-cancellable future lease payments over the lease term, minus expected tenant improvement allowances (“TIAs”) determined to be lease incentives. The ROU asset is measured at the lease liability amount, adjusted for prepaid lease payments, TIAs expected to be received, and any initial direct costs.
When calculating the present value of future lease payments, the Company utilizes an incremental borrowing rate, which incorporates several factors including the lease term, U.S. Treasury bond rates, financial ratios related to earnings and cash flows, and other comparisons with similarly sized companies.
Many of the Company’s leases contain TIA provisions, which represent contractual amounts receivable from a lessor for improvements to the leased property made by the Company which are determined to represent lease incentives. The Company considers TIAs to be reasonably certain to collect, and includes them in the present value calculation when determining the ROU assets and lease liabilities for new leases. The benefit from a TIA is amortized through rent expense over the term of the related lease.
The recognition of rent expense for an operating lease commences on the date at which control and possession of the property is obtained. Rent expense is calculated by recognizing total fixed minimum rental payments, net of any TIAs or other rental concessions, on a straight-line basis over the lease term. Some of the Company’s retail leases contain percent of sales rent or similar provisions, which is recognized as incurred as variable rent. Retail, optical laboratory, and distribution center rent expense is recognized as a component of cost of goods sold and all other rent expense is recognized as a component of selling, general, and administrative expenses.
Recently Adopted Accounting Pronouncements
In February 2016, the Financial Standards Accounting Board (“FASB”) issued Accounting Standards Codification No. 2016-02, Leases (Topic 842) (“ASC 842”), which increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. The Company adopted this standard as of January 1, 2022, using a modified retrospective transition approach without adjusting the comparative periods presented.
The new standard provides a number of optional practical expedients in transition. The Company elected practical expedients permitted under ASC 842, specifically to not reassess its prior conclusions about lease identification, to not reassess lease classification, and to not reassess initial direct costs. The Company did not elect the practical expedient allowing the use of hindsight which would require the Company to reassess the lease term of its leases based on all facts and circumstances through the effective date and did not elect the practical expedient pertaining to land easements as this is not applicable to the current contract portfolio.
Warby Parker Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Amounts in thousands, except share data)
The most significant financial statement impact of ASC 842 related to the recognition of right-of-use assets and lease liabilities on the condensed consolidated balance sheets for our retail stores, corporate offices, optical laboratories, and distribution center operating leases based on the present value of total fixed payments. Upon adoption, the Company recorded right-of-use assets of $109.4 million, lease liabilities of $146.2 million, and other liabilities of $2.2 million, and reclassified historical deferred rent and tenant improvement allowance balances of $39.0 million to operating lease right-of-use assets. The adoption did not impact the condensed consolidated statements of operations or retained earnings. The impact of the adoption of ASC 842 on the condensed consolidated balance sheet is as follows:
| | | | | | | | | | | | | | | | | |
| December 31, 2021 | | Impact of ASC 842 Adoption | | January 1, 2022 |
Assets | | | | | |
Current assets | $ | 327,980 | | | $ | — | | | $ | 327,980 | |
Property and equipment, net | 112,195 | | | — | | | 112,195 | |
Right-of-use lease assets | — | | | 109,374 | | (1) | 109,374 | |
Other assets | 471 | | | — | | | 471 | |
Total assets | $ | 440,646 | | | $ | 109,374 | | | $ | 550,020 | |
| | | | | |
Liabilities and stockholders' deficit | | | | | |
Current liabilities: | | | | | |
Accounts payable | $ | 30,890 | | | $ | — | | | $ | 30,890 | |
Accrued expenses | 60,840 | | | — | | | 60,840 | |
Deferred revenue | 22,073 | | | — | | | 22,073 | |
Current lease liabilities | — | | | 14,710 | | (2) | 14,710 | |
Other current liabilities | 4,301 | | | (2,484) | | (3) | 1,817 | |
Total current liabilities | 118,104 | | | 12,226 | | | 130,330 | |
| | | | | |
Deferred rent | 36,544 | | | (36,544) | | (3) | — | |
Non-current lease liabilities | — | | | 131,492 | | (2) | 131,492 | |
Other liabilities | — | | | 2,200 | | (4) | 2,200 | |
Total liabilities | 154,648 | | | 109,374 | | | 264,022 | |
Stockholders' equity | 285,998 | | | — | | | 285,998 | |
Total liabilities and stockholders' deficit | $ | 440,646 | | | $ | 109,374 | | | $ | 550,020 | |
(1) Represents the recognition of operating lease right-of-use assets, reflecting lease rights and the reclassifications of deferred rent and tenant allowances.
(2) Represents the recognition of current and non-current lease liabilities for fixed payments associated with the Company’s operating leases.
(3) Represents the reclassification of current and non-current deferred rent and tenant improvement allowances to operating lease right-of-use assets.
(4) Represents the recognition of negative operating lease right-of-use assets into other liabilities. This typically occurs when a lease contains TIAs but most or all of the cash rent is variable in nature and does not result in a lease liability.
In January 2016, the FASB issued ASU 2016-13, Financial Instruments—Credit Losses (“ASU 2016-13”), and additional changes, modifications, clarifications or interpretations related to this guidance thereafter, which require a reporting entity to estimate credit losses on certain types of financial instruments, and present assets held at amortized cost and available for-sale debt securities at the amount expected to be collected. The Company early adopted this guidance as of January 1, 2022 using the modified retrospective approach. The Company considered its accounts receivable balance, mainly consisting of amounts due from insurance carriers, and the related reserve for uncollectible accounts which is assessed primarily based on the aging of the related receivables. The Company considered other relevant factors such as counterparty creditworthiness, historical collections, receivable terms, and the size of the individual receivables when determining the reserve. The adoption of ASU 2016-13 did not have a material impact on the Company’s condensed consolidated financial statements or related disclosures.
Warby Parker Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Amounts in thousands, except share data)
Recently Issued Accounting Pronouncements
The Company has considered all new accounting pronouncements issued during the three months ended March 31, 2022 and does expect any to have a material impact on its condensed consolidated financial statements.
3. Property and Equipment, Net
Property and equipment, net consists of the following: | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Leasehold improvements | $ | 116,812 | | | $ | 110,948 | |
Computers and equipment | 25,788 | | | 23,084 | |
Furniture and fixtures | 19,771 | | | 17,473 | |
Capitalized software | 14,203 | | | 13,389 | |
Construction in process | 13,247 | | | 10,992 | |
| 189,821 | | | 175,886 | |
Less: accumulated depreciation and amortization | (68,568) | | | (63,691) | |
Property and equipment, net | $ | 121,253 | | | $ | 112,195 | |
Depreciation and amortization expense consisted of the following: | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Cost of goods sold | $ | 4,648 | | | $ | 3,411 | |
Selling, general, and administrative expenses | 2,489 | | | 1,293 | |
Total depreciation and amortization expense | $ | 7,137 | | | $ | 4,704 | |
4. Accrued Expenses
Accrued expenses consists of the following: | | | | | | | | | | | |
| March 31, 2022 | | December 31, 2021 |
Unvested early exercised stock options | $ | 12,710 | | | $ | 14,396 | |
Payroll related costs | 8,655 | | | 11,851 | |
Marketing expenses | 9,006 | | | 12,061 | |
Optical laboratory and inventory costs | 7,789 | | | 5,325 | |
Charitable contributions | 5,125 | | | 5,639 | |
Other accrued expenses | 13,032 | | | 11,568 | |
Total accrued expenses | $ | 56,317 | | | $ | 60,840 | |
5. Income Taxes
The Company uses the estimated annual effective tax rate approach to determine the provision for income taxes. The estimated annual effective tax rate is based on forecasted annual results and may fluctuate due to differences between the forecasted and actual results, changes in valuation allowances, and any other transactions that result in differing tax treatment.
Warby Parker Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Amounts in thousands, except share data)
The Company recorded $0.5 million and $0.1 million of income tax expense for the three months ended March 31, 2022 and 2021, respectively. The Company’s effective tax rates for the three months ended March 31, 2022 and 2021 was 1.6% and 4.5%, respectively.
The Company’s estimated annual effective income tax rate for the three months ended March 31, 2022 and 2021 differed from the statutory rate primarily due to the valuation allowance, non-deductible executive compensation, stock-based compensation, differences in tax rates in state and foreign jurisdictions, and other permanent items.
6. Redeemable Convertible Preferred Stock and Stockholders’ Equity
Common Stock
As of March 31, 2022, the Company’s Twelfth Amended and Restated Certificate of Incorporation authorizes the issuance of up to 1,050,000,000 shares of common stock, par value of $0.0001 per share, of which 750,000,000 shares are designated Class A common stock, 150,000,000 shares are designated Class B common stock, and 150,000,000 shares are designated Class C common stock. Class A common stock receives one vote per share, Class B common stock receives ten votes per share, and Class C common stock has no voting rights except as required by Delaware law. Common stock is not redeemable at the option of the holder.
As of March 31, 2022, outstanding shares of common stock as well as shares of common stock attributable to stock options, restricted stock units (“RSUs”), and performance stock units (“PSUs”) were as follows: | | | | | | | | | | | | | | | | | |
| Class A | | Class B | | Class C |
Common stock outstanding | 95,114,017 | | | 18,854,555 | | | — | |
Employee stock options – outstanding | 1,207,383 | | | 2,216,430 | | | — | |
Restricted stock units – outstanding | 1,495,498 | | | 2,075,254 | | | — | |
Performance stock units – outstanding | — | | | 4,397,688 | | | — | |
Employee stock plans – available | 20,527,664 | | | — | | | — | |
Shares of Class A common stock issuable upon conversion of all outstanding Class B common stock, options, RSUs, and PSUs | 27,543,927 | | | — | | | — | |
Total common stock – outstanding or issuable on exercise of options | 145,888,489 | | | 27,543,927 | | | — | |
Authorized | 750,000,000 | | | 150,000,000 | | | 150,000,000 | |
Common stock available for future issuance | 604,111,511 | | | 122,456,073 | | | 150,000,000 | |
| | | | | |
| | | | | |
Redeemable Convertible Preferred Stock
All classes of redeemable convertible preferred stock were convertible by the holder into shares of Series A common stock at the then applicable conversion price. In the event of liquidation of the Company (including certain events outside of the Company’s control such as a change in control), the holders of redeemable convertible preferred stock were entitled to a liquidation preference equal to the respective original issue price plus declared and unpaid dividends ahead of the classes of common stock described above. In September 2021, in connection with the Direct Listing, all outstanding shares of redeemable convertible preferred stock were converted to Class A common stock at a one-to-one ratio. As of March 31, 2022, 50,000,000 preferred shares were authorized and no shares were outstanding.
Warby Parker Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Amounts in thousands, except share data)
Stock Repurchases
During the three months ended March 31, 2022, the Company did not repurchase stock. In February 2021, the Company repurchased shares of common stock and redeemable convertible preferred stock directly from investors as follows:
| | | | | | | | | | | |
| Number of Shares Repurchased | | Amount Paid |
Series A common stock | 26,931 | | | $ | 661 | |
Series AA redeemable convertible preferred stock | 160,136 | | | 3,928 | |
Series D redeemable convertible preferred stock | 60,137 | | | 1,475 | |
Total repurchases | 247,204 | | | $ | 6,064 | |
The stock was considered constructively retired when repurchased. For the redeemable convertible preferred stock, the $4.6 million excess of repurchase price over carrying value was recorded to accumulated deficit on the condensed consolidated balance sheet. For the common stock, the excess of repurchase price over par value of $0.7 million was recorded to accumulated deficit on the condensed consolidated balance sheet.
7. Stock-Based Compensation
Plans and Awards
The Company’s eligible employees participate in various stock-based compensation plans, which are provided by the Company directly.
In August 2021, the board of directors approved the 2021 Incentive Award Plan (the “2021 Plan”). The plan became effective on September 28, 2021, the day prior to the Direct Listing of the Company’s Class A common stock, and the Company no longer grants equity awards under any prior equity plan. Upon the 2021 Plan becoming effective, there were 11,076,515 shares of Class A common stock authorized under the 2021 Plan, and the remaining shares available for issuance under the 2010 Equity Incentive Plan, 2011 Stock Plan, 2012 Milestone Stock Plan, and 2019 Founder Stock Plan (collectively, the “Prior Plans” and, collectively with the 2021 Plan, the “Plans”) were also made available for issuance under the 2021 Plan. The shares authorized under the 2021 Plan will increase annually, beginning on January 1, 2022 and continuing through 2031, by the lesser of (i) 5% of the outstanding common stock (on an as converted basis) as of the last day of the immediately preceding fiscal year, or (ii) a smaller amount as agreed by the board of directors. Awards granted under the 2021 Plan generally vest over four years. In addition, the shares authorized under the 2021 Plan will increase, among other things, to the extent that an award (including an award under the Prior Plans) terminates, expires, or lapses for any reason or an award is settled in cash without the delivery of shares.
At December 31, 2021, there were 33,677,989 shares of Class A common stock authorized for issuance, of which 11,413,848 shares of Class A common stock remained available for future issuance pursuant to new awards.
In January 2022, the board of directors approved an annual increase of 5,735,463 shares to the shares authorized for issuance under the 2021 Plan, bringing the total to 17,165,269 shares available for future issuance pursuant to new awards as of March 31, 2022.
Employee Stock Purchase Plan
In August 2021, the board of directors adopted and the stockholders of the Company approved the 2021 Employee Stock Purchase Plan (the “ESPP”). The ESPP initially reserved and authorized the issuance of up to 2,215,303 shares of Class A common stock, and such reserve will be increased annually on the first day of each fiscal year beginning in 2022 and ending in 2031, by an amount equal to the lesser of (i) 1% of the shares of the Company’s common stock outstanding (on an as converted basis) on the last day of the immediately preceding fiscal year and (ii) such number of shares of common stock as determined by the board of directors; provided, however, no more than 16,614,772 shares
Warby Parker Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Amounts in thousands, except share data)
of common stock may be issued under the ESPP. In January 2022, the board of directors approved an annual increase of 1,147,092 shares to the ESPP, bringing the total to 3,362,395 shares authorized as of March 31, 2022.
The initial offering period began on October 30, 2021 and will end on November 14, 2023, with purchase dates of May 14, 2022, November 14, 2022, May 14, 2023, and November 14, 2023. Future offering periods begin on May 15 and November 15 of each year, with each offering period consisting of four six-month purchase periods. Any employee may contribute up to 20% of their base wages and the purchase price of shares of Class A common stock under an offering will be the lesser of: (i) 85% of the fair market value of Class A common stock on the offering date, and (ii) 85% of the fair market value of Class A common stock on the applicable purchase date. If the fair market value of Class A common stock decreases from the offering date to the applicable purchase date, the offering period will terminate after the purchase of shares and all participants will be automatically enrolled in the next offering period. As of March 31, 2022 no shares have been purchased under the ESPP.
During the three months ended March 31, 2022, the Company recognized $0.5 million of stock-based compensation expense in connection with the ESPP and withheld $1.0 million of contributions from employees. As of March 31, 2022, total unrecognized compensation costs associated with the ESPP was $3.5 million and is expected to be amortized over a weighted average period of 0.9 years.
Stock-based Compensation Expense
Stock-based compensation expense consisted of the following: | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Cost of goods sold | $ | 226 | | | $ | — | |
Selling, general, and administrative expenses | 26,918 | | | 1,261 | |
Total stock-based compensation expense | $ | 27,144 | | | $ | 1,261 | |
Stock-based compensation expense for the three months ended March 31, 2022 includes $20.1 million related to the 2021 Founders Grant, as described below, and $5.3 million in connection with RSUs with a performance-based vesting condition that was satisfied by the Company’s Direct Listing.
Stock Options
The fair value for options and share awards granted under the Plans are estimated at the date of grant using the Black-Scholes option-pricing model. No options were granted during the three months ended March 31, 2022. The following assumptions were used for options granted during the three months ended March 31, 2021: | | | | | | | | |
| | Three Months Ended March 31, 2021 |
Risk-free interest rates | | 0.6 | % |
Expected dividend yield | | — | |
Expected term | | 6.25 years |
Volatility | | 60 | % |
The risk-free interest rates were estimated based on the yield curve in effect at the time of grant for zero-coupon U.S. Treasury notes with terms consistent with the expected term of the option awards. The expected dividend yield was zero as the Company has never declared or paid cash dividends and has no plans to do so in the foreseeable future. The expected term was calculated using the simplified method using the vesting term and the contractual term of the options. Stock options expire ten years from the date of the grant. The volatility rate was determined based on an analysis of comparable public company historical volatilities adjusted based on the Company’s stage of development.
Because the Company’s common stock was not yet publicly traded when the options were granted, the Company estimated the fair value of common stock. The board of directors considered numerous objective and subjective factors to determine the fair value of the Company’s common stock at each meeting in which awards are approved. The factors considered included, but were not limited to: (i) the results of contemporaneous independent third-party
Warby Parker Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Amounts in thousands, except share data)
valuations of the Company’s common stock; (ii) the prices, rights, preferences, and privileges of the Company’s redeemable convertible preferred stock relative to those of its common stock; (iii) the lack of marketability of the Company’s common stock; (iv) actual operating and financial results; (v) current business conditions and projections; (vi) the likelihood of achieving a liquidity event, such as a qualified public offering or sale of the Company, given prevailing market conditions; and (vii) contemporaneous transactions involving the Company’s common shares. The board of directors utilized third-party valuations which were performed in accordance with the guidance outlined in the American Institute of Certified Public Accountants’ Accounting and Valuation Guide, Valuation of Privately Held Company Equity Securities Issued as Compensation.
A summary of stock option activity for the three months ended March 31, 2022 is as follows: | | | | | | | | | | | | | | | | | | | | | | | |
| Number of Stock Options | | Weighted Average Exercise Price | | Weighted average contractual term | | Aggregate intrinsic value |
Balance at December 31, 2021 | 3,623,377 | | | $ | 8.03 | | | 5.7 | | $ | 136,824 | |
Options granted | — | | | — | | | | | |
Options exercised | (198,064) | | | 9.42 | | | | | 5,876 | |
Options forfeited | (1,500) | | | 4.46 | | | | | |
Balance at March 31, 2022 | 3,423,813 | | | $ | 7.95 | | | 5.4 | | $ | 98,359 | |
| | | | | | | |
Exercisable as of March 31, 2022 | 3,423,813 | | | 7.95 | | | 5.4 | | 98,359 | |
Vested as of March 31, 2022 | 2,318,976 | | | 4.01 | | | 4.1 | | |
Unvested as of March 31, 2022 | 1,104,837 | | | 16.20 | | | 8.1 | | |
The total value of unrecognized stock compensation expense related to unvested options granted under the Plans was $9.4 million as of March 31, 2022, and is expected to be recognized over 1.2 years.
Restricted Stock Units and Performance Stock Units
A summary of RSU activity for the three months ended March 31, 2022 is as follows: | | | | | | | | | | | |
| Number of Restricted Stock Units | | Weighted Average Grant Date Fair Value |
Unvested as of December 31, 2021 | 3,527,167 | | | $ | 33.38 | |
Granted | 36,719 | | 30.21 | |
Forfeited | (51,013) | | 37.41 | |
Released | (146,833) | | 22.36 | |
Vested and not yet released | (100,575) | | 36.80 | |
Unvested as of March 31, 2022 | 3,265,465 | | | $ | 33.67 | |
The total value of unrecognized stock compensation expense related to outstanding RSUs and PSUs granted under the Plans was $73.6 million and $85.7 million as of March 31, 2022, respectively, which is expected to be recognized over a weighted-average period of 1.6 years and 1.1 years, respectively. No PSUs were granted, forfeited, released or vested during the three months ending March 31, 2022.
The majority of RSUs issued by the Company prior to the Direct Listing vest upon the satisfaction of both a service and a performance condition. The service-based vesting condition is satisfied so long as the participant remains in service and employed by the Company as of each of the vesting dates. The performance condition was satisfied upon the Company’s Direct Listing on September 29, 2021, and 936,646 RSUs for which the service condition had previously been satisfied vested and were released to holders. RSUs granted subsequent to the Direct Listing vest upon the satisfaction of a service based vesting condition only. The Company will deliver one share of either Class A or Class B common stock, depending on the terms of the grant, for each vested RSU.
Warby Parker Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Amounts in thousands, except share data)
In June 2021, the Company granted 4,397,688 PSUs and 1,884,724 RSUs to the co-CEOs, in the aggregate, under the 2019 Founder Stock Plan (the “Founders Grant”). The PSUs vest upon two performance conditions, (i) a qualified public offering, which was satisfied upon the Company’s Direct Listing on September 20, 2021, and (ii) the price of the Company’s Class A common stock reaching stock price hurdles over a period of ten years, as defined by the terms of the award. The PSUs are subject to the co-CEOs’ continued employment with the Company through the applicable vesting date. If the PSUs vest, the Company will deliver one share of Class B common stock on the settlement date. Unvested PSUs expire in ten years from the date of grant. The terms of the PSUs granted are described further below.
The PSUs are divided into eight substantially equal tranches, each one vesting on the date the 90-day trailing volume-weighted average trading price of our Class A common stock exceeds the stock price hurdle, as set forth in the table below, provided that no PSUs may vest prior to the six month anniversary of the Direct Listing. | | | | | | | | | | | | | | |
Tranche | | Number of PSUs | | Stock Price Hurdle |
1 | | 549,712 | | | $ | 47.75 | |
2 | | 549,710 | | | $ | 55.71 | |
3 | | 549,712 | | | $ | 63.67 | |
4 | | 549,710 | | | $ | 71.63 | |
5 | | 549,712 | | | $ | 79.59 | |
6 | | 549,710 | | | $ | 87.55 | |
7 | | 549,712 | | | $ | 95.50 | |
8 | | 549,710 | | | $ | 103.46 | |
The Company used a Monte Carlo simulation to calculate the grant-date fair value of the PSUs of $128.8 million. Since the PSUs contain a performance and market condition, the stock-based compensation expense will be recognized when it becomes probable that the performance condition will be met using the accelerated attribution method. Stock-based compensation will be recognized over the period of time the market condition for each tranche is expected to be met (i.e., the derived service period). The performance condition was satisfied at September 29, 2021 by the Direct Listing, and the Company recorded $13.4 million of stock-based compensation expense related to the PSUs during the three months ended March 31, 2022.
The Founders Grant RSUs will vest in equal monthly installments over a period of five years, subject to the co-CEOs continued employment with the Company through the applicable vesting date and conditioned upon the completion of a qualified public offering. The grant-date fair value of the RSUs is $66.9 million. Since the RSUs contain a performance condition, stock-based compensation expense is recognized using the accelerated attribution method when it becomes probable that the performance condition will be met. The performance condition was satisfied at September 29, 2021 by the Direct Listing, and the Company recorded $6.7 million of stock-based compensation expense related to the RSUs during the three months ended March 31, 2022.
Shares underlying vested PSUs and RSUs will be issued to the CEOs on a specified quarterly date following the second anniversary of the vesting date, except for an amount necessary to cover any taxes due in connection with the vesting, which will be withheld or sold to cover, or issued to offset, such taxes. Any RSUs or PSUs subject to the award that have not vested by the tenth anniversary of the grant date will be forfeited.
Most RSUs outstanding as of March 31, 2022 vest upon the satisfaction of both a service and a performance condition. The Company had previously concluded that it was not probable that the performance condition would be satisfied as the closing of a qualified public offering or change in control is not deemed probable until consummated. Accordingly, prior to September 29, 2021, the date of the Direct Listing, the Company had not recorded stock-based compensation expense for RSUs with the exception of (i) $1.8 million recognized in June 2021 associated with RSUs that were repurchased in connection with the 2021 tender offer, and (ii) $2.3 million recognized in August 2021 associated with fully vested RSUs issued to certain directors. Upon the Direct Listing on September 29, 2021, the Company recorded stock-based compensation expense for the service condition satisfied through such date and began recording stock-based compensation expense using the accelerated attribution method as the service conditions are met.
Warby Parker Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Amounts in thousands, except share data)
8. Leases
The Company leases retail, office, optical laboratory, and distribution center space under operating leases from third parties. As of March 31, 2022, the lease terms of the various leases range from 3 to 17 years. The leases generally contain renewal options and rent escalation clauses, and from time to time include contingent rent provisions. Renewal options are exercisable at the Company’s sole discretion and are included in the lease term if they are reasonably certain to be exercised. In general it is not reasonably certain that lease renewals will be exercised at lease commencement and as such, lease renewals are not included in the lease term. The Company’s finance leases are immaterial.
The following table presents the assets and liabilities related to the Company’s leases:
| | | | | |
| March 31, 2022 |
Lease assets: | |
Right-of-use assets | $ | 109,737 | |
Total lease assets | 109,737 | |
| |
Lease liabilities: | |
Current lease liabilities | 18,518 | |
Non-current lease liabilities | 132,824 | |
Total lease liabilities | $ | 151,342 | |
The following table details the Company’s net lease expense: | | | | | |
| Three Months Ended March 31, 2022 |
Operating lease expense | $ | 6,013 | |
Variable lease expense | 938 | |
Net lease expense | $ | 6,951 | |
Variable lease expense primarily consists of contingent rent, common area maintenance charges, property taxes, and other non-fixed lease related costs.
The following table presents the future maturity of lease liabilities: | | | | | |
| Operating Leases(1) |
2022 | $ | 15,337 | |
2023 | 32,138 | |
2024 | 32,179 | |
2025 | 24,413 | |
2026 | 22,487 | |
Thereafter | 42,270 | |
Total undiscounted lease cash flows | 168,824 | |
Impact of discounting | (17,482) | |
Present value of lease payments | $ | 151,342 | |
(1) The year 2022 includes $7.1 million of expected cash inflows from TIAs. Operating lease payments exclude $6.5 million of legally binding minimum lease payments for leases signed but not yet commenced.
Warby Parker Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Amounts in thousands, except share data)
The following tables present other relevant lease information: | | | | | |
| March 31, 2022 |
Weighted average remaining lease term (years) | 5.9 |
Weighted average discount rate | 3.4 | % |
| | | | | |
| Three Months Ended March 31, 2022 |
Cash paid for amounts included in the measurement of lease liabilities: | |
Operating cash flows from operating leases | $ | 6,941 | |
9. Commitments and Contingencies
Credit Facility
In August 2013, the Company entered into the Loan and Security Agreement with Comerica Bank, or the Credit Facility, as amended, that consists of a revolving credit line of up to $50.0 million. The revolving credit line has a sub-limit of up to $15.0 million for the issuance of letters of credit. Borrowings under the revolving credit line bear interest on the principal amount outstanding at a variable interest rate based on either LIBOR or the bank’s prime rate (as defined in the credit agreement), with no additional margin. The Company is charged fees on the uncommitted portion of the credit line of approximately 0.2% as long as total borrowings remain less than $15.0 million.
Other than letters of credit of $4.0 million as of both March 31, 2022 and December 31, 2021, used to secure certain leases in lieu of a cash security deposit, there were no other borrowings outstanding under the Credit Facility.
Litigation
During the normal course of business, the Company may become subject to legal proceedings, claims and litigation. Such matters are subject to many uncertainties and outcomes are not predictable with assurance. Accruals for loss contingencies are recorded when a loss is probable, and the amount of such loss can be reasonably estimated.
As of March 31, 2022, the Company is not subject to any pending legal matters or claims that could have a material adverse effect on its financial position, results of operations, or cash flows should such litigation be resolved unfavorably.
Warby Parker Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Amounts in thousands, except share data)
10. Net Loss Per Share Attributable to Common Stockholders
The computation of net loss per share attributable to common stockholders is as follows: | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Numerator | | | |
Net loss | $ | (34,133) | | | $ | 3,011 | |
Less: deemed dividend upon redemption of redeemable convertible preferred stock | — | | | (4,613) | |
Net loss attributable to common stockholders - basic and diluted | $ | (34,133) | | | $ | (1,602) | |
Denominator | | | |
Weighted average shares, basic and diluted | 114,103,766 | | | 53,946,980 | |
Earnings Per Share | | | |
Net loss per share attributable to common stockholders, basic and diluted | $ | (0.30) | | | $ | (0.03) | |
The following potentially dilutive shares were excluded from the computation of diluted net loss per share because including them would have been antidilutive: | | | | | | | | | | | |
| Three Months Ended March 31, |
| 2022 | | 2021 |
Redeemable convertible preferred stock | — | | | 53,821,631 | |
Stock options to purchase common stock | 3,423,813 | | | 8,558,211 | |
Unvested restricted stock units | 3,265,465 | | | 1,853,711 | |
Unvested performance stock units | 4,397,688 | | | — | |
Warrants to purchase Series B redeemable convertible preferred stock | — | | | 21,745 | |
11. Related-Party Transactions
As a private company, the Company issued secured promissory notes collateralized by the stock purchased by certain Company executives in relation to the exercise of employee stock options. As the promissory notes are secured by the underlying shares they have been treated as non-recourse notes in the condensed consolidated financial statements. The promissory notes are issued with a term of 8.5 years and an interest rate equal to the minimum applicable federal mid-term rate in the month the loan was issued. The secured promissory notes are recorded as a reduction to equity offsetting the amount in additional paid-in-capital related to the exercised options funded by the notes. During the three months ended March 31, 2022, the outstanding loan balance increased by an immaterial amount due to interest. The Company did not extend any loans during the three months ended March 31, 2022. The loans had a balance of $3.1 million at March 31, 2022, and no loans are outstanding with any of our executive officers.
12. Subsequent Events
Lease Obligations
Subsequent to March 31, 2022, the Company entered into 2 operating lease agreements and extended the term of 1 existing operating lease agreement for retail space in the U.S., with terms ranging from 7 to 8 years. Total commitments under the agreements are approximately $7.0 million, payable over the terms of the related agreements.
RSU Grants
In April and May 2022, the board of directors approved grants of 20,522 RSUs for Class A common stock to employees under the 2021 Plan. The RSUs vest over a four year service period. The grant date fair value of these awards was $0.5 million.
Warby Parker Inc. and Subsidiaries
Notes to Condensed Consolidated Financial Statements (Unaudited)
(Amounts in thousands, except share data)
Stock Donation
In May 2022, the Company issued 178,572 shares of Class A common stock to the Warby Parker Impact Foundation, a Delaware exempt corporation. The grant date fair value of the shares was $3.3 million.
ESPP Purchase
On May 14, 2022, the Company issued 118,329 shares of Class A common stock in connection with the end of a purchase period of the ESPP. The Company previously withheld a total of $1.8 million of cash from employees in connection with the issuance.