Motley Fool Hidden Gems Investing - Dave Gilboa, co-Founder and co-CEO of Warby Parker

Episode Date: September 9, 2025

Warby Parker’s has serious AI glasses plans with Google. Tom Gardner, Tim Beyers, and Dave Gilboa discuss: Explaining Warby Parker’s business to a 10-year-old Plans for those AI glasses Capital allocation at Warby Parker Hosts: Tom Gardner and Tim Beyers Guest: Dave Gilboa Engineer: Natasha Hall Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, "TMF") do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement. Visit ⁠megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Yeah, it's hard to overstate how important we think this will be. So, yeah, I can't think of other questions where I would rate 100 out of 100, but this one, I'm going to have to say 100. That was Dave Gilboa, the co-founder and co-CEO of Warby Parker, and he was rating just how important Warby Parker's AI glasses partnership with Google will be over the coming years. Our own co-founder and CEO, Tom Gardner, as well as Tim Byers, talked with Dave about not only those AI glasses, but also what makes Warby Parker's current eyewear business a customer favorite. I think I'm going to start with a simple Peter Lynchism for those of us who spend our time in

the investing world. Peter Lynch once said, if you can't explain to a 10-year-old in two minutes why you own a stock. You shouldn't own it. So, can you explain to us in two minutes why you care about Warby Parker, why you believe in it, and why you helped to run the company? Sure. Thanks for having me on. I started Warby Parker now over 15 years ago with three of my best friends from business school, really to solve our own problems as frustrated consumers. We saw a massive category that is now over $60 billion in the U.S., offering products that most people need to see for their everyday lives, but a category that really was not serving consumers well and had very little innovation from a product standpoint and a

distribution standpoint. And it just didn't make sense to us that a pair of glasses, technology that's been around for 800 years, should cost more than an iPhone. And so we set out to create a brand that offered the products that we would want to wear around a brand that stood for something and wanted to make the experience great and dramatically bring down the price point for glasses. That's what we've done over the last 15 years. Now, we have over 300 stores in addition to a thriving e-commerce business. We set out to build one of the most impactful brands in the world 100 years from now and are still building the foundation for that at Warby Parker. So many things that we love to hear at The Motley Fool, like the 100-year mission.

Having gotten to spend some time with Jim Senegal, the founder of Costco, is saying that he only makes important decisions with the eye to a 25-year time horizon, which, of course, can be hard for others to track to. It can be hard to know what the CEO is thinking when they do something, if it looks questionable in a one-year period or a three-year period, but when the intention is to get the best results over the next 10 to 20 years. Can you give an example, a recent example of something that Warby Parker has done that you all as a team or you have decided to do that you think might be a short term speed bump, but positions Warby Parker very well for the next 10 plus years? Yes. So one of the areas that we're really excited to invest against is AI glasses.

Um, so, um, uh, we recently announced a partnership with Google, um, where we'll be introducing, uh, glasses that have, uh, cameras, uh, speakers, microphones, but most importantly, um, have access to always on AI, uh, that we'll be able to see what you see here, what you hear and can provide real time context and intelligence around anything that you're looking at. Um, it'll, uh, uh, tap into all the great products that Google has from Gmail to Google maps, uh, to calendar. Um, so you can ask, um, uh, you know, how long it's going to take you to walk to your next meeting.

Um, and the glasses will know, um, exactly where you are because, um, uh, they'll be able to tap into Google street view and they know, uh, which building that you're exiting and which direction to tell you to turn to asking what kind of tree you're looking at or what kind of bird is making that chirping sound or where did you leave your keys this morning or what was on the whiteboard in that meeting yesterday at 2 p.m. that I had with Tom. And we fundamentally believe that glasses are going to be the primary interface that consumers use to connect with AI, and we're excited to be on the forefront of that from

a product standpoint. Now, this is a massive new category that's just emerging, and so we're investing substantial resources and time. We have yet to start selling these products, so it is a massive bet that we're making on the future of our category. But it's an area that we believe positions us to really be on the forefront of where the optical industry is going and where consumer electronics are going. We're thrilled to be partnering with Google and all the great innovation that they've developed from a technology side and pairing that with all the capabilities that we've developed from designing glasses, selling glasses, the supply chain around prescriptions, offering eye exams and be able to serve this emerging

need as it develops. We're obviously deeper into the adoption of AI, have gotten there faster than the birth and emergence of the internet, popularization of the internet. We at The Motley Fool were back there in those early years with the questions about whether, why would I need an email address? Or I don't think I'd feel comfortable typing my credit cards in to the internet all the way through today. And you see similar patterns in the adoption of AI, a lot of questioning and hand-wringing in the beginning, then a little bit of curiosity. And then you start to find, oh, the conversations about cost management, workforce, operating margins, and those.

but the real breakthroughs are the creative discovery of what's possible. That's what's going to be transformative. It's not going to be all the short-term dynamics around remapping employment. It's going to be the new solutions that scale and can have a dramatic impact. So this is, you've really answered this question already, Dave, but I'm just curious on a scale of one to 100, where do you see enhanced AI eyewear and the Google partnership being one to 100 in terms of how transformative you think it will be, maybe for legal reasons, you have to say could be for Warby Parker over the next 10 plus years? Yeah, it's hard to overstate how important we think this will be. I can't think of other questions where I would rate 100 out of 100,

but this one, I'm going to have to say 100. We really believe that just like the power of the the internet wasn't evident in a world of mainframe computers or where everyone just was interacting in desktop computers. It required new devices and new interfaces like mobile phones that everyone is able to carry around and that constant connectivity to really showcase how powerful the internet could be. And similarly, we believe that to showcase and understand how powerful AI can be to transform consumers' lives. It's going to require new form factors, new devices, and we're biased, but we feel very strongly that glasses are the best form factor to experience AI because these devices can see what you see, can hear

what you hear, can understand what you're paying attention to, and provide real-time information and context about the real world that you're experiencing. And so, AI will be ubiquitous, but having the opportunity to ingest all the information that you as a human are ingesting and be able to provide context and intelligence so that you don't have to pull out your phone, you don't have to be looking at a separate screen, but only the relevant information is surfaced and any question can be answered in real time with the understanding of what you're paying attention to, we believe will be absolutely transformative to how consumers engage with technology and AI. And again, we're thrilled

to be partnering with Google, whose researchers invented the transformers that are now underpinning for all large language models. Their team at DeepMind and across the Google ecosystem just continues to innovate at such a rapid pace. We're thrilled to partner with them and be able to bring a lot of this technology to bear for consumers in the not-too-distant future. I get the sense that you're right, Dave, in the sense of Glasses as the window into the real-world experience of AI, because you're taking in data of being just out in the world. That's pretty interesting. full disclosure, I am both a shareholder and a customer of Warby Parker, and a lead advisor

on a service that's recommended the stock. So, I'm a little bit biased here. Thank you for all of those things. I am a little bit biased coming into this. Having said that, it strikes me that the way you're talking about this and the investment that you're making in AI, and you seem very passionate about this. I mean, you rated it 100 out of 100. So that is fascinating. But the reason I got so interested in Warby Parker originally is that you solve a significant problem for somebody like me who has been wearing glasses since four years old. And I am no longer four years old. I am much, much older than that now. So I wonder, by virtue of what you've done to solve a problem

for somebody like me, which is affordable glasses available, you know, where I want them under the conditions in which I want to buy. I mean, this is, I can't really overstate how important this is because the way it used to be is I'd have to go to optometrist and I would get really hard sold on glasses that were way too expensive and that I didn't really want and didn't really give me what I wanted. That is still true. I think that's still a big part of the Warby Parker story, making these affordable glasses. How do you keep to that ethos of highly affordable, distribute everywhere they're needed, but then also make these massive investments to create these AI-infused glasses? That seems different. You're going to make

some very expensive capital outlays, I would imagine, to do this. How do you balance that, staying true to what Warby Parker is, and then what you want Warby Parker to be? We've always had a philosophy around sustainable growth. Again, that goes back to a desire to want to be one of the most impactful brands in the world 100 years from now, and recognizing that we want to grow quickly and we want to capitalize on the white space in front of us, but it's more important to set us up to grow sustainably over the next many years and decades than it is to maximize the growth this quarter or this year if that comes at the expense of future sustainability. And what we've committed to, including when we went public and

in our messaging to shareholders since then, is that we want to grow quickly, but we also want to do so while we're improving profitability and expanding our adjusted EBITDA margins by 1 to 200 basis points a year and find the right balance where we're growing and we're taking market share, and we're serving lots of customers, and we're investing for the future. But we're able to do all those things while we're improving profitability, while we're improving cash flow. And we believe that we're in a very fortunate position because of the investments that we've made over the last 15 years that enable us to now grow profitably and sustainably and enable us to make these big investments, whether it's continuing to open stores.

And this year, we'll open 40-plus stores and still see a path to opening hundreds of additional stores over the next several years, whether it's continuing in product innovation around our core products, offering new, unique constructions in our frames, introducing new innovative lenses like precision progressives and offering those at a fraction of the price of what you would find at another optical shop investing in AI capabilities like our digital advisor where we can scan the size and shape and contours of your face and in our iPhone app and recommend frames that we know are going to fit your face and look good on you, to making these major investments in AI glasses and doing so while we're growing the core business and while we're

improving profitability every year. And that's just been kind of our core philosophy and thesis that we need to earn the right to be able to invest, to continue to invest. That means that the core business has to be working really well, and the core business works really well because we're serving customers' needs better than others in our category. That gives us the right to continue to grow and continue to invest for the future. The numbers do back this up, what you're talking about there. I'm very curious. There's a lot of capital application priorities that you just outlined there. There's quite a few of them. You're communicating now to investors, fools everywhere

around the globe, a lot of whom might be interested in Morvey Parker and Morvey Parker stock. If you want to tell the story to them about how they should view your business and the way that you allocate capital. Can you maybe give us a sense of how you think about allocating capital? Is the important thing to look at the growth of the store footprint, or is it more important to think about the variety of products you can bring to market, including this forthcoming set of AI glasses. Where's the value? The rubber meets the road. The capital meets the value that takes Warby Parker into this next stage. We feel fortunate that, at this point, we can walk and chew gum at the same time, that we don't have to make a single decision

around where we want to invest. But we always start by solving customer problems and understanding how we can serve our customers better. And that's kind of where the dollars and the effort goes to. And when we survey consumers who are aware of Warby Parker, who haven't shopped with us yet, the number one reason is because there's not a store nearby. And the number two reason is that they don't have a valid prescription. And we're able to solve both of those issues by opening more stores. Now, we have around 300 stores across the U.S. and Canada. There are over 44,000 optical shops in the U.S. Again, this is a category that really hasn't innovated. If you ask most consumers to name an optical shop that they loved walking into,

I think you'll be met with a lot of blank stares if they haven't shopped with us. And so, we continue just to see massive opportunity for us to expand our footprint, to make it more convenient for consumers to shop with us, to get their eye exam, to buy glasses, to buy contacts, and choose to do that in any of the parts of that customer journey, whether they want to engage with us online or offline. We find that even though we've been a leader in e-commerce and are still really excited about scaling our e-commerce business and some of our new digital capabilities and tools, that most consumers, if given a choice, they prefer walking into a store, they want to get a comprehensive eye exam from one of the best

doctors in the world, like we're able to offer in all of our stores now. They want to be able to try on multiple pairs of glasses, see what they look like. A pair of glasses is a very personal purchase. For most people, it's one of the only things that they wear on their face. It not only has to enhance your vision and make sure that you see well, but it also is a core part of someone's personal style and how they want to present themselves to the world. And so it's a very considered purchase. People often want feedback from experts like our team can offer. They want the convenience of being able to get their exam, buy their glasses, buy their contacts all in one place. We're able to offer that through our stores. That's why we've

been so excited to expand our store footprint. As we think about areas that we're investing, that's probably the first thing that I would point to, that there's a massive runway for us continue to open stores going from 300 up to 900-plus stores in the U.S. The second area is continuing to invest in our product portfolio. If you look at our business compared to most mature optical shops, we continue to be really underpenetrated in progressive and in multifocal lenses. That's kind of a newer area that we've invested in. Now, we have multiple types of progressive lenses. We're able to kind of serve that progressive customer in ways that we couldn't a few years ago. We're also really underpenetrated in contact lenses as a percent

of our overall business relative to the rest of the category and eye exams relative to the rest of the category. These are newer parts of our business and areas that are scaling quickly that we continue to invest against. And then, yeah, more towards the future. It's certainly an area that we're spending a lot of time around is AI glasses, as we discussed. I feel fortunate that we're able to partner with Google and are able to benefit from the massive investments that they've made in AI development and also in some of the expenses that they're covering as part of this partnership. As always, people on the program may have interests in the stocks they talk about,

and The Motley Fool may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. That's all for today. We'll see you tomorrow.