National Vision Holdings, Inc. Aktie

You, you. Thank you. Thank you. So, you'll give us the queue? I guess we're on.

I would say good afternoon, everybody, and thank you for joining us. I'm Adrienne Yih-Tennant, Barclays Specialty Retail, Apparel, and Footwear Analyst, and it is my intense pleasure to welcome Alex Wilkes, CEO of National Vision, and Christopher Laden, CFO. So I usually give a little bit of bio just so we can get a lay of the land. Alex, you joined National Vision in 2024 and were promoted to Chief Executive Officer in early 2025 after having served at CooperVision and then a long tenure at EssilorLuxottica. And the 1 point that I want to bring up here is that you helped drive the expansion of Pearle Vision, which I think is extraordinarily relevant in this situation. Chris, you then joined National Vision in 2025 as CFO, and prior to that, you bring in scaling growth businesses, operational discipline with profitability among healthcare and vision care companies, also including Pearle Vision. So, I've always thought that National Vision was a little bit misunderstood, right? It is not necessarily just an optical retailer, but what you're creating is a vision care healthcare platform. So, many investors still view you through the lens of that traditional value retailer selling glasses. And today I'd like to focus on 5 key areas. Number 1, why is fundamentally different? Number 2, National Vision's evolving business model and your competitive moat. Thirdly, the drivers of market share gains profitably. Fourth is structural margin opportunities. And finally, what National Vision will and can become over the next 5 years as you execute your transformation strategy. So, before we start, we've been kind of asking all of our companies the macro backdrop and the health of the consumer topic. How would you characterize it today versus sort of the beginning of the year? And we just had a new spike heading toward 100, gas over $4, very similar to April. So compare how your customer reacted, the lower-end value and the higher-end during that period, and if you're seeing any similarities now.

Yeah, we're not really seeing any difference now than we saw in what we reported in the second quarter in terms of the value-seeking consumer still sitting a little bit on the sideline. Again, we're seeing it actually across all income demographics. It's not necessarily lower-income households that are sitting out or participating less. It's really those consumers across all income demographics, demographics that would kind of raise their hand and say we're value seekers, they're kind of sitting out at the moment. We haven't necessarily seen any change as we've gone into the third quarter. Certainly, we believe it's tied to energy prices. You know, we saw it almost immediately once we start to start to see the energy prices.

Right. Is there typically a lag in terms of kind of that pump price and then kind of feeling it over some period of time?

Energy prices go up in the beginning of the second quarter. And when we look back at our data, that's when we started to see some of the delay in purchase cycle of the cash pay consumer in particular.

Great. Optical sits at the intersection of healthcare and consumer spending. Does that make demand inherently more resilient than traditional discretionary retail, and where does that resilience?

Hold versus where customers can still defer purchases. Yes, for sure. I mean, we see almost 7 million Americans every year for eye care. And you asked a question about what makes us so different. We employ over 2,000 optometrists. Over close to half of our customer base, I think it's like 42 percent now, use some form of insurance in their purchase journey with us. So that's a really fundamental difference from traditional retail, but it also makes us a lot more resilient. The Managed Vision Care customer in particular, who has an annual benefit that's use it or lose it, they're incentivized through their insurance plan to get an annual eye exam. They're incentivized through their insurance plan to deploy some of their benefit dollars against an optical purchase, really strengthened the resiliency of that, of that consumer type. And on the healthcare side, having doctors that are building 1-to-1 relationships with their patient base, that creates a lot more stickiness between brand and consumer or patient than what you see in traditional retail. So we are a much more resilient business than I'd say a traditional discretionary businesses because of those.

Healthcare aspects. Fantastic. So that you kind of touched on, I wanted to go into a kind of optical retail 101 when we first you kind of gave me a, let's get the lay of the land here. You touched upon some of those and why the category is largely misunderstood. When you meet investors for the first time, what do they think other than what you just described, and maybe that's it, but what do they consistently misunderstand about the optical category?

Specifically what I think today we're even having a lot of conversations around is the opportunity for mix and ticket evolution in this business. In traditional retail, you make some changes to the assortment, and maybe you get a year lap out of it and then you have to do something new. In this business, because so much of it is employee driven, as associates get more comfortable and confident in selling anti-reflective lenses, in selling more premium progressive lenses, in helping the consumer through a consultative journey on frames, it's almost as their competence and confidence grows with the new product introduction, you see ticket expansion. And that doesn't just happen in a year. In lenses in particular, it takes multiple years for your selling team to get really good and really confident at selling some of the more advanced materials. So I think that's a bit misunderstood, just like how long of a tail some mix-driven ticket strategies have to play out in this category. I think in particular what's missed in our business is, frankly, how far behind we were when Chris and I joined the company. We were laggards in almost every aspect of premiumization in the category. Although we managed to, as I said, grow our managed care mix to over 40+% of our customer base, we weren't even matching those consumers well with the purchasing power that they had in their plans. So that's a significant difference, I think, from us versus, again, discretionary or typical retail. It's the healthcare component. It's the role that the doctor plays in the transaction. It's the role that the store associate plays in the transaction, helping consumers find products that meet their lifestyle needs from a lens perspective.

Interesting. It's still a highly, highly fragmented business that you're in. Super that you're in. And so once you get that customer to come to you, I mean there's the managed care aspect of it, but they can kind of move that back and forth. How, through your customer experience and your store model, do you retain them?

Yes, it's a great question. Great question. And it's we have historically retained them because, because we were relying on the 1 kind of trick of being the low value or low cost destination within the category. In recent years, we've made investments, some significant investments in upgrading our CRM platform, upgrading our brand platform. Just this year, believe it or not, we didn't have the capability last year to appoint patients for their next eye exam. In any healthcare experience that you have, you cannot leave the doctor's office without getting your next appointment, right? You're not leaving without your next dentist appointment, your next orthopedic appointment for your knee, your next appointment with your primary care physician. In our locations, you would leave the store without having your next appointment for eye care. And that was largely because we had a technical limitation. We implemented a much more sophisticated CRM platform, and in the fourth quarter of last year, we started the process of appointing people for their annual eye exam. That will have a significant impact on our retention and then ultimately on our traffic go forward too because we now have mechanisms in place to lean into that retention element of the annual eye exam story.

Great. So let's stay on kind of the technological upgrade. And I want to kind of get something out of the way from a couple of quarters ago. It was the CSA the e-commerce platform, the shift. And there was some disappointment on the sales during that quarter. So I completely understand that there's a learning process when you transform onto a new platform.

So explain to us where we are in that. Is that now behind us, and can we move forward? Absolutely. So in the second quarter, we essentially did a heart transplant of our e-commerce platform. We moved to the Adobe e-commerce platform, all of our brands, America's Best Contacts & Eyeglasses, Eyeglass World, and DiscountContacts.com. And what that is ultimately going to enable us to do is be a much more prolific, omnipresent a new channel retailer in the future. Internally we use the word unified commerce, which I think we'll talk a little bit later about how we're reinventing the company. And actually from a technical perspective we didn't have any challenges. The learning for us was about half of our eye exams that we see get booked online. And what we weren't doing well is sending the signals back from the site to the search company saying, all right, go find us more of these. So it really broke some of our search algorithms and made our cost per acquisition so much significantly more expensive than our historical norms. So we decided to actually pull back on marketing investment because we had this inefficiency in the second quarter. All that being said, and this is what I've been reminding folks since we reported the second quarter, in the second quarter, we grew positive comps. We expanded our operating income by 140 basis points, and we took the most significant leap forward that the company has ever taken in terms of technological transformation of the enterprise. So again, I could not be prouder of what we have done and what we've been able to accomplish through the first half of the year. And then we'll dive a little bit more into really the future of what unified commerce is going to enable us to do to, from our perspective, leapfrog the category from a consumer interaction perspective.

Yes, just to kind of level set and put things into perspective, before came and I'd been covering the stock for quite some time. We talk about, uh, National Vision having been an analog business, and frankly it works because you comped every year, the firm comped, the company comped every year, you know, literally every year, including COVID. And so there was no reason to transform it. I think when you came in, it was just a light 1 on, um, that you didn't need to confine the business model to the pre-existing past 20 years. I mean, the aperture has opened, the TAM has opened, and I think that's kind of what all these investments that are being made today. They are for the next 5 to 10 years.

That's spot on. And what we found when we came into this business was, know, great supply chain, great infrastructure, incredible doctor experience. Real estate that was well maintained, well positioned, but a business model that was requiring a commercial transformation. And also this notion of being an analog replicator all focused on 1 consumer type, 1 message, 1 operating model, yet the consumer had kind of evolved. And so we had this opportunity to not only catch up, and we've talked a lot about this too, you know, post second quarter. Over the years, we'd, you know, accumulated a lot of customers that were only participating at the kind of base offer of the business. So our 2-pair offer. We love those patients, too, to be clear. And we're not walking away from that message. But we had over-indexed the organizational resource pointed at that consumer that was ultimately a lower-value transaction and a lower-profitability transaction for us. So starting to think through the lens of segmentation through optimizing the, the business. Chris and I have been joking a lot about this lately, that if you thought of our business as a manufacturing business and not a retail business, you'd actually view our strategy in a different light, that we are trying to get the highest degree of yield out of our assets, our doctor assets, our real estate assets, our store employees, and our optical supply chain.

Fantastic. So that's a great segue into the business. Business model shift. So historically, investors focus on traffic, traffic, traffic, right? And that's a retail, you know, that's how we're trained. And transaction counts. And today, the discussion that you just opened up here, it increasingly centers around customer quality, the relationship with the optometrist, wallet expansion, and profitability. You're 1 of the only, I believe the only, that employs the optometrist. So explain that as a competitive advantage and how this model, soup-to-nuts, on a 360 basis is changing.

So historically, National Vision employed our optometrists because it was the way that we could offer an eye exam as part of our consumer commercial model. Um, because if you don't employ the doctors, you can't include the service or you can't mandate what a physician would charge for the services. So the company went through a huge amount of legal and structural and investment work to have have an employed doctor model. And that served us really well for those 20 years. But now with 40+% of the business being managed care where this notion of a free eye exam or a bundle eye exam isn't as powerful as it once was, but we still have this incredible asset. And we also know that there's a huge group of consumers who would like to interact with a brand, not necessarily in a brick-and-mortar format. So we're thinking, all right, how do these assets actually work together in a way where they're very complementary? So part of the reason that we've made the significant investment in our e-commerce re-platforming is actually tied to our asset that we have with our employed doctor model. I like to say imagine a world, right? Imagine a world where you can go online to America'sBest.com, you can buy prescription eyewear and if you need to see a doctor, we got your back. You can come into 1 of our locations and we'll get you in to see 1 of our doctors. We can get you in front of our opticians to make any adjustments. Imagine a world where a patient comes to see 1 of our doctors, gets a prescription, buys eyewear, and 3 months later, we can retarget that consumer with a message of, hey, we have prescription sunglasses available in the same style and designs you like. You can make 1-click purchase here. Own the prescription information at the corporate entity level, you can basically order those lenses or those frames online through 1 click through a CRM message. So it is taking our employed doctor model, which was previously a means to an end to the free eye exam, and now transforming it into something much more noble, which is to provide truly a scaled, unified commerce business model where customers who interact with us online, if they need to see us in store, they can. They can see the doctor, and likewise for consumers who interact with us in store and see a doctor, that they can then make secondary purchases online in a much more seamless way. So that's what we're building towards.

Great. So Chris, I'm going to bring you into, so that was the strategic direction. On the model itself, those optometrists were, if not the, but 1 of the biggest fixed costs within the P&L structure. When you're holding the top line, constraining the top line, you bear the burden of the inflation in that. Talk about the model under this new format today and the ability to leverage both store expenses, fixed expenses, but really this unique salaried that goes through the COGS lines. And has his way of depressing GM or expanding it. It is a unique business model for retail where our story of...

Yes, we are looking at driving average ticket at a faster pace than traffic, and by the way, gross margin percentages might depress. These are 2 things that usually throw up red alarms for folks who follow retail stocks, but for us, it's actually a really healthy position to be in. Unpack the category a bit. As you move up the premium scale on lens materials, on lens add-ons, like anti-reflective coating or transitions, and even up on more premium frames, typically what you see is higher dollar transaction, higher gross margin dollars, but those are typically dilutive to our historical business model. Um, so as we can unpack what our 5-year journey looks like, we expect to grow 50 to 150 basis points of operating margin expansion every year. You know, 100 percent if not more than 100 percent of that will come through leveraging SG&A. As we have higher value transactions come through, certainly the doctor labor, which sits in gross margin, will better leverage, but the offset on the product side is going to outpace that to a degree. And I think the simplest example that folks can digest on the frame side is, you can imagine our input cost for smart eyewear is substantially different than a typical piece of, plastic injected mold from East Asia, the price point's higher, but it's not disproportionately higher from a percentage perspective, right? And that's kind of true as you go through the entire kind of frame portfolio and also true on the lens side. So, yes, what we're telling folks, guys, expect gross margin to be flat to dilutive over the 5-year period. Look at operating margin, make sure we're expanding there because as we drive more premium transactions through, it's really not going to require any incremental SG&A to make that happen.

Great. Also in this new business model, you've highlighted managed care customers, progressive wearers, outside prescription customers as particularly attractive cohorts. So what did you discover about the customer economics that led you to prioritize these customers?

Yes, so those customers are worth multiple times more in terms of profit contribution than our historical kind of bundle consumer. The progressive wearers in particular, those progressive wearers with a managed care benefit, those transactions can be worth hundreds of dollars more than a bundle customer because generally they're choosing lenses that provide them not only a great benefit, but it's actually maximizing their managed care benefit. And that's 1 of the things that we had to work on in recalibrating our store teams to to help them understand that managed care members in particular, they're paying for that benefit out of their paycheck, and they expect that they're getting a differential out of it. So a member out of pocket on a Tier 4 progressive lens can actually still be hundreds of dollars that that person is paying out of their pocket, plus the hundreds of dollars that come from the plan, but they've paid the premium throughout the course of the year, which ultimately is also giving them a $500 to $600 differential on that product. So if you take the most premium progressive lens and the most premium frame that we sell, if you were to apply that on a total uninsured basis, that could be a $1,000 transaction. Even for a managed care transaction, that can be a $600 transaction for that managed care member. But in their minds, they're getting a $400 discount on what someone without that insurance product would pay. So that's when I talk about getting our teams competent and confident to really kind of talk to the consumers, especially. Especially that managed vision care consumer, about the benefit that they get through the virtue of their payroll contributions against the healthcare plan. It's a completely different muscle. But even in that silly example, right, you can imagine the profitability on a $600 net managed care transaction on a premium lens is far more valuable from a flow-through perspective than to pair for 95, including a free eye exam. And that doesn't even include any of the reimbursement that comes through the back-end from the health insurance plan.

I think 1 of the other cohorts you mentioned is our Outside Rx. So just unpack that. That's folks who got a prescription from a doctor outside the 4 walls of a National Vision doctor. Going back to your point on leveraging doctor payroll rate, that is a category where we've historically under-indexed in terms of our percent of our mix of that customer cohort. And I think we've got a better right to win than anyone else in the category, given our relative price points on the product side. So in terms of opportunities, for leverage. Historically, when you've spent nearly all of your marketing assets, a customer acquisition strategy that says 2-pair plus a free eye exam, a managed care consumer or an Outside Rx consumer might go, well, that offer's not for me because I either get my exam through my insurance for free or I already have my prescription in hand, so I'm not necessarily... That puts America's Best Contacts & Eyeglasses maybe not in the consideration set, when in reality, America's Best Contacts & Eyeglasses should be towards the top of that consideration set because of the value proposition that they offer for the products that we sell. Um, so that's a little bit of the, yeah, repositioning of America's Best Contacts & Eyeglasses brand assets to make sure it resonates with these consumers where we're under-indexing.

And it's interesting that, you know, when we talk about reinvention, you know, reinventing the brand components, reinventing the supply chain, reinventing the mechanical stuff. That's what like, you know, Chris and I and Ana, our Chief Merchant, do. We also have a, our President of America's Best Contacts & Eyeglasses, his name is Mark Banner. Mark's leading the to reinvent the experience in the store. And historically, if you were to walk in an America's Best Contacts & Eyeglasses store, you were greeted with the following, hi, welcome to America's Best Contacts & Eyeglasses, what time is your eye exam? Because there was always this assumption that the eye exam was the part that was bundled in with the purchase. So Mark and his team have been leading even the, the kind of orchestration and the retail theater, if you will, within the stores to just not start like that. To start with, welcome to America's Best Contacts & Eyeglasses. How can we help you? And if you have a prescription from an outside doctor, let me go ahead and show you the frame board. Our pricing architecture, if you were an Outside Rx customer, was really hard to understand because you're like, I already got a prescription, this thing has value, don't understand it in context of your pricing so as we've taken pricing decisions and got more sophisticated there it wasn't just and hasn't been about rising AUR through pricing it is around creating a pricing architecture that makes sense in a broader ecosystem of consumers and how to engage with our brands. I think, Adrian, when you and I first met in New York a couple years ago, we were at, the chat in some restaurant. And I think I said, you know, our first step on pricing was no regrets pricing. Our second step was how do we begin to optimize pricing around managed care transactions? And phase 3 on pricing is, you know, how do we evolve our pricing architecture to make sense for all customer cohorts including being more shoppable for that Outside Rx customer, we're now entering that kind of phase 3 of pricing evolution.

Great. So it sounds like all of these are um ways to create a moat, right? So, um, you know, generally barriers to entry to retail are pretty low, but you're creating a lot of long-term infrastructure, human capital investments that make it really hard to to kind of penetrate. So, talk to you talk to us about what you think the moat is if we gave somebody, you know, an open-ended capital, what could they do what couldn't they do to replicate your model?

Immediately finding 2,000 optometrists and wrapping them under all of the dozens of legal entities that you have to have in 40 different states that all have different flavors of regulation is really, really hard. We have built that out. And again, we have this asset that's now going to be pointed at this unified commerce vision. That's certainly a moat. The infrastructure that we've built, great real estate positioning, well-maintained stores. I do want to give a huge amount of credit to the prior management team. It was always a sense of pride that we had well-maintained, clean stores with great doctors and the most up-to-date doctor equipment.

Amazing. But they weren't necessarily joyful. If you haven't been to 1, I can totally attest to that. I did my exam 3 months ago, and they were some of the cleanest stores I've ever been in and most up-to-date.

Okay. It was very functional, very prideful, but not necessarily very joyful from a merchandising and from an experience perspective. So that's kind of the pieces we're bringing in. But that's part of our moat, too. So it's the doctors, our positioning, our supply chain, and our domestic labs, where we produce lenses. I mean, we buy the pucks and then all the value-added components are generated in our labs. We have a lab and supply chain network that just this year as we introduced product segmentation, we could do it really, really fast because in our model, we run a showroom model. So when you buy glasses, you don't actually walk out of the store with the glasses you tried on. They go back on the shelf, and you get a brand new pair of glasses from our central lab. That also allowed us to be super efficient from an, from an inventory perspective. So when we're making inventory change-outs, we don't have to sell through 2, 3 pieces of back stock per store. We have 1 piece per store and then we have less than, as you can imagine, 1 piece per store in central inventory. As we make inventory changes, as we've moved into segmentation, we can be highly efficient from an inventory and inventory investment perspective on our balance sheet. That was also something that was historically built. So I really love this story because we're taking the best of what was built over 20 years during this analog replica phase and overlaying digitization and segmentation and just a greater sophistication of the business model. And, and that's, I think, some of the strength that you've seen from this management team deliver, Owen. Over the past 6 quarters. Elizabeth Pettis - Great.

So we've kind of touched on pockets of this unified commerce, uh, and building this ecosystem. So I want to give you the opportunity to kind of bring it all together. What becomes possible under the new platform? And so just to level set, unified commerce is omnichannel, plus the doctors, plus the healthcare ecosystem. I just want to make sure that we understand the definition of that, the contact, I'm sorry, connecting the eye exams, the prescriptions, the doctors, the manage care, the retail locations and digital. So tell us what becomes possible.

That's perfect. I'm going to take you on the road with me. That's a better articulation than I think I've given. That's exactly right. Possibility of having consumers who shop in-store and then make subsequent purchases online, knowing that if they ever need to see that doctor, if they ever need to go in-store, giving them that confidence that we got their back on a medical device purchase. Whether we like it or not category, 80 percent of consumers view optical as a medically necessitated purchase. Yes, there are those 20 percent who buy for fashion, but the vast majority view this as a medically necessitated category. That doesn't mean that we shouldn't be able to serve them through a lot of different things. A lower touch channel in a much more efficient and joyful way. So this idea of being able to serve a consumer with a doctor and then allowing them to make repeat purchases to stay connected to our brand. But knowing that they always have our brand and brick-and-mortar locations to rely on when they need us most. Uh, we think that is a powerful differentiator. We think the ability to attract consumers who might want to make purchases online, but again with this idea of if you need to come to see us in store, we got your back. It is, as you know, generally a longer cycle purchase category. Lens customers call it, you know, maybe once every 12 months, spectacle wearers every 2 years, the managed care members somewhere in between. It's a really long time between purchase. There's a lot that happens in your eyes and with your eyes during that time frame. So unlocking the ability for more frequent interactions, be it online, be it in-store, that's what unified commerce gives us, is a way to always stay kind of top-of-mind as a trusted destination for eye care, no matter how you want to engage with a brand. And again, we think we're really unique in that regard because we are the only ones to have the assets of 1,200 points of physical distribution, a truly advanced leading e-commerce platform now that we have kind of stood that up, and our employed doctor network. So that's what we're, um, that's what we're working to in the next year or so like get that platform up and running. Pulled together, get all those use cases running, and get the consumer to think about us in those regards.

Fantastic. So with our final few minutes, um, all of that in a nutshell. I'm going to have Chris tell us what vectors of top line, right, so customer acquisition, TAM expansion, retained customers spending more, wallet share, drivers of the top line, drivers of the structural drivers of the margin expansion. Explain to us how all that flows through the P&L and what's the future look like, the model?

Absolutely, so I think you nailed the, the top line expansion opportunities. Well, 1 thing we have not unpacked a ton here today, just yet is the white space still available for us across the country. So we today operate just under about 1,280 stores in 40 states. The lovely state we're sitting in today, we do not operate in yet, uh. So there's still significant expansion opportunities for us from a pure 4-wall perspective. I, we've made an intentional decision to slow down on new store growth. We've still been a net grower of stores for last couple of years, but we needed to get the operating model right. We needed to get the new store concepts designed and ready to go with the new brand assets to then re-accelerate store growth. So as we think about long-term drivers of growth, and particularly on traffic, as we re-accelerate store growth, we certainly expect to see some positive tailwinds from a traffic perspective. But look, I think in aggregate, the things we're doing are going to drive higher average transaction value, more... with the addition of our unified commerce approach, again, tailwinds to overall transaction growth. But we do expect to see gross margin dilution from a percentage perspective, significant leverage in SG&A. You know, we've been very focused in the last 2 years on SG&A and cost out, and that's largely come through, I'd say, some optimization of our home office, but largely on the backs of just professionalizing our procurement and sourcing processes and really leaning into our strategic partners who want to be part of this new growth trajectory for the business. And we're very, very glad that the partners met us where we needed them to. As you look in out years, right, I think there's still more, let's say, internal optimization to be done in terms of better matching supply and demand, ultimately yielding to 50 to 150 basis points of operating margin expansion on average for the next 5 years. So it's just a really exciting time to be part of the business when I came in. We finished 2024 around 3.5 percent operating margin. The midpoint of our guide for this year is going to double our operating margin dollars from 2024 through 2026. And like, how many opportunities do you get to say that when you join a company? We still feel great about the operating margin expansion. It's something that Alex has brought in a great team that's truly uniquely focused on doing what's right for the customer, but putting NVI first as well and making sure that we're driving operating margin as a key priority for the business. Yes, we think over the 5-year period we expect.

Can you just remind us what your longer-term goals are in terms of sort of an algorithm?

Kind of an average of high-single-digit revenue growth, mid-single-digit comps and operating margin expansion from 50 to 150 basis points. We're expecting to re-accelerate new store growth in 2028 back up to like the 60+ range. Whereas last year, this year, um, what we projected for next year was closer to like the 30-35 range.

And I think learnings from this year has been, as we stay really focused on driving the right type of traffic, that we've actually seen acceleration of our operating income growth even beyond our original expectations. Because I think that is also 1 of the nuances of this business versus traditional retail. It's like, your mix of traffic type matters a lot. And just where we kind of started the conversation was, we are much more focused on the quality of our traffic mix versus the kind of aggregate traffic number because of the significant delta in profit contribution depending on the type of traffic you're driving in.

With that. We're at the end of time, but it's just, to wrap it all up in very simple economic terms, every marginal revenue dollar is creating more marginal profit dollar. So, you know, thank you so much for having me, Chris. Thank you so much. Thanks for having us. Thank you. Thank you so much. Thanks for having us. Thank you.

This live transcript is auto-generated without human intervention or review.

Good day, and thank you for standing by. Welcome to the Q2 2026 National Vision Holdings Earnings Conference Call.

[Operator Instructions]

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Tamara Gonzalez, Head of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to National Vision's Second Quarter 2026 Earnings Call. Joining me on the call today are Alex Wilkes, CEO; and Chris Laden, CFO.

Our earnings release issued this morning and the presentation accompanying our call are both available in the Investors section of our website, ir.nationalvision.com. A replay of the audio webcast will be archived in the Investors section after the call.

Before we begin, let me remind you that our earnings materials and today's presentation include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections.

These risks and uncertainties include, but are not limited to, the factors identified in the release and our filings with the Securities and Exchange Commission. The release and today's presentation also includes certain non-GAAP measures. Reconciliation of these measures is included in our release and the supplemental presentation.

We would like to draw your attention to Slide 2 in today's presentation for additional information about forward-looking statements and non-GAAP measures. As a reminder, National Vision provides investor presentations and supplemental materials for investor reference in the Investors section of our website.

I will now turn the call over to Alex. Alex?

Thanks, Tamara, and good morning, everyone. Thank you for joining us today for our second quarter earnings call. The second quarter marked an important step forward for National Vision. We completed a significant technology milestone following the implementation of our e-commerce replatform. And most importantly, we delivered underlying results in line with our strategic framework, driving growth through underdeveloped customers, underpenetrated products and an enhanced customer experience, all while delivering meaningful improvement in profitability.

This is the flywheel we are building: a stronger customer mix, better product attachment and a more connected experience and a store base that supports sustainable growth, margin expansion and increased profitability. For the quarter, net revenue grew 2.5% to $499 million and adjusted comp store sales increased 2.2%, in line with our expectations discussed on our last quarter call, with accelerated ticket growth helping to offset the temporary replatform impact and broader pressure on lower value transactions.

Our trend analysis suggests the replatform impacted total adjusted comp store sales by approximately 150 basis points. Excluding this impact, we estimate America's Best would have delivered slightly over 4% adjusted comp store sales growth, a result we are really proud of. Especially in light of the current environment and represents another proof point that our strategy to build a more profitable and durable business is taking hold. We sustained momentum with higher-value customers, a key segment that we have deliberately focused our customer acquisition efforts against. This is reflected in our positive comp growth with managed care driven by strength in both ticket and traffic.

And in product categories that we have prioritized, antireflective coatings, transitions lenses, polycarbonate lenses and premium progressive lenses, each grew meaningfully this quarter. Importantly, our average ticket expansion is coming from the quality of sale and consumers raising their hands to opt into premium offerings versus simply passing price through to drive growth. The bottom line benefits of our strategy are evident in our profitability. Adjusted operating margin expanded 140 basis points to 6.3% in the quarter, and adjusted EPS increased to $0.25 per share from $0.18 in the prior year quarter.

Perhaps the clearest evidence that our strategy to become a more profitable company is working is reflected in our updated outlook. Our strategic initiatives continue to perform as expected, and we're seeing the benefits in customer mix, premium product attachment and consequently in profitability. Given this, we are meaningfully increasing our adjusted operating income outlook. As the replatform disruption faded and we gained greater insight into underlying demand patterns, it became clear that the lower-value customer continues to somewhat defer their purchases, leading us to take a more measured view of the top end of our comparable store sales range.

And this was particularly evident at the introductory bundled offer price point. While we are never satisfied with losing transactions, those transactions are among the least profitable in our portfolio. We remain fully committed to serving these customers through our compelling entry-level offer and are confident they will continue to find great value offerings at our banners when the environment improves.

At the same time, we're seeing our strategic initiatives perform as expected as we continue to strengthen higher-value customer transactions, premium attachment and ticket growth. We believe this growth in higher-value customers insulates us from the macro challenges so many other retailers are experiencing with their most budget-focused customers. This combination gives us increasing confidence in the quality of our growth and the earnings power of the business.

Just as importantly, we're increasing our investment in marketing in the back half of the year to drive awareness at America's Best and Eyeglass World and support customer acquisition. For example, this fall, America's Best will have a national presence through Fox College Football Saturdays as the sponsor of Fox Weather segments across Big Ten tailgate, pregame broadcast, all complemented by on-site activations and live broadcast integrations designed to increase awareness and engagement with the brand. This sort of high-profile media initiative is a first ever for National Vision.

As I reflect on our performance, I think it is important to take a moment to explain why the e-commerce replatform was such a milestone achievement in the quarter. While it certainly created some short-term headwinds, it sets the organization up for growth and to capitalize on our long-term aspirations. We now have moved from a legacy digital experience to a modern commerce platform that gives us capabilities we have never had before. The new website platform significantly enhances the customer experience with faster, more intuitive shopping, a meaningful step-up in functionality from our previous platform.

This is not simply a technology upgrade. It is a foundational growth platform that we believe will drive higher conversion, deeper engagement, stronger retention and more personalized customer relationships for years to come. This modernization is also foundational to a world where we expect AI to play a greater role in consumer buying habits. More modern approaches to our website and unified commerce is one of the most significant opportunities in front of National Vision and one that can reshape how customers engage with us across the full optical journey.

Each year, tens of millions of users interact with our brands online, primarily starting their journey by booking an eye exam. What an opportunity we have in front of us is we can marry this level of interaction with a best-in-class commercial experience and access to incredible eye care. That is what we are creating a unified commerce platform supported by our employee doctor model that will connect the exam, prescription, product selection and purchase experience in a way that is more seamless, more personalized and more relevant to each consumer.

Unified commerce gives us the opportunity to turn millions of annual consumer interactions into more connected, higher-value relationships. We believe we are the first optical retailer able to combine online purchasing with in-store eye care at this scale, and we see that combination as a winning one and a key differentiator for our model going forward.

Now let me turn to more near-term plans as we look to the second half of the year. First, we continue to see growth driven by durable ticket expansion attracting premium frame brands that now view National Vision as a strong fit, reflecting the evolution of our customer base toward higher income cohorts and the momentum we're seeing in higher-value categories. Premium product attachment continued to improve in the second quarter, supported by stronger branded frame performance, growing adoption of premium branded lenses and superior materials, all key categories where we continue to close the gap against the overall market.

Earlier this year, we outlined a path to grow premium materials and antireflective attachment, and we are already demonstrating meaningful progress against those ambitions.

Our expanded assortment of premium and performance frame brands include Versace, Burberry, Persona and Costa, and it's helping us attract a higher-value customer to support continued premiumization. Ray Ban continued to be a strong contributor, supported by dedicated branded presentations and new frame launches. We're also advancing product innovation through initiatives such as the launch of Nikon Eyes, Stellest lenses and continued store segmentation.

Nikon Eyes, our newest branded premium lens is exceeding expectations with strong customer adoption, validating demand for higher value lens solutions. Early results show significant mix shift in frames to more premium products, generating significant average ticket lift. Building on that momentum, our store segmentation initiative is helping us put the right brands, products and price points in the right stores. Store segmentation was rolled out in America's Best at the end of Q2, with plans on track for Eyeglass World by Q4. These efforts allow us to better tailor assortments by customer need, local demand, lifestyle and price point while supporting stronger premium attachment and more personalized engagement across our store base.

We're also seeing strong momentum in newer categories that align with where consumer demand is headed. Smart eyewear is one of the clearest examples. Our smart eyewear category continues to do very well, demonstrating our ability to be a clear leader in smart glasses with the strong customer adoption we are seeing with Ray-Ban Meta. At the beginning of the quarter, we expanded Ray-Ban Meta and added Oakley Meta smart glasses to each of our over 1,200 locations, and they are continuing to perform above expectations. Although the number of frames still represent a small portion of our SKUs, smart eyewear is our fastest-turning branded category. A differentiator for National Vision is that we are at scale with this distribution of this rapidly emerging category.

We can fit these devices with prescription lenses through our 2,000-plus license optometrist and then how customers apply their managed care benefits to make them more affordable. That combination of distribution and scale and clinical expertise puts us in a structurally advantaged position as the category continues to scale.

For Q2, adjusted comp store sales at Eyeglass World increased to 0.4% as we continue to lay the foundation for the brand's next phase. The biggest opportunity at Eyeglass World is still ahead of us. And this quarter, we took 3 important steps towards that. First, brand repositioning. We've developed a new brand identity, and we're thrilled with where it's landed. We'll be live online in just a couple of weeks, and our store teams are excited about what's ahead. This new identity gives us the opportunity to refresh our advertising and marketing message for the first time in several years in a way that's fully aligned with our lab, lens and frame strategy.

Second, our lab operating model. During the quarter, we moved lens surfacing from stores into a larger centralized lab. Historically, doing this work in stores limited our ability to offer premium progressive lenses. This change gives us the capacity to expand that offering and better supports future growth.

Third, segmentation and ticket growth store segmentation is on track to roll out at Eyeglass World by the fourth quarter, and we expect that together with the new brand and lab strategy to be a meaningful driver of ticket growth in the back half of the year. Similar to what we did with America's Best, we are applying a bold but disciplined approach unique to Eyeglass World that is focused on clear brand differentiation, stronger customer engagement and profitable growth. We're really excited about what's [indiscernible] to eyeglass world and look forward to sharing more in the coming weeks as we bring this evolution to market including a refreshed brand identity and updated marketing and messaging designed to better reflect the brand's differentiated position and growth opportunity.

For a preview of where we're headed, I encourage you to look at our earnings presentation which highlights elements of the brand evolution currently underway. The key takeaway is that Eyeglass World is another example of how we're leveraging a repeatable transformation playbook to unlock value across our portfolio and drive durable long-term growth.

To close, the second quarter was an important step forward and provided further evidence that our strategy is working. We're delivering against the priorities we outlined with measurable progress across our key protectors and meaningful runway still ahead. The progress is visible in the business: stronger managed care momentum, higher premium attachment, continued ticket growth, a more modern e-commerce platform and meaningful operating margin expansion.

As we enter the third quarter, while traffic trends with our lower-value transactions, continue to be deferred. Our America's Best comp is performing in line with our Q2 performance ex replatform. We are building a stronger national vision: One with better customer engagement, more durable ticket growth, a healthier mix and a more modern platform for long-term growth.

With that, I'll turn the call over to Chris to walk through our second quarter financial results and updated outlook in more detail. Chris?

Thank you, Alex, and good morning, everyone. Before I review our results, as a reminder, our most will include certain non-GAAP metrics, and I would refer you to today's press release for reconciliations of all non-GAAP financial measures to their most comparable GAAP measures. Our second quarter results represent another proof point that our strategic approach is working as we delivered adjusted operating margin expansion of 140 basis points in a period marked by traffic headwinds. Our deliberate shifts toward higher-value customer mix and enhanced product attachment resulted in strong average ticket and operating profit growth despite traffic headwinds, particularly among lower-value transactions related to our entry-level bundle offer. This is precisely the flywheel we impacted at our Investor Day last year. Stronger customer mix better product attachment and more durable profitability, and we're seeing the financial proof points clearly in our results.

Now turning to our results in more detail. For the second quarter, net revenue increased 2.5% and with adjusted comparable store sales growth of 2.2% and a positive 0.8% impact from the timing of unearned revenue. We ended Q with a total of 1,281 stores reflecting 9 openings and 2 closures of America's Best stores during the period. Adjusted comparable store sales growth was driven by an increase in average ticket of 7.1%, offsetting a 4.9% decline in overall customer traffic. As Alex discussed, we had 2 clear dynamics impacting our traffic performance this quarter.

First, the e-commerce replatform created temporary headwinds as we entered the quarter, impacting our total Q2 comp performance by approximately 150 basis points. As our search signals were reconnected and online bookings recovered to pre replatform rates, we saw the underlying momentum of our business become clearer. The replatform was a significant technology milestone. And while it created some near-term disruption, it sets up our organization for long-term growth and positions us to capitalize on our strategic aspirations in digital commerce.

Second is the deliberate evolution in our customer mix to higher value, more profitable transactions, which was accelerated by current category trends that continue to see many lower-value transactions deferred. As a result, our growth in ticket has accelerated across our combined managed care, Progressive and outside RX customer cohort as well as with our cash pay customer cohort.

Now turning to profitability. Costs applicable to revenue increased approximately 4% compared to the prior year, and gross profit increased 1.5% or $4.4 million, driven by the strength in our average ticket. In line with our strategy, this did result in gross margin rate dilution given the impact of a mix shift towards higher value product offerings. Adjusted SG&A was $236.2 million in the second quarter and as a percentage of revenue, leveraged 200 basis points. This performance reflects efficiencies in store labor, lower variable incentive compensation and a timing shift of marketing investments from Q2 into Q3 and in connection with the replatform that enabled about 50 basis points of leverage in the quarter.

Adjusted operating income increased to $31.6 million compared to $23.8 million in the prior year period. Adjusted operating margin increased 140 basis points to 6.3% for the quarter. This expansion was driven by both our strong execution in our cost controls and improved profitability from our higher value customer mix.

Net interest expense was $3.3 million compared to $4.2 million in the prior year. This year-over-year decrease was primarily driven by a reduction in debt with the maturity of our $85 million in convertible notes in May of 2025 and a year-over-year reduction in SOFA rates. Adjusted earnings per share was $0.25 per share in the second quarter, up from $0.18 per share last year. For the first half of fiscal 2026, we delivered adjusted comparable store sales growth of 3.4%, adjusted operating income margin expansion of 180 basis points, and nearly 37% growth in adjusted EPS compared to the prior year.

Turning to our balance sheet. We ended the second quarter with a cash balance of $36 million and total liquidity of $329.3 million, including available capacity from our revolving credit facility. During Q2 2026, we repaid $3.3 million in long-term debt, bringing our total debt outstanding net of unamortized discounts to $237.7 million at the end of the quarter. For the trailing 12 months, our net debt to adjusted EBITDA ratio was approximately 0.9. Year-to-date, we generated operating cash flow of $69.8 million and invested $39.8 million in capital expenditures, primarily driven by investments in new and existing stores and information technology.

During the second quarter, we repurchased approximately 1.2 million shares for $20 million, which was an opportunistic use of capital given the underlying performance of the business. As of July 2026, the share repurchase authorization had a remaining capacity of $30 million.

Throughout the quarter, we continued our strategic investments in inventory to support our store segmentation strategy. As of the end of the quarter, inventory increased approximately 37% compared to the prior year. As Alex mentioned, we are deploying our store segmentation approach across the portfolio, and we've built our assortment to support tailored offerings by location, customer profile and lifestyle. Additionally, we're positioned with the right inventory to capitalize on the strong performance we're seeing in premium materials, branded frames and advanced lens technologies like Nikon eyes.

Looking forward, we expect the pace of inventory growth to moderate as we move through the rest of 2026 and reach optimal levels in support of our segmented store strategy.

Before I turn to our outlook, I wanted to highlight 2 more actions taken in the quarter. As Alex discussed, we are laying the foundation for Eyeglass World next phase. During the quarter, we optimized our in-store lab capabilities at Eyeglass World by transitioning in-store lab servicing to our centralized operations. This enables us to better reflect customer expectations on turnaround time, while expanding our capacity to offer more premium products at scale. As a result, we incurred approximately $3 million in noncash charges during the quarter and may incur up to an additional $1 million in charges related to the completion of this initiative.

Separately, we applied for approximately $5 million in tariff refunds, which is expected to benefit costs applicable to revenue in the third quarter. We have incorporated these refunds into our outlook for the year.

Now moving to our outlook. Year-to-date progress on our strategic initiatives and the evolution of our customer mix is translating into a healthier and more profitable business. As such, we are raising our full year outlook for profitability while narrowing our top line expectations to reflect a more prudent view on traffic given the dynamics we've seen to date lower-value transactions. For the full year, we now expect net revenue between $2.03 billion and $2.08 billion, supported by adjusted comparable store sales growth of 3% to 5%. This outlook reflects our Q3 quarter-to-date trends as well as the expectation that ticket expansion remains a strong and consistent driver of growth.

In the second half, we expect initiatives, including Nikon Eyes, store segment [indiscernible] and continued enhancements to our premium frame and lens assortments to contribute approximately 100 to 200 basis points to ticket growth, helping to further offset traffic headwinds.

Turning to profitability for 2026. We now expect adjusted operating income between $119 million and $139 million, which includes a range for depreciation and amortization of $92 million to $93 million. At the midpoint, we expect adjusted operating margin expansion of approximately 120 basis points for fiscal 2026 relative to 2025, excluding the 53rd week, driven primarily by SG&A leverage. With respect to quarterly cadence, we now expect Q3 and Q4 to reflect flat-to-modest adjusted operating margin expansion as we plan to reinvest our tariff refunds into incremental marketing initiatives in the back half of the year to support growth.

Our full year guidance takes into account our multiyear cost savings plan, and we remain on track to realize approximately $10 million in annualized savings per year. Interest expense is expected to be between $11 million and $13 million. We expect our effective tax rate to be approximately 30%, excluding the impact of vesting on restricted stock units and stock option exercises.

Bringing this all together, we continue to expect adjusted diluted EPS to be between $0.90 and $1.09 per share, which assumes approximately 80.9 million weighted average diluted shares outstanding. We expect CapEx to be between $72 million and $76 million for fiscal 2026, which includes investments to open approximately 30 to 35 new America's Best and Eyeglass World stores this year, and split the expansion of our military locations completed at the end of the first quarter.

As a reminder, our openings are weighted towards America's Best branded stores and based on current timing of openings, we are currently tracking towards the lower end of that range. We also expect to close approximately 15 stores as part of our ongoing fleet optimization efforts, resulting in net new store growth of approximately 15 to 20 stores. We expect store openings to have a relatively balanced cadence throughout the remainder of the year, while the remaining store closures will be more skewed to the third quarter.

In closing, I want to underscore the progress our entire organization is making to transform this business. We are executing a stronger, more disciplined and more profitable business model. At our expected midpoint, we will see adjusted operating income double from our 2024 AOI performance and we'll do so while continuing to provide customers and patients with best-in-class eye care and eyewear and a value offering that remains second to none.

And with that, operator, we're now ready for questions.

[Operator Instructions]

And our first question comes from the line of Simeon Siegel of Guggenheim.

Great. So Alex, anything more you can share on the website replatforming just maybe address specifics of how it impacted the business negatively. And then maybe how and when you think we should be seeing the benefits from the initiative on the other side. Maybe just let us know how you calculated the related pressure that you had mentioned. And I think I caught it sounded like you suggested we may already be through the pressure with the quarter-to-date commentary. Maybe just flesh that out a little more.

And then just clarifying Chris, just the slightly lower full year comp guidance, is that just reflecting the 2Q and for the year is held as you had previously expected? Or just anything else we should think about from a lingering impact?

Yes, you got it. So how we looked at kind of defining the 150 basis points of headwind that we got from the replatform is really related to our ingoing trend rate on new customer acquisition versus that of repeat customers and kind of doing a little bit of a test versus base versus control to see the delta and acquisition and then marry that with our kind of cost per acquisition increasing from a marketing perspective. So we saw that go on for about a 6-week time period. So it was kind of a trough in new customer acquisition around, call it, the beginning parts of April through mid-May. And then we started to see the sequential improvement both in new customer acquisition, and we saw our CPAs return to normal.

So really, we -- that gives us a high degree of confidence that after the 6 weeks, we were through the replatform noise, our acquisition engine had turned back on to the degree that we wanted it to. And we started to see the consumer return sequentially as we step through the quarter. And then again, as we've moved into Q3.

We're already starting to see some of the benefits come through the replatform that are more tactical in nature. Obviously, the intention with is, as I mentioned in my prepared statement, is that we become a more forceful e-commerce participant in the optical category. Ultimately, that required us to build a much more flexible [ bolder ] e-commerce platform that allow us to do that.

But even in the near term, we're seeing key metrics such as completion rates. So, as an example, this is consumers who come to our website and then purchase and then schedule an exam. Both completion rates are already trending in a positive direction. So more consumers visiting us, those visits turning into exams booked because we're making the booking process more seamless through more joyful online experience.

So, we're starting to see early traction from the replatform just in terms of our exam funnel. But again, the longer-term aspiration is that this sets us up for a more significant play in unified commerce. And I'll turn it to Chris for the commentary on balance of the year.

Yes. Thanks, Alex. Also thanks, Simeon. Yes, look, I think we're -- first of all, we're super excited to be raising our [indiscernible] for our AUA guide for the rest of the year despite some of the traffic headwinds we've seen year-to-date. On the narrowing of the top line and then bringing down the top end of the comp guide by about 1 point. Look, really 2 [indiscernible]. That's right. Number 1 is we feel really confident about the ticket driving initiatives that we have in place year-to-date and what we've got lined in the back half of the year with the launch of store segmentation and Nikon Eyes is growing as a percent of the platform. the open variable remains if and when the lower value transaction consumers choose to reengage. We've seen a deferral of the purchase cycle and so really just trying to be prudent on the top end of the portions of when they might come back and being shopping again.

Our next question comes from the line of Michael Lasser of UBS.

So if we add back the quantified impact from the platform transition, the e-commerce platform transition. Traffic did still take a noticeable step down from 1Q to 2Q, you mentioned several times about deferrals of purchases by the lower-income consumer. What evidence do you have that it's just simply a result of the deferral cycle rather than either some impact from the elasticity of the price changes that have been made and/or other factors that are contributing to this?

And at what point do you think traffic can turn positive in order to drive the growth from here?

Michael, great question. So first and foremost, we're not actually seeing the deferral happen among low-income consumers. We're actually seeing the deferral occur across the psychographic of value-seeking consumers, which is an important nuance here. We're not actually seeing any meaningful deceleration at any income level across any of our income cohorts that we track.

Specifically, what we're seeing is lower participation and lower traffic in the average transaction points below the median. So typically, these are consumers that engage in our bundle offer only. So we've seen those consumers decelerate, which, again, is actually a little bit of a benefit to us because it's the least profitable consumer in our portfolio. So that started to occur at a more accelerated basis kind of towards the middle of Q2 time frame. Our data point to support that this is a deferral challenge versus a share challenge or consumers kind of just in general, stepping out is that we've seen about a 2-week increase in the purchase cycle between retained customers that participate in our business.

So again, 2 weeks doesn't sound like a lot, but it does provide about a 2-point headwind to traffic on a full year basis. So again, that's just when we're tracking months between purchase for consumers who are engaging with the lower value transactions. That being said, we have seen meaningful traffic increases for those customers who are purchasing above the median from a transaction value perspective. So we kind of triangulate around all of those data points which gives us, again, the confidence in the business, and it's part of the reason that we saw the nice profit accretion in the quarter.

Got you. Very helpful. My follow-up question is on the full year profitability outlook. The midpoint of the adjusted operating income was up by $9 million was 7.5%. I think Chris mentioned that about $5 million of that came from the tariff refund that's expected in the third quarter. What drove the remainder of the increase? And to what degree is the shift in marketing that I think you said the count for 50 basis points in 2Q. Is that fully going to be realized in 3Q? Or is there a net benefit from some of the changes in marketing spend.

Yes. Thanks, Michael. So look, actually, from a marketing perspective, between what we deferred in Q2 into Q3 and beyond and the reinvestment we're planning kind of making taking those tariff dollars and putting it towards customer acquisition. I'd say there's actually a net expectation that we're going to grow advertising spending. In the second half versus our original guide, original plan. So look, I think in terms of why the AOI is growing in aggregate, even with some of these reinvestments is, the team has done just a phenomenal job with cost execution and cost controls from the $10 million that we announced leading into the year. We've also just demonstrated better ability to [indiscernible] skewed, particularly on the store labor line. So as we saw demand soften a bit in Q2. The operating team and our stores did a great job pivoting our labor to make sure that we're bringing the supply to match the demand. And that's really the main driver of what we are seeing in AI.

Our next question comes from the line Jack Slevin from Jefferies.

To just take a step back. And I imagine there's going to be a lot of focus on traffic that I think you're giving a kind of helpful color on. But thinking a little more structurally. I know there's some specific items. There are some of the changes you have in what the consumer base is looking like in your stores. But if I think about on a couple of year basis and look at the gross margin performance and what you're doing on G&A, can you maybe speak to whether or not this current composition of slightly slower traffic but still getting ticket. I guess how long can this run paired with some of the G&A discipline to sort of sustainably grow gross profit and earnings in the business.

Yes, you got it. I mean this is one of the things we unpacked last November at our Investor Day that we have year of runway ahead in terms of ticket expansion through mix, right? I mean I think we've said that historically, we were a bit laggards in taking price. And we have certainly under-indexed the category on underdeveloped products, premium lenses, premium frames, et cetera. We are still at a significant discount related to the category measured in multiples, not percentage points in terms of average transaction value.

And as we continue to skew more premium, in particular with the Managed Vision Care customer who has a heightened degree of spending power through their plan, we have continued runway to take advantage of that really for multiple years to come. And I've said this previously that this team has outlined really internally our playbook for the next several years of actions and activities that we're going to take to continue to lean into that. And that ranges from introduction of premium lenses to training the teams in the stores on the benefits of antireflective and transition to the thing we're most excited in the back half of the year, which is the introduction of store segmentation across our entire fleet where we're distorting our assortments based on local customer demand and the types of frames that folks want to buy in their specific stores.

So we still think we're very much in early innings of executing on these strategies to continue to drive premiumization within the category. Which, by the way, once we have run these plays, we will still be the obvious destination for value in the category based on our kind of price architecture. So I mean, that's a bit of color on how we're thinking about average transaction growth over the next several years.

Our next question comes from the line of Simeon Gutman of Morgan Stanley.

Hello. This is [indiscernible] on for Simeon Gutman. So on the raise EBIT guide, can you just talk a bit more as to how much is left for the annualized SG&A cost savings? And how much more of a lever that is to pull into the back half?

Yes. We are super excited to say that we're really fully annualizing all of the cost savings initiatives so they're all in place. So we actually saw that through Q2, so you can kind of bank about $2.5 million. [indiscernible] quarter coming out of that initiative. Frankly, our performance on cost controls and performance management has given us the ability to reinvest some of the dollars in the back half. So, we spoke about reinvesting more in marketing and customer acquisitions, but we're also investing in things that will give us some tailwind going into '27 and beyond in terms of our long-term strategic plan.

Okay. Great. And then stepping back a bit, as you think about what is the right underlying algo for the business on some of your initiatives, like the store segmentation and the rollout of the premium brand and lens launches are fully ramped? And how much of that is take versus traffic getting to a healthier place

Yes. I mean our long-term outgo of mid-single-digit comps and 50 to 150 basis points of profit accretion per year is still in place, and we're still committed to delivering that over the long term. As we said, though, we would believe that in the near term, call it, through '27, we're seeing outsized impact from ticket versus from traffic. And as we've kind of shared previously, we anticipate that we're going to reaccelerate store growth from the last couple of years we're in the 30% to 35% range to something north of that when we step into '27 and '28. And then that's going to be a traffic generator as we move through more the latter phases of our long-range plan. So I think in the short to medium term, you're going to see continued growth from ticket a bit more outsized than traffic.

But that being said, the things that we're putting in place, the fact that we're thinking differently about marketing, how we're making investments in college football Saturdays the investments that we've made in the CRM. Those are all traffic driving in nature, but it's getting that flywheel all kind of working in unison that we're currently focused on. So again, I'd see more ticket growth because we saw a considerable amount of headroom in the short to medium term and then see the traffic engine coming back on a little bit later.

Our next question comes from the line of Dylan Carden of William Blair.

Let's stay on ticket here. Alex, can you speak to the difference and as far as sort of what the ticket decline between like-for-like price -- sorry, ticket increase between like-for-like price increases versus mix shift? Both this quarter and kind of over the last 2 to 3 years. Let's start there.

Yes, you got it, Dylan. So actually, so far year-to-date, we're seeing more than half of our ticket lift come from mix shift. Which we're super pleased by, right? Because most -- in most cases, these are consumers that are raising their hands for more premium product. We still have over 40% of our assortment and frames priced at under $99. We still have every lens that we previously had available for sale in our lens catalog and available for consumers to opt into.

So the ticket lift that we're seeing mix is really one of our teams in the stores becoming more accustomed to lifestyle [indiscernible] and the consumer is raising their hands for the better products that we're introducing.

To the second part of your question, compared to prior year -- in prior years, our average ticket increase was predominantly more price driven. So as we've kind of implemented our merchandising architecture -- we brought new products to market. We're seeing our ticket increase come more from mix versus from price increases, which we obviously think is a much healthier approach.

And it's kind of interesting, it's I think a related topic that you're seeing kind of that traffic decline across income cohorts and that sort of value-seeking customer. Does the guy anticipate that, that could get worse that the consumer more broadly kind of walks away from price or sits at the market for a bit?

Yes. I think probably the primary variable in the range of our comp guide is exactly what you're putting your finger on, which is at what point does the lower -- the value-seeking consumer come back and do they accelerate back into the business into consideration? Or do they take a step back. So as I think about the 3% to 5% range, that's the single biggest variable in that equation.

Our next question comes from the line of Robert Ohmes from Bank of America.

Two questions. First, just on the increased marketing for the back half. Can you give more color on what the focus is going to be? Is it more exam focused? Is it more new frames focused? Is smart glasses being highlighted here. Can you give any more color on what you guys incrementally you're going to be doing in marketing?

Yes, you got it. So we are -- from a media perspective, we're going to invest a bit more into directed TV or digital TV. We're going to invest a bit more in social and we're going to invest a bit more in search. So our linear media plan is actually already before this incremental investment, comping positive to last year given the investment that we're making in our college football program. But we're going to see meaningful increases in digital spend, again, across search, across social and across connected TV.

The content is going to be really based into kind of 3 buckets. When we introduced our Every Eye Deserves Better platform last year, we said that's kind of our anthemic marketing approach for the business, but we had an opportunity to create specific content more geared towards the managed care for the outsider can for the progressive consumer. So some of the assets we're creating are pointed more specifically at those segments that we've declared are the growth segments for us to pursue.

The other thing that we're doing that we're super excited about is we're going to dip our toe into marketing directly to online purchase consumers. So for the first time, we're going to actually have some more broad-scale media, encouraging consumers to visit us at americasbest.com to engage in our virtual try-on tool and to make purchases online. Again, that is one of the reasons that we have made the strategic investment to replatform our e-commerce site. And now we're starting to rev up the engine to drive consumers there to do something other than book an exam, but to actually engage with us from a commerce perspective.

So, those are the themes, the media and the types of things that you can expect to hear from us from a consumer communications perspective in the back half of the year.

That sounds great, Alex. And just a quick follow-up. Just on the store segmentation, can you just remind me like testing you've done and what you've seen so far? And do you think different segments will have similar lifts or -- a little more color there?

Yes, you got it. One of my favorite topics, actually. So we have -- we've developed 5 store segments for America's Best and those have rolled out. We've developed 3 for Eyeglass World, which are going to roll out in the back half of the year. The 5 segments from within America's Best kind of range from luxury to value. And each of those segments has approximately 200 stores per segment. We do anticipate to see higher average ticket lift in the luxury locations in early innings. That's exactly what we're seeing.

Frankly, we're seeing average frame purchases increase in each of the segments once we have layered in our new assortments. But the most accelerated results we are seeing in the ones that are getting the more premium SKUs. And again, probably I'll just say, it's performing as designed, and we're actually super pleased with the results just a few weeks in.

Our next question comes from the line of Zachary Fadem of Wells Fargo.

First question is how you think the optical category as a whole is performing this year? And I know you have some moving parts in your business today, but curious how you gauge your performance year-to-date in terms of market share with both managed care as well as cash pay.

Yes. Zach, it's great question. I mean from the channel checks that we do through both formal and informal methods, we believe that we are holding our own or taking share in the market. So we believe that the market is seeing similar dynamics. So we are [indiscernible] growth in managed care and deferrals in the cash pay value-seeking segment. So we don't think that we're unique in the dynamics that we're seeing across our customer cohorts. And frankly, I think on some of the cohorts like managed care, I think we're outperforming, especially because we had room to grow and room for improvement as it pertains to having products in place and price points in place that do a better job of serving that managed care consumer.

So again, in general, I think we are either holding our own or outperforming. And I think on the managed care side, we're doing really well.

Got it. And then on Eyeglass World, you have some changes coming that seemingly brings the business model to be a little bit more like America's Best. So first question is if you agree with that. And if that is right, could you talk about strategically what's the long-term value of having multiple brands today rather than leveraging the benefit of focusing on 1 brand?

You got it. So actually, we see the work that we're doing on Eyeglass World. Pulling Eyeglass World a bit further apart from where America's best is today. We're pulling it further apart in terms of commercial offer to the consumer. We're pulling it apart further from the assortment and the products that we're carrying. We're actually going to have an even more premium assortment available within the Eyeglass World fleet once we complete our segmentation efforts in the back half of the year.

With the refreshed brand identity that we are launching online in a couple of weeks and then more fully in our consumer communications thereafter. We believe that Eyeglass World will play a more premium, a more joyful, frankly, dare I say, a more luxurious spot in the optical market. So, we're really excited about the direction that the brand is taking. And again, I think with the work that we're doing, it's going to be further pull apart from where America's Best is today.

So really, really great things to come for Eyeglass World. And back to your question on, do we -- should we have a second brand? The answer is absolutely, especially once we're done with the work to having a more differentiated Eyeglass World experience?

Our next question is come from the line of Matt Koranda of Roth Capital.

Maybe spinning back to the Americas segmentation that was rolled out at the end of the second quarter. You mentioned, I think, a ticket benefit from the resegmentation. Can you just unpack that a bit more in terms of what you're seeing? It sounds like maybe more on the higher-end store segmentation side where you're going to see a ticket benefit. And is that sustainable into '27 and beyond? How to think about sort of the durability of that?

Yes, you got it. We actually think that between the introduction of Nikon Eyes and segmentation, we have about another 100 to 200 basis points of ticket growth just from kind of basic mix shift to go, call it, post 12 months after implementation. So absolutely, we think there's tailwind going into 2027 and certainly through the back half of the year.

The ticket growth across segments, again, early innings, what we're seeing, performing as expected, higher ticket growth with the higher segment. But again, even take a growth at the more entry-level segment as well. So again, I think this is the power of providing consumers the frames that they want and need tailored to their specific local market. And we're seeing kind of really, really strong results, and we have no reason to believe that, that won't sustain.

And Matt, I think an interesting thing, too, when you -- when you think about these types of initiatives and to the question I was asked earlier on sustainability more over the medium term, you have initiatives like this that you get the mechanical impact over the course of the year. But as associates in the stores get more accustomed to selling against it. Those benefits actually go beyond the year of introduction. That's been my experience in the optical category anyway, right.

That you make a mix change, you make a price change, you get a year's worth of kind of these mechanical benefits. And then you get multiple years of benefits as the team members in the stores become more accustomed and more acclimated to selling against those types of strategies.

That makes sense. And then maybe just -- now that the segmentation at America's Best is in place, and obviously, you'll probably need a little bit of time to test and learn around the new segments. But does that put into play broader store expansion next year? I think you guys had been previously talking about that as more of a '28 event, but it seems like maybe we're more within the window where you could step on the gas in terms of store expansion, maybe even in the back half of '27, but I wanted to hear your thoughts on that.

Matt, I mean, it's certainly a scenario that we're contemplating, right? I mean I think we're seeing given the strong degree of cash flow that we're generating and our overall kind of capital strategy, we are always evaluating how to best deploy that. And again, given the strength now that we're seeing in our target customers, which is changing the profitability profile of the individual transactions. And at the store level, new store growth is something that we're thinking really hard about.

Our next question comes from the line of Kate McShane of Goldman Sachs. Okay, man. Your line is now open. You can please unmute your mic.

We'll move our next question. Our next question comes from the line of Adrienne Yih of Barclays.

This is Angus Kelleher on for Adrienne Yih. I wanted to ask about premium lens attachment. Antireflective was a major contributor to ticket growth last year. Is AR doing as much heavy lifting this year? And if possible, could you unpack or maybe rank order the relative contribution from your key drivers and where you see the greatest remaining runway.

Obviously, you guys have a lot of great things going on in attachment. So it's kind of hard to keep track of.

Great question. And again, this is one that we're super pleased with the performance against all elements of lens premiumization. Internally, we talk about lens leadership in our lens quality of sale, and we're seeing inter-reflective transitions, multifocal, premium multifocal, all pointed in the right direction. We're seeing the -- in a reflective attachment rate trending in the kind of mid-single-digit positive versus [ LOI ] perspective, which is beyond what our expectations was even when we impacted at our Investor Day last year. So probably in rank order of what's contributing to our lens leadership, it's in a reflective lenses: one, premium progresses, two, transitions three, to give some type of color to what degree of impact we're seeing across those 3 levers.

Excellent. That's great color. And I think then just one for Chris. Inventory up, I believe, 37%. How should we think about the timing of the sell-through and any markdown potential if lower value traffic -- or sorry, lower income traffic remains pressured. Or do you feel comfortable that the product is there to support segmentation and premium assortment and is not dependent on a cash pay traffic turnaround?

Yes. No, it's a great question. Look, I think 1 of the things that we're really proud of is the supply chain model that we have. So just to unpack that for a moment. We don't keep back stock in stores. So really, we keep our inventory at our manufacturing facilities, which means as we're selling through, let's say, a SKU that's not going to be part of the carryforward the go-forward segmentation strategy, right? We might keep it in one of our segments for a period of time to allow us to sell through it, which really helps us reduce the risk of obsolescence.

Look, over time, I'd expect in general obsolescence to grow just as the average carrying cost per frame goes up. But what's really exciting about our segmentation strategy is it actually better allows us to work through our inventory before needing to move something to obsolete. So in terms of the overall balance growth of the quarter, look, I think we're in a great spot to support our ongoing segmentation strategy. You might see some modest growth from a -- but in terms of the big moves that we'd anticipate seeing that was really done through Q2 to support the launch here at the end of the quarter, be really good about our working capital position going forward.

Our next question comes from the line of Paul Lejuez of Citi.

Curious if you can talk about what percent of your stores where you're actually seeing positive traffic. You mentioned there were 5 segments. I'm curious how different those are from a traffic and ticket perspective. Maybe we'll start there.

And then just second question, look to hear a little bit more about the [indiscernible], how much of the sales driver that's been for you guys? And what's next in terms of smart glasses, what it can mean to you in the coming quarters and years?

You got it. So a little bit too early to tell traffic drivers by segments. Again, this is something we just rolled out within the last, call it, 5 weeks or so. But again, where we're seeing traffic increases are amongst consumers that are purchasing in the top median of average ticket or average transaction value. And so that's both with the managed care traffic is up in that segment. the self-pay, the cash pay is down slightly in that segment. But overall, we're seeing traffic in those median consumers -- or those consumers purchasing over the median average ticket value increase.

And the decrease has been more concentrated in those that are engaging at the lower end of our kind of commercial scale. This has been the trend that's been a bit more exasperated since the beginning or mid Q2. In terms of product as the sales drivers and smart eyewear, we're seeing equal parts of our frame premiumization and lens premiumization drive our product mix, which, again, is something we're super proud of. Especially in light of that, as I mentioned during the question earlier, and we still have a significant portion of our assortment available at a value or entry-level value price point.

So the fact that consumers are raising their hands for the better products, we just -- we couldn't be happier with. And we think that's -- when you hear the confidence in our strategy over the multiple, multiple years, that's what gives us the confidence of the durability of the changes we've made and the durability of the business go forward is that we do see this acceleration of consumers for opting into better product.

In terms of smart eyewear, super pleased with the progress that we've made with Ray-Ban Meta, and we introduced an Oakley Meta frame as well. Our store associates are getting ever more accustomed to selling this product and we're seeing consumer demand continue to be strong. Again, it's not yet a material contributor to our overall business. However, we do think that in the long term, more and more consumers are going to adopt smart eyewear. And as they adopt smart eyewear, what we have seen is an average transaction value that is amongst the most valuable in our portfolios.

These are the consumers who are also opting into the most premium lenses with their smart eyewear. So certainly more work to do here, but super pleased with the adoption and acceleration that we're seeing in this category.

And Alex, you mentioned a couple of things that were going to be drivers of ticket. I don't think smart eyewear is one of them. When do you think it's material enough to actually move the dial from a top line perspective and a ticket perspective.

Yes. I mean, I think once we start to see a few more players come to the category, we'll start to see material contribution to the growth.

Our next question comes from the line of Anthony Chukumba of Loop Capital.

I'm going to start with more of a comment than a question. I was going through the presentation slides, and I saw the new Eyeglass World advertising change -- or glasses change your world. And I'm just happy to see that Mr. World will no longer be haunting my dreams. So I just wanted to mention that. So anyway, but sticking with Eyeglass World, I just had a clarification. So okay. So you mentioned you're going to move to lens surfacing from the stores with larger centralized labs. My understanding has always been part of the reason to the lens servicing in the store was to offer same-day -- essentially same-day eyeglasses. So are you still going to be offering same-day Eyeglass World?

Yes. Anthony, it's a great question. I mean the in-store lab servicing is a bit of a double-edged sword. In one aspect, it allows you to do same-day service. But on another side, it prevents you from providing the consumer more advanced materials and advanced coatings. So for instance, on same-day in-store work on progressive you cannot offer things like Nikon Eyes and you cannot offer antireflective coatings because that's just not a capability that's available in the store. So it's the balancing act of what's more valuable to the consumer, same-day service or a more premium offering.

And the way the market is going, the more premium offering supersedes the need for same-day service. That being said, we do still offer same-day single vision service in the stores. So we're changing the lab operating model from one that does full servicing for progressive lenses to doing finishing work for single vision.

So for those consumers who require same-day surface or same-day lenses for a broken or lost pair of glasses, you can still service those an Eyeglass World with that same day. with that same-day service promise. It's just not going to be a kind of core central thesis for the brand go forward. It also helps us from -- from an inventory management perspective, it helps us from an efficiency perspective. And again, it helps significantly from the ability to offer more premium product to the consumer.

Got it. And then just one quick follow-up. So I know you mentioned in the past kind of moving managed vision care penetration from, call it, like around 40% to fit. Just wanted to know if you had any update in terms of where to maybe even just to the first half of this year.

Yes. We are really, really proud of the progress we're making against growing our managed care penetration. I think -- called a headwind to that even last year was the fact that our cash pay was also comping positive net. So we were -- we need to outpace our managed care growth against our cash pay growth and a byproduct of the fact that we saw some weakness in the cash pay consumer in Q2 is that the overall mix of managed care grows as a part of the portfolio as they grew in both traffic and ticket in the quarter.

So look, I think all the strategies we're deploying against growing our value proposition for the managed care consumer continue to be strong. I strongly believe the availability of Nikon Eyes is in a Tier 4 lens, the availability of a broader swap of more premium frames in the stores is going to continue to make us a strong part of the consideration set for managed care consumers in the category.

I'm showing no further questions at this time. I'll now turn it back to Alex Wilkes for closing remarks.

Great. Thank you. So before I close, I want to thank all of our National Vision team members and our affiliated doctors. Q2 was certainly -- raised some challenges to the business, and I just couldn't be prouder of the execution, the focus that this team has put forward every single day to take great care of our patients and customers. So the work you're doing is truly helping to drive our results and drive our ongoing transformation.

Thank you also to all of you who joined our call today and for the thoughtful questions. As always, we appreciate your dedication, your time, your focus and the thoughtfulness to which you come to these calls. Thanks so much, everyone.

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Good day, and thank you for standing by. Welcome to the Q1 2026 National Vision Holdings Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Tamara Gonzalez, Head of Investor Relations.

Thank you, and good morning, everyone. Welcome to National Vision's First Quarter 2026 Earnings Call. Joining me on the call today are Alex Wilkes, CEO; and Chris Laden, CFO. Our earnings release issued this morning and the presentation accompanying our call are both available in the Investors section of our website, ir.nationalvision.com.

A replay of the audio webcast will be archived in the Investors section after the call.

Before we begin, let me remind you that our earnings materials in today's presentation include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the release and our filings with the Securities and Exchange Commission.

The release and today's presentation also includes certain non-GAAP measures. Reconciliation of these measures is included in our release and the supplemental presentation. We would like to draw your attention to Slide 2 in today's presentation for additional information about forward-looking statements and non-GAAP measures. As a reminder, National Vision provides investor presentations and supplemental materials for investor reference in the Investors section of our website.

I will now turn the call over to Alex. Alex?

Thanks, Tamara. Good morning, everyone, and thank you for joining us for our first quarter 2026 earnings call. We are building a stronger, more profitable National Vision, and Q1 is clear evidence that our strategy is working. The work underway on our 4 growth vectors is structural, designed to grow demand, improve ticket and expand operating margins over time. We're closing key gaps where we are underdeveloped compared to the category with more profitable customers and closing the gap in key product areas, improving the customer and patient experience, expanding our footprint through new stores and channels and driving operating margin improvement through disciplined cost management.

We are raising the bar on the overall experience in building a more seamless digital and in-store journey that supports share gains while reinforcing our value leadership. With our Q1 results, clear initiatives for the balance of the year and strong execution against our priorities, we are reaffirming our fiscal 2026 guidance.

Moving on to our results. In the first quarter, net revenue grew 6.6% to $544 million. Adjusted comp store sales increased 4.5%, in line with our mid-single-digit algorithm despite early weather pressure and a choppier macro backdrop that affected our cash pay cohort. Adjusted operating margin expanded 210 basis points to 10.2%, reaching double digits on continued cost discipline and growth in our more profitable customer cohorts. Adjusted EPS increased to $0.45 per share from $0.34 in the prior year quarter.

We are executing our growth plan with discipline, and we continue to see strong, consistent results that reinforce our confidence in our modernization efforts. With traffic in line with our expectations, our intentional customer mix shift towards progressive, managed care and outside Rx customers continued in Q1 and is supporting stronger comps and more profitable growth.

It is important to remember that ticket growth is not just price. It reflects higher penetration of solutions customers value and modernized selling tools supported by improved associate training and clear selling choices. In fact, our cash pay ticket continues to outpace all others as this cohort is adopting our premium products at a faster rate, reflecting the strength of our value proposition, enhanced product assortment and high-quality eye exams.

Compared to a year ago, we are making meaningful progress in this area, and we're still early in the journey. Our progress drove faster, more relevant product flow in Q1. We introduced new private label frame options, pushing select price points above $100, launched Stetson to capture the Western trend, rolled out Swarovski across emerging brands. And in April, we launched Kendra Scott sunglasses, a category with meaningful growth potential. The result is continued strength in upgraded frames sold and improved mix of higher ticket items in the quarter. This is not just price. It reflects higher penetration of products customers value and clear selling choices supported by better associate training.

Customers continue to choose advanced lens materials, such as polycarbonate and high index, along with features like anti-reflective transitions and premium progressive options at a higher rate than last year. As the assortment expands, our selling approach means we do more than add choice. We bring the benefits to life through relationship building, through stronger consultations and in-store education that help each customer find the right eyewear solution. This momentum reflects the product evolution our merchandising team is driving.

One proof point is how we are scaling smart glasses with our Ray-Ban Meta launch, and it's already resonating. We're seeing strong early demand with Ray-Ban Meta as customers use managed care benefits to support the purchase. Given that demand, we expanded Ray-Ban Meta and Oakley Meta to all America's Best and Eyeglass World stores as well as online in early April. We also broadened the Meta assortment with product designed to improve comfort, wearability and performance. We added products from the Ray-Ban Meta optics line for prescription wearers, offering lighter weight, longer battery life and better all-day wear. Smart glasses are becoming a more important AI-driven category, and we are leading in making these products accessible to our customers and patients.

Looking ahead at 2Q, we have several initiatives in the pipeline that will further expand options for customers seeking quality frames and lenses to meet their lifestyle needs. In May, we began piloting a major launch of branded lenses, Nikon Eyes. Beyond the brand, these lenses offer meaningful quality improvements we believe customers will value. The Nikon Eyes lenses are available both for single vision and progressive customers.

For the single vision customer, the lens is a digitally surfaced lens that allows for better customization and personalization of the lens. The progressive Nikon Eyes lens is the most advanced Nikon Eyes progressive lens design and categorized by the insurance companies as a top-tier lens. It delivers sharper vision, a wider field of vision and a larger corridor for intermediate vision leading to best adaptation for wearers and an all-around better viewing experience.

These lenses will be available at both America's Best and Eyeglass World, and we're proud to offer the highest tier Nikon Eyes progressive lens in the U.S. market. This is a meaningful step up from what we've offered historically and is our most advanced lens to date. This is a game changer for new progressive wearers, significantly improving their adaptation, which historically is one of the largest pain points in the progressive category.

Starting in June, we're adding more premium brand assortments to America's Best with highly sought-after brands like Tory Burch, Polo Ralph Lauren and Persol. As our assortment becomes more premium and innovative, execution in-store matters even more. Our data shows that customers are highly engaged early in their shopping journey. So this month, we're expanding associate training for both Ray-Ban Meta products and premium brands across a full customer journey from purchase to pickup to improve consistency.

As we look ahead, we will further enhance our merchandising capabilities and store experience through store segmentation. By understanding the customers who shop at our stores, the purchases they make and the potential customers who live near our stores, we can tailor product assortments to align with local demand and shopping behaviors. Some expected benefits include: enabling us to adjust assortments to customer needs, allowing us to build thoughtful brand mixes for each segment, giving us the ability to establish structured exit plans for brand products that are underperforming or no longer aligned with our strategy.

We will roll this out in 2 phases. America's Best begins in late Q2 with Eyeglass World following in Q4. The goal is simple. Let the data guide us to get the right products in the right stores and make it easier for customers to compare and purchase what best meets their needs. This is a key part of our strategy, use customer and market data to localize assortments and pricing. This not only increases relevance at the store level, it unlocks the opportunity for incremental sales as we capture more demand while staying true to our customer-focused strategy.

We're applying the same mindset to our digital storefront where scale and personalization matter even more. On digital, we made an important strategic move to replatform americasbest.com at the beginning of Q2. This is a key step in our unified commerce journey to strengthen our digital foundation, improve the customer experience and over time, better connect our online and store experiences. A replatforming of this scale resets parts of the digital storefront and traffic was disrupted as search and social optimization resets.

We're managing this transition anchored in data, clear operating focus, discipline and a healthy sense of urgency. Importantly, we're seeing sequential improvement in traffic as Q2 progresses. As a result, quarter-to-date comps are tracking in the low single-digit range, and we expect that the initiatives already underway will offset the recent disruptions, reinforcing our confidence in the trajectory of the business and in reaffirming our guidance today.

Most importantly, this platform materially improves our ability to serve the roughly 30 million consumers who engage with us online each year. It reduces friction in the shopping journey, especially on mobile, with fewer clicks and fewer steps to complete an order or book an eye exam. Over time, it helps prepare us for a world where AI becomes a more important part of consumer marketing and interaction, including greater personalization, better awareness of tools like online try-on and faster frame discovery.

This is how we build a more seamless omni-channel model, with capabilities to support durable e-commerce growth over the long term. As we move into 2027 and beyond, we're building toward a true omni model, including features that lead to a more seamless shopping experience for our customers, like one-click contact lens reorders and more relevant CRM-driven second pair recommendations. So while the transition created short-term noise, the strategic value is clear. The recovery is underway and the long-term opportunity is meaningful.

In marketing, we're making steady progress and beginning to see tangible returns from the foundational work underway. Our CRM replatform is delivering positive early results, improving performance and giving us better visibility and control. It is enabling more sophisticated CRM journeys that are more relevant and better timed across the customer life cycle, from post-purchase engagement to reactivating lapsed customers. CRM is where the brand is delivered, and we're strengthening that capability. When the journey is relevant, timely and personal, brand awareness follows.

During Q1, America's Best continued to gain an unaided brand awareness, reflecting more consistent message and a stronger customer experience across stores and online. The team also made meaningful progress this quarter to strengthen the second half launch cadence and advance the Eyeglass World brand. At America's Best, we're building momentum with our campaign by staying focused on value, clarity and traffic-driving execution that supports both near-term performance and long-term brand health.

As we look at our portfolio of brands, we are continuing to make progress with the Eyeglass World brand repositioning and look forward to updating you on our repositioning efforts later this summer. Alongside that work, we're also strengthening the Emerging Brands portfolio by expanding where our value proposition is uniquely compelling.

We have long been proud to serve the military with quality optical solutions, and I'm excited to share that at the end of the first quarter, we expanded our relationship with the Army and Air Force Exchange Service, or AAFES, the government entity that operates for-profit stores on military bases. We added 20 new military optical sites, bringing our total to 72 AAFES locations, and we are now the sole optical provider in the U.S. for the Army and Air Force bases. This addition represents an important step in broadening our reach through our Emerging Brand portfolio.

Since the change in operations at the start of April, our teams have been working collaboratively to ensure a smooth, thoughtful integration. These are exciting developments underway. We'll stay focused on execution and driving value as we move forward. In closing, we're building a stronger, more profitable National Vision, one that delivers access, experience, value and convenience at scale.

Q1 was a clear step forward. These results reflect the dedication of our associates and doctors, and I want to thank them for their care, service and execution they deliver every day. The progress we're seeing across product mix, pricing, experience and cost discipline is translating into stronger comps, meaningful margin expansion, all while reinforcing our value leadership. We also took an important step in building the digital capabilities that will modernize the business over time. And what we're seeing gives us confidence to reaffirm 2026 guidance.

With that, I'll turn it over to Chris to walk through the financial results and outlook in more detail. Chris?

Thank you, Alex, and good morning, everyone. As Alex mentioned, our first quarter results reflect meaningful progress against our strategic priorities. We delivered comparable store sales in line with the midpoint of our guidance, expanded operating margin and drove improved profitability through disciplined expense management while continuing to advance our transformation initiatives. Although the consumer environment remains dynamic, we are confident that our actions are positioning us well for the balance of the year.

Before I review our results, as a reminder, my remarks will include certain non-GAAP metrics, and would refer you to today's press release for reconciliations of all non-GAAP financial measures to their most comparable GAAP financial measures. For the first quarter, net revenue increased 6.6%, with adjusted comparable store sales growth of 4.5% and a positive 2% impact from the timing of unearned revenue. We ended Q1 with a total of 1,274 stores, reflecting the 8 new America's Best stores we opened during the period as well as the closure of 3 America's Best stores and 1 military store.

In addition, our ending store count includes the expansion of our military brand. With our expanded agreement, we added 20 new military stores and are proud to be the sole optical partner on AAFES bases in the United States. We expect these stores to have a similar level of productivity as our current military locations, and we do not expect this expansion to have a material impact on our outlook for 2026. For clarity, these new stores are not included in our current guidance.

Adjusted comparable store sales growth in the period was driven by an increase in average ticket of 5.1%, which reflects continued strength in the managed care cohort, along with the continued execution of our pricing and merchandising product mix initiatives. The increase in average ticket was partially offset by a 1.2% decline in overall customer traffic compared to the prior year as positive traffic for the combined managed care, progressive and outside Rx customer cohort, continued to partially offset softer traffic in our cash pay business.

These results reflect a sequential improvement from the fourth quarter despite the impact from winter storms and a volatile macro backdrop. Our eye exam conversion to product sales has remained consistent with prior quarters, which is another key indicator of customer acceptance of our merchandising and pricing transformation. As a percentage of net revenue, cost applicable to revenue increased approximately 10 basis points. The resulting slight decrease in gross margin was driven by product mix and offset leverage in optometrist-related costs consistent with our planning scenario.

Adjusted SG&A was $246 million in the first quarter and as a percentage of revenue, leveraged 200 basis points. This performance was primarily driven by lower associate-related expenses and advertising. Adjusted operating income increased to $55.5 million compared to $41.3 million in the prior year period. And adjusted operating margin increased 210 basis points to 10.2% for the quarter.

Net interest expense was $2.8 million compared to $4.6 million in the prior year. This year-over-year decrease was driven by 2 main items. The first is the reduction in overall debt and the second is interest received from the IRS, which we will unpack in a moment. Related to reduction in debt, we repaid $101.3 million with $84.8 million attributable to the maturity of the convertible notes and $16.5 million in amortization of our term loan. Adjusted EPS was $0.45 per share in the first quarter, up from $0.34 per share last year.

Turning next to our balance sheet. We ended the first quarter with a cash balance of $67.9 million and total liquidity of $361.2 million, including available capacity from our revolving credit facility. During the quarter, we collected $10.5 million from the IRS related to the CARES Act Employee Retention Credits, which included $700,000 of interest. This collection settled a long-standing receivable accrued in 2022.

Our inventory grew approximately 22% compared to the prior year, primarily driven by investments in frames to support the launch of our store segmentation work as well as investments in premium brands as part of our ongoing assortment strategy. We feel very good about the health and mix of our inventory in line with our capital allocation strategy.

During Q1 2026, we repaid $3.3 million in long-term debt, bringing our total debt outstanding net of unamortized discounts to $241.8 million at the end of the quarter. And for the trailing 12 months, our net debt to adjusted EBITDA was 0.8x. For the quarter, we generated operating cash flow of $61.7 million and invested $17.6 million in capital expenditures, primarily driven by investments in new and existing stores and information technology.

Moving now to our outlook. As detailed in our press release, we are reiterating our full year guidance, reflecting our first quarter performance, the expected benefit of our ongoing initiatives, continued strength in average ticket and a range of assumptions for the macro environment and traffic trends. We continue to expect net revenue between $2.03 billion and $2.09 billion, supported by adjusted comparable store sales growth of 3% to 6%.

As a reminder, we expected factors such as calendar implications from last year's 53rd week, holiday shifts, changes in selling days as well as the timing of our investments to impact the quarterly cadence this year. Our expectation for flat to modest growth in Q2 reflects these factors. As Alex noted, Q2 comparable store sales are tracking in the low single-digit range, primarily due to the replatform of our website. We view this as temporary and are already seeing sequential improvement in traffic as the quarter progresses.

We continue to expect comp growth to strengthen in the back half, supported by initiatives already underway, like the new premium lens and frame launches, and the rollout of our store segmentation strategy to offset the recent traffic disruption. These factors reinforce our confidence in the trajectory of the business and in reaffirming our full year guidance.

Turning to profitability for 2026. We continue to expect adjusted operating income between $107 million and $133 million, which includes a range for depreciation and amortization of $88 million to $92 million. At the midpoint, our outlook assumes fiscal 2026 adjusted operating margin expansion of approximately 100 basis points relative to fiscal 2025, excluding the 53rd week. As we have reiterated, this expansion in adjusted operating margin is expected to be driven primarily by SG&A leverage. And from a quarterly cadence expectation, we continue to expect more favorable year-over-year growth in adjusted operating margin in Q1 and Q3, and for Q2 and Q4 to yield flat to modest growth.

Our full year guidance takes into account our multiyear cost savings plan, and we remain on track to realize approximately $10 million in annualized savings this year. Interest expense is expected to be between $14 million and $16 million. We expect our effective tax rate to be approximately 28%, excluding the impact of vesting on restricted stock units and stock option exercises.

Bringing this all together, we continue to expect adjusted diluted EPS to be between $0.85 and $1.09 per share, which assumes approximately 82 million weighted average diluted shares outstanding. We expect CapEx to be between $73 million and $78 million for fiscal 2026, which include investments to open approximately 30 to 35 new stores this year.

Our store openings guidance continues to be weighted towards America's Best branded stores and excludes the expansion of our military locations completed at the end of the first quarter. We also expect to close approximately 10 to 15 stores as part of our ongoing fleet optimization efforts, resulting in net new store growth of approximately 20 to 25 stores. We expect both store openings and store closures to have a relatively balanced cadence throughout the remainder of the year.

In closing, our disciplined approach to executing our strategic plan is delivering results, and we're seeing this reflected in the strengthening growth in transaction value. This progress reinforces our conviction in the path forward, and we're excited about the opportunities ahead. We look forward to sharing our continued progress with you.

And with that, operator, we're now ready for questions.

[Operator Instructions] Our first question comes from Michael Lasser with UBS.

This is Josh Bluestine on for Michael Lasser. Congrats, guys, on another great quarter. I guess to start off here, it would be great to hear some more color just in terms of the impact of the replatforming is having on traffic within the quarter. Could you help us quantify what the range of impact you see on traffic specifically in the quarter-to-date trending?

Thanks for the question. It's Alex. As mentioned, we launched our new America's Best platform right in the beginning of Q2. And we intentionally picked Q2 as it's our lowest volume quarter of the year. And with changes of this magnitude, you know you're going to hit some speed bumps. And one of the things that we've seen is sequential traffic improvement since the go-live of the site. And just to be clear and provide a little bit more color on this, we really haven't had any technical challenges with the site.

This is all related to how we plug the site into our social marketing and search marketing signals. So this -- our site is responsible for approximately half of our eye exams that get booked for America's Best. And as we've talked about historically, we rely a lot on social and search and marketing. So having those signals go back and forth between the search and social providers and into our site are kind of in the point of being reestablished after completely changing out the platform to what is now really the most modern e-commerce platform that you could implement that you could hope for.

So in terms of specific color, right, I mean, we started Q2 in the negative traffic realm, and we're building up from that as the quarter has progressed. So we don't see anything in the quarter that's taking us off of our full year guide. We're certainly performing within range of our planning scenario. And once again, from my prepared comments, we believe this is an important step and an important investment for the future of the organization.

Our next question comes from Simeon Siegel with Guggenheim.

Alex, can you speak to what you're seeing in traffic from new target customers versus the traffic losses from self-pay, so maybe kind of disaggregating that a little bit for us and how you think that goes forward? And then, Chris, can you just quantify the gross margin drivers between mix pressure versus the pricing and leverage benefits, and also how you think about that going forward?

You got it, Simeon. So on cash pay, we're seeing a bit of the trend that we've continued to see with cash pay customers being suppressed in Q1 from a traffic perspective. Again, as a cohort from a cohort perspective, the cash pay consumer is actually comping positive because, as mentioned, they're adopting the premium frames and premium lenses at a pretty high clip. So we're pleased with that performance.

But from a traffic perspective, kind of on trend and suppressed from what we've seen in previous quarters. Our target customer cohort base of managed care, progressives and outside Rx are -- did comp positively from a traffic perspective in Q1. And again, as we've talked about over the last few quarters, this intentional shift to these more profitable customers is one of the contributors to our overall profitability expansion. Chris, on the margin points.

Yes, great question. Thanks for the question. So from a gross margin perspective, we expect the full year to be relatively flattish to nominally negative on gross margin. When you kind of unpack the inputs as you said, we've got some nominal pricing increases, we took at Q4 at the end of Q4 and in Q1. So really, what you're going to see that's driving gross margin year-over-year is going to be almost entirely on mix front.

So as we've said at Investor Day, just to remind this group here, as we introduce more premium frames as we lean heavier into more premium lens options, those will drive more gross margin dollars and it's really going to be the primary driver of our operating income leverage. But at a gross margin level from a percentage perspective could be dilutive.

Our next question comes from Zachary Fadem with Wells Fargo.

Could we talk a bit more about the cadence of comps? And to what extent you saw changes in trend between managed care and cash pay customers as we move through the quarter? And specifically, can we talk about what you saw around the impact of tax refunds and when gas prices started to spike in March?

Yes. I'll provide some color on Q1, right? So when we reported Q4, we were sitting at mid-single-digit comps, and we're proud that we ended the quarter right in line with that. So overall, again, super pleased with the quarter, especially given the really choppy backdrop of both weather and as you kind of pointed out, some of the macro elements that we're contending with. So I don't think there's anything really remarkable from that standpoint. Chris, do you want to provide just a bit more color as well?

Yes. To address your -- the part of your question on tax refund, look, we no longer attribute a disproportionate benefit from tax refunds as we think of our demand curve in Q1. Certainly, any stimulus and more cash in our consumers' pockets is going to increase their propensity to spend. But it doesn't seem to be the same level of driver as it perhaps was historically for the business. The more we shift towards managed care consumers that are a little more insulated from these macro trends, I think we'll continue to see that reliance on tax refunds impacting consumer demand decline.

Got it. And as you think about trade-up among cash pay customers, I'm curious if you could share how your branded/newness mix has been trending over the past year, where you are today, how your pricing strategy compares for branded versus competitors? And then to what extent you think trade-up specifically has been additive to the average ticket?

Yes. Zach, we've been super happy with our ticket expansion, in particular because about half of it is coming from mix change. Consumers raising their hands and opting into more premium frames and lenses. As we shared previously, we're under-indexed on almost every part of the lens category: anti-reflective, transitions, premium progressives. And on all of them, we're making significant progress as we kind of step through the year.

Matter of fact, we're even seeing acceleration in early Q2 on our penetration of anti-reflective, transitions, and premium materials. So even with this kind of choppy macro backdrop and the cash pay consumer a bit suppressed from a traffic perspective, that cash pay consumer when they're shopping with us, they are comping positively because they're opting into more premium product side. Again, it's been a real pleasant upside for us to see the continued acceleration of our premiumization strategy.

And Alex, the other thing I'd add from an income demographic perspective, which is frankly, exciting for us to see, is we're not seeing any disproportionate shift as we look at our income deciles for cash-pay consumers. So you'll get the softness in cash pay traffic. We're not necessarily seeing that just at the low end of the income demographic. So I think what that's telling us is our cash pay consumers, regardless of income demographic, are leaning further into our premium strategy.

And just to accentuate a point that Alex said, right, we ended last year with about 40% of our frames priced over $100. I mean what that means in the inverse is we still have the majority of our frame board priced at very high-value frames. So there's still plenty of optionality for those who are seeking value, which is why we're so confident we remain the obvious destination for value in the category.

Our next question comes from Simeon Gutman with Morgan Stanley.

Alex, when I listened to the prepared remarks, when you were talking about the traffic that had slowed, I read or I felt that maybe you contemplated thinking about changing how the guidance may look for the whole year. And then I heard your response to an earlier question, and it sounds like you either have enough cushion in the plan or you've, I don't know, built in a little bit more ticket growth in the back half to get there. So can you just clarify that? And then I have 1 follow-up question.

Yes, you got it. No, we are absolutely sticking to our guidance for the year. I think we -- our planning scenario included these types of risks associated with an ambitious transformation that the company is undergoing. And we certainly believe that with the initiatives underway around segmentation, introduction of premium lenses, frankly, the benefits that we're going to get from our e-commerce platform and our CRM go-live in time that those things are more than going to offset the softness that we saw in the beginning of Q2. So yes. If there is anything to the contrary in my prepared remarks, let me clarify that now, we're still absolutely sticking with our full year guidance.

Okay. That's helpful. And then 2 follow-ups. First, we're talking about premiumization and it feels like a greater dependence on ticket in the back half. And I think Chris just made the case why the income stuff would be supportive of that. But the lower income customer probably gets worse, not better this year. So I heard a lot of premiumization. Just curious, how you reconcile those 2 or just think about it?

And then the second question, on SG&A, can you clarify, I think some of the savings this year or over time is contractual. For the quarter, I heard associated expenses and advertising. So did you get the contractual savings in this advertising and associated expense that was incremental to how the quarter played out? And then how do those 2 things interact between the contractual versus some of the tactical spending for the rest of the year?

Yes. I'll take the first piece around premiumization and take it in the back half. So yes, all of our data to date would indicate that the -- even though our lower income deciles are moving up in terms of product purchase and average transaction value. And we're seeing that both on the frame and the lens side. And again, as Chris mentioned, we still have options at the below $99 price point on the frame side. We still have options on uncoated plastic lenses in the assortment.

But now that we're becoming more of a clientelling and concierge destination in optical, we are seeing all consumers, including the lower income deciles move up. So we haven't seen anything from either an elasticity or a capture perspective, that gives us any pause or hesitation on the strategy impacting any consumer at any income decile.

Because relative to the category, we still haven't taken meaningful price at the entry level, right? I mean I'll remind the team that we have made changes to our entry price point, our lead offer of 2 pair moving from $89 to $95, which is -- I've jokingly said in the past, it's more of a modernization of a price point than it was an actual pricing action. So with our 2-pair offer with an eye exam at $95 and a credible destination for that, we still think we have a tremendous story for capture of the cash pay consumer, in particular, the lower income decile. So long way to say, Simeon, it's not something that's given me a lot of pause or concern at this point.

And on the SG&A front, there were contractual and programmatic designs of our procurement initiative last year that would impact associated labor and marketing. So elements of those were recognized in Q1, but what I'd say is of the $10 million that we expect to get in terms of savings this year versus last year, it does still continue to ramp throughout the year, so not everything went live necessarily on January 1. So there's more of that $10 million left for the rest of the year than was recognized in Q1.

Our next question comes from Robert Ohmes with Bank of America.

Really just kind of 2 follow-ups on Simeon's questions. The first is just on the replatforming, et cetera. Is there any sort of disruption related to sort of the message changing, maybe the advertising message changing a little bit here away from cash pay and maybe the more towards premium offerings and that there's some dislocation that's short term related to just the messaging, not just maybe the execution and things like that?

Yes, I'll take that. So we've actually tested our messaging extensively. We've tested old messaging versus new messaging. And we're seeing our take rate, our click-through rate, our CPAs continuing to be stronger with our newer messaging, newer creatives than we have with our kind of previous campaign.

We've seen our unaided brand awareness continue to rise and really lead the category. So from those components, we still feel really great about our marketing strategy, our marketing message, and our lead offers to the consumer. This is really our short-term disruption related to the replatforming is really an element of getting our site kind of reindexed with all of our search and social marketing.

It's -- the way that our marketing and e-commerce people have explained it to simple folk like me is it's all about reestablishing the pipes between the site and our lower funnel marketing tactics that are -- have to be reestablished once you go live with a new site. And those pipes are being kind of reestablished and rebuilt on an ongoing basis as we trend towards normalization. So it's something that's critical for the long-term growth and health of the company, especially as we do have aspirations to become a more omni-channel company in the future.

And certainly, it's a requirement as we think about the role that agentic AI will play in commerce in the future. Our previous site wasn't going to get us there. So we have now upgraded ourselves to a way that kind of future-proofs us and gets us ready and fit for future for a world where agentic commerce plays a larger role and where omni-channel plays a larger role in our future as well. So Robbie, hopefully, that provides a little bit more color and context to your question. And then if you have a follow-up, I'll turn it to Chris.

Yes, that's helpful. The follow-up would just be the -- how is this impacting trends in overall exams versus outside Rx customers? What did you see in the first quarter? And also how do you see these changes impacting the trends sort of exam versus outside Rx?

Yes. It's a great question, Rob, because that's actually exactly where the traffic impact is, is on the exam side, right? Because this is -- our website today and our marketing tactics today, especially lower funnel, are pointed at really driving exams as the kind of entry point into commerce within America's Best. So that's where we've seen the most significant kind of traffic impact is those consumers that are coming to us for an exam.

Got it. And then just recently, the same-store sales were sort of at the depth of the transition. Are you expecting to get back to mid-single digit quickly?

Yes. Go ahead, Chris.

Yes. So I'll jump in on that one. So our guide of 3% to 6% gives us -- we feel very comfortable we'll land within our guide for the year. I think there's -- this is certainly one initiative that we've got in place that's -- as Alex said, we're quarter-to-date sitting at low single-digit comps. But when you think about the timing, the calendar shifts, the investments we're making through the rest of the year, we still feel confident about coming within that range. And like I said, through Q1 being at the midpoint of our range gives us a lot of confidence for the rest of the year.

Our next question comes from Paul Lejuez with Citi.

This is Brandon Cheatham on for Paul. I wanted to ask about your AI glasses initiative in the quarter. Any color you can provide on that driving results? And then just to confirm you still don't include any benefit from that initiative in guidance. And then I wanted to understand how does the margin rate on that product compared to an average pair of glasses? I would imagine the gross margin dollars given the high ticket are probably significantly higher than what you normally saw, but can you talk about the rate there as well?

Yes. No, we are very, very pleased with our expansion of Meta AI glasses to the entirety of the National Vision portfolio within America's Best and Eyeglass World. So we scaled it to those networks in the end of Q1 based on the strength that we saw in 2025, when we initially started with, call it, 50 stores, went to 300, and now taking it to the rest of the fleet.

Our sell-through rate has exceeded our expectations. Our adoption rate of associates and consumers has exceeded our expectations. And the average transaction value of the Ray-Ban Meta consumer is amongst the highest that we have within our portfolio. So overall, continue to be incredibly bullish on this product category. As we've talked about though, we have not yet built any upside into our guide. This is still all relatively new, but early indications are that this is an additive and will be an additive product for us long term.

The question related to margin, it is a highly margin-dollar accretive transaction. But as Chris has indicated in the past, from an input cost perspective, it's not necessarily a gross margin rate accretive product. So love the transactions, love the momentum we're seeing with it, love the adoption, love our associate enthusiasm for the product. Certainly excited about the new products we've introduced, both the Oakley line extensions as well as the Ray-Ban line extensions that are more geared towards the optical consumer.

So it's been, I think, a great story for us, and it's going to be a great story for us into the future as we scale this category and ultimately, build National Vision as the destination of choice for those interested in smart eyewear.

Got it. And just not to belabor the replatforming questions, but this just sounds like it was an issue on the search engine optimization and the primary disruption was customers finding you to book an eye exam. So I just wanted to clarify, you're not seeing any impact on conversion. And then given that you're low single digits quarter-to-date, is it safe to assume that comps are back to mid-single digits over these past couple of weeks?

So you're spot on the website and the challenges is related to search and social optimization versus being a kind of technical challenge related to people coming into the website and being able to book exams and find exams. As we've kind of are reestablishing the pipes, right, what we have to ensure is that we have proper tags and signals that are going back and forth between ourselves and the search and social providers so that we're continuously optimizing our search campaign and search algorithms. That's kind of the stuff that just takes some time for the algorithms to relearn so that we can get back to our CPA efficiencies that we've had in the past.

So -- and again, from a -- our primary metric that we've been tracking to see if we're getting back on trend is our CPA through search and social and not quite there yet, but it is trending back in the right direction from go-live. So that's kind of our leading indicator to give us confidence that we're moving in the right direction.

And any comment on comps over the last couple of weeks? Are we back at mid-single digits?

So again, what I can share is that from a comp perspective from the go-live early April to where we sit today, we have seen sequential improvement week-over-week as we step through the quarter.

Our next question comes from Brian Tanquilut with Jefferies.

You got Jack Slevin on for Brian. A couple of things to clean up here. A lot of questions already been asked. Just on the military openings, I understand that the store count is not embedded in the guidance, but is there any way you can think about how that starts to layer into the business from a revenue perspective? And then secondly, just curious if there's any updates in terms of how some of the initiatives around the hybrid remote tech is progressing right now.

This is Chris. I'll take the question on military. So we acquired those stores in the first week of April in terms of integrating them into our platform. So we'll start to see the revenue build pretty immediately in Q2. As you think about kind of the scale and impact at the platform level, these locations will be relatively consistent with what our existing military locations operate at from a productivity perspective.

You can see in our cadence, these stores, they operate at less than half the average volume of, let's say, America's Best, but they still generate a healthy profit margin that's accretive to the platform. So again, we're super excited to be in a position to serve those who serve for us in these locations. And that being said, likely not a material impact to the business for the rest of the year.

Yes. On hybrid remote, we're continuing to be pleased with the progress we're seeing, with the adoption we're seeing, with the enthusiasm we're seeing from doctors that we've -- that we're piloting hybrid with. No real meaningful update from previous quarters. As I've said before, we're stepping through this awfully cautiously because this would be one of the more significant change management components that we take on.

And we're just being very pragmatic in our thinking about how to take that to further scale. So again, early signals, I think, are this is a strong and meaningful contributor to how we evolve our business model to go forward, but a lot to learn, and we're being just cautious as we move through time on this one.

Next question comes from Adrienne Yih with Barclays.

I did want to say that I did do your telehealth and it was seamless, absolutely seamless. So great job there. My first question is, can you talk about the cadence of comp that was actually in the quarter just reported? I know you said you had some weather issues, what months were those? And then I know we keep talking about the current quarter and having the transition. Did you run dual channels like on the website or on the e-commerce facility?

And then when exactly did you switch over to the new e-commerce platform? And then if you can tell us what percentage of sales comes from the e-commerce platform? My second question is, in past macro slowdowns, we've actually seen this category of a medical necessity, which we love sort of be deferred -- and so I'm wondering how you're proactively stemming that in the backdrop that we currently have.

You got it. Thanks, Adrienne. So on the first kind of cadence on Q1, we saw is a really strong start to the year. We saw -- had a really strong start in January. We saw -- and then late January, early February, I think we were impacted by weather, just like the rest of retail and the rest of the country. And then we started to see some really nice and strong recovery in the back half of February. And then as we kind of move through March, we did see, I think, a bit of pressure from some of the more choppy macro backdrop.

So again, you kind of aggregate all of that between a couple of different weather events, a war starting in the Middle East and you lay it all out and we ended at 4.5%, which is kind of right where we were when we reported Q1 results, and I shared with the team through that period, we're at mid-single digits. So certainly a complex quarter to navigate. And again, I just want to take a moment to thank all of our team members at National Vision for doing an exceptional job navigating a very tricky quarter.

So hopefully, that provides a bit of color on Q1. As we prep for the launch of the new e-commerce website, so we did launch at scale right in the beginning of Q2. We took the last couple of weeks of Q1 where we flipped the site live in states that we don't have a physical retail presence just to make sure that we weren't seeing any type of technical challenges with the site, which is what those 2 weeks confirmed. When we did go live basically first week of Q2, is when we started to experience a downtrend in exam bookings, which is the significant component of our traffic or revenue source within the brick-and-mortar environment.

So about half of our exams are booked online. And I'd say all of our lower funnel marketing is pointed at driving the -- is driving consumers through search and through social to book online. And to be clear, what we're rectifying and some of the challenges that we've identified and we've actioned on is the signals that are going back and forth between our site and search and social. So give you a real tactical example, there are some cases we know when an exam gets booked, the signal is not going back to Google to inform them that the exam has been booked. Therefore, it's leading to some inefficiencies in terms of audience identification so that we are targeting more like audiences for higher degree of efficiencies.

So some of those signals we're reestablishing through our tagging strategy and just knowing that some of that just takes time for these search algorithms to relearn a site that's been completely rearchitected and replatformed. So again, hopefully, that provides a bit more color and clarity to that question. On this point on medical necessity and downturn. So, so far, we haven't seen a meaningful shift in the repurchase cycle or months between purchase that would indicate that yet. So there's nothing that's giving me pause at this moment that we're seeing a delay in purchase cycle from a longitudinal perspective with the consumer.

Okay. Great. And then the macro backdrop that you have for sort of rest of year is similar to kind of what we're currently experiencing. And my final question, I have a lot of them, is your cash comp versus managed care percentage now. I know that you've made a big jump year-on-year at the end of the year. And then you had mentioned previously that there was a top, right? Most of the industry is 70%, but there was sort of a 50% ceiling perhaps because you only had certain vision care programs. What portion is left to penetrate? And how can you penetrate that other -- that incremental 20%?

Yes. So our planning scenario is actually a macro backdrop that looks very -- albeit without the weather challenges that we had in Q1, our planning scenario's a macro backdrop that remains relatively similar. And again, our planning scenario includes continued strength in the transactions that we're seeing today. On top of that, layering in continued momentum with Meta, continued momentum with -- through segmentation.

As I mentioned in my prepared comments, the introduction of premium lenses and Nikon Eyes is going to give us tailwind. So we have a lot of additional exciting initiatives that are being layered into the business over the coming quarters that give us the confidence that we have that we can deliver our -- we can even deliver our top end of our guide with some degree of negative traffic, given the acceleration that we've seen on ticket and giving some of the additional initiatives that we're layering in. So those are all, I think, the reasons that keep this team positive and energized for the potential for the back half of the year.

On managed care, I'll let Chris talk to the mix. But our upward bound, we said our next big milestone is around 50% of our business being sourced from managed care, category sits at 70%, and that is because there are insurance networks that we don't have an in-network relationship with, that were consumers who participate in those plans.

Yes. We are -- in Q1, we did see continued meaningful growth in managed care as a percent of our mix. We'll just remind folks is that there's a pretty heavy seasonality throughout the year between managed care and cash pay. You typically see managed care consumers purchasing more Q4 and Q1 as their benefits are either getting close to expiring or newly reset. So Q1 versus Q1 of last year, we did see the managed care penetration increase versus prior year. So it gives us confidence that we're continuing to march towards that 50% goal.

Our next question comes from Dylan Carden with William Blair.

I'm curious. You're still serving this lower income cohort cash pay customer. And even if it's just anecdotal, where is that customer? Is that customer not shopping this category right now or are they going elsewhere? Why traffic you think is still down? And particularly in the context of -- just you've been asked this question, I think, a handful of times on this call, but we've been trained to think that tax refunds are a big deal for particularly your business, but the category more broadly. You would think a 10% overall average increase, particularly for that cash pay customer, would be more than discernible. So just how we can square those things.

Yes. Dylan, thanks for the question. Yes. So our take is that the cash pay consumer is suppressed category-wide. And I think our internal data and as we've shared that supports that is we're not seeing a degradation in cash pay consumer across income cohorts or across age demographics. It's really across the board, the cash pay repurchase rate just has remained lower and suppressed versus the managed care consumer, and that's been a trend that's been consistent over -- really over the last quarters of the last year.

So we don't believe that we're losing share. We don't believe necessarily that, that consumer is stepping out. There is a component of that cash -- the cash pay pool is becoming smaller as cash pay consumers migrate into managed care plans. So again, I'll just put a reminder out there that, that historically has been in the 2% range that cash pay consumers are migrating into the managed care bucket.

So just as a reminder, right, when our -- through 2025, our exam growth outstripped the category per the Vision Council data, which again, to us -- and that's across managed care and cash pay consumers, which, again, I think mathematically would point to that we're not losing that customer. We're not losing share. It is just a function of lower repurchase velocity than what was the historic norm. Chris, if you want to comment on the tax refund and impact component.

Yes. I think this year, like I said, more cash in consumers' pockets, just increasing propensity to pay. I'm sure we benefit from that just as any other retailer in the category would. I think perhaps what's unique to this year is that the gas price spike we saw almost in concurrent time line, folks might have been -- while the cash might have been in their pocketbooks by March, they may not have had the same propensity to spend as they start to see the prices at the pump go up.

So like I said, as we continue to lean more into managed care consumers, I think our attribution of spend in the category to tax refunds is maybe less critical than we've communicated in the past. But we remain, I think, a great destination of value for those consumers as well. And just reinforcing a point that Alex said, right, because we're not seeing any disproportionate decline in cash pay traffic across the low-income demographic versus other income levels, I think it just reinforces our belief that the cash pay consumers are likely not -- may just not be engaging in the category for a temporary period.

Does it stand then that you mentioned gas prices. You guys have been trading pretty in lockstep with gas prices inversely. I mean, is there incremental risk embedded -- again, another question you were asked, but just to reiterate, embedded in your guide given that we're kind of left here with higher gas prices, but the tax refund goes away?

Yes. I think from the demand front, I'm not sure if we're that differentiated from anyone else in the category other than as a destination of value, we might pick up some share as we kind of reinforce our message, especially with our leading offer. And so from a supply side, we don't expect any material impact to the business in our guide that we can't mitigate. I'd kind of point to how we managed through the tariff impacts of last year, right? It was something that wasn't contemplated as we issued our guide early in the year. And I think the management team showed that we can pull the right cost levers to make sure that we deliver the operating margin that we've communicated.

Our next question comes from Kate McShane with Goldman Sachs.

We just were curious about the competitive environment in the quarter. As you go after more of the managed care customer, are you seeing any kind of competitive response or any kind of incremental promotions? And just one clarification question with the Nikon Eyes. I think you said it was being piloted, but it's in all locations at this time. I just wanted to get clarification of how you're thinking about that rollout.

Great. Kate, thanks so much. Yes, so we're not really seeing anything competitively different in Q1 or early Q2 as it pertains to the managed vision care customer or the cash pay consumer. So not really seeing any incremental promotions or discount strategies in the category as of yet. And therefore, we haven't changed our -- we're not changing our tactic as it relates to really promotion and pricing.

As we've talked about our strategy around ticket expansion is really one of offering consumers more premium choices while still having plenty of other choices if their pocketbooks want to take them in a different direction. I think that has actually been more of the category trend as of late. And on Nikon Eyes, we're piloting in just over 100 locations right now with a current June plan deployment for the balance of our store fleet.

Our next question comes from Matt Koranda with ROTH Capital.

A lot have been asked and answered. But I guess it sounds like you maybe need a little bit more ticket in the coming quarters to offset the near-term traffic headwind. Maybe -- and the comps get tougher on ticket, I guess, over the next couple of quarters as well. Just wanted to hear how you think about ticket growth in the context of those difficult comps and sort of the -- how much contribution comes from sort of the premium frames and lens strategy versus the customer mix factors that you've called out?

Yes. Thanks, Matt. So yes, certainly, over the next -- in Q2, we are going to see a much more substantial component of our growth coming from ticket. I mean I think that's obvious from the comments we've made. Again, I'll remind everyone that we are so underdeveloped on portions of the category, not just premium frames, but premium lenses, premium lens add-ons. And what gives us the confidence as we step through the year is, especially as we enter a chapter of store segmentation where we'll segment our store base into 5 segments that will range from a segment that will have 25% of their assortment in luxury and premium frames, to the other end of the spectrum where that segment will have less than 7% of the assortment in luxury and premium frames.

So we're serving the customers at a much more micro level, the products that they want and the products that are kind of -- that we have the data to support selling through. So as we go through the back half of the year, we do expect additional tailwinds from product segmentation. We believe that, that is going to be a significant average ticket contributor as we continue to hone our assortment for specific store and customer types.

The Nikon Eyes launch, again, can't be underestimated or understated. We're super happy that we're getting this type of premium lens in our assortment, which qualifies for the highest out-of-pocket and the highest reimbursement rate on insurance plans as well as for cash pay consumers gives them an option that offers them the best adaptation and the best clarity for a progressive lens. So that's another kind of arrow in our quiver as we move through the year.

So whereas I'd say in the chapter in late '24 and '25, we were more reliant on kind of no-regrets pricing actions as we're stepping through '26, our ticket expansion is more heavily reliant on mix changes, both on the consumer side and on the product side. And year-to-date, we're achieving above expectation levels on those, both leading and lagging indicators on ticket expansion. So hopefully, Matt, that provides just a bit more of the color you're looking for.

Yes. I appreciate the detail there, Alex. And then maybe just for the follow-up, this might be for Chris. The -- I guess with the replatform maybe driving a bit of a drop in CPAs that you called out, is that the headwind to SG&A, the marketing spend line that causes us to expect a flattish operating margins in the second quarter? And then is there any tariff recovery embedded in or baked into the guidance for the remainder of the year? How should we think about sort of how that flows through the P&L for the remainder of the year?

Yes, great question. To answer your second question first, there's no assumption for tariff recovery in the guide for the rest of the year. We are exploring our options and making sure that we're dotting the Is and crossing the Ts when it comes to executing in the right way there. But yes, to your point on Q2, and there's a couple of things that are driving it, certainly, what you said from a marketing spend perspective and CPA is a driver for our expectations for Q2 margin -- operating margin not to expand as much as in Q1.

Other things to keep in mind, we've got some calendar shift items and also just timing of investments and the launch of some of our initiatives. So as Alex mentioned, we've got some really exciting initiatives launching in the back half of the year. Some of the investments towards those investments will take place in Q2. And likewise, as we think about Q4 going into 2027. So for the year, we still feel confident that the midpoint of our guide shows about 100 basis points of operating margin expansion. But for, let's say, the foreseeable future, you can expect some choppiness in terms of how that materializes quarter-over-quarter.

Our next question comes from Anthony Chukumba with Loop Capital Markets.

Just a real quick question. In terms of traffic, you did have a nice sequential improvement in traffic from the fourth quarter to the first quarter. Just wondering what you attribute that to.

Yes. Thanks, Anthony. I agree, we're happy with that. Again, I think it -- we start -- like I said, we started January really, really, really strong. We had a nice recovery after the winter storm challenges. One of the things that I'll keep pointing to is our unaided brand awareness post changing our lead communication strategy away from our historical marketing platform to Every Eye Deserves Better. We attribute our kind of traffic growth to that, right, that our unaided brand awareness is at record highs.

Our Every Eye Deserves Better platform is resonating with consumers. We saw nice kind of eye exam growth. We saw the effectiveness and our CPA is actually at a really healthy level in Q1. So Q1 from an execution perspective, especially given the backdrop, I could not have been happier about how the team executed and the tailwinds that we got from the strategies that were put in place.

Thank you. I would now like to turn the call back over to Alex Wilkes for any closing remarks.

Well, thank you, first and foremost, to all of our National Vision associates and affiliate doctors who take the time out of their days to listen to our call. It really is your hard work and your dedication that was tied to our performance in Q1 and are certainly one of the most vital components of our ongoing transformation.

To our doctors and our store managers that I get to see next week in Dallas at our annual conference, I can't wait to spend some time with you guys to celebrate the amazing accomplishments that we've had as an organization, both in Q1 and through last year and really get everyone just excited and energized about the future transformation to come as we step through the rest of the year and into '27 and '28 and beyond.

So thank you very much, everyone, for your dedication to the company. And I appreciate everyone who's on the call today and the thoughtful question we got from our analyst community. Thanks, guys.

Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.

Thank you, Paul Lejuez, Citigroup. Thanks, everybody, for listening in. We've got the team from National Vision. We've got Alex Wilkes, on the CFO spot, and got Chris Laden on the CFO seat for National Vision and thank you guys for being here. I really appreciate the time.

Your welcome. Pleasure to be here.

Maybe we'll just kick things off. We've heard from you a couple of times over the past several months, including an Investor Day, you very clearly have a strategy that you've very clearly communicated and articulated to bring in more insurance customers, take advantage of those insurance dollars that those customers have to spend, maybe talk about what you've put in place so far and what the next steps are in that evolution as you kind of look to change the complexion of the customer base.

Yes, you got it. So I think National Vision over the years did a great job building a business model around the notion of value within the optical category. And with that positioning, one, a lot of managed care consumers because they are consumers who even though they have insurance, they're seeking to maximize their benefits and get the most out of them. And we became an obvious destination for that.

Now that being said, historically, we didn't do a good enough job distorting our business model to actually help those managed care customers get the most out of their benefits. We hadn't necessarily fine-tuned our assortment of frames and lenses to what those consumer-specific spending powers are and what their plans would allow them to engage in.

So really over these last 12 months, we spent time sharpening our assortment, getting more premium product, and that's particularly interesting to those managed vision care customers. We've worked on in-store selling behaviors with our team members to help them better serve the managed care consumers and help them understand what is some complexity sometimes around their insurance plans. So we're still kind of just scratching the surface, but we started to make meaningful headway in terms of serving those managed care consumers better.

And what are those proof points that we can point to, to kind of show that initial success? And what are those proof points that you'll be looking at to kind of judge future success?

Yes, great question. I mean our managed care as a percent of our total mix is now approaching 42%. So we're continuing to see strong growth with that consumer cohort. And we're seeing our average transaction expand with the managed care consumer as well. So as we've introduced some more premium frames, as we've talked to our associates and they're getting more acclimated to lifestyle selling on the lens side, we're seeing the average transaction arise with the consumer. So we're winning more. We're driving traffic with that consumer. And those that are coming into our doors, are making more premium purchases.

And how much do you think about as you sort of make this transition? Is it a concern that you could alienate that cash-paying customer? How do you make sure that, that doesn't happen? Are you seeing anything that would show that, that is or isn't happening?

Yes. I'd say, first and foremost, what we're doing is we're rightsizing the business to the portfolio of customers that we serve. So our business model, our assortment, our selling approach, was kind of still stuck in an era as if we were selling to 100% cash-pay customers. As we fine-tune our assortment of frames, we will still be the most credible destination to get 2 pair of eyewear for $95, including an eye exam. We're not walking away from that value proposition to the market.

However, we're just rightsizing our efforts, our acquisition expense and our in-store experience against the profile of consumers that we're seeing. So if you want a -- to make a purchase at that end of the assortment -- and again, I'm confident that we're still the best destination for value in the category. We're just redefining what value is. And an interesting thing that we've learned along the way is that as we've changed our assortment, as we've introduced some more premium product into the assortment, actually, some of those value cash-pay customers are opting in raising their hand and joining us on that journey. So that's been really exciting to watch this last year as well.

And I think 2 other data points that helps substantiate that the strategy is working. We measure our exam conversion to a materials purchase. So basically, is a consumer leading the exam room and finding a product that they like? And are they seeing it at a price point like? And we've seen exam conversion stay flat as we've kind of moved the first tier up on more premium assortment. And second, like any retailers look at NPS and our NPS scores have been flat to positive throughout. So the consumers are telling us through their KPIs that the strategy is working as well.

Got it. Now what is your current read on that cash-paying customers? There's been a couple of years of pressure that, that customer has been sort of trying to absorb, what's the view currently on their progress?

Yes. I think the cash-pay customer last year they're clearly more sensitive to some macro headwinds, and we certainly experienced that in our business, including in Q4 in the November-December time frame, as I talked about last week.

The cash pay consumers, definitely more sensitive, not as resilient as a managed care customer. And I think we're still working our way through a disruption in purchase cycle that happened in '21 and '22. Because an interesting thing happened in this category during those COVID years, right? Eye care was an essential service. We were open for business. And so if you were a customer group who is maybe in a 3-year purchase cycle in a 2023 or 2024 cohort, you were likely pulled up into the 2021 purchase cycle.

So some of that is still going to take some time to work its way through as we get back to normality of the purchase cycle. Certainly, the category benefited from that disruption in the '21 -- sorry, even the tail end of 2020, '21 and early '22 time period. So it's going to take some time for that to normalize. Again, we think about the average purchase cycle in the category, of around 2 years. But you can imagine that the tails on both ends of that are quite long. And if you're every 3, every 4-year purchase cycle customer on the cash pay side, you're still kind of working through that period of normalization.

And as you and the industry work through that period of normalization, how do you view performance versus the industry? Like what are you seeing in terms of some of those industry metrics versus like your own National Vision?

It's a great question. One of the things that we're super proud of is that last year, the category was minus 7% on eye exams, and we were plus 1%. So we're growing eye exams at a faster rate than the aggregate U.S. category is. So I think that's a proof point, obviously in the right direction as we measure the success of our initiatives.

We spent a considerable amount of time last summer re-architecting our brand and communication strategy for America's Best, our largest brand. And wholeheartedly, consumers have embraced that. Our brand -- unaided brand awareness is the highest it's ever been. We're outpacing the category. We're outpacing the rest of optical retail in Q3 and Q4, not any brand awareness. And I think that's paying off. And 1 of the reasons that we're seeing high exam growth above the category level.

Chris, I don't know if you have any other thoughts on that?

No, I think that's right. I think we've gotten some questions on traffic trends, particularly in Q4 on the cash pay side. And just eching a point that Alex made earlier which is, we're intentionally shifting our balance of assets that was exclusively pushing a promotional offer at the cash-pay consumer and now using that to communicate more equally with managed care consumers, with Progressive consumers, with outsideRx consumers.

So it's kind of an expected outcome for us that our cash-pay consumers see a little softness on the traffic side. And that, in combination with the fact that our exams are growing in a category that is seeing a pretty substantial high single digit decline, I think gives us confidence that the strategy is working.

Got it. Makes sense. Maybe talk a little bit about the Eyeglass World chain and sort of the progress there. And the long-term outlook and the vision of -- no pun intended of operating sort of 2 banners, does that make sense over the long term?

No, we absolutely think it does make sense to run the 2 banners with distinct value propositions and more distinct value proposition go forward. Over the last year, we've refocused some of our energy on Eyeglass World. We put in a separate and distinct operating structure. So previously, Eyeglass World was even from a P&L perspective, it didn't necessarily have an organizational owner. We didn't necessarily have a dedicated operational structure for Eyeglass World.

So we didn't add any resources to the business. We just segmented some people and pointed them directly at the Eyeglass World business. So we've gotten better execution through better focus in Eyeglass World last year. We also spent some time thinking about our media strategy for Eyeglass World. We typically follow the same approach for media and and for Eyeglass World that we did for America's Best. However, when you have a chain that is highly regionalized, that didn't really make a whole lot of sense.

So we pointed our media investments into more digital, more streaming and actually out of linear TV, and that's been to the benefit of Eyeglass World. And then we've also worked on raising the assortment and raising some of the brand profiles within the brands we sell at Eyeglass World. That's also contributed to the success of the brand. The last thing, we spent a good amount of time in the fourth quarter moving Eyeglass World to the same doctor operating model that we had in the balance of the chain.

We had a fair number of stores, about 50 or so that were operating under a sublease arrangement, and we moved them to the friendly PC model that we use predominantly in America's Best. And that's also benefited the Eyeglass World brand and that we can offer a really consistent end-to-end experience to the consumer. So super, super happy with what we're seeing under the leadership of Dr. Patel at Eyeglass World, she and the team have really done an amazing job.

Now we're also super excited about what comes next. I've said this in the past. I could not have been happier with the work that was done on America's best rebranding in 2025, kind of re-architecting everything from brand iconography to creative messaging was done in partnership with VML, our agency of record. The people who worked on America's Best have now pivoted their attention to Eyeglass World. I've seen some early concepts of where they're going from a brand design perspective and frankly, I was blown away by the work.

So that is work that's going to come in the back half of the year as we start to introduce a new Eyeglass World design, brand iconography, and go-to-market value proposition. So really, really happy about the progress there.

Excellent. That's great to hear and great to see the progress there. Can you maybe give us an update on remote and just sort of the time line and how that's maybe helped your business any challenges that you've encountered as they rolled out to the chain?

I mean remote eye care is where we have a doctor that sits at home or somewhere else and provides eye care in real time to a patient in 1 of our locations. What it has helped us do is, 2 things predominantly. There are doctors that are graduating from optometry school who love this idea of being able to practice how they want and where they want. So it's been a real differentiator from a doctor recruiting perspective. So us being able to say, hey, we have 1,250 stores that you can practice in or we also have this option for you to practice from home in this newest most modern setting. So it's been fantastic for that.

And then you marry that with some of the stores where it might have been hard to fill coverage or where we want to flex in some additional coverage on high-volume days. it's allowed us to do some supply and demand smoothing to better serve those customers. So super happy with the progress. I think we're deployed, Chris, in the vast majority of places we can be?

Yes. So the this concept of remote care is regulated at the state level. So in the states in which this model is allowable, we have launched and we're over 700 stores now. And really, we've got that deployed in every store that we'd want to be at this point. And then as we open up new stores, that's one of the variables in the real estate strategy to say, is this something that we think we can cover with remote care as well as in person.

Got it. Alex, I guess just going back to the -- just at a high level, you've been in this industry forever. And as you look at the opportunity now that you're still fairly new in the CEO and CFO seats. How are you thinking about the number of stores long term? What do you benchmark against -- like I said, you've come from other optical retailers and not just the number of stores and the potential there, but the margin potential and who do you benchmark against?

Yes. So again, right now, we're in an intentional period of not growing as rapidly as we have in the past. So historically, we were a 70, 80 store opener. And this year, I think we'll open 30, 35. We did about the same last year but that's an intentional capital shift in the short term because we are also making significant investments in our unified commerce experience.

We completely replatformed our CRM capability last year and moved to Adobe CRM. In just a few short weeks, we're replatforming all of our e-commerce sites onto the Adobe E-commerce platform as well. So that gives us the foundation for a stronger unified commerce experience to the consumer, not even long term but really starting in the third quarter this year.

So once we've kind of checked those boxes and we've not only modernized, but I believe once we're on our new e-comm platform and combined CRM platform, we'll have the industry-leading solution on how to stay sticky with the consumer regardless of what channel they shop, once we've kind of cleared that path, we will return to more aggressive store openings, which we've said we're targeting 2024.

To date, we operate in 38 states. So there's another 12 states we can enter, in the 38 states, there is a ton of white space where there's still opportunity for us to add stores. So we have more than enough white space to expand our brick-and-mortar footprint. But again, we're being very thoughtful that in the short term, we're modernizing our unified commerce stack because we think that needs to be a priority to support us from a long-term perspective.

And your margin goals longer term, you laid out some annual guidance back when you did your Investor Day in the fall, maybe touch on what you're expecting in terms of the drivers of EBIT margin? And if there's any low-hanging fruit, Chris, as you've kind of picked through at all?

Yes. So in 2025, we were able to expand operating margins by 160 basis points, which the team is thrilled about what we communicated at Investor Day is from '26 through '30 -- 2030. We think there's at least 50 to 150 basis points of operating margin expansion over that time period. The way that we look at architecting the business really in the next few years is we really see just significant opportunities for SG&A leverage. Last year, we kicked off a project to interrogate every line of SG&A across the business and identified $20 million of cost out and half of which will materialize this year and '26 million, half of which will materialize next year, '27.

In addition to that, as you're thinking through the way that we're architecting our sales growth, our revenue growth between a better pricing architecture, I think a more modern mix in terms of frames and lenses. Our goal there is to expand -- excuse me, gross margin dollars, we actually don't expect to see significant growth in gross margin percentage in these categories, you kind of move your way up to premium scale. Oftentimes, it will come at a gross margin percentage detriment, but pass through more dollars. So as you think about the next few years, we're expecting to see more gross margin dollars, not a necessity to expand SG&A at any point and let that flow through to operating margin.

Just 1 point on the cost-out activities. We're past the execution phase. I mean all of the cost out has been contracted at this point. Now it's just a matter of when does it start to materialize and actualize versus be identified or have to action again. So again, we're 100% confident in our cost out actions because at this point, it is -- they're contractual in nature.

Got it. Hot topic, tariffs. There's been some change over the past couple of weeks. Maybe just give us a refresher on how tariffs -- higher tariffs impacted your business? How you're thinking about this upcoming year, what's built into guidance?

Yes. So our guide does assume that we've got some impact of tariffs through the year. It's obviously fluid situation is probably a favorable choice. Look, the good news is that this business has diversified the supply chain over the course of the last 10 years. So as we think about our exposure to tariff-impacted countries, as a percent of our cost of goods, it's actually fairly low. When you think about the construct of the products that we make, the most value-add that takes places on the lenses taking from raw material into the finished good. And we're super proud. We've got 4 domestic laboratories where all that work takes place here in the United States.

So it's not subject to tariffs. So look, last year, it was actually, I think, my fourth day with the company was Liberation Day. And just for fun side fact, we actually implemented a new ERP in my second day. So it was a really exciting onboarding. But last year, we confidently were able to navigate the cost impact of tariffs on the P&L and still delivered what we had committed to from an operating margin perspective, and we are incredibly confident that we'll be able to do the same this year.

Yes. I think the -- what the team did on tariffs, I just think is a great proof point of the executional capabilities of this organization. We had a -- we're faced with the challenge, we rallied around that challenge, we figured out how to mitigate it all within a very, very short order. And again, I couldn't have been prouder of Chris and the merchandising and the supply chain and the finance and the legal team like it was -- it really was a thing of beauty to watch everyone kind of get together and figure out how we're going to mitigate this thing, and the team just did an exceptional job last year.

Yes. Another hot topic, oil prices going up a ton, what are you thinking about? What's on your radar screens? Are you nervous about that cash-paying customer, the potential drag?

Yes. I mean, gosh, it's all recent news, right? I mean, I think we're -- so we're bullish on the consumer, especially given the -- what we're seeing actualized from a tax refund perspective. So I think that's a tailwind and a good guy for us and for the category. On gas prices, sure, I mean those are things that can lead to trade-off decisions within the consumer's wallet. But I do think that as the obvious destination for value it still gives us the winning recipe.

I mean the consumers who enter the category generally start with either, I'm on a predetermined purchase cycle, and it's just something I click off every couple of years or I've noticed something changed in my eyesight. And if you're one of those consumers who noticed something changing in their eyesight, you are not going to not take action because of paying $1 more a gallon at the pump because it is something you need to take advantage of. So I think that's 1 of the things we do love about this category is, that in times of macro uncertainty, do we see wobble? Absolutely. But I don't think it's anywhere as profound as like a truly consumer discretionary category.

And as the percent of our business with managed care benefits continues to grow, that also provides us an increasing layer of insulation as those folks are effectively paying every 2 weeks out of the paycheck for a prepaid benefit. And so in their minds, it could be, well, if I don't go and get an eye exam and utilize those benefits. I'm just leaving money on the table.

Makes sense. And maybe switching topics a little bit, but another hot topic is AI-powered glasses. You've got a relationship with Meta. Maybe talk about where you started with that in terms of the initial launch? How many stores, what your experience was at the stores? Maybe any challenges selling that product. And now I think you're going through with a bigger rollout. Just maybe talk us through that.

Yes. Well, we learned a lot about Smart Eyewear in 2025. We started the launch with 50 stores last year. We scaled to 300 in the second half of the year. And in pretty short order, we're going to have Ray-Ban Meta available in 1,200 locations, so essentially the balance of our chain with a couple of small, small exceptions.

Here's what we learned. Our consumer that -- our consumer opted in and raise their hand for this product at a higher rate than we anticipated. The Ray-Ban Meta SKUs are among the fastest turning SKUs that we have in our assortment. The consumers are not only seeking the product, but they are ever more interested in the use cases that the product can provide from listening to music, taking phone calls. But when it comes to the AI interactivity that the product brings, there's some amazing things that you can do with it.

If you are -- for instance, if you're traveling overseas and you're looking at it -- you need to look at a menu and have it translate to what's on the menu, it can help you with that. If you park your car at an airport and take a picture of where your car is parked, it can recall for you where your car was parked when you -- if you're like me, I forget all the time. small detail...

[indiscernible] Picture on my phone.

Exactly. But so more and more -- and there's the intended use cases but there's more and more use cases that people are just figuring out how t make -- how to use and leverage the product to make them faster, stronger, more effective humans in some way.

And that's, I think, really, really exciting for the category. So our performance has been -- again, I'm super excited with how our team has done. And I'd say we still have room to go. It is a new product category introduction that -- we have associates who are comfortable with it, and we have a whole lot who are not yet. So getting our team of 14,000 team members super comfortable with the direction of AI Smart Eyewear I think, is -- the challenge yet to come.

And was it mostly a new customer that's coming into the store for that product? Or is it more of an existing customer?

It's a good mix of both. I think we have consumers absolutely that are seeking the product and some who are just converted to it from a curiosity standpoint. The 1 thing we're seeing that is also really encouraging is the consumers who are buying Ray-Ban Meta are also opting into some of the more premium lens options as well. Our average transaction on a Ray-Ban Meta basis is 1 of the most valuable transactions that we have within our 4 walls.

Margin dollar is higher, but more gross margin rate, not as high.

Correct. That's a fair assumption, yes. I think what's great about our stores being a destination for this is, a, you don't want to go to multiple stops if you do have a prescription need, a visual acuity need to get the lenses put in, you can kind of get that transaction, get 2 birds with 1 stone.

And the second most managed care plans will allow you to use your frame benefit against Meta AI frame. So kind of comparing us as a destination for this versus others, right? There's a lot of benefits to going to an optical retailer to buy this product.

And is there anything exclusive about this relationship. There are other players out there that might like to partner with someone who's got over 1,000 stores to help get them on people's faces. Is that an opportunity for you guys?

Sure is. And I think our vision is that we become the agnostic destination for smart eyewear and can provide people unbiased advice to help match them with the Smart Eyewear platform that best matches their lifestyle needs. So again, right now, doing great with Ray-Ban Meta, we certainly would welcome relationships with other tech companies, other suppliers in this realm.

And in terms of training, what you've already had to kind of educate your employees as far as the Meta product, what would that look like if they were now tasked with understanding a bunch of different sort of smart eyewear.

It's a great question. I'm not sure we haven't necessarily the perfect answer today, right, because it would require retraining people who have been optical experts in helping match you with the right lenses, to helping to match you with the right technology. I think there's elements of consultative selling that is really transferable but we'd have to really make that connection for our team members to say, okay, your consultative selling aspects around frames and lenses and help them people find the right product for them.

Now it's going to be frames, lenses and the technology platform that best meets your patient's lifestyle needs. But again, because we do pretty well at the first 2, I'm confident we can get to the third as well.

And I think a proof point from last year, we rolled out an iPad-based selling support tool to all of our stores by the end of the year. And even that, we saw taking out the complication of smart eyewear just attempting to describe the value of a premium Progressive Lens versus a standard Progressive Lens is actually fairly complicated to put in the words, but kind of the picture -- so the picture is worth a thousand words.

So we've kind of proven that we can deploy technology-based solutions to support the selling process today even in some of the more complicated areas of optical. In my mind, this just becomes an expansion of, but how can we leverage similar tools with our store teams as the product category might get more complicated, how do we provide the right tools to our associates to make it easy for them and ultimately easier for the consumer.

Totally. So should you guys take a long-term view and think that this is kind of the new long-term disruptive technology?

Yes. Our long-term view is that this is going to be a significant part of the optical experience. And in the very short time period that we've -- that we've gotten acclimated to it. We are proving to ourselves that we are a credible player in the space, that our teams can rally, and convey the notion of value and benefit to the consumer that we have the right points of distribution. So we think we're really, really well positioned for this category, for this category growth.

So far, haven't been in the seat super long, but the strategies that you've brought seem to be working. Is there anything that you have found more challenging that's not going as smooth, something that you'd like to be seeing happen faster than it is?

Don't say working with me.

We're working with Chris. Listen, it's -- I am lucky that I got to come into a company that I knew and a category that I deeply understood. And in some ways, for sure, I had asymmetric information about the company and who the company's consumer was from my previous life it, both EssilorLuxottica and Cooper Companies. So that helped a great deal.

So I did arrive here with a bit of a playbook in mind. And we have been executing against that playbook. And as we shared at our Investor Day, really refined it around the 4 growth vectors of underdeveloped products, underdeveloped consumers, underdeveloped markets, and underdeveloped experiences. And we're making really, really good progress against all 4 of those components, and we have the right structure in place.

In terms of like, if your question is really around lessons learned, I think there's the human part of a job like this that can be tough sometimes. And we just recently took a bit of an organizational action last week with a number of our colleagues that were fantastic people, and they were great contributors to 19 years of success, but then it also became clear that some of these individuals weren't going to be contributors to what we needed to do go forward.

And those are hard decisions, especially when there are decision not necessarily around cost, right? When you're making decisions on a broad scale around talent, it's not whether you like a person. It's not how long they've been in the company, but are they someone who can be an A player go forward, that's tough.

I think the lesson learned in these things is, you know what the right decision is. You probably knew it from the day you stepped in, take those decisions faster. It's actually the right outcome for those impact and it's certainly the right outcome for the business.

Yes. Makes sense. How about you, Chris, anything surprising or challenges that you didn't expect when you took the role?

Actually, I'll kind of go to the positive route on this one. So when I was like looking from the outside in at a business that did 3.5% operating margin in the specialty retail category, when I arrived and cracked open the hood, I expected to find a lot of things I didn't find. I expected to find a real estate portfolio that needed potentially a lot of investment in relocation and our store footprint is great and our stores are well maintained and our doctor equipment is best-in-class from what I've seen in the category.

I expected to see an absence of investment in certain technologies modernization. It was -- lo and behold, we've got 700-plus locations with remote exam technology. So it was a delight to come in and go the kinds of challenges I expected to take on exclusive of tariffs. In my first couple of weeks we're much different than what actually encountered. And I think Alex said it well earlier, it's really about modernizing the commercial approach to the business, which has been a lot of fun.

How about from an external perspective, like the market, the promotional cadence that you're seeing out there, just the competitive nature of the category, how has that looked over the past year relative to your expectations? And how do you see it kind of go forward?

Yes. I think 1 of the things that the category did better than what we had historically done is meeting the consumer where they are and what their desires were. I think they had a -- we were an analog replicator of a business model for years, punch out another store, deliver predictable results and just do the same thing over and over again. And I think as the market has embraced different ideas of customer centricity and segmentation and meeting customers where they are and refining their models, our model of analog replication just didn't work as well as it did.

So we're playing a bit of catch up there, but that's where I'm really excited about what this year has in store in terms of bringing even more brands into our assortment, going to a segmentation strategy where our stores are clustered based on a whole host of inputs that then defines what type of products they get, potentially, what type of selling model that we deploy in that specific store. So I think once we have those pieces in, we'll actually leapfrog where optical is based on where -- based on how kind of segmentation schemes in the category work today.

So I think there's a ton of opportunity there. From a promotional perspective, we were essentially an always on promotional machine. And we pointed all of our acquisition investment at the cash-pay consumer with a message of 2 pair of eyewear for x, including an eye exam.

With only -- I think that message worked really well when our market or our stores were dominated by cash-pay consumers. But now that we have more managed care customers, the fact that we're pursuing the outside or x customer as a target segment, the 2 pair with an exam message that always on promo message isn't necessarily as attractive to them as it might have been in the past.

So our challenge going forward is how do we turn our marketing and media investments into a more targeted segmented approach where we have a brand communications platform that can be fine-tuned for a specific audience. So we took that big first step in 2025 with America's Best when we when we said goodbye to our friend, the owl, and we introduced the brand promise of Every Eye Deserves Better, and that's central to our brand and central to our communication strategy to the consumer.

Our next iteration is, based on Every Eye Deserves Better, what does that mean? If you're a managed care customer, what is the brand promise that we have to deliver to you under the headline of Every Eye Deserves Better?

If you are a pediatric patient and you believe in Every Eye Deserves Better, what is it that you do from a brand perspective to make that promise come to life? One of the things we do with pediatric patients today is for every child under the age of 13 that visits us, they get a digital retinal image included in their eye exam which is phenomenal because it gives our doctors insight into their complete eye health, including anything that might be an underlying condition. That's just part of our standard of care.

Now ironically, we've already -- we've been doing this for years, but we didn't necessarily talk about it. But so the brand platform of Every Eye Deserves Better, a brand that believes in Every Eye Deserves Better, that is an action that you do for the consumer, but it's also something you can talk about. So Again, I think we did a great job on landing on a strong communications platform. This year is how do we take that platform and actually apply some segmented messaging to it and deploy it in media to a way that's not how we've done things in the past, essentially just run a bunch of TV spots.

Things seem to be working like you referenced earlier, you grew your eye exams this past year in a market that was down, where do you think that share is coming from?

And all-time like all-time high unaided brand awareness in Q3 and Q4. So we've been super excited about that. So I think you've had a fair amount of disruption in the category. You have a high degree of private equity consolidation with independent optometry you have independent optometry that still dominates the segment from a market share perspective. So I think those couple of components have dislodged some consumers and set us up as winners of share in that market.

Sounds great. Alex and Chris, thank you so much for your time, National Vision.

Great. Thanks.

Thank you, Paul.

Thank you for standing by, and welcome to National Vision's Fourth Quarter and Fiscal 2025 Earnings Conference Call. [Operator Instructions]

I would now like to hand the call over to Tamara Gonzalez, Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Welcome to National Vision's Fourth Quarter and Fiscal 2025 Earnings Call. Joining me on the call today are Alex Wilkes, CEO; and Chris Laden, CFO. Our earnings release issued this morning and the presentation accompanying our call are both available in the Investors section of our website, ir.nationalvision.com. A replay of the audio webcast will be archived in the Investors section after the call.

Before we begin, let me remind you that our earnings materials and today's presentation include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the release and our filings with the Securities and Exchange Commission.

The release in today's presentation also includes certain non-GAAP measures. Reconciliation of these measures is included in our release and the supplemental presentation. We would like to draw your attention to Slide 2 in today's presentation for additional information about forward-looking statements and non-GAAP measures. Further, please note that all financial measures in today's commentary are based on a continuing operations basis, unless otherwise noted. As a reminder, National Vision provides investor presentations and supplemental materials for investor reference in the Investors section of our website.

I will now turn the call over to Alex. Alex?

Thanks, Tamara, and good morning, everyone. Thanks for joining us today for our fourth quarter and fiscal 2025 earnings call. I'll start off by saying we had a great year. We enhanced our leadership team, laid out an ambitious transformational road map and rally the entire organization around initiatives focused on modernizing every aspect of the business, from customer engagement and in-store digital tools, to product pricing, presentation, data and technology infrastructure. We delivered strong mid-single-digit comp store sales and modernized our business, all while driving significant operating margin expansion. I'm proud of how our teams executed with urgency, and I'm confident in our ability to continue expanding our market share as we close the gap in areas where we are underdeveloped compared to the category.

In 2025, the number of exams performed by our doctor network increased over last year and metrics across ticket, NPS converge moved in the right direction, contributing to healthy profit expansion a key tenet of our path forward and in line with the expectations we set out to achieve.

I am also pleased with how our target customer cohorts are embracing the changes underway. We're expanding our customer base with more profitable customers such as those who use managed care or progressive lenses or bringing a prescription from another doctor or what we call outside Rx. This highly intentional customer mix shift we are driving resulted from key initiatives around new selling techniques in our store and a new approach to merchandising to give these customers the products they want. These initiatives were instrumental in driving the strong results we reported in fiscal 2025.

Our 2025 results exceeded the expectations we laid out at the start of the year and our proof points to the power of our transformation. In fiscal 2025, net revenue grew 9% to $1.99 billion. Adjusted comp store sales were 6%, adjusted operating income grew 56% to $102.5 million versus $65.5 million in 2024 with AOI margin expansion of 160 basis points over 2024, landing at 5.2%. This all contributed to adjusted EPS of $0.80 for fiscal 2025 compared with $0.52 in 2024.

We finished the year strong with fourth quarter comps tracking as expected within our long-term financial algorithm and bottom line results supported by our initiatives and strong execution. In the fourth quarter, net revenue grew 15.1% to $503 million. Adjusted comp store sales were 4.8%, adjusted operating income was $17.6 million, with AOI margin improving to 3.5% compared to 0.7% in the fourth quarter of last year. And adjusted EPS in the fourth quarter came in at $0.15 per share compared with a loss of $0.04 per share last year.

It's important to call out that in the fourth quarter, we saw traffic growth in our managed care, progressive and outside Rx customers combined, along with strong average ticket growth. Overall, I'm incredibly pleased with the performance of consumer resilience and the execution of our strategy during the fourth quarter. Chris will cover more detail on the quarter in just a few minutes. We're happy with the execution of our strategies and the results they are delivering. And first quarter to date, we're seeing continued confirmation of our strategy with comp store sales in the mid-single-digit range despite the weather challenges we've experienced so far this year. The success we saw in 2025 reflected early wins on the strategy we laid out at our Investor Day last fall. As we shared, our strategic initiatives are focused on 4 growth vectors, each with long runways, which include: expanding with underdeveloped customers, evolving our product offering where we are underdeveloped, enhancing the patient and customer experience and new store growth, while also remaining disciplined and intensely focused on operating margin expansion.

During 2025, we began to expand with underdeveloped customers. Through data-driven insights, we recognize that our customer audience skewed more middle income and was much broader than our historical targeted approach reflected. This intentional shift in customer mix delivered exactly the kind of performance we expected, driving stronger comps and healthier traffic from higher-value segments such as managed care, outside Rx and progressive customers.

During fiscal 2025, we saw the benefits of our initiatives reflected in average ticket growth of 6% for the year and driven by meaningful progress to close the pricing and product mix gap relative to the category. Managed care comp sales grew low double digits in 2025, and we ended the year with 42% of revenues attributable to managed care. Traffic declined 0.5% overall for the year reflecting declines with self-pay customers offsetting strong traffic gains with our more profitable customer cohorts. While some attrition among less profitable self-pay customers is anticipated and is reflected in our overall traffic results, the growing influx of more profitable customers is strengthening the quality of our business, and it is reflected in the profit expansion we are achieving.

On the product side, our strategy to target areas of under development versus the category is paying off. We made a significant pivot in fiscal 2025 to attract a greater share of the more profitable customer cohorts already shopping in our stores, notably those paying with insurance. As we refocused on attracting a broader, more profitable customer base, we transformed our merchandising strategy to better meet their needs. These are customers who see premium frames and can spend more whether through insurance benefits or higher disposable income. This evolution in customer and product approach allows us to better serve more profitable customers while still delivering compelling value to customers across all income demographics.

In 2025, our shift towards more premium frames and branded assortments drove higher ticket and resonated strongly with existing customers while attracting new customers in the higher income band demographics. With a higher mix of our customers using insurance, we evolve the mix of frames sold in our stores to better serve their needs. We ended the year with approximately 40% of frames for sale in our stores priced above $99, up from 20% at the start of the year. And we have more to do on that front to continue modernizing our stores. We introduced more branded products, new brands like Lam, Ted Baker, HUGO Boss, Jimmy Choo and in the fourth quarter, Kendra Scott. And we're really excited that in early innings, these are turning above market benchmarks. These products prove critical to serving our target customers. The timing of our business modernization couldn't be better from expanding our premium assortment and refreshing our brand, to strengthening the selling capabilities required to win in the premium, in particular, in smart eyewear.

Since launching Meta AI glasses, last spring, our sell-through has exceeded expectations. As of the fourth quarter, Meta is available in 300 stores. And based on this performance, we expect Meta will be available in all stores by the end of the second quarter. Our early success in smart glasses is a proof point to the attractiveness of America's best to these customers. We're proud to offer this technology with access to eye care at scale in the U.S.

As we look ahead, we're being methodical and strategically phasing efforts to enhance our offerings across frames, lenses and contact lenses. In 2026, we have an exciting year lined up for frame introductions. Some of the new frame brands coming to America's Best include a range of sought-after premium, fast fashion and lifestyle brands like Burberry, True Religion, Kate Spade, Polo Ralph Lauren and Costa. These advancements to our product mix also complement our pricing strategy, which progressed over the year from no regrets pricing actions to modernizing our ticket on the bundle and ultimately to enabling us to implement product segmentation in our stores. Together, pricing, product mix and the influx of targeted customers has driven comp store sales as reflected in the higher average ticket we saw over the course of the year.

Looking to 2026, our pricing actions have become more sophisticated. This year, we're simplifying lens pricing and insurance pricing constructs to remove friction and make lens selection and upgrades easier for customers to understand.

Throughout 2025, we made significant progress in our lens leader to ship initiative, and we have plenty of runway to grow. We grew in key lens products like anti-reflective coding, advanced materials, transitions and progressives. For 2026, I think about our ambition for lenses, similar to what we did in 2025 on frames. We're going to begin providing more premium lenses within our assortment. We designed and executed a test for our lens leadership strategy around pricing and assortment simplification. And in the coming months, we expect to begin offering Stellus, an FDA-approved lens designed to slow myopia progression while correcting refractive air in children with myopia.

We are also offering more premium lenses to help manage care customers get more out of their benefits. One example of this is we plan to introduce a Tier 4 progressive lens later this year, which offers the widest, most natural and distortion-free vision across all distances. This is a highly sought after lens for progressive customers, reflecting strong demand for premium performance and a comfortable vision experience. Our initiatives to enhance our lens offerings extend to key areas where we are underdeveloped when compared to the rest of the category. By the end of 2026, we expect we will have made meaningful progress to close the gap versus the category when it comes to lenses. We expect lenses sold with premium materials to approach 60% from 50% today, which includes migrating from plastic to polycarbonate and we expect anti-reflective would approach 50% of mix from approximately 40% today.

In addition to specific frames and lens product enhancements, our focus for 2026 is to continue to build our retail excellence muscle to meet customers where they are. We've changed how we think about product assortments in our stores and are moving to frame assortments by lifestyle or category and not just price point alone. Our goal is to drive greater relevance at the local level by aligning assortments more closely with the customer profiles we serve in each market. We're doing this through a disciplined data-driven approach to segment assortments in both America's Best and Eyeglass World. We've identified distinct store merchandising clusters and expect to begin tailoring assortments later this year. Stores will be aligned into 5 merchandising tiers each designed to serve defined customer cohorts. As a result of this work, depending on the cohort of a store, the mix of branded frames is expected to increase from approximately 40% today to approximately 70% by the end of the year.

Our merchandising strategy is working. By upgrading our frame and lens assortments, aligning pricing with higher value customer needs, and tailoring assortments at the store level, we're driving higher ticket and healthier mix while preserving our overall value proposition. As we move into 2026, we're building on this momentum with disciplined product innovation and segmentation that we believe will position us to continue closing the gap versus the category and drive sustainable growth. Importantly, our merchandising strategy only works if it shows up in the experience. That's where our focus on customer and patient experience becomes a critical growth driver.

In early 2025, we began implementing a more consultative selling model in both our America's Best and Eyeglass World brands, which has played a meaningful role in closing the gaps across underdeveloped customer segments and product categories. These changes are taking hold in our stores with noticeable shifts in frontline associates behavior as they move beyond purely transactional interactions. This evolution of the selling approach is showing up in our average ticket contributing meaningfully to our comp performance and is being well received by store teams. Importantly, our consultative selling approach really allows our associates to provide exceptional value for customers across demographics. It's about creating a joyful shopping experience where you get the product that best meets your lifestyle needs. To support this transformation, we deployed iPads and digital tools, enabling associates to more effectively match customers with products that best meet their needs.

These tools, along with enhancements to our selling processes have strengthened associate effectiveness and reinforce our move toward a consultative selling model. In parallel, we refreshed the in-store environment, updating visual elements such as graphics, pricing presentation, signage and associate dress standards. The overall look and feel of our stores is materially different from a year ago. Importantly, these improvements were achieved with relatively modest investments and without significant capital intensity, demonstrating our ability to drive meaningful change efficiently. Overall, these initiatives are improving performance with strong capital discipline.

Our remote exam technology continues to provide important capacity flexibility across our network and remain integral to how we deliver care at scale. We are pleased with the progress our teams are making on our remote hybrid model where in-store doctors often perform exams and other stores remotely, and we continue to expand the number of doctors trained and participating in this program. We believe this is an important way to deliver care more efficiently and gives us greater flexibility in how we deploy our doctor network going forward.

At our Investor Day, we shared that the Eyeglass World brand is a part of our portfolio that we call emerging brands, which today also includes the Vista Optical brand with locations on select military bases and within select Fred Meyer stores. In the foundational efforts at Eyeglass World to strengthen operations really gain traction, delivering solidly positive comps throughout the year. The focus has been on building a culture centered on accountability and ownership, implementing retail best practices and driving overall operational execution. And during the year, we took a meaningful step to an employed OD model at our Eyeglass World locations helping to standardize store execution and the patient experience.

We are refining the Eyeglass World brand positioning. That work is underway now. We are thrilled with the work VML did for America's Best and we'll share an update on what's coming with Eyeglass World later this year.

We made tremendous strides in 2025, successfully transforming our brand marketing, shifting from a primarily promotional posture to more strategic brand-led approach. Our focus in 2025 was on redefining the America's Best brand, including the launch of a new logo, a refresh design and our national creative campaign Every Eye Deserves Better. This campaign was designed to expand our audience targeting, allowing us to reach higher value customers such as managed care, outside Rx and progressive lense wears, while remaining true to our value proposition, and performance of the campaign has been phenomenal.

Since the launch, America's best unaided awareness saw a noticeable uptick reaching the highest in the category. Importantly, we continue targeting pragmatic buyers, those that are value-seeking self-pay consumers, reinforcing that our value proposition is compelling for customers across income demographics. As we reflect on the year, it's worth noting the journey we have taken at America's Best. Up until this past fall, America's Best was essentially a promotional all-the-time banner with the 2 pair and eye exam offer.

In 2025, we started redeploying these promotional dollars to more targeted advertising, improving both efficiency and effectiveness. As a result, America's Best brand awareness is at its highest in recent memory and a great accomplishment that we believe it is yielding the traffic that we want. With America's Best new brand identity and campaign now launched, we're able to more fully leverage these refreshed assets to drive greater impact. This updated identity gives us significantly more flexibility to personalize our messaging and increase relevance with target customers. These are capabilities that were more limited under the prior led campaign. This is a multiyear transformation. And in 2026, we're taking the next bold step forward with the addition of a new media partner, [ Infinite Rohr ], who brings a fresh perspective and more innovative thinking to how we deploy our marketing spend. Underpinning this evolution is a more segmented approach to messaging.

Our 2026 strategy is designed to bridge broad brand awareness with more targeted content designed to engage our target customers. Importantly, we're also expanding into mid-fall activities with increased emphasis on influencers, social media platforms, audio and sponsorships, creating a more balanced and effective media mix. In parallel, our recent CRM improvements are designed to drive improved engagement post purchase, including annualized bookings and more tailored journeys designed to reactivate lapsed customers.

Following the launch of our new CRM platform in the fall of 2025, we began with initial journey focused on reengaging lapsed customers. In fact, in the fourth quarter, early results from our new lapsed customer journey were nearly twice as effective as our old approach, albeit on a smaller base as the program is Jeff kicked off. Those early efforts delivered meaningful insights that sharpened our messaging and segmentation. With that learning in hand, we're expanding our CRM activation to include enhanced lapsed customer outreach, post exam engagement and journeys tailored to our highest value customer cohorts.

You've heard us talk about modernization a lot, and a big piece of that is expected to come from our technology strategy. Our goal is not just to keep pace with the industry, but to become an innovation leader supported by industry-leading technology foundations. This starts with an unwavering focus on creating a joyful customer experience. Starting with our online presence, where millions of customers begin their journey with our brands. It continues through a seamless experience into our retail locations and is maintained by meaningful ongoing connection points.

In 2025, we launched the first phases of our elevated customer experience efforts rooted on the industry-leading Adobe Digital Experience platform. In 2026, we plan to expand that across all our brands and deepen the integration with our in-store experience. Complementing our digital experience platform, we're integrating Adobe CRM capabilities to enhance our customer insight, create more meaningful customer interactions and build increased brand loyalty.

To support the transformation across our customer experience, we are modernizing our foundational platforms, beginning with the launch of a new end-to-end Oracle ERP platform in 2025 with expanded capabilities planned in '26 and 2027. We continue to deepen our investments in our modern data platforms, including our Microsoft and Databricks based data warehouses as well as our data analytics and visualization platforms. These investments are intended to create ongoing agility to allow us to continue to innovate quickly and realize the optimal benefit from emerging technologies, including AI and agentic commerce, among others, and we believe they provide us with the scale needed to meet our planned growth for years to come.

We believe the work we've done across operations, merchandising, marketing and modernizing our technology capabilities creates a more optimal environment for our customers. This is critically important where it matters most, helping our doctors deliver exceptional eye care for our patients.

We had a strong year in 2025 with doctor retention and recruiting achieving well beyond our expectations, including over 10% of the recruiting class for new graduates. Our doctor coverage remains healthy and stable, supported by innovative recruiting and retention strategies.

To close, fiscal 2025 was a defining year for National Vision. We did what we said we would do. We executed our strategy, modernized our business, improved the quality of our customer base and delivered strong top and bottom line results. These results are the outcome of disciplined execution across merchandising, pricing, marketing, customer experience and technology. I'd like to thank our teams for their dedication and continued commitment to our transformation. Your efforts have been instrumental driving the progress we've seen.

Just as important, the progress we've made this year positioned us well for what's ahead. We have clear opportunities to close the gaps and drive profitable growth. With our distinct growth factors, strong industry tailwinds and a team that has proven it can execute with urgency and precision, we're confident in our ability to deliver sustainable long-term value. Thank you for your time and continued support.

With that, I'll turn it over to Chris to walk through our 2025 results and 2026 outlook in more detail. Chris?

Thank you, Alex, and good morning, everyone. As Alex shared, fiscal 2025 was a year of significant progress for National Vision. When I first spoke with you less than 1 year ago, I reinforced our commitment to a clear and focused mandate to expand our operating margins through disciplined execution and operational excellence. Through the collective efforts of our entire organization, we successfully rallied around this objective and implemented the foundational changes necessary to drive sustainable margin improvement in 2025.

Key to our success has been instilling a culture of strong financial discipline across all levels of the enterprise. We strengthened our organizational processes to ensure every dollar spent drives measurable value creation. The culmination of these efforts resulted in a 160 basis point expansion in operating margin in 2025. This progress reflects the dedication and alignment of our entire team, and I'm confident in our ability to build on these achievements as we enter fiscal 2026.

Before I provide our outlook for 2026, let me first turn to our fourth quarter and fiscal year 2025 results, which, as a reminder, include an extra week compared to the prior year. The 53 week represented $35.6 million in net revenue and $3.5 million in adjusted operating income. All results reported today are inclusive of this 53rd week impact with the exception of our comparable sales and adjusted comparable sales metrics, which are reported on a 52-week calendar.

In addition, I will be referring to certain non-GAAP metrics in my discussion and would refer you to today's press release for reconciliations of all non-GAAP financial measures to their most comparable GAAP financial measures.

For the fourth quarter, net revenue increased 15.1% with adjusted comparable store sales growth of 4.8% and growth from new stores. During the quarter, we opened 12 new America's Best stores, and closed 4 America's Best stores. We ended the quarter with a total of 1,250 stores.

Adjusted comparable sales growth in the period was driven by an increase in average ticket of 5.8%, which reflects continued strength in the managed care cohort, including operational improvements that led to higher revenue in the quarter, along with execution of our pricing and merchandising initiatives. We expect to continue to benefit from improvements in our managed care operations going forward, though likely not to the magnitude we experienced in the fourth quarter.

The increase in average ticket was partially offset by a 2.5% decline in overall customer traffic compared to the prior year as healthy trends in our managed care business continued to offset softer traffic in our cash pay business. As we've discussed, this intentional evolution of our customer mix to more profitable target customer cohorts is expected to create a healthier overall business, even if we see short-term traffic decline.

To that end, in the fourth quarter, we saw traffic growth for managed care, progressive and outside Rx customers combined. As a reminder, the fourth quarter is unique for us, as it is typically our lowest revenue quarter of the year and one weighted toward the end of the period given seasonality with customers using benefits before expiration.

To provide some additional context to our comps in Q4, a there was a negative impact to our results driven by the calendar shift of the 53rd week. We lost one of the highest volume selling days in the comp calendar, which, for context, normalized would have driven an additional 50 basis points improvement in our Q4 traffic comp. Overall, the trends we have talked about throughout the year remain consistent, and we are excited about the revenue and operating margin performance for the quarter and the year. Our eye exam conversion to product sales has remained consistent with prior quarters, which is another key indicator of customer acceptance of our merchandising and pricing transformation.

As a percentage of net revenue, cost applicable to revenue decreased approximately 40 basis points. The resulting increase in gross margin is driven by our growth in average ticket from higher managed care revenues in the quarter and execution of pricing and product mix initiatives partially offset by the expected slight increase in optometrist-related costs as we lapped a prior year onetime benefit related to doctor incentive true-ups. .

Adjusted SG&A was $251.9 million in the fourth quarter, and as a percentage of revenue, leveraged 180 basis points. This performance was primarily driven by operating leverage on lower associated related expenses and advertising, partially offset by higher variable incentive compensation and health care expenses.

Adjusted operating income, which reflects the benefit of the 53rd week, increased to $17.6 million compared to $3.2 million in the prior year period, and adjusted operating margin increased to 280 basis points to 3.5% for the quarter. Net interest expense was $4.2 million compared to $4.6 million in the prior year. During the quarter, we entered into an interest rate hedge on a portion of our outstanding debt. This $100 million hedge at a fixed rate of 3.43% and is intended to reduce exposure to short-term rate volatility. Adjusted EPS was $0.15 per share in the fourth quarter up from negative $0.04 per share last year.

Turning now to our financial results for fiscal 2025 as compared to fiscal 2024. We delivered adjusted comparable store sales growth of 6%, adjusted operating margin expansion of 150 basis points to 5.2% and adjusted EPS growth of approximately 54% to $0.80 compared to the prior year.

Turning next to our balance sheet. We ended fiscal 2025 with a cash balance of $38.7 million and total liquidity of $332 million, including available capacity from our revolving credit facility. During fiscal 2025, we repaid $101.3 million in long-term debt and convertible notes, bringing our total debt outstanding net of unamortized discounts to $245.9 million at the end of 2025. We ended the year with a net debt to adjusted EBITDA of 1.1x.

For the full year, we generated operating cash flow of $146.3 million and invested $72.8 million in capital expenditures, primarily driven by investments in new and existing stores and information technology. We also had noncapital investments related to our IT infrastructure, including our finance ERP and new CRM and our e-commerce platforms during the year. We continue to maintain a strong balance sheet and healthy cash flow to support our growth and capital allocation priorities.

Our Board of Directors recently approved a new share repurchase authorization following the expiration of our prior authorization on January 3. While our priorities are focused on the growth initiatives underway, we are pleased to have the authorization in place to repurchase up to $50 million of shares until December 28, 2030.

Moving now to our fiscal 2026 outlook, which is consistent with the initial view we shared at our Investor Day last fall, reflecting continued momentum from our transformation initiatives, confidence in our strategic direction as well as consideration for a range of scenarios with respect to the macro environment and consumer demand.

For fiscal 2026, which as a reminder, is a 52-week year, we currently expect net revenue between $2.03 billion and $2.09 billion, supported by adjusted comparable store sales growth of 3% to 6%. Our comp outlook assumes a similar mix of ticket and traffic as we saw in 2025 and incorporates strong quarter-to-date results despite the significant weather events during the quarter.

With respect to profitability for 2026, we expect adjusted operating income between $107 million and $133 million, which includes a range for depreciation and amortization of $88 million to $92 million. At the midpoint, our outlook assumes fiscal 2026 adjusted operating margin expansion of approximately 100 basis points relative to fiscal 2025, excluding the 53rd week. This expansion in adjusted operating margin is expected to be primarily driven by SG&A leverage. Our guidance takes into account our multiyear cost savings plan and we remain on track to realize approximately $10 million in annualized savings this year.

Interest expense is expected to be between $14 million and $16 million. We expect our effective tax rate to be approximately 28%, excluding the impact of vetting of restricted stock units and stock option exercises. Bringing this all together, we expect adjusted diluted EPS to be between $0.85 and $1.09 per share, which assumes approximately 82 million weighted average diluted shares outstanding. We expect capital expenditures to be between $73 million and $78 million, which includes investments to open approximately 30 to 35 new stores this year.

Store openings will be relatively balanced throughout the year, and will be weighted towards America's Best brand stores. We also expect to close approximately 10 to 15 stores as part of our ongoing fleet optimization efforts, resulting in net new store growth of approximately 20 to 25 stores. We expect store closures beginning in the second quarter and continuing with a relatively balanced cadence through the fourth quarter.

As we consider the impact of returning to a 52-week fiscal year, the quarterly profile of the business will be affected, taking into account factors such as the loss of the 53rd week, holiday shifts, changes in selling days and the timing of our investments. Our expectation for adjusted operating margin is for Q1 and Q3 to drive more favorable year-over-year growth with Q2 and Q4, yielding flat to modest growth.

In summary, we are proud of the results we have delivered for fiscal 2025. We believe the strategic initiatives we have put in place position us well to deliver on both our near and long-term targets and will drive shareholder value.

And with that, I would like to thank you for your participation in today's call. Operator, we're now ready for questions.

[Operator Instructions] Our first question comes from the line of Michael Lasser of UBS.

You're providing a lot of evidence that your strategy is working and providing very effective -- and leading a very effective performance. The key question from here is going to be whether there could be a pause in the trade-off between the growth you're getting from the insurance, more richer pay customers versus the traditional customers that National Vision has served. So are you seeing any evidence of that, whether it was the shape or cadence of the fourth quarter or what you've seen quarter-to-date that there could be a disruption in this growth rate as you have that potential hand off over time?

I'll address a bit of the shape of the fourth quarter and step a little bit through what we're seeing in the first quarter and then provide a little bit of color on the cash pay customer versus the managed care customers. So the fourth quarter certainly was an interesting quarter for us. We started October off actually pretty darn strong and we're happy with the results. November kind of as expected. But then we did see some slowing in December, in particular, with the cash pay customer. Now an important nuance in December, though was as soon as we cleared Christmas, actually, our week 53 was pretty darn fantastic. And we saw kind of consumer demand come back. And I think a little bit of that was related to the compressed time line between Thanksgiving and Christmas work. .

Folks had might not have been as much in the optical came as we would have liked, and there was a fair amount of macro noise. As we moved into January, that demand continued. We were super happy with our results, all through essentially January 22 when winter storm, I think, but put not just our business, but a lot of other businesses, a little bit on our heels with the winter weather that impacted frankly, a large swath of the U.S.

So again, super pleased with where we're sitting through the first quarter, 2 months in, sitting in the mid-single-digit range, seeing sequential acceleration in traffic, so really, really quite pleased with that. But now a little bit deeper into your question on the managed care versus the cash pay cohort. Again, continuing to see strength with the managed care consumer.

The cash pay customer is still a bit more fickle than what we've previously experienced in years past. We did start to see a little bit of improvement late last year. I should say, last year and then late last year, there was continued -- a little bit of continued macro wobble. But we do think that we will comp positively with the cash pay consumer in 2025. One of the interesting things that we've talked about is that the cash pay consumer has actually opted into some of the more premium products that we've rolled out at a faster clip than what we had anticipated. And that was also a contributor to our success in '25. So Michael, I hope I got to most of your question...

You did. You did a great job, Alex. So you expect cash pay to comp positive. What would that compare to the comp from that cohort of consumers in '25? Just so we have a relative frame of reference. And what has you factored in from both the tax refunds as well as smart glasses that will be fully deployed your stores by the second quarter into your guidance for this year. Just to help us assess the degree of conservatism that could be baked into the outlook?

Yes. You got it. So on the cash pay consumer side, again, it's a combination of both traffic and ticket. And as we're introducing more products and rolling out smart eyewear to more stores, we absolutely think that cash-pay consumer is going to participate in that. We are still being a bit more conservative on our traffic expectations with the cash pay consumer until we start to see a bit more acceleration in the repurchase cycle of that consumer cohort. But again, on an overall comp basis, because they're opting into the more premium offerings, we're launching, we do feel positive about the cohort on a comp basis.

The second point on tax refunds on '26 outlook as it relates to smart eyewear. Clearly, we think having more money in the consumer's pocket is a good thing for us and a good thing for consumption in the category in general. And as we step through the next couple of months, we'll start to hopefully see some of that flow through at a higher rate to our business than what we've even experienced quarter-to-date. So again, optimistic. We obviously think cash in the consumer's pocket is a good thing. But again, with our more stronger resiliency with the managed care consumer, we're not necessarily as dependent on the tax refund, tax seasonality now as we may have been in years past.

As it relates to Smart Eyewear and '26 outlook, we're super excited that we're going to be deploying Ray Ban Meta to balance our fleet by the end of the second quarter. Again, this has been one of the really pleasant surprises of our business that it is one of the hottest selling products that we have in our assortment. We are ecstatic with the performance of Ray Ban Meta in our stores, the transaction value of that consumer is significantly higher among the highest of our consumer types. So nothing really but enthusiasm and good news for us as it pertains to that product category.

Our next question comes from the line of Simeon Siegel of Guggenheim Securities.

Nice job. Sorry if I missed this, Alex, anyway -- maybe just following up on last one a little bit, but just any way to help us think apart -- think about how you're breaking apart the pieces of that net traffic between those 2 pieces. So just thinking about like the puts and takes of the gains from the profitable target customers versus what you think you will. And this is I'm thinking about for the future, what you think you will still walk away. I'm just curious when we can start having the reset offset behind us and the traffic is more of a simple story of the new target customer growth.

And then maybe, Chris, real impressive SG&A leverage. How much of that was cutting expenses versus leveraging the fixed costs on higher sales? And how are you thinking about that SG&A dynamic into next year, maybe the same idea of leverage versus opportunities to cut costs?

Yes, I'll take the traffic and then turn it to Chris on the leverage question. We think we have multiple years of work ahead of us to be very deliberate on our consumer cohort shift. Again, I spoke a little bit about this in my prepared statements that historically, we were really an always-on promotional company. And when you market to eyewear for a certain price, including an eye exam and that's your primary lead offer that you deploy most of your marketing spend against, you are speaking to 1 customer type that is really sensitive to price. .

As you begin to shift that marketing expense into a marketing expense is more targeted, you're making a conscious decision to walk away potentially from some of those cash pay consumers as you're reinvesting into the acquisition of the more valuable customer group. So, Simeon, we do believe that this is a multiyear strategy. We are winning with the more profitable customers that we are seeking. We've rebuilt our acquisition platform to accomplish just that. And -- and not just my message externally, but internally to the team here has been to ensure that we're winning with the customer cohorts to drive the profitability of the company.

And then again, Chris talks about this at length to that is the primary mission of this management team is to continue to expand operating margin, and we're doing that through this intentional shift of the customer cohort. So long story short, I think we have multiple years of runway to go as we work on this customer shift, and what we are measuring ourselves on is our effectiveness at driving the customers that we want into our stores.

Yes. And on cost front. Look, I think the operating leverage expansion that we're seeing is really a healthy mix of both things. Our comps at 6% for the year certainly helps leverage our more additional fixed costs. But we have unpacked every line item within our SG&A portfolio over the course of the last 12 months. And we have seen in '25, and we expect to see over the next couple of years, about $20 million of cost out in those line items. It's -- I think we talked a little bit at Investor Day things as big as relooking at our logistics contracting for national freight to something as minor is looking at what kinds of paper our stores are ordering and making sure that we're optimizing there.

So I think what we see in the future is a continued ongoing precise view of how we spend both at the support center and our stores. And the team has embraced it with open arms is something that the entire enterprise has rallied around and excited about.

Our next question comes from the line of Dylan Carden of William Blair.

Alex, what do you make of projections for sort of a softer end market this year. I think some of the -- went out there is like down low single digits of the total industry. And then obviously, that sort of soft. And is that sort of the corollary that you see in traffic being kind of your cash customer more subject to those types of declines? And your business is sort of staying above the fray given all your initiatives. Is there sort of more of a turbocharge capacity sort of on the other end of it?

Dylan, one of the things -- first and foremost, I think we control our own destiny on a lot of these elements. And one of the things that I was most pleased by in '25 was in a category where eye exams were declining between the mid- to high single-digit range, and we actually grew eye exams in the plus 1 range. So I think that speaks to the strength of our brands. It speaks to the strength of our strategy and how we are communicating with the consumer the offerings that we provide across our banners.

So even in the face of some macro challenges and some uncertainty, I think our strategies are paying off, and it's showing in the outstripping the category from an acquisition in eye exam growth perspective. So when we think about things that can help us to continue to outperform, it is that we are the obvious destination for value in the category, so we are not shifting away from that, but we're refining exactly what that means.

We think elements like continuing to introduce more premium products to your question on turbocharging our business, continuing to introduce more premium products, making the in-store environment a bit more joyful. We didn't talk about it at length during the call, but boy, am I happy with the momentum we're seeing at Eyeglass World and the change in trajectory there in 2024, that was a negative comping business, an Eyeglass World was plus 4.2% last year.

So I think all of those things are pulling in the right direction and cumulatively are having a nice strong impact on our business, even in the face of some macro uncertainty. That being said, as you know from following our story, we do prepare for all sorts of scenarios, which is why our guidance continues to be incredibly prudent.

Excellent. And then CapEx stepping down for kind of the second year in a row. Is there any bigger lift or investment necessary for sort of store experience as you cater to a higher income consumer?

Yes, I think we've been pretty intentional about the investments we're making in kind of refreshing the stores, particularly with the America's Best rebranding have been intentionally focused on things that require minimal capital so we can refresh the stores, we can introduce in the new branding assets at a pretty nominal rate for CapEx relative to the size of the business.

Look, as we reported on CapEx, we said during Investor Day, we're looking to spend 4% to 5% of revenue on CapEx over the next few years. In the very immediate term, we're directing more of those investments at modernization of the business and organic investments you'll see a lot of that up in our traditional CapEx. Also some of that doesn't come through kind of traditional CapEx, there's still cash investments we're making that will see through other assets on the balance sheet.

So the dollars are still being reinvested in the business. But unlike when we were growing at a faster pace with new stores, not all of that are showing up in the CapEx line.

Yes. And then Dylan, I'll just -- I want to double down on something -- I get a statement I made during my prepared remarks. One of the things I'm super proud of the company for having done over the years is investing in doctor equipment, ensuring that the stores are well maintained, ensuring that our stores are orderly clean. I mean, we don't have anything that's massively out of source. But where we did have opportunities to make the environment a bit more joyful by modernizing some of the graphics, modernizing the dress code of our associates. Again, those are not capital or even expense-intensive items. These were minor investments along visual merchandising. And for those of you who haven't been in one of our stores recently. I would say going to one of our stores and take a real detailed look around at the environment at our people, at our teams and compare them to what it looked like a year ago. And I think you will see a very noticeable and feel a noticeable difference in the environment even in context of some very, very cost-efficient and minor tweak from a capital structure.

Our next question comes from the line of Brian Tanquilut of Jefferies.

Congrats. Maybe just as I think about the comment you made that what you're realizing is that your current target customer is probably more of a middle class or middle income customer, how durable do you think that is? I mean as we think about maybe like a down trade that's happening right now? And then how do you meld that with all the strategies that you're putting in? Just kind of trying to get a sense of the stickiness of this customer base that is now showing up at your stores?

Yes. Brian, I'll tell you -- thanks for the question. I mean I think we feel even better about it today than we would have a year ago because that middle-income consumer has a higher expectations of product. They have a higher expectation of experience, and those are all things that we are continuing to deliver on. And again, it's important to think through the lens of our our price in value gap versus the category. So we're delivering better product, a better experience. We're delivering better stickiness through our investment in CRM and shifting our marketing and acquisition expense into areas that are in particular pointed at the notion of retention, all while maintaining a significant gap versus the category, an intentional gap versus the category in terms of average dollar ticket transaction.

Again, yes, we are absolutely focusing on driving our ticket growth through introduction of more premium frames and being more deliberate on pricing. That being said, we still are the obvious destination for value in the category. So introducing more premium product while still maintaining our value positioning in the market, we actually think that is the winning recipe to continue to be a destination of choice, in particular, for that consumer that you spoke of.

Got it. And then just on the weather impact from the quarter, it looks like you have a decent number of stores in the Northeast, New York, New Jersey. So just curious how you think or how we should be thinking about the impact from that from a modeling perspective?

Yes. No. I mean we had probably about 15% of our fleet that sat in -- right in the crosshairs of the winter storms that we had that we had no pun intended weather through the end of January and even into February. So again, I'm really happy with how the team has responded to call patients back and get them back in source for appointments that potentially they couldn't make their for store closures and road closures and all those things that we had to manage through.

So again, sitting here today 2 months through the first quarter in the mid-single-digit range with sequential traffic acceleration from the fourth quarter, I just -- I couldn't be more pleased with how the team has responded to those challenges that we faced in the first couple of months.

Our next question comes from the line of Robert Ohmes of Bank of America.

Actually, Alex and maybe, Chris, just on 2026 and thinking about the most important potential tailwinds or maybe just be highlighting more of the tailwinds, like how significant you mentioned simplifying lens pricing. Could you give us maybe some more color on that? Also remote exams, is that a driver still or sort of tailwind for 2026? And then maybe just a little bit more on the advertising. You mentioned a new media partner, as you go through 2026, what incremental could we see on the marketing side?

Yes. Thanks, Robby. So on tailwinds, some of the things we're, again, really excited about the new product introductions that are coming throughout the year. And similar to last year, those new product introductions are going to be phased in throughout the course of the year, and we think we're going to see continued momentum from that.

On the lense side, lens purchasing in this category is a very complicated and nonconsumer friendly activity. So with our deployment of iPads with the OPTICHEM platform, all intended to demystify the lens shopping experience, we think that's going to continue to help. We are looking at simplifying our lens assortment, especially once we have our Tier 4 lens introduced that we can create a more simple lens hierarchy so that consumers, for lack of better words, understand the good, better, best architecture, a bit better than what they do today with all the different degrees of add-on and lens materials that -- and all the different combinations that exist today.

So we're kind of testing our way through that at the moment to understand exactly how to create that narrative and create that experience in the most efficient way for the consumer. And we think that will be ready and be ready for kind of commercial application towards the back half of the year. So certainly, we think that's a win for our consumers. We think that's a win for the businesses as well and helps us toward our goal of migration to more premium lens materials and lens add-ons.

Remote continues to be a winning recipe for our business. And frankly, I think it's one of the reasons that we were able to weather -- the weather impact of the first quarter and the way that we have by having doctors that could see patients remotely when they may not have been able to travel into a location. So what a great asset to have during that time period. Again super excited about the opportunity that we can provide doctors to both practice in store and practice remotely. We think that's a differentiator.

And frankly, one of the reasons that we had a really strong recruiting class in 2025. Our doctor retention and doctor recruiting was at an all-time high in the year. And we think offering remote as a mode of practice is certainly one of the contributors to that.

Your last kind of question on advertising media partner. Again, I think this is our kind of next bold step in the transformation of our marketing capabilities. And if you think of '25 was really a year around creating new brand assets and a new identity and a new campaign, '26 is around how do we take those assets and deploy them differently?

And I spoke about this in the past, historically, we spent a lot on linear TV advertising. We spent a lot on search. And we haven't really done a particularly good job in mid-funnel activation in digital, in kind of targeted advertising where more and more consumers are actually how they're consuming their media. So we are, with our new partner, making some deliberate shifts this year and how we deploy our acquisition expense, in particular, in the mid-funnel range of acquisitions. So all of that is intended to really pull in the same direction and help us to attract those customers that we spoke of the managed care, the outside Rx and the progressive customers that are so important to our profitability expansion story.

Our next question comes from the line of Anthony Chukumba of Loop Capital Markets.

First off, thank you for taking my questions. Second off, congrats on a really wonderful 2025, and it's very encouraging to hear that you're doing the single-digit comps in the first quarter, given whatever challenges that have impacted so many retailers. So I just wanted to drill down just a little bit on Smart Glass. And obviously, you're selling the way you've been met a Wayfair, it's going really well for you, you expand to all your stores.

But I just want to clarify, so my first question -- well, 2 part of the question. First, do you have any -- you don't have any type of exclusive arrangement with Meta duty where you can only sell their smart glasses. And then related to that, obviously, it's going to be Android XR last that will be coming out. Do you foresee to narrow in which be selling some of -- you could potentially be selling some of those classes as well?

Yes. So we do not have an exclusive relationship with Meta, but we're super happy with, obviously, the partnership that we have with with Ray-Ban Meta and with our partners at EssilorLuxottica. And again, I think it's just a great proof point for us that we can be highly successful in selling smart eyewear in our store environment, again, can't wait for this to be scaled to the remainder of the fleet by the end of the second quarter. And absolutely, we believe we will be participants in the smart eyewear space across different platforms. And the success that we've had with Meta so far is the proof point that we will be a very meaningful player in smart eyewear for years to come.

Our next question comes from the line of Adrienne Yih of Barclays

This is Angus Kelliher on for Adrian Yih. You talked about consultative selling, driving higher ticket and better mix. How scalable is that across the full fleet? How many stores are redeploying that in at year-end? And what's the level of investment or turnover or upskilling needed to roll that out nationwide?

Yes. it's a great question. I mean we are rolling it out nationwide. However, as you can imagine, moving 14,000 people along the journey of consultative selling is quite the task. So it requires reinforcement, it requires focus. It requires center stage activity during our national sales meeting. So this is not a kind of one-and-done thing.

Our field sales organization is continuously focused on ensuring that we're sustaining those behaviors. But it is a multiyear journey to get our associate base to the point where we want them to be. Now OPTICHEM and the launch of OPTICHEM in Q4, one of the things that we really love about that is that that becomes the tangible tool to help our associates along with that journey. So it's really the combination of a selling tool with content that we've created to again demystify the experience and help consumers through their journey, combined with the behaviors and the selling techniques and the consultative selling techniques that we're teaching and reinforcing.

So again, multiyear journey, a lot of hard work that the team is putting in place to move 14,000 people in the same direction, but also backed up with some tangible assets to help them do that. As there was a question earlier is one around lens to lens simplification, again, and we think that is something to that will help along the journey of consultative selling by simplifying the lens experience, we will make it easier for our associates to engage and consultative selling because it just makes it that much easier to have the conversation with the consumer.

Great. Good color. And then just a quick follow-up. Can you help us size up how much of your managed care customer base is Medicare Advantage or skewed to older demographics. And as you think about potential changes to Medicare Advantage, plan benefits, do you see any potential risk to vision coverage or customer retention within that cohort?

We don't see -- we really don't see any risk for -- in changes to Medicare Advantage as they participate in the managed care realm Medicare Advantage generally participates in managed care through a third-party TPA relationship with a managed care provider. So it's not something we, frankly, track, but the conversations that we have with our managed care partners is this is not something that we should be kind of concerned about or believe that will be a material impact to our business.

Our next question comes from the line of Matt Koranda of Roth Capital.

A lot have been asked and answered. But I wanted to hear, as it pertains to the mid-single-digit comp guide for '26, how important the continued frame assortment optimization is in that plan versus the premium lens penetration assumptions that you're making? And then did you explicitly have any tailwind baked into the comp from AI glasses, let's start there. .

Yes. So I think a couple of things to unpack there. I think, first of all, when we think about our average ticket increase through 2026, it's really going to be a healthy mix of both our frame assortment evolution and one leadership. Something to keep in mind is we're still -- we still have tailwinds coming from 2025. We started last year with about 20% of our framework, raised over $99. We ended the year with 40% or that was a phased approach throughout the year. So we'll continue to see tailwinds even in Q1 in the first half of the year from some of that evolution. At the same time, we're continuing that evolution through the rest of this year, targeting around 60% of the framework by the end of this year.

So I think we'll continue to see some tailwind on the frame side, as Alex mentioned, the simplification of our lens portfolio and some of our selling tools and techniques around simplifying the customer journey on lenses, we think will ultimately yield improvements in average ticket as well. And look, as we think about the kind of AI impact and smart glass impact to our comp, we couldn't be more excited about the acceleration of that product category. At the same time, it's in 200 stores today, and it doesn't represent a material impact to the business, but we are super excited about its contributions over time. And it's likely a multiyear journey where that becomes and that's a material impact to our comp.

Okay. And then on AI glasses, what you're seeing in terms of prescription lens attach rates. I know you guys are very different than some of the traditional venues in which the meta product is sold. -- which is more Sun related. So are you seeing higher rates of prescription lens attach rates? And how do you think about premium lens attach rates to AI glasses as you kind of move forward with the strategy?

Matt, it's a really, really good question. And actually, one of the reasons we are most bullish on this technology is that, in fact, we are seeing a very high degree of premium lens attachment with the meta smartware glasses that we're selling. So the vast majority of what we're selling is coming with a prescription lens and the vast majority of those lens sales are coming with the attachment of premium lens additions and lens products. So again, the overall package purchase of the Meta AI -- Meta AI transaction is among the highest value transactions that we're seeing, and it is significantly and in part related to what we're seeing from a lens attachment perspective. .

Our next question comes from the line of Simeon Gutman of Morgan Stanley.

This is Lauren Ng on for Simeon. Just first, really quickly, curious on the managed pay versus self-pay consumer in '26 as it relates to your 3 to 6 comp, can you elaborate more on the comp expectations for managed care versus self-pay at the low end versus the high end of the guide?

Yes. Our planning scenario is assumed at the high end that we can see a positive comp across both kind of consumer cohorts. Again, we're seeing what we saw in 2025 that our self-pay consumers, we're leaning into some of our more premium assortments, actually at a faster clip than even some of our managed care consumers. That being said, when you think at the low end of our range, we are assuming our scenarios assume negative traffic, we're likely to come out of the self-pay cohort.

But again, that's to unpack that a little bit further, we're trying to drive the right traffic within the business. So when we think about our guide from 3 to 6, we're still anticipating and feel confident that we're going to drive the right traffic with our 3 customer cohorts that we're targeting even at the low end of the range. But kind of at that point, you're still potentially in the negative -- negative traffic comp for self-pay consumer.

Okay. Great. And then you also previously shared expectations for managed care to reach around 50% of revenues. And today, you showed it's around 42%. So it's 50% still the right goal? And if so, what is your line of sight to achieving that 50%?

Yes, we still feel great about 50% being the North Star on our managed care business. The exciting thing about seeing our number grow from last year to this year to 42% excuse me, is we're comping on a base where both self-pay and managed care are growing. So in order to manage care to hit to that 50%, we expect to see disproportionate growth in there, but we still feel great about 50% being north star. We still look at a multiyear journey to get there. But all the strategies we discussed at Investor Day, I think are specifically targeted exactly that, and all the proof points has far been very positive.

I would now like to turn the conference back to Alex Wilkes for closing remarks. Sir?

Thank you for your questions today. Let me just wrap with this. To my National Vision teammates listening to the call today, thank you for your dedication in 2025. It was a remarkable year into the 14,000 people who contributed to this. Thank you on behalf of the leadership team for a remarkable performance, and I can't wait to see what we do in 2026. Thank you, guys.

This concludes today's conference call. Thank you for participating. You may now disconnect.

Hi, everyone. I'm Simeon Gutman, Morgan Stanley's hardline, broadline and food retail analyst. It is my pleasure to welcome back. National Vision to this conference, represented by Alex Wilkes, CEO and Chris Laden, CFO. I am going to read disclosures, make a quick intro, ask the first question and sit down.

For important disclosures, please see the Morgan Stanley research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative.

Make a fun intro because AI has stolen a lot of thunder away from the retail industry. We're looking for change stories -- step-change stories. And here's one in National Vision with a story of innovation, price point customer and wholesale change. And it's an exciting moment for this company under Alex's leadership. We've maybe seeing Phase 1, we'll talk about what phase we're in and more to go.

So it's an exciting story. We've been multi rated on this stock at the moment, equal-weight, regrettably missing the last moment of inflection and hoping to catch the next one.

So the first question for you, Alex, since joining National Vision in 2024 and recently becoming CEO in August. What's your assessment of the business? And what changes have you observed or made actually since you first joined? And what are the biggest opportunities for growth?

Great. Thanks so much. And Simeon, thank you for hosting us here. So I joined National Vision Summer of '24. And I came in lucky enough with a bit of inside baseball knowledge of the company. I spent 12 years at EssilorLuxottica in different positions, I worked in strategy for a bit, and then spent 6 years running Pearle Vision. So I knew National Vision as a bit of a competitor but also as a wholesale customer EssilorLuxottica. And I spent 2 years at Cooper Companies, where National Vision was 1 of my biggest customers from the contact lens perspective. So I knew a lot about the company and the history of the company. And frankly, where some of the opportunity was.

So when I joined in '24, it was with a playbook in mind. I saw a company that had been historically a very successful analog rigid replicator of a business model, and it worked really, really well for 20 or so years until the consumer started to evolve until more of the mix became Managed Vision Care and more of the mix of the consumer mix actually wanted a bit more of a higher-end experience and higher end product experience.

And a quick little funny story. When I was at CooperVision, I could see what we were selling out at [ NV EYE ], and I had a little bit of an insight that said, "Wow, we're actually selling more expensive, better premium contact lenses than they would have ever even anticipated. So that even told me a little bit about the consumer before I joined the company. And joining National Vision in summer of last year, 1 of the first things we did is we did a retrospective look at our entire consumer base. And the most significant insight that we came away with from that work, was that our customer was wealthier than we ever anticipated or knew that we actually over-indexed on middle-income consumers versus even the U.S. norm and that our customer wasn't frankly, the cash strapped consumer that we had historically built this model that we've built this model again.

So in fairly rapid order, we started to put in some changes to the assortment, some of the changes to our pricing strategy and then started down the path of some longer-tail initiatives around changing our brand, our brand architecture, our messaging to the consumer and some of those things took some time. They went live in summer of '25. I'd say that in terms of the question or your introduction, we are just kind of closing out chapter 1.

We have made some early mechanical changes to the business around price, around assortment, around kind of brand strategy. And then as we move into the next phases, it's around further fine-tuning our assortment, introducing more lenses in particular that customers are looking for. Deploying our brand content differently than what we've done in the past and spending a bit more time thinking about how do we deploy messaging to the consumer segments that we're targeting.

And overall, just pushing the business along that continuum. So in early innings, I could not be happier with how the team has executed on the transformation playbook. I tell these guys -- and you just get Chris and I today, but we have a management team that is -- really bought into what we're doing. And I can't tell you what pleasure it gives me when we drop off of an earnings call and we walk out of the investor our Investor/Analyst Day, and I can look at the team and say, "Hey, you guys did this," and as a team, we're bringing this transformation to life. So long story short, I think we're in early innings.

We've made some really good smart mechanical changes, they've pulled through the way we hoped they would, and we have lots more runway as we look into the next few years.

And as a follow-up, would you say it's wholesale change to this business model. And having followed the company since it's been public, was a cost issue that needed to be dealt with? Or was there is this opportunity more on the marketing, where you realized you were talking to a wealthier customer in the first place?

Yes, it's a bit of both, and I'll turn it to Chris for the cost issue because we spent a lot of time and effort on cost throughout '25, that's going to manifest in '26 and beyond. There was a certainly an opportunity to transform the commercial model of the company.

Actually, one of the things I was most pleased by is our stores are in fantastic shape. Our real estate positioning is actually better than what people think, given our historic target, right? It's interesting, the vast majority of our stores or power regional -- power centers anchored by T.J.Maxx, anchored by Targets. So we have good real estate. Our stores are clean.

Our doctor experience is fantastic. We're the only nationwide chain that offers digital retinal imaging at scale. I mean that's a really advanced technology in the space of eye care. So we have great positioning, great real estate, but the commercial model needed to be evolved. So and that's where we spent a lot of this first year focused on. And Chris, one -- procurement is one of the functions under Chris' domain. And the team has really attacked all areas of indirect spend in '25. So you got anything to share there.

On the commercial side, I tend to oversimplify it and say, we are doing a much better job of meeting our existing customers where they're at, right? Our message of value that we were shouting was attracting folks of all income demographics and managed care consumers, cash pay consumers. But we weren't providing them with the optimal experience and products and merchandising that they wanted consistently, and that's part of the early phases of the transformation journey that we're on.

I think from a cost perspective, look, we -- I took the opportunity to work with Alex at ProVision years and years ago. He gave me a call earlier this year, I joined -- the last day of March, and -- it was a pretty clear conversation of, I think Chris, we're operating at a 3.5% adjusted operating margin. You know what's possible in this category, and let's get at it. So we very quickly kind of launched a full view of cost.

We've brought in some partners with Accenture to say, hey, how do we get a turnkey procurement operation up and running in a week, 2 weeks and start to interrogate every line of cost across the business. And we are thrilled with the results. We announced at our Investor Day that we've identified -- we took out about $12 million of cost this year. We identified another $20 million of cost to come out between 2026 and 2027. And going back to Alex's point on the team, right? The entire leadership team is leaning into this concept of being very disciplined from a cost optimization perspective so one of the exercises that we went through over the last 60 days was a I'm not sure if I'm the most beloved member of the leadership team, but as we talked about our budgeting process, we did budget at a tops-down perspective.

We had leaders come in and justify every line item with every vendor that they're planning on spending investments with in 2026, and answering the question of how does this help drive 1 of the top 5 initiatives that we're focused on in the year, and it created some really great conversations, we pulled some cost out of the business that way. We also identified areas we had to invest more into this conversation. So it's been a really healthy dialogue again. I don't think I'm getting a lot of holiday cards.

Well, Chris -- so in terms of interrogating all indirect spend, like the spectrum range from renegotiating our 8-digit logistics and shipping contract to why are we paying for vending machines, why are we paying 6 figures for vending machines in our home offices when Chris can give his credit card to an admin to just go stack a fridge with sodas and it costs a fraction of that. And by the way, I'm not being funny or facetious, those are real conversations that we had in terms of interrogating every aspect of cost from largest down to that like $100,000 level this year.

Sneak peek because you mentioned it, Chris, in your answer that Alex called you and said, this is not a 3.5% EBIT margin business. I know what goals you have in the future but what would be that industry retail clearing margin for a business like this?

Look, when we IPO-ed, we were at high single-digit, low double-digit operating margin percentages. We've committed that for the next 5 years, we think we can expand margins between 50 and 150 basis points. And if we pulled that off for 5 years in a row, you get right back to where we IPO-ed, if not better. And I think that's -- I think it's a better indication of where we think category averages can be.

Thanks for this sneak peek, market share, you're 3%-ish in a USD 70 billion optical. How high is high? Because now you're redefining what this model looks like and who you can sell to?

Yes. I mean based on that number, right? I mean, if we grow -- if we grow market share just basis points, it's significant to our business. We do think that we are positioned to gain share from a very fragmented market. Over 50% of the optical retail market is still dominated by independents. They're being consolidated by private equity roll-ups, and losing a little -- some of them are losing some of the magic that was associated with this notion of independent optometry.

So we think that, that's a significant channel for growth for us that, frankly, some of those consolidators are walking away from that volume. So significant opportunity for us to grow within that segment. But again, that's, I think, the luxury of where we find ourselves in a highly fragmented business that is largely predicated on winning consumers at point of need, winning consumers that change their -- as their managed vision care benefits kind of change and evolve and we're well positioned with our offering to do that.

The independent has long been this opportunity -- is there anything structural about the way that some of the groups or franchise groups have organized to keep those businesses healthier, groom together, buying better?

So one of the things that they've done well, and we haven't is by virtue of their business, they are more regionalized, localized and segmented to the consumers that they serve. And because we've been this analog rigid replicator, we would have the same products, the same assortment, the same lenses in a store base, like pick my former home city of Cincinnati, like you walk in a Hyde Parks, in some of the Hyde Park store, super high income demographic location and you walk into Price Hill, and it's the same product, the same service, the same assortment, right?

So you're not optimizing for the consumer in our current world. And the independence by virtue of who they are, they've done that, right, because they figured out who their customer is. So I think the only structural changes that we have to make are around as we begin to be to be more segmented as a retail store base.

Health of the consumer back-ended way of asking [ health of ] the business and then expectation over 12 months?

So what we saw through Q3 was -- even the cash-pay consumer who over the last couple of years, we've publicly acknowledged has been not quite as resilient as the managed care consumer. We've seen the cash pay consumer purchase cycle start to move back in the right direction, still not where it was pre-COVID and we've seen the cash pay consumer on a cohort basis, comp positively as they're even opting into more -- some of the more higher-end product offering. So we think those are all really, really good signs and that's at least what we showed through Q3.

Growth vectors, which you introduced at Analyst Day. Can you identify and then rank order?

Yes. So at our Investor Day, we shared that we have 4 significant growth vectors, underdeveloped customer segments, underdeveloped product segments, increases to the customer experience in store and through an omnichannel perspective and growing our physical store count footprint. To provide just some degree of scale, on the consumer side, the outside or ex customer, that's a customer that gets a prescription from an independent doctor or a different retail chain, that's somewhere around -- about half of the market are prescriptions filled from somewhere that are generated others. It's in the teens for us.

So we think that's a significant opportunity for us, especially since we are an obvious destination for value, and we know that the #1 and #2 reasons people don't buy at point of prescription is either my prescription didn't change or you're too expensive.

Well, we have the solution for #2. But a bit of the -- I think the unintended consequence of our business historically because we've always marketed 2 pair of eyewear for x price with an exam, there's this association that consumers believe they have to get an exam with us even if they have an exam from an outside doctor. So we think there's significant opportunity with this outside our ex customer.

Managed care, about 40% of our mix today. We think we can reach 50% over the next over the next several years and progressive wearers, those who were multifocal lenses, we're in the 20-ish-percent range, and the market is significantly higher than that. So we just haven't have the right products, the right messaging and our historic approach to one-size-fits-all marketing hasn't allowed us to target those consumers, right?

We would spend a bunch of money on TV, that says 2 pair of eyewear for x price and an exam, and we'd spend a bunch of money buying search terms like eye exam near me in America's Best location close by, but we weren't doing anything mid-funnel to specifically attract those very, very valuable customers.

So in our -- from our perspective, expanding addressable market with those customers is point 1, and the highest kind of rank order opportunity. Two, around products, we lagged the category in almost every aspect of premium lens products that exists. We under-indexed -- I kind of like to joke that if it wasn't for us, the plastic lens market would no longer exist because we are the most predominant buyer of plastic lenses, whereas the rest of the market has shifted to polycarbonate, higher scratch resistant, more dense, higher index, thinner lenses. So we have significant opportunity to move our product, our lens mix from these kind of old plastic, old technology lenses to higher index, lighter, harder, more scratch-resistent lenses.

Antireflective coatings that just don't provide the better cosmesis for the lens. They also provide higher durability and scratch resistance. We are significantly under indexed by a factor of 1 to 2 to 1 to 3, where the market is on that as an addition. And frankly, it is a product that once customers get it, they never buy glasses without it again but historically hasn't been a focus for us. So we are leaning into some of the advanced materials, advanced coatings.

From in-store experience and omnichannel experience perspective, we booked over 3.5 million eye exams a year on americasbest.com, we are running on a e-commerce platform that is probably older than most people's cars in this room today. And in '26, we're migrating our e-com platform to the Adobe Experience platform to provide better flexibility, higher integration with our CRM and then ultimately a more joyful online experience to those 3.5 million customers that just book eye exams with us there. So great opportunity not just to get better pull-through from exam book to people showing up in stores but also opening up the opportunity for us to transact online in ways that we haven't in the past.

And from a store growth perspective, we have made a deliberate decision to take '26 and '27. Historically, we've been a grower of 60 to 70 stores per year. We've -- we're pulling that down for '26 and '27 to let us give us time to reinvest into some of these first 3 kind of pillars around products and segments and unified experience.

Let's just shift some of the investment into those 3. And then we'll look to reaccelerate our store growth in '28 back to more historic norms. It also gives us a minute to take a beat and think about our store design, which we're currently interrogating.

We have a design agency who's helping us design our store of the future that could fit in a [ 2,400 ] to 3,000 square foot box, where we've historically looked for real estate that was more in the 3,500 to 4,500 square feet. So that's the kind of rank order of those 4 and a little bit more texture and color on how we're thinking about each of those.

Do these accumulate, do you flip the switch and these things are all on and there's initiatives going or do these build over time?

Yes. So there's initiatives going on against all 4. I think the interesting and frankly, the fun part is there's a lot of interplay between them, right? So as we do a better job of marketing to an attractive managed care consumers, those are consumers that on average are going to demand, more premium frames, their benefits might give them better access and better discounts against more premium lenses.

So when you think about our underdevelopment product categories, right, that's naturally going to help us as we elevate our kind of consumer cohort. It has a natural elevation of average ticket because there's -- they're going to have a separate set of expectations.

So as you pull the lever on one, in most cases, you're actually helping elevate vector 2 or vector 3 along the way. But we've got initiatives laid out for, frankly, over the next 5 years. And then a large part of the debate we have internally is we've got the playbook. We've got the road map. It's how fast do we pull these levers to make sure that we are not overwhelming the consumer with the degree of change, we're not overwhelming store or 13,000 store associates with the degree of change and making sure that we're investing in a disciplined way where we continue to be disciplined at home office cost and not necessarily need to go and ramp incremental head count there and delever SG&A as we think about driving some of these growth vectors.

So it's a very fun equation that we work to solve on a daily basis, but we feel really confident that those things within our control are going very well.

Yes. I was going to ask if it's a fair question, like how do you know if you're going too fast. And then it would strike me that maybe to get that customer who's willing to spend more, yes, some of it overlaps with your current mix but also marketing to get the customer who may not have been visiting your store beforehand?

Yes. I mean at the most macro level, what Chris and I talk a lot about is that historically, we've pointed 100% of our organizational resources at attracting that cash pay consumer with our base offer. And now we're taking a more deliberate segmented approach and say, we're not -- we're still going to spend on attracting that customer. But it's going to be more proportional against those other consumers that we need to win because, again, as we shared a few weeks ago, the managed care outside or ex progressive customer they're not percentage points more valuable.

There are multiple times more valuable from a per patient profitability perspective within our business which again is why when we've talked about this notion of traffic within our business, we're more concerned with are we adequately shifting the mix to maximize our profit profile versus, I think, the historical approach, which was just so laser-focused on drive as many people into the stores as possible regardless of what their contribution was from a profit perspective per encounter.

So it's a mindset change within the organization to say look, we need to be sure we're growing our profitability. Like Chris and I talk about this a lot, growing our profitability like 50 to 150 basis points per year over this next 5-year time horizon, that is our #1 objective. And everything kind of builds from that, including how we're thinking about the deliberate evolution of our customer mix and some of the implications that, that might have on seeing less of the cash-pay offer customers that we've traditionally spent 100% of our resource on and we might not proportionally get as many of the higher-volume consumers, but if it's stacking to the profit accretion, then it's a very, very positive outcome for the company.

The path to move managed care from 40% to 50%, does that mean you have to get into more VSPs or you're maxed out?

No. I think what it means is we have to serve those customers better. The managed care customer, we've made great strides to evolve our assortment, but we're just at the kind of parity point in terms of frames that would appeal to the managed care customer. In today's world, we don't offer a tier 4 Progressive Lens to the managed care customers. So if a managed care customer wants to come into our stores today and actually get the maximized benefit for a Progressive Lens.

We don't have a product in our assortment today that allows them to do that. We will be offering a product that allows them to do that. So a bit of what is our constraint has been, not having the products, services and solutions for that managed care customer that helps them actually get the maximum value out of the premium that they pay on their paycheck every cycle.

You mentioned the profitability of managed care, if I caught that right, was great. I think if I understood the mix right, was that because of the amount that they're allowed to spend within their plan?

Yes. I think the way to think about it, for those of you that have vision care insurance, right, you're probably seeing a withdrawal every 2 weeks out of your paycheck. A lot of our consumers think about that is that -- some folks do this as insurance product, some folks do this as prepaid. Like I've already spent $100, $150, $200 out of my paycheck. I want to go leverage that benefit. So they walk in, making sure we're speaking that same language and going, look, you've got a frame benefit of $150.

By the way, you funded that. So here's the selection if you want to maximize your benefits of what's available to you and making sure we have the right product and appeals both from a branding, fashion colors, et cetera. And on the lens side, I think where we've got a great area of opportunity and just to really scratch the surface on this, which is, hey, your benefit also includes either discounting or access to more premium lens options that previously we may not have highlighted as well, right? Again, going back to the fact that we're not meeting our existing consumer base where they're at. We're not best serving them in the ways that we know that we could.

And so that's not just a matter of shouting at 13,000 store associates to do better, right? We've got a great trained disciplined staff. It's how do you equip them with the knowledge of the training and frankly, the tools and technology to make that conversation easier. And we spoke a little bit at our Investor Day about iPad-based digital platform as kind of a sales support tool or if you're trying to verbalize the benefits, for example, of a tier 4 premium Progressive Lens, a picture is worth a thousand words, right? So me trying to articulate that in words versus saying, hey, as a quick example, left side of the screen shows you, what a standard progressive lens looks like on the right side is a more advanced progressive lens and kind of bringing the use cases of you've tried to walking down stairs with your current -- notes are fuzzy., it feels a little -- walk like -- this helps kind of reduce some of that impact of having Progressive Lens and folks go, oh, now that I can see that benefit while you're talking, that seems maybe like a more obvious choice if it's the right thing for that patient. So I think it's a matter of just -- it's kind of evolving to Alex's point, the product selection and the sales processes that can just better serve the folks walking through the door.

Did you mention the percentage of the industry that's attaching the higher premium lenses and your penetration? And then what could it do from a ticket perspective?

Yes. So across the different like piece components of premium progressive lenses and a reflective transitions, I'd say as a combined cohort, we under-index somewhere between 1.5 to 3 in terms of how significantly we're under-indexed on those product categories. We did share that moving all 3 of those by 1%, each of them by 1% is worth about $40 million to us every year. I mean that's the degree of sensitivity that just a small -- relatively small movement in these metrics will have to our to our business.

And for context, we'll do just under $2 billion in top line this year. So that's about a 2% comp.

Yes. So the next question is getting to this high single-digit annual net revenue growth, some of it is store growth. But it feels like there's more than enough building blocks to get there?

There are. And I think some of the questions we've got most frequently are about the retail calendar, the folks in this room know the most fun part of the job is talking about a 53-week versus a 52-week calendar. So as we -- as you kind of laid out our long-term regressions at Investor Day and said, look, we've we're confident we're going to deliver high single-digit revenue growth, mid-single-digit comps and 50 to 150 basis points of operating margin per year. We generally think in long-term cycles of that is like-for-like 52 -- versus 52-week calendar. But to your point about some of the momentum we have, like the upper end of our planning scenarios for '26.

We think we can grow to that point even comparing against the 53-week year in the prior year, which is around a 2% incremental revenue. So yes, the building blocks are there, again, the playbook is well laid out. It's really a question of how fast can we move and bring the market, the consumer base and the stores along the journey, and thus far, frankly, they've -- all of the above have exceeded our expectations. It's one of the reasons we kicked off this year with our initial guide.

We pretty quickly increased in each quarter, our expectations because frankly, the consumers and our field teams were really excited about some of the changes we were making, and we saw that come through our comps much earlier in the year than our initial projection. So it's exciting.

Remote hybrid exams. I think it's like the metaverse? Is it going to happen? How are we going to go there?

We are going there. I mean we have over 730 of our doors are enabled with remote today. We are -- we have trained about 100 of our doctors in hybrid, which -- remote is where you have a doctor who's sitting at home or in a remote location, providing eye care in the store.

Hybrid is where we have in-store doctor through our remote platform providing care to a patient that's sitting in a different store. We are treading very carefully into that area. It's big change management endeavor, right? Because look, the reality is for doctors who see 3 hours, 3 patients, 4 patients per hour for 3 hours to look at that hour on their book and say, oh, that's nice. I got a little breather here. I only have 1 patient during that hour, that's my time to take a beat.

The expectation in a pure hybrid world is that you would then say, oh, okay, I have some excess capacity, let me log on and provide care to a store that might need this capacity.

So we're being really, really mindful of the doctor's wellbeing their kind of approach to patient care. So this entry into hybrid so far has been 1 of -- how do we get feedback from doctors and how they want to practice because ultimately, we want to do it to get -- sure, we want to get leverage in our -- out of our doctor expenditure, but we also want to continue to be an obvious destination to attract optometrists.

We're proud that we attract over 10% of the graduating class. We're proud to pay doctors a fantastic salary and benefits to be affiliated with National Vision. So when we think about hybrid, we want to make sure that we are not doing anything that creates risk to our value proposition to attract doctors into our mode of practice.

And I think we're around 10% of our annual exams today are delivered through remote care. So in terms of, hey, are we going to get there? Like we're really happy with kind of the level to which our -- we've incorporated this into our operating model and it's part of our kind of new store build out.

It is assumed in states where remote care is allowed to be delivered that is part of the store build-out model. It's kind of assumed part of the -- you've heard us talk a little bit less in earnings calls because it went from, call it, a project that we were investing a lot of dollars into. This is just who we are today. Like National Vision is a brand and America's Best is a brand that can deliver remote care in the states that allow it.

Speaking of doctors as an aside, you're gearing the model now to deal with future inflation. But post-COVID felt like there was rampant inflation, and a lot of choice for the doctors where they wanted to work and felt like there was -- they got what they wanted for some time. A few industries went through that. You talk about the curve.

Yes. So well, I think from '22 through '24. National Vision did an exceptional job of sharpening the value proposition for doctors from both an acquisition and a retention perspective. We know some of our competitors have had challenges on both those topics of acquisition and retention.

I'm proud that on our weekly management meeting, we have a the 40-page deck and the last page in that deck is doctor recruiting and retention, and we spend 30 seconds on it. That's the state that we are in today but it really came after a lot of hard work around what role does remote play, what role does salary and benefits play?

What role does flexibility play because we do allow doctors to have a bit of that kind of choose your own adventure of when you want to work that best kind of aligns to your personal commitments as well. So I think all of those things have strengthened our positioning. So from a from a retention and recruitment perspective, I think our execution has been almost flawless.

Maybe to 1 last one to close on somewhere where we started 50 to 100 basis points of margin expansion through 2030. What gives you the confidence? And then can you frame the risk to getting there?

Yes, absolutely. I think if we look just from a purely cost optimization perspective, right, we took $12 million this year. We've got identified $10 million of SG&A out '26 and an incremental $10 million in '27. So the team has been very disciplined in terms of looking not just at what can we deliver for today but what are the structural changes we can make to our operating model, both at the home office and the stores that can deliver long-term cost out of the business.

And then like Alex said, as we as we begin to better serve and better target more profitable customer cohorts. From a gross margin perspective, we may be neutral because some of these customers as they buy more premium products, the gross margin rates might be slightly accretive, slightly dilutive, but what's important is they're delivering more gross margin dollars, and we don't need to invest anything else in SG&A to let those dollars flow through to the bottom line.

So I think our confidence is looking at the next 5 years and saying, we can see a high degree of SG&A leverage as we modernize our product assortment as we better serve our new customer cohorts as we really lean into all 4 of our growth vectors, every single 1 of them points to a higher degree of operating margin, including our new store growth and typically, you'll see obviously a payback period on those where they're unprofitable for a period of time.

But as we -- as Alex mentioned, we're looking at new store segmentation, looking at a different footprint, our new brand assets are much more modern than previous from America's Best. Like these are all -- these are all puzzle pieces that as we assemble them and begin to get more data around what the new store design looks like, they should yield an answer which is a faster payback and a more profitable store footprint.

To follow up to that, if gross is flat, than the governor on the 50 to 100, it's either rate of sales growth, what you reinvest into or what -- how quick you take out sales growth is typically the most variable and incremental. But on the other 2, is that the right way to think about it?

It is. And I think one of the reasons why we're being very disciplined about our investments, as Alex said, right, we pulled back on new store growth this year to around 30-ish locations. Next year, we're projecting the same, right? We're redeploying those capital dollars back capital and operating expenditure dollars back in, the things we know, the infrastructure we know we need to build to be successful for the next 5 years.

So Alex mentioned the Adobe CRM platform, some of the new e-com platform that we'll be -- are investing in and we'll be continuing to invest in. We launched a new ERP in April, that's unlocking some internal capabilities and efficiencies, these are great platforms. They also require a higher standard of operating investment on an ongoing basis. So as we look at the year, next year and as we're engaging when to pull those levers. If we have a quarter or we're projecting for the rest of the year to overdeliver in terms of our initial comp expectations, we might also then look and say, well, what do we need to do to make sure we're set up for success in the future and choose to invest more in some of these initiatives where we can kind of pull forward or push back the things that are I'll say, discretionary in terms of do we kick it off this quarter, next quarter, knowing that over the next 5 years, all of these things have to come to fruition.

Great. On that note, we appreciate you being here. Good luck for the rest of this year and into until 2030.

Exactly. Great.

Thank you very much. Thanks for making the time.

Well, good morning, everyone. Thank you so much for joining us today. We are thrilled that you were able to be here both in person and on our live webcast. We have quite a full day for you that we hope you'll get a lot out of. Before we begin, if you would please silence your cell phones, take a minute to do that.

We are so glad that you could join us. We have a lot of items to go over first, such as our forward-looking statements here available for your reference on Slide 3. And we will have an agenda here of presenters. At 11:30, we have a 15-minute break. After that, you'll come back in. We'll have our panel discussion, financial overview and then closing remarks and Q&A at the end of our presentation. Once the webcast is done, we will have a lunch and management mingle at the very end.

And with that, we couldn't be more excited to share with you the transformation we have underway. And here is a quick video highlighting.

[Presentation]

And with that, it is my pleasure to welcome Alex Wilkes, CEO of National Vision.

Thank you. Thanks, Tamara. And first and foremost, thanks for everyone for joining us this morning. We actually do have a fantastic story to share. I joined National Vision summer of last year. And when I was going through the recruiting process with the Board and with Reade, I came into the company and I said, look, there's a lot of stuff that needs to evolve in this organization. And here's the playbook that I see we need to execute in order to get back to where this company once was.

And these are the things that need to occur. And I got a resounding endorsement from the Board, from the management team, and we've been on the path of executing that plan for the last 15 months. However, there's an interesting thing in this story. Reade is such a cultural phenomenon within the company. And it's hard to describe it. But he literally will high five every doctor, every store manager and the organization has a lot of love for that gentleman. So Reade, thank you for being the cultural champion that you have been.

This transformation that we get to talk about would not be possible without you laying the groundwork and making the organization feel great about we're up to. So 1 million thanks. All right. So I had this opportunity to join the company with really a playbook in mind of what needed to occur. And what I hope you take away from today is we are executing that playbook. We're boldly reinventing national vision. We're modernizing almost every single aspect of the company and how we approach the consumer and how we think about marketing and how we think about technology and how we think about our in-store experiences.

We're attacking key areas of underdevelopment, and you're going to hear a lot about that today about areas of underdeveloped products, underdeveloped consumer segments and underdeveloped experiences that we believe we have a right to win and a clear path to closing those gaps. We're leveraging a data-driven approach like never before.

We know more about our consumer today than we did last year and certainly several years ago. And that's informing a lot of the decisions that we're making around product, around marketing, around in-store experiences, around our staffing and around our doctor models. We're hyper focused on operating margin expansion. This was once a company that delivered double-digit operating margin, and we think we have a pathway to get back there. It's a hyper focus of the management team.

And over the last year, we've made significant strides in that direction. But one of the things I'm most proud of is these folks that are just sitting to my left and to my right and also some of our other team members who are here today, you'll find that we've built a world-class team. These are phenomenal leaders that you're going to get to spend a little bit more time with today and hear about their story as well.

So a lot is changing at National Vision. We're changing our strategy. We're changing our approach to the consumer. We've changed a lot of our management team members. But one thing that is not changing is our core mission, which is helping people see their best to live their best. At our core, we want to deliver exceptional experiences, exceptional value and exceptional access to care. And we do that across a network of over 1,200 locations with over 13,000 passionate team members with a phenomenal lab distribution network.

We own 4 domestic labs where we manufacture the lenses at the highest quality standards within the category. And ultimately, we deliver over 6 million eye exams per year. That is a lot of health care that we get to deliver to Americans on an annual basis. We're also one of the largest participants in the optical ecosystem. Our scale economies from a purchasing perspective means that we are either the #1 or #2 purchaser of lenses frames in the world. That gives us tremendous scale and tremendous opportunity to launch new products and go to market with new and interesting things.

But even as large as we are, we are still a small component of the overall optical retail category. We're about 3% of optical retail, and there's some big other players in the market. But the most significant owner of optical retail share to date is still the independent optometrist. Independent optometry still maintains about a 50% share of the market. So it's a highly fragmented market with an opportunity for us to take share. And it's a growing market.

Vision Council estimates that the optical retail market will be worth $85 billion by 2030. So a nice market with nice growth and really strong tailwinds. I don't know if folks in this room have kids. I have a 15-year-old, a 12-year-old and a 9-year-old. Those kids are spending a lot of time on screens. And with that time spent on screens, we're seeing prevalence of myopia nearsightedness raise. We're seeing consumers who are becoming presbyopic at an earlier age. So all of these things are consumer tailwinds that are driving more and more impact into the category.

So population is aging. Younger kids are spending more time on screens. We have demonstration of Ray-Ban Meta. So you will hopefully get a chance to experience that product, if not here today in one of our stores. Certainly, that's going to be a significant part of the category. So it's a fantastic category with great tailwinds, and we believe we have the strongest foundation to win within the market. So we're starting from a great place. We have great assets.

Sometimes you come into roles like this and you have to worry about real estate repositioning and capital structures and different asset allocation strategies. This transformation that we're driving is actually one of the commercial model of the company. And we're doing it from a strong foundation, a foundation that historically has delivered consistent and strong results. For 19 years, National Vision was a strong mid-single-digit comp performing company, and the model worked.

However, consumer preferences evolved. We saw a rise of managed care. You saw a rise of consumers who are demanding more premium products in the category, and we weren't always meeting those needs. So as a company, we're at an inflection point. We're a company that had to change our model. We had to change our approach to optical and our approach to the consumer.

So today, you're going to hear a story of bold reinvention. That's really along 3 themes: a new leadership team with fresh perspectives that's really changing how we think about the business, how we think about National Vision, how we think about the consumer and acting with a real sense of urgency to change the trajectory of the company. You'll see how we're rapidly modernizing the business, again, in almost every aspect of our business model. And you're going to see our clear growth runway on the underdeveloped products, segments and customer experiences where we have significant opportunity to grow.

So let me spend a minute on the leadership team, the folks that are seated to my left and my right. Tremendous leaders with both retail and optical experience and over half of them are new in their roles within the last 16 months. When I look at this group of leaders, my colleagues, these are folks that are sharp, driven and certainly have the right attitude and the right capabilities and the right energy to accomplish what we want to.

And by the way, I mean, these 3 guys, they go to the same barber, how lucky am I to spend time with these handsome folks. And then -- so it's funny. Actually, I'm looking at these guys like you have the marketing commercial people on the left and you have like the accountant and the technology and the lawyers on the right. They didn't even decide to sit like this, but I guess you gravitate towards your people or whatever it is, right?

So anyway, fantastic leaders I couldn't be more thrilled to get to work with these guys on a daily basis. And if you can't tell, we actually have a lot of fun doing what we're doing along the way. So the story of National Vision is we were an analog one-size-fits-all replicator. As a company, we had a bunch of manual processes, and they worked, but they weren't necessarily the most efficient and smartest way to go forward.

We were super focused on a price-sensitive cash pay customer. That's what this company was actually founded and based on. We had a one-size-fits-all approach to marketing. I think some of you have heard me say this in the past. We bought a bunch of linear, we bought a bunch of search, and we put the same message out in those channels. We had an outdated digital experience.

And for a company that captures almost 3.5 million people online every year that book their eye exams on americasbest.com, what I said before is booking an eye exam at americasbest.com was less committed than making a dinner reservation on OpenTable. So we have the opportunity to create a more joyful, better online experience for those consumers who not only book appointments, but also want to shop online. And we had a very functional but limited product assortment.

Our assortment was geared towards that cash pay consumer, and we always worked to keep those prices incredibly, incredibly low. But as we evolve, we're becoming more data-driven. We're becoming a more dynamic company. We have an expanded view of the customer that we're going to share a lot more about today and specifically, our -- not just our historic consumer, but also the consumer that we're working to attract and retain go forward. We're moving to a dynamic marketing organization, powered by world-class CRM capabilities and a new approach to creative and media.

We're working on an e-commerce transformation to update our e-com capabilities, to make our online experience more joyful. As the #1 entry point to our brand, our consumers deserve to have a fantastic online experience with us. And last but certainly not least, we're taking a much, much more sophisticated approach to pricing and assortment than what we've ever done in the past.

And those early actions that we've taken on price and assortment have a long runway. And as I'll share here in a little bit, we think substantial more opportunity. So as we've developed a strategic framework that's guiding our work, that's guiding our prioritization. And we really think about this in terms of 4 vectors to grow the company. The first is around underdeveloped consumers, the managed care customer, the progressive wear and the outside Rx consumer.

Underdeveloped products. We are underdeveloped in almost every aspect of premiumization within the optical category, lens coatings, transitions, progressive lenses and more premium frames. We have the ability to enhance the customer experience through segmentation, by creating more joyful in-store and online experiences and by doing a better job of integrating e-commerce and CRM so that we have one single view of the customer.

And even with 1,200 points of distribution, we have significant opportunity for new store growth and white space. And we certainly have opportunity for cost optimization. Chris Laden, our CFO, is going to spend a bit more time diving deep into specifically our point of view on costs and where we have opportunity in the specific areas that we have attacked this year and that are going to bear fruit in the future years.

Okay. The following 3 slides might be the most important takeaways for this group today. Our opportunity to drive value comes from really 2 significant places, where we are underdeveloped on consumer type and where we're underdeveloped on products. We significantly under-index the market on managed care consumers. And it's about 40% of our mix today. The category sits at 70%. The outside Rx customer, that's the customer that gets their prescription from an outside doctor and then has that prescription filled within a specific retail location. That business is in the teens for us. It's about 50% of the optical retail category.

And progressive wares, we've made some traction there. It's about in the 20 percent of our mix, but the category sits closer to 40. So there's a lot of room for us to go with these very valuable segments. And on underdeveloped products, antireflective coatings, transitions, advanced materials, we under-index significantly in all 3 of those.

One of my favorite fun facts is that if we increase penetration 1% across all 3 of those elements, we would generate $40 million of incremental revenue for the company. And given the size of our under development, we actually think that is substantial low-hanging fruit. So let me unpack the customer mix data points a little bit because I think this could be surprising to some.

Our entry-level bundle and our self-pay customer that we spent so much of our time, energy on over the years to attract and grow is worth somewhere between 1.4% and 4% 4x less profit than some of these more valuable consumer segments that we are now seeking. And we know we have a right to win because we've already been winning with these consumer types. This is a significant opportunity.

I think if we were to take a straw pole amongst our analysts and investors and said, "Hey, do you think the progressive wear is a percent or a multiple times more valuable from a profitability standpoint?" We would probably hear somewhere in the percent range, right?

But the fact that the progressive wear is 4x more valuable from a profit perspective than our entry bundle level customer, I think that gives some really good perspective on as we think about the construct of our traffic overall, why we are so hyper focused on these 3 segments of managed care outside Rx and progressives because of the outsized profit contribution that they can have compared to who our historical target was.

And as we begin to make pricing adjustments and assortment adjustments, we have plenty of room to go versus the category from an average transaction perspective. This might also surprise you that we, with an exam, sit between 1.5 to 3x under the category from an average transaction value perspective. Our strategy isn't to close the gap in its entirety. We will maintain our position as the destination for value within the category, the obvious destination for value within the category.

But because we under-index so significantly, we do know we have room to chip away against that underdevelopment from an average revenue per customer perspective. So what you're going to hear from us throughout the day is we believe we have a right to win as an organization. We're expanding with our high-value customers that we are already gaining. It's not like we are attracting a whole new customer cohort to our stores.

We're winning with these customers today, but now we're starting to distort a bit more of our attention, our marketing power, our assortment power against serving these customers better. We have a significant opportunity in underdeveloped areas of both consumer and product. We will leverage our extensive store footprint stronger and better than what we have in the past. And as a company and our brands, we have category-leading brand awareness.

Just this third quarter with the launch of our new America's Best campaign, we actually took the #1 spot within optical retail for unaided customer awareness. And I'm super proud of the work that the marketing organization has done to capture that spot. And with one of the largest employed optometrist networks on the planet, we have a fantastic partnership and asset with our doctors to ensure we're driving consistency and quality of care to the 6 million-plus patient interactions we have on an annual basis.

And our early traction is showing and the results have already started to accumulate. Year-to-date, we've driven 120 basis points of operating margin improvement as we put this strategy into play, and our comps are back in the mid-single-digit range. Again, I couldn't be prouder of this organization and this team for what we've done so far.

So today, you're hearing the story of a bold reinvention of our company, led by the right team, and we have significant long-term opportunity for growth by serving the under-indexed consumers and by focusing on the underdeveloped product segments that historically have necessarily been a focus for the organization.

So with that, it's my great pleasure to introduce Joe VanDette, our Chief Brand and Marketing Officer, who led all of the fantastic work around both the National Vision rebrand and the America's Best branding and repositioning. So Joe, welcome.

Thanks, Alex. Hello, everyone. There I am. All right. As he said, I am Joe VanDette. I lead marketing and I also lead our go-to-market brand strategy. I joined National Vision 3.5 years ago, excited to join a successful mature organization. Reade probably sold me on the 19 years of consistent results. I'm super excited.

But where we are today is actually a marketer's dream. Why? Because we have the advantage of starting from such a strong foundation. Alex said it, #1 brand awareness in the category. I too am super proud of my team for achieving that goal. But we are enthusiastically operating with the heartbeat of a start-up company. Why? Because we have so much untapped potential and opportunity to modernize.

What we're working on right now is the most exciting thing a marketer could do, and it all begins with the customer. Importantly, and more than ever before, we are using consumer insights and data to drive our strategy. A clear picture of who our customers are ensures we delight them across this transformation. Alex did a poll. I think I'll do a poll, too. I bet if I pulled the room, you would say our consumer is or was low-income, cost conscious. That's who we targeted.

But as we have evolved, so too has our customer. We actually have a consumer base that mirrors broad U.S. demographics. If you direct your attention to the chart on the left, we actually over-index on middle-income consumers. Again, we were out there saying one message, targeting one consumer set, but what we attracted was something else. On the right-hand side, age demographics right in line with the U.S.

So they don't skew younger, older. We are right down the middle in terms of 18 to 65. This is an important unlock as we introduce more premium services and assortment, which you'll hear a little bit more about today. To be clear, this is a reset of our expectations for which consumers we can win. Our appeal is broader and stronger than ever before. That knowledge plus a clear view of those underdeveloped product segments and consumer segments gives us a real clear path forward to winning.

Customers and patients like the pragmatic buyer who appreciates value regardless of their income level, style leaders who have their own prescription in hand or want more premium products, wellness shoppers looking for great clinical experiences or have more advanced needs. We have a significant runway with all of these customer segments.

Growth will come by evolving our marketing to attract them now that we know we can win them, right? So going from an analog replicator, shouting the same message at the top of our lungs to everyone in the United States to taking that volume and that share of voice and targeting these customers more specifically is the plan. Messages that will convey the type of experiences that we are building in our stores and in our offices. And again, my colleagues will take you through some of those as we go through today's presentation.

Regardless of which brand we are talking about, there are key moments in the customer journey where we need to create experiences that matter and are tailored to winning these customer segments. These moments that matter will make the customer come back. Winning those moments that matter will make them love us. At America's Best, that could be a best-in-class clinical experience.

But at Eyeglass World, that might be a stylish pair of frames that unlocks the customer's personal style. It means delighting consumers wherever and however they choose to shop. And that means in-store or online. As Alex mentioned, we have 3.5 million visits to americasbest.com to book exams. At strong online traffic, a strong base that starts their journey with us in a digital manner.

But now we're investing in that digital experience, right, to turn those visitors into customers to engage them in between their purchase cycle and drive loyalty. We just launched a new CRM system. Our first customer journeys, specifically targeting these customer segments with messages that are meaningful to them have begun. We still have a long runway to go, but we're very proud to have done that late this summer.

Soon, we will launch a new digital experience online, connected to the CRM experience we built. Same platform, same partner, same goal to tailor our messaging to ensure consumers get what they want from us, when they want from us, where they want it. We have new partners like VML, Adobe and Accenture that are helping us along this journey. We are now operating with the most advanced technologies available with the most innovative partners in the market. But advancements in our capabilities, not enough.

We need to ensure that our brands resonate with these consumer groups and this expanded view of our customer. We are reinventing our brands to meet this moment. This summer, both the National Vision and America's Best brands were refreshed, strong signals of who we are becoming. Looking forward, Eyeglass World and Vista will undergo evolutions of their own.

Let's start by touching on our revised corporate brand. As you saw in our opening video, which always gets me hyped up and as you see around you today, this is the new national vision design. And it's announced investment outside to who we are becoming, but it's also rallying our internal teams. We are now more focused, more dynamic, sharper.

I think everyone here would agree, everyone's really rallied around this new design, and we all want the same swag that Alex is wearing today. But we didn't stop there. We did it at America's Best, too. At America's Best, we launched a new brand design and a new creative platform. And the goal was to resonate with consumers in a new, fresh and distinctive way.

This new campaign, every eye deserves better, sets us up as a champion of the consumer in our industry with real energetic people at its center. By allowing all to see themselves as America's Best consumers, we can drive more awareness, more traffic and more advocacy from those consumers regarding our brands. Let's take a look at how we got to where we got.

[Presentation]

We are just getting started. We've stayed true to our heritage. You can probably see there's a little owl in the AB. He hasn't gone away entirely, takes more of a brand guide position now as opposed to being our spokesman. We're letting people speak for our brand, people that are really enjoying their lives because of what we do for them. It has been an absolute dream to work on this rebrand. And it's a dream that I don't have to wake up from because we're going to do it again.

Next up and happening now is work on Eyeglass World's evolution. And I think Priti will talk a little bit later about some of the directions we're heading, just as Mark is going to talk a little later about the experiences we're building around every eye deserves better. As always, it will begin with our consumer as we do this work, right? And the outcomes that we are aiming to attract those additional segments and to create brand designs and marketing plans and online experiences will be based on those consumer insights.

To summarize, I hope you get a sense of the excitement I have for my job, the incredible progress we've made unlocking customer growth by understanding who they are, how we're maximizing our marketing approach, partners, technology and design to attract those segments and the incredible opportunity ahead. Next up to talk about how we are evolving our assortment to capture this expanded view of our customer is our Chief Merchandising and Managed Care Officer, Ana Moeddel.

Thanks, Joe, and thank you all for being here with us today. I am Ana Moeddel, and I lead our merchandising and managed care teams. I'm one of the newer members of the team about 2 months in, but I can honestly say this is already shaping up to be one of the most exciting chapters of my career. I have always loved how the optical industry combines innovation and purpose. And throughout my career, I've been lucky to experience both.

What drew me to NVI, however, is also the size of the opportunity. And the fact that here at NVI, we're not just talking about change. We're in it. We're doing it every day. That mix of ambition and momentum is what energizes me, and I'm really excited today to share with you how we're channeling that energy into our plans for merchandising and managed care, plans that have been built on same insights that Joe just talked about.

In my short time here at NVI, one thing became very clear very quickly. We have so much untapped potential. And that's an opportunity, an opportunity to really shape the next chapter of growth for NVI. To capture this opportunity, we'll have to pivot. We'll have to evolve our assortment mix, we'll have to strengthen our managed care capabilities. That will allow us to better align our products with our customer base while staying true to what makes us special, which is delivering great quality and accessibility at a great value.

And the best part is our teams are ready. They're energized, they're talented and already leaning into making it all happen. Let's take a quick look back before we look ahead. You've already heard from Alex and Joe that historically, we focused on one segment of customers, and we've optimized both our product and programs to that customer segment. Over time, though, due to our strong value proposition and brand recognition, we've seen the managed care customers become a much larger part of our customer base.

The challenge is that our product did not evolve at the same pace with our customer, and that is exactly where our opportunity lies. And it's time to pivot. It's time to meet this segment where they are. Serving the managed vision care customer means helping them maximize their benefits. And that means offering them more premium products that allow them to take advantage and get the best value out of the plans that they have on their managed care benefits.

The good news is our early shifts are working, and they're delivering already great results. But how big is this opportunity? Our ambition is for 50% of our revenue to come from managed vision care customer orders. Today, we're closer to 40%, which means that we have the significant runway ahead of us. And we believe we have a clear path to getting there and getting ourselves much more in line with the category.

And here's the thing. We are confident we can win with this customer segment. The industry has seen significant growth in managed care. Today, about 70% of consumers report having some sort of managed vision care benefits. That's a big market, and we are well positioned to serve it.

First, our customer-centric approach. Everything we do starts and ends with the customer. Second, our national scale. We have reach, we have consistency, and we have resources that most of our competitors cannot match. And third, our evolving product assortment. We are now aligning our product with insurance benefits so we can allow these customers to get the best value their plans allow. But how exactly will we get there?

You've heard this from both Joe and Alex and even myself. But historically, we've focused on one segment of customer, the price-sensitive cash-paying consumer. And our assortment reflected that. That focus helped us grow, but left us underdeveloped versus the category in premium or branded frames and premium lenses and contact lenses. And that stopped us from being able to capture the full potential of the ticket that we can get from this customer segment. You have heard us talk about quick wins with pricing.

But to evolve the ticket further, we really need to evolve the mix. And that will not only improve our ticket, but it will also drive traffic because we'll be offering customers what they're looking for. As end of 2024, about 20% of our frame board in our stores with frames above $99. At the end of this year, that percentage is moving to 40%. And we have room to grow it even further.

Over time, we'll become more localized. We'll be tailoring our assortment to very specific market customer needs. And last but not least, we do think there is significant opportunity in lenses and contact lenses. Now we're very much in the early stages of this evolution. Every frame on our board has a purpose, and our updated visual merchandising makes it easier for customers to find what they're looking for.

When it comes to lenses and contact lenses, we have not yet scratched the surface. But it is very clear that we're underdeveloped versus the category in both of these segments. So let's dig a little deeper into the lenses. For those of you who wear glasses, these terms may seem familiar. I will try to give a brief explanation anyway. When it comes to lenses, I'd like to highlight 3 areas of opportunities among lots of others.

First, antireflective coatings. These are glare-free coatings that allow both lux and vision to be glare-free. We are about half penetrated in this category of coatings versus the industry. Second, advanced materials. These are materials like polycarbonate and high-index plastic. They are thinner, lighter and more impact resistant. A bit better progress versus the category, but still significant opportunity to get us more in line with the category.

And third, transition lenses. These are lenses that are clear indoors, become darker when you go outside and back clear indoors. Again, we're half penetrated versus the category. These are not niche upgrades. Consumers these days expect these upgrades. They're looking for them. By offering and selling more like the category, we're really putting our customer first.

And we have significant opportunity to grow without pushing away our value-driven consumer. As we make these changes, we're being very intentional and data-driven. This past year, we've turned lots of dials and our early progress is exciting. Our conversion is healthy. Our NPS scores are rising. So our consumers are telling us that we're on the right path. And the best part is, we're just getting started.

But let me share with you a few examples of what this progress looks like in action. This past year, we focused on frames, and we've made quite a few shifts. We've launched luxury brands like Jimmy Choo and BOSS and Versace and Burberry. And the results are just after a few months, very much in line with industry expectations on these brands.

These are big milestones, and it shows us that our customers are really embracing our new offerings. We've also launched Ray-Ban Meta AI glasses, and they are overachieving our expectations. Again, significant. Our customers are responding really well to innovation. In other words, our early moves are significant telling that our customers are really, really appreciate where we're going.

We've also taken steps to modernize our pricing, starting with America's Best. That means saying goodbye to the 0.95 price points in our bundles. This may sound simple, but it's a meaningful change because cleaner around the pricing helps our customers understand our offering better, compare their options and find what they're looking for. It also creates a more modern and cohesive brand experience, reinforcing our value.

To sum this up, we have a tremendous opportunity with product, and we have the strategies, the teams and the plans in place to achieve it. Even better, our customers are telling us that we are on the right path. I truly could not be more excited about what's to come. We're at the beginning of a longer journey, but this is shaping the next chapter of growth for NVI.

Now I'd like to hand it over to Mark Banner, the President of America's Best, who is helping bring these changes to life and leading our field teams at America's Best, making sure that every customer that comes through our door receives the product, the service and the experience they've come to expect from us. Welcome, Mark.

I'd like to start off by saying that Joe and Ana are fantastic partners, and I couldn't have a better team as we go forward and work on this transformation. So my name is Mark Banner, and I am the President of America's Best. I have the privilege to lead our 10,000-plus frontline retail team members as well as the 2,400 doctors of optometry in our optometry network.

The service and customer experience that our front-line teams deliver is critical to bringing Alex's vision to life. And I got to say our frontline teams are passionate, they're mission-driven, and they're excited about the future. I've been in retail for over 30 years, beginning my career as a consultative salesperson on the sales floor and then leading successful customer experience transformations at 2 large brands.

And I got to tell you, this is one of the most exciting times in retail in the industry as well as in the optical industry. We know more about our customers than ever before. And our customers expect brands to personalize their experiences to meet their own individual needs.

And it's important as we think about leveraging the data and the advancements in technology that we're also thinking about the important human-to-human connections that we know lead to those lasting lifetime relationships. We believe in America's Best that we have the opportunity to significantly increase the lifetime value of all of our customers as we focus on delivering a world-changing experience for them.

I joined NVI about 16 months ago, just about the time that Alex did. And it was an exciting time to join because, as Alex shared, the mandate for transformation was clear. It's one thing to join a company that says they want to change. It's another thing to join a company at that critical moment where they acknowledge that not only is change necessary, but they're willing to start the change.

Joining at that critical moment between the realization of the need of transformation and the actualization of the transformation is an exciting time to join. And then over time, we put an amazing team together. This is the team that I'm excited to transform America's Best with. And we're doing it all on behalf of our customers and patients.

Here at America's Best, we believe that every eye deserves better. As you heard Joe share, this is a marketing campaign that we launched in Q3, and we're very pleased with our early consumer results. But as importantly, every eye deserves better is resonating strongly with our frontline teams on both the retail side and the clinical side. Every eye deserves better is our brand promise. It's the ethos through which we're running the business. We stand all of our decisions up against does this bring every eye deserves better to life.

And as America's Best, we are the largest brand at NVI. We're at the forefront of the transformation with over 1,050 stores, 10,000 retail team members, 2,400 affiliated doctors, and we have momentum at our back as the transformation is really getting rolling. And this all starts from our perspective with delivering an outstanding customer experience.

Without the right experience for our customers and patients, we won't be able to sell the exciting new merchandise that Ana is bringing or serve in multiple ways the customers that Joe is sending to us. So we really thought about this across 3 different dynamics. We had to get the culture right. We had to get the behaviors right, and we had to make sure that we had the right digital tools to improve the experiences.

You heard Alex share that we're moving from analog replicator to segmented digital innovator. And in America's Best, this transformation began in the back half of last year as we said we are going to move from a transactional lowest price to consultative best value. Well, why does that matter? Let me unpack a few examples that I'll talk about on some of these segments that we've been thinking about.

Because we were operations first as opposed to customer first, if a customer came into the store with an outside Rx, what we've branded as bring your own prescription, because our teams were focused on operating specifically just to get someone into a doctor examination room and then get them out and get that flow fast, our teams didn't know what to do with someone when they came in. They started with every transaction with a question, what time is your appointment? Are you here to see the doctor?

And today, we start with welcome to America's Best and the teams find out their reason for joining us and what the customers' names and individual needs are. And through that lens, we've been able to quickly, oh, you have your own prescription with you. We love to help you today, and we have lots of different styles that we think would meet your needs.

Let's talk about progressive customers or anti-glare reflective. Because we were focused on lowest price, if someone came into our stores, our teams are we're always focused on what's the absolute lowest price that we could find for you as opposed to determining what are your individual needs. And let me give you a couple of options and educate you along the journey.

Since we've begun to do that, we're seeing significant acceleration in the penetration of things like progressives and anti-glare. And that's all driven by behavior changes in our frontline teams. And then on managed vision care, again, because we were operations focused, focused on that cash pay customer, it was really hard and complex for our teams to find out what are the managed vision care plans that this particular customer might have.

So we're in pilot right now on digital tools that will make it a lot easier for us to find and match the customers' I managed vision care plan to them, allowing our teams to focus on building, again, those important human-to-human interactions. And while we're moving, we're also being very thoughtful about doing it in a sustainable manner. We have a clear North Star vision that is tightly aligned with where National Vision as a whole is going.

And it's really important to remember that America's Best remains committed to being a value player in the industry. It's important for us to remain and keep our position as both attainable and accessible for eye care and eyewear for our patients and customers. And with over 1,000 stores, you can see exceptionally executed, it's important that we're able to do this exceptionally well across all of our stores. And in order to do that, we know that we have to make it simple and easy.

And here's the great thing. We actually have heard and our data shows that, that's what our customers are looking for. Patients want a simple and easy experience. And simple and easy does not mean a low-quality eye exam. As a matter of fact, simple and easy actually gives our doctors the time to build the relationships with their patients and find out what's important to them.

And we also want our team -- entire team focused on our customers and patients' emotional reason for purchasing. And that's where the line comes in. We want to make sure that you look, see and feel your best. Look your best. Did we find the right pair of frames for you that matches your personality? And do we help guide you to that? Are we helping you see your best?

Because our doctors gave you a high-quality eye exam and the right prescription. And then our retail team members find the right lens and enhancements for you and how you live your life every day. And we know if we do that well and our customers and patients feel listened to and cared for that they will leave feeling their best.

We believe that there's not very many people in the optical industry that are focused on the emotional reasons for buying, and this is definitely a place that America's Best can win. And we have significant runway. You think about the 4 growth vectors that you've heard us talk about. We have actions underway in all 4 of these and are already beginning to see results.

So starting with underdeveloped customers. This starts with the shifting the mindsets of our teams, so they understand who's already coming into our stores and what are they interested in purchasing and then putting those behaviors that I've already unpacked a little bit in place.

And then you think about underdeveloped products. Well, as you heard Ana share, it starts with making sure that we have the right merchandise in our stores to meet the needs and expectations of the customers that are already coming in. And then step 2, we'll begin to segment our merchandising by each individual store based on the customers that they have and enhancing our customer and patient experience.

Again, everything that we're doing is focused on our customers and patients first and ensuring that our teams have the digital tools so they can spend their time building great customer relationships and spend less time doing non-value-added tasks. And of course, we view new store growth as an important driver of our short-term and our long-term growth strategy.

Now this is a lot of change. So you may ask yourself, well, how are our frontline teams doing managing this change? I've led a couple of different customer experience transformations, and I know winning the hearts and minds of the frontline is the most important part of being successful in a transformation. So what you're seeing here is we actually brought all of our frontline leaders together at the beginning of this.

And we said, "Hey, we've done things the same way a long time. We've got an exciting compelling vision for the future. How are you feeling about it?" And this is the real-time word cloud on what they said, not unexpected, things like, I'm nervous. This is some uncertainty. And so what I want you to know is that we're eyes wide open on change is not something that just happens. You've got to bring your frontline teams along.

What we started with them is saying, let's paint a compelling vision for you on where we are going. And once we did that, we had to make sure that we created the right environment and system for our teams to embrace the change. So it starts with mindset. The first thing that we did was introduce this idea of growth mindset, which I'm sure that you're all aware of. Many of our team members were living in a fixed mindset, and we had to teach them what does it mean to lead with a growth mindset.

We had to educate them on who's already coming into our stores and how do we serve them best. And then we had to think about our teams, making sure we had clear expectations of what we wanted them to do and where they were spending their time. Had you come into one of our stores a year ago, you would have seen our managers -- actually probably wouldn't have seen our managers because they would have been sitting in an office filling out checklists and sending all sorts of forms into their teams, lots of auditing.

If you came into one of our stores today, hopefully, what you'll see is you'll see our store managers out on the floor, training their team members, interacting with customers, making sure that everyone's needs are met. And then we had to put the right mechanisms in place. So for our district managers, they used to hit 3 or 4 stores a day with a checklist of things that they would fill out. Now you'll see our district managers hit 1 store a day focused on training and development with all of their team members.

We also had to think about KPIs. When I joined, we had 27 pages on our production report that our teams were held accountable for. We actually had a definition book that had to tell you what all they are. And we've simplified that to the most important 1 page worth of things that we need our teams focused on.

And then behaviors, behaviors, something that I can hear our frontline team members say or we can see them do. What are the behaviors that lead to success? One of the things that we just started putting in place last quarter that we're really excited about is the idea of a doctor to retail handoff. And so now in the past, what you would see because we were operations focused, our doctors would leave, they walk over, there was a metal file here. They would drop the patient chart in it and they would walk back and grab the next patient.

And the retail team member would walk up and they would grab it out and there was no interaction between that doctor and the patient. Well, here's the thing. The most important part in the purchase from a patient perspective is the doctor's recommendation. People want to buy what the doctors tell them they need, makes a lot of sense, right? And so we said, we got to pause and make sure that there's a clean handoff.

And so this isn't just on the retail side. This is also on the doctor side. We had to convince our doctors, which was easy to do, by the way, to say, "Hey, you're spending a lot of time with your patients, and we want them to see their best. They will purchase what you think is right for them."

By the way, our doctors aren't selling, just to be clear. They're just letting the patients know based on what I found out about you, this is the right product for you. And we're seeing tremendous success with that in a short period of time. And if you look in the center here, you'll see feedback loop. One of the ways we were able to get so much done so fast is we're listening to our frontline teams. One of my favorite sayings is that good ideas can come from anywhere and be implemented everywhere.

And so what we've done is we brought groups of store managers in, district managers in, salespeople in, doctors in. And we've asked them the most important question that any leader can ask, what can I do to make your job easier? And we heard from them all sorts of things, many of which were easy to put in place.

And by the way, most of them were aligned with providing a great customer and patient experience. And so as we were rolling these things out, you could share with our teams, hey, these are ideas that we're hearing from you. And that accelerated the speed at which our teams were willing to transform. By the way, there's all sorts of nuggets you can get out there. So we now have these voice of the field calls every month. And then once a quarter, we bring a live group in and we listen to them, right?

That also helps us understand what are best practices one place that we can implement someplace else. And as you can see, we got our group of leaders together, and we asked them the exact same question again. Again, this is real time, word bubble. We said, how are you feeling about the transformation now? And now you're seeing words like growth, evolution, opportunity, progress, innovation needed, necessary. And so our teams are excited about the future, but they're excited because we're listening to them, and they're seeing the results show up.

And that's so important as well. You can't just ask them to do something. You have to make sure it's something that's measurable and that it's in the right interest of our customers and patients. And my favorite part is our patients and customers are telling us that it's working. Our NPS scores have continually risen year-over-year.

Our NPS scores have continually risen year-over-year. And actually, this is the first month that we're comping the transformation from last year, and it's great to see that even on top of last year's great results, our customers are telling, we're getting even better.

So some of my favorite quotes here, as you'll see, the folks radiate a level of warmth and professionalism that's praiseworthy. That's that emotional connection, warmth. The staff explained progressive lens to me, and I'm finally able to see. No other eye care facility has ever done that.

Again, if you go back and you think about transactional lowest price to consultative best value. I wonder a year ago would we have heard this from our teams, right? Taking the time to explain what's the difference between a progressive lens and a standard bifocal?

As a matter of fact, we actually have Optikam over here in our AB experience. I really recommend you all go over there and see it because it does a great job of showing what this means. And then I've been coming here for a while now, and I love how they remember you and are always so helpful and friendly.

Again, one of the first things we did, and this -- it seems so simple, but it's so game changing for any type of experience is, can you get and use your customer's name? Just that one simple, let me find out your name and use it throughout the presentation builds a great connection, which, of course, leads to loyalty. And loyalty leads to more frequent purchases, which significantly drives the lifetime value of each customer that comes into one of our stores. So I love it when they talk about the fact that we are remembering them.

So actually, we're talking about this year, we put in place. We want our customers to remember -- I'm sorry, we want to remember our customers. That was a key piece. And then as we look towards next year, our rallying cry is and we want our customers to remember us as an individual and what our names are because the experience we're giving is that differentiated.

And as we look towards the future, we're excited about where we're going. We're going to continue to double down on behavior changes. So we know it's one of the simplest things that you can do. And what I love about this picture is what you're noticing, it seems like it's so simple because you've got one of our sales associates talking with one of our customers at the frame board. Why is this so game changing? Because we were operationally focused before. Had you come into one of our stores a year ago, what you would have seen is that sales associate, she probably would have been sitting at a desk and asking the customer to browse frames on their own because they were focused on doing all of the paperwork and doing the hard work to find out what's the right insurance plan.

And just standing up and saying, well, let me come over here and help guide you and find the right set of frames for you can be really, really game changing because now you're not just a place that you're pulling a piece of glasses off a wall, you actually have an expert there that's helping guide you on your journey.

And then empowering smarter associates. Again, this comes in many different places. We want to make sure that things like demonstrating merchandise or telling features and benefits, that can be done through video way more effectively than it can be done from a person having a conversation with you. Again, please check out our AB experience over here. You'll get to see the new merchandise that's out, but you'll also get to see Optikam, which is now deployed as of this month in all of our America's Best and Eyeglass World stores.

And it really does three things. Number one, it can simply and easily get to what your price should be. That allows our team members to give every customer multiple quotes. If lowest price is what's important to you, we still have that because that's who we are. But in finding the right solution for you, so you can see your best and we can meet your needs, here's what that solution is. And we're finding more and more customers are, of course, choosing the solution that allows their vision to be the best for them.

The other thing that it can do is it shows videos on what does it look like if you're wearing a progressive lens and how do you actually interact with that? What does AR, anti-reflection do for you when you're driving at night, and you can simply slide it. By the way, I encourage you to pick this up, you can see how easy it is to use yourself. You can use that yourself and our patients can see, wow, this is the experience that I'm going to get that's different. So this isn't just about an add-on to sell you more. It's you make the choice that's best for you. We just want to make sure that you're well-informed and educated on the choices that are out there for you.

And then, of course, making sure that we can take things that are operationally driven, like how do I actually match up your eye insurance? What you find is that if you ask most people, man on the street, they know what their health insurance is, but almost everyone's eye insurance is through a different provider. And very few people when they come in, actually know who their eye insurance provider is to their managed vision care provider is. So having a quick and easy way for our teams to look that up, again, frees up their time to focus on building those important relationships.

And then strengthening our ways of working. We'll continue to be committed to investing in training with our teams. For example, next year, we'll be launching a communications platform, which will simplify our communication with the front line as well as us to measure effectively our sales tasks versus our non-selling tasks.

And then modernizing and shaping our care journey. Today, we're doing it through behaviors and digital tools, and we're loving what we're seeing. Tomorrow, as you heard Joe say, we'll have a new e-commerce platform out and we'll begin to have a stronger, more effective online presence to complement our already strong in-store presence. And in the future, we're envisioning a connected experience where customers can shop online and when they come into the store, well, I already have your 3 favorite frames pulled out for you, maybe with a couple of other recommendations. We can take what the doctor recommended for you and make sure that, that's shown to you and waiting for you when you leave the eye exam.

And we're also committed to Every Eye Deserves Better and how do we bring this to life? Like Joe shared, we launched this marketing campaign in Q3. And we've already touched every one of our 1,050-plus stores in a very cost-effective way by putting Every Eye Deserves Better into each one of our stores, things like window claims and small signages. And what we're really excited about is we've been able to bring this to life without having to undergo a massive, massive store remodel program. There are small changes we can make to bring this to life in all of our stores.

And speaking of real estate, we still view real estate as an important part of our growth future. As Chris and Alex have shared, in the short term, we expect to open around 30 stores a year, while we reinvest into high-return, high-growth initiatives, things like e-commerce and digital. And then we expect to return to our more traditional 60-plus growth pattern starting in 2028.

We also are in the middle of a new store design project with WD Partners, focused on, again, bridging clinical and digital and retail altogether, envisioning that connected commerce world of the future and making sure that we can bring to life for our teams and for our customers, Every Eye Deserves Better. We anticipate our first new store to launch in the back half of Q2 next year.

I'm excited about the future of AB and believe that the new store design we have, coupled with the tremendous opportunities for store growth, will lead to sustainable long-term growth. And now let's watch one of our new commercials focused on These Eyes and bringing Every Eye Deserves Better to life.

[Presentation]

So we love that. As Joe said, real people with real experiences. So again, here at America's Best, we believe that each and every eye deserves better. And with our frontline teams, we're challenging to bring that to life through BETTER BEGINS WITH YOU. How can you commit every day to be better on behalf of our customers and our patients.

We also know that our experience is not just a retail experience, it's also a clinical experience. And what's really important to think about is, if you think about the industry, most people, you go see a doctor in the back room and you come out and you see a retail associate in the front room.

But customers and patients, they don't actually bifurcate that in their mind. They think about it as this was a single America's Best experience.

So how can we make sure that we connect those 2 things really, really seamlessly? And that's a place that we believe America's Best has a chance to win. I would say this, you've heard the term, we're just getting started so many times.

And as I think about where America's Best is today, number one, we're early in our journey, but we love what we're seeing. Two, we're excited about the future and the possibilities that exist. And three, we have a long runway for growth, both with our existing customers as well as attracting new customers to the brand.

And right now, I'd actually like to invite Dr. Priti Patel, our former Chief Medical Officer and current Head of Emerging Brands onto the stage. And we can share with you a little bit about how we bridge the clinical and retail experience for our customers and patients.

Thank you, Mark, and thank you, doctor. All right. So I actually want to start with my journey and how I joined optometry. It was actually in the examining, seeing patients, providing the great care for patients coming in. And I quickly realized that I can make a bigger impact shaping the experience for customers and patients across the country. So the natural next step was really to join National Vision, whose sole mission was providing accessible eyewear and eye care.

So I'm really thrilled to be leading the transformation for Emerging Brands and for Eyeglass World. And I'll tell you, Mark, I personally know how important the doctor and our doctor network is in our overall experience.

Yes, for sure. And I got to tell you, Dr. Patel is an amazing, amazing partner. We worked together when she was Chief Medical Officer, and I'm just so excited that together, we lead our brands and work with customer experience again.

As Priti said, we have over 2,400 doctors in our network. And I think you've heard us share that several times. That is a key competitive advantage for National Vision. And the way we deliver care, National Vision was at the forefront of teleoptometry, ensuring that we provide access to as many patients as possible.

Yes. Through the pandemic, National Vision had a big challenge to ensure we had enough doctor capacity to meet the large patient demand coming out of the pandemic. And I'll tell you, the organization not only met that challenge, they transformed the challenge.

We launched a remote care platform that allowed optometrists to practice in their homes, how they see fit. And actually for patients, this was a huge unlock for access to care. We were able to have the patients be seen in their community and also in rural communities where there may not be optometrists already available. So I'd say, Mark, we had a win both on the doctor side and the patient side with remote.

Exactly. And members of my own family have had remote exams. It is a little different, but once you get used to it, right? And actually, if you think about it, if you're getting your eye exam, you actually have right in front of you 1 versus 2, right? You hear the doctor the same way.

And you see them.

For sure. There you go. You see them on screen. As leaders in fields that are talking to customers and patients, the most important place for us to be is actually out in our stores and out in our doctors' offices, spending time with the people that are interacting with our customers and patients every day.

And one thing that was really eye-opening to me spending time with our doctors is that our doctors provide more than just a prescription for eyeglasses. You think about -- that's the main reason that most patients come to see us. They want a prescription to buy -- purchase a pair of eyeglasses. But our doctors provide so much more than that. And it was eye-opening to me to learn that our doctors actually provide full eye health.

Yes. I mean typically, a patient comes into an Eyeglass World or America's Best to get an updated prescription. But I'll tell you, on a weekly basis, our optometrists are diagnosing only -- not only sight-threatening conditions, but life-threatening conditions such as diabetes in the eye, hypertension in the eye, even ocular tumors. And so I would say the doctors are able to provide a comprehensive exam, and the technology that we provide really helps that entire experience.

Absolutely. We've talked a lot about customer experience advancements and how we're changing this to consulting. And I got to say, that also is happening with our doctors. National Vision has always been committed to quality patient care.

The pivot we made with our frontline doctors this year was we want them to be focused on quality patient outcomes. Now if you think about it, you can't provide a quality patient outcome without delivering quality patient care. So quality patient care is still at the heart of that. But that is a transformation. Quality patient care was operationally focused. Quality patient outcome says, you need to listen to the patient, find out what is important to you -- to them, make sure that they understand the recommendation and prescription that you're giving them and make sure when they leave the office, they understand the steps they need to take so they can see their best.

And some of the quotes we've heard, because, again, we're hearing this from our patients, things like, the doctor who did my eye exam was wonderful. He explained everything about my eyesight to me that I never knew before I visited America's Best. It's not just providing the care. It's making sure that the patient understands what is being explained to them so they can action upon it after they leave.

My doctor that did my exam was the most informative doctor that I ever had. If a doctor gives a fantastic eye exam and they don't explain it to the patient, that exam is almost wasted. Versus if the doctor takes the time to explain to them what's happening in their eyes, the patient is much more likely to action on it, leading to better quality vision for them.

And my favorite here again was, the doctor was personal, kind and thorough and answered all my questions.

Doctors that build a connection with their patients make a difference in their lives. We're so proud of our doctor network and everything that they provide to our patients, and we couldn't do it without them. And we've had a lot of exciting transformation going on in the company. And Priti, I know there's a lot of transformation going on in Emerging Brands as well.

Yes, there is. Thank you, Mark, and congratulations on the outstanding work at America's Best. So, all right. So we're going to talk about Eyeglass World right now. So I'm super excited, as I said, to lead the Emerging Brands and Eyeglass World into this transformation. So I'm going to jump right in here.

So let me talk about our Emerging Brands' strategy and how we're looking at Emerging Brands. We're now pulling our Eyeglass World brand and our Vista Optical, which is Fred Meyer and Military under one umbrella. This actually allows us to focus on these brands, resource and invest strategically to allow even our smaller brands to grow.

As you heard from Joe earlier, Eyeglass World is next in our brand evolution. We've just kicked off important work around brand positioning to allow focus for the Eyeglass World brand. This not only helps us in terms of any category trends that may come up, but it also sets up the brand for long-term growth.

Since stepping into the role earlier this year, the focus has been on really strengthening the brand, and it starts with our store associates. You heard Mark talk about all of the amazing work going on at America's Best with our store associates. It's no different at Eyeglass World. We've given the teams a vision, a purpose, really energized our front lines to get behind the brand.

We've also focused on operational discipline, doubling down on retail best practices, focusing on the KPIs that matter to National Vision and more importantly, our customer.

We also made the strategic decision to transition 42% of our Eyeglass World locations to an employed OD model. And I'll tell you, we're already seeing the benefits of this decision, both from a patient experience as well as our store associates.

And then lastly, we're focusing on our demand drivers. You heard Ana and Joe talk about the amazing work that their teams are doing, both on the merchandising and marketing side, which will help our Eyeglass World continue to grow.

We recognize and I recognize that Eyeglass World is an important asset for National Vision, especially in areas like Florida, where our brand recognition is particularly strong. We've rallied the troops. We have a clear vision, as I stated, and we're already seeing positive momentum with our comp trajectory moving in the right direction. I'm incredibly proud of the team and what they've done this year.

Again, the brand will start with customer insights. That's where this all begins with data-driven insights that will help the brand in terms of growth. From that, we'll tailor our products and our experiences to really meet that brand positioning. Our goal is to launch a refreshed brand by mid-2026, which we're all very, very excited to happen.

And then finally, as we look at National Vision's 4 growth vectors, for Eyeglass World, it's very clear. It starts with our brand positioning and our messaging. Becoming more relevant in this crowded optical market. Making sure that we're meeting our customers' needs, having that perfect pair of lenses and frames as they leave our stores. And then lastly, delivering a memorable experience, not just any experience, a memorable experience when they exit an Eyeglass World.

And as you see, our foundation becomes stronger, you'll start to see us pursue unit growth opportunities in a more focused and targeted way. And all of these investments isn't just about keeping up with the pace. It's actually building deeper more long-standing relationships with our customers. So I hope you heard today from me a clear vision for our future and a clear path forward.

Thank you so much for your time. I will turn it over to Tamara.

All right. Well, we have a 15-minute break now. So we'll meet back here at 11:35, right? Thank you.

[Break]

All right, everyone, welcome back. We're excited to get started. I'm going to hand it over to Alex Wilkes to -- who is our moderator for our panel discussion.

Great. These chairs are much more comfortable than the ones on the side, I got to say that. Thank you, Tamara. For the record, I only agreed to moderate this session if I got note cards, so I could be like the inside the actor studio guy between as between the firms. I might. I can...

Just be careful, you don't want to hurt anybody.

Hand them out.

Okay. We've got it. We've got you covered.

Thanks, Priti. So far, right, you've heard a bit of our story and how it's rooted in data and our notions of the consumer transformation, how we're thinking about it. But I get the pleasure of also working with these 3 fantastic guys on a daily basis. You have Jared Brandman who's our Chief Strategy Officer and our General Counsel, a role that he took on both of those positions within the last year; David Cutler, our Chief Technology Officer; and Bill Clark, our Chief People Officer.

And these 3 guys play a really, really important role in our transformation as well. Jared, as he's leading strategic planning for the organization and continuously thinking about the risk within the company.

As you've heard from everyone on the day so far, technology is playing an ever more important part of our organization and how it enables our transformational experience. And of course, our 14,000 people. It's a tremendous amount of change management that needs to be led and that's all in those hands.

So let's spend a little bit of time talking about -- let me get to my cards here. So you look at that. Jared, let's start with you.

So Jared, you do have this exciting new job of both combined Legal and Strategy Officer. So talk a little bit about that and how that unique role plays into our company.

Great. Well, thanks, Alex, and it's great to be with everybody here today. As Alex mentioned, I'm the Chief Legal and Strategy Officer here at National Vision. And I've been here since the IPO.

One of the things before I get going, I just wanted to maybe hit a couple of things that Alex mentioned earlier on in his opening remarks. The first one is, as you think about the equation for delivering the commercial transformation that we've talked about, right? Like it's no coincidence here that the equation means strategy plus people and culture plus technology. This bald thing, the bald thing is optional.

Now you tell me.

I just want to make that clear because I know it came up, it may come up more, but just to be clear, I do think that's really important.

Dave, thanks for cutting your hair for the day...

Yes. The other thing that Alex mentioned, and again, since I've been here since the IPO, there's been a ton of change. Alex mentioned one important thing that isn't changing that I do want to just reinforce, which is our mission. Each and every day, we get to wake up working for a company knowing that we are in existence to help people, right, to help people see, to see their best, to live their best. And that is and has been and will be an important, noble cause that guides us as we're moving forward.

That said, there's been a good amount of change since the transition. But as I look around, I'm confident in saying this. I've never seen this company more focused, more disciplined, more strategically aligned and working together closely as we're looking to deliver growth and achieve our goals.

And as I think about the strategy role, that's a big part of what it really is. It's cliche, but it is true. Strategy doesn't work if it's just words on a page. It really is about translating ambition into execution. For us, it's about executing our transformation with focus, with intentionality with a data-driven approach and taking a multiyear planning approach to achieving our strategic plans.

As you've heard from Alex already and from Ana and from Joe and from Mark and from Priti, there's truly so many exciting things about our strategic journey. We are a company that is well positioned in a growing industry. We've got a great foundation with our brands, with our store footprint, with our doctor network. We're being laser focused as we're driving growth through our 4 growth vectors, where we have a pretty significant maybe massive opportunity as we're thinking about products, underdeveloped products and our underdeveloped consumer segments.

And we're being super intentional as we're rapidly modernizing the company, which again takes both strategy, technology and people and strong culture. And probably most important of all, and I hope that you see it both on the panel as you're talking with all of us today that we are doing this working super closely as a team and having some fun along the way.

Actually, working with Jared is -- it truly is a delight. I mean he's a lawyer. He's -- think the good and the bad with that. But honestly, one of the most -- one of the sharpest legal minds I've had a chance to work with, a phenomenal teammate and one of the most strategic thinkers I've encountered, which is why it was a natural move for him to take on this added responsibility.

A lot of the work you're seeing, how we think about the business, how we're structuring our operating rhythm, all come from Jared, and Jared in his expanding role. So thanks, Jared.

Thanks a lot.

All right. So Dave has been here 3 months. Almost 3 months, right? So Dave, early observations, 3 months in?

Well, probably a little bit of context first. So I've known Alex now for what's it been, 20 years? We were young in. Somehow, you've aged and I have. But we worked together at a consulting company, spent about 3 years in Minneapolis working side by side. So a great deal of respect for Alex. We've stayed in touch. And when he gave me a call several months ago to talk about the role here at National Vision and CTO, I was at Slalom Consulting, been there for 17 years, helping companies do transformation. So I was more than happy to give him some advice, consulting, maybe even sell him a little bit of work, but he shared the vision we have here at National Vision. He shared the mission, the idea about transforming not just ourselves, but transforming the industry, it really hooked me.

And so I listened, paid attention, got a chance to meet a lot of the rest of the executive team and a lot of the folks. And the common thing I saw was repeated over and over was that focus on the transformation, focus on the mission, focus on the vision.

And I've been super excited to be here. I've learned a ton about the platform and really excited about what we're building. It's not perfect. We've got some work to do. But I don't think you would have hired me if it was going to be easy.

Well, thanks for taking my call. So what surprised you?

What surprised me? It's a good question. I think what has surprised me, I've had a chance through my nearly 30 years of career in consulting to work with some amazing leadership teams, amazing companies and had a chance to kind of see how they work. I've been through many different transformations. And what I've seen is that the companies that have a connected integrated vision with a leadership team that are all rallied around that are the most successful. And I see that here. That has been, I won't say surprising, but it's been encouraging and it's gotten me excited, but it's also just the little things.

I showed up on day 1 and Joe was standing there and he introduced himself, like, let me walk you around. We had a corporate fun run and Jared tracked me down and said, hey, let me talk to you about kind of our legal team and what we do and how we can work together and what we can do. We all sit in an open area in the center of our floor. We don't have offices. We kind of want to be accessible.

Bill sits next to me, and he just waves to everybody that walks by and says hi and he's totally genuine in doing it. It's those little things.

And the lack of ego, I think that's what surprised me the most is the fact it's an amazing team. I've worked with world-class executive teams before, and this is a world-class executive team. It's amazing to be part of this.

It's been great welcoming, Dave. He's been immediately an awesome addition to the team, no doubt about it.

So 30 seconds on this fun run business. So we host this annual fun run in Atlanta with a bunch of business, other businesses sponsored by Kaiser. National Vision had the largest turnout of any corporation in Atlanta at this year's fun run.

Now the story that no one else knows is Jared is also a pretty fantastic athlete. He plays soccer for like -- he plays in one of the leagues that goes till like 2 in the morning on Monday and Tuesday nights. And I know Jared is also a runner. So I called Libby on Jared's team, I said, hey, what do you think Jared's splits are and she gave me a number, I'm like, that's going to be hard to beat because I'm a little competitive. So I showed him this thing.

This is just a 5k by the way, I'm telling...

Try me.

For the kids.

It is just a fun run. So I show up to this thing. I'm like trying to get in the zone and Jared is like, yes, I twisted my ankle playing soccer, I'm not going to run this thing. But I had a number in mind, and these two walked and I ended up with like a leg injury that I was hobbling around with the next week.

He did beat us even though we walked.

You won.

I won. Thanks, Bill.

So hard to let him win.

These guys were walking. Anyway. It was a great experience. Dave, welcome to the team. And again, in all sincerity, thank you for taking my call.

So none of what we're doing, though, really works without the engagement of the team and our army of 14,000 embracing what we're doing.

So Bill, talk a little bit about the change management approach within the company.

Yes. Thanks, Alex. I'm really excited about all the change that's happening in the organization, and there is a lot of change happening in the organization. But the great thing is no single person is really leading this change. We all are. It's the entire leadership team working together, being very intentional. And it's us empowering the leaders that we work with every day to lead their teams.

And so it's not a single individual. And so it's really great to see this come about. And it's set up with all the things that Jared talked about, better plans, path forward.

And I love what Mark talked about earlier also because we're able to take those different expectations and build training and behavior guides and all of the right things that we need to do to ensure that all of our frontline leaders understand what success looks like because they all really want to serve our patients and cultures -- sorry, our patients and customers.

That hasn't changed with all of the things that we've done. We still have that strong foundation of our associate base very strongly wanting to serve the communities within where they live and work.

And so that's been a great foundation as we put all of this new change in place in a very disciplined way. And I do love the fact that we're ensuring that all of our leaders across the organization are aligned, and we've been intentional about that by putting different leadership behaviors in place and teaching and training those throughout the organization.

Let's take a minute on that. Last year, right around this time, we, as a leadership -- as a senior leadership team, we developed our 5 leadership expectations that subsequently have been rolled out to the rest of the team and have really taken hold within the organization. Spend maybe a few minutes on that as well?

Absolutely. It was great because we had the what set aside, what we're going to work on, how we're going to transform the organization, a lot of great initiatives in place. What we had to really spend some time on is how are we going to engage the company? How are we going to ensure that it is all of our leaders working together to bring the change about. And so we did -- we spent some time. We put together 5 leadership behaviors, and I'll go through them.

The first was putting National Vision first or is putting National Vision first. And so this was around ensuring that all of our leaders were owners of the organization. And they were putting the company first and -- which is a little bit different than maybe we would have worked before, where maybe we were just trying to make sure that things were nice versus ensuring that the company we owned that relationship with at least...

Yes, I'd say, we were a very nice large player in the optical ecosystem, but we weren't necessarily always leveraging that size and scale to always get the best for our company.

Back to your earlier slide around the scale that we have, the next is being customer and patient obsessed, just ensuring that everybody across all our leaders across the organization understand what that means. And we heard Ana talk about it and Joe talk about it and Mark talk about it, we begin and end with the customer and patient in mind with all that we do. And we've got to ensure that, that continues.

The third is curiosity and staying curious. Asking the next question, pushing a little further, not just managing the status quo. And we reward and we talk about as our teams and our leaders are curious in whatever business that they're leading and we reward it in the moment. And it's being great. We use this a lot in our everyday vernacular.

The third is acting with urgency. We've got -- when we're transforming at the rate that we are, we've got to move fast. If things aren't working, we pivot fast. And I think that's really important as we're working in this kind of startup mode that we're in.

And the last, but definitely not least, is the behavior around sweating every nickel. I think it's Chris' favorite. Yes, we'll talk about that a little bit more. And how we're sweating nickels left and right in the business. But we're focusing the team on expense control while still investing in the things that we need to invest in. So it's really getting the most out of -- out of those dollars.

One of the things I was surprised about David, when he joined, is that in addition to just being really good in IT, he also was good at a literation. And I was just thinking about it, Bill, as you were talking, like I think there's a few things like I'm going to do it in Fs here, right?

I think -- it's about -- it's going to be okay. It's on a webcast. It's about focus, fast and fun. And I think focus, I think, is a really important element here, right, that certainly, I hope you see, right, in how we're delivering the transformation.

Another piece because I know this group doesn't really always get to see like tactically how companies bring things to life like this. I did want to just mention some -- a way in which Bill and I are working closely together. And again, it's bringing strategy to life, right, from ambition to execution, as we've been intentional in establishing a strategic transformation office, right?

And that is a -- like it's a governance cross-functional group that is designed to ensure that we're staying focused and that we're driving forward on these strategic initiatives.

Think about all the change that we've been talking about today. We're talking about managing 30-plus important strategic initiatives and ensuring that we're hitting our marks we're measuring against our KPIs. We're being nimble. We're assessing risks and that we're layering these initiatives to ensure that we are going to be delivering this consistent long-term growth, right, which is so super important.

And again, it's -- beyond just that, it's a great way to bring the organization along, right, to be reinforcing these behaviors and in many ways, to help upskill the organization to ensure we're being able to deliver.

Focused?

Focused, fast and fun.

And we need one for -- we need one for Chris. Fiscally responsible.

I love that. I was thinking about one for Mark and Priti also, where we're talking about the brands. We are being led by our consumers, you're going to have to go with me here. We're being led with our consumers so that they can talk to their friends and family, and they're all going to come to our stores.

Well, that's 6 Fs.

That's I think 5 Fs.

I don't know.

Maybe I'll jump in. So we do have a lot of change coming throughout the org -- going on throughout the organization and more to come. One of the great reinforcement mechanisms that we have in place is, we measure and we talk to our associates, Mark talked about all of the listening groups that we have and -- but we also do an annual experience survey and we publish those results the next summer, but we had record participation this year, which was phenomenal.

And we saw great linkage. Our associates and our doctors were connected to the things that we're doing. They were seeing based on their survey results, they can link what they do every day to our strategies and what we're trying to accomplish. And I think that's really great. And we did see an overall increase in our scores, which was also just icing on the cake.

Yes. And the discipline you guys spoke of, it can't be understated. And just in practical terms, what that means is this leadership team and our strategic transformation office spends a couple of hours every Friday, focused on the initiatives, what we need to do as leaders to remove any obstacles, what do we need to do to speed those along, what do we need to do to pivot and we're incredibly disciplined within that rhythm.

So it's a wonderful structure for our organization to ensure that we stay on track to ultimately the financial goals that all of those things ladder up to.

So guys, we're almost out of time, but I do have a quick speed dating questions for all 3 of you guys. We're sitting on the stage 5 years from now. What's on your mind? And what are we saying then?

All right. Great. Well, I guess, first, I'm going to say, of course. Given everything that we've talked about today, we are being laser-focused in, right, all the important things that are happening now. But if you force us to fast forward 5 years from now, I think there's a couple of things that I would just highlight quickly.

One, you heard Ana talk about it earlier today around the smart glasses realm. I think 5 years from now, we'll be in a much more mature smart glasses and wearable moment where I think we'll have a great place to play and a leadership opportunity there.

You've heard Priti and Mark talked about it a little bit earlier, right? It's more than just an eye exam, and I do think health care through the eye and medical technology advancements are going to be pretty important. And we're going to see a lot of change between now in the next 5 years.

And of course, we're always staying tracking and watching things closely in the industry, whether that's partnerships and other transactional things. And undoubtedly, there'll be more to talk about in 5 years on that front, too. That's what I got.

Good. I like that list. I guess as a technology guy, like no self-respecting technology guy could be in a room like this and not say AI is going to be key. And AI is fundamental. We talk about how technology is a foundation for a lot of what we're doing.

I'd like to say, we are customer focused, we are data-driven, but we're technology-enabled. And AI is a key element of that. But you said 5 years. So I think in 5 years, we're going to see a very interesting change in the way that we are conducting commerce in general.

We can see it already with what ChatGPT is doing by doing transactions within the actual dialogs. I think we're going to see an expansion of that. We're going to see agent to agent commerce. We're going to see agent-enabled commerce, agentic commerce. There's going to be a whole different way in which people are interacting with us, they're interacting with each other and they're interacting with those that they're buying from.

And I believe that National Vision is going to be a key player in that. The work that we're doing, that Joe is doing and teams doing around our new e-commerce site, we're setting ourselves up technologically, but also from a customer expectation to be leading in that sector.

So I think maybe even before 5 years from now, but we'll see a huge transition in how people are buying and National Vision will be helping drive a lot of that.

That's great. I just can't wait to see how we evolve our remote hybrid exam model and what that looks like in 5 years. I think that's going to be phenomenal. Much to what you were talking about, Dave, the organization and technological advancements that we have and how that comes to play and how we work and how teams get work accomplished.

And then we've had a great history of associates and doctors building careers at National Vision, and I can't wait to see how that continues to progress and meeting and hanging out with all those folks that have been with us for so long and build wonderful careers here.

Great. Thanks, guys. Really appreciate everything you're doing to drive this company forward. And couldn't appreciate more the efforts and how much fun it is to work with you guys on a daily basis, so many thanks.

Thanks, Alex.

Thanks. All righty.

All right. No one wants to hear from the finance guy, right? You guys good? All right. Just kidding.

It is actually my pleasure now to introduce our CFO, Chris Laden. Chris and I have also had the privilege of working together in the past. He has brought an incredible discipline to the organization. For a finance guy, he's funny, he's energetic. Most importantly, he knows his stuff, and we are in a phenomenal place with you leading our finance function.

Thanks, Alex. Hello, everybody. Here's to the finance guy. So I don't think anyone's going to accuse us of being scripted in our panel discussion, which is great. As Alex said, my name is Chris Laden, and I have the privilege of serving as National Vision's Chief Financial Officer.

I actually had the opportunity to work with Alex for about 5 years in the optical industry prior to joining National Vision. And when I heard he came over here, I was eagerly awaiting a phone call because I've always had the utmost respect for what National Vision stood for from its mission, its story and its market position.

So fast forward less than a year, how lucky am I to be up here on stage with you all talking about our long-term financial ambitions. So there's 4 things I want you guys to take away from our conversation today. It's this.

First, as you heard me say since I've joined National Vision, operating margin expansion is a primary focus for this management team. We've got significant opportunities in growing top line and profitability and we're going to bring these opportunities to life through disciplined investments phased over time. And we're going to maintain a strong balance sheet and preserve liquidity to make sure that we can support these growth initiatives while actively mitigating our risks.

As we unpack this further, let me quickly start by recapping some of the key messages you heard from all of our speakers today and why they give us confidence in the future of National Vision.

So as you heard Alex start off with, we operate in a highly fragmented growing industry. And we, frankly, have a right to win with our great base of assets, including our over 1,200 locations, 4 domestic laboratories and great brands.

Joe and Ana walked us through our new branding and merchandising strategies, which demonstrate the tailwinds that we have with our targeted consumer segments. Mark and Priti highlighted our elevated focus on customer care, providing superior, scalable customer experiences and exam experiences. And these strategic levers will all work together to help us unlock the revenue potential in our 4 growth vectors.

So you guys have seen this slide a lot today, and I'm going to show it one more time because it is critically important to understanding our unique position for growth.

What's exciting to consider is that you think through these growth vectors, most of them apply to growing our 2 key retail KPIs, both average ticket and growing traffic. For example, the better that we can attract the outside Rx consumer, it not only helps us grow customer count, but these consumers tend to spend more than our current average cash pay customers today also driving average ticket.

Likewise, by introducing more premium frames that appeals to a broader consumer set, so not only are we increasing average ticket, but we're also putting ourselves in the consideration set for consumers that previously may not have chosen to purchase with the National Vision brand.

We've designed these transformation levers to create value, not just for our consumers, but for our business and our investors. And we're going to execute these levers with a strong focus on cost optimization, which we'll go into more detail shortly.

Together, we believe that these will grow long-term sales, improve profitability and I know that's why you're here today. So let's dig into our long-term sales projections a bit further.

As we look out through 2030, we believe we can produce predictable and consistent revenue growth in the high single digits. The strategies behind our foundational improvements in growth vectors will deliver comparable store sales in the mid-single-digit range. And this, together with new stores will help us hit that high single-digit target range.

As we think about our new store opportunities, let me take a moment to remind everyone where we operate today. So we operate in 38 states in Puerto Rico. As you can see from this chart, we tend to have higher presence in states like Florida, my own town, Georgia, Texas and California. But even in these states, we believe that we have ample opportunity for fill-ins. That's why you heard Mark say earlier that we plan on growing approximately 30 new stores in 2026 and 2027. And then to reaccelerate our new store growth from 2028 through 2030 to about 60 stores per year. Ultimately, we're looking to grow about 240 new stores over the next 5 years.

As we think about new store economics, we're really excited about the opportunity that our growth strategies has towards improving payback. Our new store formats and modernized branding will better resonate with consumers.

Our new merchandising and selling strategies will better delight customers and ultimately drive higher average ticket, while we still maintain ourselves an obvious destination for value.

And states that allow it, remote care is part of our core operating model, and we'll continue to drive efficiencies there. And of course, our focus on keeping costs down will help improve not just new store, but also home office economics. So let's drill into that a bit further.

As you heard Alex and I say in our earnings calls throughout the year, we've already taken out $10 million of SG&A in 2025, and we said that we were interrogating every line of indirect spend as part of a broader enterprise-wide cost-out initiative.

We're happy to report that by the end of Q4, we will have begun the implementation of cost-out initiatives worth $20 million of annualized spend, about half of which we expect to materialize in 2026.

The nature of these savings will materialize through renegotiated pricing with our key strategic vendors, optimized consumption in our stores and home office and frankly, just better improvements in our working capital management.

From a category perspective, we review partnerships and spend in categories ranging from logistics to insurance, technology to marketing, banking to store supplies. We reviewed spend as critical to our core software platforms, to items as detailed as what kind of paper are we ordering in our stores, and we are highly confident that we can execute against all of these cost-out initiatives.

So what does this mean for us in the short term and long term? Our 2026 planning scenario currently assumes net revenue growth in the high single-digit range, driven by mid-single-digit comps and another 100 basis points of operating margin expansion. Our comp sales profile will likely look similar to 2025, with growth in average ticket through consumer adoption of more premium frames and lenses as well as the impact of price increases.

Our planning scenario assumes that we continue to grow traffic in our target consumer segments that will be at least partially offset by softness in lower consumer segments. Our planning scenario assumes that we open 30 new stores in 2026, and we continue to balance capital investments booking new store growth and ongoing investments in modernizing the business.

As we look beyond 2026, assuming no deterioration in the macroeconomic environment, our profitability algorithm remains quite simple for the next 5 years. On average, we plan to grow net revenue in the high single-digit range, while proving meaningful operating margin expansion in the 50 to 150 basis point range, restoring our operating margin rate to proven historical norms.

We will continue to remain focused on disciplined cost management, ensuring that we gain leverage in our key spend categories while we continue to reinvest in the strategies that are ultimately going to fuel our growth vectors.

While we grow, we are committed to maintaining a strong balance sheet and preserving liquidity. Over the last 2 years, we've reduced our net leverage ratio from 2.2x to 1.1x by paying down over $200 million in debt and growing EBITDA. Going forward, our goal is to keep our leverage ratio around 1x, assuming no material change in market conditions.

From a capital allocation perspective, over the next 2 years, we expect it to look quite similar to 2025. We will balance investments in our organic growth initiatives with those in new stores, ultimately unlocking higher investor returns.

As we reaccelerate store growth in 2028 and beyond, we'll also be generating very healthy free cash flows, which is going to provide us with optionality for new ways to allocate capital and maximize shareholder returns.

In any given year over the next 5 years, we expect to reinvest approximately 4% to 5% of our net revenues into capital expenditures. In any given year, 1% to 2% will be invested in store maintenance, refresh and remodels.

As Mark mentioned earlier, we are being purposeful in our new store design efforts to minimize the investment required to bring elements of the new store design to our existing fleet. The remaining 3% to 4% of CapEx in any given year will go towards our organic growth initiatives and new store growth.

So as I wrap this section, the obvious question is, what gives this team the confidence that we can achieve these lofty long-term financial ambitions. And my very simple answer is, because we are already doing it.

Year-to-date through Q3, we've increased net revenue 7.1% while expanding operating margin by 120 basis points. We have confidence that we can continue this momentum into 2026 and beyond.

So I hope this context helps you understand why we're so excited about the future of National Vision. We're in the midst of a transformation that is energizing this management team, our store associates and our associates at our home office. And I truly believe that there is no one better equipped to lead this transformation than our CEO and my friend, Alex Wilkes.

So Alex, with that moderate amount of brown-nosing, I'll invite you back on stage and invite you for closing remarks.

Thanks, Chris. Also another guy that I could not have been more pleased answered my call when I call him. Quick true story. I actually called Chris. I said, hey, Chris, I have this idea for you. He said, hey, I'm actually pretty happy. And so it wasn't quite as he portrayed it on a couple of phone calls later. I was able to convince Chris to join us as our CFO. And again, Chris, you've just done a fantastic job getting us disciplined, getting us organized and really setting the stage for our growth. Thank you so much.

All right. So I hope what you take away from today is the following. First and foremost, we have the right team to drive this transformation. We have sophisticated thinkers, team players, optical legends, marketing geniuses, people leaders, technology leaders. And collectively, we know exactly what we need to do to drive growth within this company.

We have an absolutely clear game plan on how to deliver the growth. We know exactly where our opportunities lie from an underdevelopment perspective, both from a product and a consumer side. We know the improvements that we still need to make to the consumer experience and importantly, we know exactly what we need to attack from a cost perspective. That work is already well underway.

We spent the entirety of '25 understanding, as Chris mentioned, where we had opportunity to reduce cost. I love that example of interrogating the paper that goes to our stores, but we looked at everything, policies related to mileage, how many printers a store could have, how many printers we should have in the office, how many calendars a store manager, the answer is, one should be allowed to order.

So this is the level of discipline and focus we're bringing to the organization. I'm confident in this team. I'm confident in our strategy. Again, I think we know exactly the value and the relative value of what we can go after over the next several years to drive both comps and to drive our traffic. Importantly, though, for us, it's the character of that traffic.

I want to go back to one of the slides I shared with this group earlier. The relative value and profit contribution of the managed care, progressive and outside customer versus the historical norm that we have targeted being not a percentage, but a multiple in terms of profit contribution to the company. So when we talk about our evolution, focusing on those customer types, that is why we are so hyper-focused on it.

Going back to what Ana shared around our product evolution. Just a 1% change in the premium products of anti-reflective coatings, transitions, premium lens materials, generates $40 million of incremental revenue to the company. And we are so significantly under-indexed versus the category.

On a very sensitive and frankly, adjustable and easy sellable product that consumers are dying for, we just need to do a better job of serving those products up. So I hope everyone here has gotten a real good sense for what we are, what we are trying to accomplish and what we will accomplish as a company.

We're boldly reinventing National Vision. We're modernizing every aspect of the company. We're attacking all the underdeveloped areas of product and consumer. We're taking a much more data-driven and analytical approach to the business than we might have historically. We're hyper-focused on operating margin expansion. And Bill talked to our leadership behaviors, sweating every nickel is something we expect of our teammates.

And last, but most importantly, we have built the right team to deliver long-term shareholder value. So with that, this is just the beginning. There's lots more to come from our organization, and you can expect significant growth from this team go forward over the long term.

So with that, it's my pleasure to take questions from the audience. And myself, Chris and the entire leadership team is at your disposal for what might be on your minds. And I think Tamara is going to play.

Well, just a little bit. We're going to pass mics around. If you would please state your name and your question when you get the mic. And that's it.

Okay. I'll start with Kate.

Kate McShane from Goldman Sachs. I wanted to ask 2 questions. First, just how we should be thinking about the makeup of the comp you wrote that you put out today for fiscal year '26 between ticket and traffic.

And then just with regards to store growth, is there any detail that you could share about mature markets versus new markets and how that cadence changes through 2030? And any additional information on the 42% of the Eyeglass World locations that are going to employed OD?

Got it. Let me quickly just talk about a little bit of our ticket and traffic dynamic that I think is important context. And then, Chris, if you can delve into some of the specifics.

Again, as we think about evolving our ticket, it is also a function of the mix of our customer type, right? So our ticket is actually composed of 3 functions. It's price, it's mix and assortment evolution, but it's also customer mix evolution within that that's driving it, again, based on this notion of the relative value of those managed care outside Rx and progressive -- progressive wears.

So for us, it's actually as important to think about the mix of customer type versus just the absolute traffic number. But Chris, if you want to touch a little bit on the composition of...

Yes, Alex, I think it's spot on. I think from a core traffic versus ticket perspective, you'd say it's 2026 will likely look pretty similar to what we've seen year-to-date 2025, which is relatively flat overall traffic with the majority of our comp coming from mix.

But to Alex's point, we are growing traffic. We're just growing traffic, specifically in the targeted customer segments that we know are going to produce more value for the company. So as you think about where we've allocated our resources historically, right, we've got this huge ball of resources that we've historically pointed towards cash pay typically low-income consumers.

We're not walking away from that consumer. But as we reproportion the messaging, the investments we're making towards attracting customers, we're naturally going to see some softness in that consumer segment that historically got close to 100% of our attention when we started drawing in more managed care outside Rx progressive consumers.

So on the net, you might see traffic that's not growing at a material level, but kind of when you peel back the onion, we're actually seeing double-digit traffic growth in the key consumer segments, with some partial offsets in some of our lower-value segments.

And again, just -- it can't be understated that those more valuable consumers are worth a multiple in terms of profit contribution than the historical segment that we've targeted. And Kate, I'm sorry, would you remind -- would you -- your question on Eyeglass World?

The Eyeglass World comment about 42% of the locations going to employed OD model. Can you talk about that decision and maybe what that means and then what was the store growth [ in mature markets ]?

Great. I'll take the Eyeglass World one, if you take the store growth. So Eyeglass World had a bifurcated doctor model. A fair number of stores where we had employed doctors and then a very large portion where there was a sublease doctor relationship. And as Priti and I were talking about the Eyeglass World strategy, getting to a consistent operating model with the doctor was necessary in order for us to kind of start to build upon the brand, right?

It gave us a stronger foundation to jump off from. Ensuring that we could deliver consistency and experience. Ensuring that we could deliver consistency and price because an interesting thing happens in the world of sublease doctors. The doctors actually set their price wherever they want to set the price. And that can actually become an impediment to traffic growth.

The other thing is the sublease doctors, they get to individually decide which managed care panels they participate on and which ones they do not.

When you move to an employed model, you have a far greater consistency of the experience, and that was a necessary step and the first necessary step that we felt we had to take in order to start reinvesting in Eyeglass World and accelerating our growth within the brand. And again, 1 quarter in, we're super, super pleased with the results.

Yes. As we think about the geographies of our new store growth, let's say, over the last 2 years, we've been focused on growing in states that allow for a remote doctor model to work. I think it's still a key focus area for us because, boy, does it help when you think about some of the challenges this industry went through post 2020 and National Vision is a great job of pivoting quickly of how do you solve the supply constraint. So I think we'll continue to stay focused on states that allow remote care. But I do think, we've really been focused on filling opportunities around existing stores. It wouldn't surprise me if we went into some new markets in 2026.

Adrienne Yih from Barclays. Along the same lines, the -- it seems like the organization is moving extraordinarily fast. The customers uptake is very fast. But one of the longest kind of horizon events is your store-based infrastructure. So let's call it, 1,200 some-odd stores. They were historically targeting that 80% world, 10-year leases. How are you kind of changing those, elevating the markets, and there should be some very low-hanging fruit as you come up into higher demos and MSAs. So just wondering how that transition is going to be happening and what the opportunity for the multiples return on that?

So on real estate and real estate -- our overall real estate portfolio, we actually find is located pretty much in the places we want to be. The vast majority of our real estate are in regional power centers anchored by T.J. Maxx or Target and aligned to the customer demo that we generally are winning with and want to continue winning with.

Absolutely, we do have some outlier locations in the kind of local strip mall, but generally speaking, we don't believe we have a real estate positioning challenge and executing our strategy. As Mark spoke of earlier, we are looking at ways. We have hired a design agency to help us design our store of the future. And part of their brief is to also say, what are the elements we can take from that store of the future in a very cost-effective way, bring those to scale within our existing 1,200 locations. So in the capital algorithm that Chris provided is consideration for taking those elements and bringing it at scale to the rest of the fleet.

Yes. The only thing I'd add is, in Q4 of last year, we announced that we had a series of closures that were going to be planned at lease expiration through 2026. Part of the analysis was not just store profitability, but is the store positioned where we want to be in the future. So as we look at some of the things we've announced then, I believe it was around a dozen stores a year from '24 through '26. That was kind of contemplated as part of the equation as well, are these, ultimately the stores and locations we need in order to be successful as we move forward.

Can you just remind us where is your four-wall at peak or you are historically where is it today? And where can it go in the future?

Yes. So I don't think we've disclosed four-wall economic specifically. What I'd say is, as you look at the enterprise level, operating margin historically in the low double digits. We've seen inflation in both the store economics and in the home office as we think about the $20 million we discussed earlier today, those are not exclusively four-wall savings opportunities. I'd say it's pretty well balanced between where we can see just cost out from a store footprint perspective and what we're seeing in the home office.

It's Michael Lasser from UBS. Thank you for laying out such a compelling story today. If there are some vulnerabilities, it might be, as you serve more affluent and higher income consumer, inevitably, that customers are also going to have higher expectations. So how do you need to invest in order to ensure that you're meeting that higher expectation of that higher income consumer?

And second, the point in which you made about weaning off some of the legacy traffic and growing the new demographic traffic makes sense, but at what point should outsiders hold you accountable for growing traffic in totality because that will be the ultimate measure of success of the strategy and execution?

Yes. In terms of investment on selling experience next year, and I'll actually have Mark share a little bit more here as well. Next year, we are budgeting and planning for an extended store manager week, where we'll have our store manager organization together to more fully activate them in terms of their expectations for creating those experience. Mark, do you want to spend a minute on that?

Yes, sure. I mean I think you heard me say pretty consistently. We know we have to elevate our in-store experience. And so it really does start with behaviors, which means we have to get our teams together. So actually, last year, for the very first time, we had all of our brands together, all of our store managers together, the energy was incredible, but it wasn't just a party. It was an investment in them. It was a train the trainer. And so there was this behavior piece.

But you're also now starting to see -- again if you check out Optikam on the iPads, and you heard Dave say, we now have iPads in every single one of our stores. So look, just having an iPad doesn't make the experience better. It's the content that's on that iPad. But if you think about our ability to now showcase the different types of merchandise that we want to show and the enhancements, our teams are really, really grabbing on to that in an extremely powerful way. And probably the place that we were most underdeveloped on is actually on our e-commerce platform.

And Joe spoke about that. And that's coming online at the beginning of next year. And that should help us elevate the experience quite a bit. And last thing I would say is, remember, these are customers that are already coming into our store. So like we are having the customer come in. We just hadn't optimized our experience for them. So elevating our merchandising, having the right merchandise that they want to see, making sure that we've changed the experience to where we're building a relationship with them, those are really the keys.

And if I think about like a premium experience versus, call it, maybe like an [ intermediate ] experience, it's, do I feel that I'm being treated as an individual? Do I feel that somebody is there listening to me? Do they know my name? Do they know me the next time I come in, do they know me no matter where I show up from an integrated commerce perspective, and that's where we're making our investments.

Yes. If you think through the nature of the question through capital investments, if you look at what we're doing in 2025, we've reduced the capital going into new store growth pretty significantly. But our total capital guide for the year isn't materially different than what we spent in prior years.

So going back to your point, we're still continuing to invest in the business, but we're investing in infrastructural items like the Optikam platform with iPads, like the new Adobe CRM platform, our new ERP that we launched in the Q1, early Q2, as well as upfront investments in things like the new e-commerce website that will come out likely in the next year range.

So it's the right question, which is we're really rebalancing the proportion of assets going against new store growth and those infrastructural investments as we start to get some of that foundation built, it's only going to help us to reaccelerate new store growth and payback when we then double down on new store growth in 2028 and beyond.

And again, on the topic of traffic, we undertook the brand reinvention, the rebrand architecture, the new campaign, how we're thinking about our media investment, our investment in the CRM to be more personalized. All of those are pointed at driving traffic. That being said, historically, when you're growing 70 to 80 stores a year your traffic ramp and your traffic number looks a little bit different than when you're growing 30%, right, because they're not getting that compounding effect of the new store or the relatively new store fleet as you were previously.

So for us, traffic is absolutely a focus. But again, driving the right type of profitable, accretive traffic in my mind is the first thing over the aggregate traffic number. Everything we're doing is intended to drive traffic. Highest brand consideration within the optical retail channel post rebrand of America's Best Q3, certainly a component of driving positive traffic. But I would expect a more significant traffic inflection to come upon the reacceleration of store growth during that era of our transformation.

So Anthony Chukumba, Loop Capital Markets. So I have two questions. First off, you talked about opening 30 stores a year over the next few years and then accelerating that to 60 stores. And I was just wondering if, just at a high level what the breakdown would be between America's Best versus like Eyeglass World. And the second thing, there was a lot of conversation about this fun run. So Alex, what was your time?

Okay. It looks like we might be out of time for questions for question two. So question one, the vast majority are going to be America's Best at least in the next year or 2. As Priti talked about, we are in the early stages of Eyeglass World reinvention with outside partners helping us from both a brand and a store design perspective. And we also have to answer some fundamental questions about like what role does the in-store lab plays longer term. So we are planning on opening some Eyeglass World stores in the very, very near future. But scale, I think, is probably a little bit further down the pathway. The second question, so I had a target in mind, which was to run like the 5K. I'm not a great runner, but I wanted to do it in like 8:30 split, and I hit that mark. So I was just over, I think, like 25, 26 minutes, somewhere in that range, which for a guy this physique, it's not shabby.

He is the fastest CEO we have.

And as someone afterwards said, by the way, it is a fun run. This didn't have to be a competition. I'm like, oh, well, then why give me the bib? So thanks for that. Go ahead.

Zach Fadem, Wells Fargo. So it seems like you're guiding us to about a double-digit operating margin five years from now. Can you talk about just the path in terms of gross margin, SG&A? What's the contribution from things like remote medicine? What does the cost structure look like? Can you kind of bridge us from point A to point B?

Yes. Look, I think the majority of the expansion we're going to see is in SG&A. As we're making evolutions to our premium frames and lenses, some of those decisions are going to be taken that might actually be gross margin dilutive. Obviously, we'll have some that are accretive as well. But our primary focus is to drive more gross margin dollars, which will ultimately help the bottom line. So we don't need any incremental SG&A to go support selling more premium products to our existing consumer base. So as I think about the five-year outlook, I'd say gross margin expansion is not our primary focus. I expect to see the majority of it come through SG&A.

[ Vicki Li ] from Bank of America. We've heard about the segmenting merchandising in each store based on the customer base in that area. Curious what the percentage of merchandise will be unique to the store and what the timeline of the segmented merchandising will be?

Yes. So Ana, if you could go ahead and take that. The question was timeline of segmentation about what percent do you think would be unique.

So we're in the very early stages of really understanding that customer and how that segmentation will work in the future. I can't give you a percentage one way or the other. I can tell you that we are keeping a very close eye on that customer, looking at the data and we'll make decisions that will match our product to who our customer is.

In the first phase of segmentation, but how many different store segments do you think we'll have?

We are thinking that we expect four, five store segments to start with in maybe the second part of the next year. So matching product in those four to five segments.

And we have been in conversations with some of our partners regarding some more premium/luxury brands that previously we would not have been able to get access to—, but we're talking about those in the direction of they would be in a couple of hundred stores where it absolutely is a no-brainer and makes sense. But that's also, I think, a new thought for National Vision that in previous years, we would not have been in a position where our kind of brand was to have conversations with some of the fashion houses that we are today about even carrying those products in, call it, a couple of hundred stores. So those are things that are on the table at the moment.

Simeon Siegel at Guggenheim. So you mentioned the multiples often, right? And that seems really powerful. So I guess, number one, why -- just very simply, why is that customer such a better customer from a profitability perspective? I don't know if it's specifically price. I think you said transactions, so it wouldn't be frequency. So if you can go there. And then why aren't they shopping you now? So as you think about like I see the reasons why they're going to, but why aren't they yet? And then you talked about the increased awareness, which is fantastic. Did you see -- was it with them? Where has it been growing? And are you seeing an increase in sales penetration as that awareness grows?

Yes. Let me take your second of your third questions first. The short answer is we actually already are winning those customers. We're just under-indexed. As Chris talked about, we had spent our entire organizational engine chasing the cash pay, lower-income consumer. Yet we were actually winning the managed care customers to the point that it's already 40% of our mix. We're under-indexed, but we were winning those customers. We're winning the progressive customers. Mark spoke of the outside Rx customer.

Frankly, that, I think, was a bit of an unintended consequence of our model. When you spend $150 million a year on linear media saying, two pair of eyewear and an eye exam cost X, for those customers that already have that eye exam, they don't think that you're a brand for them because they don't want to go through the eye exam again. And there's this unintended consequence or this belief that the consumer has that if I shop at America's Best, I have to go back through. And as Mark said, we kind of actually operated that way. So we were winning with these customers, but we had so pointed all of our organizational resources against one specific thing that we weren't maximizing for those. So as we start to move into a different direction and we actually target our consumers, that's why we believe we will win because we actually already are without even trying or doing it well today. The second point on— -- sorry, that was a question two.

So the first part of the question was the why -- help us understand and unpack why is the profitability at such a high level.

Yes. Well, thanks, Chris. By the way, just for the analysts in the room, unlike earnings day, there's like people that write the questions on the board. So you just— -- we don't remember that stuff. Like you look at someone like has a job to write it on the board, so you can click it off, like no one remembers that stuff. All right. So apparently, Chris does, [ Brown knows it]. All right. So why are some of those customers more valuable? The way managed care plans are constructed in particular, they're actually built in a way to motivate consumers to move towards more premium lens options and all the lens add-ons. So that's where those things really start to stack up.

The way a plan might work is you get $130 or -- $130 to $170 frame allowance, but your managed care provider has also negotiated the cost of anti-reflective lenses on your behalf. So it conveys value to that managed care customer that no matter where we price it, they're basically paying a negotiated rate for that AR coating, the transitions coating, or more premium material. So they feel like they have to take advantage of those options because in a way, they're paying for it in their premium in their paychecks. So the managed care consumer through the construct of their plan is actually motivated to move into these higher product categories already. That's why that customer is so valuable.

The progressive consumer, just a base progressive lens design begins to move you up in terms of lens cost. But then those consumers, they also— -- they're not going to spend the type of money on a progressive lens without protecting it with a better anti-reflective coating because not only does a better anti-reflective coating give you better cosmesis on the lens, it actually gives you better durability from a scratch resistance perspective as well. So it's a little bit of a momentum and velocity game on lenses. Like the more you spend on the base lens, consumers are predisposing to start adding things on to either enhance or protect it because they've already invested a substantial amount in the base transaction. Chris, anything else you'd add on that?

Yes. I think on the outside Rx consumer, right, there was a reason they chose not to purchase at the point of exam, which is either we didn't find the product that we liked in the stores or holy cow, that's really expensive. I'm going to go somewhere else. In both of those categories, we've got a strategy to win. We're now introducing more premium frames that will better resonate with those consumers. On the latter, we still offer tremendous value for like-for-like frames and lenses than a lot of the competition. So they might be spending more than our current average cash pay consumer, but we've got a huge right to win with those consumers that would also help kind of raise our weighted average ticket.

So if you think about the success you've had to date and you were to sort of talk or speak to the balance between success doing a better job selling to the existing core versus new customer acquisition, how would you kind of weight those two?

Yes. I think it's probably about 50-50. I think we've done some really smart mechanical things so far in our assortment and our pricing structure. And I think we talked about taking some more of those decisions as we look into '26. Ana talked about evolving our price points, the modernization, dropping decimal points going to 95. But it's not just about moving to 95. Our entire pricing algorithm in the store starts from that point. So it makes it way, way simpler for the consumer to navigate. So I think that's had a huge impact. And I think it shows in our NPS scores.

In terms of the behavioral changes in the stores, we still have a long way to go. But the work that Mark and Priti are doing is exceptional. Getting our store associates recalibrated from the historical norms that they were trained for 20-plus years that their job was to help consumers come into our store and leave having spent as little as possible. That's what they were calibrated on. And Mark and Priti are doing a phenomenal job recalibrating expectations to something different. But it takes a long time, right, to get 14,000 people along that same way. So again, it's more than just my gut, I mean, we do have some data points that would suggest it's about 50-50, the mechanical changes and then the expectations and behavioral stuff flowing through.

Great. And then, Alex, the comments around returning to historical levels from an op margin standpoint. I mean, maybe we don't have these numbers, but it looks like, again, you have the guidance for like sort of, call it, 9%, 10% op margin eventually, if you run through that math, which is double what you've done historically. I mean -- and then it sort of bleeds into the conversation about the better payback on these stores. Is it really just that you're comping on a base with a higher overall ticket so the leverage point is better in the model now? Or how do you kind of think about the profitability versus what at least the numbers we have historically?

Yes. I think there's two areas for opportunity. I think the flow-through on the higher average ticket will certainly be better as we're taking even in the world of flat traffic and trading, higher value traffic for lower value traffic, we're going to see more gross margin dollars flow through ultimately helping operating margin. The second is, if you think about it, we'll have three years in a row from 2025 through 2027 of $10 million of incremental annualized SG&A out of the business. That's what we've identified so far, right? We are not stopping and this team is not satisfied that the cost infrastructure that we have today is what it needs to be go forward. There are certain areas we'll have to make more investments, but we certainly believe there's more operating leverage throughout the business. So it's really just a matter of sequencing then what's the next round of cost outlook like potentially in the latter years in the five-year period.

But Dylan -- sorry, one more thing real quick on your point on price and ticket evolution. It is so important and critical for us that the category from 2020 through 2025, expanded price somewhere in the range of 20% to 25%. And National Vision expanded somewhere around 6% during that same time period. So of course, we saw compression in the P&L because we weren't evolving even keeping pace with the category, right? So now we have this chasm of 1.5 to 3x average transaction. Again, it can't be overstated. We're not intending to close the gap to category. But as we start to take incremental steps up in that direction, the mix evolution, the pricing, it absolutely does help us from a marginality perspective at an accelerated pace.

Can I sneak one more in? Just remote, — where is remote in these numbers and the outlook? I think there was some hope that it would be a real margin driver, cutting down dead share time. Yes, anything you can say on that would be appreciated.

So remote is certainly a component. We could not achieve our revenue algorithm without remote as a capability. So as we think about our ambition of high single-digit revenue growth, mid-single-digit comps through the 2030 time horizon, remote is an enabler to get there because of the challenges that still exist around doctor capacity that I think as an organization, we've done a fantastic job solving for. So remote is an enabler of that. As Chris said, though, we're not satisfied with what we're going to accomplish from a margin perspective until we unlock hybrid remote, that could be something it's not currently in our guide, but we do believe that there is an opportunity there. But we've always said it's something that we have to be extraordinarily thoughtful in how we progress, right? The change management associated with the hybrid world, which hybrid is the unlock to leverage on doctor labor.

[indiscernible] of hybrid.

So we have about 100 doctors currently trained in, operating in a remote hybrid mode of practice, and we're capturing learnings from that.

I'd say in the same breath that we say remote is part of our core operating model in the states that allow it today. Hybrid is in the very early testing phases of how do you build not just a technology solution that's actually not the most challenging part of it. How do you build the incentives and the behaviors around the doctors to participate in a way that's meaningful?

Paul Lejuez, Citi. On your quest to attract this higher-income consumer, where do you think you're pulling from? Is the low-hanging fruit more of the independents, the mom-and-pops? Do you have your eyes set on certain chains? And how does your marketing tie into where you think that customer is going to come from?

I mean, ultimately, we do believe it's coming disproportionately from the independent channel. It's a channel that hasn't evolved necessarily from a product capability, infrastructure, joyfulness of experience perspective in a very, very, very long time. So we do think we're going to disproportionately win from those channels, especially around those three customer segments, right? Those three segments— outside Rx, progressives and managed care consumers— historically have been more ingrained in the independent optometrist channel. But as they start to shift or they're not evolving as they're not making the changes to their model to be more modern, to be fresher, to be more joyful, we think we have a disproportionate ability to win with those consumers.

And to clarify a point that Joe made earlier, when you look at the income demographics of who we're attracting today, we're actually already over-indexing in middle-income consumers. What we're not optimized for yet is how— -- we're not actually meeting them where they're at in terms of the products and services that they want to buy. So part of the equation is how do you better attract new traffic in these target cohorts.

The other part of the equation, and frankly, the part of the equation that's been more impactful for us in terms of quick wins in 2025 has been how do you take the folks that are already coming through your stores and better serve them through consultative selling techniques through having the right product available, introducing new technologies like Optikam that helps the consumer better understand some of the benefits of the more premium products and services that you're offering. So it's a really interesting and exciting position to be in, which is we don't necessarily have to go and attract a ton of new traffic from a volume perspective to drive the average ticket outcomes that we're looking for. It's really just better serving the folks that are already walking through the door.

Matt Koranda with ROTH Capital. I guess two things. I wanted to hear a little bit more about the deployment of Optikam and what that's done in terms of attach rates for some of the premium lenses that you talked about because you're still under-indexed there. So just curious about sort of the trajectory of how that improves over time.

So Optikam deployment, how many locations, then I'll take the AR one.

So we are now— -- I'm sorry. As of November, we are now in every single America's Best store in every single Eyeglass World store. So it's fully deployed. We started deploying it in August and then scaled it out one region at a time throughout the country and got learnings along the way.

And part to your question on anti-reflective in particular, part of our average ticket growth, a significant part of our average ticket growth this year was actually came from attachment rate of anti-reflective growing.

Okay. Great. And then just in the long-term targets, I noticed you guys said about 50% of sales from managed care. But it looks like in terms of the category, 70% of consumers report having managed care benefits to spend. So why the mismatch there? And is there upside opportunity to that 50% over time?

Yes. I mean I think there are some managed care plans that we don't see necessarily an obvious path towards an in-network relationship with. And therefore, we're setting our next milestone at 50% of our mix coming from managed care. If some of those opportunities were to ever open up, of course, it could be north of that. But we'd have to see an obvious pathway to accomplish that. So— -- but getting to 50% of our business with those that we participate in currently, we do think is absolutely achievable.

All right. Okay. Wow. So are we done? Or are there any other questions among the group? So if you haven't had a chance to already, the things we talked about today, you can actually see come to life on your right side, my left side of the room. So we have our Optikam demos available. If you spend time with our frames, you can see a little bit of a before and after, and it's a fairly visceral experience when you see just even our limited assortment of before frames to what we're moving to, to help bring that to life. We have a fantastic group of National Vision teammates. And again, I just want to take a moment to thank everyone else who's here besides our senior leadership team that made today come to life. They're all sitting at the back of the room. But they're also here to give demos to answer questions and spend a little bit more time with this group.

One of the things we didn't do is introduce the person who ultimately crafted this entire experience for everyone. So Tamara Gonzalez, Head of IR and Communications. Thank you for pulling this together.

So we reported earnings like a couple, I don't know, 1.5 weeks ago. Then we had to do this. Tamara is going to Spain and hopefully coming back, but she leaves this week for a much-deserved 10-day vacation. Echoing Chris, Tamara, thank you a million times over for keeping us organized, for keeping this leadership team on track, and for helping us to craft the story. So thank you very much.

Good. I know that we have folks in this room who traveled far and wide to be with us here today, and it is much, much appreciated that you took time out of your schedule to hear the National Vision story. As you can tell, it's one that we are all incredibly proud of. We're bullish on this company. We absolutely believe every word we said and that we can execute our strategic playbook. The best is yet to come for this organization. Thank you, guys. Thank you, guys, for making this come true.

I say oftentimes that I basically get to report the news, but these guys are the ones creating it on a daily basis. So thank you to the leadership team. All right, guys. I think we have box lunches. We have some mix and mingle time, but the entire team is here for your disposal for the next little bit. All right. Thank you, guys, for the time this morning.

Good day, and thank you for standing by. Welcome to National Vision's Third Quarter 2025 Earnings Call. [Operator Instructions]

Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker day; Tamara Gonzalez, Vice President of Investor Relations and Communications. .

Thank you, and good morning, everyone. Welcome to National Vision's Third Quarter 2025 Earnings Call. Joining me on the call today are Alex Wilkes, CEO; and Chris Laden, CFO. Our earnings release issued this morning and the presentation accompanying our call are both available in the Investors section of our website, ir.nationalvision.com. A replay of the audio webcast will be archived in the Investors section after the call. Before we begin, let me remind you that our earnings materials in today's presentation include forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995.

These statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. These risks and uncertainties include, but are not limited to, the factors identified in the release and our filings with the Securities and Exchange Commission. The release in today's presentation also includes certain non-GAAP measures. Reconciliation of these measures is included in our release and the supplemental presentation.

We would like to draw your attention to Slide 2 in today's presentation for additional information about forward-looking statements and non-GAAP measures. Further, please note that all financial measures in today's commentary are based on a continuing operations basis unless otherwise noted. As a reminder, National Vision provides investor presentations and supplemental materials for investor reference in the Investors section of our website. I'll now turn the call over to Alex. Alex?

Thanks, Tamara, and good morning, everyone. Thanks for joining us today to discuss our third quarter results. We delivered another strong quarter, thanks to our team's intense focus on our transformation initiatives, which are continuing to gain traction and drive positive responses from our customers, energizing our entire organization. The third quarter marks our 11th consecutive quarter of positive comp store sales with adjusted comp growth reaching 7.7% compared to the prior year. .

We drove healthy year-over-year adjusted operating margin expansion of 90 basis points, supported by higher average ticket with our refreshed merchandising mix and new selling methods. The momentum we're building across our business is driven by the success of the strategy and approach that we have shared this past year. We're growing in areas where we are underdeveloped relative to the category with a focus on our most valuable customers while enhancing the patient and customer experience for all.

Our momentum is evident with the growth we have seen among managed care customers. Our managed care business continues to be very strong, approaching low teens comp sales growth in the quarter with both positive transaction and ticket trends. We are also seeing strong performance in the quarter with the 2 other high-value segments we are targeting, progressive lens wearers and outside Rx customers.

As we have discussed throughout this year, and we'll discuss even more at our upcoming Investor Day, we're maintaining a strong value proposition while focusing on broadening our target customer audience and delivering a healthier bottom line. To this end, while at face value traffic is relatively flat this quarter, we are pleased with the intentional evolution of our customer mix toward higher-value customer segments that we are confident will lead to a healthier business overall.

Managed care, progressive and outside Rx traffic trends are very healthy, and we're seeing early indicators that our new marketing strategy and CRM platform and in-source selling tools are leading to stronger customer engagement. As we continue to execute our initiatives, including making meaningful improvements to our assortment, our messaging and our selling behaviors, we are confident we will strengthen our consumers' perception as the destination for style and value.

Although we are just beginning our merchandising transformation, our initial actions are yielding positive results. New premium frames like L.A.M.B., Ted Baker, Jimmy Choo, Hugo Boss that we recently introduced are turning faster than our expectations. The fact that our cash pay ticket is accelerating is a good sign. It means that beyond serving our managed care outside Rx and progressive customers with better product, the cash pay customer is also opting in to the premium brands we are now offering. And we've seen this response, even though we still have the opportunity to improve our lifestyle selling techniques, our visual merchandising and product presentation to really showcase our new and exciting products.

We are also pleased with our initial pilot of Meta-enabled smart glasses, which we began in 50 stores last spring. Our associates are learning how to sell this unique and highly sought-after product, and we are pleased with the consumer uptick we are seeing. Given the traction we have experienced, we are excited to roll out Meta to an additional 250 locations during the fourth quarter.

As we look ahead to the remainder of the year, we will continue to evolve our assortment mix and are on track to have approximately 40% of frames at our stores priced at or above $99 by year-end, up from approximately 20% this time last year. When it comes to our pricing architecture, it's important to keep our journey in mind.

When we took our first pricing actions last year, we talked about no regrets pricing, and we've successfully delivered on these actions. We are now looking toward a more sophisticated era of pricing where we consider factors like lens components, managed vision care, packages and targeted discounts and offers in our pricing construct. Our pricing playbook is architected on a thoughtful plan rooted in consumer response and data, and we have our next series of pricing actions already mapped out.

In the fourth quarter, we're taking our next set of pricing actions on lenses, lens add-ons and our bundle offer. We are also modernizing our bundled pricing. We're moving from $89.95 to a clean and simple $95 price point for our lead offer. This is a result of listening to our customer feedback that our price points [ felt stated ].

Just as we are evolving our assortment to fit the needs of the customers shopping in our stores, our price points must evolve as well. As we continue to take pricing actions, we're being mindful of our customers' response by measuring KPIs around conversion and NPS, both of which remain healthy. As hopefully you've seen, we have made a significant transformation to evolve how we are communicating with our consumers.

During the third quarter, we launched our new Every Eye Deserves Better campaign for America's Best which has energized our 13,000-plus team members and is clearly resonating with customers. We are really excited with the response to our new campaign, which has resulted in a significant increase in unaided awareness in the third quarter. This new campaign was launched almost simultaneously with our new [ Cira ] platform, which is also showing positive inflection with consumer engagement. Beyond engagement, the platform is enabling greater operating efficiency and more personalized solutions with tangible results and increased number of exam schedule and higher customer reactivation rates.

During the third quarter, we launched our First Journey, targeting lapsed customers. Those customers who have not returned during their typical purchase cycle, 1 month in [ launching lapsed journeys ], and we are seeing significant improvement in click-through and open rates. Looking ahead, future journeys plan include post exam loyalty and scheduler journey, which are all about making sure people show up for their booked exams. We plan to learn from our initial work as we evolve into developing.

Those initiatives intended to improve appointment show rates as these are the most sensitive and business-impacting journeys over the next several quarters. Overall, I'm extraordinarily pleased with the urgency and progress we've made in a relatively short time to modernize our marketing approach, both in messaging and technology enablement.

Along with advancements in marketing, we are also continuing to enhance the digital tools and capabilities for our store associates. Earlier this year, we introduced digital selling tools that help our associates to visually explain complicated lens benefits like progressive and transitions to our customers. This tool has been impactful in pilot stores, allowing a more seamless and elevated experience for our customers to ensure they get the product they most want and need and we'll also be used for pricing demonstrations to explore various frame and lens combinations and help demystify the customer journey.

Beyond educational and product demonstration features, associates will be able to take digital measurements, offering a more precise outcome versus our historical manual approach. All America's Best and Eyeglass World locations are expected to have this technology live in store before the end of the year. Having capabilities like this, combined with our new lifestyle selling approach will be a game changer for our stores and the improvements we are making are being enthusiastically embraced by our store teams.

During the quarter, we saw sales gains and premium add-ons like superior progressive lenses and antireflective coatings. Behavior change is happening and ongoing associate adoption of lifestyle selling is certainly contributing to our results. Our doctor coverage remains healthy and stable, supported by innovative recruiting and retention strategies. We're seeing our best doctor retention numbers in recent memory, and we've once again successfully recruited over 10% of the entire graduating of [ Tom Tree ] [indiscernible] class. Our Remote Exam technology continues to provide additional capacity flexibility.

Our remote hybrid pilot, where in-store doctors perform exams in other stores is progressing well with more in-store doctors now trained to perform remote exams in other locations. Looking ahead, we have tremendous opportunity. We are pleased with the progress we're making on SG&A leverage. Our cost optimization has given us flexibility to drive AOI expansion even as we face higher health care expenses than planned.

Chris will go into more detail on how we're mitigating health care expenses going forward. We are well underway with our broader cost optimization efforts. This is a hyper focus for the organization, and we will be sharing more at our upcoming Investor Day. We're confident in our transformation strategy and the multiple years of runway ahead for continued growth. Our focus on higher value segments, enhanced product assortment and marketing and in-store selling approach continues to deliver results.

Our investments are strategically placed to strengthen our market position and create long-term shareholder value. We remain focused on our core mission of helping people see their best to live their best through exceptional eye care, and the modernization work we're doing across technology, branding and operations is just at the beginning of our commercial model evolution.

I look forward to sharing more details about our strategic vision and long-term growth opportunities at our November 17 Investor Day. I want to take a moment to thank our team for their exceptional dedication, focus and execution toward delivering an exceptional Q3 and year-to-date.

And with that, I'll turn it over to Chris to review our financial results. Chris?

Thank you, Alex, and good morning, everyone. As Alex shared, the disciplined execution of our strategic initiatives is reflected in our strong third quarter performance. These results continue to reinforce our confidence in the multiyear growth opportunity ahead. I believe the consistent performance we have delivered over the past year serves as a compelling validation of our ability to deliver on our stated objectives and drive sustainable results.

Now I'll turn to our third quarter results as compared to the prior year period. Please refer to today's press release for reconciliations of non-GAAP financial measures to their most comparable GAAP financial measures. For the third quarter, net revenue increased 7.9%, driven by adjusted comparable store sales growth of 7.7% and growth from new store sales. The timing of unearned revenue negatively impacted revenue in the period by approximately 80 basis points. During the quarter, we opened 4 new America's Best stores and closed 2 Fred Meyer stores. We ended the quarter with a total of 1,242 stores. Adjusted comparable store sales growth in the period was driven by an increase in average ticket of 7.1%, which reflects a combination of price increases implemented in Q4 and Q1 as well as the benefit from our refreshed merchandising mix and new selling methods.

Overall customer transactions were relatively flat compared to the prior year as healthy trends in our managed care business continued to offset softer traffic in our cash pay business. As a reminder, last year, we ran promotions targeted at cash pay consumers in Q3 that we chose not to anniversary this year. Our eye exam conversion to product sales has remained consistent with prior quarters, which is a key indicator of customer acceptance of our merchandising and pricing transformation. As a percentage of net revenue, cost applicable to revenue decreased approximately 40 basis points. The resulting increase in gross margin is driven by our growth in average ticket and leveraging our optometrist-related costs. We expect gross margin to expand slightly for fiscal 2025.

Adjusted SG&A was $242.3 million in the third quarter. And as a percentage of revenue, leveraged 10 basis points despite ongoing headwinds in health care costs that many companies like ours are experiencing. Better leveraging our SG&A remains a primary focus for the organization, and we remain on track to leverage adjusted SG&A this year. Additionally, we will share more about the multiyear cost optimization opportunities we are pursuing at our Investor Day.

Adjusted operating income was $19.8 million compared to $14.3 million in the prior year period. Adjusted operating margin increased 90 basis points to 4.1% in the quarter. Net interest expense was $4.1 million, same as the prior year period. Adjusted EPS increased to $0.13 per share in the third quarter of 2025 from $0.12 per share a year ago. For the year-to-date fiscal 2025, we delivered adjusted comparable store sales growth of 6.4%, supporting adjusted operating income margin expansion of 120 basis points and nearly 18% growth in adjusted EPS compared to the prior year.

Turning next to our balance sheet. We ended the period with a cash balance of approximately $56 million and total liquidity of $349.6 million, including available capacity from our revolving credit facility. During the quarter, we repaid $15 million of the borrowings outstanding under our revolving credit facility, bringing the balance to 0. Year-to-date, we have repaid $94.7 million in debt and convertible notes, bringing our total debt outstanding net of unamortized discounts to $253.4 million at the end of Q3.

For the trailing 12 months, we ended the period with a net debt to adjusted EBITDA of 1.1x. Year-to-date, we generated operating cash flow of $133.1 million and invested $48.4 million in capital expenditures, primarily driven by investments in new and existing stores and information technology. We continue to maintain a strong balance sheet and healthy cash flow to support our growth and capital allocation priorities.

Moving now to our outlook. We are very pleased to be in a position to raise our expectations for the year. We now expect revenue of $1.97 billion to $1.99 billion, adjusted comparable store sales growth of 5% to 6%, adjusted operating income of $92 million to $98 million and adjusted EPS of $0.63 to $0.71., which assumes approximately 81 million weighted average diluted shares outstanding. As a reminder, this outlook incorporates the benefit of the 53rd week which we estimate will add approximately $35 million of net revenue and approximately $3 million of adjusted operating income for the year.

Our adjusted comparable store sales growth is calculated on a 52-week comparable basis to the prior year. As Alex mentioned, we are in process of executing our Q4 pricing updates in line with our multiyear pricing strategy playbook. These pricing actions are factored into our full year guidance. We have been closely monitoring consumer response to the merchandising and price framework we've implemented to date and have seen consistent conversion and NPS rates. We remain confident that we can continue to evolve our assortment and pricing architecture in a way that drives value for our consumers and our investors.

As we discussed, we continue to see strong traffic for managed care customers offsetting a decline in cash paid traffic. We continue to guide for traffic trends to be similar to what we've seen year-to-date. Disciplined cost management remains a primary focus for the organization, and we are excited about the projected operating margin expansion presented in our 2025 guidance.

Our outlook includes the cost-out actions we've discussed in prior quarters as well as other cost mitigation actions to offset headwinds in health care costs and our investments in associate variable incentive programs as we continue to reward the team for exceeding their plan and drive behaviors contributing to our top line performance. We expect improved leverage on incentive compensation in the future as these behaviors become the new baseline. For clarity, our outlook continues to include the anticipated impact of tariffs, which are not materially changed from prior quarter's guidance.

Now turning to our expectations for capital expenditures. We reduced our guide for CapEx to $80 million to $85 million. This change is largely driven by investments in certain projects that have shifted into fiscal 2026. We remain on track to open 32 new stores during fiscal 2025, including planned closures for the year, we now expect to open 9 net new stores in 2025. This includes 21 America's Best stores opened through the end of Q3 and an expected 11 openings in Q4.

In addition to new stores, we expect to close 23 stores in total this year related to both our fleet optimization as well as overall disciplined fleet management. This includes 4 store closures expected in Q4. For all other details regarding our outlook, please refer to today's press release. And with that, I would like to thank you for your participation in today's call. Operator, we are now ready for questions.

[Operator Instructions] Our first question comes from Michael Lasser of UBS.

you've been making a lot of changes over the last year or so, especially with respect to merchandising the assortment, what signals are you looking for that you're not going too far and it would only come to light too late? And when do you think traffic will inflect? Is that something that we can -- we should reasonably expect within the next couple of quarters?

Thanks, Michael, and yes, as it pertains to merchandising, we're really happy with the changes that we've made -- that have been made to date. We're monitoring NPS, we're monitoring conversion rate from exam to purchase to ensure that we're not pushing too far. But we do think we have really a long way yet still to go. A couple of signs that we're incredibly encouraged by. One is that our cash pay consumer, the one that we've historically thought is the most sensitive, they're actually adopting some of our higher price point items at a higher clip than we addition -- than we initially anticipated. That's both on the frame side and the lens side.

We're seeing inventory turns of our higher-value frames that we just introduced actually exceed our expectations. So we think that's a really good sign as well. And those are data points that come through. in real time. So from early innings in our merchandising evolution strategy, all signs are still pointing to a very, very positive response rate to what we're up to. In terms of traffic inflection, we have seen traffic inflection where we have intended to see it on the managed care customer on the outside or ex customer and on the Progressive wear.

We're certainly pleased with the inflection in traffic that we're seeing driving those customers into our stores. It was a very intentional approach on behalf of the team to do that. But overall traffic remains flat as a cash pay consumer remains a little bit depressed. So again, overall, I just couldn't be happier with all the signals we're seeing in the business.

My follow-up question is, given the pricing that you're going to take in the fourth quarter as well as what you will have yet to lap from what you've taken earlier this year. If all else remains equal, what would be the contribution from pricing if nothing else happens as you look towards 2026, just so we can get a sense of what the embedded comp already is in the model.

Yes. Thanks, Michael. Great question. So we are lapping our price actions from last year, call it, in the mid-November time period. We made some additional changes to the promotion in Q1 of this year. So the pricing actions that we're taking in Q4, albeit a different character than what we did last year, right? Remember, we did frame pricing and we took some changes to the base offer. This year, we're evolving it to be a bit more surgical again, around lenses, lens packages we're changing the offer to be a bit more modern.

As I'd like to say around here, we're retiring the decimal points to modernize our price points. But largely, we believe that our pricing actions will yield around the same contribution in '26 as they've yielded in '25. .

Our next question comes from Simeon Gutman of Morgan Stanley.

A follow-up to the prior one. First, you mentioned some of the pricing changes for '26 center on contact lenses. It seems like that category may be a little more commoditized, correct me if I'm wrong. So where do you sit versus peers or brands at this point? And how much leeway can you have? And then to put words in your mouth, you said the pricing benefit may look similar to 2025, is the ticket lift that we saw this quarter, I think, around 7%. Is that the right proxy for '26?

Yes. Great. On contact lenses, so we're actually taking some pricing actions on ophthalmic lenses, and we will be taking some pricing actions on contact lenses go forward. One of the things that's been a historic truth for our business is we see cost increases come through from the contact lens vendors. We typically pause for about a quarter or so until we take pricing on contact lenses, just to see how the market responds because to your point, it is a more commoditized, more shoppable product in our category.

So there generally is about a quarter delay between the time we get cost increases from vendors and when we take our pricing actions to the consumer, but we're always really mindful of how we're positioned, especially versus the online channel. As it pertains to ticket evolution throughout overall '26, we think of our ticket evolution really in 3 components. There's a pricing component. There is an assortment mix component, and there's also a consumer mix component that drives our ticket as well. right?

As we're driving more outside Rx, more progressive, more managed care customers, those consumers tend to have a higher purchase value when they shop with us. So really, you have to deconstruct our average ticket growth along those 3 components. We're going to share more about our long-term algorithm on the 17th and share some more of the details specifically where we'll showcase where we're underdeveloped and where we think that can continue to grow over a multiyear time horizon.

Yes, And Simeon, just one data point for -- you asked about the Q3 run rate. Just keep in mind that we're lapping a promotion from last year, which kind of gave us some additional upside to average ticket Q3 this year versus Q3 of last year, which we don't think we'll replicate again in 2026.

Okay. And then a follow-up, this is maybe preempting the Investor Day a little, so respect maybe less of an answer. The flow-through of the business, if you're going to -- if the business is going to comp, call it, mid-single digits for the foreseeable future, are you spending into it? It sounds like there's some advertising and other things you can spend and flow-through comes in outer years? Or should there be proportional flow-through as the comps accelerate here?

Yes, it's a great question. Look, I think we're super pleased with the year-to-date operating margin expansion of 120 basis points this year. I'll tell you that as a focus area for this management team, operating margin expansion remains a primary focus kind of year-over-year. We are definitely investing back into the business to bring some of these strategic initiatives and transformation to life. But we believe we can do so continuing to drive positive operating margins.

Our next question comes from Robert Ohmes of Bank of America.

Alex, not to front-run the Analyst Day either, but can you give some color on what market share trends look like from your perspective both on a volume and dollar basis? Are you guys gaining share on both the dollar -- obviously, on a dollar, I would expect you are, but on a unit basis as well?

Robbie, great question. So we actually do believe we're getting share on a volume basis as well. So we look at the [ Vision Council ] data that gives a good indication for what exam growth is in the category, and we have been outstripping that through kind of year-to-date. So we do believe we are gaining share on a customer account basis.

And then my follow-up question is, can you guys give a little more color on the cash pay customer? Are you -- it's interesting that you're seeing them trade up. But is that -- what are you seeing there? And are you seeing any kind of changes that you could see growth in that cohort again? .

Yes. No, we're -- I'd say 3 things related to the cash pay consumer. We are seeing ever so slight acceleration in the purchase cycle that we think is an encouraging sign. On the ticket evolution perspective, we are seeing them, like I said, up into higher frames, higher-end frames at a rate that was much above what our expectation was when we started to make some of these changes, right? When we started to make assortment changes early on, we thought that these were going to be more significantly impacting to the managed care customer.

The managed care consumers absolutely have responded well. But the really pleasant surprise has been the cash pay consumer that's also opting in to our more premium frames. The third component is I'm super pleased with some of the advancements we've seen as we started leaning into more premium lens sales, we're seeing the cash pay consumer also opt into a higher degree of antireflective, of transitions and a more premium progressive lenses.

So the uptake there with the cash pay consumer has also been super healthy. One additional point just to note is that there is absolute growth in the managed care consumer over the cash pay cohort. So actually, the cash pay cohorts are becoming managed care customers as the managed care category grows in general, but somewhere in the rate of 2% per year. So again, I think our strategy has been working super well for managed care consumers and for where the cash pay customer is. We're also super pleased with the progress being made there.

Our next question comes from Brian Tanquilut of Jefferies.

This is Cameron Harbilas on for Brian. Can I dig a little bit more to the cash pay consumer? You guys said you're gaining share. So it almost sounds like it's not people switching to other providers, but it's just the cash pay consumer base as a whole in the industry. Are you seeing any losses to other competitors? Or do you think it's just like a pause in demand that you expect to reaccelerate in the future?

Yes. Again, kind of just double clicking it, we actually do think we are taking share from the category. I can't speak to specific retailers or competitors that we could be seeing some movement between. But on a category basis, we are share takers based on the data that we have at our fingertips.

But that's true for both the cash pay and the managed care consumer, right? This is the consumer group in general. The -- I think the thing that's true across the category is there is still a delayed purchase cycle of the cash pay consumer. I'd say our data point that months between purchase is still depressed, is a true one for the category. And as we've talked about at length over many, many of these calls, at some point, that has to accelerate as we burn through the purchases of consumers that were made in the kind of post COVID era.

And then just as a follow-up, thinking about pricing actions in Q4, that price increase to $95 for an exam, that's going to hit in Q4, correct?

That's correct. Yes. That's going to be rolled out on November, call it the weekend of November 15, November 16 is when that will go live.

Our next question is from Paul Lejuez of Citi.

Curious if you could talk about what's happening on the competitive front from a pricing perspective. And if you're seeing anything today on the pricing side that's different than what you were thinking 3 months ago?

Yes. So in terms of category pricing, our [ category scan ] would indicate that the category is generally growing on price versus on exam growth or customer count growth. And I think that's been a true statement for the last 5 years. And I think historically, we've shared that National Vision has not kept up with the market in terms of price evolution, and we are certainly using this as an opportunity now to close that gap.

We still believe at our core that we are going to be the destination for value in the category, right? We are not looking to match some of the more premium price competitors in the market, but we are certainly closing the gap versus some of the actions that they have taken over the past 5 years.

Got it. And I'm also curious if you could speak to any regional differences that are noteworthy.

Generally, not so much. I mean the category doesn't really experience a ton of regional price discrepancy, at least from a chain retail perspective.

Our next question comes from Kate McShane of Goldman Sachs.

We were curious about 2 things. One, with regards to just new customer acquisition, is there anything more there that you can tell us about how many new customers you're acquiring that are walking through the door for the first time? And just what the brand awareness scores may have changed or how they've changed since the brand relaunch that you've had? And then our second unrelated question is just with the change in CapEx, is there anything meaningfully changing with the projects that you're pursuing in '25 versus '26

Yes. Kate, thanks for the questions. I'll take the first one and then Chris can take the CapEx one. As it pertains to traffic, we're seeing traffic growth in the low teens for managed care outside Rx and progressive wearers.

So again, from our traffic-driving initiatives, that's where we're seeing, and that's where we pointed our assets to drive growth. With the brand relaunch in the third quarter, we're super, super happy with our growth in unaided brand awareness. Since we've launched a new campaign, we've actually seen some of our best scores today. We've seen unaided brand awareness grow around 19%. We've seen brand consideration up about 10%. And our overall creative copy has scored better than our ads in recent memory.

So again, in terms of things that give us a whole lot of confidence in our direction, the leading indicators of our new campaign resonating with consumers. Again, we just could not be happier with the results, and we couldn't be happier with the early indicating scores that we've seen on our campaign assets.

Kate. And on the CapEx front, the decrease in our guidance for capital really just comes from a timing perspective. We're not investing any less in the strategic initiatives that we anticipate investing in. It really just becomes a matter of timing that bills will be paid shifting into 2026 versus Q4 of this year

[Operator Instructions] our next question comes from Matt Koranda of ROTH Capital.

Just wanted to see if you could break down the lens pricing actions that you referenced earlier in a little bit more detail. Is that going to be a basic ophthalmic lenses or more specialized lenses like progressives and coatings. And I guess how would those actions impact out-of-pocket spend for managed care customers?

Yes. Great question. So we're taking -- this is going to be an era of much more surgical increases, right? Because lens pricing is a much more complicated endeavor. We are taking some price changes on some coatings. We are taking some price changes on our lens materials, in light of some planned reimbursement rates. So we're considering how plans pay and what the division is between plan pay versus member out-of-pocket in our lens pricing architecture. .

So those are really the areas of focus. So when I talk about our lens playbook evolving, the no-regret actions we've taken previously have been more of the kind of straightforward obvious 101 level stuff. And now we're graduating into 201 pricing architecture within optical.

Okay. Makes sense. And then my follow-up, I guess, is if I look at the fourth quarter implied comp, even if I'm sort of looking at the higher end of the guide, I guess, it's in the kind of mid-4% range, which would be a bit of a deceleration from the third quarter growth rate. Is that actually what you guys have observed in October? Just wanted to hear a little bit more color on sort of what you're seeing on the ground level. .

Yes. I think in Q4, we haven't seen anything that would materially take us off of our guide. We did -- just a reminder, from a Q3 perspective, right, we're lapping our promotion. So as you think about the run rate from Q3 into Q4, we should see some deceleration in comp driven by that. From a consumer sentiment perspective, I think we're remaining pragmatic about what is our customer sentiment to open the wallet in Q4, given just some of the macro uncertainty or especially around the holidays.

Our next question comes from Anthony Chukumba of Loop Capital Markets.

I guess my first question, you talked about the new America's Best advertising campaign, which I've seen it a lot. It's a vast improvement. I don't miss [ Ally ]. I believe that's his name. But was -- and you also talked about taking price in America's best. I was just wondering what your plans are for Eyeglass World in terms of a new advertising campaign and also potentially raising the opening price point. .

Anthony, thanks for that. One of my favorite topics recently with our management team, actually. So as we have just kind of cleared the work with America's Best and just to be clear, there's a lot more to do, right? And in terms of marketing evolution, we've nailed the campaign assets that we feel just so great about. There is more work to do on the media side on America's Best. Historically, I've talked about we needed to Rearchitect our brand campaign and messaging so that we could have assets that work better in mid-funnel media.

We now have that. So we're turning our attention a bit to now how we invest the media go forward at America's Best. But we're turning our creative teams onto an eyeglass world replatforming. So I would look to that as a 26th initiative [indiscernible] [ Prive ], our Eyeglass World, General Manager, is going to share a little bit more color on that on the 17th. But we do plan on taking a similar approach to what we took at America's Best for Eyeglass World in 2026.

That being said, we are really, really happy with the early success that we're seeing in Eyeglass World. Eyeglass World is comping in the mid-single digits for the first time in quite some time. And that's been on the back of some assortment evolution and some price evolution at Eyeglass World taken out of the America's Best playbook. So we're borrowing from the America's Best playbook. We haven't fully yet rolled it out. but we're seeing some really nice early wins with the Eyeglass World brand.

Got it. That's really helpful. And then just my second question, a quick one, just in terms of men's basic care penetration. I know it was 40% for a while. Last quarter, I believe you said it was 50%. I was just wondering if we had any update on that.

Yes. So managed care penetration is growing. Like I said, it's been growing in the low double-digit rate for the past quarters, and we're still on that trend.

Yes, I think what we had said previously that our Northern Star was 50%, not that we were at 50% just yet. We entered the year around the 40% penetration mark, and we do see that growing as part of that journey to 50%.

our next question comes from Dylan Carden of William Blair.

Curious if you could unpack some of the puts and takes in the gross margin for the quarter? And maybe specifically, kind of some of those comments around the leverage on optometrist costs. And what to expect, perhaps, from a rate of change standpoint as you raise your teaser price? And then kind of related, how you're thinking about availability of doctors now that we're kind of in a more stable market go forward relative to a scale. .

Yes. I think we were excited about our gross margin expansion in Q3. As we saw neutral traffic and increase in average ticket just us kind of think through the operational impact of that. We're generating more value per customer without necessarily needing to put more doctors in lanes. So we did see some improved leverage there, which we're -- even more excited about is Q3 is a large hiring quarter for us to generally bring on a lot of doctors that are not as productive as they're onboarding with us.

In terms of kind of long-range opportunity, I think it's an area for us to continue to focus on as we drive -- focus both on average ticket and traffic. We're remaining laser focused on how do we drive efficiency in the doctor spend line as well as other areas of SG&A.

And then, Dylan, just a couple of sound bites on overall doctor recruiting and doctor availability. I'm pleased that this is a topic that is a management team we're not having to have a whole lot of discussion about at the moment, right? We're super pleased with what we're accomplishing from a recruiting perspective. We don't necessarily see a lot of risk or challenge from a dark store perspective.

So it's a topic that, again, full credit to the organization for the last few years for what's happened from a remote capability perspective, from a hybrid capability perspective from dialing up our recruiting efforts and landing the right messages so that we can recruit over 10% of the graduating class every year. So again, it's, I think, a great progress that's been made over the last few years, and we're now continuing to benefit from.

And I don't know how much you can speak to this, but [ Essilor ] has put out some pretty large numbers as it relates to the Met glasses. Any comment you kind of have about the opportunity current business, anything really?

Yes. I mean the -- our bullish notion on it is similar to the premium frames turning at or above our expectations, we've seen great performance with Meta in the first 50 pilot locations that we rolled out, again, exceeding our expectations.

And as I've talked to my pals at EssilorLuxottica, I'd say that in the 50 stores that we've launched our turns and sell-through is among the best that they've seen globally. So we're really happy with our first kind of entree into the smart glass arena. Hence, our plans to scale it to an additional 250 stores as rapidly as possible.

Our next question comes from Adrienne Yih of Barclays. .

It's great to see the progress on all the initiatives. Alex, I guess my first quick question is the trends that you saw throughout the quarter. I'm imagining they sound like they're pretty consistent from back-to-school through end of quarter and into current day. Also, are you seeing the cash pay consumer the target household income is edging upwards in any way to suggest that they're a little bit becoming more resilient to kind of price increases. And kind of along those lines, what advertising or acquisition strategies are you using to engage this MC customer to get them into the exam room and to bring them in-house?

Thanks, Adrienne. Great question. We didn't see much kind of variation throughout Q3. I think the character of our sales July, August, September, we're roughly all kind of in line and similar. So not a whole lot of variability there. And as Chris mentioned, in October, we haven't seen anything that would signal a difference in our guide or in our performance.

What we're doing from an acquisition perspective against the mid -- sorry, against the managed vision care consumers, specifically activating a bit better mid-funnel. We're spending a bit more in social. We're spending a bit more in display. We're shifting our media out of overall kind of broad TV advertising into more digital assets. So if you think about historically, we've probably spent 60% of our media budget on linear, we're beginning to pull that down and invest that in more targeted digital assets.

So think of your YouTube TV, Hulu, et cetera, where you can be much, much more targeted to a specific consumer or consumer cohort. So this is going to be a continued evolution for us from a company that was historically spending the vast majority of our advertising on linear and in search that we're now entering into spending more mid-funnel where we can be more targeted. But that's certainly going to be part of our media evolution in '26.

Okay. And then does that -- because of that target where you're going, does that necessarily mean that you're acquiring that managed care customer at an earlier age at the beginning of their career perhaps?

Well, what it means is we are acquiring the managed care consumer when either they become insured for the first time, and we are talking to managed care consumers that maybe historically, we weren't in their consideration set. And I think one of the things we've learned is that our historical message of [ 2 pair ] of eyewear for x price with an eye exam was a very compelling message to the cash pay consumer, but it didn't necessarily speak to the managed care consumer because they knew they were covered by an insurance benefit.

So the notion of an included exam didn't resonate as strongly with them. So being able to shift and change our messaging in a way that's more targeted to that consumer specifically, I think we now have the opportunity to reinforce with them that we actually are an obvious brand destination for them when historically, they might not have even had us in their consideration set. .

That's super helpful color. And then for Chris to kind of model, I guess, modeling ones. In terms of the health care costs, obviously, they're kind of limiting flow through in the third quarter. Was that kind of like -- was that kind of a step up in the health care costs? How much are those up year-on-year? And then on the incentive compensation, same thing, typically, I guess, you get some accruals in the back half of the year, third quarter, fourth quarter. So just the timing of when we'll see some -- maybe less pressure on the incentive comp accrual.

Yes, great question. On the health care cost front, that's been something that's been kind of burdened in the P&L. Each quarter, year-to-date Q3 was a little bit more disproportionate in terms of the magnitude of impact. And our guide does assume that, that continues into Q4. In terms of the variable incentive compensation, I mean that's really something that we'll see kind of rebalance as we get to 2026 planning and guide.

We think we're adequately accrued for business performance, inclusive of what's in our guide. So while it will be -- again, said simply, it's in our guide that the STIP accrual or short-term incentive accrual remains consistent with what we've seen year-to-date. And again, it's an area that we're making intentional investments in rewarding the team for driving these behavior changes. But again, as those behavior changes become -- run the business, we do expect to see leverage in 2026.

No, we love to see incentive comp go up. That's always a good thing. .

We'll see you in a couple weeks -- in next week.

Our next question comes from Zachary Fadem of Wells Fargo.

This is David Lanes on for Zack. So you're still on track to open 32 new stores this year. Curious if you can walk through the new store economic model as it stands today and provide any color around openings for '26.

We'll share more details on our '26 openings at our Investor Day . In terms of new store economics, really no material shifts in terms of what we've previously communicated. As we're thinking about long-term evolution of the model, right, as we contemplate things like new store formats, and some of the infrastructure that we're building from a marketing and CRM perspective, we do expect over time that these infrastructural investments will help us accelerate our ability to break even in new stores. But we're still in the early innings of observing kind of the data coming back from these initiatives to be able to model that in.

Got it. That's helpful. And then can you talk about the ramp of remote in a bit more detail on where penetration sits today?

Penetration of remote, we are north of 70% of our locations are enabled with remote. We are scaling remote to a handful more Eyeglass World locations in context of the doctor model switch out that we just executed in the third quarter in Florida. We are deploying it in the markets that we have -- that we can deploy it. But I think we feel -- again, we feel great about the penetration where we are and the investments that we've made to date, and you can start to see a, I guess, more moderate pacing because we're at our saturation rate that we're hoping to achieve.

Yes. And just a reminder for the group due to state regulatory constraints, we cannot deploy remote in all of our stores, kind of a state-by-state consideration.

Thank you. I am showing no further questions at this time. I would now like to turn it back to the CEO, Alex Wilkes, for closing remarks.

Great. Thanks so much, everyone, for the thoughtful questions, and thanks for your focus on our business. As I hope you can take away from this call, we're super pleased with the transformation efforts that we've undertaken. The business is performing well. Our teams are engaged and the strategic initiatives that we put in place are playing out exactly as we'd hoped. So more to come here from National Vision guys, and we hope to see you all on November 17 at our Investor Day. Thanks so much.

Thank you for your participation in today's conference. This does conclude the program, and you may now disconnect.

Okay. Good afternoon, everyone. It's my pleasure to introduce National Vision to this afternoon session. Today, we have with us Alex Wilkes, Chief Executive Officer, newly minted Chief Executive Officer, it's so nice for you to be here, and Chris Laden, Chief Financial Officer.

And we'll kick it off with maybe just a lay of the land with the health of the consumer. I mean you guys have a lot going on with your business and new strategies, and so we'll definitely get into that. But could you maybe talk a little bit about the lower income consumer, which is still the crux of your consumer base and what you're seeing from that customer?

Yes. So interestingly enough, actually, the lower-income consumer actually probably represents about 10%, 20% of our business. Our consumer base actually more closely mimics the U.S. household income distribution than what we had previously been thought as a company.

And frankly, we're starting to see some resilience with that consumer. We've made a number of changes to our business model over the last year, advancing our assortment, taking some pricing decisions. And across the board, we're actually seeing consumers, one, opt into some products that are a little bit higher in the assortment range. And we're starting to see some kind of green shoots of acceleration of purchase cycle. We've certainly seen it with the managed care consumer. It's not quite back to pre-COVID levels yet with the cash pay consumer, but it is accelerating.

That's great to see. And I know it's been a lot on the execution side, but from a purchasing cycle standpoint, there has to be at least, I think, some pent-up demand at this point.

Yes, we're still seeing -- certainly, on the managed care side, we're seeing the purchase cycle return to historical norms. The cash pay is still a bit depressed. I think we still have a bit of 2022 stimulus that we need to burn through in order for that to kind of finally normalize. But from what we're seeing so far year-to-date, again, we're quite happy with where consumption is within our brands.

That's great. I have a bunch of questions about what happened in the last quarter and the strength in same-store sales, but maybe it's just better to take a step back. And since you're new to the role and have had implemented a lot of changes already. Could you maybe walk us through just in these early days, what you have found are strengths of the company, what are things that are more bigger challenges and just how you're approaching this new strategy for National Vision.

Sure. So for 19 years, National Vision was an incredibly successful company, and they were successful at running the analog replicator play that worked so well for them through a couple of private equity transactions. And that model worked, and it worked through the COVID time period when a couple of things, I think, occurred where the company needed to now rapidly catch up. The consumer evolved. There was a market that pre, call it, [ 22,000 ] when National Vision and America's Best was really embedded, the market was predominantly a cash pay market. The market today is 70% managed care. And the business model hadn't necessarily evolved to capture and to optimize for those managed care consumers.

The model had also evolved where consumers were expecting more, especially around lenses and contact lenses and frame assortment. And again, a model that had been so successfully replicated over a number of years, just hadn't adapted and evolved to the consumer of today. So as we started putting in strategies, we're not chasing a different consumer type. Frankly, what we're doing is we're pivoting our model to better serve the consumers that we're already capturing with our message of value. We believe that we will continue to be the undisputed value leader in the optical category, but we're redefining what value means.

And we think we can provide better value to the managed care members. We think we can provide better value to cash pay consumers by offering them better selection, better product. So that's one kind of component of a mindset shift within the organization.

But to your point, we are changing a lot. We've made some management team changes. We brought in a new CFO in, Chris Laden, who I had the privilege of working with for a number of years at EssilorLuxottica, and Chris is a wonderful addition to the team. We brought in a new leader to run America's Best. We promoted someone internally to focus on Eyeglass World. We have just this week, a new chief merchant that's starting with experience from EssilorLuxottica. We brought in some product people from Meta. We have a Chief Technology Officer starting who specialized in Adobe implementations, and we've talked a lot about this. We're moving to the Adobe CRM and the Adobe e-commerce stack as a way to drive loyalty and better stickiness with our customers. So we have made significant upgrades to our talent within the team.

We've also made some important changes with our external relationships. We have a new campaign and new brand identity that we just launched for America's Best within the last 2 weeks in partnership with VML that we frankly couldn't be happier with. Again, early innings, but so far, the reception we're getting from consumers has been quite positive. We've done some early stages in market testing and the assets that we put out creatively are performing better than our historic norms. So we're super excited about that. So yes, it is a time of rapid change and rapid modernization of the organization. And we're just super pleased that the consumer is responding to the work that we're doing today.

Yes. So Alex, you focused a lot on what are the things that were evolving today when you kind of think about what are the things that we're already going great, right? We've got -- almost 1,300 points of distribution across 38 states in Puerto Rico. So the team has done a great job of building out just a pool of very valuable assets through which we think that there's even more value to produce.

We've got domestic laboratories, diversified supply chain. So I think it was my third or fourth day in role when Liberation Day occurred, and it was a privilege and refreshing to begin to think through what are the implications on the business and the supply chain and sourcing of the business that already built kind of seeing these trends coming that not being a major focus point of a pivot point that we needed to make as an organization.

And the last piece of -- around doctors and doctors' scarcity, like these models, the optical retail model doesn't work without access to doctors. And from '22 through '25, the team did a really good job of building out remote care tech capability and technology to serve patients in a remote environment, building new recruitment strategies and flexible scheduling offers for optometrists that allowed us to attract over 10% of the graduating optometry class with optometrists being a really scarce resource in this category. Those things went really, really well from '22 through '25 and gave us a strong foundation to build upon.

So there's a lot going on, as you mentioned, and there's also, I think, a new -- I don't know if objective is the right word, but certainly a new initiative maybe for your sales force and those who work in the store. Culturally, I think they've been there a long time. How is it going in terms of messaging this, messaging the change to them. I know there's been training involved. When do you think that will start to make its way into the store? If you could talk a little bit about that.

So we're trying to take a balanced approach of changing things in the company, both mechanically and kind of behaviorally both with the team members in the store and with the consumers. And historically, we were a company that prided itself on helping customers leave the stores, having spent as little as possible because that was in our ethos of what we believe made for great value and a great long-term sticky consumer.

But as we're thinking about value and delivering great value to customers, that's a different equation now than it was when some of those ideas kind of first took root. And I'd like to give really kind of visual examples. And in the world where 40% of our customers are managed care and those managed care members have benefits that they pay for. If we're not helping them get those consumers, if we're not helping them get the most out of their benefits, we're actually not helping them get the best value. And that's a complete mindset shift for the team members who are always so hyper-focused on helping customers save as much as possible, getting what they actually need for their lifestyle needs and getting the most out of their insurance plans, it's a new muscle.

So to your question, we started kind of around the beginning part of the year just saying, "Hey, look, we're going to lift the -- this old way of working, you're no longer kind of constrained to that." Your job and your responsibility is to sell to a lifestyle need of the consumer. And around the May time frame, we brought all of our store managers together and talk them more around lifestyle selling, talk them more around kind of sales floor leadership. And then just a few weeks ago, before we launched our new Every Eye Deserves Better campaign, we rolled out a meeting -- kind of meeting in a box to the store managers to share and continue to reinforce this message with the stores.

But changing that mindset is something that's going to take time. It's going to take continuous training. It's going to take follow up. This is an incredibly complicated category to sell in lenses and insurance plans and a medical append to a retail experience, right? There's nothing quite like it that I found anywhere else and motivating our 14,000 people to help consumers differently is certainly going to take time, but they're up for the challenge, and they're certainly -- they're excited about it.

When we shared in May, the direction we're going with Every Eye Deserves Better and what that meant in terms of our anthemic kind of call to action, but the teams were legitimately excited about it. So they're embracing it, and now we just have to continue to reinforce and teach them how to do it on a daily basis.

Great. You mentioned the management changes. I think both at America's Best and Eyeglass World. Could you maybe talk a little bit -- I mean, I know this is -- the initiatives and strategies in places for the enterprise. But is there any, I guess, a difference between how you're approaching America's Best and Eyeglass World, might be much bigger than the other, but 2 different brands.

Yes. Sure. I mean, America's Best is obviously our largest component of our business. And it was the thing that we focused on first over the last year. So when we briefed our agency partners and our consultants, it was like, hey, guys, help us get America's Best pivoted first. And now we're really starting to see the success there, and we're going to start turning our attention to Eyeglass World.

As I mentioned, we promoted one of our most promising talents to run that brand. And her mandate is get some of the operational stuff kind of shored up, like there's some just pretty substantial opportunities to do that. We just made a significant change with one of our doctor networks within Eyeglass World, where we transitioned, what was a sublease arrangement with 40 or so locations to an employed doctor model to be more closely aligned to how we do business at America's Best at least operationally. So that was a change is made in the last 60 days.

And then we can turn our attention to like how do we evolve the brand; how do we evolve our marketing strategy akin to what we've done at America's Best. Not the same, applying the same approach, but with a different message and a different point of differentiation.

Could we maybe talk about the real estate strategy? How do you feel about the real estate portfolio as it is today? Is it the right portfolio to have if you're going to try and cater to a more managed care?

Actually, we feel great about our real estate -- current real estate portfolio. The vast majority of our America's Best locations are in regional power centers anchored by a TJX or a Target or something of that ilk, right? So I mean, we do have some freestanding smaller strip locations, but a lot of our real estate is actually in these regional draw power centers. So we don't think that real estate should be a hindrance to us executing our strategy.

Chris, I don't know if you have anything to add.

No. I agree. I think one of the interesting takeaways is that a lot of our -- as we think about a more premium frame assortment, better selling strategies to help articulate the benefits of more premium lens features. We're doing that with a consumer base who's walking in with a purchasing power higher than we previously assumed, right? The business was architected around the lower income cash pay consumer, but that's not actually who's coming through the doors today, as Alex mentioned earlier.

So as we think about the real estate and the consumer base that's attracting today. These are folks that are walking in already. It's a matter of how do we better meet them where they're already at and kind of better distribute our merchandising, our branding, our marketing, our consumer messaging to better resonate with the folks who are already coming through. I think as we do that, what we'll find is that other folks across those consumer segments will better understand what Eyeglass World, America's Best are all about and help with new customer acquisition.

Maybe if we can go back now to what you just reported last quarter and what you see for the second half of the year, very strong growth in the second quarter. I think the bigger contributor to the comp was ticket with traffic improving. Can you talk about the composition of ticket versus traffic? How you see that evolving? And what should we expect in terms of what could happen at the low end of your range in the second half versus the high end?

Yes. A couple of comments on. We believe that we have longer-term room to continue to evolve our ticket. We think we can do that both via price and through assortment changes over the next several years. So we think we have significant -- now we're going to maintain our intent is that we're always going to be the obvious destination for value. So we're not going to push on this over to the point that we're repositioned versus market, but we think that we have a significant amount of kind of price and assortment evolution that can benefit our comp going into the future.

From a traffic perspective, we did see, I think, 40 basis points of negative traffic in Q2. Year-to-date, we're about flat. That being said, we're far more concerned with the composition of our traffic than the net traffic number, especially given the strategy. We're underdeveloped in the category on managed care customers. We're underdeveloped on a customer type that's the outside Rx customer. That's the -- the customer that comes with a prescription from an outside doctor. We're underdeveloped there to the tune of 3:1 to the category. 50% of managed care versus 70% category. Progressive wear is 20% is our mix, 40% of category.

So we're really hyper-focused on how do we grow our customer count within those underdeveloped segments more than -- so than the kind of aggregate traffic number.

So your point is spot on. We grew Q2 from a ticket perspective. We think there's lots of runway left there. We are obviously putting initiatives in place to grow traffic, new campaign, new CRM, new targeted approach. But again, we're as, if not more concerned about the composition of our traffic versus the aggregate traffic number.

Yes. I think echoing a point earlier, right, we've put a disproportionate amount of our energy around kind of one of the fewer deciles in terms of the lower income cash pay consumer. So the evolution is really just better proportioning our energy, our assets or resources towards driving traffic across that broader group. So you might see some potential degradation in decile 1, but we expect to see that improvements in the other deciles that we're targeting.

And then when it comes to margin, that's another place that we saw quite a bit of success in the second quarter, both gross margins expanded as well as operating margin. Just how sustainable are these margin improvements? And do you think, or do you have a road map where you can get back to the historical operating margin range of 6.5% to 7%?

Yes, I'll talk to some of the current and let Chris take the future questions. On the current for sure, making some decisions on not anniversarying our promotion from last year that did drive traffic, but not necessarily accretive traffic was a contributor, taking the pricing decisions that we took contributed to operating margin expansion as well as gross margin expansion.

So that's where we know and understand now, we have a better sense for what are the opportunities to continue to lean into those levers to expand operating margins, both near term and long term. And we think those are going to be significant levers for us to move in that direction.

Chris, I don't know if you have thoughts on...

Expanding operating margin is a primary focus area for this management team. So the initiatives that we've spoken about to date are all going to drive -- we've seen it in the P&L about 180 basis points of operating margin leverage year-to-date, and we don't think that we're done. Something we haven't spoken about yet is a different view of kind of cost control. So it was March, April-ish this year, we signed a strategic partnership agreement with Accenture to come through and really turn over every rock and kind of the SG&A and indirect spend line.

We don't have anything in our guidance in terms of the savings opportunity there. We haven't communicated anything with more to come here in future communications. But we're really excited about the prospects that, that has.

And look, we've broken open contracts with Fortune 100 companies, invited them back to the table, even though there might be a couple of years left in the look, we're National Vision expects to continue growing at a very rapid pace for partners that want to join that journey with us, how we think about the strategic partnerships needs to evolve from where we've been. And those conversations have gone great.

And for the no rock left on turn, one of my favorite examples is like it's actually a debate point whether or not store managers are going to be allowed to order catalogs from Office Depot. I mean that's the level of granularity we're going to on the SG&A out.

So analyzing stuff like that, mileage programs, fleet vehicle programs, shifting, logistics, technology spend, everything, literally every aspect of indirect spend is under a microscope.

You had mentioned some recent successes in getting the 10% of the optometrist class graduating class. And I know it's been a very tight supply for -- maybe for a very long time actually. It's not just in recent years. Are you at a place now where you feel good about the level of optometrists that are working the store fleet? And how do you maybe manage this better in the future?

So we feel great about the number of optometrists we have currently affiliate with working with the store fleet. We -- that was a topic that consumed a lot of management time, focus and effort and previous to the kind of this iteration of management team. Luckily, it's not something we spend a whole heck of a lot of time concerning ourselves with now.

Of course, continuing to lean into it and continue to make sure we have the right mix of programs and offers in place to continue to attract and retain doctors is front of mind. But we don't have the kind of burning crisis that we might have had in the past.

And there's been a couple of things that have allowed that. One is we are the only optical chain at scale that employs doctors through various mechanisms across the nation. And that has become predominantly the mode of choice for newly graduated optometrists. The days of optometrists wanting to be entrepreneurs, starting their own optometric practice and shop and dealing with the complexities of insurance and receivables, that's less attractive today than it ever was.

And we offer a great salary. We offer benefits and we offer the security of employment. Some great flexibility as well and great flexibility so that we've introduced flexible scheduling options. So doctors a little bit can kind of choose their own adventure of when they work. That's resonated.

And most importantly, we have remote now in 730 locations. And for doctors that we want to recruit that want to actually practice out of the comfort of their homes, we offer that as a solution -- as a scaled solution to attract optometrists. So we think we're in a really, really good position with a super differentiated value proposition and a great message for those optometrists.

And then just to kind of close the loop on the optometrist piece, the remote medicine initiative that I thought was pretty neat like when it was being introduced as a solution to some of the shortage, where does that fit in your strategy now?

Yes. So we -- it is a -- it's just a way of doing business now. We offer remote. We offer in 730 locations. We just crossed our 1 millionth exam that was done through remote medicine. It is how we do business, and it fills a very important gap in our coverage. We're in super early innings of figuring out how remote hybrid could work. So remote today is doctor at home, seeing patient in-store, remote hybrid would be the evolution of one doctor in one location, seeing another patient and another. But there's a lot of change management involved in that because the doctors when they look at their schedule and they see that they might have 4 appointment slots that aren't booked, I can't blame them. They're like, hey, that's my time to maybe eat an apple and read a book.

And in the hybrid world, we have to create the right incentives, the right mechanisms, the right kind of training so that they want to kind of flag themselves for being available and seeing patients in another store that might be overcapacity. So we're approaching that very, very thoughtfully, very carefully. We think there's longer term ability to kind of leverage that spend, but we're just being -- we're being super, super cautious.

And I should have asked this question much earlier, but since we have some more time, I just want to make sure I ask it now. As you start to, again, speak to more of the managed care customer than you had spoken to before, how -- who do you now compete with more? Does the competitive landscape change that drastically? Or are you still kind of the value-oriented retailer just talking to a managed care customer?

I think we're beyond the managed care customer. I think we're a value-oriented retailer talking a managed care customer, a progressive customer and an outside Rx customer. And Chris' pie chart example is that we spent 90% of our energy talking to the $89 2-pair and an eye exam customer. And -- but we believe that we still have -- we've built this great business model on the notion of value and that value message can apply to these underdeveloped segments that we have.

I don't think it changes the competitive landscape. Optical is still a super highly fragmented market. Over 50% of care is delivered through independent optometry. So I don't see it changing necessarily competitively who we go at, like who we go after from a consumer perspective. I just think we're going to have an offering and a message that's more relevant to a broader base.

Okay. And we're asking 5 questions of every company that sits with us today. Some are applicable, some are not. So we'll try and like vouch it a little bit. One is just the overall health of the consumer. So just very simply what your expectations are for the consumer environment in the second half of '25 versus what you saw in the first half?

So obviously, I think we guided with some uncertainty in the macro in mind. But that being said, I think we're optimistic about the consumer. Again, we're seeing -- the thing that leaves me optimistic about the consumer is as we've introduced some better products, some higher-end price points, we're seeing consumers actually gravitate towards those and self-selecting into that. And to me, that's a bit of a signal of strength.

Again, we're seeing traffic in this environment. I mean, wow, flat traffic. That's pretty, pretty amazing. And we're seeing increased traffic, again, on the managed care side, on the progressive side. So there's I think signals to us that things are, if not improving, certainly stabilizing from a consumer perspective.

And where I get excited about our business is if consumer sentiment falls and pocketbooks tighten up, but I still think we've got a huge right to win in that environment as an obvious destination of value. So whether consumer sentiment is improving or degrading, I still think that there's opportunity for us to perform and to take share.

Okay. Our second question is on pricing, and we've talked a little bit about that today. But we're curious about like-for-like pricing. So anything maybe that as a result of higher tariff costs, if you're prices have to go up as a result. Are you seeing or would you expect any pushback or elasticity?

We've had very minimal tariff exposure and have had to take very minimal tariff-related price increases. We have actually been on a journey since last year, taking price increases even before this kind of tariff environment, because we believe we had ability to take price because historically, we weren't price takers when the category had. We have not seen consumer pushback or kind of internal measures of elasticity point to that the pricing that we have taken, not only stuck but hasn't created any type of ill consumer will.

Chris, I don't know if you have anything to add.

No, that's right. I mean our 2 elasticity measures we use internally are exam conversion to a materials purchase and NPS as most retailers would. And both of those metrics since we've implemented our pricing actions have either remained flat or gone up.

Inventory, what are your expectations for inventory growth into the second half?

No real expectations.

With regards to margin...

Sorry, just the reason for us, it's less of a concern. This is an inside baseball thing, but we run a showroom-based inventory model. So basically, if you go into our stores, you pick your frame and then it's manufactured and fulfilled from a central warehouse. So you're not actually buying the frame that's in the store, but that allows us to be very, very efficient because we have a pooled inventory at a central location.

Okay. With margins ex tariffs. So as you think about freight, wages into '26, do you think that's the better, same or worse?

Yes. Look, I think versus prior years, I think we're seeing some further stability in terms of if you look back to '21 through '24, especially on the wage side, where things were inflating at a higher rate than the years prior on average. Where we're super excited is we've got a clear point of view on cost actions and opportunities where we're able to actually take cost out of those components.

So you've kind of got the macro, what typical inflation look like for us. I think we're -- we would normally be riding the same wave, but I think there's more strategic initiatives we've got in place that should help invert those trends and actually deliver significant savings.

Okay. And then the last question is just about consolidation. Do you think there will be more market share consolidation in 2026 than there was in '25? I guess more of the same or less, the question.

I would expect probably more of the same. Yes, I mean I think the -- at least the consolidation in this category that's been kind of fueled by private equity consolidation of independent optometrists. I think it's still going to be ongoing. But I think the market is waiting to see these -- the private equity consolidators at one point is their next transaction on the horizon. I think everyone's kind of waited with [ paid and ] press to see how that plays out to see whether that accelerates or decelerate. So that's why I think it just kind of stays status quo until we have a better answer on that.

I agree. I think a key variable in that expand upon your thought is just interest rates. If interest rates stay relatively flat, and that shouldn't drive material changes in the ability for those to acquire or go find the next buyer.

That's right. That's right. Chris came from the world. He was consolidating veterinary hospitals before I recruit him. So he knows that space well.

Well, thank you so much for joining us today. I appreciate the time.

Thank you.

Thank you so much, Kate.