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IPO Overview: Warby Parker IPO: 5 Issues You Ought to Know About Inexpensive Eyewear Maker Earlier than Going Immediately Listed

Warby Parker Inc., the company known for its affordable eyewear that sells online, through its app, and in stores, has filed for an IPO.

The New York City-based company initially submitted confidential filings in June. Now the official S-1 says it should be listed on the New York Stock Exchange under the ticker "WRBY".

Warby Parker
WRBY,

goes through direct listing on the stock exchange, a route other companies like Roblox Corp.
RBLX,
+ 3.40%
has taken. With a direct listing, stocks are not listed on the stock market by a team of underwriters. Instead, the stakeholders convert their stocks into stocks based on trading prices in private markets. The direct listing route is typically used by established companies that do not need the income from a more traditional IPO.

Warby Parker will offer Class A shares, entitled to one vote per share; Class B shares, which entitle shareholders to 10 votes per share and can be converted into Class A shares; and Class C Shares that have no voting rights.

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The company announced Thursday that it will sell more than 77 million shares, with trading on or about Jan.

Warby Parker will be a thriving, growth company, which means it won't have to make the same disclosures required by larger publicly traded companies. A company remains a thriving, growth company until it reaches a number of milestones, including more than $ 1.07 billion in annual sales.

Neil Blumenthal and Dave Gilboa, 41 and 40 years old respectively, are co-founders, co-chairs and co-directors of the company.

Prior to Warby Parker, Blumenthal was a director at VisionSpring, a nonprofit that trains men and women in developing countries to sell affordable glasses. Blumenthal is also a director at Allbirds, which went public this week, at the Sweetgreen lettuce chain, and a number of nonprofits including the Warby Parker Impact Foundation and RxArt.

Prior to Warby Parker, Gilboa worked for the consulting firm Bain & Company and the commercial bank Allen & Co. He is also on the board of directors of the Warby Parker Impact Foundation.

Andrew Hunt and Jeffrey Raider, both 40 years old, are the other two co-founders of Warby Parker and both serve as directors. Also on the board is Ronald Williams, 71 years old and former CEO of Aetna from 2006 to 2010.

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Founded in 2010, Warby Parker was inspired by the founders' concerns that glasses are expensive and the buying process inconvenient.

In its prospectus, Warby Parker says it aims to do good and make customers happy. Warby Parker has not only made glasses more affordable, but has sold more than 8 million glasses through the Buy a Pair, Give a Pair program. The company is also climate neutral, which it has achieved by purchasing offsets.

“(That motivation) drives us to defy convention – and sometimes forego short-term profits – but we believe that delivering remarkable customer experiences and making a positive impact on everyone involved will result in continued long-term sustainable growth and profitability. “Says a letter from the co-CEOs contained in the prospectus.

Warby Parker glasses start at $ 95 including prescription lenses and can be purchased digitally through a free home try-on system or virtual trial system and from 145 Warby Parker stores. The company keeps prices down by selling directly to the consumer and bypassing middlemen.

The company recorded a net loss of $ 55.9 million in 2020, after breaking even in 2019 and a loss of $ 22.9 million in 2018. In 2020, the company had sales of 393 . $ 7 million compared to $ 370.5 million in 2019.

Around 95% of net sales in 2020 came from the sale of glasses, 2% of sales came from the sale of contact lenses, 1% from eye exams and 2% from eyeglass accessories. The company expects to expand its eye exam customer base.

For the six months ended June 30, 2021, net losses were $ 7.3 million and revenue was $ 270.5 million. The company has more than two million active customers and nearly 3,000 employees.

According to the prospectus, about 76% of Americans were using some type of vision correction in 2020. The number of Americans 65 and older will more than double in the next 40 years, and at least 84% of people in this older age group wear corrective lenses. The increasing use of screens such as mobile devices and computers has contributed to the need for vision correction. The glasses are replaced every two to two and a half years.

Warby Parker says that between 2015 and 2019, it had a 50% retention rate from its acquired customers within two years of their first purchase. After four years over the same period, the retention rate was almost 100%.

According to Statista data in the prospectus, the eyesight industry is expected to grow at an average annual growth rate (CAGR) of 9.2% between 2020 and 2025.

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Here are five more things you should know about Warby Parker before it goes public:

Most of the decision-making power will rest with the co-founders and co-CEOs of Warby Parker

The company's stock structure after the IPO will give the company's founders and top executives considerable control that could last until October 1, 2031.

“With the ten-to-one voting ratio between our Class B and Class A common stock, our Co-Founders and Co-CEOs could collectively continue to control a significant percentage of the common voting power of our common stock and would therefore be able to manage all matters our shareholders concern Authorization will be submitted to control by the auto-conversion date if all outstanding Class B Ordinary Shares are automatically converted into Class A Ordinary Shares, ”the prospectus states.

This means that other shareholders have little control over the running of the company and no control over decisions such as the election of directors, changes to organizational documents, mergers, consolidations or sales of some or all of its assets.

As a loss-making company, it won't be paying dividends for the foreseeable future.

Warby Parker does most things in-house – and that could limit his ability to grow

Warby Parker says his business model of doing most things in-house could cause problems.

“(D) the vertically integrated nature of our business, where we all design our own glasses in our New York headquarters, manufacture all of our lens frames on a contract basis, the glasses we sell in our own optical and fulfillment laboratories, as well as third party laboratories Selling and servicing our products solely through our own retail stores, e-commerce sites and mobile applications exposes us to risk and disruption at many points that are critical to the successful operation of our business and can make it more difficult for us to to scale our business ”, it says in the prospectus.

There could be supply chain issues outside of those caused by COVID-19

Supply chain issues plagued businesses across the consumer space this year. However, the company warns that its business operations also face other challenges.

Warby Parker sources more than half of the cellulose acetate used in its frames from a single supplier. Other components are sourced from the USA, China, Italy, Vietnam and Japan. The company also uses third-party suppliers for certain items, but has no long-term contracts with these suppliers.

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"We are therefore subject to the risk of bottlenecks and long lead times in the delivery of these components and the risk that our suppliers stop or modify components used in our products," says the prospectus.

"We may experience component bottlenecks in the future, and the predictability of the availability of these components may be limited, which could be increased given the ongoing COVID-19 pandemic."

Warby Parker says customers are slow to adopt e-commerce for eyewear

Warby Parker offers online eyewear shopping, one of the most important ways to stand out from a crowded competitive landscape. But the company says many customers are finding it more convenient to buy glasses in person.

"Improving the consumer shopping experience through an online platform is difficult because of the wide range of consumer demands for choice, quality, convenience and affordability," the prospectus reads.

When the company started, less than 2.5% of glasses were purchased online. Already now, the company says it has "historically generated a significant portion of our sales from our retail stores, and our growth strategy will depend in large part on attracting customers by growing our retail store base and expanding our existing retail business." Store. "

Warby Parker's business is actually seasonal

Customers who want to take advantage of health benefits before the end of a calendar year tend to boost demand in December.

“In accordance with our policy of recording sales on delivery, all orders placed at the end of December are recorded as sales on delivery for the following year,” said Warby Parker.

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