Thinking

Warby Parker (the « Company ») is a seller of direct-to-consumer prescription eyewear aiming to offer at an affordable price (glasses starting at $95, including prescription lenses) a wide range of designer eyewear. Founded in 2010, the Company’s growth was partly fueled by the digital transformation wave fostered by the coronavirus pandemic (with a clear inversion of channel mix between E-commerce and Retail in FY20). The Company filed to go public on the NYSE on August 24, 2021, through a direct listing. Before going public, it had raised c.€456m (source: Pitchbook). The Company stresses its impact in its S1- filing, perhaps to a higher degree than peer companies, considered here as a strong intangible asset, but also as a risk of not being able to maximize stockholder value. On top of the Company’s wish to deliver affordable eyewear, its core mission, it has a unique “Buy a pair, give a pair” program, and has obtained the relevant certifications as it is both a public benefit corporation and a B corporation. The Company is disrupting a legacy market, that of the optical industry, in which competition is fierce. To that extent, it is notable that the Company operates in both the e-commerce and Health tech verticals, unlike most DNVBs which generally operate on the sole e-commerce vertical. As such it has to comply with strong regulations both relating to e-commerce and to the Company’s operations in the optical industry. The Company operates a direct-to-consumer business model, with an integrated supply chain (through both in-house laboratories and partnerships with a limited number of third-party manufacturers), with the originality of having a hybrid distribution model through brick-and-mortar stores (40% of FY20 net sales) and strong online presence (60% of FY20 net sales). The Company has incurred strong growth over FY18 – YTD21, with a 2M+ customer base at June 30, 2021. The Company presents a positive Adjusted EBITDA of $21,9m in FY20, with however a $(55,0)m net loss in FY20 (to be compared to a nil result in FY19). Note that on top of the hit related to COVID (with a reliance on brick-and-mortar stores at the time), a significant part of the loss was driven by a stock-based compensation charge at the time of the Company’s Series G, not reflected in the Adjusted EBITDA. On top of financial and operational KPIs, the Company presents customer unit economics, in the form of average gross profit per customer and average contribution per customer, by bringing respectively its gross profit and its contribution margin (after acquisition and selling costs) to the number of active customers, i.e. unique customers that have made at least one purchase in the preceding 12m period. CAC is more complex, and the S-1 only presents a blended one. With the switch to a dominant e-commerce model, digital acquisition shall be closely monitored in the future!