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What changed in Warby Parker Inc.'s 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Warby Parker Inc.'s 2023 and 2024 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2024 report.

+375 added−404 removedSource: 10-K (2025-02-27) vs 10-K (2024-02-29)

Top changes in Warby Parker Inc.'s 2024 10-K

375 paragraphs added · 404 removed · 326 edited across 8 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeThere is often a significant markup at 10 to 20x from manufacture to sale, as products are often burdened by various licensing, wholesale, and retail fees that support the legacy supply chain. Upon checkout, customers often find their vision insurance (if they have it) only covers a portion of their purchase. • Limited Ongoing Customer Engagement.
Biggest changeGlasses have historically only been offered at a premium price point, leaving millions of customers without access to stylish, affordable eyewear. There is often a significant markup at 10x to 20x from manufacture to sale, as products are often burdened by various licensing, wholesale, and retail fees that support the legacy supply chain.
And whenever we have room to improve, our teams are the first to know; our direct-to-consumer approach helps us to gather real-time customer feedback and act on it more quickly than our non-DTC competitors. • Sustainable, Predictable Growth . Eye care purchases are predominantly a non-discretionary medical necessity.
Whenever we have room to improve, our teams are the first to know; our direct-to-consumer approach helps us to gather real-time customer feedback and act on it more quickly than our non-DTC competitors. • Sustainable, Predictable Growth . Eye care purchases are predominantly a non-discretionary medical necessity.
Approximately half the market is fragmented and eyewear is sold through independent optical shops who drive the majority of their revenue through eyewear sales. This is unique in the medical world as it’s one of the only places where a prescribing doctor can sell you the product they prescribe.
Approximately half of the market is fragmented and eyewear is sold through independent optical shops who drive the majority of their revenue through eyewear sales. This is unique in the medical world as it’s one of the only places where a prescribing doctor can sell you the product they prescribe.
Our eyewear is considered a medical device by the FDA and regulated as such—so, where applicable, we follow the requirements set by the Consumer Product Safety Commission. We also comply with standards set by the American National Standards Institute for prescription eyewear and sunglasses (both prescription and non-prescription).
Our eyewear is considered a medical device by the FDA and regulated as such and, where applicable, we follow the requirements set by the Consumer Product Safety Commission. We also comply with standards set by the American National Standards Institute for prescription eyewear and sunglasses (both prescription and non-prescription).
Since then we have added many additional ways to engage with consumers—from our 237 retail stores to our Virtual Vision Test telehealth app—all with the intention of making the shopping process easy and fun for our customers. As we continuously seek to elevate the seamless customer experience, we leverage multiple components of our business model, including: • Customer-First, Direct-to-Consumer .
Since then we have added many additional ways to engage with consumers—from our 276 retail stores to our Virtual Vision Test telehealth app—all with the intention of making the shopping process easy and fun for our customers. As we continuously seek to elevate the seamless customer experience, we leverage multiple components of our business model, including: • Customer-First, Direct-to-Consumer .
When we started Warby Parker 14 years ago, there were not many examples of brands that had launched online. Yet we believed that building a digitally native, vertically integrated brand would enable us to circumvent traditional channels, directly build meaningful relationships with consumers, and offer high-quality products at a reasonable price.
When we started Warby Parker 15 years ago, there were not many examples of brands that had launched online. Yet we believed that building a digitally native, vertically integrated brand would enable us to circumvent traditional channels, directly build meaningful relationships with consumers, and offer high-quality products at a reasonable price.
Prescription eyewear consumers purchase new glasses approximately every two years, while contact lens customers typically reorder every 12 months. Given our brand’s strength and replenishment cycle, we believe we have significant opportunity ahead to grow our wallet share, and delight more and more customers. • Vertical Integration . We design and sell glasses under our own brand name.
Prescription eyewear consumers purchase new glasses approximately every two years, while contact lens customers typically reorder every 12 months. Given our brand’s strength and replenishment cycle, we believe we have significant opportunity ahead to grow our market share, and delight more and more customers. • Vertical Integration . We design and sell glasses under our own brand name.
We also engage contractors and consultants from time to time. We have invested substantial time and resources in building our team. We are highly dependent on our management, highly skilled software engineers, Customer Experience and Retail teams, laboratory personnel, and other professionals, and it is crucial that we continue to attract, develop and retain valuable employees.
We also engage contractors and consultants from time to time. We have invested substantial time and resources in building our team. We are highly dependent on our management, highly skilled software engineers, Customer Experience and Retail teams, laboratory personnel, optometrists, opticians, and other professionals, and it is crucial that we continue to attract, develop and retain valuable employees.
While there are approximately 45,000 optical retail stores in the U.S. as of December 2023, consumers are often unaware that power is consolidated among a handful of companies, whose influence spans the full eyewear value chain from design, to manufacturing, distribution, retailing, and insurance.
While there are approximately 45,000 optical retail stores in the U.S. as of December 2024, consumers are often unaware that power is consolidated among a handful of companies, whose influence spans the full eyewear value chain from design, to manufacturing, distribution, retailing, and insurance.
The eyewear industry is resilient to economic cycles given its medical and non-discretionary nature and is defined by durable fundamentals and trends including: • Most people need vision correction : The Vision Council reported that approximately 80% of adults in the United States use some form of vision correction, equating to approximately 208 million people.
The eyewear industry is resilient to economic cycles given its medical and non-discretionary nature and is defined by durable fundamentals and trends including: • Most people need vision correction : The Vision Council reported that approximately 80% of adults in the United States use some form of vision correction, equating to approximately 214 million people.
Based on analysis we conducted with a third-party research firm in 2021, we expect that our retail footprint has room to expand in the U.S. to 900+ retail stores, which is still a fraction of the approximately 45,000 optical retail stores in the United States as of December 2023.
Based on analysis we conducted with a third-party research firm in 2021, we expect that our retail footprint has room to expand in the U.S. to 900+ retail stores, which is still a fraction of the approximately 45,000 optical retail stores in the United States as of December 2024.
We strive to benefit our employees, customers, communities, partners, and the environment by advancing access to eye care and living our core values. Working closely with our nonprofit partners, we distribute glasses to people in need in more than 50 countries globally and many parts of the United States.
We strive to benefit our employees, customers, communities, partners, and the environment by advancing access to eye care and living our core values. Working closely with our nonprofit partners, we distribute glasses to people in need in more than 80 countries globally and many parts of the United States.
Consistent with our policy to recognize revenue upon order delivery, any orders placed at the end of December are recognized as revenue upon delivery, which may occur in the following year, and as such we typically see revenue increase sequentially from the fourth quarter to the first quarter of the following year.
Consistent with our policy to recognize revenue on order delivery, any orders placed at the end of December are recognized as revenue on delivery, which may occur in the following year, and as such we typically see revenue increase sequentially from the fourth quarter to the first quarter of the following year.
Every day, our team of over 3,000 employees is focused on our mission to inspire and impact the world with vision, purpose, and style (without charging a premium for it). Our ultimate objective is to provide vision for all.
Every day, our team of over 3,500 employees is focused on our mission to inspire and impact the world with vision, purpose, and style (without charging a premium for it). Our ultimate objective is to provide vision for all.
This includes strengthening our offering and position within: • Glasses. On average, we release 20 eyewear collections each year; we will continue to scale our core glasses offering by introducing new sizes, shapes, widths, lens offerings, and more to ensure as many people as possible can find a frame that fits, functions, and looks great. • Contact Lenses.
This includes strengthening our offering and position within: • Glasses. We release nearly 20 new eyewear collections each year; we will continue to scale our core glasses offering by introducing new sizes, shapes, widths, lens offerings, and more to ensure as many people as possible can find a frame that fits, functions, and looks great. • Contact Lenses.
On average, we release 20 new eyewear collections each year, often incorporating patented designs and extended sizing to offer our customers products that not only fit well but look great. As for frame materials, we select premium—from custom-designed cellulose acetate to ultra-lightweight titanium.
We release nearly 20 new eyewear collections each year, often incorporating patented designs and extended sizing to offer our customers products that not only fit well but look great. As for frame materials, we select premium—from custom-designed cellulose acetate to ultra-lightweight titanium.
Additionally, an estimated 53 million people in the United States wear contact lenses that are typically disposable, replaced on a daily, weekly, or monthly basis, driving frequent repurchase.
Additionally, an estimated 51 million people in the United States wear contact lenses that are typically disposable, replaced on a daily, weekly, or monthly basis, driving frequent repurchase.
Nearly 80% of contacts wearers purchase contact lenses at least once per year. • Increasing screen time usage : With the rising usage of smartphones, tablets, computers, and other devices, three out of four adults report experiencing digital eye strain at some point during the day, contributing significantly to increased vision correction needs and a steady influx of new customers within the eyewear market. • Acceleration of e-commerce penetration : While e-commerce penetration is at an all-time high in the U.S. and abroad, it is relatively small in the eyewear industry, representing approximately 10% of prescription eyeglasses sales in 2023 according to The Vision Council. • Increasing prominence of telehealth : The Vision Council reported that over 50% of people receiving an eye exam would be interested in having a virtual or telehealth eye exam.
Approximately 80% of contacts wearers purchase contact lenses at least once per year. • Increasing screen time usage : With the rising usage of smartphones, tablets, computers, and other devices, three out of four adults report experiencing digital eye strain at some point during the day, contributing significantly to increased vision correction needs and a steady influx of new customers within the eyewear market. • Acceleration of e-commerce penetration : While e-commerce penetration is at an all-time high in the U.S. and abroad, it is relatively small in the eyewear industry, representing approximately 10% of prescription eyeglasses sales in 2024 according to The Vision Council. • Increasing prominence of telehealth : The Vision Council reported that over 50% of adults that use eye products would be interested in having a virtual or telehealth eye exam.
From friendly and knowledgeable in-person exams at 194 of our retail stores as of December 31, 2023 to innovative telehealth services like our Virtual Vision Test app, we provide access to convenient and accessible vision services for primary vision care needs through optometrists employed either by us or by independent professional corporations or similar entities with whom we have contractual arrangements.
From friendly and knowledgeable in-person exams at 236 of our retail stores as of December 31, 2024 to innovative telehealth services like our Virtual Vision Test app, we provide access to convenient and accessible vision services for primary vision care needs through optometrists employed either by us or by independent professional corporations or similar entities with whom we have contractual arrangements.
As a pioneer of the direct-to-consumer model, and now through our multichannel business, we have unlocked access to affordable, quality eye care for millions.
As a pioneer of the direct-to-consumer model, and now through our omnichannel business, we have unlocked access to affordable, quality eye care for millions.
Our business has historically experienced a higher proportion of costs in each subsequent quarter as a year progresses due to the overall growth of the business and operating costs to support that growth, including costs 12 Table of Contents related to the opening of new retail stores and employee-related compensation to support growth.
Our business has historically experienced a higher proportion of costs in each subsequent quarter as a year progresses due to the overall growth of the business and operating costs to support that growth, including costs related to the opening of new retail stores and employee-related compensation to support growth.
In addition to lower prices, we introduced simple, unified pricing (glasses starting at $95, including prescription lenses) to the eyewear market. • We’ve built a seamless shopping experience that meets customers where and how they want to shop, whether that’s on our website, on our mobile app, or in our 237 retail stores as of December 31, 2023. • We’ve crafted a holistic vision care offering that extends beyond glasses to include contacts, vision tests and eye exams, vision insurance, and beyond.
In addition to lower prices, we introduced simple, unified pricing (glasses starting at $95, including prescription lenses) to the eyewear market. • We’ve built a seamless shopping experience that meets customers where and how they want to shop, whether that’s on our website, on our mobile app, or in our 276 retail stores as of December 31, 2024. • We’ve crafted a holistic vision care offering that extends beyond glasses to include contacts, vision tests and eye exams, and more.
As we continue to enhance our design capabilities, we believe this will be a competitive advantage moving forward. • Expanding Our Holistic Vision Care Offering. We plan to continue to build upon our existing products, while selectively introducing new offerings that aim to surprise and delight both new and existing customers.
As we continue to enhance our design capabilities, we believe this will be a competitive advantage moving forward. 9 Table of Contents • Expanding Our Holistic Vision Care Offering. We plan to continue to build upon our existing products, while selectively introducing new offerings that aim to surprise and delight both new and existing customers.
With BSI’s global reach, this engagement also provides us with a secondary audit partner for Asia should it be required. We are committed to making sure that working conditions throughout our supplier network are safe and that employees are treated with dignity.
With BSI’s global reach, this engagement also provides us with a secondary audit partner for Asia should it be required. 11 Table of Contents We are committed to making sure that working conditions throughout our supplier network are safe and that employees are treated with dignity.
Completing a yearly report, as benchmarked against the universally recognized GRI (Global Reporting Initiative) and SASB (Sustainability Accounting Standards Board, now under the oversight of the International Sustainability Board) frameworks, gives us the opportunity to examine how we’re aligning with our core values, assess if we’re growing responsibly, and to manage change more effectively.
Completing a yearly report, as benchmarked against the universally recognized GRI (Global Reporting Initiative) and SASB (Sustainability Accounting Standards 12 Table of Contents Board, now under the oversight of the International Financial Reporting Standards Foundation) frameworks, gives us the opportunity to examine how we’re aligning with our core values, assess if we’re growing responsibly, and to manage change more effectively.
We provide free access to various reports that we file with, or furnish to, the United States Securities and Exchange Commission (the “SEC”) through our website, as soon as reasonably practicable after they have been filed or furnished.
We provide free access to various reports that we file with, or furnish to, the United States Securities and Exchange Commission (the “SEC”) through our website at investors.warbyparker.com, as soon as reasonably practicable after they have been filed or furnished.
We are not presently a party to any such legal proceedings that, in the opinion of our management, would individually or taken together have a material adverse effect on our business, financial condition, results of operations, or cash flows.
We are not presently involved in any legal proceedings that, in the opinion of our management, would individually or taken together have a material adverse effect on our business, financial condition, results of operations, or cash flows.
Expanding internationally would add approximately $120 billion to our total addressable market. As we grow, we will continue our strategy of evaluating opportunities to open distinctive retail stores in select locations and providing our customers with an engaging online experience. Our Seamless Experience We offer our customers a seamless customer experience—whether shopping in-person or online—that’s unparalleled within the market.
Expanding internationally would significantly increase our total addressable market. As we grow, we will continue our strategy of evaluating opportunities to open distinctive retail stores in select locations and providing our customers with an engaging online experience. Our Seamless Experience We offer our customers a seamless customer experience—whether shopping in-person or online—that’s unparalleled within the market.
Securities and Exchange Commission Filings We announce material information to the public about us, our products and services, and other matters through a variety of means, including filings with the SEC, press releases, public conference calls, webcasts and the investor relations section of our website in order to achieve broad, non-exclusionary distribution of information to the public and for complying with our disclosure obligation under Regulation FD.
We believe that our employee relations are strong. 13 Table of Contents Securities and Exchange Commission Filings We announce material information to the public about us, our products and services, and other matters through a variety of means, including filings with the SEC, press releases, public conference calls, webcasts and the investor relations section of our website in order to achieve broad, non-exclusionary distribution of information to the public and for complying with our disclosure obligation under Regulation FD.
All of our active direct suppliers in China, Vietnam, and Japan 11 Table of Contents are audited to ensure compliance with our program, and we continue to expand the program to new suppliers.
All of our active direct suppliers in China, Vietnam, Japan, and Italy are audited to ensure compliance with our program, and we continue to expand the program to new suppliers.
The Vision Council defines the U.S. eyewear market as an approximately $66 billion industry (1) as of December 2023, up from $63 billion in 2022, that has exhibited consistent, stable growth across multiple economic cycles, and estimates the U.S. prescription eyeglasses and sunglasses market to be approximately $24 billion (1) , flat to the prior year.
The Vision Council defines the U.S. eyewear market as an approximately $68 billion industry as of December 2024, up from $66 billion in 2023, that has exhibited consistent, stable growth across multiple economic cycles, and estimates the U.S. prescription eyeglasses and sunglasses market to be approximately $25 billion, up from $24 billion in the prior year.
Our team of strategists and technologists prioritizes innovation while developing proprietary tools in-house, whether it’s our Virtual Try-On, Digital PD Tool (which measures pupillary distance), custom point of sale system, or our Virtual Vision Test telehealth app. 9 Table of Contents • Continuing to Enhance Our Design Capabilities.
Our team of strategists and technologists prioritizes innovation while developing proprietary tools in-house, whether it’s our Virtual Try-On, video assisted eye exams, Digital PD Tool (which measures pupillary distance), custom point of sale system, or our Virtual Vision Test telehealth app. • Continuing to Enhance Our Design Capabilities.
To facilitate talent attraction, development and retention, we strive to make Warby Parker a diverse, inclusive, and safe workplace, with opportunities for our employees to grow and develop in their careers, supported by what we believe are strong compensation and benefits programs. We believe that our employee relations are strong.
To facilitate talent attraction, development and retention, we strive to make Warby Parker an inclusive and safe workplace, with opportunities for our employees to grow and develop in their careers, supported by what we believe are strong compensation and benefits programs.
The eye exams and vision care market is estimated at $10.6 billion as of December 31, 2023 and contributed only 4.3% to Warby Parker net revenue for the year ended December 31, 2023. • Vision Insurance .
The eye exams and vision care market is estimated at $10.7 billion as of December 31, 2024 and contributed only 5.3% to Warby Parker net revenue for the year ended December 31, 2024. • Vision Insurance .
Customers can even try on glasses virtually using our proprietary Virtual Try-On tool. Plus, our Customer Experience advisors and Social Media team are on standby online via phone, chat, or email to iron out any styling predicaments and answer any questions. Home Try-On We started out selling our frames exclusively online—which was a novel concept in 2010.
Plus, our Customer Experience advisors and Social Media team are on standby online via phone, chat, or email to iron out any styling predicaments and answer any questions. Home Try-On We started out selling our frames exclusively online—which was a novel concept in 2010.
See Item 1A, “Risk Factors—Risks Related to Our Legal and Regulatory Environment—Failure to adequately maintain and protect our intellectual property and proprietary rights could harm our brand, devalue our proprietary content, and adversely affect our ability to compete effectively.” Employees and Human Capital Resources As of December 31, 2023, we had a total of 3,491 employees, including 2,140 full-time, 1,333 part-time, and 18 temporary employees, across 237 retail stores, two in-house optical laboratories, and two offices in the United States.
See It em 1A, “Risk Factors—Risks Related to Our Legal and Regulatory Environment—Failure to adequately maintain and protect our intellectual property and proprietary rights could harm our brand, devalue our proprietary content, and adversely affect our ability to compete effectively.” Employees and Human Capital Resources As of December 31, 2024, we had a total of 3,780 employees, including 2,218 full-time employees and 1,562 part-time employees, across 276 retail stores, two in-house optical laboratories, and two offices in the United States.
Direct-to-consumer telehealth is expected to grow by nearly 50% by 2028, reflecting an evolution of consumer preferences from in-person to remote medical care. We believe these factors contribute to rising vision correction needs and a steady influx of new customers who expect an exceptional vision care experience.
Direct-to-consumer telehealth is expected to grow at a rate of approximately 30% per year, reflecting an evolution of consumer preferences from in-person to remote medical care. We believe these factors contribute to rising vision correction needs and a steady influx of new customers who expect an exceptional vision care experience.
The contact lens market is estimated at $12.1 billion as of December 31, 2023 and contributed only 8.6% to Warby Parker net revenue for the year ended December 31, 2023. • Eye Exams and Vision Care.
The contact lens market is estimated at $11.8 billion as of December 31, 2024 and contributed only 10.2% to Warby Parker net revenue for the year ended December 31, 2024. • Eye Exams and Vision Care.
Vision insurance is used on over 50% of purchases made in the vision care market as of December 31, 2023 and contributed a small portion of Warby Parker net revenue for the year ended December 31, 2023.
Vision insurance is used on over 50% of purchases made in the vision care market as of December 31, 2024 and contributed approximately 7% to Warby Parker net revenue for the year ended December 31, 2024.
The keystone to our strategy is ensuring each retail store location—whether on proven, retail-oriented streets or in high-performing shopping centers—communicates the brand in a consistent and engaging manner to all customers, past, current, and potential.
Our retail strategy is thoughtful and data-driven, creative and colorful, and consistent with the Warby Parker brand. The keystone to our strategy is ensuring each retail store location—whether on proven, retail-oriented streets or in high- 10 Table of Contents performing shopping centers—communicates the brand in a consistent and engaging manner to all customers, past, current, and potential.
We rely on a combination of patent, trademark, copyright, trade secret, and other intellectual property laws, as well as confidentiality procedures, non-disclosure agreements, employee non-disclosure and invention assignment agreements, and other contractual restrictions to establish and protect our intellectual property rights.
We rely on a combination of patent, trademark, copyright, trade secret, and other intellectual property laws, as well as confidentiality procedures, non-disclosure agreements, employee non-disclosure and invention assignment agreements, and other contractual restrictions to establish and protect our intellectual property rights. We own and maintain utility and design patents in the United States and in other jurisdictions around the world.
In 2023, we onboarded The British Standards Institution (“BSI”), a signatory of the United Nations Global Compact, to build out an in-depth program in Italy that more closely mirrors our criteria in Asia. We audited our highest volume supplier in 2023 and have built a pathway to audit other suppliers in the region.
In 2023, we onboarded The British Standards Institution (“BSI”), a signatory of the United Nations Global Compact, to build out an in-depth program in Italy that more closely mirrors our criteria in Asia.
To the extent we expand to partner with more vision care insurers, we will have to negotiate with each individual insurer for coverage of the cost of our optometric and telehealth services, which may incur additional time, cost, and resources.
To the extent we expand to partner with more vision care insurers, we will have to negotiate with each individual insurer for coverage of the cost of our optometric and telehealth services, which may incur additional time, cost, and resources. Ripe for Change The eye care industry has largely been slow to innovate, despite strong and defensible fundamentals.
As of December 31, 2023, we have also registered ten copyrights in the United States. We also register domain names for certain websites that we use in our business, such as www.warbyparker.com, as well as similar variations to protect our brands and marks from cybersquatters.
We have trademark rights in our name and other brand indicia in the United States and in other jurisdictions around the world. We also have registered copyrights in the United States. We register domain names for certain websites that we use in our business, such as www.warbyparker.com, as well as similar variations to protect our brands and marks from cybersquatters.
E-commerce & Mobile App Shopping online at Warby Parker is just as seamless an experience as visiting us in person.
E-commerce & Mobile App Shopping online at Warby Parker is just as seamless an experience as visiting us in person. Our website and mobile app make quick perusing a cinch.
From time to time, we have faced, and we expect to face in the future, allegations by third parties, including our competitors and non-practicing entities, that we have infringed their trademarks, copyrights, patents, and other intellectual property rights, or challenging the validity or enforceability of our intellectual property rights.
From time to time, we have faced, and expect to face in the future, allegations from third parties, that we have infringed their intellectual property rights or that challenge the validity or enforceability of our intellectual property rights.
Impact Reporting Since 2018, Warby Parker has published an annual Impact Report to evaluate and communicate the economic, environmental, and social impacts of our everyday business activities.
In the future, seasonal trends may cause fluctuations in our quarterly results, which may impact the predictability of our business and operating results. Impact Reporting Since 2018, Warby Parker has published an annual Impact Report to evaluate and communicate the economic, environmental, and social impacts of our everyday business activities.
Our current retail footprint is national and operates across urban and suburban communities with street, lifestyle, and mall locations. Our U.S. retail footprint has a long runway for expansion.
Our retail stores spread across the U.S. and parts of Canada and operate across urban and suburban communities with street, lifestyle, and mall locations. Our U.S. retail footprint has a long runway for expansion.
Independent optical retailers made up approximately 50% of all prescription optical retail sales in 2023 (1) , while optical retail chains made up the majority of the remainder. Globally, the eyewear market was approximately $184 billion in 2023, according to Statista.
Independent optical retailers made up approximately 50% of all prescription optical retail sales in 2024, while optical retail chains made up the majority of the remainder. Globally, the eyewear market was approximately $150 billion in 2024, according to Statista, inclusive of optical retailers’ revenue from the sales of products (including glasses, sunglasses, and contact lenses).
Our website and mobile app make quick perusing a cinch, and our online quiz helps customers find frames to fill their Home Try-On box based on style, color, and shape preferences, which is ideal for when there’s not a retail store nearby or if you’d prefer to stay home.
Customers can even try on glasses virtually using our proprietary Virtual Try-On tool, or explore our AI-powered online quiz that helps customers find frames based on style, color, and shape preferences, which is ideal for when there’s not a retail store nearby or if you’d prefer to stay home.
In addition, the number of Americans ages 65 and older will nearly double over the next 40 years, reaching 80 million in 2040, according to the U.S. Census Bureau.
In addition, the number of Americans ages 65 and older is expected to increase by more than 25% over the next 20 years, reaching 80 million people in 2045, according to the U.S. Census Bureau.
The eyewear industry has been built to maximize individual transactions versus optimize the customer journey. In addition, a concentrated number of companies license the vast majority of premium eyewear brands sold and often wholesale their products through retailers, so they lack direct connection to their end customers.
In addition, a concentrated number of companies license the vast majority of premium eyewear brands sold and often wholesale their products through retailers, so they lack direct connection to their end customers. The legacy optical industry is highly concentrated amongst a few industry players that have created an illusion of choice for consumers.
Beyond selection of frames, the purchase decision involves complex, multi-step decision-making with an emphasis on upselling lens alternatives and coating options. We believe there is also little connection between pricing and quality. • Unappealing Value Proposition. Glasses have historically only been offered at a premium price point, leaving millions of customers without access to stylish, affordable eyewear.
Customers rely heavily on a dominant physical footprint with little to no digital counterparts. • Confusing, Unstandardized, and Opaque Pricing. Beyond selection of frames, the purchase decision involves complex, multi-step decision-making with an emphasis on upselling lens alternatives and coating options. We believe there is also little connection between pricing and quality. 8 Table of Contents • Unappealing Value Proposition.
Our retail stores introduce the brand to new consumers, strengthen relationships with existing customers, and create environments that celebrate the breadth of our vision care offerings, from glasses to contact lenses and eye exams. Our retail strategy is thoughtful and data-driven, creative and colorful, and consistent with the Warby Parker brand.
All of our retail stores are corporate-owned, and we have no franchise retail stores, which allows us complete control over the customer experience. Our retail stores introduce the brand to new consumers, strengthen relationships with existing customers, and create environments that celebrate the breadth of our vision care offerings, from glasses to contact lenses and eye exams.
While we believe our patents and patent applications in the aggregate are important to our competitive position, no single patent or patent application is material to our business as a whole.
We continually review our development efforts to assess the existence and registrability of new intellectual property and determine whether to seek patent protection or trademark or copyright registrations. While we believe our intellectual property rights in the aggregate are important to our competitive position, no single right is material to our business as a whole.
Customers can pick five of their favorites on our site (or get tailored suggestions after taking a quick quiz) and try them at home for five full days. Oh, and it’s free! The Home Try-On program is very unique to our business and maintains a high conversion rate from try-on to purchase.
Customers can pick five of their favorite frames on our site (or get tailored suggestions after taking a quick quiz) and try them at home for five full days. Oh, and it’s free! Retail Stores As of December 31, 2024, our retail footprint included 276 retail stores, including 271 locations in the U.S. and 5 locations in Canada.
The legacy customer journey largely entails going in person to an optical retailer, browsing frames stored behind locked cases, and feeling overwhelmed by the assortment. Customers rely heavily on a dominant physical footprint with little to no digital counterparts. • Confusing, Unstandardized, and Opaque Pricing.
The process of buying eyewear has lacked an engaging customer experience and has historically been defined by: • Underinvested Shopping Experience. The legacy customer journey largely entails going in person to an optical retailer, browsing frames stored behind locked cases, and feeling overwhelmed by the assortment.
Core Market refers to a Core-Based Statistical Area as defined 10 Table of Contents by the U.S. Census Bureau. All of our retail stores are corporate-owned, and we have no franchise retail stores, which allows us complete control over the customer experience.
We are located in 42 states or provinces, 209 cities, and 93 Core Markets, and our retail stores are in 47 of the 50 most populous Core Markets in the U.S. Core Market refers to a Core-Based Statistical Area as defined by the U.S. Census Bureau.
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The industry includes optical retailers’ revenue from the sales of products (including glasses, sunglasses, and contact lenses) and eye care services provided by vision care professionals, including eye exams.
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Upon checkout, customers often find their vision insurance (if they have it) only covers a portion of their purchase. • Limited Ongoing Customer Engagement. The eyewear industry has been built to maximize individual transactions versus optimize the customer journey.
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According to Statista, the industry is projected to accelerate at a rate above GDP, with an outlook of 6.7% CAGR from 2023 to 2027, supported by secular trends. (1) In 2023, The Vision Council updated its market sizing and allocation methodology within the vision care space.
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It now estimates the total U.S. eyewear market to be approximately $66 billion in size, compared to $76 billion in the 2022 report; the prescription eyeglasses and sunglasses market is $24 billion, compared to $36 billion in the 2022 report; and independent retailers make up approximately 50% of the market, compared to 40% in the 2022 report.
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Ripe for Change The eye care industry has largely been slow to innovate, despite strong and defensible fundamentals. The process of buying eyewear has lacked an engaging customer experience and has historically been defined by: 8 Table of Contents • Underinvested Shopping Experience.
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The legacy optical industry is highly concentrated amongst a few industry players that have created an illusion of choice for consumers.
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Retail Stores As of December 31, 2023, our retail footprint included 237 retail stores, including 232 locations in the U.S. and 5 locations in Canada. We are located in 41 states or provinces, 178 cities, and 83 Core Markets, and our retail stores are in 48 of the 50 most populous Core Markets in the U.S.
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In 2022, this historical trend was offset by specific actions we took to reduce costs, including a reduction in marketing spend beginning in the second quarter and a reduction in corporate headcount in connection with our restructuring plan that was executed in the third quarter.
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These actions contributed to a sequential decline in selling, general, and administrative costs from quarter to quarter in 2022, however, 2023 has followed historical trends. In the future, seasonal trends may cause fluctuations in our quarterly results, which may impact the predictability of our business and operating results.
Removed
As of December 31, 2023, we held 17 issued utility patents in the United States and 25 issued utility patents outside of the United States; four design patents in the United States and 49 issued design registrations outside of the United States; and 52 utility patent applications (including active PCT applications) pending in the United States and other countries, and five design patent applications pending in the United States.
Removed
We have trademark rights in our name and other brand indicia and, as of December 31, 2023, have 42 trademark registrations and 11 active applications for select marks in the United States as well as 91 trademark registrations and active applications in 28 other jurisdictions around the world.
Removed
We continually review our development efforts to assess the existence and registrability of new intellectual property and determine whether to seek patent protection or trademark or copyright registrations. 13 Table of Contents We seek to control access to and use of our proprietary technology and other confidential information through the use of internal and external controls, including contractual protections with employees, contractors, customers, and partners.
Removed
It is our practice to enter into confidentiality and invention assignment agreements (or similar agreements) with our employees, consultants, and contractors involved in the development of intellectual property on our behalf. We also enter into confidentiality agreements with other third parties in order to limit access to, and disclosure and use of, our confidential information and proprietary information.
Removed
We further control the use of our proprietary technology and intellectual property through provisions in our terms of service. We also monitor the activities of third parties with respect to potential infringing uses of our intellectual property.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

184 edited+40 added−40 removed447 unchanged
Biggest changeSimilar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; • the Physician Payments Sunshine Act and its implementing regulations, which require, among other things, certain manufacturers of drugs, devices, biologics, and medical supplies that are reimbursable under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to report annually to the Centers for Medicare and Medicaid Services, or CMS, information related to certain payments and other transfers of value to physicians (defined to include doctors, dentists, optometrists, podiatrists, and chiropractors), certain non-physician practitioners such as physician assistants and nurse practitioners, and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; • analogous state laws and regulations, including: state anti-kickback and false claims laws, some of which apply to healthcare items or services reimbursed by any third-party payor, including commercial payors and self-pay patients; and • state licensing and registration laws that apply to our stores and employed and affiliated vision care professionals, including ophthalmologists, optometrists, and opticians.
Biggest changeSimilar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; • analogous state laws and regulations, including: state anti-kickback and false claims laws, some of which apply to healthcare items or services reimbursed by any third-party payor, including commercial payors or by self-pay patients; and • state licensing and registration laws that apply to our stores and employed and affiliated vision care professionals, including ophthalmologists, optometrists, and opticians.
If unauthorized parties gain access to our networks, databases, or other IT systems, or those of our third-party service providers or business partners, they may be able to steal, publish, delete, use inappropriately, or modify our private and sensitive third-party information including personal health information, credit card and other payment card information, and personal information.
If unauthorized parties gain access to our networks, databases, or other IT systems, or those of our third-party service providers or business partners, they may be able to steal, publish, delete, use inappropriately, or modify our private and sensitive third-party information including health information, credit card and other payment card information, and personal information.
A decline in sales of our glasses would negatively affect our business, financial condition, and results of operations. We derive most of our revenue from the sale of one product, our glasses. Our glasses are sold in highly competitive markets with limited barriers to entry.
We derive most of our revenue from sales of our glasses. A decline in sales of our glasses would negatively affect our business, financial condition, and results of operations. We derive most of our revenue from the sale of one product, our glasses. Our glasses are sold in highly competitive markets with limited barriers to entry.
A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; • the federal physician self-referral law, commonly referred to as the Stark Law, that, subject to limited exceptions, prohibits physicians (defined to also include optometrists) from referring Medicare or Medicaid patients to an entity for the provision of certain “designated health services” if the physician or a member of such physician’s immediate family has a direct or indirect financial relationship (including an ownership interest or a compensation arrangement) with the entity, and prohibit the entity from billing Medicare or Medicaid for such designated health services; • the federal civil and criminal false claims laws, including the civil False Claims Act, which can be enforced by private citizens on behalf of the government through civil whistleblower or qui tam actions, and prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, to the government, claims for payment or approval that are false or fraudulent, knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making a false statement to avoid, decrease, or conceal an obligation to pay money to the government.
A person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation; • the federal physician self-referral law, commonly referred to as the Stark Law, that, subject to limited exceptions, prohibits physicians (defined to also include optometrists) from referring Medicare or Medicaid patients to an entity for the provision of certain “designated health services” if the physician or a member of such physician’s immediate family has a direct or indirect financial relationship (including an ownership interest or a compensation arrangement) with the entity, and prohibit the entity from billing Medicare or Medicaid for such designated health services; • the federal civil and criminal false claims laws, including the civil False Claims Act, which can be enforced by the federal government or by private citizens on behalf of the government through civil whistleblower or qui tam actions, and prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, to the government, claims for payment or approval that are false or fraudulent, knowingly making, using, or causing to be made or used, a false record or statement material to a false or fraudulent claim, or from knowingly making a false statement to avoid, decrease, or conceal an obligation to pay money to the government.
Any assessment of the potential impact of future climate change legislation, regulations or industry standards, as well as any international treaties and accords, is uncertain given the wide scope of potential regulatory change in the countries in which we, or our suppliers, operate or conduct business. Item 1B. Unresolved Staff Comments None.
Any assessment of the potential impact of future climate change legislation, regulations or industry standards, as well as any international treaties and accords, is uncertain given the wide scope of potential regulatory change in the countries in which we, our suppliers, operate or conduct business. Item 1B. Unresolved Staff Comments None.
Overall growth of our net revenue will depend on a number of factors, including our ability to: • price our products and services so that we are able to attract new customers, and expand our relationships with existing customers; • accurately forecast our net revenue and plan our operating expenses; • successfully compete with other companies that are currently in, or may in the future enter, the industry or the markets in which we compete, and respond to developments from these competitors such as pricing changes and the introduction of new products and services; • comply with existing and new laws and regulations applicable to our business; • successfully expand in existing geographic markets and enter new geographic markets, including international markets; • successfully expand and gain market adoption on our market share by offering customers the ability to pay through managed vision care, vision insurance, and other third-party payors; • successfully develop new offerings, including new offerings with higher margins, and innovate and enhance our existing products and services and their features, including in response to new trends, competitive dynamics, or the needs of customers; • successfully identify and acquire or invest in businesses, products, or technologies that we believe could complement or expand our business; • avoid interruptions or disruptions in distributing our products and services; • provide customers with a high-quality experience and customer service and support that meets their needs; • hire, integrate, and retain talented sales, customer experience, product design, and development and other personnel, including vision care professionals; • expand vision care services provided by optometrists employed either by us or by independent professional corporations or similar entities or with whom we have contractual arrangements; • effectively manage growth of our business, personnel, and operations, including new retail store openings; • effectively manage our costs related to our business and operations; and • maintain and enhance our reputation and the value of our brand.
Overall growth of our net revenue will depend on a number of factors, including our ability to: • price our products and services so that we are able to attract new customers, and expand our relationships with existing customers; • accurately forecast our net revenue and plan our operating expenses; • successfully compete with other companies that are currently in, or may in the future enter, the industry or the markets in which we compete, and respond to developments from these competitors such as pricing changes and the introduction of new products and services; • comply with existing and new laws and regulations applicable to our business; • successfully expand in existing geographic markets and enter new geographic markets, including international markets; • successfully expand and gain market adoption on our market share by offering customers the ability to pay through managed vision care, vision insurance, and other third-party payors; • successfully develop new offerings, including new offerings with higher margins, and innovate and enhance our existing products and services and their features, including in response to new trends, competitive dynamics, or the needs of customers; • successfully identify and acquire or invest in businesses, products, or technologies that we believe could complement or expand our business; • avoid interruptions or disruptions in distributing our products and services; • provide customers with a high-quality experience and customer service and support that meets their needs; • hire, integrate, and retain talented sales, customer experience, product design, and development and other personnel, including vision care professionals; • expand vision care services provided by optometrists employed either by us or by independent professional corporations or similar entities or with whom we have contractual arrangements; • effectively manage growth of our business, personnel, and operations, including new retail store openings; • effectively manage our costs related to our business and operations, including increased costs related to tariffs; and • maintain and enhance our reputation and the value of our brand.
Any material interruptions or failures in our payment-related systems could have a material adverse effect on our business, financial condition, and results of operations. If there are amendments to the PCI Standard, the cost of re-compliance could also be substantial and we may suffer loss of critical data and interruptions or delays in our operations as a result.
Any material interruptions or failures in our payment-related systems could have a material adverse effect on our business, financial condition, and results of operations. If there are amendments to the PCI, the cost of re-compliance could also be substantial and we may suffer loss of critical data and interruptions or delays in our operations as a result.
All of the components that go into the manufacturing of our products and services are sourced from a limited number of third-party suppliers predominantly in the U.S., China, Taiwan, Italy, Vietnam, and Japan, and, in particular, over half of the cellulose acetate used to produce many of our frames is provided by a single supplier.
All of the components that go into the manufacturing of our products and services are sourced from a limited number of third-party suppliers predominantly in the U.S., China, Italy, Vietnam, and Japan, and, in particular, over half of the cellulose acetate used to produce many of our frames is provided by a single supplier.
Our transactions with our suppliers and vendors operating in foreign jurisdictions, including China, Italy, Taiwan, Vietnam, and Japan and our quality assurance presence in China, may subject us to such anti-corruption laws. If we expand our international sales and business, we may engage with business partners and third-party intermediaries to obtain necessary permits, licenses, and other regulatory approvals.
Our transactions with our suppliers and vendors operating in foreign jurisdictions, including China, Italy, Vietnam, and Japan and our quality assurance presence in China and Vietnam, may subject us to such anti-corruption laws. If we expand our international sales and business, we may engage with business partners and third-party intermediaries to obtain necessary permits, licenses, and other regulatory approvals.
In addition to hiring new employees, we must continue to focus on developing, motivating, and retaining our best employees, all of whom are at-will employees in the U.S. If we fail to identify, recruit, and integrate strategic personnel hires, our business, financial condition, and results of operations could be adversely affected.
In addition to hiring new employees, we must continue to focus on developing, motivating, and retaining our best employees, almost all of whom are at-will employees in the U.S. If we fail to identify, recruit, and integrate strategic personnel hires, our business, financial condition, and results of operations could be adversely affected.
We also must be able to identify and originate styles and trends as well as to anticipate and react to changing consumer demands in a timely manner. The success of new and/or enhanced products and services depends on several factors, including their timely introduction and completion, sufficient demand, and cost-effectiveness.
We also must be able to identify and originate styles and trends as well as to anticipate and react to changing consumer tastes and demands in a timely manner. The success of new or enhanced products and services depends on several factors, including their timely introduction and completion, sufficient demand, and cost-effectiveness.
Despite our compliance efforts, in the event of a breach of the security of payment card data, we may become subject to claims that we have violated the PCI Data Security Standard, based on past, present, and future business practices, which could have an adverse impact on our business and reputation.
Despite our compliance efforts, in the event of a breach of the security of payment card data, we may become subject to claims that we have violated the PCI based on past, present, and future business practices, which could have an adverse impact on our business and reputation.
Additionally, changes in regulations could limit the ability of search engines and social media platforms, including, but not limited to, Google, Meta, and TikTok, to collect data from users and engage in targeted advertising, making them less effective in disseminating our advertisements to our target customers.
Additionally, changes in regulations could limit the ability of search engines and social media platforms, including, but not limited to, Google and Meta, to collect data from users and engage in targeted advertising, making them less effective in disseminating our advertisements to our target customers.
In the process of obtaining PMA approval, the FDA must determine that a proposed device is safe and effective for its intended use based, in part, on extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing, and labeling data.
In the process of obtaining PMA approval, the FDA must determine that a proposed device is safe and effective for its intended use based on extensive data, including, but not limited to, technical, preclinical, clinical trial, manufacturing, and labeling data.
Our IT and ERP systems and the IT systems of our third-party service providers and business partners may be vulnerable to security incidents, attacks by hackers, acts of vandalism, computer viruses, misplaced or lost data, human errors or other similar events.
Our IT and ERP systems and the IT systems of our third-party service providers and business partners may be vulnerable to security incidents, attacks by hackers, acts of vandalism, computer viruses, misplaced or lost data, human or technological errors or other similar events.
Costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology such as those necessary to achieve compliance with the PCI Standard or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations.
Costs and potential problems and interruptions associated with the implementation of new or upgraded systems and technology such as those necessary to achieve compliance with the PCI or with maintenance or adequate support of existing systems could also disrupt or reduce the efficiency of our operations.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or the DGCL, which prohibit an interested stockholder, defined as, among other things, a person who owns 15% or more of our outstanding voting stock, from entering into a business combination with us for a three-year period following the time such stockholder became an interested stockholder, unless: (1) prior to such time the board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; (2) upon consummation of the transaction which resulted in the 52 Table of Contents stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding certain shares for purposes of determining the voting stock outstanding; or (3) at or subsequent to such time the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, or the DGCL, which prohibit an interested stockholder, defined as, among other things, a person who owns 15% or more of our outstanding voting stock, from entering into a business combination with us for a three-year period following the time such stockholder became an interested stockholder, unless: (1) prior to such time the board of directors approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder; (2) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of our voting stock outstanding at the time the transaction commenced, excluding certain shares for purposes of determining the voting stock outstanding; or (3) at or subsequent to such time the business combination is approved by the board of directors and authorized at an annual or special meeting of stockholders, and not by written consent, by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder.
The 29 Table of Contents applicable federal and state healthcare laws that affect our ability to operate include, but are not limited to, the following: • the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving, or providing any remuneration (including any kickback, bribe, or certain rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order, or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under any U.S. federal healthcare program, such as Medicare and Medicaid.
The applicable federal and state healthcare laws that affect our ability to operate include, but are not limited to, the following: • the federal Anti-Kickback Statute, which prohibits, among other things, persons or entities from knowingly and willfully soliciting, offering, receiving, or providing any remuneration (including any kickback, bribe, or certain rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, lease, order, or recommendation of, any good, facility, item or service, for which payment may be made, in whole or in part, under any U.S. federal healthcare program, such as Medicare and Medicaid.
We rely heavily on our proprietary information technology (“IT”) and enterprise resource planning systems (“ERP”) for many functions across our operations, including managing our supply chain and inventory, processing customer transactions in our stores, allocating orders to the appropriate laboratories, our financial accounting and reporting, compensating our employees, and operating our website, mobile applications and in-store systems, including point-of-sale systems.
We rely heavily on our information technology (“IT”) and enterprise resource planning systems (“ERP”), many of which are proprietary, for many functions across our operations, including managing our supply chain and inventory, processing customer transactions in our stores, allocating orders to the appropriate laboratories, our financial accounting and reporting, compensating our employees, and operating our website, mobile applications and in-store systems, including point-of-sale systems.
Our business depends on consumer demand for our products and services and, consequently, is sensitive to a number of macroeconomic factors that influence consumer confidence and spending, such as general economic conditions, inflation, consumer disposable income, energy and fuel prices, recession and fears of recession, unemployment, 53 Table of Contents minimum wages, availability of consumer credit, consumer debt levels, conditions in the housing market, interest rates, tax rates and policies, inflation, consumer confidence in future economic conditions and political conditions, war and fears of war, inclement weather, natural disasters, terrorism, outbreak of viruses or widespread illness, and consumer perceptions of personal well-being and security.
Our business depends on consumer demand for our products and services and, consequently, is sensitive to a number of macroeconomic factors that influence consumer confidence and spending, such as general economic conditions, inflation, consumer disposable income, energy and fuel prices, recession and fears of recession, unemployment, minimum wages, availability of consumer credit, consumer debt levels, conditions in the housing market, interest rates, tax rates and policies, inflation, consumer confidence in future economic conditions and political conditions, war and fears of war, inclement weather, natural disasters, terrorism, outbreak of viruses or widespread illness, and consumer perceptions of personal well-being and security.
The market value of our Class A common stock has experienced significant volatility since it began trading in September 2021, and if the perceived value of our equity awards declines or continues to experiences significant volatility such that prospective employees believe there is limited upside to the value of our equity awards, it may adversely affect our ability to recruit and retain key employees.
The market value of our Class A common stock has experienced significant volatility since it began trading in September 2021, and if the perceived value of our equity awards declines or continues to experience significant volatility such that prospective employees believe there is limited upside to the value of our equity awards, it may adversely affect our ability to recruit and retain key employees.
In addition, various regulatory authorities have imposed, and may continue to impose, mandatory substantive and/or disclosure requirements with respect to ESG matters.
In addition, various regulatory authorities have imposed, and may continue to impose, mandatory substantive or disclosure requirements with respect to ESG and sustainability matters.
If our operations 30 Table of Contents are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant penalties, including civil, criminal, and administrative penalties, damages, fines, exclusion from government-funded healthcare programs, such as Medicare and Medicaid, integrity oversight, and reporting obligations to resolve allegations of noncompliance, disgorgement, imprisonment, contractual damages, reputational harm, diminished profits, and the curtailment or restructuring of our operations.
If our operations are found to be in violation of any of the laws described above or any other governmental laws and regulations that may apply to us, we may be subject to significant penalties, including civil, criminal, and administrative penalties, damages, fines, exclusion from government-funded healthcare programs, such as Medicare and Medicaid, integrity oversight, and reporting obligations to resolve allegations of noncompliance, disgorgement, imprisonment, contractual damages, reputational harm, diminished profits, and the curtailment or restructuring of our operations.
The Company has not performed a formal Internal Revenue Code Section 382 study to determine if an annual limitation may apply as of December 31, 2023. If we undergo an ownership change, we may incur limitations on our ability to utilize our NOLs existing at the time of the ownership change.
The Company has not performed a formal Internal Revenue Code Section 382 study to determine if an annual limitation may apply as of December 31, 2024. If we undergo an ownership change, we may incur limitations on our ability to utilize our NOLs existing at the time of the ownership change.
For example: • we may choose to revise or implement policies in ways that we believe will be beneficial to our stakeholders, including suppliers, employees, and local communities, even though the changes may be costly; • we may be influenced to pursue programs and services to demonstrate our commitment to the communities to which we serve even though there is no immediate return to our stockholders; and • in responding to a possible proposal to acquire the company, our board of directors may be influenced by the interests of our stakeholders, including suppliers, employees, and local communities, whose interests may be different from the interests of our stockholders.
For example: • we may choose to revise or implement policies in ways that we believe will be beneficial to our stakeholders, including suppliers, employees, and local communities, even though the changes may be costly; 46 Table of Contents • we may be influenced to pursue programs and services to demonstrate our commitment to the communities to which we serve even though there is no immediate return to our stockholders; and • in responding to a possible proposal to acquire the company, our board of directors may be influenced by the interests of our stakeholders, including suppliers, employees, and local communities, whose interests may be different from the interests of our stockholders.
A variety of organizations measure the performance of companies on such ESG topics, and the results of these assessments are widely publicized.
A variety of organizations and stakeholders measure the performance of companies on such ESG topics, and the results of these assessments are widely publicized.
Although the majority of our revenues is derived from cash-pay consumers, we have contracts with certain vision plans, including Medicare Advantage health plans, which subject us to a number of federal and state healthcare regulatory laws, including federal and state anti-kickback, false claims, self-referral, and other healthcare fraud and abuse laws, some of which apply to items or services reimbursed by any third-party payor, including self-pay patients.
Although the majority of our revenues is derived from cash-pay consumers, we have contracts with certain vision plans, including Medicare Advantage health plans, which subject us to a number of federal and state healthcare regulatory laws, including federal and state anti-kickback, false claims, self-referral, and other healthcare fraud and abuse laws, 29 Table of Contents some of which apply to items or services reimbursed by any third-party payor, or by self-pay patients.
Certain of our vendors have experienced security incidents in the past, and we expect that other vendors or third-party service providers will experience security incidents in the future that could compromises the confidentiality, integrity, or availability of the systems they operate for us or the information they process on our behalf.
Certain of our vendors have experienced security incidents in the past, and we expect that other vendors or third-party service providers will experience security incidents in the future that could compromise the confidentiality, integrity, or availability of the systems they operate for us or the information they process on our behalf.
We also source inputs directly from suppliers outside of the United States, including China, Taiwan, Italy, Vietnam, and Japan.
We also source inputs directly from suppliers outside of the United States, including China, Italy, Vietnam, and Japan.
We cannot assure you that there will not be additional material weaknesses or significant deficiencies in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations.
We cannot assure you that there will not be additional future material weaknesses in our internal control over financial reporting in the future. Any failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations.
We or our third-party manufacturers are also subject to FDA regulations with respect to medical devices relating to clinical trials, establishment registration and device listing, sales and distribution, recordkeeping, advertising and promotion, recalls and field safety corrective actions, postmarket surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury, and import and export.
We or our third-party manufacturers are also subject to FDA regulations with respect to medical devices relating to clinical trials, establishment registration and device listing, sales and distribution, recordkeeping, advertising and promotion, recalls and field safety corrective actions, post-market surveillance, including reporting of deaths or serious injuries and malfunctions that, if they were to recur, could lead to death or serious injury, and import and export.
Our IT and ERP systems may be subject to damage or interruption from power outages or damages, telecommunications problems, data corruption, software errors, network failures, acts of war or terrorist attacks, fire, flood, global pandemics, and natural disasters; and our existing safety systems, data backup, access protection, user management, and information technology emergency planning may not be sufficient to prevent data loss or long-term network outages.
Our and our third party providers’ IT and ERP systems may be subject to damage or interruption from power outages or damages, telecommunications problems, data corruption, software errors, network failures, acts of war or terrorist attacks, fire, flood, global pandemics, and natural disasters; and our existing safety systems, data backup, access protection, user management, and information technology emergency planning may not be sufficient to prevent data loss or long-term network outages.
If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have additional material weakness or significant deficiency in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our Class A common stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities.
If we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm determines we have a material weakness in our internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, the market price of our Class A common stock could decline, and we could be subject to sanctions or investigations by the SEC or other regulatory authorities.
These covenants may limit our ability and the ability of our subsidiaries, under certain circumstances, to, among other things: • incur additional indebtedness; ▪ create or incur liens; ▪ make capital expenditures; ▪ engage in certain fundamental changes, including mergers or consolidations; ▪ sell or transfer assets; ▪ make acquisitions, investments, loans or advances; ▪ pay or modify the terms of certain indebtedness; ▪ engage in certain transactions with affiliates; and ▪ enter into negative pledge clauses.
These covenants may limit our ability and the ability of our subsidiaries, under certain circumstances, to, among other things: • incur additional indebtedness; ▪ create or incur liens; ▪ make capital expenditures; ▪ engage in certain fundamental changes, including mergers or consolidations; ▪ sell or transfer assets; ▪ make acquisitions, investments, loans or advances; ▪ pay or modify the terms of certain indebtedness; 28 Table of Contents ▪ engage in certain transactions with affiliates; and ▪ enter into negative pledge clauses.
The trading price of our Class A common stock has been volatile and has fluctuated significantly since our direct listing and may continue to fluctuate or decline in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our results of operations; • the number of shares of our Class A common stock made available for trading; • changes in financial markets or macroeconomic conditions, including, for example, due to the effects of recession or slow economic growth in the United States and abroad, rising inflation and interest rates, fuel prices, international currency fluctuations, corruption and political instability and geopolitical events; • changes in the financial projections we may provide to the public or our failure to meet these projections; • failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • changes in costs of our inputs; • actual or anticipated changes in our growth rate relative to that of our competitors; • changes in the anticipated future size or growth rate of our addressable markets; • announcements of new products, or of acquisitions, strategic partnerships, joint ventures, or capital-raising activities or commitments, by us or by our competitors; • additions or departures of board members, management, or key personnel; • rumors and market speculation involving us or other companies in our industry; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business, including those related to data privacy and cybersecurity in the United States or globally; • lawsuits threatened or filed against us, including as may result from government inquiries or proceedings; • geopolitical events and security issues (including incidents of terrorism, armed hostilities, and political conflicts, including those involving China or responses to these events), international trade disputes or disruptions, and similar events; • disruptions from natural or human-caused disasters (including health epidemics, such as the COVID-19 pandemic, influenza, and other highly communicable diseases or viruses) or extreme weather (including as a result of climate change); and • sales or expectations with respect to sales of shares of our Class A common stock by us or our security holders.
The trading price of our Class A common stock has been volatile and has fluctuated significantly since our direct listing and may continue to fluctuate or decline in response to numerous factors, many of which are beyond our control, including: • actual or anticipated fluctuations in our results of operations; • the number of shares of our Class A common stock made available for trading; • changes in financial markets or macroeconomic conditions, including, for example, due to the effects of recession or slow economic growth in the United States and abroad, elevated inflation and interest rates, fuel prices, international currency fluctuations, corruption and political instability and geopolitical events; • changes in the financial projections we may provide to the public or our failure to meet these projections; • failure of securities analysts to initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • changes in costs of our inputs; • actual or anticipated changes in our growth rate relative to that of our competitors; • changes in the anticipated future size or growth rate of our addressable markets; • announcements of new products, or of acquisitions, strategic partnerships, joint ventures, or capital-raising activities or commitments, by us or by our competitors; • additions or departures of board members, management, or key personnel; • rumors and market speculation involving us or other companies in our industry; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business, including those related to data privacy and cybersecurity in the United States or globally; • lawsuits threatened or filed against us, including as may result from government inquiries or proceedings; • geopolitical events and security issues (including incidents of terrorism, armed hostilities, and political conflicts, including those involving China or responses to these events), international trade disputes or disruptions, and similar events; • disruptions from natural or human-caused disasters (including health epidemics) or extreme weather (including as a result of climate change); and • sales or expectations with respect to sales of shares of our Class A common stock by us or our security holders.
See “--Risks Related to Our Dependence on Third Parties--We face risks associated with suppliers from whom our products are sourced and are dependent on a limited number of suppliers.” In addition, substantially all of our components are shipped directly from our contract manufacturers to our optical laboratories in the United States or our third-party optical laboratories in the United States and China, where lenses are cut and mounted into frames.
See “ —We face risks associated with suppliers from whom our products are sourced and are dependent on a limited number of suppliers. ” In addition, substantially all of our components are shipped directly from our contract manufacturers to our optical laboratories in the United States or our third-party optical laboratories in the United States and China, where lenses are cut and mounted into frames.
This concentrated control could delay, defer, or prevent a change of control, merger, consolidation, takeover, or other business combination involving us that you, as a stockholder, may otherwise support, and could allow us to take actions that some of our stockholders do not view as beneficial, which could reduce the trading price of our Class A common stock.
This concentrated control could delay, defer, or prevent a change of control, merger, consolidation, takeover, or other business combination involving us that you, as a stockholder, may otherwise support, and could allow us to take actions that some of our stockholders do not view as 49 Table of Contents beneficial, which could reduce the trading price of our Class A common stock.
Even if our net revenue continues to increase, our net revenue growth 15 Table of Contents rates may decline in the future as a result of a variety of factors, including macroeconomic factors, increased competition, and the maturation of our business.
Even if our net revenue continues to increase, our net revenue growth rates may decline in the future as a result of a variety of factors, including macroeconomic factors, increased 14 Table of Contents competition, and the maturation of our business.
If we fail to comply with existing or future laws or regulations, or if these laws or regulations are violated by importers, manufacturers or distributors, we may be subject to governmental or judicial fines or sanctions, as well as monetary judgment, injunctions, and loss of intellectual property rights in civil litigation, while incurring substantial legal fees and costs.
If we fail to comply with existing or future laws or regulations or changing interpretations thereof, or if these laws or regulations are violated by importers, manufacturers or distributors, we may be subject to governmental or judicial fines or sanctions, as well as monetary judgment, injunctions, and loss of intellectual property rights in civil litigation, while incurring substantial legal fees and costs.
Further, as a few major vendors dominate the contact lenses market, the risks associated with finding alternative sources to the contact lenses we source from them may be exacerbated. 42 Table of Contents We rely on a limited number of contract manufacturers and logistics partners for our products. A loss of any of these partners could negatively affect our business.
Further, as a few major vendors dominate the contact lenses market, the risks associated with finding alternative sources to the contact lenses we source from them may be exacerbated. We rely on a limited number of contract manufacturers and logistics partners for our products. A loss of any of these partners could negatively affect our business.
Any of the foregoing may require us to make additional investments in facilities and equipment, require us to incur additional costs for the collection of data and/or preparation of disclosures and associated internal controls, may impact the availability and cost of key raw materials used in the production of our products or the demand for our products, and, in turn, may adversely impact our business, operating results, and financial condition.
Any of the foregoing may 25 Table of Contents require us to make additional investments in facilities and equipment, require us to incur additional costs for the collection of data and/or preparation of disclosures and associated internal controls, may impact the availability and cost of key raw materials used in the production of our products or the demand for our products, and, in turn, may adversely impact our business, operating results, and financial condition.
In addition, resolution of claims may require us to redesign or rebrand our products, license rights from third parties on potentially unfavorable terms, cease using certain brand names or other intellectual property rights altogether, make substantial payments for royalty or license fees, legal fees, settlement payments or other costs or damages, or admit liability.
In addition, resolution of claims may 35 Table of Contents require us to redesign or rebrand our products, license rights from third parties on potentially unfavorable terms, cease using certain brand names or other intellectual property rights altogether, make substantial payments for royalty or license fees, legal fees, settlement payments or other costs or damages, or admit liability.
In the de novo classification process, a manufacturer whose novel device under the FDCA would otherwise be automatically classified as Class III and require the submission and approval of a PMA prior to marketing is able to request down-classification of the device to Class I or Class II on the basis that the device presents a low or moderate risk.
In the de novo classification process, a 36 Table of Contents manufacturer whose novel device under the FDCA would otherwise be automatically classified as Class III and require the submission and approval of a PMA prior to marketing is able to request down-classification of the device to Class I or Class II on the basis that the device presents a low or moderate risk.
Although we offer a differentiated distribution and service business model, we continue to compete directly with large, integrated optical players that have multiple brands and retail banners, such as EssilorLuxottica and VSP. This competition takes place both in physical retail locations as well as online, for both glasses and contact lenses.
Although we offer a differentiated distribution and service business model, we continue to compete directly with large, integrated optical players that have multiple brands and retail banners, such as EssilorLuxottica SA and VSP Vision Care. This competition takes place both in physical retail locations as well as online, for both glasses and contact lenses.
For example, in March 2023, a former employee on behalf of herself and a proposed class of California hourly employees, filed a complaint against us, alleging violations of various California wage and hour laws, and two additional follow on actions have been filed against us pursuant to California’s Private Attorneys General Act asserting largely overlapping claims.
For example, in March 2023, a former employee on behalf of herself and a proposed class of California hourly employees, filed a complaint against us, alleging violations of various California wage and hour laws, and two additional follow on actions were filed against us pursuant to California’s Private Attorneys General Act asserting largely overlapping claims.
Apple and Google have broad discretion to change their respective terms and conditions applicable to the distribution of our mobile applications, to interpret their respective terms and conditions in ways that may limit, eliminate or otherwise interfere with our ability to distribute mobile app through their stores, the features we provide and the manner in which we market in-application products.
Apple and Google have broad discretion to change their respective terms and conditions applicable to the distribution of our mobile applications, to interpret their respective terms and conditions in ways that may limit, eliminate or otherwise interfere with our ability to distribute 44 Table of Contents mobile app through their stores, the features we provide and the manner in which we market in-application products.
Economic disruption and uncertainty resulting from these factors can negatively impact our business, resulting in: • inflation and increased price pressure for our products and services; • increased cost to manufacture and sell our products and services; • reduced consumer spending power; • reduced demand for our products and services, delays in shipment of orders or increases in order cancellation; • increased risk of excess and obsolete inventory; and • delays in payment for our products and services.
Economic disruption and uncertainty resulting from these factors can negatively impact our business, resulting in: 52 Table of Contents • inflation and increased price pressure for our products and services; • increased cost to manufacture and sell our products and services; • reduced consumer spending power; • reduced demand for our products and services, delays in shipment of orders or increases in order cancellation; • increased risk of excess and obsolete inventory; and • delays in payment for our products and services.
Global sourcing and foreign trade involve numerous factors and uncertainties beyond our control including increased shipping costs, the imposition of additional import or trade restrictions, including legal or economic restrictions on overseas suppliers’ ability to produce and deliver inputs, increased custom duties and tariffs, unforeseen delays in customs clearance of goods, more restrictive quotas, loss of a most favored nation trading status, currency exchange rates, transportation delays, port of entry issues and foreign government regulations, political instability and wars, and economic uncertainties in the countries from which we or our suppliers source our products.
Global sourcing and foreign trade involve numerous factors and uncertainties beyond our control including increased shipping costs, the imposition of additional import or trade restrictions, including legal or economic restrictions on overseas suppliers’ ability to produce and deliver inputs, increased custom duties and tariffs including the recent tariffs imposed by the U.S. government, unforeseen delays in customs clearance of goods, more restrictive quotas, loss of a most favored nation trading status, currency exchange rates, transportation delays, port of entry issues and foreign government regulations, political instability and wars, and economic uncertainties in the countries from which we or our suppliers source our products.
During the evaluation and testing process of our internal controls, if we identify additional material weaknesses in our internal control over financial reporting, we will be unable to certify that our internal control over financial reporting is effective.
During the evaluation and testing process of our internal controls, if we identify future material weaknesses in our internal control over financial reporting, we will be unable to certify that our internal control over financial reporting is effective.
Any provision in our certificate of incorporation, our bylaws, or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our Class A common stock, and could also affect the price that some investors are willing to pay for our Class A common stock.
Any provision in our certificate of incorporation, our bylaws, or Delaware law that has the effect of delaying or deterring a change in control 51 Table of Contents could limit the opportunity for our stockholders to receive a premium for their shares of our Class A common stock, and could also affect the price that some investors are willing to pay for our Class A common stock.
Future regulatory changes could also limit our ability to utilize our NOLs. To the extent we are not able to offset future taxable income with our NOLs, our cash flows may be adversely affected. Changes in our effective tax rate or liability may have an adverse effect on our results of operations.
Future regulatory changes could also limit our ability to utilize our NOLs. To the extent we are not able to offset future taxable income with our NOLs, our cash flows may be adversely affected. 45 Table of Contents Changes in our effective tax rate or liability may have an adverse effect on our results of operations.
There is also no guarantee that our pending trademark applications for any mark will proceed to registration; 34 Table of Contents our pending applications may be opposed by a third party prior to registration; and even those trademarks that are registered could be challenged by a third party, including by way of revocation or invalidity actions.
There is also no guarantee that our pending trademark applications for any mark will proceed to registration; our pending applications may be opposed by a third party prior to registration; and even those trademarks that are registered could be challenged by a third party, including by way of revocation or invalidity actions.
The diversity of patent laws may make our expenses associated with the development and maintenance of intellectual property in foreign jurisdictions more expensive than we anticipate. We probably will not be able to obtain the same patent protection in every market in which we may otherwise be able to potentially generate revenue.
The diversity of patent laws may make our expenses associated with the development and maintenance of intellectual property in foreign jurisdictions more expensive than we anticipate. We probably will not be able to obtain the same patent protection in every market 34 Table of Contents in which we may otherwise be able to potentially generate revenue.
We rely on a limited number of suppliers to supply the majority of the inputs to our products and are thus exposed to concentration of supplier risk. Approximately 18%, 19%, and 23% of cost of goods sold were from our top five suppliers for the years ended December 31, 2023, 2022, and 2021, respectively.
We rely on a limited number of suppliers to supply the majority of the inputs to our products and are thus exposed to concentration of supplier risk. Approximately 18%, 18%, and 19% of cost of goods sold were from our top five suppliers for the years ended December 31, 2024, 2023, and 2022, respectively.
Increases in transportation costs (including increases in fuel costs), issues with overseas shipments, supplier-side delays, reductions in the transportation capacity of carriers, labor strikes or shortages in the transportation industry, disruptions to the national and international transportation infrastructure, and unexpected delivery interruptions or delays also have the potential to derail our distribution process.
Increases in transportation costs (including increases in fuel costs), issues with overseas shipments, supplier-side delays, reductions in the transportation capacity of carriers, labor strikes or shortages in the 16 Table of Contents transportation industry, disruptions to the national and international transportation infrastructure, and unexpected delivery interruptions or delays also have the potential to derail our distribution process.
Consistent with our policy to recognize revenue upon order delivery, any orders placed at the end of December are recognized as revenue upon delivery, which may occur in the following year.
Consistent with our policy to recognize revenue on order delivery, any orders placed at the end of December are recognized as revenue on delivery, which may occur in the following year.
Our competitive price model and pricing pressures in the optical retail industry may inhibit our ability to reflect these increased costs in the prices of our 17 Table of Contents products, in which case such increased costs could have a material adverse effect on our business, financial condition, and results of operations.
Our competitive price model and pricing pressures in the optical retail industry may inhibit our ability to reflect these increased costs in the prices of our products, in which case such increased costs could have a material adverse effect on our business, financial condition, and results of operations.
Our results of operations may be adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock.
Our results of operations may be 53 Table of Contents adversely affected if our assumptions change or if actual circumstances differ from those in our assumptions, which could cause our results of operations to fall below the expectations of securities analysts and investors, resulting in a decline in the market price of our Class A common stock.
While we have taken measures designed to protect the security of the IT systems and confidential and personal information under our control, we cannot ensure that any security measures that we or our third-party service providers have implemented will be effective against current or future security threats.
While we have taken measures 18 Table of Contents designed to protect the security of the IT systems and confidential and personal information under our control, we cannot ensure that any security measures that we or our third-party service providers have implemented will be effective against current or future security threats.
Our suppliers may be forced to reduce their production, shut down their operations or file for bankruptcy. The occurrence of one or more of these events could impact our ability to get products to our customers, result in disruptions to our operations, increase our costs and decrease our profitability.
Our suppliers may be forced to reduce their production, shut down their operations or file for 41 Table of Contents bankruptcy. The occurrence of one or more of these events could impact our ability to get products to our customers, result in disruptions to our operations, increase our costs and decrease our profitability.
In the event that AWS’ or any other third-party provider’s systems or service abilities are hindered by any of the 43 Table of Contents events discussed above, particularly in a region where our website is mainly hosted, our ability to operate our business may be impaired.
In the event that AWS’ or any other third-party provider’s systems or service abilities are hindered by any of the events discussed above, particularly in a region where our website is mainly hosted, our ability to operate our business may be impaired.
Our business has historically experienced a higher proportion of costs in each subsequent quarter as a year progresses due to the overall growth of the business and operating costs to support that growth, including costs 24 Table of Contents related to the opening of new retail stores and increased marketing and employee-related compensation to support growth.
Our business has historically experienced a higher proportion of costs in each subsequent quarter as a year progresses due to the overall growth of the business and operating costs to support that growth, including costs related to the opening of new retail stores and increased marketing and employee-related compensation to support growth.
Pursuant to our certificate of incorporation, we are authorized to issue 150,000,000 shares of Class C common stock, none of which were outstanding as of December 31, 2023.
Pursuant to our certificate of incorporation, we are authorized to issue 150,000,000 shares of Class C common stock, none of which were outstanding as of December 31, 2024.
Topics taken into account in such assessments include, among others, the company’s efforts and impacts on climate change and human rights or labor conditions, ethics and compliance with law, and the role of the company’s board of directors in supervising various ESG issues.
Topics taken into account in such assessments include, among others, the company’s efforts and impacts on climate change and human rights or labor conditions, ethics and compliance with law, and governance considerations, including the role of the company’s board of directors in supervising various ESG issues.
The extent to which a jurisdiction considers particular actions or relationships to comply with the applicable standard of care is subject to change and to evolving interpretations by states medical boards and state attorneys general, among others, each with broad discretion.
The extent to which a jurisdiction considers particular actions or relationships to comply with the applicable standard of care is subject to change and to evolving interpretations by states medical boards and state 33 Table of Contents attorneys general, among others, each with broad discretion.
If we fail to meet the ESG values, standards and metrics that we set for ourselves, or our articulated public benefit purposes, or if we fail to meet regulatory requirements for ESG disclosures, we may experience negative publicity and a loss of customers or be subject to regulatory fines or penalties or litigation, which will adversely affect our business, financial condition, and results of operations.
If we fail, or are perceived to fail, to meet the ESG values, standards and metrics that we set for ourselves, or our articulated public benefit purposes, or if we fail to meet regulatory requirements for ESG disclosures, we may experience negative publicity and a loss of customers, employees, or suppliers or be subject to regulatory fines or penalties or litigation, which will adversely affect our business, financial condition, and results of operations.
Our Co-Founders and Co-CEOs, Neil Blumenthal and Dave Gilboa, if they choose to act together and if they exercise and/or settle their options and restricted stock units that will exercise or settle into Class B common stock, have the ability to exercise significant influence over all matters submitted to stockholders for approval, including exercising significant control over the outcome of director elections.
Our Co-Founders and Co-CEOs, Neil Blumenthal and Dave Gilboa, if they choose to act together and if they exercise and/or settle their options, RSUs and PSUs that will exercise or settle into Class B common stock, have the ability to exercise significant influence over all matters submitted to stockholders for approval, including exercising significant control over the outcome of director elections.
As we gain an increasingly high public profile, the possibility of intellectual property rights claims against us grows. Our competitors 35 Table of Contents and others may now and in the future have significantly larger and more mature patent portfolios than us.
As we gain an increasingly high public profile, the possibility of intellectual property rights claims against us grows. Our competitors and others may now and in the future have significantly larger and more mature patent portfolios than us.
Any actual or perceived non-compliance could result in litigation and proceedings against us by governmental entities, customers or others, fines and civil or criminal penalties, limited ability or inability to operate our 33 Table of Contents business, offer services, or market our business in certain jurisdictions, negative publicity and harm to our brand and reputation, and reduced overall demand for our products and services.
Any actual or perceived non-compliance could result in litigation and proceedings against us by governmental entities, customers or others, fines and civil or criminal penalties, limited ability or inability to operate our business, offer services, or market our business in certain jurisdictions, negative publicity and harm to our brand and reputation, and reduced overall demand for our products and services.
Our customer agreement with AWS remains in effect until (i) terminated for convenience, which we may do for any reason by providing AWS notice and closing our account and which AWS may do for any reason by providing us at least 30 days’ notice or (ii) terminated for cause, which either party may do if the other party has an uncured material breach and which AWS may do immediately upon notice.
Our customer agreement with AWS remains in effect until (i) terminated for convenience, which we may do for any reason by providing AWS notice and closing our account and which AWS may do for any reason by providing us at 43 Table of Contents least 30 days’ notice or (ii) terminated for cause, which either party may do if the other party has an uncured material breach and which AWS may do immediately upon notice.
If our number of customers declines or fluctuates for any of these reasons among others, our business would suffer. The optical industry is highly competitive, and if we do not compete successfully, our business may be adversely impacted.
If our number of customers declines or fluctuates for any of these reasons among others, our business would suffer. 20 Table of Contents The optical industry is highly competitive, and if we do not compete successfully, our business may be adversely impacted.
In addition, the Telephone Consumer Protection Act, or TCPA, imposes significant restrictions on the ability to make telephone calls or send text messages to mobile telephone numbers without the prior consent of the person being contacted. Claims that we have violated the TCPA could be costly to litigate, and if successful, expose us to substantial statutory damages.
For example, the Telephone Consumer Protection Act, or TCPA, imposes significant restrictions on the ability to make telephone calls or send text messages to mobile telephone numbers without the prior consent of the person being contacted. Claims that we have violated the TCPA could be costly to litigate, and if successful, expose us to substantial statutory damages.
In addition, noncompliance with anti-corruption, anti-bribery, or anti-money laundering laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, enforcement actions, fines, damages, other civil or criminal penalties or injunctions, 40 Table of Contents suspension or debarment from contracting with certain persons, reputational harm, adverse media coverage, and other collateral consequences.
In addition, noncompliance with anti-corruption, anti-bribery, or anti-money laundering laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, enforcement actions, fines, damages, other civil or criminal penalties or injunctions, suspension or debarment from contracting with certain persons, reputational harm, adverse media coverage, and other collateral consequences.
In addition, if we issue shares of Class C common stock in the future, such issuances would have a dilutive effect on the economic interests of our Class A common stock and Class B common stock. 49 Table of Contents We cannot predict the effect our multi-class structure may have on the trading price of our Class A common stock.
In addition, if we issue shares of Class C common stock in the future, such issuances would have a dilutive effect on the economic interests of our Class A common stock and Class B common stock. We cannot predict the effect our multi-class structure may have on the trading price of our Class A common stock.
Similar laws have been proposed in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States.
Similar laws have been enacted in other states and at the federal level, reflecting a trend toward more stringent privacy legislation in the United States.
The fourth quarter, in particular, has historically experienced the highest amount of costs in a year to support the business demand in the quarter, even though a portion of the net revenue from that demand is not recognized until January of the following year.
The fourth quarter, in particular, has historically experienced the highest amount of costs in a year to support the business demand in the quarter, even though a portion of the net revenue from that demand is not recognized until 24 Table of Contents January of the following year.
Our results of operations could vary significantly from quarter to quarter and year to year because of a variety of factors, many of which are outside of our control. As a result, comparing our results of operations on a period-to-period 27 Table of Contents basis may not be meaningful.
Our results of operations could vary significantly from quarter to quarter and year to year because of a variety of factors, many of which are outside of our control. As a result, comparing our results of operations on a period-to-period basis may not be meaningful.
If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the 48 Table of Contents attention of management from our business, and adversely affect our business, results of operations, and financial condition.
If we were to become involved in securities litigation, it could subject us to substantial costs, divert resources and the attention of management from our business, and adversely affect our business, results of operations, and financial condition.
For example, the FDA has required manufacturers of certain disposable and daily-wear contact 36 Table of Contents lenses to obtain 510(k) clearances prior to marketing these products, while requiring manufacturers of certain extended-wear contact lenses to obtain approval of a PMA.
For example, the FDA has required manufacturers of certain disposable and daily-wear contact lenses to obtain 510(k) clearances prior to marketing these products, while requiring manufacturers of certain extended-wear contact lenses to obtain approval of a PMA.
For example, Apple has moved to “opt-in” 44 Table of Contents privacy models, requiring consumers to expressly consent to receiving targeted ads, which may reduce the value of inventory on its iOS mobile application platform.
For example, Apple has moved to “opt-in” privacy models, requiring consumers to expressly consent to receiving targeted ads, which may reduce the value of inventory on its iOS mobile application platform.

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Item 1C. Cybersecurity

Cybersecurity — threats and controls disclosure

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Biggest changeOur cybersecurity risk management program includes: • Risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; • A security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security protocols and controls, and (3) our response to cybersecurity incidents; 55 Table of Contents • The use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security protocols and controls; • Cybersecurity awareness training of our employees, incident response personnel, and senior management; • A cybersecurity incident response plan that includes procedures for assessing and responding to cybersecurity incidents; and • A third-party risk management process for service providers, suppliers, and vendors who have access to our critical systems and information.
Biggest changeOur cybersecurity risk management program includes: • Risk assessments designed to help identify material cybersecurity risks to our critical systems, information, products, services, and our broader enterprise IT environment; • A security team principally responsible for managing (1) our cybersecurity risk assessment processes, (2) our security protocols and controls, and (3) our response to cybersecurity incidents; • The use of external service providers, where appropriate, to assess, test or otherwise assist with aspects of our security protocols and controls; • Cybersecurity awareness training of our employees, incident response personnel, and senior management; • A cybersecurity incident response plan that includes procedures for assessing and responding to cybersecurity incidents; and 54 Table of Contents • A third-party risk management process for service providers, suppliers, and vendors who have access to our critical systems and information.
“Risk Factors—Risks Related to Our Business and Industry—We rely heavily on our information technology systems, as well as those of our third-party vendors, business partners, and service providers, for our business to effectively operate and to safeguard confidential information; any significant failure, inadequacy, interruption, or cybersecurity incident could adversely affect our business, financial condition, and operations.” Cybersecurity Governance Our Board considers cybersecurity risk as part of its risk oversight function and has delegated to our Audit Committee oversight of cybersecurity and other information technology risks.
“ Risk Factors—Risks Related to Our Business and Industry—We rely heavily on our information technology systems, as well as those of our third-party vendors, business partners, and service providers, for our business to effectively operate and to safeguard confidential information; any significant failure, inadequacy, interruption, or cybersecurity incident could adversely affect our business, financial condition, and operations. ” Cybersecurity Governance Our board of directors considers cybersecurity risk as part of its risk oversight function and has delegated to our Audit Committee oversight of cybersecurity and other information technology risks.
Our Audit Committee reports to the full Board regarding its activities, including those related to cybersecurity. The full Board also receives an annual briefing from management on our cyber risk management program. Board members receive presentations on cybersecurity topics from the Chief Technology Officer and the Senior Director of Information Security.
Our Audit Committee reports to the full board of directors regarding its activities, including those related to cybersecurity. The full board of directors also receives an annual briefing from management on our cyber risk management program. Board members receive presentations on cybersecurity topics from the Chief Technology Officer (“CTO”) and the Senior Director of Information Security.
Our management team, including our Chief Technology Officer (“CTO”) and Senior Director of Information Security, are responsible for assessing and managing our material risks from cybersecurity threats, and our Chief Financial Officer and General Counsel are responsible for associated materiality assessments.
Our management team, including our CTO and Senior Director of Information Security, are responsible for assessing and managing our material risks from cybersecurity threats, and our Chief Financial Officer and General Counsel are responsible for associated materiality assessments.
The Company annually purchases a cybersecurity risk insurance policy that would help defray the costs associated with a covered cybersecurity incident if it occurred.
The Company maintains a cybersecurity risk insurance policy that would help defray the costs associated with a covered cybersecurity incident if it occurred.

Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe following table summarizes our domestic retail store locations by state, as of December 31, 2023: State Retail Store Count State Retail Store Count Alabama 2 Missouri 4 Arizona 5 Nebraska 1 Arkansas 1 Nevada 1 California 32 New Jersey 12 Colorado 5 New Mexico 1 Connecticut 5 New York 20 District of Columbia 5 North Carolina 7 Florida 18 Ohio 5 Georgia 6 Oklahoma 2 Illinois 10 Oregon 2 Indiana 2 Pennsylvania 7 Iowa 1 Rhode Island 2 Kansas 2 South Carolina 2 Kentucky 2 Tennessee 4 Louisiana 2 Texas 19 Maryland 7 Utah 2 Massachusetts 12 Virginia 7 Michigan 5 Washington 4 Minnesota 5 Wisconsin 2 Mississippi 1 We believe our facilities are adequate and suitable for our current needs, and that should it be needed, suitable additional or alternative space will be available to accommodate our operations.
Biggest changeThe following table summarizes our domestic retail store locations by state, as of December 31, 2024: State Retail Store Count State Retail Store Count Alabama 3 Mississippi 1 Arizona 5 Missouri 5 Arkansas 1 Nebraska 1 California 33 Nevada 2 Colorado 6 New Jersey 13 Connecticut 6 New Mexico 1 District of Columbia 6 New York 26 Florida 20 North Carolina 9 Georgia 9 Ohio 6 Idaho 1 Oklahoma 2 Illinois 10 Oregon 2 Indiana 2 Pennsylvania 9 Iowa 1 Rhode Island 2 Kansas 2 South Carolina 3 Kentucky 2 Tennessee 4 Louisiana 2 Texas 21 Maryland 7 Utah 4 Massachusetts 14 Virginia 10 Michigan 7 Washington 5 Minnesota 5 Wisconsin 3 We believe our facilities are adequate and suitable for our current needs, and that should it be needed, suitable additional or alternative space will be available to accommodate our operations.
All of our retail properties are leased or licensed from third parties under agreements expiring at various dates from 2024 to 56 Table of Contents 2033, and the average size of our retail stores is approximately 1,700 square feet as of December 31, 2023.
All of our retail properties are leased or licensed from third parties under agreements expiring at various dates from 2025 to 55 Table of Contents 2036, and the average size of our retail stores is approximately 1,700 square feet as of December 31, 2024.
As of December 31, 2023, we operated 232 retail stores across the United States and five retail stores in Canada.
As of December 31, 2024, we operated 271 retail stores across the United States and five retail stores in Canada.
Item 2. Properties Our corporate headquarters is located in New York, New York, where we lease approximately 79,474 square feet of space under a lease that expires in January 2025.
Item 2. Properties Our corporate headquarters is located in New York, New York, where we lease approximately 52,983 square feet of space under a lease that expires in August 2036.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeItem 3. Legal Proceedings See Note 10, “Commitments and Contingencies” in our consolidated financial statements included in Part II, Item 8 of this Form 10-K for information regarding legal proceedings, which discussion is incorporated herein by reference. Item 4. Mine Safety Disclosures Not applicable. 57 Table of Contents Part II.
Biggest changeItem 3. Legal Proceedings See Note 11, “Commitments and Contingencies” in our consolidated financial statements included in Part II, Item 8 of this Form 10-K for information regarding legal proceedings, which discussion is incorporated herein by reference. Item 4. Mine Safety Disclosures Not applicable. 56 Table of Contents Part II.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeHolders As of February 26, 2024, there were 7 holders of record of our Class A common stock and 13 holders of record of our Class B common stock. Dividends We have not paid dividends in the past and have no current plans to pay dividends on our common stock.
Biggest changeHolders As of February 25, 2025, there were 3 holders of record of our Class A common stock and 12 holders of record of our Class B common stock. Dividends We have not paid dividends in the past and have no current plans to pay dividends on our common stock. Unregistered Sales of Equity Securities None.
The graph assumes an initial investment of $100.00 at the close of trading on September 29, 2021 and that all dividends paid by companies included in these indices have been reinvested. The performance shown in the graph below is not intended to forecast or be indicative of future stock price performance. Item 6. Reserved 59 Table of Contents
The graph assumes an initial investment of $100.00 at the close of trading on September 29, 2021 and that all dividends paid by companies included in these indices have been reinvested. The performance shown in the graph below is not intended to forecast or be indicative of future stock price performance. Item 6. Reserved 58 Table of Contents
The following graph depicts the total cumulative stockholder return on our Class A common stock from September 29, 2021, the first day of trading of our Class A common stock on the NYSE, through December 31, 2023, relative to the performance of the S&P 500 Index and the S&P Apparel, Accessories & Luxury Index.
The following graph depicts the total cumulative stockholder return on our Class A common stock from September 29, 2021, the first day of trading of our Class A common stock on the NYSE, through December 31, 2024, relative to the performance of the S&P 500 Index and the S&P Apparel, Accessories & Luxury Index.
Issuer Purchases of Equity Securities None. 58 Table of Contents Performance Graph The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, or otherwise subject to the liabilities under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
Use of Proceeds None. 57 Table of Contents Performance Graph The following performance graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC, nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, whether made before or after the date hereof and irrespective of any general incorporation language in any such filing, or otherwise subject to the liabilities under the Securities Act or Exchange Act, except to the extent that we specifically incorporate it by reference into such filing.
Removed
Use of Proceeds and Issuer Purchases of Equity Securities Unregistered Sales of Equity Securities None.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe following table reconciles adjusted EBITDA and adjusted EBITDA margin to the most directly comparable GAAP measure, which is net loss: Year Ended December 31, 2023 2022 2021 ($ in thousands) Net loss $ (63,197) $ (110,393) $ (144,271) Adjusted to exclude the following: Interest and other income (loss), net (9,232) (1,307) 347 Provision for income taxes 433 497 263 Depreciation and amortization expense 38,554 31,864 21,643 Asset impairment charges 3,230 1,647 317 Stock-based compensation expense (1) 71,065 98,655 110,543 Non-cash charitable donations (2) 3,191 3,770 7,757 Transaction costs (3) — — 28,262 Amortization of cloud-based software implementation costs (4) 2,895 247 — ERP implementation costs (5) 4,413 687 — Restructuring and other costs (6) 1,000 1,535 — Adjusted EBITDA $ 52,352 $ 27,202 $ 24,861 Adjusted EBITDA margin 7.8 % 4.5 % 4.6 % __________________ (1) Represents expenses related to the Company’s equity-based compensation programs and related employer payroll taxes, which may vary significantly from period to period depending upon various factors including the timing, number, and the valuation of awards granted, vesting of awards including the satisfaction of performance conditions, and the impact of repurchases of awards from employees.
Biggest changeEach of the adjustments and other adjustments described in this paragraph and in the reconciliation table below help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations. 61 Table of Contents The following table reconciles Adjusted EBITDA and Adjusted EBITDA Margin to the most directly comparable GAAP measure, which is net loss: Year Ended December 31, 2024 2023 2022 ($ in thousands) Net loss $ (20,390) $ (63,197) $ (110,393) Adjusted to exclude the following: Interest and other income, net (10,596) (9,232) (1,307) Provision for income taxes 875 433 497 Depreciation and amortization expense 45,865 38,554 31,864 Asset impairment charges 816 3,230 1,647 Stock-based compensation expense (1) 48,409 71,065 98,655 Non-cash charitable donations (2) 2,196 3,191 3,770 Amortization of cloud-based software implementation costs (3) 3,704 2,895 247 ERP implementation costs (4) — 4,413 687 Other costs (5) 2,232 1,000 1,535 Adjusted EBITDA $ 73,111 $ 52,352 $ 27,202 Adjusted EBITDA Margin 9.5 % 7.8 % 4.5 % __________________ (1) Represents expenses related to the Company’s equity-based compensation programs and related employer payroll taxes, which may vary significantly from period to period depending upon various factors including the timing, number, and the valuation of awards granted, vesting of awards including the satisfaction of performance conditions, as well as the issuance of 48,486 shares of Class A common stock to charitable donor advised funds in February 2024.
This decrease was primarily driven by a $27.7 million decrease in stock-based compensation, mostly related to the Founders Grant (as described in Note 7 to our condensed consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K), and lower marketing costs, including costs associated with our Home Try-On program, in the first half of the year, which decreased to 12% of revenue in the year ended December 31, 2023 compared to 14% in the same period of 2022.
This decrease was primarily driven by a $27.7 million decrease in stock-based compensation, mostly related to the Founders Grant (as described in Note 7 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K), and lower marketing costs, including costs associated with our Home Try-On program, in the first half of the year, which decreased to 12% of revenue in the year ended December 31, 2023 compared to 14% in the same period of 2022.
The decrease in gross margin was primarily driven by the sales growth of contact lenses which are sold at a lower margin than our other eyewear, increased doctor salaries, as the number of stores with offering eye exams grew, and increases in store occupancy costs as a percent of revenue as we grew our store base from 200 stores as of December 31, 2022 to 237 stores as of December 31, 2023.
The decrease in gross margin was primarily driven by the sales growth of contact lenses which are sold at a lower margin than our other eyewear, increased doctor salaries, as the number of stores offering eye exams grew, and increases in store occupancy costs as a percent of revenue as we grew our store base from 200 stores as of December 31, 2022 to 237 stores as of December 31, 2023.
We define adjusted EBITDA margin as adjusted EBITDA divided by net revenue. We caution investors that amounts presented in accordance with our definitions of adjusted EBITDA and adjusted EBITDA margin may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate adjusted EBITDA and adjusted EBITDA margin in the same manner.
We define Adjusted EBITDA Margin as Adjusted EBITDA divided by net revenue. We caution investors that amounts presented in accordance with our definitions of Adjusted EBITDA and Adjusted EBITDA Margin may not be comparable to similar measures disclosed by our competitors, because not all companies and analysts calculate these measures in the same manner.
However, unforeseen adverse future economic and market conditions, such as those resulting from disease pandemics and other catastrophic events, could result in our actual results differing materially from our estimates. 71 Table of Contents Stock-Based Compensation We recognize compensation expense for stock-based awards based on the grant date fair value, on a straight-line basis over the requisite service period of the awards, which is generally the vesting term of the outstanding stock awards.
However, unforeseen adverse future economic and market conditions, such as those resulting from disease pandemics and other catastrophic events, could result in our actual results differing materially from our estimates. 69 Table of Contents Stock-Based Compensation We recognize compensation expense for stock-based awards based on the grant date fair value, on a straight-line basis over the requisite service period of the awards, which is generally the vesting term of the outstanding stock awards.
Stock-based compensation will be recognized over the period of time the market condition for each tranche is expected to be met (i.e., the derived service period). The derived service period over which the expense is expected to be recognized is 3.8 years.
Stock-based compensation is recognized over the period of time the market condition for each tranche is expected to be met (i.e., the derived service period). The derived service period over which the expense is expected to be recognized is 3.8 years.
We maintain data across the entire customer journey that allows us to develop deep insights, informing our innovation priorities and enabling us to create a highly personalized, brand-enhancing experience for our customers. We have built an integrated, multichannel presence that we believe deepens our relationship with existing customers while broadening reach and accessibility.
We maintain data across the entire customer journey that allows us to develop deep insights, informing our innovation priorities and enabling us to create a highly personalized, brand-enhancing experience for our customers. We have built an integrated, omnichannel presence that we believe deepens our relationship with existing customers while broadening reach and accessibility.
Cash Flows from Investing Activities For the year ended December 31, 2023, net cash used in investing activities was $54.7 million related to purchases of property and equipment to support our growth, primarily related to the build-out of new retail stores and capitalized software development costs, and an investment in a private optical equipment company.
For the year ended December 31, 2023, net cash used in investing activities was $54.7 million related to purchases of property and equipment to support our growth, primarily related to the build-out of new retail stores and capitalized software development costs, and an investment in a private optical equipment company.
The PSUs vest upon two performance conditions, (i) a qualified public offering and (ii) the price of the Company’s Class A common stock reaches stock price hurdles over a period of ten years, as defined by the terms of the award. The PSUs are subject to the co-CEOs’ continued employment with the Company through the applicable vesting date.
The PSUs vest upon two performance conditions, (i) a qualified public offering and (ii) the price of our Class A common stock reaches stock price hurdles over a period of ten years, as defined by the terms of the award. The PSUs are subject to the Co-CEOs’ continued employment with the Company through the applicable vesting date.
Compensation expense for performance awards is recognized when it is determined that it is probable that the vesting conditions will be satisfied. In June 2021, the Company granted 4,397,688 PSUs and 1,884,724 RSUs to the co-CEOs, in the aggregate, under the 2019 Plan (the “Founders Grant”).
Compensation expense for performance awards is recognized when it is determined that it is probable that the vesting conditions will be satisfied. In June 2021, we granted 4,397,688 PSUs and 1,884,724 RSUs to the Co-CEOs, in the aggregate, under the 2019 Plan (the “Founders Grant”).
The estimated net realizable value of inventory is determined based on an analysis of historical sales trends, the impact of market trends and economic conditions, forecasts of future demand, and estimated timing of product retirements. Adjustments for damaged inventory are recorded primarily based on actual damaged inventory.
The estimated net realizable value of excess and obsolete inventory is determined based on an analysis of historical sales trends, the impact of market trends and economic conditions, forecasts of future demand, and estimated timing of product retirements. Adjustments for damaged inventory are recorded primarily based on actual damaged inventory.
We also continue to diversify and expand our supply chain network, both internationally with our frame manufacturers and domestically with our wholly owned and partner optical laboratories, which we believe has helped to insulate us from supply chain disruption and allowed us to continue to meet growing customer demand over the last several years while maintaining our exceptional quality and customer satisfaction standards.
We also continue to diversify and expand our supply chain network, both internationally with our frame manufacturers and domestically with our wholly owned and partner optical laboratories, which we believe helps to insulate us from supply chain disruption and allowed us to continue to meet growing customer demand over the last several years while maintaining our exceptional quality and customer satisfaction standards.
The Company used a Monte Carlo simulation to calculate the grant-date fair value of the PSUs of $128.8 million. Since the PSUs contain a performance and market condition, the stock-based compensation expense will be recognized when it becomes probable that the performance condition will be met using the accelerated attribution method.
We used a Monte Carlo simulation to calculate the grant-date fair value of the PSUs of $128.8 million. Since the PSUs contain a performance and market condition, the stock-based compensation expense is recognized when it becomes probable that the performance condition will be met using the accelerated attribution method.
Due to these limitations, adjusted EBITDA and adjusted EBITDA margin should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by 62 Table of Contents relying primarily on our GAAP results and using these non-GAAP measures only supplementally.
Due to these limitations, Adjusted EBITDA and Adjusted EBITDA Margin should not be considered as measures of discretionary cash available to us to invest in the growth of our business. We compensate for these limitations by relying primarily on our GAAP results and using these non-GAAP measures only supplementally.
In addition to lower prices, we introduced simple, unified pricing (glasses starting at $95, including prescription lenses) to the eyewear market. • We’ve built a seamless shopping experience that meets customers where and how they want to shop, whether that’s on our website, on our mobile app, or in our 237 retail stores as of December 31, 2023. • We’ve crafted a holistic vision care offering that extends beyond glasses to include contacts, vision tests and eye exams, vision insurance, and beyond.
In addition to lower prices, we introduced simple, unified pricing (glasses starting at $95, including prescription lenses) to the eyewear market. • We’ve built a seamless shopping experience that meets customers where and how they want to shop, whether that’s on our website, on our mobile app, or in our 276 retail stores as of December 31, 2024. • We’ve crafted a holistic vision care offering that extends beyond glasses to include contacts, vision tests and eye exams, vision insurance, and more.
Since the RSUs contain a performance condition, stock-based compensation expense is recognized using the accelerated attribution method when it becomes probable that the performance condition will be met. The performance condition was satisfied on September 29, 2021 by the Company’s Direct Listing, and the Company began recording expense at that time.
Since the RSUs contain a performance condition, stock-based compensation expense is recognized using the accelerated attribution method when it becomes probable that the performance condition will be met. The performance condition was satisfied on September 29, 2021 by our direct listing, and we began recording expense at that time.
Given our definition of a customer is a unique customer that has made at 61 Table of Contents least one purchase, it can include either an individual person or a household of more than one person utilizing a single account.
Given our definition of a customer is a unique customer account that has made at least one purchase, it can include either an individual person or a household of more than one person utilizing a single account.
Elevated inflation and interest rates, changing consumer commuting habits, and other negative economic factors may impact consumer spending habits as well as our cost of attracting and our ability to attract new customers.
Elevated inflation and interest rates, tariffs, and other negative economic factors may impact consumer spending habits as well as our cost of attracting and our ability to attract new customers.
Overall economic environment The nature of our business, which involves the sale of products and services that are a medical necessity for many consumers, provides some insulation from swings in consumer sentiment and general economic conditions. However, our performance and growth are still impacted by these factors.
“Risk Factors” of this Annual Report. Overall economic environment The nature of our business, which involves the sale of products and services that are a medical necessity for many consumers, provides some insulation from swings in consumer sentiment and general economic conditions. However, our performance and growth are still impacted by these factors.
(2) Represents charitable expense recorded in connection with the donation of 56,938 shares of Class A common stock to charitable donor advised funds in June 2023 and 178,572 shares of Class A common stock in both August 2023 and May 2022 to the Warby Parker Impact Foundation, and a donation of 34,528 shares of Class A common stock to third-party charitable donor advised funds in November 2022.
(2) Represents charitable expense recorded in connection with the donation of 178,572 shares of Class A common stock in each of May 2024, August 2023 and May 2022 to the Warby Parker Impact Foundation, 56,938 shares of Class A common stock to charitable donor advised funds in June 2023, and 34,528 shares of Class A common stock to charitable donor advised funds in November 2022.
We expect SG&A to increase in absolute dollars over time and to fluctuate as a percentage of revenue due to the anticipated growth of our business, intentional investments in marketing, and changing prices of goods and services caused by inflation and other macroeconomic factors. SG&A is expensed in the period in which it is incurred.
We expect SG&A to increase in absolute dollars over time and to fluctuate as a percentage of revenue due to the anticipated growth of our business, intentional investments in marketing, and changing prices of goods and services caused by inflation and other macroeconomic factors.
Our results of operations have been and will continue to be affected by the timing and number of retail stores that we operate. We have thoughtfully expanded our retail store footprint over the past several years. During the years ended December 31, 2023, 2022, and 2021, we opened 40, 40, and 35 new retail stores, respectively.
Our results of operations have been and will continue to be affected by the timing and number of retail stores that we operate. We have thoughtfully expanded our retail store footprint over the past several years. During the years ended December 31, 2024, 2023, and 2022, we opened 39, 37, and 39 net new retail stores, respectively.
The qualified public offering performance condition was satisfied at September 29, 2021 by the Company’s Direct Listing, and the Company began recording expense at that time.
The qualified public offering performance condition was satisfied at September 29, 2021 by our direct listing, and we began recording expense at that time.
For the years ended December 31, 2023, 2022, and 2021, the amount includes $0.6 million, $0.6 million, and $3.4 million of employer payroll costs associated with releases of RSUs and option exercises, respectively.
For the years ended December 31, 2024, 2023, and 2022, the amount includes $1.1 million, $0.6 million, and $0.6 million of employer payroll costs associated with releases of RSUs and option exercises, respectively.
For the year ended December 31, 2021, net cash used in investing activities was $48.5 million related to purchases of property and equipment to support our growth, primarily related to the build-out of new retail stores, as well as investments in our supply chain infrastructure and capitalized software development costs. 70 Table of Contents Cash Flows from Financing Activities For the year ended December 31, 2023, net cash provided by financing activities was $2.9 million, which was primarily related to proceeds from shares issued in connection with our Employee Stock Purchase Plan (“ESPP”) and stock option exercises.
For the year ended December 31, 2022, net cash used in investing activities was $60.2 million related to purchases of property and equipment to support our growth, primarily related to the build-out of new retail stores, as well as investments in our supply chain infrastructure and capitalized software development costs. 68 Table of Contents Cash Flows from Financing Activities For the year ended December 31, 2024, net cash provided by financing activities was $5.0 million, which was primarily related to proceeds from stock option exercises, shares issued in connection with our Employee Stock Purchase Plan (“ESPP”), and other equity activity.
Such costs include (i) product costs held at the lesser of cost and net realizable value, (ii) freight and import costs, (iii) optical laboratory costs, (iv) customer shipping, (v) occupancy and depreciation costs of retail stores, and (vi) employee-related 64 Table of Contents costs associated with eye exams and optical laboratories, which includes salaries, benefits, bonuses, and stock-based compensation.
Such costs include (i) product costs, including freight and import costs and adjustments to the lesser of cost and net realizable value, (ii) optical laboratory costs, (iii) customer shipping, (iv) occupancy and depreciation costs of retail stores, and (v) employee-related costs associated with eye exams, which includes salaries, benefits, bonuses, and stock-based compensation.
Included in stock-based compensation expense for the three and twelve months ended December 31, 2023 is $2.2 million of liability based awards resulting from accrued bonuses that will be settled in equity in the first quarter of 2024.
Included in stock-based compensation expense for the year ended December 31, 2023 is $2.2 million of liability based awards resulting from accrued bonuses that were settled in equity in the first quarter of 2024.
Gross margin, expressed as a percentage and calculated as gross profit divided by net revenue, decreased by 180 basis points for the year ended December 31, 2022 compared to the same period in 2021.
Gross margin, expressed as a percentage and calculated as gross profit divided by net revenue, increased by 80 basis points for the year ended December 31, 2024 compared to the same period in 2023.
Adjusted EBITDA and Adjusted EBITDA Margin We define adjusted EBITDA as net income (loss) before interest and other income (loss), taxes, and depreciation and amortization as further adjusted for asset impairment costs, stock-based compensation expense and related employer payroll taxes, amortization of cloud-based software implementation costs, non-cash charitable donations, and non-recurring costs such as restructuring costs, major system implementation costs, and direct listing or other transaction costs.
Adjusted EBITDA and Adjusted EBITDA Margin We define Adjusted EBITDA as net income (loss) before interest and other income, taxes, and depreciation and amortization as further adjusted for asset impairment costs, stock-based compensation expense and related employer payroll taxes, amortization of cloud-based software implementation costs, non-cash charitable donations, charges for certain legal matters outside the ordinary course of business, and non-recurring costs such as restructuring costs and major system implementation costs.
Recent Accounting Pronouncements See Note 2 to our consolidated financial statements included elsewhere in this Form 10-K for a description of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.
Recent Accounting Pronouncements See Note 2, “Summary of Significant Accounting Policies” in our consolidated financial statements included in Part II, Item 8 of this Form 10-K for a description of recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted.
We define an Active Customer as a unique customer that has made at least one purchase in the preceding 12-month period. We determine our number of Active Customers by counting the total number of customers who have made at least one purchase in the preceding 12-month period, measured from the last date of such period.
We determine our number of Active Customers by counting the total number of customer accounts that have made at least one purchase in the trailing 12-month period, measured from the last date of such period.
Financial Highlights For the years ended December 31, 2023, 2022, and 2021: • we generated net revenue of $669.8 million, $598.1 million, and $540.8 million, respectively; • we generated gross profit of $365.2 million, $341.1 million, and $317.7 million, respectively, representing a gross profit margin of 55%, 57%, and 59%, respectively; • we generated net loss of $63.2 million, $110.4 million, and $144.3 million, respectively; and 60 Table of Contents • we generated adjusted EBITDA of $52.4 million, $27.2 million, and $24.9 million, respectively.
Financial Highlights For the years ended December 31, 2024, 2023, and 2022: • we generated net revenue of $771.3 million, $669.8 million, and $598.1 million, respectively; • we generated gross profit of $426.8 million, $365.2 million, and $341.1 million, respectively, representing a gross profit margin of 55.3%, 54.5%, and 57.0%, respectively; • we generated net loss of $20.4 million, $63.2 million, and $110.4 million, respectively; and 59 Table of Contents • we generated Adjusted EBITDA of $73.1 million, $52.4 million, and $27.2 million, respectively.
Gross profit, calculated as net revenue less cost of goods sold, increased by $23.3 million, or 7.3%, for the year ended December 31, 2022 compared to the same period in 2021, primarily due to the increase in net revenue over the same period.
Gross profit, calculated as net revenue less cost of goods sold, increased by $61.6 million, or 16.9%, for the year ended December 31, 2024 compared to the same period in 2023, primarily due to the increase in net revenue over the same period.
The following tables set forth our results of operations for the periods presented in dollars and as a percentage of net revenue: Year Ended December 31, 2023 2022 2021 ($ in thousands) Consolidated Statements of Operations Data: Net revenue $ 669,765 $ 598,112 $ 540,798 Cost of goods sold 304,541 257,050 223,049 Gross profit 365,224 341,062 317,749 Selling, general, and administrative expenses 437,220 452,265 461,410 Loss from operations (71,996) (111,203) (143,661) Interest and other income (loss), net 9,232 1,307 (347) Loss before income taxes (62,764) (109,896) (144,008) Provision for income taxes 433 497 263 Net loss $ (63,197) $ (110,393) $ (144,271) Year Ended December 31, 2023 2022 2021 % of Net Revenue Consolidated Statements of Operations Data: Net revenue 100.0 % 100.0 % 100.0 % Cost of goods sold 45.5 % 43.0 % 41.2 % Gross profit 54.5 % 57.0 % 58.8 % Selling, general, and administrative expenses 65.3 % 75.6 % 85.3 % Loss from operations (10.8) % (18.6) % (26.5) % Interest and other income (loss), net 1.4 % 0.2 % (0.1) % Loss before income taxes (9.4) % (18.4) % (26.6) % Provision for income taxes — % 0.1 % — % Net loss (9.4) % (18.5) % (26.6) % Components of Results of Operations Net Revenue We primarily derive revenue from the sales of eyewear products, optical services, and accessories.
The following tables set forth our results of operations for the periods presented in dollars and as a percentage of net revenue: Year Ended December 31, 2024 2023 2022 ($ in thousands) Consolidated Statements of Operations Data: Net revenue $ 771,315 $ 669,765 $ 598,112 Cost of goods sold 344,481 304,541 257,050 Gross profit 426,834 365,224 341,062 Selling, general, and administrative expenses 456,946 437,220 452,265 Loss from operations (30,112) (71,996) (111,203) Interest and other income, net 10,597 9,232 1,307 Loss before income taxes (19,515) (62,764) (109,896) Provision for income taxes 875 433 497 Net loss $ (20,390) $ (63,197) $ (110,393) 62 Table of Contents Year Ended December 31, 2024 2023 2022 % of Net Revenue Consolidated Statements of Operations Data: Net revenue 100.0 % 100.0 % 100.0 % Cost of goods sold 44.7 % 45.5 % 43.0 % Gross profit 55.3 % 54.5 % 57.0 % Selling, general, and administrative expenses 59.2 % 65.3 % 75.6 % Loss from operations (3.9) % (10.8) % (18.6) % Interest and other income, net 1.4 % 1.4 % 0.2 % Loss before income taxes (2.5) % (9.4) % (18.4) % Provision for income taxes 0.1 % — % 0.1 % Net loss (2.6) % (9.4) % (18.5) % Components of Results of Operations Net Revenue We primarily derive revenue from the sales of eyewear products, optical services and accessories.
Subsequent to December 31, 2023, we entered into 2 operating lease agreements and extended the terms of 5 existing operating lease agreements for retail space in the U.S. Total commitments under the new agreements are approximately $2.3 million.
Subsequent to December 31, 2024, we entered into four operating lease agreements and extended the term of one existing operating lease agreement for retail space in the U.S. Total commitments under these agreements are approximately $4.3 million.
As of December 31, 2023, 194 out of our 237 retail stores offered in-person eye exams.
As of December 31, 2024, 236 out of our 276 retail stores offered in-person eye exams.
Year Ended December 31, 2023 2022 2021 Active Customers ( in millions ) 2.33 2.28 2.20 Store Count (1) 237 200 161 Adjusted EBITDA (2) ( in thousands ) $ 52,352 $ 27,202 $ 24,861 Adjusted EBITDA margin (2) 7.8 % 4.5 % 4.6 % __________________ (1) Store Count number at the end of the period indicated.
Year Ended December 31, 2024 2023 2022 Active Customers ( in thousands ) 2,514 2,332 2,276 Store Count (1) 276 237 200 Adjusted EBITDA (2) ( in thousands ) $ 73,111 $ 52,352 $ 27,202 Adjusted EBITDA Margin (2) 9.5 % 7.8 % 4.5 % __________________ (1) Store Count number at the end of the period indicated.
Contractual Obligations and Commitments The following table summarizes our contractual obligations and commitments as of December 31, 2023: Payments Due by Period Total Less than 1 year 1 to 3 years 3 to 5 years More than 5 years ($ in thousands) Operating leases $ 208,531 $ 33,382 $ 73,479 $ 61,873 $ 39,797 Total $ 208,531 $ 33,382 $ 73,479 $ 61,873 $ 39,797 For additional discussion on our operating lease obligations, see Note 10, “Commitments and Contingencies” in our consolidated financial statements included in Part II, Item 8 of this Form 10-K.
Contractual Obligations and Commitments The following table summarizes our contractual obligations and commitments as of December 31, 2024: Payments Due by Period Total Less than 1 year 1 to 3 years 3 to 5 years More than 5 years ($ in thousands) Operating leases $ 274,882 $ 32,333 $ 97,204 $ 77,175 $ 68,170 Total $ 274,882 $ 32,333 $ 97,204 $ 77,175 $ 68,170 For additional discussion on our lease obligations, see Note 8, “Leases” in our consolidated financial statements included in Part II, Item 8 of this Form 10-K.
(6) Represents employee severance and related costs for our restructuring plan that was executed in August 2022 and other non-recurring costs, including charges for legal matters. 63 Table of Contents Results of Operations The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in this Annual Report on Form 10-K.
(5) Represents employee severance and related costs for restructuring actions executed in October 2024 and August 2022 and charges for certain legal matters outside the ordinary course of business. Results of Operations The results of operations presented below should be reviewed in conjunction with the consolidated financial statements and notes included elsewhere in this Annual Report on Form 10-K.
For the year ended December 31, 2022, net cash used in investing activities was $60.2 million related to purchases of property and equipment to support our growth, primarily related to the build-out of new retail stores, as well as investments in our supply chain infrastructure and capitalized software development costs.
Cash Flows from Investing Activities For the year ended December 31, 2024, net cash used in investing activities was $66.0 million related to purchases of property and equipment to support our growth, primarily related to the build-out of new retail stores, investments in capitalized software development costs, and an investment in a private optical equipment company.
The non-cash charges included $107.1 million of stock-based compensation, $21.6 million of depreciation and amortization, $7.8 million of non-cash charitable contributions, and $0.3 million of non-cash impairment charges.
The non-cash charges included $47.3 million of stock-based compensation, $45.9 million of depreciation and amortization, $3.7 million of amortization of cloud-based implementation costs, $2.2 million of non-cash charitable contributions, and $0.8 million of non-cash impairment charges.
There are no borrowings outstanding under the 2024 Credit Facility. 69 Table of Contents Cash Flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, 2023 2022 2021 ($ in thousands) Net cash provided by (used in) operating activities $ 60,991 $ 10,370 $ (31,994) Net cash used in investing activities (54,671) (60,181) (48,513) Net cash provided by financing activities 2,871 3,291 22,999 Effect of exchange rates on cash (882) (1,311) (161) Net increase (decrease) in cash and cash equivalents $ 8,309 $ (47,831) $ (57,669) Cash Flows from Operating Activities Net cash provided by operating activities was $61.0 million for the year ended December 31, 2023, consisting of a net loss of $63.2 million, adjusted for $118.4 million of non-cash expenses and $5.8 million of net cash from changes in operating assets and liabilities.
Cash Flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, 2024 2023 2022 ($ in thousands) Net cash provided by operating activities $ 98,744 $ 60,991 $ 10,370 Net cash used in investing activities (66,032) (54,671) (60,181) Net cash provided by financing activities 4,961 2,871 3,291 Effect of exchange rates on cash (404) (882) (1,311) Net increase (decrease) in cash and cash equivalents $ 37,267 $ 8,309 $ (47,831) Cash Flows from Operating Activities Net cash provided by operating activities was $98.7 million for the year ended December 31, 2024, consisting of a net loss of $20.4 million, adjusted for $99.9 million of non-cash expenses and $19.2 million of net cash from changes in operating assets and liabilities.
The obligations of the Borrowers under the 2024 Credit Agreement are secured by first-lien security interests in substantially all of the assets of the Borrowers. In addition, the obligations are required to be guaranteed in the future by certain additional domestic subsidiaries of the Company.
The obligations of the Borrowers under the 2024 Credit Agreement are secured by first-lien security interests in substantially all of the assets of the Borrowers.
Store Count Store Count is a key performance measure that we use to reach consumers and generate incremental demand for our products. We define Store Count as the total number of retail stores open at the end of a given period. We believe our retail stores embody our brand, drive brand awareness, and serve as efficient customer acquisition vehicles.
We define Store Count as the total number of retail stores open at the end of a given period. We believe our retail stores embody our brand, drive brand 60 Table of Contents awareness, and serve as efficient customer acquisition vehicles.
Factors Affecting Our Financial Condition and Results of Operations We believe that our performance and future success depend on a variety of factors that present significant opportunities for our business but also present risks and challenges that could adversely impact our growth and profitability, including those discussed below and in Part I, Item 1A. “Risk Factors” of this Annual Report.
For a definition of Adjusted EBITDA, a non-GAAP measure, and a reconciliation to the most directly comparable GAAP measure, see the section titled “Key Business Metrics and Certain Non-GAAP Financial Measures.” Factors Affecting Our Financial Condition and Results of Operations We believe that our performance and future success depend on a variety of factors that present significant opportunities for our business but also present risks and challenges that could adversely impact our growth and profitability, including those discussed below and in Part I, Item 1A.
Interest and Other Income (Loss), Net Interest and other income (loss), net, consists primarily of interest generated from our cash and cash equivalents balances net of interest incurred on borrowings and fees on our undrawn line of credit, and are recognized as incurred.
SG&A is expensed in the period in which it is incurred. 63 Table of Contents Interest and Other Income, Net Interest and other income, net, consists primarily of interest generated from our cash and cash equivalents balances net of interest incurred on borrowings and fees on our undrawn line of credit, and is recognized as incurred.
(5) Represents internal and external non-capitalized costs related to the implementation of our new Enterprise Resource Planning (“ERP”) system which went live in 2023.
(3) Represents the amortization of costs capitalized in connection with the implementation of cloud-based software. (4) Represents internal and external non-capitalized costs related to the implementation of our new Enterprise Resource Planning (“ERP”) system.
The increase in cost of goods sold was primarily driven by increased product and fulfillment costs associated with the growth in our contact lens offering, as well as an increase in store occupancy, store depreciation, and prescription services expenses due to new retail stores opened in 2022 and a full-year of expense from new retail stores opened throughout 2021.
The increase in cost of goods sold was primarily driven by increased product and fulfillment costs associated with our sales growth, particularly related to the growth in our contact lens offering, as well as increases in store occupancy, store depreciation, doctor headcount due to new retail stores opened in 2024, and optical laboratory costs to support glasses growth.
The 2022 Credit Facility consisted of a $100.0 million five-year revolving credit facility with sublimits of $15.0 million for letters of credit and $5.0 million for swing line notes.
(together, the “Borrowers”), entered into a Credit Agreement with Comerica Bank and the lenders from time to time party thereto (as amended, the “2022 Credit Facility”). The 2022 Credit Facility consisted of a $100.0 million five-year revolving credit facility with sublimits of $15.0 million for letters of credit and $5.0 million for swing line notes.
We expect that operating losses could continue in the foreseeable future as we continue to invest in the expansion of our business. We believe our existing cash and cash equivalents, funds available under our existing credit facility, and cash flows from operating activities will be sufficient to fund our operations for at least the next 12 months.
We believe our existing cash and cash equivalents, funds available under our existing credit facility, and cash flows from operating activities will be sufficient to fund our operations for at least the next 12 months. Credit Facility 2022 Credit Facility In September 2022, the Company and its wholly owned subsidiary, Warby Parker Retail, Inc.
Liquidity and Capital Resources Since inception, we have financed our operations primarily from net proceeds from the sale of redeemable convertible preferred stock and cash flows from operating activities. As of December 31, 2023, we had cash and cash equivalents of $216.9 million, which was primarily held for working capital purposes, and an accumulated deficit of $666.8 million.
Liquidity and Capital Resources Since inception, we have financed our operations primarily from net proceeds from the sale of redeemable convertible preferred stock and cash flows from operating activities. We also have access to cash from our credit facility, which remains undrawn as of December 31, 2024.
Comparison of the Years Ended December 31, 2022 and 2021 Net Revenue Year Ended December 31, 2022 2021 $ Change % Change ($ in thousands) Net revenue $ 598,112 $ 540,798 $ 57,314 10.6 % Net revenue increased $57.3 million, or 10.6%, for the year ended December 31, 2022 compared to the same period in 2021.
Comparison of the Years Ended December 31, 2024 and 2023 Net Revenue Year Ended December 31, 2024 2023 $ Change % Change ($ in thousands) Net revenue $ 771,315 $ 669,765 $ 101,550 15.2 % Net revenue increased $101.6 million, or 15.2%, for the year ended December 31, 2024 compared to the same period in 2023.
We sell products and services through our retail stores, website, and mobile apps. Revenue generated from eyewear products includes the sales of prescription and non-prescription optical glasses and sunglasses and contact lenses. Revenue is recognized when the customer takes possession of the product, either at the point of delivery or in-store pickup, and is recorded net of returns and discounts.
Revenue from products is recognized when the customer takes possession of the product, either at the point of delivery or in-store pickup, and is recorded net of returns and discounts. Revenue for services is recognized when the service is rendered and is recorded net of discounts.
Other than such letters of credit of $4.3 million and $4.2 million as of December 31, 2023 and 2022, respectively, there were no borrowings outstanding under the 2022 Credit Facility. 2024 Credit Facility In February 2024, the Borrowers entered into a Credit Agreement with JPMorgan Chase Bank, N.A. and the lenders party thereto (the “2024 Credit Facility”), which replaced the 2022 Credit Facility.
In February 2024, the 2022 Credit Facility was terminated and replaced by the 2024 Credit Facility as described below. 2024 Credit Facility In February 2024, the Borrowers entered into a Credit Agreement with JPMorgan Chase Bank, N.A. and the lenders party thereto (the “2024 Credit Facility”), which replaced the 2022 Credit Facility.
Net cash used in operating activities was $32.0 million for the year ended December 31, 2021, consisting of a net loss of $144.3 million, adjusted for $136.8 million of non-cash expenses and $24.5 million of net cash used as a result of changes in operating assets and liabilities. Net loss includes $28.3 million of costs related to the Direct Listing.
Net cash provided by operating activities was $61.0 million for the year ended December 31, 2023, consisting of a net loss of $63.2 million, adjusted for $118.4 million of non-cash expenses and $5.8 million of net cash from changes in operating assets and liabilities.
For the year ended December 31, 2021, net cash provided by financing activities was $23.0 million, which was primarily related to proceeds from repayments of related party loans and proceeds from stock option exercises, partially offset by repurchases of stock during the period, including shares repurchased in connection with our tender offer and tax withholdings on exercises and releases of employee equity awards.
For the year ended December 31, 2023, net cash provided by financing activities was $2.9 million, which was primarily related to proceeds from shares issued in connection with our ESPP and stock option exercises.
Interest and Other Income (Loss), Net Year Ended December 31, 2022 2021 $ Change % Change ($ in thousands) Interest and other income (loss), net $ 1,307 $ (347) $ 1,654 476.7 % As a percentage of net revenue 0.2 % (0.1) % 0.3 % Interest and other income (loss), net increased by $1.7 million, or 476.7%, for the year ended December 31, 2022 compared to the same period in 2021.
Interest and Other Income, Net Year Ended December 31, 2024 2023 $ Change % Change ($ in thousands) Interest and other income, net $ 10,597 $ 9,232 $ 1,365 14.8 % As a percentage of net revenue 1.4 % 1.4 % — % Interest and other income, net increased by $1.4 million, or 14.8%, for the year ended December 31, 2024 compared to the same period in 2023 primarily due to interest on our increased cash and cash equivalents balance.
Marketing costs, which consist of both online and offline advertising, include sponsored search, online advertising, marketing and retail events, and other initiatives. SG&A also includes administrative costs associated with our Home Try-On program, which provides customers the opportunity to sample eyewear at home prior to purchase.
Marketing, which consist of both online and offline advertising, includes sponsored search, online advertising, Home Try-On program costs, and other initiatives.
For more information regarding our use of these measures and a reconciliation of net loss, the most directly comparable GAAP measure, to adjusted EBITDA and adjusted EBITDA margin, see the section titled "Adjusted EBITDA and Adjusted EBITDA Margin” Active Customers The number of Active Customers is a key performance measure that we use to assess the reach of our physical retail stores and digital platform as well as our brand awareness.
(2) Adjusted EBITDA and Adjusted EBITDA Margin are non-GAAP financial measures. For more information regarding our use of these measures and a reconciliation of net loss to Adjusted EBITDA and Adjusted EBITDA Margin, see the section titled "Adjusted EBITDA and Adjusted EBITDA Margin” below.
Cost of Goods Sold, Gross Profit, and Gross Margin Year Ended December 31, 2022 2021 $ Change % Change ($ in thousands) Cost of goods sold $ 257,050 $ 223,049 $ 34,001 15.2 % Gross profit 341,062 317,749 23,313 7.3 % Gross margin 57.0 % 58.8 % (1.8) % Cost of goods sold increased by $34.0 million, or 15.2%, for the year ended December 31, 2022 compared to the same period in 2021, and increased as a percentage of revenue over the same period by 180 basis points, from 41.2% of revenue to 43.0% of revenue.
Cost of Goods Sold, Gross Profit, and Gross Margin Year Ended December 31, 2024 2023 $ Change % Change ($ in thousands) Cost of goods sold $ 344,481 $ 304,541 $ 39,940 13.1 % Gross profit 426,834 365,224 61,610 16.9 % Gross margin 55.3 % 54.5 % 0.8 % Cost of goods sold increased by $39.9 million, or 13.1%, for the year ended December 31, 2024 compared to the same period in 2023, and decreased as a percentage of revenue over the same period by 80 basis points, from 45.5% of revenue to 44.7% of revenue.
Provision for Income Taxes Year Ended December 31, 2022 2021 $ Change % Change ($ in thousands) Provision for income taxes $ 497 $ 263 $ 234 89.0 % As a percentage of net revenue 0.1 % — % 0.1 % Provision for income taxes increased $0.2 million, or 89.0%, for the year ended December 31, 2022 compared to the same period in 2021 primarily due to the establishment of a valuation allowance on our Canadian subsidiary.
Provision for Income Taxes Year Ended December 31, 2024 2023 $ Change % Change ($ in thousands) Provision for income taxes $ 875 $ 433 $ 442 102.1 % As a percentage of net revenue 0.1 % — % 0.1 % Provision for income taxes increased $0.4 million, or 102.1%, for the year ended December 31, 2024 compared to the same period in 2023 primarily due to the change in pre-tax loss in addition to the tax effects of stock-based compensation expense, depreciation expense, and differences in tax rates in state jurisdictions.
Revenue generated from services consists of in-person eye exams and prescriptions issued through the Virtual Vision Test app. The Company also sells eyewear accessories and charges customers for optional expedited shipping. Revenue is recognized when the service is rendered and is recorded net of discounts.
We sell products and services through our stores, website, and mobile apps. Revenue generated from eyewear includes the sales of prescription and non-prescription optical glasses and sunglasses, contact lenses, eyewear accessories, lens replacements, and customer charges for optional expedited shipping. Revenue generated from vision care consists of in-person eye exams and prescriptions issued through the Virtual Vision Test app.
Upon termination of the 2022 Credit Facility, the Company was required to cash collateralize letters of credit of $4.3 million originally issued under the 2022 Credit Facility that are used to secure certain leases in lieu of a cash security deposit.
In addition, the obligations are required to be guaranteed in the future by certain additional domestic subsidiaries of the Company. 67 Table of Contents Other than letters of credit outstanding of $4.3 million as of both December 31, 2024 and 2023, used to secure certain leases in lieu of a cash security deposit, there were no other borrowings outstanding under the 2024 Credit Facility.
The changes in operating assets and liabilities were primarily driven by an increase in net inventory to support the growth of our business and prepaid expenses and other assets, decreases in accounts payable, deferred revenue, partially offset by increases in accrued expenses and deferred rent.
The changes in operating assets and liabilities were primarily driven by decreased inventory as we more closely manage stock on hand, increased accrued expenses, and increased net lease liabilities in connection with retail leases entered into in 2024, partially offset by an increase in prepaid expenses and other current assets.
Removed
For a definition of adjusted EBITDA, a non-GAAP measure, and a reconciliation to the most directly comparable GAAP measure, see the section titled “Key Business Metrics and Certain Non-GAAP Financial Measures.” Direct Listing On September 29, 2021, we completed a direct listing of our Class A common stock (the “Direct Listing”) on the New York Stock Exchange (“NYSE”).
Added
Active Customers The number of Active Customers is a key performance measure that we use to assess the reach of our physical retail stores and digital platform as well as our brand awareness. We define an Active Customer as a unique customer account that has made at least one purchase in the trailing 12-month period.
Removed
We incurred fees related to financial advisory service, audit, and legal services in connection with the Direct Listing of $28.3 million for the year ended December 31, 2021 which are recorded in selling, general and administrative expenses.
Added
We define Average Revenue per Customer as the sum of the total net revenues in the trailing 12-month period divided by the current period Active Customers. Store Count Store Count is a key performance measure that we track as we grow our retail footprint. Stores drive customer awareness of our brand and generate incremental demand for our products.
Removed
For example, during 2023, we continued to see lower overall sales growth rates than we have historically experienced as consumer activity within the optical industry has not recovered to pre-pandemic growth level.
Added
Active Customers increased 7.8% and Average Revenue per Customer increased to $307 from $287 in the prior year period.
Removed
(2) Adjusted EBITDA and adjusted EBITDA margin are non-GAAP financial measures.
Added
Average Revenue per Customer growth was primarily driven by our glasses business, which saw strong adoption of precision progressives, our highest priced lens option which launched in April 2023, growth in our lens replacement service that was launched in the fourth quarter of 2023, and continued uptake of our higher priced frames, as well as by the impact of customers purchasing contacts or eye exams along with glasses in the same transaction.
Removed
Each of the adjustments and other adjustments described in this paragraph and in the reconciliation table below help management with a measure of our core operating performance over time by removing items that are not related to day-to-day operations.
Added
The increase in gross margin was primarily driven by faster growth in our glasses business which is our highest margin product category, lower outbound customer shipping costs as a percent of revenue, and efficiencies in our owned optical laboratories.
Removed
(3) Represents (i) costs directly attributable to the preparation for our Direct Listing and (ii) expenses incurred in connection with the cash tender offer completed in June 2021. (4) Represents the amortization of costs capitalized in connection with the implementation of cloud-based software.
Added
These impacts were partially offset by sales growth of contact lenses, which are sold at a lower margin than our other eyewear, and increased doctor headcount, as the number of stores offering eye exams grew from 194 stores as of December 31, 2023 to 236 stores as of December 31, 2024. 64 Table of Contents Selling, General, and Administrative Expenses Year Ended December 31, 2024 2023 $ Change % Change ($ in thousands) Selling, general, and administrative expenses $ 456,946 $ 437,220 $ 19,726 4.5 % As a percentage of net revenue 59.2 % 65.3 % (6.1) % Selling, general, and administrative expenses increased $19.7 million, or 4.5%, for the year ended December 31, 2024 compared to the same period in 2023.
Removed
The growth in net revenue was primarily driven by an increase in our Active Customer base to 2.28 million customers, or a 3.6% increase, an increase in average order value (“AOV”), defined as net revenue for a given period divided by the number of orders during the same period, and adding new customers, which elevated average revenue per customer to $263, or a 6.9% increase.
Added
This increase was primarily driven by higher payroll-related costs, primarily from growth in our retail workforce, and investments in marketing, partially offset by a $23.2 million decrease in stock-based compensation, mostly related to the Founders Grant (as described in Note 7 to our consolidated financial statements included in Part II, Item 8 of this Annual Report on Form 10-K).
Removed
AOV increased primarily due to a higher mix of purchases of glasses with progressive lenses which increased our average price per unit sold, while our average units per order remained stable year-over-year.
Added
We had cash and cash equivalents of $254.2 million, which was primarily held for working capital purposes, and an accumulated deficit of $687.2 million as of December 31, 2024. We expect that operating losses could continue in the foreseeable future as we continue to invest in the expansion of our business.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeInterest Rate Risk Our cash and cash equivalents as of December 31, 2023 consisted of $216.9 million in cash and money-market funds. Such interest-earning instruments carry a degree of interest rate risk. The goals of our investment policy are liquidity and capital preservation.
Biggest changeWe do not believe that foreign exchange rates have a material effect on our business, financial condition or results of operations. Interest Rate Risk Our cash and cash equivalents as of December 31, 2024 consisted of $254.2 million in cash and money-market funds. Such interest-earning instruments carry a degree of interest rate risk.
We believe that we do not have any material exposure to changes in the fair value of these assets as a result of changes in interest rates due to the short-term nature of our cash and cash equivalents. 72 Table of Contents Inflation Risk We believe that inflation, including from geopolitical unrest and other macroeconomic factors, has had a limited impact on our business, financial condition, and results of operations.
We believe that we do not have a material exposure to changes in the fair value of these assets as a result of changes in interest rates due to the short-term nature of our cash and cash equivalents. 70 Table of Contents Inflation Risk We believe that inflation, including from geopolitical unrest and other macroeconomic factors, has had a limited impact on our business, financial condition, and results of operations.
Our inability or failure to do so could harm our business, financial condition, and results of operations. 73 Table of Contents
Our inability or failure to do so could harm our business, financial condition, and results of operations. 71 Table of Contents
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market risk represents the risk of loss that may impact our financial position because of adverse changes in financial market prices and rates. Our market risk exposure is primarily a result of exposure resulting from potential changes in currency rates, interest rates, or inflation.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk Market risk represents the risk of loss that may impact our financial position because of adverse changes in financial market prices and rates. Our market risk exposure primarily results from potential changes in currency rates, interest rates, or inflation.
We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate exposure.
The goals of our investment policy are liquidity and capital preservation. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate exposure.
Foreign Exchange Risk We are exposed to changes in foreign currency rates as a result of our foreign operations and international suppliers from whom we purchase in Japanese yen and euros.
Foreign Exchange Risk We are exposed to changes in foreign currency rates as a result of our foreign operations and international suppliers from whom we purchase in Japanese yen and euros. Revenue and income generated by our operations in Canada and our foreign denominated cost of goods sold are impacted by changes in foreign currency exchange rates.
Removed
Revenue and income generated by our operations in Canada and our cost of goods sold will increase or decrease compared to prior periods as a result of changes in foreign currency exchange rates. We do not believe that foreign exchange rates have a material effect on our business, financial condition or results of operations.

Other WRBY 10-K year-over-year comparisons