The Vision Council

Optical Retail Division

Meeting

March 15, 2018

International Vision Expo East

Crowne Plaza Times Square Hotel

Introductions/Agenda Review

I. Introductions

II. Optical Market Update – Deeper Dive Retail Perspective

Steve Kodey, TVC Senior Director of Industry Research

III. Private Equity and the Optical Industry

Richard Sanchez, Visibility Management

IV. Optical Industry Standard Setting & Technical Programs

Michael Vitale, TVC Senior Technical Director and Lens Division

Liaison

V. Optical Retail Division Programs – Open Discussion

I. Guest Lecture Series – Ted Talks with a Retail Slant

II. Regional Optical Retail Meetings/Events

III. Fashion Trend session(s)

VI. Update – Hiring of Retail Division Liaison

VII. Retail Division Chair

Optical Retail Division Chair

• Current TVC Member Company

• Elected by fellow Division Members

• Presides over Division Meetings

• Ensures the Division is enacting programs of interest

• Serves as a member of:

– The Vision Council Board of Directors,

– Executive Committee and

– Nominating & Governance Committee

• Interested Candidates?

Optical Retail Division Chair

Q4’17 US Optical Market

Eyewear Overview:

Vision Council Retail

Division*

March 15th, 2018

Steve Kodey Senior Director of Industry Research

*Please note that the VisionWatch information in this

presentation is for the sole use of Vision Council companies only

and cannot be distributed in any form to non-members without

consent from The Vision Council.

Vision Correction Usage: December 2016 and

December 2017

216.2

162.7

41.631.8 29.4 23.8

12.9 16.2 12.6

PlanoSunglasses

Eyeglasses ContactLenses

Readers RxSunglasses

SunglassClips

ComputerEyewear

Surgery Squinters

In Millions of People

12ME Dec'16 12ME Dec'17

* Surgery is the sum of US residents having ever had refractive surgery; not counted as vision correction users

‘Squinters’: US residents who say that they need vision correction, but do not use any

• Categories: the number of US residents 18+ who use the

vision correction alternative all or any part of the time

• Some people use more than one vision correction

alternative 192.4 Million

Vision Correction

Users: +2.5 Million

from Dec’16

Vision Care Products & Services –

Total U.S. Market

$9,728.2

$12,658.9

$5,012.8$4,197.1

$895.2

$6,082.8

$1,806.9

OphthalmicFrames

Rx Lenses Contact Lenses PlanoSunglasses*

OTC Readers Examinations** RefractiveSurgery

In $Millions$All Retail*

Inflation not taken into consideration

12ME Dec15 12ME Dec16 12ME Dec17

*All retail includes dollars spent at all retail types at any retail location on the sale of either spectacle lenses (including Rx sun), frames, contact lenses,

sunglasses (plano), OTC readers, or revenue earned from refractive surgery (LASIK only) or eye examinations. This number does not include sunglass

clips and reflects the dollars spent only by those U.S. residents 18 and older. Does not include retail dollars spent by/for contact lenses and exams for those

17 years of age and younger.

$40.38 Billion:

+0.1% from 12ME

Period Dec’16

Vision Care Products & Services – Total U.S.

Independent ECP Market

$5,200.2

$6,859.4

$1,959.1

$155.5 $34.4

$4,234.7

OphthalmicFrames

Rx Lenses Contact Lenses PlanoSunglasses*

OTC Readers Examinations**

In $Millions$All Independent Optical Retail*

Inflation not taken into consideration

12ME Dec15 12ME Dec16 12ME Dec17

*All Independent Optical Retail includes dollars spent at independent optical locations on either spectacle lenses (including Rx sun), frames, contact lenses, sunglasses (plano), OTC readers, or revenue earned from refractive surgery (LASIK only) or eye examinations. This number does not include sunglass clips and reflects the dollars spent only by those U.S. residents 18 and older. Does not include retail dollars spent by/for contact lenses and exams for those 17 years of age and younger. An independent optical location is a locations with 3 doors or less that has either a MD, OD, Optician or Optical Retailer on site.

$18.44 Billion:

+0.9% from 12ME

Period Dec’16

US Optical Industry Retail Store Counts by

Distribution Channel: Trended 2007-2016

2007 2009 2011 2012 2013 2014 2015 2016

Independents Conventional Chains Mass Club Dept Stores

+22.6%: +715

-29.8%: -378

+9.5%: +700

+27%: +270

+9.6%: +2,500

Source: Jobson Optical Census of Retailers

38,830

42,637

Vision Care Products & Services – Total U.S.

Conventional Optical Chain Market $8.08 Billion:

-0.9% from 12ME

Period Dec’16

$2,589.7

$3,414.6

$923.0

$232.4$58.4

$864.4

OphthalmicFrames

Rx Lenses Contact Lenses PlanoSunglasses

OTC Readers Examinations**

In $Millions$All Conventional Chain Retail

Inflation not taken into consideration

12ME Dec15 12ME Dec16 12ME Dec17

Vision Care Products & Services – Total U.S.

Mass Merchant / Wholesale Club Market $5.14 Billion:

+0.5% from 12ME

Period Dec’16

$1,032.0

$1,290.3$1,247.9

$563.9

$227.0

$778.5

OphthalmicFrames

Rx Lenses Contact Lenses PlanoSunglasses

OTC Readers Examinations**

In $Millions$All Mass / Club Retail

Inflation not taken into consideration

12ME Dec15 12ME Dec16 12ME Dec17

Vision Care Products & Services – Total U.S.

Online / Internet Market

$238.5

$360.6

$786.0

$517.2

$70.5

OphthalmicFrames

Rx Lenses Contact Lenses Plano Sunglasses OTC Readers

In $Millions$Online Retail Dollars *

Inflation not taken into consideration

12ME Dec15

12ME Dec16

12ME Dec17

*Online retail includes dollars spent on websites / online retailers for the sale of either spectacle lenses (including Rx sun), frames, contact lenses,

sunglasses (plano), and OTC readers. This number does not include sunglass clips and reflects the dollars spent only by those U.S. residents 18 and

older. Does not include retail dollars spent by/for contact lenses and exams for those 17 years of age and younger.

$1.97 Billion:

+5.1% from 12ME

Period Dec’16

VisionWatch and Optical Retailers

▪ Survey a Supported List of Main Optical Retailers

– Eye Exams, Ophthalmic Frames, Rx Lenses, Plano SG, Contact

Lenses, OTC Readers

– Edited as Needed

– Quarterly Published Market Share & Demographics for Top Retailers

• Data Mining Opportunities and Reports

– Focus on Specific Retailer(s)

– Trended Sales Performance; Demographics of Recent and

Anticipated Future Buyers

– Retailer Flow (Location of Previous Purchase Location of Current

Purchase)

– Walk-Outs

• Custom Research Opportunities

List of BAM “Optical” Retailers in VisionWatch

A1. Independent eyecare provider A2. America's Best Contacts

A14. JC Penney Optical A26. SVS Vision

A3. BJ's Optical A15. Kaiser Permanente A27. Target Optical

A4.Clarkson Eyecare A16. LensCrafters A28. Texas State Optical

A5. Cohen's Fashion Optical A17. Macy's A29. Vision Source

A6. Costco Optical A18. MyEyeDr. A30. VisionWorks

A7. Davis Vision A19. Nationwide Vision A31. Vision World

A8. Empire Vision Center A20. Pearle Vision A32. Walmart Vision Center

A9. Eye Mart A21. Rx Optical A33. Other

A10. Eyeglass World A22. Sam's Club A34. Don't Know

A11. Eyemart Express A23. Sears Optical A12. EyeMasters A24. Shopko A13. For Eyes Optical A25. Sterling Optical

List of Online “Optical” Retailers in VisionWatch

39dollarglasses.com Goggles4u.com Buymeglasses.com Justeyewear.com Bestbuyeyeglasses.com LensesRX.com Coastal.com RivetandSway.com EyeBuyDirect.com Warbyparker.com Eyeglasses.com Zennioptical.com Framesdirect.com My eye doctor’s website Glasses.com Other GlassesUSA.com Not sure / Can’t remember Globaleyeglasses.com

Custom Research Opportunities

• Monthly custom slots allow companies to ask questions that are important to their needs. Results are proprietary and confidential!

• Ideal for: product concept testing, campaign testing, consumer sentiment testing

• Customized: Questions designed by professionals to meet your objectives, asked of your specific target group

• Repeatable: Easy to see trending and changes over time

• Part of VisionWatch: Data can be cross-tabbed with already existing VisionWatch questions.

• Analyzed Results: By people who understand the industry and how to present results and implications

• Cost Effective: Offers “Air Time” (8-10 questions) with consumers for a nominal fee that would be expensive to do otherwise.

• Expert Input: Project goals and objectives (including questionnaire and report output) are developed in conjunction with The Vision Council Market Research Team who can provide guidance and input on the project for your team.

Custom Research Opportunities Continued…

▪ List of Recent VisionWatch Custom Consumer Reports

of Interest to Retailers

▪ The Internet Influence Report Linked

▪ Frame Purchase Motivation Study Linked

▪ MVC Usage and Behavior Study Linked

▪ Parent Child Vision Care Report Linked

▪ Consumer Technology Study Linked

▪ Other Custom “Retail” Research Opportunities

▪ Custom ECP and Retailer Surveys

▪ Buying Groups, Technology Adoption, Sales Trends, Pricing

▪ Manufacturer / Supplier / TVC Member Surveys

▪ Volunteer Participant “Retailer” Tracking Studies

▪ Shipments Programs, Benchmarking, LPT Tracker, etc….

QUESTIONS?

Private Equity Capital Impact

on the Eye Care Market

The Vision Council

Optical Retail Division

Richard Sanchez

Visibility Management

VISIBILITY MANAGEMENT

CONFIDENTIA

L

Private Equity Capital Impact on the Eye Care Market

The Vision Council Retail Division presentation-VEE

March 15, 2018

Why Now?

• $400-$500B of underplayed capital in the market

• Eye care is unique in combining medical and retail – Challenges crossing the three O’s

– Optical yields higher margins vs. other medical services

• Eye care is a resilient, recurring, non-discretionary

• The industry growth $26B to $35B, 2007-2016

• PE recent activity in– Dermatology

– Oncology

– Anesthesia services

– Dental

– Urgent Care

Consolidating Trends

10.9x 11.2x 11.6x 11.6x12.2x12.6x 13.0x 12.9x

11.9x12.8x

9.8x10.4x

9.5x10.3x

11.0x

0.0x

2.0x

4.0x

6.0x

8.0x

10.0x

12.0x

14.0x

16.0x

18.0x

Q1-16 Q2-16 Q3-16 Q4-16 Q1-17

TEV /

EBIT

DA

Public Market Valuations

S&P 500 S&P 500 Health Care Phy Pract Mgmt

• Middle market deal volume fell 14% 2016 vs. 2015– However, total value of the transactions only fell by 1%

• Managed Healthcare returns were up 19% at the end of 2016

• Managed Healthcare multiples median was 7.5X

• Healthcare Distribution was 9.4X

• For Q1 2017, multiples increase to 10-11X

Source: Scott Mason Healthcare review; Hyde Park

Capital research report,

Increasing Need for Resources / Investment

Technology

Talent & Expertise

Facility & Service Upgrades

• Better efficient Flow

• Strategic Positioning

• Growth in # of non eye

care Providers –PCP’s

• Addition of Ancillary

Services

• Strategic/Business acumen

• Compliance/Regulatory

• Scalability

• Payer / MCO acumen

• Clinical

• Operational

Consolidators

• Private Equity Capital Funds– Opportunity from an investment and ROI viewpoint

– Span of the investment 3-5 years

– More lenient covenants

• Strategic Buyers– Looking to build a local delivery health system

– Hospital or health plan driven

– Complimentary services to eye care• Dental, ancillary benefits companies-UNUM, Mutual of Omaha

– CVS expansion to optical and mini medical centers

• Ophthalmology Mega Practices– Need for optometric physician extenders

– Multiple patient touch points

– Cataract growth of 30% by 2020

Its Accelerating

Waud Capital Comvest Partners

Sterling Partners Flexpoint Ford

HIG Shore Capital

Deals completed in 2017….

….. with more in

the market

PE recapitalization

M&A - Optometric Alliances

The Future?

• Vertical integration in the industry

– Optical distribution, manufacturing, managed

care, surgical eye care, alliance groups, hospital

based health systems

– Consolidation of synergistic services

• Dental

• Other ancillary benefits

• Health plans

– Opportunities in the vertical integration models

Thank you

Richard L. Sanchez

Visibility Management Managing Partner

www.visibilitymgmt.com

Michael C. Vitale, ABOM

Senior Technical Director & Lens Division Liaison

The Vision Council

mvitale@thevisioncouncil.org

703-548-2684

Standards Work

Standards Update ANSI Z80

• ANSI ASC/Z80 - 28 Active standards

– Structure

• SC1 – Prescription lenses

• SC2 – Non-prescription lenses and fashion eyewear

• SC3 – Frames

• SC4 – Medical Ophthalmic Devices

• SC5 – Low Vision Devices

• SC6 – Ophthalmic Instruments

• SC7 – Contact Lenses

• SC8 – Information Interchange

Standards Update ANSI Z80• ANSI ASC/Z80 - 28 Active standards

– ANSI Z80.5 – Optical Frames

• ANSI has adopted the three ISO standards for Frames

– ANSI/ISO 7998 / 8624 / 12870 - Optics Set

– ANSI Z80.31 – Specifications for Ready-to-Wear Near Vision

Spectacles

• Committee vote passed with no negative votes

• Public review process closed with minor editorial change

– PINs issued

• Z80.1 – Recommendations for Prescription Lenses

• Z80.3 – Sunglasses and Fashion Eyewear

– 2020 Revision dates

• ANSI Z80.24 -2017 – Reaffirmed

– PINs issued for updating to match current DCS version

– Paul Wade is chairing this revision

Standards Update ANSI Z87

• ANSI Z87

– ANSI Z87.1-2015 - Personal Eye and Face Protection

Devices

• Currently working on 2020 revision

• Working on “Bio Hazard Protection” (Z87.62)

Standards Update ISO

• ISO/TC172/SC7 – Ophthalmic Optics and

Instruments – 97 Publications

– 15 Publications over the last 12 months

– 20 Standards under Systematic Review

– 23 Active standards

• 18 Active work items & 5 Preliminary Work Items

• 19 Revision or Amendments & 4 New Projects

– 21 Participating Members (Countries)

– 12 Observing Members (Countries)

• US / TVC to host the Fall 2019 ISO Plenary Meeting

• Opening working group for the revision of ISO 13284– Data Interchange

– Updating to align with current version of the TVC DCS (Data Communications Standard)

– Paul Wade will be the working group leader

Standards Update ISO TC94/SC6

• ISO/TC94 – Sunglasses and Safety Eyewear

– 15 Publications

– 13 Standards under Systematic Review

– 21 Participating Members (Countries)

– 14 Observing Members (Countries)

Industry Standards & Technical Committees

• The Vision Council hosts technical meetings at

VEE and VEW

– Active Committees

• Lens Technical Committee (LTC)

• Data Communications Standard (DCS)

• Lens Product Description Standard (LPDS)

Industry Standards & Technical Committees

• TVC Standards Page

– https://www.thevisioncouncil.org/members/standards

• FRAME MANUFACTURING STANDARDS AND

REGULATIONS

– Country of Origin Marking Rules

– Rimless Drill Mount Standard

– Lead Guidelines

• STANDARDS FOR SUNGLASSES AND READERS

– ANSI Z80.3-2015 Points of Interest Guide

– New EU Sunglass Standard Implementation Date Pushed

Back

– Regulation of Sunglasses & Reading Glasses - March 2016

Industry Standards & Technical Committees

• TVC Standards Page

– https://www.thevisioncouncil.org/members/standards

• STANDARDS FOR LENSES

– Developing standards for lenses is a key component to The Vision

Council's technical initiatives.

» ANSI Z80.1-2015 Quick Reference Guide

» ANSI Z80.1-2015 Points of Interest Guide

» ANSI Z87.1-2015 American National Standard for Occupational

and Educational Personal Eye and Face Protection Devices

» Lens Impact Resistance Guidance Revised 2013-12

» Lens Impact Testing Plan Revised 2013-12

» Mass Lens Manufacturers Comments on the 2010 FDA Q&A on

Impact

» Lens Description Standard v2.2 Revised 2018-01

» Lens Marking Guideline v2.0 Revised 2014-06

» Country of Origin for Lenses Standard

» 2D Barcode Standard for Lenses

Industry Standards & Technical Committees

• TVC Standards Page

– https://www.thevisioncouncil.org/members/standards

• STANDARDS FOR COMMUNICATION

– Necessary for getting the job done, multiple

communication tools and other general standards have

been produced to benefit industry and the eyeglass

wearing public.

» Data Communication Standard 3.11 (Updated March 2017)

» Data Communication Standard Simulator Software

» Optical Product Code Manager

» Optical Product Code (OPC) Guide

» Job Tray Automation Standard

Industry Standards & Technical Committees

• DCS (Data Communications Standard)

– Current Version 3.11

• DCS Committee working on next revision

• LDS (Lens Description Standard)

– Current Version 2.2

• Recently updated adding a new color code and filter code

– Violet – VIOn

– High Energy Visible – HEV

• LPDS (Lens Product Description Standard) Committee

QUESTIONS?

Open Discussion

Potential Retail Division

Programs

Open Discussion

Potential Retail Division Programs

– Guest Lecture Series – Ted Talks with a Retail

Slant

– Regional Optical Retail Meetings/Events

– Fashion Trend session(s)

– Optical Market Intelligence Projects

Optical Retail Division

Staffing