Kits Eyecare: Questions to Roger Hardy | Value Bridge
Archieve - Everything Roger Hardy Said
Business Summary
Kits Eyecare is a vertically integrated, digital-first optical company founded in 2018 and listed on the TSX in 2021. It manufactures its own glasses at a Vancouver lab and sells eyeglasses and contact lenses across North America. The company leverages a recurring customer base, with over 60% of revenue from repeat buyers, and has scaled from zero to a $140 million run rate within six years . Eyeglasses are the largest growth driver, a market roughly 10x the size of contact lenses, and glasses revenue has grown over 40% year-on-year . Contact lenses remain profitable, with Kits-branded dailies achieving 50% year-on-year growth and roughly 50% gross margins . Marketing is kept at 12–14% of revenue, supported by word-of-mouth, influencer marketing, and referral programs. The optical lab has capacity for over 4,000 pairs per day, currently operating at about one-third utilization . Internally, Kits targets $200 million revenue, 40% gross margins, and 10–15% EBITDA within two years , with a longer-term goal of $500 million revenue and 15–20% EBITDA within five years .
Catalysts & Milestones
2021 - Listed on the Toronto Stock Exchange
2022 - Revenue run rate near $100 million; adjusted strategy toward EBITDA and cash flow
2023 - Consecutive quarters of 38% growth and adjusted EBITDA profitability
2024 - Revenue run rate at $140 million with positive adjusted EBITDA
2025 - Internal target: $250 million revenue run rate with 10% EBITDA
2030 - Internal target: $500 million revenue run rate with 15–20% EBITDA
Investment Highlights
Over 60% of revenue from repeat customers ensures strong retention
Eyeglasses market is 10x larger than contacts, fueling long-term growth
Branded contact lenses in “50-50 club” with 50% growth and 50% margin
Optical lab capacity supports $200 million+ revenue without major CapEx
Internal goal of $500 million revenue run rate with 15–20% EBITDA
Future Growth Drivers
Expansion of glasses franchise, including digital progressives and premium lenses
Kits-branded daily contact lenses scaling rapidly with strong profitability
Insurance integrations with Sun Life, Green Shield, and U.S. expansion in 2025
“Own This Town” hyperlocal marketing model boosting brand awareness
Smart glasses and other product innovations broadening category reach
Risk Factors
Reliance on promotions like “First Pair Free” may compress near-term margins
Capacity ramp requires sustaining demand; current utilization only 10–15%
Insurance integration timelines can take over a year, slowing adoption
Competitive discounting from peers like Warby Parker and LVMH entering glasses【8†Documento sem nome (6).pdf】
Marketing discipline crit–35%** of revenue vs. Kits’ 13–14%
I joined the MicroCapClub community this year, and you should too!
Click below in order to apply and get access to +1300 pitches and +300 multibagger ideas 👇
Capital Allocation
11/08/2022 Do you plan to increase marketing or promotional spending?
We reached an inflection point in the glasses business this quarter, growing significantly while marketing spend decreased 23% year over year. Word of mouth has been the strongest driver of growth, with customers sharing their experiences. We will continue to invest in that dynamic. Marketing investment will remain consistent as a percent of sales in the back half of the year.
13/12/2022 How will you use your $20 million in cash?
Over the past six months, we have focused on funding our own growth through operations. Now, with two consecutive quarters at this level, we are excited about further growth, particularly in glasses. Most capital expenditures for our lab are already complete, and capacity remains for expansion. We will continue to keep a healthy balance sheet so we can be opportunistic when growth opportunities arise.
13/12/2022 You’ve been a significant buyer of your stock. What are your thoughts on price and what should investors focus on?
The category is compelling, and with so much uncertainty in the world, I like to focus on what I know. We are growing faster than the category and faster than competitors, with accelerating growth. Our team continues to deliver, and I am impressed by their progress. That gives me confidence to keep buying. I know what I sold Coastal for in 2014, and valuations have only increased since then. I believe we can build another $200 million revenue business and sell for more than half a billion.
I have no hesitation buying at $2.50 or $2.60 and will continue to do so. With strong recurring revenue, a seasoned team, and $20 million in cash, the business is undervalued. Management and insiders hold about 76 percent of the stock, and I expect even more insider participation going forward. We are heavily invested alongside shareholders, and we believe strongly in what we are building.
29/02/2024 Will growth be funded from cash flow, or do you expect to raise more capital?
We expect to fund growth from cash flow. Insider ownership is high, close to 80%, which aligns us with shareholders but results in a small float and limited liquidity. Our IPO issue price was $8.50, and we are approaching that level again. We believe once the stock sustains above the IPO price, liquidity will improve naturally, creating future opportunities.
Our capital structure is intentionally simple, with only one equity raise at the IPO in January 2021. As of the last quarter, we had $18–19 million in cash, a small debt balance with the BDC, and no other significant liabilities. We are comfortable continuing to grow organically without additional capital raises.
29/02/2024 You have held about $20 million in cash for six quarters. How do you plan to invest it?
Maintaining a strong cash balance was important, particularly over the last 18 months, to show the market that we could fund growth from cash flow. Our focus now is on building out our glasses selection, seeding the next wave of customers, and introducing our glasses line to our active contact lens base.
06/03/2024 How do private multiples for optical labs look and is international expansion planned?
We continually evaluate opportunities but remain focused on the $76 billion North American market, which provides ample growth. Nothing is imminent on M&A. We have reviewed many opportunities, but private market valuations have not corrected to levels we would find attractive. Any deal would need to be highly accretive. For now, the best return comes from investing in Kits itself.
03/06/2024 How are you managing your growing cash position?
We’ve consistently ended each quarter with $18–20 million in cash, maintaining a strong balance sheet that gives us flexibility as we grow. The one area we won’t deploy cash is into marketing without a clear path to revenue generation.
Instead, we are exploring ways to expand our product selection, particularly within eyeglasses, and evaluating adjacent opportunities such as integrating hearing aids into eyewear. We receive frequent inbound requests in these areas, and we see them as promising avenues for long-term growth.
03/06/2024 How are you addressing concerns about low stock liquidity?
Our team and employees own about 78% of the float, which creates tight liquidity. A year ago, we considered raising equity once the stock reached $8.50 or $9.00 to address this. However, our thinking has shifted. With organic growth of 25–30% compared to industry growth of 3–5%, positive adjusted EBITDA, and deployed capex, we see no reason to raise equity at today’s valuations.
We believe this is a $15–20 stock opportunity and prefer to maintain a tight float while continuing to execute. Our focus is on rewarding existing shareholders through consistent performance rather than diluting equity for liquidity’s sake.
03/06/2024 Do you see opportunities for mergers and acquisitions?
Yes, we see many opportunities and receive frequent inbound interest. Our previous company, Coastal Contacts, made several acquisitions, so we understand the process well. For now, most opportunities are private companies whose valuations are still adjusting, so timing is important.
Any deal must be accretive on day one. At our current run rate, we trade at about 1.2–1.3 times revenue, so we would only consider acquisitions at lower multiples. We also need confidence that we can increase customer basket size and take significant G&A savings to the bottom line. Until those conditions align, we remain patient and focused on organic growth.
07/08/2024 Is there a prepayment penalty on the BDC loan and will you consider refinancing before 2026?
Currently, there is no prepayment penalty on the BDC loans. From a capital allocation perspective, we always look to maximize value for stakeholders and shareholders. While there is nothing firm on the table right now, we are consistently evaluating opportunities, including refinancing, if they create value.
06/11/2024 Was recent CapEx spend for capacity expansion?
Yes. We were pleased with premium lens growth, including digital progressives and SunRx, both growing above 60%. To support demand, we invested in expanding our surfacing and coating line. The new machinery requires 30% less labor and significantly expands capacity.
This investment has already yielded results, but going forward CapEx will remain stable at or below 1% of total revenue, consistent with 2023 levels.
10/02/2025 In October we saw sales from several senior managers near all-time highs, any reason?
We have only done one equity raise, which was our IPO in January 2021. That left insider ownership at about 79%. There was constant market feedback on that, so as a release valve the team did a minor secondary of just over $10 million. This modestly reduced insider ownership to around 75%. The team still feels very strong about the opportunities ahead and we remain very happy shareholders.
10/02/2025 With an NCIB in place, will you continue share buybacks?
We have had a normal course issuer bid for several years but rarely acted on it. In hindsight, we missed opportunities when the stock was at two or three dollars. We will not make that mistake again. Recently we did a small buy of about 25,000 shares. If we see the company trading at a significant discount, we will act again. We are not afraid to use the NCIB when it makes sense.
05/03/2025 With cash accumulating and debt declining, what are your capital deployment priorities, M&A, dividends, or buybacks?
Capital is building, and we want to be productive with it. We have looked at potential M&A but do not see opportunities that excite us at current pricing. For any deal, it must be accretive, which is difficult since few businesses are growing at 30% to 40% with expanding gross profit and EBITDA. Most acquisitions would be a drag unless strong synergies exist.
Given that, our best use of capital is likely our own stock. We repurchased shares last quarter under the NCIB and may continue. Phase one is finishing debt repayment, now under $5,000,000. Once that is done, we will consider further buybacks or other productive uses.
13/03/2025 How will Kits use future cash flow, and what about M&A?
We see multiple options. On M&A, we apply strict criteria: any deal must deliver a block of vision-corrected customers at lower cost than acquiring them directly, allow us to expand basket size, improve adjusted EBITDA by taking G&A to the bottom line, and not distract from our core business. To date, we haven’t found one that meets those standards, though we may in the future.
For now, our focus is on whether the best investment is Kits itself or something external, and so far the answer has been Kits. That has led us to pursue initiatives like buybacks while keeping strict discipline on growth investments, always balancing opportunity with shareholder returns.
13/03/2025 How will you deploy capital going forward, and what is your stance on share buybacks?
Our approach has overwhelmingly been to reinvest in the business. With 35% growth, $13 million in cash flow from operations, and 4% adjusted EBITDA last year, we see strong returns by expanding selection and investing in quality. We could cut frame costs, but we prioritize delivering a perfect product, strong hinges, flawless lenses, and durability. We are also continuing to scale the “own this town” rollout, eventually moving to two or three cities at once, though we will do so patiently.
On share buybacks, if opportunities arise, we will act. We missed one when the stock was $3 a couple of years ago, and we will not make that mistake again. If we see the stock below a certain threshold, we will allocate capital to repurchases, balancing that with growth investments.
06/08/2025 How are you able to expand to 12,000 styles without burdening cash flow?
We are delighted to increase selection for customers. Unlike legacy brick-and-mortar chains with hundreds of stores, our digital-first model allows us to go wide on selection but shallow on inventory, led by customer demand and browsing behavior. This flexibility means we can expand variety without tying up cash in large stockpiles.
Each quarter we get better and more efficient at managing inventory. As an example, in Q1 levels were higher, but in Q2 we reduced inventory by about CAD 4,000,000 quarter over quarter, delivering on our commitment to lower working capital burden while still expanding choice.
Competitive Advantage
13/12/2022 Do you focus on profit or growth at this stage?
The category remains very compelling, and our original hypothesis was that health care and technology needed innovation here. By placing ourselves at the center of that, we created a differentiated model where we manufacture ourselves and control quality at every step. That creates a strong customer experience and organic growth. We are also looking for opportunities to consolidate other players at the right price, with cash on the balance sheet and the business producing cash.
Our model has been more efficient than peers and has outperformed the sector, consumer, and e-commerce benchmarks. Growth has been accelerating since Q3, after a temporary slowdown earlier in the year tied to COVID variants. We feel good about the run rate and the long-term opportunity.
13/12/2022 Are there product segments you do not offer compared to brick-and-mortar?
The main difference is we do not invest millions into physical stores. Our view is the category will shift further online, as customers already know the frames and sizes they want without waiting in-store. Instead, we invest in customer experience, offering selection, savings, convenience, and delivery within a day or two. Vision is non-discretionary, so speed and reliability matter most. This model has driven us to outperform both the category and competitors like Warby Parker.
10/05/2023 What dynamics are driving your outperformance versus the optical category?
We see a secular shift of customers moving online from brick and mortar, which accelerated during the pandemic and continues today. Customers want the industry to be easier, fair pricing, faster delivery, and better product quality. When orders arrive within one or two days at a fair price and fit perfectly, customers are impressed. We have invested to scale that experience, aiming to double revenue within existing infrastructure, and we remain encouraged by the number of customers adopting online.
08/11/2023 How should investors think about next steps toward long-term adjusted EBITDA targets?
We feel strong momentum in taking share and running the business without legacy infrastructure or costs. We are pleased with sustaining single-digit adjusted EBITDA as we grow. There is significant leverage in the model, and you have seen efficiencies begin to flow through to EBITDA and net income. Our focus is on serving customers and making eye care easy. As more people experience our brand, they become advocates, creating a network effect that supports growth.
Over the next several quarters, we expect continued growth and efficiency. Our operations can at least double with limited capital expenditure, so the bottom line should scale alongside revenue. We have built this model from the ground up for this moment, and we believe it is the best in the category. We are reinvesting cash flow from organic growth and maintaining a strong cash balance, which remains our priority going forward.
08/11/2023 Will glasses revenue continue incremental growth or reach an inflection point?
We believe it is still very early for the glasses business. As critical mass builds in certain markets, customer referrals begin to take effect, marketing spend decreases, and network effects emerge. We are seeing this in only a couple of markets so far, but once established, we can replicate it in many others.
The opportunity is very large, with many markets to penetrate. It remains early, but we expect compounding growth as network effects take hold.
29/02/2024 What is Kits’ competitive advantage beyond price?
Our focus is on maintaining the lowest cost infrastructure and manufacturing high-quality products ourselves. We avoid the heavy cost burden of 45,000 brick-and-mortar optical stores across North America, own our manufacturing instead of outsourcing, and are building scale in fulfillment to deliver within one to two days. Repeat customers, who represent over 60% of revenue, reduce marketing expense and allow us to run promotions like $28 prescription glasses or even first-pair-free campaigns. Serving a customer costs us about $30, which we’d rather invest in the customer than pay to social media platforms. Combined with decades of experience in this category, this model keeps customers coming back multiple times.
29/02/2024 What percentage of revenue comes from repeat customers?
In the last reported quarter, 64% of revenue came from repeat customers. Our benchmark is 60%, which we view as a test of the strength of our model. If a business in this category relies too heavily on new customer acquisition, it becomes less efficient. Alongside this, we track net promoter score, which measures how likely customers are to recommend Kits. Our benchmark is 85 or higher, compared with Amazon’s 82, and we focus on maintaining the lowest cost infrastructure and highest customer satisfaction to drive repeat behavior.
08/05/2024 How effective is the virtual try-on tool in driving purchases and reducing returns?
The virtual try-on excites us because it helps customers explore more of our selection. A typical retail store offers 150–300 frames, but in Q1 alone we added 384 new styles online, giving customers over 2,100 options. Virtual try-on allows them to quickly test multiple frames, find the right fit, and benefit from our perfect fit guarantee. This not only improves first-time purchases but also reduces return rates when customers come back for repeat purchases.
We’ve had more than one million try-ons, which shows the scale of engagement. Conversion rates are still low, but even small improvements will have a meaningful impact. The tool provides valuable data on demand trends, style preferences, and lead generation. Importantly, customers use it wherever they are, on commutes, at home, or at the office, making it highly convenient. We will continue investing in more online vision tools given these strong results.
03/06/2024 Can China compete with your prices?
Labor in Vancouver costs $3–4 per pair, versus about $1–1.50 in mainland China, saving roughly $2. However, shipping glasses overseas by air negates this advantage and delays delivery by 7–14 days. Our model focuses on fast fulfillment, over 50% of orders are shipped the same day and delivered within two days in North America.
Competitors like Zenni operate low-cost super labs in China and sell $8–10 glasses, but the trade-off is slower shipping and lower-quality materials. Our strategy emphasizes both speed and quality.
07/08/2024 How are customer acquisition costs evolving and do trends differ between Canada and the U.S.?
We don’t disclose detailed breakdowns, but the key is that our marketing and customer service teams have done an outstanding job finding more effective ways to spread the Kits message. A critical driver is our network effect, with nearly one million existing customers sharing their experience with friends and family.
That word-of-mouth growth is starting to show up in the numbers in certain markets. We’re excited to see this expand further and will update as it continues to build.
13/03/2025 What is Kits’ advantage over other online eyewear retailers?
There are only a handful of pure online competitors, and we think they generally do a good job. In fact, we would welcome more because moving this $70 billion category online should not rest on only three or four players. That said, our advantage comes from being purpose-built as an online-first company, not adapting from brick-and-mortar. Incumbents cannot easily reorganize their infrastructure, systems, and profit base around digital.
Our moat lies in our lab, which would take years and enormous capital to replicate, plus the technology and data infrastructure that processes over 10 million unique data points daily. This allows us to continuously refine quality, efficiency, and customer experience. Add to that our base of nearly one million loyal vision-corrected customers, with 60%+ repeat revenue, and it would take a new entrant a decade and hundreds of millions to replicate. The moat is not just cost and speed, it’s the whole infrastructure and daily operational improvements that extend our lead.
13/03/2025 What progress have you made with insurance partnerships, and what are the challenges?
We began experimenting in Canada, where we built API connections with major insurers. This integration addresses two pain points: customers not knowing what is covered and the burden of paperwork. With our system, customers log in, see their exact benefit balance, and apply it instantly at checkout. The insurer handles reimbursement directly with us, creating a seamless process. Net promoter scores on this experience have been outstanding.
The main challenge is the tech build. Our team can move quickly, but insurers move more slowly, so integration can take a year or more. The U.S. market is more fragmented, but we see strong engagement and are now targeting U.S. partnerships for 2025. We believe this creates a durable moat, combining a superior customer experience with operational efficiency for insurers and Kits.
Operations
11/08/2022 Where do you expect inventory levels and days of inventory on hand to normalize?
Inventory was stable and down marginally quarter over quarter. Our direct-to-consumer model provides excellent visibility into traffic and purchasing trends, and we do not need to stock hundreds of retail stores, which is an advantage. Strong vendor partnerships also help with planning and delivery.
On contacts, inventory management continues to improve with tighter controls. On glasses, we occasionally build marginally higher inventory positions if raw material deliveries are expected to be delayed. Overall, we have seen stability and improvement in the last quarter.
13/12/2022 Do you sell high-index lenses, and are they more expensive?
Yes, we sell high-index lenses, including options like 1.67 for thinner profiles. They should not be materially more expensive. Because we manufacture ourselves and source lens materials directly, we can offer the full range without the significant markups often charged by brick-and-mortar providers.
13/12/2022 Do high-index lenses cost significantly more for customers?
We pass on 70 to 90 percent or more in savings compared to other providers. Traditionally, customers with strong prescriptions are charged more, which we have always felt was unfair. By breaking down costs and leveraging our high volume and in-house manufacturing, we avoid penalizing those who need us most. Our onshore facility includes advanced labs capable of producing digital progressives quickly, ensuring high quality, fast delivery, and lower prices.
10/05/2023 What is the current throughput and nameplate capacity of the manufacturing facility?
We are operating at about one third of the capacity of our fully automated optical lab. Run rate is 800 to 1,000 pairs of glasses per day, with potential to reach at least 4,000 per day using our existing machines, conveyors, and automation. This world-class facility will support growth to at least $200 million and likely just above that without new CapEx.
09/08/2023 Can you maintain lower fulfillment costs going forward?
Yes, Luke. On fulfillment, particularly carrier costs, we feel confident in the momentum we have built and the partnerships we maintain across Canada and the U.S. These relationships, combined with our scale and data capabilities, allow us to predict where orders originate and need to be delivered, aligning partners efficiently.
Despite ongoing volatility in the U.S. carrier market, we have seen stable to declining costs. We intend to hold that line on behalf of customers while continuing to improve delivery speed.
09/08/2023 What is current plant capacity utilization and potential operating leverage?
We agree there is significant expansion potential if we continue executing on glasses. Gross margin remains a major driver, with plenty of headroom to grow while still delivering strong value to customers. On capacity, our glasses line is currently just over one-third utilized.
From an overall revenue perspective, we believe the company can double with only minimal additional capital investment. This supports our expectation of continued profitable growth in both glasses and contact lenses in future years.
08/11/2023 How do holiday ordering patterns compare with last year and pre-pandemic?
Typically, the eyeglasses industry has seen a repeat cycle of 18 to 24 months, not because prescriptions always change then, but because vision insurance of $300 to $400 renews every two years, which historically matched the cost of a pair of prescription glasses. With the kits model, our vertically integrated process and reduced system waste allows us to offer prescription eyeglasses, even progressives, for under $100.
This affordability has shortened the repeat cycle to under 12 months, sometimes even sooner. While I cannot speak for broader industry trends, our business has seen repeat glasses sales cycles speeding up.
29/02/2024 How does a new customer buy glasses from Kits?
Most customers already have a prescription or can update one with an eye test. On kits.ca, they can enter measurements from their current glasses or use our Perfect Fit guarantee and virtual try-on tool directly in the browser. After selecting frames and lenses, glasses are delivered within a day or two. The process is simple, eliminates the hassle of traditional optical stores, and offers a seamless online experience.
29/02/2024 Is your expanded production capacity fully operational? What benefits do you see from it?
Yes, we invested in capacity ahead of demand. It gives us confidence in scaling from $125 million to $250 million in revenue with only minimal additional capex, likely just $1–2 million for repairs or an extra machine. It also allows us to handle fluctuating demand , for example, Mondays are always heavy order days , while maintaining consistent service and producing glasses within 24 hours of ordering.
29/02/2024 Do you offer multifocal contact lenses and glasses, and are they more profitable?
Yes, we carry multifocal contact lenses in the U.S. and Canada, along with torics for astigmatism, colored lenses, and one of the largest inventories in North America. Multifocals typically command a higher price point due to more technology and carry a higher gross margin profile.
06/03/2024 What is your order fulfillment cycle time and outlook?
Traditional brick-and-mortar averages 1–2 weeks for delivery, while our goal is 1–2 days. At our lab, we often start making an order within 2–3 hours of receipt, with almost all glasses completed and shipped the same day.
This speed, combined with high product quality at a $28 price point, delights customers and drives strong word-of-mouth. It is also a key factor behind more than 60% of revenue consistently coming from repeat customers each quarter.
03/06/2024 Do you face supply issues or high input costs for glasses?
The average frame costs about $10, lenses $3–4, and labor and consumables another $3–4. Shipping adds the rest, so a high-quality prescription pair totals about $25 in cost. Frames are the largest input. We source acetate mainly from Italy, metals from Italy, Germany, or Asia, and hinges from Germany. These are long-standing, carefully curated partnerships that ensure quality across materials.
What drives retail prices far higher is inefficiency. Brick-and-mortar stores average only 5–10 pairs sold per day, so customers absorb $150 per pair in overhead. Many stores also outsource lab work at about $100 per pair. Together that adds $250 to the customer’s bill. At Kits, where all glasses are made in Vancouver, we price every pair at $28.
03/06/2024 Do you do any white-label or contract manufacturing?
Yes, through Fulfillment by Kits, modeled after Fulfillment by Amazon. It lets partners use our infrastructure while we grow into our scale. This business is small but margin accretive and productive, though never our core focus. Our priority is direct customer relationships built over decades.
We have partnered selectively with West Coast chains for their lab work, but only with like-minded partners who won’t mark up prices excessively. The goal is to reinforce our mission of making eye care easy, not dilute it.
03/06/2024 What percentage of your business is fulfillment?
We don’t break it out because it is not a sizable share of revenue. By design, it remains a small contributor. It helps us utilize capacity efficiently, but our growth opportunity is direct-to-customer.
03/06/2024 In the UK, lenses are often more expensive than frames. Is that the same for you?
Raw lens materials cost us only $3–5, while frames average $10. But for consumers globally, lenses are often the most expensive because retailers outsource to labs that charge high prices. Multifocal or digital progressive lenses are a prime example, often $800–1,000 in-store.
At Kits, we do the lens work ourselves, pricing progressives at $98. That segment grew 55% year over year last quarter and remains our fastest-growing category. We also offer upgrades like super-thin lenses, photochromatic tints, and blue-light blocking options, all at affordable prices.
06/06/2024 What is your view on showrooms versus large-scale brick and mortar stores?
I think it is an important question and I appreciate the way you framed it. There is a big difference between having two to five select showrooms across North America versus building out 100 brick and mortar stores. Showrooms can be very effective awareness boosters. You only need a couple per country for them to be successful. We currently have one showroom in Vancouver on Kits Beach. We sell coffee and food there too, so customers can have a coffee and try on glasses, which has been a great concept.
The danger is becoming too reliant on this quick injection of revenue that comes with a heavy burden. Each store can cost around $2,000,000 of capital, plus ongoing maintenance and labor. That cost usually falls on the customer, who ends up paying an extra $100 to $200 per pair compared to an online-only purchase. Our view is that shareholders benefit more from a leaner structure with higher returns on invested capital over time, though we still see an opportunity for a limited number of showrooms.
07/08/2024 What drove fulfillment expenses lower as a percentage of revenue, and will this continue?
Fulfillment leverage came from two areas. First, efficiency and scale with carrier partners are lowering cost per order while improving delivery speed. Strong data insights also help us predict order flows and optimize logistics. Second, we’re achieving labor leverage in our Vancouver facility as volumes grow, making each order more efficient.
Going forward, we expect fulfillment as a percentage of revenue to stabilize around 11% to 11.5%. We’ll continue prioritizing speed, often delivering next day in Canada and within one to two days across North America.
04/09/2024 What progress have you made with insurance partnerships?
Roughly 50% of vision-corrected customers in North America use insurance, but most face two frustrations: not knowing what is covered and paying upfront with no clarity. We solved this by partnering with insurers in Canada and are expanding to the U.S. Customers log in on kits.ca, enter their plan number, and instantly see their coverage, for example, $400 expiring in December.
At checkout, they can apply the coverage directly, with no out-of-pocket payment, paperwork, or guessing. We handle reimbursement in the background. This launched only a few months ago but has already been very productive, and we are rolling it out further.
10/02/2025 Will you need to expand manufacturing capacity, and when?
On our busiest days, without full 24-hour shifts, the Vancouver lab shows potential capacity of at least $500 million in revenue. We expect to reach that in four and a half to six years. Phase two would likely be a micro lab focused on high-velocity items, probably on the U.S. east coast. It would not replicate all capabilities of Vancouver but provide additional throughput. This is several years away unless volume growth accelerates or other needs emerge. We have the expertise to scale labs responsibly as demand requires.
13/03/2025 How many storefronts do you operate, and will Kits expand physical presence?
We have one store in Vancouver, right on Kitsilano Beach where the business plan was first drafted. It used to be a Starbucks, and we saw it as too good to pass up, a Kits store on Kits Beach. It functions as a coffee shop, a community meeting place, a showroom, and an optometry office. It sells about ten times the number of glasses of the average optical store in North America.
That said, we view it as a marketing exercise, not a core infrastructure strategy. Over time, we might add a handful of similar showrooms, perhaps two or three in Canada and a few in the U.S., but no more. They would serve brand and customer experience goals, while the backbone of the business remains digital and vertically integrated.
13/03/2025 What role do promotions and shipping times play in your strategy?
Promotions, especially for first-time customers, let us invest directly in them instead of in platforms like Instagram or Facebook. We’d rather give a customer a $17 pair of glasses at cost than spend heavily on advertising. Each promotion is tailored by region, and digital infrastructure makes that possible. The goal is to respect the risk customers take in trying Kits, betting on our experience to bring them back repeatedly.
On shipping, it’s an under-promise, over-deliver approach. Over 95% of single-vision prescription glasses are made and shipped the same day they are ordered. The faster we deliver, the higher the net promoter score and the stronger the likelihood of repeat purchases. Our aim is to get every order to customers within two days or less.
07/05/2025 What are your expansion plans as you scale the Vancouver lab?
Our product team has done an outstanding job improving frame quality, selection, and freshness, which strengthens the brand and keeps customers coming back. Newness supports repeat visits, marketing campaigns, and social engagement. As we scale, one initiative is “optician AI,” which helps surface the right product for the right customer at the right moment. We expect to launch and refine this over the next few quarters.
We are also seeing strong traction at our Vancouver retail store, with customers lining up to experience Kits in person. Looking forward, we may explore additional flagship opportunities to replicate that success in other towns, though these are longer-term plans.
Competition
13/12/2022 How do you compete against Warby Parker?
One of the best tests is customer comments. Our reviews are the highest in the category despite being only four years old, while Warby has been around since 2008. In Canada, searches for Warby Parker are down 24 percent year on year, while our brand searches are up 64 percent. We believe that reflects the experience not living up to expectations for them, while our model consistently delivers.
When an order is placed at Kits, manufacturing begins within a minute. Glasses are produced, quality-checked, and shipped within 15 minutes, reaching customers the next day or within a few days. That speed, combined with savings, convenience, and selection, drives strong word-of-mouth growth. We are now the fastest-growing brand in the country, powered by customer experience rather than advertising spend.
09/03/2023 What trends are you seeing in the competitive environment, and how are you responding?
The team has been disciplined. Vision care is non-discretionary, and despite the macro environment, demand remains resilient. Unlike legacy brick-and-mortar models, we don’t carry large overhead, and our value proposition resonates strongly with both new and returning customers. We are also seeing more existing customers returning for multiple pairs within a year, which is encouraging.
Competitive discounting exists in the market, but we focus on serving customers rather than reacting to others. We held firm on promotions in Q4, which supported margins. As brand strength grows, we see less need for promotion, marketing spend declines, and word-of-mouth increases. This dynamic is now showing up in our results.
10/05/2023 Competitors are pursuing different strategies, any comments on their approach?
We won’t comment on others’ strategies, but it is clear our offering resonates with customers. Eyeglasses launched just over two years ago and already show strong traction, with unusually high retention rates at 18 and 24 months. This demonstrates that our fulfillment and service model is wowing customers and retaining them better than anyone else in the category.
Our focus remains on disciplined and intentional growth. We want to ensure every new customer has a great experience that inspires them to return and share with friends and family. The team is continuously working on fulfillment and product improvements. The glasses category is five times larger than contacts, with significant margin potential, so we remain very focused on serving customers and growing this business.
08/11/2023 Any comments on LVMH entering the glasses category as a fashion accessory?
We are already seeing a cohort of customers breaking the trend of buying one pair every 18 months. Many are purchasing multiple pairs from us, and our lower price points make that possible.
As eyewear becomes more of a fashion item, our model of making eye care easy and affordable supports increased consumption. That has been our focus, and it continues to resonate with customers.
06/03/2024 What underpins your recent glasses pricing strategy?
Our focus is less on competitors and more on building fulfillment and manufacturing capabilities that impress consumers. Early on, we used heavily promoted offers to gain traction and gather feedback, refining the product over time. As customers return and word-of-mouth spreads, we find they are less price-sensitive. From time to time, we will adjust promotions like the first-pair-free offer, but we are increasingly positioning around quality, fulfillment, and delivery rather than price.
We are especially excited about new product launches arriving later this year, with strong consumer referrals expected in the back half of Q2. With world-class fulfillment and product quality, we believe momentum in glasses will continue to accelerate.
06/03/2024 How do you view competition, particularly from online peers like Warby Parker?
Our focus is delivering the highest quality product with the fastest fulfillment times. Customers can compare reviews and see our quality and service resonate. Pricing and speed of delivery continue to stand out.
We also built a subscription business that creates the most loyal customers in the category. Compared with peers, we see stronger repeat behavior, which supports long-term growth. We are confident in these pillars as we scale.
08/05/2024 How is the competitive landscape evolving in Canada and the U.S.?
Promotional intensity was higher in Q4 2023, particularly around Black Friday and Cyber Monday, but outside those periods we’ve seen less pressure. In Q1 and into Q2, this trend has continued. For legacy players with heavy brick-and-mortar costs, outsourced design, or large headquarters, competing online has been more challenging.
Our focus remains on delivering category-leading value, expanding selection each quarter, and ensuring one-to-two day delivery. These strengths make it harder for incumbents to compete. Our marketing spend yields more because our offering cuts through the noise. As weaker competitors struggle, some have already fallen out of the leading group, and more could follow. We believe our model is only just beginning, and there is significant opportunity ahead.
07/08/2024 Can you give more detail on competitor decline in Canada and the U.S.?
We’re seeing traditional players reduce marketing spend and pull back from certain channels, which lowers acquisition costs for us. Traditional optical consumers are spending less and visiting less, so their marketing dollars are less effective compared to ours.
Our momentum has increased over the last couple of quarters, reflecting both our share gains and the ineffectiveness of competitors. The impact is already visible in our Canadian results, where our dollars are stretching further as competitors weaken.
06/11/2024 Are you gaining share against other online competitors, not just brick-and-mortar?
Morning, Martijn. Based on U.S. market and Vision Council data, the overall market is growing around 3% to 4%, while online is growing 10% to 15%. We're growing about 10 times the industry rate, so yes, it suggests we're taking share both online and overall.
The millennial demographic, now 28 to 43 years old, is the largest in the U.S. and Canada and will drive the optical market for the next 10 to 20 years. This consumer wants value, selection, and convenience, and is choosing to shop online. Traffic was up substantially in the quarter, ahead of revenue, with virtual try-on remaining the top-used feature.
07/05/2025 Why lean more aggressively into marketing now, and is competition shifting?
We are seeing strong growth indicators: traffic is building, CAC is improving, and Virtual Try-On usage is rising. Customers are exploring more and appear more open to switching than before, likely due to macro conditions and our improved offering and speed of delivery. These signals give us confidence to lean into acquisition now.
The competitive landscape online has only a few dominant players, and we believe we are the fastest-growing. Barriers to entry are high, with digital infrastructure, manufacturing, and nearly 1 million active vision customers that take 5–10 years to build. Traditional players are burdened by brick-and-mortar costs, which can add hundreds of dollars to customer prices. At the same time, U.S. insurance often underwrites $200–$400 for two-thirds of customers, creating a strong value proposition for online players like us. We also see pressure on traditional chains, including one of Canada’s largest filing for bankruptcy. These shifts reinforce our confidence in the opportunity.
Growth
09/11/2022 How should we think about growth in glasses versus contacts into 2023?
Glasses have been growing aggressively and are now a more meaningful part of the business. We expect high double-digit growth in glasses and low double-digit growth in contacts, outpacing the category in both. Street estimates for Q4 look reasonable to us, and we are confident in delivering a strong finish to the year with sequential growth continuing.
09/11/2022 How are your larger partnerships like Sun Life performing so far?
In Q3, we launched a new partnership with GreenShield Insurance in Canada, which allows customers to see their coverage directly and avoid out-of-pocket costs. While still early, unit economics are strong, and we expect both Sun Life and GreenShield to become meaningful contributors to growth in 2023.
09/11/2022 Is the average transaction size larger for customers from insurance partnerships?
Yes, compared to our broad base outside of insurance, these customers are coming in with even more favorable economics, including higher average order values.
09/11/2022 How is consumer behavior evolving given the macro backdrop, and are customers trading down to KITS-branded frames?
Vision is non-discretionary, so customers need to see regardless of macro conditions. This makes our category compelling, especially as people look for better value. We do not view KITS frames as a trade-down; the quality, service, savings, and convenience create a “Wow” factor that drives adoption. Word-of-mouth has fueled glasses growth, while in contacts, customers continue to move online for better value compared to retail stores. Both trends are strong tailwinds for us.
13/12/2022 Can you remind us what Kits is and provide Q3 highlights?
Thanks Paul, great to be here. Kits is an eye care company focused on building a modern brand. We manufacture all glasses ourselves onshore and provide glasses and contact lenses throughout North America. Roger, Sabrina, and I launched Kits in 2018, and the business has grown rapidly to nearly $100 million in sales run rate within four years. We listed on the Toronto Stock Exchange in 2021 and have been actively building our vertically integrated eyeglasses business, always pursuing the highest net promoter score in the optical category.
We are fortunate to have an experienced leadership team with over 100 years of combined industry experience. Roger previously built and scaled Coastal Contacts, a NASDAQ-listed company sold for about $450 million. Sabrina joined from Goldman Sachs, where she led a growth portfolio for 14 years. My background includes Procter & Gamble and Amazon, and our other leaders bring deep optical experience, including partnerships with LD Vision.
For Q3, revenue grew about 18 to 20 percent year over year, reaching $23.5 million, and was up over eight percent sequentially. Importantly, gross profit grew about 38 percent year over year to a record $7.2 million and was also up sequentially. Active customers reached more than 765,000, up nearly 20 percent year over year. Cash flow from operations was $3.9 million, bringing our cash balance to just over $20 million. Awareness of the Kits brand continues to increase, with organic Google brand searches up 64 percent while the broader market is flat or declining.
Our glasses business is driving much of the growth, more than doubling versus last year, even as marketing as a percentage of revenue remains flat to declining. This reflects strong word of mouth and industry-leading customer acquisition costs of about $21. Over 90 percent of our glasses sales come from Kits’ own brands, though we also sell Tom Ford, Gucci, and Ray-Ban. At the heart of our success is our vertically integrated model, with an automated high-capacity lab on the West Coast that produces prescription glasses in 10–20 minutes and delivers across North America in one to two days. This allows us to provide significant value at strong margins while keeping costs far below the industry norm.
13/12/2022 How do you encourage word-of-mouth growth?
Our focus is on net promoter scores and taking great care of customers. When someone orders from Kits.com or Kits.ca and is delighted by the selection, price, and speed of delivery, often one or two days, they feel great, look great, and receive compliments. That experience makes them return and recommend us. Our secret sauce is delivering great selection, great value, and unmatched convenience.
13/12/2022 Where do you expect to innovate next?
There is much more to do in this category. Virtual try-on is one of our most popular features, letting customers try frames from their computer or iPhone. We are also expanding technology for renewing prescriptions virtually, which customers can do in 5–10 minutes without visiting an optometrist. We believe this is just the beginning of technology adoption in optical.
13/12/2022 Are customers proving sticky in this environment?
Yes, our customers are very loyal, repeating at close to a 100 percent rate within 24 months. This creates a strong annuity stream. Net promoter scores support this retention, and we have seen our performance exceed the broader optical category and even some high-growth peers.
13/12/2022 What impact has Green Shield had on growth?
While we do not break out individual insurance partners, our Green Shield partnership has been very exciting. Through a direct API connection, Green Shield members can log into Kits, see their available coverage, and purchase glasses without any out-of-pocket expense. Families can often cover multiple pairs within their plan. Feedback and net promoter scores have been fantastic. It is still early, but the unit economics are strong, and we plan to keep investing in this partnership.
13/12/2022 Do you plan to expand beyond North America?
Not yet. We still represent less than one percent of the North American category, which is a $40 billion-plus market. Our focus is on owning Canada and then expanding more directly into the U.S. The opportunity is massive: customers who once bought glasses every three years now buy multiple pairs for different uses, alongside contact lenses for sports or evenings. Prices are lower, but consumption is higher, making the total addressable market very compelling here before looking abroad.
13/12/2022 Contact lens revenues have been flat year to date. Why?
At IPO, our focus shifted to eyeglasses. While we maintained a contact lens business, proceeds were directed to building out our lab and marketing to accelerate our entry into eyeglasses. We view this category as larger, more disruptive, and one where we can take material share. As a result, lenses have been stable while eyeglasses have become the primary growth engine.
09/03/2023 How should we think about glasses mix in 2023 compared to 2022?
In Q2 and Q3 of 2022, we added a significant number of new glasses customers, and in Q4, repeat customers were the biggest driver of growth. These repeat buyers typically return at a higher gross margin and without the marketing costs tied to new customer acquisition.
This high repeat rate reinforces our model and gives us confidence to invest further in glasses growth in 2023. In Q1, we continue to see this trend, supported by ample capacity in our lab and fulfillment network. Glasses remain a key growth driver, with a larger share of growth from repeat customers compared to 2022.
09/03/2023 How do insurance partners impact order size and customer behavior?
We continue to onboard more insurance partners, and we like the economics. Average order size is higher, and customers are tied to plans that renew annually. This builds gradually, rather than switching on overnight, but we are investing in it and are excited about the growth potential.
09/03/2023 How is the expansion into progressive lenses progressing, and what should we expect?
Progressives are the next major growth focus. We are building a holistic eye care solution that includes contact lenses, single-vision prescription glasses, and now progressives. The retail price for digital progressive glasses can range from $800 to $1,200 per pair, and we are offering our branded progressive glasses at about $100.
We see significant opportunity here and are continuing to invest in manufacturing. Expect to see increasing activity in both Canada and the U.S. We are very bullish on this market.
10/05/2023 How are partnerships with GreenShield and Sun Life progressing?
Both partnerships are ramping well and we like the economics. Insurance customers typically have higher average order value, better gross margin, and concentrate more on digital progressive lenses, which excites us. We do not break out insurance revenue separately, but growth is strong and we expect to extend similar partnerships in the U.S. in the future.
10/05/2023 How are average order value and product mix trends developing, especially with digital progressives?
Digital progressives are driving higher average order size, though still a relatively small share. Growth this past quarter was largely from repeat customers, who have higher average order values and stronger economics than first-time buyers. These are the customers we invested in during the second half of 2022, and their behavior supports continued investment in new customer acquisition, particularly in glasses throughout 2023.
10/05/2023 Where are you directing marketing spend and what is the focus?
Marketing spend has been in the 13% to 14% of revenue range, with some quarter-to-quarter seasonality. Given growth well ahead of the market and competitors, we are comfortable at this level. Investment is mainly directed at onboarding new customers as the online optical shift continues, with about 27% of the category already online. Retention has remained strong in both contact lenses and eyeglasses, and scale continues to improve fulfillment and G&A leverage. We expect marketing to remain in the 12% to 14% range, with some seasonal variation, and are pleased with the growth it has delivered.
10/05/2023 Can you confirm 67,000 glasses delivered, 37,000 to repeat customers, and discuss revenue cadence ahead?
Yes, that is correct. We are encouraged by growth in both contacts and glasses. The contact lens business continues to benefit from strong customer care, high net promoter scores, and retention. With the end of the pandemic, we are seeing more growth in the category, and we will continue to invest in that area. The larger growth driver, however, remains glasses. We are expanding by offering prescription glasses to existing contact lens customers, which has been an exciting part of our story and will continue in future quarters.
The millennial consumer is now entering the prescription glasses category, representing the largest consumer group in North America, highly comfortable with online purchasing. They are surprised they can find every option online without driving to a store, waiting weeks, and paying $300–$500 for single-vision or progressive glasses. With our asset-light model, we eliminate waste and pass savings and quality to customers, which should fuel growth for many quarters ahead.
09/08/2023 Are you seeing any changes in consumer behavior or demographics?
Good morning, Luke. Thanks for the question. We continue to be encouraged by the trends we see from our customers. The optical category, both glasses and contact lenses, continues to move online, and we believe our business model positions us well to benefit. Millennials remain a key focus for us. This group, now aged 26 to 42, is the largest customer segment in North America by people and dollars. They are entering the optical category at the single-vision level for glasses and contacts and are also beginning to adopt digital progressives and readers.
In recent quarters, we have seen strong growth in contact lenses as customers return to work and social activities post-pandemic. The millennial tailwind continues to drive adoption in single vision, contacts, and increasingly in progressives and readers.
09/08/2023 How are you allocating marketing spend between new and existing customers?
While we do not disclose detailed marketing breakdowns, we are very encouraged by our repeat profile. We believe we have the highest repeat rates in the category for both contacts and glasses, which gives us confidence to continue investing in new customer acquisition. Most of our spend is directed toward new customers.
On the contact lens side, we lean on more traditional channels. For glasses, we invest in the customer experience, knowing word-of-mouth drives growth. When customers receive glasses online within 1 to 2 business days, with great value and perfect prescriptions, they share that experience widely. That combination of convenience, value, and repeat business has been our focus over the past couple of quarters.
09/08/2023 What drove the 22% growth in glasses and how do units compare to AOV?
In the MD&A, we noted 22% growth in glasses while meaningfully reducing marketing spend. A key highlight was the repeat profile. In Q2, we sold roughly 72,000 units totaling $3.5 million in sales, with a record 39,000 glasses going to repeat customers. This builds on the strong repeat trends we see in contact lenses.
We also experienced over 50% year-over-year growth in premium lens orders. Looking forward, we are expanding our product range with a rimless line, new progressives and readers, and an exclusive lens called Spectra. We believe we are still in the early innings of this growth opportunity.
08/11/2023 What percentage of revenue comes from progressives and what is the long-term target?
Hi, Luke. Thanks for the question. The digital progressive market represents about 40% of dollars in the category, while we are below that but growing rapidly. We have upgraded our manufacturing to prepare for further growth, though it is too early to predict the ultimate level. We are very pleased with the progress and believe we are changing the value equation in this category.
Typically, digital progressives cost $800 to $1,000 or more, while customers on kits.com or kits.ca can buy them for under $200, and in some cases under $100. We think this value equation will disrupt the digital progressive market. It is still early, but we are very excited about the momentum in the last quarter.
08/11/2023 What are you seeing in the current promotional environment given macro softness?
There are two trends impacting our business. First, the percentage of revenue moving online continues to grow. Pre-pandemic, less than 20% of contact lenses and less than 10% of glasses were sold online. Now, contact lenses are approaching 40% online and glasses about 20%, with no signs of slowing. This growth vector has helped insulate us from the macro pullback and reduced our reliance on promotions compared with prior quarters.
Second, the optical market is anchored by vision insurance, which provides hundreds of dollars of coverage per person. This gives optical an advantage compared to many categories. Our focus remains on providing a selection that allows customers to meet their needs within coverage or budget, and our business model and infrastructure are well-positioned to capitalize on both trends.
08/11/2023 Will you continue outgrowing the industry at the same pace?
We do not see anything suggesting a slowdown. Macro trends remain in our favor, and we are happy with our operations and team, which delivered consistent growth in 2022 and 2023. Each quarter differs, so growth levels may fluctuate, but we have no plans to slow down.
You should expect continued growth focus as we work toward our next target of $200,000,000 in revenue and beyond.
08/11/2023 Most recent growth has been in Canada, is that by design?
Our focus has been on building network effects in a few markets. Canada’s growth is partly due to our presence in Vancouver and historical underrepresentation there. The market has simply been receptive to the offering.
There has not been a special push beyond that. Both Canada and the U.S. have responded well, but growth in Canada reflects catching up from being underpenetrated historically.
29/02/2024 Can you explain Kits Eyecare’s business model and benefits for customers?
Thanks, Paul and Trevor. We started Kits a little over five years ago to make eyecare simple. The optical market is massive at about $770 billion, with 8 out of 10 adults needing glasses or contact lenses. Yet customers often ask why the process is still complicated, expensive, and slow. We built Kits to remove waste, simplify, and provide better selection, value, and convenience.
We launched in November 2018. Our last reported quarter was Q3 2023, with a run rate of just over $125 million in revenue, up over 30%. We consistently generate more than 60% of revenue from repeat customers, and we’re approaching one million active customers. Growth is funded by our own cash flow, and we were profitable throughout 2023. Scale is critical in this industry , to make an impact you need $100–200 million in revenue, which we are well on our way toward. My co-founder Roger previously scaled Coastal Contacts, sold for about $450 million in 2014, and I bring Amazon e-commerce experience.
We’ve followed two core strategies. First, start with contact lenses, a smaller but recurring category with 35–40% gross margins, to build a profitable base of vision-corrected customers. Second, when entering glasses, begin with manufacturing by building our own optical lab. This allows us to control quality and cost rather than outsourcing profit to third-party labs, which forces higher prices. Before selling our first pair of glasses, we invested several million of our own capital into our lab. That foundation has enabled us to grow while delivering high quality and lower cost to customers. We went public on the TSX in January 2021, and we remain as excited about the next few years as we have been about the journey so far.
29/02/2024 How do you expect to allocate growing cash flow?
Our focus is on expanding the eyeglasses market, which remains our biggest growth opportunity. We already have strong businesses in contact lenses, glasses, the U.S., and Canada, but glasses represent the largest upside. In November 2023, we launched prescription glasses at $28, inclusive of frame and lens, a price point designed to invite new customers into the category.
A major driver of growth has been the accelerating migration of eyeglasses sales online, especially among millennials, now the largest customer group in North America. They are highly comfortable shopping online, and our $28 offering serves as a compelling entry point to capture this demand. Over the past two years, we have been seeding the market with affordable glasses and building long-term customer relationships to fuel sustained growth.
29/02/2024 How are you seeing repeat customer behavior and market growth by region?
This industry is built on repeat customers and lifetime value. In Q3, the share of revenue from repeat customers was actually higher than from new customers, giving us confidence to secure the next waves of growth. Canada has been a strong growth market, up about 45% in Q3, even though the U.S. remains two-thirds of our revenue and Canada about one-third. Canada has fewer retailers, and we are outperforming them.
29/02/2024 What benefits are you seeing from partnerships with insurers like Green Shield and Sun Life?
These partnerships have been very positive. Customers with vision benefits that renew every two years can log in through their insurance portal, link directly to our site, and instantly see their available coverage. The integration eliminates paperwork, uncertainty, and delays. Customers can apply the benefit at checkout with no out-of-pocket cost. This model allows us to serve Canadians nationwide, regardless of whether they live near a store. Uptake has been gradual rather than immediate, but we are seeing a steady increase in orders and expect more partnerships to come.
29/02/2024 Beyond word of mouth, what marketing channels are working best?
The influencer ecosystem is powerful, especially with millennials, who have now surpassed baby boomers as the largest demographic in North America. Customers value referrals from people they trust, including influencers at all levels. We are still early in this channel but seeing success. We also launched a referral program called Share a Pair, which rewards customers for sharing their positive experience by giving a free pair of glasses to someone they know. We prefer investing $30 in new customers through this program rather than spending more on social platforms.
29/02/2024 What challenges keep you up at night?
We are growing quickly but remain a smaller player in the overall industry, so staying focused on growth and controlling our own destiny is key. Marketing costs are a particular area of attention. Many growth companies let marketing creep up to 20–35% of revenue, eroding gross margin gains. We have kept marketing around 13–14% while still growing, but we watch this closely to ensure discipline.
29/02/2024 What key metrics or catalysts should investors watch?
The biggest one is online penetration of the optical category. It is a $70 billion market, and even a 1–2% annual shift online represents enormous growth. Investors should also watch the percentage of revenue from repeat customers, as that is the truest test of whether we are serving customers well and building long-term relationships.
06/03/2024 How do you identify and reach higher lifetime value customers?
We segment by geography and initial purchase patterns, allowing us to direct marketing toward customers who fit our profile. Subscription customers are especially important since they carry longer and higher lifetime values. Some targeted segments also show higher-value orders, and while we are not breaking them out yet, early signs are encouraging. We look forward to sharing more detail as results develop.
06/03/2024 How is the eye care category growing in 2024 and how do you compare?
The category is growing at around 3–5% annually, and we are well ahead of that pace. A key driver is the expansion of online penetration in optical. Pre-pandemic, it was roughly half of what it is today. Kits is well positioned to capture this wave in both contact lenses and glasses, which has been a major factor in our growth.
06/03/2024 How are contacts and glasses contributing to Q1 growth?
We are seeing positive indicators across the business in Q1, including strong traffic and growth across both categories. The Q4 brand investments are paying off, and customers continue to seek value. Word-of-mouth is especially strong in glasses, driven by our $28 entry price point and frame quality. These factors are fueling momentum across both contacts and glasses as the quarter progresses.
08/05/2024 What is your influencer marketing strategy for Q2 and beyond?
Influencers have been our fastest growing channel with the lowest cost per acquisition. We like channels where we must work to find the right partners and iterate quickly, and that has been our experience here. This has been building over the last year and a half. We started with micro influencers, expanded within that segment, and are now moving up the chain. Overall, it is our highest growth channel and has the lowest cost per acquisition, which is a strong combination. The category itself is very topical since about 8 out of 10 adults require corrective optical products.
We’ve also had success with local market activations and city-by-city takeovers. These help create momentum at the community level. So we are very excited about the team’s progress and expect to do much more in this channel.
08/05/2024 How successful were targeted promotions for customer acquisition in Q1?
We added about 74,000 new customers in Q1, bringing our 2-year active customer base to 870,000. The influencer and affiliate channels continue to be the most productive with the lowest acquisition costs. Local market activations, or city-by-city takeovers, also proved successful. We tested this in Vancouver with strong results and see 15 to 20 core metro areas where we can expand efficiently.
We want to remain at 12% to 14% marketing spend as a percentage of revenue in the short term, even while growing at industry-leading levels, and expect that percentage to come down further over time. Customers are our best advocates, and we prefer giving marketing dollars back to them in value and service rather than relying solely on platforms like Facebook or Instagram.
08/05/2024 What is driving growth in glasses average order value (AUR)?
Glasses AUR rose 22% in Q1. Much of this came from onboarding premium customers with lens upgrades and digital progressives, which were up 55% versus last year. Repeat customers are also a driver as they return to make upgrades or multiple purchases. This behavior, consistent with contacts, is now emerging in glasses. We expect this trend to continue through 2024.
08/05/2024 Will glasses growth accelerate relative to contacts in Q2 and beyond?
We saw glasses revenue grow 36% in Q1 with 75,000 units, including 33,000 new customers. While we won’t break out guidance by quarter, we are bullish on eyeglasses through 2024. Our long-term goal is a $100 million run rate glasses business in 3 to 5 years.
Drivers include rising AUR, strong repeat customer behavior, and increased exploration on our site. Over 1.3 million frames were virtually tried on in the quarter. Influencers and our perfect fit guarantee further support growth. These give us confidence that glasses will remain a growth engine.
08/05/2024 How quickly do new glasses customers typically return to buy again?
Industry averages are 18–24 months, largely tied to $300 insurance coverage every 2 years. We set a higher bar, targeting repeats within 12 months. Customers who have a great first experience often return for prescription sunglasses or a second pair of glasses.
In many cases, we are seeing repeats within 6 months. While we don’t disclose specifics, trends have been improving quarter on quarter and year on year.
16/05/2024 How do you view the store versus online debate in eyewear?
It is an important debate and one we are actively considering. Some customers prefer shopping in store, and there are about 45,000 brick-and-mortar optical shops across North America, making it a very over-retail category. The category is shifting online, and a recent Boston Consulting Group report suggested that 41% of all U.S. commerce will be online by 2027. Specialty categories like optical take longer to build the infrastructure for online, but once the shift begins, it never reverses.
With no physical stores, we pass on $150 to $250 in savings per pair to customers. Millennials, who will dominate this category for the next 10–30 years, have no interest in paying $350 to $400 at a store and waiting two weeks. They prefer browsing online, saving hundreds of dollars, and receiving their glasses within one or two days. This aligns with their purchasing habits and gives us confidence in the online model.
16/05/2024 How do you view influencers as a customer acquisition channel?
Influencers have been a pleasant surprise, especially given our $28 price point for prescription glasses including lenses. This model works very well for influencers eager to share with their networks. Micro-influencers will likely continue driving growth, and as we attract more, we will graduate into larger influencers. One example was an unpaid influencer in Los Angeles who posted an unboxing on TikTok, leading to a record day and week for glasses sales. This shows how early but promising the channel is.
In Q1, influencers were our largest customer acquisition channel with the lowest acquisition cost, which is a powerful combination. We plan to invest much more in this channel going forward.
16/05/2024 How does influencer marketing compare to spending on Google or performance marketing?
It is extremely efficient. A customer may be drawn in by the $28 message, roughly the price of an Uber, and then discover our selection of over 2,000 styles. Their first purchase may include upgrades totaling $40 to $50. Returning customers typically buy two pairs, often using the $300 to $400 of vision care benefits they have over two years. If their initial experience is strong, quality lenses, durable frames, and great service, they return for more, perhaps even prescription sunglasses or bolder styles.
Word-of-mouth, referrals, influencers, and affiliate channels give us confidence. We already operate at the lowest cost of manufacturing, shipping, and service with our online model. The next frontier is achieving the lowest acquisition cost, which we can earn through thousands, and soon millions, of satisfied customers spreading the word.
16/05/2024 What are the drivers of strong repeat purchase behavior?
We are fortunate to have strong businesses in both Canada and the U.S. and across contact lenses and glasses. For contact lenses, customers value low prices and extremely fast delivery. Many reorder when they have only two to four days of supply left, so waiting two weeks is not an option. Meeting that need with one- to two-day delivery at unbeatable prices and with a few clicks on their phone makes them customers we believe we can retain for decades.
For glasses, the historical repeat cycle is 18–24 months, not because prescriptions change that often, but because insurance typically covers $300–$400 every two years. Legacy pricing has matched that benefit, limiting customers to one pair. Now we see customers coming back in three to six months, treating it like a treasure hunt, since they can get multiple pairs. We expect to consistently generate 60%+ of revenue from repeat customers, making this a true annuity category when executed well.
16/05/2024 What were the biggest positive and negative surprises last quarter?
The biggest positive surprise was the strength of word-of-mouth. Traditional channels like Google, Facebook, and Instagram cost $100–$200 per eyeglass customer, which erodes economics. By contrast, influencers and organic word-of-mouth stretch dollars much further. With no heavy retail footprint, we can run city-by-city takeovers, concentrating spend in one market for a few weeks. This sparks awareness that spreads naturally within communities and workplaces. Early results in Vancouver were encouraging, and we plan 15–20 more markets over the next few years.
On the downside, consumers remain financially pressured. Our Canadian survey showed one in two Canadians postponing necessary optical purchases due to cost and insurance limitations. Given that 70% of our business is U.S. and 30% Canadian, with Canada growing over 40% last quarter, we see it as our mission to remove cost and complexity. Offering $28 prescription glasses that meet everyday needs is how we help customers avoid delaying critical purchases.
16/05/2024 Why target premium consumers, and what results did you see?
In Q1, one of our biggest surprises was the success with premium customers. We defined these as daily contact lens users and glasses customers seeking digital progressives, photochromatic, or thinner lenses. Our strategy was to offer an incremental discount to new customers in this tier, and the response exceeded expectations, with new acquisition and revenue growth faster than forecast.
We invested some gross margin dollars on a one-time basis rather than raising marketing spend. For example, digital progressive glasses often cost $800–$1,000 at U.S. retailers, but on our site they are $98. We see significant opportunity in this segment. While the initiative had a small impact on gross margin percentage, it was a deliberate trade-off to grow our premium cohort without inflating marketing expense.
16/05/2024 How is the optical industry performing post-pandemic?
Industry growth has been modest, around 3% to 4% last year and similar this year. It is a stable, non-discretionary category, but within that, legacy brick-and-mortar growth is coming mostly from price premiums charged to consumers. That is not the type of growth we aim for. We focus on expanding both new and active customers without burdening them with higher prices.
The biggest structural shift in this 500-year-old industry is from brick-and-mortar to online. While traditional players are flat to plus or minus 3% to 5%, pure-play online models like ours are growing about five times faster. More like-minded competitors would accelerate the transition, but even with only a few of us, the shift is clearly underway.
16/05/2024 What is driving average order value growth?
In the latest quarter, average order value grew 10% in contact lenses and 22% in glasses. This was largely driven by premium customers buying digital progressives and other higher-value upgrades. We see continued room for growth in this segment.
At the same time, we balance new customer growth with repeat purchases. In fiscal 2023, revenue grew 32% while over 60% came from repeat customers. Our goal remains expanding the active customer base, growing in premium categories, and passing cost savings, rather than cost increases, on to customers.
03/06/2024 Can you give us a business summary for new listeners?
Thanks Paul and Trevor, great to be back on behalf of the Kits team. The optical category, glasses, contact lenses, and eye exams, is about an $80 billion market in North America, with nearly 8 out of 10 adults needing vision correction. We started Kits in 2018 to make eye care easy, not by adding more stores but by eliminating waste and passing on savings, quality, and convenience to customers.
In Q1 we reported $35 million in revenue, up 26% year over year, putting us at a $140 million revenue run rate. Based on our data, we are the fastest-growing company in Optical to scale from zero to this size. That’s six consecutive quarters of 25%+ revenue growth, along with six quarters of positive adjusted EBITDA, so we’re generating cash flow while funding growth. Importantly, vision correction is a recurring category, and when you take care of customers, they come back. Over 60% of our revenue has consistently come from repeat customers, with Q1 at 64%.
03/06/2024 How did you grow this quickly?
We leveraged two industry “secrets.” First, start with the smaller but highly recurring contact lens category, which provides profitable vision-corrected customers who also need glasses. Then use that profit base to launch into eyeglasses. Second, begin with manufacturing, building our own lab from the start. Since most profit and cost in eyeglasses sits in the lab, this gave us structural advantages. Others might sell glasses first and then back into manufacturing, but that makes you a retail or marketing company, not a true optical platform.
We grew faster than expected because millennials accelerated the move online. This cohort, now the largest demographic in the U.S. and Canada, is 28 to 43 years old, prime optical age. They want selection, value, and the convenience of buying from home. If you deliver a great experience, they spread the word. That word-of-mouth dynamic lets us scale while reducing marketing reliance. Marketing spend dropped from 14.5% of revenue in Q1 last year to 13.3% this year. With guidance of $36 to $38 million in Q2 revenue and 3% to 5% adjusted EBITDA, we expect a seventh consecutive quarter of 20–25% growth and positive cash generation.
03/06/2024 What impact did influencer marketing have on your growth?
We offered an influencer free prescription glasses, and she shared her unboxing on TikTok. The video received over 200,000 likes, and we had a record week for glasses sales that hasn’t slowed since. This reinforced our belief that we need to lean further into this channel while keeping customers at the center of the model.
Looking ahead, our internal target, not formal guidance, is to reach a $200 million revenue run rate within two years, with gross margins approaching 40% and adjusted EBITDA of 10–15%. Our optical lab in Vancouver is central to this. It can produce over 4,000 pairs daily, often shipping within 24 hours, giving customers delivery in one to two days across North America. With capex already deployed, we do not expect additional major capex until we exceed $250–300 million in revenue.
03/06/2024 What challenges are you currently facing?
Growth companies often overspend on marketing, but we are disciplined in resisting that temptation. Many peers invest heavily upfront, hoping to find efficiency later, but we aim to maintain efficiency while scaling. Another challenge is our relatively small size, we believe reaching $200 million in revenue will be an important milestone for scale and stability.
While the category is moving online with limited pure-play competition, we remain cautious about balancing growth and profitability. These are the issues that keep us most focused.
03/06/2024 How much of your business is outside North America?
About 70% of revenue is in the U.S. and 30% in Canada, with Canada growing faster off a smaller base. We receive occasional European orders, but our focus is North America.
Expansion to Europe is possible, most likely through M&A. Coastal Contacts built a strong European business, and we believe the Kits model will travel well internationally, though our priority is building deeper in North America.
07/08/2024 What led you to introduce smart glasses and how big is the category today compared to optical?
It's early days, just a couple of weeks into our smart glasses launch, but there are several things we already like. The category benefits from our existing infrastructure with the addition of audio and camera components. Companies like Meta and Google are building technology in this space, and Meta has said demand is outpacing supply. Customers prefer ordering this product online, which supports growth in the online glasses market. Most importantly, the biggest friction customers face is getting prescription lenses with smart glasses in a convenient and cost-effective way, something we believe we can uniquely deliver.
As for revenue contribution, it is still very small. We'll monitor it closely and scale as demand grows. The economics look favorable because customers are seeking innovation in a category that hasn’t seen much. They are willing to pay a higher average order value, so while it’s early days, we are very bullish on the category.
07/08/2024 Why is growth stronger in Canada versus the U.S. and how does brand awareness compare to industry averages?
We believe our brand awareness is still very small, in the low single-digit percentages, which excites us as there is significant room to grow. We have strong pockets of awareness in Vancouver and a building presence in Toronto, and we see this model working across more than 2,000 metro areas in North America.
Canada is growing because our value proposition resonates strongly, and we benefit from word-of-mouth. Our market-by-market approach has been successful in Vancouver, and we’re relaunching it in other areas such as Toronto, Montreal, and U.S. metros. We’re confident Canada will continue to grow well.
07/08/2024 How much of your 20%+ organic growth is from gaining market share versus attracting new customers?
We believe customers in this category are steadily moving online, and Kits is benefiting from that transition. The online market is not easily built, so we do feel we are gaining share. Importantly, we create more value when customers return. While the industry standard is for eyeglasses customers to return every 18 to 24 months due to insurance cycles, we see customers coming back in as little as 3 to 6 months because of the value we provide.
These repeat customers treat it as a treasure hunt, exploring more products as they grow familiar with Kits. A contact lens buyer may discover eyeglasses, or an eyeglass customer may try color contacts. This cross-category expansion, supported by our low-cost infrastructure, allows us to keep gaining share while creating significant value for customers.
07/08/2024 Is Canada’s 40% growth helped by the TELUS Health partnership and how are early results?
We’re delighted with the early results, though it is still early days since the partnership launched in Q2. We don’t break down specifics of our insurance business, but in Q2 insurance revenue saw significant quarter-over-quarter growth. It contributed to Canada’s growth, glasses growth, and new customer growth. The economics are favorable, and from what we see in net promoter scores and customer feedback, it has been a great experience.
07/08/2024 What percentage of contacts and glasses are still offline, and how is penetration trending?
Pre-pandemic, about 6% to 8% of eyeglasses revenue was online. Today, U.S. data shows eyeglass penetration approaching 20%, around 18% to 19%. Contact lenses were 16% to 18% online pre-pandemic, and the latest Vision Council numbers show 42% now transacted online in the U.S. So both categories are growing rapidly, even if the data isn’t perfect.
07/08/2024 Could contact lens penetration rise to 60–80% since it’s largely a reorder business?
Yes, we share that optimism. Once a category reaches 30% online penetration, it often accelerates quickly, and we think contacts will follow this pattern. Millennials, now the largest consumer group in North America, consistently tell us they don’t want to travel to a brick-and-mortar location. They prefer ordering online. So we believe the sky is the limit for contact lenses online.
07/08/2024 How is the launch of your own branded contact lenses progressing?
We had a fantastic launch of our Kits silicone hydrogel daily lenses in Q2, and they’re off to a very strong start. Customers are getting the latest hydrogel technology at a fraction of industry cost, which is resonating. We plan to expand this line with an exciting new product coming later in Q3. It’s still a smaller percentage of our contact lens business but growing quickly.
From a financial standpoint, we expect gross margins of 65% to 70% over time for our own brand. Beyond clear lenses, we also see a big opportunity with younger customers in color lenses, and we’ll be launching a color product in Q3.
07/08/2024 What is driving glasses growth and higher average order revenue?
The last two quarters have been our best in the glasses business. AOV growth has been a major driver, with digital progressives up over 50% in Q2. We’ve reshaped value in this segment, and customers are responding. Glasses revenue grew 42% this quarter to over $5 million, with higher AOV, stronger gross margins, and high repeat rates.
We also have the most robust product pipeline we’ve ever seen, supported by CapEx already in place, setting us up for more profitable growth in glasses. These ingredients give us strong confidence in the outlook.
07/08/2024 Do you have any new promotions or launches planned for Q3?
The team is excited to expand across multiple areas. Expect the glasses release cadence to continue and even accelerate in Q3 and Q4. On the contact lens side, we’re expanding our Kits daily modality lineup in Q3.
We also see strong momentum in our auto-ship business, which grew over 20% year on year in the past quarter. It’s valuable for customers and for us, and we’re testing additional membership offerings with encouraging results. Expect more expansion in this area in Q3 and Q4.
04/09/2024 How are you acquiring customers, and what are your customer acquisition costs and lifetime value?
We focus on keeping marketing at 12% to 14% of revenue, supported by 60% to 65% of revenue coming from repeat customers. This allows us to invest heavily in that first customer interaction. Our cost of goods sold advantage and lower general and administrative expenses let us give more value upfront, because the industry only works if customers return, and they tend to return for decades.
When we launched glasses, we ran a “first pair free” promotion, which brought in hundreds of thousands of skeptical but delighted customers. That taught us our customers are our best marketing channel. We prefer investing $20 in a pair of glasses rather than $100 in Facebook ads. From there, we evolved to “city by city” campaigns. If two or three people in one workplace buy, word-of-mouth quickly spreads to 20 more. This lowers our acquisition cost to about half the industry average. While we do not disclose lifetime value, the consistent repeat profile keeps us confident in long-term returns.
06/11/2024 What is driving expansion of designer glasses offerings in Q4?
We've had strong performance on the Kits line, adding over 190 new SKUs. As our glasses business expands and segments like insurance grow, we've broadened the branded frame offering. Regardless of brand, customers still get the same quick delivery within a day or two.
Our goal is to make eye care easy by providing the widest selection in the market, and that includes branded frames. Starting in Q4, we've expanded substantially and expect to build to thousands of new SKUs throughout the quarter.
06/11/2024 What is driving recent success in glasses, up 43% to $5.7 million?
Each quarter is different, but in glasses we've seen growth with less reliance on promotions and higher average order values. We've also seen an encouraging repeat profile. Customers are coming back after being delighted with their first purchase, often with insurance dollars still available. This leads to discovery purchases such as prescription sunglasses or a second pair of glasses.
We're pleased with this repeat dynamic and the growth in premium lenses like digital progressives and specialty lenses. These trends give us confidence in further growth for 2025.
06/11/2024 How is your own branded new contact lens line performing?
Thanks, Doug. We're pleased with how the new line has started. A couple of quarters in, it's up to about 5% of revenue. While it brings down average order value slightly, it is quite margin accretive. We're excited by the traction so far.
We now have more than 890,000 customers, approaching one million active customers, with many repeating. The goal for the next few quarters is to keep introducing products that excite customers, support margins, and deliver excellent care.
06/11/2024 Customer acquisition costs appear up 20% year over year. Where do you see CAC evolving?
You're right that CAC increased in absolute dollars, but this quarter also delivered a record level of new customer revenue, up over 40% year on year. Growth of new customers has far outpaced the increase in CAC. With two strong businesses in the U.S. and Canada, glasses and contacts, our model remains nimble, allowing us to pivot toward acquiring premium customers with high lifetime value potential.
Looking ahead, CAC has been consistent between Q2 and Q3. Our focus is on growing 5 to 10 times faster than the market. While we could spend more, we maintain a high threshold for return and are comfortable with our cash position. We’re also paying down debt, with $4.6 million due by Q2 2026. Marketing spend as a percent of sales has been measured and even declining. Some longer-term brand initiatives and market-by-market strategies are included in CAC, so not every dollar is attributable to the same quarter. Overall, the team has executed well, keeping efficiency high even as CAC shows some increases.
06/11/2024 What percentage of customers use insurance, and how is that business trending?
We don’t break out exact percentages, but Q3 insurance revenue saw significant growth quarter over quarter and year over year. It contributed to glasses growth, average order value expansion of over 50%, and more than 60% new customer growth. We expect insurance to steadily build each quarter with favorable economics.
Industry data suggests about half of U.S. customers and just over half of Canadian customers use vision insurance, and what we’ve seen in our base is comparable. This is part of why we’re expanding branded frame offerings in Q4, and we’ll continue updating as the insurance business grows.
06/11/2024 Are you seeing any uplift in AOV from the TELUS Health channel?
Good morning, Gianluca. The insurance category, including TELUS Health, continues to perform strongly with significant quarter-on-quarter and year-on-year growth. We don’t break it out specifically, but the impact is evident in the numbers: glasses growth up over 40%, average order value on glasses up over 60%, and strong new customer revenue.
This won’t be a one-time boost; it will be a steady stream of new customers with favorable economics. We remain bullish and look forward to updating you each quarter.
06/11/2024 What drove the record week during customer appreciation month, and is it replicable?
Matt, the strength really came from recurring customers returning at higher average order values. We now have a cohort of more than 10,000 customers who have each spent over $10,000 with us in the past six years. That kind of loyal customer base fuels growth and gives us flexibility in acquisition strategies.
Word-of-mouth continues to be a strong driver. So the record week was less about short-term tactics and more about the strength of returning customers spending at healthy levels.
06/11/2024 Any update on the “Own This Town” strategy rollout?
Yes, it remains an important part of our expansion plan. Our next market will activate and go live in the near term, and we’ll provide an update when it happens. There’s no change to our rollout strategy.
06/11/2024 What drove strong U.S. growth in Q3? Any special promotions?
Good morning, Devin. Each quarter is different, and our nimble model lets us flex. The U.S. saw particularly strong responses to marketing, and we allocated dollars accordingly. Canada also delivered over 10% quarter-on-quarter growth for two consecutive quarters, though off a strong prior-year base.
Overall, both markets are strong, but Q3 saw more growth than expected in the U.S. As always, we allocate capital where we see the best results, across both glasses and contact lenses.
10/02/2025 Can you discuss new products and innovation, including smart glasses?
We are now able to plant a number of seeds and watch them grow. One example is smart glasses. While still a small category, we see significant momentum with large players like Meta, Google, and Apple building into this form factor. Our role is to provide prescription lenses and our own smart frames. Our assemblers are trained to handle the complexity of prescription lenses in smart frames, which positions us well as this market expands. We are not investing heavy capital at this stage, but we expect to capture commerce as adoption grows.
We are also expanding our private-label Kits contact lenses, which have passed 5% market share and are on the way to 10%. We launched color contacts as well. Beyond that, we are innovating in insurance integration, with TELUS Health proving a valuable tailwind, and we plan to expand into the U.S. insurance market in 2025. Less visible but equally important is infrastructure, such as building a regional carrier network to reduce dependence on Canada Post or FedEx. These efforts improve flexibility, speed, and cost. We will continue innovating both on the customer-facing and operational sides.
10/02/2025 Can you explain the role of influencers and the “Own This Town” model?
We were slower to adopt influencers, but after “first pair free” we saw their impact, especially in concentrated local markets. That success led us to launch “Own This Town,” which became a game changer. We started in Vancouver by saturating the city with advertising for two to three months. People felt surrounded by Kits, pop-up stores, metro ads, local buzz. This approach mirrors how companies like Uber and DoorDash grew city by city. It allows us to hyper-invest locally, win customers with a great product and experience, then return to sustainable levels. We could reduce marketing spend if necessary, but given our growth we plan to maintain spend and focus it on awareness and expanding glasses.
10/02/2025 What key message should investors take away today?
One takeaway is that while we have revenue across Canada and the U.S., our glasses business density is really concentrated in Vancouver and British Columbia. Awareness and revenue there have grown sharply, and our “Own This Town” model has been executed to great effect. We have a showroom on Kits Beach that now draws lines out the door on weekends, with demand so strong we may need crowd control.
Institutional investors have told us that if we can replicate this model in 5, 10, or 20 markets, it could drive significant growth. Glasses revenue grew 60% last quarter, and we see continued gross margin and profit expansion as we build leverage. That story may be overlooked when people view us as spread evenly across markets, but the opportunity is in replicating a proven local model.
05/03/2025 What is the uptake of Kits-branded contact lenses, and will you expand this category?
It was a great quarter for Kits contact lenses, with strong performance in dailies and colors. We added a dedicated teammate to manage the business, who has already shown good success. The brand surpassed its first milestone of 5% category share, with the next milestone set at 10%. Focus areas include delivering value, ensuring retention at or above the category, and innovating new products. While still a small part of the business, it is expected to be a future driver of revenue and margin growth.
The product itself is a next-generation silicone hydrogel lens with high oxygen transmissibility and high water content, providing healthier and more comfortable wear than legacy products. As a daily lens, it also increases average order value and is margin-accretive from the first order.
05/03/2025 What percentage of contact lens revenue is from Kits-branded products?
We have not disclosed a specific figure yet. It is not over 10% of contact lens revenue. Around that level, we will begin to break it out separately.
05/03/2025 On glasses, does the diversified pricing structure include features beyond lens upgrades?
Yes, we continue to expand products while maintaining our $28 entry model, which includes prescription lenses at roughly 90% less than the market average of $350. We have also introduced $38 and $48 tiers, including titanium rimless glasses that compare to $600–$700 retail pairs. Selection will continue to widen while inventory stays shallow until styles gain traction.
Lens upgrades were up over 60% year on year in Q4. Customers are choosing thinner lenses, blue-blocking options, and digital progressives, all of which are contributing to higher average order values.
13/03/2025 Can you share the history of Kits and what led you to the business?
Sure. I was at Amazon in Seattle, and we were looking for categories that had not yet had their online or mobile moment. Optical stood out because it is such a large, broken category. Seven out of ten adults need glasses or contacts, yet costs remain inexplicably high. Through that process I got to know Roger and the business he built with Coastal, which sold for around $450 million after raising $40 million. It was a great exit, but my view was that if Coastal had remained independent, it would be a $2 to $5 billion company today. There is still so much work to be done.
Roger and I took six months to build the plan carefully, knowing this is not a category where you can be small. You need significant capital and scale; you cannot just be a $10 million or $50 million player. Our goal was to go from zero to $200 million quickly while staying profitable. Since then, it has been a great run and we are moving even faster than the numbers in your introduction.
13/03/2025 What is the mission behind Kits, and how are you executing on it?
We started Kits just over six years ago with a mission to make eyewear easy. This category is large and essential to people’s daily lives, yet full of unnecessary steps and middle layers. From this mission flows every decision and metric. Specifically, the U.S. and Canadian market is about $70 billion, and more than seven in ten adults need glasses or contacts. We hypothesized we could take 90% of the cost and waste out of prescription glasses and pass those savings to customers. Average prices in the U.S. are around $350 per pair; our price point is $38 to $48, including prescription lenses.
Online allows us to offer ten times the selection and much greater convenience. Instead of multiple store visits and two weeks of waiting, we can make glasses the same day and deliver them within one to two days anywhere in North America. Our goal is to deliver a net promoter score of 80% to 85% in a category where customer satisfaction has historically been very low, like the taxi industry before disruption. We also benefit from a structural advantage: the industry is evolving toward us, driven by millennial consumers who want affordability, convenience, and choice.
13/03/2025 How do Millennials shape demand for Kits, and what results have you achieved?
Millennials are now the largest U.S. demographic, about 80 million in the U.S. and Canada, ages 28 to 43, which is prime optical age. They demand convenience on mobile, fast delivery, and flawless experiences. They will not tolerate outdated models like visiting a LensCrafters, waiting weeks, and paying hundreds of dollars for limited selection. The bar is high, but if we meet it, this category will define the next 10 to 20 years, with Gen Z right behind them.
Since our IPO in early 2021, we launched glasses on top of our profitable contact lens business and invested in our next-generation lab. Growth accelerated, and in Q4 2024 we closed our ninth consecutive quarter of about 35% organic growth, with a five-year CAGR of 35%. That is roughly ten times the category’s 3% growth rate. Fiscal 2024 revenue reached $160 million, with positive adjusted EBITDA in every quarter. Q4 EBITDA margin was 6.5%, and full-year 2024 was about 4%, just over $6 million. We generated $13 million in cash flow from operations, funding growth internally. Even with 32% revenue growth, 63% of total revenue came from repeat customers, highlighting the category’s annuity-like profile. We remain on track to hit a $200 million run rate in under seven years.
13/03/2025 What are the core building blocks and strategy for Kits’ growth?
We focus on three areas, starting with foundation. Unlike incumbents built around store networks, our central nervous system is vertically integrated, automated, onshore infrastructure. Our optical lab is designed to scale to $500 million in revenue with the capex already deployed. It combines advanced machines, data infrastructure processing 10 million data points daily, and a technology stack that routes an order from the website to the lab in under 10 minutes, often completed within two hours. This requires category expertise and capital, which we’ve built without the trial-and-error phase that consumes enormous venture funding.
From this foundation, we drive growth through marketing discipline. We set aggressive growth targets of 25% to 30% but cap marketing spend below 15% of revenue, forcing creativity. A key initiative is leveraging our cost of goods sold advantage, such as the “first pair free” program with influencers. New customers can order prescription glasses at no cost, which creates buzz and skepticism at first, but hundreds of thousands have taken the offer. This builds trust, converts first-time buyers, and fuels repeat revenue, while demonstrating the power of our model.
13/03/2025 How does the “first pair free” program and influencer marketing support customer growth?
When customers see a free pair offer, they often assume there’s a catch. But once they order, the glasses are produced within hours, shipped the same day, and typically delivered the next day. Many are stunned, what normally costs $300 to $400 and requires multiple store visits arrives free, fast, and accurate. We explain that our cost of goods sold is under $20 per pair, while acquiring customers through traditional channels like Facebook or Instagram costs $100 to $200. We’d rather take that $20 risk upfront because we believe the experience will convert them into lifelong customers.
From there, every customer becomes an influencer in our model. We provide referral codes so they can share with friends. Influencer-led surges have shown strong results, sometimes creating record order volume in a single city. That led to our “own this town” program, where we concentrate marketing in one market for several months, then sustain and measure results before expanding. With nearly one million active vision-corrected customers across North America, we can enter cities where we already have tens of thousands of contact lens buyers and activate them into glasses customers. This localized rollout has parallels to Uber and DoorDash, and it keeps marketing spend efficient while building long-term profitable retention.
13/03/2025 What are Kits’ priorities in building shareholder value?
We emphasize organic growth as the primary driver, over the past nine to ten quarters, that has been 30% to 35% consistently. Our philosophy is to do the hard work first, such as starting with profitable contact lenses, building an optical lab before selling glasses, and going public early to develop the discipline of a listed company. We also limit dilution, having completed only one equity raise since inception, the 2021 IPO.
Financial discipline is equally important. We monitor working capital closely so growth does not consume all cash. In 2024, capex was 1.5% of revenue, and we intend to keep it at or below that level. We are reducing debt, with our Business Development Bank facility now under $4 million and set to be repaid within three to four quarters, while maintaining around $20 million in cash. Marketing remains capped under 15% of revenue, and we drive efficiency in fulfillment, G&A, and operations. Analysts now cover us broadly, with recent target prices ranging from $14.50 to $18. Overall, our goal is steady growth in revenue, adjusted EBITDA, and working capital efficiency, ensuring both customers and shareholders benefit as we scale.
13/03/2025 Where do consumer businesses often go wrong, and how does Kits avoid those pitfalls?
From the feedback we hear, many companies lose discipline as they grow, especially on marketing spend and capex decisions. Stores, for example, provide a short-term boost but create legacy infrastructure that either customers or shareholders end up paying for. From the outset, we’ve tried to be humble students of the market, learning from where others have succeeded or failed, and setting a high bar for ourselves.
We also believe in earning the right to scale. For example, when big offers came in for expensive celebrity influencers, we passed because we hadn’t proven the model at that scale. Instead, we started with micro-influencers, giving them product for free and asking for honest feedback. This approach gave us authentic signals and small wins we could build on, rather than overextending prematurely.
13/03/2025 How has influencer marketing evolved for Kits?
We found micro-influencers to be especially powerful because they have deep engagement in their city or state and are open to partnerships. I was initially skeptical, thinking influencer marketing had run its course, but through trial and error we saw that our “first pair free” promotion performed best when promoted by influencers. That success led us to build a dedicated team, and influencer marketing has since become our largest channel.
07/05/2025 What are the key drivers of contact lens growth and the role of branded dailies?
Our aspiration at Kits has always been to make eye care easy for customers everywhere, and we believe there is a secular change continuing. The category has been resilient; people need to see in good times and bad. Customers look for value, savings, and convenience, and we think Kits is delivering on all of them.
The key drivers remain consistent. This contact lens market is almost software-like in its annuity stream. Customers continue to return if you take great care of them, and we saw that again in Q1 with over 60% of revenue from repeat customers. Our Kits Daily contact lens business is also growing rapidly, offering great value to customers and strong margins to Kits. It is now part of our 50-50 club, with about 50% growth year-on-year and around 50% gross margin.
07/05/2025 How will higher Q2 marketing spend affect EBITDA and customer growth?
In Q2, we are accelerating new customer growth at Kits. In Q1, new customer growth was up 28% to $95,000. Customer acquisition cost was flat year-on-year and down quarter-on-quarter by about 18% to 20%. Gross margin percentage and gross margin dollars are growing, led by repeat customers. We believe customers are more open than ever to switching to Kits in this environment.
Given our strong history of converting new customers to repeat and the profitability of these repeat customers, we see Q2 as an opportunity to invest in growth. Marketing and fulfillment will rise slightly as a percentage of revenue, and some customers may come in at a slightly lower gross margin. But this does not change our view of building toward 15% to 20% EBITDA in the next 5 years. Q1 showed we can flex up EBITDA while still growing 34%. We are confident that the return on investment from new customers comes back in spades.
07/05/2025 Does Kits’ growth trajectory parallel Coastal’s acquisition by Essilor?
At Kits, our aspiration is to become the largest eye care provider in North America, making it easy for people everywhere to see. It is no time to hold back. We are leaning into Q2 growth with confidence, seeing upticks across many initiatives. Job one for us is to deliver for customers and make eye care easy.
We continue to deliver value for shareholders and keep our focus on serving customers. It is still very early, and we see many positive developments. Our progressive business is growing more than 50% with more than 50% gross margins, delivering great customer value. Kits branded lenses are showing the same results, and other products are performing similarly. As those continue to grow, we could not be more excited. We spend no time thinking about anything but delivering for customers.
07/05/2025 How is the Own This Town initiative performing and has the strategy changed?
We are achieving growth across all segments in both glasses and contact lenses. Glasses revenue grew 46%, contact lenses 32%. Geographies are also thriving, with Canada up 35% and the U.S. up 33%. Growth is broad-based, showing strong execution by the marketing team.
As we drill down into different segments and markets, the program has started well, and we are seeing good early results. Joe can provide further details, but overall we are pleased with the trajectory.
07/05/2025 How is traffic trending and what role does Virtual Try-On play?
Traffic is a leading indicator for us. In Q4, traffic was up significantly, and in Q1 sessions were up around 70%, with even higher growth on our Virtual Try-On tool. This shows strong leading indicators for future growth.
We are seeing a lot of exploration on the site, customers trying out frames, sharing with friends, and a strong correlation between Virtual Try-On usage and conversion rates. Marketing results in Q1 speak for themselves: customer acquisition cost flat year-on-year, down 18%–20% quarter-on-quarter, new customer growth up 28%, and marketing as a percentage of revenue down. Tactics such as first pair free and influencer promotions are scaling, reflected in 46% growth in glasses revenue, with more to come in future quarters.
07/05/2025 Can you provide data on flow-through and glasses mix impact?
In Q1, we added almost $3 million of EBITDA year-on-year on nearly $12 million of revenue growth, about 24% incremental flow-through. This gives us confidence that we can flex EBITDA up or down depending on growth investment. Q2 is an opportunity to lean into customer acquisition at the right time.
One modeling point is that glasses average order size is lower, and our investment is going toward acquiring a larger number of first-time glasses customers. Over time, the glasses business will exceed contacts, as the eyeglasses market is 10x the size of contact lenses. This category shift is disruptive and strategically important, even if it temporarily lowers average order size.
07/05/2025 How are you achieving lower customer acquisition costs, and are they sustainable?
The influencer and referral model has real momentum. Once it gains traction, it is harder to slow down than speed up because influencers and customers market the story in their own words, using the channels that work for them. That requires us to put our full offering on display, but we are confident in the value, quality, and convenience we provide. This has been the big driver, led by Rob and our terrific marketing team.
We also saw channels like Reddit pop up organically as customers shared experiences. These offshoots give us confidence that the unit economics are highly favorable. Customers acquired this way convert into repeat buyers at increasing levels, which is why we are leaning in further during Q2.
07/05/2025 Should we expect customer acquisition costs to rise again in Q2?
In Q1, we added 95,000 new customers, up 28%. In Q2, we expect even higher new customer growth, both in percentage and absolute terms. Marketing as a percentage of revenue may rise slightly quarter-on-quarter but will remain within our long-term plan to stay below 15%.
The investment strategy remains the same: use our cost-of-goods-sold advantage as a marketing tool. For first-time customers, we may see a moderate pullback in gross margin, but this is part of our strategy to drive long-term repeat behavior.
07/05/2025 Why did eyeglasses revenue per unit decline sequentially in Q1?
The sequential dip comes from new customers using promotions like first pair free, which lowers average order value (AOV) for those transactions. However, overall AOV for glasses is up about 30% year-on-year, and contact lens AOV continues to rise.
The strength of the repeat customer base is significant, giving us confidence to invest more in acquiring new customers. The quarter-on-quarter moderation in AOV is a natural result of this mix shift.
07/05/2025 How confident are you in the conversion and repeat rates from first pair free promotions?
We track cohorts by region and customer, and the data shows consistently strong repeat behavior. In Q1, we added 95,000 new customers while marketing as a percentage of revenue declined and gross margin increased. New customers may come in at slightly lower margin, but repeat customers more than offset this, as the numbers clearly show.
For customers, first pair free often feels too good to be true. They order skeptically, and when glasses arrive the next day or two, perfectly made and free, they are amazed. They compare that to paying $400, waiting two weeks, and making multiple store trips. Our only “catch” is that they tell everyone they know. Months later, those customers return, often using insurance dollars to buy multiple pairs. This builds lifetime customers in a category where vision correction is needed for decades.
07/05/2025 What are your expectations for the Own This Town playbook this year?
Own This Town remains an important part of our marketing plans, alongside initiatives like first pair free, digital progressives, and premium lens offerings. While we don’t break it out in detail, you can see its impact in results like 46% growth in glasses. We have more activation planned for Q2 and will share additional updates later, but it remains one of several tools helping us grow at 8x to 10x the category rate.
07/05/2025 Can you update us on U.S. insurance partnerships and expected contribution?
Insurance is foundational, on par with digital progressives, premium lenses, and Kits contacts. This quarter, we launched a broad U.S. partnership and extended another in Canada. These customers arrive efficiently and tend to return at higher rates, with strong average order value and margin profiles.
The biggest frustrations with insurance are unclear coverage and paperwork for reimbursement. Our platform addresses both by showing coverage clearly and in some cases applying it directly in the cart. These initiatives, built over three years, are generating strong Net Promoter Scores. Expect a steady drip of growth rather than one-off jumps, with more foundation and innovation coming.
06/08/2025 Are your Canadian revenues concentrated in a few regions, and are there white space opportunities ahead?
Yes, thanks Martin. We have seen strong double-digit growth across both frames and lens categories in Canada, with accelerating word-of-mouth in some geographies. We have targeted a few regions more specifically and are seeing higher order flow and more returning customers. But it is still very early, and our market share remains very small despite these growth numbers.
Only a couple of geographies are even aware of KITS at this point. Canada is a large category with significant opportunity ahead. We believe the future of eye care will be fast, personalized, and digital first without sacrificing trust or quality. KITS is building that first vertically integrated platform, and it is resonating with customers.
06/08/2025 Excluding 60,000 free glasses, were volumes still up year over year?
We were thrilled with glasses performance this quarter, with revenue up 44% and unit growth from new customers up over 50%. Regarding the approximately 60,000 first pair free units, we also had that promotion in the market a year ago, so it is in the base. Net of first pair free, volumes were still an increase in new customers year over year.
This year we also had more tools in our arsenal within the glasses franchise. Digital progressives are now playing a bigger role, growing even faster than the overall glasses business, along with other categories that contributed to growth.
06/08/2025 To confirm, excluding free glasses, were volumes up year over year?
That is correct, Martin.
06/08/2025 How do you measure ROI on the First Pair Free program compared with earlier iterations?
Hi Luke, good morning. First Pair Free is one tool in our arsenal that customers love. It is an investment in product, an invitation to try us out, and typically customers make a purchase alongside the free pair. So average order value is not zero. The economics come from lower cost of acquisition, which in prescription glasses can run $100 to $200 in the category. Our cost is far lower thanks to promotions like First Pair Free.
We measure ROI by looking at conversion to repeat customers. Where the market sees repeat in 18 to 24 months, our target is six to twelve months or less. The team works against that goal, and we have been very happy with the results, which is why we continue to invest in this program.
06/08/2025 What learnings from Own This Town could guide future expansion into the U.S.?
Yes Luke, testing, iterating, and rolling out is our approach, both for Own This Town and First Pair Free. Each quarter the execution improves, and the economics get better. Awareness campaigns like these drive traffic, which we see as a strong indicator of demand. In Q2, traffic was up ahead of our growth rate, over 100%, fueled by curiosity and word-of-mouth around these promotions.
While many consumer companies see marketing as a rising cost, in Q2 our average order value increased 1% year over year and cost of acquisition declined 9% to 10%, even more in glasses. The larger mission remains building lifetime customer relationships. We are pleased with short-term results, but the long-term value of these customers is what matters most.
06/08/2025 Are you directing more growth spend toward eyeglasses than contact lenses?
We do talk a lot about glasses, and performance there was strong. But contact lenses also continue to onboard new customers and remain a workhorse for us. Customers in contacts seek more value through online channels, and we continue to invest there. You are right that glasses get more airtime in remarks and Q&A, but both categories are receiving investment and growing.
Financials
11/08/2022 How are inflationary pressures affecting gross margin targets?
Gross margin improvement is coming from stronger pricing discipline and higher service levels, supported by over 179,000 five-star ratings and an NPS above 80. Glasses units grew 72%, with more customers choosing premium upgrades and repeats at higher gross margin levels. Our investment in onshore infrastructure allows us to serve customers more efficiently than the market. Longstanding vendor relationships, along with scale benefits from glasses growth, have offset potential cost increases.
09/11/2022 Should we expect margins to stay in the low 30% range before moving toward 35%–40%?
There are many moving parts in that margin number. We are balancing growth with profitability, so maintaining margins around 30% is the near-term expectation. As glasses become a larger share of revenue, particularly with returning customers, we expect margins to improve. Longer term, our consolidated margin target remains 35% to 40%.
09/11/2022 Are marketing expenses expected to remain around 14% of sales, and how is spending shifting toward glasses?
Yes, marketing expense decreased slightly in the quarter, and we expect this trend to continue, staying around 14%. Importantly, organic search and word-of-mouth are rising sharply, with brand searches up 64% year over year. This contributed to about 80% growth in glasses revenue while holding marketing spend flat, showing the positive impact of brand momentum.
13/12/2022 What is driving margin improvement?
Margins are improving in both contact lenses and glasses. Scale benefits help, but importantly, glasses customers are coming back for second and third pairs, often adding more lens options. Growth in our digital progressive lenses also expands margins.
10/05/2023 How are you thinking about inventory position and free cash flow growth this year?
Yes, we saw moderation in inventory, around $2 million quarter on quarter. There is seasonality, particularly at fiscal year-end. We stock more in December to ensure strong customer service over the holiday period when suppliers are closed. Historically, inventory rises at year-end and then moderates, as it did again this year.
08/11/2023 What drove average order value higher this quarter and how sustainable is it?
Average order value rose to about $156 per transaction, up 15% year on year, with growth across both contact lenses and eyeglasses. Repeat customers have been a strong driver since they often purchase more after a good first experience.
Another driver has been digital progressives and specialty lenses, which have grown above expectations. Average order value may fluctuate quarter to quarter, but this past quarter benefited from a strong mix of repeat customers and specialty products.
08/11/2023 Is the 60% repeat revenue figure consolidated across contacts and glasses?
Yes, Doug. That percentage reflects the combined revenue from both glasses and contact lenses that comes from repeat customers.
08/11/2023 Is repeat revenue split equally between contacts and glasses?
We do not break out those specifics. The contact lens business has been around longer and is more mature, while the glasses business is newer.
06/03/2024 What drove gross margin expansion in 2023 versus 2022?
In 2022, gross margin was 31.9%, rising to 33.8% in 2023, a 190 basis-point increase. This was driven by a higher percentage of repeat customers, who return at stronger margins since we use initial promotions to attract new customers. In Q4, we also improved pricing and reduced promotions in glasses, which lifted margins further.
Longer term, as glasses become a larger share of the mix, we expect margins to keep improving. We see gross margin potential of 45% to 50% over the next 2–3 years as that business matures.
06/03/2024 How did customer acquisition costs evolve in 2023 versus 2022?
Marketing expense increased slightly in 2023 both as a percentage of revenue and on a per-customer basis. This reflects our strategy of spending more to acquire better-fit customers. With five years of data, we are more targeted in finding customers who bring higher initial and long-term value. That is not always the cheapest customer, but the one best aligned with our products.
In Q4, marketing as a percent of revenue rose due to branded marketing tests that help awareness but do not always pay back within the quarter. We expect marketing expense to normalize around 13–14% of revenue in early 2024.
06/03/2024 How do margins compare between new and returning glasses customers?
Margins are subtly better today, with returning customers having a stronger profile. Over time, based on our experience, we expect margins to continue to improve.
06/03/2024 What was the revenue split between contacts and glasses in Q4?
Glasses revenue was $4.1 million, and contacts revenue was $27.6 million.
06/03/2024 What was average revenue per pair of glasses in Q4?
Average revenue per pair was $68 in Q4 2023, up 26% compared to $56 in Q4 2022.
08/05/2024 How does Q1’s 74,000 new customers compare to Q4, and what explains gross margin pressure?
In Q4 2023 we added 69,000 new customers, so Q1 represents an uptick. The mix in Q1 leaned more heavily toward Canada, where incentives supported growth. That drove some seasonality and a temporary gross margin impact. On a normalized basis, Q1 2024 gross margin was essentially flat compared with last year, with some noise from vendor rebates and purchase incentives.
We expect a lift in gross margin in Q2 as we finalize incentive agreements. Overall, sequential new customer growth from 69,000 in Q4 to 74,000 in Q1, along with mix dynamics and incentives, explains the margin impact.
16/05/2024 Should we expect similar gross margin headwinds going forward?
We issued Q2 guidance for both top line and bottom line, which we had not done before. The outlook reflects continued growth into Q2, and we felt it was important to provide that visibility to the market.
07/08/2024 Are you seeing changes in consumer health or demand over the last 30–60 days?
We have not seen a slowdown. In uncertain times, customers look for value, and optical has structural benefits, it’s non-discretionary since people need to see, and roughly half of customers are covered by insurance premiums. We also benefit from the category moving online in both contacts and glasses across the U.S. and Canada, which shelters us from broader consumer headwinds.
Traffic was up over 30% year on year and also up quarter on quarter. Site traffic grew faster than revenue, showing more exploration on our website. Revenue strength is particularly visible in premium subcategories like daily contact lenses and digital progressive eyeglasses, which grew over 50%. This drove average order value up more than 20% in the quarter, so overall we’re seeing very positive signals.
07/08/2024 Why are margins steady despite higher revenue run rate, and where are you reinvesting?
In Q2, faster growth in new customer revenue slightly diluted gross margins, but it boosted revenue and EBITDA and will build a long-term active base. Looking ahead, we see a clear path to 40% gross margins and 10%+ EBITDA. Drivers include our own-brand contacts, branded frames with Kits prescription lenses, digital progressives, insurance, and new categories like smart glasses.
We will keep prioritizing revenue growth at industry-leading rates while scaling toward higher margins. Marketing and customer acquisition investments remain key areas, alongside strategies like influencers and top-of-funnel expansion, to sustain momentum.
06/11/2024 Are new customers showing higher average order value, and what is resonating with them?
You're right to notice the AOV increase, up about 22% in the quarter. We've seen strong success with the premium segment, including daily modality contact lenses and premium eyeglass lenses like Digital Progressive. We're continuing to invest there, as the online value delta is more meaningful in absolute dollars for these products and the convenience is unmatched.
So yes, the new customers are resonating with premium offerings, and you should expect us to continue to invest in that area.
10/02/2025 Can we expect marketing expenses to decrease as a percentage of the business?
Marketing is where we enjoy inventing the most. Many believe the only way to grow revenue is by scaling marketing spend, but we disagree. Since our launch in 2018, we have believed that scarcity fuels creativity. Instead of paying ever-increasing amounts into the same crowded channels, we focus on novel approaches that create enduring value for customers.
When we launched glasses, our “first pair free” strategy was born from this mindset. It costs us about $25 fully landed to deliver a high-quality prescription pair in one day, which we view as a better investment than paying $100–$150 to traditional advertising channels. It requires a leap of faith, but customers return and spread the word. This approach allows us to keep marketing expenses flat as a percentage of revenue while still driving growth.
05/03/2025 What drove gross margin improvement in Q4, and what levers remain?
Gross margin benefited from scale efficiency in fulfillment and general and administrative expenses, which continue to decline as the business grows. We are comfortable guiding 4% to 6% EBITDA with no additional CapEx. Efficiency leverage improves as volume increases. Marketing efficiency also improves with customer density, particularly in markets where brand awareness has grown. Even during an election quarter with elevated costs, marketing was efficient, and we expect continued leverage.
07/05/2025 What caused the uptick in inventory and when will it normalize?
Typically, inventory increases in Q4 and moderates in Q1. This year, out of caution given macroeconomic and supply chain volatility, we held higher inventory levels longer. As a result, Q1 inventory was higher than last year even adjusted for growth, and inventory days on hand increased.
We have worked with the team and expect levels to moderate down in Q2 and be back in line with historical norms by Q3. This should generate $2 million to $3 million of incremental operating cash flow.
06/08/2025 Does the 60,000 free pairs impact the average order value calculation?
Martin, the 60,000 pairs were new customers, not purely free customers. So while a portion were first pair free, they should not be assumed as zero value. Adjusted average order value is not exactly $237 as in your math. We can follow up with the precise adjusted figure. The key point is that net new customers generally have a lower average order size, but not zero.
06/08/2025 Is there a revenue mix shift toward third-party branded frames, and what is the margin impact?
The mix has shifted slightly toward branded frames from a low base. For the first few years we focused almost exclusively on KITS-branded frames, which still account for over 80% of total frames. We do not expect dramatic change. Each designer frame still comes with a KITS prescription lens and is delivered in a KITS box.
Gross margin percentages on branded frames are comparable to KITS frames. However, higher average order values on branded frames mean gross margin dollars are higher. So while the mix shift is modest, it can lift overall gross margin dollars.
Outlook & Guidance
11/08/2022 Why was revenue guidance removed and how do you view growth in the second half?
The shift in strategy was about moving from a revenue target to an EBITDA and cash flow positive target for the rest of the year. With current uncertainty across industries, we are prioritizing profitability and generating cash flow internally to fund operations. That said, we do expect growth, which will be a function of execution in the second half.
11/08/2022 Do you expect second half growth compared to the first half?
Yes, we do.
11/08/2022 How will you stabilize and grow the contact lens business?
We have been focused on expanding gross margin, which required triaging out customers that were not profitable long-term. That contributed to the decline you saw in the contact lens business. The outlook is positive and the business did grow sequentially quarter on quarter. We expect that trajectory to continue through the back half.
11/08/2022 Will EBITDA remain positive and will marketing investment increase?
Yes, we expect to continue expanding EBITDA and remain EBITDA positive in the back half of the year. We do not expect the ratio of marketing expense to increase materially, if at all. Growth is primarily being fueled by repeat customers and word-of-mouth.
11/08/2022 What drove the decline in conversion, and was it lower traffic or stable conversions?
Sequentially, the contact lens business improved. Year on year, we shifted some marketing spend from contacts into glasses, which gave us more efficient use of capital. Q1 saw a decline in contacts, but the business recovered in Q2 and we expect sequential growth to continue for the rest of the year.
In many cases, we converted contact lens customers, who typically have higher average order values, into glasses customers, which carry lower average order values. This explains why the top line hasn’t moved as much despite impressive glasses growth. Going forward, glasses will become a bigger part of the mix, driving top-line growth and higher margins. We’re pleased with contacts staying consistent while glasses growth accelerates.
13/12/2022 What challenges do you see going forward?
Like many, we have faced supply chain impacts. Lead times that were two to three weeks pre-pandemic stretched to eight to ten weeks. Fortunately, our onshore manufacturing allows us to deliver in one to two days, reducing reliance on overseas shipping. On inflation, the benefits of scale and growth in optical largely offset pressures, though we remain cautious. Supply chain conditions appear to be improving, and we are well positioned with our facility to continue serving customers reliably.
13/12/2022 Are you sticking with 2022 revenue guidance of $110–120 million?
We are a bit behind the original guidance, but our current run rate is just under $100 million. Analysts model us at over $100 million for Q4, and we are comfortable finishing the year in that range. While we are about two quarters behind the initial timeline, the growth trend is accelerating post-COVID, and we feel confident in the trajectory.
09/03/2023 What are the key drivers to reach margin targets, and when will they be achieved?
Hi, Mike. The gross margin targets discussed are in the 3 to 5 year range. We remain very excited about the long-term potential and profitability of this business based on the progress in Q4.
In the short to medium term, we are aiming for a 40% gross margin and EBITDA in the 5% to 10% range. We haven’t defined a specific quarter to achieve this, but Q4 results show steady progress. Drivers of gross margin expansion include glasses growth, which carries a higher margin profile, along with insurance customers, digital progressives, and lens upgrades. As volume increases, scale benefits will also contribute.
10/05/2023 What are your gross margin expectations going forward?
We improved by about 250 basis points in Q1 versus the prior year, though quarter-to-quarter seasonality exists. We compare margins year over year. Key drivers remain growth in repeat customers, who already represent over 60% of revenue, particularly in glasses, along with more digital progressive adoption. These factors position us on a path toward 40% gross margin.
10/05/2023 Any update on timing and outlook for reaching 40% gross margins?
We see margin expansion continuing over time, with some quarter-to-quarter seasonality. Year on year, progress has been steady, and growth in returning glasses customers supports further improvement. We are not seeing significant pricing pressure, and the contact lens market remains rational, which is positive for margins.
Customers are becoming less price sensitive as the brand grows. Glasses, particularly return customers, progressives, and specialty lenses, carry higher margins than our core business. As these segments expand, margins should systematically increase. Our outlook remains unchanged, and we expect margins to rise as glasses become a larger share of revenue.
09/08/2023 Can you update us on revenue growth expectations for the second half of the year?
Thanks, Matt. We are very pleased with 38% growth in two consecutive quarters, about 10 times the industry rate. This has been driven by strong repeat customers and accelerating online penetration, which has doubled from pre-pandemic levels. With millennials continuing to enter the category, we feel confident in maintaining momentum.
While we have not issued formal guidance, the high teens to low 20s growth rates you suggested are comfortable for us. Contacts have outperformed expectations this year, while glasses grew 22% in a category expanding only 3% to 4%, even as we reduced marketing spend. Our focus remains on profitable growth with momentum continuing into Q3.
09/08/2023 What are the drivers to reach mid to high 30% gross margins and timing?
We remain committed to our 3 to 5 year target of 40%+ gross margins. In Q2, we achieved an 80 basis point improvement while delivering 38% growth. The main drivers ahead will be the mix shift to glasses, particularly progressives and readers, which are gross margin accretive. Premium single-vision lens offerings also contribute positively.
We see significant room for expansion in glasses gross margins. Combined with five straight quarters of growth and multiple quarters of adjusted EBITDA profitability, we expect continued leverage on operating expenses. Investors can anticipate steady progress toward higher margins in the coming quarters.
09/08/2023 When do you expect a breakout quarter for glasses as a percentage of revenue?
Thanks, Doug. We love to talk about glasses, and it remains a major focus for our team. We are closely monitoring two things: first, ensuring the rate of online penetration for glasses continues, which we believe it has; second, making sure repeat trends for glasses mirror the strong retention we see in contacts. This quarter, we were delighted to deliver 39,000 glasses to repeat customers, more than half of total units.
The last piece has been building out our lens and product offering. The lens lineup is nearly complete, and the product range will expand meaningfully over the next one to two quarters. All this progress has come while keeping marketing spend efficient, supported by repeat purchases. While we have not pinpointed a specific breakout quarter, we are very encouraged by the momentum and expect notable advances in the near term.
29/02/2024 What does the expense outlook look like for capex and opex? Any big spends ahead?
We built capacity well ahead of demand. Our Vancouver optical lab can handle just over 4,000 pairs of glasses a day, while we currently produce 1,200–1,500. The machines are made to order in Europe, take about a year to deliver, and require integration with our technology, so we invested early. We believe the capex already deployed supports roughly a doubling of revenue from our $125 million run rate.
The machines are highly automated, with one technician able to operate four industrial edgers per shift. Glasses still require some hand assembly and QA, but total production time is 20–25 minutes per pair. It took about four years to grow from zero to $100 million, which was roughly break-even at about 1% EBITDA and 30–33% gross margin. With the lab and brand now established, we expect to reach $200 million in revenue within 18–24 months. At that scale, we target gross margins around 40%, fulfillment costs reduced from 14.5% of revenue a year ago to about 11.5%, G&A down to 5–6%, and marketing steady at 12–14%. Internally, our goal is to reach $200 million in revenue, 40% gross margins, and 10–15% EBITDA within about two years.
29/02/2024 Why no guidance for Q4?
As we have grown, we have occasionally issued pre-releases to address investor questions about growth. Over time, we have built a consistent record of delivering quarters at or above expectations. We feel confident in our results and are excited to report them in a couple of weeks, but we are considering whether pre-releases should continue or whether we will simply report earnings each quarter going forward.
29/02/2024 Why did you hold back on Q4 pre-release guidance this quarter? Who covers Kits now?
We decided to wait until earnings on March 6 to share our full fiscal year and Q4 results. We’re very excited to report. Analyst coverage has expanded to five firms: Doug Cooper at Beacon Securities, Derek and Luke at Canaccord, Jason at Pi Financial, Matt Krenda at Roth Capital, and most recently John Luca at Haywood, who published a thoughtful initiation. We expect one more initiation soon, which will bring us to six analysts.
06/03/2024 Should we expect more margin expansion in 2024?
We will balance growth with margins. New glasses customers arrive at lower gross margin while returning customers are higher. So it depends on how aggressively we choose to grow. For larger expansion, we are thinking in terms of a couple of years. In the near term, the focus is growth while maintaining positive adjusted EBITDA. We want to capture as much share as possible during this secular shift while staying profitable at the adjusted EBITDA level.
06/03/2024 What is driving strength in Q1 despite seasonal softness?
Momentum from Q4 brand investments carried into Q1, with strength across both contacts and glasses. Demand is supported by the non-discretionary nature of the category, customers need to refresh prescriptions, contacts, and glasses. In addition, consumers are seeking value, and our proposition is resonating. We believe Q4 had more noise in the category, but investments in brand spend are now showing benefits. All in all, 2024 is off to a good start.
06/03/2024 Has the mix between new and repeat customers shifted in Q1?
No major change. The mix remains relatively stable in the mid-60s percentage range for repeat customers, consistent with historical levels.
06/03/2024 Why wouldn’t Q1’s high growth rate be sustainable through year-end?
We are confident in the offering, especially the subscription business, which is scaling consistently, and the contact lens business, which remains strong in both Canada and the U.S. Customers are seeking better value, and our eyeglasses offer is unmatched. As awareness spreads, we expect that business to strengthen significantly, particularly starting in the back half of Q2.
Overall, 2024 growth looks consistent with a high-growth business in the 20–30% range. We expect glasses to accelerate and margins to improve over time. Looking 2–3 years out, our goal is less about competitive reactions and more about wowing customers with experience, fulfillment, and quality, allowing organic pull through customer referrals.
06/03/2024 What are your long-term gross margin and EBITDA targets at scale?
Q4 was a strong margin quarter, but the annual level is more representative. Margins will not increase by 100 basis points each quarter; instead, we expect step changes as glasses grow in the mix. Near term, gross margins should be modeled more moderately, with continued focus on growth and positive adjusted EBITDA.
Longer term, our facility can support eyeglass margins in the 50% range. As glasses expand and marketing efficiency improves, more of this benefit will flow through. Fulfillment is faster and more efficient, G&A has remained flat for six quarters, and the team is delivering faster than competitors by air freighting. Over time, higher glasses mix will push gross margins into the 50s.
06/03/2024 When will we see a breakout quarter in glasses and what is current facility utilization?
Glasses capacity utilization today is low, about 10–15% on a unit basis and lower on a dollar basis. Average order size will rise over time. We expect momentum to build in the back half of Q2, with Q1 already strong. By Q4, we anticipate meaningful acceleration in glasses, potentially surprising even our internal team.
At that point, marketing as a percent of sales should become less material, with growth driven more by word-of-mouth and repeat customers. We view this as reaching “escape velocity” in glasses.
08/05/2024 How should we think about gross margin and EBITDA cadence this year?
On an annualized basis, both gross margin and EBITDA have improved significantly over the last year, and we see those gains as durable. We remain confident in building a business with 40%+ gross margins and 10%+ EBITDA. Our Q2 outlook is EBITDA in the 3% to 5% range while continuing industry-leading growth. EBITDA expansion will come from scale in revenue and leverage on operating lines.
Each quarter is unique. In Q1 we invested in acquiring optical customers in premium categories, which lowered gross margin percentage on first orders but was offset by lower marketing spend. We are excited to continue expanding EBITDA and progressing toward our 40%+ gross margin target in the coming quarters and years.
08/05/2024 Did your revenue and EBITDA guidance of $36–38M and 3%–5% margins apply to Q4?
No, that guidance was for Q2.
08/05/2024 What are your expectations for Q2 2024 and what is driving momentum?
We are finishing Q1 and expect strong momentum in Q2 2024. We are not quite halfway through the quarter, but spring has been strong. The value proposition is cutting through with success despite declining marketing spend as a percent of revenue.
We have focused on three things: quality of the product, speed of delivery, and selection. Those are resonating with customers and showing up in new customer traction as well as returning customer strength.
08/05/2024 Has your outlook for marketing spend as a percentage of revenue changed?
Yes, in Q1 yields went up while marketing expense went down to 13%, a leverage of about 150 basis points year on year. For the balance of 2024, we want to keep marketing spend in the 12% to 14% of revenue range. Longer term, we see that percentage declining further.
08/05/2024 How should we think about growth for the second half of 2024?
We remain comfortable with our annual revenue growth target of 20% to 30%. Q1 and Q2 have both shown strong growth, about 5 times the rate of the industry, which is growing only 3% to 5%. We are staying focused on delivering value for customers.
For Q2 specifically, we guided to $36–38 million in revenue and 3% to 5% EBITDA margins. We will update on the balance of the year in the next call, but there is no change to the 20% to 30% annual outlook.
16/05/2024 What is your Q2 outlook and medium-term financial target?
We expect revenue to grow 23% to 25%, reaching $36 million to $38 million in Q2. Adjusted EBITDA should come in at 3% to 5%. The puts and takes are marketing and fulfillment leverage versus gross margin expansion, which vary by quarter, but over six quarters we have made meaningful progress on both.
Looking ahead, our internal two-year target is a $200 million revenue run rate, gross margin approaching 40%, and EBITDA in the 10% to 15% range. Right now, our focus is Q2, delivering 3% to 5% EBITDA while maintaining growth.
03/06/2024 What is the long-term end game for Kits?
There will certainly be opportunities for acquisition, but our mindset is different. Coastal Contacts, our previous company, could have been a multi-billion-dollar business had it continued independently. While that sale was a great outcome, we believe the current opportunity is larger, with the market now rapidly moving online.
Our view is that Kits can capture this moment. The focus is not on selling but on building a lasting business that thrives as the optical category shifts online.
03/06/2024 What is your long-term vision for Kits?
Our capex is already deployed and organic growth opportunities remain significant. We may also use M&A to expand further in North America or beyond. There is no reason to stop at a $450 million outcome like Coastal Contacts. We see Kits as a business we could hand down to our children and continue to grow for decades.
03/06/2024 What milestones should investors look for in the next year?
The main catalysts are continued organic growth and consistent cash flow generation. Every quarter we meet or exceed top- and bottom-line expectations, it builds confidence. We now have six sell-side analysts covering us, and their reports reinforce that progress.
We also have minimal debt, only about $6 million with the BDC, due in Q2 2026, while many U.S. microcaps face heavy refinancing. Kits is asset-light, profitable, and positioned in a non-discretionary category with the market moving online. Investors should expect steady execution and leadership among TSX consumer stocks, as we were the top performer in 2023.
07/08/2024 With average order value at $182, is this unusually high and where could it trend?
We were very pleased to see average order value around $180, with both glasses and contacts contributing, and growth coming from Canada and the U.S. We haven’t set public targets for later 2024 or 2025, but we do expect continued appreciation, largely from the eyeglasses category. Digital progressives and lens upgrades are major drivers.
Smart glasses could also become a tailwind, though they remain very small today. Overall, we expect average order value to continue edging up quarter on quarter over the next 4 to 6 quarters.
07/08/2024 Does Q3 guidance imply accelerating growth and operating leverage?
We’ve guided to $39 million to $41 million in revenue and 3% to 5% EBITDA margin for Q3. Growth has been consistent, and our forecasting is improving, which is why we set that range. While guidance suggests acceleration, we view it as steady growth with continued operating leverage.
07/08/2024 Can you break down Q3 guidance between contacts and glasses, and how do smart glasses impact AOV?
For now, we’re providing blended guidance. Both contacts and glasses are showing momentum. Smart glasses are very early, a small part of the business, and not something we’ve modeled extensively yet. We are seeing encouraging traction, but we expect any material contribution to AOV to build gradually over the next three to four quarters rather than in Q3.
07/08/2024 How should we think about long-term growth, margins, and customer basket size?
Over the last three years, we’ve doubled the size of the business, and that’s how we think about our targets, continuing to grow the top line while steadily building gross margins and the bottom line, all while serving customers exceptionally well. We focus on long-term value creation rather than optimizing margins for the next quarter. Gross margins become more attractive as our own products and specialty lenses expand in the mix.
There is no real cap on average order size. As customers age, they tend to buy multiple pairs of glasses, progressives, transitions, sunglasses, and fashion pairs, while also using contact lenses for sport or fashion. Over the next three to four years, we could see basket sizes double. Alongside that, we continue to add new customers through existing channels and strong word-of-mouth.
04/09/2024 How do you convince reluctant new customers, and when will gross margins reach 35%–40% with scale?
On margins, we expect to approach 40% in the short to medium term as glasses become a larger part of our mix. Industry glasses margins are often north of 50%, so scale and glasses growth will drive expansion to 40%, then 45% and beyond. Premium lenses are another margin driver.
As for converting new customers, millennials are our strongest cohort, driven by influencers and unboxing experiences. For those who hesitate, like your mom, the key is the value delta. Digital Progressive lenses in a brick-and-mortar store start at around $1,000 in the U.S., while on kits.com they cost about $128. The same or better quality comes from automated precision machines. Once customers see they can save $800 or more without sacrificing quality, they return and rarely go back to brick and mortar.
06/11/2024 What is driving Q4 guidance ahead of consensus expectations?
Good morning and thanks, Luke. We're proud of the team and the results this quarter. The team has delivered strong acquisition and retention, and word-of-mouth from happy customers sharing their experience has been a major driver. We are seeing the strengths of the model really help us grow.
You may have seen our note at the start of the quarter about another record week in October. Typically, Q4 builds gradually, but this time we saw strength right out of the gate. With momentum from the last eight quarters, we feel the wind at our backs. We want to be transparent when we have news, so we're happy to share the strength in October and excited about the plans for November and December.
06/11/2024 With 39% year-over-year growth at the midpoint, do you see momentum continuing into 2025?
Thanks, Doug. We have good visibility into Q4 thanks to a strong recurring revenue base, and the team is executing well across functions. We feel confident in the Q4 guidance, but we're not looking too far into 2025 yet. Our focus is on executing this quarter.
That said, the model has been gaining momentum, driven by both new and returning customers, and supported by execution across marketing, fulfillment, customer service, and manufacturing. We're producing high-quality products quickly, often in less than a day, and customers are responding well. There's still a lot of flexibility in the model, and we're optimistic about what 2025 and beyond will bring.
06/11/2024 What is driving the large increase in glasses AUR, and how should we think about it going forward?
Each quarter is a little different, but this quarter saw strong premium lens growth and less need for promotions. Glasses AUR was up over 60% year on year. Digital Progressives were up over 60%, SunRx was strong, and overall promotional activity was lower.
Going forward, we expect premium mix and continued strong adoption of higher-value lenses to support healthy AUR levels.
06/11/2024 Why maintain EBITDA margin guidance flat despite higher Q4 revenue guidance?
We expect to stay consistent with prior periods, focusing on marketing efficiency, fulfillment efficiency, and keeping SG&A tight. Investments will be consistent with past quarters, rather than ramped significantly.
06/11/2024 Was more marketing spent in the U.S., or just timing?
Marketing spend as a percent of revenue remained consistent at 12% to 14%. We saw strong responses in both Canada and the U.S., with outsized growth in the U.S. The model remains focused on category-leading growth while staying adjusted EBITDA positive, and marketing efficiency will remain a consistent theme.
10/02/2025 As the shareholder base matures from retail to more institutional, what has changed in investor relations strategy?
The best investor relations is strong execution. Many institutions have been following us for years, judging us on consistency of results. With nine straight quarters of 30%+ average organic growth and disciplined costs, they are now investing. Our first investor day in September helped as well. Olivia coordinated an excellent event where over 50 investors attended. We highlighted that the hard work of building infrastructure is done, capital is deployed, and now we focus on growth, adjusted EBITDA, and free cash flow with minimal capital required.
We began that day with a lab tour to show how glasses are made, underscoring why $400 prescription glasses are unnecessary when technology, automation, and skilled technicians are applied. That transparency reinforced our story. The event generated momentum and confidence. While share price growth is welcome, we believe continued execution positions this as more than a $10 per share story, with significant upside ahead.
10/02/2025 What are the greatest challenges moving forward?
Our biggest challenge is holding on to what works, our low-cost model and infrastructure that give us flexibility. We must not let costs get away from us. Because of our lean setup, the gap between adjusted EBITDA and net income is around 1%, compared to about 5% at peers like Warby Parker. That 400 basis point advantage drives free cash flow and efficiency.
The temptations are real: overspending on stores, bloated marketing, or losing control of working capital. Our focus is to resist those and stay disciplined. We are comfortable growing a little slower if it means doing the hard work first. As we reach a $300–350 million market cap and a $200 million revenue run rate, we want to be students of companies that scaled to $1 billion. We study both successes and failures to guide our next steps.
10/02/2025 What catalysts or milestones should investors watch?
As expectations rise with execution, we will remain conservative in forecasts and focus on consistent top- and bottom-line delivery. Key milestones include steady revenue growth, margin expansion, and quarter-by-quarter progress toward stronger adjusted EBITDA and free cash flow. Our priority is disciplined execution, which we believe will drive sustainable value creation.
10/02/2025 What internal targets are you working toward over the next few years?
These are not formal guidance, but we shared them at our investor day. If you walk our halls, you’ll hear people discussing them openly. Near term, the focus is quarter by quarter, continuing to exceed on both top and bottom line. Over the next two years, we aim to grow into a $250 million revenue run rate business with 10% EBITDA. Looking further out, our five-year internal target is a $500 million revenue run rate with 15–20% EBITDA. The roadmap is clear, and the challenge is disciplined execution, avoiding overinvestment, maintaining cost advantages, and being good students of the market.
05/03/2025 Are you seeing changes in KPIs, churn, acquisition costs, or upgrades given weak Canadian consumer confidence?
We had a phenomenal fourth quarter and strong year, with record new and returning customers. Operating expenses were tightly controlled, though marketing ticked up slightly due to election noise. As for consumer confidence, customers are trading into value and innovation without sacrificing quality. Kits is being chosen for both quality and value, and the message is resonating. The vision care category remains resilient because it is non-discretionary, and we are not seeing changes in consumer behavior at year-end. Customers still need contact lenses quickly and that demand has not shifted.
05/03/2025 How do you see 2025 evolving, any large investments or costly marketing campaigns that could impair profitability?
For Q1, we guided $46,000,000 to $48,000,000 revenue and 4% to 6% EBITDA, which is solid progress. Historically we aimed for 3% to 5%, so moving up reflects our confidence. We expect no reversal, with record returning customers fueling higher average order values, gross margins, and EBITDA. No new catalysts are needed beyond continuing this trajectory.
On CapEx, we do not expect a change as a percentage of revenue. In 2024 it was 1.9%, and 2025 will be similar. The investments are largely deployed and we will grow into them. In Q4, adjusted EBITDA was 6.5%, up 380 basis points, and Q1 is on track for 4% to 6%, compared with 1.8% last year. We will continue to make steady progress quarter by quarter.
05/03/2025 Can you expand on Q1 growth guidance in terms of AOVs, units, product mix, and customer segments?
We are not breaking out all components, but expect consistent growth across contact lenses, glasses, and return customers. We continue to acquire the most valuable customers, those with fast returns and best margins. Innovation initiatives remain a potential catalyst for further growth, though we are not detailing them today.
05/03/2025 Did glasses unit volumes improve in Q4, and what is the trend?
Yes, unit volumes improved in Q4 and we expect that to continue into Q1. We have a strong engine for acquiring new customers, driven by influencers and organic word-of-mouth, and that steady growth in glasses customers should persist.
05/03/2025 How does the Own This Town strategy roll out in 2025, and what impact will it have on marketing?
We are excited about the next iteration, though it is too early to share details. The strategy allows us to expand market by market based on customer data, not tied to legacy brick-and-mortar locations. In Q4, new customer revenue rose 50% with only a modest marketing increase, despite elevated seasonal and election costs. Going forward, we expect marketing costs to moderate as word-of-mouth and influencers further improve efficiency.
05/03/2025 Are you optimizing marketing efficiency, and can ROI hold or expand in 2025?
Our web store saw same-store sales up over 40% in Q4, and our physical store presence was up more than 60%. We are transacting in a single day what typical retail optical stores do in a week. This shows strong resonance with our strategy, whether in permanent or pop-up formats. The focus is not just efficiency of spend but acquiring the right customers and letting them amplify the brand.
We remain equally focused on retention, ensuring customers return for second and third purchases, which drives lifetime value. Vision correction is a decades-long need, so the fulfillment team’s ability to deliver orders quickly and accurately is central to retention. Influencers continue to lift new customer growth, while retention sustains long-term performance.
05/03/2025 How is the TELUS Health partnership performing, and is it generating meaningful revenue?
Insurance has been a strong driver of average order value, retention, and marketing efficiency. In the most recent period, insurance customers grew over 200%. Most partnerships to date have focused on Canada, and we expect to expand this success into the U.S. during 2025.
13/03/2025 What are Kits’ long-term profitability targets?
Thanks for the question. These are internal targets, not formal guidance, but I’m happy to share them. In 2024 we delivered $160 million in revenue with 4% adjusted EBITDA, accelerating to 42% growth and 6.5% adjusted EBITDA in Q4. Looking ahead two years, our target is a $250 million revenue business with adjusted EBITDA of around 10% or slightly above. Over five years, we aim for $500 million in revenue with 15% to 20% adjusted EBITDA, ideally above that.
We recognize growth requires reinvestment, but these targets reflect our confidence in scaling profitably while maintaining customer and shareholder alignment.
07/05/2025 What underpins Kits’ strong Q2 outlook despite the macro environment?
Marketing and growth are coming from existing customers, word of mouth, and traditional channels. The best way to build the business is to wow customers, so we focus on Net Promoter Score relentlessly. Customers love the selection, service, speed, and how easy insurance connections make billing. They value our branded selection of over 6,700 styles, including Ray-Ban and Oakley.
High-value products like progressive eyeglasses, which typically retail for $800–$1,000, are priced at around $200 with Kits. These factors drive word of mouth and growth outpacing the market 8x–10x. Customers are leaving traditional optical due to confusing pricing and high-pressure sales. The category is resilient, and our goal is to exceed expectations. We are leaning into growth with confidence as we head into Q2.
07/05/2025 Why is Q2 EBITDA margin guidance 3%–5% despite strong Q1 performance?
Our original Q1 forecast was 3%–5% EBITDA, but the team outperformed with traction across progressives, Kits contacts, branded products, and insurance. Marketing also ticked down in Q1, which helped margins. For the first half of the year, we have always guided around 3%–5% normalized EBITDA. In the back half, we expect this to move higher, and we will provide updated guidance at the end of Q2 and into Q3.
Some fast-growing segments, like progressives, carry higher gross margins and will play a larger role over time. We continue to target 15% or more normalized EBITDA longer term. Today, we are investing to secure high-value customers, so maintaining 3%–5% in Q2 is appropriate. Our focus is on attracting the right customers, making the right investments, and wowing customers, while margins and EBITDA trend higher over time.
We continue to invest in Own This Town with no change in strategy, and results in Q2 were encouraging. Seeds planted earlier are paying off with higher awareness in key markets, visible in Canadian revenue up 44%. The team is now focused on converting these initial customers and planning subsequent markets. It remains an important tool in our playbook.
On marketing, Q2 spend was about 15.2% of revenue. With Q3 EBITDA guidance of 5% to 7%, we expect marketing as a percentage of revenue to moderate by 50 to 100 basis points quarter over quarter. We also expect gross margin to show some favorability sequentially.
06/08/2025 What are your short and long-term gross margin targets as glasses scale?
No change to strategy. As the glasses business grows, it contributes to higher gross margin. A year ago margins were in the low 30s, now they are approaching the high 30s. The destination remains 45% and above within three to five years.
This will be driven by franchises like digital progressives and other fifty-fifty club members that help lift margins. So the plan is steady progress toward 45% over that timeframe.
06/08/2025 How will you balance growth versus margin expansion into 2026?
Thanks Kyle. In Q2 we wanted to show that we do control the dials between growth and profitability. Some quarters we prioritize EBITDA levels, others we lean more into growth. For Q3, guidance is for adjusted EBITDA margin of 5% to 7%, which would be our third or fourth quarter at that level. In Q4 we expect some favorability in marketing and gross margin, and we will share more then.
Our next milestone is adjusted EBITDA above 10% in the next few years and 15% to 20% within five years. Glasses growth, premium lenses, Sun Rx, kids brand contacts, kids colors, and digital progressives will continue to drive that trajectory.
Ridks & Macro
11/08/2022 Have you seen changes in consumer behavior given inflation?
We continue to see customers demand great quality products at fair prices. We now offer over 800 styles across multiple brands and price points. Customers want convenience and selection, and our vertically integrated model enables efficient manufacturing, which allows us to pass savings along. This is fueling growth in the glasses segment.
06/11/2024 What are your thoughts on potential tariffs affecting the eyeglass industry?
We source raw materials globally, including Asia, with some component assembly. We cannot predict government action, but for every source and component we buy, we have identified clear alternatives and can shift within a single quarter with minimal cost impact.
Importantly, we benefit from our onshore manufacturing facility where every pair of glasses is made locally. Most of the industry still outsources manufacturing overseas, so we believe this is an advantage. We also hold months of inventory on hand. Expect us to stay ahead of any changes and be well positioned versus the market.
13/03/2025 What is your view on potential tariffs and their impact on Kits?
We are watching developments very closely, refreshing news feeds daily. Currently, our contact lens products are manufactured in the U.S. or outside the countries identified for tariffs, so we see little disruption there. On the glasses side, the Canadian market is unaffected, and the country of origin is defined as the raw material lens puck, which we source primarily from Europe, Taiwan, and Israel. None of these are currently implicated.
If U.S. rules change, our plan is to quickly set up a micro-lab in Washington State, using equipment from our existing lab. We could have that operational within one to two months, with no increase in capex as a percentage of revenue. While 73% of U.S. prescription glasses are still manufactured in China, large incumbents will face costly supply chain reorganizations. Our vertically integrated model, with direct sourcing and redundancies, positions us to maintain and even expand our cost advantage. As we see it, disruption in the industry only sharpens our competitive edge.
07/05/2025 How are tariffs affecting Kits and what is the competitive impact?
To date, there has been no impact on our business. Our lightweight infrastructure and lean approach let us move fast and expand the value delta between us and competitors. According to The Vision Council, 75% of U.S. glasses sold last year were made in China, which means longer adjustment cycles for larger players.
Once definitions are clarified, we expect to adjust within weeks or at most a couple of months. Any one-time costs should be manageable and completed within a quarter. In any scenario evaluated, 2025 CapEx as a percentage of revenue should be in line with or below 2024 levels, around 1.8%–1.9%. We remain confident in our ability to adapt quickly and maintain our cost advantage.
Personal Questions
03/06/2024 Where did the name “Kits” come from?
The company is named after Kitsilano, a Vancouver neighborhood and its well-known Kits Beach, often called the city’s heartbeat. Roger and I met daily at a coffee shop there in early 2018 to brainstorm the business. Initially we wanted to use “Kitsilano,” but realized it was hard to spell and recognize, so we shortened it to Kits.
When that same coffee shop later closed, we opened our one and only Kits store in the location. It now serves as a retail store, event space, and community hub right on the beach.
Other
11/08/2022 Any closing remarks?
It was an impressive quarter of execution by the team. We managed the fast-growing glasses business while improving gross margins and reducing marketing, manufacturing, and fulfillment expenses despite a volatile cost environment. We became a cash-generating company with positive EBITDA, demonstrating the predictable and recurring nature of our revenues. We look forward to updating shareholders on upcoming developments.
03/06/2024 What key message do you want investors to take away today?
We’re grateful for the chance to share our story. Kits is a small, focused team with a clear mission to make eye care easy. While we may not broadcast as often as other small caps, we are consistently building a strong, recurring business with cash flow, scale advantages, and a market that is moving online.
03/06/2024 What final message would you like to leave investors with?
We love this business and industry, and it’s fun to work on every day. We’re grateful for the chance to share our story at conferences and in forums like this. But more than listening to our story, investors can best understand Kits by becoming customers. If you’re considering investing, try us first, order from kits.ca in Canada or kits.com in the U.S. and experience our products and service directly.
That experience should demonstrate the quality and opportunity in front of us. Just over five years ago, we couldn’t have imagined people wanting to hear about our vision. Today, our customer-first model speaks for itself, and we believe it is the foundation for long-term growth and shareholder value.
Disclaimer:
The following transcript and Q&A have been generated with the assistance of Artificial Intelligence (AI). While we strive for accuracy, completeness, and clarity, the content may contain errors, inaccuracies, or misinterpretations. Neither the company featured in this document nor ValueBridge assumes any responsibility or liability for the accuracy, reliability, or completeness of the information presented.
This material is for informational purposes only and should not be construed as official company communication, financial advice, or a definitive representation of the company's views. Readers should independently verify any information before making decisions based on it.