Kits Eyecare Ltd. Earnings Call Highlights Growth and Strategic Investments

Kits Eyecare Ltd. ((TSE:KITS)) has held its Q1 earnings call. Read on for the main highlights of the call.

Kits Eyecare Ltd. recently held its earnings call, revealing a positive outlook driven by impressive revenue growth, margin improvements, and strong customer metrics. The company is strategically investing in marketing to fuel further expansion, which may impact short-term EBITDA margins, but the overall sentiment remains optimistic due to significant growth and future-focused investments.

Record Revenue and Growth Across Segments

Kits Eyecare achieved a record revenue of $46.6 million, marking a 34% increase year-over-year. All four key segments experienced substantial growth, with glasses revenue up 46%, contact lens revenue up 32%, and geographical growth of 35% in Canada and 33% in the USA. This broad-based growth underscores the company’s strong market position and effective strategies.

Significant Margin Improvement

The company reported a gross profit increase of over 53% year-over-year, reaching $17.1 million. The gross margin expanded by 460 basis points to 36.7%, up from 32.1% in the previous year. This improvement highlights Kits Eyecare’s operational efficiency and pricing strategies.

Strong Customer Acquisition and Retention

Kits Eyecare welcomed over 95,000 new customers, a 28% increase from the previous year, with 62% of total revenue coming from returning customers. The Kits Autoship program also contributed significantly, generating almost $6 million in revenue, up 11% year-over-year.

Successful Expansion of Premium Products

Revenue from premium upgrades grew nearly 60% year-over-year, with healthy margins. The premium lens category now accounts for approximately 40% of total glasses revenue, showcasing the company’s ability to cater to higher-end market segments.

Operational Efficiency Gains

Kits Eyecare improved its fulfillment expense as a percentage of revenue to 10.9% from 11.9% last year. Marketing expenses were 13.5% of revenue, while general and administrative expenses decreased from 6.9% to 6.3% of revenue, reflecting enhanced operational efficiencies.

Moderate Increase in Marketing Spend Expected

The company anticipates a moderate increase in marketing spend, which is expected to decrease the Q2 EBITDA margin to between 3% and 5%. This investment aims to drive customer acquisition and support long-term growth.

Lower Average Order Value for New Customers

Despite the increase in customer acquisition, new customers typically have a lower average order size, impacting the overall average order value. This trend highlights the importance of converting new customers to higher-value orders over time.

Forward-Looking Guidance

Kits Eyecare has set its sights on continued growth, projecting Q2 revenue between $48 million and $50 million, with an adjusted EBITDA margin of 3% to 5%. The company remains confident in its ability to absorb high new customer growth while maintaining robust gross profit and margin expansion.

In summary, Kits Eyecare Ltd.’s earnings call conveyed a positive sentiment, driven by record revenue growth, margin improvements, and strategic investments in marketing and premium products. While short-term EBITDA margins may be impacted, the company’s forward-looking guidance and operational efficiencies suggest a promising outlook for sustained growth.