Kits Eyecare TSE: KITS reported second-quarter 2026 revenue growth of 17.8% year over year as its prescription-glasses business expanded and repeat customers contributed a larger share of sales. The company also posted net income, record operating cash flow and its 15th consecutive quarter of positive adjusted EBITDA.
Revenue for the quarter totaled CAD 58.4 million, while first-half revenue reached CAD 115.9 million, up 20.5% from the prior-year period. On a constant-currency basis, second-quarter revenue increased 17.9%, and first-half revenue rose 22%, according to Chief Executive Officer Roger Hardy.
Net income was CAD 1.5 million, or CAD 0.04 per share, compared with a net loss of CAD 700,000, or CAD 0.02 per share, a year earlier. Adjusted EBITDA was CAD 2.9 million, representing 5% of revenue and a 14.3% year-over-year increase.
Glasses Business Gains Share
Prescription-glasses revenue rose 54% to CAD 11.1 million and accounted for nearly 19% of total revenue, up from 14.5% in the second quarter of 2025. The company delivered 148,300 pairs of glasses during the quarter, an increase of 32.4%.
Hardy said Kits had intentionally directed acquisition and merchandising efforts toward glasses entering 2026. The company’s vertically integrated model includes frame design, lens production and fulfillment, which management said supports faster delivery and higher-margin sales as glasses volume grows.
Premium lens upgrades represented 45.2% of glasses revenue in the quarter. Kits said customers acquired during the period spent 50% more on their first glasses order than the comparable cohort a year earlier, without changes to entry-level pricing. Management attributed the increase to multiple-pair purchases, premium lens upgrades and newer product categories.
During the quarter, Kits introduced anti-fatigue lenses designed for screen-time and close-up work. It also expanded its Pangolin smart-glasses offering into the sports category. Chief Operating Officer Joseph Thompson said the company expects continued expansion in premium lens offerings, including digital progressive lenses, thinner lenses, photochromic lenses and SunRx products.
Management said glasses growth did result in a slower overall revenue-growth rate than in the first quarter because glasses are a higher-consideration purchase and require more marketing investment per customer. Kits plans to rebalance acquisition spending in the second half, maintaining glasses momentum while placing additional emphasis on contact lenses, which Hardy described as the company’s primary customer-acquisition channel.
Repeat Revenue and Customer Metrics
Repeat customers generated 65.5% of second-quarter revenue, compared with 60.6% a year earlier. Repeat revenue totaled CAD 38.3 million, an increase of CAD 8.2 million. Hardy said the company’s installed customer base grew 27% year over year, outpacing total company revenue growth.
- New customers acquired in the quarter: 90,800
- Two-year active customer base: 1.1 million, up 15.2% year over year
- Average order value: CAD 213, up 15.8%
- Pairs of glasses sold to repeat customers: 78,500, up 51%
- Autoship annualized revenue: CAD 24.6 million
Hardy said newer glasses cohorts are generating higher initial revenue than earlier cohorts, while Kits expects repeat purchasing and cross-selling between contact lenses and glasses to support customer lifetime value over time. He said management tracks acquisition spending against cohort data and expects the value of customers acquired through recent campaigns to develop over future quarters.
Margins, Cash Flow and Capital Allocation
Gross margin expanded 160 basis points from a year earlier to 37.9%. Chief Financial Officer Ibrahim Kamar said the improvement was driven by operating execution rather than tariff refunds.
Marketing expense represented 17.4% of revenue, compared with 15.2% in the prior-year quarter, reflecting the company’s investment in glasses customer acquisition. Thompson said spending was gradually reduced through the second quarter and ended at levels similar to historical levels. Management expects the baseline marketing rate to be in the mid-teens, while retaining flexibility based on customer-cohort performance.
Fulfillment expense was 10.9% of revenue, up modestly from 10.7% a year earlier, due in part to fuel surcharges imposed by carrier partners. Kits said it chose not to pass those charges to customers and instead plans to absorb them through fulfillment efficiencies. For the first half, fulfillment expense improved to 10.7% of revenue.
Operating cash flow reached a record CAD 7.8 million, while free cash flow was CAD 6.4 million. The company ended the quarter with CAD 27.4 million in cash and no debt, compared with CAD 19 million at the end of the first quarter. Including its undrawn CAD 15 million asset-based lending facility, Kits said it had approximately CAD 42.4 million in accessible liquidity, plus a CAD 5 million uncommitted accordion.
During the quarter, Kits repaid its remaining CAD 290,000 promissory note, exited its Bitcoin ETF treasury position and repurchased and canceled 89,200 shares for CAD 1 million under its normal course issuer bid. Hardy said the company continues to evaluate acquisition opportunities but has not identified a transaction that has moved forward.
Toronto Store, Insurance Expansion and Outlook
Kits opened its Toronto flagship location late in the second quarter at 735 Queen Street West. Thompson said the store’s financial contribution was not included in second-quarter results because it opened near the end of the period. Management said early results have exceeded expectations, with activity in the surrounding Toronto area also supporting branded searches and digital demand.
The Toronto location is more than 2,500 square feet and approximately twice the size of the company’s Vancouver flagship. Kamar said the buildout required less than CAD 1 million in capital expenditures. Thompson said Kits could identify approximately two additional locations in the second half of 2026 if the current expansion continues to perform well.
The company also added Manulife to its Canadian direct-billing platform through TELUS Health eClaims. Thompson said the addition gives approximately 7 million Manulife group benefits members access to real-time coverage verification and direct claims processing. He said adoption in the first month was faster than for prior carrier integrations, though he characterized the data as early.
For the third quarter, Kits projected revenue of CAD 62 million to CAD 64 million and an adjusted EBITDA margin of 4% to 6%.
About Kits Eyecare (TSE:KITS)
KITS TSX: KITS is one of the world's fastest growing eyecare providers, offering high-quality, affordable prescription glasses and contact lenses through its vertically integrated digital platform. With advanced in-house lens manufacturing, an industry-leading digital fit experience powered by OpticianAI, and thousands of 5-star customer reviews, KITS is redefining how Canadians experience eyecare. Designed in Canada. Delivered worldwide.
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