What Kits Eyecare (KITS) Said on Its Q3 Earnings Call

Key Points

• Revenue hit a record C$63.7 million, up 21.6%, as glasses sales surged 59.3% and contact lens revenue grew 15.7%. Gross margin expanded to 37.4%, while repeat revenue rose to 65.6% of sales.
• Net income declined to C$672,000 from C$1.9 million, and adjusted EBITDA margin fell to 4.6% from 5.5%. Higher marketing investment and non-cash compensation and foreign-exchange effects weighed on earnings; the company remained profitable on an adjusted EBITDA basis for its 16th straight quarter.
• Kits forecast fourth-quarter revenue of C$64 million to C$66 million and an adjusted EBITDA margin of 4% to 6%. It ended Q3 with C$30.6 million in cash and no debt, and plans to open a Calgary store in early to mid-Q1 2027.

Kits Eyecare TSE: KITS reported record third-quarter 2026 revenue as glasses sales climbed nearly 60% and contact lens growth accelerated, though higher customer acquisition spending and non-cash expenses contributed to lower net income.

Revenue rose 21.6% to C$63.7 million, while gross profit increased 31.1% to C$23.8 million. Gross margin expanded to 37.4% from 34.6% a year earlier, helped by a greater share of glasses sales, premium lens upgrades and pricing and promotion management, CFO Ibrahim Kamar said.

Net income fell to C$672,000, or C$0.02 per share, from C$1.9 million, or C$0.06 per share, a year earlier. Kamar said an approximately C$0.8 million increase in non-cash share-based compensation and a swing in foreign exchange results more than accounted for the difference.

Adjusted EBITDA was C$2.9 million, or 4.6% of revenue, down from a 5.5% margin a year earlier. The company recorded its 16th consecutive quarter of positive adjusted EBITDA.

Glasses and repeat sales drive growth

Glasses revenue rose 59.3% to C$11.3 million on approximately 145,000 pairs sold, an increase of 55.6%. Glasses accounted for 17.7% of total revenue, up from 13.5% a year earlier. For the first nine months of 2026, glasses revenue reached C$33.1 million, surpassing the category’s sales for all of 2025.

Average glasses order value rose 32.5% to C$151, while premium lens upgrades represented 44.8% of glasses revenue. Revenue from progressive lenses increased 56% to C$3.1 million.

Contact lens revenue increased 15.7% to C$52.4 million, accelerating from 11.7% growth in the second quarter. The company’s Autoship program reached C$29.6 million in annualized revenue and accounted for 14.1% of contact lens orders, compared with 12.1% a year earlier.

Repeat revenue rose 27.8% to C$41.8 million, representing 65.6% of total revenue, up from 62.4% a year earlier. The two-year active customer base grew 14.1% to 1.175 million.

Chairman and CEO Roger Hardy said most contact lens customers have not bought glasses from Kits, giving the company an opportunity to sell higher-margin products to existing customers. In response to an analyst’s question, Hardy said contact lens customers generally return sooner than glasses customers, which can affect the timing of revenue relative to marketing spending.

Marketing investment weighs on margins

Marketing spending increased to 17.1% of revenue from 14.1% a year earlier, although it declined from 17.4% in the second quarter. Hardy said Kits reinvested about C$3.5 million of its C$5.7 million gross profit increase in acquiring customers.

New customers generated C$21.9 million in revenue, up 11% despite a 4% decline in the number of new customers. First-order values for new glasses customers were 63% higher than those of the comparable year-earlier group, Hardy said.

Hardy said the company expects marketing spending to become more efficient over time, with a range of roughly 15% to 16% of revenue as glasses growth normalizes. He described earnings as the next test for the business after its progress in expanding gross margin and generating cash.

Operating cash flow rose 63% year over year to C$4.8 million for the quarter. Kits ended the period with C$30.6 million in cash and no debt, compared with C$27.4 million in cash at the end of June.

Outlook and expansion plans

For the fourth quarter, Kits forecast revenue of C$64 million to C$66 million, representing approximately 19% to 22% year-over-year growth, and an adjusted EBITDA margin of 4% to 6%. Hardy said the outlook assumes continued momentum in contacts and glasses during the holiday and year-end benefits season, alongside continued investment in customers.

Kamar said the company invested C$1.4 million in property and equipment during the third quarter, mainly for a new surfacing line. The equipment had been installed and was in production at the time of the call, he said, adding that it would increase capacity for premium lenses by 60%.

The company’s Toronto flagship store finished its first full quarter ahead of expectations, Kamar said. Toronto-area online growth, which had trailed the rest of Canada before the opening, outpaced it by about 28 percentage points afterward. Kits has signed a letter of intent for a Calgary location, which Kamar said is expected to open in early to mid-first quarter of 2027.

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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