Mr. Roger Hardy reports

KITS EYECARE REPORTS RECORD FOURTH QUARTER AND FULL YEAR 2022 FINANCIAL RESULTS

Kits Eyecare Ltd. has released its results for the fourth quarter and full year ended Dec. 31, 2022.

Fourth quarter 2022 financial and operational highlights

For the fourth quarter of 2022, compared with the fourth quarter of 2021:

• Revenue increased $6-million, or 29 per cent, to a record $26.2-million, compared with $20.3-million;
• Repeat customers drove over 60 per cent of revenue;
• Record two-year active customers of 780,000, representing an increase of 15 per cent;
• Gross margin increased 380 basis points to a record 34 per cent, compared with 30 per cent;
• Net loss improved to $1.4-million, compared with a net loss of $4.1-million;
• EBITDA (earnings before interest, taxes, depreciation and amortization) improved to negative $300,000 from negative $2.4-million, an increase of $2.1-million;
• Adjusted EBITDA improved by $1.6-million to $400,000 compared with negative $1.2-million.

Full-year 2022 financial and operational highlights

For full-year 2022, compared with full-year 2021:

• Revenue increased 11 per cent to a record $91.6-million, compared with $82.4-million;
• Repeat customers drove approximately 65 per cent of revenue;
• Glasses revenue growth of 45 per cent to $11.5-million, compared with $8-million;
• Significant growth in repeat glasses delivered of 128 per cent;
• Gross margin increased 656 basis points to 31.9 per cent, compared with 25.4 per cent;
• Net loss improved to $4.6-million, compared with a net loss of $14.6-million;
• EBITDA improved to negative $800,000, compared with negative $14.4-million;
• Adjusted EBITDA improved by $6.9-million to negative $1.8-million;
• Strong year-end cash balance of approximately $19-million;
• Generated positive cash flow from operations of $4.7-million.

Management commentary

"We closed out the year with accelerated momentum and delivered another quarter of double-digit revenue growth, margin expansion and impressive performance," said Roger Hardy, co-founder and chief executive officer of Kits. "In 2022, the team delivered record results as the Kits brand continued to resonate with new and returning customers.

"Since our inception just four years ago, we've established Kits as the fastest-growing brand in the compelling optical category, built a one-of-a-kind automated manufacturing facility and expanded to a current annual revenue run rate exceeding $100-million. As we continue to expand our footprint across North America, we'll lean on the deep skill sets of the Kits team, along with our highly recurring business model, to drive organic growth. Even during tough economic times, the vision care category remains resilient with what we believe will deliver asymmetric upside for shareholders. With a strong balance sheet and growth funded through cash flow, we are confident that we are on the right path to accelerated value creation. We look forward to continuing to execute on our growth strategy in 2023 while providing the best care and value for our customers."

Fourth quarter 2022 financial results

Revenue growth accelerated to 29 per cent to $26.2-million, compared with $20.3-million in the prior-year period. The increase was primarily attributable to growth in new customers and strong repeat revenue driven by the strength of the Kits brand.

Gross profit increased 46 per cent to $8.9-million, compared with $6.1-million in the prior-year period, while gross margin increased 380 basis points to 33.9 per cent, compared with 30.1 per cent in the prior-year period. The increase was primarily driven by a moderation in promotions to focus on higher-margin orders and improved margins from returning customers.

Net loss was $1.4-million, or net loss of four cents per share, compared with a net loss of $4.1-million, or net loss of 13 cents per share, in the prior-year period. The improvement was primarily attributable to higher revenue and gross profit, a reduction in public company expenses, and a decrease in marketing and administrative expenses.

EBITDA improved to negative $300,000, compared with negative $2.4-million the prior-year period, while adjusted EBITDA improved to $400,000, compared with negative $1.2-million in the prior-year period. The improvement was primarily attributable to the higher revenue and gross profit and a decrease in marketing and administrative expenses.

Full-year 2022 financial results

Revenue increased 11 per cent to $91.6-million, compared with $82.4-million in 2021. The increase was primarily attributable to growth in new customers, repeat revenue from active customers and a significant expansion in glasses offerings during the year.

Gross profit increased 40 per cent to $29.2-million, compared with $20.9-million in 2021, while gross margin increased 656 basis points to 31.9 per cent, compared with 25.4 per cent in 2021. The increase was primarily driven by a reduction in promotions to prioritize higher-margin orders and improved margins from repeat customers.

Net loss was $4.6-million, or net loss of 15 cents per share, in 2022, compared with a net loss of $14.6-million, or net loss of 49 cents per share, in 2021. The improvement was primarily attributable to higher revenue and gross profit and a decrease in marketing expenses, including a decrease in customer acquisition and retention costs. Additionally, the improvement was driven by a foreign exchange gain of $2.3-million recognized in 2022 and one-time IPO (initial public offering) costs incurred in the first quarter of 2021.

EBITDA improved to negative $800,000, compared with negative $14.4-million in 2021, while adjusted EBITDA improved to negative $1.8-million compared with negative $8.7-million in 2021. The improvement was primarily attributable to higher revenue and gross profit, a decrease in marketing expenses, one-time IPO costs recorded in the first quarter of 2021, and a foreign exchange gain recognized in 2022.

At Dec. 31, 2022, cash and cash equivalents totalled $18.8-million, compared with $20.4-million at Sept. 30, 2022, and $20.5-million at Dec. 31, 2021.

Conference call

Kits management will host a conference call followed by a question-and-answer period. To access the call instantly, please register your name and phone number on-line.

Date:  Thursday, March 9, 2023

Time:   4:30 p.m. Eastern Time (1:30 p.m. Pacific Time)

North American toll-free number:  1-888-664-6392

Local Toronto dial-in number:  1-416-764-6392

Confirmation No.:  491762

Please call the conference telephone number five to 10 minutes prior to the start time. An operator will register your name and organization. If you have any difficulty connecting with the conference call, please contact Gateway Group at 1-949-574-3860.

The conference call will be also be broadcast live and available for replay through the investor relations section of the company's website.

Financial highlights

The selected financial information is qualified in its entirety by and should be read in conjunction with the company's consolidated financial statements for the year ended Dec. 31, 2022, and Dec. 31, 2021, and accompanying notes and management discussion and analysis, which may be viewed on SEDAR.

About Kits Eyecare Ltd.

Kits is Canada's fastest-growing digital eye care brand providing eyewear for eyes everywhere. The company offers customers access to a vast selection of contact lenses and eyeglasses, including its own exclusive Kits designed products, as well as a robust suite of on-line vision tools. The company's efficient digital platform, backed by its industry-leading manufacturing and designs, removes intermediaries and enables the company to offer great prices and deliver made-to-order personalized products with incredible care and accuracy. Kits is creating disruption in the industry by constantly pursuing cutting-edge technologies to enable the best customer experience, including on-line eyewear fitting tools and virtual try-on for glasses. Kits strives to delight its customers with the company's competitive prices, a convenient digital shopping experience, fast and reliable delivery options, and an unrelenting focus on earning its customers' lifelong trust.

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