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KITS Eyecare shares spike nine per cent after earnings report

Online eyewear seller has returned to profitability
KITS Eyecare operates a cafe with eyewear on display in cases, at 1500 Yew Street in Vancouver

Shares in Vancouver-based KITS Eyecare Ltd. (TSX:KITS) popped more than nine per cent today (May 8) following a first-quarter earnings report that impressed investors as it showed that the company had returned to profitability, on a record $34.8 million in quarterly revenue.

The eyeglasses and contact lens seller's revenue rose 26 per cent, from $27.7 million in the same quarter last year. 

KITS, which primarily sells eyewear online, generated about $64,000 in net income, or profit, in the three months ended March 31, up from a $1.02 million loss in the same quarter one year ago, according to the report. 

"We started 2024 with another record quarter, achieving an annual revenue run-rate of nearly $140 million while achieving our sixth straight quarter of adjusted EBITDA-positive (earnings before interest, taxes, depreciation and amortization) growth," said Roger Hardy, co-founder and CEO of KITS.

"We also maintained strict cost discipline throughout the quarter as we saw our operating expenses as a percentage of revenue decline across the board. With uncertainty throughout the broader consumer environment, our offering continued to cut through the economic and competitor noise, with more and more customers choosing KITS."

Gross profit, which is the company's revenue minus its cost of the goods it sold, was up 22 per cent, to $11.2 million, compared to $9.1 million in the same quarter in 2023, according to the company. Gross profit does not include costs such as taxes, depreciation and overhead expenses.

Technological innovation at the company includes what it calls its Virtual Try-On Tool (VTO), which allows online shoppers to better see how glasses would look on their faces. More than 1.35 million glasses were tried on using that tool in the quarter, Hardy said.

KITS first turned profitable in the third quarter of 2022, when it generated $20,000 in earnings, but it soon returned to having net losses.

Hardy told BIV in March that his focus was to grow his company's revenue as fast as possible and that profitability was something that could come later. 

"I take you back to (Nasdaq:AMZN)," he told BIV in March.

"I don't think they made money for 10 years. Facebook (Nasdaq:META): not 10 years. Google (Nasdaq:GOOGL): something like that, six years. So, you know, we're in Year 5 of a fast-growing consumer business that's gone to over $100 million [in revenue] in five years."

Hardy is likely best known for founding and being CEO at the Vancouver-based, Nasdaq-listed Coastal Contacts in 2014, when French lens giant Essilor bought the venture for $430 million. Earlier this year, he invested in the humanoid-robot venture Figure AI

Essilor then merged with Italian frame giant Luxottica to become Essilor Luxottica SA (ESLOY:US), and that venture hived off parts of Coastal Contacts and put them in various divisions

The division based in Vancouver is now known simply as Clearly, and was headed by CEO Arnaud Bussiers until last summer. BIV has heard that Clearly has shrunk its Vancouver footprint but its parent, Essilor, has not responded to BIV's media requests for a local staff count or an update on the extent of the company's Vancouver operations.

KITS' share price closed at $6.24, up $0.52 on heavy volume of 39,554 shares traded, compared with an average day when about 17,503 shares change hands.

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