On Wednesday, Kits Eyecare (TSX:KITS) discussed first-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

Kits Eyecare reported a 23% year-over-year revenue growth in Q1 2026, reaching $57.5 million, marking the 14th consecutive quarter of organic revenue growth above 20%.

The company achieved its highest adjusted EBITDA in history at $4.1 million, representing 7.2% of revenue, with a gross margin expansion to 40.9%, aided by a one-time tariff refund.

Glasses revenue grew 61% year-over-year to $10.8 million, with a 50% increase in glasses units sold, indicating strong momentum in the category now representing 18.8% of total revenue.

A strategic reinvestment of a $2.1 million non-recurring tariff refund was made into customer acquisition, resulting in approximately 100,000 new customers, contributing 36.1% of Q1 revenue.

The company ended the quarter with $19 million in cash and zero long-term debt, positioning it well for future growth investments.

Looking ahead, Kits Eyecare expects Q2 revenues between $57 to $59 million with adjusted EBITDA margins between 3 and 5%, aiming for a full-year constant currency revenue growth of 25-30%.

Management emphasized the strength of its vertically integrated model, which provides a cost advantage and supports future category expansion and margin growth.

The company announced plans to open a Toronto location in Q2 to support brand building and glasses growth in Canada's largest market.

Full Transcript

Sa (Operator)

Good afternoon everyone and thank you for joining Kits Eyecare first quarter 2026 earnings call with me on today's call are Roger Hardy, Chief Executive Officer, Joseph Thompson, Chief Operating Officer and Ibrahim Kumar, Chief Financial Officer. Before we begin, I'm required to provide the following statement respecting forward looking information which is made on behalf of KITS and all of its representatives on this call. Certain statements made on this call will contain forward looking information. This forward looking statements generally can be identified by the use of words such as intend, believe, could, expect, estimate, forecast, may, would and other words of similar meaning. This forward looking information is based on management's opinions, estimates and assumptions in light of their experience and perception of historical trends, current conditions and expected future developments as well as factors that they currently believe are appropriate and reasonable in the circumstances. Actual results could differ materially from a conclusion, forecast, expectation, belief, or projection in forward-looking information and certain material factors and assumptions were applied in drawing a conclusion or making a forecast or projection as reflected in the forward looking information. Management cautions investors not to rely on forward looking information. Additional information about the material factors that could cause actual results to differ materially from the conclusion, forecast or projection in forward-looking information and material factors or assumptions that were applied in drawing a conclusion or making a forecast or projection as reflected in the forward looking information are contained in filings with Canadian provincial security regulators during today's call. All figures are in Canadian dollars unless otherwise stated and with that I will turn the call over to Roger Hardy, CEO. Please go ahead.

Roger Hardy (Chief Executive Officer)

Thank you operator and thank you to everyone joining us today. Q1 marks our 14th consecutive quarter of organic revenue growth above 20% year over year. Fourteen straight quarters in Q1 total revenue reached 57.5 million, growing approximately $11 million or 23% year over year and 27% on a constant currency basis. Importantly, this was $3.6 million or almost 7% sequential growth over Q4. We continue to believe our growth in North America makes us an one-of-a-kind in the optical category and Q1 reinforced that view. Adjusted EBITDA reached $4.1 million or 7.2% of revenue, the highest adjusted EBITDA in our company's history. A strong start to the year and building on our three year trend of adjusted EBITDA progress as we take meaningful steps forward in our journey of compounding profitable growth. Gross margin expanded to 40.9% supported by both underlying mix improvements and and a non recurring tariff refund. I'll discuss in a moment. The quarter also marked our 14th consecutive quarter of positive adjusted EBITDA while continuing to grow at category leading rates. We ended the quarter with $19 million in cash and zero in long term debt. Three themes that define the quarter are number one, the strength and acceleration of our glasses business, the disciplined reinvestment of a one time tariff benefit and the durability of our customer economics. First in glasses glasses revenue grew 61% year over year to $10.8 million. Building on momentum we've been describing for the past several quarters underneath that headline we delivered over 156,000 pairs of glasses units in the quarter, a 50% year over year increase. This growth reflects compounding tailwinds including accelerating adoption of the premium lens business, growing units over 75% year over year, contributing to expansion of average order value which now sits approximately 35% higher than a year ago for glasses, consistency in customer retention with our returning customer rate supporting over 60% of revenue every quarter since our IPO in January 2021 reaching 63.9% of total revenue from repeat customers and continued strength in our vertically integrated manufacturing capability which gives us both cost and quality advantages we don't believe our competitors can easily match. Glasses are transitioning from a growth vector to a core driver of both revenue and margin, now representing 18.8% of total revenue, up from 14.4% in the prior year period. As this category scales, we expect it to play a larger role in both top line growth and margin expansion over the years to come. Underneath that growth, premium Lens upgrades represented 42% of glasses revenues, with digital progressive revenue growing over 65% year over year. We ended the quarter with over 609,994 frames in stock across more than 21,438 styles, supporting both selection and scale as we extend into adjacent categories and the most important leading indicator from the quarter, the 2026 glasses cohort is generating first order revenue approximately 62% higher than the 2025 cohort on the same entry level pricing the clearest evidence yet that the platform is compounding. Second, the tariff refund and reinvestment during Q1 2.1 million in non recurring tariff refunds related to prior periods and imports into the U.S. consistent with our long stated strategy of growing with intention while delivering steady EBITDA progression, we made a decision to reinvest that benefit into accelerated customer acquisition during the quarter with specific focus on capturing share in our glasses category where the return opportunity was disproportionate. That decision translated directly into some exciting leading indicators. Approximately 100,000 new customers acquired representing 36.1% of Q1 revenue. Our two year active customer base reached over 1.1 million, up 17% year over year and glasses units increased 50% year over year to 156,000 units. As a result, marketing came in at 18.9% of revenue. To be clear, this was strategic and a time bound reinvestment of a one time item, not a change in our marketing intensity framework. We'll continue to invest in customer acquisition where returns support it. Marketing will flex with cohort quality as we assess the spend against long term customer value, not short term period comparisons, while remaining committed to an adjusted EBITDA positive framework. Third, our customer economics our cohort metrics continue to support the case for long term compounding. Repeat revenue represented 64% of total revenue in Q1 and continues to grow as a percentage of mix. Our autoship customer base, which is the foundation of a recurring revenue, represented 5.9 million in revenue during Q1 and we're seeing strong cross category dynamics where glasses customers are increasingly purchasing contact lenses and vice versa. At the cohort level, the metrics continue to improve. Our two year active customer base grew 17% year over year to over 1.1 million customers. Average order value is up approximately 35% higher for glasses versus a year ago as customers move into higher value lens categories and repeat customers continue to deliver materially higher gross margin per order than first purchase customers. More importantly, cohort quality is improving. What gives us conviction in that signal is how these cohorts behave over time. Customers acquired in 2024 through 2026 are outperforming earlier cohorts. When looking specifically at the 2021 contacts cohorts, it's grown from approximately $151 of revenue per customer in year one to over $450 in cumulative revenue in a four year period. That expansion is driven by stronger brand awareness, a broader product offering and a meaningful improved customer experience. What we're seeing in 2026 is that customers are entering the platform at a higher starting point which when layered onto the same multi year trajectory materially increases the lifetime value of each new cohort. While the financials show the output innovation is what drives it on the product side. We continue to expand the glasses offering across materials, product lines and construction with a focus on increasing both customer value and margin. In Q1 we expanded our readers and progressive readers offering, driving meaningful year over year growth in units up 74% year over year. We also introduced new frame innovations including our Flex Collection designed for durability and comfort through a 360 degree hinge system. But the more important shift is happening on the tech side. Optician AI is no longer just a feature, it's increasingly the interface offering personalization, guiding product discovery, improving conversion and increasing attachment to higher value lenses in real time. As more customers engage, the system gets smarter, conversion improves and cohort economics, Strengthening a compounding loop we are also extending AI across the business from search and merchandising to marketing and customer support with a clear objective, remove friction, increase confidence and elevate the entire buying experience. Looking ahead to Q2, we expect continued momentum with revenue projections in the range of 57 to $59 million and adjusted EBITDA margins to come in between 3 and 5%. Joe will speak to the operational drivers in a moment and Ibrahim will walk through the financials in detail. But before I hand off, I want to highlight one point we continue to have high conviction around our ability to generate asymmetric returns in the category. With that, I'll turn it over to Joe.

Joe

Thanks Roger. I want to touch on two foundational beliefs that frame how we think about the glasses business and why we believe the next five years represent a generational opportunity for kits to establish itself as the platform for prescription eyewear in North America. The first is cost. Our vertically integrated model gives kits a structural cost advantage in high quality prescription glasses at scale. Our vertically integrated Vancouver lab, our just in time production model and the volume leverage we capture as unit scale. Over 156,000 pairs delivered this quarter alone, up 50% year over year combined to give us a structural cost position we don't believe traditional optical retailers can match. That cost advantage is what allows us to keep entry level pricing unchanged while expanding gross margin and it's what creates the Runway to extend into adjacent categories, readers Progressives light adaptive SonNRx and the premium configurations beyond without compromising on either price or quality. Each new category sits on the same fixed manufacturing base, which means every incremental unit of volume flows through at very attractive incremental margins. The wider our category footprint, the more reasons a customer has to come back to Kits and the more share of their eyewear wallet we capture over time. The second is repeat behavior because customers experience that combination of value, quality and convenience. Our customers exhibit industry leading repeat behavior. Repeat orders represented 63.9% of total revenue in Q1 and on the glasses side specifically, 78,000 pairs delivered this quarter went to returning customers a 53% year over year increase in repeat glasses volume. But the more important point is what those repeat customers look like compared to first time buyers. They trade up into premium lenses at meaningfully higher rates, they carry larger basket sizes, they buy across categories, glasses customers buying contacts, contacts customers buying glasses, and they require a fraction of the marketing investment to reengage. Every cohort we acquire today becomes a lower cost, higher margin revenue stream for years afterwards. That is the asset we are compounding. Lastly, we're on track with our previously announced Toronto location which we expect to open later in Q2. This expansion supports our brand building strategy in Canada's largest market and we expect it to incrementally support glasses growth in southern Ontario over the back half of 2026 and into 2027. I also want to take a moment to welcome Ibrahim Kamar to his first earnings call as Chief Financial Officer. Ibrahim has been a key partner behind the scenes as SVP Finance and his promotion reflects the strength and continuity of our financial leadership. I'll now turn the call over to Ibrahim for the financials.

Ibrahim Kamar (Chief Financial Officer)

Thanks Joe and good morning everyone. To recap, Q1 revenue grew 23% to 57.5 million with glasses revenue as the standout reaching 10.8 million up 61% year over year. Repeat revenue represented 63.9% of total revenue in the quarter and new customers revenue increased almost 17% year over year. That combination is what supports both near term revenue and long term economics. Gross profit was 23.5 million in Q1 up 6.4 million from 17.1 million to in Q1 2025 and gross margin expanded to 40.9% reaching a new threshold for CAIF. It's worthwhile to note three areas under the gross margin line. First, the headline 40.9% includes a 2.1 million non recurring tariff recovery. Excluding that recovery, underlying gross margin was over 37% a year over year improvement. Second, the structural drivers are the repeat revenue mix and glasses. Repeat revenue reached 36.7 million and our glasses gross margin continues to expand. Third, premium lens categories which carry higher gross margin which represent approximately 42% of glasses revenue highlighted by digital progressives growing over 65% year over year. Adjusted EBITDA was a record 4.1 million or 7.2% of revenue. This includes the benefit of the tariff recovery. Adjusted EBITDA remains positive while we increased marketing reinvestments on operating expenses. Marketing was 18.9% of revenue increasing year over year from 13.5%. As Roger noted, this was a strategic reinvestment of the 2.1 million tariff recovery into accelerated acquisition, mainly In Glasses fulfillment improved to 10.5% of revenue, down from 10.9% in Q1 2025 and GNA improved to 5.7% of revenue, down from 6.3% in Q1 2025. In short, outside of the deliberate marketing lean in, every line in our PL moved in the right direction on the balance sheet. We ended the quarter with $19 million in cash and fully undrawn 15 million ABL facility with the bank of Montreal. On January 2, we repaid the full balance of 10 million on the ABL reflecting a zero long term debt balance. The ABL in combination with our cash position provides ample liquidity to fund operations and future growth. Cash used in operating activities was 5 million in the quarter, reflecting a planned inventory build to support our continued growth while operating cash flow moderated relative to previous quarters. Our supply chain strategy and balance sheet flexibility continue to support ongoing investments in growth initiatives. We enter Q2 with a strong balance sheet, a growing and increasingly loyal customer base, and a glasses business that is inflecting. Operator, we are now ready for questions.

OPERATOR

Thank you ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press the Star button followed by the number one. On your Touchstone phone you will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the Star button followed by the number two. If you are using a speakerphone, please lift the handset before pressing any keys. We kindly ask that each participant ask no more than two questions each. One moment please for your first question. First question comes from Luke Hannon Canaccord Genuity. Please go ahead.

Luke Hannon (Equity Analyst at Canaccord Genuity)

Thanks. Good morning everyone. I want to start with a clarification on the marketing spend. So this will be I guess a two part question. The first is Roger, if I heard you correctly, you did deliberately increase marketing spend during the quarter was 18.9% of revenue. When we back out the 2.1 million from the tariff recovery out of the marketing spend though it is close to 15% of revenue. Is it fair to say that for the balance of the year you are still thinking about the marketing guardrails being between 13 to 15%?

Roger Hardy (Chief Executive Officer)

Hey Luke, good morning. You know, I think our normalized marketing framework has historically been in that 14 to 16% range and that remains our reference point. What happened in Q1 was specific and deliberate. We had the 2.1 million of non recurring benefit land in the quarter at a moment seasonally when the when the return opportunity in Glasses acquisition was disproportionately attractive. So we made the call to deploy it. That decision has been made and we're happy with the results. Going into Q2, we're not carrying that same elevated spend. So you should expect marketing as a percent of revenue to move back towards our historic range. We're moving away to managing towards cohort quality and payback and specifically because of how strong we are seeing the cohorts and this year. But Q1 level was not normal, but we are moving towards looking more intentionally at quality of the customer. Thank you. Okay, thanks. So then as a follow up to that first question though, and I appreciate all the detail that you've shared when it comes to the reorder rates and the new cohorts that you're acquiring being accretive overall to the P and L, it sounds like compared to earlier cohorts. But can you just share with us? I mean, what does that look like on an LTV basis or maybe an LTV to CAC ratio basis? A little bit more specificity because I think the issue that investors and analysts may have looking at this is there tends to be a lag between when you're investing and acquiring these customers versus when we may see the benefit of that show up later on in the P and L. So how should we sort of think about this or reconcile that? Yeah, maybe I'll hit a high level and then pass to Joe for a little more detail. You know, just at a high level. Luke, I think what we and it is covered in the MDA and I think, you know, hopefully fairly well. Talking a little bit about first off the contact lens cohorts and how those are behaving customers returning, you know, at almost 85 to 95% net revenue retention. And those numbers are similar to a software business, less like a retail business. They are incredibly unique, I would say, in retail and they look a lot more like some of our favorite subscription-type businesses. So we've got extremely high revenue retention. That's giving us confidence. You know, we've got five plus years of cohort information there and each year the cohorts come back and they say spend more and that is of course what, what we look for. And in glasses, you know, it's earlier on in the, in the life cycle of our glasses customers. But we've broken out some of the, the numbers there that, that we're also finding and that are exciting, including seeing this year's first quarter cohort in glasses basically being at a, at a three year LTV of previous cohorts so we're seeing a dramatic jump in performance. Customers are coming in, they're buying multiple pairs, they're upgrading their lenses, they are choosing specialty products. So all of those bode very well for just in general the kits brand and more specifically towards glasses that return being faster and faster. So when the one year cohort is higher than the three year cohort cohort

Joe

to your question about how quickly, you know, does it generate a return, the return is accelerating and maybe I'll pass to Joe for if he has any more comment there. Yeah, good morning Luke. So we did, you know, as Roger's detailed, very well may make an investment in glasses and here's some more data on why. You know, from a unit economic standpoint, unit economics were very compelling to us in Q1. We saw glasses as average order value increase from, you know, below $100 a year ago to now approximately $130 while seeing gross margin percent grow from the mid-30s to now approaching 50%. So from a gross profit per order standpoint, year on year we're seeing an

Luke Hannon (Equity Analyst at Canaccord Genuity)

increase of of approaching 80%. Lots of tailwind on top of this bogo offer really resonate resonating and our manufacturing cost per pair of glasses made in the quarter improved over 10% which of course helps gross margin. But I think as Roger highlighted, the reoccurring revenue profile of these customers is what really makes this attractive. Our revenue from repeat customers on glasses in the quarter grew over 50% which of course our customers, you know, acquired in previous quarters and gives us even more confidence on the nearly 80,000 new customers added to the franchise this year. So put these together and we've really progressed our glasses business in the last two quarters. In two quarters we've seen the size of glasses grow more than 50% while meaningfully improving the economics. So maybe a little bit that was just little bit more context on what gave us confidence in the investment. Very helpful, thanks. And then for my second question, and then I'll pass the line here just on capital allocation. If you can share more detail on what drove the decision for you guys to buy the Bitcoin ETF last quarter. Maybe who was involved from a management or board perspective there, what your plans are here moving forward as well. Thank you. Yes, sure Luke. The position was established as a long duration Treasury reserve at a time when we were evaluating alternatives for excess capital. It's a non-operating holding and has remained modest in size. We did not add to the position in Q1, have no plans to add to it going forward. Over time, we expect it to be reduced as part of our broader treasury management. Our focus as a management team is squarely on the optimization business and our capital allocation priorities are glasses growth, customer acquisition and the balance sheet. The position doesn't distract from any of that. As to who was involved, we had, we prepared a memo, it went through our board and we had approval from just over 60% of shareholders in person at that meeting to approve it. So hopefully that gives you some color on that. Thanks, Luke. Thanks. I'll pass the line.

OPERATOR

Next question is from Martin Landry from Stifle. Please go ahead.

Martin Landry (Equity Analyst at Stifel)

Hi, good morning, guys. I would like to dig a little bit into your revenue guidance for Q2. You know, admittedly the revenue growth is a little lower than our expectations at the midpoint, I think you're calling for revenues to be up 17% year over year. It would also represent a lower growth than what you've accomplished in the past several quarters. So can you discuss a little bit the environment, why you're expecting revenue growth to slow down a little bit? Anything change from a competitive dynamic, any color would be very helpful.

Roger Hardy (Chief Executive Officer)

Yeah. Great. Good morning, Martin. You know, I think Martin was an outstanding first quarter to be direct growth at about 27% on a constant currency basis. So we're preferring to think about our growth targets still in a yearly framework of about 25 to 30%. But there is going to be some seasonality inside those, those quarterly moves. And so in Q1, the market was fairly robust. And that's, that's kind of how we're thinking about it. Of course, we've guided conservatively and consistently over the past, you know, double digit quarters. We do see some seasonality playing out as expected. And I think, you know, there's a lot of moving parts, including the US dollar and US currency and many things built in. But at a constant currency basis, we think the year looks more like 25 to 30%. It's going to take some solid execution by the team. And Q2 is looking probably seasonally, it has been one of our weaker quarters if we go back over the last number of years. So we've adjusted that into our framework. Joe, anything you want to add there? That's great. Okay, thanks, Martin.

Martin Landry (Equity Analyst at Stifel)

So just to, just to clarify, you expect your annual revenue in 2026 to grow by 25 to 30%? Correct. Okay. Okay. Okay. So that means a pretty strong back half. Just, you know, there's been a lot of, you know, inflationary pressures with the war in Ukraine. So I'm wondering as any of Your input costs increased following the war, and could that have any impact on your cost of goods sold in the coming months?

Joe

Marte, can I just add one qualifier to that? 25 to 30%, I did say in constant currency. So, as you know, 60% of our revenue does come out of the US and so that dollar impact can be meaningful as it was in Q1. And then I'm going to turn, I'm going to turn over to Joe to talk a little bit about if we're seeing any input cost movement. Joe? Yeah, Good morning, Martin. We look at a number of data points as we're kind of assessing the market. One of them is traffic. You know, our customers still interested in the platform is traffic growing ahead of revenue growth. And so in Q1, we did see, you know, revenue up, you know, 23%, 27% constant currency traffic was up over double that in glasses, you know, growing about 60% in revenue traffic up, you know, well over 100%. So lots of, of consumers still exploring on the platform, and we think that that's a great leading indicator with regards to cogs. You know, we, our view just continues to be we want to draw the shortest line between raw materials and the customer and the customer, and we want to take as many layers and as much waste out of the system on behalf of customers. And so, you know, if you take

Martin Landry (Equity Analyst at Stifel)

our glasses business as an example, you know, all the frames are designed right here in Vancouver. The raw materials come in to the lab, they're assembled, the prescription is cut right here, and then they're shipped to the customer. So if there is any variance on either inbound or outbound transport, we expect the variance that we see to be significantly less from delta standpoint than what the industry sees. And so when we, when we do see disruption, we tend to see it as an opportunity to continue to get sharper on a simple, straightforward supply chain that passes disproportionate savings on to customers. So, so no change in our, in our forecast or thinking on 2026 with anything that we've seen so far. Far. Okay, thank you and best of luck.

OPERATOR

Next question is from Gianluca Tucci out of Haywood Securities. Please go ahead.

Gianluca Tucci (Equity Analyst at Haywood Securities)

Hi, good morning, everyone. Congrats on the quarter. Seems like it was a record also for gross margin line, even excluding the tariff benefit. Given how the glasses business has been scaling, everyone, is this a step function to continue modeling from going forward? I'm just curious as to how you're thinking about consolidated margins from this point forward, given how the glasses growth has been scaling Is the long term Target still like 40, 50% gross margin target or is that now like evolving given the growth here?

Roger Hardy (Chief Executive Officer)

Morning, Jean Luca, thanks for the question. You know, we haven't broken out our glasses gross margin as standalone in the disclosures, but what I can tell you directionally is you're correct, it's meaningfully higher than our contact lens category. It's expanding quarter over quarter. As in house production scales as premium lens mix increases and the significance of that is compounding. As glasses grows from 18% of revenue today towards a larger share of the mix, it becomes increasingly powerful engine for our overall margin expansion. Expansion. So you know, we view the current trajectory as an inflection, not a 1/4 event. And as we look out into the future, you know, it's a good reminder that the glasses category itself is 8 to 10 times the the size of the contact lens business and you know, could easily make up 50% or more of our overall total business. So you know, we think gross margin will continue to compound and you know, you're right to focus on that and ultimately that'll be the big lever towards contributing to overall EBITDA margins.

Gianluca Tucci (Equity Analyst at Haywood Securities)

Thanks, Roger. So like longer term, is the target for the business still 40, 50 percent or how are you thinking about the long term objective on the gross margin perspective given how fast you're scaling glasses?

Roger Hardy (Chief Executive Officer)

Yeah, it's a good question. I mean, what, you know, it depends on your definition of long term. I think, you know, as we move out a couple of years, it's easy to see a business whose gross margins exceeded 50%. I think I'll just leave it there. I mean, as the brand gets stronger, as I mentioned earlier, people are choosing to buy more line items, more specialty lenses, second pair of frames, all of which reduces the cost of fulfillment, reduces the cost of marketing as a percent. So you get operating leverage from every time consumer customers upgrade and choose higher value products. So all these things will be contributors to overall gross margins north of 50% and to healthy EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) margins.

Gianluca Tucci (Equity Analyst at Haywood Securities)

And that's kind of what we're building towards. Anything I missed there? You're okay. Okay, that's great, Roger, appreciate it. And then just lastly, can you speak to perhaps optician AI and the traction that you're seeing out of that product and if there's any tangible upsell opportunities that you're seeing through the deployment of that technology across the business?

Roger Hardy (Chief Executive Officer)

Yeah, great, great question, Jean Luca. You know, it's an exciting time to be, to be running a growth company. So many opportunities when we're looking at AI and internally how our business continues to get more and more efficient. If you look at over the past couple of quarters, we've gone from revenue per employee at about 600,000 per employee to right around a million dollars per employee. Again, very unique I think in terms of retail and part of what's helping drive that is just all the technology innovation that's coming out of our tech team. So we have deployed a number of AI agents, agentic agents, assisting with many tasks and we're also running those in parallel with different roles, different assignments within the company, helping those people be more efficient, make better decisions. So we're seeing all of those things contribute to making the team better but also keeping it highly efficient and sorry

Joe

lastly to get to opticians AI it's a great example of where we're using technology to help customers find what they're looking for. So it lets us personalize it helps us upsell and that tool I think just will get better and better over time at understanding the journeys customers take different customers through the website. What products do we need to surface to make sure we serve them in a way that's compelling Customers that interact with upcoming option AI right now do choose to have and do have higher order values. So we are seeing that at play and we're continuing to refine it. I, you know, I think we're leading the category in this, in this regard for the number of customers that are checking out with a digital optician and that is helping and contributing to uptick in order size and uptick in again we're back to gross margin I guess the end of the day. But most, you know, most important probably is just finding customers the right, the right product for them. And so it's very exciting. It will get better and better over time and we'll start to show it to more and more customers as we have confidence in its ability to serve customers. Joe, anything there in more detail you want to cover? Good morning, John Luca. So yeah, in the short term Optician AI is front and center. Is, you know, is engagement improving and to our expectations with the tool and is conversion improving? Both are a solid confirmation and ahead

Gianluca Tucci (Equity Analyst at Haywood Securities)

of what we expect it to be. But I think as Roger described, this is in the longer term or even really in the midterm. This is an LTV machine, this product, it's really going to increase the engagement, increase the comfort level, the feeling of hey, I'm home. When I come to the site, it's got my history embedded. So we, you know, the sky's the limit for our expectation for this tool. And you know, and typically in our view, businesses that are set up to win first and in a big way on AI have a digital footprint where all the data is consumed and captured and immediately goes into improving all different parts of the business. So the consumer facing tools such as optician AI tend to get most of the focus and most of the press. But I'd say, you know, our team is equally excited about all the, you know, maybe less exciting externally improvement areas like improved turns on inventory, that large language models can really help us with improved revenue per employee with every teammate getting more productive every quarter having more access to more data. So I think, you know, we're investing in this in a big way as a team and the sky's the limit on what the potential is. Thanks for the color, guys. I'll pass the line. Congrats again.

Roger Hardy (Chief Executive Officer)

Thanks, John Luca.

OPERATOR

Next question is from Matt Karanda from Roth Capital. Please go ahead.

Matt Karanda (Equity Analyst at Roth Capital)

Hey everyone. Good morning. I guess want to just hear you unpack the growth commentary for the year a bit more. It sounds like it steps down a little bit in terms of rate in the second quarter, but I guess if we want to hit the midpoint of the full year growth goal, we'd accelerate to something in the high 20s, low 30s for the remainder of the year, I guess. What are the underlying industry assumptions you're using to get there? What's your outperformance versus the industry look like, I guess in the scenario that you're highlighting? And how should we be thinking about, I guess, AOB versus unit growth?

Joe

Yes, thanks, Luke. And I mean, I think we talked a little bit about the growth we saw in Q1. Lots of new customers there. We're also seeing those customers return at a frequency that's improving. We are seeing those customers spend more as they return. So at a high level, those are some of the key assumptions. Assumptions is that as you know, we attract and retain a high number of customers. There's a large number of customers repeat and return in a predictable way. So we've modeled that into our year and that's the type of growth we're seeing. I guess it's also important to remember that, you know, despite being 200 million-plus in revenue, the category itself remains quite large, fragmented, not disrupted. And so there's some parts of what we're finding is that we're seeing great results in Q1 from a specific number of activities. We'll look to continue to scale those throughout the rest of the year. Including some of our influencer strategies that have been working quite effectively. Some of the other optician AI experiences that will roll out more broadly to more parts of the website. So, you know, there's a lot of moving parts in that model, but we did see good growth in Q1 and healthy cohorts that encourage us to continue investing. And yeah, so that's kind of the high level. Maybe I'll turn to Joe if he wants to hit any detail or EB. Hey Matt, how are you? So, you know, we, I think as you know, described this earlier, are taking a conservative look at Q2, but we're looking overall at 2026. So you know, with our, with our plans, you know, we expect our fourth consecutive fiscal year with organic growth over 25% in constant currency. And I think that puts kits in a very small pool of companies that can both expand profitability and grow at that level. The underlying platform and economics are really what's driving it. So over 60% of revenue continuing to come from repeat customers. And then as we see the unit economics on glasses, you know, really improving from, you know, from a gross profit per order standpoint, improving over 75% in Q1 on glasses, it just, it, you know, and seeing the repeat profile continue to come in and manufacturing getting even more efficient as we add more volume onto the platform, it just, it gives us, you know, just so much confidence in the balance of the year and then, and then 2027 as well.

Roger Hardy (Chief Executive Officer)

And Joe, I probably just add one thing, you know, I didn't hit on Matt, our autoship program. We've, we've really kind of been starting to increase and reinvest in the auto ship with a new Subscribe & Save platform that we're seeing some good, early, early results with. So I think all that just add that into kind of your, your modeling perspective. Thank you.

Matt Karanda (Equity Analyst at Roth Capital)

Sounds great guys. Thanks for that. And then maybe just on, on the glasses front, this might dovetail with with your response earlier, but I noticed the, the mix of higher priced frames available on your site has increased over the last several months. Just wondering what you're seeing in terms of customer behavior that's driving that mix shift. I would assume maybe some, some assumption of more repeat and customers liking the product and coming back, but just wanted to give you the chance to sort of talk about the driver of that mix shift. Yeah, yeah, Matt, the big driver of that is category expansion within glasses. So you know, so you have this platform, this, this chassis of, of an optical lab onshore and with all of the Services lines and edging lines and assembly and selection. And we're now able to, at a faster pace than ever, add new subcategories. So, for example, readers or progressive readers, which were a big introduction. These are entire categories unto themselves that we're able to introduce at significant savings. I mean, our digital progressives business continues, continues to be one of our highest net promoter score, highest repeating businesses because the value is so astounding to customers. You know, customers spending a couple hundred dollars for a pair of digital progressives when they're used to spending 800 to 1,000 in the market and now coming back to say, actually I can now have two pairs and we think we're seeing it's early days, but the same behavior in progressive readers and more premium categories to come where we feel like we have the opportunity with the platform already built to offer incredible value to customers. So those are a few that we launched in the quarter and expanded in the quarter, but many more to come. Great to hear, guys. Thank you.

OPERATOR

Next question comes from Doug Cooper from Beacon Securities. Please go ahead. Looks like Doug has dropped. Doug, if you want to do the prompts again with your question, please go ahead. Otherwise, our next question comes from Frederick Tremblay from Desjardins. Please go ahead.

Frederick Tremblay (Equity Analyst at Desjardins)

Thanks. Good morning. With your new chief marketing officer joining during the quarter to the extent that you can, can you comment on if there's any tweaks or adjustments to the marketing strategy or the marketing tool that you intend on using? Not really looking for numbers per se, but just more broadly at the potential changes in the marketing strategy going forward?

Roger Hardy (Chief Executive Officer)

Good morning.

Joe

You know, we were excited to add a couple of new teammates to the marketing team this quarter. From a strategy standpoint, I think we're just, you know, kind of carrying on things that have worked and been successful historically with a new lens, with some added experience and with some additional expertise. So it's still early and, you know, I think our view is to make sure we give people lots of time to understand the business and expectations in the first quarter. We're really just to seek first to understand. And so I would say Q1 reflects, it reflects kind of that strategy with the newer folks. But as the quarters progress here, we'll be looking for our newer teammates to add contributions as we go. So, you know, we're excited about the new teammates and look forward to them contributing as the year goes on. Joe, anything you want to add there? Hey, Fred, great, great to hear from you this morning. Yes, it's more of the same of, you know, Incredible traction that are some

Roger Hardy (Chief Executive Officer)

of our offers are getting in the market and some of our new launches, like progressive readers buy one, get one just continues to be a big staple offering that others just are not able to to offer to customers at the same value. Influencers continue to be an area where the team invests and actually expands. So more of the same from a tactical standpoint and more success that we're seeing on the unit economic side for glasses. I think maybe just to touch on where we're headed in the long term. Again, no change to this, but it's worth repeating. We have, we feel like we built the lowest cost of manufacturing high quality prescription glasses in North America and we now have a big base of vision corrected customers and now our focus is on word of mouth referrals, et cetera, to continue to over time lower the cost of, of marketing. Because the last frontier on this platform is if we have the best platform, the lowest cost of manufacturing and the lowest cost of acquisition, then that will really be a powerful in our view, multi billion dollar platform. So that's where we're headed in the long term. And I think probably one more point to note is that we are new teammates, have had experience in hybrid and omnichannel type retail and so we are excited to in Q2 our Toronto location will be opening up. It's an extension of our brand building strategy in Canada. Our large, large market here. It's not a pivot in the operating model. We're remaining fundamentally digital first business. But physical locations will serve a specific purpose for us. They'll increase our brand trust or awareness in some of these high density markets. They support the glasses category where customers sometimes want a touch point before committing to higher value purchase. And we see them creating a halo effect on digital revenue in the surrounding geography. That's a dynamic we've seen play out with our Vancouver presence and we really wanted to scale into our team folks that had that experience. It's always nice to be working from experience, not from opinions. So we're excited to have folks that have that experience. You know that capital outlay will be modest relative to our overall balance sheet, but we look forward to contributing to supporting our glasses growth. And again, that experience will really be invaluable as we think about how to expand that strategy further across Canada.

Frederick Tremblay (Equity Analyst at Desjardins)

Thank you. Yeah, thanks for that answer. And last question for me, now that the debt repayment has been completed, I was wondering if you could talk a little bit about capital allocation priorities going forward, I guess including if you're open to assessing acquisition opportunities or share buyback opportunities as well. Thanks.

Joe

Fred. Yeah, no, we're continuing to take a long term view on the value of this platform. And so the best investment has continued to be are investing in our own organic growth. And we saw it again in Q1. Lots of kind of noise in the broader market but more growth from kits and continuing to add high value long term customers to the platform. So I think Roger talked about the Toronto store, you know, what an opportunity in Canada's largest market to you know, analogical extension of a model that's working really well in the Vancouver market. So more awareness, traffic and trial expected across the gta. So I think that's our, that's our focus. Maybe I'll pass to Roger for anything else on ncib.

Frederick Tremblay (Equity Analyst at Desjardins)

Yeah, no, I think it's good. I mean I think from time to time the market becomes fairly short term focus. So we'll assess those opportunities as they present. But as Joe said, the focus remains clearly on growing and investing in growth. And so that's where we'll kind of continue to deploy capital. Thank you. Thank you.

OPERATOR

That appears to be the last of the questions for today. I will now turn the call over for closing remarks.

Roger Hardy (Chief Executive Officer)

Let me close where I started. Q1 2026 delivered strong profitable organic growth. Revenue up 23%, glasses up 61%. Gross margins expanding and adjusted EBITDA at 7.2% of revenue. Strong acquisition cohort of approximately 100,000 new customers brought in through a delivered investment due to a non recurring tariff benefit. None of this is accidental. Every one of these outcomes reflects an intentional choice about where we invest, what we prioritize and how we run the company. The optical category remains structurally attractive. We continue to take share and the model is compounding. We believe the combination of our operating model, customer economics and continued innovation positions us well to sustain this momentum through 2026 and beyond. Thanks very much operator.

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