Kits Eyecare Ltd.

Thank you. Thank you. Thank you. Thank you. music music Thank you. Thank you. Thank you. ... ...

Good afternoon, everyone, and thank you for joining KITS iCare 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. These 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 into 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 causes investors 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 the forward-looking information and material factors or assumptions that were applied in drawing the conclusion or making a forecast or projection as reflected in the forward-looking information are contained in group filings with Canadian provincial security regulators. During today's call, all figures are in Canadian dollars, most otherwise stated. And with that, I will turn the call over to Roger Hardy, CEO. Please go ahead.

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, 14 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 N of 1 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. Growth's margin expanded to 40.9%, supported by both underlying mix improvements 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, attributing 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 continuous 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 and 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 auto-ship 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 for 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 context 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 strengthen, a compounding loop. We're 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 dollars 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.