Kits Eyecare Ltd (KTYCF) Q2 2024 Earnings Call Highlights: Record Revenue Growth and Strategic ...
Revenue: $37.9 million, a 26% increase year-over-year.
Annual Run Rate: $151 million.
Adjusted EBITDA: $1.3 million, representing 3.5% of revenue.
Net Income: $0.2 million.
Earnings Per Share: $0.01.
Cash Flow: Positive cash flow of $1.1 million in the quarter.
Debt Reduction: Paid down $0.8 million, leaving approximately $6 million in debt.
Gross Margin: 32.8%, a 70 basis point increase from Q1 2024.
Canadian Business Growth: 47% year-over-year.
Contact Lens Business Growth: 24% year-over-year.
Eyeglasses Business Growth: 42% year-over-year.
Marketing Expense: Declined from 13.7% to 13.4% of sales year-over-year.
Fulfillment Expense: Decreased from 12.6% to 11.2% of sales year-over-year.
Average Order Value: Increased by 21% to $182.
New Customers Revenue: $13.8 million from 72,000 new customers, a 21% increase year-over-year.
Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Kits Eyecare Ltd (KTYCF) reported a record quarter with Q2 revenues reaching nearly $38 million, marking a 26% year-over-year organic growth.
The company achieved positive cash flow of $1.1 million and reduced its debt by $0.8 million, leaving a low outstanding balance of approximately $6 million.
Kits Eyecare Ltd (KTYCF) saw significant growth in its Canadian market, with a 47% year-over-year increase, driven by both contact lenses and eyeglasses segments.
The company introduced innovative products, including a new line of silicone hydrogel daily modality lenses and expanded its eyeglasses offerings with 231 new frame styles.
Kits Eyecare Ltd (KTYCF) maintained a high customer retention rate, with 64% of revenue coming from loyal core customers, and achieved a 21% increase in average order value to $182.
Negative Points
Despite the positive growth, the company faces challenges from declining competition, which may impact future market dynamics and pricing strategies.
The smart glasses category, although promising, is still in its early stages and currently represents a small portion of revenue.
Kits Eyecare Ltd (KTYCF) operates in a highly competitive $80 billion North American optical market, which remains largely undisrupted by new entrants.
The company's marketing expenses, while slightly reduced, still represent a significant portion of revenue at 13.4%, indicating ongoing investment needs to sustain growth.
There is a potential risk associated with the company's reliance on word-of-mouth and customer satisfaction for growth, which may not be as controllable as traditional marketing strategies.
Q & A Highlights
Q: What led Kits Eyecare to introduce smart glasses, and how significant is this category for the company? A: Joseph Thompson, Chief Operating Officer, explained that the introduction of smart glasses is in its early stages, but the company is excited about the potential. The infrastructure already supports this category, and there is growing demand, especially as major companies like Meta and Google invest in the space. Currently, smart glasses represent a small percentage of revenue, but they offer favorable economics and potential for growth.
Q: Why is Kits Eyecare experiencing stronger growth in Canada compared to the US? A: Joseph Thompson noted that the brand's value proposition resonates well in Canada, aided by strong word-of-mouth and a market-by-market approach. Awareness is still low, providing room for growth. The company is expanding its successful strategies from Vancouver to other Canadian cities and the US.
Q: Are there any prepayment penalties on the BDC loan, and is Kits considering refinancing? A: Zhe Choo, Chief Financial Officer, confirmed there are no prepayment penalties on the BDC loan. The company is always exploring ways to maximize shareholder value, including potential refinancing options.
Q: How much of Kits Eyecare's growth is due to capturing market share from competitors? A: Joseph Thompson stated that as the market shifts online, Kits is gaining share due to its low-cost infrastructure and value proposition. The company sees high repeat purchase rates, indicating strong customer retention and cross-category sales.
Q: Can you provide more details on the decline in competition and its impact on Kits Eyecare? A: Roger Hardy, CEO, mentioned that traditional players are reducing marketing spend, which benefits Kits by lowering acquisition costs. This trend has been noticeable over the past few quarters, contributing to Kits' momentum and market share gains.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.