Kits Eyecare (KITS) fell as much as 10% after its co-founder and COO transitioned to an advisory role, which brought in a big bid to end the day down 5%…
… as investors placed bets that the selling was overdone. On a fundamental basis the business has grown substantially, with revenue nearly tripling since its IPO…
… even with some recent deceleration weighing on the share price, which rebounded in Q3 based on preliminary results calling for revenue at the top end of guidance.
With a mid-20s run-rate growth target for the next few years supported by 8-10% growth in online eyecare…
We're still looking at 25% as a growth target for this year. And I expect, in that neighborhood every year is a bit different, but I expect it'll be similar in 2027 and 2028. That might sound high for some considering this category grows at 2% to 4% every year, the optical category. But what we see is online, underneath that 2% to 4% in the category online, from the numbers that we've seen, is growing around 8% to 10%
… the company is transitioning to an operating leverage story, as the next step turns towards flowing revenue down through to the bottom line…
… and drive expansion towards management’s longer term 15% EBITDA margin target.
The plan is going to grow the Gross Margin line, continue to grow revenue and hold the expenses to get us over 10% adjusted EBITDA on the way to 15%.
With active customers and repeat revenue scaling steadily, Kits appears to be delivering against its top-line growth algorithm to get there…
… so it’s a matter of execution from here, which should drive investor confidence and multiple expansion over time if they can deliver.
