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29% Year-over-Year Revenue Growth in Q4

Q4 Gross Margin Improved to a Record 34%

Delivered More Than 240,000 pairs of Eyeglasses in Second Full Year of Glasses Production

Vancouver, BC, March 10, 2023--(T-Net)--Kits Eyecare Ltd. (TSX: KITS), a leading, vertically integrated eyecare provider, is reporting its results for the fourth quarter and full year ended December 31, 2022.

Fourth Quarter 2022 Financial & Operational Highlights

For the fourth quarter of 2022, compared to the fourth quarter of 2021:

• Revenue increased $6.0 million or 29% to a record $26.2 million compared to $20.3 million
• Repeat customers drove over 60% of revenue
• Record two-year active customers of 780,000, representing an increase of 15%
• Gross margin increased 380 basis points to a record 34% compared to 30%
• Net loss improved to $1.4 million, compared to a net loss of $4.1 million
• EBITDA improved to $(0.3) million from $(2.4) million, an increase of $2.1 million
• Adjusted EBITDA improved by $1.6 million to $0.4 million compared to $(1.2) million

Full Year 2022 Financial & Operational Highlights

For the full year 2022, compared to the full year 2021:

• Revenue increased 11% to a record $91.6 million compared to $82.4 million
• Repeat customers drove approximately 65% of revenue
• Glasses revenue growth of 45% to $11.5 million compared to $8.0 million
• Significant growth in repeat glasses delivered of 128%
• Gross margin increased 656 basis points to 31.9% compared to 25.4%
• Net loss improved to $4.6 million compared to a net loss of $14.6 million
• EBITDA improved to $(0.8) million compared to $(14.4) million
• Adjusted EBITDA improved by $6.9 million to $(1.8) million
• Strong year-end cash balance of approximately $19 million
• Generated positive cash flow from operations of $4.7 million

Roger Hardy, CEO, Kits Eyecare

"We closed out the year with accelerated momentum and delivered another quarter of double-digit revenue growth, margin expansion, and impressive performance," said Roger Hardy, co-founder and CEO of KITS. "In 2022, the team delivered record results as the KITS brand continued to resonate with new and returning customers.

"Since our inception just four years ago, we've established KITS as the fastest growing brand in the compelling optical category, built a one-of-a-kind automated manufacturing facility, and expanded to a current annual revenue run rate exceeding $100 million. As we continue to expand our footprint across North America, we'll lean on the deep skill sets of the KITS team along with our highly recurring business model to drive organic growth. Even during tough economic times, the vision care category remains resilient with what we believe will deliver asymmetric upside for shareholders. With a strong balance sheet and growth funded through cash flow, we are confident that we are on the right path to accelerated value creation. We look forward to continuing to execute on our growth strategy in 2023, while providing the best care and value for our customers."

Fourth Quarter 2022 Financial Results

Revenue growth accelerated to 29% to $26.2 million compared to $20.3 million in the prior year period. The increase was primarily attributable to growth in new customers and strong repeat revenue driven by the strength of the KITS Brand.

Gross profit increased 46% to $8.9 million, compared to $6.1 million in the prior year period, while gross margin increased 380 basis points to 33.9% compared to 30.1% in the prior year period. The increase was primarily driven by a moderation in promotions to focus on higher margin orders and improved margins from returning customers.

Net loss was $1.4 million, or $(0.04) per share, compared to a net loss of $4.1 million, or $(0.13) per share, in the prior year period. The improvement was primarily attributable to higher revenue and gross profit, a reduction in public company expenses and a decrease in marketing and administrative expenses.

EBITDA improved to $(0.3) million compared to $(2.4) million the prior year period, while Adjusted EBITDA improved to $0.4 million compared to $(1.2) million in the prior year period. The improvement was primarily attributable to the higher revenue and gross profit and a decrease in marketing and administrative expenses.

Full Year 2022 Financial Results

Revenue increased 11% to $91.6 million compared to $82.4 million in 2021. The increase was primarily attributable to growth in new customers, repeat revenue from active customers, and a significant expansion in glasses offerings during the year.

Gross profit increased 40% to $29.2 million compared to $20.9 million in 2021, while gross margin increased 656 basis points to 31.9% compared to 25.4% in 2021. The increase was primarily driven by a reduction in promotions to prioritize higher margin orders and improved margins from repeat customers.

Net loss was $4.6 million, or $(0.15) per share, in 2022 compared to a net loss of $14.6 million, or $(0.49) per share, in 2021. The improvement was primarily attributable to higher revenue and gross profit and a decrease in marketing expenses, including a decrease in customer acquisition and retention costs. Additionally, the improvement was driven by a foreign exchange gain of $2.3 million recognized in 2022 and one-time IPO costs incurred in the first quarter of 2021.

EBITDA improved to $(0.8) million compared to $(14.4) million in 2021, while Adjusted EBITDA improved to $(1.8) million compared to $(8.7) million in 2021. The improvement was primarily attributable to higher revenue and gross profit, a decrease in marketing expenses, one-time IPO costs recorded in the first quarter of 2021 and a foreign exchange gain recognized in 2022.

At December 31, 2022, cash and cash equivalents totaled $18.8 million compared to $20.4 million at September 30, 2022, and $20.5 million at December 31, 2021.

Financial Highlights

The following selected financial information is qualified in its entirety by and should be read in conjunction with our consolidated financial statements for the year ended December 31, 2022 and 2021 and accompanying notes and Management's Discussion and Analysis ("MD&A") which may be viewed on SEDAR at www.sedar.com.

About KITS

KITS is Canada's fastest growing, digital eyecare brand providing eyewear for eyes everywhere. We offer customers access to a vast selection of contact lenses and eyeglasses, including our own exclusive KITS designed products, as well as a robust suite of online vision tools. Our efficient digital platform, backed by our industry-leading manufacturing and designs, removes intermediaries, and enables us to offer great prices and deliver made to order personalized products with incredible care and accuracy. We are creating disruption in the industry by constantly pursuing cutting-edge technologies to enable the best customer experience, including online eyewear fitting tools, and virtual try-on for glasses. We strive to delight our customers with our competitive prices, a convenient digital shopping experience, fast and reliable delivery options, and an unrelenting focus on earning our customers' lifelong trust.

Non-IFRS Financial Measures and Industry Metrics

This press release includes references to certain non-IFRS financial measures such as Constant Currency Revenue, EBITDA and Adjusted EBITDA, and industry metrics such as Active Customers. These financial measures and industry metrics are employed by the company to measure its operating and economic performance and to assist in business decision-making, as well as providing key performance information to senior management. The company believes that, in addition to conventional measures prepared in accordance with IFRS, certain investors and analysts use this information to evaluate the company's operating and financial performance.

These financial measures are not defined under IFRS, nor do they replace or supersede any standardized measure under IFRS. Other companies in our industry may calculate these measures differently than we do, limiting their usefulness as comparative measures. Definitions and reconciliations of non-IFRS measures to the nearest IFRS measure and Industry Metrics can be found in our Management's Discussion and Analysis. Such non- IFRS reconciliations can also be found in this press release under "Financial Highlights".