All right. Well, thank you all for joining. Our next presenter is everyone's favorite eye care company, Kits Eyecare, which is traded on the TSX under ticker symbol KITS. Kits set out on a mission to make eye care easy through its vertically integrated direct-to-consumer digital platform, and they've been leading their category with accelerating growth across almost every key metric in the business. It's one of my personal favorite stories. So, without further ado, I'd like to introduce you to Joe Thompson, Co-Founder and COO of Kits. Joe, the floor is yours.
Okay. Good morning, everyone. You know, about eight out of 10 adults require either glasses or contact lenses to get through the day. The optical is this big $80 billion. It's almost $80 billion across North America. But for us, we realized the category is still way too expensive and way too complicated. You know, it seems like the optical is this category that technology and automation has just forgotten about. If you're wearing a pair of eyeglasses right now, chances are a fax machine was involved at some point in the making of those eyeglasses. So we launched Kits in 2018 to make eye care easy.
So we had a hypothesis that if we started with the statement, "Kits makes eye care easy," and we use easy to discover, easy to buy, easy to reorder, and we stayed single-mindedly focused on it, that we'd build an enduring business for decades. And really at the heart of this hypothesis was our belief that the category didn't need more steps. It certainly didn't need more stores, but that if we could take the waste out of the system, and refocus the industry on vertically integrated manufacturing and pass all that savings and all that quality on to customers, that we'd be onto something. What we didn't realize at the time was just how much waste and how much savings that we could recognize.
You know, we estimate that we've been able to take 90% of the cost out of the system, and pass 90%-100% of the experience, quality, and convenience and selection that customers were getting before, but just with all that cost savings, and it's been very productive for us. Nearly six years in, how are we doing? Our most recent quarter was Q2 that we reported. We believe that we're the fastest-growing optical company to go to CAD 150 million in revenue, globally. Over the last seven quarters, we've been growing an average of 30% a quarter, revenue growth. We're funding this growth completely from cash flow, Adjusted EBITDA positive seven quarters in a row.
And we've got a community of active vision-corrected customers that's approaching a million. And, you know, this, this community is important, because once you need vision correction, you need it for decades or a lifetime. And so, as a result of this active community that we built, over 60%, now approaching 65% of our revenue every year, comes from repeat customers. So easy, right? Find a category that everyone forgot about and make it easy for customers and just grow profitably. Well, you know, there's a reason that this category has been so slow to innovate and so slow to evolve. An obstacle to make any kind of difference, you really need scale. There's so many components. There's a design component, there's a manufacturing component, there's a fulfillment component, a marketing component, a big technology component.
And so our view as we started this company in 2018 was that to really make a difference for customers and to really build this into an enduring model, we needed to be not CAD 20 million, not CAD 50 million, but CAD 100 million , really CAD 200 million in revenue to get to scale and see everything tip. And so we set out, you know, six years ago with a simple plan to go from zero to CAD 200 million and do so profitably. And we have some experience in the category, and we just found that there were two real secrets to this market. Secret number one was to start with the smaller part of the category, which is actually contact lenses. It's about a quarter the size of eyeglasses.
Gross margin is a little bit lower than eyeglasses, but it's highly recurring. It's a very profitable subcategory. And, the customers in contact lenses tend to skew younger, tend to skew female, and come back every three to six months. So secret one was start with contact lenses, build up that profit core of vision-corrected customers, and then use that base of customers and that profit core to launch into glasses. And when you do, start with the manufacturing, 'cause all of the profit in eyeglasses is in the lenses. The thinner lenses, the blue light coatings, the digital progressives. And so it's counterintuitive to start with the manufacturing. Why would you put millions into an optical lab manufacturing facility onshore before you figured out how to sell any glasses?
The problem is, if you do it the other way, you know, and figure out how to sell 10,000 , 100,000 or more pairs of glasses, you've essentially built really just a marketing company or retail company, and you're giving all that profit to someone else who's producing the lenses. So before we sold our first pair of glasses, we we invested CAD 2 million of our own capital into the first version of our lens lab. And we've since built it out to what we believe to be the biggest, most automated lens manufacturing facility or lens lab in North America. We had an unfair advantage as we grew. We're growing in all demographics, but the biggest growth is the millennial cohort.
This millennial cohort is now the biggest demographic in the U.S. and Canada, in people and in spending power. Over 70 million U.S. citizens now are millennial, 28- 43 years old. And this cohort is now in prime optical age, coming into contact lenses, single vision correction, all the way up to, you know, more complicated optical products like digital progressives. This is a, w e call this the customer of today. It's also the customer for the next two decades. And so this has been our focus, and as we built the low-cost infrastructure for this market, we've seen the market start to move online because this is a cohort that is very comfortable buying every category online.
They just have not had the selection, convenience, and value in this category that they've seen in others. So, it's been a good, steady increase in growth. This is our revenue line. You know, roughly doubled in about on a revenue per quarter in about two years, and you know, growing about eight times the rate of the category. The category has been growing about 3%-5%. Online's growing faster, and it's taking share from a very fragmented brick-and-mortar business, and for us, I put out a note to the market this morning. We've actually just taken up our Q3 guidance to be above the high end of the range that we had forecasted.
We originally forecasted CAD 39 million-CAD 41 million in revenue for Q3, and we now feel we're gonna come ahead of that. So that will have us continuing eight straight quarters of just over 30% growth rate on the revenue side. You know, almost more important than that for us is that bottom line, which is the marketing spend. This is really where things with consumer companies can go astray. As you chase revenue, the marketing line goes up as a percentage of revenue. And so this is. It's been a focus area for us to really maintain marketing as a percentage of revenue in the 12%-14% range, and ideally, as we've seen over the last seven, now eight quarters, decrease marketing as a percentage of revenue as we're growing.
As we add more scale to the model, because we've already made the investment in the foundation, we see that growth become more profitable. So we're seeing gross profit expand, adjusted EBITDA expand, and we can foresee this continuing into the future. Really, at the heart of everything is our optical lab and fulfillment center. We've kind of taken to call this our optical Giga factory, and it's onshore. It's on the West Coast, and we built out the capacity to make over 4,000 pairs of glasses, prescription glasses per day.
And so, because it's automated, because it's right here onshore, it takes us our team makes a pair of prescription glasses in about 30 minutes after you order them, quickly gets into the carrier network, and then it's flying that evening to ideally get to you the next day, worst case, two days. You know, compare this to the industry, which is delivering in two weeks and costing, you know, hundreds and hundreds of dollars for a pair of prescription glasses. This really, this automated optical lab is our central nervous system. It allows us to invest in the customer experience versus just investing in Facebook or Google or Instagram. An example of that is the price point for our glasses.
Whereas the industry charges on average last year in the U.S., $350 per pair of single-vision prescription glasses, at Kits, on kits.com or kits.ca in Canada, almost all of our glasses are sold, including prescription lenses, between $28 and $38, and delivered to you in a day or two everywhere in North America. So, last and certainly not least, is the team. Roger and I started Kits in 2018, and Roger had a lot of experience in optical. He'd built and scaled a NASDAQ-traded company called Coastal Contacts, Clearly in Canada, and it was sold in 2014. And we've been very fortunate to build a team that has a lot of depth in technology and optical and e-commerce.
What's ahead? We haven't put any formal guidance in the market, for the out years, but, you know, certainly we have internal goals. We're gonna continue on this organic growth path, funding that growth ourselves from our own cash flow and increasing EBITDA, Adjusted EBITDA as we do. And so over the next two, three years , our target is to build to CAD 250 million in revenue, targeting an EBITDA of around 10%. And then over the next five years, with the growth that we've shown over the last eight quarters, if that continues, we'll have a CAD 500 million revenue business. And we think, you know, as we leverage the scale that we've already invested in, technology, manufacturing, fulfillment, design, that EBITDA will end at that range, in the 15%-20% range.
Maybe the last thing to mention is, you know, we aim to keep our capital structure very simple. We've got about CAD 20 million cash on hand, a small, about CAD 5 million debt balance, all common stock, relatively small float, with high insider ownership. Importantly for us, the CapEx has been deployed, so that's what gets us excited about the next couple of years. Our manufacturing facility, our fulfillment network, everything's been built to scale us to CAD 500 million, really above CAD 500 million. And so minimal CapEx required, just really maintenance CapEx over the next five years, as we grow into that infrastructure that we've already built.
You know, we're still fairly small in the industry, and we're still young as a public company. So, you know, we just try to be really good students of what's working and what temptations to resist as we progress, and I think we've, you know, found a groove with good, consistent revenue growth, increasing a little bit each quarter with profit growing as we do, and we have a very strong resistance to dilution or flashy fundraising announcements. KITS is a simple but consistent story of, y ou know, if we were here six years ago, you would've heard the exact same story as today. It's the same approach. We're here to make eye care easy.
And if we're, you know, lucky enough to come back here in the next couple of years, you'll likely hear the exact same story again, just with bigger numbers. Still no fax machines, though. So, you know, thank you for your time. Maybe I'll kind of stop there. I think we have some time for some questions.
Yeah, the floor is open.
Joe, can you cover again just the news this morning? Because it's obviously very positive. I was trying to read that while you were speaking, but just any more commentary on the guidance increase, why the timing and obviously positive momentum therein?
Sure. Yeah, no, we had, you know, anticipated, here's the last seven quarters, and we had Q3 pegged at around CAD 39 million-CAD 41 million revenue. And typically, September's the biggest month of the three, and just had really strong momentum in July and August, and had confidence that, you know, we're going to come in ahead of the high end of that guidance. So we'll just try to be as transparent, you know, with good news, with bad news as possible. So we wanted to put a note out that, we're anticipating to be a little bit above the high end of that range, which should have us growing, you know, in around 32%, year-on-year for the quarter.
Hi, question, how are you acquiring your customers? Do you have an idea of, like, what the cost of acquisition is and the lifetime value of these customers?
Yeah, absolutely. So we, you know, we have our focus is to really to keep marketing within that 12%-14% of revenue. And now a huge tailwind for us is the percentage of revenue comes from repeat customers. So when you start every year, knowing 60%-65% of your revenue, even as you're growing, is coming from repeat, it allows us to be really focused on acquiring new customers. And that 12%-14% of revenue still allows us to be present in all the channels, Google, Facebook. But it really the scarcity mindset forces us to invest in that first customer interaction. And a way that we do that is with our cost of goods sold advantage.
So we think we've got a cost of goods sold advantage, and we think we've got a G&A delta versus the competitive set. And so we use those two to give everything possible to the customer on their first interaction, because this industry works when customers come back. 'Cause when they come back, they come back not once or twice. They come back for decades. And so, you know, when we started and launched glasses, we ran a promotion called Get your first pair free so if you'd never made a transaction on kits.com in the U.S. or kits.ca in Canada, we would give you a pair of prescription glasses for free.
And many folks didn't buy it, didn't believe it, and there was skepticism, but hundreds of thousands of customers tried it and were delighted when a day or two later, a fantastic pair of prescription glasses arrived at their door. And really, what that opened our eyes to is our customers are basically our marketing channel. And so if we can invest in the customer, you know, cost of goods sold, CAD 20 for a pair of prescription glasses, if I can give that to a customer instead of giving CAD 100 to Facebook or Instagram, that's a much better investment because that's a customer that's delighted. They're gonna tell everyone they know, and they're gonna come back again. So that's how we started. Now, we've evolved to a number of different marketing tactics.
We use what we call kind of city-by-city takeover. So we'll focus on a market. We're obviously available everywhere in North America, but we'll focus on a city and really get the movement going in that city. If we found if you get two or three folks in one company to buy a pair of KITS glasses, all of a sudden you have 20 very quickly. Because those three or four customers are telling everyone they work with, "Oh, let me tell you about the experience I had with this company, kits.com." And then those folks are coming in. So we'll focus on launching in a city and then go to sustain, and then take the learnings and then go on to the next city. So those are some of the things we've been doing.
Cost of acquisition, you know, we think is about half of what we've seen in the industry, and we think there's still further to go on that. We don't break out our LTV, but, you know, but with the repeat profile that we've seen consistently, it. You know, that's what gets us excited to wake up every day and come to work, is those customers coming back, and not just coming back once or twice, but coming back for decades.
Just follow up on that. So, my friend orders from Kits, and so I realized that this is a crazy, sticky business once you get it the first time. So on the other side of that, though, like my mom, it's also crazy sticky on the other side that she doesn't use Kits, and I'm trying to get her to try Kits, and she's like: "Ah, I don't know." Like, so and the way that you're sort of marketing it, it kind of reminds me of the way kind of like Dutch Bros started, where they went -like small places, kind of got it going. So my question to you is, two of them. One of them is, how do you break someone like my mom to get to use Kits? If you guys have any sort of insight information or, s orry, any information on that.
And then the, the second question is, your gross margins are definitely getting better, so is there a point where it really starts to, you know, you get into, like, that 35%-40%, and then, you know, essentially all the CapEx is fully deployed, and you're, and you're running on scale? Like, when, when does that happen? So two questions.
Yeah, maybe I'll take them in reverse. So, you know, gross margin profile, you know, we expect as glasses becomes a bigger mix, glasses typically in the industry have a very high gross margin profile, often well north of 50%, or much, much higher than that. And so, you know, we anticipate in kind of the short to medium term, getting towards that 40% gross margin threshold and then, you know, then 45%, and then onwards from there. Glasses and scale will be the drivers of that. Our premium lenses. So, which leads into the second part of your question, where how do we convert your mom to kits.com, which, you know, we're gonna solve this today before we leave, before we leave the conference. You know, we're seeing growth in two areas, on glasses.
We're seeing them in the millennial cohort, where, you know, word of mouth and influencers are just massive drivers, and so we don't have to build hundreds of stores to reach customers. We just need to seed the market with word of mouth and with unboxing experiences, and then as long as we're willing to give up control, you know. Give up control on how our message is communicated to these influencers and to all of our customers, and just trust that it is a much better experience than anywhere else in the market, and that's worked well for us with our key target, which is this millennial cohort. The next fastest-growing cohort for us is not demographic-driven. It's really attribute-driven, which is premium lenses.
It's not necessarily customers who are saying: "You know, I just don't want to go into a brick-and-mortar store." It's customers that are seeing the value delta, and it's so significant that they can't ignore it. So for your mom, you know, potentially, she's wearing digital progressives, which have, you know, two sets of prescription within one lens. Now, in the market, if you were to go to brick-and-mortar store, the frame plus a lens starts at $1,000. And on kits.com, the price is, I think, $128. And so the value delta and the quality is the same. In fact, it's probably better because we're using the best machines in the world that are, w e don't have a team kind of hand-grinding that prescription in, taken from a fax machine, sent from a brick-and-mortar store.
It's all automated. It's all traced to perfection. For those customers, they may even prefer to go to a brick-and-mortar store, but the value delta is intriguing. Maybe it's for their backup pair. Once they try it, well, they realize, "Oh my gosh, the prescription's better, the quality compares, and I saved $800 or more. I'm not going back." That's what we found to be, you know, pretty effective for us.
All right. I think we have time for one more. But Joe, can you talk a little bit about your, y ou've announced some major insurance partnerships over the past couple of years. Can you just maybe expand on that and how that plays into attracting more customers, especially in Canada?
Sure, yeah. I didn't touch on it, so thanks for bringing it up, Cody. You know, insurance underwrites about 50%, just under 50% of all vision-corrected customers in North America use some form of vision insurance, and there's two frustrations we've talked to customers, two frustrations they have. Number one, it's a leap of faith. They go into a store, and they know they've got some kind of vision insurance, but you know, the individual in the store says: "Well, here's the cost of the frame. Here's the cost of the lens. You want a thinner lens, here's the upgrade charge." They have no idea what's covered, and so they're investing. They hand over their credit card, and it's a leap of faith of, "Okay, I'm paying CAD 400-CAD 500.
Maybe some or none of it is covered. I have no idea." And then there's some paperwork and some waiting. And so we started with Canada, and we're rolling this out to the U.S., where we, we've just taken both of those, you know, against the mission to make eye care easy, just taken both of those concerns away. And we've built a, together with a key insurance partners in Canada, an API connection. So, you know, you could log in as an insurance customer on kits.ca, type in your plan number, and it will pop up. "Cody, you have CAD 400 vision insurance. It expires the end of December." And so you'll know right away, I know what's covered.
And then importantly, when you get to the checkout, let's say you make a transaction, you know, CAD 200, you can just apply it directly at the checkout so you have no out-of-pocket. We just work in the back end with insurance partners on the transfer. So for the customer, you know, they feel like they have full visibility on what's covered and what's not, and they have no out-of-pocket, no paperwork, no guessing. We just launched it a couple of months ago. It's been very, very productive, and we're gonna roll that out.
Awesome. Thank you so much for presenting here, Joe, and we look forward to having you the rest of the conference.
Thanks.