Stitch Fix, Inc. (NASDAQ:SFIX), the leading online personal styling
service, has released its financial results for the third quarter
of fiscal year 2019 ended April 27, 2019, and posted a letter
to its shareholders on its investor relations website.
Third quarter highlights
- Active clients of 3.1 million, an increase of 17% year over
year
- Net revenue of $408.9 million, an increase of 29% year over
year
- Net income of $7.0 million and adjusted EBITDA of $(0.3)
million
- Diluted earnings per share of $0.07
“Q3 was another strong quarter for us,
delivering net revenue of $408.9 million, exceeding our guidance
and representing 29% year-over-year growth,” said Stitch Fix
founder and CEO Katrina Lake. “We grew our active clients to 3.1
million, an increase of 17% year over year. At the same time, we
continue to drive engagement with our existing client base, growing
revenue per active client 8% year over year. These results
demonstrate our ability to attract new clients and to serve our
existing clients well. The continued strength of our Women’s
category and the growth of our Men’s category give us even more
confidence in our ability to scale new categories and geographies.
As I look forward, I’m excited about the opportunities ahead to
delight even more clients around the world.”
Please visit the Stitch Fix investor relations
website at https://investors.stitchfix.com to view the
financial results included in the letter to shareholders. The
Company intends to continue to make future announcements of
material financial and other information through its investor
relations website. The Company will also, from time to time,
disclose this information through press releases, filings with the
Securities and Exchange Commission, conference calls, or webcasts,
as required by applicable law.
Conference Call and Webcast
Information
Katrina Lake, Founder and Chief Executive
Officer of Stitch Fix, Paul Yee, Chief Financial Officer of Stitch
Fix, and Mike Smith, President and Chief Operating Officer of
Stitch Fix, will host a conference call at 2:00 p.m. Pacific Time
today to discuss the Company’s financial results and outlook. A
live webcast will be accessible on Stitch Fix’s investor relations
website at investors.stitchfix.com. Interested parties can also
access the call by dialing (800) 458-4121 in the U.S. or (323)
794-2093 internationally, and entering conference code 3401344.
A telephonic replay will be available through Wednesday, June
12, 2019, at (888) 203-1112 or (719) 457-0820, passcode 3401344. An
archive of the webcast conference call will be available shortly
after the call ends at https://investors.stitchfix.com.
About Stitch Fix, Inc.
Stitch Fix is reinventing the shopping
experience by delivering one-to-one personalization to our clients,
through the combination of data science and human judgment. Stitch
Fix was founded in 2011 by CEO Katrina Lake. Since our founding,
we’ve helped millions of men, women, and kids discover and buy what
they love through personalized shipments of apparel, shoes, and
accessories, hand-selected by Stitch Fix stylists and delivered to
our clients’ homes.
Forward-Looking Statements
This press release and related conference call
and webcast contain forward-looking statements within the meaning
of the federal securities laws. All statements other than
statements of historical fact could be deemed forward looking,
including but not limited to statements regarding our future
financial performance, including our guidance on financial results
for the fourth quarter and full year of fiscal 2019; market trends,
growth, and opportunity; profitability; competition; the timing and
success of expansions to our offering and penetration of our target
markets, such as the launch of our offering in the United Kingdom;
our ability to leverage our engineering and data science
capabilities to drive efficiencies in our business and enhance our
ability to personalize; our plans related to client acquisition,
including any impact on our costs and margins and our ability to
determine optimal marketing and advertising methods; and our
ability to successfully acquire, engage, and retain clients. These
statements involve substantial risks and uncertainties, including
risks and uncertainties related to our ability to generate
sufficient net revenue to offset our costs; the growth of our
market and consumer behavior; our ability to acquire, engage, and
retain clients; our ability to provide offerings and services that
achieve market acceptance; our data science and technology,
stylists, operations, marketing initiatives, and other key
strategic areas; risks related to international operations; and
other risks described in the filings we make with the Securities
and Exchange Commission (“SEC”). Further information on these and
other factors that could cause our financial results, performance,
and achievements to differ materially from any results,
performance, or achievements anticipated, expressed, or implied by
these forward-looking statements is included in filings we make
with the SEC from time to time, including in the section titled
“Risk Factors” in our Quarterly Report on Form 10-Q for the fiscal
quarter ended January 26, 2019. These documents are available
on the SEC Filings section of the Investor Relations section of our
website at: http://investors.stitchfix.com. We undertake no
obligation to update any forward-looking statements made in this
press release to reflect events or circumstances after the date of
this press release or to reflect new information or the occurrence
of unanticipated events, except as required by law. The achievement
or success of the matters covered by such forward-looking
statements involves known and unknown risks, uncertainties, and
assumptions. If any such risks or uncertainties materialize or if
any of the assumptions prove incorrect, our results could differ
materially from the results expressed or implied by the
forward-looking statements we make. You should not rely upon
forward-looking statements as predictions of future events.
Forward-looking statements represent our management’s beliefs and
assumptions only as of the date such statements are made.
|
Stitch Fix, Inc. |
Condensed Consolidated Balance Sheets |
(Unaudited) |
(In thousands, except share and per share amounts) |
|
|
April 27, 2019 |
|
July 28, 2018 |
Assets |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
143,829 |
|
|
$ |
297,516 |
|
Restricted cash |
250 |
|
|
250 |
|
Short-term investments |
147,779 |
|
|
— |
|
Inventory, net |
110,100 |
|
|
85,092 |
|
Prepaid expenses and other current assets |
40,639 |
|
|
34,148 |
|
Total current assets |
442,597 |
|
|
417,006 |
|
Long-term investments |
62,919 |
|
|
— |
|
Property and equipment, net |
52,715 |
|
|
34,169 |
|
Deferred tax assets |
17,436 |
|
|
14,107 |
|
Restricted cash, net of current portion |
12,600 |
|
|
12,600 |
|
Other long-term assets |
3,215 |
|
|
3,703 |
|
Total assets |
$ |
591,482 |
|
|
$ |
481,585 |
|
Liabilities and
Stockholders’ Equity |
|
|
|
Current liabilities: |
|
|
|
Accounts payable |
$ |
99,727 |
|
|
$ |
79,782 |
|
Accrued liabilities |
66,039 |
|
|
43,037 |
|
Gift card liability |
7,660 |
|
|
6,814 |
|
Deferred revenue |
12,962 |
|
|
8,870 |
|
Other current liabilities |
2,664 |
|
|
3,729 |
|
Total current liabilities |
189,052 |
|
|
142,232 |
|
Deferred rent, net of current portion |
16,811 |
|
|
15,288 |
|
Other long-term liabilities |
10,484 |
|
|
8,993 |
|
Total liabilities |
216,347 |
|
|
166,513 |
|
Stockholders’ equity: |
|
|
|
Class A common stock, $0.00002 par value |
1 |
|
|
1 |
|
Class B common stock, $0.00002 par value |
1 |
|
|
1 |
|
Additional paid-in capital |
265,547 |
|
|
235,312 |
|
Accumulated other comprehensive income |
91 |
|
|
— |
|
Retained earnings |
109,495 |
|
|
79,758 |
|
Total stockholders’
equity |
375,135 |
|
|
315,072 |
|
Total liabilities and
stockholders’ equity |
$ |
591,482 |
|
|
$ |
481,585 |
|
|
Stitch Fix, Inc. |
Condensed Consolidated Statements of Operations and
Comprehensive Income |
(Unaudited) |
(In thousands, except share and per share amounts) |
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
|
April 27, 2019 |
|
April 28, 2018 |
|
April 27, 2019 |
|
April 28, 2018 |
Revenue, net |
$ |
408,893 |
|
|
$ |
316,741 |
|
|
$ |
1,145,409 |
|
|
$ |
908,210 |
|
Cost of goods sold |
224,445 |
|
|
178,535 |
|
|
632,644 |
|
|
513,606 |
|
Gross profit |
184,448 |
|
|
138,206 |
|
|
512,765 |
|
|
394,604 |
|
Selling, general, and
administrative expenses |
189,015 |
|
|
128,454 |
|
|
491,024 |
|
|
359,696 |
|
Operating income (loss) |
(4,567 |
) |
|
9,752 |
|
|
21,741 |
|
|
34,908 |
|
Remeasurement of preferred
stock warrant liability |
— |
|
|
— |
|
|
— |
|
|
(10,685 |
) |
Interest income |
(1,463 |
) |
|
(111 |
) |
|
(4,032 |
) |
|
(147 |
) |
Other income, net |
(391 |
) |
|
(98 |
) |
|
(964 |
) |
|
(97 |
) |
Income (loss) before income
taxes |
(2,713 |
) |
|
9,961 |
|
|
26,737 |
|
|
45,837 |
|
Provision (benefit) for income
taxes |
(9,761 |
) |
|
474 |
|
|
(2,965 |
) |
|
19,221 |
|
Net income |
$ |
7,048 |
|
|
$ |
9,487 |
|
|
$ |
29,702 |
|
|
$ |
26,616 |
|
Other comprehensive income: |
|
|
|
|
|
|
|
Change in unrealized gain on available-for-sale securities, net of
tax |
140 |
|
|
— |
|
|
162 |
|
|
— |
|
Foreign currency translation |
(190 |
) |
|
— |
|
|
|
(71 |
) |
|
|
— |
|
Total other comprehensive income
(loss), net of tax |
(50 |
) |
|
— |
|
|
|
91 |
|
|
|
— |
|
Comprehensive income |
$ |
6,998 |
|
|
$ |
9,487 |
|
|
$ |
29,793 |
|
|
$ |
26,616 |
|
Net income attributable to common
stockholders: |
|
|
|
|
|
|
|
Basic |
$ |
7,048 |
|
|
$ |
9,458 |
|
|
$ |
29,681 |
|
|
$ |
19,065 |
|
Diluted |
$ |
7,048 |
|
|
$ |
9,459 |
|
|
$ |
29,682 |
|
|
$ |
11,413 |
|
Earnings per share
attributable to common stockholders: |
|
|
|
|
|
|
|
Basic |
$ |
0.07 |
|
|
$ |
0.10 |
|
|
$ |
0.30 |
|
|
$ |
0.28 |
|
Diluted |
$ |
0.07 |
|
|
$ |
0.09 |
|
|
$ |
0.29 |
|
|
$ |
0.15 |
|
Weighted-average shares used
to compute earnings per share attributable to common
stockholders: |
|
|
|
|
|
|
|
Basic |
100,301,078 |
|
|
97,055,573 |
|
|
99,619,426 |
|
|
68,596,978 |
|
Diluted |
103,615,159 |
|
|
101,847,521 |
|
|
103,575,702 |
|
|
74,281,211 |
|
|
Stitch Fix, Inc. |
Condensed Consolidated Statements of Cash
Flow |
(Unaudited) |
(In thousands) |
|
|
For the Nine Months Ended |
|
April 27, 2019 |
|
April 28, 2018 |
Cash Flows from
Operating Activities |
|
|
|
Net income |
$ |
29,702 |
|
|
$ |
26,616 |
|
Adjustments to reconcile net
income to net cash provided by operating activities: |
|
|
|
Deferred income taxes |
(3,832 |
) |
|
5,775 |
|
Remeasurement of preferred stock warrant liability |
— |
|
|
(10,685 |
) |
Inventory reserves |
2,805 |
|
|
3,928 |
|
Stock-based compensation expense |
23,815 |
|
|
10,277 |
|
Depreciation and amortization |
10,191 |
|
|
7,538 |
|
Loss on disposal of property and equipment |
24 |
|
|
146 |
|
Change in operating assets and liabilities: |
|
|
|
Inventory |
(27,818 |
) |
|
(18,558 |
) |
Prepaid expenses and other assets |
(5,969 |
) |
|
(407 |
) |
Accounts payable |
20,083 |
|
|
29,594 |
|
Accrued liabilities |
18,504 |
|
|
1,857 |
|
Deferred revenue |
4,288 |
|
|
3,118 |
|
Gift card liability |
1,251 |
|
|
1,495 |
|
Other liabilities |
2,164 |
|
|
802 |
|
Net cash provided by operating activities |
75,208 |
|
|
61,496 |
|
Cash Flows from
Investing Activities |
|
|
|
Purchases of property and
equipment |
(24,517 |
) |
|
(12,026 |
) |
Purchases of securities
available-for-sale |
(233,151 |
) |
|
— |
|
Sales of securities
available-for-sale |
2,414 |
|
|
— |
|
Maturities of securities
available-for-sale |
21,500 |
|
|
— |
|
Net cash used in investing activities |
(233,754 |
) |
|
(12,026 |
) |
Cash Flows from
Financing Activities |
|
|
|
Proceeds from initial public
offering, net of underwriting discounts paid |
— |
|
|
129,046 |
|
Proceeds from the exercise of
stock options, net |
9,284 |
|
|
2,074 |
|
Payments for tax withholding
related to vesting of restricted stock units |
(4,350 |
) |
|
(402 |
) |
Repurchase of Class B common
stock related to early exercised options |
— |
|
|
(39 |
) |
Net cash provided by financing activities |
4,934 |
|
|
130,679 |
|
Net increase (decrease) in
cash, cash equivalents, and restricted cash |
(153,612 |
) |
|
180,149 |
|
Effect of exchange rate
changes on cash |
(75 |
) |
|
— |
|
Cash, cash equivalents, and
restricted cash at beginning of period |
310,366 |
|
|
119,958 |
|
Cash, cash equivalents, and
restricted cash at end of period |
$ |
156,679 |
|
|
$ |
300,107 |
|
Components of Cash,
Cash Equivalents, and Restricted Cash |
|
|
|
Cash and cash equivalents |
$ |
143,829 |
|
|
$ |
287,257 |
|
Restricted cash – current
portion |
250 |
|
|
— |
|
Restricted cash – long-term
portion |
12,600 |
|
|
12,850 |
|
Total cash, cash equivalents, and restricted cash |
$ |
156,679 |
|
|
$ |
300,107 |
|
Supplemental
Disclosure |
|
|
|
Cash paid for income
taxes |
$ |
191 |
|
|
$ |
9,583 |
|
Supplemental
Disclosure of Non-Cash Investing and Financing
Activities: |
|
|
|
Purchases of property and
equipment included in accounts payable and accrued liabilities |
$ |
4,166 |
|
|
$ |
891 |
|
Capitalized stock-based
compensation |
$ |
1,277 |
|
|
$ |
520 |
|
Vesting of early exercised
options |
$ |
209 |
|
|
$ |
546 |
|
Conversion of preferred stock
upon initial public offering |
$ |
— |
|
|
$ |
42,222 |
|
Reclassification of preferred
stock warrant liability upon initial public offering |
$ |
— |
|
|
$ |
15,994 |
|
Deferred offering costs paid
in prior year |
$ |
— |
|
|
$ |
1,879 |
|
|
|
|
|
|
|
|
|
Non-GAAP Financial Measures
We report our financial results in accordance
with generally accepted accounting principles in the United States
(“GAAP”). However, management believes that certain non-GAAP
financial measures provide users of our financial information with
additional useful information in evaluating our performance.
Management believes that excluding certain items that may vary
substantially in frequency and magnitude period-to-period from net
income and earnings per share (“EPS”) provides useful supplemental
measures that assist in evaluating our ability to generate earnings
and to more readily compare these metrics between past and future
periods. Management also believes that adjusted EBITDA is
frequently used by investors and securities analysts in their
evaluations of companies, and that this supplemental measure
facilitates comparisons between companies. We believe free cash
flow is an important metric because it represents a measure of how
much cash from operations we have available for discretionary and
non-discretionary items after the deduction of capital
expenditures. These non-GAAP financial measures may be different
than similarly titled measures used by other companies. For
instance, we do not exclude stock-based compensation expense from
adjusted EBITDA or non-GAAP net income. Stock-based compensation is
an important part of how we attract and retain our employees, and
we consider it to be a real cost of running the business.
Our non-GAAP financial measures should not be
considered in isolation from, or as substitutes for, financial
information prepared in accordance with GAAP. There are several
limitations related to the use of our non-GAAP financial measures
as compared to the closest comparable GAAP measures. Some of these
limitations include:
- our non-GAAP net income and non-GAAP EPS attributable to common
stockholders – diluted measures exclude the impact of the
remeasurement of our net deferred tax assets following the adoption
of the Tax Cuts and Jobs Act (“Tax Act”);
- our non-GAAP net income, adjusted EBITDA and non-GAAP EPS
attributable to common stockholders – diluted measures exclude the
remeasurement of the preferred stock warrant liability, which is a
non-cash expense incurred in the periods prior to the completion of
our initial public offering;
- adjusted EBITDA excludes the recurring, non-cash expenses of
depreciation and amortization of property and equipment and,
although these are non-cash expenses, the assets being depreciated
and amortized may have to be replaced in the future;
- adjusted EBITDA does not reflect our tax provision, which
reduces cash available to us;
- adjusted EBITDA excludes interest income and other income, net,
as these items are not components of our core business; and
- free cash flow does not represent the total residual cash flow
available for discretionary purposes and does not reflect our
future contractual commitments.
Adjusted EBITDA
We define adjusted EBITDA as net income
excluding interest income, other income, net, provision for income
taxes, depreciation and amortization, and, when present, the
remeasurement of preferred stock warrant liability. The following
table presents a reconciliation of net income, the most comparable
GAAP financial measure, to adjusted EBITDA for each of the periods
presented:
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
(in thousands) |
|
April 27, 2019 |
|
April 28, 2018 |
|
April 27, 2019 |
|
April 28, 2018 |
Adjusted EBITDA
reconciliation: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
7,048 |
|
|
$ |
9,487 |
|
|
$ |
29,702 |
|
|
$ |
26,616 |
|
Add (deduct): |
|
|
|
|
|
|
|
|
Interest income |
|
(1,463 |
) |
|
(111 |
) |
|
(4,032 |
) |
|
(147 |
) |
Other income, net |
|
(391 |
) |
|
(98 |
) |
|
(964 |
) |
|
(97 |
) |
Provision (benefit) for income taxes |
|
(9,761 |
) |
|
474 |
|
|
(2,965 |
) |
|
19,221 |
|
Depreciation and amortization |
|
4,257 |
|
|
2,650 |
|
|
11,441 |
|
|
7,538 |
|
Remeasurement of preferred stock warrant liability |
|
— |
|
|
— |
|
|
— |
|
|
(10,685 |
) |
Adjusted
EBITDA |
|
$ |
(310 |
) |
|
$ |
12,402 |
|
|
$ |
33,182 |
|
|
$ |
42,446 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-GAAP Net Income
We define non-GAAP net income as net income
excluding, when present, the remeasurement of preferred stock
warrant liability and the remeasurement of our net deferred tax
assets in relation to the adoption of the Tax Act. The following
table presents a reconciliation of net income, the most comparable
GAAP financial measure, to non-GAAP net income for each of the
periods presented:
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
(in thousands) |
|
April 27, 2019 |
|
April 28, 2018 |
|
April 27, 2019 |
|
April 28, 2018 |
Non-GAAP net income
reconciliation: |
|
|
|
|
|
|
|
|
Net income |
|
$ |
7,048 |
|
|
$ |
9,487 |
|
|
$ |
29,702 |
|
|
$ |
26,616 |
|
Add (deduct): |
|
|
|
|
|
|
|
|
Remeasurement of preferred stock warrant liability |
|
— |
|
|
— |
|
|
— |
|
|
(10,685 |
) |
Impact of Tax Act (1) |
|
— |
|
|
— |
|
|
— |
|
|
4,730 |
|
Non-GAAP net
income |
|
$ |
7,048 |
|
|
$ |
9,487 |
|
|
$ |
29,702 |
|
|
$ |
20,661 |
|
_____________________________(1) The U.S. government enacted
comprehensive tax legislation in December 2017. This resulted
in a net charge of $4.7 million for the nine months ended
April 28, 2018, due to the remeasurement of our net deferred
tax assets for the reduction in tax rate from 35% to 21%. The
adjustment to non-GAAP net income only includes this transitional
impact. It does not include the ongoing impacts of the lower
U.S. statutory rate on current year earnings.
Non-GAAP Earnings Per Share Attributable
to Common Stockholders – Diluted
We define non-GAAP EPS attributable to common
stockholders - diluted as EPS attributable to common stockholders -
diluted excluding, when present, the per share impact of the
remeasurement of preferred stock warrant liability and the
remeasurement of our net deferred tax assets in relation to the
adoption of the Tax Act. The following table presents a
reconciliation of EPS attributable to common stockholders –
diluted, the most comparable GAAP financial measure, to non-GAAP
EPS attributable to common stockholders – diluted for each of the
periods presented:
|
|
For the Three Months Ended |
|
For the Nine Months Ended |
(in dollars) |
|
April 27, 2019 |
|
April 28, 2018 |
|
April 27, 2019 |
|
April 28, 2018 |
Non-GAAP earnings per
share attributable to common stockholders –
diluted reconciliation: |
|
|
|
|
|
|
|
|
Earnings per share attributable to common stockholders –
diluted |
|
$ |
0.07 |
|
|
$ |
0.09 |
|
|
$ |
0.29 |
|
|
$ |
0.15 |
|
Per share impact of the remeasurement of preferred stock warrant
liability(1) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
Per share impact of Tax Act(2) |
|
— |
|
|
— |
|
|
— |
|
|
0.07 |
|
Non-GAAP earnings per
share attributable to common stockholders –
diluted |
|
$ |
0.07 |
|
|
$ |
0.09 |
|
|
$ |
0.29 |
|
|
$ |
0.22 |
|
_____________________________(1) For the three and nine months
ended April 28, 2018, the preferred stock warrant liability
was dilutive and included in EPS attributable to common
stockholders – diluted. Therefore, it is not an adjustment to
arrive at non-GAAP EPS attributable to common stockholders –
diluted.
(2) The U.S. government enacted comprehensive
tax legislation in December 2017. This resulted in a net
charge of $4.7 million for the nine months ended April 28,
2018, due to the remeasurement of our net deferred tax assets for
the reduction in tax rate from 35% to 21%. The adjustment to
non-GAAP EPS attributable to common stockholders –
diluted only includes this transitional impact. It does not
include the ongoing impacts of the lower U.S. statutory rate on
current year earnings.
Free Cash Flow
We define free cash flow as cash flows provided
by operating activities reduced by purchases of property and
equipment that are included in cash flows used in investing
activities. The following table presents a reconciliation of cash
flows provided by operating activities, the most comparable GAAP
financial measure, to free cash flow for each of the periods
presented:
|
|
For the Nine Months Ended |
(in thousands) |
|
April 27, 2019 |
|
April 28, 2018 |
Free cash flow
reconciliation: |
|
|
|
|
Cash flows provided by operating activities |
|
$ |
75,208 |
|
|
$ |
61,496 |
|
Deduct: |
|
|
|
|
Purchases of property and equipment |
|
(24,517 |
) |
|
(12,026 |
) |
Free cash
flow |
|
$ |
50,691 |
|
|
$ |
49,470 |
|
Cash flows used in investing
activities |
|
$ |
(233,754 |
) |
|
$ |
(12,026 |
) |
Cash flows provided by
financing activities |
|
$ |
4,934 |
|
|
$ |
130,679 |
|
|
|
|
|
|
|
|
|
|
IR Contact:
David Pearce
ir@stitchfix.com
PR Contact:
Suzy Sammons
media@stitchfix.com
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