EPS Forecast
Revenue Forecast
EX-99.1
2
exhibit991-q220.htm
EX-99.1
Document
Exhibit 99.1
Stitch Fix Announces Second Quarter Fiscal Year 2020 Financial Results
SAN FRANCISCO, March 9, 2020 (GLOBE NEWSWIRE) -- Stitch Fix, Inc. (NASDAQ:SFIX), the leading online personal styling service, has released its financial results for the second quarter of fiscal year 2020 ended February 1, 2020, and posted a letter to its shareholders on its investor relations website.
Second quarter highlights
•Active clients of 3.5 million, an increase of 17% year over year
•Net revenue per active client of $501, an increase of 8% year over year
•Net revenue of $451.8 million, an increase of 22% year over year
•Net income of $11.4 million
•Adjusted EBITDA of $14.3 million and adjusted EBITDA excluding stock-based compensation expense of $30.1 million
•Diluted earnings per share of $0.11
“We are pleased to deliver another strong quarter in Q2,” said Stitch Fix founder and CEO Katrina Lake. “Net revenue was $452 million, representing 22% year-over-year growth, in line with our guidance. We grew active clients to 3.5 million, an increase of 17% year over year, and grew net revenue per active client by 8% year over year, our seventh consecutive quarter of growth and a reflection of our unique personalization capabilities.”
Lake added, “This quarter, we are excited to expand our new direct buy offerings to even more clients. As we continue to evolve our personalization capabilities we're confident in our ability to capture additional market share, and deliver on our mission to transform the way people find what they love.”
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, and Mike Smith, President, Chief Operating Officer, and interim Chief Financial 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 (888) 394-8218 in the U.S. or (786) 789-4776 internationally, and entering conference code 8951047.
A telephonic replay will be available through Monday, March 16, 2020, at (888) 203-1112 or (719) 457-0820, passcode 8951047. 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 an online personal styling service that 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 then, we’ve helped millions of women, men, and kids discover and buy what they love through personalized selections of apparel, shoes, and accessories, curated by Stitch Fix stylists and algorithms. For more information about Stitch Fix, please visit https://www.stitchfix.com.
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 third quarter and full year of fiscal 2020; 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 and the expansion of Shop New Colors and Shop Your Looks; the success of our direct-buy functionality; our ability to leverage our engineering and data science capabilities to drive efficiencies in our business and enhance our ability to personalize; our plans to continue to roll out new features to extend our personalization platform and drive an even stronger personalized eCommerce model; our plans related to client acquisition, engagement, and retention, including any impact on our costs and margins and our ability to determine optimal marketing and advertising methods; and the search for a new CFO. 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 November 2, 2019. These documents are available on the SEC Filings section of the Investor Relations section of our website at: https://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)
| February 1, 2020 | August 3, 2019 | |||||||||||||
| Assets | ||||||||||||||
| Current assets: | ||||||||||||||
| Cash and cash equivalents | $ | 165,989 | $ | 170,932 | ||||||||||
| Short-term investments | 134,592 | 143,276 | ||||||||||||
| Inventory, net | 147,236 | 118,216 | ||||||||||||
| Prepaid expenses and other current assets | 38,513 | 49,980 | ||||||||||||
| Total current assets | 486,330 | 482,404 | ||||||||||||
| Long-term investments | 96,657 | 53,372 | ||||||||||||
| Property and equipment, net | 63,158 | 54,888 | ||||||||||||
| Operating lease right-of-use assets | 123,490 | — | ||||||||||||
| Deferred tax assets | 27,047 | 22,175 | ||||||||||||
| Other long-term assets | 3,046 | 3,227 | ||||||||||||
| Total assets | $ | 799,728 | $ | 616,066 | ||||||||||
| Liabilities and Stockholders’ Equity | ||||||||||||||
| Current liabilities: | ||||||||||||||
| Accounts payable | $ | 86,092 | $ | 90,883 | ||||||||||
| Operating lease liabilities | 23,475 | — | ||||||||||||
| Accrued liabilities | 84,904 | 69,734 | ||||||||||||
| Gift card liability | 10,393 | 7,233 | ||||||||||||
| Deferred revenue | 11,273 | 11,997 | ||||||||||||
| Other current liabilities | 3,934 | 2,784 | ||||||||||||
| Total current liabilities | 220,071 | 182,631 | ||||||||||||
| Operating lease liabilities, net of current portion | 125,925 | — | ||||||||||||
| Deferred rent, net of current portion | — | 24,439 | ||||||||||||
| Other long-term liabilities | 14,822 | 12,996 | ||||||||||||
| Total liabilities | 360,818 | 220,066 | ||||||||||||
| 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 | 308,687 | 279,511 | ||||||||||||
| Accumulated other comprehensive income (loss) | 2,294 | (187) | ||||||||||||
| Retained earnings | 127,927 | 116,674 | ||||||||||||
| Total stockholders’ equity | 438,910 | 396,000 | ||||||||||||
| Total liabilities and stockholders’ equity | $ | 799,728 | $ | 616,066 | ||||||||||
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 Six Months Ended | |||||||||||||||||||||||||||||||||||||
| February 1, 2020 | January 26, 2019 | February 1, 2020 | January 26, 2019 | |||||||||||||||||||||||||||||||||||
| Revenue, net | $ | 451,784 | $ | 370,280 | $ | 896,599 | $ | 736,516 | ||||||||||||||||||||||||||||||
| Cost of goods sold | 249,597 | 207,131 | 493,110 | 408,199 | ||||||||||||||||||||||||||||||||||
| Gross profit | 202,187 | 163,149 | 403,489 | 328,317 | ||||||||||||||||||||||||||||||||||
| Selling, general, and administrative expenses | 193,689 | 147,738 | 394,831 | 302,009 | ||||||||||||||||||||||||||||||||||
| Operating income | 8,498 | 15,411 | 8,658 | 26,308 | ||||||||||||||||||||||||||||||||||
| Interest (income) expense | (1,477) | (1,170) | (3,130) | (2,569) | ||||||||||||||||||||||||||||||||||
| Other (income) expense, net | 28 | (453) | 862 | (573) | ||||||||||||||||||||||||||||||||||
| Income before income taxes | 9,947 | 17,034 | 10,926 | 29,450 | ||||||||||||||||||||||||||||||||||
| Provision (benefit) for income taxes | (1,484) | 5,058 | (327) | 6,796 | ||||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 11,431 | $ | 11,976 | $ | 11,253 | $ | 22,654 | ||||||||||||||||||||||||||||||
| Other comprehensive income (loss): | ||||||||||||||||||||||||||||||||||||||
| Change in unrealized gain (loss) on available-for-sale securities, net of tax | 247 | 104 | 75 | 22 | ||||||||||||||||||||||||||||||||||
| Foreign currency translation | 651 | 93 | 2,406 | 119 | ||||||||||||||||||||||||||||||||||
| Total other comprehensive income (loss), net of tax | 898 | 197 | 2,481 | 141 | ||||||||||||||||||||||||||||||||||
| Comprehensive income | $ | 12,329 | $ | 12,173 | $ | 13,734 | $ | 22,795 | ||||||||||||||||||||||||||||||
| Net income (loss) attributable to common stockholders: | ||||||||||||||||||||||||||||||||||||||
| Basic | $ | 11,431 | $ | 11,968 | $ | 11,253 | $ | 22,632 | ||||||||||||||||||||||||||||||
| Diluted | $ | 11,431 | $ | 11,968 | $ | 11,253 | $ | 22,633 | ||||||||||||||||||||||||||||||
| Earnings (loss) per share attributable to common stockholders: | ||||||||||||||||||||||||||||||||||||||
| Basic | $ | 0.11 | $ | 0.12 | $ | 0.11 | $ | 0.23 | ||||||||||||||||||||||||||||||
| Diluted | $ | 0.11 | $ | 0.12 | $ | 0.11 | $ | 0.22 | ||||||||||||||||||||||||||||||
| Weighted-average shares used to compute earnings (loss) per share attributable to common stockholders: | ||||||||||||||||||||||||||||||||||||||
| Basic | 102,045,087 | 99,590,187 | 101,801,666 | 99,278,599 | ||||||||||||||||||||||||||||||||||
| Diluted | 104,637,548 | 102,817,838 | 104,018,782 | 103,597,316 | ||||||||||||||||||||||||||||||||||
Stitch Fix, Inc.
Condensed Consolidated Statements of Cash Flow
(Unaudited)
(In thousands)
| For the Six Months Ended | ||||||||||||||||||||
| February 1, 2020 | January 26, 2019 | |||||||||||||||||||
| Cash Flows from Operating Activities | ||||||||||||||||||||
| Net income (loss) | $ | 11,253 | $ | 22,654 | ||||||||||||||||
| Adjustments to reconcile net income (loss) to net cash provided by operating activities: | ||||||||||||||||||||
| Deferred income taxes | (4,865) | (2,288) | ||||||||||||||||||
| Inventory reserves | 2,831 | 4,853 | ||||||||||||||||||
| Stock-based compensation expense | 27,881 | 14,747 | ||||||||||||||||||
| Depreciation, amortization, and accretion | 10,347 | 6,456 | ||||||||||||||||||
| Other | 71 | — | ||||||||||||||||||
| Change in operating assets and liabilities: | ||||||||||||||||||||
| Inventory | (31,586) | (22,928) | ||||||||||||||||||
| Prepaid expenses and other assets | 5,167 | 1,546 | ||||||||||||||||||
| Operating lease right-of-use assets and liabilities | 141 | — | ||||||||||||||||||
| Accounts payable | (4,870) | 7,012 | ||||||||||||||||||
| Accrued liabilities | 15,254 | 17,689 | ||||||||||||||||||
| Deferred revenue | (729) | 3,822 | ||||||||||||||||||
| Gift card liability | 3,160 | 3,512 | ||||||||||||||||||
| Other liabilities | 4,187 | 592 | ||||||||||||||||||
| Net cash provided by operating activities | 38,242 | 57,667 | ||||||||||||||||||
| Cash Flows from Investing Activities | ||||||||||||||||||||
| Purchases of property and equipment | (11,446) | (11,903) | ||||||||||||||||||
| Purchases of securities available-for-sale | (129,925) | (185,994) | ||||||||||||||||||
| Sales of securities available-for-sale | 14,095 | 1,163 | ||||||||||||||||||
| Maturities of securities available-for-sale | 81,675 | 9,500 | ||||||||||||||||||
| Net cash used in investing activities | (45,601) | (187,234) | ||||||||||||||||||
| Cash Flows from Financing Activities | ||||||||||||||||||||
| Proceeds from the exercise of stock options, net | 5,658 | 1,931 | ||||||||||||||||||
| Payments for tax withholding related to vesting of restricted stock units | (5,256) | (2,281) | ||||||||||||||||||
| Net cash provided by (used in) financing activities | 402 | (350) | ||||||||||||||||||
| Net increase (decrease) in cash, cash equivalents, and restricted cash | (6,957) | (129,917) | ||||||||||||||||||
| Effect of exchange rate changes on cash | 2,014 | (103) | ||||||||||||||||||
| Cash, cash equivalents, and restricted cash at beginning of period | 170,932 | 310,366 | ||||||||||||||||||
| Cash, cash equivalents, and restricted cash at end of period | $ | 165,989 | $ | 180,346 | ||||||||||||||||
| Components of Cash, Cash Equivalents, and Restricted Cash | ||||||||||||||||||||
| Cash and cash equivalents | $ | 165,989 | $ | 167,496 | ||||||||||||||||
| Restricted cash – current portion | — | 250 | ||||||||||||||||||
| Restricted cash – long-term portion | — | 12,600 | ||||||||||||||||||
| Total cash, cash equivalents, and restricted cash | $ | 165,989 | $ | 180,346 | ||||||||||||||||
| Supplemental Disclosure | ||||||||||||||||||||
| Cash paid for income taxes | $ | 90 | $ | 191 | ||||||||||||||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities: | ||||||||||||||||||||
| Purchases of property and equipment included in accounts payable and accrued liabilities | $ | 4,474 | $ | 4,741 | ||||||||||||||||
| Capitalized stock-based compensation | $ | 893 | $ | 812 | ||||||||||||||||
| Vesting of early exercised options | $ | — | $ | 178 | ||||||||||||||||
| Leasehold improvements paid by landlord | $ | 7,406 | $ | — | ||||||||||||||||
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. We believe 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 also provide adjusted EBITDA excluding the impact of stock-based compensation expense (“ex. SBC”), which management believes provides useful information to investors and others in understanding our operating performance and 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.
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:
•adjusted EBITDA ex. SBC excludes the non-cash expense of stock-based compensation, which has been, and will continue to be for the foreseeable future, an important part of how we attract and retain our employees and a significant recurring expense in our business;
•adjusted EBITDA and adjusted EBITDA ex. SBC 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 and adjusted EBITDA ex. SBC does not reflect our tax provision, which reduces cash available to us;
•adjusted EBITDA and adjusted EBITDA ex. SBC excludes interest (income) expense and other (income) expense, 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 and Adjusted EBITDA ex. SBC
We define adjusted EBITDA as net income (loss) excluding interest (income) expense, provision (benefit) for income taxes, other (income) expense, net, and depreciation and amortization. We define adjusted EBITDA ex. SBC as adjusted EBITDA excluding stock-based compensation expense. The following table presents a reconciliation of net income (loss), the most comparable GAAP financial measure, to adjusted EBITDA and adjusted EBITDA ex. SBC for each of the periods presented:
| For the Three Months Ended | For the Six Months Ended | |||||||||||||||||||||||||||||||||||||
| (in thousands) | February 1, 2020 | January 26, 2019 | February 1, 2020 | January 26, 2019 | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA ex. SBC reconciliation: | ||||||||||||||||||||||||||||||||||||||
| Net income (loss) | $ | 11,431 | $ | 11,976 | $ | 11,253 | $ | 22,654 | ||||||||||||||||||||||||||||||
| Add (deduct): | ||||||||||||||||||||||||||||||||||||||
| Interest (income) expense | (1,477) | (1,170) | (3,130) | (2,569) | ||||||||||||||||||||||||||||||||||
| Provision (benefit) for income taxes | (1,484) | 5,058 | (327) | 6,796 | ||||||||||||||||||||||||||||||||||
| Other (income) expense, net | 28 | (453) | 862 | (573) | ||||||||||||||||||||||||||||||||||
| Depreciation and amortization | 5,804 | 3,790 | 10,770 | 7,184 | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA | 14,302 | 19,201 | 19,428 | 33,492 | ||||||||||||||||||||||||||||||||||
| Add (deduct): | ||||||||||||||||||||||||||||||||||||||
| Stock-based compensation expense | 15,755 | 8,110 | 27,881 | 14,747 | ||||||||||||||||||||||||||||||||||
| Adjusted EBITDA ex. SBC | $ | 30,057 | $ | 27,311 | $ | 47,309 | $ | 48,239 | ||||||||||||||||||||||||||||||
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 Six Months Ended | ||||||||||||||||||||
| (in thousands) | February 1, 2020 | January 26, 2019 | ||||||||||||||||||
| Free cash flow reconciliation: | ||||||||||||||||||||
| Cash flows provided by operating activities | $ | 38,242 | $ | 57,667 | ||||||||||||||||
| Deduct: | ||||||||||||||||||||
| Purchases of property and equipment | (11,446) | (11,903) | ||||||||||||||||||
| Free cash flow | $ | 26,796 | $ | 45,764 | ||||||||||||||||
| Cash flows used in investing activities | $ | (45,601) | $ | (187,234) | ||||||||||||||||
| Cash flows provided by financing activities | $ | 402 | $ | (350) | ||||||||||||||||
Operating Metrics
| February 1, 2020 | November 2, 2019 | August 3, 2019 | April 27, 2019 | January 26, 2019 | ||||||||||||||||||||||||||||
| Active clients (in thousands) | 3,465 | 3,416 | 3,236 | 3,133 | 2,961 | |||||||||||||||||||||||||||
Net revenue per active client(1) | $ | 501 | $ | 485 | $ | 488 | $ | 467 | $ | 463 | ||||||||||||||||||||||
(1) Fiscal year 2019 was a 53-week year, with the extra week occurring in the quarter ended August 3, 2019. Net revenue per active client calculations including the fourth quarter of fiscal year 2019 include 53 weeks of revenue. The 53rd week of fiscal 2019 contributed approximately 2.0% of the increase to net revenue per active client as of February 1, 2020.
Active Clients
We define an active client as a client who checked out a Fix or was shipped an item using our direct-buy functionality in the preceding 52 weeks, measured as of the last day of that period. A client checks out a Fix when she indicates what items she is keeping through our mobile application or on our website. We consider each Men’s, Women’s, or Kids account as a client, even if they share the same household.
Net Revenue per Active Client
We calculate net revenue per active client based on net revenue over the preceding four fiscal quarters divided by the number of active clients, measured as of the last day of the period.
IR Contact: David Pearce ir@stitchfix.com | PR Contact: Suzy Sammons media@stitchfix.com | ||||