SAN FRANCISCO, Oct. 01, 2019 (GLOBE NEWSWIRE) -- Stitch Fix, Inc. (NASDAQ:SFIX), the leading online personal styling service, has released its financial results for the fourth quarter and full fiscal year 2019 ended August 3, 2019, and posted a letter to its shareholders on its investor relations website. Fiscal year 2019 included 53 weeks, with the additional week occurring in the fourth quarter.

Fourth quarter highlights

  • Active clients of 3.2 million, an increase of 18% year over year
  • Net revenue of $432.1 million, an increase of 36% year over year
  • Net income of $7.2 million and adjusted EBITDA of $6.4 million
  • Diluted earnings per share of $0.07

Full year highlights

  • Net revenue of $1.6 billion, an increase of 29% year over year
  • Net income of $36.9 million and adjusted EBITDA of $39.6 million
  • Diluted earnings per share of $0.36

“Q4 was another strong quarter for us, delivering net revenue of $432.1 million, representing 36% year-over-year growth,” said Stitch Fix founder and CEO Katrina Lake. “We grew our active clients to 3.2 million, an increase of 18% year over year. For the full year, we grew net revenue 29% year over year to $1.6 billion and captured more of our large addressable client base by adding nearly half a million active clients in 2019. In addition, we consistently demonstrated our ability to deliver great client experiences, growing revenue per active client in every quarter of fiscal 2019, including 9% year over year in Q4. These gains are a testament to the strength of our data science capabilities.”

Lake continued, “In our second year as a public company I’m proud of how much we’ve accomplished, and the opportunities we’ve created for future growth across categories and geographies. We have built a personalization engine with incredible potential, and I’m excited to expand on our platform in new and innovative ways.”

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 (786) 789-4772 internationally, and entering conference code 6009320.

A telephonic replay will be available through Tuesday, October 8, 2019, at (888) 203-1112 or (719) 457-0820, passcode 6009320. 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 first 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 launch of Shop New Colors and Shop Your Looks; 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 ability to continue to increase success rates; our plans related to client acquisition, including any impact on our costs and margins and our ability to continue to generate payback on our marketing investments and 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 April 27, 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)

  August 3, 2019 July 28, 2018
Assets    
Current assets:    
Cash and cash equivalents $170,932  $297,516 
Restricted cash   250 
Short-term investments 143,276   
Inventory, net 118,216  85,092 
Prepaid expenses and other current assets 49,980  34,148 
Total current assets 482,404  417,006 
Long-term investments 53,372   
Property and equipment, net 54,888  34,169 
Deferred tax assets 22,175  14,107 
Restricted cash, net of current portion   12,600 
Other long-term assets 3,227  3,703 
Total assets $616,066  $481,585 
Liabilities and Stockholders’ Equity    
Current liabilities:    
Accounts payable $90,883  $79,782 
Accrued liabilities 69,734  43,037 
Gift card liability 7,233  6,814 
Deferred revenue 11,997  8,870 
Other current liabilities 2,784  3,729 
Total current liabilities 182,631  142,232 
Deferred rent, net of current portion 24,439  15,288 
Other long-term liabilities 12,996  8,993 
Total liabilities 220,066  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 279,511  235,312 
Accumulated other comprehensive income (187)  
Retained earnings 116,674  79,758 
Total stockholders’ equity 396,000  315,072 
Total liabilities and stockholders’ equity $616,066  $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 Fiscal Year Ended
  August 3, 2019 July 28, 2018 August 3, 2019 July 28, 2018
Revenue, net $432,149  $318,295  $1,577,558  $1,226,505 
Cost of goods sold 241,785  176,877  874,429  690,483 
Gross profit 190,364  141,418  703,129  536,022 
Selling, general, and administrative expenses 188,610  133,302  679,634  492,998 
Operating income 1,754  8,116  23,495  43,024 
Remeasurement of preferred stock warrant liability       (10,685)
Interest income (1,759) (757) (5,791) (904)
Other income, net (571) (3) (1,535) (100)
Income before income taxes 4,084  8,876  30,821  54,713 
Provision (benefit) for income taxes (3,095) (9,408) (6,060) 9,813 
Net income $7,179  $18,284  $36,881  $44,900 
Other comprehensive income:        
Change in unrealized gain on available-for-sale securities, net of tax 229    391   
Foreign currency translation (507)   (578)  
Total other comprehensive income (loss), net of tax (278)   (187)  
Comprehensive income $6,901  $18,284  $36,694  $44,900 
Net income attributable to common stockholders:        
Basic $7,179  $18,244  $36,863  $35,541 
Diluted $7,179  $18,246  $36,864  $27,285 
Earnings per share attributable to common stockholders:        
Basic $0.07  $0.19  $0.37  $0.47 
Diluted $0.07  $0.18  $0.36  $0.34 
Weighted-average shares used to compute earnings per share attributable to common stockholders:        
Basic 101,111,138  98,019,577  100,013,462  75,947,759 
Diluted 104,190,711  102,782,006  103,653,626  81,288,418 
             

Stitch Fix, Inc.
Condensed Consolidated Statements of Cash Flow
(Unaudited)
(In thousands)

  For the Fiscal Year Ended
  August 3, 2019 July 28, 2018
Cash Flows from Operating Activities    
Net income $36,881  $44,900 
Adjustments to reconcile net income to net cash provided by operating activities:    
Deferred income taxes (8,203) 6,588 
Remeasurement of preferred stock warrant liability   (10,685)
Inventory reserves 7,974  1,916 
Stock-based compensation expense 35,256  15,403 
Depreciation, amortization, and accretion 14,331  10,542 
Loss on disposal of property and equipment 148  155 
Change in operating assets and liabilities:    
Inventory (41,233) (19,416)
Prepaid expenses and other assets (16,831) (17,307)
Accounts payable 10,774  35,502 
Accrued liabilities 22,856  (3,595)
Deferred revenue 3,325  1,720 
Gift card liability 825  1,624 
Other liabilities 12,491  4,831 
Net cash provided by operating activities 78,594  72,178 
Cash Flows from Investing Activities    
Purchases of property and equipment (30,825) (16,565)
Purchases of securities available-for-sale (285,205)  
Sales of securities available-for-sale 10,596   
Maturities of securities available-for-sale 80,250   
Net cash used in investing activities (225,184) (16,565)
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 13,693  6,384 
Payments for tax withholding related to vesting of restricted stock units (6,748) (596)
Repurchase of Class B common stock related to early exercised options   (39)
Net cash provided by financing activities 6,945  134,795 
Net increase (decrease) in cash, cash equivalents, and restricted cash (139,645) 190,408 
Effect of exchange rate changes on cash 211   
Cash, cash equivalents, and restricted cash at beginning of period 310,366  119,958 
Cash, cash equivalents, and restricted cash at end of period $170,932  $310,366 
Components of Cash, Cash Equivalents, and Restricted Cash    
Cash and cash equivalents $170,932  $297,516 
Restricted cash – current portion   250 
Restricted cash – long-term portion   12,600 
Total cash, cash equivalents, and restricted cash $170,932  $310,366 
Supplemental Disclosure    
Cash paid for income taxes $966  $10,071 
Supplemental Disclosure of Non-Cash Investing and Financing Activities:    
Purchases of property and equipment included in accounts payable and accrued liabilities $5,272  $795 
Capitalized stock-based compensation $1,789  $883 
Vesting of early exercised options $209  $988 
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.

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 Fiscal Year Ended
(in thousands) August 3, 2019 July 28, 2018 August 3, 2019 July 28, 2018
Adjusted EBITDA reconciliation:        
Net income $7,179  $18,284  $36,881  $44,900 
Add (deduct):        
  Interest income (1,759) (757) (5,791) (904)
Other income, net (571) (3) (1,535) (100)
Provision (benefit) for income taxes (3,095) (9,408) (6,060) 9,813 
Depreciation and amortization 4,654  3,004  16,095  10,542 
Remeasurement of preferred stock warrant liability       (10,685)
Adjusted EBITDA $6,408  $11,120  $39,590  $53,566 
                 

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 Fiscal Year Ended
(in thousands) August 3, 2019 July 28, 2018 August 3, 2019 July 28, 2018
Non-GAAP net income reconciliation:        
Net income $7,179  $18,284  $36,881  $44,900 
Add (deduct):        
Remeasurement of preferred stock warrant liability       (10,685)
Impact of Tax Act (1)   (521)   4,209 
Non-GAAP net income $7,179  $17,763  $36,881  $38,424 

(1) The U.S. government enacted comprehensive tax legislation in December 2017.  This resulted in a net charge of $4.7 million for the three months ended January 27, 2018 and a net benefit of $0.5 million for the three months ended July 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 Fiscal Year Ended
(in dollars) August 3, 2019 July 28, 2018 August 3, 2019 July 28, 2018
Non-GAAP earnings per share attributable to common stockholders diluted reconciliation:        
Earnings per share attributable to common stockholders – diluted $0.07  $0.18  $0.36  $0.34 
Per share impact of the remeasurement of preferred stock warrant liability(1)        
Per share impact of Tax Act(2)   (0.01)   0.05 
Non-GAAP earnings per share attributable to common stockholders diluted $0.07  $0.17  $0.36  $0.39 

(1) For the twelve months ended months ended July 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 three months ended January 27, 2018 and a net benefit of $0.5 million for the three months ended July 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 Fiscal Year Ended
(in thousands) August 3, 2019 July 28, 2018
Free cash flow reconciliation:    
Cash flows provided by operating activities $78,594  $72,178 
Deduct:    
Purchases of property and equipment (30,825) (16,565)
Free cash flow $47,769  $55,613