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 | ||||