EX-99.1 2 exhibit991-q219.htm EXHIBIT 99.1 Exhibit
Exhibit 99.1


stitchfixearningsreleimg.gif

Stitch Fix Announces Second Quarter Fiscal Year 2019 Financial Results
 
SAN FRANCISCO, March 11, 2019 (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 2019 ended January 26, 2019, and posted a letter to its shareholders on its investor relations website.

Second quarter highlights
•
Active clients of 3.0 million, an increase of 18% year over year
•
Net revenue of $370.3 million, an increase of 25% year over year
•
Net income of $12.0 million and adjusted EBITDA of $19.2 million
•
Diluted earnings per share of $0.12

“Q2 was another strong quarter for us, delivering net revenue of $370.3 million, exceeding our guidance and representing 25% year-over-year growth,” said Stitch Fix Founder and CEO Katrina Lake. “Since becoming a public company, we have posted six consecutive quarters of over 20% growth, which demonstrates our ability to drive consistent business performance. I’m proud that we’re now serving 3 million people across the U.S. and remain focused on delighting our existing clients and expanding our reach. We launched our first integrated brand campaign in February to increase awareness and consideration with new and existing clients and we’re excited to connect even more people to the power of personalized styling.”

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 (888) 254-3590 in the U.S. or (323) 994-2093 internationally, and entering conference code 1231328.
 
A telephonic replay will be available through Monday, March 18, 2019, at (888) 203-1112 or (719) 457-0820, passcode 1231328. 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 Founder and 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 third 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 October 27, 2018. 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)
 
 
January 26, 2019
 
July 28, 2018
Assets
 
 

 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
167,496

 
$
297,516

Restricted cash
 
250

 
250

Short-term investments
 
109,363

 
—

Inventory, net
 
103,167

 
85,092

Prepaid expenses and other current assets
 
33,160

 
34,148

Total current assets
 
413,436

 
417,006

Long-term investments
 
66,734

 
—

Property and equipment, net
 
44,888

 
34,169

Deferred tax assets
 
16,383

 
14,107

Restricted cash, net of current portion
 
12,600

 
12,600

Other long-term assets
 
3,010

 
3,703

Total assets
 
$
557,051

 
$
481,585

Liabilities and Stockholders’ Equity
 
 

 
 

Current liabilities:
 
 

 
 

Accounts payable
 
$
86,815

 
$
79,782

Accrued liabilities
 
66,080

 
43,037

Gift card liability
 
9,921

 
6,814

Deferred revenue
 
12,496

 
8,870

Other current liabilities
 
1,847

 
3,729

Total current liabilities
 
177,159

 
142,232

Deferred rent, net of current portion
 
16,420

 
15,288

Other long-term liabilities
 
10,183

 
8,993

Total liabilities
 
203,762

 
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
 
250,699

 
235,312

Accumulated other comprehensive income
 
141

 
—

Retained earnings
 
102,447

 
79,758

Total stockholders’ equity
 
353,289

 
315,072

Total liabilities and stockholders’ equity
 
$
557,051

 
$
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 Six Months Ended
 
 
January 26, 2019
 
January 27, 2018
 
January 26, 2019
 
January 27, 2018
Revenue, net
 
$
370,280

 
$
295,906

 
$
736,516

 
$
591,469

Cost of goods sold
 
207,131

 
168,523

 
408,199

 
335,071

Gross profit
 
163,149

 
127,383

 
328,317

 
256,398

Selling, general, and administrative expenses
 
147,738

 
111,771

 
302,009

 
231,242

Operating income
 
15,411

 
15,612

 
26,308

 
25,156

Remeasurement of preferred stock warrant liability
 
—

 
(1,614
)
 
—

 
(10,685
)
Interest income
 
(1,170
)
 
(18
)
 
(2,569
)
 
(35
)
Other income, net
 
(453
)
 
—

 
(573
)
 
—

Income before income taxes
 
17,034

 
17,244

 
29,450

 
35,876

Provision for income taxes
 
5,058

 
13,603

 
6,796

 
18,747

Net income
 
$
11,976

 
$
3,641

 
$
22,654

 
$
17,129

Other comprehensive income:
 
 
 
 
 
 
 
 
Change in unrealized gain on available-for-sale securities, net of tax
 
104

 
—

 
22

 
—

Foreign currency translation
 
93

 
—

 
$
119

 
$
—

Total other comprehensive income, net of tax
 
197

 
—

 
$
141

 
$
—

Comprehensive income
 
$
12,173

 
$
3,641

 
$
22,795

 
$
17,129

Net income attributable to common stockholders:
 
 
 
 
 
 
 
 
Basic
 
$
11,968

 
$
3,036

 
$
22,632

 
$
9,794

Diluted
 
$
11,968

 
$
1,653

 
$
22,633

 
$
3,530

Earnings per share attributable to common stockholders:
 
 
 
 
 
 
 
 
Basic
 
$
0.12

 
$
0.04

 
$
0.23

 
$
0.18

Diluted
 
$
0.12

 
$
0.02

 
$
0.22

 
$
0.06

Weighted-average shares used to compute earnings per share attributable to common stockholders:
 
 
 
 
 
 
 
 
Basic
 
99,590,187

 
82,439,351

 
99,278,599

 
54,377,466

Diluted
 
102,817,838

 
87,954,656

 
103,597,316

 
60,599,568















Stitch Fix, Inc.
Condensed Consolidated Statements of Cash Flow
(Unaudited)
(In thousands)
 
 
For the Six Months Ended
 
 
January 26, 2019
 
January 27, 2018
Cash Flows from Operating Activities
 
 
 
 
Net income
 
$
22,654

 
$
17,129

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Deferred income taxes
 
(2,288
)
 
5,498

Remeasurement of preferred stock warrant liability
 
—

 
(10,685
)
Inventory reserves
 
4,853

 
7,027

Stock-based compensation expense
 
14,747

 
5,135

Depreciation and amortization
 
6,456

 
4,888

Loss on disposal of property and equipment
 
—

 
131

Change in operating assets and liabilities:
 
 
 
 
Inventory
 
(22,928
)
 
(19,529
)
Prepaid expenses and other assets
 
1,546

 
5,078

Accounts payable
 
7,012

 
10,843

Accrued liabilities
 
17,689

 
4,484

Deferred revenue
 
3,822

 
3,283

Gift card liability
 
3,512

 
2,961

Other liabilities
 
592

 
(2,508
)
Net cash provided by operating activities
 
57,667

 
33,735

Cash Flows from Investing Activities
 
 
 
 
Purchases of property and equipment
 
(11,903
)
 
(8,232
)
Purchases of securities available-for-sale
 
(185,994
)
 
—

Sales of securities available-for-sale
 
1,163

 
—

Maturities of securities available-for-sale
 
9,500

 
—

Net cash used in investing activities
 
(187,234
)
 
(8,232
)
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
 
1,931

 
1,006

Payments for tax withholding related to vesting of restricted stock units
 
(2,281
)
 
—

Repurchase of Class B common stock related to early exercised options
 
—

 
(39
)
Net cash (used in) provided by financing activities
 
(350
)
 
130,013

Net increase (decrease) in cash, cash equivalents, and restricted cash
 
(129,917
)
 
155,516

Effect of exchange rate changes on cash
 
(103
)
 
—

Cash, cash equivalents, and restricted cash at beginning of period
 
310,366

 
119,958

Cash, cash equivalents, and restricted cash at end of period
 
$
180,346

 
$
275,474

Components of Cash, Cash Equivalents, and Restricted Cash
 
 
 
 
Cash and cash equivalents
 
$
167,496

 
$
266,374

Restricted cash – current portion
 
250

 
—

Restricted cash – long-term portion
 
12,600

 
9,100

Total cash, cash equivalents, and restricted cash
 
$
180,346

 
$
275,474

Supplemental Disclosure
 
 
 
 
Cash paid for income taxes
 
$
191

 
$
3,091

Supplemental Disclosure of Non-Cash Investing and Financing Activities:
 
 
 
 
Purchases of property and equipment included in accounts payable and accrued liabilities
 
$
4,741

 
$
780

Capitalized stock-based compensation
 
$
812

 
$
261

Vesting of early exercised options
 
$
178

 
$
456

Deferred offering costs included in accounts payable and accrued liabilities
 
$
—

 
$
134

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 – 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 – 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 Six Months Ended
(in thousands)
 
January 26, 2019
 
January 27, 2018
 
January 26, 2019
 
January 27, 2018
Adjusted EBITDA reconciliation:
 
 

 
 

 
 

 
 

Net income
 
$
11,976

 
$
3,641

 
$
22,654

 
$
17,129

Add (deduct):
 
 
 
 
 
 
 
 
    Interest income
 
(1,170
)
 
(18
)
 
(2,569
)
 
(35
)
Other income, net
 
(453
)
 
—

 
(573
)
 
—

Provision for income taxes
 
5,058

 
13,603

 
6,796

 
18,747

Depreciation and amortization
 
3,790

 
2,618

 
7,184

 
4,888

Remeasurement of preferred stock warrant liability
 
—

 
(1,614
)
 
—

 
(10,685
)
Adjusted EBITDA
 
$
19,201

 
$
18,230

 
$
33,492

 
$
30,044








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 Six Months Ended
(in thousands)
 
January 26, 2019
 
January 27, 2018
 
January 26, 2019
 
January 27, 2018
Non-GAAP net income reconciliation:
 
 

 
 

 
 

 
 

Net income
 
$
11,976

 
$
3,641

 
$
22,654

 
$
17,129

Add (deduct):
 
 
 
 
 
 
 
 
Remeasurement of preferred stock warrant liability
 
—

 
(1,614
)
 
—

 
(10,685
)
Impact of Tax Act (1)
 
—

 
4,730

 
—

 
4,730

Non-GAAP net income
 
$
11,976

 
$
6,757

 
$
22,654

 
$
11,174

 
(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 and six months ended January 27, 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 – Diluted
We define non-GAAP EPS as diluted EPS 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 Six Months Ended
(in dollars)
 
January 26, 2019
 
January 27, 2018
 
January 26, 2019
 
January 27, 2018
Non-GAAP earnings per share – diluted reconciliation:
 
 

 
 

 
 

 
 

Earnings per share attributable to common stockholders – diluted
 
$
0.12

 
$
0.02

 
$
0.22

 
$
0.06

Per share impact of the remeasurement of preferred stock warrant liability(1)
 
—

 
—

 
—

 
—

Per share impact of Tax Act(2)
 
—

 
0.05

 
—

 
0.08

Non-GAAP earnings per share attributable to common stockholders – diluted
 
$
0.12

 
$
0.07

 
$
0.22

 
$
0.14

 
(1) For the three and six months ended January 27, 2018, the preferred stock warrant liability was dilutive and included in earnings per share attributable to common stockholders – diluted. Therefore, it is not an adjustment to arrive at non-GAAP EPS – 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 and six months ended January 27, 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 earnings per share 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 operations 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)
 
January 26, 2019
 
January 27, 2018
Free cash flow reconciliation:
 
 

 
 

Cash flows provided by operating activities
 
$
57,667

 
$
33,735

Deduct:
 
 
 
 
Purchases of property and equipment
 
(11,903
)
 
(8,232
)
Free cash flow
 
$
45,764

 
$
25,503

Cash flows used in investing activities
 
$
(187,234
)
 
$
(8,232
)
Cash flows (used in) provided by financing activities
 
$
(350
)
 
$
130,013



IR Contact:

David Pearce
ir@stitchfix.com
PR Contact:

Suzy Sammons
media@stitchfix.com