Stitch Fix Announces First Quarter of Fiscal Year 2023 Financial Results
December 6, 2022
First Quarter Key Metrics and Financial Highlights
- Net revenue of
$455.6 million , a decrease of 22% year over year - Active clients of 3,709,000, a decrease of 471,000 or 11% year over year
- Net revenue per active client (RPAC) of
$525 , approximately flat year over year - Net loss of
$55.9 million and diluted loss per share of$0.50 - Adjusted EBITDA loss of
$7.4 million
Financial Outlook
Our financial outlook for the second quarter of fiscal 2023, which ends on
| Q2’23 |
||||
| Net Revenue | (21)% - (19)% YoY decline | |||
| Adjusted EBITDA | (1)% - 1% margin | |||
For the fiscal year ending
Conference Call and Webcast Information
To access the call by phone, please register at the following link:
Dial-In Registration: https://register.vevent.com/register/BI7aeee37f61674ead8e555a5ca1ea5b7b
Upon registration, telephone participants will receive the dial-in number along with a unique PIN number that can be used to access the call. A replay of the webcast will also be available for a limited time, at https://investors.stitchfix.com.
About
Forward-Looking Statements
This press release, the 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 expectations for future financial performance, including our profitability and long-term targets; guidance on financial results and active clients for the second quarter and full fiscal year of 2023; our ability to balance the need to optimize our cost-structure against achieving the long-term growth objectives of the business; our ability to create a leaner, more nimble, and profitable
Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except share and per share amounts) |
||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 113,346 | $ | 130,935 | ||||
| Short-term investments | 90,041 | 82,049 | ||||||
| Inventory, net | 220,163 | 197,251 | ||||||
| Prepaid expenses and other current assets | 42,095 | 39,456 | ||||||
| Income tax receivable | 921 | 27,561 | ||||||
| Total current assets | 466,566 | 477,252 | ||||||
| Long-term investments | 5,379 | 17,713 | ||||||
| Income tax receivable, net of current portion | 26,091 | 26,091 | ||||||
| Property and equipment, net | 99,847 | 103,375 | ||||||
| Operating lease right-of-use assets | 140,241 | 132,179 | ||||||
| Other long-term assets | 6,562 | 7,925 | ||||||
| Total assets | $ | 744,686 | $ | 764,535 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 142,442 | $ | 143,934 | ||||
| Operating lease liabilities | 30,199 | 29,014 | ||||||
| Accrued liabilities | 97,724 | 94,416 | ||||||
| Gift card liability | 10,018 | 10,551 | ||||||
| Deferred revenue | 13,757 | 14,441 | ||||||
| Other current liabilities | 3,235 | 3,214 | ||||||
| Total current liabilities | 297,375 | 295,570 | ||||||
| Operating lease liabilities, net of current portion | 147,843 | 141,334 | ||||||
| Other long-term liabilities | 4,701 | 4,980 | ||||||
| Total liabilities | 449,919 | 441,884 | ||||||
| Stockholders’ equity: | ||||||||
| Class A common stock, |
1 | 1 | ||||||
| Class B common stock, |
1 | 1 | ||||||
| Additional paid-in capital | 552,490 | 522,658 | ||||||
| Accumulated other comprehensive loss | (5,325 | ) | (3,527 | ) | ||||
| Accumulated deficit | (222,358 | ) | (166,440 | ) | ||||
| (30,042 | ) | (30,042 | ) | |||||
| Total stockholders’ equity | 294,767 | 322,651 | ||||||
| Total liabilities and stockholders’ equity | $ | 744,686 | $ | 764,535 | ||||
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (In thousands, except share and per share amounts) |
||||||||
| For the Three Months Ended | ||||||||
| Revenue, net | $ | 455,593 | $ | 581,244 | ||||
| Cost of goods sold | 263,832 | 308,327 | ||||||
| Gross profit | 191,761 | 272,917 | ||||||
| Selling, general, and administrative expenses | 246,891 | 274,767 | ||||||
| Operating loss | (55,130 | ) | (1,850 | ) | ||||
| Interest income | 773 | 334 | ||||||
| Other expense, net | (1,284 | ) | (109 | ) | ||||
| Loss before income taxes | (55,641 | ) | (1,625 | ) | ||||
| Provision for income taxes | 277 | 202 | ||||||
| Net loss | $ | (55,918 | ) | $ | (1,827 | ) | ||
| Other comprehensive loss: | ||||||||
| Change in unrealized loss on available-for-sale securities, net of tax | (186 | ) | (315 | ) | ||||
| Foreign currency translation | (1,612 | ) | (603 | ) | ||||
| Total other comprehensive loss, net of tax | (1,798 | ) | (918 | ) | ||||
| Comprehensive loss | $ | (57,716 | ) | $ | (2,745 | ) | ||
| Net loss attributable to common stockholders: | ||||||||
| Basic | $ | (55,918 | ) | $ | (1,827 | ) | ||
| Diluted | $ | (55,918 | ) | $ | (1,827 | ) | ||
| Loss per share attributable to common stockholders: | ||||||||
| Basic | $ | (0.50 | ) | $ | (0.02 | ) | ||
| Diluted | $ | (0.50 | ) | $ | (0.02 | ) | ||
| Weighted-average shares used to compute loss per share attributable to common stockholders: | ||||||||
| Basic | 112,359,901 | 108,375,911 | ||||||
| Diluted | 112,359,901 | 108,375,911 | ||||||
Condensed Consolidated Statements of Cash Flow (Unaudited) (In thousands) |
||||||||
| For the Three Months Ended | ||||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss | $ | (55,918 | ) | $ | (1,827 | ) | ||
| Adjustments to reconcile net loss to net cash (used in) provided by operating activities: | ||||||||
| Change in inventory reserves | 476 | (2,763 | ) | |||||
| Stock-based compensation expense | 31,714 | 32,323 | ||||||
| Depreciation, amortization, and accretion | 10,157 | 8,335 | ||||||
| Other | 31 | (923 | ) | |||||
| Change in operating assets and liabilities: | ||||||||
| Inventory | (23,781 | ) | 30,806 | |||||
| Prepaid expenses and other assets | (871 | ) | 6,035 | |||||
| Income tax receivables | 26,640 | 43 | ||||||
| Operating lease right-of-use assets and liabilities | (347 | ) | 101 | |||||
| Accounts payable | (918 | ) | 55,352 | |||||
| Accrued liabilities | 4,226 | 16,193 | ||||||
| Deferred revenue | (671 | ) | (1,532 | ) | ||||
| Gift card liability | (532 | ) | (442 | ) | ||||
| Other liabilities | (254 | ) | (45 | ) | ||||
| Net cash (used in) provided by operating activities | (10,048 | ) | 141,656 | |||||
| Cash Flows from Investing Activities | ||||||||
| Purchases of property and equipment | (6,143 | ) | (16,392 | ) | ||||
| Purchases of securities available-for-sale | (258 | ) | (52,435 | ) | ||||
| Sales of securities available-for-sale | 4,144 | 2,160 | ||||||
| Maturities of securities available-for-sale | — | 59,130 | ||||||
| Net cash used in investing activities | (2,257 | ) | (7,537 | ) | ||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from the exercise of stock options, net | — | 1,054 | ||||||
| Payments for tax withholdings related to vesting of restricted stock units | (3,753 | ) | (14,752 | ) | ||||
| Other | (117 | ) | — | |||||
| Net cash used in financing activities | (3,870 | ) | (13,698 | ) | ||||
| Net (decrease) increase in cash and cash equivalents | (16,175 | ) | 120,421 | |||||
| Effect of exchange rate changes on cash and cash equivalents | (1,414 | ) | (529 | ) | ||||
| Cash and cash equivalents at beginning of period | 130,935 | 129,785 | ||||||
| Cash and cash equivalents at end of period | $ | 113,346 | $ | 249,677 | ||||
| Supplemental Disclosure | ||||||||
| Cash paid for income taxes | $ | 83 | $ | 190 | ||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities: | ||||||||
| Purchases of property and equipment included in accounts payable and accrued liabilities | $ | 1,579 | $ | 4,394 | ||||
| Capitalized stock-based compensation | $ | 1,871 | $ | 1,866 | ||||
Non-GAAP Financial Measures
We report our financial results in accordance with generally accepted accounting principles in
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 excludes interest income and other expense, net, as these items are not components of our core business;
- adjusted EBITDA does not reflect our provision for income taxes, which may increase or decrease cash available to us;
- 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 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; and
- adjusted EBITDA excludes costs incurred related to discrete restructuring plans and other one-time costs that are fundamentally different in strategic nature and frequency from ongoing initiatives. We believe exclusion of these items facilitates a more consistent comparison of operating performance over time, however these costs do include cash outflows;
- 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 loss excluding interest income, other expense, net, provision for income taxes, depreciation and amortization, stock-based compensation expense, and restructuring and other one-time costs. The following table presents a reconciliation of net loss, the most comparable GAAP financial measure, to adjusted EBITDA for each of the periods presented:
| For the Three Months Ended | ||||||||
| (in thousands) | ||||||||
| Net loss | $ | (55,918 | ) | $ | (1,827 | ) | ||
| Add (deduct): | ||||||||
| Interest income | (773 | ) | (334 | ) | ||||
| Other expense, net | 1,284 | 109 | ||||||
| Provision for income taxes | 277 | 202 | ||||||
| Depreciation and amortization | 9,840 | 7,740 | ||||||
| Stock-based compensation expense | 31,714 | 32,323 | ||||||
| Restructuring and other one-time costs(1) | 6,155 | — | ||||||
| Adjusted EBITDA | $ | (7,421 | ) | $ | 38,213 | |||
_____________________________
(1)Restructuring charges consist of
Free Cash Flow
We define free cash flow as cash flows provided by (used in) operating activities reduced by purchases of property and equipment that are included in cash flows provided by (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 Three Months Ended | ||||||||
| (in thousands) | ||||||||
| Free cash flow reconciliation: | ||||||||
| Cash flows (used in) provided by operating activities | $ | (10,048 | ) | $ | 141,656 | |||
| Deduct: | ||||||||
| Purchases of property and equipment | (6,143 | ) | (16,392 | ) | ||||
| Free cash flow | $ | (16,191 | ) | $ | 125,264 | |||
| Cash flows used in investing activities | $ | (2,257 | ) | $ | (7,537 | ) | ||
| Cash flows used in financing activities | $ | (3,870 | ) | $ | (13,698 | ) | ||
Operating Metrics
| Active clients (in thousands) | 3,709 | 3,795 | 3,907 | 4,019 | 4,180 |
Active Clients
We define an active client as a client who checked out a Fix or was shipped an item via Freestyle 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 Women’s, Men’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. Net revenue per active client was
| IR Contact: ir@stitchfix.com |
PR Contact: media@stitchfix.com |
Source: Stitch Fix, Inc.