Stitch Fix Announces First Quarter of Fiscal Year 2024 Financial Results
December 5, 2023
“The original vision of
During the first quarter of fiscal 2024, we ceased operations of our
First Quarter Fiscal 2024 Key Metrics and Financial Highlights
- Net revenue from continuing operations of
$364.8 million , a decrease of 18% year-over-year, but at the higher end of our first quarter 2024 guidance range. - Net loss from continuing operations of
$26.2 million and diluted loss per share from continuing operations of$0.22 . - Adjusted EBITDA from continuing operations of
$8.6 million , which exceeded the high end of our first quarter 2024 guidance and reflects benefits from our disciplined cost management. - Active clients from continuing operations of 2,989,000, a decrease of 132,000, or 4%, quarter-over-quarter; and a decrease of 515,000, or 15%, year-over-year.
- Net revenue per active client (“RPAC”) from continuing operations of
$506 , a decrease of 6% year-over-year. - We generated positive free cash flow from continuing operations for the fourth quarter in a row, delivering
$16.9 million in the first fiscal quarter. We ended the quarter with$262.3 million of cash, cash equivalents, and investments attributable to continuing operations; and no bank debt. - On
December 4, 2023 , we entered into a credit agreement withCitibank, N.A ., which provides for a$50.0 million revolving credit facility maturing onDecember 4, 2026 . The borrowing availability under this facility will be based upon a borrowing base formula valuing certain of our accounts receivable, credit card receivables, and inventory as reduced by certain reserves, if any. Our initial borrowing availability is$50.0 million , and we do not anticipate borrowing on the facility. Upon entry into this facility, our existing revolving credit agreement was terminated.
Financial Outlook
Our financial outlook for our continuing operations for the second quarter of fiscal 2024 ending
| Q2 2024 | ||
| Net Revenue from Continuing Operations | (19)% - (16)% YoY decline | |
| Adjusted EBITDA from Continuing Operations | 1% - 2% margin | |
Our fiscal year is a 52-week or 53-week period ending on the Saturday closest to
Our financial outlook for our continuing operations for fiscal year 2024, which contemplates the 53-week period, is as follows:
| Fiscal Year 2024 | ||
| Net Revenue from Continuing Operations |
(18)% - (14)% YoY | |
| (20)% - (15)% YoY adjusted to a 52-week period (1) |
||
| Adjusted EBITDA from Continuing Operations | 1% - 2% margin | |
(1) Full fiscal year 2024 net revenue from continuing operations has been adjusted to remove the 53rd week for year-over-year comparative purposes.
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/BI5c93d547fede4750a1c0f047d9e4e50e
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 metrics for the second quarter and full fiscal year of 2024; our ability to deliver long term, sustainable, and profitable growth and positive free cash flow; that our strategy will drive growth and create value for shareholders; that new technology is making it possible for us to take personalization to a new level; that we are strengthening our foundation; that we are building a healthier client base by more precisely targeting high lifetime value clients and that will help us expand our client base over time; that we are developing a long term strategy that will help us to better serve the clients; that our strategy to embed retail best practices and make operational excellence our standard will fuel our ability to deliver sustainable, profitable growth; that our buying, assortment planning, and inventory allocation strategies will improve operational efficiencies and grow margins; that we will seize the opportunity to widen the aperture of target client segment and introduce many more people to
Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except per share amounts) |
||||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 256,898 | $ | 239,437 | ||||
| Short-term investments | 5,440 | 18,161 | ||||||
| Inventory, net | 160,720 | 130,548 | ||||||
| Prepaid expenses and other current assets | 24,789 | 27,692 | ||||||
| Current assets, discontinued operations | 2,438 | 9,623 | ||||||
| Total current assets | 450,285 | 425,461 | ||||||
| Property and equipment, net | 71,490 | 79,757 | ||||||
| Operating lease right-of-use assets | 98,645 | 104,533 | ||||||
| Other long-term assets | 2,830 | 2,681 | ||||||
| Long-term assets, discontinued operations | 788 | 2,046 | ||||||
| Total assets | $ | 624,038 | $ | 614,478 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 131,444 | $ | 96,730 | ||||
| Operating lease liabilities | 27,650 | 28,210 | ||||||
| Accrued liabilities | 75,114 | 69,893 | ||||||
| Gift card liability | 9,826 | 10,328 | ||||||
| Deferred revenue | 10,702 | 11,366 | ||||||
| Other current liabilities | 9,479 | 8,802 | ||||||
| Current liabilities, discontinued operations | 6,678 | 12,782 | ||||||
| Total current liabilities | 270,893 | 238,111 | ||||||
| Operating lease liabilities, net of current portion | 118,741 | 125,418 | ||||||
| Other long-term liabilities | 3,664 | 3,639 | ||||||
| Total liabilities | 393,298 | 367,168 | ||||||
| Stockholders’ equity: | ||||||||
| Class A common stock, |
1 | 1 | ||||||
| Class B common stock, |
1 | 1 | ||||||
| Additional paid-in capital | 635,164 | 615,236 | ||||||
| Accumulated other comprehensive income (loss) | (481 | ) | 527 | |||||
| Accumulated deficit | (373,903 | ) | (338,413 | ) | ||||
| (30,042 | ) | (30,042 | ) | |||||
| Total stockholders’ equity | 230,740 | 247,310 | ||||||
| Total liabilities and stockholders’ equity | $ | 624,038 | $ | 614,478 | ||||
Condensed Consolidated Statements of Operations and Comprehensive Loss (Unaudited) (In thousands, except share and per share amounts) |
||||||||
| For the Three Months Ended | ||||||||
| Revenue, net | $ | 364,785 | $ | 443,741 | ||||
| Cost of goods sold | 205,682 | 256,431 | ||||||
| Gross profit | 159,103 | 187,310 | ||||||
| Selling, general, and administrative expenses | 187,764 | 235,846 | ||||||
| Operating loss | (28,661 | ) | (48,536 | ) | ||||
| Interest income | 2,248 | 748 | ||||||
| Other income (expense), net | 411 | (177 | ) | |||||
| Loss before income taxes | (26,002 | ) | (47,965 | ) | ||||
| Provision for income taxes | 169 | 187 | ||||||
| Net loss from continuing operations | (26,171 | ) | (48,152 | ) | ||||
| Loss from discontinued operations, net of income taxes | (9,319 | ) | (7,766 | ) | ||||
| Net loss | $ | (35,490 | ) | $ | (55,918 | ) | ||
| Other comprehensive income (loss): | ||||||||
| Change in unrealized loss on available-for-sale securities, net of tax | 121 | (186 | ) | |||||
| Foreign currency translation | (1,129 | ) | (1,612 | ) | ||||
| Total other comprehensive loss, net of tax | (1,008 | ) | (1,798 | ) | ||||
| Comprehensive loss | $ | (36,498 | ) | $ | (57,716 | ) | ||
| Loss per share from continuing operations, attributable to common stockholders: | ||||||||
| Basic | $ | (0.22 | ) | $ | (0.43 | ) | ||
| Diluted | $ | (0.22 | ) | $ | (0.43 | ) | ||
| Loss per share from discontinued operations, attributable to common stockholders: | ||||||||
| Basic | $ | (0.08 | ) | $ | (0.07 | ) | ||
| Diluted | $ | (0.08 | ) | $ | (0.07 | ) | ||
| Loss per share attributable to common stockholders: | ||||||||
| Basic | $ | (0.30 | ) | $ | (0.50 | ) | ||
| Diluted | $ | (0.30 | ) | $ | (0.50 | ) | ||
| Weighted-average shares used to compute loss per share attributable to common stockholders: | ||||||||
| Basic | 116,645,160 | 112,359,901 | ||||||
| Diluted | 116,645,160 | 112,359,901 | ||||||
Condensed Consolidated Statements of Cash Flow (Unaudited) (In thousands) |
||||||||
| For the Three Months Ended | ||||||||
| Cash Flows from Operating Activities from Continuing Operations | ||||||||
| Net loss from continuing operations | $ | (26,171 | ) | $ | (48,152 | ) | ||
| Adjustments to reconcile net loss from continuing operations to net cash provided by (used in) operating activities from continuing operations: | ||||||||
| Change in inventory reserves | 3,083 | 203 | ||||||
| Stock-based compensation expense | 19,902 | 31,129 | ||||||
| Depreciation and amortization | 13,784 | 9,846 | ||||||
| Other | 19 | 31 | ||||||
| Change in operating assets and liabilities: | ||||||||
| Inventory | (33,255 | ) | (21,802 | ) | ||||
| Prepaid expenses and other assets | 2,800 | (786 | ) | |||||
| Income tax receivables | — | 26,640 | ||||||
| Operating lease right-of-use assets and liabilities | (1,349 | ) | (278 | ) | ||||
| Accounts payable | 34,709 | (1,187 | ) | |||||
| Accrued liabilities | 7,502 | 4,284 | ||||||
| Deferred revenue | (664 | ) | (714 | ) | ||||
| Gift card liability | (503 | ) | (533 | ) | ||||
| Other liabilities | 702 | (255 | ) | |||||
| Net cash provided by (used in) operating activities from continuing operations | 20,559 | (1,574 | ) | |||||
| Cash Flows from Investing Activities from Continuing Operations | ||||||||
| Proceeds from sale of property and equipment | 21 | — | ||||||
| Purchases of property and equipment | (3,653 | ) | (5,888 | ) | ||||
| Purchases of securities available-for-sale | — | (258 | ) | |||||
| Sales of securities available-for-sale | — | 4,145 | ||||||
| Maturities of securities available-for-sale | 12,820 | — | ||||||
| Net cash provided by (used in) investing activities from continuing operations | 9,188 | (2,001 | ) | |||||
| Cash Flows from Financing Activities from Continuing Operations | ||||||||
| Payments for tax withholdings related to vesting of restricted stock units | (4,008 | ) | (3,664 | ) | ||||
| Other | (100 | ) | (117 | ) | ||||
| Net cash used in financing activities from continuing operations | (4,108 | ) | (3,781 | ) | ||||
| Net increase (decrease) in cash and cash equivalents from continuing operations | 25,639 | (7,356 | ) | |||||
| Cash Flows from Discontinued Operations | ||||||||
| Net cash used in operating activities from discontinued operations | (6,119 | ) | (8,474 | ) | ||||
| Net cash used in investing activities from discontinued operations | — | (256 | ) | |||||
| Net cash used in financing activities from discontinued operations | (164 | ) | (89 | ) | ||||
| Net decrease in cash and cash equivalents from discontinued operations | (6,283 | ) | (8,819 | ) | ||||
| Effect of exchange rate changes on cash and cash equivalents | (1,895 | ) | (1,414 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | 17,461 | (17,589 | ) | |||||
| Cash and cash equivalents at beginning of period | 239,437 | 130,935 | ||||||
| Cash and cash equivalents at end of period | $ | 256,898 | $ | 113,346 | ||||
| Supplemental Disclosure | ||||||||
| Cash paid for income taxes | $ | 386 | $ | 83 | ||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities | ||||||||
| Purchases of property and equipment included in accounts payable and accrued liabilities | $ | 1,099 | $ | 1,579 | ||||
| Capitalized stock-based compensation | $ | 1,303 | $ | 1,871 | ||||
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 net other (income) expense 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;
- Adjusted EBITDA excludes costs incurred related to discrete restructuring plans and other one-time costs attributable to our continuing operations 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; 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 loss from continuing operations excluding interest income, net other (income) expense, provision for income taxes, depreciation and amortization, stock-based compensation expense, and restructuring and other one-time costs related to our continuing operations. The following table presents a reconciliation of net loss from continuing operations, the most comparable GAAP financial measure, to Adjusted EBITDA for each of the periods presented:
| For the Three Months Ended | ||||||||
| (in thousands) | ||||||||
| Net loss from continuing operations | $ | (26,171 | ) | $ | (48,152 | ) | ||
| Add (deduct): | ||||||||
| Interest income | (2,248 | ) | (748 | ) | ||||
| Other (income) expense, net | (411 | ) | 177 | |||||
| Provision for income taxes | 169 | 187 | ||||||
| Depreciation and amortization (1) | 9,439 | 9,529 | ||||||
| Stock-based compensation expense | 19,902 | 31,129 | ||||||
| Restructuring and other one-time costs (2) | 7,950 | 6,155 | ||||||
| Adjusted EBITDA | $ | 8,630 | $ | (1,723 | ) | |||
(1) For the three months ended
(2) For the three months ended
Free Cash Flow
We define Free Cash Flow as net cash flows provided by (used in) operating activities from continuing operations, reduced by purchases of property and equipment that are included in cash flows from investing activities from continuing operations. The following table presents a reconciliation of net cash flows provided by (used in) operating activities from continuing operations, 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: | ||||||||
| Net cash provided by (used in) operating activities from continuing operations | $ | 20,559 | $ | (1,574 | ) | |||
| Deduct: | ||||||||
| Purchases of property and equipment from continuing operations | (3,653 | ) | (5,888 | ) | ||||
| Free Cash Flow | $ | 16,906 | $ | (7,462 | ) | |||
| Net cash provided by (used in) investing activities from continuing operations | $ | 9,188 | $ | (2,001 | ) | |||
| Net cash used in financing activities from continuing operations | $ | (4,108 | ) | $ | (3,781 | ) | ||
Operating Metrics
| (in thousands) | |||||||||||||||
| Active clients | 2,989 | 3,121 | 3,288 | 3,377 | 3,504 | ||||||||||
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.