Stitch Fix Announces Fourth Quarter and Fiscal Year 2022 Financial Results
September 20, 2022
Spaulding added, “Today’s macroeconomic environment and its impact on retail spending has been a challenge to navigate, but we remain committed to working through our transformation and returning to profitability. We are also capitalizing on every customer touchpoint to build long-term relationships and reignite net active client growth. Even in retail’s dynamism, our core differentiators — fit, discovery, and human relationships — remain as relevant as ever, and will further cement our place as the global destination for personalized online shopping and styling.”
Fourth Quarter Key Metrics and Financial Highlights
- Net revenue of
$481.9 million , a decrease of 16% year over year - Active clients of 3,795,000, a decrease of 370,000 or 9% year over year
- Net revenue per active client (RPAC) of
$546 , an increase of 8% year over year - Net loss of
$96.3 million and diluted loss per share of$0.89 - Adjusted EBITDA loss of
$31.8 million
Full Year
- Net revenue of
$2 .1 billion, a decrease of 1.4% year over year - Net loss of
$207 .1 million and diluted loss per share of$1.90 - Adjusted EBITDA loss of
$19.5 million
Financial Outlook
Our financial outlook for the first quarter of fiscal 2023, which ends on
| Q1’23 | ||
| Net Revenue | (22)% - (20)% YoY decline | |
| Adjusted EBITDA | (3)% - (2)% margin | |
For the fiscal year ending
Conference Call and Webcast Information
A telephonic replay will be available through
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 first quarter and full fiscal year of 2023; that optimizing our cost base and returning to active client growth will help us return to profitability; that the efforts we are making in connection with our client experience will drive higher engagement and further cement us as the go-to online styling partner; our “How it Works” campaign will drive a sizable increase in impressions and will increase traffic to our ecosystem; our ability to scale our Affiliate Influencer network quickly; that further investments in the client onboarding journey will drive conversion rates; that developments in our infrastructure will drive profitable growth and support future expansion; that investments in our structured data platforms and more modular architecture will enable faster launch of new client features; our ability to evolve our underlying infrastructure, create a stable foundation for scale, and set the stage for profitable growth in fiscal year 2024; our ability to right size our inventory position to be in line with demand; our ability to achieve Adjusted EBITDA profitability and positive Free Cash Flow; and our ability to improve our overall cash conversion cycle in fiscal year 2023 by right sizing inventory, extending vendor terms, and investing in capex with near-term positive return on investment. These statements involve substantial risks and uncertainties, including risks and uncertainties related to the ongoing COVID-19 pandemic; risks and uncertainties related to the current macroeconomic environment; 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 our inventory; risks related to our supply chain, sourcing of materials and shipping of merchandise; risks related to international operations; and other risks described in the filings we make with the
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share and per share amounts)
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 130,935 | $ | 129,785 | |||
| Short-term investments | 82,049 | 101,546 | |||||
| Inventory, net | 197,251 | 212,294 | |||||
| Prepaid expenses and other current assets | 39,456 | 50,512 | |||||
| Income tax receivable | 27,561 | 27,667 | |||||
| Total current assets | 477,252 | 521,804 | |||||
| Long-term investments | 17,713 | 59,035 | |||||
| Income tax receivable, net of current portion | 26,091 | 27,054 | |||||
| Property and equipment, net | 103,375 | 86,959 | |||||
| Operating lease right-of-use assets | 132,179 | 118,565 | |||||
| Other long-term assets | 7,925 | 5,732 | |||||
| Total assets | $ | 764,535 | $ | 819,149 | |||
| Liabilities and Stockholders’ Equity | |||||||
| Current liabilities: | |||||||
| Accounts payable | $ | 143,934 | $ | 73,499 | |||
| Operating lease liabilities | 29,014 | 25,702 | |||||
| Accrued liabilities | 94,416 | 99,028 | |||||
| Gift card liability | 10,551 | 9,903 | |||||
| Deferred revenue | 14,441 | 18,154 | |||||
| Other current liabilities | 3,214 | 2,027 | |||||
| Total current liabilities | 295,570 | 228,313 | |||||
| Operating lease liabilities, net of current portion | 141,334 | 121,623 | |||||
| Other long-term liabilities | 4,980 | 8,364 | |||||
| Total liabilities | 441,884 | 358,300 | |||||
| Stockholders’ equity: | |||||||
| Class A common stock, |
1 | 1 | |||||
| Class B common stock, |
1 | 1 | |||||
| Additional paid-in capital | 522,658 | 416,755 | |||||
| Accumulated other comprehensive (loss) income | (3,527 | ) | 3,411 | ||||
| Retained earnings (accumulated deficit) | (166,440 | ) | 40,681 | ||||
| (30,042 | ) | — | |||||
| Total stockholders’ equity | 322,651 | 460,849 | |||||
| Total liabilities and stockholders’ equity | $ | 764,535 | $ | 819,149 | |||
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(In thousands, except share and per share amounts)
| For the Three Months Ended | For the Twelve Months Ended | |||||||||||||||
| Revenue, net | $ | 481,903 | $ | 571,159 | $ | 2,072,812 | $ | 2,101,258 | ||||||||
| Cost of goods sold | 289,240 | 305,707 | 1,164,338 | 1,153,622 | ||||||||||||
| Gross profit | 192,663 | 265,452 | 908,474 | 947,636 | ||||||||||||
| Selling, general, and administrative expenses | 291,280 | 244,710 | 1,116,519 | 1,010,997 | ||||||||||||
| Operating income (loss) | (98,617 | ) | 20,742 | (208,045 | ) | (63,361 | ) | |||||||||
| Interest income | 231 | 363 | 930 | 2,610 | ||||||||||||
| Other expense, net | (1,259 | ) | (449 | ) | (2,355 | ) | (366 | ) | ||||||||
| Income (loss) before income taxes | (99,645 | ) | 20,656 | (209,470 | ) | (61,117 | ) | |||||||||
| Income tax provision (benefit) | (3,303 | ) | (812 | ) | (2,349 | ) | (52,241 | ) | ||||||||
| Net income (loss) | $ | (96,342 | ) | $ | 21,468 | $ | (207,121 | ) | $ | (8,876 | ) | |||||
| Other comprehensive income (loss): | ||||||||||||||||
| Change in unrealized gain (loss) on available-for-sale securities, net of tax | 202 | (153 | ) | (2,050 | ) | (1,503 | ) | |||||||||
| Foreign currency translation | (1,053 | ) | 288 | (4,888 | ) | 2,186 | ||||||||||
| Total other comprehensive income (loss), net of tax | (851 | ) | 135 | (6,938 | ) | 683 | ||||||||||
| Comprehensive income (loss) | $ | (97,193 | ) | $ | 21,603 | $ | (214,059 | ) | $ | (8,193 | ) | |||||
| Net income (loss) attributable to common stockholders: | ||||||||||||||||
| Basic | $ | (96,342 | ) | $ | 21,468 | $ | (207,121 | ) | $ | (8,876 | ) | |||||
| Diluted | $ | (96,342 | ) | $ | 28,012 | $ | (207,121 | ) | $ | (8,876 | ) | |||||
| Earnings (loss) per share attributable to common stockholders: | ||||||||||||||||
| Basic | $ | (0.89 | ) | $ | 0.20 | $ | (1.90 | ) | $ | (0.08 | ) | |||||
| Diluted | $ | (0.89 | ) | $ | 0.19 | $ | (1.90 | ) | $ | (0.08 | ) | |||||
| Weighted-average shares used to compute earnings (loss) per share attributable to common stockholders: | ||||||||||||||||
| Basic | 108,762,589 | 107,526,693 | 108,762,589 | 105,975,403 | ||||||||||||
| Diluted | 108,762,589 | 115,439,429 | 108,762,589 | 105,975,403 | ||||||||||||
Condensed Consolidated Statements of Cash Flow
(Unaudited)
(In thousands)
| For the Twelve Months Ended | ||||||||
| Cash Flows from Operating Activities | ||||||||
| Net loss | $ | (207,121 | ) | $ | (8,876 | ) | ||
| Adjustments to reconcile net loss to net cash provided by operating activities: | ||||||||
| Deferred income taxes and valuation allowance | (535 | ) | 64 | |||||
| Change in inventory reserves | 16,552 | 8,875 | ||||||
| Stock-based compensation expense | 128,485 | 100,696 | ||||||
| Depreciation, amortization, and accretion | 37,185 | 29,929 | ||||||
| Asset impairment | 6,154 | — | ||||||
| Other | 300 | (3,632 | ) | |||||
| Change in operating assets and liabilities: | ||||||||
| Inventory | (2,594 | ) | (96,056 | ) | ||||
| Prepaid expenses and other assets | 8,110 | (20,096 | ) | |||||
| Income tax receivables | 1,069 | (31,700 | ) | |||||
| Operating lease right-of-use assets and liabilities | 4,301 | (1,818 | ) | |||||
| Accounts payable | 71,349 | (12,385 | ) | |||||
| Accrued liabilities | (2,641 | ) | 22,011 | |||||
| Deferred revenue | (3,679 | ) | 5,082 | |||||
| Gift card liability | 649 | 1,313 | ||||||
| Other liabilities | (2,189 | ) | (9,082 | ) | ||||
| Net cash provided by (used in) operating activities | 55,395 | (15,675 | ) | |||||
| Cash Flows from Investing Activities | ||||||||
| Purchases of property and equipment | (46,351 | ) | (35,256 | ) | ||||
| Purchases of securities available-for-sale | (94,420 | ) | (173,726 | ) | ||||
| Sales of securities available-for-sale | 45,351 | 104,501 | ||||||
| Maturities of securities available-for-sale | 105,653 | 143,574 | ||||||
| Net cash provided by investing activities | 10,233 | 39,093 | ||||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from the exercise of stock options, net | 1,534 | 25,932 | ||||||
| Payments for tax withholdings related to vesting of restricted stock units | (31,742 | ) | (64,316 | ) | ||||
| Repurchase of common stock | (30,042 | ) | — | |||||
| Issuance costs on revolving credit facility | — | (501 | ) | |||||
| Net cash used in financing activities | (60,250 | ) | (38,885 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | 5,378 | (15,467 | ) | |||||
| Effect of exchange rate changes on cash | (4,228 | ) | 1,797 | |||||
| Cash and cash equivalents at beginning of period | 129,785 | 143,455 | ||||||
| Cash and cash equivalents at end of period | $ | 130,935 | $ | 129,785 | ||||
| Supplemental Disclosure | ||||||||
| Cash paid for income taxes | $ | 868 | $ | 461 | ||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities: | ||||||||
| Purchases of property and equipment included in accounts payable and accrued liabilities | $ | 2,443 | $ | 3,803 | ||||
| Capitalized stock-based compensation | $ | 7,626 | $ | 5,693 | ||||
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 income tax provision (benefit), 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, income tax provision (benefit), 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 | For the Twelve Months Ended | |||||||||||||||
| (in thousands) | ||||||||||||||||
| Net income (loss) | $ | (96,342 | ) | $ | 21,468 | $ | (207,121 | ) | $ | (8,876 | ) | |||||
| Add (deduct): | ||||||||||||||||
| Interest income | (231 | ) | (363 | ) | (930 | ) | (2,610 | ) | ||||||||
| Other expense, net | 1,259 | 449 | 2,355 | 366 | ||||||||||||
| Income tax provision (benefit) | (3,303 | ) | (812 | ) | (2,349 | ) | (52,241 | ) | ||||||||
| Depreciation and amortization | 9,566 | 7,438 | 35,011 | 27,610 | ||||||||||||
| Stock-based compensation expense(1) | 31,068 | 27,210 | 127,373 | 100,696 | ||||||||||||
| Restructuring and other one-time costs(2) | 26,206 | — | 26,206 | — | ||||||||||||
| Adjusted EBITDA | $ | (31,777 | ) | $ | 55,390 | $ | (19,455 | ) | $ | 64,945 | ||||||
__________________
(1) Excludes
(2) 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 Twelve Months Ended | ||||||||
| (in thousands) | ||||||||
| Free cash flow reconciliation: | ||||||||
| Cash flows provided by (used in) operating activities | $ | 55,395 | $ | (15,675 | ) | |||
| Deduct: | ||||||||
| Purchases of property and equipment | (46,351 | ) | (35,256 | ) | ||||
| Free cash flow | $ | 9,044 | $ | (50,931 | ) | |||
| Cash flows provided by investing activities | $ | 10,233 | $ | 39,093 | ||||
| Cash flows used in financing activities | $ | (60,250 | ) | $ | (38,885 | ) | ||
Operating Metrics
| Active clients (in thousands) | 3,795 | 3,907 | 4,019 | 4,180 | 4,165 | ||||||||||
| Net revenue per active client | $ | 546 | $ | 553 | $ | 549 | $ | 524 | $ | 505 | |||||
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.
| IR Contact: ir@stitchfix.com |
PR Contact: media@stitchfix.com |
Source: Stitch Fix, Inc.