Stitch Fix Announces Fourth Quarter and Full Fiscal Year 2021 Financial Results
September 21, 2021
Fourth Quarter Key Metrics and Financial Highlights
- Net revenue of
$571.2 million , an increase of 29% year over year - Active clients of 4,165,000, an increase of 643,000 or 18% year over year
- Net revenue per active client of
$505 , an increase of 4% year over year - Net income of
$21.5 million and diluted earnings per share of$0.19 - Adjusted EBITDA of
$55.4 million
Full Year Financial Highlights
- Net revenue of
$2 .1 billion, an increase of 22.8% year over year - Net loss of
$8 .9 million and diluted loss per share of$0.08 - Adjusted EBITDA of
$64 .9 million
Business Highlights
- Delivered strong top line revenue growth, driven by momentum in Women’s Fix, outsized growth in Kids and the
UK , and continued acceleration in our Freestyle channel - Drove positive trends in client engagement and retention, with keep rates reaching all-time highs, client churn rates ending the year at all-time lows, and revenue per active client above
$500 for the first time - Continued to evolve the client experience across Fix, and direct buy (now Freestyle); released numerous feature enhancements such as expanded branded shops, and rolled out Fix Preview to 100% of our Men’s and Women’s clients. As of August, Freestyle is open to everyone
- Delivered strong adjusted EBITDA, driven by outperformance in revenue, as well as all time high gross margins, achieved through gains in product margins and efficiency in transportation costs
Financial Outlook
Our financial outlook for the first quarter of fiscal 2022, which ends on
| Q1’22 | ||
| Net Revenue | 14.0% - 17.0% YoY growth | |
| Adjusted EBITDA | 2.7% - 3.5% margin | |
Our financial outlook for fiscal year 2022, which ends on
| FY’22 | |
| Net Revenue | > 15.0% YoY growth |
| Adjusted EBITDA | > 2.0% margin |
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 for the first quarter and full year of 2022; the momentum of our business; the rate of client migration to our offering; the forecasted continued and lasting shift to online shopping and our ability to capture market share; our expectation that the overall demand for apparel will increase as the broader environment normalizes; our expected conversion and retention of new and existing clients; the success of and opportunity related to our Freestyle offering; our ability to enhance and broaden Freestyle through additional brands, assortment, price points, and client-facing features; that our new product features, such as Freestyle and Fix preview will drive deeper client adoption; that Freestyle will expand our ecosystem and fuel client acquisition by unlocking the full addressable apparel market; our ability to expand our client base and increase wallet share; our ability to leverage our engineering and data science capabilities to drive efficiencies in our business and enhance our ability to personalize our service and offerings; our ability to invest significantly in our infrastructure to enable new inventory models; that our Active, Athleisure and Lounge apparel categories will be an engine of growth; our ability to scale our branded shops; that our investments will allow us to maximize our working capital efficiency; our advertising and marketing plans, including opening up new marketing channels, and whether our marketing investments will pay off in future quarters; our ability to broaden our assortment and partner with notable brands; and our ability to create new exclusive brands that appeal to clients. These statements involve substantial risks and uncertainties, including risks and uncertainties related to the ongoing COVID-19 pandemic, our responses to the pandemic, the responses of our clients, competitors, suppliers, governmental authorities, and public health officials; 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 | $ | 129,785 | $ | 143,455 | ||||
| Short-term investments | 101,546 | 143,037 | ||||||
| Inventory, net | 212,294 | 124,816 | ||||||
| Prepaid expenses and other current assets | 50,512 | 32,723 | ||||||
| Income tax receivable | 27,667 | 22,279 | ||||||
| Total current assets | 521,804 | 466,310 | ||||||
| Long-term investments | 59,035 | 95,097 | ||||||
| Income tax receivable, net of current portion | 27,054 | 742 | ||||||
| Property and equipment, net | 86,959 | 70,369 | ||||||
| Operating lease right-of-use assets | 118,565 | 132,615 | ||||||
| Other long-term assets | 5,732 | 4,296 | ||||||
| Total assets | $ | 819,149 | $ | 769,429 | ||||
| Liabilities and Stockholders’ Equity | ||||||||
| Current liabilities: | ||||||||
| Accounts payable | $ | 73,499 | $ | 85,177 | ||||
| Operating lease liabilities | 25,702 | 24,333 | ||||||
| Accrued liabilities | 99,028 | 77,590 | ||||||
| Gift card liability | 9,903 | 8,590 | ||||||
| Deferred revenue | 18,154 | 13,059 | ||||||
| Other current liabilities | 2,027 | 3,406 | ||||||
| Total current liabilities | 228,313 | 212,155 | ||||||
| Operating lease liabilities, net of current portion | 121,623 | 140,175 | ||||||
| Other long-term liabilities | 8,364 | 16,062 | ||||||
| Total liabilities | 358,300 | 368,392 | ||||||
| Stockholders’ equity: | ||||||||
| Class A common stock, |
1 | 1 | ||||||
| Class B common stock, |
1 | 1 | ||||||
| Additional paid-in capital | 416,755 | 348,750 | ||||||
| Accumulated other comprehensive income (loss) | 3,411 | 2,728 | ||||||
| Retained earnings | 40,681 | 49,557 | ||||||
| Total stockholders’ equity | 460,849 | 401,037 | ||||||
| Total liabilities and stockholders’ equity | $ | 819,149 | $ | 769,429 | ||||
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)
(Unaudited)
(In thousands, except share and per share amounts)
| For the Three Months Ended | For the Fiscal Year Ended | |||||||||||||||
| Revenue, net | $ | 571,159 | $ | 443,408 | $ | 2,101,258 | $ | 1,711,733 | ||||||||
| Cost of goods sold | 305,707 | 244,298 | 1,153,622 | 957,523 | ||||||||||||
| Gross profit | 265,452 | 199,110 | 947,636 | 754,210 | ||||||||||||
| Selling, general, and administrative expenses | 244,710 | 213,377 | 1,010,997 | 805,874 | ||||||||||||
| Operating income (loss) | 20,742 | (14,267 | ) | (63,361 | ) | (51,664 | ) | |||||||||
| Interest (income) expense | (363 | ) | (1,033 | ) | (2,610 | ) | (5,535 | ) | ||||||||
| Other (income) expense, net | 449 | 162 | 366 | 1,593 | ||||||||||||
| Income (loss) before income taxes | 20,656 | (13,396 | ) | (61,117 | ) | (47,722 | ) | |||||||||
| Provision (benefit) for income taxes | (812 | ) | 31,071 | (52,241 | ) | 19,395 | ||||||||||
| Net income (loss) | $ | 21,468 | $ | (44,467 | ) | $ | (8,876 | ) | $ | (67,117 | ) | |||||
| Other comprehensive income (loss): | ||||||||||||||||
| Change in unrealized gain (loss) on available-for-sale securities, net of tax | (153 | ) | (247 | ) | (1,503 | ) | 822 | |||||||||
| Foreign currency translation | 288 | 1,460 | 2,186 | 2,093 | ||||||||||||
| Total other comprehensive income (loss), net of tax | 135 | 1,213 | 683 | 2,915 | ||||||||||||
| Comprehensive income (loss) | $ | 21,603 | $ | (43,254 | ) | $ | (8,193 | ) | $ | (64,202 | ) | |||||
| Net income (loss) attributable to common stockholders: | ||||||||||||||||
| Basic | $ | 21,468 | $ | (44,467 | ) | $ | (8,876 | ) | $ | (67,117 | ) | |||||
| Diluted | $ | 28,012 | $ | (44,467 | ) | $ | (8,876 | ) | $ | (67,117 | ) | |||||
| Earnings (loss) per share attributable to common stockholders: | ||||||||||||||||
| Basic | $ | 0.20 | $ | (0.44 | ) | $ | (0.08 | ) | $ | (0.66 | ) | |||||
| Diluted | $ | 0.19 | $ | (0.44 | ) | $ | (0.08 | ) | $ | (0.66 | ) | |||||
| Weighted-average shares used to compute earnings (loss) per share attributable to common stockholders: | ||||||||||||||||
| Basic | 107,526,693 | 103,278,240 | 105,975,403 | 102,383,282 | ||||||||||||
| Diluted | 115,439,429 | 103,278,240 | 105,975,403 | 102,383,282 | ||||||||||||
Condensed Consolidated Statements of Cash Flow
(Unaudited)
(In thousands)
| For the Fiscal Year Ended | ||||||||
| Cash Flows from Operating Activities | ||||||||
| Net income (loss) | $ | (8,876 | ) | $ | (67,117 | ) | ||
| Adjustments to reconcile net income (loss) to net cash provided (used in) operating activities: | ||||||||
| Deferred income taxes and valuation allowance | 64 | 22,880 | ||||||
| Inventory reserves | 8,875 | 8,828 | ||||||
| Stock-based compensation expense | 100,696 | 67,530 | ||||||
| Depreciation, amortization, and accretion | 29,929 | 22,617 | ||||||
| Other | (3,632 | ) | 882 | |||||
| Change in operating assets and liabilities: | ||||||||
| Inventory | (96,056 | ) | (15,222 | ) | ||||
| Prepaid expenses and other assets | (20,096 | ) | (140 | ) | ||||
| Income tax receivables | (31,700 | ) | (6,543 | ) | ||||
| Operating lease right-of-use assets and liabilities | (1,818 | ) | 394 | |||||
| Accounts payable | (12,385 | ) | (5,520 | ) | ||||
| Accrued liabilities | 22,011 | 8,297 | ||||||
| Deferred revenue | 5,082 | 1,054 | ||||||
| Gift card liability | 1,313 | 1,357 | ||||||
| Other liabilities | (9,082 | ) | 3,580 | |||||
| Net cash provided by (used in) operating activities | (15,675 | ) | 42,877 | |||||
| Cash Flows from Investing Activities | ||||||||
| Purchases of property and equipment | (35,256 | ) | (30,207 | ) | ||||
| Purchases of securities available-for-sale | (173,726 | ) | (248,318 | ) | ||||
| Sales of securities available-for-sale | 104,501 | 36,587 | ||||||
| Maturities of securities available-for-sale | 143,574 | 171,477 | ||||||
| Net cash provided by (used in) investing activities | 39,093 | (70,461 | ) | |||||
| Cash Flows from Financing Activities | ||||||||
| Proceeds from the exercise of stock options, net | 25,932 | 12,078 | ||||||
| Payments for tax withholding related to vesting of restricted stock units | (64,316 | ) | (12,819 | ) | ||||
| Issuance costs on revolving credit facility | (501 | ) | (694 | ) | ||||
| Net cash provided by (used in) financing activities | (38,885 | ) | (1,435 | ) | ||||
| Net increase (decrease) in cash and cash equivalents | (15,467 | ) | (29,019 | ) | ||||
| Effect of exchange rate changes on cash | 1,797 | 1,542 | ||||||
| Cash and cash equivalents at beginning of period | 143,455 | 170,932 | ||||||
| Cash and cash equivalents at end of period | $ | 129,785 | $ | 143,455 | ||||
| Supplemental Disclosure | ||||||||
| Cash paid for income taxes | $ | 461 | $ | 365 | ||||
| Supplemental Disclosure of Non-Cash Investing and Financing Activities: | ||||||||
| Purchases of property and equipment included in accounts payable and accrued liabilities | $ | 3,803 | $ | 4,088 | ||||
| Capitalized stock-based compensation | $ | 5,693 | $ | 2,450 | ||||
| Leasehold improvements paid by landlord | $ | — | $ | 7,406 | ||||
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) expense and other (income) expense, net, as these items are not components of our core business;
- adjusted EBITDA does not reflect our 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
- 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 (loss) excluding interest (income) expense, other (income) expense, net, provision (benefit) for income taxes, depreciation and amortization, and stock-based compensation expense. The following table presents a reconciliation of net income (loss), 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) | ||||||||||||||||
| Net income (loss) | $ | 21,468 | $ | (44,467 | ) | $ | (8,876 | ) | $ | (67,117 | ) | |||||
| Add (deduct): | ||||||||||||||||
| Interest (income) expense | (363 | ) | (1,033 | ) | (2,610 | ) | (5,535 | ) | ||||||||
| Other (income) expense, net | 449 | 162 | 366 | 1,593 | ||||||||||||
| Provision (benefit) for income taxes | (812 | ) | 31,071 | (52,241 | ) | 19,395 | ||||||||||
| Depreciation and amortization | 7,438 | 6,004 | 27,610 | 22,562 | ||||||||||||
| Stock-based compensation expense | 27,210 | 20,055 | 100,696 | 67,530 | ||||||||||||
| Adjusted EBITDA | $ | 55,390 | $ | 11,792 | $ | 64,945 | $ | 38,428 | ||||||||
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 (used in) 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) | ||||||||
| Free cash flow reconciliation: | ||||||||
| Cash flows provided by (used in) operating activities | $ | (15,675 | ) | $ | 42,877 | |||
| Deduct: | ||||||||
| Purchases of property and equipment | (35,256 | ) | (30,207 | ) | ||||
| Free cash flow | $ | (50,931 | ) | $ | 12,670 | |||
| Cash flows provided by (used in) investing activities | $ | 39,093 | $ | (70,461 | ) | |||
| Cash flows provided by (used in) financing activities | $ | (38,885 | ) | $ | (1,435 | ) | ||
Operating Metrics
| Active clients (in thousands) | 4,165 | 4,107 | 3,873 | 3,763 | 3,522 | |||||||||||||||
| Net revenue per active client(1) | $ | 505 | $ | 481 | $ | 467 | $ | 467 | $ | 486 | ||||||||||
________________
(1) Fiscal year 2019 was a 53-week year, with the extra week occurring in the quarter ended
Active Clients
We define an active client as a client who checked out a Fix or was shipped an item using our direct-buy functionality, “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 Men’s, Women’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.