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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended October 29, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission file number: 001-38291
STITCH FIX, INC.
(Exact name of registrant as specified in its charter)
Delaware
27-5026540
(State or other jurisdiction of incorporation or organization)
(I.R.S. Employer Identification No.)
1 Montgomery Street, Suite 1100
San Francisco, California 94104
(Address of principal executive offices and zip code)

(415) 882-7765
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of Each ClassTrading SymbolName of Each Exchange on Which Registered
Class A common stock, par value $0.00002 per shareSFIXNasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 ☒
Accelerated filer
Non-accelerated filer  
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No
As of December 2, 2022, the number of outstanding shares of the registrant’s Class A common stock, par value $0.00002 per share, was 85,403,036, and the number of outstanding shares of the registrant’s Class B common stock, par value $0.00002 per share, was 25,405,020.
1



STITCH FIX, INC.
TABLE OF CONTENTS
 
  
Page No.
   
  
  
  
 
  
  
  
  
  
   
  
  
  
  
  
  
  
  
  
 


2


PART I. FINANCIAL INFORMATION
ITEM 1.FINANCIAL STATEMENTS

Stitch Fix, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
(In thousands, except share and per share amounts)
October 29, 2022July 30, 2022
Assets
Current assets:
Cash and cash equivalents$113,346 $130,935 
Short-term investments90,041 82,049 
Inventory, net220,163 197,251 
Prepaid expenses and other current assets42,095 39,456 
Income tax receivable921 27,561 
Total current assets466,566 477,252 
Long-term investments5,379 17,713 
Income tax receivable, net of current portion26,091 26,091 
Property and equipment, net99,847 103,375 
Operating lease right-of-use assets140,241 132,179 
Other long-term assets6,562 7,925 
Total assets$744,686 $764,535 
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable$142,442 $143,934 
Operating lease liabilities30,199 29,014 
Accrued liabilities97,724 94,416 
Gift card liability10,018 10,551 
Deferred revenue13,757 14,441 
Other current liabilities3,235 3,214 
Total current liabilities297,375 295,570 
Operating lease liabilities, net of current portion147,843 141,334 
Other long-term liabilities4,701 4,980 
Total liabilities449,919 441,884 
Commitments and contingencies (Note 6)
Stockholders’ equity:
Class A common stock, $0.00002 par value – 2,000,000,000 shares authorized; 87,705,177 and 86,187,911 shares issued; 85,403,036 and 86,187,911 shares outstanding
1 1 
Class B common stock, $0.00002 par value – 100,000,000 shares authorized; 25,405,020 and 25,405,020 shares issued and outstanding
1 1 
Additional paid-in capital552,490 522,658 
Accumulated other comprehensive loss(5,325)(3,527)
Accumulated deficit(222,358)(166,440)
Treasury stock at cost (2,302,141 and 2,302,141 shares)
(30,042)(30,042)
Total stockholders’ equity294,767 322,651 
Total liabilities and stockholders’ equity$744,686 $764,535 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
3


Stitch Fix, Inc.
Condensed Consolidated Statements of Operations and Comprehensive Loss
(Unaudited)
(In thousands, except share and per share amounts)
 
 For the Three Months Ended
 October 29, 2022October 30, 2021
Revenue, net$455,593 $581,244 
Cost of goods sold263,832 308,327 
Gross profit191,761 272,917 
Selling, general, and administrative expenses246,891 274,767 
Operating loss(55,130)(1,850)
Interest income773 334 
Other expense, net(1,284)(109)
Loss before income taxes(55,641)(1,625)
Provision for income taxes277 202 
Net loss$(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:  
Basic112,359,901 108,375,911 
Diluted112,359,901 108,375,911 
 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

4


Stitch Fix, Inc.
Condensed Consolidated Statements of Stockholders’ Equity
(Unaudited)
(In thousands, except share amounts)
For the Three Months Ended October 29, 2022
 Common StockAdditional
Paid-In
Capital
Accumulated Other Comprehensive LossAccumulated DeficitTreasury StockTotal
Stockholders’
Equity
 SharesAmountSharesAmount
Balance as of July 30, 2022
111,592,931 $2 $522,658 $(3,527)$(166,440)(2,302,141)$(30,042)$322,651 
Issuance of common stock upon settlement of restricted stock units, net of tax withholdings1,517,266 — (3,753)— — — — (3,753)
Stock-based compensation— — 33,585 — — — — 33,585 
Net loss— — — — (55,918)— — (55,918)
Other comprehensive loss, net of tax— — — (1,798)— — — (1,798)
Balance as of October 29, 2022
113,110,197 $2 $552,490 $(5,325)$(222,358)(2,302,141)$(30,042)$294,767 
For the Three Months Ended October 30, 2021
 Common StockAdditional
Paid-In
Capital
Accumulated Other Comprehensive Income (Loss)Retained
Earnings
Treasury StockTotal
Stockholders’
Equity
 SharesAmountSharesAmount
Balance as of July 31, 2021
107,955,988 $2 $416,755 $3,411 $40,681 $ $460,849 
Issuance of common stock upon exercise of stock options91,394 — 1,054 — — — — 1,054 
Issuance of common stock upon settlement of restricted stock units, net of tax withholdings747,574 — (14,752)— — — — (14,752)
Stock-based compensation— — 34,189 — — — — 34,189 
Net loss— — — — (1,827)— — (1,827)
Other comprehensive loss, net of tax— — — (918)— — — (918)
Balance as of October 30, 2021
108,794,956 $2 $437,246 $2,493 $38,854  $ $478,595 

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

5


Stitch Fix, Inc.
Condensed Consolidated Statements of Cash Flow
(Unaudited)
(In thousands)
 For the Three Months Ended
 October 29, 2022October 30, 2021
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 reserves476 (2,763)
Stock-based compensation expense31,714 32,323 
Depreciation, amortization, and accretion10,157 8,335 
Other31 (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 liabilities4,226 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-sale4,144 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 period130,935 129,785 
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 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6



Stitch Fix, Inc.
Notes to Condensed Consolidated Financial Statements
(Unaudited)
 
1.    Description of Business
Stitch Fix, Inc. (“we,” “our,” “us”, or the “Company”) delivers personalization to our clients through the pairing of data science and human judgment. Currently, clients can engage with us in one of two ways that, combined, form an ecosystem of personalized experiences across styling, shopping, and inspiration: (1) by receiving a personalized shipment of items informed by our algorithms and sent by a Stitch Fix stylist (a “Fix”); or (2) by purchasing directly from our website or mobile app based on a personalized assortment of outfit and item recommendations (“Freestyle”). Clients can choose to schedule automatic shipments or order a Fix on demand after they fill out a style profile on our website or mobile app. After receiving a Fix, our clients purchase the items they want to keep and return the other items, if any. Freestyle utilizes our algorithms to recommend a personalized assortment of outfit and item recommendations that will update throughout the day and will continue to evolve as we learn more about the client. We are incorporated in Delaware and have operations in the United States and the United Kingdom (“UK”).
2.    Summary of Significant Accounting Policies
Basis of Presentation
Our fiscal year is a 52-week or 53-week period ending on the Saturday closest to July 31. The fiscal years ending July 29, 2023 (“2023”), and July 30, 2022 (“2022”), consist of 52 weeks.
The unaudited condensed consolidated financial statements include the accounts of Stitch Fix, Inc. and our wholly owned subsidiaries, and have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and the requirements of the U.S. Securities and Exchange Commission (the “SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. These financial statements have been prepared on the same basis as our annual consolidated financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of our financial information. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending July 29, 2023, or for any other interim period or for any other future year. All intercompany balances and transactions have been eliminated in consolidation.
The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the fiscal year ended July 30, 2022, included in our Annual Report on Form 10-K filed with the SEC on September 21, 2022 (the “2022 Annual Report”).
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in our condensed consolidated financial statements and accompanying footnotes.
Significant estimates and assumptions are used for inventory, stock-based compensation expense, income taxes, and revenue recognition. Actual results could differ from those estimates and such differences may be material to the condensed consolidated financial statements.
Short-Term and Long-Term Investments
Our short-term and long-term investments have been classified and accounted for as available-for-sale securities. We determine the appropriate classification of our investments at the time of purchase and reevaluate the classification at each balance sheet date. Available-for-sale securities with maturities of 12 months or less are classified as short-term and available-for-sale securities with maturities greater than 12 months are classified as long-term. Our available-for-sale securities are carried at fair value, with unrealized gains and losses, net of taxes, reported within accumulated other comprehensive income (loss) (“AOCI”) in stockholders’ equity. The cost of securities sold is based upon the specific identification method.
For debt securities with an amortized cost basis in excess of estimated fair value, we determine what amount of that deficit, if any, is caused by expected credit losses. The portion of the deficit attributable to expected credit losses is recognized in other expense, net on our condensed consolidated statements of operations and comprehensive income. During the three months ended October 29, 2022, we did not record any expected credit losses on our available-for-sale debt securities.
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We have elected to present accrued interest receivable separately from short-term and long-term investments on our condensed consolidated balance sheets. Accrued interest receivable was $0.4 million and $0.3 million as of October 29, 2022, and July 30, 2022, respectively, and was recorded in prepaid expenses and other current assets in the condensed consolidated balance sheets. We have also elected to exclude accrued interest receivable from the estimation of expected credit losses on our available-for-sale securities and reverse accrued interest receivable through interest income when amounts are determined to be uncollectible. We did not write off any accrued interest receivable during the three months ended October 29, 2022, and October 30, 2021, respectively.
Inventory, net
Inventory, net consists of finished goods which are recorded at the lower of cost or net realizable value using the first-in-first-out (FIFO) method. Gross inventory costs include both merchandise costs and in-bound freight costs. Inventory, net includes reserves for excess and slow-moving inventory we expect to write off based on historical trends, damaged inventory, and shrinkage. We estimate and accrue shrinkage as a percentage of inventory out to the client and damaged items at 100% of cost.
Leases
Our leasing portfolio consists of operating leases, which include lease arrangements for our corporate offices, fulfillment centers, and, to a lesser extent, equipment. Operating leases with a term greater than one year are recorded on the condensed consolidated balance sheets as operating lease right-of-use assets and operating lease liabilities at the commencement date. These balances are initially recorded at the present value of future minimum lease payments, which is calculated using our incremental borrowing rate and the expected lease term. Certain adjustments to our operating lease right-of-use assets may be required for items such as initial direct costs paid or incentives received.
In September 2022, we amended our lease agreement for our fulfillment center in Phoenix, AZ, to extend the lease term by five years. We recorded an additional operating lease liability of $14.9 million and right-of-use asset of $14.9 million.
Foreign Currency
The functional currency of our international subsidiary is the British pound sterling. For that subsidiary, we translate assets and liabilities to U.S. dollars using period-end exchange rates, and average monthly exchange rates for revenues, costs, and expenses. We record translation gains and losses in AOCI as a component of stockholders’ equity. Net foreign exchange transaction gains and losses resulting from the conversion of the transaction currency to functional currency are recorded in other expense, net in the condensed consolidated statements of operations and comprehensive income.   
Impairment of Long-Lived Assets
We review our long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets held and used is measured by comparison of the carrying amount of an asset to the future undiscounted cash flows expected to be generated from the use of the asset and its eventual disposition. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount exceeds the fair value of the impaired assets. Assets to be disposed of are reported at the lower of their carrying amount or fair value less cost to sell.
Revenue Recognition
We generate revenue primarily from the sale of merchandise in a Fix or Freestyle. Clients create an online account on our website or mobile app, complete a style profile, and order a Fix or merchandise to be delivered on a specified date.
Each Fix represents an offer made by us to the client to purchase merchandise. The client is charged a nonrefundable upfront styling fee before the Fix is shipped. As an alternative to the styling fee, we offer select clients the option to purchase a Style Pass. Style Pass clients pay a nonrefundable annual fee for unlimited Fixes that is credited towards merchandise purchases. If the offer to purchase merchandise is accepted, we charge the client the order amount for the accepted merchandise, net of the upfront styling fee or Style Pass annual fee. For each Fix, acceptance occurs when the client checks out the merchandise on our website or mobile app. We offer a discount to clients who purchase all of the items in the Fix.
We recognize revenue through the following steps: (1) identification of the contract, or contracts, with the customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, we satisfy a performance obligation.
Our styling fee and Style Pass arrangements represent the option to purchase merchandise. These fees and arrangements are not distinct within the context of the contract with our Fix customers and therefore do not give rise to separate performance obligations. Both the upfront styling fee and Style Pass annual fee are included in deferred revenue until the performance obligation is satisfied when the client exercises his or her option to purchase merchandise (i.e., upon checkout of a Fix) or when the option(s) to purchase merchandise expire(s).
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Revenue is recognized when control of the promised goods is transferred to the client. For a Fix, control is transferred when the client accepts or rejects the offer to purchase merchandise. Upon acceptance by purchasing one or more items within the Fix at checkout, the total amount of the order, including the upfront styling fee, is recognized as revenue. If none of the items within the Fix are accepted at checkout, the upfront styling fee is recognized as revenue at that time. The Style Pass annual fee is recognized at the earlier of (i) the time at which a client accepts and applies the Style Pass fee to an offer to purchase merchandise or (ii) upon expiry of the annual period. Under Style Pass arrangements, if a client does not accept any items within the Fix, the annual fee will continue to be deferred until it is applied to a future purchase or upon expiry of the annual period. If a client would like to exchange an item, we recognize revenue at the time the exchanged item is shipped, which coincides with the transfer of control to the customer. For a Freestyle purchase, control is transferred and revenue is recognized upon shipment to the client.
We deduct discounts, sales tax, and estimated refunds to arrive at net revenue. Sales tax collected from clients is not considered revenue and is included in accrued liabilities until remitted to the taxing authorities. All shipping costs are accounted for in cost of goods sold and all handling costs are accounted for as fulfillment costs within selling, general, and administrative expense (“SG&A”), and are therefore not evaluated as a separate performance obligation. Discounts are recorded as a reduction to revenue when the order is accepted. We record a refund reserve based on our historical refund patterns. Our refund reserve, which is included in accrued liabilities in the condensed consolidated balance sheets, was $10.2 million and $10.3 million as of October 29, 2022, and July 30, 2022, respectively.
We have five types of contractual liabilities: (i) cash collections of upfront styling fees, which are included in deferred revenue and are recognized as revenue upon the earlier of application to a merchandise purchase or expiry of the offer, (ii) cash collections of Style Pass annual fees, which are included in deferred revenue and are recognized upon the earlier of application to a merchandise purchase or expiry of the Style Pass annual period, (iii) unredeemed gift cards, which are included in gift card liability and recognized as revenue upon usage or inclusion in gift card breakage estimates, (iv) referral credits, which are included in other current liabilities and are recognized as revenue when used, and (v) cash collections of Freestyle purchases, which are included in deferred revenue and are recognized as revenue upon shipment.
We sell gift cards to clients and establish a liability based upon the face value of such gift cards. We reduce the liability and recognize revenue upon usage of the gift card. If a gift card is not used, we will recognize estimated gift card breakage revenue proportionately to customer usage of gift cards over the expected gift card usage period, subject to requirements to remit balances to governmental agencies. All commissions paid to third parties upon issuance of gift cards are recognized in SG&A as incurred, as on average, gift cards are used within a one-year period. Similarly, referral credits that are considered incremental costs of obtaining a contract with a customer are recognized in SG&A when issued, as on average, referral credits are used within a one-year period.
We expect deferred revenue for upfront styling fees, Freestyle orders, and Style Pass annual fees to be recognized within one year. On average, gift card liability and other current liabilities are also recognized within one year.
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The following table summarizes the balances of contractual liabilities included in deferred revenue, gift card liability, and other current liabilities as of the dates indicated:
(in thousands)October 29, 2022July 30, 2022
Deferred revenue
Upfront styling fees$8,335 $8,422 
Style Pass annual fees4,154 4,337 
Freestyle orders1,268 1,682 
Total deferred revenue$13,757 $14,441 
Gift card liability$10,018 $10,551 
Other current liabilities
Referral credits$894 $684 
The following table summarizes revenue recognized during the three months ended October 29, 2022, that was previously included in deferred revenue, gift card liability, and other current liabilities at July 30, 2022:
(in thousands)
Revenue Recognized From Amounts Previously Included in Deferred Balances at July 30, 2022
Upfront styling fees$8,295 
Style Pass annual fees2,113 
Freestyle orders1,160 
Gift card liability1,281 
Referral credits545 
Concentration of Credit Risks
We are subject to concentrations of credit risk principally from cash and cash equivalents and investment securities. The majority of our cash is held by two financial institutions within the United States. Our cash balances held by these institutions may exceed federally insured limits. The associated risk of concentration for cash is mitigated by banking with credit-worthy institutions. The associated risk of concentration for cash equivalents and investments is mitigated by maintaining a diversified portfolio of highly rated instruments. 
No client accounted for greater than 10% of total revenue, net for the three months ended October 29, 2022, and October 30, 2021, respectively.
3.    Fair Value Measurements
We disclose and recognize the fair value of our assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes three levels of the fair value hierarchy as follows:
Level 1: Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;
Level 2: Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and
Level 3: Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.
Our financial instruments consist of cash and cash equivalents, short-term and long-term investments, accounts payable, and accrued liabilities. At October 29, 2022, and July 30, 2022, the carrying values of cash and cash equivalents, accounts payable, and accrued liabilities approximated fair value due to their short-term maturities.
The following table sets forth our cash equivalents, and short-term and long-term investments accounted for as available-for-sale securities that were measured at fair value on a recurring basis based on the fair value hierarchy as of October 29, 2022, and July 30, 2022:
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 October 29, 2022July 30, 2022
(in thousands)Level 1Level 2Level 3TotalLevel 1Level 2Level 3Total
Financial Assets:        
Cash equivalents:
Money market funds$61 $ $ $61 $16,267 $ $ $16,267 
Investments:
U.S. Treasury securities42,406   42,406 42,260   42,260 
Commercial paper 2,993  2,993  2,985  2,985 
Corporate bonds 50,021  50,021  54,517  54,517 
Total$42,467 $53,014 $ $95,481 $58,527 $57,502 $ $116,029 
There were no transfers of financial assets or liabilities into or out of Level 1, Level 2, or Level 3 for the three months ended October 29, 2022, and October 30, 2021.
The following table sets forth the amortized cost, gross unrealized gains, gross unrealized losses and fair values of our short-term and long-term investments accounted for as available-for-sale securities as of October 29, 2022, and July 30, 2022:
October 29, 2022July 30, 2022
(in thousands)Amortized CostGross Unrealized GainsGross Unrealized LossesFair ValueAmortized CostGross Unrealized GainsGross Unrealized LossesFair Value
Financial Assets:
Investments:
U.S. Treasury securities$43,366 $ $(960)$42,406 $43,163 $ $(903)$42,260 
Commercial paper2,993   2,993 2,985   2,985 
Corporate bonds51,159  (1,138)50,021 55,526  (1,009)54,517 
Total$97,518 $ $(2,098)$95,420 $101,674 $ $(1,912)$99,762 
The following table shows fair value and gross unrealized losses, aggregated by security category and length of time that individual securities have been in a continuous unrealized loss position as of October 29, 2022:
Less Than 12 MonthsMore Than 12 MonthsTotal
(in thousands)Fair ValueUnrealized LossesFair ValueUnrealized LossesFair ValueUnrealized Losses
Financial Assets:
Investments:
U.S. Treasury securities$42,406 $(960)$ $ $42,406 $(960)
Corporate bonds18,052 (518)31,969 (620)50,021 (1,138)
Total$60,458 $(1,478)$31,969 $(620)$92,427 $(2,098)
Due to the increasing interest rate environment, gross unrealized losses on our available-for-sale securities have increased. We evaluate securities for expected credit losses on a quarterly basis with consideration given to the financial condition and near-term prospects of the issuer; whether we intend to sell the securities, and whether it is more likely than not that we will be required to sell the securities before recovery of their amortized cost basis.
As of October 29, 2022, the losses on our available-for-sale securities were considered to be a direct effect of the increase in interest rates and not the creditworthiness of the issuers. We have the current intent and ability to retain these securities until maturity or recovery of the amortized cost basis. Therefore, we did not recognize any expected credit losses as of October 29, 2022.
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The following table sets forth the fair value of available-for-sale securities by contractual maturity as of October 29, 2022 and July 30, 2022:
October 29, 2022July 30, 2022
(in thousands)One Year or LessOver One Year Through Five YearsOver Five YearsTotalOne Year or LessOver One Year Through Five YearsOver Five YearsTotal
Financial Assets:
Investments:
U.S. Treasury securities$42,147 $259 $ $42,406 $35,473 $6,787 $ $42,260 
Commercial paper2,993   2,993 2,985   2,985 
Corporate bonds44,901 5,120  50,021 43,591 10,926  54,517 
Total$90,041 $5,379 $ $95,420 $82,049 $17,713 $ $99,762 
4.    Accrued Liabilities
Accrued liabilities consisted of the following:
(in thousands)October 29, 2022July 30, 2022
Compensation and related benefits$18,178 $11,319 
Advertising13,322 15,579 
Sales taxes8,262 7,136 
Shipping and freight10,833 10,304 
Accrued accounts payable3,773 5,814 
Inventory purchases24,248 24,712 
Sales refund reserve10,247 10,314 
Other8,861 9,238 
Total accrued liabilities$97,724 $94,416 
5.    Credit Agreement
We are party to an amended and restated credit agreement, entered into June 2, 2021 and amended on July 29, 2022 (the “Amended Credit Agreement”) with Silicon Valley Bank and other lenders, to provide a revolving line of credit of up to $100.0 million, including a letter of credit sub-facility in the aggregate amount of $30.0 million, and a swingline sub-facility in the aggregate amount of $40.0 million. We also have the option to request an incremental facility of up to an additional $150.0 million from one or more of the lenders under the Amended Credit Agreement.
Under the terms of the Amended Credit Agreement, revolving loans may be either Secured Overnight Financing Rate (“SOFR”) Loans or ABR Loans. Outstanding SOFR Loans incur interest at the Adjusted Term SOFR, which is defined in the Amended Credit Agreement as Term SOFR plus the Term SOFR Adjustment), plus a margin of 2.25%. Outstanding ABR Loans incur interest at the highest of (a) the Prime Rate, as published by the Wall Street Journal, (b) the federal funds rate in effect for such day plus 0.50%, and (c) the Adjusted Term SOFR for a one-month tenor in effect on such day plus 1.00%, in each case plus a margin of 1.25%. We are charged a commitment fee of 0.25% for committed but unused amounts. The revolving line of credit under the Amended Credit Agreement will terminate on May 31, 2024, unless the termination date is extended at the election of the lenders.
Our obligations under the Amended Credit Agreement and any hedging or cash management agreements entered into with any lender thereunder are secured by substantially all of our current and future property, rights, and assets, including, but not limited to, cash, goods, equipment, contractual rights, financial assets, and intangible assets. The Amended Credit Agreement contains covenants limiting the ability under certain circumstances to, among other things, dispose of assets, undergo a change in control, merge or consolidate, make acquisitions, incur debt, incur liens, pay dividends, repurchase stock, and make investments, in each case subject to certain exceptions. The Amended Credit Agreement also contains financial covenants requiring us to maintain minimum free cash flow and an adjusted current ratio above specified levels, measured in each case at the end of each fiscal quarter. The Amended Credit Agreement contains events of default that include, among others, non-payment of principal, interest, or fees, breach of covenants, inaccuracy of representations and warranties, cross defaults to certain other indebtedness, bankruptcy and insolvency events, and material judgments.
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As of October 29, 2022, we did not have any borrowings outstanding on the revolving line of credit under the Amended Credit Agreement, and we had $82.2 million in borrowing capacity as reduced by outstanding letters of credit. As of October 29, 2022, we were in compliance with all financial covenants.
6.    Commitments and Contingencies
Contingencies
We record a loss contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We also disclose material contingencies when we believe a loss is not probable but reasonably possible. Accounting for contingencies requires us to use judgment related to both the likelihood of a loss and the estimate of the amount or range of loss. Although we cannot predict with assurance the outcome of any litigation or tax matters, we do not believe there are currently any such actions that, if resolved unfavorably, would have a material impact on our operating results, financial position, and cash flows.
On August 26, 2022, a class action lawsuit alleging violations of federal securities laws was filed by certain of our stockholders in the U.S. District Court for the Northern District of California, naming as defendants us, certain of our officers and directors and certain of our affiliated stockholders. The lawsuit alleges violations of the Securities Exchange Act of 1934, as amended, by us and our officers for allegedly making materially false and misleading statements regarding our Freestyle offering between December 2020 and December 2021. The plaintiffs seek unspecified monetary damages and other relief. 
On October 11, 2018, October 26, 2018, November 16, 2018, and December 10, 2018, four putative class action lawsuits alleging violations of the federal securities laws were filed by certain of our stockholders in the U.S. District Court for the Northern District of California, naming as defendants us and certain of our officers. The four lawsuits each make the same allegations of violations of the Securities Exchange Act of 1934, as amended, by us and our officers for allegedly making materially false and misleading statements regarding our active client growth and strategy with respect to television advertising between June 2018 and October 2018. The plaintiffs seek unspecified monetary damages and other relief. The four lawsuits have been consolidated and a lead plaintiff has been appointed. On September 18, 2019, the lead plaintiff in the consolidated class action lawsuits (the “Class Action”) filed a consolidated complaint for violation of the federal securities laws. On October 28, 2019, we and other defendants filed a motion to dismiss the consolidated complaint. The lead plaintiff filed an opposition to the motion to dismiss on December 9, 2019, and we and the other defendants filed our reply in support of our motion to dismiss on December 30, 2019. The court granted our motion to dismiss on September 30, 2020 but allowed the lead plaintiff to file an amended complaint. On November 6, 2020, the lead plaintiff filed his amended complaint. We filed a motion to dismiss the amended complaint on December 7, 2020. The lead plaintiff filed an opposition to the motion to dismiss on January 8, 2021, and we filed our reply in support of our motion to dismiss on January 22, 2021. The court granted our motion to dismiss on October 1, 2021. On October 29, 2021, the plaintiffs filed a notice of appeal to the Ninth Circuit Court of Appeals. On October 19, 2022, the United States Court of Appeals for the Ninth Circuit affirmed the district court's dismissal of the complaint.
On December 12, 2018, a derivative action was filed against our directors in the same court, alleging the same violations of securities laws as alleged in the Class Action and breach of fiduciary duties. On December 12, 2019, a second derivative action was filed against our directors in the same court, alleging the same violations of securities laws and breach of fiduciary duties as the other derivative action. The two derivative actions have been related to each other and to the Class Action, and all the related cases are now proceeding before a single judge in the U.S. District Court for the Northern District of California. The derivative actions were stayed pending resolution of the plaintiffs’ appeals of the dismissal of the Class Action pursuant to the parties’ stipulation.
There have been no other material changes to our commitments and contingencies disclosed in our 2022 Annual Report.
Indemnifications
In the ordinary course of business, we may provide indemnifications of varying scope and terms to vendors, directors, officers and other parties with respect to certain matters. We have not incurred any material costs as a result of such indemnifications and have not accrued any liabilities related to such obligations in our condensed consolidated financial statements.
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7.    Accumulated Other Comprehensive Loss
The following tables present the changes in AOCI by component and, if applicable, the reclassifications out of AOCI for the periods presented:
For the Three Months Ended October 29, 2022For the Three Months Ended October 30, 2021
(in thousands)Available-for-sale SecuritiesForeign Currency TranslationTotalAvailable-for-sale Securities Foreign Currency TranslationTotal
Beginning balance$(2,340)$(1,187)$(3,527)$(290)$3,701 $3,411 
Other comprehensive loss before reclassifications(1)
(168)(1,612)(1,780)(315)(603)(918)
Amounts reclassified from AOCI(18) (18)   
Net change in AOCI(186)(1,612)(1,798)(315)(603)(918)
Ending balance$(2,526)$(2,799)$(5,325)$(605)$3,098 $2,493 
 (1) There was no associated income tax effect for gains/losses on available-for-sale securities for the three months ended October 29, 2022 or October 30, 2021, as we have recorded a valuation allowance against these deferred tax balances.
8.    Stock-Based Compensation
2011 Equity Incentive Plan
In 2011, we adopted the 2011 Equity Incentive Plan (the “2011 Plan”). The 2011 Plan provided for the grant of stock-based awards to employees, directors, and nonemployees under terms and provisions established by the Board of Directors.
The 2011 Plan allowed for the grant of incentive stock options or nonqualified stock options as well as restricted stock units, restricted stock, and stock appreciation rights. Only incentive and nonqualified stock options were granted under the 2011 Plan. Employee stock option awards generally vested 25% on the first anniversary of the grant date with the remaining shares subject to the option vesting ratably over the next three years subject to the employee’s continued service with the Company. Options generally expire after 10 years. Effective upon our initial public offering in 2017, the 2011 Plan was replaced by the 2017 Incentive Plan.
2017 Incentive Plan
In November 2017, our Board of Directors and stockholders adopted our 2017 Incentive Plan (the “2017 Plan”). The remaining shares available for issuance under our 2011 Plan became reserved for issuance under the 2017 Plan. Our 2017 Plan provides for the grant of Class A incentive stock options to employees, including employees of our subsidiary, and for the grant of nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards (“RSU”), performance stock awards, performance cash awards, and other forms of stock awards to employees, directors, and consultants, including employees and consultants of our subsidiaries. Employee stock option awards generally begin to vest six months after the grant date with the remaining shares subject to the option vesting ratably over the next 30 months. Options generally expire after 10 years. RSU awards made to employees generally vest ratably on a quarterly basis subject to the employee’s continued service with the Company. The number of shares authorized for issuance under the 2017 Plan was 38,257,771 shares of Class A common stock as of October 29, 2022.
2019 Inducement Plan
In October 2019, our Board of Directors adopted our 2019 Inducement Plan (the “2019 Plan”). Our 2019 Plan provides for the grant of Class A nonqualified stock options and RSU awards to individuals who satisfy the standards for inducement grants under the relevant Nasdaq Stock Market rules. The number of shares authorized for issuance under the 2019 Plan was 10,750,000 shares of Class A common stock as of October 29, 2022.
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Stock Options
Stock option activity under the 2011 Plan, 2017 Plan, and 2019 Plan is as follows:
 Options Outstanding
Number of
Options
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Life (in Years)
Aggregate
Intrinsic
Value
(in thousands)
Balance – July 30, 2022
4,703,564 $21.07 7.58$638 
Granted  
Exercised  
Cancelled(322,116)19.50 
Balance – October 29, 2022
4,381,448 $21.18 7.24$333 
The aggregate intrinsic value is the difference between the current fair value of the underlying common stock and the exercise price for in-the-money stock options. During the three months ended October 29, 2022 and October 30, 2021, no options were granted to employees.
Restricted Stock Units
The following table summarizes the RSU award activity under the 2017 Plan and 2019 Plan:
Unvested RSUs
 Class A Common StockWeighted-
Average
Grant Date
Fair Value
Unvested at July 30, 2022
19,217,622 $16.09 
Granted1,648,129 4.02 
Vested(1,517,266)14.93 
Forfeited(1,966,658)17.09 
Unvested at October 29, 2022
17,381,827 $14.93 
Stock-Based Compensation Expense
Stock-based compensation expense for employees was $31.7 million for the three months ended October 29, 2022, and $32.3 million for the three months ended October 30, 2021. Stock-based compensation expense is included in selling, general, and administrative expenses in our condensed consolidated statements of operations and comprehensive income.
As of October 29, 2022, the total unrecognized compensation expense related to unvested options and RSUs, net of estimated forfeitures, was $243.3 million, which we expect to recognize over an estimated weighted average period of 2.4 years.
We record stock-based compensation of stock options granted to employees by estimating the fair value of stock-based awards using the Black-Scholes option pricing model and amortizing the fair value of the stock-based awards granted over the applicable vesting period of the awards on a straight-line basis. During the three months ended October 29, 2022, and October 30, 2021, there were no options granted to employees.
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9.    Income Taxes
The following table summarizes our effective tax rate from income for the periods presented:
 For the Three Months Ended
(in thousands)October 29, 2022October 30, 2021
Loss before income taxes$(55,641)$(1,625)
Provision for income taxes277 202 
Effective tax rate(0.5)%(12.4)%
We are primarily subject to income taxes in the United States and the United Kingdom. Our effective tax rate for the three months ended October 29, 2022, differs from the federal statutory income tax rate primarily due to the full valuation allowance recorded on our net federal and state deferred tax assets. The tax provision for the three months ended October 29, 2022, is primarily comprised of state taxes and income taxes in foreign jurisdictions.
Our effective tax rate for the three months ended October 30, 2021, differed from the federal statutory income tax rate primarily due to the full valuation allowance recorded on our net federal and state deferred tax assets.
We continue to monitor the progress of ongoing discussions with tax authorities and the impact, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions.
10.    Net Loss Per Share Attributable to Common Stockholders
Basic and diluted loss per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities: Class A and Class B common stock. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting, conversion, and transfer rights. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to ten votes per share. Each share of Class B common stock is convertible at any time at the option of the stockholder into one share of Class A common stock.
Basic net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding during the period.
For the calculation of diluted loss per share, net loss attributable to common stockholders for basic loss per share is adjusted by the effect of dilutive securities. Diluted net loss per share attributable to common stockholders is computed by dividing the net loss attributable to common stockholders by the weighted-average number of common shares outstanding, including all potentially dilutive common shares. In periods of loss, there are no potentially dilutive common shares to add to the weighted-average number of common shares outstanding. The undistributed earnings are allocated based on the contractual participation rights of the Class A and Class B common shares as if the losses for the year have been distributed. As the liquidation and dividend rights are identical, the undistributed loss is allocated on a proportionate basis.
In January 2022, the Company's Board of Directors authorized a share repurchase program to repurchase up to $150.0 million of our outstanding Class A common stock, with no expiration date (the “2022 Repurchase Program”). The actual timing, number and value of shares repurchased in the future will be determined by the Company in its discretion and will depend on a number of factors, including market conditions, applicable legal requirements, our capital needs, and whether there is a better alternative use of capital.
Repurchases during any given fiscal period under the 2022 Repurchase Program will reduce the number of weighted-average common shares outstanding for the period.
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A reconciliation of the numerator and denominator used in the calculation of basic and diluted loss per share attributable to Class A and Class B common stockholders is as follows:
 For the Three Months Ended
(in thousands, except share and per share amounts)October 29, 2022October 30, 2021
Numerator: 
Net loss attributable to Class A and Class B common stockholders$(55,918)$(1,827)
Denominator: 
Weighted-average shares of common stock - basic112,359,901 108,375,911 
Weighted-average shares of common stock - diluted112,359,901 108,375,911 
Loss per share attributable to Class A and Class B common stockholders: 
Basic$(0.50)$(0.02)
Diluted$(0.50)$(0.02)

As the Company has reported net loss for each of the periods presented, all potentially dilutive securities were considered antidilutive. The following common stock equivalents were excluded from the computation of diluted loss per share for the periods presented because including them would have been antidilutive:
 For the Three Months Ended
 October 29, 2022October 30, 2021
Restricted stock units that settle into Class A common stock17,381,827 10,105,521 
Stock options to purchase Class A common stock3,341,137 2,266,417 
Stock options to purchase Class B common stock1,040,311 1,232,810 
Total21,763,275 13,604,748 
11.    Restructuring
We announced a restructuring plan on June 9, 2022, to reduce our future fixed and variable operating costs and allow us to centralize key capabilities, strengthen decision-making to drive efficiencies, and ensure we are allocating resources to our most critical priorities. This restructuring plan reduced our workforce by approximately 15% of salaried positions and represented approximately 4% of our roles in total. In the first quarter of fiscal 2023, we recorded $0.9 million of additional restructuring charges consisting of severance and employee-related benefits. These charges were recorded in selling, general, and administrative expenses on the consolidated statements of operations and comprehensive loss.
The following table provides the components of and changes in the Company’s restructuring and related charges, included in accrued liabilities on the consolidated balance sheets:
(in thousands)Severance and Employee Related Benefits
Balance at July 30, 2022
$290 
Charges incurred927 
Cash payments(480)
Balance at October 29, 2022
$737 
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ITEM 2.    Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes thereto included in Part I, Item 1 of this report and with our audited consolidated financial statements and related notes and our Annual Report on Form 10-K (the “2022 Annual Report”) for the year ended July 30, 2022, filed with the Securities and Exchange Commission on September 21, 2022. We use a 52- or 53-week fiscal year, with our fiscal year ending on the Saturday that is closest to July 31 of that year. Each fiscal year typically consists of four 13-week fiscal quarters. The fiscal year ending July 29, 2023, and the fiscal year ended July 30, 2022, include 52 weeks of operations. Throughout this Quarterly Report on Form 10-Q (this “Quarterly Report”), all references to quarters and years are to our fiscal quarters and fiscal years unless otherwise noted.
Special Note Regarding Forward-Looking Statements
This Quarterly Report contains forward-looking statements that involve risks, uncertainties, and assumptions that, if they never materialize or prove incorrect, could cause our results to differ materially from those expressed or implied by such forward-looking statements. The statements contained in this Quarterly Report that are not purely historical, including without limitation statements in the following discussion and analysis of financial condition and results of operations regarding our projected financial position and results, business strategy, plans, and objectives of our management for future operations, are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Private Securities Litigation Reform Act of 1995. Forward-looking statements are often identified by the use of words such as, but not limited to, “anticipate,” “believe,” “can,” “continue,” “could,” “estimate,” “expect,” “intend,” “may,” “might,” “plan,” “project,” “seek,” “should,” “target,” “will,” “would,” and similar expressions or variations intended to identify forward-looking statements. These statements are based on the beliefs and assumptions of our management, which are in turn based on information currently available to management. Such forward-looking statements are subject to risks, uncertainties, and other important factors that could cause actual results and the timing of certain events to differ materially from future results expressed or implied by such forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section titled “Risk Factors” included under Part II, Item 1A below. Furthermore, such forward-looking statements speak only as of the date of this Quarterly Report. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements.
Overview
Since our founding in 2011, we have helped millions of women, men, and kids discover and buy what they love through personalized shipments of apparel, shoes, and accessories. Currently, clients can engage with us in one of two ways that, combined, form an ecosystem of personalized experiences across styling, shopping, and inspiration: (1) by receiving a personalized shipment of items informed by our algorithms and sent by a Stitch Fix stylist (a “Fix”); or (2) by purchasing directly from our website or mobile app based on a personalized assortment of outfit and item recommendations (“Freestyle”). For a Fix, clients can choose to schedule automatic shipments or order on demand after they fill out a style profile on our website or mobile app. After receiving a Fix, our clients purchase the items they want to keep and return the other items, if any. Freestyle utilizes our algorithms to recommend a personalized assortment of outfit and item recommendations that will update throughout the day and will continue to evolve as we learn more about the client.
For the three months ended October 29, 2022, we reported $455.6 million in net revenue, representing a year-over-year decline of 21.6% from the three months ended October 30, 2021. As of October 29, 2022, and October 30, 2021, we had 3,709,000 and 4,180,000 active clients, respectively, representing a year-over-year decline of 11.3%.
During fiscal 2022, we experienced a decline in net revenue year-over-year primarily due to our challenges in acquiring new clients. This trend has continued in the first quarter of fiscal 2023, and we expect these challenges in acquiring active clients to have a negative compounding effect on net revenue in fiscal 2023. We are continuing to navigate the uncertainties presented by the current macroeconomic environment and remain focused on retaining current clients, improving the conversion of new clients, and enhancing our overall client experience for new and existing clients.
Net loss for the three months ended October 29, 2022, was $55.9 million, compared to a net loss of $1.8 million for the three months ended October 30, 2021.
We announced a restructuring plan on June 9, 2022, to reduce our future fixed and variable operating costs and allow us to centralize key capabilities, strengthen decision-making to drive efficiencies, and ensure we are allocating resources to our most critical priorities. This restructuring plan reduced our workforce by approximately 15% of salaried positions and represented approximately 4% of our roles in total. In connection with the restructuring plan, we incurred $0.9 million in restructuring costs in the first quarter of fiscal 2023. We also incurred other one-time cash charges related to retention bonuses for continuing employees of $5.2 million in the first quarter of fiscal 2023.
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We are continuing to evaluate other fixed and variable operating costs, including rationalizing our real estate footprint and further optimizing and being disciplined in our marketing strategy to better position ourselves for profitability. However, our future results of operations will depend on our ability to successfully navigate current business challenges and the overall macroeconomic environment.
For more information on the components of net loss for the three months ended October 29, 2022, refer to the section titled “Results of Operations” below.
Key Financial and Operating Metrics
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. We believe 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.
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.
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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)October 29, 2022October 30, 2021
Net loss$(55,918)$(1,827)
Add (deduct):
Interest income(773)(334)
Other expense, net1,284 109 
Provision for income taxes277 202 
Depreciation and amortization9,840 7,740 
Stock-based compensation expense31,714 32,323 
Restructuring and other one-time costs(1)
6,155 — 
Adjusted EBITDA$(7,421)$38,213 
(1)Restructuring charges consist of $0.9 million in severance and employee-related benefits. Other one-time costs consists of $5.3 million in retention bonuses for continuing employees.
Free Cash Flow
We define free cash flow as cash flows (used in) provided by operating activities reduced by purchases of property and equipment that are included in cash flows used in investing activities. The following table presents a reconciliation of cash flows provided by operating activities, the most comparable GAAP financial measure, to free cash flow for each of the periods presented:
 For the Three Months Ended
(in thousands)October 29, 2022October 30, 2021
Free cash flow reconciliation:  
Cash flows (used in) provided by operating activities$(10,048)$141,656 
Deduct:  
Purchases of property and equipment(6,143)(16,392)
Free cash flow$