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PRESS RELEASE from provider: Globe Newswire
This content is a press release from our partner Globe Newswire. The AP newsroom and editorial departments were not involved in its creation.

Stitch Fix Announces Second Quarter Fiscal Year 2019 Financial Results

March 11, 2019

SAN FRANCISCO, March 11, 2019 (GLOBE NEWSWIRE) -- Stitch Fix, Inc. (NASDAQ:SFIX), the leading online personal styling service, has released its financial results for the second quarter of fiscal year 2019 ended January 26, 2019, and posted a letter to its shareholders on its investor relations website.

Second quarter highlights

-- Active clients of 3.0 million, an increase of 18% year over year -- Net revenue of $370.3 million, an increase of 25% year over year -- Net income of $12.0 million and adjusted EBITDA of $19.2 million -- Diluted earnings per share of $0.12

“Q2 was another strong quarter for us, delivering net revenue of $370.3 million, exceeding our guidance and representing 25% year-over-year growth,” said Stitch Fix Founder and CEO Katrina Lake. “Since becoming a public company, we have posted six consecutive quarters of over 20% growth, which demonstrates our ability to drive consistent business performance. I’m proud that we’re now serving 3 million people across the U.S. and remain focused on delighting our existing clients and expanding our reach. We launched our first integrated brand campaign in February to increase awareness and consideration with new and existing clients and we’re excited to connect even more people to the power of personalized styling.”

Please visit the Stitch Fix investor relations website at https://investors.stitchfix.com to view the financial results included in the letter to shareholders. The Company intends to continue to make future announcements of material financial and other information through its investor relations website. The Company will also, from time to time, disclose this information through press releases, filings with the Securities and Exchange Commission, conference calls, or webcasts, as required by applicable law.

Conference Call and Webcast Information

Katrina Lake, Founder and Chief Executive Officer of Stitch Fix, Paul Yee, Chief Financial Officer of Stitch Fix, and Mike Smith, President and Chief Operating Officer of Stitch Fix, will host a conference call at 2:00 p.m. Pacific Time today to discuss the Company’s financial results and outlook. A live webcast will be accessible on Stitch Fix’s investor relations website at investors.stitchfix.com. Interested parties can also access the call by dialing (888) 254-3590 in the U.S. or (323) 994-2093 internationally, and entering conference code 1231328.

A telephonic replay will be available through Monday, March 18, 2019, at (888) 203-1112 or (719) 457-0820, passcode 1231328. An archive of the webcast conference call will be available shortly after the call ends at https://investors.stitchfix.com.

About Stitch Fix, Inc.

Stitch Fix is reinventing the shopping experience by delivering one-to-one personalization to our clients, through the combination of data science and human judgment. Stitch Fix was founded in 2011 by Founder and CEO Katrina Lake. Since our founding, we’ve helped millions of men, women, and kids discover and buy what they love through personalized shipments of apparel, shoes, and accessories, hand-selected by Stitch Fix stylists and delivered to our clients’ homes.

Forward-Looking Statements

This press release and 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 future financial performance, including our guidance on financial results for the third quarter and full year of fiscal 2019; market trends, growth, and opportunity; profitability; competition; the timing and success of expansions to our offering and penetration of our target markets, such as the launch of our offering in the United Kingdom; our ability to leverage our engineering and data science capabilities to drive efficiencies in our business and enhance our ability to personalize; our plans related to client acquisition, including any impact on our costs and margins and our ability to determine optimal marketing and advertising methods; and our ability to successfully acquire, engage, and retain clients. These statements involve substantial risks and uncertainties, including risks and uncertainties related to 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 international operations; and other risks described in the filings we make with the Securities and Exchange Commission (“SEC”). Further information on these and other factors that could cause our financial results, performance, and achievements to differ materially from any results, performance, or achievements anticipated, expressed, or implied by these forward-looking statements is included in filings we make with the SEC from time to time, including in the section titled “Risk Factors” in our Quarterly Report on Form 10-Q for the fiscal quarter ended October 27, 2018. These documents are available on the SEC Filings section of the Investor Relations section of our website at: http://investors.stitchfix.com. We undertake no obligation to update any forward-looking statements made in this press release to reflect events or circumstances after the date of this press release or to reflect new information or the occurrence of unanticipated events, except as required by law. The achievement or success of the matters covered by such forward-looking statements involves known and unknown risks, uncertainties, and assumptions. If any such risks or uncertainties materialize or if any of the assumptions prove incorrect, our results could differ materially from the results expressed or implied by the forward-looking statements we make. You should not rely upon forward-looking statements as predictions of future events. Forward-looking statements represent our management’s beliefs and assumptions only as of the date such statements are made.

Stitch Fix, Inc. Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except share and per share amounts) January 26, 2019 July 28, 2018 ---------------- ------------- Assets Current assets: Cash and cash equivalents $ 167,496 $ 297,516 Restricted cash 250 250 Short-term investments 109,363 — Inventory, net 103,167 85,092 Prepaid expenses and other current assets 33,160 34,148 --------- ------ --------- --- Total current assets 413,436 417,006 Long-term investments 66,734 — Property and equipment, net 44,888 34,169 Deferred tax assets 16,383 14,107 Restricted cash, net of current portion 12,600 12,600 Other long-term assets 3,010 3,703 --------- ------ --------- --- Total assets $ 557,051 $ 481,585 - ------- ------ - ------- --- Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 86,815 $ 79,782 Accrued liabilities 66,080 43,037 Gift card liability 9,921 6,814 Deferred revenue 12,496 8,870 Other current liabilities 1,847 3,729 --------- ------ --------- --- Total current liabilities 177,159 142,232 Deferred rent, net of current portion 16,420 15,288 Other long-term liabilities 10,183 8,993 --------- ------ --------- --- Total liabilities 203,762 166,513 --------- ------ --------- --- Stockholders’ equity: Class A common stock, $0.00002 par value 1 1 Class B common stock, $0.00002 par value 1 1 Additional paid-in capital 250,699 235,312 Accumulated other comprehensive income 141 — Retained earnings 102,447 79,758 --------- ------ --------- --- Total stockholders’ equity 353,289 315,072 --------- ------ --------- --- Total liabilities and stockholders’ equity $ 557,051 $ 481,585 - ------- ------ - ------- ---

Stitch Fix, Inc. Condensed Consolidated Statements of Operations and Comprehensive Income (Unaudited) (In thousands, except share and per share amounts) For the Three Months For the Six Months Ended Ended January 26, January 27, January 26, January 27, 2019 2018 2019 2018 ----------- ----------- ----------- ----------- Revenue, net $ 370,280 $ 295,906 $ 736,516 $ 591,469 Cost of goods sold 207,131 168,523 408,199 335,071 --------- - --------- - --------- - --------- - Gross profit 163,149 127,383 328,317 256,398 --------- - --------- - --------- - --------- - Selling, general, and administrative expenses 147,738 111,771 302,009 231,242 --------- - --------- - --------- - --------- - Operating income 15,411 15,612 26,308 25,156 Remeasurement of preferred stock warrant liability — (1,614 ) — (10,685 ) Interest income (1,170 ) (18 ) (2,569 ) (35 ) Other income, net (453 ) — (573 ) — --------- - --------- - --------- - --------- - Income before income taxes 17,034 17,244 29,450 35,876 Provision for income taxes 5,058 13,603 6,796 18,747 --------- - --------- - --------- - --------- - Net income $ 11,976 $ 3,641 $ 22,654 $ 17,129 - ------- - - ------- - - ------- - - ------- - Other comprehensive income: Change in unrealized gain on available-for-sale 104 — 22 — securities, net of tax Foreign currency translation 93 — $ 119 $ — --------- - --------- - - ------- - - ------- - Total other comprehensive income, net of tax 197 — $ 141 $ — --------- - --------- - - ------- - - ------- - Comprehensive income $ 12,173 $ 3,641 $ 22,795 $ 17,129 - ------- - - ------- - - ------- - - ------- - Net income attributable to common stockholders: Basic $ 11,968 $ 3,036 $ 22,632 $ 9,794 - ------- - - ------- - - ------- - - ------- - Diluted $ 11,968 $ 1,653 $ 22,633 $ 3,530 - ------- - - ------- - - ------- - - ------- - Earnings per share attributable to common stockholders: Basic $ 0.12 $ 0.04 $ 0.23 $ 0.18 - ------- - - ------- - - ------- - - ------- - Diluted $ 0.12 $ 0.02 $ 0.22 $ 0.06 - ------- - - ------- - - ------- - - ------- - Weighted-average shares used to compute earnings per share attributable to common stockholders: Basic 99,590,187 82,439,351 99,278,599 54,377,466 --------- - --------- - --------- - --------- - 102,817,83 87,954,656 103,597,31 60,599,568 Diluted 8 6 --------- - --------- - --------- - --------- -

Stitch Fix, Inc. Condensed Consolidated Statements of Cash Flow (Unaudited) (In thousands) For the Six Months Ended January 26, January 27, 2019 2018 ----------- ----------- Cash Flows from Operating Activities Net income $ 22,654 $ 17,129 Adjustments to reconcile net income to net cash provided by operating activities: Deferred income taxes (2,288 ) 5,498 Remeasurement of preferred stock warrant liability — (10,685 ) Inventory reserves 4,853 7,027 Stock-based compensation expense 14,747 5,135 Depreciation and amortization 6,456 4,888 Loss on disposal of property and equipment — 131 Change in operating assets and liabilities: Inventory (22,928 ) (19,529 ) Prepaid expenses and other assets 1,546 5,078 Accounts payable 7,012 10,843 Accrued liabilities 17,689 4,484 Deferred revenue 3,822 3,283 Gift card liability 3,512 2,961 Other liabilities 592 (2,508 ) --------- - --------- - Net cash provided by operating activities 57,667 33,735 Cash Flows from Investing Activities Purchases of property and equipment (11,903 ) (8,232 ) Purchases of securities available-for-sale (185,994 ) — Sales of securities available-for-sale 1,163 — Maturities of securities available-for-sale 9,500 — Net cash used in investing activities (187,234 ) (8,232 ) Cash Flows from Financing Activities Proceeds from initial public offering, net of underwriting discounts paid — 129,046 Proceeds from the exercise of stock options, net 1,931 1,006 Payments for tax withholding related to vesting of restricted stock units (2,281 ) — Repurchase of Class B common stock related to early exercised options — (39 ) Net cash (used in) provided by financing activities (350 ) 130,013 --------- - --------- - Net increase (decrease) in cash, cash equivalents, and restricted cash (129,917 ) 155,516 Effect of exchange rate changes on cash (103 ) — --------- - --------- - Cash, cash equivalents, and restricted cash at beginning of period 310,366 119,958 --------- - --------- - Cash, cash equivalents, and restricted cash at end of period $ 180,346 $ 275,474 - ------- - - ------- - Components of Cash, Cash Equivalents, and Restricted Cash Cash and cash equivalents $ 167,496 $ 266,374 Restricted cash – current portion 250 — Restricted cash – long-term portion 12,600 9,100 --------- - --------- - Total cash, cash equivalents, and restricted cash $ 180,346 $ 275,474 - ------- - - ------- - Supplemental Disclosure Cash paid for income taxes $ 191 $ 3,091 - ------- - - ------- - Supplemental Disclosure of Non-Cash Investing and Financing Activities: Purchases of property and equipment included in accounts payable and accrued $ 4,741 $ 780 liabilities - ------- - - ------- - Capitalized stock-based compensation $ 812 $ 261 - ------- - - ------- - Vesting of early exercised options $ 178 $ 456 - ------- - - ------- - Deferred offering costs included in accounts payable and accrued liabilities $ — $ 134 - ------- - - ------- - Conversion of preferred stock upon initial public offering $ — $ 42,222 - ------- - - ------- - Reclassification of preferred stock warrant liability upon initial public offering $ — $ 15,994 - ------- - - ------- - Deferred offering costs paid in prior year $ — $ 1,879 - ------- - - ------- -

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. Management believes that excluding certain items that may vary substantially in frequency and magnitude period-to-period from net income and earnings per share (“EPS”) provides useful supplemental measures that assist in evaluating our ability to generate earnings and to more readily compare these metrics between past and future periods. Management also believes 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. For instance, we do not exclude stock-based compensation expense from adjusted EBITDA or non-GAAP net income. Stock-based compensation is an important part of how we attract and retain our employees, and we consider it to be a real cost of running the business.

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:

-- our non-GAAP net income and non-GAAP EPS – diluted measures exclude the impact of the remeasurement of our net deferred tax assets following the adoption of the Tax Cuts and Jobs Act (“Tax Act”); -- our non-GAAP net income, adjusted EBITDA and non-GAAP EPS – diluted measures exclude the remeasurement of the preferred stock warrant liability, which is a non-cash expense incurred in the periods prior to the completion of our initial public offering; -- 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 does not reflect our tax provision, which reduces cash available to us; -- adjusted EBITDA excludes interest income and other income, net, as these items are not components of our core 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 excluding interest income, other income, net, provision for income taxes, depreciation and amortization, and, when present, the remeasurement of preferred stock warrant liability. The following table presents a reconciliation of net income, the most comparable GAAP financial measure, to adjusted EBITDA for each of the periods presented:

For the Three Months For the Six Months Ended Ended (in thousands) January January January January 26, 2019 27, 2018 26, 2019 27, 2018 -------------------------------------------------- ---------- ---------- ---------- ---------- Adjusted EBITDA reconciliation: Net income $ 11,976 $ 3,641 $ 22,654 $ 17,129 Add (deduct): Interest income (1,170 ) (18 ) (2,569 ) (35 ) Other income, net (453 ) — (573 ) — Provision for income taxes 5,058 13,603 6,796 18,747 Depreciation and amortization 3,790 2,618 7,184 4,888 Remeasurement of preferred stock warrant liability — (1,614 ) — (10,685 ) Adjusted EBITDA $ 19,201 $ 18,230 $ 33,492 $ 30,044 - ------ - - ------ - - ------ - - ------ -

Non-GAAP Net Income

We define non-GAAP net income as net income excluding, when present, the remeasurement of preferred stock warrant liability and the remeasurement of our net deferred tax assets in relation to the adoption of the Tax Act. The following table presents a reconciliation of net income, the most comparable GAAP financial measure, to non-GAAP net income for each of the periods presented:

For the Three Months Ended For the Six Months Ended (in thousands) January 26, 2019 January January 26, 2019 January 27, 2018 27, 2018 -------------------------------------------------- ---------------- --------- ---------------- ---------- Non-GAAP net income reconciliation: Net income $ 11,976 $ 3,641 $ 22,654 $ 17,129 Add (deduct): Remeasurement of preferred stock warrant liability — (1,614 ) — (10,685 ) Impact of Tax Act (1) — 4,730 — 4,730 -------- ------- -------- - Non-GAAP net income $ 11,976 $ 6,757 $ 22,654 $ 11,174 - ------ ------- - ----- - - ------ ------- - ------ -

(1) The U.S. government enacted comprehensive tax legislation in December 2017. This resulted in a net charge of $4.7 million for the three and six months ended January 27, 2018, due to the remeasurement of our net deferred tax assets for the reduction in tax rate from 35% to 21%. The adjustment to non-GAAP net income only includes this transitional impact. It does not include the ongoing impacts of the lower U.S. statutory rate on current year earnings.

Non-GAAP Earnings Per Share – Diluted

We define non-GAAP EPS as diluted EPS excluding, when present, the per share impact of the remeasurement of preferred stock warrant liability and the remeasurement of our net deferred tax assets in relation to the adoption of the Tax Act. The following table presents a reconciliation of EPS attributable to common stockholders – diluted, the most comparable GAAP financial measure, to non-GAAP EPS attributable to common stockholders – diluted for each of the periods presented:

For the Three Months Ended For the Six Months Ended (in dollars) January 26, 2019 January 27, 2018 January 26, 2019 January 27, 2018 ------------------------------------- ---------------- ---------------- ---------------- ---------------- Non-GAAP earnings per share –diluted reconciliation: Earnings per share attributable to $ 0.12 $ 0.02 $ 0.22 $ 0.06 common stockholders – diluted Per share impact of the remeasurement of preferred stock warrant liability — — — — (1) Per share impact of Tax Act(2) — 0.05 — 0.08 ------ --------- ------ --------- Non-GAAP earnings per share attributable to common stockholders $ 0.12 $ 0.07 $ 0.22 $ 0.14 –diluted - ---- --------- - ---- --------- - ---- --------- - ---- ---------

(1) For the three and six months ended January 27, 2018, the preferred stock warrant liability was dilutive and included in earnings per share attributable to common stockholders – diluted. Therefore, it is not an adjustment to arrive at non-GAAP EPS – diluted.

(2) The U.S. government enacted comprehensive tax legislation in December 2017. This resulted in a net charge of $4.7 million for the three and six months ended January 27, 2018, due to the remeasurement of our net deferred tax assets for the reduction in tax rate from 35% to 21%. The adjustment to non-GAAP earnings per share attributable to common stockholders – diluted only includes this transitional impact. It does not include the ongoing impacts of the lower U.S. statutory rate on current year earnings.

Free Cash Flow

We define free cash flow as cash flows provided by operations 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 Six Months Ended (in thousands) January 26, January 27, 2019 2018 ----------------------------------------------------- ------------ ----------- Free cash flow reconciliation: Cash flows provided by operating activities $ 57,667 $ 33,735 Deduct: Purchases of property and equipment (11,903 ) (8,232 ) ---------- - --------- - Free cash flow $ 45,764 $ 25,503 - -------- - - ------- - Cash flows used in investing activities $ (187,234 ) $ (8,232 ) Cash flows (used in) provided by financing activities $ (350 ) $ 130,013

IR Contact: David Pearce ir@stitchfix.com PR Contact: Suzy Sammons media@stitchfix.com