GlobeNewswire Inc | Dec 7, 2020 04:05PM EST

December 07, 2020

SAN FRANCISCO, Dec. 07, 2020 (GLOBE NEWSWIRE) -- Stitch Fix, Inc. (NASDAQ:SFIX), the leading online personal styling service, has released its financial results for the first quarter of fiscal year 2021 ended October31, 2020, and posted a letter to its shareholders on its investor relations website.

First quarter highlights

-- Net revenue of $490.4 million, an increase of 10% year over year -- Active clients of nearly 3.8 million, an increase of 347,000 or 10% year over year, and 241,000 clients quarter over quarter -- Net revenue per active client of $467, a decrease of 4% year over year -- Net income of $9.5 million and diluted earnings per share of $0.09 -- Adjusted EBITDA of $6.9 million

Stitch Fix Founder and CEO Katrina Lake said, In Q1, we delivered $490 million in net revenue, reflecting 10% year-over-year growth, and grew our active client count to nearly 3.8 million, reflecting 10% year-over-year growth. This quarter we are proud to have achieved several multi-year highs, including our highest sequential client addition on record and the highest level of successful first Fixes in the past five years. Our powerful personalization engine is evolving, and innovations in our Fix and direct buy offerings will expand our addressable market, deepen client engagement and grow wallet share over time. We're excited about the momentum in our business, confident in the future ahead, and we expect to deliver between 20% and 25% growth for the full year.

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 (the SEC), conference calls, or webcasts, as required by applicable law.

Conference Call and Webcast Information

Katrina Lake, Founder and Chief Executive Officer of Stitch Fix, Mike Smith, President, Chief Operating Officer, and interim Chief Financial Officer of Stitch Fix, and Elizabeth Spaulding, President of Stitch Fix, will host a conference call at 2:00 p.m. Pacific Time today to discuss the Companys financial results and outlook. A live webcast will be accessible on Stitch Fixs investor relations website at investors.stitchfix.com. Interested parties can also access the call by dialing 800-458-4121 in the U.S. or 323-794-2093 internationally, and entering conference code 1665713.

A telephonic replay will be available through Monday, December 14, 2020, at 888-203-1112 or 719-457-0820, passcode 1665713. 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 an online personal styling service that 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 CEO Katrina Lake. Since then, weve helped millions of women, men, and kids discover and buy what they love through personalized selections of apparel, shoes, and accessories, curated by Stitch Fix stylists and algorithms. For more information about Stitch Fix, please visit https://www.stitchfix.com.

Forward-Looking Statements

This press release, the related conference call and webcast, and the letter to shareholderscontain 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 profitability; guidance on financial results for the second quarter and full year of 2021; the momentum of our business and improving trends; the impact of the COVID-19 pandemic on consumer purchasing behavior; the secular shift to online shopping and market share gains that we expect; acceleration of active client growth, continued increases in active clients and higher new client sign-ups; our ability to serve higher Fix demand in fiscal year 2021; our ability to adapt quickly to new and changing consumer demands, including shifting our inventory mix to meet consumer demand; the enhancements of our Fix and direct buy offerings to expand our addressable market, deepen client engagement and grow client wallet share; whether favorable first Fix outcomes indicate future client behavior; the continued success of our direct-buy functionality and plans for its expansion, and whether direct-buy becomes the growth vector we think it represents to acquire new clients, convert prospective clients and reactivate lapsed clients; whether newly launched direct-buy capabilities, such as Trending For You or Shop by Category will be as successful as we expect, including whether they elevate client engagement and create opportunities; our plans to expand our Fix Preview initiative and its impact on client satisfaction, retention, keep rate and average order value; our ability to attract high-quality clients and to convert our large prospect population; 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 for individual clients; our plans to increase marketing spend to capitalize on market share shifts and improving consumer optimism in the quarters ahead; whether our marketing investments and initiatives to create personalized advertising will be effective in acquiring, engaging and retaining clients; improvements in marketing efficiencies, including decreases in CPAs and our ability to determine optimal marketing and advertising methods; and the resilience of our warehouse network and whether we will be able to operate uninterrupted by the COVID-19 pandemic. 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, and suppliers, and the responses of 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 international operations; and other risks described in the filings we make with the 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 Annual Report on Form 10-K for the fiscal year ended August1, 2020. These documents are available on the SEC Filings section of the Investor Relations section of our website at: https://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 managements 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)

October 31, August 1, 2020 2020Assets Current assets: Cash and cash equivalents $ 200,346 $ 143,455 Short-term investments 187,979 143,037 Inventory, net 156,786 124,816 Prepaid expenses and other current assets 52,322 55,002 Total current assets 597,433 466,310 Long-term investments 41,592 95,097 Property and equipment, net 71,275 70,369 Operating lease right-of-use assets 135,561 132,615 Other long-term assets 34,363 5,038 Total assets $ 880,224 $ 769,429 Liabilities and Stockholders? Equity Current liabilities: Accounts payable $ 129,547 $ 85,177 Operating lease liabilities 25,531 24,333 Accrued liabilities 110,800 77,590 Gift card liability 8,319 8,590 Deferred revenue 14,963 13,059 Other current liabilities 5,902 3,406 Total current liabilities 295,062 212,155 Operating lease liabilities, net of current 140,298 140,175 portionOther long-term liabilities 16,277 16,062 Total liabilities 451,637 368,392 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 367,760 348,750 Accumulated other comprehensive income (loss) 1,727 2,728 Retained earnings 59,098 49,557 Total stockholders? equity 428,587 401,037 Total liabilities and stockholders? equity $ 880,224 $ 769,429

Stitch Fix, Inc.Condensed Consolidated Statements of Operations and Comprehensive Income (Loss)(Unaudited)(In thousands, except share and per share amounts)

For the Three Months Ended October 31, November 2, 2020 2019Revenue, net $ 490,423 $ 444,815 Cost of goods sold 270,972 243,513 Gross profit 219,451 201,302 Selling, general, and administrative 238,984 201,142 expensesOperating income (loss) (19,533 ) 160 Interest (income) expense (1,161 ) (1,653 )Other (income) expense, net 205 834 Income (loss) before income taxes (18,577 ) 979 Provision (benefit) for income taxes (28,118 ) 1,157 Net income (loss) $ 9,541 $ (178 )Other comprehensive income (loss): Change in unrealized gain (loss) on (663 ) (172 )available-for-sale securities, net of taxForeign currency translation (338 ) 1,755 Total other comprehensive income (loss), (1,001 ) 1,583 net of taxComprehensive income (loss) $ 8,540 $ 1,405 Net income (loss) attributable to common stockholders:Basic $ 9,541 $ (178 )Diluted $ 9,541 $ (178 )Earnings (loss) per share attributable to common stockholders:Basic $ 0.09 $ (0.00 )Diluted $ 0.09 $ (0.00 )Weighted-average shares used to computeearnings (loss) per share attributable to common stockholders:Basic 104,134,850 101,557,546 Diluted 109,477,354 101,557,546

Stitch Fix, Inc.Condensed Consolidated Statements of Cash Flow(Unaudited)(In thousands)

Three Months Ended October 31, November 2, 2020 2019Cash Flows from Operating Activities Net income (loss) $ 9,541 (178 )Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:Deferred income taxes ? (1,960 )Inventory reserves (1,343 ) 1,801 Stock-based compensation expense 19,925 12,126 Depreciation, amortization, and accretion 6,961 4,652 Other 271 13 Change in operating assets and liabilities: Inventory (30,665 ) (31,837 )Prepaid expenses and other assets (28,299 ) 2,973 Operating lease right-of-use assets and liabilities (225 ) 272 Accounts payable 44,609 21,721 Accrued liabilities 32,237 16,170 Deferred revenue 1,906 (25 )Gift card liability (271 ) (354 )Other liabilities 2,712 2,150 Net cash provided by (used in) operating activities 57,359 27,524 Cash Flows from Investing Activities Purchases of property and equipment (5,985 ) (7,502 )Purchases of securities available-for-sale (41,307 ) (67,535 )Sales of securities available-for-sale 16,193 5,306 Maturities of securities available-for-sale 32,800 23,210 Net cash provided by (used in) investing activities 1,701 (46,521 )Cash Flows from Financing Activities Proceeds from the exercise of stock options, net 5,106 518 Payments for tax withholding related to vesting of (7,002 ) (2,212 )restricted stock unitsNet cash provided by (used in) financing activities (1,896 ) (1,694 )Net increase (decrease) in cash and cash equivalents 57,164 (20,691 )Effect of exchange rate changes on cash (273 ) 1,538 Cash and cash equivalents at beginning of period 143,455 170,932 Cash and cash equivalents at end of period $ 200,346 $ 151,779 Supplemental Disclosure Cash paid for income taxes $ 38 $ 7 Supplemental Disclosure of Non-Cash Investing and Financing Activities:Purchases of property and equipment included in $ 4,880 $ 731 accounts payable and accrued liabilitiesCapitalized stock-based compensation $ 981 $ 773 Leasehold improvements paid by landlord $ ? $ 7,406

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) expense and other (income) expense, net, as these items are not components of our core business; -- adjusted EBITDA does not reflect our tax provision, which reduces 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, provision (benefit) for income taxes, other (income) expense, net, 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(in thousands) October 31, November 2, 2019 2020Net income (loss) $ 9,541 $ (178 )Add (deduct): Interest (income) expense (1,161 ) (1,653 )Provision (benefit) for income taxes (28,118 ) 1,157 Other (income) expense, net 205 834 Depreciation and amortization 6,459 4,966 Stock-based compensation expense 19,925 12,126 Adjusted EBITDA $ 6,851 $ 17,252

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 Three Months Ended(in thousands) October 31, November 2, 2020 2019Free cash flow reconciliation: Cash flows provided by (used in) operating $ 57,359 $ 27,524 activitiesDeduct: Purchases of property and equipment (5,985 ) (7,502 )Free cash flow $ 51,374 $ 20,022 Cash flows provided by (used in) investing $ 1,701 $ (46,521 )activitiesCash flows provided by (used in) financing $ (1,896 ) $ (1,694 )activities

Operating Metrics

October August May 2, February November 31, 2020 1, 2020 2020 1, 2020 2, 2019Active clients (in 3,763 3,522 3,418 3,465 3,416 thousands)Net revenue per $ 467 $ 486 $ 498 $ 501 $ 485 active client^(1)___________________________^(1) Fiscal year 2019 was a 53-week year, with the extra week occurring in thequarter ended August 3, 2019. Therefore, net revenue per active client for eachquarter ended May 2, 2020, February 1, 2020, and November 2, 2019, includes theimpact of the extra week of revenue.

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 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 Mens, Womens, 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:

David Pearceir@stitchfix.com

PR Contact:

Suzy Sammonsmedia@stitchfix.com