GlobeNewswire Inc | Sep 22, 2020 04:05PM EDT

September 22, 2020

SAN FRANCISCO, Sept. 22, 2020 (GLOBE NEWSWIRE) -- Stitch Fix, Inc. (NASDAQ:SFIX), the leading online personal styling service, has released its financial results for the fourth quarter and full fiscal year 2020 ended August1, 2020, and posted a letter to its shareholders on its investor relations website.

Fourth quarter highlights*

-- Net revenue of $443.4 million, an increase of 11% year over year on an adjusted basis -- Active clients of 3.5 million, an increase of 9% year over year -- Net revenue per active client of $486, an increase of 2% year over year on an adjusted basis -- Net loss of $44.5 million -- Adjusted EBITDA ex. SBC of $11.8 million -- Diluted loss per share of $0.44

Full year highlights*

-- Net revenue of $1.7 billion, an increase of 11% year over year on an adjusted basis -- Net loss of $67.1 million and adjusted EBITDA ex. SBC of $38.4 million -- Diluted loss per share of $0.66

_____________________* Q419 consisted of 14 weeks, which resulted in fiscal 2019 being a 53-week year. As such, any reference to adjusted growth rates means we have removed the impact of the extra week to provide a comparison that we believe more accurately reflects our performance. On an unadjusted basis, revenue growth for the fourth quarter and full fiscal year of 2020 was 3% and 9%, respectively, and net revenue per active client was approximately flat year over year.

I'm very pleased with our strong Q4 results and our return to topline growth. We grew active clients to 3.5 million, an increase of 9% year over year, and generated $443 million in net revenue, reflecting 11% adjusted year-over-year growth, said Stitch Fix founder and CEO Katrina Lake. I'm proud of our team for successfully navigating through the deepest impacts of COVID-19 and am excited to bring our model of an individual and deeply personalized shopping experience to even more consumers as they transition to a future of online shopping.

Stitch Fix President Elizabeth Spaulding added, Were particularly excited by the momentum of our direct buy offering. Its still early days, but the ability to shop personalized items and outfits in our feed-based experience is clearly resonating with our clients. Our styling algorithms combined with input from our talented stylists, and the network effects of nearly 10 years of shopping data are enabling clients to now shop via direct buy without ever having purchased something from us in the past. Encouraged by its early success, we plan to expand the offering to give existing clients more reasons to engage with us, and give new-to-Stitch Fix customers the opportunity to experience the magic of online personal styling through direct buy.

Please visit the Stitch Fix investor relations website at https://investors.stitchfix.comto 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, 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 800-289-0571 in the U.S. or 323-794-2093 internationally, and entering conference code 8588442.

A telephonic replay will be available through Tuesday, September 29, 2020, at 888-203-1112 or 719-457-0820, passcode 8588442. 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 and the related conference call and webcast contain forward-looking statements within the meaning of the federal securities laws. All statements other than statements of historical fact could be deemed forward looking, including but not limited to statements regarding our future financial performance, including our expectations regarding financial trends in and expectations for our fiscal year 2021; the resilience of our warehouse network, ongoing improvement in client demand, and the impact of the COVID-19 pandemic on consumer purchasing behavior; our redeployment of marketing spend to capitalize on improving consumer optimism in the quarters ahead; market trends, growth, and opportunity; our ability to adapt quickly to new and changing consumer demands; profitability; competition; the timing and success of expansions to our offering and penetration of our target markets, such as the continued growth of our offering in the United Kingdom and the expansion of Buy It Again and Complete Your Looks, our enhancements to our direct buy functionality, including the introduction of Trending For You; the continued success of our direct-buy functionality, whether it becomes the growth vector we think it represents, and our plan to use it as a client acquisition vehicle; 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 continue to roll out new features to extend our personalization platform and drive an even stronger personalized eCommerce model; our plans related to client acquisition, engagement, and retention, including any impact on our costs and margins and our ability to determine optimal marketing and advertising methods; and our ongoing search for a new CFO. 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 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 May2, 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)

August 1, August 3, 2020 2019Assets Current assets: Cash and cash equivalents $ 143,455 $ 170,932 Short-term investments 143,037 143,276 Inventory, net 124,816 118,216 Prepaid expenses and other current assets 55,002 49,980 Total current assets 466,310 482,404 Long-term investments 95,097 53,372 Property and equipment, net 70,369 54,888 Operating lease right-of-use assets 132,615 ? Deferred tax assets 333 22,175 Other long-term assets 4,705 3,227 Total assets $ 769,429 $ 616,066 Liabilities and Stockholders? Equity Current liabilities: Accounts payable $ 85,177 $ 90,883 Operating lease liabilities 24,333 ? Accrued liabilities 77,590 69,734 Gift card liability 8,590 7,233 Deferred revenue 13,059 11,997 Other current liabilities 3,406 2,784 Total current liabilities 212,155 182,631 Operating lease liabilities, net of current 140,175 ? portionDeferred rent, net of current portion ? 24,439 Other long-term liabilities 16,062 12,996 Total liabilities 368,392 220,066 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 348,750 279,511 Accumulated other comprehensive income (loss) 2,728 (187 )Retained earnings 49,557 116,674 Total stockholders? equity 401,037 396,000 Total liabilities and stockholders? equity $ 769,429 $ 616,066

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 For the Fiscal Year Ended August 1, 2020 August 3, 2019 August 1, 2020 August 3, 2019Revenue, net $ 443,408 $ 432,149 $ 1,711,733 $ 1,577,558 Cost of goods sold 244,298 241,785 957,523 874,429 Gross profit 199,110 190,364 754,210 703,129 Selling, general,and administrative 213,377 188,610 805,874 679,634 expensesOperating income (14,267 ) 1,754 (51,664 ) 23,495 (loss)Interest (income) (1,033 ) (1,759 ) (5,535 ) (5,791 )expenseOther (income) 162 (571 ) 1,593 (1,535 )expense, netIncome (loss)before income (13,396 ) 4,084 (47,722 ) 30,821 taxesProvision(benefit) for 31,071 (3,095 ) 19,395 (6,060 )income taxesNet income (loss) $ (44,467 ) $ 7,179 $ (67,117 ) $ 36,881 Othercomprehensive income (loss):Change inunrealized gain(loss) on (247 ) 229 822 391 available-for-salesecurities, net oftaxForeign currency 1,460 (507 ) 2,093 (578 )translationTotal othercomprehensive 1,213 (278 ) 2,915 (187 )income (loss), netof taxComprehensive $ (43,254 ) $ 6,901 $ (64,202 ) $ 36,694 income (loss)Net income (loss)attributable to commonstockholders:Basic $ (44,467 ) $ 7,179 $ (67,117 ) $ 36,863 Diluted $ (44,467 ) $ 7,179 $ (67,117 ) $ 36,864 Earnings (loss)per shareattributable to commonstockholders:Basic $ (0.44 ) $ 0.07 $ (0.66 ) $ 0.37 Diluted $ (0.44 ) $ 0.07 $ (0.66 ) $ 0.36 Weighted-averageshares used tocompute earnings(loss) per share attributable tocommonstockholders:Basic 103,278,240 101,111,138 102,383,282 100,013,462 Diluted 103,278,240 104,190,711 102,383,282 103,653,626

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

For the Fiscal Year Ended August 1, August 3, 2020 2019Cash Flows from Operating Activities Net income (loss) $ (67,117 ) $ 36,881 Adjustments to reconcile net income (loss) to net cash provided by operating activities:Deferred income taxes (21,594 ) (8,203 )Deferred tax assets valuation allowance 43,153 ? Inventory reserves 8,828 7,974 Stock-based compensation expense 67,530 35,256 Depreciation, amortization, and accretion 22,617 14,331 Other 882 148 Change in operating assets and liabilities: Inventory (15,222 ) (41,233 )Prepaid expenses and other assets (6,683 ) (16,831 )Operating lease right-of-use assets and liabilities 394 ? Accounts payable (5,520 ) 10,774 Accrued liabilities 8,297 22,856 Deferred revenue 1,054 3,325 Gift card liability 1,357 825 Other liabilities 4,901 12,491 Net cash provided by operating activities 42,877 78,594 Cash Flows from Investing Activities Purchases of property and equipment (30,207 ) (30,825 )Purchases of securities available-for-sale (248,318 ) (285,205 )Sales of securities available-for-sale 36,587 10,596 Maturities of securities available-for-sale 171,477 80,250 Net cash used in investing activities (70,461 ) (225,184 )Cash Flows from Financing Activities Proceeds from the exercise of stock options, net 12,078 13,693 Payments for tax withholding related to vesting of (12,819 ) (6,748 )restricted stock unitsIssuance costs on revolving credit facility (694 ) ? Net cash provided by (used in) financing activities (1,435 ) 6,945 Net increase (decrease) in cash and cash equivalents (29,019 ) (139,645 )Effect of exchange rate changes on cash 1,542 211 Cash and cash equivalents at beginning of period 170,932 310,366 Cash and cash equivalents at end of period $ 143,455 $ 170,932 Supplemental Disclosure Cash paid for income taxes $ 365 $ 966 Supplemental Disclosure of Non-Cash Investing and Financing Activities:Purchases of property and equipment included in $ 4,088 $ 5,272 accounts payable and accrued liabilitiesCapitalized stock-based compensation $ 2,450 $ 1,789 Vesting of early exercised options $ ? $ 209 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 also provide adjusted EBITDA excluding the impact of stock-based compensation expense (ex. SBC), which management believes provides useful information to investors and others in understanding our operating performance and 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 ex. SBC 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; -- adjusted EBITDA and adjusted EBITDA ex. SBC 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 and adjusted EBITDA ex. SBC does not reflect our tax provision, which reduces cash available to us; -- adjusted EBITDA and adjusted EBITDA ex. SBC excludes interest (income) expense and other (income) expense, 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 and Adjusted EBITDA ex. SBC

We define adjusted EBITDA as net income (loss) excluding interest (income) expense, provision (benefit) for income taxes, other (income) expense, net, and depreciation and amortization. We define adjusted EBITDA ex. SBC as adjusted EBITDA excluding stock-based compensation expense. The following table presents a reconciliation of net income (loss), the most comparable GAAP financial measure, to adjusted EBITDA and adjusted EBITDA ex. SBC for each of the periods presented:

For the Three Months Ended For the Fiscal Year Ended(in thousands) August 1, August 3, August 1, August 3, 2020 2019 2020 2019Adjusted EBITDAex. SBC reconciliation:Net income $ (44,467 ) $ 7,179 $ (67,117 ) $ 36,881 (loss)Add (deduct): Interest (1,033 ) (1,759 ) (5,535 ) (5,791 )(income) expenseProvision(benefit) for 31,071 (3,095 ) 19,395 (6,060 )income taxesOther (income) 162 (571 ) 1,593 (1,535 )expense, netDepreciation and 6,004 4,654 22,562 16,095 amortizationAdjusted EBITDA (8,263 ) 6,408 (29,102 ) 39,590 Add (deduct): Stock-basedcompensation 20,055 11,440 67,530 35,256 expenseAdjusted EBITDA $ 11,792 $ 17,848 $ 38,428 $ 74,846 ex. SBC

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 used in investing activities. The following table presents a reconciliation of cash flows provided by (used in) operating activities, the most comparable GAAP financial measure, to free cash flow for each of the periods presented:

For the Fiscal Year Ended(in thousands) August 1, August 3, 2019 2020Free cash flow reconciliation: Cash flows provided by (used in) operating $ 42,877 $ 78,594 activitiesDeduct: Purchases of property and equipment (30,207 ) (30,825 )Free cash flow $ 12,670 $ 47,769 Cash flows used in investing activities $ (70,461 ) $ (225,184 )Cash flows provided by (used in) financing $ (1,435 ) $ 6,945 activities

Operating Metrics

August 1, May 2, February November August 3, 2020 2020 1, 2020 2, 2019 2019Activeclients (in 3,522 3,418 3,465 3,416 3,236 thousands)Net revenueper active $ 486 $ 498 $ 501 $ 485 $ 488 client^(1) ^(1) Fiscal year 2019 was a 53-week year, with the extra week occurring in thequarter ended August 3, 2019. Net revenue per active client calculationsincluding the fourth quarter of fiscal year 2019 include 53 weeks 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