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Stitch Fix Announces Second Quarter Fiscal Year 2019 Financial Results

SAN FRANCISCO, March 11, 2019 (GLOBE NEWSWIRE) -- Stitch Fix, Inc. (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 Ended   For the Six Months Ended
    January 26, 2019   January 27, 2018   January 26, 2019   January 27, 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 securities, net of tax   104         22      
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  
Diluted   102,817,838     87,954,656     103,597,316     60,599,568  


 
Stitch Fix, Inc.
Condensed Consolidated Statements of Cash Flow
(Unaudited)
(In thousands)
 
    For the Six Months Ended
    January 26, 2019   January 27, 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 liabilities   $ 4,741     $ 780  
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 Ended   For the Six Months Ended
(in thousands)   January 26, 2019   January 27, 2018   January 26, 2019   January 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 27, 2018   January 26, 2019   January 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 common stockholders – diluted   $ 0.12     $ 0.02     $ 0.22     $ 0.06  
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 diluted   $ 0.12     $ 0.07     $ 0.22     $ 0.14  

(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, 2019   January 27, 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

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    Once the gold-standard of Big Oil, the stock closed Monday at its lowest since October 2010, amid a slump in oil prices due to concerns about weak demand coupled with a glut. Chief Executive Officer Darren Woods is running a counter-cyclical strategy by plowing money in new oil and gas assets, at a time when many investors are urging energy companies to improve returns for shareholders. Exxon is betting on a “windfall of cash” to arrive from its investments sometime in the mid to late 2020s, said Noah Barrett, a Denver-based energy analyst at Janus Henderson, which manages $356 billion.

  • BorgWarner auto parts maker to buy Delphi Technologies for $3.3 billion
    Business
    Autoblog

    BorgWarner auto parts maker to buy Delphi Technologies for $3.3 billion

    BorgWarner Inc on Tuesday agreed to buy UK-based Delphi Technologies Plc in a $3.3 billion deal, as the U.S. auto parts maker looks to expand in a growing market for hybrid and electric vehicles. Delphi shareholders will receive 0.4534 shares of BorgWarner for each share held. That translates to $17.39 per share, a premium of about 77% to Delphi's closing price on Monday.

  • 3 “Strong Buy” Stocks Under $5 That Are Ready to Run Higher
    Business
    TipRanks

    3 “Strong Buy” Stocks Under $5 That Are Ready to Run Higher

    With Orbcomm's shares trading roughly 4X our 2021 adjusted EBITDA estimate, we view the risk reward on the shares as very positive… We believe if management can execute, the shares should return to higher multiples. What does it mean, then? It means that Walkley keeps his Buy rating on Orbcomm.

  • Lockheed Martin Had 'Tremendous' Hypersonic Weapons Growth As Earnings Beat
    Business
    Investor's Business Daily

    Lockheed Martin Had 'Tremendous' Hypersonic Weapons Growth As Earnings Beat

    Lockheed Martin raised its tally for hypersonic contract payouts and easily topped fourth-quarter estimates Tuesday, but gave mixed 2020 guidance. Supplier Mercury Systems will report results after the market closes. Lockheed stock rose.

  • 7 Steps to Create a 10-Years-From-Retirement Plan
    Business
    Investopedia

    7 Steps to Create a 10-Years-From-Retirement Plan

    The government's Social Security website provides a retirement benefit estimator to help determine what kind of monthly income you can expect in retirement. If you're fortunate enough to be covered by a pension plan, monthly income from that asset should be added. You can also tally up income from a part-time job while in retirement.

  • Can AMD Beat Intel’s Stellar Earnings Report? Top Analyst Weighs In
    Business
    TipRanks

    Can AMD Beat Intel’s Stellar Earnings Report? Top Analyst Weighs In

    Intel's latest earnings seem to have taken the Street by surprise, and drove the stock to its best one-day performance in the last two years. Revenue of $20.2 billion beat the Street's estimate of $19.2 billion and exhibited a year-over-year increase of 8%. Adjusted EPS (diluted) came in at $1.52, beating the $1.25 consensus estimate and gaining 19% from the prior-year quarter.

  • Louis Vuitton owner LVMH's sales growth slows in fourth quarter
    Business
    Reuters

    Louis Vuitton owner LVMH's sales growth slows in fourth quarter

    Sales growth at luxury goods group LVMH slowed slightly in the fourth quarter, pushed down in part by a sharp drop in revenue in Hong Kong where months of violent protests have scared away many high-end shoppers. The company, which owns labels including Louis Vuitton and Christian Dior, said the new coronavirus outbreak this month forced it to shutter some stores in the Chinese city of Wuhan, but it believed the peak of the virus would pass in a few weeks, limiting the impact on sales. LVMH posted record revenue and profit for the whole of 2019.

  • Millennials are making one embarrassing investing mistake: study
    Business
    Yahoo Finance

    Millennials are making one embarrassing investing mistake: study

    Amid the impressive years-long run in the stock market, it would appear that newbie millennial investors are doing as little homework as possible in the pursuit of quick profits. Instead, millennials are mostly plowing into overheated tech stocks that are probably familiar to one's ear — but possibly overvalued by now. According to a new study by Apex Clearing, the top 10 stocks owned by millennials in the U.S. include Apple, Amazon, Facebook, Microsoft, Berkshire B, Disney, Netflix, Advanced Micro Devices and Alibaba.