Stitch Fix(SFIX) - 2024 Q2 - Quarterly Results

Financial Highlights and Outlook The company reported its second-quarter fiscal 2024 performance, provided financial guidance for Q3 and full fiscal year 2024, and outlined key strategic updates Second Quarter Fiscal 2024 Performance Net revenue from continuing operations declined 18% year-over-year to $330.4 million, with active clients down 17% and RPAC down 3%, while gross margin improved to 43.4% and Adjusted EBITDA reached $4.4 million Q2 FY2024 Key Metrics from Continuing Operations (YoY) | Metric | Q2 FY2024 | Change (YoY) | | :--- | :--- | :--- | | Net Revenue | $330.4 million | -18% | | Active Clients | 2,805,000 | -17% | | Net Revenue per Active Client (RPAC) | $515 | -3% | | Gross Margin | 43.4% | +250 bps | | Net Loss | $(35.0) million | N/A (Improved from $(63.4)M) | | Adjusted EBITDA | $4.4 million | N/A (Decreased from $6.3M) | | Free Cash Flow | $(26.1) million | N/A (Decreased from $16.8M) | - Gross margin improvement was driven by enhanced inventory health and transportation leverage[6] - Free cash flow was negative as expected, primarily due to the timing of payments for inventory purchases made in the first fiscal quarter[6] - The company ended the quarter with $229.8 million in cash, cash equivalents, and investments, and no bank debt[6] Financial Outlook Stitch Fix provided Q3 FY2024 guidance for net revenue between $300 million and $310 million and Adjusted EBITDA between -$5 million and $0 million, with full fiscal year revenue projected at $1.29 billion to $1.32 billion and Adjusted EBITDA at $10 million to $20 million Q3 Fiscal 2024 Outlook | Metric | Guidance | YoY Change | | :--- | :--- | :--- | | Net Revenue | $300M - $310M | (22)% - (19)% | | Adjusted EBITDA | $(5)M - $0M | (2)% - 0% margin | Full Fiscal Year 2024 Outlook | Metric | Guidance | YoY Change (52-week adjusted) | | :--- | :--- | :--- | | Net Revenue | $1.29B - $1.32B | (20)% - (18)% | | Adjusted EBITDA | $10M - $20M | 1% - 2% margin | - Fiscal year 2024 is a 53-week year, with the extra week occurring in the fourth quarter, and the year-over-year revenue comparison is adjusted to a 52-week period for comparability[4][5] Strategic Updates CEO Matt Baer reaffirmed the company's vision and ongoing transformation efforts to drive sustainable, profitable growth, alongside the cessation of UK business operations in Q1 FY2024, now reported as a discontinued operation - The CEO expressed confidence in the company's strategic priorities to drive sustainable, profitable growth through transformation efforts[2] - During Q1 FY2024, the company ceased its UK business operations, and the financial results of the UK business are now reported as a discontinued operation in all presented periods[2] Consolidated Financial Statements This section presents the condensed consolidated balance sheets, statements of operations, and cash flows, detailing the company's financial position and performance for the reported periods Condensed Consolidated Balance Sheets As of January 27, 2024, total assets decreased to $538.3 million from $614.5 million, with cash and cash equivalents at $227.5 million, while total liabilities and stockholders' equity also declined Balance Sheet Summary (in thousands) | Account | Jan 27, 2024 | July 29, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $227,503 | $239,437 | | Inventory, net | $126,033 | $130,548 | | Total current assets | $377,971 | $425,461 | | Total assets | $538,316 | $614,478 | | Total current liabilities | $209,421 | $238,111 | | Total liabilities | $325,045 | $367,168 | | Total stockholders' equity | $213,271 | $247,310 | Condensed Consolidated Statements of Operations For Q2 FY2024, net revenue from continuing operations was $330.4 million, a decrease from $400.6 million, but the net loss from continuing operations narrowed to $35.0 million ($0.29 per share) due to an improved gross margin of 43.4% and lower SG&A expenses Statement of Operations Summary - Continuing Operations (in thousands) | Account | Three Months Ended Jan 27, 2024 | Three Months Ended Jan 28, 2023 | | :--- | :--- | :--- | | Revenue, net | $330,402 | $400,622 | | Gross profit | $143,480 | $163,756 | | Gross margin | 43.4% | 40.9% | | Operating loss | $(38,038) | $(63,282) | | Net loss from continuing operations | $(34,956) | $(63,444) | | Diluted loss per share from continuing operations | $(0.29) | $(0.56) | Condensed Consolidated Statements of Cash Flow For the six months ended January 27, 2024, net cash used in operating activities from continuing operations was $1.7 million, a significant negative shift from the prior year's $20.8 million provided, with investing activities providing $8.6 million and financing activities using $8.7 million Cash Flow Summary - Continuing Operations (in thousands) | Activity | Six Months Ended Jan 27, 2024 | Six Months Ended Jan 28, 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $(1,736) | $20,783 | | Net cash from investing activities | $8,564 | $3,699 | | Net cash from financing activities | $(8,730) | $(6,757) | | Net (decrease)/increase in cash | $(1,902) | $17,725 | Non-GAAP Financial Measures and Operating Metrics This section reconciles GAAP to non-GAAP measures like Adjusted EBITDA and Free Cash Flow, and details key operating metrics including active clients and net revenue per active client Reconciliation of GAAP to Non-GAAP Measures For Q2 FY2024, Adjusted EBITDA was $4.4 million, reconciled from a net loss of $35.0 million, and Free Cash Flow was negative $26.1 million, reconciled from net cash used in operating activities Adjusted EBITDA Reconciliation (in thousands) | Line Item | Three Months Ended Jan 27, 2024 | Three Months Ended Jan 28, 2023 | | :--- | :--- | :--- | | Net loss from continuing operations | $(34,956) | $(63,444) | | Stock-based compensation expense | $21,065 | $25,262 | | Restructuring and other one-time costs | $12,019 | $34,742 | | Adjusted EBITDA | $4,447 | $6,281 | Free Cash Flow Reconciliation (in thousands) | Line Item | Three Months Ended Jan 27, 2024 | Three Months Ended Jan 28, 2023 | | :--- | :--- | :--- | | Net cash from operating activities | $(22,295) | $22,357 | | Purchases of property and equipment | $(3,774) | $(5,510) | | Free Cash Flow | $(26,069) | $16,847 | Key Operating Metrics The company's active clients declined to 2,805,000 as of January 27, 2024, from 3,377,000 a year prior, and net revenue per active client (RPAC) also decreased to $515 from $530 - An active client is defined as someone who checked out a Fix or was shipped a Freestyle item in the preceding 52 weeks[21] Active Clients Trend (in thousands) | Quarter End | Active Clients | | :--- | :--- | | Jan 27, 2024 | 2,805 | | Oct 28, 2023 | 2,989 | | Jul 29, 2023 | 3,121 | | Apr 29, 2023 | 3,288 | | Jan 28, 2023 | 3,377 | - Net revenue per active client (RPAC) was $515 as of January 27, 2024, a decrease from $530 as of January 28, 2023[22] Supplemental Financial Information This section provides supplemental unaudited historical financial data for continuing operations over the trailing six fiscal quarters, offering clearer performance comparisons post-UK business discontinuation Historical Continuing Operations Data Supplemental unaudited financial data for the trailing six fiscal quarters is provided for continuing operations, allowing for clearer historical comparisons of revenue, net loss, and Adjusted EBITDA after the UK business cessation - Supplemental data is provided to help investors understand historical financial results for continuing operations following the discontinuation of the UK business in Q1 FY2024[23] Quarterly Revenue and Net Loss from Continuing Operations (in thousands) | Quarter Ended | Revenue, net | Net loss | | :--- | :--- | :--- | | Jan 27, 2024 | $330,402 | $(34,956) | | Oct 28, 2023 | $364,785 | $(26,171) | | Jul 29, 2023 | $364,739 | $(20,319) | | Apr 29, 2023 | $383,419 | $(18,421) | | Jan 28, 2023 | $400,622 | $(63,444) | | Oct 29, 2022 | $443,741 | $(48,152) | Quarterly Adjusted EBITDA Trend (in thousands) | Quarter Ended | Adjusted EBITDA | | :--- | :--- | | Jan 27, 2024 | $4,447 | | Oct 28, 2023 | $8,630 | | Jul 29, 2023 | $13,104 | | Apr 29, 2023 | $13,246 | | Jan 28, 2023 | $6,281 | | Oct 29, 2022 | $(1,723) |