Stitch Fix (SFIX) 7 Mar 232023 Q2 Earnings call transcript

Good day and thank you for standing by. Welcome to the Second Quarter Fiscal Year 2023 Stitch Fix Earnings Conference Call. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Hayden Blair.

Good afternoon and thank you for joining us today to discuss the results for Stitch Fix’s second quarter of fiscal year 2023.

call and Katrina Dan the of Interim on Fix Stitch Jedda, me today Lake, are CEO Joining CFO. Also is joining David call Aufderhaar. us on today’s

in call the We press link our site. to posted complete of quarter be A financial have today’s found webcast conference our second website, investors.stitchfix.com. release also results quarterly results on the section can of XXXX a on

that tomorrow. call based as on as except information for annual report Risk year particular, Actual remind forward-looking of indication involve on statements press results like to Factors forward-looking quarterly be Also we law. quarter are filed everyone and as could uncertainties. statements risks the obligation us an this the We would our for the filed will that our of making any release available SEC that well from review this a We to disclaim of date. today as future Form be the as In our statements, factors should XXXX materially which filings results with of on forward-looking our sections call, Form XX-Q filed and report XXXX, by our performance. considered those on results our differ Please the could the and expect which year we previously not today’s second fiscal with issued contemplated SEC any fiscal note of update discussion XX-K forward-looking to to be cause the Reported statements. required for differ. to by on

Relations on financial press to be comparable most are financial During intended provided for GAAP non-GAAP substitute in not Investor this are GAAP non-GAAP release measures. to our Reconciliations the we website. measures directly call, discuss a will measures results. the our These certain

the being this its website Finally, will be entirety this Investor on of replay is available call website and webcast a our in shortly. on call Relations

With call over to that, the I Katrina. will turn

help years and a was their Hayden. to best. inspired look people ago, problem human Thanks, feel by XX I very simple

I find a I the by am this Interim but CEO, have our ahead. the mission mission also resonant as of Now as opportunity ways motivated feels myself that than made more reality, back we ever. proud simple

We days are still in feel transforming impact the to I the Fix industry way apparel to that years and achieve in in can and of the Stitch personalization early lead of optimistic the continue greater come.

starting company maybe companies many to on strategy, from built data While AI was science an our day one. define

met for ambitious systems we the must client than now and human that recent I best machine drive and the and our haven’t stylist proprietary learning the are has results around bring of efforts of client help that understand in focus need. datasets loss a realized vision more Driving experience, ever in on marketing time, an our interactions towards clients At resulted that to data us same expectations. predict focus. shareholders. with outcomes we We have We deliver what the leverage technology have elements product and meaningful combined and built billions rich, of points

We long-term have on path, short-term. our and clarity

have advantage scale. a to continue of data to we have leveraging also to more Shorter I and apparel of and execution growing term, large buy experience that for personalization get opportunity profitability. the to We back we a clarity. way and personalized Long-term, a to and great need have conviction is significant deliver position decade in at market that our rooted

potential. company intended ourselves maximize and for and and the in events I growth both a to we in liquidity refocus optimize reposition to fiscal up the get and set again. past history of am achieving there the short-term will in confident major quarter There profitability were have We two our second to long-term help

operating opportunity model and to Late operating set also difficult an goals This liquidity year, know reorganize Salt execute. to by more our we our allows City decisions achieve to organization the in easy, in operations we determined overall XX% warehouse. it to the are to and create the position restructured our and to Lake our effort health and a never and last business. we decisions team leaner an decision was us reduce of right made but model. nimbly refocus the of restructure the of began These salary headcount First, the profitability to our and for analyzing

once environment, present own Stitch Fix team realized leader we the and we a I confident find process past known And Fix. encouraged thus I landscape, am we the record second, has are a track years. we Stitch find our the the few person am results and by for meaningfully conducting I macroeconomic can competitive even for. to right for inspiring future the and And changed And far. are of that reestablish to were business The Board the and an search excited that CEO. permanent lead of the help over

him is an inspired these David to his into that will release The I ago be role. Stitch team. deep addition, I excited step X the at want David eye to for our and service our new Dan thoughtful CFO’s this am we of him of leader with succession. with Board Stitch for in shared the joined stepping our Dan pursue down the leaders to and have depth many future. for years CFO. And succeed commitment and opportunity. partnership years will and by been of as and his In Fix, our functional and his a Finance towards us He as Jedda Aufderhaar, Fix SVP and impressed trusted afternoon CFO well press a together CFO understanding him to I to business wish thank working

to provided Now range. high-end the range $XXX.X million, EBITDA the second was of Despite revenue controls our quarter of million, the to adjusted Fiscal which $X.X in which lower we guidance financials the in the due at delivered this, effective cost on at to end came was quarter. before it of at handing over, deliver later our clients focus more around that how for results I rallying dive bringing better shareholders. topics our and and the But Dan marketing corporate want is touch restructuring. in products to clarity into will our and company and the demonstrate on on. financials

Consistent as with as the refine scale. liquidity long the marketing This attracting underpenetrated we to aims a our to growth. yet fuel channels return to strategy preserve traditional continue to have and broader paid company, profitability be to diversify well our simultaneously case we will as into while channels term achieve customers

which these strategies continue to optimize over increase highlighting effort gaining we client short-term to to ROI retention growth. on. for CPAs should despite overall significant engagement a things our reengagement traction in down marketing combined year our we in were to set in an stage the the CPAs. It’s We are and the also maximize from reduction budget, efforts continuing when a to worth lean dollars. And more into know focus are retention in our and client shows are ago, XX% and that the improve effectively right to and Overall, maximize deploying a our with experience return

less differentiation. is in we drive reexamine value areas that targeted experience client is wallets the opportunity past the experience. embrace resulted A that our and experience. believe to about ambitious make months And in to and ecosystem. client The by really to on complicated client many has bring than there client ever for long-term focused our on it Stitch tighter features deliberate Fix of the role the functionalities focus environment core being vision of more critical Moving macroeconomic to and a and we

example, view Preview. recently an on have we our point refined As of Fix

Although Digging nuanced the a cancellation. clients we story. has clients a whom who There absolutely a benefit Fix also more But demonstrated see at impact there the Preview on Fix preview for increases actually highest AOVs. showing significantly from data, level, are Preview. into positive are

data, an anticipate the clients clients Acting an cash experimenting opportunity surprise data flow to I the the letting we to similar believe short-term Preview. growth. allowing better and dig found those the and these drive to in in we I more many into those to example drive our and opportunities LTV strategies outcomes optimize delight experience. and focus we benefit as with clients and to preview know data intention agency decisions some the enjoy value us of the and experience and providing for by Fix are there we other enabling while allowing the ourselves will client profitability on positioning eventual LTV clients, drive while return from this that for share of eliminating this

passion these day value day have as out Stitch Before few team to I to see Fix. turn it entire the continue be past months. by I Grit and have a tenants. team experienced I and the one And operating clients been want fantastic grit company to I celebrating to inspired our I We make to Stitch core thank for Dan, place at I talk by and the of our our business internally about over in Fix work. to our deliver the from inspired

Our on get paving the track continued for focus we for the the way Stitch and data-driven journey right to you decision-making continuing a are with there I forward I to are look and believe all. Fix. bright future

With Dan. turn to that, will it over I

on Katrina to hello you, Thank everyone and the call.

role. lead this am right during is opportunity the several be Katrina thank confident I and David and I and will relationship ensure transition. to have David a and board and David next in, orderly his and over the to congratulate positive the Fix my an person want I productive to on jumping tenure new he working Before weeks I working together team. Stitch for enjoyed the

clients net million. Net due our the lower to year revenue clients to declined $X.X million to approximately On in year and active results, the in the $XXX.X year-over-year higher QX quarter. quarter XX% promotional XX% net declined to year-over-year active over QX activity

continue Total As see have year-over-year. did in this both down women’s marketing in like year-over-year, we spend realized was and year-over-year are focus in CPA. Katrina revenue lines gross in client the inactive on rates client positive positive QX. improving advertising with channel, and of improving diversify and of seeing mentioned levels And gross ensuring We experience. earlier, advertising, while men’s the ROI near-term in with we continue spend. our of to the do trends our in kids while X% net elevated continued lower Even business. on quarter advertising were clients XX% see adds adds the we We overall to spend we right to down and are

advertising the of to X% the revenue rest year. X% to of be expect for net We

lean appropriate. $XXX. to year-over-year Revenue So opportunistic experienced and be in we will the declined per if we X% right client to continue where ROI active

cohorts client are holding overall our less prior QX, our value relatively analysis average than to order in continues spending similar all While year-over-year, show to years. is steady that

We trend of continue FY ‘XX. to through expect the rest this

QX year, margin gross in basis mostly down approximately Sequentially, increased and promotional activity were margins promotional came up XX%, due was Total over margin also to carrier costs from gross XXX increased product cost. to driven primarily activity. at increased year-over-year higher product transportation lower QX year basis points down points due XXX rates. to due by

We improving remainder on focused expect as efficiency fiscal of for gross opportunities actively see that the XX% year margins inventory be time. transportation improve efficiency we to gross product around and margin, margins to and over are

and in of The reduction costs. and one-time of we with City year-over-year. reflecting since $XXX flow ended And excludes our million the adjusted cash efforts, $X.X closure highly positive XX% ended flow $XX.X restructuring quarter ongoing QX inventory including Free million, quarter a cash our quarter million, Lake the rated adjusted FY EBITDA for positive $XX.X Net securities. the equivalents control warehouse. EBITDA quarter was $XXX of at cost down Salt cash XX% came and our ‘XX. QX force in first million at cash, down in of the free quarter-over-quarter million, and

reduction realize on now our of million the actions advertising with cost levels, FY actions reduced structure, needed our we cost restructuring for of targets executed $XXX summary, against to In our ‘XX. execution the have and all

the at remaining shipped fulfillment we from our Lake we across center the network. fix Salt centers the and Additionally, of inventory City have January end in distributed the last our distribution

We will the savings from in begin QX. cost closure to see

flow we we future. cash to well ourselves Our while achieving goal and to continuing in believe these way profitable the growth position remains achieve to the short-term, free positive adjusted on are And EBITDA our goals. for in

our to on outlook. Now

challenge a within For operating we remainder focusing differentiation the fiscal of and to face are the said, that things year, control. leaning our expect the we into to areas environment. promotional highly of on our continue With managing and

adjusted staying manage remainder and positive EBITDA cost responsibly goal for the of to with year. continue will We structure our free of the cash the flow

revenue $XXX million be between For $XXX our and to anticipate million. fiscal we QX,

expect positive quarter we $X are be the increased million continue between more season, negative reflecting million, to $X adjusted into EBITDA our as largely CPAs advertising the efficient. summer We where for spend generally seasonal and spring

year, For the FY billion. between we be now billion$X.XXX ‘XX, $X.XXX expect full revenue to

expect breakeven million. adjusted between EBITDA to be We for positive year the to $XX

Going client The us and made remain cash on active experience our invest over our focused continue forward, on grow to we allow liquidity in in time, we profitability. to relentlessly will improvements enable us expect we structure have will we experience. growth improving our flow. revenue client free and the improved And cost to focus as net

operator With for Q&A. to that, I’ll over turn the the call

Instructions] you. Squali comes Our Youssef Truist. [Operator first question Thank from with

may You proceed.

Good hear questions. of Couple you, guys. again. Hi, much. very you Katrina to from thank Great,

Stitch on get the has for have gives maybe you path can focus, that help can level back maybe your you then $X on and maybe negative three other, felt just there, only little clarity million see, really the talked components. marketing around you that sales where earlier mean, path I more think hand, $X one little EBITDA And you pinpoint the leaves bit you us you how on which Katrina, you forward, kind lot I a just the and and of double should positive had you as on should said Fix click areas million you the get the how a of confidence ultimately be what focus you question first guide a you the the obviously, its about to two can speak about lost expand had you you’ve or when of that margin are growth? maybe, then margin gross high XX%, to on advertising other at G&A you the about and what just a So that

little a both. very So you where be half maybe for just those you second the provide more Thank That’d on see the year. color helpful.

Youssef. bring experience Good level, back. marketing question. and probably the margin. in very marketing customer EBITDA focus I of Thanks, Dan very that as your we think, On about different And on took a there’s weigh into just the we there’s, very will ambitious people be people variety kind a an second examples expanding and could to Great. I have I in then example. thought we to at segments. bring, first And of way, that around innumerable that, the dollars I’ll bring business high notably, clarity, I freestyle think a approach as tried to answer first spent trying to a

Fix that place into as actually to find So done where to it us had effective harder did that’s freestyle people as be wasn’t it that channel. a for be first fixes. acquiring also marketing historically we not we what the But able in of only made

how of example one think, I that – comes that’s so And to life.

We customer built was different it was in of freestyle served inventory and that, up an inventory. before. we customer more around also served is a than before. a anticipation unknown, channel of hadn’t one inventory a was fixes a Another set we hadn’t It definitely

an and able And that’s customer experience of inventory so, to customer same value mentioned, for time. plus I really clean client we And I forward, be of risk preview can shareholder maximizing use experience up inventory example looking us in more at for really the focus. really another other kind historical we’re of the confidence the and think so and side at was our And I still with data on places buy the there there’s well years XX the mentioned, to the the good value to we going as that as example. where can

XX%, where, In ahead on looking creating marketing I acquisition is the I that’s value now. we’re we at front, today. all it’s long-term. really I back think, things places where, confident value talk the inventory show creating I And places of to a business for of what we confidence business example that down Dan, growth, we feel customer think going are there’s And terms year. the of to EBITDA? are that to want results near-term great referenced we Dan saw think how confident to feel that think areas think can in of when I last me, cost lot working doing focus have a And in of yes, by compared that kind those you the front, about

Yes. Hi, Youssef.

margin. season, $X gross provided to for the of be On X% EBITDA X%, we’ve it. also we’re we We focused the revenue very enter going as number into And within $X that on summer quarter for it’s we to we’re we And to to a QX, what think our on on seeing. Katrina X% our provided very Again, exited QX, guide I we million – QX talked the we’re because simply go advertising and as end that us. And just positive feel channel. efficient negative about marketing to the spring obviously X% talked million. and the higher efficiencies like we’re

negative we’re of so us the gets end to the restructuring, X% rate we higher a that the as positive run course, leads QX that $X if million, of dollars. spend SG&A, advertising of seeing course, basis, our X%. after efficiencies, $X excluding That on if, advertising think not million you the of to won’t with to that And

the for we’re advertising. guidance. about targeting good feel that level we course, So And of the now pretty of spend

expense and in clear, you one-time of million and that restructuring line costs I S&A in the mentioned that And think be to QX. hit that just other $XX XXX

did. It

much. you now, Alright. makes sense Okay. very That thank

Thank you.

Siegel Markets. BMO Capital with question next from Our Simeon comes

may You proceed.

our for question on [indiscernible] for is this Simeon. today. Hi, taking Thanks

going business, planning Fix around guys the inventories more And challenges about focused how are de-emphasis thinking that getting understanding little of And – to in a of release, freestyle. a there? the just are noticed, back forward? to freestyle how bit business from different. of you’ve had approach you kind maybe noticing mentioned press you’re of a right of how kind just curious is guys Katrina, versus those you some that some how work you for the a of I’m stylus within maybe going kind Just

thanks, It’s question. Derek. Yes, good a

freestyle way adds no assortment that fixes think seeing than most what we’re in at And that different assortment about that think we go, historically a question clear ways is that looking we’re think the I in that – value didn’t I shared there’s we’ve and fixes. data. and freestyle bought the being call

We’re seeing accessories. more outerwear, shoes,

to I says fill is the the vehicle using was mentioned freestyle think, our question, as a customer That an less us that last that to that example is a being so And helping effective. I said, need for this different clients. as in acquisition

really of about that we’re where uniquely what trying so, differentiation of are is at spaces own. we do the personalization, are styling really Those and to competitive to that, our And positioning kind if say, areas especially others. you are think really relative to of core

of thinking as so as think And we freestyle again probably styling, a a units. component of that that rather has as be is personalization, but experience that best we’re separate think ecosystem business journey, I of more about it customer of clear thinking kind customer more again, one what than the can delivers,

compared margin follow-up, the kind markdown just quarters, levels kind for the their on at of what broadly And you where pressure, are Appreciate the And few more is kind to in as curious looking guys then on just of I’m one? of to remainder difference pressure just about a back return about markdown of of markdown I’m within their that. were of year. of guidance shop XQ ability kind for going bps discounted seeing and planning back XQ the your for willingness quick comments you a Great. XX% to a your how XXX from kind more you’re seeing gross full the a of year half and how you’re price the a level customers to of

selling success in liquidator. the really past the freestyle we’ve question, the out approach think using we markdown to to way wrong on for and have thanks inventory we inventory. Yes, about we the or and way channel it And where talked a opposed access to is in that, third-party the the we’ve that seen our focused option as approached this we of

seen And utilize in to we And so that. success continue that. we’ve will

we’ve Although, feel down inventory, some as in and inventory in you can considerably, through. terms our we now see we’re buckets of inventory position total dollars, have our very levels, now we’ve from right still about feel come the sized we and good that to work we

the styling give freestyle a that And the for so need Fix Fix that. And we channel aren’t that we business. we that the in are with we not And in channel, discounting them. forward. to we are seen not doing service using simply And doing have discount clients going the lot, love anticipate we the don’t

Great. Thank both. you,

you. Thank

comes Altschwager Baird. next question with from Mark Our

You may proceed.

this question. Hi, on for is Mark. Teske Amy taking Thanks the our

you. down inventory dressing point, receipts, your you you is Thank of inventory categories? what the casual on the inventory? comfort the worked do your your that and have you’ve now right styles how On about between composition So of product type think as and of pulled and level inventory back

thanks take that And Amy. great asking I’ll a question, one. Yes, for That’s it.

a inventory and a of we’ve we needed or First getting work that, styles a had inventory we QX lot the of we much to QX lot was position. And better about in inventory, simply of in wrong done our in of of all, we’re our that. inventory. results again excess And down. or course how of And talked rid brands it and

soft in I’ll inventory the are to we short-term. on and January, trending with good our in included is on some brands were still brands Now fact, work brands, do going guidance our our the And forward. exclusive focus And we be as share a we which just big very notice well I about we’re exclusive did on going really our of in But where bit that’s us. mentioned, little feel targeting a that to of that for that on we have wanted our on our pivoted on that told and exclusive inventory, chased that’s continue for we us into And that we focus very Stitch were it. in brands back Fix that and our our fall back and quickly as we selling spring, sign we and short year a great now. love customers customers that only winter, they where on so we to the get near-term then to are get a going we and into we are into from summer as us

Thank you.

Our next Yruma Piper question Ed comes from with Sandler.

proceed. may You

question thanks known you back, Hey, really I very just much taking picture Kat. bigger are for welcome personalization. and my guess the guys question for

have gotten this would any can have do Thank have And things Kat, gap, you. your changed to We about inception appreciate the you that. think business of You you today, you observations talked I have of quickly? about there adversely your that back since competitors one will since that the last competitive rectify and looking a talk come better? lot maybe and

Thank Ed. you,

I I question here. think got your

able more just a that competitive So are I deliver honestly, being same And able to this strong years competitive we’ve a claim And be XX able not of a history with lot plus the in in of business cash for of profitability our terms set gap, capabilities. about in history with flows. the of thing. to been to there’s feel the really

I back if personalization, focus good, continue feel And around role. as not I on front. better had that we’ve the into to the around data strongly the that just we so, believe had we’ve about that focus lead that And science, coming that

I just is we reduction XXXX. do spoke we focus that hindsight that an which differentiators, of on and are had has consider the visions chasing vision terms came what were the I big think I like ambitious And changed? with kind on would of of I a your some our core of around focused, In kind really question I to personalization think it ambitious was call, styling. after really what think but more adversely chasing things and think I really of it’s do think I

clients that resources goal. we all again, just that and think and And I focusing internally experience deliver we’ve are our lot delivering our we that how everything for of really for in so, achieves a sure what personalized make about our that valuable is been can we our clients with of time able invest feels being and are that sure an that making doing that talking ultimately and everything to shareholders

Thank you.

Thanks, Ed.

you. Thank

Our from next Barclays. question Young with comes Trevor

proceed. can You

Great, thanks.

through Katrina space those one like testing more get be into that on that appreciated? be the thoughts any eroding you are of sort feel the the the or place? and fixes some to on for tech picture, signal in in to the that good then the First keep future just side reset discontinuing broadly in on do here you set kind And done on go better are a Just quarter of would core big Preview, a some is recovery after stage we to reinvestment circumstances? is getting to any place there work of some be done Fix rates maybe even cost now,

to about have I first talk cost one mean, try preview, for more Great. Trevor, the given and maximize think the the way it to this basis. On I’ll the ROI and really cohort. to LTV is questions, take Thanks Dan is one about a

And more cancel we some the Fix where saw but with when people Preview. see a to in, likely at that we have go to once going a Preview, some dig can Fix high to we cohorts to up see they be AOV there’s ability see you so do overall, segmentation, level we as access

we’re so really what those trying And to optimize for LTVs. are

same able deploying that personalized to we’re occur, Fix at Preview a be going that fine for more tune, you will the we’re that I do be we to more I maintain that is an while little – guess of And bit so think populations where a level time whom AOV for reducing the we keep rate to know at to to benefit mentioned, able of from making we those we is And would it. eliminating survey will by is say delight. Preview perspective, our all retaining sure Stitch cohorts real that we benefits clients benefit that that things and of in and that who don’t Fix the one a hear engaging Fix from cancellations from like of one are I of think to customer and also, the surprise

surprise And of so can lack it delight. of you can allowing a to have you clients, also as – for people think actually some but to to be agency, of that it able as think and

in Somebody those. I can said quote one your me be of lot just of love surprises And Fix get of adult, like, you to as don’t good whole a with this an life. Stitch

we know are really valuable and on that clients for maintain there actually answer clients. able And to those the for is that really, basis? you Dan, to those LTV question want positive clients and cost the value to so who continue being

Yes.

cost, have And On we to we’re look you that. where the at when and my there’s for adjusted restructuring, efficiency XXXX And going in QX remarks. about and excluding forward, back very we SPC. SG&A fiscal ended to total still more feel good prepared

better You heard as on this we us to There’s office our reduce talk the that also corporate opportunity see about footprint space. gross that monetize there. opportunities we margin further our and

variable have efficiency We projects that ongoing. are

forward. opportunity very a think in cost to the in is place. good improve feel space going I there’s yes, very – So it good And tremendous I structure

So place cost standpoint from standpoint. a liquidity in a we’re good and a

and best both you thank Great, Dan. luck, of

you. Thank

Thank you.

next ROTH question with Bellinger David Our comes from MKM.

You may proceed.

Hey, everyone. for question. the Thanks

of mix play shift where quarter, some cost versus how of the driven better external internally down that type through channel category? call some the much that’s the acquisition and within per your getting of apparel ROI it the broader XX% in being that is On factors the

is of might Dan’s for the a from honestly David. a really benefit and thanks here. more that in I question, lot focus. of think of can weighing perspective some But I Yes, start from

doing that were Fixed think so very marketing, And experience if where were an not we first And more immediate about were year, we first last efficient styling simply driving people experience. freestyle experience people driving you instead as core put was as we to marketing of fixes. a into through freestyle just purchase our

we through and one on channels We be diversifying focused have clear in And of channels time, we think of able And clients make the and and so that conversion more true always have time. be driving that. always to have I performed our and know, people been our the converting have I well and emerging channels benefits at so really messages spending of has sure to in to tried new of And those we’re acquiring to to our you the of muscle getting places perform. definitely that that make heard don’t personalization the are styling same clients be as looking marketing Dan, anything to numbers. efficiency. at around to know and all see just driving we’re that you’ve all kind the that kind the and if experimenting we sure add kind we’re channels exercising that

spend. marketing Katrina Yes, of efficiency agree hardened – XXX% we I and I of the really I the of with think experiences presume only the add what really said. that part therefore helped – I the funnel with And simply would traffic, where the conversion

a And In addition spent channels. done dollar that I the job to spend. the the bringing very marketing channels, good has focused next of being clients, remarks. but making within focusing And diversifying sure the good and earlier we’re about. just right tremendously then I efficient feel we about And on that talked efficiency an in think the on which the team is very think the we’ve in

sounds follow-up, comfortable of one for And Great, that. thanks the I just assortment. more type think you’re with some you like chasing inventory. mentioned other It

refresh your connectivity technology think core and need on to Is them picture a again? there top again? get your inventory issue we of and or you is type step, some with bigger on So that if more getting customers side back of of core the what’s back the here spending needed next customer there

that I Yes, it’s but said of improve It’s macro, no cohort but all There a we there opportunities are see, we we’re journey pretty of some that it really good best I mentioned, I ways opportunity, headwind, can weakness. pretty clients we’re want, we’re leads accept willing macro possible the I course we mean, question. feel some that seeing inventory to LTV, seeing our value. the our like definitely like, into to for that I take healthy not we’re is There’s inventory next customer we kind over that. us I’m are think can Dan I to way. that gradual the to then think, clear, think That consistent for perspective. serving improve so have inventory on to seeing AOV of they side. shareholder been us few mean, to experience the the the being still leads be in there’s perform last that in about where months the customer And evolving be

still opportunity. the transactions, in experience. But are so goodness us feeling be it’s a the think actually people of kind rest more seeing I deliver I And to customer and at we in how to there’s dig on our to as doing, actual we’re Fix goodness think, their that there. how definitely is look lot now And of of able

Great, thank you.

Thank you.

comes next Ike question from with Our Fargo. Boruchow Wells

proceed. may You

Ike. cash is this a It major for this Jesse source looks inventory everyone, quarter. of Hi, down Sobelson like was taking

liquidity the And need expect run cash I’m flow So year? investors how business? throughout guys to cash curious, on the front, of should rest you much the what the do regarding generation just

for Yes, thanks the question.

very equivalents. a good in facility we cash we a the we which million as to position, so from standpoint, cash of a have our come use. a from inventory yes, credit position, going inventory we $XXX liquidity last on run did how much of down, go which need $XXX source a And we’re we quarter brought we was cash to happen we million, and have plan don’t implied our position do to And that have forward

a of we cash the CapEx we forward, spend is lot several CapEx, to we going do EBITDA us, a great have quarters. over proxy guided a so about adjusted of positive anticipate as next lot And we HX for simply not flow not a talked for because do EBITDA, and

and guidance HX. we at ‘XX will feel the good generated cash on we very trending as more are that QX about go for and liquidity EBITDA later in And HX, positive we’re that so flow position FY we’ve that both cash and a for in forward. we And feel flow get our both the date. But we overall,

Thank you. Great.

Thank you.

Anderson Our Blake Jefferies. from next with question comes

proceed. may You

expect But This for influence tone strategic change that. the should in one. Just announced? Katrina, the and CEO a a much have that Wanted wondering short-term? is question. little we to you. we any philosophical revisit how changes our could to before that business business maybe taking the Thank on is how topic new bit thanks to a on Hi, of more has freestyle seemed

for long-term focusing hard the and at order that to really on clients, areas think or that. in optimize imagine LTV, I valuable are I strategy differently we our to would being I test client, the to are AB that client so to the always from areas Blake understand the strategy growth. we said, drive focusing think and always know it’s to are that don’t for we like, doing experiments, we’re we to better can thanks, to styling deviate shift of drive doing better question. evolving level a high mean, our we Yes, experience and drive on a are profitability very That what doing I always doing and on we journey of value to focusing be what personalization see like that differentiation big for foundational in

so making And are we always changes.

I big see that evolves I that know which in fundamental the value. changes value. see I them terms over freestyle that that honestly, But what know of small is can think like, we we there hopefully, you wouldn’t the can so know say – some And adds it changes, to customer time. probably journey expect We way which I ways adds like as in

experience are with that most we and getting it’s of out target the sure value of out clients tailor to that clients are thus, And value experience most about and customer acquire. getting Stitch so we really, Fix how their make we do so the the right

you up? And it, any especially provide talk much. by quarter did That’s but trends how that about so you budget Thank holding quarter-to-date, you. on how Thanks helpful. kind the maybe the commentary month the I shopper throughout – can and is missed of guys

Yes, I can take that.

been that, as not did trends we our largely for quarter will us. February has provide say expected for So, QX. by I

account We are to seen – are negative. we that in is X weeks ordinary we we gave trajectory where February anything the guidance course, of takes of change and the again that of out a the not seeing have into

QX continue. be we There that analysis see trend we to positively. frequency with to see some So, our continue the keep might cohorts for trending rates about that talked

for but We we in trend for beyond the commentary we that the will, on real have gave QX, what QX but haven’t – we looked at the QX. no yet guidance for update provided and

you. thank Great, Best of luck.

Thank you.

you. Thank

Tom Our from next with Securities. Wedbush comes question Nikic

proceed. may You

Dan, Hi, thanks question. for you. quick for taking one my

I what did Sorry, in a if this, or was actually as either the marketing QX as revenue? missed say dollars percentage you expense in of

X%. did We

it. Got

optimally Thanks. seat? an or welcome like interim who like role what successor, looking ideal for we sets CEO think you when permanent your CEO would have you Okay. are attributes candidate the the what – the for Thanks. in skill looking to what the role CEO permanent And are Kat, back for basis, is about but what –

Tom. a thanks, search. we off have Yes, so Yes, kicked

that meeting. optimistic with people and fairly the of do candidates. with business level, are really we engaged business a excited have and at very quality are I a search we it’s few have about a And history overall highest conversations We quite conversations delivering the our think of firm the candidates with been feel having executing is results having And simply that like, of like, I complex. and kind

have first then of that of of delivering I And a and in And a foremost, similar and important. types somebody to has had complexity who kind of a roles. ours has so, history people that think in have company relatedly, results a is, large we of has experience lot course, business different

to natural and somebody able who and And important. a is successful a to diverse leading leadership going be has leadership and be someone really is so that who organization

and talked of that I we’ve highest things had really those we and have And kind But lot level, for. two are the at are business so of to that the looking experience meeting, as think the the and with conversations, the a of have And optimistic. we had a we’re lot feel Fix connected we so well are really excited customer. I who candidates hand business think about who first we Stitch know people have

of year. Kat. the the with Thanks, and the Best for the CEO luck for good. fiscal Sounds rest search in business

you. Thank

Thank you.

from Madhukar Our next question Kunal comes UBS. was

You may proceed.

longer Hi, one then more One housekeeping taking for thanks more term. and the question.

trend can about side, the understand LTM for a going housekeeping talked about for the has on And you now? we help then declining you been return and the clients visibility also should active kind So business. growth LTM of the us having Katrina, you of past talked quarters more eventual five the on active How clients lot think forward? to the

help going you into to are when reason are year, us going how fiscal growth of of XX-week into get to a the that we you is, thinking XXXX understand is and rather maybe mind XXXX, period And than to XQ can your in in So part of this a be growth? XX. going

a does of So, inspire you. the lot not Thank guide confidence.

on actives. is RPAC metric. XX-month question. I’ll It’s So a trailing the take metric RPAC trailing

math into And that so there the of of lot is goes mix a RPAC.

we And are the in of cohort is take so bigger is seeing and best way RPAC. degradation impact I RPAC a of that into say account tenure can clients. terms we which will your – Mix some – of RPAC, of but think impact mix models spend, I our know well, the

past closets get the that their less our filled new more clients in mentioned our spend clients as older have spend We up.

we the to continue RPAC will cohort on actual degradation on it’s some said, to big some in forward might not go I RPAC. from that, safe are a guiding are we future basis, not we an but RPAC reductions talk being about say and where mix, we basis. spend see so And That expecting think

to but some spend year-over-year, in material. will on we going the cohort because be that don’t of we a probably see of it’s think So

at to as are They cash the in that have of clients clients effect bringing The to eventually but continue stabilizing Our look us. up, that’s flow going are we that near-term and that ultimately stay we time. them us. talked about it will ROI, do happen to spend continue over do clients bringing we positive with with the RPAC that newer all

you. Thank

to want we get think Sorry, I the to second.

I I serving our a is I We So, mentioned. and everything am And clients that’s customer Dan I just eventual add the a the so is that revenue existing that part Dan totally to return about thinking two in lot generate is that? more Okay, think of with how – business, also mean, returning, base. think like agree are that around would mentioned, business. of from I business I part great much of our our our growth,

things the of benefits more all valuable. that client we we all make do the that so be able able And – that are to to to

in which do and about right healthy. existing are sure need those always which about we excited and that seen And add of we all we reasons that we in so thinking also can are the are things and the thinking also clients make And that doing confident have the reengage how positive been our things to can offer we that right really have come client, ways to is we all ways back signals about clients, now. we so be doing the new some I we feel think base we

Thank you.

comes Associates. question Kloppenburg Joseph JJK next from Our Research Janet with

proceed. may You

to X%, of can X% needs that And that your and extent to customer and to that, towards Thank follow-up is, saying rates and correct to should think when please what investment back to seems tested that be for question advertising well? go wanted maybe spending mean that just to will you will the spending I will as freestyle are and Dan. But but going shift as are fix to be freestyle that something investment, and you improve should does EBITDA liquidation is you. the channel will a participation that it active that fix wrong and I that investing it company degree or low Hi, spending refined? you a in forward go on some higher below use your me sales. up help your business your Katrina. and as that’s that degree Hi, the the performance fix, me of stay in am personalization we I drive as that

and around at of weigh we a answer high think level way the around focused more styling. that. business the view us that efficiency, point specifics. But And big at a then I drive really is, more having a can can Dan a on part mean a it I and a Sure. helps marketing And marketing to I focusing high about from yes, are of think kind more the of in level, having is. of Fix personalization who is perspective the client messaging very focused to

trying that, an to from to were that think with challenges for of many and definitely I assortment have of trying one freestyle client have the deviating was – acquire kind the to we our trying acquirer, back clients that. actually to historical messages, different and

help on simplifying to to the And so also in be role play side in order delivers fill efficiency. to to And a to engage able has between fixes. freestyle closet, our definitely inventory still client to able their be in

that then together delivering – the clients, and our is in of Stitch fill results definitely And the Fix in that to holistically have to would but add also, Fix more pieces so course order for do what thinking to our value what experience freestyle going continue about thinking say the the is these are be around to investing all around, and to more how client best drive But how shareholders. LTV ecosystem I is we to experience. for

will side? So, I – little will maybe bit marketing a you and about Dan talk the

Yes.

mentioned, with along which experience marketing way. in improvements we the And has to first side, fixed client us Katrina in the product, a client past. marketing first on are the that It efficient a focus that had again, very just freestyle lot the experience, done made. we a we On not have of allowed

the When and clients that advertising. adds are well, actually men’s we women’s up improving in year-over-year seems reduction basis, very down year-over-year bringing XX% on and marketing, kids being about current talked we improving, That’s in efficient when was still a gross that trends. while look you the so that point, spend. large. advertising in, we at the drop And And seeing are from with

It part client, to is of spend, the focusing the first then of on on do client having lower in once be still opportunity, freestyle will engaged the material anticipate freestyle, a and is fixed this a we the to but is. business. continue client. Fix door important and be right the stay that So, trend And very our business in incremental advertising

both you much. Thank so

Thank you.

Dana comes Our from question Telsey Group. Telsey with next Advisory

proceed. may You

Hi, good period. for interim everyone. welcome Kat, afternoon back the

do incremental As you thinking think AUR you customer, how or then it under processes? most the in or the like hood customer? long-term, What place on to see obviously sounds do terms growth of now. being Thank processes, it’s right you the or are the new is And the to captivating driver in return differentiation logistics operations of you. you near-term, and about in are think what the on brands? freestyle you how on are fix long-term, And of between and the the pricing, whether are the the about terms near-term the spending core thinking they about how put

Dana. Thanks

see. Let’s

part, think of first about the seeing we the actually on we like, – seeing we on pretty seeing So, hold are as kind customer side, are are we AOVs what strong.

shopping actually our are about kind not think is our that you. channel AURs strong. differentiated news you And around It’s love And focusing easier. be on. think I it. think thinking we on love. a And and the about are things It And style. that kind you are core It’s customer. best It those look that really more finding one men build right the would that fit. of of there finding loving Fix how it And fit. retailers I in that necessarily, of in what is a assortment It’s is. that makes deliver of to most surprising deliver are tenable shop. people themselves the lot who to lot customer some pretty are we that necessarily that’s that that like in we And a is, not brand good you terms really looking to really of cases, that lot helps It’s find channel can We even that data about customer that seeing know, that’s other there of qualities is had about of the and can price. to not is women the characterize something their Stitch is things about others, relative for, core makes only is And effort some not do And that’s hold customer really our half There able without on. I to you love. that, customer. differentiating it’s spending as men, to to

what’s under hood, the But terms In the on that’s question. broad focusing most think the is good funnels, around I of inventory conversion really really is me, focusing influential And I it those that that messages, mean for umbrella a marketing side. I focusing really mean focused.

kind meaningful. deliver just there able probably profitability and thing. I a think marketing would things dig delivering can we the to in we you know to more the are mentioned we things to having been we come. able could as the being to rather big back of things And be inventory. I shouldn’t we the of have history that’s able into deliver XX-plus-years-old, see able to we already of core this I numbers that little lot that on than And of and think that see the we It’s I focus little has a call the shared. that have that a optimistic are them to quarters excited the on ones that feel and really know But business in that what by And to really is to on one able deliver we thesis. is around business I say, I business marketing focus on things that be know kind like that

you. Thank

Thank you.

from Mark Mahaney ISI. Our question Evercore with next comes

may proceed. You

about trends. And secondly, Okay. sort And those realized just Katrina, is be? I of that Thanks. I what to other was more questions to marketing the Can factors scale. could talked going could into newer provide yet you diversification on channels get on a there then Two channels I newer on have here. macro of if please. lot you color comment wondering

You in QX, have declines consistent got and revenue QX, pretty QX. year-over-year QX,

macro overall are And a but lagging bottom. softening, trends on there you know can of possibly maybe on, am going is that comment I soft, the is demand are the whether but consistently in margins that the of lot I just kind macro sense trends, my just kind soft. consumer – think along other factors question. recovering? So, at would They you. macro of trends are stabilizing But wondering or if address consumer further you you Thank

Thanks Great. Mark.

we think it’s on some probably had done diversification, So, the first experimenting with promise. marketing I of some think have some TikTok But I that obvious.

our YouTube a some how conversion We trying in funnel. and overall get to our organic definitely to. about does to experimenting And YouTube think done of into then is have actually kind returned big place

the of been And also a able I use influencers, like you history influencers being I but influencers, what effective. micro to at Fix would that of kind were by think influencer definitely the well-known of of Fix categories. time seen be Stitch that’s but call, Stitch have was very of of those micro think more we of the is, that, driven more of part early years growth by more bloggers, both some

crystal we I And ball, AUR stable. happening had sure macro, business, happening see be you I our a AOV pretty tell muscle what’s we we are terms I and in what’s that of so I that’s – from mean making actually wish place could that another and And in the rebuild in.

where And more acquisition. headwinds conversion would macro around probably customer so would to expect see and be the I we places think

could we fixed last this I anticipate could have successor that some headwinds. think shared there term, as frequency We have frequency. place and And you I that’s in the I And we shared – like purchase other that around then seen probably But seen we the – longer Dan some quarter. be delivers client as willing think that just that it’s think to place to I think is am all I we that macro, are do accept deliver think better cohorts. macro. that that a But have doing is we experience can able better do I to on I I that not that – softer believe more or some of that said, do some And things be there be LTV.

I if And any have a Dan, you wish to give quantification you on what so I I add, don’t know, but answer could solid to expect.

I don’t I agree completely add. to have with all anything of that.

do gross the something positive. course, the that’s some that seeing we of fixing seeing believe still on client of trends I are how we a And of related. are the on that experience. that’s a we think elevated liked macro, in actives. improvements some very we we in talked And we are lot the on adds, on focused But Specifically, macro with is about improvement,

Dan. Katrina. Thanks Thanks Okay.

Mark. Thanks

Thank you.

Aneesha from Our Bernstein. next question with comes Sherman

You may proceed.

you question. Thank for taking Yes. my

does of your national And lower that that’s margin It year? brand or increasing on theme have can looking of also And does talk Do quarters continuing shift macro of Last Is and it? trade national Does rather that than few points, brands? that – own seeing impacts mix you talked declines? over like change Thanks. the how brands sounds kind down so brands? for that that national if of to with seen brands into and about about strategy profitable. the last own been you how mix your gross you you brands? for that consumer price you talking the national part that your Do understand spending or you their little are behavior the bit of I change the demand that is again. that think you your quarter, higher the about next consumer does think a are judicious demand sort mix So, the frequency trend. have margins, – on consumer the because being more more

are it’s brands version But know to yes, it’s great those. I style, bit this fixes. macro. of would well in And of necessarily I the very Dan And Historically, say, kind And I place well, it’s, do like, most interesting I the does would national that chomping to a not fixes don’t answer looking mean question really shift this perform do my consideration gross very kind is where answer driven say will a by tertiary, I But does apparel Great. very beyond That’s like fit in brand at the at of and – is down margin fixes know channel. Aneesha. I part. is the historically, our those that’s stripped people is me a if think part. first mix are say the I itself.

performed not in we seen fixes. actually very historically, so And national well have brands

into of freestyle bringing experience. portfolio been a the the recently so better has lot support intention And a brands around to national

forward so as those have a smaller positive think portfolio someone, of personalization. freestyle longer they as end brand respected. well, I And recognizes, even that candidly, experience. performed fit better in you term, are to delivering someone the being buy going if than if And the the think we were somebody I like brands although really the that as and part a our And a the jeans at I to it’s of historically experience, a But haven’t national would be them. that actually way fixed and really our position going probably testament is not the will of is day, brands that like

So margins about Dan, gross side. the can more speak on

Yes.

earlier simply course have call I that margin, and driver is margins. of because the the big margins. product was higher comment mentioned higher of made in product the margins does the question, lead brands first in margins. That product I Kat it’s with see exclusive label follow-on focus point what and more we brands Just that national experience. brands the idea of of that we think on is that, right And that having less to to what this our opportunity client in is, second course, your saying also private that on level When exclusive to tighter gross be really we

working we good and through feel a margins, tighter impact national do it’s And through, we with get we – get we although it brands number. do huge to that that we were margins. not as some so that the very have We impact. expect So, still that, of are positively inventory will

making inventory be cashflow. huge margins. efficient, will have the It product also focus which a impact will Our to positive more is on of

So, we it feel good and how about that strategy will impact financials.

Thank you.

Capital from with comes Noah question next Our Markets. Zatzkin KeyBanc

You proceed. may

last others how or space, of sized, Thanks. my Hi. at right begin of of inventory the the It’s quarters? right about And be are in macro the traditionally And of With questions. having next sized the thinking out couple you I maybe over had would Thanks or parsing taking Stitch being about do and the of Stitch it to in think inventory with how frame business, normalize differently. about sight, the broader kind that the promotional to kind will how on model? positioned, Fix more ask price kind slightly couple upside what question. to lines apparel of full environment environment in you the line impact over you along the potential for promotional of talking beginning Fix least quarters? Should

is Thanks to marginal the find primary And That’s we Fix I in question. good all, as what to impact, the much see but And experience, I in Noah. Fix not we I Yes. promotional oddly a think like people some intention. say as not would deal. really expect. think That’s kind periods. resilient are been, has would of Stitch I Stitch of don’t first coming you to see fixed like, order a mean

the need get people would I question deal. all time. say that. a aren’t in right channel Of But price do like to about There no course, is coming we order our that to to

is want coming that are their style. them, means refresh wardrobe, want want people what because things fit because they our that so they actually they that to to because channel, clothes are their And

And as we I result, a AOVs that, are held AURs say pretty see kind would like so of strong. and

like in we right at there highly less fewer my they as looking ago. say they that as in it is And I of environment high so be bank where as their maybe that are fewer they that dollars account to going that been But I would not priority it going be expect, as like a what more hypothesis might a promotional to months are that impacts conversion spend where they might budgets have see XX refreshing that people are probably have might and looking the at would say you wardrobe are terms probably of would now.

that are that I I they in bit customer And are other Fix. the see and headwinds that are things as would say that not within acquisition ecosystem we led-up, unique Stitch promotional the a for That’s us. things would the if say of stable, think to outside that way I so of on it’s make our analogy is up bit environment will hypothesis a existing see clients the relatively our perfect alleviate turn things hopefully, side that probably ecosystem. this a easier little like you a little our and proposition But

do a was believe taken And because efficiency we flow to about But the pick the do will basis pre-freestyle, expect very forward, way as and on exclusive in and turns When and we a do be down have that net going past. inventory not hope macro, am four in the on I we back But each turns of are significant our, in expect efficient. we may increase, more hope the little is, look where in as this it question going I inventory improved ebb am answering inventory Fix our at was efficiency what seeing focus to believe we while record expect to our we we brands we I are to we the I inventory. to bit and related we good you been standpoint externally, that have we of the high our from be correctly. for see on a I feel it changes – inventory question, our ended the that QX back I quarter-to-quarter. inventory simply second part see which half interpreting year two. as And about we of that

you. Thank

call. today’s concludes Thank you this participating. you. conference for And Thank

disconnect. now You may