Stitch Fix (SFIX) 6 Jun 232023 Q3 Earnings call transcript

Good day and thank you for standing by. Welcome to the Third Quarter Fiscal Year 2023 Stitch Fix Earnings Conference Call. At this time, all participants are in a listen-only mode. [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.

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

Interim and on of me the today Katrina Joining call Stitch Aufderhaar, David Lake, Fix; CFO. are CEO

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

statements. be Reported materially making remind that results to which filings forward-looking to everyone of contemplated will this uncertainties. our with indication that like results by the differ. statements SEC could would an call, cause discussion forward-looking we involve should factors be Actual as for performance. We on the results review from considered our future and risks could differ Please those a not of

on on statements Risk to this XX-Q year the fiscal law. as In of SEC third our update particular, to which as with Form filed except quarterly that today, our required tomorrow. and call statements, as as forward-looking today’s to report of available fiscal by Also quarter disclaim XXXX, are note well our XX-K filed filed the be press the issued report any obligation sections Factors XXXX and us previously expect Form on for for the we based of information release We annual on date. any year forward-looking our

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

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

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

clear with top Today, for opportunity need understanding the by to macroeconomic remain Five up months challenging as priorities. Interim motivated and a CEO and profitability refocus and back Hayden. preserving ahead success. to Thanks, reposition amidst came a the company of ourselves climate, flow cash ago, I set the

Generally, improving opportunity inventory managing near impact standards no the and ahead the the managing by while of mindful on manufacturers. long-term levels, still. are also term on balance sheet, and composition our tightening But global actively and we focusing of we are vendors standing means the credit protecting

to to understand We and key AI success, on in continue potential. invest client that focusing we to personalization our is long-term our and maximize

of and a with review operations results. to on company timeframe a maintaining operational focus and enhance a QX, longer robust growth. our experience, future the we and cash drive of improved profitability review This processes eye was flow strategic across a operations business our completed areas, the over in as also driving critical client efficiency We identify effectiveness, on while and business

of aspect review network was analysis a full this our One of strategy.

[X smaller node the a to refocused and breadth the that optimally simultaneously our greatest and and inventory of in this, have our us to strategy] be fixed believe allow country we [ph] of our the better business, depth we As more warehouses have we Understanding clients optimized inventory a across U.S. core on entire showcase network will will stylists. developed serve

additional close given This to allowing to fix, access deliver Because inventory with consolidated time lower this, of inventory to cash Bethlehem, Pennsylvania; efficient in us at experience to centers more network intend two will with same and allow levels. client we better operate the a Dallas, fulfillment us more while a Texas. for

that. choosing are have in As expiring already not lease we renew a we Bethlehem, to

within future three in Atlanta, larger client the expand and optimal as with the even remaining and these shown will has fulfillment capacity Indianapolis, also base remain that the analysis long-term. in centers in Our we locations short-term a Phoenix could our

We will of our maintain client undertake high levels to phased with service. closures current the approach a

wind down year. begin and the the we will later to expect in We move QX Bethlehem Dallas on to in

in strategy thank cost all once XX [indiscernible]. is annualized the savings want We associates at X to node I expect to completed. of team approximately and achieve million the our

clients. We grateful immensely and commitment to for hard work are your you. our Thank

exploring Additionally, employees the And FY to XXXX, informed UK in and U.S. of the UK UK FY in conditions million continued geographic led approximately XXXX. XX exiting negative will we million revenue and the of in footprint. in realities EBITDA. adjusted annual economic both market we XX our morning, us our that have this the the are UK represent In the re-examine

experience Though we believe and especially our geographies, and ultimately Stitch are prepare path U.S. including the the of for near-term our Western Europe, many as in client potentially in macroeconomic in market, across confident periods numerous There we success extended find Fix investments that today, not profitability in in UK have in will in client the we complicated is a that UK. not UK. service both replicated core to we the that also have made we conditions experience the are

we country to instead build core [tech be as and many in platform forward, more stacks] experience managing would prefer it scale [ph] the by continue a to of Going capable country. to geographies investing our ability with modern, in globally multiple

enter any UK date. the Consistent accomplished to to of making final we UK and potentially consultation market team prior a regarding UK UK employees the are will they exiting law, period We have decision. into proud with what with

realistic have paint of more will it trajectory, around clarity of has these we we and moving ahead. a there This change are our know changes, opportunities more number a they the operational to the decisions what course right take parts are of the review While make. view to helped to

will scenarios come. wide in for be are growth position We refocused up retooled on setting right ourselves macroeconomic a through we to in metrics short-term a that eventual and the range of the and navigate are the healthier to us

in continuing personalization. of on to build leadership further to our committed the competitive we space to are and we meantime, the advantages In have the

to each leadership our client core invest leveraging continue and human style. the science personalization data experience, and to further in our and enable to AI our advantages stylists, leveraging We of

generative For years, generated our automatically capabilities had personalization descriptions. language recently, AI, we engine, injecting into scores, utilized and product and more in

We generation developed is recommendations the in as and personalized implemented tools, more unique have also unmatched believe advanced create outfit exciting style proprietary we such a that and and experience market.

AI area new our have A enhanced we inventory buying. our in capabilities is

of purchases. tools make utilized inventory informed We decisions our have with to historically a number data

Now, algorithms, developed level company creates directly our new level client tool shift, [indiscernible] the action. exciting personalization drive at paradigm we a have utilize an which to will that leveraging buying

and more individual increases as decisions allow to because and rates to decisions backend of This signals will efficient so drive timing over we the demand it company. inventory the in client and in drive our expect time. level see also to proactive AOV at the rates and of right will clarity the on expect We a And keep allow personalization success right us time. this, at higher depth fixes amounts inventory the buying the buy more to tailor us effectively right of

have and POs lift rate QX, of informed. a compared expect Early of XX% the created against testing AOV, all by of this our existing XX% we shown end and in be keep buying to approach algorithmically tools

and how and the long-term our example into are scale we to data excited to science to capabilities. drive adoption differentiators remains AI lean a the about we continue It and year throughout success. continue further will of We clear

and business improve continuing to profitability short-term. and we I'm and the truly for done. we do Ultimately, about have in Understanding are continue to have we prioritize the set will to believe are excited lean taking in differentiation experience to these necessary work that to the the want work stage investing into is future. the customer that build by steps both we a growth of in we differentiated, that healthy the areas the capabilities

deeper the turn to With David a on for that, I'll over dive it financials.

April. did QX the year-over-year Consistent and active we year-over-year, Revenue hello to XX% exceeded expectations. declined macroeconomic during down sequentially X% call. and of Net our on and peers, in sequentially. but clients some retail of at high-end and the with March, increased million. range quarter $X.X approximately strength Kat, Thank everyone headwinds $XXX Fiscal saw the see million, at to in February in X% our XX% guidance came you, results

composition average activity and expanded we years, shows and similar to client holding QX is analysis trend all order in value promotional this to year-over-year, XXX than quarter. XX.X%, and that QX, overall improved continue our quarter-over-quarter prior relatively gross less expect points less our in margins steady cohorts inventory QX the While in to to due are spending QX. basis

initiative that that expect and is product over fiscal for XX% around highlighted on are a our margin, margins efficiency in with margins and to example continue efficiency gross We of network actively to year, focus. The time. strategy be good inventory focused opportunities to improve gross improving transportation comments Kat the

We inventory inventory optimize. with take Net experience. may at year-over-year. our to down $XXX million, decline this to the do better align to XX% continue quarter assortment to ended closer demand expect as several manage down core quarter-over-quarter and we QX overall levels in our revise inventory strategy X% And alignment quarters to and

Advertising was X% of revenue QX. in

see an increased to XX% quarter, were was increase seasonality costs re-engagements channels and XX% which offset quarter-over-quarter continue year-over-year, growth This see partially and sequentially we to brand in did due focus by driving we in declining an customer strong our While acquisition year-over-year. marketing awareness. on the up

spend positive finally, in our adjusted this controls. savings tight We And the QX. realization in to of flow similar again ahead cost at cash ongoing quarter, $XX.X of expect flow million FY advertising delivering EBITDA continued free QX million, cash outlook generated levels of in $XX.X XXXX of due and to once maintain cost we came QX. in

in feel and over to securities cash, and equivalents, ended bank debt. balance our continue $XXX million and the no quarter good We sheet with rated cash strong highly about

the outlook. on Moving to

a QX, million reflecting April. between similar million in to For trajectory expect what revenues saw and relatively we we be $XXX $XXX to

sequentially the the expect and be $XX to structure largely $X line. between EBITDA reflecting quarter top We impact a initiatives for adjusted our of on implemented cost lower million,

on while will forward, in profitability to our continue the short-term, Going maximizing potential. long-term we focus

savings completed million the cost of reminder, we proposed an will initiatives XXXX a $XX already As in additional drive Kat expense earlier FY have that $XXX savings. and in annualized initiatives discussed million a

macroeconomic establish endure profitable and enable our in the the to scenarios. we base with possible past We levels are will that tough wide the investments revenue mindful along in Over range different expect on the our experience been to at in grow. we time, P&L healthy increased to client us we've are a of decisions now a improving leverage making which

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

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

You may proceed.

questions. you you level on high little Yes. a for guys. in just Maybe your [ph]. prepared a I Thank remarks. bit question. [sales] taking the a of have Hi, Kat, couple touched this

of then kind lot How market fixed you of a market? So, refocusing search making you obviously you're business? ahead is you those that of of out on believe just think the curation pulling of you way side over opportunity, as long-term us on you [X.X, the basically this the two of core maybe of be size the changes, realize as customers, just and should of what Thank in UK. we you Can addressable AI think kind the the talk thinking just [ph], how fruits remind you at questions. to upon. able look hanging and we terms also now] think look do the little are you maybe addressable As you. X.X realistically, business, on new I just AI, have of how And a about about touched are at you will the, strategy, you'll now with number impact ultimately us you something this at time low look be bit the to up side the

and Yes, questions, excited the mean, feel I great. I long-term Thank on I Youssef. the optimistic. mean, opportunity, for you great firstly, super

world loop really think to a able the now human things be best, to we strategy deliver the is with being in know the of algorithms that's which the focusing differentiators right core combine of styling the stylists experience, to in the lot this that really in human differentiated. combination on is that our best able on do on and I we

really long-term business, to differentiation, the now level but so, the able how that we to stabilizing have kind continuing we're of we're kind in be to spend thinking really high push about forward believe the time of And this that business still we areas competitive that's and right where we're excited.

In think to terms market, really about that. I feel the addressable optimistic of continue we

kind of that think that's I Like a AI, things the, really and it's capabilities think love we that of Intersection that some visual our pushing more of the good about generative as we asked. of really have I that a experience so about format. link is on, of are of we're you really in kind at one the questions which AI

what I our in value with addressable firstly, That's more and unique example we because in technology think that then taking good think that really continue closet. really we that be their continue you personalization that about give outfits about the Fix. data be what we that as of, it's around know app, kind market aligned our experience also you so I and push and we to I have to us, know pushes capabilities able in your account able really is, then And and a with to capability Stitch people think a is. own what to think to to compelling that And really actually those preferences, your in are combination and of into with really to

we to to on think an a what and that thing a I to to is something think wear it. to basis to if that have, access to outfits be be universal have daily how love is I push can wear to can that be around people able advice everybody, would asset

are which we're lot the we is how particular we well these that that but capabilities eye we're about thinking that so, in I addressable value broader clients. really a sure And with of of an like a pushing universe market, we the actually that in as and think making that thinking about innovating in ways sure serve to serving the make features we're our also investing, we're are add towards clients today, AI, ways do and

those excited the we're excited so, and be that continue invest to to And have we I about about those. feel really in we able think capabilities to plan

you, Thank Kat. Okay. Great.

Thank you.

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

You may proceed.

And give any revenues, you're distribution to many that? us help well. Hope are how year, there, you. Can share might EBIT pressures, then you be maybe however all P&L the closing maybe clients active contextualize Thanks. you doing us do from P&L everyone. last think two you pay Hey, just also with centers? want quantify you to and impact Thank impacts maybe understand context, what

have more I'll Yes, David there. share color

Yes, A thanks. couple things. Simeon, of

I been so $XX this First on no made. that and the a there's in million reminder this and proposal, think a out that decision $XX in just just around year, about revenue UK, But and is size still that's shape, million it's Kat called negative in EBITDA.

about do So, there's math that of the if you simple SG&A just flow through, expense million in UK $XX the in well. means as

And so, UK. the level P&L of the for sort that's high

closings. we ways phasing that the know do a be was sure right And do million we're client $XX it we we centers. you and of, want the make about that's on then client an to very this, million. question the this, of It's distribution savings With would $XX of question to second in that as aren't impacting the a more we timing annualized why this

would in than obviously FY XXXX be smaller so, that. And savings

And you're there? then Kat, about just seeing any down Great. wise, environment thinking the on broader just anything Thanks. trade out promotional color

question, Yes. talked It's a points. lot we a Simeon. I wide it honestly, range and about mean, great a have of internally price we've

We to have XXs in the $XXX. all are the up items way that

area an we on of And a eye a seen pretty kind And have we we've range kind kept it's our of softness. little price macroeconomic points. inventory have definitely bit that business of wide of of so, our as

in to strategy We've points think far, range of really is I expect, in AOV been more have broad customer is thing so actually a think to spending price terms able be customer be of that more I that's climate. might strength but in seeing the than macroeconomic meet think people the to acquisition hard to So probably are. I able where our one they far

that like And trade to don't I we're to reflects definitely seen something that. so, able prepared but that a don't data huge of feel – be down, I we we've know eye an know on. amount it's very candidly, keeping do But our

of Hope a guys. summer. have for year. luck Best a Thanks you rest lot the the of Great. nice

you. Thank

You too.

Thank you.

too. You

Thank from you. next Bellinger ROTH comes with MKM. question Our [Operator David Instructions]

proceed. You may

Hi, thanks question. for the

the just mentioned much improved stylist on up much frame to inventory base? the to way inventory was stylists? be order how that's more to And [ph] access available] inventories that your to QX improved fully to can one, how in First And QX? work [depths any you the the greater quantify to needs and for done release, the further in open-up access is

you sure where about, just this Thanks, network part I make of question? want the of David. the kind talk I'm specific to can If or we are understanding clarify, kind I speaking that to

Yes, that's correct. Yes.

One things that first look fresh collecting kind where really co-located as model is at that really think styling kind of really and like model as can through so our the we, of channeling we depends having funnel of for we personalize business a clients about them, are the preferences inventory. right a on that took a we

historically, so And X X warehouses even we've had points. and different at

And many network, inventory inventory. of pockets across inventory pockets be the when a have that of have which broader warehouses when and that more there's times means challenging going good we spreading were we to

to we and a if inventory and used is stylist need like don't for client. very kind so, coming able the potentially to you specific where that with stylist it be have in think to – makes it meet a And of specific that the cases with density somebody depth, in a request, especially breadth if of harder of

clients of we inventory of the have system. and availability stylists warehouse really nodes we be buy ability something in we specific to have depth that and future to our in of that that and our about is too breadth X that for be consolidating able to into helps requests to think all so, as meet And able our

it as be needs we think being so clients' us see help about think able And stylist something ultimately our of as goals really, able that to I and this we needs. to our more achieve meet can to our

Does that sense? make

on a more there to exited No. my as very And then about is later in April anything you Just clarify our models. perfect. Could And to can point guidance, you quarter you talk then consistent QX there to bit helpful. help specific the stood comment you on deceleration would that quarter? out saw with period? regard the in of can can It's us you too Is revenue date in it's That's the you anything growth? follow-up. the some that the Is trends?

Yes. to David, want answer that? do you

David. Yes,

For had was April, then It what were of in that our Kat's we volume peers And that some pretty from through. off it sort as we wasn't And strength that to point, is to included – around pricing sort for it more of and well some coming wasn't heard QX where macro February tended it AOV we it was well. we March. our saw as in anything in April. tailed was saw – consistent with around, steady. headwinds And hold of or guide

Thank very much. you Understood.

Thank you.

from question Young Our comes with Trevor next Barclays.

You may proceed.

Great, thanks.

of get First breadth next that right levels in one, that thinning contemplate the depth you should of at inventory [ph], just were footprint] the to contemplate further talking continue come as into out on we're I'm of we about, we just sheet? year, as on more your bit on to should and set or little [DC you of, balance and sense as here? Katrina kind now, reduced a that trying level having a inventory some are plays kind

in as just just that maintaining that revenue spend of a levels And in commentary did then one, housekeeping percentage on similar dollars? absolute David, a of or XQ, mean you advertising,

of actually? you Thanks, take both Trevor. to do those David, want

one. it's one Sure. that's revenue. quick a answer first, Advertising, And because the a I'll percentage of second really

X% So, we we the do this be that to of expect quarter. saw to similar revenue

think One right on composition work with think And things that focusing mean, core on the so, the doing to teams the then actually really there. now on and I that are we're the inventory, about is, I focusing there's experience. two

teams that helps inventory QX really have this we into quarter clients. inventory focus done great on relevant us think chasing I the our last a job is, really and for get to touched the

or And And so because go to of regard in QX. added benefit. closures, be with the inventory then that, we to impact an could certainly expect that down do

less density available, We want right sure the to warehouses, in absolutely, make less have do sure the have there we inventory as everything making that and is ability you with that inventory. Kat’s first to stylists but to around concentrate point that

And go turns inventory would over up expect time. so we to

Great. Thank you.

you. Thank Securities. next comes from Our Wedbush with question Instructions] Nikic Tom [Operator

You may proceed.

good taking afternoon. for Thanks question. and my Hey,

customer know, know, count? you mean, year line again? reacceleration account then kind you Thanks. bottoming at you done I top happen, There needs the the the know, how of like, how driving, know, size and you of of business. to you know, to of rising I to account the the you know, go customer think, about, base? the normalization you do like, structure needs needs and more again. to ease and think, know, point, I some a and customer starts know, potential, do top do you've are that start you and lot up cost about So, know, think you some of right a ultimately, to the attrition customer rising of customer inflect, needs know, work But, you next we Like, line we

right are of Yes, focused profitability we're Like, to Thanks a for for day, And that marketing be is now. the the right based the outcomes. being were and and our be over we're like macroeconomic like flow we about right? the that on ultimately right on to really where macro longer-term. we we understand spend efficient. like to is where we want on side, focus, we're about look, want where to I totally And cash on question, to now, levels, mean, range really really based prepared growth thinking the like Tom. things on able thinking Like this

and there. mentioned, tougher, we And data bit some was see we a think April then good here pockets right? of little as I

prepared whatever we've profitable. so, great lower to has be be able we much revenue. this been And just at business business like And means. profitable to of need has been This that levels for economics, and

And doing I investing sure in investing the the things can business, making focused we're to for be sure right are core, growth. trying our our we're make that now be in platform so so, be to think that that we on that stabilizing absolutely to we prepared

at I we prepared be going to that time not really inflection set but when we're to doing We're this to to believe ourselves be, able you up is tell think all that. the right things for

Appreciate Thanks, color. guys. the

you. Thank

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

may You proceed.

your Kat, everyone. Stitch categories business afternoon, expect the think you to good Fix to realignment reduction distribution category you there seeing Is worked, you in what Hi, about known the manage space expect on that as you center be what in are enhancing that given is terms a categories? for the on subscription experience? past are model? you in customer relative you. towards moving of of Thank seeing and the And How keep some seeing what are what And in you're to that the this plans? how rates? lastly, along

we're [short side, questions. the like the [ph], great the we're woven’s mean, think And seeing first I on board. Yes, on seeing assortment, across the men's one sleeve work] we're I seeing

dresses, definitely an of occasion seen And dressy. been We’ve In place business, think where event. we've the the work seen in dresses and more of historically lot a we're fitted in been I women's dresses. underpenetrated. success dresses a more seeing have success and we've

doing across our allow and be variety. of excited probably of that be are and we're think things out the that the consolidation people that I to I be think the really able in but to hearing certainly And board, more to hit business. does warehouses you're seeing

places is more so, more inventory, our And the partly consolidation maybe to going that in putting And think like be able it's, the of because forward, be represented have, our to will I probably less harder I tops. the available that would categories we indexed been it be believe to with in historically, say some it's even business fixes of to categories easier I kind warehouses. over in serve are of for our – – stylists underrepresented it's often think easier like

of really our potentially so, us be and believe parts and more that consolidation to clients for greater of us able share we help categories. in the our parts warehouses of of help will And kind and wallet wardrobe of that those variety access to to more be the do kind stylists, achieve could greater, to to the address able clients

terms excited I of, of of we're other think the we about in a place experience, enhancing algorithms using longer-term, some which in And really about rates ways. interesting, But like we're AOV buying, we're I we're though is I'm seen great. terms that where said the talked kind really, excited is in be some that. we what macro really holding, actually earlier, seeing our about seeing we say, ways some and just like like and David I customer even keep in it's AOV like feel as In would problematic, mentioned, haven't

experience really I about, like think can And a impacting of that starting, now we we're bought of buy kind the kind some part hit scaling that there's, warehouses we're insights customer something in see to but product way, actually starting about doing of team, that's that think product. kind and of that rate. give think our we're the to and potential not to using product. we're of excited that buying know keep really you definitely I capability play is, to algorithms enhancing I longer-term our the excited large what we're is that really things just And

you. Thank

you. Thank

from with next Our Jefferies. Helgans Ashley comes question

proceed. may You

for Thanks our Hi. taking questions.

to progressing? much. that's about Thanks any clients. color targeting in how you've the Any clients? And marketing so just active talked reactivate on First, in declines then update past I the know on

we acquisition Yes. the X%. strong down gross Thanks But went and sort point, out And call XX% and think around this see both we compared of reengagement. for is, adds quarter-over-quarter also, of were your also increased was That's that saw to a spend. year-over-year. the function QX, we question. I XX,XXX Reengagement up XX% On quarter, active did clients, to higher quarter-over-quarter.

from a side definitely marketing so, think in And reengagement we're standpoint. the I leaning on

With that, active we're clients be that's we still, in negative of this to QX, because high continue and sort dormancy. do expect lapping to

spent Just QX marketing that. portion that active each headwind client as and reminder, back That's we're standpoint. the first acquisition that we and a quarter $XX on a good pulling and last in of client over QX year million from on still on an focused working this Freestyle was

Great. so Thank you much.

Thank you.

from comes Edward Piper next Our question with Sandler. Yruma

You may proceed.

but client for month the asked I know the Kat, question, And I of first guys. a forward? Hey, stock the significantly that client is of when drive a like just is down housekeeping about guess this think curve trailing I could kind you differently, bend guess, year-over-year, supportive need do going kind picture comp Thanks trend should you X Thank macro was less then, maybe pretty taking I basis, the in ask have if the could back the question. medium-term? kind question. tools bigger growth? that you so you we even about think been think based on growth remains or you. the more you try do a But of to bring to that business that today you that to levers and on growth macro tough

no I And because That I maybe, the your I frankly, question too don't back kind have spend inflect our without Ed. Thanks, it quantifying to a I hard a time it macro. Ed. I can on think answer think, it's is waste to to know like that know it's a I us effect then there's really you exactly. come to can like, it's quantify. take I time will question much said, of for question, we of question. being business, we think enough Like, and do SBC. and great second I macro mean, David mean, that

are I I Like, I the of but fiscal on exactly, answer know now, do we're year. kind I'm for can really if opportunities. And think I don't next And that excited. plan think there our, right real strategic working

do experience, for deliver people. of better proposition have for I to think have value very identified where for us range clearly we broad more, a more a a to a opportunities compelling

business and positively can I positively there be And impact to regardless think clients. the that our doing so, of things definitely our we are impact macro,

really want XX a whatever over just And next like for range we're be to is to so, I I hand the focused XX we really to wide macro And there. going prepared months. of said, months as us

want things going be and to way. so, are take make of right want the our able be focused to regardless the things that on right to macro sure macro when turns And we we to advantage prepared to we're be

I it with so, we'll forward progress exactly, make we on and answer eye happening can an we can't even – macro. definitely believe but like what's keep And

last from quarter on the Ed, quarter. then came down side, And definitely SBC this we

around last down I think down XX% XX% from it's year-over-year. quarter, and around it's

at And so, the we're right is right now that level probably the level.

you fixed forward. that the think going near-term our from structure, If something leverage like cost perspective want it's rest of about a and it just we'll to

much. so Thanks

Thank you.

Lauren with from question Our next comes Morgan Schenk Stanley.

proceed. You may

you AI you bigger years, Thanks. just over threat, a I incremental frankly? of competitive as Great. And just wanted AI, share you around be personal of thinking little your know, sort picture, are coming, whether dig deeper months the more any then how Thanks. about into sort just that assistance, to and comments etcetera, about, investing there? a color can

Yes. entire Thanks, probably Lauren. spend could an I on we this. mean, hour

So, – that few are power like beginning. some like, been of hear in differentiation AI over of learning it's our data of just XX like there's ways that our part machine I has that years been competitive I'll highlights. very one like in our we've it's We've I science today. is leading I a and benefiting think since what And business. space us we, using But day saying developed to real share the that plus since story positive, it maybe you're is, lot think a

and obviously, same interested a people And right space the lot of time, in we've the at really now are that looking at things done.

And both worlds. plan think kind so, I of of we have the to best

year. I or that a And now a so, That's other [deliver would take strategic and that X, off-the-shelf. as XX% and us a of team roadmap, years are X% develop there that's our build kind which something have our have capability business is team the next have opportunities of AI that where happened sliced of off-the-shelf to can AI advantage combination into I our into plan clients. can that's in of, advancements [ph] we to value] our X% there And technology part we where capabilities kind day, required or with we for XX bring ago to think was an are being, what's of

the around we XX it's is And that good AI other about training where that, It's like, we places are then the are proprietary. there over data and And really really need to is been on. that predictive. as only real continue really, your of you're as need years developed to AI the data And we push capabilities our one things have advantage.

that – have amount we to lot the And we of envelope? this but us things do able real data the there's how are a are clients of to push surfaced, incredible take that and one-to-one connection where the with things there's so, can be of we for advantage opportunities we can that off-the-shelf valuable have that our where

we that. about what really great And I example talked of is think buying in a inventory

that, level kind about are able do aggregate be that now that be to a to historically. like actually of using to we buy way in compelling more clients and We individual much our able to have in data

been that generated mentioned we that buys having days. that just styles our by hitting now. have that it's access so, And our starting And are to early and tool we're to warehouses are have super

test. that tested AB the we AB know saw that it. there's we in so, benefit And We a

and be bottom we're numbers to better is integrate deliver to that going buying our to gradually to algorithmic that are really We're experiences a buying and numbers excited, better ultimately our that's starting our but actually is able starting I where where to place that to better clients stylists processes, line. into this and think we roll-out

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you. Great. Thank

Thank you.

from Our next Bernstein. with question Aneesha comes Sherman

You may proceed.

you. Thank Great.

a of to February in back ups years, pre-COVID of, rewind the few lot XXXX, so if but you you X.X now. COVID, about kind go before to, and kind you customers, if about been active had levels million back there's we are downs in right So, last just where of

downs stronger of sort now. of you've a the and circle, it's so, but anniversaried And ways, and full ups business in many come all

higher have awareness levels. You

better assortment. You broader [ph], [algo] have data, better customer

revenue? what you customers those help about their know, lower the buying us then behavior? generating So, you were different, keep Can contextualize, pre-COVID? know, like, Are is total you million different same why what's where items? Like, rates are lower X.X they versus are it Is back priced you different?

delivery exactly historically high did. It's in some but were would of not the without I anniversarying pointing experience. level, same like the knowing clients that revenue of say some of our engagement you're those point hard to, at clients that data first freestyle in clients a is what we specific brought level like, and that a generate are did And

you're guess my is think I probably at. so, And looking that's what of kind

style don't bringing Freestyle those of And gathering kind during people their days, they're they looking where clients. like they're preferences, like. like, into they sharing what what now us that of And information first some with what an experience are weren't for, about we forward, going we

the historically engage made done us so that hard And way it that in we've for to and that. them retain

probably that's to say where the certainly forward getting that. news is even we pushing largely is getting back that reason guess would we're good And I past to were. back my so, and where And the

were an XXXX. things think change. that's place That a is from where in way paradigm I a a doing is That the the improvement an – we're at step we algorithmic as buying example now shift. is we that

be I in And value for be we way forward, are look opportunities a where return and other to bringing that to more able people are long-term focusing a compelling us client lot we similar in, there looking we back deliver to our able more business when as experience And about, who who that's happening are relationship. are talked engaged, of at what core. on kind what's we about. That's talk this a a excited, lot of who are of think

client same tenure. mix call is one just amount from other perspective. And Is, of the definitely it's a out a think different but clients, I there's client

And life tend to so, earlier clients in more until stabilizes. cycle that active it be

And the that's another one so, of factors.

helpful really color. are Those Okay.

So that. then, on follow-up just to

up, up, what's and I differentiation You the is that all gone David, are to cohorts by seeing earlier AOV declining gross driving assume churn are that's means you're accurate? not on that isn't cohort, declines. spending your that volume and comment, know, that Is if less what's and adds

yes. is, That

years seeing clients no in those does brought older you're kind churn are several last newer then in people seeing ago? behavior And between of the and churn Okay. actually actually suggest in some cohorts levels the that or couple you original and differences from on those differences you've Freestyle of between your versus cohorts first years

I alluding it's Freestyle clients. bit losing Kat mean, think those a what of I big to But both. No, was first it is, certainly, of is a part little

cohorts than for for seeing you're older churn newer higher your So, your cohorts?

clients, our cohort, that Not seeing And clients for they're some specific necessarily we're the cohort. are of were Freestyle more we Those newer bringing. newer cohorts, specifically those but first it's that certainly that Overall, core. pressures we a we're the rates. of sort more one churn still way them all same that's of in on and back the And higher of the on pulled reasons though. focusing macro definitely

Thank you.

Yes.

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

may now You disconnect.