x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 27-5026540 | |
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |
1 Montgomery Street, Suite 1500 San Francisco, CA | 94104 | |
(Address of Principal Executive Offices) | (Zip Code) |
Large accelerated filer | ¨ | Accelerated filer | ¨ | |||
Non-accelerated filer | x | Smaller reporting company | ¨ | |||
Emerging growth company | ¨ |
Page No. | ||
ITEM 1. | FINANCIAL STATEMENTS |
October 27, 2018 | July 28, 2018 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash & cash equivalents | $ | 173,341 | $ | 297,516 | |||
Restricted cash | 250 | 250 | |||||
Short-term investments | 84,985 | — | |||||
Inventory, net | 106,701 | 85,092 | |||||
Prepaid expenses and other current assets | 33,036 | 34,148 | |||||
Total current assets | 398,313 | 417,006 | |||||
Long-term investments | 83,870 | — | |||||
Property and equipment, net | 37,629 | 34,169 | |||||
Deferred tax assets | 15,234 | 14,107 | |||||
Restricted cash, net of current portion | 12,600 | 12,600 | |||||
Other long-term assets | 3,146 | 3,703 | |||||
Total assets | $ | 550,792 | $ | 481,585 | |||
Liabilities, Convertible Preferred Stock and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 105,662 | $ | 79,782 | |||
Accrued liabilities | 67,098 | 43,037 | |||||
Gift card liability | 6,268 | 6,814 | |||||
Deferred revenue | 11,206 | 8,870 | |||||
Other current liabilities | 1,761 | 3,729 | |||||
Total current liabilities | 191,995 | 142,232 | |||||
Deferred rent, net of current portion | 15,635 | 15,288 | |||||
Other long-term liabilities | 9,659 | 8,993 | |||||
Total liabilities | 217,289 | 166,513 | |||||
Commitments and contingencies (Note 6) | |||||||
Stockholders’ equity: | |||||||
Preferred stock, $0.00002 par value – 20,000,000 shares authorized as of October 27, 2018 and July 28, 2018; zero shares issued and outstanding as of October 27, 2018 and July 28, 2018 | — | — | |||||
Class A common stock, $0.00002 par value – 2,000,000,000 shares authorized as of October 27, 2018 and July 28, 2018; 41,856,617 and 35,756,628 shares issued and outstanding as of October 27, 2018 and July 28, 2018, respectively | 1 | 1 | |||||
Class B common stock, $0.00002 par value – 100,000,000 shares authorized as of October 27, 2018 and July 28, 2018; 57,577,608 and 63,043,233 shares issued and outstanding as of October 27, 2018 and July 28, 2018, respectively | 1 | 1 | |||||
Additional paid-in capital | 243,086 | 235,312 | |||||
Accumulated other comprehensive loss | (56 | ) | — | ||||
Retained earnings | 90,471 | 79,758 | |||||
Total stockholders’ equity | 333,503 | 315,072 | |||||
Total liabilities, convertible preferred stock and stockholders’ equity | $ | 550,792 | $ | 481,585 |
For the Three Months Ended | |||||||
October 27, 2018 | October 28, 2017 | ||||||
Revenue, net | $ | 366,236 | $ | 295,563 | |||
Cost of goods sold | 201,068 | 166,548 | |||||
Gross profit | 165,168 | 129,015 | |||||
Selling, general and administrative expenses | 154,271 | 119,471 | |||||
Operating income | 10,897 | 9,544 | |||||
Remeasurement of preferred stock warrant liability | — | (9,071 | ) | ||||
Interest income | (1,399 | ) | (17 | ) | |||
Other income, net | (120 | ) | — | ||||
Income before income taxes | 12,416 | 18,632 | |||||
Provision for income taxes | 1,738 | 5,144 | |||||
Net income | $ | 10,678 | $ | 13,488 | |||
Other comprehensive income (loss): | |||||||
Change in unrealized loss on available-for-sale securities, net of tax | (82 | ) | — | ||||
Foreign currency translation | 26 | — | |||||
Total other comprehensive loss, net of tax | (56 | ) | — | ||||
Comprehensive income | $ | 10,622 | $ | 13,488 | |||
Net income attributable to common stockholders: | |||||||
Basic | $ | 10,664 | $ | 3,915 | |||
Diluted | $ | 10,665 | $ | 1,347 | |||
Earnings per share attributable to common stockholders: | |||||||
Basic | $ | 0.11 | $ | 0.15 | |||
Diluted | $ | 0.10 | $ | 0.04 | |||
Weighted-average shares used to compute earnings per share attributable to common stockholders: | |||||||
Basic | 98,965,274 | 26,329,495 | |||||
Diluted | 104,539,452 | 33,262,082 |
Convertible Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Total Stockholders’ Equity | ||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||
Balance as of July 29, 2017 | 59,511,055 | $ | 42,222 | 26,834,535 | $ | 1 | $ | 27,002 | $ | — | $ | 34,858 | $ | 61,861 | |||||||||||||||||
Issuance of common stock upon exercise of stock options | — | — | 211,236 | — | 444 | — | — | 444 | |||||||||||||||||||||||
Repurchase of common stock related to early exercised options | — | — | (19,479 | ) | — | — | — | — | — | ||||||||||||||||||||||
Vesting of early exercised options | — | — | — | — | 315 | — | — | 315 | |||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 2,159 | — | — | 2,159 | |||||||||||||||||||||||
Net income | — | — | — | — | — | — | 13,488 | 13,488 | |||||||||||||||||||||||
Balance as of October 28, 2017 | 59,511,055 | $ | 42,222 | 27,026,292 | $ | 1 | $ | 29,920 | $ | — | $ | 48,346 | $ | 78,267 | |||||||||||||||||
Convertible Preferred Stock | Common Stock | Additional Paid-In Capital | Accumulated Other Comprehensive Loss | Retained Earnings | Total Stockholders’ Equity | ||||||||||||||||||||||||||
Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||
Balance as of July 28, 2018 | — | — | 98,799,861 | $ | 2 | $ | 235,312 | $ | — | $ | 79,758 | $ | 315,072 | ||||||||||||||||||
Cumulative effect of adopting accounting standards(1) | — | — | — | — | — | — | 35 | 35 | |||||||||||||||||||||||
Issuance of common stock upon exercise of stock options | — | — | 578,107 | — | 2,000 | — | — | 2,000 | |||||||||||||||||||||||
Issuance of restricted stock units, net of tax withholdings | — | — | 56,257 | — | (1,363 | ) | — | — | (1,363 | ) | |||||||||||||||||||||
Vesting of early exercised options | — | — | — | — | 90 | — | — | 90 | |||||||||||||||||||||||
Stock-based compensation | — | — | — | — | 7,047 | — | — | 7,047 | |||||||||||||||||||||||
Net income | — | — | — | — | — | — | 10,678 | 10,678 | |||||||||||||||||||||||
Other comprehensive loss, net of tax | — | — | — | — | — | — | (56 | ) | — | (56 | ) | ||||||||||||||||||||
Balance as of October 27, 2018 | — | $ | — | 99,434,225 | $ | 2 | $ | 243,086 | $ | (56 | ) | $ | 90,471 | $ | 333,503 |
For the Three Months Ended | |||||||
October 27, 2018 | October 28, 2017 | ||||||
Cash Flows from Operating Activities | |||||||
Net income | $ | 10,678 | $ | 13,488 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Deferred income taxes | (1,061 | ) | (1,366 | ) | |||
Remeasurement of preferred stock warrant liability | — | (9,071 | ) | ||||
Inventory reserves | 1,563 | 4,224 | |||||
Stock-based compensation expense | 6,637 | 2,038 | |||||
Depreciation and amortization | 3,175 | 2,270 | |||||
Loss on disposal of property and equipment | — | 131 | |||||
Change in operating assets and liabilities: | |||||||
Inventory | (23,172 | ) | (24,208 | ) | |||
Prepaid expenses and other assets | 1,252 | 4,084 | |||||
Accounts payable | 26,008 | 13,967 | |||||
Accrued liabilities | 24,360 | 16,942 | |||||
Deferred revenue | 2,532 | 1,663 | |||||
Gift card liability | (141 | ) | (119 | ) | |||
Other liabilities | (865 | ) | 748 | ||||
Net cash provided by operating activities | 50,966 | 24,791 | |||||
Cash Flows from Investing Activities | |||||||
Purchases of property and equipment | (6,985 | ) | (4,180 | ) | |||
Purchases of securities available-for-sale | (169,095 | ) | — | ||||
Sales of securities available-for-sale | 302 | — | |||||
Net cash used in investing activities | (175,778 | ) | (4,180 | ) | |||
Cash Flows from Financing Activities | |||||||
Proceeds from the exercise of stock options | 637 | 444 | |||||
Repurchase of Class B common stock related to early exercised options | — | (39 | ) | ||||
Payment of deferred offering costs | — | (528 | ) | ||||
Net cash provided by (used in) financing activities | 637 | (123 | ) | ||||
Net increase (decrease) in cash, cash equivalents and restricted cash | (124,175 | ) | 20,488 | ||||
Cash, cash equivalents and restricted cash at beginning of period | 310,366 | 119,958 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 186,191 | $ | 140,446 | |||
Components of cash, cash equivalents and restricted cash | |||||||
Cash and cash equivalents | $ | 173,341 | $ | 131,096 | |||
Restricted cash – current portion | 250 | 250 | |||||
Restricted cash – long-term portion | 12,600 | 9,100 | |||||
Total cash, cash equivalents and restricted cash | $ | 186,191 | $ | 140,446 | |||
Supplemental Disclosure | |||||||
Cash paid for income taxes | $ | 42 | $ | — | |||
Supplemental Disclosure of Non-Cash Investing and Financing Activities: | |||||||
Purchases of property and equipment included in accounts payable and accrued liabilities | $ | 224 | $ | 1,022 | |||
Capitalized stock-based compensation | $ | 410 | $ | 121 | |||
Vesting of early exercised options | $ | 90 | $ | 315 | |||
Deferred offering costs included in accrued liabilities | $ | — | $ | 920 |
1. | Description of Business |
2. | Summary of Significant Accounting Policies |
3. | Fair Value Measurements |
October 27, 2018 | ||||||||||||||||
(in thousands) | Amortized Cost | Gross Unrealized Gains | Gross Unrealized Losses | Fair Value | ||||||||||||
Financial Assets: | ||||||||||||||||
Investments: | ||||||||||||||||
U.S. Treasury securities | $ | 31,808 | $ | — | $ | (12 | ) | $ | 31,796 | |||||||
Commercial paper | 41,431 | — | — | 41,431 | ||||||||||||
Asset-backed securities | 34,723 | 5 | (45 | ) | 34,683 | |||||||||||
Corporate bonds | 61,042 | — | (97 | ) | 60,945 | |||||||||||
Total | $ | 169,004 | $ | 5 | $ | (154 | ) | $ | 168,855 |
October 27, 2018 | ||||||||||||||||
(in thousands) | One Year or Less | Over One Year Through Five Years | Over Five Years | Total | ||||||||||||
Financial Assets: | ||||||||||||||||
Investments: | ||||||||||||||||
U.S. Treasury securities | $ | 31,796 | $ | — | $ | — | $ | 31,796 | ||||||||
Commercial paper | 41,431 | — | — | 41,431 | ||||||||||||
Asset-backed securities | 5,933 | 28,750 | — | 34,683 | ||||||||||||
Corporate bonds | 5,825 | 55,120 | — | 60,945 | ||||||||||||
Total | $ | 84,985 | $ | 83,870 | $ | — | $ | 168,855 |
October 27, 2018 | ||||||||||||||||
(in thousands) | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Financial Assets: | ||||||||||||||||
Cash equivalents: | ||||||||||||||||
Money market funds | $ | 862 | $ | — | $ | — | $ | 862 | ||||||||
Commercial paper | — | 5,993 | — | 5,993 | ||||||||||||
Investments: | ||||||||||||||||
U.S. Treasury securities | 31,796 | — | — | 31,796 | ||||||||||||
Commercial paper | — | 41,431 | — | 41,431 | ||||||||||||
Asset-backed securities | — | 34,683 | — | 34,683 | ||||||||||||
Corporate bonds | — | 60,945 | — | 60,945 | ||||||||||||
Total | $ | 32,658 | $ | 143,052 | $ | — | $ | 175,710 |
(in thousands) | For the Three Months Ended October 28, 2017 | |||
Balance at July 29, 2017 | $ | 26,679 | ||
Change in fair value | (9,071 | ) | ||
Ending Balance at October 28, 2017 | $ | 17,608 |
4. | Accrued Liabilities |
(in thousands) | October 27, 2018 | July 28, 2018 | ||||||
Compensation and related benefits | $ | 7,019 | $ | 10,680 | ||||
Advertising | 14,075 | 10,456 | ||||||
Sales taxes | 8,399 | 7,066 | ||||||
Shipping and freight | 11,271 | 4,801 | ||||||
Accrued accounts payable | 6,146 | 4,567 | ||||||
Inventory purchases | 14,709 | 506 | ||||||
Other | 5,479 | 4,961 | ||||||
Total accrued liabilities | $ | 67,098 | $ | 43,037 |
5. | Preferred Stock Warrant Liability |
6. | Commitments and Contingencies |
7. | Accumulated Other Comprehensive Loss |
Changes in Accumulated Other Comprehensive Income | ||||||||||||
(in thousands) | Available-for-sale Securities | Foreign Currency Translation | Total | |||||||||
Balance at July 28, 2018 | $ | — | $ | — | $ | — | ||||||
Other comprehensive income (loss) before reclassifications(1) | (82 | ) | 26 | (56 | ) | |||||||
Net change in AOCI | (82 | ) | 26 | (56 | ) | |||||||
Balance at October 27, 2018 | $ | (82 | ) | $ | 26 | $ | (56 | ) |
Options Outstanding | |||||||||||||
Number of Options | Weighted- Average Exercise Price | Weighted- Average Remaining Contractual Life (in Years) | Aggregate Intrinsic Value (in thousands) | ||||||||||
Balance – July 28, 2018 | 9,052,160 | $ | 11.74 | 8.23 | $ | 160,856 | |||||||
Authorized | — | ||||||||||||
Granted | 105,061 | $ | 38.69 | ||||||||||
Exercised | (578,107 | ) | $ | 3.39 | |||||||||
Cancelled | (175,356 | ) | $ | 11.20 | |||||||||
Balance – October 27, 2018 | 8,403,758 | $ | 12.29 | 8.11 | $ | 95,008 |
Unvested RSUs | ||||||||||||
Class A Common Stock | Weighted- Average Grant Date Fair Value | Weighted- Average Remaining Contractual Life (in Years) | Aggregate Intrinsic Value (in thousands) | |||||||||
Unvested at July 28, 2018 | 2,432,326 | $ | 21.58 | 3.50 | $ | 71,778 | ||||||
Granted | 759,776 | $ | 40.73 | |||||||||
Vested | (56,257 | ) | $ | 19.38 | ||||||||
Forfeited | (95,337 | ) | $ | 23.45 | ||||||||
Unvested at October 27, 2018 | 3,040,508 | $ | 26.38 | 3.51 | $ | 71,969 |
For the Three Months Ended | |||||
October 27, 2018 | October 28, 2017 | ||||
Expected term (in years) | 5.1 - 6.2 | 5.6 - 6.5 | |||
Volatility | 41.7 - 42.0% | 42.1 - 43.5% | |||
Risk free interest rate | 2.8 - 3.0% | 1.9 - 2.0% | |||
Dividend yield | — | % | — | % |
9. | Income Taxes |
For the Three Months Ended | ||||||||
(in thousands) | October 27, 2018 | October 28, 2017 | ||||||
Income before income taxes | $ | 12,416 | $ | 18,632 | ||||
Provision for income taxes | 1,738 | 5,144 | ||||||
Effective tax rate | 14.0 | % | 27.6 | % |
10. | Earnings Per Share Attributable to Common Stockholders |
For the Three Months Ended | ||||||||||||
October 27, 2018 | October 28, 2017 | |||||||||||
(in thousands, except share and per share amounts) | Class A | Class B | Class B | |||||||||
Numerator: | ||||||||||||
Net income | $ | 4,084 | $ | 6,594 | $ | 13,488 | ||||||
Less: noncumulative dividends to preferred stockholders | — | — | (635 | ) | ||||||||
Less: undistributed earnings to participating securities | (5 | ) | (9 | ) | (8,938 | ) | ||||||
Net income attributable to common stockholders - basic | 4,079 | 6,585 | 3,915 | |||||||||
Less: change in fair value of preferred stock warrant liability (net of tax) | — | — | (9,071 | ) | ||||||||
Add: adjustments to undistributed earnings to participating securities | 1 | — | 6,503 | |||||||||
Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares | 6,585 | — | — | |||||||||
Reallocation of undistributed earnings to Class B shares | — | 85 | — | |||||||||
Net income attributable to common stockholders - diluted | $ | 10,665 | $ | 6,670 | $ | 1,347 | ||||||
Denominator: | ||||||||||||
Weighted-average shares of common stock - basic | 37,850,643 | 61,114,631 | 26,329,495 | |||||||||
Conversion of Class B to Class A common shares outstanding | 61,114,631 | — | — | |||||||||
Effect of dilutive stock options and restricted stock units | 5,574,178 | 4,260,911 | 5,876,621 | |||||||||
Effect of potentially dilutive preferred stock warrants | — | — | 1,055,966 | |||||||||
Weighted-average shares of common stock - diluted | 104,539,452 | 65,375,542 | 33,262,082 | |||||||||
Earnings per share attributable to common stockholders: | ||||||||||||
Basic | $ | 0.11 | $ | 0.11 | $ | 0.15 | ||||||
Diluted | $ | 0.10 | $ | 0.10 | $ | 0.04 |
For the Three Months Ended | |||||
October 27, 2018 | October 28, 2017 | ||||
Convertible preferred stock | — | 59,511,055 | |||
Preferred stock warrants | — | — | |||
Restricted stock units | 750,607 | — | |||
Stock options to purchase Class A common stock | 351,184 | — | |||
Stock options to purchase Class B common stock | 2,239 | 954,706 | |||
Total | 1,104,030 | 60,465,761 |
ITEM 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
• | our non-GAAP net income, adjusted EBITDA and non-GAAP EPS – diluted measures exclude the remeasurement of the preferred stock warrant liability, which is a non-cash expense incurred in the periods prior to the completion of our IPO; |
• | adjusted EBITDA excludes the recurring, non-cash expenses of depreciation and amortization of property and equipment and, although these are non-cash expenses, the assets being depreciated and amortized may have to be replaced in the future; |
• | adjusted EBITDA does not reflect our tax provision, which reduces cash available to us; |
• | adjusted EBITDA excludes interest income and other income, net, as these items are not components of our core business; and |
• | free cash flow does not represent the total residual cash flow available for discretionary purposes and does not reflect our future contractual commitments. |
For the Three Months Ended | ||||||||
(in thousands) | October 27, 2018 | October 28, 2017 | ||||||
Adjusted EBITDA reconciliation: | ||||||||
Net income | $ | 10,678 | $ | 13,488 | ||||
Add (deduct): | ||||||||
Interest income | (1,399 | ) | (17 | ) | ||||
Other income, net | (120 | ) | — | |||||
Provision for income taxes | 1,738 | 5,144 | ||||||
Depreciation and amortization | 3,394 | 2,270 | ||||||
Remeasurement of preferred stock warrant liability | — | (9,071 | ) | |||||
Adjusted EBITDA | $ | 14,291 | $ | 11,814 |
For the Three Months Ended | ||||||||
(in thousands) | October 27, 2018 | October 28, 2017 | ||||||
Non-GAAP net income reconciliation: | ||||||||
Net income | $ | 10,678 | $ | 13,488 | ||||
Add (deduct): | ||||||||
Remeasurement of preferred stock warrant liability | — | (9,071 | ) | |||||
Non-GAAP net income | $ | 10,678 | $ | 4,417 |
For the Three Months Ended | ||||||||
(in dollars) | October 27, 2018 | October 28, 2017 | ||||||
Non-GAAP earnings per share – diluted reconciliation: | ||||||||
Earnings (loss) per share attributable to common stockholders - diluted | $ | 0.10 | $ | 0.04 | ||||
Per share impact of the remeasurement of preferred stock warrant liability(1) | — | — | ||||||
Non-GAAP earnings per share attributable to common stockholders – diluted | $ | 0.10 | $ | 0.04 |
For the Three Months Ended | ||||||||
(in thousands) | October 27, 2018 | October 28, 2017 | ||||||
Free cash flow reconciliation: | ||||||||
Cash flows from operating activities | $ | 50,966 | $ | 24,791 | ||||
Deduct: | ||||||||
Purchases of property and equipment | (6,985 | ) | (4,180 | ) | ||||
Free cash flow | $ | 43,981 | $ | 20,611 | ||||
Cash flows used in investing activities | $ | (175,778 | ) | $ | (4,180 | ) | ||
Cash flows from (used in) financing activities | $ | 637 | $ | (123 | ) |
For the Three Months Ended | % | ||||||||||
(in thousands) | October 27, 2018 | October 28, 2017 | Change | ||||||||
Revenue, net | $ | 366,236 | $ | 295,563 | 23.9 | % | |||||
Cost of goods sold | 201,068 | 166,548 | 20.7 | % | |||||||
Gross profit | 165,168 | 129,015 | 28.0 | % | |||||||
Selling, general and administrative expenses | 154,271 | 119,471 | 29.1 | % | |||||||
Operating income | 10,897 | 9,544 | 14.2 | % | |||||||
Remeasurement of preferred stock warrant liability | — | (9,071 | ) | (100.0 | )% | ||||||
Interest income | (1,399 | ) | (17 | ) | * | ||||||
Other income, net | (120 | ) | — | 100.0 | % | ||||||
Income before income taxes | 12,416 | 18,632 | (33.4 | )% | |||||||
Provision for income taxes | 1,738 | 5,144 | (66.2 | )% | |||||||
Net income | $ | 10,678 | $ | 13,488 | (20.8 | )% |
For the Three Months Ended | ||||||
October 27, 2018 | October 28, 2017 | |||||
Revenue, net | 100.0 | % | 100.0 | % | ||
Cost of goods sold | 54.9 | % | 56.3 | % | ||
Gross margin | 45.1 | % | 43.7 | % | ||
Selling, general and administrative expenses | 42.1 | % | 40.5 | % | ||
Operating income | 3.0 | % | 3.2 | % | ||
Remeasurement of preferred stock warrant liability | — | % | (3.1 | )% | ||
Interest income | (0.4 | )% | — | % | ||
Other income, net | — | % | — | % | ||
Income before income taxes | 3.4 | % | 6.3 | % | ||
Provision for income taxes | 0.5 | % | 1.7 | % | ||
Net income | 2.9 | % | 4.6 | % |
For the Three Months Ended | ||||||||
(in thousands) | October 27, 2018 | October 28, 2017 | ||||||
Income before income taxes | $ | 12,416 | $ | 18,632 | ||||
Provision for income taxes | 1,738 | 5,144 | ||||||
Effective tax rate | 14.0 | % | 27.6 | % |
For the Three Months Ended | ||||||||
(in thousands) | October 27, 2018 | October 28, 2017 | ||||||
Net cash provided by operating activities | $ | 50,966 | $ | 24,791 | ||||
Net cash used in investing activities | (175,778 | ) | (4,180 | ) | ||||
Net cash provided by (used in) financing activities | 637 | (123 | ) | |||||
Net increase (decrease) in cash and restricted cash | $ | (124,175 | ) | $ | 20,488 |
ITEM 3. | Quantitative and Qualitative Disclosures about Market Risk |
ITEM 4. | Controls and Procedures |
ITEM 1. | LEGAL PROCEEDINGS |
ITEM 1A. | RISK FACTORS |
• | cost-effectively acquire new clients and engage with existing clients; |
• | increase consumer awareness of our brand and maintain our reputation; |
• | successfully expand our offering and geographic reach; |
• | anticipate and respond to changing style trends and consumer preferences; |
• | manage our inventory effectively; |
• | anticipate and respond to macroeconomic changes; |
• | compete effectively; |
• | avoid interruptions in our business from information technology downtime, cybersecurity breaches or labor stoppages; |
• | effectively manage our growth; |
• | continue to enhance our personalization capabilities; |
• | hire, integrate and retain talented people at all levels of our organization; |
• | maintain the quality of our technology infrastructure; |
• | develop new features to enhance the client experience; and |
• | retain our existing merchandise vendors and attract new vendors. |
• | effectively differentiating our service and value proposition from those of our competitors; |
• | attracting new clients and engaging with existing clients; |
• | our direct relationships with our clients and their willingness to share personal information with us; |
• | further developing our data science capabilities; |
• | maintaining favorable brand recognition and effectively marketing our services to clients; |
• | delivering merchandise that each client perceives as personalized to him or her; |
• | the amount, diversity and quality of brands and merchandise that we or our competitors offer; |
• | our ability to expand and maintain appealing Exclusive Brands and exclusive-to-Stitch Fix merchandise; |
• | the price at which we are able to offer our merchandise; |
• | the speed and cost at which we can deliver merchandise to our clients and the ease with which they can use our services to return merchandise; and |
• | anticipating and quickly responding to changing apparel trends and consumer shopping preferences. |
• | the need to localize our merchandise offerings, including translation into foreign languages and adaptation for local practices; |
• | different consumer demand dynamics, which may make our model and the merchandise we offer less successful compared to the United States; |
• | competition from local incumbents that understand the local market and may operate more effectively; |
• | regulatory requirements, taxes, trade laws, trade sanctions and economic embargoes, tariffs, export quotas, custom duties or other trade restrictions or any unexpected changes thereto; |
• | laws and regulations regarding anti-bribery and anti-corruption compliance; |
• | differing labor regulations where labor laws may be more advantageous to employees as compared to the United States and result in increased labor costs; |
• | more stringent regulations relating to privacy and data security and access to, or use of, commercial and personal information, particularly in Europe; |
• | changes in a specific country’s or region’s political or economic conditions; and |
• | risks resulting from changes in currency exchange rates. |
• | difficulties in integrating the technologies, operations, existing contracts and personnel of an acquired company; |
• | difficulties in supporting and transitioning clients and suppliers, if any, of an acquired company; |
• | diversion of financial and management resources from existing operations or alternative acquisition opportunities; |
• | failure to realize the anticipated benefits or synergies of a transaction; |
• | failure to identify all of the problems, liabilities or other shortcomings or challenges of an acquired company or technology, including issues related to intellectual property, regulatory compliance practices, revenue recognition or other accounting practices, or employee or client issues; |
• | risks of entering new markets in which we have limited or no experience; |
• | potential loss of key employees, clients, vendors and suppliers from either our current business or an acquired company’s business; |
• | inability to generate sufficient revenue to offset acquisition costs; |
• | additional costs or equity dilution associated with funding the acquisition; and |
• | possible write-offs or impairment charges relating to acquired businesses. |
• | actual or anticipated fluctuations in our client base, the level of client engagement, revenue or other operating results; |
• | variations between our actual operating results and the expectations of securities analysts, investors and the financial community; |
• | any forward-looking financial or operating information we may provide to the public or securities analysts, any changes in this information or our failure to meet expectations based on this information; |
• | actions of securities analysts who initiate or maintain coverage of us, changes in financial estimates by any securities analysts who follow our company or our failure to meet these estimates or the expectations of investors; |
• | whether investors or securities analysts view our stock structure unfavorably, particularly our dual-class structure and the significant voting control of our executive officers, directors and their affiliates; |
• | additional shares of our Class A common stock being sold into the market by us or our existing stockholders, or the anticipation of such sales; |
• | announcements by us or our competitors of significant products or features, technical innovations, acquisitions, strategic partnerships, joint ventures or capital commitments; |
• | changes in operating performance and stock market valuations of companies in our industry, including our vendors and competitors; |
• | price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole; |
• | lawsuits threatened or filed against us; |
• | developments in new legislation and pending lawsuits or regulatory actions, including interim or final rulings by judicial or regulatory bodies; and |
• | other events or factors, including those resulting from war or incidents of terrorism, or responses to these events. |
• | establish a classified board of directors so that not all members of our board of directors are elected at one time; |
• | permit the board of directors to establish the number of directors and fill any vacancies and newly-created directorships; |
• | provide that directors may only be removed for cause; |
• | require super-majority voting to amend some provisions in our certificate of incorporation and bylaws; |
• | authorize the issuance of “blank check” preferred stock that our board of directors could use to implement a stockholder rights plan; |
• | eliminate the ability of our stockholders to call special meetings of stockholders; |
• | prohibit stockholder action by written consent, which requires all stockholder actions to be taken at a meeting of our stockholders; |
• | provide that the board of directors is expressly authorized to make, alter or repeal our bylaws; |
• | restrict the forum for certain litigation against us to Delaware; |
• | reflect the dual class structure of our common stock; and |
• | establish advance notice requirements for nominations for election to our board of directors or for proposing matters that can be acted upon by stockholders at annual stockholder meetings. |
• | any derivative action or proceeding brought on our behalf; |
• | any action asserting a breach of fiduciary duty; |
• | any action asserting a claim against us arising under the Delaware General Corporation Law, our amended and restated certificate of incorporation or our amended and restated bylaws; and |
• | any action asserting a claim against us that is governed by the internal affairs doctrine. |
ITEM 2. | UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS |
ITEM 3. | DEFAULTS UPON SENIOR SECURITIES |
ITEM 4. | MINE SAFETY DISCLOSURES |
ITEM 5. | OTHER INFORMATION |
ITEM 6. | EXHIBITS |
Exhibit Number | Description | Incorporation By Reference | |||||||||||
Form | Sec File No. | Exhibit | Filing Date | Filed or Furnished Herewith | |||||||||
10.1 | X | ||||||||||||
31.1 | X | ||||||||||||
31.2 | X | ||||||||||||
32.1* | X | ||||||||||||
101.INS | XBRL Instance Document | ||||||||||||
101.SCH | XBRL Taxonomy Extension Schema Document | ||||||||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document | ||||||||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase Document | ||||||||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase Document | ||||||||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document | ||||||||||||
* | The certification attached as Exhibit 32.1 accompanying this Quarterly Report on Form 10-Q is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Stitch Fix, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Quarterly Report on Form 10-Q, irrespective of any general incorporation language contained in such filing. |
Stitch Fix, Inc. | ||||
Date: | December 11, 2018 | By: | /s/ Paul Yee | |
Paul Yee | ||||
Chief Financial Officer | ||||
(Principal Financial and Accounting Officer) |
1. | Annual Board Service Retainer: |
3. | Annual Committee Chair Service Retainer (in lieu of Committee Member Service Retainer): |
1. | I have reviewed this quarterly report on Form 10-Q of Stitch Fix, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(b) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | December 11, 2018 | /s/ Katrina Lake |
Katrina Lake | ||
Founder, Chief Executive Officer and Director | ||
(Principal Executive Officer) |
1. | I have reviewed this quarterly report on Form 10-Q of Stitch Fix, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and we have: |
(a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
(c) | Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
(d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
5. | The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
(a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and |
(b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
Date: | December 11, 2018 | /s/ Paul Yee |
Paul Yee | ||
Chief Financial Officer | ||
(Principal Financial and Accounting Officer) |
1. | The Periodic Report fully complies with the requirements of Section 13(a) or Section 15(d) of the Exchange Act; and |
2. | The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
/s/ Katrina Lake | ||||
Katrina Lake | ||||
Founder, Chief Executive Officer and Director | ||||
(Principal Executive Officer) | ||||
/s/ Paul Yee | ||||
Paul Yee | ||||
Chief Financial Officer | ||||
(Principal Financial and Accounting Officer) |
Document and Entity Information - shares |
3 Months Ended | |
---|---|---|
Oct. 27, 2018 |
Dec. 04, 2018 |
|
Document Information [Line Items] | ||
Entity registrant name | Stitch Fix, Inc. | |
Trading symbol | SFIX | |
Entity central index key | 0001576942 | |
Current fiscal year end date | --08-03 | |
Entity filer category | Non-accelerated Filer | |
Document type | 10-Q | |
Document period end date | Oct. 27, 2018 | |
Document fiscal year focus | 2019 | |
Document fiscal period focus | Q1 | |
Amendment flag | false | |
Entity Emerging Growth Company | false | |
Entity Small Business | false | |
Class A Common Stock | ||
Document Information [Line Items] | ||
Entity common stock, shares outstanding | 41,985,380 | |
Class B Common Stock | ||
Document Information [Line Items] | ||
Entity common stock, shares outstanding | 57,552,608 |
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares |
Oct. 27, 2018 |
Jul. 28, 2018 |
---|---|---|
Preferred stock, par value (in dollars per share) | $ 0.00002 | $ 0.00002 |
Preferred stock, shares authorized | 20,000,000 | 20,000,000 |
Preferred stock, shares issued | 0 | 0 |
Preferred stock, shares outstanding | 0 | 0 |
Class A Common Stock | ||
Common stock, par value (in dollars per share) | $ 0.00002 | $ 0.00002 |
Common stock, shares authorized | 2,000,000,000 | 2,000,000,000 |
Common stock, shares issued | 41,856,617 | 35,756,628 |
Common stock, shares outstanding | 41,856,617 | 35,756,628 |
Class B Common Stock | ||
Common stock, par value (in dollars per share) | $ 0.00002 | $ 0.00002 |
Common stock, shares authorized | 100,000,000 | 100,000,000 |
Common stock, shares issued | 57,577,608 | 63,043,233 |
Common stock, shares outstanding | 57,577,608 | 63,043,233 |
Condensed Consolidated Statements of Cash Flow - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Oct. 27, 2018 |
Oct. 28, 2017 |
|
Cash Flows from Operating Activities | ||
Net income | $ 10,678 | $ 13,488 |
Adjustments to reconcile net income to net cash provided by operating activities: | ||
Deferred income taxes | (1,061) | (1,366) |
Remeasurement of preferred stock warrant liability | 0 | (9,071) |
Inventory reserves | 1,563 | 4,224 |
Stock-based compensation expense | 6,637 | 2,038 |
Depreciation and amortization | 3,175 | 2,270 |
Loss on disposal of property and equipment | 0 | 131 |
Change in operating assets and liabilities: | ||
Inventory | (23,172) | (24,208) |
Prepaid expenses and other assets | 1,252 | 4,084 |
Accounts payable | 26,008 | 13,967 |
Accrued liabilities | 24,360 | 16,942 |
Deferred revenue | 2,532 | 1,663 |
Gift card liability | (141) | (119) |
Other liabilities | (865) | 748 |
Net cash provided by operating activities | 50,966 | 24,791 |
Cash Flows from Investing Activities | ||
Purchases of property and equipment | (6,985) | (4,180) |
Purchases of securities available-for-sale | (169,095) | 0 |
Sales of securities available-for-sale | 302 | 0 |
Net cash used in investing activities | (175,778) | (4,180) |
Cash Flows from Financing Activities | ||
Proceeds from the exercise of stock options | 637 | 444 |
Repurchase of Class B common stock related to early exercised options | 0 | (39) |
Payment of deferred offering costs | 0 | (528) |
Net cash provided by (used in) financing activities | 637 | (123) |
Net increase (decrease) in cash, cash equivalents and restricted cash | (124,175) | 20,488 |
Cash, cash equivalents and restricted cash at beginning of period | 310,366 | 119,958 |
Cash, cash equivalents and restricted cash at end of period | 186,191 | 140,446 |
Components of cash, cash equivalents and restricted cash | ||
Cash & cash equivalents | 173,341 | 131,096 |
Restricted cash – current portion | 250 | 250 |
Restricted cash – long-term portion | 12,600 | 9,100 |
Cash, cash equivalents and restricted cash at end of period | 186,191 | 140,446 |
Supplemental Disclosure | ||
Cash paid for income taxes | 42 | 0 |
Supplemental Disclosure of Non-Cash Investing and Financing Activities: | ||
Purchases of property and equipment included in accounts payable and accrued liabilities | 224 | 1,022 |
Capitalized stock-based compensation | 410 | 121 |
Vesting of early exercised options | 90 | 315 |
Deferred offering costs included in accrued liabilities | $ 0 | $ 920 |
Description of Business |
3 Months Ended |
---|---|
Oct. 27, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Description of Business | Description of Business Stitch Fix, Inc. (“we,” “our,” “us” or “the Company”) delivers one-to-one personalization to our clients through the combination of data science and human judgment. Our stylists hand select items from a broad range of merchandise. Stylists pair their own judgment with our analysis of client and merchandise data to provide a personalized shipment of apparel, shoes and accessories suited to each client’s needs. We call each of these unique shipments a Fix. After receiving a Fix, our clients purchase the items they want to keep and return the other items. We are incorporated in Delaware and have operations in the United States and the United Kingdom. Initial Public Offering On November 16, 2017, we completed an initial public offering (“IPO”). In connection with the IPO, we authorized two new classes of common stock: Class A common stock and Class B common stock. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting, conversion and transfer rights. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to ten votes per share. Each share of Class B common stock is convertible at any time at the option of the stockholder into one share of Class A common stock and has no expiration date. The Class B common stock automatically converts to Class A common stock upon transfers or any sale. In our IPO, we issued and sold 8,000,000 shares of our Class A common stock at a public offering price of $15.00 per share. We received $110.4 million in net proceeds after deducting $6.2 million of underwriting discounts and $3.4 million in offering costs. Upon the closing of the IPO, all of the then outstanding shares of common stock were reclassified into Class B common stock, all of the outstanding shares of convertible preferred stock automatically converted into 59,511,055 shares of Class B common stock and all of the outstanding preferred stock warrants were automatically exercised into 1,066,225 shares of Class B common stock. Subsequent to the closing of the IPO, there were no shares of preferred stock or preferred stock warrants outstanding. In December 2017, we issued an additional 1,175,557 shares of Class A common stock at a price of $15.00 per share following the underwriters’ exercise of their option to purchase additional shares and received $16.7 million in net proceeds after deducting underwriting discounts and expenses. |
Summary of Significant Accounting Policies |
3 Months Ended |
---|---|
Oct. 27, 2018 | |
Accounting Policies [Abstract] | |
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies Basis of Presentation Our fiscal year is a 52-week or 53-week period ending on the Saturday closest to July 31. The fiscal years ended August 3, 2019 (“2019”) and July 28, 2018 (“2018”) consist of 53 weeks and 52 weeks, respectively. The unaudited condensed consolidated financial statements include the accounts of Stitch Fix, Inc. and our wholly owned subsidiaries, and have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and following the requirements of the U.S. Securities and Exchange Commission (the “SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. These financial statements have been prepared on the same basis as our annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of our financial information. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending August 3, 2019, or for any other interim period or for any other future year. All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the fiscal year ended July 28, 2018, included in the Company’s Annual Report on Form 10-K filed with the SEC on October 3, 2018 (“2018 Annual Report”). Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in our condensed consolidated financial statements and accompanying footnotes. Significant estimates and assumptions are used for inventory, stock-based compensation expense, income taxes, revenue recognition and, prior to our IPO, common stock valuation and remeasurement of preferred stock warrant liability. Actual results could differ from those estimates and such differences may be material to the condensed consolidated financial statements. Restricted Cash Restricted cash represents cash balances held in segregated accounts collateralizing letters of credit for our leased properties as of October 27, 2018, and July 28, 2018. Investment Securities The Company’s short-term and long-term investments have been classified and accounted for as available-for-sale. We determine the appropriate classification of our investments at the time of purchase and reevaluate the classifications at each balance sheet date. Available-for-sale securities with maturities of 12 months or less are classified as short-term and available-for-sale securities with maturities greater than 12 months are classified as long-term. The Company’s available-for-sale securities are carried at fair value, with unrealized gains and losses, net of taxes, reported within accumulated other comprehensive loss (“AOCI”) in stockholders’ equity, with the exception of unrealized losses believed to be other-than-temporary, which are reported in earnings in the current period, if applicable. The cost of securities sold is based upon the specific identification method. Foreign Currency The functional currency of our international subsidiary is the local currency. For that subsidiary, we translate assets and liabilities to U.S. dollars using period-end exchange rates, and average monthly exchange rates for revenues, costs, and expenses. We record translation gains and losses in AOCI as a component of stockholders’ equity. Net foreign exchange transaction gains and losses resulting from the conversion of the transaction currency to functional currency are recorded in Other income, net in the condensed consolidated statements of operations and comprehensive income. Revenue Recognition We generate revenue primarily from the sale of merchandise in a Fix. Clients create an online account on our website or mobile app, complete a style profile and order a Fix to be delivered on a specified date. Each Fix represents an offer made by us to the client to purchase merchandise. The client is charged a nonrefundable $20 upfront styling fee before the Fix is shipped. As an alternative to the styling fee, we offer select clients the option to purchase a Style Pass. Style Pass clients pay a $49 nonrefundable annual fee for unlimited Fixes that is credited towards merchandise purchases. If the offer to purchase merchandise is accepted, we charge the client the order amount for the accepted merchandise, net of the upfront styling fee or Style Pass annual fee. For each Fix, acceptance occurs when the client checks out the merchandise on our website or mobile app. We offer a 25% discount to clients who purchase all of the items in the Fix. We recognize revenue through the following steps: (1) identification of the contract, or contracts, with the customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, we satisfy a performance obligation. Both our styling fee and Style Pass arrangements consist of one performance obligation, which is the option to purchase merchandise. The upfront styling fee is not a performance obligation as the styling activity is not distinct within the context of the contract. Similarly, the right to receive multiple options under Style Pass does not provide the customer with material stand-alone value and therefore does not give rise to a separate performance obligation. Both the upfront styling fee and Style Pass annual fee are included in deferred revenue until the performance obligation is satisfied when the client exercises his or her option to purchase merchandise (i.e., upon checkout of a Fix) or when the option(s) to purchase merchandise expire(s). Revenue is recognized when control of the promised goods is transferred to the client. Control is transferred when the client accepts or rejects the offer to purchase merchandise. Upon acceptance by purchasing one or more items within the Fix at checkout, the total amount of the order, including the upfront styling fee, is recognized as revenue. If none of the items within the Fix are accepted at checkout, the upfront styling fee is recognized as revenue at that time. The Style Pass annual fee is recognized at the earlier of (i) the time at which a client accepts and applies the Style Pass fee to an offer to purchase merchandise or (ii) upon expiry of the annual period. Under Style Pass arrangements, if a client does not accept any items within the Fix, the annual fee will continue to be deferred until it is applied to a future purchase or upon expiry of the annual period. If a client would like to exchange an item, we recognize revenue at the time the exchanged item is shipped, which coincides with the transfer of control to the customer. We deduct discounts, sales tax and estimated refunds to arrive at net revenue. Sales tax collected from clients is not considered revenue and is included in accrued liabilities until remitted to the taxing authorities. All shipping and handling costs are accounted for as fulfillment costs in Cost of goods sold and Selling, general, and administrative expense (“SG&A”), respectively, and are therefore not evaluated as a separate performance obligation. Discounts are recorded as a reduction to revenue when the order is accepted. We record a refund reserve based on our historical refund patterns. Our refund reserve, which was included in accrued liabilities in the consolidated balance sheets, was $2.5 million and $2.3 million as of October 27, 2018, and July 28, 2018, respectively. The Company has four types of contractual liabilities: (i) cash collections of upfront styling fees, which are included in Deferred revenue and are recognized as revenue upon the earlier of application to a merchandise purchase or expiry of the offer (ii) cash collections of Style Pass annual fees, which are included in Deferred revenue and are recognized upon the earlier of application to a merchandise purchase or expiry of the Style Pass annual period, (iii) unredeemed gift cards, which are included in Gift card liability and recognized as revenue upon usage or inclusion in gift card breakage estimates and (iv) referral credits, which are included in Other current liabilities and are recognized as revenue when used. We sell gift cards to clients and establish a liability based upon the face value of such gift cards. We reduce the liability and recognize revenue upon usage of the gift card. If a gift card is not used, we will recognize estimated gift card breakage revenue proportionately to customer usage of gift cards over the expected gift card usage period, subject to requirements to remit balances to governmental agencies. All commissions paid to third parties upon issuance of gift cards are recognized in SG&A as incurred, as on average, gift cards are used within a one-year period. Similarly, referral credits that are considered incremental costs of obtaining a contract with a customer are recognized in SG&A when issued, as on average, referral credits are used within a one-year period. Contractual liabilities included in Deferred revenue, Gift card liability and Other current liabilities were $11.2 million, $6.3 million and $0.8 million, respectively, at October 27, 2018, and $8.9 million, $6.8 million and $2.7 million, respectively, at July 28, 2018. During the three months ended October 27, 2018, the Company recognized $8.2 million, $0.1 million and $0.6 million of net revenue included in Deferred revenue, Gift card liability and Other current liabilities, respectively, at July 28, 2018. All amounts presented as of July 28, 2018, are accounted for under ASC 605. All amounts presented as of October 27, 2018, include the transition impact of adopting ASC 606. See “Recently Adopted Accounting Pronouncements” below. Deferred revenue related to upfront styling fees totaled $10.1 million as of October 27, 2018, and $7.6 million as of July 28, 2018. Deferred revenue related to Style Pass annual fees totaled $1.1 million as of October 27, 2018, and $1.1 million as of July 28, 2018. Deferred revenue related to exchanges totaled $0.2 million as of July 28, 2018. The Company expects Deferred revenue for upfront styling fees and Style Pass annual fees to be recognized within one year. On average, Gift card liability and Other current liabilities are also recognized within one year. Concentration of Credit Risks We are subject to concentrations of credit risk principally from cash and cash equivalents and investment securities. The majority of our cash is held by three financial institutions within the United States. Our cash balances held by these institutions may exceed federally insured limits. The associated risk of concentration for cash is mitigated by banking with credit-worthy institutions. Our cash equivalents consist of money market funds and commercial paper. The associated risk of concentration for cash equivalents and investments is mitigated by maintaining a diversified portfolio of highly rated instruments. No client accounted for greater than 10% of total revenue, net for the three months ended October 27, 2018, and October 28, 2017. Recently Issued Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which requires lessees to record most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. ASU 2016-02 states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. We expect to adopt this standard in our first quarter of fiscal 2020. We are currently evaluating the impact that this standard will have on our consolidated financial statements but we expect that it will result in a substantial increase in our long-term assets and liabilities. In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Under this ASU, the accounting for awards issued to nonemployees will be similar to the accounting for employee awards. This includes allowing for the measurement of awards at the grant date and recognition of awards with performance conditions when those conditions are probable, both of which are earlier than under current guidance for nonemployee awards. We expect to adopt this standard in our first quarter of fiscal 2020. We are currently evaluating the impact that this standard will have on our consolidated financial statements. Recently Adopted Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amended the existing FASB Accounting Standards Codification. ASU 2014-09 establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services and also provides guidance on the recognition of costs related to obtaining and fulfilling customer contracts. The new guidance may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption (“modified retrospective method”). We adopted the standard in the first quarter of fiscal 2019 under the modified retrospective approach. Under the new standard, we recognize estimated gift card breakage revenue proportionately to customer gift card usage over the expected gift card usage period rather than waiting until the likelihood of redemption becomes remote. Further, we recognize revenue related to exchanges upon shipment by us, rather than upon receipt by the customer. In the first quarter of fiscal 2019, the Company recorded a cumulative catch-up adjustment resulting in an increase to opening retained earnings, net of tax, of $0.4 million, comprised of the impact of $0.3 million from the change in revenue recognition related to gift cards and $0.1 million from the recognition of exchanges upon shipment. The impact to net revenue for the three months ended October 27, 2018, was an increase of $0.5 million as a result of applying the standard. In October 2016, the FASB issued ASU No. 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory (Topic 740), which amends existing guidance on the recognition of current and deferred income tax impacts for intra-entity asset transfers other than inventory. We adopted the standard in the first quarter of fiscal 2019 under the modified retrospective approach. As a result, a cumulative adjustment of $0.4 million, net of tax, was recorded to reduce opening retained earnings in connection with this adoption. |
Fair Value Measurements |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Measurements | Fair Value Measurements We disclose and recognize the fair value of our assets and liabilities using a hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The guidance establishes three levels of the fair value hierarchy as follows: Level 1: Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date; Level 2: Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and Level 3: Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data. Our financial instruments consist of short-term and long-term investments, accounts payable, accrued liabilities and, prior to our IPO, the preferred stock warrant liability. At October 27, 2018, and July 28, 2018, the carrying values of cash and cash equivalents, accounts payable and accrued liabilities approximated fair value due to their short-term maturities. In November 2017, in connection with our IPO, all outstanding preferred stock warrants were automatically exercised into Class B common stock. As a result, we remeasured and reclassified the preferred stock warrant liability to additional paid-in capital upon the closing of the IPO. The following table sets forth the amortized cost, gross unrealized gains, gross unrealized losses and fair values of our short-term and long-term investments accounted for as available-for-sale as of October 27, 2018:
The following table sets forth the fair value of available-for-sale securities by contractual maturity as of October 27, 2018:
The following table sets forth our short-term and long-term investments accounted for as available-for-sale that were measured at fair value on a recurring basis based on the fair value hierarchy as of October 27, 2018:
As of July 28, 2018, the Company did not have any financial instruments measured at fair value. There were no transfers of financial assets or liabilities into or out of Level 1, Level 2 or Level 3 for the three months ended October 27, 2018, and October 28, 2017. The following table sets forth a summary of the changes in the fair value of the preferred stock warrant liability for the three months ended October 28, 2017 (in thousands):
See Note 5, Preferred Stock Warrant Liability, for more details on our preferred stock warrants. |
Accrued Liabilities |
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Accrued Liabilities | Accrued Liabilities Accrued liabilities consisted of the following:
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Preferred Stock Warrant Liability |
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Oct. 27, 2018 | |
Equity [Abstract] | |
Preferred Stock Warrant Liability | Preferred Stock Warrant Liability In 2012 and 2013, in connection with financing arrangements, we issued warrants to purchase shares of our convertible preferred stock. For one of the financing arrangements, we issued warrants to purchase 375,230 shares of Series Seed convertible preferred stock at an exercise price of $0.1066 per share and 66,265 shares of Series A convertible preferred stock at an exercise price of $0.22636 per share. For the second financing arrangement, we issued warrants for the purchase of, at the warrant holder’s option, either (a) 624,730 shares of Series A-1 convertible preferred stock at an exercise price of $0.2401 per share or (b) 308,315 shares of Series B convertible preferred stock at an exercise price of $0.486516 per share. Prior to their automatic exercise in connection with our IPO, as described below, the warrants were exercisable for and expired 10 years from the date of issuance. In November 2017, in connection with our IPO, the preferred stock warrants were automatically exercised into Class B common stock and the preferred stock warrant liability was reclassified to additional paid-in capital. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Commitments On October 12, 2018, we executed an agreement with a third-party logistics contractor to lease and operate a fulfillment center in Leicester, England (the “Fulfillment Center Logistics Agreement”). The agreement commits the Company to a five-year contract for logistics services at the Leicester fulfillment center that can be terminated after two years, with six months’ advance notice. Effective with the Fulfillment Center Logistics Agreement, the leasing component of the arrangement will be accounted for as an operating lease with future minimum lease payments over the five-year term of $11.1 million. Contingencies We record a loss contingency when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We also disclose material contingencies when we believe a loss is not probable but reasonably possible. Accounting for contingencies requires us to use judgment related to both the likelihood of a loss and the estimate of the amount or range of loss. Although we cannot predict with assurance the outcome of any litigation or tax matters, we do not believe there are currently any such actions that, if resolved unfavorably, would have a material impact on our operating results, financial position and cash flows. On October 11, 2018, October 26, 2018, and November 16, 2018, three putative class action lawsuits alleging violations of the federal securities laws were filed in the U.S. District Court for the Northern District of California, naming as defendants us and certain of our officers. The three lawsuits make the same allegations of violations of the Securities Exchange Act of 1934 by us and our officers for allegedly making materially false and misleading statements regarding our active client growth and strategy with respect to television advertising between June 2018 and October 2018. The plaintiffs seek unspecified monetary damages and other relief. We expect the three lawsuits to be consolidated into one. There have been no other material changes to our commitments and contingencies as disclosed in our 2018 Annual Report. Indemnifications In the ordinary course of business, we may provide indemnifications of varying scope and terms to vendors, directors, officers and other parties with respect to certain matters. We have not incurred any material costs as a result of such indemnifications and have not accrued any liabilities related to such obligations in our condensed consolidated financial statements. |
Accumulated Other Comprehensive Loss |
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Accumulated Other Comprehensive Loss | Accumulated Other Comprehensive Loss The table below presents the changes in accumulated other comprehensive loss by component and the reclassifications out of AOCI:
(1)The associated income tax effects for gains / losses on available-for-sale securities were $67. |
Stock Based Compensation |
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Stock-Based Compensation | Stock-Based Compensation 2011 Equity Incentive Plan In 2011, we adopted the 2011 Equity Incentive Plan (the “2011 Plan”). The 2011 Plan provided for the grant of stock-based awards to employees, including directors and nonemployees under terms and provisions established by the board of directors. The 2011 Plan allowed for the grant of incentive stock options or nonqualified stock options as well as restricted stock units, restricted stock and stock appreciation rights. As of October 27, 2018, we had only granted incentive and nonqualified stock options under the 2011 Plan. Employee stock option grants generally vest 25% on the first anniversary of the grant date with the remaining options vesting ratably over the next three years. Options generally expire after 10 years. Effective upon our IPO, the 2011 Plan was replaced by the 2017 Incentive Plan. 2017 Incentive Plan In November 2017, our board of directors and stockholders adopted our 2017 Incentive Plan (the “2017 Plan”). The remaining shares available for issuance under the 2011 Plan became reserved for issuance under the 2017 Plan. Our 2017 Plan provides for the grant of Class A incentive stock options to employees, including employees of any parent or subsidiary, and for the grant of nonqualified stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards and other forms of stock awards to employees, directors and consultants, including employees and consultants of our subsidiaries. The number of shares authorized for issuance under the 2017 Plan was 28,423,374 as of October 27, 2018, of which 3,149,479 were available for grant. Stock option activity under the 2011 Plan and 2017 Plan is as follows:
The aggregate intrinsic value is the difference between the current fair value of the underlying common stock and the exercise price for in-the-money stock options. The following table summarizes the restricted stock unit (“RSU”) award activity under the 2017 Plan:
Stock-Based Compensation Expense Stock-based compensation expense for employees was $6.6 million for the three months ended October 27, 2018, and $2.0 million for the three months ended October 28, 2017. Stock-based compensation expense is included in selling, general and administrative expenses in our condensed consolidated statements of operations. The weighted-average grant date fair value of options granted during the three months ended October 27, 2018, was $17.22 per share. The weighted-average grant date fair value of options granted during the three months ended October 28, 2017, was $7.55 per share. As of October 27, 2018, the total unrecognized compensation expense related to unvested options and RSUs, net of estimated forfeitures, was $121.3 million, which we expect to recognize over an estimated weighted average period of 3.1 years. We record stock-based compensation of stock options granted to employees by estimating the fair value of stock-based awards using the Black-Scholes option pricing model and amortizing the fair value of the stock-based awards granted over the applicable vesting period of the awards on a straight-line basis. The fair value of stock options granted to employees was estimated at the grant date using the Black-Scholes option-pricing model with the following assumptions:
In July 2017, we granted options to certain members of our executive management team to purchase an aggregate of 1,097,463 shares of Class B common stock which had both a service-based condition and a liquidity event-related performance condition. Such options vest ratably over the 24-month period following the fourth anniversary of the grant date, subject to an IPO occurring within 12 months of the grant date and the option holder’s continuous service through each vesting date. The aggregate grant-date fair value of such option awards was $14.0 million. Since an IPO is not deemed probable until such event occurs, no compensation cost related to the performance condition was recognized prior to the consummation of our IPO in November 2017. Subsequently, we recorded stock-based compensation expense of $0.5 million related to periods prior to the IPO. |
Income Taxes |
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Income Taxes | Income Taxes The following table summarizes our effective tax rate from income for the periods presented:
We are primarily subject to income taxes in the United States. Our effective tax rate for the three months ended October 27, 2018, differs from the federal statutory income tax rate primarily due to lower tax rates in foreign jurisdictions where international expansion expenses are incurred, and certain nondeductible expenses and state taxes, partially offset by the benefits on stock-based compensation deductions and allowable credits. Our effective tax rate for the three months ended October 28, 2017, was based on the historic statutory tax rate of 35%. Our effective tax rate for the three months ended October 28, 2017, differed from the federal statutory income tax rate primarily due to nondeductible loss on remeasurement of the preferred stock warrant liability, state taxes and certain other nondeductible expenses, partially offset by the benefits on certain stock-based compensation deductions. On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Tax Act”), which significantly changed U.S. tax law. The Tax Act contains several key tax provisions including the reduction of the corporate income tax rate from 35% to 21%, as well as a variety of other changes including the acceleration of expensing of certain business assets and reductions in the amount of executive pay that could qualify as a tax deduction. The federal statutory tax rate reduction is effective January 1, 2018. During the period ended July 28, 2018, the Company remeasured the deferred tax balances based on the tax rates at which they are expected to reverse in the future which resulted in an increase in income tax expense of $6.7 million. The Company will continue to refine adjustments made under Staff Accounting Bulletin No. 118, Income Tax Accounting Implications of the Tax Cuts and Jobs Act (“SAB 118”), during the measurement period as a result of future changes in interpretation, information available, assumptions made by the Company and/or issuance of additional guidance. There were no changes to the remeasurement of deferred tax balances during the three months ended October 27, 2018. We continue to monitor the progress of ongoing discussions with tax authorities and the impact, if any, of the expected expiration of the statute of limitations in various taxing jurisdictions. |
Earnings Per Share Attributable to Common Stockholders |
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Earnings Per Share Attributable to Common Stockholders | Earnings Per Share Attributable to Common Stockholders Basic and diluted net income per share attributable to common stockholders is presented in conformity with the two-class method required for participating securities. We consider convertible preferred stock and early exercised share options to be participating securities. In connection with our IPO, we established two classes of authorized common stock: Class A common stock and Class B common stock. As a result, all then-outstanding shares of common stock were converted into shares of Class B common stock upon effectiveness of the IPO. The rights of the holders of Class A and Class B common stock are identical, except with respect to voting, conversion and transfer rights. Each share of Class A common stock is entitled to one vote per share and each share of Class B common stock is entitled to ten votes per share. Each share of Class B common stock is convertible at any time at the option of the stockholder into one share of Class A common stock. Undistributed earnings allocated to participating securities are subtracted from net income in determining net income attributable to common stockholders. Basic net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding during the period. All participating securities are excluded from basic weighted-average common shares outstanding. For the calculation of diluted earnings per share (“EPS”), net income attributable to common stockholders for basic EPS is adjusted by the effect of dilutive securities. Diluted net income per share attributable to common stockholders is computed by dividing the net income attributable to common stockholders by the weighted-average number of common shares outstanding, including all potentially dilutive common shares. The undistributed earnings are allocated based on the contractual participation rights of the Class A and Class B common shares as if the earnings for the year have been distributed. As the liquidation and dividend rights are identical, the undistributed earnings are allocated on a proportionate basis. The computation of the diluted net income per share of Class A common stock assumes the conversion of Class B common stock, while diluted net income per share of Class B common stock does not assume the conversion of Class A common stock as Class A common stock is not convertible into Class B common stock. A reconciliation of the numerator and denominator used in the calculation of the basic and diluted EPS attributable to common stockholders is as follows:
The following common stock equivalents were excluded from the computation of diluted earnings per share for the periods presented because including them would have been antidilutive:
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Summary of Significant Accounting Policies (Policies) |
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Oct. 27, 2018 | |
Accounting Policies [Abstract] | |
Basis of Presentation | Basis of Presentation Our fiscal year is a 52-week or 53-week period ending on the Saturday closest to July 31. The fiscal years ended August 3, 2019 (“2019”) and July 28, 2018 (“2018”) consist of 53 weeks and 52 weeks, respectively. The unaudited condensed consolidated financial statements include the accounts of Stitch Fix, Inc. and our wholly owned subsidiaries, and have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and following the requirements of the U.S. Securities and Exchange Commission (the “SEC”) for interim reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP can be condensed or omitted. These financial statements have been prepared on the same basis as our annual financial statements and, in the opinion of management, reflect all adjustments, consisting only of normal recurring adjustments, which are necessary for the fair statement of our financial information. These interim results are not necessarily indicative of the results to be expected for the fiscal year ending August 3, 2019, or for any other interim period or for any other future year. All intercompany balances and transactions have been eliminated in consolidation. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the fiscal year ended July 28, 2018, included in the Company’s Annual Report on Form 10-K filed with the SEC on October 3, 2018 (“2018 Annual Report”). |
Use of Estimates | Use of Estimates The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts in our condensed consolidated financial statements and accompanying footnotes. Significant estimates and assumptions are used for inventory, stock-based compensation expense, income taxes, revenue recognition and, prior to our IPO, common stock valuation and remeasurement of preferred stock warrant liability. Actual results could differ from those estimates and such differences may be material to the condensed consolidated financial statements. |
Restricted Cash | Restricted Cash Restricted cash represents cash balances held in segregated accounts collateralizing letters of credit for our leased properties as of October 27, 2018, and July 28, 2018. |
Investment Securities | Investment Securities The Company’s short-term and long-term investments have been classified and accounted for as available-for-sale. We determine the appropriate classification of our investments at the time of purchase and reevaluate the classifications at each balance sheet date. Available-for-sale securities with maturities of 12 months or less are classified as short-term and available-for-sale securities with maturities greater than 12 months are classified as long-term. The Company’s available-for-sale securities are carried at fair value, with unrealized gains and losses, net of taxes, reported within accumulated other comprehensive loss (“AOCI”) in stockholders’ equity, with the exception of unrealized losses believed to be other-than-temporary, which are reported in earnings in the current period, if applicable. The cost of securities sold is based upon the specific identification method. |
Foreign Currency | Foreign Currency The functional currency of our international subsidiary is the local currency. For that subsidiary, we translate assets and liabilities to U.S. dollars using period-end exchange rates, and average monthly exchange rates for revenues, costs, and expenses. We record translation gains and losses in AOCI as a component of stockholders’ equity. Net foreign exchange transaction gains and losses resulting from the conversion of the transaction currency to functional currency are recorded in Other income, net in the condensed consolidated statements of operations and comprehensive income. |
Revenue Recognition | Revenue Recognition We generate revenue primarily from the sale of merchandise in a Fix. Clients create an online account on our website or mobile app, complete a style profile and order a Fix to be delivered on a specified date. Each Fix represents an offer made by us to the client to purchase merchandise. The client is charged a nonrefundable $20 upfront styling fee before the Fix is shipped. As an alternative to the styling fee, we offer select clients the option to purchase a Style Pass. Style Pass clients pay a $49 nonrefundable annual fee for unlimited Fixes that is credited towards merchandise purchases. If the offer to purchase merchandise is accepted, we charge the client the order amount for the accepted merchandise, net of the upfront styling fee or Style Pass annual fee. For each Fix, acceptance occurs when the client checks out the merchandise on our website or mobile app. We offer a 25% discount to clients who purchase all of the items in the Fix. We recognize revenue through the following steps: (1) identification of the contract, or contracts, with the customer; (2) identification of the performance obligations in the contract; (3) determination of the transaction price; (4) allocation of the transaction price to the performance obligations in the contract; and (5) recognition of revenue when, or as, we satisfy a performance obligation. Both our styling fee and Style Pass arrangements consist of one performance obligation, which is the option to purchase merchandise. The upfront styling fee is not a performance obligation as the styling activity is not distinct within the context of the contract. Similarly, the right to receive multiple options under Style Pass does not provide the customer with material stand-alone value and therefore does not give rise to a separate performance obligation. Both the upfront styling fee and Style Pass annual fee are included in deferred revenue until the performance obligation is satisfied when the client exercises his or her option to purchase merchandise (i.e., upon checkout of a Fix) or when the option(s) to purchase merchandise expire(s). Revenue is recognized when control of the promised goods is transferred to the client. Control is transferred when the client accepts or rejects the offer to purchase merchandise. Upon acceptance by purchasing one or more items within the Fix at checkout, the total amount of the order, including the upfront styling fee, is recognized as revenue. If none of the items within the Fix are accepted at checkout, the upfront styling fee is recognized as revenue at that time. The Style Pass annual fee is recognized at the earlier of (i) the time at which a client accepts and applies the Style Pass fee to an offer to purchase merchandise or (ii) upon expiry of the annual period. Under Style Pass arrangements, if a client does not accept any items within the Fix, the annual fee will continue to be deferred until it is applied to a future purchase or upon expiry of the annual period. If a client would like to exchange an item, we recognize revenue at the time the exchanged item is shipped, which coincides with the transfer of control to the customer. We deduct discounts, sales tax and estimated refunds to arrive at net revenue. Sales tax collected from clients is not considered revenue and is included in accrued liabilities until remitted to the taxing authorities. All shipping and handling costs are accounted for as fulfillment costs in Cost of goods sold and Selling, general, and administrative expense (“SG&A”), respectively, and are therefore not evaluated as a separate performance obligation. Discounts are recorded as a reduction to revenue when the order is accepted. We record a refund reserve based on our historical refund patterns. Our refund reserve, which was included in accrued liabilities in the consolidated balance sheets, was $2.5 million and $2.3 million as of October 27, 2018, and July 28, 2018, respectively. The Company has four types of contractual liabilities: (i) cash collections of upfront styling fees, which are included in Deferred revenue and are recognized as revenue upon the earlier of application to a merchandise purchase or expiry of the offer (ii) cash collections of Style Pass annual fees, which are included in Deferred revenue and are recognized upon the earlier of application to a merchandise purchase or expiry of the Style Pass annual period, (iii) unredeemed gift cards, which are included in Gift card liability and recognized as revenue upon usage or inclusion in gift card breakage estimates and (iv) referral credits, which are included in Other current liabilities and are recognized as revenue when used. We sell gift cards to clients and establish a liability based upon the face value of such gift cards. We reduce the liability and recognize revenue upon usage of the gift card. If a gift card is not used, we will recognize estimated gift card breakage revenue proportionately to customer usage of gift cards over the expected gift card usage period, subject to requirements to remit balances to governmental agencies. All commissions paid to third parties upon issuance of gift cards are recognized in SG&A as incurred, as on average, gift cards are used within a one-year period. Similarly, referral credits that are considered incremental costs of obtaining a contract with a customer are recognized in SG&A when issued, as on average, referral credits are used within a one-year period. Contractual liabilities included in Deferred revenue, Gift card liability and Other current liabilities were $11.2 million, $6.3 million and $0.8 million, respectively, at October 27, 2018, and $8.9 million, $6.8 million and $2.7 million, respectively, at July 28, 2018. During the three months ended October 27, 2018, the Company recognized $8.2 million, $0.1 million and $0.6 million of net revenue included in Deferred revenue, Gift card liability and Other current liabilities, respectively, at July 28, 2018. All amounts presented as of July 28, 2018, are accounted for under ASC 605. All amounts presented as of October 27, 2018, include the transition impact of adopting ASC 606. See “Recently Adopted Accounting Pronouncements” below. Deferred revenue related to upfront styling fees totaled $10.1 million as of October 27, 2018, and $7.6 million as of July 28, 2018. Deferred revenue related to Style Pass annual fees totaled $1.1 million as of October 27, 2018, and $1.1 million as of July 28, 2018. Deferred revenue related to exchanges totaled $0.2 million as of July 28, 2018. The Company expects Deferred revenue for upfront styling fees and Style Pass annual fees to be recognized within one year. On average, Gift card liability and Other current liabilities are also recognized within one year. |
Concentration of Credit Risks | Concentration of Credit Risks We are subject to concentrations of credit risk principally from cash and cash equivalents and investment securities. The majority of our cash is held by three financial institutions within the United States. Our cash balances held by these institutions may exceed federally insured limits. The associated risk of concentration for cash is mitigated by banking with credit-worthy institutions. Our cash equivalents consist of money market funds and commercial paper. The associated risk of concentration for cash equivalents and investments is mitigated by maintaining a diversified portfolio of highly rated instruments. |
Recently Issued/Adopted Accounting Pronouncements | Recently Issued Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842) (“ASU 2016-02”), which requires lessees to record most leases on their balance sheets but recognize the expenses on their income statements in a manner similar to current practice. ASU 2016-02 states that a lessee would recognize a lease liability for the obligation to make lease payments and a right-to-use asset for the right to use the underlying asset for the lease term. We expect to adopt this standard in our first quarter of fiscal 2020. We are currently evaluating the impact that this standard will have on our consolidated financial statements but we expect that it will result in a substantial increase in our long-term assets and liabilities. In June 2018, the FASB issued ASU No. 2018-07, Compensation—Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting. Under this ASU, the accounting for awards issued to nonemployees will be similar to the accounting for employee awards. This includes allowing for the measurement of awards at the grant date and recognition of awards with performance conditions when those conditions are probable, both of which are earlier than under current guidance for nonemployee awards. We expect to adopt this standard in our first quarter of fiscal 2020. We are currently evaluating the impact that this standard will have on our consolidated financial statements. Recently Adopted Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09, Revenue from Contracts with Customers (Topic 606) (“ASU 2014-09”), which amended the existing FASB Accounting Standards Codification. ASU 2014-09 establishes a principle for recognizing revenue upon the transfer of promised goods or services to customers, in an amount that reflects the expected consideration received in exchange for those goods or services and also provides guidance on the recognition of costs related to obtaining and fulfilling customer contracts. The new guidance may be applied retrospectively to each prior period presented or retrospectively with the cumulative effect recognized as of the date of adoption (“modified retrospective method”). We adopted the standard in the first quarter of fiscal 2019 under the modified retrospective approach. Under the new standard, we recognize estimated gift card breakage revenue proportionately to customer gift card usage over the expected gift card usage period rather than waiting until the likelihood of redemption becomes remote. Further, we recognize revenue related to exchanges upon shipment by us, rather than upon receipt by the customer. In the first quarter of fiscal 2019, the Company recorded a cumulative catch-up adjustment resulting in an increase to opening retained earnings, net of tax, of $0.4 million, comprised of the impact of $0.3 million from the change in revenue recognition related to gift cards and $0.1 million from the recognition of exchanges upon shipment. The impact to net revenue for the three months ended October 27, 2018, was an increase of $0.5 million as a result of applying the standard. In October 2016, the FASB issued ASU No. 2016-16, Income Taxes: Intra-Entity Transfers of Assets Other Than Inventory (Topic 740), which amends existing guidance on the recognition of current and deferred income tax impacts for intra-entity asset transfers other than inventory. We adopted the standard in the first quarter of fiscal 2019 under the modified retrospective approach. As a result, a cumulative adjustment of $0.4 million, net of tax, was recorded to reduce opening retained earnings in connection with this adoption. |
Fair Value Measurements (Tables) |
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Amortized Cost, Gross Unrealized Gains (Losses) and Fair Value of Available-for-sale Investments | The following table sets forth the amortized cost, gross unrealized gains, gross unrealized losses and fair values of our short-term and long-term investments accounted for as available-for-sale as of October 27, 2018:
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Schedule of Fair Value of Available-for-sale Securities By Contractual Maturity | The following table sets forth the fair value of available-for-sale securities by contractual maturity as of October 27, 2018:
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Schedule of Short-term and Long-term Investments Accounted for as Available-for-sale Measured at Fair Value on Recurring Basis | The following table sets forth our short-term and long-term investments accounted for as available-for-sale that were measured at fair value on a recurring basis based on the fair value hierarchy as of October 27, 2018:
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Schedule of Changes in Fair Value of Preferred Stock Warrant Liability | The following table sets forth a summary of the changes in the fair value of the preferred stock warrant liability for the three months ended October 28, 2017 (in thousands):
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Accrued Liabilities (Tables) |
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Schedule of Accrued Liabilities | Accrued liabilities consisted of the following:
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Accumulated Other Comprehensive Loss (Tables) |
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Equity [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Accumulated Other Comprehensive Loss By Component | The table below presents the changes in accumulated other comprehensive loss by component and the reclassifications out of AOCI:
(1)The associated income tax effects for gains / losses on available-for-sale securities were $67. |
Stock-Based Compensation (Tables) |
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Summary of Stock Option Activity Under 2011 and 2017 Stock Plan | Stock option activity under the 2011 Plan and 2017 Plan is as follows:
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Summary of Restricted Stock Units Award Activity | The following table summarizes the restricted stock unit (“RSU”) award activity under the 2017 Plan:
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Summary of Assumptions Used in Black-Scholes Option-Pricing Model to Determine Fair Value of Stock Options | The fair value of stock options granted to employees was estimated at the grant date using the Black-Scholes option-pricing model with the following assumptions:
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Income Taxes (Tables) |
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Schedule of Effective Tax Rate from Income | The following table summarizes our effective tax rate from income for the periods presented:
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Earnings Per Share Attributable to Common Stockholders (Tables) |
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Reconciliation of Numerator and Denominator Used in Calculation of Basic and Diluted EPS | A reconciliation of the numerator and denominator used in the calculation of the basic and diluted EPS attributable to common stockholders is as follows:
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Schedule of Common Stock Equivalents Excluded from Computation of Diluted Earnings Per Share | The following common stock equivalents were excluded from the computation of diluted earnings per share for the periods presented because including them would have been antidilutive:
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Description of Business - Additional Information (Details) $ / shares in Units, $ in Thousands |
1 Months Ended | 3 Months Ended | ||||
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Nov. 16, 2017
USD ($)
class
vote
$ / shares
shares
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Dec. 31, 2017
USD ($)
$ / shares
shares
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Oct. 27, 2018
USD ($)
shares
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Oct. 28, 2017
USD ($)
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Jul. 28, 2018
shares
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Nov. 17, 2017
shares
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Class of Stock [Line Items] | ||||||
Number of new classes of common stock authorized | class | 2 | |||||
Common stock, conversion ratio | 1 | |||||
Offering costs | $ | $ 0 | $ 528 | ||||
Preferred stock, shares outstanding (in shares) | 0 | 0 | 0 | |||
Preferred stock warrants outstanding (in shares) | 0 | |||||
IPO | ||||||
Class of Stock [Line Items] | ||||||
Proceeds from initial public offering, net of underwriting discounts paid | $ | $ 110,400 | |||||
Underwriting discounts | $ | 6,200 | |||||
Offering costs | $ | $ 3,400 | |||||
IPO | Class A Common Stock | ||||||
Class of Stock [Line Items] | ||||||
Number of votes per share | vote | 1 | |||||
Number of shares issued (in shares) | 8,000,000 | |||||
Price per share (in dollars per share) | $ / shares | $ 15.00 | |||||
IPO | Class B Common Stock | ||||||
Class of Stock [Line Items] | ||||||
Number of votes per share | vote | 10 | |||||
Number of shares converted as a result of the IPO (in shares) | 59,511,055 | |||||
Outstanding preferred stock warrants exercised (in shares) | 1,066,225 | |||||
Underwriters' Over-Allotment Option | Class A Common Stock | ||||||
Class of Stock [Line Items] | ||||||
Number of shares issued (in shares) | 1,175,557 | |||||
Price per share (in dollars per share) | $ / shares | $ 15.00 | |||||
Net proceeds after deducting underwriting discounts and expenses | $ | $ 16,700 |
Summary of Significant Accounting Policies - Additional Information (Details) - USD ($) |
3 Months Ended | |||||
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Oct. 27, 2018 |
Oct. 28, 2017 |
Jul. 28, 2018 |
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Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Nonrefundable upfront styling fee | $ 20 | |||||
Nonrefundable annual fee | $ 49 | |||||
Discount for purchase of all items In shipment | 25.00% | |||||
Refund reserve | $ 2,500,000 | $ 2,300,000 | ||||
Contractual liabilities | 11,206,000 | 8,870,000 | ||||
Cumulative effect of adopting accounting standards | [1] | 35,000 | ||||
Increase in net revenue | 366,236,000 | $ 295,563,000 | ||||
Upfront Styling Fees | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Contractual liabilities | 10,100,000 | 7,600,000 | ||||
Style Pass annual fees | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Contractual liabilities | 1,100,000 | 1,100,000 | ||||
Exchanges | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Contractual liabilities | 200,000 | |||||
Difference between Revenue Guidance in Effect before and after Topic 606 | Accounting Standards Update 2014-09 | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Increase in net revenue | 500,000 | |||||
Deferred revenue | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Contractual liabilities | 11,200,000 | 8,900,000 | ||||
Revenue recognized | 8,200,000 | |||||
Gift card liability | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Contractual liabilities | 6,300,000 | 6,800,000 | ||||
Revenue recognized | 100,000 | |||||
Other current liabilities | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Contractual liabilities | 800,000 | 2,700,000 | ||||
Revenue recognized | $ 600,000 | |||||
Retained Earnings | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Cumulative effect of adopting accounting standards | [1] | 35,000 | ||||
Retained Earnings | Accounting Standards Update 2014-09 | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Cumulative effect of adopting accounting standards | 400,000 | |||||
Retained Earnings | Accounting Standards Update 2014-09 | Exchanges | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Cumulative effect of adopting accounting standards | 100,000 | |||||
Retained Earnings | Accounting Standards Update 2014-09 | Gift cards | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Cumulative effect of adopting accounting standards | 300,000 | |||||
Retained Earnings | Accounting Standards Update 2016-16 | ||||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | ||||||
Cumulative effect of adopting accounting standards | $ (400,000) | |||||
|
Fair Value Measurements - Additional Information (Details) |
12 Months Ended |
---|---|
Jul. 28, 2018
USD ($)
| |
Fair Value Disclosures [Abstract] | |
Financial instruments measured at fair value | $ 0 |
Fair Value Measurements - Fair Value of Available-for-sale Securities (Details) $ in Thousands |
Oct. 27, 2018
USD ($)
|
---|---|
Debt Securities, Available-for-sale [Line Items] | |
Amortized Cost | $ 169,004 |
Gross Unrealized Gains | 5 |
Gross Unrealized Losses | (154) |
Fair Value | 168,855 |
U.S. Treasury securities | |
Debt Securities, Available-for-sale [Line Items] | |
Amortized Cost | 31,808 |
Gross Unrealized Gains | 0 |
Gross Unrealized Losses | (12) |
Fair Value | 31,796 |
Commercial paper | |
Debt Securities, Available-for-sale [Line Items] | |
Amortized Cost | 41,431 |
Gross Unrealized Gains | 0 |
Gross Unrealized Losses | 0 |
Fair Value | 41,431 |
Asset-backed securities | |
Debt Securities, Available-for-sale [Line Items] | |
Amortized Cost | 34,723 |
Gross Unrealized Gains | 5 |
Gross Unrealized Losses | (45) |
Fair Value | 34,683 |
Corporate bonds | |
Debt Securities, Available-for-sale [Line Items] | |
Amortized Cost | 61,042 |
Gross Unrealized Gains | 0 |
Gross Unrealized Losses | (97) |
Fair Value | $ 60,945 |
Fair Value Measurements - Fair Value of Available-for-Sale Securities by Contractual Maturity (Details) $ in Thousands |
Oct. 27, 2018
USD ($)
|
---|---|
Debt Securities, Available-for-sale [Line Items] | |
One Year or Less | $ 84,985 |
Over One Year Through Five Years | 83,870 |
Over Five Years | 0 |
Total | 168,855 |
U.S. Treasury securities | |
Debt Securities, Available-for-sale [Line Items] | |
One Year or Less | 31,796 |
Over One Year Through Five Years | 0 |
Over Five Years | 0 |
Total | 31,796 |
Commercial paper | |
Debt Securities, Available-for-sale [Line Items] | |
One Year or Less | 41,431 |
Over One Year Through Five Years | 0 |
Over Five Years | 0 |
Total | 41,431 |
Asset-backed securities | |
Debt Securities, Available-for-sale [Line Items] | |
One Year or Less | 5,933 |
Over One Year Through Five Years | 28,750 |
Over Five Years | 0 |
Total | 34,683 |
Corporate bonds | |
Debt Securities, Available-for-sale [Line Items] | |
One Year or Less | 5,825 |
Over One Year Through Five Years | 55,120 |
Over Five Years | 0 |
Total | $ 60,945 |
Fair Value Measurements - Schedule of Financial Instruments Measured at Fair Value on Recurring Basis Based on Fair Value Hierarchy (Details) $ in Thousands |
Oct. 27, 2018
USD ($)
|
---|---|
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Investments at fair value | $ 168,855 |
Assets at fair value | 175,710 |
Level 1 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Assets at fair value | 32,658 |
Level 2 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Assets at fair value | 143,052 |
Level 3 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Assets at fair value | 0 |
U.S. Treasury securities | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Investments at fair value | 31,796 |
U.S. Treasury securities | Level 1 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Investments at fair value | 31,796 |
U.S. Treasury securities | Level 2 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Investments at fair value | 0 |
U.S. Treasury securities | Level 3 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Investments at fair value | 0 |
Commercial paper | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Investments at fair value | 41,431 |
Commercial paper | Level 1 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Investments at fair value | 0 |
Commercial paper | Level 2 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Investments at fair value | 41,431 |
Commercial paper | Level 3 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Investments at fair value | 0 |
Asset-backed securities | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Investments at fair value | 34,683 |
Asset-backed securities | Level 1 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Investments at fair value | 0 |
Asset-backed securities | Level 2 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Investments at fair value | 34,683 |
Asset-backed securities | Level 3 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Investments at fair value | 0 |
Corporate bonds | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Investments at fair value | 60,945 |
Corporate bonds | Level 1 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Investments at fair value | 0 |
Corporate bonds | Level 2 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Investments at fair value | 60,945 |
Corporate bonds | Level 3 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Investments at fair value | 0 |
Money market funds | Cash equivalents | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash equivalents at fair value | 862 |
Money market funds | Cash equivalents | Level 1 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash equivalents at fair value | 862 |
Money market funds | Cash equivalents | Level 2 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash equivalents at fair value | 0 |
Money market funds | Cash equivalents | Level 3 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash equivalents at fair value | 0 |
Commercial paper | Cash equivalents | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash equivalents at fair value | 5,993 |
Commercial paper | Cash equivalents | Level 1 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash equivalents at fair value | 0 |
Commercial paper | Cash equivalents | Level 2 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash equivalents at fair value | 5,993 |
Commercial paper | Cash equivalents | Level 3 | |
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |
Cash equivalents at fair value | $ 0 |
Fair Value Measurements - Schedule of Changes in Fair Value of Preferred Stock Warrant Liability (Details) $ in Thousands |
3 Months Ended |
---|---|
Oct. 28, 2017
USD ($)
| |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation | |
Balance at July 29, 2017 | $ 26,679 |
Change in fair value | (9,071) |
Ending Balance at October 28, 2017 | $ 17,608 |
Accrued Liabilities - Schedule of Accrued Liabilities (Details) - USD ($) $ in Thousands |
Oct. 27, 2018 |
Jul. 28, 2018 |
---|---|---|
Payables and Accruals [Abstract] | ||
Compensation and related benefits | $ 7,019 | $ 10,680 |
Advertising | 14,075 | 10,456 |
Sales taxes | 8,399 | 7,066 |
Shipping and freight | 11,271 | 4,801 |
Accrued accounts payable | 6,146 | 4,567 |
Inventory purchases | 14,709 | 506 |
Other | 5,479 | 4,961 |
Total accrued liabilities | $ 67,098 | $ 43,037 |
Preferred Stock Warrant Liability (Details) |
24 Months Ended |
---|---|
Dec. 31, 2013
$ / shares
shares
| |
Class of Stock [Line Items] | |
Warrant term | 10 years |
2012 Financing Arrangements | Series Seed Convertible Preferred Stock | |
Class of Stock [Line Items] | |
Outstanding preferred stock warrants exercised (in shares) | shares | 375,230 |
Exercise price of warrants (in dollars per share) | $ / shares | $ 0.1066 |
2012 Financing Arrangements | Series A Convertible Preferred Stock | |
Class of Stock [Line Items] | |
Outstanding preferred stock warrants exercised (in shares) | shares | 66,265 |
Exercise price of warrants (in dollars per share) | $ / shares | $ 0.22636 |
2013 Financing Arrangements | Series A1 Convertible Preferred Stock | |
Class of Stock [Line Items] | |
Outstanding preferred stock warrants exercised (in shares) | shares | 624,730 |
Exercise price of warrants (in dollars per share) | $ / shares | $ 0.2401 |
2013 Financing Arrangements | Series B Convertible Preferred Stock | |
Class of Stock [Line Items] | |
Outstanding preferred stock warrants exercised (in shares) | shares | 308,315 |
Exercise price of warrants (in dollars per share) | $ / shares | $ 0.486516 |
Commitments and Contingencies - Additional Information (Details) $ in Millions |
1 Months Ended | |
---|---|---|
Oct. 12, 2018
USD ($)
|
Nov. 16, 2018
lawsuit
|
|
Loss Contingencies [Line Items] | ||
Term of operating lease | 5 years | |
Minimum term of operating lease | 2 years | |
Length of notice required to terminate operating lease | 6 months | |
Future minimum operating lease payments | $ | $ 11.1 | |
Subsequent event | ||
Loss Contingencies [Line Items] | ||
Number of lawsuits | 3 | |
Number of expected consolidated lawsuits | 1 |
Accumulated Other Comprehensive Loss (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Oct. 27, 2018 |
Oct. 28, 2017 |
|
Changes in Accumulated Other Comprehensive Income (Loss) By Component | ||
Stockholders' equity, beginning balance | $ 315,072 | $ 61,861 |
Other comprehensive income (loss) before reclassifications | (56) | |
Total other comprehensive loss, net of tax | (56) | 0 |
Stockholders' equity, ending balance | 333,503 | 78,267 |
Tax benefit for gains and losses on available-for-sale securities | 67 | |
Available-for-sale Securities | ||
Changes in Accumulated Other Comprehensive Income (Loss) By Component | ||
Stockholders' equity, beginning balance | 0 | |
Other comprehensive income (loss) before reclassifications | (82) | |
Total other comprehensive loss, net of tax | (82) | |
Stockholders' equity, ending balance | (82) | |
Foreign Currency Translation | ||
Changes in Accumulated Other Comprehensive Income (Loss) By Component | ||
Stockholders' equity, beginning balance | 0 | |
Other comprehensive income (loss) before reclassifications | 26 | |
Total other comprehensive loss, net of tax | 26 | |
Stockholders' equity, ending balance | 26 | |
Accumulated Other Comprehensive Loss | ||
Changes in Accumulated Other Comprehensive Income (Loss) By Component | ||
Stockholders' equity, beginning balance | 0 | 0 |
Total other comprehensive loss, net of tax | (56) | |
Stockholders' equity, ending balance | $ (56) | $ 0 |
Stock-Based Compensation - Additional Information (Details) - USD ($) |
1 Months Ended | 3 Months Ended | 12 Months Ended | |
---|---|---|---|---|
Jul. 31, 2017 |
Oct. 27, 2018 |
Oct. 28, 2017 |
Jul. 28, 2018 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Weighted-average grant date fair value of options (in dollars per share) | $ 17.22 | $ 7.55 | ||
Unrecognized compensation expense related to unvested options and RSU’s, net of estimated forfeitures | $ 121,300,000 | |||
Unrecognized compensation expense related to unvested options weighted average recognition period | 3 years 21 days | |||
Employees | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Stock-based compensation expense | $ 6,600,000 | $ 2,000,000 | ||
Stock Options | Certain Members of Executive Management Team | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Options vesting term | 24 months | |||
Aggregate grant-date fair value of option awards | $ 14,000,000 | |||
Stock based compensation expense related to prior periods | $ 0 | $ 500,000 | ||
Stock Options | Certain Members of Executive Management Team | Class B Common Stock | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Options granted (in shares) | 1,097,463 | |||
2011 Equity Incentive Plan | Stock Options | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Remaining vesting after first anniversary of grant date | 3 years | |||
Options exercisable period | 10 years | |||
2011 Equity Incentive Plan | Stock Options | First Anniversary | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Employee stock options vesting percentage | 25.00% | |||
2011 Equity Incentive Plan | Stock Options | Second Anniversary | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Employee stock options vesting percentage | 25.00% | |||
2011 Equity Incentive Plan | Stock Options | Third Anniversary | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Employee stock options vesting percentage | 25.00% | |||
2011 Equity Incentive Plan | Stock Options | Fourth Anniversary | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Employee stock options vesting percentage | 25.00% | |||
2017 Incentive Plan | ||||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||||
Number of shares authorized for issuance (in shares) | 28,423,374 | |||
Number of shares available for grant (in shares) | 3,149,479 |
Stock-Based Compensation - Summary of Stock Option Activity Under 2011 and 2017 Stock Plan (Details) - 2011 and 2017 Plans - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Oct. 27, 2018 |
Jul. 28, 2018 |
|
Number of Options | ||
Outstanding, beginning balance (in shares) | 9,052,160 | |
Granted (in shares) | 105,061 | |
Exercised (in shares) | (578,107) | |
Cancelled (in shares) | (175,356) | |
Outstanding, ending balance (in shares) | 8,403,758 | 9,052,160 |
Weighted- Average Exercise Price | ||
Outstanding, beginning balance (in dollars per share) | $ 11.74 | |
Granted (in dollars per share) | 38.69 | |
Exercised (in dollars per share) | 3.39 | |
Cancelled (in dollars per share) | 11.20 | |
Outstanding, ending balance (in dollars per share) | $ 12.29 | $ 11.74 |
Weighted- Average Remaining Contractual Life (in Years) | ||
Outstanding, weighted-average remaining contractual life | 8 years 1 month 10 days | 8 years 2 months 23 days |
Aggregate Intrinsic Value (in thousands) | ||
Outstanding, aggregate intrinsic value | $ 95,008 | $ 160,856 |
Stock-Based Compensation - Summary of Restricted Stock Units Award Activity (Details) - Class A Common Stock - Restricted stock units - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended |
---|---|---|
Oct. 27, 2018 |
Jul. 28, 2018 |
|
Class A Common Stock | ||
Unvested, beginning balance (in shares) | 2,432,326 | |
Granted (in shares) | 759,776 | |
Vested (in shares) | (56,257) | |
Forfeited (in shares) | (95,337) | |
Unvested, ending balance (in shares) | 3,040,508 | 2,432,326 |
Weighted- Average Grant Date Fair Value | ||
Unvested, beginning balance (in dollars per share) | $ 21.58 | |
Granted (in dollars per share) | 40.73 | |
Vested (in dollars per share) | 19.38 | |
Forfeited (in dollars per share) | 23.45 | |
Unvested, ending balance (in dollars per share) | $ 26.38 | $ 21.58 |
Weighted- Average Remaining Contractual Life (in Years) | ||
Unvested, weighted-average remaining contractual life | 3 years 6 months 5 days | 3 years 6 months |
Aggregate Intrinsic Value (in thousands) | ||
Unvested, aggregate intrinsic value | $ 71,969 | $ 71,778 |
Stock-Based Compensation - Summary of Assumptions Used in Black-Scholes Option-Pricing Model to Determine Fair Value of Stock Options (Details) |
3 Months Ended | |
---|---|---|
Oct. 27, 2018 |
Oct. 28, 2017 |
|
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Volatility, minimum | 41.70% | 42.10% |
Volatility, maximum | 42.00% | 43.50% |
Risk free interest rate, minimum | 2.80% | 1.90% |
Risk free interest rate, maximum | 3.00% | 2.00% |
Dividend yield | 0.00% | 0.00% |
Minimum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected term (in years) | 5 years 1 month 6 days | 5 years 7 months 6 days |
Maximum | ||
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | ||
Expected term (in years) | 6 years 2 months 12 days | 6 years 6 months |
Income Taxes - Schedule of Effective Tax Rate from Income (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Oct. 27, 2018 |
Oct. 28, 2017 |
|
Income Tax Disclosure [Abstract] | ||
Income before income taxes | $ 12,416 | $ 18,632 |
Provision for income taxes | $ 1,738 | $ 5,144 |
Effective tax rate | 14.00% | 27.60% |
Income Taxes - Additional Information (Details) $ in Millions |
12 Months Ended |
---|---|
Jul. 28, 2018
USD ($)
| |
Income Tax Disclosure [Abstract] | |
Increase in income tax expense as a result of remeasurement of net deferred tax assets | $ 6.7 |
Earnings Per Share Attributable to Common Stockholders - Additional Information (Details) |
Nov. 16, 2017
class
vote
|
---|---|
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | |
Number of new classes of common stock authorized | class | 2 |
Common stock, conversion ratio | 1 |
IPO | Class A Common Stock | |
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | |
Number of votes per share | 1 |
IPO | Class B Common Stock | |
Earnings Per Share, Diluted, by Common Class, Including Two Class Method [Line Items] | |
Number of votes per share | 10 |
Earnings Per Share Attributable to Common Stockholders - Reconciliation of Numerator and Denominator Used in Calculation of Basic and Diluted EPS (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | |
---|---|---|
Oct. 27, 2018 |
Oct. 28, 2017 |
|
Numerator: | ||
Net income | $ 10,678 | $ 13,488 |
Net income attributable to common stockholders - basic | 10,664 | 3,915 |
Net income attributable to common stockholders - diluted | $ 10,665 | $ 1,347 |
Denominator: | ||
Weighted-average shares of common stock - basic (in shares) | 98,965,274 | 26,329,495 |
Weighted-average shares of common stock - diluted (in shares) | 104,539,452 | 33,262,082 |
Earnings per share attributable to common stockholders: | ||
Basic (in dollars per share) | $ 0.11 | $ 0.15 |
Diluted (in dollars per share) | $ 0.10 | $ 0.04 |
Class A Common Stock | ||
Numerator: | ||
Net income | $ 4,084 | |
Less: noncumulative dividends to preferred stockholders | 0 | |
Less: undistributed earnings to participating securities | (5) | |
Net income attributable to common stockholders - basic | 4,079 | |
Less: change in fair value of preferred stock warrant liability (net of tax) | 0 | |
Add: adjustments to undistributed earnings to participating securities | 1 | |
Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares | 6,585 | |
Reallocation of undistributed earnings to Class B shares | 0 | |
Net income attributable to common stockholders - diluted | $ 10,665 | |
Denominator: | ||
Weighted-average shares of common stock - basic (in shares) | 37,850,643 | |
Conversion of Class B to Class A common shares outstanding (in shares) | 61,114,631 | |
Effect of dilutive stock options and restricted stock units (in shares) | 5,574,178 | |
Effect of potentially dilutive preferred stock warrants (in shares) | 0 | |
Weighted-average shares of common stock - diluted (in shares) | 104,539,452 | |
Earnings per share attributable to common stockholders: | ||
Basic (in dollars per share) | $ 0.11 | |
Diluted (in dollars per share) | $ 0.10 | |
Class B Common Stock | ||
Numerator: | ||
Net income | $ 6,594 | $ 13,488 |
Less: noncumulative dividends to preferred stockholders | 0 | (635) |
Less: undistributed earnings to participating securities | (9) | (8,938) |
Net income attributable to common stockholders - basic | 6,585 | 3,915 |
Less: change in fair value of preferred stock warrant liability (net of tax) | 0 | (9,071) |
Add: adjustments to undistributed earnings to participating securities | 0 | 6,503 |
Reallocation of undistributed earnings as a result of conversion of Class B to Class A shares | 0 | 0 |
Reallocation of undistributed earnings to Class B shares | 85 | 0 |
Net income attributable to common stockholders - diluted | $ 6,670 | $ 1,347 |
Denominator: | ||
Weighted-average shares of common stock - basic (in shares) | 61,114,631 | 26,329,495 |
Conversion of Class B to Class A common shares outstanding (in shares) | 0 | 0 |
Effect of dilutive stock options and restricted stock units (in shares) | 4,260,911 | 5,876,621 |
Effect of potentially dilutive preferred stock warrants (in shares) | 0 | 1,055,966 |
Weighted-average shares of common stock - diluted (in shares) | 65,375,542 | 33,262,082 |
Earnings per share attributable to common stockholders: | ||
Basic (in dollars per share) | $ 0.11 | $ 0.15 |
Diluted (in dollars per share) | $ 0.10 | $ 0.04 |
Earnings Per Share Attributable to Common Stockholders - Schedule of Common Stock Equivalents Excluded from Computation of Diluted Earnings (Loss) Per Share (Details) - shares |
3 Months Ended | |
---|---|---|
Oct. 27, 2018 |
Oct. 28, 2017 |
|
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of diluted earnings (loss) per share | 1,104,030 | 60,465,761 |
Convertible preferred stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of diluted earnings (loss) per share | 0 | 59,511,055 |
Preferred stock warrants | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of diluted earnings (loss) per share | 0 | 0 |
Restricted stock units | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of diluted earnings (loss) per share | 750,607 | 0 |
Stock Options | Class A Common Stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of diluted earnings (loss) per share | 351,184 | 0 |
Stock Options | Class B Common Stock | ||
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items] | ||
Antidilutive securities excluded from computation of diluted earnings (loss) per share | 2,239 | 954,706 |
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