Hi, good afternoon, everyone, and thanks for joining us on a Friday. My name's Ashley Owens, and I cover Softl ines and Internet Retail at KeyBanc. We're thrilled to be joined today by Stitch Fix. Before we begin, I am going to read a Safe Harbor statement. So just as a reminder, this discussion may include forward-looking statements. These statements are subject to risks and uncertainties and reflect the company's current expectations. Descriptions of these risks and other factors that could cause actual results to differ materially from these statements are discussed in Stitch Fix's filings with the SEC, including its most recent Form 10-Q. Statements made today are effective today only and will not be updated to reflect subsequent events or circumstances that may arise. So with that, just a little background on Stitch Fix. To start off, Stitch Fix sits at the intersection of apparel technology and personalization. They leverage data science, human stylists, and have an evolving assortment strategy, which we will touch on later. The company has been navigating a period of transformation with sharper focus on profitability, client engagement, and refining how personalization shows up across their platform. So with us today is Matt Baer, Chief Executive Officer, and David Aufderhaar, Chief Financial Officer, with both having served in their current roles since June and April of 2023, respectively. So we'll get started here, but want to point out to listeners that at any time, if you do have a question, please feel free to use the chat board to ask one, and we will make sure to get to it. So with that, Matt, David, happy to have you with us. Yeah, thank you. Excited to chat. So Matt, let's start high level. You reported 1Q last week, and it was another quarter of accelerating growth, which led you to raise your full-year guide. Where do you feel Stitch Fix is today in its transformation, and what stood out to you most in the quarter? Yeah, I appreciate the recognition on the strong quarter and that further revenue acceleration. Maybe I'll start at a bit of a higher level. As you noted, I just joined the company as CEO a couple of years ago, just over two years ago. And what drew me to Stitch Fix was the fact that we know our clients better before their very first transaction than any other retailer is going to know their clients over the entire lifetime of that relationship. And in retail, that's the Holy Grail. How well you know your clients determines how well you're able to serve them. And the fact that we know our clients' style preferences, we know their fit parameters, and we know their budget and value orientation in advance of their first transaction means that we have this really unique competitive advantage. And when I joined, what I was really excited about was using innovation and technology to fully realize what was the original vision of Stitch Fix, which was just to make shopping easier for apparel and accessories. And when I joined, there was a lot of work to do, and the transformation that we set out upon, we did that in three phases. The first was to rationalize the business. We wanted to make sure that we were focused on the right initiatives. We wanted to make sure that we were operating as profitably as possible, and we wanted to install retail best practices across the board. We closed a couple of fulfillment centers. We exited the U.K. We got much smarter about the operations within our fulfillment centers, the cost efficiency of our styling and client services. And we also got smarter about how we buy, price, and sell through our merchandise. We also right-sized our workforce. And as a result of all of that, we removed about $500 million of annualized SG&A. Then what got even more exciting is we entered the build phase of our transformation where, based on client insights, we really got to work improving the client experience. We did that in four ways. The first was deepening the engagement we had with our clients. We wanted to make sure our clients had a reason to visit us in between their Fixes. We invested in our CRM and MarTech stack. And more recently, we launched Stitch Fix Vision, a generative AI image visualization software whereby clients can see themselves dressed in Stitch Fix apparel. It's fully shoppable and fully shareable. We also wanted to make sure to improve the client-stylist relationship. It's those deep and enduring relationships that bring people back to Stitch Fix, and we recently launched Stylist Connect, a platform where clients and stylists can talk in real time, share pictures and generative AI images back and forth, and then we also wanted to overhaul our assortment. We added 50 new brands. We rationalized about half of the brands we previously sold out, and that upleveling of the assortment has continued to yield results for us, and then finally, we added more flexibility into our business model and moved from just one way of shopping with us to now you can order any number of items. You can order themed Fixes, start a Fix in our Freestyle business. You can open family accounts, and that's just continued to drive adoption as well. The outperformance that we saw from a results perspective in the first quarter was really just a confluence of all of those things coming together for us. That third consecutive quarter of revenue growth and what we guided to last quarter of another quarter of further acceleration of revenue growth is really just built on all of the efforts through that transformation. That's also helped us drive nine consecutive quarters of increase in our average order value and seven consecutive quarters of a contribution profit above 30%. Great. And you've outpaced the broader apparel market pretty meaningfully as well. So from your perspective, what are you seeing in the client base that's enabling that outperformance, especially as we're in this choppy discretionary environment? As part of the transformation, one of the things that we knew we needed to work on was how we went to market to acquire new clients. And we wanted to acquire clients that had a really high resonance for our service. And we wanted to get as segmented or as targeted as possible when we acquired new clients. So we rebranded the business. We built a new brand platform called Retail Therapy. And we went out to really find specific consumer segments that we knew we could serve exceptionally well. A great example of that is clients that are prospective clients that are on a GLP-1 medication. And they're going to go through a body transformation. They're going to be having a lot of fluctuation in their weight. Our ability to put a human stylist to guide them through that is a unique and superior service that they can't get anywhere else. We were able to target who GLP-1 users are, serve dedicated marketing to them, bring them into a personalized landing page that speaks to why Stitch Fix is the right service for them, and then carry that information through their onboarding such that their stylist knows this is a client that's on a GLP-1 medication, and we can serve them exceptionally well. We've done that across dozens of different indicators or different factors for prospective clients. As a result, we have nine consecutive quarters of our new client LTV increasing. Last quarter, we had an increase in new clients, both quarter -over -quarter and year -over -year. Also, as we've continued to improve the experience overall, we're seeing a lot of clients that formerly shopped with us come back. And all of those clients that have come back in aggregate, they're staying longer, they're spending more, and they're signing back up for our auto-ship cadence at really impressive rates. And then finally, the third bucket that we have are clients that go dormant or leave our service. And last quarter, that was the lowest number of folks in the last five years. So across the board, we're seeing strength pretty much everywhere. And as our LTV, RPAC, and revenue per active client just continues to increase, that gives us even more confidence in our ability to grow the top line while returning to active client growth in the near future. And then, David, further, I think in the quarter, AOV was up nearly 10%, RPAC grew 5%, both metrics now increasing for many consecutive quarters. Just what's resonating most with clients and driving that step up in spend that you're seeing? Yeah, Ashley, I think we're really encouraged with what we're seeing in both of those metrics. I think Matt might have called this out earlier that AOV was up the ninth consecutive quarter in a row, and that 10% this last quarter was following a 12% in Q4. Revenue per active client has been up for the seventh consecutive quarter. So we're definitely seeing real strength there with our clients. And I'd probably call out two things. One is really the flexibility of our offering. Historically, Stitch Fix delivered five items in a box, and that was what we delivered. And really, there's been a really big focus over the last couple of years in expanding on that and offering more flexibility to our clients where now we're offering anywhere from five, six, seven, eight items in a Fix. You can also start a Fix from our Freestyle environment, which is more our e-commerce, our personalized e-commerce environment. And so having all of that flexibility, we've really seen that come through in average order value. I think the other thing is really retail best practices from a merchandising perspective. We've focused quite a bit on improving our inventory, and that's really coming through and resonating with our clients. And probably a little bit further ahead on our men's business than our women's business. So we still think there's even more opportunity to deliver across the board, but this has been a big area of focus. And that's why within AOV, we're also seeing increases in our average unit retail. And AUR was up 3% this last quarter. And what's great about that is that's not about inflationary pressures or tariff pressures. That's truly about improving the quality of our inventory and having that really resonate with our clients, so we're really excited with what we're seeing there. Understood. Matt, you've talked a lot about the client quality improving. You gave us some really great metrics on LTV, the re-engaged clients, and dormant clients as well. Just what's structurally different about some of those cohorts today versus two years ago when you first took the seat? Yeah. I think maybe one way to think about that is just how methodical we've been in terms of how we build a healthy client base. I've been part of organizations before that chase new client acquisition almost like a vanity metric. And as I mentioned, we really want to make sure that those that we acquire are going to have a really high level of resonance for our service. And we want to make sure that that judicious approach allows us to build towards a profitable and sustainable future such that that return on investment from an acquisition standpoint really pays off for us. And I think the work that we did there, in addition to what I shared before, that's what's helped us already return or inflect back to active client growth in our men's business and what's helped us guide to a return to enterprise active client growth in our third quarter. Maybe on the point of men's really quickly, you did see that sequential growth in our leaning more into elevated everyday and athleisure, if I'm not mistaken. What do you think is driving that men's recovery, and how repeatable is some of the momentum that you're seeing? Yeah, we're really proud of the work we've done in our men's business. Part of going to market with a much more tailored or segmented view was speaking directly to our men's clients and also different segments within men's clients. And we found that the service that we offer is just a phenomenal fit for them. The majority of men out there, they don't want to drive to the mall and spend their weekend shopping. They want to get everything that they need delivered, and they don't want to have to think about it. They want to look good at work. They want to look good on date night. They want to look good when they're at soccer games on the weekends. But they don't want to spend that time shopping. And we solve that for them. And we've really leaned into that convenience for them. And then also, we just considerably upleveled our assortment within men's. We launched a new private brand called The Commons, which is elevated everyday essentials. It's now a top five revenue brand for us. We also added a ton of new and invested further into a lot of notable national brands like Vuori, Public Rec, Rhone, Marine Layer, Faherty, Vineyard Vines, TravisMathew, Johnnie-O. It's a really remarkable assortment, and I believe we have the leading assortment for all men's retailers. And then we really leaned in through that stylist relationship to meet them where they are, understand what they're looking for, and allow them to customize the experience to their needs. And as a result of that, we've had consecutive quarters of double-digit revenue comps in our men's business. And we're really confident in our ability to continue that. And in addition, we're also really excited about the work we've done to launch family accounts. 92% of our women's clients purchase on behalf of a spouse or partner. And it's a pretty crazy statistic. Upwards of 70% of the assortment in a men's closet was actually purchased by someone else. So when you think about the fact that we got to double-digit revenue growth in our men's business without even being able to tap into that market, that gives us even more confidence to accelerate our men's business further going forward. You're making an example out of me. I'm in that category, but might need to use Stitch Fix Men's to ease the burden on me a little bit and go into the stores. We got you. So quickly, David, seasonality does play a role in Q2. You've guided to softer client acquisition quarter before inflecting positively in 3Q. What gives you confidence in that 3Q inflection? Yeah, Ashley, there is seasonality in our business. We tend to see more strength from a client acquisition standpoint in our Q1 and in our Q3. But we are very confident in that return to growth. And a big reason why is what Matt was alluding to before. We have been taking a very methodical approach to our client acquisition to make sure that we are bringing in the right clients and that with those clients the service truly resonates. And we're seeing that in a lot of those client engagement metrics. But there's really three components to that. There's new client acquisition. We continue to see strength there. New client acquisition was up 3% or 4% year-over-year this last quarter. Re-engaged clients was up 8% year-over-year. And so really going back to those clients who might have used our service years ago and might have gone dormant, our service has changed pretty dramatically, both from just sort of a client experience perspective, but obviously from an inventory perspective as well. So seeing a lot of strength there. And then we're really seeing some strength in client retention as well. This last quarter was the lowest dormancy amount we have seen in five years. And so those three components all playing together as we played that forward, we're very confident in being able to talk about that inflection in Q3. And we started talking about it almost a year ago. And so that goes back to that methodical approach that we knew if we just continue to build on the experience that we've been doing, that we would see that inflection point. So we're really encouraged with being able to say that. Maybe to switch over to one of the bigger topics within the consumer space and with digitally native companies right now. So AI, you have Stitch Fix Vision, the AI style assistant, and some other tools that are helping to generate above-expected client engagement. What kind of behavioral changes are you seeing from clients that are utilizing these features? Retail innovation has been at the core of Stitch Fix since our founding. Data science and AI, that's in our DNA, and the investments that we've made into generative AI applications is really just a continuation of that leadership in retail innovation that we have. It's something that our clients expect from us, and our team is best suited to continue to lead in this space. As you noted, a couple of more recent innovations that we brought to market. The first is that AI style assistant. That's integrated into our Fix process. That allows clients to interact with this conversational AI and help them really understand and explain what it is that they're looking for from their stylist and from our service. That AI chat experience also then is feeding generative AI images back to the client in order to ensure that we're properly understanding what they're looking for. We've seen great engagement from clients with this. It's a huge benefit for them. It's one of the largest pain points that we identified they had is that they were unable to articulate what they were looking for. Go back to that same men's client that we were talking about earlier. He doesn't know what to say. He just knows, "I need clothes for work." He's able to start with the AI style assistant and eventually get a really clear articulation of exactly what it is he's looking for, as well as visuals to validate it. Then all of that information is passed back to the stylist. And in doing so, ensures that he's going to get better product, more relevant product. And we're seeing it manifest with higher client satisfaction and higher average order values for all of our clients that are interacting with the AI style assistant. Maybe more exciting, and I referenced it before, and you noted it, is Stitch Fix Vision. That's the generative AI image visualization experience. Clients upload a couple of photos, and then they're able to see themselves dressed head to toe in Stitch Fix apparel. It's inspiring. It's exciting. And we have a competitive advantage where no one else has the data that we do, both in terms of the market and, more importantly, about that individual. So everything that you're seeing that you're dressed in matches your style preferences, aligns with your budget, and we know that when it ships to you, it's going to fit. We're seeing a lot of different engagement manners in which our clients are engaging with it. The first and maybe the most obvious is they're buying the product. So it's being a real revenue generator for us. The second is that they're then using that vision image to inspire them in terms of what they're asking for from their stylist and what they're going to be and how they're going to be working with their stylist going forward. The third, and what's really exciting, is they're so excited by the image, they're sharing it. They're sharing it across all their social media feeds. They're sharing it with friends and family, which creates a bit of virality for us and a lot of organic client acquisition going forward. And then I think the way to think about both of these experiences in the future is taking that AI chat and the AI image visualization and continuing to infuse it into other elements of our client experience. So you can imagine as you're onboarding, you're seeing yourself in different outfits to understand style preferences, or if you're shopping and you're on a product detail page, how that item looks on you. And there's just really a ton of opportunities that we're excited to launch in the coming months and quarters. I also want to touch on assortment really quickly because you have made some substantial changes to that. You're expanding into categories like active, footwear, accessories, has been accelerating for you. You've mentioned a $1 billion wallet share opportunity with existing clients alone. I guess, what's the roadmap for capturing that opportunity? Absolutely. So we're a retailer at heart. And if we don't have the absolute best assortment that any other retailer has, we're losing opportunity with our current clients and future clients. So that's a tentpole of our transformation. The first year of our transformation, we had a lot of work to do to just rationalize our assortment. That meant exiting brands that weren't adding value. It meant exiting SKUs or items that weren't adding value. We even exited certain private brands that we had within our portfolio. And then in the second year of the transformation, we got to build it back. I mentioned before that we launched some new private brands that have worked exceptionally well. I mentioned a lot of the national brands that we brought to market. In fact, in our fiscal 2025, we launched over 50 different national brands. And then the piece that you're mentioning is another really exciting one: a really concerted move into non-apparel. When I joined Stitch Fix, about 80% of our business was in tops and bottoms. And while we were having a lot of success with that, we were leaving wallet share on the table. And that meant two things. One is just the opportunity cost of those sales. And two, and most importantly, and this came from our client insights, is our clients don't want to shop anywhere else. Once they experience Stitch Fix and understand that it's this superior way to get your apparel, they wanted it to be that it can be all of their apparel and accessories needs. So we've continued to move into non-apparel categories and other apparel categories in order to capture that wallet share and ensure clients never have to go anywhere else. We're seeing outsized growth in a ton of categories right now. We're seeing growth in women's accessories of over 40%. We're seeing growth in footwear of over 30%, jewelry 26%. Men's accessories is up over 55%. And the billion-dollar number that you cited is what makes it so compelling for the future growth opportunity that we have. On our base of 2.3 million active clients, we're leaving $1 billion of fair share on the table. And so without even expanding our active client base, which we're going to, we have all of that incremental revenue that we're going to work to capture going forward and continue to deliver outsized results in those categories. Great. Let's shift over to holiday just because it's really topical right now. And you did mention during the call, record Freestyle sales over that Black Friday to Cyber Monday period, and then strong gifting momentum, especially within the family accounts. What do you think is behind the strength that you're seeing there? Excuse me, behind the what? The strength you're seeing. Yeah. Yeah, absolutely. So holiday's always been an area at Stitch Fix where we leaned in early. So we are uniquely able to serve clients during the holiday time period so that they can get dressed for special occasions, so that they can get dressed for office parties. And then it's an area where we had opportunity when it came to gifting season. So we've been working the last couple of years to really strengthen our capabilities there so that we can capture, again, that wallet share or that market share during a period of elevated sales. We spent the last two years as part of the transformation, meaningfully investing in our CRM, in our MarTech. We made sure that this year we had the best assortment that we've ever had for holiday. We bought it with the intent that it would be promoted, which enables us to not only drive top line, but also to ensure that we don't take any hit on the bottom line through the process, and then critically, the launch of family accounts was really the first foray into a true gifting experience, so it wasn't just consumers buying gifts for self. Now, when they upload a profile for a spouse or partner or kid or a loved one, a parent or grandparent, they're able to actually buy gifts for them, which is really compelling because apparel is the number one category for gifting during the holiday season. It's also the number one gift that people don't want, so that's just this really interesting thing and this interesting dynamic that's always existed. We've all been subject to, as a kid, especially a grandparent, buying them a gift, and you start to unwrap it and you see it's apparel and you get upset, and best case scenario is you get to return it and have some store credit. At Stitch Fix, it's an awesome experience because when you gift through Stitch Fix, it's only product that matches their style and it's going to fit them, so you actually know you're gifting apparel that they're going to like, so we have this unique opportunity in the future, especially to continue to expand market share during this period of time and really win with consumers. Proud of what we delivered this quarter. It's part of what enabled us to guide to another quarter of accelerated revenue growth and even more opportunity for us in future holiday seasons. You're bringing back some memories with Christmas for me, unwrapping some of those clothes. Nobody wants that under the tree. Stitch Fix will change that. David, maybe let's turn to some more on the financials and get under the hood here a little bit. But with margins, gross margin was down year -over -year, and you cited three drivers with that: transportation, mix shift into footwear, and then a small tariff impact. How should we think about gross margin as we move into the back half of the year and through to you? Yeah, we're really encouraged with the results that we saw this last quarter. Gross margin came in slightly above the midpoint of that guidance range of 43%-44%. And to your point, Ashley, when we called out those three components from a year-over-year perspective, transportation certainly is something that's increasing from a year-over-year perspective. Our teams have done a great job over the last four years, five years, really mitigating the impact of those general rate increases that you see across these carriers through carrier diversification, last-mile carriers, negotiations. And that's just something we're seeing this year. The other component that's a more exciting component is what you were just talking to Matt about, that billion-dollar opportunity and really leaning into driving our fair share of that market. And some of those categories have lower margin profiles. And we're more than willing to invest in that to be able to drive the business because we know clients are really looking for that complete outfitting, and we can deliver on that. And so truly, it's an investment in growth. And so that's something we were very comfortable with. And then the last is tariffs. Our teams have done a phenomenal job with tariffs, really mitigating the tariff impacts. It was relatively small. And so because of that, we really see probably a very similar margin profile going into Q2, which is different than most retailers who would probably see a hit to margin because of the heavy sort of promotional activity they need to do in this quarter. We aren't seeing that. We continue to see strength in our gross margin in Q2. Probably expect to see something similar in Q2 and into the back half of the year. Then moving on to contribution margin, because that continues to be a bright spot for Stitch Fix. You've held above 30 for the seventh consecutive quarter. What does that say about the structural leverage of the model? Yeah, we've been talking about contribution margin quite a bit recently for exactly that reason, Ashley. It's really trying to explain that leverage that we're driving. Because contribution margin, for those that don't know, is that margin just below gross margin where we have our warehouse employees, our stylists, our customer experience employees. And we've seen a lot of leverage there. Those teams have done a great job driving efficiency in the business. And so to your point, we used to talk about ranges of 25%-30% for contribution margin, but we've been above that for quite a while now. And last quarter was above 32%. And so it's something that we definitely see as driving leverage going into the future. Really what we're encouraged by is if you think about that leverage and then keeping our fixed cost structure relatively fixed and growing well below revenue, that's where we are really encouraged with seeing sort of expanding margins as we drive this growth. Yeah, maybe I'll just jump in too to underscore just how important that contribution margin is. Being in and around digital retail for so long, prior experience worked for a retailer where our contribution margin was negative. I worked for another retailer where our contribution margin was in the single digits. For a digital retailer or an omnichannel retailer to have a contribution margin north of 30% is pretty phenomenal. It's one of the things that attracted me to the business, and it's one of the things that gives us that much more confidence as we continue to accelerate the top line. We'll be able to drive even more leverage through the business. Moving to advertising as well, 9.9% of revenue this quarter leaned in because some of the CAC to LTV ratios were strong, with new client LTV up nearly 17%. Do you now have more freedom to scale marketing spend when the opportunities present themselves? Yeah, we do, Ashley. And this goes back to that methodical approach that Matt was talking about, is really holding ourselves accountable to that CAC to LTV ratio. But as we're bringing in clients that are truly healthy and are showing those higher LTVs, it makes us much more confident to be able to market and market higher and know that we're still going to be bringing in healthy clients. But it really goes back to that healthy client that we want to make sure we're holding ourselves accountable to because that means it's something that's durable. And so we talk about this with our marketing teams on a daily, weekly basis, and we'll continue to look for those opportunities to be able to lean in. And then there will be times when we pull back because we don't see that efficacy. And so we really want to make sure that we continue to use that methodology because that truly is that building block from a growth perspective that we just want to make sure we're doing it in a methodical way that drives long-term sustainable growth. Connecting this back to the guidance, you did raise the full year revenue and EBITDA guide and expect to be free cash flow positive. What were the key drivers that gave you the confidence to raise numbers at this stage in the year? Yeah, we're really encouraged with what we were seeing in Q1, and we're really encouraged with what we were seeing in the first part of Q2. If you look at the Q2 guide, our guidance in Q2 is accelerating revenue growth in Q2 as well. And so we're just really encouraged. It goes back to it's sort of the culmination of all of the things we've talked about on this call, just really seeing that health and client demand and really seeing that come through in all of our client metrics has really given us the confidence to be able to provide that guidance. And it's really all of those things. It's delivering new and exciting experiences for our clients. It's truly all of that improved inventory, taking the methodical approach with clients, all of that, and seeing that come through an average order value and the improvements in our client trends and knowing that we're going to be inflecting our clients in Q3. All of that just continues to give us that confidence, and that's why we increase the guide, not only because of Q1 performance and what we're seeing in Q2, but being able to play some of that strength into the back half of the year, and because of that, I think Matt has talked about this quite a few times. We will continue to play offense because that's working well for us, and we'll continue to take market share, and that methodical approach is something that we've included in this increased guide, so we're really encouraged by that. Yeah. Maybe a couple of asides on that too. I think there's a lot of talk in the market and just in terms of the macro environment and the K-shaped economy. For us, we're not seeing any signs of impact with our clients. In part, that's just because of the resonance of our service and the relationship clients and stylists have together. We're seeing strong performance from all income levels of our clients. Clients, even if their wallet share comes down, they're making decisions where to shop. Overwhelmingly, they're choosing to shop with us. That gives us confidence that no matter what the macro is, we can face those headwinds head-on and play offense, continue to gain market share, and drive up our revenue growth. That's great. That's great. It's the last couple of minutes here. Matt, just a closing question for you. As you continue to shift the business model towards these higher LTV clients, the broader assortments, and AI experiences, what would you say are the two to three KPIs or milestones that matter most to you over the next 12 to 18 months? I'd focus on three things. The first, and I just mentioned it, was market share gains. In the last quarter, our revenue grew 7.3%. The market for apparel, accessories, and footwear only grew 1%. So we're already growing 7X the rate of the overall market. And we anticipate accelerating that delta going forward. We're going to continue to increase wallet share and steal market share from other retailers into the future. The second, and we talked about it too, is just reestablishing that durable active client growth while also maintaining a high level of discipline on the quality of the clients that we have at Stitch Fix. And when we focus on those higher-value clients who engage more frequently and stay longer and spend more, that also helps to accelerate that revenue growth. And then the third is really just how we get back to achieving and sustaining net income positivity and a real high level of confidence as the top line accelerates over the next 12 to 18 months. We'll be able to deliver that as well. Great. I think that's a great place to leave it for this afternoon. But thank you both for joining us. Thank you. Best of luck into 2026. Awesome. Thanks so much.