Largest Product Introduction Points Business
in the Right Direction
LEHI,
Utah, Aug. 9, 2023 /PRNewswire/ -- Purple
Innovation, Inc. (NASDAQ: PRPL) ("Purple"), a comfort innovation
company known for creating the "World's First No Pressure™
Mattress," today announced results for the second quarter ended
June 30, 2023.
Second Quarter Financial Summary (Comparisons versus Second
Quarter 2022)1
- Net revenue decreased 16.1% to $120.9
million compared to $144.1
million.
-
- Wholesale revenue decreased 15.5% and Direct-to-Consumer (DTC)
revenue decreased 16.6%.
- Gross margin decreased 210 basis points to 31.8% compared to
33.9%.
-
- Excluding discounts and transitional costs associated with the
new product transition, second quarter 2023 adjusted gross margin
was 38.6%
- Operating expenses were $75.7
million, or 62.7% of revenue compared to $60.9 million, or 42.3% of revenue.
-
- Advertising spend increased 6.0% to $20.1 million, compared to $18.9 million.
- Operating loss was $(37.3)
million compared to an operating loss of $(12.1) million.
- Net loss was $(37.5) million as
compared to $(8.3) million.
-
- Adjusted net loss was $(21.1)
million, or $(0.20) per
diluted share as compared to $(8.8)
million, or $(0.11) per
diluted share.
- EBITDA was $(31.3) million
compared to $(8.0) million.
-
- Adjusted EBITDA was $(18.5)
million compared to $(0.3)
million.
- Cash and cash equivalents were $26.9
million at June 30, 2023.
- New, less restrictive debt facility signed on August 7, 2023, as disclosed in the second
quarter 10-Q
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|
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|
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1
Reconciliations for non-GAAP financial measures to the most
directly comparable GAAP financial measures are included in the
"RECONCILIATION OF GAAP TO NON-GAAP MEASURES" tables at the end of
this press release.
|
"This was an important quarter for Purple Innovation, marked by
the largest product and brand refresh in the company's history as
we introduced 11 all-new, innovative products supported by a more
premium brand position," said Chief Executive Officer
Rob DeMartini. "This new 'Path to Premium Sleep' strategy,
while not immediately evident in our topline results due to the
mid-quarter timing of the launch and ongoing industry-wide
pressures, demonstrated several positive indications to reinforce
that we have set the right course for the next stage of growth for
the Company. June, the first full month with our new product
in-market, was the strongest month of 2023 with a revenue run rate
up 18% to the first 5 months of the year, and we've seen that
momentum continue into the third quarter. This budding momentum,
along with the continued rollout of our new product with additional
wholesale partners in the coming months, positions us to deliver
improved results in the second half of the year."
Second Quarter 2023 Review
Second quarter 2023 net revenue decreased 16.1% to $120.9 million, compared to $144.1 million in the second quarter of 2022.
This decrease was primarily due to softening demand for
home-related products, inflationary pressure on discretionary
consumer spending, forward buying of consumers in recent
years, industry-standard price reductions on the sell-in of new
mattress and adjustable base floor models to wholesale partners,
and increased discounting of discontinued models sold through our
DTC channels. By channel, wholesale revenue decreased 15.5% and DTC
revenue decreased 16.6%. DTC net revenues declined due to lower
e-commerce revenue partially offset by growth in Purple retail
showroom revenue driven by the addition of 16 showrooms over the
previous 12 months.
Gross margin for the second quarter 2023 decreased to 31.8%
compared to 33.9% in the year ago period. Excluding discounts and
one-time costs associated with the product transition, gross margin
in the current year quarter was 38.6%. These discounts and costs
include industry standard price reductions on the sell-in of new
mattress floor models to wholesale partners coupled with increased
discounting of discontinued models sold through our DTC channels as
we transitioned to our new premium and luxury product lineups. The
470-basis point improvement year-over-year was driven by the
ongoing realization of efficiency and cost saving initiatives put
in place during the first half of 2022.
Operating expenses were $75.7
million, or 62.7% of net revenue for the second quarter of
2023 compared to $60.9 million, or
42.3% of net revenue in the year ago period. This increase in
operating expenses was largely driven by an increase in legal and
professional fees of $8.2 million
incurred by the Special Committee, including a $4.0 million accrual made in the second quarter
of 2023 for the settlement amount owed to Coliseum. Marketing
and sales expenses were higher in the second quarter as management
increased advertising spend to align with the launch of our new
premium and luxury product lineup in May
2023.
Operating loss was $(37.3) million
for the second quarter 2023 compared to $(12.1) million in the prior year period.
Net loss attributable to Purple Innovation, Inc. was
$(37.5) million for the second
quarter 2023 compared to $(8.3)
million in the year ago period. As previously disclosed, the
Company determined that its outstanding warrants should be
accounted for as liabilities and recorded at fair value on the date
of the transaction and subsequently re-measured to fair value at
each reporting date. For the three months ending June 30, 2023, there was no change in the fair
value of warrant liabilities, while for the three months ended
June 30, 2022, the Company recognized
a non-cash gain of $0.4 million
associated with the change in fair value of warrant liabilities. As
of June 30, 2023, all outstanding
warrants have expired.
Adjusted net loss, which excludes adjustments for certain
non-cash items and other items the Company does not consider in the
evaluation of ongoing operational performance, including losses
associated with the extinguishment of debt and the expenses
incurred by the Board's Special Committee, was $(21.1) million, or $(0.20) per diluted share, compared to
$(8.8) million, or $(0.11) per diluted share in the prior year
period. Adjusted net income has also been adjusted to reflect an
estimated effective income tax rate of 25.9% for the current year
period and 31.7% for the comparable prior year period.
EBITDA for the second quarter 2023 was $(31.3) million compared to $(8.0) million in the second quarter 2022.
Adjusted EBITDA, which excludes the expenses of the Board's Special
Committee, legal fees, non-cash stock-based compensation, severance
and showroom opening costs, was $(18.5)
million compared to Adjusted EBITDA of $(0.3) million in the prior year period.
Balance Sheet
As of June 30, 2023, the Company
had cash and cash equivalents of $26.9
million compared to $41.8
million as of December 31,
2022. The decrease was driven primarily by cash used in
operations of $38.1 million, capital
expenditures of $5.8 million
primarily related to additional investments made in our
manufacturing facilities and the repayment of the full $24.7 million outstanding on the term loan. This
was partially offset by cash provided from net proceeds of
$57.0 million received from the
public offering completed in February
2023. Inventories as of June 30,
2023 totaled $78.4 million
compared with $73.2 million as of
December 31, 2022.
On August 7, 2023, the Company
closed on a new debt facility consisting of a $25 million term loan with Callodine Commercial
Finance and an ABL credit agreement led by Bank of Montreal that provides up to $50 million in financing. This facility, which
replaces Purple's prior credit agreement, is less restrictive,
including no minimum EBITDA requirement, allowing for more
flexibility to invest in accelerating growth initiatives and
increasing market share.
2023 Outlook
Based on results for the first half of 2023 and a more cautious
view of industry demand for the remainder of the year, the Company
is adjusting its outlook. It now expects net revenue to be in
the range of $560 to $590 million and adjusted EBITDA between
$(10) million and breakeven.
Based on results for the first half of 2023 and a more cautious
view of industry demand for the remainder of the year, the Company
is adjusting its outlook. It now expects net revenue to be in
the range of $560 to $590 million and adjusted EBITDA between
$(10) million and breakeven.
Conference Call and Webcast Information
Purple Innovation, Inc. will host a live conference call to
discuss financial results today, August 9,
2023 at 4:30 p.m. Eastern
Time. To access the call dial (844) 825-9789
(domestic) or (412) 317-5180 (international). The call
is also being webcast and can be accessed on the investor relations
section of the Company's website, investors.purple.com. After the
conference call, a webcast replay will remain available on the
investor relations section of the Company's website for 30
days.
About Purple
Purple, the leading premium mattress company with the #1 Gel
Grid technology in the world, the GelFlex® Grid, thoughtfully
engineers products that make restorative sleep effortless for every
kind of sleeper. The result of over 30 years of innovation and in
comfort technologies, Purple's GelFlex Grid is the most significant
advancement in mattresses in decades and is proven to reduce aches
and pains. It instantly adapts as you move, balances temperature,
relieves pressure and offers support in all the right places.
Purple products, including mattresses, pillows, cushions, frames,
sheets, and more, can be found online at Purple.com, in over
57 Purple stores and over 3,000 retailers nationwide. Sleep Better.
Live Purple.
Forward Looking Statements
Certain statements made in this release that are not historical
facts are "forward looking statements" within the meaning of the
"safe harbor" provisions of the United States Private Securities
Litigation Reform Act of 1995. Such forward-looking statements
include but are not limited to statements relating to our expected
continuing expansion of market share from investment in expanded
product lines, innovation and showrooms; our ability to achieve
profitability; expected improvements in performance
quarter-over-quarter and growth in the second half of the year;
expected improvement in margin rates; our ability to successfully
execute on improvement strategies, including right-sizing our cost
structure and improving supply chain and manufacturing efficiency,
and related impacts on our operating results; expected improvements
in our operating performance, including wholesale relationships;
demand for our products; expectations regarding consumer behavior;
the timing and impact of the introduction of new product lines; the
adequacy of our cash other capital resources; and expected
financial and operating results for the second quarter or full year
2023, including net revenue and Adjusted EBITDA. Statements based
on historical data are not intended and should not be understood to
indicate the Company's expectations regarding future events.
Forward-looking statements provide current expectations or
forecasts of future events or determinations. These forward-looking
statements are not guarantees of future performance, conditions or
results, and involve a number of known and unknown risks,
uncertainties, assumptions and other important factors, many of
which are outside the Company's control, that could cause actual
results or outcomes to differ materially from those discussed in
the forward-looking statements. Factors that could influence the
realization of forward-looking statements include, among others:
changes in economic, financial and end-market conditions in the
markets in which we operate; fluctuations in raw material prices
and cost of labor; the financial condition of our customers and
suppliers; competitive pressures, including the need for technology
improvement, successful new product development and introduction;
changes in consumer demand, including pullbacks in consumer
spending; disruptions to our manufacturing processes; and the risk
factors outlined in the "Risk Factors" section of our Annual Report
on Form 10-K filed with the Securities and Exchange Commission (the
"SEC") on March 22, 2023 as amended
on Form 10-K/A filed with the SEC on May 1,
2023, and in our other filings made with the SEC. The
Company does not undertake any obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.
Non-GAAP Financial Measures
EBITDA, adjusted EBITDA, adjusted net income, and adjusted net
income per diluted share are non-GAAP financial measures that
remove the impact of certain non-cash and non-recurring costs.
Adjusted gross margin is a financial measure that removes the
impact of reduced revenues relating to the sales of floor model
mattresses and adjustable bases and increased one-time costs
associated with the transition to our new Premium and Luxe product
lineups. Management believes that the use of such non-GAAP
financial measures provides investors with additional useful
information with respect to the impact of various adjustments,
which we view as a better measure of our operating performance.
Refer to the attached tables for the reconciliation of such
non-GAAP financial measures to the most comparable GAAP financial
measure.
With respect to the Company's Adjusted EBITDA outlook for the
second quarter and full year 2023, a quantitative reconciliation to
the corresponding GAAP information cannot be provided without
unreasonable effort because of the inherent difficulty of
accurately forecasting the occurrence and financial impact of the
various adjusting items necessary for such reconciliation that have
not yet occurred, are out of our control, or cannot be reasonably
predicted, including but not limited to warrant liabilities and
stock based compensation. For the same reasons, the Company is
unable to assess the probable significance of the unavailable
information, which could have a material impact on its future GAAP
financial results.
Investor Contact:
Brendon
Frey, ICR
brendon.frey@icrinc.com
203-682-8200
PURPLE INNOVATION,
INC.
Condensed
Consolidated Balance Sheets
(unaudited - in
thousands, except par value)
|
|
|
|
|
|
June 30,
2023
|
|
|
December 31,
2022
|
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
|
|
Cash, cash equivalents and restricted cash
|
|
$
|
26,949
|
|
|
$
|
41,754
|
|
Accounts receivable, net
|
|
|
22,769
|
|
|
|
34,566
|
|
Inventories, net
|
|
|
78,402
|
|
|
|
73,197
|
|
Prepaid expenses
|
|
|
5,669
|
|
|
|
7,821
|
|
Other current assets
|
|
|
3,881
|
|
|
|
4,117
|
|
Total current
assets
|
|
|
137,670
|
|
|
|
161,455
|
|
Property and equipment,
net
|
|
|
131,493
|
|
|
|
136,673
|
|
Operating lease
right-of-use assets
|
|
|
99,858
|
|
|
|
102,541
|
|
Goodwill
|
|
|
5,021
|
|
|
|
4,897
|
|
Intangible assets,
net
|
|
|
23,688
|
|
|
|
26,221
|
|
Other long-term
assets
|
|
|
2,958
|
|
|
|
1,546
|
|
Total assets
|
|
$
|
400,688
|
|
|
$
|
433,333
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts payable
|
|
$
|
48,742
|
|
|
$
|
46,441
|
|
Accrued sales returns
|
|
|
4,197
|
|
|
|
5,107
|
|
Accrued compensation
|
|
|
4,190
|
|
|
|
6,691
|
|
Customer prepayments
|
|
|
5,477
|
|
|
|
4,452
|
|
Accrued sales and use tax
|
|
|
1,674
|
|
|
|
2,978
|
|
Accrued rebates and allowances
|
|
|
5,827
|
|
|
|
9,804
|
|
Operating lease obligations – current portion
|
|
|
14,390
|
|
|
|
13,708
|
|
Other current liabilities
|
|
|
7,359
|
|
|
|
8,130
|
|
Total current
liabilities
|
|
|
91,856
|
|
|
|
97,311
|
|
Debt
|
|
|
—
|
|
|
|
23,657
|
|
Operating lease
obligations, net of current portion
|
|
|
113,549
|
|
|
|
115,599
|
|
Other long-term
liabilities, net of current portion
|
|
|
17,717
|
|
|
|
17,876
|
|
Total
liabilities
|
|
|
223,122
|
|
|
|
254,443
|
|
Commitments and
contingencies (Note 14)
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
|
|
Class A common stock; $0.0001 par value, 210,000 shares
authorized; 105,045
issued and outstanding at June 30, 2023 and
91,380 issued and outstanding at
December 31, 2022
|
|
|
11
|
|
|
|
9
|
|
Class B common stock; $0.0001 par value, 90,000 shares
authorized; 448 issued and
outstanding at June 30, 2023 and 448 issued and
outstanding at December 31, 2022
|
|
|
—
|
|
|
|
—
|
|
Additional paid-in capital
|
|
|
589,145
|
|
|
|
529,466
|
|
Accumulated deficit
|
|
|
(412,323)
|
|
|
|
(351,514)
|
|
Total stockholders'
equity attributable to Purple Innovation, Inc.
|
|
|
176,833
|
|
|
|
177,961
|
|
Noncontrolling interest
|
|
|
733
|
|
|
|
929
|
|
Total stockholders'
equity
|
|
|
177,566
|
|
|
|
178,890
|
|
Total liabilities and
stockholders' equity
|
|
$
|
400,688
|
|
|
$
|
433,333
|
|
PURPLE INNOVATION,
INC.
Condensed
Consolidated Statements of Income
(unaudited - in
thousands, except per share amounts)
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
|
Six Months Ended
June 30,
|
|
|
|
2023
|
|
|
2022
|
|
|
2023
|
|
|
2022
|
|
Revenues,
net
|
|
$
|
120,872
|
|
|
$
|
144,109
|
|
|
$
|
230,244
|
|
|
$
|
287,288
|
|
Cost of
revenues
|
|
|
82,408
|
|
|
|
95,297
|
|
|
|
148,557
|
|
|
|
186,850
|
|
Gross profit
|
|
|
38,464
|
|
|
|
48,812
|
|
|
|
81,687
|
|
|
|
100,438
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing and
sales
|
|
|
46,379
|
|
|
|
40,373
|
|
|
|
84,552
|
|
|
|
90,332
|
|
General and
administrative
|
|
|
26,437
|
|
|
|
18,779
|
|
|
|
50,104
|
|
|
|
36,667
|
|
Research and
development
|
|
|
2,925
|
|
|
|
1,748
|
|
|
|
6,297
|
|
|
|
3,891
|
|
Total operating
expenses
|
|
|
75,741
|
|
|
|
60,900
|
|
|
|
140,953
|
|
|
|
130,890
|
|
Operating income
(loss)
|
|
|
(37,277)
|
|
|
|
(12,088)
|
|
|
|
(59,266)
|
|
|
|
(30,452)
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(352)
|
|
|
|
(707)
|
|
|
|
(554)
|
|
|
|
(1,730)
|
|
Other income (expense),
net
|
|
|
37
|
|
|
|
(136)
|
|
|
|
110
|
|
|
|
(119)
|
|
Change in fair value –
warrant liabilities
|
|
|
—
|
|
|
|
346
|
|
|
|
—
|
|
|
|
4,274
|
|
Loss on extinguishment
of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
(1,217)
|
|
|
|
—
|
|
Total other income
(expense), net
|
|
|
(315)
|
|
|
|
(497
|
|
|
|
(1,661)
|
|
|
|
2,425
|
|
Net loss before income
taxes
|
|
|
(37,592)
|
|
|
|
(12,585)
|
|
|
|
(60,927)
|
|
|
|
(28,027)
|
|
Income tax benefit
(expense)
|
|
|
(72)
|
|
|
|
4,175
|
|
|
|
(144)
|
|
|
|
5,986
|
|
Net loss
|
|
|
(37,664)
|
|
|
|
(8,410)
|
|
|
|
(61,071)
|
|
|
|
(22,041)
|
|
Net loss attributable
to noncontrolling interest
|
|
|
(155)
|
|
|
|
(70)
|
|
|
|
(262)
|
|
|
|
(199)
|
|
Net loss attributable
to Purple Innovation, Inc.
|
|
$
|
(37,509)
|
|
|
$
|
(8,340)
|
|
|
$
|
(60,809)
|
|
|
$
|
(21,842)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net loss per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.36)
|
|
|
$
|
(0.10)
|
|
|
$
|
(0.60)
|
|
|
$
|
(0.29)
|
|
Diluted
|
|
$
|
(0.36)
|
|
|
$
|
(0.10)
|
|
|
$
|
(0.60)
|
|
|
$
|
(0.29)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common
shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
105,079
|
|
|
|
82,703
|
|
|
|
101,760
|
|
|
|
74,924
|
|
Diluted
|
|
|
105,079
|
|
|
|
83,151
|
|
|
|
101,760
|
|
|
|
75,372
|
|
|
|
|
|
|
|
|
PURPLE INNOVATION,
INC.
Condensed
Consolidated Statements of Cash Flows
(unaudited - in
thousands)
|
|
|
|
Three Months
Ended
June 30,
|
|
|
Six Months
Ended
June
30,
|
|
|
|
2023
|
|
|
2022
|
|
|
2023
|
|
|
2022
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(37,664)
|
|
|
$
|
(8,410)
|
|
|
$
|
(61,071)
|
|
|
$
|
(22,041)
|
|
Adjustments to
reconcile net income (loss) to net cash provided by (used in)
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
6,007
|
|
|
|
3,741
|
|
|
|
12,890
|
|
|
|
7,583
|
|
Non-cash
interest
|
|
|
416
|
|
|
|
212
|
|
|
|
686
|
|
|
|
360
|
|
Change in fair value -
warrant liabilities
|
|
|
—
|
|
|
|
(346)
|
|
|
|
—
|
|
|
|
(4,274)
|
|
Stock-based
compensation
|
|
|
1,661
|
|
|
|
1,275
|
|
|
|
2,853
|
|
|
|
1,817
|
|
Deferred income
taxes
|
|
|
—
|
|
|
|
(4,249)
|
|
|
|
—
|
|
|
|
(6,161)
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
|
(8,657)
|
|
|
|
(2,572)
|
|
|
|
11,467
|
|
|
|
(6,148)
|
|
Inventories,
net
|
|
|
9,423
|
|
|
|
20,940
|
|
|
|
(5,061)
|
|
|
|
13,804
|
|
Prepaid inventory and
other assets
|
|
|
2,049
|
|
|
|
2,460
|
|
|
|
2,952
|
|
|
|
3,481
|
|
Operating lease,
net
|
|
|
239
|
|
|
|
3,760
|
|
|
|
1,315
|
|
|
|
4,178
|
|
Accounts
payable
|
|
|
2,081
|
|
|
|
(21,127)
|
|
|
|
3,304
|
|
|
|
(37,027)
|
|
Accrued sales
returns
|
|
|
79
|
|
|
|
(35)
|
|
|
|
(910)
|
|
|
|
(2,005)
|
|
Accrued
compensation
|
|
|
(5,598)
|
|
|
|
(2,403)
|
|
|
|
(2,709)
|
|
|
|
354
|
|
Customer
prepayments
|
|
|
2,624
|
|
|
|
271
|
|
|
|
1,025
|
|
|
|
(5,722)
|
|
Accrued rebates and
allowances
|
|
|
2,845
|
|
|
|
306
|
|
|
|
(3,977)
|
|
|
|
(2,854)
|
|
Other accrued
liabilities
|
|
|
(55)
|
|
|
|
(2,346)
|
|
|
|
(2,034)
|
|
|
|
1,851
|
|
Net cash provided by
(used in) operating activities
|
|
|
(24,550)
|
|
|
|
(8,523)
|
|
|
|
(38,053)
|
|
|
|
(52,804)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property
and equipment
|
|
|
(2,500)
|
|
|
|
(11,602)
|
|
|
|
(5,443)
|
|
|
|
(24,233)
|
|
Investment in
intangible assets
|
|
|
(225)
|
|
|
|
(1,375)
|
|
|
|
(380)
|
|
|
|
(1,822)
|
|
Net cash used in
investing activities
|
|
|
(2,725)
|
|
|
|
(12,977)
|
|
|
|
(5,823)
|
|
|
|
(26,055)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Payments on term
loan
|
|
|
—
|
|
|
|
—
|
|
|
|
(24,656)
|
|
|
|
(2,531)
|
|
Payments on revolving
line of credit
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(55,000)
|
|
Payments for debt
issuance costs
|
|
|
—
|
|
|
|
—
|
|
|
|
(2,898)
|
|
|
|
(1,242)
|
|
Proceeds from stock
offering
|
|
|
—
|
|
|
|
—
|
|
|
|
60,300
|
|
|
|
93,125
|
|
Payments for public
offering costs
|
|
|
(201)
|
|
|
|
(29)
|
|
|
|
(3,301)
|
|
|
|
(259)
|
|
Proportional
Representation Preferred Linked Stock redemption fee
|
|
|
(105)
|
|
|
|
—
|
|
|
|
(105)
|
|
|
|
—
|
|
Tax receivable
agreement payments
|
|
|
—
|
|
|
|
—
|
|
|
|
(269)
|
|
|
|
(5,847)
|
|
Proceeds from exercise
of stock options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
166
|
|
Net cash provided by
(used in) financing activities
|
|
|
(306)
|
|
|
|
(29)
|
|
|
|
29,071
|
|
|
|
28,412
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase (decrease)
in cash
|
|
|
(27,581)
|
|
|
|
(21,529)
|
|
|
|
(14,805)
|
|
|
|
(50,447)
|
|
Cash, beginning of the
period
|
|
|
54,530
|
|
|
|
62,698
|
|
|
|
41,754
|
|
|
|
91,616
|
|
Cash, end of the
period
|
|
$
|
26,949
|
|
|
$
|
41,169
|
|
|
$
|
26,949
|
|
|
$
|
41,169
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the
period for interest
|
|
$
|
(187)
|
|
|
$
|
482
|
|
|
$
|
(226)
|
|
|
$
|
1,345
|
|
Cash paid during the
period for income taxes
|
|
$
|
15
|
|
|
$
|
175
|
|
|
$
|
58
|
|
|
$
|
219
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental schedule
of non-cash investing and financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and equipment
included in accounts payable
|
|
$
|
3,209
|
|
|
$
|
3,648
|
|
|
$
|
3,209
|
|
|
$
|
3,648
|
|
Accrued
distributions
|
|
$
|
—
|
|
|
$
|
228
|
|
|
$
|
—
|
|
|
$
|
228
|
|
PURPLE INNOVATION,
INC.
RECONCILIATION OF GAAP TO NON-GAAP
MEASURES
(In thousands)
Management believes that the use of the following non-GAAP
financial measures provides investors with additional useful
information with respect to the impact of various adjustments,
which we view as a better measure of our operating performance.
These non-GAAP financial measures are EBITDA, adjusted EBITDA,
adjusted net income, adjusted net income per diluted share and
adjusted gross profit. Other companies may calculate these non-GAAP
measures differently than we do. These non-GAAP measures have
limitations as analytical tools, and you should not consider them
in isolation or as a substitute for our financial results prepared
in accordance with GAAP.
Reconciliation of GAAP Net Income (Loss) to Non-GAAP EBITDA
and Adjusted EBITDA
A reconciliation of GAAP net income (loss) to the non-GAAP
measures of EBITDA and adjusted EBITDA is provided below. EBITDA
represents net income (loss) before interest expense, income tax
(benefit) expense, other (income) expense, net, and depreciation
and amortization. Adjusted EBITDA represents EBITDA excluding costs
incurred due to stock-based compensation expense, debt
extinguishment, changes in the fair value of the warrant liability,
nonrecurring legal fees, Board special committee costs, executive
interim and search costs, severance costs, vendor separation fee,
showroom opening costs, new production facility start-up costs and
COVID-19 related expenses. We believe EBITDA and Adjusted EBITDA
provide additional useful information with respect to the impact of
various adjustments and provide meaningful measures of our
operating performance.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
June
30,
|
|
|
Six Months
Ended
June
30,
|
|
|
|
2023
|
|
|
2022
|
|
|
2023
|
|
|
2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income
(loss)
|
|
$
|
(37,664)
|
|
|
|
(8,410)
|
|
|
|
(61,071)
|
|
|
|
(22,041)
|
|
Interest
expense
|
|
|
352
|
|
|
|
707
|
|
|
|
554
|
|
|
|
1,730
|
|
Income tax (benefit)
expense
|
|
|
72
|
|
|
|
(4,175)
|
|
|
|
144
|
|
|
|
(5,986)
|
|
Other income,
net
|
|
|
(37)
|
|
|
|
136
|
|
|
|
(110)
|
|
|
|
119
|
|
Depreciation and
amortization
|
|
|
6,007
|
|
|
|
3,741
|
|
|
|
12,890
|
|
|
|
7,583
|
|
EBITDA
|
|
|
(31,270)
|
|
|
|
(8,001)
|
|
|
|
(47,593)
|
|
|
|
(18,595)
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in fair value -
warrant liability
|
|
|
—
|
|
|
|
(346)
|
|
|
|
—
|
|
|
|
(4,274)
|
|
Loss on extinguishment
of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
1,217
|
|
|
|
—
|
|
Stock-based
compensation expense
|
|
|
1,661
|
|
|
|
1,275
|
|
|
|
2,853
|
|
|
|
1,817
|
|
Vendor separation
fee
|
|
|
—
|
|
|
|
3,136
|
|
|
|
1,050
|
|
|
|
3,136
|
|
Legal fees
|
|
|
1,395
|
|
|
|
104
|
|
|
|
2,745
|
|
|
|
266
|
|
Board special committee
fees
|
|
|
8,298
|
|
|
|
—
|
|
|
|
14,160
|
|
|
|
—
|
|
Acquisition
expenses
|
|
|
65
|
|
|
|
—
|
|
|
|
65
|
|
|
|
—
|
|
Executive interim and
search costs
|
|
|
1,013
|
|
|
|
1,356
|
|
|
|
1,802
|
|
|
|
3,070
|
|
Severance
costs
|
|
|
267
|
|
|
|
1,191
|
|
|
|
635
|
|
|
|
2,469
|
|
Showroom opening
costs
|
|
|
39
|
|
|
|
900
|
|
|
|
96
|
|
|
|
1,576
|
|
New production facility
start-up costs
|
|
|
—
|
|
|
|
85
|
|
|
|
—
|
|
|
|
348
|
|
COVID-19 related
expenses
|
|
|
—
|
|
|
|
2
|
|
|
|
—
|
|
|
|
331
|
|
Adjusted
EBITDA
|
|
$
|
(18,532)
|
|
|
$
|
(298)
|
|
|
$
|
(22,970)
|
|
|
$
|
(9,856)
|
|
Reconciliation of GAAP Net Income to non-GAAP Adjusted Net
Income and Adjusted Net Income per Diluted Share
Our presentation of adjusted net income assumes that all net
income is attributable to Purple Innovation, Inc. (i.e. there is no
allocation of net income or loss to noncontrolling interests),
which assumes the full exchange at the beginning of the period of
all outstanding Paired Securities for shares of Class A common
stock of Purple Innovation, Inc., adjusted for certain nonrecurring
items that we do not believe directly reflect our core operations.
Adjusted net income per share, diluted, is calculated by dividing
adjusted net income by the total shares of Class A common stock
outstanding plus any dilutive warrants, options and restricted
stock as calculated in accordance with GAAP and assuming the full
exchange of all outstanding Paired Securities as of the beginning
of each period presented. Adjusted net income and adjusted net
income per diluted share, are supplemental measures of operating
performance that do not represent, and should not be considered,
alternatives to net income and earnings per share, as calculated in
accordance with GAAP. We believe adjusted net income and adjusted
net income per diluted share, supplement GAAP measures and enable
us to more effectively evaluate our performance period-over-period.
A reconciliation of net income (loss), the most directly comparable
GAAP measure, to adjusted net income and the computation of
adjusted net income per diluted share, are set forth below:
|
|
|
|
|
|
|
|
|
|
|
|
|
(in thousands, except
per share amounts)
|
|
Three Months
Ended
June 30,
|
|
|
Six Months
Ended
June 30,
|
|
|
|
2023
|
|
|
2022
|
|
|
2023
|
|
|
2022
|
|
Net income
(loss)
|
|
$
|
(37,664)
|
|
|
$
|
(8,410)
|
|
|
$
|
(61,071)
|
|
|
$
|
(22,041)
|
|
Income tax (benefit)
expense, as reported
|
|
|
72
|
|
|
|
(4,175)
|
|
|
|
144
|
|
|
|
(5,986)
|
|
Loss on extinguishment
of debt
|
|
|
—
|
|
|
|
—
|
|
|
|
1,217
|
|
|
|
—
|
|
Board special committee
fees
|
|
|
8,298
|
|
|
|
—
|
|
|
|
14,160
|
|
|
|
—
|
|
Change in fair value –
warrant liabilities
|
|
|
—
|
|
|
|
(346)
|
|
|
|
—
|
|
|
|
(4,274)
|
|
Adjusted net income
(loss) before income taxes
|
|
|
(29,294)
|
|
|
|
(12,931)
|
|
|
|
(45,550)
|
|
|
|
(32,301)
|
|
Adjusted income tax
benefit (expense)(1)
|
|
|
7,587
|
|
|
|
4,106
|
|
|
|
11,797
|
|
|
|
6,977
|
|
Adjusted net income
(loss)
|
|
$
|
(21,107)
|
|
|
$
|
(8,825)
|
|
|
$
|
(33,753)
|
|
|
$
|
(25,324)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
(loss) per share, diluted
|
|
$
|
(0.20)
|
|
|
$
|
(0.11)
|
|
|
$
|
(0.33)
|
|
|
$
|
(0.34)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
weighted-average shares outstanding,
diluted(2)
|
|
|
105,507
|
|
|
|
83,151
|
|
|
|
102,188
|
|
|
|
75,372
|
|
|
(1) Represents the
estimated effective tax rate of 25.9% for the three and six months
ended June 30, 2023, and 31.74% and 21.6% for the three and six
months ended June 30, 2022, applied to adjusted net income before
income taxes. The estimated effective tax rates are what the
Company would be subject to and consist of the combined federal
statutory tax rate and the Company's blended state tax
rates.
|
|
(2) Assumes options and
restricted stock units calculated in accordance with GAAP and the
full exchange of all outstanding Paired Securities for shares of
Class A common stock as of the beginning of the period.
|
A reconciliation of net income (loss) per share, diluted, to
adjusted net income per diluted share is set forth below for the
three and six months ended June 30,
2021 and 2020:
|
|
For the Three Months
Ended
|
|
|
|
June 30,
2023
|
|
|
June 30,
2022
|
|
|
|
Net
Income
|
|
|
Weighted
Average
Shares,
Diluted
|
|
|
Net
Income
per
Share,
Diluted
|
|
|
Net
Income
|
|
|
Weighted
Average
Shares,
Diluted
|
|
|
Net
Income
per
Share,
Diluted
|
|
Net income (loss)
attributable to Purple Innovation Inc.(1)
|
|
$
|
(37,509)
|
|
|
|
105,079
|
|
|
$
|
(0.36)
|
|
|
$
|
(8,340)
|
|
|
|
83,151
|
|
|
$
|
(0.10)
|
|
Assumed exchange
of shares(2)
|
|
|
(155)
|
|
|
|
428
|
|
|
|
|
|
|
|
(70)
|
|
|
|
—
|
|
|
|
|
|
Net income
(loss)
|
|
|
(37,664)
|
|
|
|
|
|
|
|
|
|
|
|
(8,410)
|
|
|
|
|
|
|
|
|
|
Adjustments to
arrive at adjusted income (loss) before
taxes(3)
|
|
|
8,370
|
|
|
|
|
|
|
|
|
|
|
|
(4,521)
|
|
|
|
|
|
|
|
|
|
Adjusted income
(loss) before taxes
|
|
|
(29,294)
|
|
|
|
|
|
|
|
|
|
|
|
(12,931)
|
|
|
|
|
|
|
|
|
|
Adjusted income
tax benefit(4)
|
|
|
7,587
|
|
|
|
|
|
|
|
|
|
|
|
4,106
|
|
|
|
|
|
|
|
|
|
Adjusted
net income (loss)
|
|
$
|
(21,107)
|
|
|
|
105,507
|
|
|
$
|
(0.20)
|
|
|
$
|
(8,825)
|
|
|
|
83,151
|
|
|
$
|
(0.11)
|
|
|
(1) Represents net
income attributable to Purple Innovation, Inc. and the associated
weighted average diluted shares, of Class A common stock
outstanding.
|
|
(2) Assumes the full
exchange of all outstanding Paired Securities for shares of Class A
common stock as of the beginning of the period. Also assumes the
addition of net income attributable to noncontrolling interests
corresponding with the assumed exchange of the Paired Securities
for shares of Class A common stock.
|
|
(3) Represents the
total impact of all adjustments identified in the adjusted net
income table above to arrive at adjusted income before income
taxes. Also assumes the dilutive warrants, options and restricted
stock as calculated in accordance with GAAP.
|
|
(4) Represents the
estimated effective tax rate of 25.9% and 31.7% for the three
months ended June 30, 2023 and 2022, respectively, applied to
adjusted net income before income taxes. The estimated effective
tax rates are what the Company would be subject to and consist of
the combined federal statutory tax rate and the Company's blended
state tax rates.
|
|
|
For the Six Months
Ended
|
|
|
|
June 30,
2023
|
|
|
June 30,
2022
|
|
|
|
Net
Income
|
|
|
Weighted
Average
Shares,
Diluted
|
|
|
Net
Income
per
Share,
Diluted
|
|
|
Net
Income
|
|
|
Weighted
Average
Shares,
Diluted
|
|
|
Net
Income
per
Share,
Diluted
|
|
Net income (loss)
attributable to Purple Innovation Inc.(1)
|
|
$
|
(60,809)
|
|
|
|
101,760
|
|
|
$
|
(0.60)
|
|
|
$
|
(21,842)
|
|
|
|
75,372
|
|
|
$
|
(0.29)
|
|
Assumed exchange
of shares(2)
|
|
|
(262)
|
|
|
|
428
|
|
|
|
|
|
|
|
(199)
|
|
|
|
—
|
|
|
|
|
|
Net income
(loss)
|
|
|
(61,071)
|
|
|
|
|
|
|
|
|
|
|
|
(22,041)
|
|
|
|
|
|
|
|
|
|
Adjustments to
arrive at adjusted income before taxes(3)
|
|
|
15,521
|
|
|
|
|
|
|
|
|
|
|
|
(10,260)
|
|
|
|
|
|
|
|
|
|
Adjusted income
before taxes
|
|
|
(45,550)
|
|
|
|
|
|
|
|
|
|
|
|
(32,301)
|
|
|
|
|
|
|
|
|
|
Adjusted income
tax benefit (expense)(4)
|
|
|
11,797
|
|
|
|
|
|
|
|
|
|
|
|
6,977
|
|
|
|
|
|
|
|
|
|
Adjusted
net income
|
|
$
|
(33,753)
|
|
|
|
102,188
|
|
|
$
|
(0.33)
|
|
|
$
|
25,324
|
|
|
|
75,372
|
|
|
$
|
(0.34)
|
|
|
(1) Represents net
income attributable to Purple Innovation, Inc. and the associated
weighted average diluted shares, of Class A common stock
outstanding.
|
|
(2) Assumes the full
exchange of all outstanding Paired Securities for shares of Class A
common stock as of the beginning of the period. Also assumes the
addition of net income attributable to noncontrolling interests
corresponding with the assumed exchange of the Paired Securities
for shares of Class A common stock.
|
|
(3) Represents the
total impact of all adjustments identified in the adjusted net
income table above to arrive at adjusted income before income
taxes. Also assumes the dilutive warrants, options and restricted
stock as calculated in accordance with GAAP.
|
|
(4) Represents the
estimated effective tax rate of 25.9% and 21.6% for the six months
ended June 30, 2023 and 2022, respectively, applied to adjusted net
income before income taxes. The estimated effective tax rates are
what the Company would be subject to and consist of the combined
federal statutory tax rate and the Company's blended state tax
rates.
|
Reconciliation of GAAP Gross Margin to Non-GAAP Adjusted
Gross Margin
A reconciliation of GAAP gross margin to the non-GAAP adjusted
gross margin is provided below. Adjusted gross margin represents
gross margin removing the impact in the second quarter 2023 of
industry-standard price reductions on the sell-in of new mattress
and base floor models to wholesale partners, and increased
discounting of discontinued models sold through our wholesale and
DTC channels. In addition, adjusted gross margin excludes certain
one-time costs associated with the new product transition. There
was no new product transition activity in the second quarter
2022. We believe adjusted gross margin provides
additional useful information with respect to the impact of the new
model transition and provides meaningful measures of our operating
performance.
|
|
|
|
|
|
|
|
|
Three Months
Ended
June 30,
|
|
|
|
2023
|
|
|
2022
|
|
Revenues, net, as
reported
|
|
$
|
120,872
|
|
|
$
|
144,109
|
|
Effect of price
reductions and discounts
|
|
|
9,700
|
|
|
|
—
|
|
Revenue, net, as
adjusted
|
|
|
130,572
|
|
|
|
144,105
|
|
|
|
|
|
|
|
|
|
|
Cost of revenues, as
reported
|
|
$
|
82,408
|
|
|
$
|
95,297
|
|
One-time costs
associated with the new product transition
|
|
|
(2,200)
|
|
|
|
—
|
|
Costs of revenues, as
adjusted
|
|
|
80,208
|
|
|
|
95,297
|
|
|
|
|
|
|
|
|
|
|
Gross margin, as
reported
|
|
$
|
38,464
|
|
|
$
|
48,812
|
|
Gross margin
percent
|
|
|
31.8
|
%
|
|
|
33.9
|
%
|
|
|
|
|
|
|
|
|
|
Adjusted gross
margin
|
|
$
|
50,364
|
|
|
$
|
48,812
|
|
Adjusted gross margin
percent
|
|
|
38.6
|
%
|
|
|
33.9
|
%
|
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SOURCE Purple Innovation, Inc.