Purple Innovation Inc PRPL

LEHI, Utah, Aug. 5, 2024 /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, 2024.

Second Quarter Financial Summary (Comparisons versus Second Quarter 2023)¹

• Net revenue increased 2.0% to $120.3 million compared to $117.9 million.
  • Wholesale revenue increased 7.2% and Direct-to-Consumer (DTC) revenue decreased 1.8%.
• Gross margin increased to 40.7% compared to 30.1%.
• Operating expenses were $63.5 million, or 52.8% of revenue compared to $75.7 million, or 64.3% of revenue.
• Operating loss was $(14.5) million compared to an operating loss of $(40.3) million.
• Net income was $0.0 million as compared to a net loss of $(40.5) million.
  • Adjusted net loss was $(13.8) million, or $(0.13) per diluted share as compared to adjusted net loss of $(23.9) million, or $(0.23) per diluted share.
• EBITDA was $10.6 million compared to $(34.3) million.
  • Adjusted EBITDA was $(4.1) million compared to $(21.5) million.
• Cash and cash equivalents were $23.4 million at June 30, 2024.

"Our second quarter results underscore the progress we've made enhancing the financial profile of the Company," said Chief Executive Officer Rob DeMartini. "Even as industry trends further deteriorated and impacted demand, we exceeded our adjusted EBITDA plan thanks to a number of operational improvements and cost saving programs that drove a significant increase in gross margins on both a year-over-year and sequential basis. As we look forward, we remain on track for a return to profitability in the second half of the year and are confident that our Path to Premium Sleep strategy will continue to gain traction in the marketplace, allowing us to take share and deliver value to our shareholders."

Second Quarter 2024 Review

Second quarter 2024 net revenue increased 2.0% to $120.3 million, compared to $117.9 million in the second quarter of 2023. This increase was primarily due to increased wholesale channel revenues driven by a significant increase in wholesale floor slots, along with the continued positive response to the Company's new product lineup. By channel, wholesale revenue increased 7.2% and DTC revenue decreased 1.8%. DTC net revenues declined due to lower e-commerce revenue partially offset by growth in Purple retail showroom revenue driven by the addition of 4 showrooms over the previous 12 months, along with a product mix shift to higher priced product.

Gross margin for the second quarter 2024 increased to 40.7% compared to 30.1% in the year ago period. Excluding the liquidation of discontinued products and other costs associated with the new product launch in the second quarter of 2023, the increase in gross margins was primarily attributable to improved production efficiencies gained through the implementation of several commercial and supply chain actions over the past year.

Operating expenses were $63.5 million, or 52.8% of net revenue for the second quarter of 2024 compared to $75.7 million, or 64.3% of net revenue in the year ago period. The reduction in operating expenses was largely driven by a $8.3 million decrease in general and administrative costs reflecting the non-recurrence of legal and professional fees incurred by the Board's Special Committee in the second quarter of 2023, along with a $5.0 million decrease in marketing and sales expense. Advertising spend as a percentage of net revenues was 13.2% in the second quarter of 2024 compared to 17.0% in the second quarter of 2023.

Operating loss was $(14.5) million for the second quarter 2024 compared to $(40.3) million in the prior year period.

Net income was $0.0 million for the second quarter 2024 compared to a net loss of $(40.5) million in the year ago period. 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 a $18.7 million gain on the change in fair value of the warrant liability, was $(13.8)million, or $(0.13) per diluted share, compared to $(23.9) million, or $(0.23) per diluted share in the prior year period. Adjusted net loss has also been adjusted to reflect an estimated effective income tax rate of 25.9% for the current year and comparable prior year period.

EBITDA for the second quarter 2024 was $10.6 million compared to $(34.3) million in the second quarter 2023. Adjusted EBITDA was $(4.1) million compared to Adjusted EBITDA of $(21.5) million in the prior year period.

Balance Sheet

As of June 30, 2024, the Company had cash and cash equivalents of $23.4 million compared to $26.9 million as of December 31, 2023.

Inventories as of June 30, 2024 totaled $69.7 million, representing a decrease of 11.2% compared with June 30, 2023, and an increase of 4.2% compared with December 31, 2023.

2024 Outlook

Based on first half results, couple with ongoing industry-wide demand declines, the Company is amending its revenue outlook and reiterating its adjusted EBITDA outlook for 2024.

Purple now expects full year net revenue to be in the range of $490 to $510 million compared to its prior range of $540 million to $560 million. The Company still expects Adjusted EBITDA to be between $(20) million and $(10) million.

Conference Call and Webcast Information

Purple Innovation, Inc. will host a live conference call to discuss financial results today, August 5, 2024 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 60 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. 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 on March 12, 2024, 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. 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 table 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 third quarter and full year 2024, 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.
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.

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 loss and adjusted net loss per diluted share, are supplemental measures of operating performance that do not represent, and should not be considered, alternatives to net loss and earnings per share, as calculated in accordance with GAAP. We believe adjusted net loss and adjusted net loss per diluted share, supplement GAAP measures and enable us to more effectively evaluate our performance period-over-period. A reconciliation of net loss, the most directly comparable GAAP measure, to adjusted net loss and the computation of adjusted net loss per diluted share, are set forth below:

A reconciliation of net income (loss) per share, diluted, to adjusted net loss per diluted share is set forth below for the three and six months ended June 30, 2024 and 2023:

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SOURCE Purple Innovation, Inc.