Purple Innovation Announces Consolidation of Manufacturing Operations to Accelerate Growth

Rhea-AI Summary

Purple Innovation (NASDAQ: PRPL) has announced a strategic consolidation of its manufacturing operations, aiming to accelerate growth and innovation. The company will close two Utah facilities and consolidate production into its McDonough, Georgia facility by December 31, 2024. This move is expected to generate $15 to $20 million in EBITDA benefit annually starting in 2025.

The restructuring includes corporate-level job reductions and plans for a new Utah distribution center. Purple will maintain its Utah headquarters, showrooms, and R&D activities. The company anticipates restructuring costs of $35 to $45 million, with $26 to $32 million being non-cash. These changes are not expected to impact Purple's 2024 guidance targets.

Positive

• Consolidation expected to generate $15-$20 million in annual EBITDA benefit starting 2025
• Streamlining operations to reinvest in technology and marketing
• Maintaining R&D activities and headquarters in Utah
• Plans to increase capacity at Georgia manufacturing facility
• No impact on full-year 2024 guidance targets

Negative

• Closure of two manufacturing facilities in Utah
• Reduction of corporate-level positions
• Restructuring costs of $35-$45 million expected

Insights

Financial Analyst

Purple Innovation's consolidation strategy appears to be a calculated move towards operational efficiency. The projected $15 to $20 million EBITDA benefit in 2025 is substantial, potentially boosting profitability. However, investors should note the $35 to $45 million in restructuring costs, which will impact short-term financials. The non-cash nature of 74-71% of these costs mitigates immediate cash flow concerns.

The company's focus on its "Path to Premium Sleep" strategy and Grid innovation suggests a shift towards higher-margin products. This could enhance revenue quality if executed well. The maintenance of 2024 guidance indicates confidence in managing the transition without disrupting current performance. Overall, this restructuring seems aimed at long-term value creation, but investors should monitor execution risks and potential market share impacts during the transition period.

Supply Chain Expert

Purple's consolidation of manufacturing operations into a single facility in Georgia represents a significant supply chain optimization. This move should streamline logistics, reduce overhead and potentially improve quality control. The planned increase in capacity at the Georgia facility suggests economies of scale, which could lead to improved margins and production flexibility.

The closure of Utah facilities and opening of a new distribution center indicates a strategic realignment of the supply chain network. This could optimize distribution routes and reduce transportation costs, especially for East Coast markets. However, there's a risk of disruption during the transition and the company must ensure that the consolidated facility can meet demand efficiently. The retention of R&D in Utah while moving production to Georgia creates a geographical separation that will require robust communication and coordination to maintain innovation speed and product quality.

Human Resources Consultant

The consolidation plan signals a significant workforce restructuring at Purple Innovation. The closure of two Utah facilities and reduction of corporate positions will likely result in substantial job losses, which could impact employee morale and potentially lead to a loss of institutional knowledge. However, the company's decision to maintain its headquarters and R&D center in Utah demonstrates a commitment to retaining critical intellectual capital.

The success of this restructuring will heavily depend on effective change management and talent retention strategies. Purple must focus on clear communication, potential relocation support for key personnel and robust training programs to ensure smooth operations at the expanded Georgia facility. The company should also be prepared for potential challenges in recruiting and retaining talent in the Georgia labor market, which may have different dynamics compared to Utah. Overall, this move presents both opportunities for efficiency and risks to organizational culture and capabilities.

Actions will expedite Grid innovation and deliver cost synergies

Anticipated to generate $15 to $20 million in EBITDA benefit in 2025

LEHI, Utah, Aug. 22, 2024 /PRNewswire/ -- Purple Innovation, Inc. (NASDAQ: PRPL) ("Purple"), a comfort innovation company with the #1 Gel Grid technology in the world, today announced the consolidation of its mattress production operations into its McDonough, Georgia facility, and the corresponding closure of two manufacturing facilities in Salt Lake City and Grantsville, Utah. The closure of the Utah manufacturing facilities is expected to be completed during the first quarter of 2025 and the consolidation into the McDonough, Georgia facility is expected to be completed by December 31, 2024.   

"These moves enable Purple to streamline our operations and to reinvest in technology and marketing to grow the category," said Rob DeMartini, CEO of Purple Innovation. "This decision was not made lightly. Over the past year, we have driven savings through manufacturing efficiency and supply chain initiatives, and we are confident that the consolidation of our manufacturing footprint is an important step to advance our Grid innovation and build momentum with our 'Path to Premium Sleep' strategy, which will set Purple up for positive operating cash flow and market share growth over the long-term."

Purple will remain headquartered in Utah with its 4 showrooms; all R&D activities will continue to be based in the Innovation Center that Purple opened in Draper, Utah last year.  As part of the plan, the company expects to open a new distribution center in Utah. Purple also plans to increase capacity at its Georgia manufacturing facility. The Company also announced plans to reduce a number of positions at the corporate level.

These actions are expected to be completed in early 2025 and generate $15 to $20 million in EBITDA benefit on an annualized run-rate basis starting in 2025. The Company expects to incur restructuring costs of $35 to $45 million, beginning in the third quarter of 2024 through the second quarter of 2025, of which $26 to $32 million is non-cash. The Company does not expect these actions to impact full-year 2024 guidance targets.

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
Stacy Turnof, Edelman Smithfield
purpleIR@edelmansmithfield.com

Media Contact
Alicia Foreman, Purple Innovation
alicia@purple.com

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SOURCE Purple Innovation, Inc.

FAQ

What changes is Purple Innovation (PRPL) making to its manufacturing operations?

Purple Innovation is consolidating its mattress production into its McDonough, Georgia facility and closing two manufacturing facilities in Utah by early 2025.

How much EBITDA benefit does Purple (PRPL) expect from the consolidation?

Purple expects to generate $15 to $20 million in EBITDA benefit on an annualized run-rate basis starting in 2025.

Will Purple's (PRPL) restructuring affect its 2024 financial guidance?

No, Purple does not expect these actions to impact its full-year 2024 guidance targets.

What are the estimated restructuring costs for Purple (PRPL)?

Purple expects to incur restructuring costs of $35 to $45 million, of which $26 to $32 million is non-cash.

Is Purple Innovation (PRPL) relocating its headquarters from Utah?

No, Purple will remain headquartered in Utah and maintain its showrooms and R&D activities in the state.