Purple Innovation Reports First Quarter 2022 Results
Purple Innovation, Inc. (NASDAQ: PRPL) reported a 23.2% decline in net revenue for Q1 2022, totaling $143.2 million compared to $186.4 million in Q1 2021. DTC revenue fell 31.5%, while gross margin dropped to 36.1% from 46.9%. The company incurred an operating loss of $(18.4) million and a net loss of $(13.6) million, reversing the previous year's profits. Purple adjusted its 2022 revenue outlook to $650-$690 million due to economic headwinds. The company remains optimistic about future profitability in the second half of the year.
- Stronger than expected demand in wholesale and retail channels.
- Progress in reducing expenses and enhancing operational execution.
- Net revenue decreased 23.2% year-over-year.
- Direct-to-Consumer (DTC) revenue declined 31.5%.
- Operating loss of $(18.4) million compared to a profit last year.
- Adjusted net loss of $(16.5) million, or $(0.24) per diluted share.
LEHI, Utah, May 10, 2022 /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 first quarter ended March 31, 2022.
- Net revenue decreased
23.2% to$143.2 million compared to$186.4 million . - Wholesale revenue decreased
6.3% and Direct-to-Consumer (DTC) revenue decreased31.5% . - Gross margin was
36.1% compared to46.9% . - Operating expenses as a percent of net revenue were
48.9% compared to37.9% . - Operating loss was
$(18.4) million compared to operating income of$16.9 million . - Net loss was
$(13.6) million as compared to a net income of$20.9 million . Adjusted net loss was$(16.5) million , or$(0.24) per diluted share as compared to adjusted net income of$12.0 million , or$0.17 per diluted share. - EBITDA was
$(10.6) million compared to$27.8 million . Adjusted EBITDA decreased to$(9.6) million compared to$22.8 million . - Cash and cash equivalents were
$62.7 million at March 31, 2022.
"I am pleased that we exceeded our net revenue and adjusted EBITDA guidance, despite an increasingly challenging economic environment. Compared with the fourth quarter of 2021, these results represent a building block towards reestablishing Purple as a profitable growth company and creating a stronger foundation that will move us toward our long-term plans." said Chief Executive Officer Rob DeMartini. "We were able to exceed guidance on stronger than expected demand in our wholesale and owned retail channels as we continue to build a true omnichannel brand. We are encouraged by elements of our recent performance, however, we remain in the early stages of creating the framework for strong operational execution. While we are making progress, and believe we will see sequential improvements including second-half profitability during this year, evolving economic and post-pandemic headwinds such as a shift in consumer buying behavior from online to in-stores and away from home related categories toward experiences and travel, has caused us to adopt a more conservative view on the remainder of 2022."
DeMartini continued, "While the timing around achieving our near- and long-term goals is being delayed, my confidence in our strategic initiatives remains strong. We have already seen some of the benefits of our plan manifest and expect these will compound as 2022 unfolds, leading to quarter-over-quarter improvement as the year progresses. We have a long journey ahead of us, but our first quarter results confirm that we are heading in the right direction."
First quarter 2022 net revenue decreased
Gross margin for the first quarter 2022 declined to
Operating expenses were
Operating loss was
Net loss was
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 gains associated with the change in fair value of warrant liabilities, was
EBITDA for the first quarter 2022 was
As of March 31, 2022, the Company had cash and cash equivalents of
Inventories as of March 31, 2022 totaled
Due to economic and post-pandemic headwinds that are expected to continue, such as from the effects of inflation and changes in consumer spending patterns, the Company is taking a more cautious view on the remainder of the year and is amending its 2022 outlook. It now expects full year 2022 net revenue to be between
The Company still expects sequential improvements each quarter, in 2022 and believes that it will achieve profitable growth in the second half of the year. The Company now expects it will exit 2022 with gross margins close to
Purple Innovation, Inc. will host a live conference call to discuss financial results today, May 10, 2022 at 4:30 p.m. Eastern Time. To access the call dial (8000 239-9838 (domestic) or (929) 477-0402 (international) and provide the Conference ID: 6122811. 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.
Purple is a digitally-native vertical brand with a mission to help improve lives through innovative comfort solutions. We design and manufacture a variety of innovative, premium, branded comfort products, including mattresses, pillows, bedding, frames and more. Our products are the result of over 30 years of innovation and investment in proprietary and patented comfort technologies and the development of our own manufacturing processes. Our proprietary gel technology, GelFlex Grid, is the foundation of many of our comfort products and provides a range of benefits that differentiate our offerings from other competitors' products. We market and sell our products through our direct-to-consumer online channels, traditional retail partners, third-party online retailers and our owned retail showrooms. Visit Purple online at purple.com and "like" Purple on Facebook and "follow" on Instagram.
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 capacity, innovation and showrooms; expected continuing quarter to quarter improvements in profitability and our ability to achieve profitability; expected incremental improvement in net revenue throughout the year; expected sequential improvements in performance from quarter to quarter; expected improvement in margin rates; our ability to successfully execute on improvement strategies; expected improvements in our operating performance; our ability to improve brand recognition; demand for our products; expectations regarding consumer behavior; our ability to develop and expand our distribution channels; our ability to accelerate production innovation; and expected financial and operating results for the full year 2022. 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: uncertainties regarding the extent and duration of the impact of the COVID-19 pandemic on many aspects of our business, operations and financial performance; disruptions to our manufacturing processes; 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; 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 1, 2022, as amended by our Annual Report on Form 10-K/A filed with the SEC on March 16, 2022 and our Quarterly Report on Form 10-Q filed with the SEC on May 10, 2022. 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.
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 full year 2022, 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.
Gina Balistreri
Senior Public Relations Manager
gina.b@purple.com
414-213-4460
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.
PURPLE INNOVATION, INC. | ||||||||
Condensed Consolidated Balance Sheets | ||||||||
(In thousands, except par value) | ||||||||
(unaudited) | ||||||||
March 31, | December 31, | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 62,698 | $ | 91,616 | ||||
Accounts receivable, net | 29,006 | 25,430 | ||||||
Inventories, net | 105,826 | 98,690 | ||||||
Prepaid expenses | 7,262 | 8,064 | ||||||
Other current assets | 5,483 | 5,702 | ||||||
Total current assets | 210,275 | 229,502 | ||||||
Property and equipment, net | 119,939 | 112,614 | ||||||
Operating lease right-of-use assets | 75,578 | 68,037 | ||||||
Intangible assets, net | 14,199 | 13,204 | ||||||
Deferred income taxes | 219,703 | 217,791 | ||||||
Other long-term assets | 1,255 | 1,322 | ||||||
Total assets | $ | 640,949 | $ | 642,470 | ||||
Liabilities and Stockholders' Equity | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 62,884 | $ | 79,752 | ||||
Accrued sales returns | 5,146 | 7,116 | ||||||
Accrued compensation | 11,737 | 8,928 | ||||||
Customer prepayments | 4,861 | 10,854 | ||||||
Accrued sales tax | 3,290 | 4,672 | ||||||
Accrued rebates and allowances | 7,009 | 10,169 | ||||||
Operating lease obligations – current portion | 8,408 | 7,053 | ||||||
Warrant liabilities | 415 | — | ||||||
Other current liabilities | 7,625 | 13,470 | ||||||
Total current liabilities | 111,375 | 142,014 | ||||||
Debt, net of current portion | 37,353 | 94,113 | ||||||
Operating lease obligations, net of current portion | 89,392 | 81,159 | ||||||
Warrant liabilities | — | 4,343 | ||||||
Tax receivable agreement liability, net of current portion | 161,970 | 162,239 | ||||||
Other long-term liabilities, net of current portion | 14,574 | 12,061 | ||||||
Total liabilities | 414,664 | 495,929 | ||||||
Commitments and contingencies (Note 13) | ||||||||
Stockholders' equity: | ||||||||
Class A common stock; | 8 | 7 | ||||||
Class B common stock; | — | — | ||||||
Additional paid-in capital | 500,824 | 407,591 | ||||||
Accumulated deficit | (275,327) | (261,825) | ||||||
Total stockholders' equity | 225,505 | 145,773 | ||||||
Noncontrolling interest | 780 | 768 | ||||||
Total stockholders' equity | 226,285 | 146,541 | ||||||
Total liabilities and stockholders' equity | $ | 640,949 | $ | 642,470 | ||||
PURPLE INNOVATION, INC. | ||||||||
Condensed Consolidated Statements of Income | ||||||||
(In thousands, except per share amounts) | ||||||||
(unaudited) | ||||||||
Three Months Ended | ||||||||
2022 | 2021 | |||||||
Revenues, net | $ | 143,179 | $ | 186,429 | ||||
Cost of revenues | 91,553 | 98,905 | ||||||
Gross profit | 51,626 | 87,524 | ||||||
Operating expenses: | ||||||||
Marketing and sales | 49,959 | 54,368 | ||||||
General and administrative | 17,888 | 14,526 | ||||||
Research and development | 2,143 | 1,723 | ||||||
Total operating expenses | 69,990 | 70,617 | ||||||
Operating income (loss) | (18,364) | 16,907 | ||||||
Other income (expense): | ||||||||
Interest expense | (1,023) | (570) | ||||||
Other income (expense), net | 17 | (68) | ||||||
Tax receivable agreement benefit | — | 174 | ||||||
Change in fair value – warrant liabilities | 3,928 | 9,147 | ||||||
Total other income, net | 2,922 | 8,683 | ||||||
Net income (loss) before income taxes | (15,442) | 25,590 | ||||||
Income tax benefit (expense) | 1,811 | (4,651) | ||||||
Net income (loss) | (13,631) | 20,939 | ||||||
Net income (loss) attributable to noncontrolling interest | (129) | 115 | ||||||
Net income (loss) attributable to Purple Innovation, Inc. | $ | (13,502) | $ | 20,824 | ||||
Net income (loss) per share: | ||||||||
Basic | $ | (0.20) | $ | 0.32 | ||||
Diluted | $ | (0.20) | $ | 0.17 | ||||
Weighted average common shares outstanding: | ||||||||
Basic | 67,058 | 64,592 | ||||||
Diluted | 67,506 | 68,372 | ||||||
PURPLE INNOVATION, INC. | ||||||||
Condensed Consolidated Statements of Cash Flows | ||||||||
(In thousands) | ||||||||
(unaudited) | ||||||||
Three Months Ended | ||||||||
2022 | 2021 | |||||||
Cash flows from operating activities: | ||||||||
Net income (loss) | $ | (13,631) | $ | 20,939 | ||||
Adjustments to reconcile net income (loss) to net cash used in operating activities: | ||||||||
Depreciation and amortization | 3,842 | 1,549 | ||||||
Non-cash interest | 148 | 129 | ||||||
Change in fair value – warrant liabilities | (3,928) | (9,147) | ||||||
Tax receivable agreement benefit | — | (174) | ||||||
Stock-based compensation | 542 | 479 | ||||||
Non-cash lease expense | 1,853 | 953 | ||||||
Deferred income taxes | (1,912) | 1,835 | ||||||
Changes in operating assets and liabilities: | ||||||||
Accounts receivable | (3,576) | (12,507) | ||||||
Inventories | (7,136) | 2,444 | ||||||
Prepaid expenses and other assets | 1,021 | 2,109 | ||||||
Accounts payable | (15,900) | (10,408) | ||||||
Accrued sales returns | (1,970) | (148) | ||||||
Accrued compensation | 2,757 | (4,435) | ||||||
Customer prepayments | (5,993) | 1,648 | ||||||
Accrued rebates and allowances | (3,160) | (5,327) | ||||||
Operating lease obligations | (1,435) | (809) | ||||||
Other accrued liabilities | 4,197 | 1,479 | ||||||
Net cash used in operating activities | (44,281) | (9,391) | ||||||
Cash flows from investing activities: | ||||||||
Purchase of property and equipment | (12,631) | (12,285) | ||||||
Investment in intangible assets | (447) | (69) | ||||||
Net cash used in investing activities | (13,078) | (12,354) | ||||||
Cash flows from financing activities: | ||||||||
Payments on term loan | (2,531) | (563) | ||||||
Payments on revolving line of credit | (55,000) | — | ||||||
Payments for debt issuance costs | (1,242) | — | ||||||
Proceeds from secondary stock offering | 93,125 | — | ||||||
Payments for secondary stock offering costs | (230) | — | ||||||
Proceeds from InnoHold indemnification payment | — | 4,142 | ||||||
Tax receivable agreement payments | (5,847) | (628) | ||||||
Distributions to members | — | (545) | ||||||
Proceeds from exercise of warrants | — | 116 | ||||||
Proceeds from exercise of stock options | 166 | 83 | ||||||
Net cash provided by financing activities | 28,441 | 2,605 | ||||||
Net decrease in cash | (28,918) | (19,140) | ||||||
Cash and cash equivalents, beginning of the year | 91,616 | 122,955 | ||||||
Cash and cash equivalents, end of the period | $ | 62,698 | $ | 103,815 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid during the period for interest, net of amounts capitalized | $ | 863 | $ | 430 | ||||
Cash paid during the period for income taxes | $ | 44 | $ | 519 | ||||
Supplemental schedule of non-cash investing and financing activities: | ||||||||
Property and equipment included in accounts payable | $ | 4,730 | $ | 4,168 | ||||
Non-cash leasehold improvements | $ | — | $ | 701 | ||||
Accrued tax distributions | $ | 228 | $ | 99 | ||||
Tax receivable agreement liability | $ | — | $ | 777 | ||||
Deferred income taxes | $ | — | $ | 971 | ||||
Exercise of warrant liabilities | $ | — | $ | 64,146 | ||||
RECONCILIATION OF GAAP TO NON-GAAP MEASURES
(In thousands)
(unaudited)
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 and adjusted EBITDA. 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.
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, net other income and depreciation and amortization. Adjusted EBITDA represents EBITDA excluding certain non-cash and non-recurring costs incurred.
Three Months Ended March 31, | ||||||||
2022 | 2021 | |||||||
GAAP net income (loss) | $ | (13,631) | 20,939 | |||||
Interest expense | 1,023 | 570 | ||||||
Income tax (benefit) expense | (1,811) | 4,651 | ||||||
Other (income) expense, net | (17) | 68 | ||||||
Depreciation and amortization | 3,842 | 1,549 | ||||||
EBITDA | (10,594) | 27,777 | ||||||
Adjustments: | ||||||||
Change in fair value - warrant liability | (3,928) | (9,147) | ||||||
Stock-based compensation expense | 542 | 479 | ||||||
Tax Receivable Agreement benefit | — | (174) | ||||||
Legal fees | 162 | 1,112 | ||||||
Executive interim and search costs | 1,714 | 360 | ||||||
Severance costs | 1,278 | 193 | ||||||
Showroom opening costs | 676 | 80 | ||||||
New production facility start-up costs | 263 | 2,062 | ||||||
COVID-19 related expenses | 329 | 38 | ||||||
Adjusted EBITDA | $ | (9,558) | $ | 22,780 | ||||
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 | |||||||
2022 | 2021 | |||||||
Net income (loss) | $ | (13,631) | $ | 20,939 | ||||
Income tax (benefit) expense, as reported | (1,811) | 4,651 | ||||||
Tax receivable agreement benefit | — | (174) | ||||||
Change in fair value – warrant liabilities | (3,928) | (9,147) | ||||||
Adjusted net income (loss) before income taxes | (19,370) | 16,269 | ||||||
Adjusted income tax benefit (expense)(1) | 2,886 | (4,295) | ||||||
Adjusted net income (loss) | $ | (16,484) | $ | 11,974 | ||||
Adjusted net income (loss) per share, diluted | $ | (0.24) | $ | 0.17 | ||||
Adjusted weighted-average shares outstanding, diluted(2) | 67,506 | 68,642 | ||||||
(1) | Represents the estimated effective tax rate of |
(2) | Assumes dilutive warrants, options and restricted stock 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 months ended March 31, 2022 and 2021:
For the Three Months Ended | ||||||||||||||||||||||||
March 31, 2022 | March 31, 2021 | |||||||||||||||||||||||
Net | Weighted | Net Loss | Net | Weighted | Net | |||||||||||||||||||
Net income (loss) attributable to Purple | $ | (13,502) | 67,506 | $ | (0.20) | $ | 20,824 | 68,372 | $ | 0.17 | ||||||||||||||
Assumed exchange of shares(2) | (129) | — | 115 | 470 | ||||||||||||||||||||
Net income (loss) | (13,631) | 20,939 | ||||||||||||||||||||||
Adjustments to arrive at adjusted | (5,739) | (4,670) | ||||||||||||||||||||||
Adjusted income (loss) before taxes | (19,370) | 16,269 | ||||||||||||||||||||||
Adjusted income tax benefit | 2,886 | (4,295) | ||||||||||||||||||||||
Adjusted net income (loss) | $ | (16,484) | 67,506 | $ | (0.24) | $ | 11,974 | 68,842 | $ | 0.17 | ||||||||||||||
(1) | Represents net income attributable to Purple Innovation, Inc. and the associated weighted average diluted shares, of Class A common stock outstanding. Net income per share, diluted includes the effect of an adjustment to net income attributable to Purple Innovation, Inc. to consider the dilutive impact of the change in fair value of warrant liabilities. |
(2) | For the three months ended March 31, 2022, the assumed full exchange of all outstanding Paired Securities for shares of Class A common stock as of the beginning of the period was included in the calculation of the Weighted Average Shares, Diluted on the previous line as the effect was dilutive. For the three months ended March 31, 2021 the effect of the assumed full exchange of all outstanding Paired Securities for shares of Class A common stock as of the beginning of the period was not dilutive and thus were included on this line. 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 |
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SOURCE Purple Innovation, Inc.
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