Purple Innovation Reports Second Quarter 2023 Results
- Purple Innovation, Inc. introduced 11 new products and a more premium brand position, signaling a strategic shift for the company.
- Despite a decrease in net revenue, the company saw strong momentum in June with a revenue run rate up 18% compared to the first 5 months of the year.
- Purple Innovation signed a new debt facility, providing more flexibility for growth initiatives and increasing market share.
- Net revenue decreased by 16.1% compared to the same quarter last year.
- Gross margin decreased to 31.8%.
- Operating expenses increased to $75.7 million.
Largest Product Introduction Points Business in the Right Direction
Second Quarter Financial Summary (Comparisons versus Second Quarter 2022)1
- Net revenue decreased
16.1% to compared to$120.9 million .$144.1 million - Wholesale revenue decreased
15.5% and Direct-to-Consumer (DTC) revenue decreased16.6% . - Gross margin decreased 210 basis points to
31.8% compared to33.9% . - Excluding discounts and transitional costs associated with the new product transition, second quarter 2023 adjusted gross margin was
38.6% - Operating expenses were
, or$75.7 million 62.7% of revenue compared to , or$60.9 million 42.3% of revenue. - Advertising spend increased
6.0% to , compared to$20.1 million .$18.9 million - Operating loss was
compared to an operating loss of$(37.3) million .$(12.1) million - Net loss was
as compared to$(37.5) million .$(8.3) million - Adjusted net loss was
, or$(21.1) million per diluted share as compared to$(0.20) , or$(8.8) million per diluted share.$(0.11) - EBITDA was
compared to$(31.3) million .$(8.0) million - Adjusted EBITDA was
compared to$(18.5) million .$(0.3) million - Cash and cash equivalents were
at June 30, 2023.$26.9 million - New, less restrictive debt facility signed on August 7, 2023, as disclosed in the second quarter 10-Q
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
Second Quarter 2023 Review
Second quarter 2023 net revenue decreased
Gross margin for the second quarter 2023 decreased to
Operating expenses were
Operating loss was
Net loss attributable to Purple Innovation, Inc. 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 losses associated with the extinguishment of debt and the expenses incurred by the Board's Special Committee, was
EBITDA for the second quarter 2023 was
Balance Sheet
As of June 30, 2023, the Company had cash and cash equivalents of
On August 7, 2023, the Company closed on a new debt facility consisting of a
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
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
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, | December 31, | |||||||
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; issued and outstanding at June 30, 2023 and 91,380 issued and outstanding at December 31, 2022 | 11 | 9 | ||||||
Class B common stock; 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 | Six Months Ended | |||||||||||||||
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 | 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 | Six Months Ended | ||||||||||||||
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 |
(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 | Weighted | Net | Net | Weighted | Net | |||||||||||||||||||
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 |
For the Six Months Ended | ||||||||||||||||||||||||
June 30, 2023 | June 30, 2022 | |||||||||||||||||||||||
Net | Weighted | Net | Net | Weighted | Net | |||||||||||||||||||
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 |
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 | ||||||||
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.
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