Purple Innovation Reports Third Quarter 2024 Results
Restructuring Initiatives are On Track and Delivering Significant Margin Improvement
GAAP Gross Margin of 29.7%; Adjusted Gross Margin Improved 340bps versus Last Year to 40.5%
Adjusted EBITDA Loss Narrowed Notably to $(6.4) Million versus $(16.3) Million Last Year
LEHI, Utah, Nov. 4, 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 third quarter ended September 30, 2024.
"While our third quarter revenue was challenged, we are encouraged by both our year-to-date performance modestly exceeding the broader industry and the sustained improvements in our profitability," said CEO Rob DeMartini.
"The restructuring plan we announced earlier this quarter is on track to deliver meaningful cost savings in the new year as we improve our operational efficiencies and positions us to capitalize on tailwinds when the market improves. Looking forward, we remain confident in our Path to Premium Sleep strategy's ability to deliver long-term value and we look forward to building on this momentum into 2025."
Third Quarter 2024 Financial Results
Third quarter 2024 net revenue declined by 15.3% to $118.6 million, compared to $140.0 million in the third quarter of 2023. This decrease was primarily driven by industry-wide demand softness for home-related products, a reduction in advertising spend towards more profitable marketing, and the lapping of our successful launch of new premium mattresses in 2023. By channel, DTC net revenues decreased 11.7%, and wholesale net revenues decreased 20.1%. Within DTC, e-commerce net revenues decreased 15.7%, while showroom net revenues were approximately flat. In addition to the factors above, the decline in wholesale net revenues reflected the exit of certain customers.
Gross margin for the third quarter of 2024 decreased to 29.7% down 410 basis points compared to 33.8% in the prior year, negatively impacted by the $12.9 million of restructuring related charges offset in part by improved production efficiencies. The increase in production efficiencies was primarily due to supply chain initiatives and manufacturing efficiencies. We expect the restructuring plan will further streamline our operations and provide increased gross profits. Despite deleveraging from lower sales, adjusted gross margin, which excludes restructuring related charges during the quarter and launch costs in the prior year period, grew to 40.5%, an increase of 340 basis points compared to adjusted gross margin last year.
Operating expenses for the third quarter were $82.0 million, up 2.6% from $79.9 million in Q3 2023. This increase was driven by $19.8 million in restructuring related charges as part of the consolidation of our manufacturing operations to achieve significant operational efficiencies. Excluding all restructuring related charges this year and loss on impairment of goodwill last year, adjusted operating expenses were down by $10.9 million, primarily due to a $9.1 million reduction in advertising spend.
Net loss attributable to Purple Innovation, Inc. for the third quarter of 2024 was $(39.2) million or $(0.36) per diluted share, compared to a net loss of $(36.0) million or $(0.34) per diluted share in the third quarter 2023. Adjusted net loss, excluding restructuring related charges and certain non-cash and one-time items, was $(8.4) million or $(0.08) per diluted share, an improvement from $(19.4) million or $(0.18) per diluted share in the prior year.
EBITDA for the third quarter 2024 was $(27.4) million compared to $(29.7) million in the third quarter 2023. Adjusted EBITDA was $(6.4) million, an improvement from $(16.3) million in the prior year.
Restructuring, Impairment and Other Related Charges
In August 2024, we initiated a restructuring plan to strategically realign our operational focus to achieve significant operational efficiencies. This plan includes the closure of our two Utah manufacturing facilities to consolidate mattress production to our Georgia plant, as well as a headcount reduction at our Utah headquarters. As a result, we have a $32.7 million total restructuring, impairment and other related charges in the third quarter 2024. We expect to record additional restructuring and other related charges in the amount of $9.9 million through the second quarter of 2025. The supply chain consolidation and corporate restructure is expected to yield annual EBITDA savings of $15 to $20 million starting in 2025, and we plan to have positive cash flow and adjusted EBITDA next year.
Balance Sheet
Cash and cash equivalents were $23.4 million as of September 30, 2024, compared to $26.9 million as of December 31, 2023.
Inventories as of September 30, 2024 totaled $59.9 million, representing a decrease of 10.5%, or $7.0 million compared with December 31, 2023.
2024 Outlook
For the full year 2024, we expect to be at the lower end of our guidance range for net revenue of $490 million to $510 million, and also at the lower end of our guidance range for Adjusted EBITDA outlook of $(20) million to $(10) million. The company continues to prioritize and benefit from operational improvements and expects positive Adjusted EBITDA in the fourth quarter.
Conference Call and Webcast Information
Purple Innovation, Inc. will host a live conference call to discuss financial results today, November 4, 2024 at 4:30 p.m. Eastern Time. To access the call dial 844-481-1976 (domestic) or 412-317-0642 (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 59 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 917-362-2581
PURPLE INNOVATION, INC.Condensed Consolidated Balance Sheets(unaudited, in thousands, except for par value)
September 30,2024
December 31,2023
Assets
Current assets:
Cash and cash equivalents
$
23,399
$
26,857
Accounts receivable, net
29,662
37,802
Inventories
59,881
66,878
Prepaid expenses
9,241
8,536
Other current assets
1,005
1,737
Total current assets
123,188
141,810
Property and equipment, net
100,155
128,661
Operating lease right-of-use assets
74,254
95,767
Intangible assets, net
9,226
22,196
Other long-term assets
2,450
2,191
Total assets
$
309,273
$
390,625
Liabilities and Stockholders' Equity
Current liabilities:
Accounts payable
$
30,393
$
49,831
Accrued compensation
15,109
5,064
Customer prepayments
3,778
5,718
Accrued rebates and allowances
10,040
13,243
Accrued warranty liabilities, current portion
7,634
9,793
Operating lease obligations, current portion
16,157
14,843
Other current liabilities
11,353
12,490
Total current liabilities
94,464
110,982
Related party debt
50,813
—
Long-term debt, net of current portion
—
26,909
Accrued warranty liabilities, net of current portion
27,336
25,798
Operating lease obligations, net of current portion
85,621
109,094
Warrant liabilities
19,682
—
Other long-term liabilities
3,344
2,235
Total liabilities
281,260
275,018
Commitments and contingencies (Note 14)
Stockholders' equity:
Class A common stock; $0.0001 par value, 210,000 shares authorized; 107,516 issued and outstanding at September 30, 2024 and 105,507 issued and outstanding at December 31, 2023
11
11
Class B common stock; $0.0001 par value, 90,000 shares authorized; 192 issued and outstanding at September 30, 2024 and at December 31, 2023
—
—
Additional paid-in capital
593,343
591,380
Accumulated deficit
(565,387)
(475,969)
Total stockholders' equity attributable to Purple Innovation, Inc.
27,967
115,422
Noncontrolling interest
46
185
Total stockholders' equity
28,013
115,607
Total liabilities and stockholders' equity
$
309,273
$
390,625
PURPLE INNOVATION, INC.Condensed Consolidated Statements of Operations(unaudited, in thousands, except per share amounts)
Three Months EndedSeptember 30,
Nine Months EndedSeptember 30,
2024
2023
2024
2023
Revenues, net
$
118,598
$
139,996
$
358,902
$
364,605
Cost of revenues:
Cost of revenues
70,546
92,687
220,190
241,244
Cost of revenues - restructuring related charges
12,859
—
12,859
—
Total cost of revenues
83,405
92,687
233,049
241,244
Gross profit
35,193
47,309
125,853
123,361
Operating expenses:
Marketing and sales
42,939
52,816
125,778
137,368
General and administrative
17,266
17,524
55,111
67,628
Research and development
2,920
2,704
10,572
9,001
Restructuring, impairment and other related charges
18,881
—
18,881
—
Loss on impairment of goodwill
—
6,879
—
6,879
Total operating expenses
82,006
79,923
210,342
220,876
Operating loss
(46,813)
(32,614)
(84,489)
(97,515)
Other income (expense):
Interest expense
(4,394)
(594)
(13,029)
(1,148)
Other income, net
7,165
205
11,612
315
Change in fair value, warrant liabilities
4,795
—
(111)
—
Loss on extinguishment of debt
—
(3,114)
(3,394)
(4,331)
Total other income (expense), net
7,566
(3,503)
(4,922)
(5,164)
Net loss before income taxes
(39,247)
(36,117)
(89,411)
(102,679)
Income tax expense
(63)
(18)
(176)
(162)
Net loss
(39,310)
(36,135)
(89,587)
(102,841)
Net loss attributable to noncontrolling interest
(82)
(131)
(169)
(417)
Net loss attributable to Purple Innovation, Inc.
$
(39,228)
$
(36,004)
$
(89,418)
$
(102,424)
