ALPINE, Utah, Aug. 13, 2019 /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, 2019.
Second Quarter Financial Summary (Comparisons versus Second Quarter 2018)1
"We are very pleased with the way 2019 is unfolding," continued Megibow. "The growing team continues to demonstrate their ability to effectively execute and with a stronger balance sheet, I am confident that we are well positioned to profitably capitalize on the numerous growth opportunities we believe exist for the Company in the near and long-term."
Second Quarter 2019 Review
Second quarter 2019 net revenue increased 36.0% to $103.0 million, compared to $75.8 million in the second quarter of 2018. The increase in net revenue was driven by continued wholesale door expansion combined with higher replenishment orders following strong sell-through.
Gross margin for the second quarter 2019 was 41.5% compared to 42.0% in the year ago period. The slight decrease was primarily due to a shift in sales mix to more sales with wholesale pricing, which carry lower gross margins than direct sales, partially offset by efficiencies in operations and logistics.
Net loss was $(7.3) million for the second quarter 2019 compared to a net loss of $(5.6) million in the year ago period.
PURPLE INNOVATION, INC. RECONCILIATION OF GAAP TO NON-GAAP MEASURES (In thousands)
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.
Net revenue increased 36.0% to $103.0 million, compared to $75.8 million.
Gross margin was 41.5% compared to 42.0%.
Operating expenses as a percent of net revenue were 43.8% compared to 48.2%.
Operating loss was $(2.4) million compared to an operating loss of $(4.7) million. Adjusted operating income was $5.3 million compared to an adjusted operating loss of $(4.1) million. (See Reconciliation below)
Net loss was $(7.3) million compared to a net loss of $(5.6) million. The second quarter 2019 included a $3.7 million non-cash loss associated with the change in fair value of warrant liabilities and a $6.7 million non-cash expense associated with stock compensation.
EBITDA was $(5.2) million compared to $(4.1) million. Adjusted EBITDA was $6.2 million compared to $(3.5) million. (See Reconciliation below)
"The positive top-line momentum we experienced at the start of the year carried over into the second quarter," said Joe Megibow, Chief Executive Officer. "We once again delivered strong year-over-year revenue growth as our wholesale door expansion and enhanced marketing programs are continuing to drive greater awareness of the Purple brand and create even greater demand for our differentiated product offering. Importantly, the initiatives we have successfully deployed in our manufacturing, supply chain, and fulfillment processes combined with advancements with our marketing effectiveness are yielding improved operating margins, and generating increased cash flows.
Operating expenses were $45.1 million in the second quarter 2019 compared to $36.5 million in the prior year period. As a percent of sales, operating expenses improved to 43.8% compared with 48.2% in the year ago period driven by improved efficiencies in marketing initiatives, partially offset by an increase in non-cash stock based compensation expense. For the second quarter 2019, marketing and sales expense as a percent of sales improved to 34.9% compared with 40.6% last year.
Operating loss was $(2.4) million, compared to an operating loss of $(4.7) million in the prior year period. Adjusted operating income was $5.3 million compared to an adjusted operating loss of $(4.1) million in second quarter 2018. Adjusted operating income (loss) excludes non-cash stock based compensation, legal fees, interim CFO costs, severance and executive search costs.
EBITDA for the second quarter 2019 was $(5.2) million compared to $(4.1) million in the second quarter 2018. Adjusted EBITDA, which excludes the non-cash loss associated with the change in fair value of warrant liabilities, non-cash stock based compensation, legal fees, interim CFO costs, severance and executive search costs, was $6.2 million, compared to adjusted EBITDA of $(3.5) million in the last year period.
As of June 30, 2019, the Company had cash and cash equivalents of $20.3 million, compared with $12.2 million at December 31, 2018. Inventories as of June 30, 2019 totaled $25.1 million compared with $22.9 million as of December 31, 2018.
Based on first half results combined with the expectation for continued growth during the second half including the positive impact from further wholesale door expansion and the opening of additional Company showrooms throughout the third and fourth quarters, the Company now expects revenue to be in the range of $400 million to $425 million. Based on the increased revenue outlook combined with continued operational improvements, the Company now expects Adjusted EBITDA between $24 million to $27 million.
Adjusted EBITDA is a non-GAAP financial measure. With respect to the Company's Adjusted EBITDA outlook for the full year 2019, 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.
Purple Innovation, Inc. will host a live conference call to discuss financial results today, August 13, 2019, at 4:30 p.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 425-9470 (domestic) or (201) 389-0878 (international) at 4:25 p.m. ET and provide the Conference ID: 13693268. The conference call will also be available to interested parties through a live webcast at investors.purple.com. Please visit the website at least 15 minutes prior to the start of the call to register and download any necessary software.
Purple is an innovative comfort product company that designs and manufactures products to improve people's lives. It designs and manufactures a range of comfort products, including mattresses, pillows, and cushions, using its patented Hyper-Elastic Polymer® material designed to improve comfort. The Company markets and sells its products through its direct-to-consumer online channel, traditional retail partners, and third party online retailers. For more information on Purple, visit purple.com.
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 about our outlook and expectations for our financial results for the fiscal year ended December 31, 2019, and our ability to create sustained profitability and shareholder value. 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 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 14, 2019 and our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 13, 2019. 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.
Adjusted Operating Income (Loss), EBITDA, and Adjusted EBITDA 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.
Media Contact: Alecia Pulman/Mitch Polikoff, ICR [email protected] 646-277-1200
Purple Innovation, Inc. For information regarding Purple products, please contact: Savannah Hobbs Director of Purple Communications [email protected]
PURPLE INNOVATION, INC.
Condensed Consolidated Balance Sheets
(In thousands, except par value)
(Unaudited)
June 30,
December 31,
2019
2018
Assets
Current assets:
Cash and cash equivalents
$
20,255
$
12,232
Accounts receivable, net
24,845
10,241
Inventories, net
25,057
22,940
Prepaid inventory
883
790
Other current assets
2,591
1,494
Total current assets
73,631
47,697
Property and equipment, net
24,485
22,514
Intangible assets, net
1,574
1,493
Other long-term assets
46
5
Total assets
$
99,736
$
71,709
Liabilities and Stockholders' Deficit
Current liabilities:
Accounts payable
$
29,457
$
24,828
Accrued sales returns
6,001
5,457
Accrued compensation
4,760
2,691
Customer prepayments
5,074
7,522
Accrued sales tax
4,464
5,538
Other current liabilities
6,148
2,541
Total current liabilities
55,904
48,577
Long-term debt, related-party
33,653
21,411
Warrant liabilities
6,852
—
Other long-term liabilities, net of current portion
6,690
3,732
Total liabilities
103,099
73,720
Commitments and contingencies
Stockholders' deficit:
Class A common stock; $0.0001 par value, 210,000 shares authorized; 9,827 issued and outstanding at June 30, 2019 and 9,731 issued and outstanding at December 31, 2018
1
1
Class B common stock; $0.0001 par value, 90,000 shares authorized; 44,071 issued and outstanding at June 30, 2019 and December 31, 2018
4
4
Additional paid-in capital
10,364
3,655
Accumulated deficit
(5,790)
(4,322)
Total stockholders' deficit
4,579
(662)
Noncontrolling interest
(7,942)
(1,349)
Total deficit
(3,363)
(2,011)
Total liabilities and stockholders' deficit
$
99,736
$
71,709
PURPLE INNOVATION, INC.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2019
2018
2019
2018
Revenues, net
$
103,004
$
75,760
$
186,652
$
136,528
Cost of revenues
60,221
43,938
109,800
78,891
Gross profit
42,783
31,822
76,852
57,637
Operating expenses:
Marketing and sales
35,967
30,723
59,984
52,768
General and administrative
7,933
5,213
12,498
12,066
Research and development
1,244
555
1,934
1,066
Total operating expenses
45,144
36,491
74,416
65,900
Operating income (loss)
(2,361)
(4,669)
2,436
(8,263)
Interest expense
1,301
971
2,445
1,673
Other income, net
(6)
(82)
(235)
(101)
Loss on extinguishment of debt
—
—
6,299
—
Change in fair value – warrant liabilities
3,685
—
1,988
—
Net loss
(7,341)
(5,558)
(8,061)
(9,835)
Net loss attributable to noncontrolling interest
(6,003)
(4,554)
(6,593)
(7,281)
Net loss attributable to Purple Innovation, Inc.
$
(1,338)
$
(1,004)
$
(1,468)
$
(2,554)
Net loss per common share—basic and diluted
$
(0.16)
$
(0.12)
$
(0.17)
$
(0.30)
Weighted average common shares outstanding—basic and diluted
8,457
8,410
8,447
8,399
PURPLE INNOVATION, INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended June 30,
Six Months Ended June 30,
2019
2018
2019
2018
Cash flows from operating activities:
Net loss
$
(7,341)
$
(5,558)
$
(8,061)
$
(9,835)
Adjustments to reconcile net loss to net cash provided in operating activities:
Depreciation and amortization
852
545
1,574
1,001
Non-cash interest
833
938
1,565
1,092
Loss on extinguishment of debt
—
—
6,299
—
Loss on change in fair value warrant liability
3,685
—
1,988
—
Stock-based compensation
6,733
313
6,806
313
Changes in operating assets and liabilities:
Increase in accounts receivable
(5,156)
(3,327)
(14,604)
(3,056)
Decrease (increase) in inventories
284
(4,760)
(2,117)
(17,994)
Increase in prepaid inventory and other assets
(548)
(329)
(1,231)
(1,629)
Increase (decrease) in accounts payable
3,431
29
4,610
(1,206)
Increase in accrued sales returns
812
1,024
544
805
Increase in accrued compensation
1,606
557
2,069
207
Increase (decrease) in customer prepayments
739
(614)
(2,448)
3,412
Increase (decrease) in other accrued liabilities
4,509
(851)
5,155
(718)
Net cash (used in) provided by operating activities
10,439
(12,033)
2,149
(27,608)
Cash flows from investing activities:
Purchase of property and equipment
(2,204)
(4,323)
(3,136)
(6,968)
Investment in intangible assets
(57)
(49)
(121)
(117)
Net cash used in investing activities
(2,261)
(4,372)
(3,257)
(7,085)
Cash flows from financing activities:
Proceeds from the Business Combination
—
—
—
25,912
Proceeds from related-party debt
—
—
10,000
24,000
Repurchase of stock options
(97)
—
(97)
—
Payments on line of credit
—
—
—
(8,000)
Payments for debt issuance costs
—
—
(758)
(367)
Principle payments on capital lease obligations
(8)
(7)
(14)
(14)
Net cash provided by (used in) financing activities
(105)
(7)
9,131
41,531
Net increase (decrease) in cash
8,073
(16,412)
8,023
6,838
Cash, beginning of the period
12,182
26,843
12,232
3,593
Cash, end of the period
$
20,255
$
10,431
$
20,255
$
10,431
Supplemental schedule of non-cash investing and financing activities:
Property and equipment included in accounts payable
$
44
$
(22)
$
482
$
73
Equipment acquired through capital lease
$
350
$
—
$
350
$
—
Issuance of sponsor warrants to Coliseum credit agreement
$
—
$
—
$
—
$
4,691
Build to suit Power project at Purple West
$
—
$
735
$
—
$
1,288
Sale-leaseback of equipment under build-to-suit service agreement
$
—
$
(735)
$
—
$
(1,288)
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 and adjusted operating income (loss). 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 Loss to Non-GAAP EBITDA and Adjusted EBITDA A reconciliation of GAAP net 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 June 30,
Six Months Ended June 30,
2019
2018
2019
2018
GAAP net loss
$
(7,341)
$
(5,558)
$
(8,061)
$
(9,835)
Interest expense
1,301
971
2,445
1,673
Other income, net
(6)
(82)
(235)
(101)
Depreciation and amortization
852
545
1,574
1,001
EBITDA
(5,194)
(4,124)
(4,277)
(7,262)
Adjustments:
Merger transaction costs
—
—
—
2,028
Debt extinguishment and warrant liability
3,685
—
8,287
—
Stock-based compensation expense
6,733
313
6,806
313
Legal fees
262
—
403
199
Interim CFO costs
307
—
494
—
Severance and executive search costs
389
280
411
420
Adjusted EBITDA
$
6,182
$
(3,531)
$
12,124
$
(4,302)
Reconciliation of GAAP Operating Income (Loss) to Non-GAAP Adjusted Operating Income (Loss) A reconciliation of GAAP operating income (loss) to the non-GAAP measure of adjusted operating income (loss) is provided below. Adjusted operating income (loss) represents GAAP operating income (loss) excluding certain non-cash and non-recurring costs incurred.
