Subjects: ERN, CCA, ERP
Purple Innovation Reports Third Quarter 2018 Results
ALPINE, Utah, Nov. 14, 2018 /PRNewswire/ -- Purple Innovation, Inc. (NASDAQ: PRPL) ("Purple"), a comfort innovation company known for creating the "World's First No Pressure tm Mattress," today announced results for the third quarter ended September 30, 2018.
Third Quarter Financial Summary (Comparisons versus Third Quarter 2017)1
- Net revenue increased 26.4% to $70.8 million, compared to $56.0 million.
- Gross margin was 39.7% compared to 43.0%.
- Operating loss was $(3.4) million compared to an operating loss of $(5.4) million. Adjusted operating loss was $(3.3) million compared to an adjusted operating loss of $(5.0) million.
- Net loss was $(4.4) million compared to a net loss of $(5.4) million.
- EBITDA was $(2.9) million compared to $(5.2) million. Adjusted EBITDA was $(2.7) million compared to $(4.8) million.
_____________________________ |
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. |
"Consumer response for the Purple brand and our differentiated mattress offering continues to gain momentum," said Joe Megibow, Chief Executive Officer. "Memorable marketing campaigns and viral customer promotion have allowed the Company to quickly establish a strong presence and expand into traditional brick and mortar retail. Our success is also a direct result of not only the patent protected manufacturing capabilities developed internally, but also manufacturing domestically. While the organization has experienced challenges typical of a young, fast-growing company, we believe they are mostly execution related and not core to brand or product. Over the coming months, we plan to implement new systems and processes aimed at improving efficiencies in all areas of the business. I am confident that we can capitalize on the many growth opportunities that exist for Purple while generating sustained profitability and increased shareholder value over the long-term."
Third Quarter 2018 Review
Third quarter 2018 net revenue increased 26.4% to $70.8 million, compared to $56.0 million in the third quarter of 2017. The increase in net revenue was driven by increased efficiencies in our marketing investments and the release of our new higher-priced mattress models combined with contributions from mattress sales in the wholesale channel, which initially launched in the fourth quarter 2017 and has continued to expand throughout 2018.
Gross margin for the third quarter 2018 was 39.7% compared to 43.0% in the year ago period. The decrease was partially driven by increased product and freight costs, inefficiencies in the Company's manufacturing process as it migrated to a new warehouse management system, and improved quality assurance processes that have identified additional scrap. In addition, a shift in sales mix to more sales with wholesale pricing also reduced gross margin. These decreases to gross margin were partially offset by the higher product margins from the new mattress models.
Operating expenses were $31.6 million in the third quarter 2018 compared to $29.5 million in the prior year period. The increase in operating expenses was primarily attributable to higher general and administrative expenses associated with supporting top-line growth and being a public company.
Operating loss was $(3.4) million, compared to an operating loss of $(5.4) million in the prior year. Adjusted operating loss was $(3.3) million compared to an adjusted operating loss of $(5.0) million in third quarter 2017. Adjusted operating loss excludes litigation related legal fees and severance costs.
Net loss was $(4.4) million for the third quarter 2018 compared to a net loss of $(5.4) million in the year ago period.
EBITDA for the third quarter 2018 was $(2.9) million compared to $(5.2) million in the third quarter 2017. Adjusted EBITDA, which excludes litigation related legal fees and severance costs was $(2.7) million, compared to adjusted EBITDA of $(4.8) million last year.
Balance Sheet Highlights
As of September 30, 2018, the Company had cash and cash equivalents of $7.7 million compared to $3.6 million in cash and cash equivalents as of December 31, 2017. Inventories as of September 30, 2018 totaled $28.7 million compared with $13.3 million as of December 31, 2017.
2018 Outlook
For the fourth quarter of 2018, the Company expects net revenue to be between $76.0 million and $80.0 million and adjusted EBITDA to be in the range of $0 to $2.0 million.
For 2018, the Company now expects net revenue to be between $283.0 million and $287.0 million, an increase of between 44% and 46% over annual 2017, and adjusted EBITDA to be in the range of ($5.0) million to ($7.0) million.
Webcast and Conference Call Information
Purple Innovation, Inc. will host a live conference call to discuss financial results today, November 14, 2018, at 4:30 p.m. Eastern Time. The dial-in number for the conference call is (855) 327-6838. The dial-in number for international callers is (604) 235-2082. 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 is a comfort technology company that designs and manufactures products to improve how people sleep, sit, and stand. It designs and manufactures a range of comfort technology products, including mattresses, pillows, and cushions, using its patented Hyper-Elastic Polymer technology 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 www.purple.com.
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 about our outlook and expectations for our financial results for the third quarter of 2018 and the fiscal year ended December 31, 2018, our ability to create sustained profitability and shareholder value and our plan to implement new systems and processes aimed at improving efficiencies in all areas of the business. 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 Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 15, 2018, August 9, 2018 and November 14, 2018, and in our Current Report on Form 8-K filed with the Securities and Exchange Commission on February 8, 2018, as amended February 14, 2018, March 15, 2018 and April 17, 2018. 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
Adjusted Operating Loss, EBITDA, and Adjusted EBITDA are non-GAAP financial measures that remove the impact of costs incurred due to the merger transaction with GPAC, as well as certain other nonrecurring legal fees and severance payments. 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.
Investor Contact:
Brendon Frey, ICR
[email protected]
203-682-8200
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) | |||
September 30, | December 31, | ||
2018 | 2017 | ||
(Revised) | |||
Assets | |||
Current assets: | |||
Cash and cash equivalents | $ 7,665 | $ 3,593 | |
Accounts receivable, net | 8,484 | 4,182 | |
Inventories, net | 28,680 | 13,345 | |
Prepaid inventory | 317 | 1,296 | |
Other current assets | 2,246 | 492 | |
Total current assets | 47,392 | 22,908 | |
Property and equipment, net | 21,719 | 13,464 | |
Intangible assets, net | 1,408 | 1,267 | |
Other long-term assets | 5 | 22 | |
Total Assets | $ 70,524 | $ 37,661 | |
Liabilities and Equity | |||
Current liabilities: | |||
Accounts payable | $ 20,443 | $ 21,131 | |
Accrued sales returns | 5,507 | 4,825 | |
Accrued compensation | 2,153 | 2,097 | |
Customer prepayments | 7,291 | 3,213 | |
Accrued sales tax | 5,655 | 8,466 | |
Other accrued liabilities | 2,026 | 1,451 | |
Current portion of long-term obligations | 31 | 29 | |
Total current liabilities | 43,106 | 41,212 | |
Long-term debt | 20,695 | 8,000 | |
Other long-term liabilities and obligations, net of current portion | 3,493 | 2,368 | |
Total liabilities | 67,294 | 51,580 | |
Commitments and contingencies (Note 9) | |||
Stockholders' equity: | |||
Class A common stock | 1 | ? | |
Class B common stock | 4 | ? | |
Additional paid-in capital | 3,646 | ? | |
Accumulated deficit | (3,343) | ? | |
Total stockholders' equity | 308 | ? | |
Noncontrolling interest | 2,922 | ? | |
Member deficit | ? | (13,919) | |
Total equity | 3,230 | (13,919) | |
Total Liabilities and Equity | $ 70,524 | $ 37,661 | |
PURPLE INNOVATION, INC. | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
(In thousands) | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2018 | 2017 | 2018 | 2017 | ||||
(Revised) | (Revised) | ||||||
Revenues, net | $ 70,806 | $ 56,011 | $ 207,334 | $ 133,820 | |||
Cost of revenues | 42,684 | 31,927 | 121,575 | 74,726 | |||
Gross profit | 28,122 | 24,084 | 85,759 | 59,094 | |||
Operating expenses: | |||||||
Marketing and sales | 25,188 | 25,655 | 77,956 | 53,970 | |||
General and administrative | 5,804 | 3,520 | 17,870 | 8,473 | |||
Research and development | 578 | 356 | 1,644 | 904 | |||
Total operating expenses | 31,570 | 29,531 | 97,470 | 63,347 | |||
Operating loss | (3,448) | (5,447) | (11,711) | (4,253) | |||
Interest expense | 999 | 4 | 2,672 | 4 | |||
Other income, net | (83) | (2) | (184) | (2) | |||
Net loss | (4,364) | (5,449) | (14,199) | (4,255) | |||
Net loss attributable to noncontrolling interest | (3,575) | ? | (10,856) | ? | |||
Net loss attributable to Purple Innovation, Inc. | $ (789) | $ (5,449) | $ (3,343) | $ (4,255) | |||
Net loss per common share - basic and diluted | $ (0.09) | $ (0.65) | $ (0.40) | $ (0.51) | |||
Weighted average common shares outstanding - basic and diluted | 8,437 | 8,389 | 8,412 | 8,389 | |||
PURPLE INNOVATION, INC. | |||||||
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
(in thousands) | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2018 | 2017 | 2018 | 2017 | ||||
(Revised) | (Revised) | ||||||
Cash flows from operating activities: | |||||||
Net loss | $ (4,364) | $ (5,449) | $ (14,199) | $ (4,255) | |||
Adjustments to reconcile net loss to net cash from operating activities: | |||||||
Depreciation and amortization | 533 | 223 | 1,534 | 465 | |||
Non-cash interest | 676 | ? | 1,768 | ? | |||
Stock-based compensation | ? | ? | 313 | ? | |||
Loss on disposal of property and equipment | ? | ? | ? | 10 | |||
Changes in operating assets and liabilities: | |||||||
Increase in accounts receivable | (1,246) | (750) | (4,302) | (574) | |||
(Increase) decrease in inventories | 2,659 | 2,963 | (15,335) | (3,377) | |||
(Increase) decrease in prepaid inventory and other assets | 1,288 | (1,076) | (341) | (2,044) | |||
Increase (decrease) in accounts payable | 639 | 6,365 | (567) | 11,823 | |||
Increase (decrease) in accrued sales returns | (123) | 78 | 682 | 2,172 | |||
Increase (decrease) in accrued compensation | (151) | (770) | 56 | (196) | |||
Increase (decrease) in customer prepayments | 666 | 907 | 4,078 | (1,985) | |||
Increase (decrease) in other accrued liabilities | (369) | 1,407 | (1,087) | 6,719 | |||
Net cash (used in) provided by operating activities | 208 | 3,898 | (27,400) | 8,758 | |||
Cash flows from investing activities: | |||||||
Purchase of property and equipment | (2,910) | (1,332) | (9,878) | (5,317) | |||
Investment in intangible assets | (56) | (167) | (173) | (167) | |||
Net cash used in investing activities | (2,966) | (1,499) | (10,051) | (5,484) | |||
Cash flows from financing activities: | |||||||
Proceeds from the Transaction | ? | ? | 25,912 | ? | |||
Proceeds from credit agreement | ? | ? | 24,000 | ? | |||
Payments on line of credit | ? | ? | (8,000) | ? | |||
Payments for debt issuance costs | ? | ? | (367) | ? | |||
Principal payments on capital lease obligations | (8) | ? | (22) | ? | |||
Member distributions | ? | (1,401) | ? | (3,790) | |||
Payments on related party notes payable | ? | - | ? | (300) | |||
Payments on long-term obligations | ? | (2) | ? | (42) | |||
Net cash provided by (used in) financing activities | (8) | (1,403) | 41,523 | (4,132) | |||
Net increase (decrease) in cash | (2,766) | 996 | 4,072 | (858) | |||
Cash, beginning of the period | 10,431 | 2,159 | 3,593 | 4,013 | |||
Cash, end of the period | $ 7,665 | $ 3,155 | $ 7,665 | $ 3,155 | |||
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 and adjusted operating 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) Income to Non-GAAP EBITDA and Adjusted EBITDA | |||||||
A reconciliation of GAAP net (loss) income to the non-GAAP measures of EBITDA and adjusted EBITDA is provided below. EBITDA represents net (loss) income before interest expense, other (income) expense, net and depreciation and amortization. Adjusted EBITDA represents EBITDA excluding costs incurred due to the merger transaction with GPAC, stock-based compensation expense, nonrecurring legal fees and severance and CEO search costs. | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2018 | 2017 | 2018 | 2017 | ||||
(Revised) | (Revised) | ||||||
GAAP net loss | $ (4,364) | $ (5,449) | $ (14,199) | $ (4,255) | |||
Interest expense | 999 | 4 | 2,672 | 4 | |||
Other income, net | (83) | (2) | (184) | (2) | |||
Depreciation and amortization | 533 | 223 | 1,534 | 465 | |||
EBITDA | (2,915) | (5,224) | (10,177) | (3,788) | |||
Adjustments: | |||||||
Merger transaction costs | ? | 215 | 2,028 | 258 | |||
Stock-based compensation expense | ? | ? | 313 | ? | |||
Legal fees | 46 | 253 | 245 | 573 | |||
Severance and CEO search costs | 123 | ? | 543 | ? | |||
Adjusted EBITDA | $ (2,746) | $ (4,756) | $ (7,048) | $ (2,957) | |||
Reconciliation of GAAP Operating (Loss) Income to Non-GAAP Adjusted Operating (Loss) Income | |||||||
A reconciliation of GAAP operating (loss) income to the non-GAAP measure of adjusted operating (loss) income is provided below. Adjusted operating (loss) income represents GAAP operating (loss) income excluding costs incurred due to the merger transaction with GPAC, stock-based compensation expense, nonrecurring legal fees and severance and CEO search costs. | |||||||
Three Months Ended September 30, | Nine Months Ended September 30, | ||||||
2018 | 2017 | 2018 | 2017 | ||||
(Revised) | (Revised) | ||||||
GAAP operating loss | (3,448) | (5,447) | (11,711) | (4,253) | |||
Adjustments: | |||||||
Merger transaction costs | ? | 215 | 2,028 | 258 | |||
Stock-based compensation expense | ? | ? | 313 | ? | |||
Legal fees | 46 | 253 | 245 | 573 | |||
Severance and CEO search costs | 123 | ? | 543 | ? | |||
Adjusted operating loss | $ (3,279) | $ (4,979) | $ (8,582) | $ (3,422) | |||
SOURCE Purple Innovation, Inc.
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