LEHI, Utah, Aug. 13 -- Purple Innovation, Inc issued the following news release:- Second Quarter Net Revenue Increased 60.3% to $165.1 Million - Second Quarter Operating Income Improved to $32.0 Million - Cash and Cash Equivalents at June 30, 2020 Increased to $95.4 Million 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, 2020. Second Quarter Financial Summary (Comparisons versus Second Quarter 2019)[1] * Net revenue increased 60.3% to $165.1 million, compared to $103.0 million. - Direct-to-Consumer (DTC) revenue increased 127.9%; Wholesale revenue decreased 49.3% * Gross margin improved to 49.4% compared to 41.5%. * Operating expenses as a percent of net revenue were 30.1% compared to 43.8%. * Operating income was $32.0 million compared to operating loss of $(2.4) million. * Net loss was $(5.8) million compared to a net loss of $(7.3) million. Adjusted net income was $30.6 million compared to $2.6 million. * EBITDA was $(37.8) million compared to $(5.2) million. Adjusted EBITDA was $35.2 million compared to $6.2 million. "It was a record breaking quarter from both a revenue and operating income standpoint as our organization successfully capitalized on the strengths of our business model and the changes in consumer buying behavior brought on by COVID-19," said Joe Megibow, Chief Executive Officer. "Following a brief scale back in our operations early in the pandemic, we quickly ramped production and fulfillment capabilities and pivoted back to our digital roots, shifting our efforts into a mostly direct-to-consumer business to capture the growing online demand. In addition to driving an increase in online purchasing, shelter-at-home directives also fueled higher demand for many categories tied to the home. This was certainly true for Purple as our direct-to-consumer mattress business grew triple digits as did several of our other categories led by seat cushions, pillows and sheets. Our exceptional digital performance more than offset the decline in wholesale revenue, which was down due to significant store closures and reduced traffic, particularly during the first half of the quarter." Megibow continued, "Looking ahead, we remain optimistic. The positive momentum in our business has carried over into the third quarter and our strong cash position is allowing us to further invest in our key growth initiatives. This includes a new 520,000 square foot facility in Georgia opening later this year that will significantly expand our domestic manufacturing capacity over time. In terms of channel performance, we have seen a resurgence in wholesale sales as partner doors continue to reopen and resume more normalized store operations. We are encouraged with the improvement in this channel, as brick and mortar retail – both third party and Company-owned – is an important part of our omni-channel strategy. While we still have much work to be done, we are pleased with how our team is navigating through these unprecedented times and are confident that the long-term growth prospects for our Company are stronger than ever." Second Quarter 2020 Review Second quarter 2020 net revenue increased 60.3% to $165.1 million, compared to $103.0 million in the second quarter of 2019. The increase in net revenue was driven by strong growth in mattress sales in the DTC channel along with higher demand for pillows, sheets and seat cushions, partially offset by lower wholesale revenue due to the disruption in partner store operations including temporary closures in response to COVID-19. Net revenue, compared to order totals announced during the quarter, include the impact of customer returns and cancellations as well as timing of deliveries that drive revenue recognition. With order totals exceeding capacity for a portion of the quarter, some orders placed in the quarter will not be fulfilled and recognized as revenue until the third quarter. Gross margin for the second quarter 2020 improved to 49.4% compared to 41.5% in the year ago period. The 790 basis point increase in gross margin year-over-year was primarily attributable to the higher proportion of DTC channel revenue, which carries higher gross margins than the wholesale channel as well as other cash preservation efforts early in the quarter. In addition, given constraints imposed by COVID-19, we have temporarily suspended white glove delivery to the home, passing along the cost savings to our consumer and thereby maintaining gross margin dollars, while showing an increase in gross margin percentage. DTC revenues comprised approximately 88% of net revenue for the quarter, compared with approximately 62% in the same quarter last year, and 66% in the first quarter of 2020. With partner doors continuing to reopen and resuming more normalized store operations, the Company expects wholesale revenue to increase as a percentage of overall revenue during the second half of 2020 compared with the second quarter. Operating expenses were $49.7 million in the second quarter 2020 compared to $45.1 million in the prior year period. As a percent of net revenue, operating expenses were 30.1% compared with 43.8% in the year ago period. The increase in operating expenses was primarily attributable to a modest increase in marketing spend aimed at driving demand and increased brand awareness as well as the addition of company-owned retail showrooms in the fourth quarter 2019. For the second quarter 2020, marketing and sales expense as a percent of net revenue decreased to 23.9% compared with 34.9% last year due to creative efforts to improve efficiency in marketing spend as well as several non-recurring factors including lower market rates near the onset of COVID-19 and intentional reductions in ad spend early in the quarter in an effort to preserve cash. The Company expects marketing and sales expense as a percent of net revenue to return to historical levels during the second half of 2020 driven in part by higher market rates due to increased advertising ahead of the November elections. Operating income increased to $32.0 million for the second quarter 2020 compared to an operating loss of $(2.4) million in the prior year period. Net loss was $(5.8) million for the second quarter 2020 compared to a net loss of $(7.3) million in the year ago period. Adjusted net income, which excludes adjustments for non-cash expenses associated with the change in fair value of warrant liabilities, the Tax Receivable Agreement, non-recurring stock-based compensation, and release of deferred tax asset reserves, was $30.6 million, compared to $3.1 million in the prior year period. The second quarter 2020 included a $39.0 million non-cash expense associated with the change in fair value of warrant liabilities, a $32.8 million non-cash expense associated with our Tax Receivable Agreement and a $35.4 million income tax benefit. The income tax benefit was primarily related to the release of a reserve for deferred tax assets created when Paired Class B shareholders exchanged their shares for Class A shares creating an amortizable tax basis difference. The second quarter 2019 included a $3.7 million non-cash expense associated with the change in fair value of warrant liabilities and a $6.2 million non-cash compensation expense related to InnoHold's distribution of Paired Class B securities to then current Purple employees. EBITDA for the second quarter 2020 was $(37.8) million compared to $(5.2) million in the second quarter 2019. Adjusted EBITDA, which excludes the adjustment for non-cash expense associated with the change in fair value of warrant liabilities, non-cash expense associated with the loss on extinguishment of debt, Tax Receivable Agreement expense, non-cash stock based compensation, legal fees, interim CFO & consulting costs, severance and COVID-19 related expenses, was $35.2 million, compared to Adjusted EBITDA of $6.2 million in the prior year period. Balance Sheet As of June 30, 2020, the Company had cash and cash equivalents of $95.4 million compared to $33.5 million as of December 31, 2019, an increase of 184.8%. Compared with March 31, 2020, cash and cash equivalents at June 30, 2020 increased 261.7%. The Company expects to invest a portion of these resources into capital expansion and company-owned store expansion and may be impacted by a channel shift back to wholesale. Inventories as of June 30, 2020 totaled $39.8 million compared with $47.6 million as of December 31, 2019 and compared with $42.1 million as of March 31, 2020. Outlook For the year ending December 31, 2020, the Company previously withdrew guidance as a result of uncertainty due to the COVID-19 pandemic. Due to the continued uncertainty in the overall economy, the Company is not providing an update at this time. Webcast and Conference Call Information Purple Innovation, Inc. will host a live conference call to discuss financial results today, August 13, 2020 at 4:30 p.m. Eastern Time. To access the call dial (877)425-9470 (domestic) or (201) 389-0878 (international) at 4:25 p.m. ET and provide the Conference ID: 13708191. 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 digitally-native vertical brand with a mission to help people feel and live better through innovative comfort solutions. We design and manufacture a variety of innovative, premium, branded comfort products, including mattresses, pillows, cushions, frames, sheets 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, Hyper-Elastic Polymer®, underpins 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. For more information on Purple, visit purple.com. Footnote: [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. Source: Purple Innovation, Inc |
