Purple Innovation Reports First Quarter 2022 Results

LEHI, Utah, May 10, 2022 /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 first quarter ended March 31, 2022.

• Net revenue decreased 23.2% to $143.2 million compared to $186.4 million.
• Wholesale revenue decreased 6.3% and Direct-to-Consumer (DTC) revenue decreased 31.5%.
• Gross margin was 36.1% compared to 46.9%.
• Operating expenses as a percent of net revenue were 48.9% compared to 37.9%.
• Operating loss was $(18.4) million compared to operating income of $16.9 million.
• Net loss was $(13.6) million as compared to a net income of $20.9 million. Adjusted net loss was $(16.5) million, or $(0.24) per diluted share as compared to adjusted net income of $12.0 million, or $0.17 per diluted share.
• EBITDA was $(10.6) million compared to $27.8 million. Adjusted EBITDA decreased to $(9.6) million compared to $22.8 million.
• Cash and cash equivalents were $62.7 million at March 31, 2022.

"I am pleased that we exceeded our net revenue and adjusted EBITDA guidance, despite an increasingly challenging economic environment. Compared with the fourth quarter of 2021, these results represent a building block towards reestablishing Purple as a profitable growth company and creating a stronger foundation that will move us toward our long-term plans." said Chief Executive Officer Rob DeMartini. "We were able to exceed guidance on stronger than expected demand in our wholesale and owned retail channels as we continue to build a true omnichannel brand. We are encouraged by elements of our recent performance, however, we remain in the early stages of creating the framework for strong operational execution. While we are making progress, and believe we will see sequential improvements including second-half profitability during this year, evolving economic and post-pandemic headwinds such as a shift in consumer buying behavior from online to in-stores and away from home related categories toward experiences and travel, has caused us to adopt a more conservative view on the remainder of 2022."

DeMartini continued, "While the timing around achieving our near- and long-term goals is being delayed, my confidence in our strategic initiatives remains strong. We have already seen some of the benefits of our plan manifest and expect these will compound as 2022 unfolds, leading to quarter-over-quarter improvement as the year progresses. We have a long journey ahead of us, but our first quarter results confirm that we are heading in the right direction."

First quarter 2022 net revenue decreased 23.2% to $143.2 million, compared to $186.4 million in the first quarter of 2021. This decrease was primarily due to the challenging year-over-year comparison created by the pull forward of demand driven by the effects of COVID and economic stimulus in the first quarter of 2021, coupled with the pullback in discretionary consumer spending in early 2022. By channel, wholesale revenue decreased 6.3% and DTC revenue decreased 31.5%. DTC net revenues declined due to lower e-commerce revenue partially offset by growth in Purple retail showroom revenue driven by the addition of 25 showrooms over the last 12 months.

Gross margin for the first quarter 2022 declined to 36.1% compared to 46.9% in the year ago period. This decline was primarily attributable to elevated level of labor and overhead costs coupled with a larger than expected reduction in higher margin e-commerce sales. DTC revenues comprised approximately 60% of net revenue for the quarter, compared with approximately 67% in the same quarter last year.

Operating expenses were 48.9% of net revenue for the first quarter of 2022 compared to 37.9% in the year ago period. The increase in operating expenses as a percent of net revenue compared with the prior year period was driven primarily by a decrease in net revenue coupled with an increase in showroom-related operating expenses associated with continued showroom expansion and an increase in ongoing infrastructure development costs. These increases were partially offset by a reduction in marketing and sales expenses due to a pullback in paid search advertising and other efficiency gains.

Operating loss was $(18.4) million for the first quarter 2022 compared to operating income of $16.9 million in the prior year period.

Net loss was $(13.6) million for the first quarter 2022 compared to a net income of $20.9 million in the year ago period. As previously disclosed, the Company determined that its outstanding warrants should be accounted for as liabilities and recorded at fair value on the date of the transaction and subsequently re-measured to fair value at each reporting date. For the three months ended March 31, 2022 and 2021, the Company recognized non-cash gains of $3.9 million and $9.1 million, respectively, associated with the change in fair value of warrant liabilities.

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 gains associated with the change in fair value of warrant liabilities, was $(16.5) million, or $(0.24) per diluted share, compared to adjusted net income of $12.0 million, or $0.17 per diluted share in the prior year period. Adjusted net income (loss) has also been adjusted to reflect an estimated effective income tax rate of 14.9% for the current year period resulting in an adjusted income tax benefit and 25.4% for the comparable prior year period resulting in an adjusted income tax expense.

EBITDA for the first quarter 2022 was $(10.6) million compared to $27.8 million in the first quarter 2021. Adjusted EBITDA, which excludes the adjustment for non-cash gain associated with the change in fair value of warrant liabilities, Tax Receivable Agreement benefit, new production facility start-up costs, non-cash stock-based compensation, executive search costs, severance, showroom opening costs, product reserve and COVID-19 related expenses, was $(9.6) million compared to Adjusted EBITDA of $22.8 million in the prior year period.

As of March 31, 2022, the Company had cash and cash equivalents of $62.7 million compared to $91.6 million as of December 31, 2021. The decrease was driven primarily by cash used in operations of $44.3 million, capital expenditures of $12.6 million primarily related to showroom expansion, the repayment of the full $55.0 million outstanding on the credit facility, a $5.8 million tax receivable agreement payment and a $2.5 million prepayment on term debt. These uses of cash were offset by net proceeds of $92.9 million received from the secondary offering completed in March 2022. The Company believes its cash is adequate through the balance of the year

Inventories as of March 31, 2022 totaled $105.8 million compared with $98.7 million as of December 31, 2021. The increase in inventories was driven by higher non-mattress finished goods due to extended sourcing lead times, partially offset by a reduction in mattress inventories.

Due to economic and post-pandemic headwinds that are expected to continue, such as from the effects of inflation and changes in consumer spending patterns, the Company is taking a more cautious view on the remainder of the year and is amending its 2022 outlook. It now expects full year 2022 net revenue to be between $650 million and $690 million, compared with its prior range of $790 million to $830 million. Adjusted EBITDA for 2022 is now expected to be between $21 million and $27 million, compared with its prior range of $26 million to $33 million and compared with 2021 adjusted EBITDA of $11.0 million. The more modest reduction in the Company's adjusted EBITDA outlook compared with the change in revenue reflects the early progress on reducing expenses and eliminating less effective advertising spending.

The Company still expects sequential improvements each quarter, in 2022 and believes that it will achieve profitable growth in the second half of the year. The Company now expects it will exit 2022 with gross margins close to 40%, as it benefits from the strategies currently being implemented aimed at improving execution and strengthening margins, elevating the Purple brand, further developing and expanding distribution channels and accelerating product innovation, offset by changes in channel mix.

Purple Innovation, Inc. will host a live conference call to discuss financial results today, May 10, 2022 at 4:30 p.m. Eastern Time. To access the call dial (8000 239-9838 (domestic) or (929) 477-0402 (international) and provide the Conference ID: 6122811. 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.

Purple is a digitally-native vertical brand with a mission to help improve lives through innovative comfort solutions. We design and manufacture a variety of innovative, premium, branded comfort products, including mattresses, pillows, bedding, frames 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, GelFlex Grid, is the foundation of 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. Visit Purple online at purple.com and "like" Purple on Facebook and "follow" on Instagram.

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 capacity, innovation and showrooms; expected continuing quarter to quarter improvements in profitability and our ability to achieve profitability; expected incremental improvement in net revenue throughout the year; expected sequential improvements in performance from quarter to quarter; expected improvement in margin rates; our ability to successfully execute on improvement strategies; expected improvements in our operating performance; our ability to improve brand recognition; demand for our products; expectations regarding consumer behavior; our ability to develop and expand our distribution channels; our ability to accelerate production innovation; and expected financial and operating results for the full year 2022. 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: uncertainties regarding the extent and duration of the impact of the COVID-19 pandemic on many aspects of our business, operations and financial performance; disruptions to our manufacturing processes; 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; 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 1, 2022, as amended by our Annual Report on Form 10-K/A filed with the SEC on March 16, 2022 and our Quarterly Report on Form 10-Q filed with the SEC on May 10, 2022. 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.

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 full year 2022, 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.
Gina Balistreri
Senior Public Relations Manager
gina.b@purple.com
414-213-4460

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.

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 and adjusted EBITDA. 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.

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, net other income and depreciation and amortization. Adjusted EBITDA represents EBITDA excluding certain non-cash and non-recurring costs incurred.

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:

A reconciliation of net income (loss) per share, diluted, to adjusted net income per diluted share is set forth below for the three months ended March 31, 2022 and 2021:

View original content to download multimedia:https://www.prnewswire.com/news-releases/purple-innovation-reports-first-quarter-2022-results-301544324.html

SOURCE Purple Innovation, Inc.