COVID-19 and Supply Chain Impacted Third
Quarter 2020 Revenue of $123.5 million
Continued Strength in Retail Partnership
Channel, up 28% YoY
Gross Margins of 55.5%, up 480 basis points
YoY
Casper Sleep Inc. (“Casper” or the “Company”) (NYSE: CSPR) today
announced financial results for the quarter ended September 30,
2020 (the “third quarter 2020” or “third quarter”).
Third Quarter 2020 Financial Highlights (as compared to
the quarter ended September 30, 2019)
- Revenue decreased 3.3% to $123.5 million;
- North America revenue increased $2.2 million or 1.8%;
- European revenue was negligible due to the closure of our
European operations in the second quarter of 2020, compared to
approximately $6 million in the quarter ended September 30,
2019;
- Direct-to-Consumer Revenue decreased 11.4% to $89.9
million;
- Retail Partnership Revenue increased 28.3% to $33.6
million;
- Gross Profit increased 5.9% to $68.5 million with gross margin
of 55.5%, up 480 basis points;
- Net Loss improved $7.2 million or 31.1% to $15.9 million;
- Adjusted EBITDA loss improved by $9.3 million or 55% to $7.5
million; and
- Cash and cash equivalents of $96.1 million at quarter end.
Philip Krim, Chief Executive Officer, comments: “Casper’s third
quarter was highly productive but unfortunately we believe the
results don’t fully reflect the health and potential of our
business. We saw record interest for our products evidenced by
record website traffic, continued to drive gross margin expansion
and progress towards profitability, and had another sequential
quarter of growth; however, our top-line growth was disappointing
based on the initial demand signals. Challenges in our supply
chain, including industry-wide shortages in textiles and chemicals
critical to foam production, led to significant out-of-stock
inventory both in our direct-to-consumer and retail partnership
channels. Many of our core mattresses were out of stock on our
website for weeks at time and we were unable to monetize the full
demand from retail partners leading to cancelled orders.
We have made significant progress addressing some of our supply
chain challenges. Specifically, we have on-boarded new Tier 1 and
Tier 2 suppliers and vendors; we are putting in place redundancies
across key supply chain points and implementing improved inventory
planning; and we are actively building up our safety stock which
will help protect against further disruptions. We believe the worst
of our supply chain disruptions are behind us, and we are
well-positioned going forward.”
Mr. Krim continued: “We are actively managing the business to
best position Casper for the future and are excited about the many
opportunities in front of us to enhance shareholder value as we
continue to leverage our leading brand and scale our multi-channel
distribution. Our organization is focused on long-term, sustainable
growth and we believe our expanded distribution, current growing
product offering and pipeline, strong brand awareness, refined
marketing expertise and healthy balance sheet position us well to
achieve our goal of sustainable Adjusted EBITDA profitability
starting in mid-2021.”
Third Quarter 2020 Review (all comparisons to the three
months ended September 30, 2019)
Revenue was $123.5 million, a decrease of $4.2 million, or 3.3%,
compared to $127.7 million. North America revenue increased $2.2
million or 1.8%, while our European operations, which closed at the
end of the second quarter of 2020, had negligible revenue compared
to revenue of $6.4 million for the three months ended September 30,
2019. Direct-to-consumer sales decreased 11.4% driven by the
closure of our European operations and limited store offerings in
response to public health and government orders and depressed
retail foot traffic due to the COVID-19 pandemic, partially offset
by a modest increase in North America e-commerce sales. North
America direct-to-consumer revenue decreased by $6.1 million or
6.3%. We ended the third quarter with a retail presence of 65
stores, an increase of 17 net new stores compared with our retail
footprint in the third quarter of 2019, with 64 of our 65 stores
open and operating as of the end of the third quarter. Total retail
partnership revenue increased by $7.4 million, or 28.3%, to $33.6
million driven by growth of sales activity with existing partners
and the introduction of 7 new partners compared to the same period
in the prior year. We ended the quarter with 21 partners, and an
expanded range of product offerings. North America retail
partnership revenue increased $8.3 or 32.6%. Additionally, during
the third quarter 2020, we believe our revenue was negatively
impacted by supply chain constraints that extended the time
required to fulfill customer orders and resulting in lost orders.
We have taken active measures which we expect to mitigate these
supply chain issues in future quarters.
Gross profit was $68.5 million, an increase of $3.8 million, or
5.9%, compared to $64.7 million. Gross margin of 55.5% increased
480 basis points compared to 50.7%. The increase in gross margin
was primarily driven by favorable product mix related to our new
mattress line launched in March 2020, as well as lower logistics
costs due to a change in service provider. Gross margin also
benefited from an 80 basis point partial reversal of a charge taken
in the first quarter of 2020 associated with a change in logistics
providers.
Sales and marketing expenses were $42.6 million, a decrease of
$2.0 million, or 4.5%, compared to $44.6 million. Sales and
marketing expenses decreased due to reduced advertising spend
resulting from lower online and offline media costs and improved
marketing efficiencies. Sales and marketing expenses as a
percentage of revenue decreased 40 basis points to 34.5% from
34.9%.
General and administrative expenses, which include store
operating costs, were $39.5 million, a decrease of $1.8 million, or
4.3% , compared to $41.3 million. General and administrative
expenses decreased primarily due to lower payroll costs and lower
operating expenses associated with our corporate workforce working
from home and limited store operations, partially offset by
increased expenses related to being a public company. General and
administrative expenses as a percentage of revenue decreased from
32.4% to 32.0%.
The Company recorded restructuring expenses of $0.2 million
related to previously announced steps to reduce our cost structure
and exit our European operations.
Net loss was $15.9 million, a decrease of $7.2 million, or
31.1%, compared to a net loss of $23.0 million.
Adjusted EBITDA loss was $7.5 million, a 55% improvement of $9.3
million compared to a loss of $16.8 million. See below for a
reconciliation of Adjusted EBITDA to the most directly comparable
measure calculated in accordance with GAAP, net loss.
Balance Sheet
As of September 30, 2020, the Company had cash and cash
equivalents of $96.1 million, compared to $67.6 million as of
December 31, 2019. The increase was driven primarily by $88.0
million in net proceeds from our initial public offering, partially
offset by $47.0 million of cash used in operating activities and
$12.6 million invested in property and equipment, primarily to
build retail stores.
Recent Initiatives
Our Casper retail stores remain critical to our multi-channel
strategy, providing our customers the opportunity to experience our
products before making a purchase. Since the temporary closure of
all our retail stores in North America in mid-March 2020, we have
reopened all of our 66 total stores as of the date of this release,
with each offering walk-in shopping, private in-store appointments,
curbside pick-up services, as well as virtual appointments. As part
of our retail operations, we have implemented and continuously
update a suite of COVID-19-related operating policies and
protocols, including providing modified service offerings where
advisable, with the health and safety of our customers and
employees as our top priority. We have also developed procedures to
enable us to responsibly and efficiently open or close our stores
and adjust our service offerings as needed in response to changing
COVID-19 conditions and applicable guidance from government and
public health officials.
We continued to see strong demand for our products on our
e-commerce platform and from our retail partners in the third
quarter. COVID-19-related supply constraints and labor shortages
experienced by certain of our suppliers and logistics partners,
coupled with the lean levels of safety stock inventory we generally
maintain as part of our flexible manufacturing model, resulted in
increased delivery times for certain products on our website and
impacted order fulfillment for certain of our retail partners. As a
result, during the third quarter, sales in our e-commerce and
retail partnership channels were meaningfully impacted by product
and delivery supply chain constraints. We are actively qualifying
and on-boarding new suppliers, working in close partnership with
existing suppliers to re-build safety stock inventory levels, and
enhancing internal inventory planning and monitoring capabilities.
Taken together, we expect these actions and additional capacity to
significantly mitigate inventory constraints in future
quarters.
Outlook
The Company today provided an outlook for certain financial
metrics for the quarter ended December 31, 2020 (the “fourth
quarter 2020”), reflecting certain assumptions by management
regarding the Company’s business, trends, historical seasonal
factors, and the continuing impact of the COVID-19 pandemic on its
business. In addition, the outlook assumes there will be no
material changes in world events, weather, recent consumer trends,
economic conditions, competitive landscape or other circumstances
beyond our control that may adversely affect the Company’s results
of operations.
In the fourth quarter 2020, the Company expects revenue of
approximately $132 to $142 million, driven by year-over-year growth
in the Company’s e-commerce channel and the expansion of its retail
partnerships. At the mid-point, this range represents high
single-digit consolidated growth and double-digit year-over-year
growth for its North America business in the fourth quarter
2020.
Conference Call & Webcast Information
Casper will hold a conference call on Monday, November 16, 2020,
at 8:00 a.m. Eastern time to discuss the Company’s third quarter
results and other business updates. To access the conference call,
interested parties may dial 866-319-1799 (for domestic callers) or
825-312-2362 (for international callers). Please call at least five
minutes in advance of the start of the call to ensure that you are
connected prior to the call. Interested parties may also access a
live audio webcast of the call at
https://ir.casper.com/news-and-events/events-and-presentations/default.aspx.
Please allow 15 minutes to register. A replay of the call will be
available within two hours of the conclusion of the call until
January 16, 2021 at
https://ir.casper.com/news-and-events/events-and-presentations/default.aspx.
Casper periodically provides information for investors on its
corporate website, casper.com, and its investor relations website,
ir.casper.com. This includes press releases and other information
about financial performance, reports filed or furnished with the
SEC and information on corporate governance.
About Casper
Casper believes everyone should sleep better. The Sleep Company
has a full portfolio of obsessively engineered sleep
products—including mattresses, pillows, bedding, and furniture
designed in-house by the Company’s award-winning R&D team at
Casper Labs. In addition to its e-commerce business, Casper owns
and operates Sleep Shops across North America and its products are
available at a growing list of retailers.
Forward-Looking Statements
This press release contains forward-looking statements within
the meaning of the Private Securities Litigation Reform Act of
1995. All statements contained in this press release that do not
relate to matters of historical fact should be considered
forward-looking statements, including without limitation statements
regarding our expectations surrounding the impact of the COVID-19
pandemic and the related effect on our employees, customers and
business operations; our expectations surrounding our ability to
deliver growth, gain market share, and improve profitability;
anticipated cost savings as a result of our restructuring
initiatives; our planned openings and closures of our retail
stores; our on-boarding of new suppliers and the effects on our
inventory constraints; our future competitive position; our future
results of operations and financial position including our outlook
for the fourth quarter 2020; our business strategy and plans, and
objectives of management for future operations and creating
long-term value. These statements are neither promises nor
guarantees, but involve known and unknown risks, uncertainties and
other important factors that may cause our actual results,
performance or achievements to be materially different from any
future results, performance or achievements expressed or implied by
the forward-looking statements, including, but not limited to, the
following: the COVID-19 pandemic could adversely impact our
business, financial condition and results of operations; our
ability to compete successfully in the highly competitive
industries in which we operate; our ability to maintain and enhance
our brand; the success of our retail store expansion plans; our
ability to successfully implement our growth strategies related to
launching new products; the effectiveness and efficiency of our
marketing programs; our ability to manage our current operations
and to manage future growth effectively; our past results may not
be indicative of our future operating performance; our ability to
attract new customers or retain existing customers; the growth of
the market for sleep as a retail category and our ability to become
a leader or maintain our leadership in the category; the impact of
social media and influencers on our reputation; our ability to
protect and maintain our intellectual property; our exclusive
reliance on third-party contract manufacturers whose efforts we are
unable to fully control; our ability to effectively implement
strategic initiatives; our ability to transfer our supply chain and
other business processes to a global scale; risks relating to our
international operations and expansion; we are dependent on our
retail partners; general economic and business conditions; we could
be subject to system failures or interruptions and security
breaches; risks relating to changing legal and regulatory
requirements, and any failure to comply with applicable laws and
regulations; we may be subject to product liability claims and
other litigation; we may experience fluctuations in our quarterly
operating results; we have and expect to continue to incur
significant losses; risks relating to our indebtedness; our need
for additional funding, which may not be available; risks relating
to taxes; future sales by us our stockholders may cause the market
price of our stock to decline; and risks and additional costs
relating to our status as a new public company. These and other
important factors discussed under the caption “Risk Factors” in our
Annual Report on Form 10-K for the year ended December 31, 2019, as
updated by the “Risk Factors” section of our Quarterly Report on
Form 10-Q for the quarter ended September 30, 2020, and our other
filings with the Securities and Exchange Commission could cause
actual results to differ materially from those indicated by the
forward-looking statements made in this press release. Any such
forward-looking statements represent management’s estimates as of
the date of this press release. While we may elect to update such
forward-looking statements at some point in the future, we disclaim
any obligation to do so, even if subsequent events cause our views
to change.
Non-GAAP Financial Measures
Adjusted EBITDA is a supplemental measure of our performance
that is not required by, or presented in accordance with, GAAP.
Adjusted EBITDA is not a measurement of our financial performance
under GAAP and should not be considered as an alternative to net
income or any other performance measure derived in accordance with
GAAP.
We define Adjusted EBITDA as net loss before net interest
expense, income tax expense and depreciation and amortization as
further adjusted to exclude the impact of stock-based compensation
expense, restructuring expenses, legal settlements, and expenses
incurred in connection with our initial public offering. We caution
investors that amounts presented in accordance with our definition
of Adjusted EBITDA may not be comparable to similar measures
disclosed by our competitors, because not all companies and
analysts calculate Adjusted EBITDA in the same manner. We present
Adjusted EBITDA because we consider them to be important
supplemental measures of our performance and believe it is
frequently used by securities analysts, investors, and other
interested parties in the evaluation of companies in our industry.
Management believes that investors’ understanding of our
performance is enhanced by including this non-GAAP financial
measure as a reasonable basis for comparing our ongoing results of
operations.
Management uses Adjusted EBITDA:
- as a measurement of operating performance because it assists us
in comparing the operating performance of our business on a
consistent basis, as it removes the impact of items not directly
resulting from our core operations;
- for planning purposes, including the preparation of our
internal annual operating budget and financial projections;
- to evaluate the performance and effectiveness of our
operational strategies; and
- to evaluate our capacity to expand our business.
By providing this non-GAAP financial measure, together with the
reconciliation, we believe we are enhancing investors’
understanding of our business and our results of operations, as
well as assisting investors in evaluating how well we are executing
our strategic initiatives. Adjusted EBITDA has limitations as an
analytical tool, and should not be considered in isolation, or as
an alternative to, or a substitute for net income or other
financial statement data presented in our consolidated financial
statements as indicators of financial performance. Some of the
limitations are:
- such measures do not reflect our cash expenditures;
- such measures do not reflect changes in, or cash requirements
for, our working capital needs;
- although depreciation and amortization are non-cash charges,
the assets being depreciated and amortized will often have to be
replaced in the future and such measures do not reflect any cash
requirements for such replacements; and
- other companies in our industry may calculate such measures
differently than we do, limiting their usefulness as comparative
measures.
Due to these limitations, Adjusted EBITDA should not be
considered as measures of discretionary cash available to us to
invest in the growth of our business. We compensate for these
limitations by relying primarily on our GAAP results and using
these non-GAAP measures only supplementally. As noted in the
Reconciliation of Non-GAAP metrics table elsewhere in this press
release, Adjusted EBITDA includes adjustments to exclude the impact
of stock-based compensation expense and material infrequent items,
including but not limited to the costs of our initial public
offering and restructuring costs, among other items. It is
reasonable to expect that these items will occur in future periods.
However, we believe these adjustments are appropriate because the
amounts recognized can vary significantly from period to period, do
not directly relate to the ongoing operations of our business and
may complicate comparisons of our internal operating results and
operating results of other companies over time. In addition,
Adjusted EBITDA includes adjustments for other items that we do not
expect to regularly record following our initial public offering.
Each of the normal recurring adjustments and other adjustments
described in this paragraph and in the Reconciliation of Non-GAAP
metrics table elsewhere in this press release help management with
a measure of our core operating performance over time by removing
items that are not related to day-to-day operations.
Casper Sleep Inc. and
Subsidiaries Consolidated Balance Sheets (In thousands, except per
share amounts) (Unaudited)
Assets
September 30, 2020
December 31, 2019
Current assets:
Cash and cash equivalents
$
96,128
$
67,578
Accounts receivable, net
17,574
31,059
Prepaid expenses and other current
assets
14,531
23,924
Inventory, net
34,269
39,358
Total current assets
162,502
161,919
Property and equipment, net
67,662
66,262
Other assets
2,682
2,137
Total assets
$
232,846
$
230,318
Liabilities, Convertible Preferred
Stock and Stockholders’ Equity/(Deficit)
Current liabilities:
Accounts payable
$
26,778
30,734
Accrued expenses
58,246
73,130
Deferred revenue
10,255
9,673
Other current liabilities
27,073
34,422
Total current liabilities
122,352
147,959
Other liabilities
74,368
69,492
Total liabilities
196,720
217,451
Convertible preferred stock
—
319,961
Stockholders’ equity/(deficit):
Common stock
—
—
Additional paid-in capital
436,360
18,097
Accumulated other comprehensive (loss)
income
(447
)
69
Accumulated deficit
(399,787
)
(325,260
)
Total stockholders’ equity/(deficit)
36,126
(307,094
)
Total liabilities, convertible preferred
stock and stockholders’ equity
$
232,846
$
230,318
Casper Sleep Inc. and
Subsidiaries Consolidated Statements of Operations and
Comprehensive Loss (In thousands, except share and per share
amounts) (Unaudited)
Three Months Ended September
30,
Nine Months Ended September
30,
2020
2019
2020
2019
Revenue
$
123,464
$
127,655
$
346,704
$
312,319
Cost of goods sold
54,944
62,942
168,155
157,342
Gross profit
68,520
64,713
178,549
154,977
Operating expenses
Sales and marketing expenses
42,565
44,551
113,220
113,994
General and administrative expense
39,518
41,311
128,522
105,445
Restructuring expenses
155
681
5,595
681
Total operating expenses
82,238
86,543
247,337
220,120
Loss from operations
(13,718
)
(21,830
)
(68,788
)
(65,143
)
Other (income) expense
Net interest expense
2,127
813
6,435
1,355
Other (income) expense, net
(9
)
287
(742
)
841
Total other expenses, net
2,118
1,100
5,693
2,196
Loss before income taxes
(15,836
)
(22,930
)
(74,481
)
(67,339
)
Income tax expense
20
93
46
60
Net loss
(15,856
)
(23,023
)
(74,527
)
(67,399
)
Net loss per share attributable to common
stockholders, basic and diluted
$
(0.40
)
$
(2.16
)
$
(2.07
)
$
(6.40
)
Weighted-average number of shares used in
computing net loss per share attributable to common stockholders,
basic and diluted
40,118,959
10,635,338
35,927,521
10,530,262
Casper Sleep Inc. and
Subsidiaries Consolidated Statement of Cash Flows (In thousands)
(Unaudited)
Nine Months Ended September
30,
2020
2019
Cash flows used in operating
activities:
Net loss
$
(74,527
)
$
(67,399
)
Adjustments to reconcile net loss to net
cash used in operating activities:
Depreciation and amortization
11,047
4,804
Stock based compensation expense
9,691
5,648
Other
2,328
4,287
Changes in assets and liabilities:
Accounts receivable, net
13,485
(1,273
)
Prepaid expenses and other current
assets
9,393
(16,747
)
Inventory, net
4,484
5,585
Other assets
(552
)
52
Accounts payable
(3,843
)
2,973
Accrued expenses
(14,884
)
13,263
Deferred revenue
583
(3,219
)
Other liabilities
(4,191
)
22,320
Net cash used in operating activities
(46,986
)
(29,706
)
Cash flows used in investing
activities:
Purchases of property and equipment
(12,559
)
(43,631
)
Note receivable
—
4,000
Net cash used in investing activities
(12,559
)
(39,631
)
Cash flows provided by financing
activities:
Exercise of stock options and warrants
612
1,318
Proceeds from equity issuance
87,999
68,187
Proceeds from borrowings
—
29,225
Repayment on borrowings
—
(2,922
)
Net cash provided by financing
activities
88,611
95,808
Effect of exchange rate changes
(516
)
75
Net change in cash and cash
equivalents
28,550
26,546
Cash and cash equivalents at beginning of
period
67,578
28,355
Cash and cash equivalents at end of the
period
$
96,128
$
54,901
Casper Sleep Inc. and
Subsidiaries Reconciliation of Non-GAAP Metrics (In thousands)
(unaudited)
Three months ended
September 30,
Nine months ended
September 30,
(in thousands)
2020
2019
2020
2019
Net loss
$
(15,856
)
$
(23,023
)
$
(74,527
)
$
(67,399
)
Income tax expense
20
93
46
60
Net interest expense
2,127
813
6,435
1,355
Depreciation and amortization
3,313
2,118
9,656
4,804
Stock based compensation(a)
3,746
2,122
9,691
5,648
Restructuring(b)
155
681
5,595
681
Legal settlements(c)
(1,000
)
—
500
138
Transaction costs(d)
—
383
787
906
Adjusted EBITDA
$
(7,495
)
$
(16,813
)
$
(41,817
)
$
(53,807
)
(a) Represents non-cash stock-based compensation expense.
(b) Represents costs associated with strategic shifts in our
business structure including exiting certain lines of business and
geographies. Associated costs include severance and other employee
separation costs, contract termination expenses and asset
impairment.
(c) Amounts related to litigation settlements.
(d) Represents expenses incurred for professional, consulting,
legal, and accounting services performed in connection with our
initial public offering, which are not indicative of our ongoing
costs and which were discontinued following the completion of our
initial public offering.
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