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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported):
November 9, 2023
Purple Innovation, Inc.
(Exact Name of Registrant as Specified in its
Charter)
Delaware |
|
001-37523 |
|
47-4078206 |
(State of Incorporation) |
|
(Commission File Number) |
|
(IRS Employer
Identification No.) |
4100 North Chapel Ridge Rd., Suite 200 |
|
|
Lehi, Utah |
|
84043 |
(Address of Principal Executive Offices) |
|
(Zip Code) |
Registrant’s telephone number, including
area code: (801) 756-2600
(Former name or former address, if changed since
last report)
Check the appropriate box below if the Form 8-K is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following provisions:
☐ |
Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
☐ |
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
☐ |
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
☐ |
Pre-commencements communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
|
Trading Symbol(s) |
|
Name of each exchange on which registered |
Class A Common Stock, par value $0.0001 per share |
|
PRPL |
|
The NASDAQ Stock Market LLC |
Indicate by check mark whether the registrant is an emerging growth
company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b–2 of the Securities Exchange
Act of 1934 (§ 240.12b–2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant
has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant
to Section 13(a) of the Exchange Act. ☐
ITEM
1.01. ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.
Waivers
and Amendments to 2023 Credit Agreements
On August 7, 2023, Purple Innovation, Inc. (the
“Company”) and certain of its subsidiaries (collectively the “Loan Parties”) entered into a term loan credit agreement
(the “Term Loan Agreement”) with Callodine Commercial Finance, LLC and a group of financial institutions (the “Term
Loan Lenders”). Also, on August 7, 2023, the Loan Parties entered into a separate financing arrangement with the Bank of Montreal
and a group of financial institutions (collectively the “ABL Lenders”) that provides for a revolving asset-based credit facility
(the “ABL Agreement” and together with the Term Loan Agreement the “2023 Credit Agreements”).
Certain events of default occurred under each
of the 2023 Credit Agreements due to (i) the Company’s failure to (a) provide certain financial reporting and related materials
on a timely basis and (b) complete certain post-closing deliverables as required under the ABL Agreement and (ii) the Company drawing
on the loan under the ABL Agreement while the above events of default were in existence (collectively, the “Subject Events of Default”).
On November 6, 2023, the Loan Parties entered
into (i) a First Amendment and Waiver to the ABL Agreement (the “ABL Amendment”) and (ii) a First Amendment and Waiver to
the Term Loan Agreement (the “Term Loan Amendment”), with the Term Loan Lenders and ABL Lenders, respectively (collectively,
the “Lenders”), including waivers of the Subject Events of Default. In addition, the ABL Amendment and Term Loan Amendment
also amended certain provisions of the 2023 Credit Agreements, including, among other changes, to require (i) weekly borrowing base certificates,
(ii) 13-week cash flow reports and budgets, (iii) budget variance reports, (iv) the appointment of a third-party consultant, and (v) daily
cash sweeps from the Loan Parties’ accounts to an account at the ABL Lender (collectively, the “2023 Credit Agreement Amendments”).
The foregoing descriptions of the ABL Amendment and Term Loan Amendment do not purport to be complete and are qualified in their entirety
by reference to the ABL Amendment and Term Loan Amendment, which are attached as Exhibit 10.2 and Exhibit 10.3, respectively, to this
report and are incorporated by reference herein.
ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL
CONDITION
On November 9, 2023, Purple Innovation, Inc. (the “Company”)
issued a press release announcing its financial results for the third quarter ended September 30, 2023, and providing revised net revenue
and adjusted EBITDA guidance for 2023. A copy of the Company’s press release is attached as Exhibit 99.1 to this report and incorporated
by reference.
The information furnished pursuant to this Item 2.02 and the exhibit
hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”), and shall not be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the
Exchange Act except as shall be expressly set forth by specific reference in such filing.
The press release furnished herewith in Exhibit 99.1 contains non-GAAP
financial measures. Management believes non-GAAP financial measures assist management and investors in evaluating and comparing period-to-period
results and projections in a more meaningful and consistent manner. Reconciliations for these non-GAAP financial measures to the most
directly comparable GAAP financial measures are included in the press release.
ITEM 9.01 FINANCIAL STATEMENTS AND EXHIBITS
EXHIBIT INDEX
Exhibit
Number |
|
Description |
10.1 |
|
First Amendment to Credit Agreement and Limited Waiver, dated November 6, 2023, between and among Purple Innovation, LLC, Purple Innovation, Inc., Intellibed, LLC, the ABL Lenders, the ABL Agent, the Swing Line Lender, and the Letter of Credit Issuer. |
10.2 |
|
First Amendment to Term Loan Credit Agreement and Limited Waiver, dated November 6, 2023, between and among Purple Innovation, LLC, Purple Innovation, Inc., Intellibed, LLC,, the Term Loan Agent, and the Term Loan Lenders. |
99.1 |
|
Press Release dated November 9, 2023, regarding financial results for the third quarter ended September 30, 2023. |
104 |
|
Cover
Page Interactive Data File (embedded within the Inline XBRL document) |
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
Dated: November 9, 2023 |
PURPLE INNOVATION, INC. |
|
|
|
|
By: |
/s/ Todd Vogensen |
|
|
Todd Vogensen |
|
|
Chief Financial Officer |
3
Exhibit 10.1
FIRST AMENDMENT TO CREDIT AGREEMENT AND LIMITED
WAIVER
This FIRST AMENDMENT
TO CREDIT AGREEMENT AND LIMITED WAIVER (this “Amendment”), dated as of November 6, 2023, is entered into among Purple
Innovation, LLC, a Delaware limited liability company (the “Company” or “Borrower”), Purple Innovation,
Inc., a Delaware corporation (“Holdings”), Intellibed, LLC, a Delaware limited liability company (“Intellibed”),
each lender from time to time party hereto (collectively, the “Lenders” and individually, a “Lender”),
and Bank of Montreal, as Administrative Agent (as hereinafter defined), Swingline Lender and Letter of Credit Issuer.
PRELIMINARY STATEMENTS
A. Reference is hereby
made to that certain Credit Agreement, dated as of August 7, 2023 (as amended, amended and restated, extended, supplemented or otherwise
modified in writing from time to time and in effect immediately prior to the effectiveness of this Amendment, the “Existing
Credit Agreement”, and the Existing Credit Agreement, as amended by this Amendment, the “Amended Credit Agreement”),
among (a) Holdings, (b) the Borrower, (c) Intellibed, (d) the Lenders and (e) Bank of Montreal, as administrative agent (in such
capacity, together with its successors or assigns in such capacity, the “Administrative Agent”), Swingline Lender
and Letter of Credit Issuer.
B. The following Events
of Default have occurred and are continuing under the Existing Credit Agreement (individually, each an “Existing Event of Default”,
and collectively, the “Existing Events of Default”): (a) the Events of Default under Section 9.01(b) of the Existing
Credit Agreement due to Borrower’s failure to deliver the monthly financial statements for the months of July and August 2023 within
the required time periods as set forth in Section 7.01(c) of the Existing Credit Agreement, (b) the Events of Default under Section 9.01(b)
of the Existing Credit Agreement due to the Borrower’s failure to deliver the Compliance Certificates for the months of July and
August 2023 within the required time periods set forth in Section 7.02(c) of the Existing Credit Agreement, (c) the Events of Default
under Section 9.01(b) of the Existing Credit Agreement due to the Borrower’s failure prior to the date hereof to complete the requirements
set forth in the Post-Closing Agreement within the required time periods set forth therein, (d) the Events of Default under Section 9.01(b)
of the Existing Credit Agreement due to the Borrower’s failure to deliver notice of the foregoing Events of Default to the Administrative
Agent as required by Section 7.03(a) of the Existing Credit Agreement, (e) the Event of Default under Section 9.01(b) of the Existing
Credit Agreement due to Borrower’s failure to deliver notice of the appointment of Todd Vogensen as Chief Financial Officer within
the required time period as set forth in Section 7.03(g) of the Existing Credit Agreement, (f) the Event of Default under Section 9.01(d)
of the Existing Credit Agreement due to Borrower’s representation under Section 5.02(b) that no Default had occurred prior to the
Credit Extension on October 16, 2023, and (g) the Events of Default under Section 9.01(e) of the Existing Credit Agreement due to the
“Events of Default” (as such term is defined in the Term Loan Credit Agreement) existing under the Term Loan Credit Agreement
as such Events of Default shall be waived on the First Amendment Effective Date pursuant to an amendment and waiver to the Term Loan
Documents duly executed and delivered by the Loan Parties, the Term Loan Agent and the Term Loan Lenders, in form and substance acceptable
to the Administrative Agent.
C. The Company has
requested that the Administrative Agent and the Lenders (i) waive the Existing Events of Default and (ii) make certain modifications
to the Existing Credit Agreement as set forth herein, and the Administrative Agent and the Lenders have agreed to grant such modifications,
subject to the terms and conditions and in reliance on the representations set forth herein.
Accordingly, in consideration
of the mutual agreements contained in the Existing Credit Agreement and in this Amendment, and for other good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1. Defined Terms.
Unless otherwise defined in this Amendment, capitalized terms used this Amendment, including in the preamble and preliminary statements
hereto, and not otherwise defined herein shall have the meanings ascribed to such terms in the Amended Credit Agreement.
2. Limited Waiver
under Credit Agreement. Pursuant to the request of the Loan Parties and subject to the satisfaction of the conditions set forth in
Section 4 hereof and in reliance on the representations and warranties set forth herein, notwithstanding anything to the contrary
contained herein or in the Amended Credit Agreement, as of the First Amendment Effective Date, the Administrative Agent and Lenders hereby
waive the Existing Events of Default. The limited waiver of the Existing Events of Default shall be effective only in this specific instance
and shall not entitle the Loan Parties to any other or further waivers in any similar or other circumstances. The Administrative Agent’s
and the Lenders’ agreements to waive their rights and remedies shall be limited precisely as written and shall not be deemed to
(i) be an amendment or a waiver of any other Default or Event of Default or any other term or condition of the Amended Credit Agreement
or other Loan Documents or to prejudice any right or remedy which such persons may now have or may have in the future under or in connection
with the Amended Credit Agreement, the other Loan Documents or otherwise other than with respect to the Existing Events of Default, (ii)
be a consent to any amendment, waiver or modification of any other term or condition of the Amended Credit Agreement or of any other
Loan Document, (iii) prejudice any right that the Administrative Agent or the Lenders have or may have in the future under or in connection
with the Amended Credit Agreement or any other Loan Document, (iv) create any obligation to forbear from taking any enforcement action,
or to make any further extensions of credit except with respect to the Existing Events of Default, (v) establish a custom or course of
dealing among the Borrower, on the one hand, or Administrative Agent or any Lender, on the other hand or (vi) be a consent to any future
agreement or waiver.
3. Amendments to
Existing Credit Agreement. Subject to the satisfaction (or written waiver) of the conditions set forth in Section 4 below
and in reliance upon the representations and warranties of the Loan Parties set forth in Section 6 below, as of the First Amendment
Effective Date (as hereinafter defined) the Existing Credit Agreement (excluding the schedules and exhibits thereto, which shall remain
in full force and effect) is hereby amended in the following manner:
(a) Section 7.02(a) of
the Existing Credit Agreement is hereby amended and restated in their entirety as follows:
(A) (a)
the Borrower Agent shall execute and deliver to Administrative Agent, in a form acceptable to the Administrative Agent, (x) on or before
the 20th day of each month a Borrowing Base Certificate as of the last day of the immediately preceding month, and (y) Borrowing
Base Certificates weekly on or before Wednesday of each week and as of the last day of the immediately preceding week, in each case together
with such supporting materials as the Administrative Agent shall reasonably request (including weekly reporting of gross inventory and
rolling forward accounts receivable data by reporting weekly sales, cash collections and credits and monthly reporting of Credit Card
Receivables, inventory ineligibles and accounts receivable ineligibles); provided that, to the extent approved by the Administrative
Agent in its reasonable discretion, the Borrower will not be required to update certain items in the weekly Borrowing Base Certificate
to the extent that such items are not available on a weekly basis in the ordinary course of business using commercially reasonable efforts
(it being agreed that the foregoing shall not prevent the Administrative Agent from implementing Availability Reserves to account for
such items). All calculations of Availability in any Borrowing Base Certificate shall initially be made by Borrowers and certified by
a Responsible Officer, provided that the Administrative Agent may from time to time review and adjust any such calculation in its Credit
Judgement (a) to reflect its estimate of declines in value of any Collateral, including due to collections received in the Concentration
Account or otherwise; (b) to adjust advance rates to reflect changes in dilution, quality, mix and other factors affecting Collateral,
including delay of payment of accounts payable beyond past practice; and (c) to the extent the calculation is not made in accordance
with this Agreement or does not accurately reflect the Availability Reserve;
(b) Article VII of the
Existing Credit Agreement is hereby amended by adding the following Sections at the end thereof:
| 7.20 | Budgets and Variance Reports. |
(a) For
purposes of this Amendment, the term “Approved Budget” shall mean a 13-week cash flow forecast and budget of the Loan Parties’
and their Subsidiaries’ consolidated (A) projected cash receipts, (B) projected disbursements, (C) projected operating cash flow,
(D) projected net cash flow, (E) projected Borrowings to be requested by the Borrower under this Amendment, and (F) the projected Borrowing
Base and Availability, including back-up schedules and supporting information as reasonably requested by the Administrative Agent, as
each Approved Budget may be revised or adjusted by the Borrower from time to time with the prior written consent of the Administrative
Agent.
(b) Beginning
on November 17, 2023, the Borrower shall deliver to the Administrative Agent on or before each Friday (or, if such day is not a Business
Day, on the next succeeding Business Day) an initial (or, in the case of any subsequent week, updated) Approved Budget for the 13-week
period commencing as of the Sunday of such week, in form and substance satisfactory to Administrative Agent (it being understood that
each subsequent Approved Budget shall only add projections for the last week of the 13-week period covered thereby, shall contain an
explanation if the projections for the last week of the 13-week period covered thereby are different in any material respect from the
prior weeks, and shall not modify any prior periods, and no such initial, updated, modified or supplemented budget shall be effective
until so approved by the Administrative Agent and only once so approved by the Administrative Agent shall it be deemed an “Approved
Budget”).
(c) Beginning
on November 24, 2023, the Borrower shall deliver to the Administrative Agent on or before Friday (or, if such day is not a Business Day,
on the next succeeding Business Day) of each week an Approved Budget Variance Report, and such Approved Budget Variance Report shall
be in form and substance satisfactory to the Administrative Agent, and executed by a Responsible Officer of the Borrower certifying that
(A) the Loan Parties are in compliance with the covenants contained herein and (B) no Default or Event of Default has occurred
or, if such a Default or Event of Default has occurred, specifying the nature and extent thereof and any corrective action taken or proposed
to be taken with respect thereto.
(d) As
used herein, the below terms shall have the meanings specified as follows:
“Actual
Cash Receipts” means the amount of all cash proceeds from ordinary course operations actually received by the Loan Parties
and their Subsidiaries during the relevant period, as determined in a manner consistent with the Approved Budget, excluding proceeds
of any Indebtedness.
“Actual
Disbursement Amounts” means the amount of all disbursements actually paid by the Loan Parties and their Subsidiaries during
the relevant period of determination, as determined in a manner consistent with the Approved Budget.
“Actual
Net Cash Flow” means the actual net cash flow of the Loan Parties as of the relevant date of determination which corresponds
to the budgeted net cash flow of the Loan Parties during the relevant period of determination, as determined in a manner consistent with
the Approved Budget.
“Approved
Budget Variance Report” means a weekly report, prepared by the Borrower (after consultation with the Borrower Consultant) and
provided by the Borrower to the Administrative Agent, and as certified by a Responsible Officer of the Borrower as being true, correct
and complete in all material respects showing by line item Actual Cash Receipts, Actual Disbursement Amounts, and Actual Net Cash
Flow as of the last day of the Prior Week and for the Cumulative Four-Week Period then ended, noting therein all variances, on a line-item
basis, from amounts set forth for such period in the Approved Budget for the Prior Week and for the Cumulative Four-Week Period then
ended, and shall include explanations for all material variances (i.e., greater than 10%), together with back-up schedules and supporting
information as reasonably requested by the Administrative Agent. The Approved Budget Variance Report shall be in a form, and shall contain
supporting information, reasonably satisfactory to the Administrative Agent. Such Approved Budget Variance Report may be revised or adjusted
from time to time by the Borrower with the prior written consent of the Administrative Agent.
“Cumulative
Four-Week Period” means (i) for the Approved Budget Variance Report to be delivered on November 24, 2023, the one-week period
ending on November 18, 2023, (ii) for the Approved Budget Variance Report to be delivered on December 1, 2023, the two-week period ending
on November 25, 2023, (iii) for the Approved Budget Variance Report to be delivered on December 8, 2023, the three-week period ending
on December 2, 2023, and (iv) for each Approved Budget Variance Report to be delivered thereafter, the four-week period up to and through
the Saturday of the most recent week ended.
“Prior
Week” means as of any date of determination, the immediately preceding week ended on a Saturday and commencing on the prior
Sunday.
7.21 Borrower Consultant.
Beginning on November 8, 2023 and at all times thereafter, the Borrower shall retain a third-party consultant acceptable to the Administrative
Agent (the “Borrower Consultant”) pursuant to an engagement letter previously acceptable to the Administrative Agent,
and at the sole cost and expense of, the Loan Parties. The Loan Parties (i) covenant and agree that the Loan Parties shall fully
cooperate with the Borrower Consultant (including, without limitation, in connection with the preparation and/or review of the deliverables
required herein, (ii) hereby authorize the Administrative Agent (or its agents or advisors, including the Secured Party Consultant)
to communicate directly with the Borrower Consultant regarding any and all matters related to the Loan Parties, including, without limitation,
all financial reports and projections developed, reviewed or verified by the Borrower Consultant and all additional information, reports
and statements requested by the Administrative Agent or any Lender, and (iii) hereby authorize and direct the Borrower Consultant
to provide the Administrative Agent with copies of reports and other information or materials prepared or reviewed by the Borrower Consultant
as the Administrative Agent, the Secured Party Consultant or any Lender may request; provided, that none of the Loan Parties or Borrower
Consultant will be required to disclose any document, information or other matter (x) in respect of which disclosure to the Administrative
Agent or any Lender (or their respective agent or representatives) is prohibited by law or any binding agreement entered into with third
parties that are not Affiliates of the Borrower (and only so long as such confidentiality obligations were not incurred to avoid disclosure
pursuant to this section) or (y) that is, upon the reasonable advice of the Borrower’s counsel, subject to attorney-client
or similar privilege or constitutes attorney work product.
7.22 Secured Party
Consultant. Each Loan Party hereby consents to and reaffirms the Administrative Agent’s right to retain a financial advisor
(the “Secured Party Consultant”), to perform an independent business, financial and operational review of the Borrower,
the Guarantors, and any of their Subsidiaries, including an assessment of the Borrowing Base Certificates and the Approved Budgets, and
to conduct any additional analysis as reasonably requested by the Administrative Agent. The Loan Parties acknowledge that the Secured
Party Consultant does not have any authority to bind the Administrative Agent or any other Secured Party or any counsel to any Secured
Party to any agreement with any Loan Party, to make any representations or warranties on behalf of any Secured Party or any counsel to
any Secured Party, or otherwise to act on behalf of any Secured Party or any counsel to any Secured Party; and that the Secured Party
Consultant may share with the Secured Parties and the Secured Parties’ counsel and other advisors any information obtained by the
Secured Party Consultant during the course of the discharge of its engagement concerning Loan Parties, their financial condition, business,
prospects, financial forecasts, or the Collateral. Each Loan Party agrees to provide the Secured Party Consultant with such information
concerning such Loan Party, its financial condition, business prospects, forecasts, assets and liabilities as the Secured Party Consultant
may request. The Loan Parties jointly and severally agree to reimburse the Administrative Agent and the Lenders (or their counsels) for
any amounts that any of them pay to the Secured Party Consultant for all of the Secured Party Consultant’s fees and expenses. Each
Loan Party acknowledges and agrees that neither any Secured Party nor any counsel to any Secured Party will have any liability for any
wrongful acts of the Secured Party Consultant.
7.23 Daily Cash Sweep.
Within 30 days after the First Amendment Effective Date, the Loan Parties shall cause to be put into effect a daily automatic sweep of
all amounts from all of the Loan Parties’ accounts at KeyBank to an account at Bank of Montreal. The Loan Parties shall keep that
daily automatic sweep in effect at all times that any Loan Party has any accounts at KeyBank.
(c) Section 9.01(b) of
the Existing Credit Agreement is hereby amended and restated in its entirety as follows:
(b) Specific
Covenants. Any Loan Party fails to perform or observe any term, covenant or agreement contained (i) in any of Sections 7.01(a),
7.01(b), 7.01(c), 7.02(a) to the extent a Reporting Trigger Period exists, 7.03, 7.05, 7.07,
7.10, 7.11, 7.19, 7.20, 7.21, 7.22 or 7.23, Article VIII or the Post-Closing
Agreement, or (ii) in any of Sections 4.04, 7.02(a) to the extent a Reporting Trigger Period does not exist, 7.02(b),
7.02(c), 7.02(e) or 7.02(f) and such failure continues for three (3) or more Business Days; or
(d) Exhibit A of the Post-Closing
Agreement is hereby amended and restated in its entirety as set forth in Exhibit A to this Amendment.
4. Conditions to
Effectiveness of Amendment. This Amendment shall become effective as of the date first written above (the “First Amendment
Effective Date”) upon the satisfaction (or written waiver) of the following conditions precedent:
(a) the Administrative
Agent shall have received this Amendment duly executed and delivered by the Loan Parties and the Lenders;
(b) the Administrative
Agent shall have received an amendment and waiver to the Term Loan Documents duly executed and delivered by the Loan Parties, the Term
Loan Agent and the Term Loan Lenders, in form and substance acceptable to the Administrative Agent; and
(c) The Borrower shall
have paid all fees, charges and disbursements of counsel to the Administrative Agent required to be reimbursed or paid by the Borrower
pursuant to the terms of the Amended Credit Agreement.
5. Representations
and Warranties. In order to induce the Administrative Agent and the Lenders to enter into this Amendment, the Loan Parties hereby
represent and warrant to the Administrative Agent and the Lenders as of the First Amendment Effective Date as follows:
(a) Authorization;
No Contravention. The execution, delivery and performance by each Loan Party of this Amendment, and the consummation of the transactions
contemplated hereby, have been duly authorized by all necessary corporate or other organizational action, and do not and will not (a)
contravene the terms of the Organization Documents of any such Person; (b) conflict with or result in any breach or contravention of,
or the creation of any Lien under (i) any material Contractual Obligation to which such Person is a party or (ii) any order, injunction,
writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject; or (c) violate any
Law.
(b) Governmental Authorization;
Other Consents. No approval, consent, exemption, authorization, or other action by, or notice to, or filing with, any Governmental
Authority or any other Person is necessary or required in connection with (a) the execution, delivery or performance by, or enforcement
against, any Loan Party of this Amendment or the consummation of the transactions contemplated hereby, (b) the grant by any Loan Party
of the Liens granted by it pursuant to the Security Instruments, (c) the perfection or maintenance of the Liens created under the Security
Instruments (including the first priority nature thereof) or (d) the exercise by the Administrative Agent or any Lender of its rights
under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents, except for those which have
been duly obtained, taken, given or made and are in full force and effect and the filing and recording of financing statements and other
documents necessary in order to perfect the Liens created by the Security Instruments.
(c) Binding Effect.
This Amendment has been duly executed and delivered by each Loan Party. This Amendment constitutes a legal, valid, and binding obligation
of each Loan Party, enforceable against each Loan Party in accordance with its terms, except as the enforcement hereof may be limited
by any applicable Debtor Relief Laws or by general equitable principles.
(d) Representations
and Warranties; No Default. The following statements are true on the First Amendment Effective Date, immediately after giving effect
to this Amendment and the consummation of the transactions contemplated by this Amendment taking place on the First Amendment Effective
Date:
(i) The representations
and warranties (other than, with respect to Section 6.07 of the Credit Agreement and solely with respect to the Existing Events of Default)
of the Loan Parties contained in Article VI of the Amended Credit Agreement or any other Loan Document, or which are contained
in any document furnished at any time under or in connection with the Amended Credit Agreement or such other Loan Document, are true
and correct in all material respects on and as of the First Amendment Effective Date (or in the case of any representation or warranty
that is itself subject to a materiality or Material Adverse Effect qualification, in all respects), except to the extent that such representations
and warranties specifically refer to an earlier date, in which case they are true and correct in all material respects (or in the case
of any representation or warranty that is itself subject to a materiality or Material Adverse Effect qualification, in all respects)
as of such earlier date, and except that for purposes of this Section 5(d)(i), the representations and warranties contained
in subsections (a) and (b) of Section 6.05 of the Amended Credit Agreement shall be deemed to refer to the most recent statements furnished
pursuant to clauses (a), (b) and (c), respectively, of Section 7.01 of the Amended Credit Agreement.
(ii) No Default
or Event of Default (other than the Existing Events of Default) has occurred and is continuing, or would result from entering into this
Amendment.
6. Survival of Representations
and Warranties. All representations and warranties made in this Amendment or in any other document delivered pursuant to this Amendment
or in connection herewith or therewith shall survive the execution and delivery hereof and thereof. Such representations and warranties
have been or will be relied upon by the Administrative Agent and the Lenders, regardless of any investigation made by the Administrative
Agent or the Lenders and notwithstanding that the Administrative Agent or any Lender may have had notice or knowledge of any Default
at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any other Obligation shall remain
unpaid or unsatisfied or any Letter of Credit shall remain outstanding.
7. Amendment as a
Loan Document. This Amendment constitutes a “Loan Document” under the Amended Credit Agreement.
8. Effect on Loan
Documents. After giving effect to this Amendment on the First Amendment Effective Date, the Amended Credit Agreement and the other
Loan Documents shall be and remain in full force and effect in accordance with their terms and are hereby ratified and confirmed by each
Loan Party in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this Amendment shall not
operate as a waiver of any right, power, or remedy of the Administrative Agent or the Lenders under the Existing Credit Agreement or
the other Loan Documents. Each Loan Party hereby acknowledges and agrees that, after giving effect to this Amendment, all of its obligations
and liabilities under the Existing Credit Agreement and the other Loan Documents to which it is a party, as such obligations and liabilities
have been amended by this Amendment, are reaffirmed and remain in full force and effect. All references to the Existing Credit Agreement
in any Loan Document or other document or instrument delivered in connection therewith shall be deemed to refer to the Amended Credit
Agreement. Nothing contained herein shall be construed as a novation of the Obligations outstanding under and as defined in the Existing
Credit Agreement, which shall remain in full force and effect, except as modified hereby.
9. Reaffirmation
of Grant of Security Interests. Each Loan Party hereby ratifies and reaffirms its grant to the Administrative Agent, for the benefit
of the Secured Parties, of a continuing security interest in and Lien upon the Collateral, whether now owned or hereafter acquired or
arising, and wherever located, all as provided in the Security Instruments and the other Loan Documents, and each Loan Party hereby ratifies
and reaffirms that the Obligations are and shall continue to be secured by the continuing security interest and Lien granted by each
Loan Party to the Administrative Agent, for the benefit of the Secured Parties, pursuant to the Security Instruments and the other Loan
Documents.
10. Release by the
Loan Parties. Each Loan Party for and on behalf of itself and its legal representatives, successors and assigns, fully, unconditionally,
and irrevocably waives, releases, relinquishes and forever discharges the Administrative Agent, the Lenders and each of their parents,
subsidiaries, and affiliates, its and their respective past, present and future directors, officers, managers, agents, employees, insurers,
attorneys, representatives and all of their respective heirs, successors and assigns, (collectively, the “Released Parties”),
of and from any and all manner of action or causes of action, suits, claims, liabilities, losses, costs, expenses, demands, judgments,
damages (including compensatory and punitive damages), levies and executions of whatsoever kind, nature and/or description arising on
or before giving effect to this Amendment on the First Amendment Effective Date, in each case whether known or unknown, asserted or unasserted,
liquidated or unliquidated, joint or several, fixed or contingent, direct or indirect, contractual or tortious, which the Loan Parties,
or their legal representatives, successors or assigns, ever had or now has or may claim to have against any of the Released Parties,
with respect to any matter whatsoever, including, without limitation, the Loan Documents, the administration of any Loan Documents, the
negotiations relating to this Amendment and the other Loan Documents executed in connection herewith and any other instruments and agreements
executed by the Loan Parties in connection therewith or herewith, arising on or before the date hereof.
11. Limited Effect.
This Amendment relates only to the specific matters expressly covered herein, shall not be considered to be an amendment or waiver of
any rights or remedies that the Administrative Agent may have under the Existing Credit Agreement or any other Loan Document (except
as expressly set forth herein) or under applicable Law, and shall not be considered to create a course of dealing or to otherwise obligate
in any respect the Administrative Agent to execute similar or other amendments or waivers or grant any amendments or waivers under the
same or similar or other circumstances in the future.
12. GOVERNING LAW.
THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
13. Counterparts.
This Amendment may be executed in counterparts (and by different parties hereto on different counterparts), each of which shall
constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed counterpart
of a signature page of this Amendment by facsimile or other electronic imaging means (e.g., “pdf” or “tif”)
shall be effective as delivery of a manually executed counterpart of this Amendment.
[Signature Pages Follow]
IN WITNESS WHEREOF,
the parties hereto have caused this Amendment to Credit Agreement to be executed as of the date first above written.
|
BORROWERS: |
|
|
|
|
PURPLE INNOVATION, LLC, a Delaware limited liability company |
|
|
|
|
By: |
/s/ Todd Vogensen |
|
Name: |
Todd Vogensen |
|
Title: |
Chief Financial Officer |
|
|
|
|
GUARANTORS: |
|
|
|
|
PURPLE INNOVATION, INC., a Delaware corporation |
|
|
|
|
By: |
/s/ Todd Vogensen |
|
Name: |
Todd Vogensen |
|
Title: |
Chief Financial Officer |
|
|
|
|
INTELLIBED, LLC, a Delaware limited liability company |
|
|
|
|
By: |
/s/ Casey K. McGarvey |
|
Name: |
Casey K. McGarvey |
|
Title: |
President |
[Signature Page to First Amendment to Credit Agreement
and Limited Waiver]
|
ADMINISTRATIVE AGENT: |
|
|
|
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BANK OF MONTREAL |
|
|
|
|
By: |
/s/ Lauren Wittert |
|
Name: |
Lauren Wittert |
|
Title: |
Vice President |
|
|
|
|
LENDERS: |
|
|
|
BANK OF MONTREAL, |
|
as a Lender, Letter of Credit Issuer and Swing Line Lender |
|
|
|
|
By: |
/s/ Lauren Wittert |
|
Name: |
Lauren Wittert |
|
Title: |
Vice President |
[Signature Page to First Amendment to Credit Agreement
and Limited Waiver]
Post-Closing Agreement
Exhibit A
| 1. | Within thirty (30) days after the First
Amendment Effective Date, the Loan Parties shall deliver, or shall cause to be delivered,
to the Administrative Agent insurance endorsements with respect to the Loan Parties’
property and liability insurance policies, as required pursuant to Section 7.07 of
the Credit Agreement. |
| 2. | Within thirty (30) days after the First
Amendment Effective Date, each Loan Party shall maintain its primary lockbox deposit accounts
exclusively with Bank of Montreal and shall utilize Bank or Montreal for its primary disbursement
account and other Treasury Management and Other Services, as required pursuant to Section
7.19 of the Credit Agreement. |
| 3. | Within five (5) Business Days after the
First Amendment Effective Date, the Loan Parties shall use commercially reasonable efforts
to deliver UCC-3 amendments, in form and substance reasonably satisfactory to the Administrative
Agent, with respect to the Splitit Inc. UCC-1 financing statements. |
| 4. | Within fifteen (15) days after the First
Amendment Effective Date, the Loan Parties shall have used commercially reasonable efforts
to deliver Lien Waivers with respect to the following leased locations: |
| a. | 4100 North Chapel Ridge Road, Lehi, Utah |
| b. | 1325 Hwy 42 S., Building B, McDonough
Georgia |
| c. | 441 Sheep Lane, Grantsville, Utah |
| d. | 1680 S. Distribution Drive, Salt Lake
City, UT |
| e. | Building 631, Suites 1 and 4, 1835 West
G Ave, Tooele, UT 84074 and Building 641, 1829 West G Ave, Tooele, UT 84074 |
| 5. | Within fifteen (15) days after the First
Amendment Effective Date, the Loan Parties shall have used commercially reasonable efforts
to deliver Lien Waivers from: |
| b. | AIT Worldwide Logistics (formerly Select
Express & Logistics) |
| c. | Sherwood Acquisition Holdings LLC (doing
business as Sherwood Bedding) |
| 6. | Within thirty (30) days after the First
Amendment Effective Date, the Loan Parties shall use commercially reasonable efforts to deliver
UCC-3 amendments, in form and substance reasonably satisfactory to the Administrative Agent,
with respect to the following UCC-1 financing statements: |
| a. | UCC Filing #561476201939 filed in favor
of Hanmi Bank against Advanced Comfort Technologies, Inc. DBA Intellibed on March 4, 2019
with the Utah Division of Corporations & Commercial Code |
| b. | UCC Filing # 565370201931 filed in favor
of BB&T Commercial Equipment Capital Corp. against Advanced Comfort Technologies, Inc.
on April 22, 2019 with the Utah Division of Corporations & Commercial Code |
| c. | UCC Filing # 567240201937 filed in favor
of Crestmark Equipment Finance, a division of MetaBank (as assigned) against Advanced Comfort
Technologies, Inc. on May 13, 2019 with the Utah Division of Corporations & Commercial
Code |
| 7. | UCC Filing # 570559201938 filed in favor
of Crestmark Vendor Finance, a division of MetaBank against Advanced Comfort Technologies,
Inc. on June 26, 2019 with the Utah Division of Corporations & Commercial Code |
| 8. | Within fifteen (15) days after the First
Amendment Effective Date, the Loan Parties shall deliver, or shall cause to be delivered,
to the Administrative Agent Control Agreements with respect to the following Deposit Accounts
and Securities Accounts of the Loan Parties’, as required pursuant to Section 4.04
of the Credit Agreement, or provide evidence to the Administrative Agent that any such
Deposit or Securities Accounts have been closed: |
Name of Company |
|
Type of Account |
|
Account Name,
Number
and Sort
Code (if applicable) |
|
Name & Address
of
Financial Institution |
Intellibed, LLC |
|
Checking/Operations |
|
5105879 |
|
Alta Bank
5824 S State St
Murray, Utah
84107 |
Intellibed, LLC |
|
Business Money Market Account |
|
9940010124725 |
|
Alta Bank
5824 S State St
Murray, Utah
84107 |
Intellibed, LLC |
|
ICS Money Market
Depository Account |
|
9940010124741 |
|
Alta Bank
5824 S State St
Murray, Utah
84107 |
Exhibit
10.2
Execution
Version
FIRST
AMENDMENT TO TERM LOAN CREDIT AGREEMENT
AND
LIMITED WAIVER
This
FIRST AMENDMENT TO TERM LOAN CREDIT AGREEMENT AND LIMITED WAIVER (this “Amendment”), dated as of November 6, 2023,
is entered into among Purple Innovation, LLC, a Delaware limited liability company (the “Company” or “Borrower”),
Purple Innovation, Inc., a Delaware corporation (“Holdings”), Intellibed, LLC, a Delaware limited liability company
(“Intellibed”), each lender from time to time party hereto (collectively, the “Lenders” and individually,
a “Lender”), and Callodine Commercial Finance, LLC, as Administrative Agent (as hereinafter defined).
PRELIMINARY
STATEMENTS
A.
Reference is hereby made to that certain Term Loan Credit Agreement, dated as of August 7, 2023 (as amended, amended and restated, extended,
supplemented or otherwise modified in writing from time to time and in effect immediately prior to the effectiveness of this Amendment,
the “Existing Credit Agreement”, and the Existing Credit Agreement, as amended by this Amendment, the “Amended
Credit Agreement”), among (a) Holdings, (b) the Borrower, (c) Intellibed, (d) the Lenders and (e) Callodine Commercial
Finance, LLC, as administrative agent (in such capacity, together with its successors or assigns in such capacity, the “Administrative
Agent”).
B.
The following Events of Default have occurred and are continuing under the Existing Credit Agreement (individually, each an “Existing
Event of Default”, and collectively, the “Existing Events of Default”): (a) the Events of Default under
Section 9.01(b) of the Existing Credit Agreement due to Borrower’s failure to deliver the monthly financial statements for the
months of July and August 2023 within the required time periods as set forth in Section 7.01(c) of the Existing Credit Agreement, (b)
the Events of Default under Section 9.01(b) of the Existing Credit Agreement due to the Borrower’s failure to deliver the Compliance
Certificates for the months of July and August 2023 within the required time periods set forth in Section 7.02(c) of the Existing Credit
Agreement, (c) the Events of Default under Section 9.01(b) of the Existing Credit Agreement due to the Borrower’s failure prior
to the date hereof to complete the requirements set forth in the Post-Closing Agreement within the required time periods set forth therein,
(d) the Events of Default under Section 9.01(b) of the Existing Credit Agreement due to the Borrower’s failure to deliver notice
of the foregoing Events of Default to the Administrative Agent as required by Section 7.03(a) of the Existing Credit Agreement, (e) the
Event of Default under Section 9.01(b) of the Existing Credit Agreement due to Borrower’s failure to deliver notice of the appointment
of Todd Vogensen as Chief Financial Officer within the required time period as set forth in Section 7.03(g) of the Existing Credit Agreement
and (f) the Events of Default under Section 9.01(e) of the Existing Credit Agreement due to the “Events of Default” (as such
term is defined in the Revolving Credit Agreement) existing under the Term Loan Credit Agreement as such Events of Default shall be waived
on the First Amendment Effective Date pursuant to an amendment and waiver to the Revolving Loan Documents duly executed and delivered
by the Loan Parties, the Revolving Agent and the Revolving Lenders, in form and substance acceptable to the Administrative Agent.
C.
The Company has requested that the Administrative Agent and the Lenders (i) waive the Existing Events of Default and (ii) make certain
modifications to the Existing Credit Agreement as set forth herein, and the Administrative Agent and the Lenders have agreed to grant
such modifications, subject to the terms and conditions and in reliance on the representations set forth herein.
Accordingly,
in consideration of the mutual agreements contained in the Existing Credit Agreement and in this Amendment, and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto agree as follows:
1.
Defined Terms. Unless otherwise defined in this Amendment, capitalized terms used this Amendment, including in the preamble and
preliminary statements hereto, and not otherwise defined herein shall have the meanings ascribed to such terms in the Amended Credit
Agreement.
2.
Limited Waiver under Credit Agreement. Pursuant to the request of the Loan Parties and subject to the satisfaction of the conditions
set forth in Section 4 hereof and in reliance on the representations and warranties set forth herein, notwithstanding anything
to the contrary contained herein or in the Amended Credit Agreement, as of the First Amendment Effective Date, the Administrative Agent
and Lenders hereby waive the Existing Events of Default. The limited waiver of the Existing Events of Default shall be effective only
in this specific instance and shall not entitle the Loan Parties to any other or further waivers in any similar or other circumstances.
The Administrative Agent’s and the Lenders’ agreements to waive their rights and remedies shall be limited precisely as written
and shall not be deemed to (i) be an amendment or a waiver of any other Default or Event of Default or any other term or condition of
the Amended Credit Agreement or other Loan Documents or to prejudice any right or remedy which such persons may now have or may have
in the future under or in connection with the Amended Credit Agreement, the other Loan Documents or otherwise other than with respect
to the Existing Events of Default, (ii) be a consent to any amendment, waiver or modification of any other term or condition of the Amended
Credit Agreement or of any other Loan Document, (iii) prejudice any right that the Administrative Agent or the Lenders have or may have
in the future under or in connection with the Amended Credit Agreement or any other Loan Document, (iv) create any obligation to forbear
from taking any enforcement action, or to make any further extensions of credit except with respect to the Existing Events of Default,
(v) establish a custom or course of dealing among the Borrower, on the one hand, or Administrative Agent or any Lender, on the other
hand or (vi) be a consent to any future agreement or waiver.
3.
Amendments to Existing Credit Agreement. Subject to the satisfaction (or written waiver) of the conditions set forth in Section
4 below and in reliance upon the representations and warranties of the Loan Parties set forth in Section 6 below, as of the
First Amendment Effective Date (as hereinafter defined) the Existing Credit Agreement (excluding the schedules and exhibits thereto,
which shall remain in full force and effect) is hereby amended in the following manner:
(a)
Section 2.05(a)(i) of the Existing Credit Agreement is hereby amended by inserting the following text immediately after the text “commencing”
in such Section: “on (and, for the avoidance of doubt, including an instalment on)”.
(b)
Section 7.02(a) of the Existing Credit Agreement is hereby amended and restated in its entirety as follows:
(A)
(a) the Borrower Agent shall execute and deliver to Administrative Agent, in a form acceptable to the Administrative Agent, (x) on or
before the 20th day of each month a Borrowing Base Certificate as of the last day of the immediately preceding month, and
(y) Borrowing Base Certificates weekly on or before Wednesday of each week and as of the last day of the immediately preceding week,
in each case together with such supporting materials as the Administrative Agent shall reasonably request (including weekly reporting
of gross inventory and rolling forward accounts receivable data by reporting weekly sales, cash collections and credits and monthly reporting
of Credit Card Receivables, inventory ineligibles and accounts receivable ineligibles); provided that, to the extent approved by the
Administrative Agent in its reasonable discretion, the Borrower will not be required to update certain items in the weekly Borrowing
Base Certificate to the extent that such items are not available on a weekly basis in the ordinary course of business using commercially
reasonable efforts (it being agreed that the foregoing shall not prevent the Administrative Agent from implementing Availability Reserves
to account for such items). All calculations of Availability in any Borrowing Base Certificate shall initially be made by Borrowers and
certified by a Responsible Officer, provided that the Administrative Agent may from time to time review and adjust any such calculation
in its Credit Judgement (a) to reflect its estimate of declines in value of any Collateral, including due to collections received in
the Concentration Account or otherwise; (b) to adjust advance rates to reflect changes in dilution, quality, mix and other factors affecting
Collateral, including delay of payment of accounts payable beyond past practice; and (c) to the extent the calculation is not made in
accordance with this Agreement or does not accurately reflect the Availability Reserve;
(c)
Article VII of the Existing Credit Agreement is hereby amended by adding the following Sections at the end thereof:
| 7.19 | Budgets
and Variance Reports. |
(a)
For purposes of this Amendment, the term “Approved Budget” shall mean a 13-week cash flow forecast and budget of the Loan
Parties’ and their Subsidiaries’ consolidated (A) projected cash receipts, (B) projected disbursements, (C) projected operating
cash flow, (D) projected net cash flow, (E) projected Borrowings to be requested by the Borrower under the Revolving Credit Agreement,
and (F) the projected Borrowing Base and Availability, including back-up schedules and supporting information as reasonably requested
by the Administrative Agent, as each Approved Budget may be revised or adjusted by the Borrower from time to time with the prior written
consent of the Administrative Agent.
(b)
Beginning on November 17, 2023, the Borrower shall deliver to the Administrative Agent on or before each Friday (or, if such day is not
a Business Day, on the next succeeding Business Day) an initial (or, in the case of any subsequent week, updated) Approved Budget for
the 13-week period commencing as of the Sunday of such week, in form and substance satisfactory to Administrative Agent (it being understood
that each subsequent Approved Budget shall only add projections for the last week of the 13-week period covered thereby, shall contain
an explanation if the projections for the last week of the 13-week period covered thereby are different in any material respect from
the prior weeks, and shall not modify any prior periods, and no such initial, updated, modified or supplemented budget shall be effective
until so approved by the Administrative Agent and only once so approved by the Administrative Agent shall it be deemed an “Approved
Budget”).
(c)
Beginning on November 24, 2023, the Borrower shall deliver to the Administrative Agent on or before Friday (or, if such day is not a
Business Day, on the next succeeding Business Day) of each week an Approved Budget Variance Report, and such Approved Budget Variance
Report shall be in form and substance satisfactory to the Administrative Agent, and executed by a Responsible Officer of the Borrower
certifying that (A) the Loan Parties are in compliance with the covenants contained herein and (B) no Default or Event of Default
has occurred or, if such a Default or Event of Default has occurred, specifying the nature and extent thereof and any corrective action
taken or proposed to be taken with respect thereto.
(d)
As used herein, the below terms shall have the meanings specified as follows:
“Actual
Cash Receipts” means the amount of all cash proceeds from ordinary course operations actually received by the Loan Parties
and their Subsidiaries during the relevant period, as determined in a manner consistent with the Approved Budget, excluding proceeds
of any Indebtedness.
“Actual
Disbursement Amounts” means the amount of all disbursements actually paid by the Loan Parties and their Subsidiaries during
the relevant period of determination, as determined in a manner consistent with the Approved Budget.
“Actual
Net Cash Flow” means the actual net cash flow of the Loan Parties as of the relevant date of determination which corresponds
to the budgeted net cash flow of the Loan Parties during the relevant period of determination, as determined in a manner consistent with
the Approved Budget.
“Approved
Budget Variance Report” means a weekly report, prepared by the Borrower (after consultation with the Borrower Consultant) and
provided by the Borrower to the Administrative Agent, and as certified by a Responsible Officer of the Borrower as being true, correct
and complete in all material respects showing by line item Actual Cash Receipts, Actual Disbursement Amounts, and Actual Net Cash
Flow as of the last day of the Prior Week and for the Cumulative Four-Week Period then ended, noting therein all variances, on a line-item
basis, from amounts set forth for such period in the Approved Budget for the Prior Week and for the Cumulative Four-Week Period then
ended, and shall include explanations for all material variances (i.e., greater than 10%), together with back-up schedules and supporting
information as reasonably requested by the Administrative Agent. The Approved Budget Variance Report shall be in a form, and shall contain
supporting information, reasonably satisfactory to the Administrative Agent. Such Approved Budget Variance Report may be revised or adjusted
from time to time by the Borrower with the prior written consent of the Administrative Agent.
“Cumulative
Four-Week Period” means (i) for the Approved Budget Variance Report to be delivered on November 24, 2023, the one-week period
ending on November 18, 2023, (ii) for the Approved Budget Variance Report to be delivered on December 1, 2023, the two-week period ending
on November 25, 2023, (iii) for the Approved Budget Variance Report to be delivered on December 8, 2023, the three-week period ending
on December 2, 2023, and (iv) for each Approved Budget Variance Report to be delivered thereafter, the four-week period up to and through
the Saturday of the most recent week ended.
“Prior
Week” means as of any date of determination, the immediately preceding week ended on a Saturday and commencing on the prior
Sunday.
7.20
Borrower Consultant. Beginning on November 8, 2023 and at all times thereafter, the Borrower shall retain a third-party consultant
acceptable to the Administrative Agent (the “Borrower Consultant”) pursuant to an engagement letter previously acceptable
to the Administrative Agent, and at the sole cost and expense of, the Loan Parties. The Loan Parties (i) covenant and agree that
the Loan Parties shall fully cooperate with the Borrower Consultant (including, without limitation, in connection with the preparation
and/or review of the deliverables required herein), (ii) hereby authorize the Administrative Agent (or its agents or advisors, including
the Secured Party Consultant) to communicate directly with the Borrower Consultant regarding any and all matters related to the Loan
Parties, including, without limitation, all financial reports and projections developed, reviewed or verified by the Borrower Consultant
and all additional information, reports and statements requested by the Administrative Agent or any Lender, and (iii) hereby authorize
and direct the Borrower Consultant to provide the Administrative Agent with copies of reports and other information or materials prepared
or reviewed by the Borrower Consultant as the Administrative Agent, the Secured Party Consultant or any Lender may request; provided,
that none of the Loan Parties or Borrower Consultant will be required to disclose any document, information or other matter (x) in
respect of which disclosure to the Administrative Agent or any Lender (or their respective agent or representatives) is prohibited by
law or any binding agreement entered into with third parties that are not Affiliates of the Borrower (and only so long as such confidentiality
obligations were not incurred to avoid disclosure pursuant to this section) or (y) that is, upon the reasonable advice of the Borrower’s
counsel, subject to attorney-client or similar privilege or constitutes attorney work product.
7.21
Secured Party Consultant. Each Loan Party hereby consents to and reaffirms the Administrative Agent’s right to retain a financial
advisor (the “Secured Party Consultant”), to perform an independent business, financial and operational review of
the Borrower, the Guarantors, and any of their Subsidiaries, including an assessment of the Borrowing Base Certificates and the Approved
Budgets, and to conduct any additional analysis as reasonably requested by the Administrative Agent. The Loan Parties acknowledge that
the Secured Party Consultant does not have any authority to bind the Administrative Agent or any other Secured Party or any counsel to
any Secured Party to any agreement with any Loan Party, to make any representations or warranties on behalf of any Secured Party or any
counsel to any Secured Party, or otherwise to act on behalf of any Secured Party or any counsel to any Secured Party; and that the Secured
Party Consultant may share with the Secured Parties and the Secured Parties’ counsel and other advisors any information obtained
by the Secured Party Consultant during the course of the discharge of its engagement concerning Loan Parties, their financial condition,
business, prospects, financial forecasts, or the Collateral. Each Loan Party agrees to provide the Secured Party Consultant with such
information concerning such Loan Party, its financial condition, business prospects, forecasts, assets and liabilities as the Secured
Party Consultant may request. The Loan Parties jointly and severally agree to reimburse the Administrative Agent and the Lenders (or
their counsels) for any amounts that any of them pay to the Secured Party Consultant for all of the Secured Party Consultant’s
fees and expenses. Each Loan Party acknowledges and agrees that neither any Secured Party nor any counsel to any Secured Party will have
any liability for any wrongful acts of the Secured Party Consultant.
(d)
Section 9.01(b) of the Existing Credit Agreement is hereby amended and restated in its entirety as follows:
(b)
Specific Covenants. Any Loan Party fails to perform or observe
any term, covenant or agreement contained (i) in any of Sections 7.01(a), 7.01(b), 7.01(c), 7.02(a) to the
extent a Reporting Trigger Period exists, 7.03, 7.05, 7.07, 7.10, 7.11, 7.19, 7.20 or
7.21, Article VIII or the Post-Closing Agreement, or (ii) in any of Sections 4.04, 7.02(a) to the extent
a Reporting Trigger Period does not exist, 7.02(b), 7.02(c), 7.02(e) or 7.02(f) and such failure continues
for three (3) or more Business Days; or
(e)
Exhibit A of the Post-Closing Agreement is hereby amended and restated in its entirety as set forth in Exhibit A to this Amendment.
4.
Conditions to Effectiveness of Amendment. This Amendment shall become effective as of the date first written above (the “First
Amendment Effective Date”) upon the satisfaction (or written waiver) of the following conditions precedent:
(a)
the Administrative Agent shall have received this Amendment duly executed and delivered by the Loan Parties and the Lenders;
(b)
the Administrative Agent shall have received an amendment and waiver to the Revolving Loan Documents duly executed and delivered by the
Loan Parties, the Revolving Agent and the Revolving Lenders, in form and substance acceptable to the Administrative Agent; and
(c)
The Borrower shall have paid all fees, charges and disbursements of counsel to the Administrative Agent required to be reimbursed or
paid by the Borrower pursuant to the terms of the Amended Credit Agreement.
5.
Representations and Warranties. In order to induce the Administrative Agent and the Lenders to enter into this Amendment, the
Loan Parties hereby represent and warrant to the Administrative Agent and the Lenders as of the First Amendment Effective Date as follows:
(a)
Authorization; No Contravention. The execution, delivery and performance by each Loan Party of this Amendment, and the consummation
of the transactions contemplated hereby, have been duly authorized by all necessary corporate or other organizational action, and do
not and will not (a) contravene the terms of the Organization Documents of any such Person; (b) conflict with or result in any breach
or contravention of, or the creation of any Lien under (i) any material Contractual Obligation to which such Person is a party or (ii)
any order, injunction, writ or decree of any Governmental Authority or any arbitral award to which such Person or its property is subject;
or (c) violate any Law.
(b)
Governmental Authorization; Other Consents. No approval, consent, exemption, authorization, or other action by, or notice to,
or filing with, any Governmental Authority or any other Person is necessary or required in connection with (a) the execution, delivery
or performance by, or enforcement against, any Loan Party of this Amendment or the consummation of the transactions contemplated hereby,
(b) the grant by any Loan Party of the Liens granted by it pursuant to the Security Instruments, (c) the perfection or maintenance of
the Liens created under the Security Instruments (including the first priority nature thereof) or (d) the exercise by the Administrative
Agent or any Lender of its rights under the Loan Documents or the remedies in respect of the Collateral pursuant to the Collateral Documents,
except for those which have been duly obtained, taken, given or made and are in full force and effect and the filing and recording of
financing statements and other documents necessary in order to perfect the Liens created by the Security Instruments.
(c)
Binding Effect. This Amendment has been duly executed and delivered by each Loan Party. This Amendment constitutes a legal, valid,
and binding obligation of each Loan Party, enforceable against each Loan Party in accordance with its terms, except as the enforcement
hereof may be limited by any applicable Debtor Relief Laws or by general equitable principles.
(d)
Representations and Warranties; No Default. The following statements are true on the First Amendment Effective Date, immediately
after giving effect to this Amendment and the consummation of the transactions contemplated by this Amendment taking place on the First
Amendment Effective Date:
(i)
The representations and warranties (other than, with respect to Section 6.07 of the Credit Agreement and solely with respect to the Existing
Events of Default) of the Loan Parties contained in Article VI of the Amended Credit Agreement or any other Loan Document,
or which are contained in any document furnished at any time under or in connection with the Amended Credit Agreement or such other Loan
Document, are true and correct in all material respects on and as of the First Amendment Effective Date (or in the case of any representation
or warranty that is itself subject to a materiality or Material Adverse Effect qualification, in all respects), except to the extent
that such representations and warranties specifically refer to an earlier date, in which case they are true and correct in all material
respects (or in the case of any representation or warranty that is itself subject to a materiality or Material Adverse Effect qualification,
in all respects) as of such earlier date, and except that for purposes of this Section 5(d)(i), the representations and warranties
contained in subsections (a) and (b) of Section 6.05 of the Amended Credit Agreement shall be deemed to refer to the most recent statements
furnished pursuant to clauses (a), (b) and (c), respectively, of Section 7.01 of the Amended Credit Agreement.
(ii)
No Default or Event of Default (other than the Existing Events of Default) has occurred and is continuing, or would result from entering
into this Amendment.
6.
Survival of Representations and Warranties. All representations and warranties made in this Amendment or in any other document
delivered pursuant to this Amendment or in connection herewith or therewith shall survive the execution and delivery hereof and thereof.
Such representations and warranties have been or will be relied upon by the Administrative Agent and the Lenders, regardless of any investigation
made by the Administrative Agent or the Lenders and notwithstanding that the Administrative Agent or any Lender may have had notice or
knowledge of any Default at the time of any Credit Extension, and shall continue in full force and effect as long as any Loan or any
other Obligation shall remain unpaid or unsatisfied or any Letter of Credit shall remain outstanding.
7.
Amendment as a Loan Document. This Amendment constitutes a “Loan Document” under the Amended Credit Agreement.
8.
Effect on Loan Documents. After giving effect to this Amendment on the First Amendment Effective Date, the Amended Credit Agreement
and the other Loan Documents shall be and remain in full force and effect in accordance with their terms and are hereby ratified and
confirmed by each Loan Party in all respects. Except as expressly set forth herein, the execution, delivery, and performance of this
Amendment shall not operate as a waiver of any right, power, or remedy of the Administrative Agent or the Lenders under the Existing
Credit Agreement or the other Loan Documents. Each Loan Party hereby acknowledges and agrees that, after giving effect to this Amendment,
all of its obligations and liabilities under the Existing Credit Agreement and the other Loan Documents to which it is a party, as such
obligations and liabilities have been amended by this Amendment, are reaffirmed and remain in full force and effect. All references to
the Existing Credit Agreement in any Loan Document or other document or instrument delivered in connection therewith shall be deemed
to refer to the Amended Credit Agreement. Nothing contained herein shall be construed as a novation of the Obligations outstanding under
and as defined in the Existing Credit Agreement, which shall remain in full force and effect, except as modified hereby.
9.
Reaffirmation of Grant of Security Interests. Each Loan Party hereby ratifies and reaffirms its grant to the Administrative Agent,
for the benefit of the Secured Parties, of a continuing security interest in and Lien upon the Collateral, whether now owned or hereafter
acquired or arising, and wherever located, all as provided in the Security Instruments and the other Loan Documents, and each Loan Party
hereby ratifies and reaffirms that the Obligations are and shall continue to be secured by the continuing security interest and Lien
granted by each Loan Party to the Administrative Agent, for the benefit of the Secured Parties, pursuant to the Security Instruments
and the other Loan Documents.
10.
Release by the Loan Parties. Each Loan Party for and on behalf of itself and its legal representatives, successors and assigns,
fully, unconditionally, and irrevocably waives, releases, relinquishes and forever discharges the Administrative Agent, the Lenders and
each of their parents, subsidiaries, and affiliates, its and their respective past, present and future directors, officers, managers,
agents, employees, insurers, attorneys, representatives and all of their respective heirs, successors and assigns, (collectively, the
“Released Parties”), of and from any and all manner of action or causes of action, suits, claims, liabilities, losses,
costs, expenses, demands, judgments, damages (including compensatory and punitive damages), levies and executions of whatsoever kind,
nature and/or description arising on or before giving effect to this Amendment on the First Amendment Effective Date, in each case whether
known or unknown, asserted or unasserted, liquidated or unliquidated, joint or several, fixed or contingent, direct or indirect, contractual
or tortious, which the Loan Parties, or their legal representatives, successors or assigns, ever had or now has or may claim to have
against any of the Released Parties, with respect to any matter whatsoever, including, without limitation, the Loan Documents, the administration
of any Loan Documents, the negotiations relating to this Amendment and the other Loan Documents executed in connection herewith and any
other instruments and agreements executed by the Loan Parties in connection therewith or herewith, arising on or before the date hereof.
11.
Limited Effect. This Amendment relates only to the specific matters expressly covered herein, shall not be considered to be an
amendment or waiver of any rights or remedies that the Administrative Agent may have under the Existing Credit Agreement or any other
Loan Document (except as expressly set forth herein) or under applicable Law, and shall not be considered to create a course of dealing
or to otherwise obligate in any respect the Administrative Agent to execute similar or other amendments or waivers or grant any amendments
or waivers under the same or similar or other circumstances in the future.
12.
GOVERNING LAW. THIS AMENDMENT SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
13.
Counterparts. This Amendment may be executed in counterparts (and by different parties hereto on different counterparts),
each of which shall constitute an original, but all of which when taken together shall constitute a single contract. Delivery of an executed
counterpart of a signature page of this Amendment by facsimile or other electronic imaging means (e.g., “pdf” or “tif”)
shall be effective as delivery of a manually executed counterpart of this Amendment.
[Signature
Pages Follow]
IN
WITNESS WHEREOF, the parties hereto have caused this Amendment to Term Loan Credit Agreement to be executed as of the date first
above written.
|
BORROWERS: |
|
|
|
PURPLE INNOVATION, LLC, a Delaware limited liability
company |
|
|
|
By: |
/s/ Todd Vogensen |
|
Name: |
Todd Vogensen |
|
Title: |
Chief Financial Officer |
|
|
|
GUARANTORS: |
|
|
|
PURPLE INNOVATION, INC., a Delaware corporation |
|
|
|
By: |
/s/ Todd Vogensen |
|
Name: |
Todd Vogensen |
|
Title: |
Chief Financial Officer |
|
|
|
INTELLIBED, LLC, a Delaware limited liability company |
|
|
|
By: |
/s/ Casey K. McGarvey |
|
Name: |
Casey K. McGarvey |
|
Title: |
President |
[Signature
Page to First Amendment to Term Loan Credit Agreement and Limited Waiver]
|
ADMINISTRATIVE AGENT: |
|
|
|
CALLODINE COMMERCIAL FINANCE, LLC |
|
|
|
By: |
/s/ Michael Watson |
|
Name: |
Michael Watson |
|
Title: |
Managing Director |
[Signature
Page to First Amendment to Term Loan Credit Agreement and Limited Waiver]
|
LENDERS: |
|
|
|
|
CALLODINE COMMERCIAL FINANCE SPV, LLC,
as a Term Loan Lender |
|
|
|
|
By: |
/s/ Stephen
Rainville |
|
Name: |
Stephen Rainville |
|
Title: |
CFO/COO |
[Signature
Page to First Amendment to Term Loan Credit Agreement and Limited Waiver]
|
CALLODINE ASSET BASED LOAN FUND II,
LP, as a Term Loan Lender |
|
|
|
|
By: |
Callodine Commercial Partners, LLC, its General Partner |
|
|
|
|
By: |
/s/ Stephen
Rainville |
|
Name: |
Stephen Rainville |
|
Title: |
CFO/COO |
[Signature
Page to First Amendment to Term Loan Credit Agreement and Limited Waiver]
|
CALLODINE PERPETUAL ABL FUND SPV, LLC,
as a Term Loan Lender |
|
|
|
|
By: |
Callodine Perpetual ABL Fund, LP, its Member |
|
|
|
|
By: |
Callodine Commercial Partners, LLC, its General Partner |
|
|
|
|
By: |
/s/ Stephen
Rainville |
|
Name: |
Stephen Rainville |
|
Title: |
CFO/COO |
[Signature
Page to First Amendment to Term Loan Credit Agreement and Limited Waiver]
Post-Closing
Agreement
Exhibit
A
| 1. | Within
thirty (30) days after the First Amendment Effective Date, the Loan Parties shall deliver,
or shall cause to be delivered, to the Administrative Agent insurance endorsements with respect
to the Loan Parties’ property and liability insurance policies, as required pursuant
to Section 7.07 of the Credit Agreement. |
| 2. | Within
five (5) Business Days after the First Amendment Effective Date, the Loan Parties shall have
used commercially reasonable efforts to deliver UCC-3 amendments, in form and substance reasonably
satisfactory to the Administrative Agent, with respect to the Splitit Inc. UCC-1 financing
statements. |
| 3. | Within
fifteen (15) days after the First Amendment Effective Date, the Loan Parties shall have used
commercially reasonable efforts to deliver Lien Waivers with respect to the following leased
locations: |
| a. | 4100
North Chapel Ridge Road, Lehi, Utah |
| b. | 1325
Hwy 42 S., Building B, McDonough Georgia |
| c. | 441
Sheep Lane, Grantsville, Utah |
| d. | 1680
S. Distribution Drive, Salt Lake City, UT |
| e. | Building
631, Suites 1 and 4, 1835 West G Ave, Tooele, UT 84074 and Building 641, 1829 West G Ave,
Tooele, UT 84074 |
| 4. | Within
fifteen (15) days after the First Amendment Effective Date, the Loan Parties shall have used
commercially reasonable efforts to deliver Lien Waivers from: |
| b. | AIT
Worldwide Logistics (formerly Select Express & Logistics) |
| c. | Sherwood
Acquisition Holdings LLC (doing business as Sherwood Bedding) |
| 5. | Within
thirty (30) days after the First Amendment Effective Date, the Loan Parties shall use commercially
reasonable efforts to deliver UCC-3 amendments, in form and substance reasonably satisfactory
to the Administrative Agent, with respect to the following UCC-1 financing statements: |
| a. | UCC
Filing #561476201939 filed in favor of Hanmi Bank against Advanced Comfort Technologies,
Inc. DBA Intellibed on March 4, 2019 with the Utah Division of Corporations & Commercial
Code |
| b. | UCC
Filing # 565370201931 filed in favor of BB&T Commercial Equipment Capital Corp. against
Advanced Comfort Technologies, Inc. on April 22, 2019 with the Utah Division of Corporations
& Commercial Code |
| c. | UCC
Filing # 567240201937 filed in favor of Crestmark Equipment Finance, a division of MetaBank
(as assigned) against Advanced Comfort Technologies, Inc. on May 13, 2019 with the Utah Division
of Corporations & Commercial Code |
| d. | UCC
Filing # 570559201938 filed in favor of Crestmark Vendor Finance, a division of MetaBank
against Advanced Comfort Technologies, Inc. on June 26, 2019 with the Utah Division of Corporations
& Commercial Code |
| 6. | Within
fifteen (15) days after the First Amendment Effective Date, the Loan Parties shall deliver,
or shall cause to be delivered, to the Administrative Agent Control Agreements with respect
to the following Deposit Accounts and Securities Accounts of the Loan Parties’, as
required pursuant to Section 4.04 of the Credit Agreement, or provide evidence to
the Administrative Agent that any such Deposit or Securities Accounts have been closed: |
Name
of Company |
|
Type
of Account |
|
Account
Name,
Number and Sort
Code (if applicable) |
|
Name
& Address of
Financial Institution |
Intellibed, LLC |
|
Checking/Operations |
|
5105879 |
|
Alta Bank
5824 S State St
Murray, Utah
84107 |
Intellibed, LLC |
|
Business Money Market Account |
|
9940010124725 |
|
Alta Bank
5824 S State St
Murray, Utah
84107 |
Intellibed, LLC |
|
ICS
Money Market
Depository
Account |
|
9940010124741 |
|
Alta Bank
5824 S State St
Murray, Utah
84107 |
Exhibit 99.1
Purple Innovation Reports Third Quarter 2023
Results
Third Quarter Revenue Increased 19% Sequentially
vs. Second Quarter and Just Short of Year Ago
New Product Transition Costs Temporarily Weighing on Margins
Company Expecting Return to Year-over-Year Revenue
Growth in the Fourth Quarter
Lehi, Utah, November 9, 2023 – 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 third quarter ended September 30, 2023.
Third Quarter Financial Summary (Comparisons
versus Third Quarter 2022 and Second Quarter 2023)1
| ● | Net
revenue decreased 2.0% to $140.0 million compared to 3Q22 and increased 18.8% compared to 2Q23. |
| o | Wholesale
revenue increased 2.6% compared to 3Q22 and increased 20.0% compared to 2Q23. |
| o | Direct-to-Consumer
(DTC) revenue decreased 5.2% compared to 3Q22 and increased 17.8% compared to 2Q23. |
| ● | Gross
margin was 33.8% compared to 41.3% in 3Q22 and 30.1% in 2Q23. |
| o | Adjusted gross margin, which excludes discounts and transitional costs
associated with the new product transition, was 37.1% in 3Q23 compared to 37.2% in 2Q23. |
| ● | Operating expenses were $79.9 million, or 57.1% of revenue compared to $58.1 million, or 40.7% of revenue
in 3Q22 and $75.7 million, or 64.3% in 2Q23. |
| ● | Operating loss was $(32.6) million compared to operating income of
$0.9 million in 3Q22 and an operating loss of ($40.3) million in 2Q23. |
| ● | Net
loss was $(36.0) million as compared to net income of $2.0 million in 3Q22 and a net loss of $(40.5) million in 2Q23. |
| o | Adjusted
net loss was $(19.4) million, or $(0.18) per diluted share, as compared to adjusted net income of $2.5 million, or $0.03 per diluted
share, in 3Q22 and adjusted net loss of $(24.1) million, or $(0.23) per diluted share, in 2Q23. |
| ● | EBITDA
was $(29.7) million compared to $7.0 million in 3Q22 and $(34.3) million in 2Q23. |
| o | Adjusted
EBITDA decreased to $(16.3) million compared to $11.8 million in 3Q22 and $(21.5) million in 2Q23. |
| ● | Cash
and cash equivalents were $26.6 million at September 30, 2023. |
“Our third quarter top-line performance demonstrates that our
Path to Premium Sleep strategy is gaining traction,” said Chief Executive Officer Rob DeMartini. “Since launching our innovative
new mattresses and enhanced brand campaign in May and converting the majority of our retail partner floor sets to our new premium and
luxury collections over the past several months, we’ve seen a steady improvement in demand for Purple mattresses despite ongoing
industry softness. We are encouraged by the continued sequential acceleration in revenue and we are focused on driving further improvement
across each of our distribution channels during the fourth quarter and into 2024. While market conditions and one-time costs associated
with our new product transition have pressured our bottom line this year, we remain confident that we are well positioned to continue
taking market share and deliver sustained, profitable growth over the long-term.”
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. |
Third Quarter 2023 Review
Third quarter 2023 net revenue decreased 2.0% to $140.0 million from
$142.9 million in the third quarter of 2022. This decrease was driven by soft demand for home related-products in the current operating
environment, nearly fully offset by the positive response to the Company’s new product lineup including its higher priced Premium
and Luxe collections, along with increased advertising spend to support the new product launch and enhanced brand positioning. By channel,
wholesale revenue increased 2.6% and DTC revenue declined 5.2%. DTC net revenues declined due to lower e-commerce revenue partially offset
by growth in Purple retail showroom revenue driven by the addition of 5 showrooms over the previous 12 months.
Gross margin for the third quarter 2023 decreased to 33.8% compared
to 41.3% in the year ago period. Adjusted gross margin, which excludes discounts and one-time costs associated with the product transition,
was 37.1% in the current year quarter. These discounts and costs include industry standard price reductions on the sell-in of new mattress
floor models to wholesale partners coupled with increased discounting of discontinued models sold through the Company’s DTC channels
associated with the transition to the new premium and luxury product lineups. In addition, the Company experienced increased labor and
airfreight costs associated with the new product launch. Net of these transitional items, gross margins were impacted by the wrap-around
on manufacturing efficiencies from last year, when we had a higher amount of inventory production, and a channel mix shift in revenue
to wholesale which carries a lower average selling price than DTC channel sales. Wholesale revenues comprised approximately 43% of net
revenue for the quarter, compared with approximately 41% in the same quarter last year.
Operating expenses were $79.9 million, or 57.1% of net revenue for
the third quarter of 2023 compared to $58.1 million, or 40.7% of net revenue in the year ago period. This increase in operating expenses
was largely driven by a $12.6 million increase in advertising expenses to support the new product launch including a new brand campaign
that highlights Purple’s premium positioning and showcases the benefits of its proprietary sleep technology and a $6.9 million loss
on the impairment of goodwill.
Operating loss was $(32.6) million for the third quarter 2023 compared
to operating income of $0.9 million in the prior year period.
Net loss attributable to Purple Innovation, Inc. was $(36.0) million
for the third quarter 2023 compared to net income of $2.0 million in the year ago period. Adjusted net income, which excludes adjustments
for certain non-cash items and other items the Company does not consider in the evaluation of ongoing operational performance, including
losses associated with the extinguishment of debt, impairment of goodwill, change in fair value of warrant liabilities, Board special
committee fees, Acquisition expenses and gain on effective settlement in acquisition was $(19.4) million, or $(0.18) per diluted share,
compared to $2.5 million, or $0.03 per diluted share in the prior year period. Adjusted net income has also been adjusted to reflect an
estimated effective income tax rate of 25.9% for the current year period and 25.1% for the comparable prior year period.
EBITDA for the third quarter 2023 was $(29.7) million compared to $7.0
million in the third quarter 2022. Adjusted EBITDA was $(16.3) million compared to Adjusted EBITDA of $11.8 million in the prior year
period.
Balance Sheet
As of September 30, 2023, the Company had cash and cash equivalents
of $26.6 million compared to $41.8 million as of December 31, 2022. The decrease was driven primarily by cash used in operations of $55.8
million and capital expenditures of $9.4 million primarily related to additional manufacturing facility investments and showroom expansion.
This was partially offset by cash provided from net proceeds of $57.0 million received from the public offering completed in February
2023 and $25 million in proceeds from the new term loan put in place in August. As of September 30, 2023, the Company had no amounts outstanding
under its credit facility. As we continue to pursue our growth strategies, we will draw on our credit facility as needed and may also
seek additional funding sources to further fund growth and strengthen liquidity, including new debt from subordinated lenders or equity
capital.
Inventories as of September 30, 2023, totaled $72.1 million compared
with $73.2 million as of December 31, 2022, and $78.4 million as of June 30, 2023.
2023 Outlook
Based on results for the first nine-months of 2023 and a more cautious
view of industry demand for the remainder of the year, the Company is adjusting its outlook. It now expects net revenue to be in the range
of $510 to $520 million and negative adjusted EBITDA between $(65) million and $(55) million.
Conference Call and Webcast Information
Purple Innovation, Inc. will host a live conference call to discuss
financial results today, November 9, 2023 at 4:30 p.m. Eastern Time. To access the call dial (888) 300-3045 (domestic) or (646) 568-1027
(international) and provide the Conference ID: 8565527. 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, the leading premium mattress
company with the #1 Gel Grid technology in the world, the GelFlex® Grid, thoughtfully
engineers products that make restorative sleep effortless for every kind of sleeper. The result of over 30 years of innovation and in
comfort technologies, Purple's GelFlex Grid is the most significant advancement in mattresses in decades and is proven to reduce aches
and pains. It instantly adapts as you move, balances temperature, relieves pressure and offers support in all the right places. Purple
products, including mattresses, pillows, cushions, frames, sheets, and more, can be found online at Purple.com, in 57 Purple stores
and over 3,000 retailers nationwide. Sleep Better. Live Purple.
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 relating to our expected
continuing expansion of market share from investment in expanded product lines, innovation and showrooms; our ability to achieve profitability;
expected improvements in performance quarter-over-quarter and growth in the second half of the year; expected improvement in margin rates;
our ability to successfully execute on improvement strategies, including right-sizing our cost structure and improving supply chain and
manufacturing efficiency, and related impacts on our operating results; expected improvements in our operating performance, including
wholesale relationships; demand for our products; expectations regarding consumer behavior; the timing and impact of the introduction
of new product lines; the adequacy of our cash and other capital resources; and expected financial and operating results for the fourth
quarter or full year 2023, including net revenue and Adjusted EBITDA. 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: 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; disruptions to our manufacturing processes;
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 22, 2023 as amended on Form 10-K/A filed with the SEC on May 1, 2023, and in
our other filings made with the SEC. 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.
Presentation
The financial results included in this earnings release reflect
adjustments to prior period warranty liability amounts.
Non-GAAP Financial Measures
EBITDA, adjusted EBITDA, adjusted gross margin,
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 the
fourth quarter and full year 2023, 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.
Condensed Consolidated Balance Sheets
(unaudited – in thousands, except for
par value)
| |
September 30, 2023 | | |
December 31, 2022 | |
Assets | |
| | |
| |
Current assets: | |
| | |
| |
Cash, cash equivalents and restricted cash | |
$ | 26,606 | | |
$ | 41,754 | |
Accounts receivable, net | |
| 32,686 | | |
| 34,566 | |
Inventories, net | |
| 72,085 | | |
| 73,197 | |
Prepaid expenses | |
| 8,807 | | |
| 7,821 | |
Other current assets | |
| 1,989 | | |
| 4,117 | |
Total current assets | |
| 142,173 | | |
| 161,455 | |
Property and equipment, net | |
| 129,580 | | |
| 136,673 | |
Operating lease right-of-use assets | |
| 100,739 | | |
| 102,541 | |
Goodwill | |
| — | | |
| 4,897 | |
Intangible assets, net | |
| 22,971 | | |
| 26,221 | |
Other long-term assets | |
| 2,510 | | |
| 1,546 | |
Total assets | |
$ | 397,973 | | |
$ | 433,333 | |
| |
| | | |
| | |
Liabilities and Stockholders’ Equity | |
| | | |
| | |
Current liabilities: | |
| | | |
| | |
Accounts payable | |
$ | 45,720 | | |
$ | 46,441 | |
Accrued sales returns | |
| 4,971 | | |
| 5,107 | |
Accrued compensation | |
| 6,220 | | |
| 6,691 | |
Customer prepayments | |
| 5,175 | | |
| 4,452 | |
Accrued sales and use tax | |
| 1,876 | | |
| 2,978 | |
Accrued rebates and allowances | |
| 8,575 | | |
| 9,804 | |
Operating lease obligations – current portion | |
| 14,771 | | |
| 13,708 | |
Other current liabilities | |
| 14,664 | | |
| 8,948 | |
Total current liabilities | |
| 101,972 | | |
| 98,129 | |
Debt | |
| 22,483 | | |
| 23,657 | |
Operating lease obligations, net of current portion | |
| 114,196 | | |
| 115,599 | |
Other long-term liabilities, net of current portion | |
| 26,306 | | |
| 20,777 | |
Total liabilities | |
| 264,957 | | |
| 258,162 | |
Commitments and contingencies (Note 15) | |
| | | |
| | |
Stockholders’ equity: | |
| | | |
| | |
Class A common stock; $0.0001 par value, 210,000 shares authorized; 105,333 issued and outstanding at September 30, 2023 and 91,380 issued and outstanding at December 31, 2022 | |
| 11 | | |
| 9 | |
Class B common stock; $0.0001 par value, 90,000 shares authorized; 418 issued and outstanding at September 30, 2023 and 448 issued and outstanding at December 31, 2022 | |
| — | | |
| — | |
Additional paid-in capital | |
| 590,096 | | |
| 529,466 | |
Accumulated deficit | |
| (457,636 | ) | |
| (355,212 | ) |
Total stockholders’ equity attributable to Purple Innovation, Inc. | |
| 132,471 | | |
| 174,263 | |
Noncontrolling interest | |
| 545 | | |
| 908 | |
Total stockholders’ equity | |
| 133,016 | | |
| 175,171 | |
Total liabilities and stockholders’ equity | |
$ | 397,973 | | |
$ | 433,333 | |
PURPLE INNOVATION, INC.
Condensed Consolidated Statements of Operations
(unaudited – in thousands, except per
share amounts)
| |
Three Months Ended September 30, | | |
Nine Months Ended September 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Revenues, net | |
$ | 139,996 | | |
$ | 142,867 | | |
$ | 364,605 | | |
$ | 428,896 | |
Cost of revenues | |
| 92,687 | | |
| 83,867 | | |
| 241,244 | | |
| 270,717 | |
Gross profit | |
| 47,309 | | |
| 59,000 | | |
| 123,361 | | |
| 158,179 | |
Operating expenses: | |
| | | |
| | | |
| | | |
| | |
Marketing and sales | |
| 52,816 | | |
| 37,007 | | |
| 137,368 | | |
| 127,339 | |
General and administrative | |
| 17,524 | | |
| 19,166 | | |
| 67,628 | | |
| 55,833 | |
Research and development | |
| 2,704 | | |
| 1,927 | | |
| 9,001 | | |
| 5,818 | |
Loss on impairment of goodwill | |
| 6,879 | | |
| — | | |
| 6,879 | | |
| — | |
Total operating expenses | |
| 79,923 | | |
| 58,100 | | |
| 220,876 | | |
| 188,990 | |
Operating income (loss) | |
| (32,614 | ) | |
| 900 | | |
| (97,515 | ) | |
| (30,811 | ) |
Other income (expense): | |
| | | |
| | | |
| | | |
| | |
Interest expense | |
| (594 | ) | |
| (717 | ) | |
| (1,148 | ) | |
| (2,447 | ) |
Other income, net | |
| 205 | | |
| 1,107 | | |
| 315 | | |
| 988 | |
Change in fair value – warrant liabilities | |
| — | | |
| (53 | ) | |
| — | | |
| 4,221 | |
Loss on extinguishment of debt | |
| (3,114 | ) | |
| — | | |
| (4,331 | ) | |
| — | |
Total other income (expense), net | |
| (3,503 | ) | |
| 337 | | |
| (5,164 | ) | |
| 2,762 | |
Net income (loss) before income taxes | |
| (36,117 | ) | |
| 1,237 | | |
| (102,679 | ) | |
| (28,049 | ) |
Income tax benefit (expense) | |
| (18 | ) | |
| 720 | | |
| (162 | ) | |
| 7,036 | |
Net income (loss) | |
| (36,135 | ) | |
| 1,957 | | |
| (102,841 | ) | |
| (21,013 | ) |
Net income (loss) attributable to noncontrolling interest | |
| (131 | ) | |
| 1 | | |
| (417 | ) | |
| (204 | ) |
Net income (loss) attributable to Purple Innovation, Inc. | |
$ | (36,004 | ) | |
$ | 1,956 | | |
$ | (102,424 | ) | |
$ | (20,809 | ) |
| |
| | | |
| | | |
| | | |
| | |
Net income (loss) per share: | |
| | | |
| | | |
| | | |
| | |
Basic | |
$ | (0.34 | ) | |
$ | 0.02 | | |
$ | (0.99 | ) | |
$ | (0.26 | ) |
Diluted | |
$ | (0.34 | ) | |
$ | 0.02 | | |
$ | (0.99 | ) | |
$ | (0.27 | ) |
| |
| | | |
| | | |
| | | |
| | |
Weighted average common shares outstanding: | |
| | | |
| | | |
| | | |
| | |
Basic | |
| 105,326 | | |
| 85,666 | | |
| 102,962 | | |
| 78,544 | |
Diluted | |
| 105,326 | | |
| 86,115 | | |
| 102,962 | | |
| 78,992 | |
PURPLE INNOVATION, INC.
Condensed Consolidated Statements of Cash Flows
(unaudited – in thousands)
| |
Three Months Ended September 30, | | |
Nine Months Ended September 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Cash flows from operating activities: | |
| | |
| | |
| | |
| |
Net income (loss) | |
$ | (36,135 | ) | |
$ | 1,957 | | |
$ | (102,841 | ) | |
$ | (21,013 | ) |
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |
| | | |
| | | |
| | | |
| | |
Depreciation and amortization | |
| 6,073 | | |
| 4,622 | | |
| 18,963 | | |
| 12,205 | |
Non-cash interest | |
| 234 | | |
| 523 | | |
| 920 | | |
| 883 | |
Loss on extinguishment of debt | |
| 3,114 | | |
| — | | |
| 4,331 | | |
| — | |
Loss on impairment of goodwill | |
| 6,879 | | |
| — | | |
| 6,879 | | |
| — | |
Change in fair value - warrant liabilities | |
| — | | |
| 53 | | |
| — | | |
| (4,221 | ) |
Stock-based compensation | |
| 939 | | |
| 795 | | |
| 3,792 | | |
| 2,612 | |
Gain from effective settlement of preexisting relationship | |
| — | | |
| (1,421 | ) | |
| — | | |
| (1,421 | ) |
Deferred income taxes | |
| — | | |
| (689 | ) | |
| — | | |
| (6,850 | ) |
Changes in operating assets and liabilities: | |
| | | |
| | | |
| | | |
| | |
Accounts receivable | |
| (10,002 | ) | |
| 6,607 | | |
| 1,465 | | |
| 459 | |
Inventories, net | |
| 5,757 | | |
| (2,325 | ) | |
| 696 | | |
| 11,479 | |
Prepaid inventory and other assets | |
| (4,156 | ) | |
| (3,589 | ) | |
| (1,204 | ) | |
| (108 | ) |
Operating lease, net | |
| 147 | | |
| 2,227 | | |
| 1,462 | | |
| 6,405 | |
Accounts payable | |
| (2,760 | ) | |
| 10,412 | | |
| 544 | | |
| (26,615 | ) |
Accrued sales returns | |
| 774 | | |
| 189 | | |
| (136 | ) | |
| (1,816 | ) |
Accrued compensation | |
| 1,908 | | |
| 1,236 | | |
| (801 | ) | |
| 1,590 | |
Customer prepayments | |
| (302 | ) | |
| (1,400 | ) | |
| 723 | | |
| (7,122 | ) |
Accrued rebates and allowances | |
| 2,748 | | |
| 736 | | |
| (1,229 | ) | |
| (2,118 | ) |
Other accrued liabilities | |
| 7,027 | | |
| 2,397 | | |
| 10,628 | | |
| 5,177 | |
Net cash provided by (used in) operating activities | |
| (17,755 | ) | |
| 22,330 | | |
| (55,808 | ) | |
| (30,474 | ) |
| |
| | | |
| | | |
| | | |
| | |
Cash flows from investing activities: | |
| | | |
| | | |
| | | |
| | |
Excess restricted cash returned to acquiree | |
| (826 | ) | |
| — | | |
| (826 | ) | |
| — | |
Cash, cash equivalents and restricted cash acquired from acquisition, net of cash paid | |
| — | | |
| 3,648 | | |
| — | | |
| 3,648 | |
Purchase of property and equipment | |
| (3,326 | ) | |
| (7,189 | ) | |
| (8,769 | ) | |
| (31,422 | ) |
Investment in intangible assets | |
| (208 | ) | |
| (815 | ) | |
| (588 | ) | |
| (2,637 | ) |
Net cash used in investing activities | |
| (4,360 | ) | |
| (4,356 | ) | |
| (10,183 | ) | |
| (30,411 | ) |
| |
| | | |
| | | |
| | | |
| | |
Cash flows from financing activities: | |
| | | |
| | | |
| | | |
| | |
Payments on term loan | |
| — | | |
| — | | |
| (24,656 | ) | |
| (2,531 | ) |
Payments on revolving line of credit | |
| — | | |
| — | | |
| — | | |
| (55,000 | ) |
Proceeds from term loan | |
| 25,000 | | |
| — | | |
| 25,000 | | |
| — | |
Payments for debt issuance costs | |
| (3,228 | ) | |
| — | | |
| (6,126 | ) | |
| (1,242 | ) |
Proceeds from stock offering | |
| — | | |
| — | | |
| 60,300 | | |
| 98,210 | |
Payments for public offering costs | |
| — | | |
| — | | |
| (3,301 | ) | |
| (5,344 | ) |
Proportional Representation Preferred Linked Stock redemption fee | |
| — | | |
| — | | |
| (105 | ) | |
| — | |
Tax receivable agreement payments | |
| — | | |
| — | | |
| (269 | ) | |
| (5,847 | ) |
Proceeds from exercise of stock options | |
| — | | |
| — | | |
| — | | |
| 166 | |
Net cash provided by (used in) financing activities | |
| 21,772 | | |
| — | | |
| 50,843 | | |
| 28,412 | |
| |
| | | |
| | | |
| | | |
| | |
Net increase (decrease) in cash | |
| (343 | ) | |
| 17,974 | | |
| (15,148 | ) | |
| (32,473 | ) |
Cash, beginning of the period | |
| 26,949 | | |
| 41,169 | | |
| 41,754 | | |
| 91,616 | |
Cash, end of the period | |
$ | 26,606 | | |
$ | 59,143 | | |
$ | 26,606 | | |
$ | 59,143 | |
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, adjusted net
income, and adjusted net income per diluted share. 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 Income (Loss) to Non-GAAP EBITDA and
Adjusted EBITDA
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, income
tax (benefit) expense, other (income) expense, net, and depreciation and amortization. Adjusted EBITDA represents EBITDA excluding costs
incurred due to stock-based compensation expense, debt extinguishment, changes in the fair value of the warrant liability, impairment
of goodwill, nonrecurring legal fees, Board special committee costs, executive interim and search costs, severance costs, vendor separation
fee, showroom opening costs, new production facility start-up costs and COVID-19 related expenses. We believe EBITDA and Adjusted
EBITDA provide additional useful information with respect to the impact of various adjustments and provide meaningful measures of our
operating performance.
| |
Three Months Ended September 30, | | |
Nine Months Ended September 30, | |
| |
2023 | | |
2022 | | |
2023 | | |
2022 | |
GAAP net income (loss) | |
$ | (36,135 | ) | |
| 1,957 | | |
| (102,841 | ) | |
| (21,013 | ) |
Interest expense | |
| 594 | | |
| 717 | | |
| 1,148 | | |
| 2,447 | |
Income tax (benefit) expense | |
| 18 | | |
| (631 | ) | |
| 162 | | |
| (6,617 | ) |
Other income, net | |
| (205 | ) | |
| 314 | | |
| (315 | ) | |
| 433 | |
Depreciation and amortization | |
| 6,072 | | |
| 4,622 | | |
| 18,962 | | |
| 12,205 | |
EBITDA | |
| (29,656 | ) | |
| 6,979 | | |
| (82,884 | ) | |
| (12,545 | ) |
Adjustments: | |
| | | |
| | | |
| | | |
| | |
Change in fair value - warrant liability | |
| — | | |
| 53 | | |
| — | | |
| (4,221 | ) |
Loss on extinguishment of debt | |
| 3,114 | | |
| — | | |
| 4,331 | | |
| — | |
Stock-based compensation expense | |
| 939 | | |
| 795 | | |
| 3,792 | | |
| 2,612 | |
Loss on impairment of goodwill | |
| 6,879 | | |
| — | | |
| 6,879 | | |
| — | |
Vendor separation fee | |
| — | | |
| — | | |
| 1,050 | | |
| 3,136 | |
Legal fees | |
| 775 | | |
| 227 | | |
| 3,520 | | |
| 493 | |
Board special committee fees | |
| — | | |
| — | | |
| 14,160 | | |
| — | |
Acquisition expenses | |
| — | | |
| 3,389 | | |
| 65 | | |
| 3,389 | |
Gain on effective settlement in acquisition | |
| — | | |
| (1,421 | ) | |
| — | | |
| (1,421 | ) |
Executive interim and search costs | |
| 1,456 | | |
| 1,014 | | |
| 3,258 | | |
| 4,084 | |
Severance costs | |
| — | | |
| — | | |
| 586 | | |
| 2,469 | |
Showroom opening costs | |
| 242 | | |
| 740 | | |
| 338 | | |
| 2,316 | |
New production facility start-up costs | |
| — | | |
| — | | |
| — | | |
| 348 | |
COVID-19 related expenses | |
| — | | |
| — | | |
| — | | |
| 331 | |
Adjusted EBITDA | |
$ | (16,251 | ) | |
| 11,776 | | |
| (44,905 | ) | |
| 991 | |
(in thousands) | |
Three Months Ended
June 30,
2023 | |
GAAP net income (loss) | |
$ | (40,654 | ) |
Interest expense | |
| 352 | |
Income tax (benefit) expense | |
| 72 | |
Other income, net | |
| (37 | ) |
Depreciation and amortization | |
| 6,007 | |
EBITDA | |
| (34,260 | ) |
Adjustments: | |
| | |
Stock-based compensation expense | |
| 1,661 | |
Legal fees | |
| 1,395 | |
Board special committee fees | |
| 8,298 | |
Acquisition expenses | |
| 65 | |
Executive interim and search costs | |
| 1,013 | |
Severance costs | |
| 267 | |
Showroom opening costs | |
| 39 | |
Adjusted EBITDA | |
$ | (21,522 | ) |
Reconciliation of GAAP Gross Margin to Adjusted Gross Margin
A reconciliation of GAAP gross margin to the non-GAAP
measure of adjusted gross margin is provided below. Adjusted gross margin represents adjusted net revenue less adjusted cost of revenues.
Adjusted revenue represents revenue adjusted for revenue deemed lost through discounts on products during our transition to our new product
line. Adjusted cost of revenues presents cost of revenues excluding certain incremental costs incurred during our transition to our new
product line. We believe adjusted gross margin provides additional useful information with respect to the impact of certain temporary
or one-time items and provides a meaningful measure of our operating performance.
| |
Three Months Ended | |
(in thousands except percentages) | |
September 30, 2023 | | |
June 30,
2023 | |
Net revenue | |
$ | 139,996 | | |
$ | 117,882 | |
Discounts on new product transition | |
| 3,124 | | |
| 9,628 | |
Adjusted net revenue | |
| 143,120 | | |
| 127,510 | |
| |
| | | |
| | |
Cost of revenues | |
| 92,687 | | |
| 82,408 | |
Costs of new product transition | |
| 2,692 | | |
| 2,323 | |
Adjusted cost of revenues | |
| 89,995 | | |
| 80,085 | |
| |
| | | |
| | |
Adjusted gross margin | |
$ | 53,125 | | |
$ | 47,425 | |
Adjusted gross margin % | |
| 37.1 | % | |
| 37.2 | % |
Reconciliation of GAAP Net Income to non-GAAP Adjusted Net Income
and Adjusted Net Income per Diluted Share
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:
| |
Three Months Ended
September 30, | | |
Nine Months Ended
September 30, | |
(in thousands, except per share amounts) | |
2023 | | |
2022 | | |
2023 | | |
2022 | |
Net income (loss) | |
$ | (36,135 | ) | |
$ | 1,957 | | |
$ | (102,841 | ) | |
$ | (21,013 | ) |
Income tax (benefit) expense, as reported | |
| 18 | | |
| (631 | ) | |
| 162 | | |
| (6,617 | ) |
Change in fair value – warrant liabilities | |
| — | | |
| 53 | | |
| — | | |
| (4,221 | ) |
Loss on extinguishment of debt | |
| 3,114 | | |
| — | | |
| 4,331 | | |
| — | |
Loss on impairment of goodwill | |
| 6,879 | | |
| — | | |
| 6,879 | | |
| — | |
Board special committee fees | |
| — | | |
| — | | |
| 14,160 | | |
| — | |
Acquisition expenses | |
| — | | |
| 3,389 | | |
| 65 | | |
| 3,389 | |
Gain on effective settlement in acquisition | |
| — | | |
| (1,421 | ) | |
| — | | |
| (1,421 | ) |
Adjusted net income (loss) before income taxes | |
| (26,124 | ) | |
| 3,347 | | |
| (77,244 | ) | |
| (29,883 | ) |
Adjusted income tax benefit (expense)(1) | |
| 6,766 | | |
| (840 | ) | |
| 20,006 | | |
| 7,082 | |
Adjusted net income (loss) | |
$ | (19,358 | ) | |
$ | 2,507 | | |
$ | (57,238 | ) | |
$ | (22,801 | ) |
| |
| | | |
| | | |
| | | |
| | |
Adjusted net income (loss) per share, diluted | |
$ | (0.18 | ) | |
$ | 0.03 | | |
$ | (0.55 | ) | |
$ | (0.29 | ) |
| |
| | | |
| | | |
| | | |
| | |
Adjusted weighted-average shares outstanding, diluted(2) | |
| 105,744 | | |
| 86,115 | | |
| 103,380 | | |
| 78,992 | |
(in thousands, except per share amounts) | |
Three Months Ended
June 30,
2023 | |
Net income (loss) | |
$ | (40,654 | ) |
Income tax (benefit) expense, as reported | |
| 72 | |
Board special committee fees | |
| 8,298 | |
Adjusted net income (loss) before income taxes | |
| (32,284 | ) |
Adjusted income tax benefit (expense)(1) | |
| 8,362 | |
Adjusted net income (loss) | |
$ | (23,922 | ) |
| |
| | |
Adjusted net income (loss) per share, diluted | |
$ | (0.23 | ) |
| |
| | |
Adjusted weighted-average shares outstanding, diluted(2) | |
| 105,507 | |
(1) | Represents the estimated effective tax rate of 25.9% for the three
and nine months ended September 30, 2023 and for the three months ended June 30, 2023 , and 25.1% and 23.7% for the three and nine months
ended September 30, 2022, applied to adjusted net income before income taxes. The estimated effective tax rates are what the Company would
be subject to and consist of the combined federal statutory tax rate and the Company’s blended state tax rates assuming no valuation
allowance . |
(2) | Assumes options and restricted stock units calculated in
accordance with GAAP and the full exchange of all outstanding Paired Securities for shares of Class A common stock as of the beginning
of the period. |
A reconciliation of net income (loss) per share,
diluted, to adjusted net income per diluted share is set forth below for the three and six months ended June 30, 2021 and 2020:
| |
For the Three Months Ended | |
| |
September 30, 2023 | | |
September 30, 2022 | |
| |
Net
Income | | |
Weighted Average Shares, Diluted | | |
Net
Income
per Share,
Diluted | | |
Net
Income | | |
Weighted Average
Shares,
Diluted | | |
Net
Income
per Share,
Diluted | |
Net income (loss) attributable to Purple Innovation Inc.(1) | |
$ | (36,004 | ) | |
| 105,326 | | |
$ | (0.34 | ) | |
$ | 1,956 | | |
| 86,115 | | |
$ | 0.02 | |
Assumed exchange of shares(2) | |
| (131 | ) | |
| 418 | | |
| | | |
| 1 | | |
| — | | |
| | |
Net income (loss) | |
| (36,135 | ) | |
| | | |
| | | |
| 1,957 | | |
| | | |
| | |
Adjustments to arrive at adjusted income (loss) before taxes(3) | |
| 10,011 | | |
| | | |
| | | |
| 1,390 | | |
| | | |
| | |
Adjusted income (loss) before taxes | |
| (26,124 | ) | |
| | | |
| | | |
| 3,347 | | |
| | | |
| | |
Adjusted income tax benefit(4) | |
| 6,766 | | |
| | | |
| | | |
| (840 | ) | |
| | | |
| | |
Adjusted net income (loss) | |
$ | (19,358 | ) | |
| 105,744 | | |
$ | (0.18 | ) | |
$ | 2,507 | | |
| 86,115 | | |
$ | 0.03 | |
| |
For the Three Months Ended June 30, 2023 | |
| |
Net Income | | |
Weighted Average Shares, Diluted | | |
Net Income per Share, Diluted | |
Net income (loss) attributable to Purple Innovation Inc.(1) | |
$ | (40,487 | ) | |
| 105,079 | | |
$ | (0.39 | ) |
Assumed exchange of shares(2) | |
| (167 | ) | |
| 428 | | |
| | |
Net income (loss) | |
| (40,654 | ) | |
| | | |
| | |
Adjustments to arrive at adjusted income (loss) before taxes(3) | |
| 8,370 | | |
| | | |
| | |
Adjusted income (loss) before taxes | |
| (32,284 | ) | |
| | | |
| | |
Adjusted income tax benefit(4) | |
| 8,362 | | |
| | | |
| | |
Adjusted net income (loss) | |
$ | (23,922 | ) | |
| 105,507 | | |
$ | (0.23 | ) |
(1) | Represents net income attributable to Purple Innovation,
Inc. and the associated weighted average diluted shares, of Class A common stock outstanding. |
(2) | Assumes the full exchange of all outstanding Paired Securities
for shares of Class A common stock as of the beginning of the period and added in if not already included in the weighted average diluted
shares. Also assumes the addition of net income attributable to noncontrolling interests corresponding with the assumed exchange of the
Paired Securities for shares of Class A common stock. |
(3) | Represents the total impact of all adjustments identified
in the adjusted net income table above to arrive at adjusted income before income taxes. Also assumes the dilutive warrants, options
and restricted stock as calculated in accordance with GAAP. |
(4) | Represents the estimated effective tax rate of
25.9% and 25.1% for the three months ended September 30, 2023, and June 30, 2023 and 25.1% for the three months ended September 30, 2022,
applied to adjusted net income before income taxes. The estimated effective tax rates are what the Company would be subject to and consist
of the combined federal statutory tax rate and the Company’s blended state tax rates assuming no valuation allowance. |
| |
For the Nine Months Ended | |
| |
September 30, 2023 | | |
September 30, 2022 | |
| |
Net
Income | | |
Weighted Average Shares, Diluted | | |
Net
Income
per Share,
Diluted | | |
Net
Income | | |
Weighted Average
Shares,
Diluted | | |
Net
Income
per Share,
Diluted | |
Net income (loss) attributable to Purple Innovation Inc.(1) | |
$ | (102,424 | ) | |
| 102,962 | | |
$ | (0.99 | ) | |
$ | (20,809 | ) | |
| 78,992 | | |
$ | (0.27 | ) |
Assumed exchange of shares(2) | |
| (417 | ) | |
| 418 | | |
| | | |
| (204 | ) | |
| — | | |
| | |
Net income (loss) | |
| (102,841 | ) | |
| | | |
| | | |
| (21,013 | ) | |
| | | |
| | |
Adjustments to arrive at adjusted income before taxes(3) | |
| 25,597 | | |
| | | |
| | | |
| (8,870 | ) | |
| | | |
| | |
Adjusted income before taxes | |
| (77,244 | ) | |
| | | |
| | | |
| (29,883 | ) | |
| | | |
| | |
Adjusted income tax benefit (expense)(4) | |
| 20,006 | | |
| | | |
| | | |
| 7,082 | | |
| | | |
| | |
Adjusted net income | |
$ | (57,238 | ) | |
| 103,380 | | |
$ | (0.55 | ) | |
$ | (22,801 | ) | |
| 78,992 | | |
$ | (0.29 | ) |
(1) | Represents net income attributable to Purple Innovation,
Inc. and the associated weighted average diluted shares, of Class A common stock outstanding. |
(2) | Assumes the full exchange of all outstanding Paired Securities
for shares of Class A common stock as of the beginning of the period and added in if not already included in the weighted average diluted
shares. Also assumes the addition of net income attributable to noncontrolling interests corresponding with the assumed exchange of the
Paired Securities for shares of Class A common stock. |
(3) | Represents the total impact of all adjustments identified
in the adjusted net income table above to arrive at adjusted income before income taxes. Also assumes the dilutive warrants, options
and restricted stock as calculated in accordance with GAAP. |
(4) | Represents the estimated effective tax rate of
25.9% and 23.7% for the nine months ended September 30, 2023 and 2022, respectively, applied to adjusted net income before income taxes.
The estimated effective tax rates are what the Company would be subject to and consist of the combined federal statutory tax rate and
the Company’s blended state tax rates assuming no valuation allowance. |
12
v3.23.3
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Nov. 09, 2023 |
Cover [Abstract] |
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8-K
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Amendment Flag |
false
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Document Period End Date |
Nov. 09, 2023
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Entity File Number |
001-37523
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Entity Registrant Name |
Purple Innovation, Inc.
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Entity Central Index Key |
0001643953
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Entity Tax Identification Number |
47-4078206
|
Entity Incorporation, State or Country Code |
DE
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Entity Address, Address Line One |
4100 North Chapel Ridge Rd.
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Entity Address, Address Line Two |
Suite 200
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Entity Address, City or Town |
Lehi
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Entity Address, State or Province |
UT
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Entity Address, Postal Zip Code |
84043
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801
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756-2600
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Class A Common Stock, par value $0.0001 per share
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PRPL
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Security Exchange Name |
NASDAQ
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Entity Emerging Growth Company |
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