LEHI, Utah, Nov. 10, 2020 /PRNewswire/ -- Purple
Innovation, Inc. (NASDAQ: PRPL) ("Purple"), a comfort innovation
company known for creating the "World's First No Pressure ™
Mattress," today announced results for the third quarter ended
September 30, 2020.
Third Quarter Financial Summary (Comparisons versus Third
Quarter 2019)1
- Net revenue increased 59.4% to $187.1
million, compared to $117.4
million.
-
- Direct-to-Consumer (DTC) revenue increased 97.5%; Wholesale
revenue increased 6.9%
- Gross margin improved 220 basis points to 47.2% compared to
45.0%.
- Operating expenses as a percent of net revenue were 34.2%
compared to 35.7%.
- Operating income increased 120.9% to $24.3 million compared to $11.0 million.
- Net loss was ($1.2) million
compared to net income of $8.4
million. Adjusted net income was $17.2 million, or $0.27 per diluted share compared to $7.3 million, or $0.14 per diluted share.
- EBITDA was $2.5 million compared
to $10.5 million. Adjusted EBITDA was
$30.1 million compared to
$15.3 million.
"Demand for the Purple brand was at an all-time high during the
third quarter and our organization did a terrific job capitalizing
upon opportunities, translating record revenue to strong cash
flow," said Joe Megibow, Chief
Executive Officer. "The investments we made earlier this year to
expand our manufacturing capacity helped support strong
year-over-year growth in our direct-to-consumer mattress business,
as well as a resurgence in our wholesale channel as our retail
partners experienced improved store traffic. We also continued to
see strong gains in seat cushions, pillows and sheets, underscoring
the progress we've made increasing awareness and driving demand for
our premium, non-mattress categories. The combination of
outstanding top-line performance, improved operating margins, and
marketing efficiencies, resulted in an increase in operating profit
of more than 120% over the third quarter of 2019 and continued
strong cash generation."
Megibow continued, "We believe that we are on track for an
exceptional year of growth and enhanced profitability. As we head
into the final months of 2020, our focus is on successfully
fulfilling demand during the holiday season and preparing to kick
off the new year from a position of strength to profitably
accelerate market share growth. This includes continuing the rapid
build-out of our new 520,000 square foot facility in Georgia that will significantly expand our
domestic manufacturing capacity, as well as expanding our brand
showrooms in additional major markets. We are also increasing
marketing investment in the fourth quarter with incremental
spending on website development and new creative set to debut in
2021 aimed at attracting new consumers and further advancing the
premium positioning of the Purple brand. Our work over the past
year has significantly strengthened our foundation and we believe
has put the Company on a clear path to maintain successful growth
in the coming years."
______________________________
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 2020 Review
Third quarter 2020 net revenue increased 59.4% to $187.1 million, compared to $117.4 million in the third quarter of 2019. The
increase in net revenue was driven primarily by strong growth in
mattress sales in the DTC channel along with higher demand for
pillows, sheets and seat cushions.
Gross margin for the third quarter 2020 improved to 47.2%
compared to 45.0% in the year ago period. The 220 basis point
increase in gross margin year-over-year was primarily attributable
to the higher proportion of DTC channel revenue, which carries
higher gross margins than the wholesale channel. DTC revenues
comprised approximately 72% of net revenue for the quarter,
compared with approximately 58% in the same quarter last year.
Operating expenses were 34.2% of net revenue for the third
quarter of 2020 compared to 35.7% in the year ago period. The
improvement in operating expenses as a percent of net revenue was
driven by leverage on higher net revenue and more efficient
marketing spend, partially offset by additional marketing spend to
increase brand awareness and the addition of company-owned retail
showrooms. For the third quarter 2020, marketing and sales
expense as a percent of net revenue decreased to 27.4% compared
with 29.0% last year due to creative efforts to improve efficiency
in marketing spend as well as lower advertising costs.
Operating income increased 120.9% to $24.3 million for the third quarter 2020 compared
to an operating income of $11.0
million in the prior year period.
Net loss was ($1.2) million for
the third quarter 2020 compared to a net income of $8.4 million in the year ago period. Adjusted net
income, which excludes adjustments for certain non-cash items,
including expenses associated with the change in fair value of
warrant liabilities and the Tax Receivable Agreement, the loss on
extinguishment of debt and previous period sales tax liability, was
$17.2 million, or $0.27 per diluted share, compared to $7.3 million, or $0.14 per diluted share in the prior year period.
The main items in the third quarter 2020 included an $18.0 million non-cash expense associated with
the change in fair value of warrant liabilities, a $5.8 million loss on the extinguishment of debt
related to the retirement of the Company's previous debt agreement,
a $0.6 million non-cash expense
associated with the Tax Receivable Agreement (see complete
reconciliation in the table below). The third quarter 2019
included a $1.4 million non-cash
expense associated with the change in fair value of warrant
liabilities. Adjusted net income has been adjusted to reflect an
estimated effective income tax rate of 25.2% for the current year
period and 25.6% for the comparable prior year period and excludes
certain non-cash and other items that we do not consider in the
evaluation of ongoing operational performance (see "Non-GAAP
Financial Measures").
EBITDA for the third quarter 2020 was $2.5 million compared to $10.5 million in the third quarter 2019. Adjusted
EBITDA, which excludes non-cash expenses associated with the change
in fair value of warrant liabilities, the Tax Receivable Agreement
and non-cash stock based compensation, along with the loss on
extinguishment of debt, legal fees, interim CFO & consulting
costs, severance, vendor impairment, previous period sales tax
liability and COVID-19 related expenses, was $30.1 million. This compares to Adjusted EBITDA
of $15.3 million in the prior year
period.
Balance Sheet
As of September 30, 2020, the
Company had cash and cash equivalents of $98.0 million compared to $33.5 million as of December 31, 2019, an increase of 192.5%. The
Company expects to invest a portion of these resources to expand
our manufacturing capacity and fulfillment capabilities, to expand
our IP portfolio, selectively grow our company-owned showrooms, and
to fund working capital related to wholesale expansion and
restocking.
Inventories as of September 30,
2020 totaled $50.8 million
compared with $47.6 million as of
December 31, 2019.
During the third quarter of 2020, the Company executed a new
five-year $100 million senior secured
credit facility with a group of financial institutions led by
KeyBanc Capital Markets. The new credit facility consists of a
$45 million term loan and a
$55 million revolving line of
credit. Proceeds from the term loan, which was fully drawn at
closing, were used to retire all indebtedness related to the
Company's existing credit agreement. No amounts have been drawn on
the revolving line of credit.
The borrowing rates are based on the Company's leverage ratio,
as defined in the Credit Agreement, and can range from LIBOR plus
3.00 percent to 3.75 percent with a LIBOR floor of 0.50 percent.
The initial borrowing rate is LIBOR plus 3.00 percent, which is 850
basis points lower than the Company's previous borrowing rate.
Share Count
For the period October 1 through October
26, 2020, approximately 8.0 million public warrants were
exchanged for 4.0 million Class A shares resulting in cash proceeds
to the Company of approximately $45.6
million. On October 27, 2020,
the Company announced the redemption of previously issued public
and incremental loan warrants, to take place on November 30, 2020. For the period
October 27 through November 9, 2020,
approximately 1.7 million public and all 2.6 million incremental
loan warrants have been exercised and, as a result, there were 60.9
million Class A shares outstanding on November 9, 2020. The approximately 9.3 million
public warrants that remain may be cashless exercised at any time
prior to November 30, 2020. Any
public warrants remaining outstanding at that date will be
redeemed. As of November 9, 2020,
approximately 8.5 million sponsor warrants remain outstanding.
Sponsor warrants are not redeemable, and do not need to be
exercised on a cashless basis prior to November 30, 2020, if they are held by the
sponsor or a permitted transferee.
Outlook
For the year ending December 31,
2020, the Company previously withdrew guidance as a result
of uncertainty due to the COVID-19 pandemic. Due to the continued
uncertainty in the overall economy, the Company is not providing
formal Q4 guidance at this time. While Q4 is historically a more
promotional quarter, with increased marketing expense, the Company
does expect year-over-year quarterly growth rates similar to Q3 in
revenue and adjusted EBITDA balanced with a modest channel shift
toward wholesale and the planned Q4 investments in people,
capacity, showrooms and infrastructure. It is also important to
note that the Company, like the rest of the mattress industry,
continues to manage supply chain challenges from supply of foam and
coils, which could limit its ability to manufacture and fulfill a
portion of demand in the fourth quarter.
Webcast and Conference Call Information
Purple Innovation, Inc. will host a live conference call to
discuss financial results November 11,
2020 at 8:30 a.m. Eastern
Time. To access the call dial (877)
425-9470 (domestic) or (201) 389-0878 (international) at
8:25 a.m. ET and provide the
Conference ID: 13712736. The call is also being webcast and can be
accessed on the investor relations section of the Company's
website, investors.purple.com. After the conference call, a webcast
replay will remain available on the investor relations section of
the Company's website for 30 days.
About Purple
Purple is a digitally-native vertical brand with a mission
to help people feel and live better through innovative comfort
solutions. We design and manufacture a variety of innovative,
premium, branded comfort products, including mattresses, pillows,
cushions, frames, sheets and more. Our products are the result of
over 30 years of innovation and investment in proprietary and
patented comfort technologies and the development of our own
manufacturing processes. Our proprietary gel technology,
Hyper-Elastic Polymer®, underpins many of our comfort products and
provides a range of benefits that differentiate our offerings from
other competitors' products. We market and sell our products
through our direct-to-consumer online channels, traditional retail
partners, third-party online retailers and our owned retail
showrooms. For more information on Purple, visit purple.com.
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
use of cash resources, the possible inability to meet demand due to
constraints on the supply of foam and coils, expected future growth
of our business, anticipated levels of demand for our products,
expected performance of our business in the fourth quarter with
respect to demand for our products, marketing expense, and supply
chain issues, and the redemption of outstanding warrants.
Statements based on historical data are not intended and should not
be understood to indicate the Company's expectations regarding
future events. Forward-looking statements provide current
expectations or forecasts of future events or determinations. These
forward-looking statements are not guarantees of future
performance, conditions or results, and involve a number of known
and unknown risks, uncertainties, assumptions and other important
factors, many of which are outside the Company's control, that
could cause actual results or outcomes to differ materially from
those discussed in the forward-looking statements. Factors that
could influence the realization of forward-looking statements
include the risk factors outlined in the "Risk Factors" section of
our Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 9, 2020
and our Quarterly Reports on Form 10-Q filed with the Securities
and Exchange Commission on May 11,
2020, August 13, 2020, and
November 10, 2020. The Company does
not undertake any obligation to update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as required by law.
Non-GAAP Financial Measures
EBITDA, Adjusted EBITDA, Adjusted Net Income, and Adjusted Net
Income per Diluted Share are non-GAAP financial measures that
remove the impact of certain non-cash and non-recurring costs.
Management believes that the use of such non-GAAP financial
measures provides investors with additional useful information with
respect to the impact of various adjustments, which we view as a
better measure of our operating performance. Refer to the attached
table for the reconciliation of such non-GAAP financial measures to
the most comparable GAAP financial measure.
Investor Contact:
Brendon
Frey, ICR
brendon.frey@icrinc.com
203-682-8200
Purple Innovation, Inc.
Misty Bond
Director of Purple Communications
misty.b@purple.com
385-498-1851
PURPLE INNOVATION,
INC.
Condensed
Consolidated Balance Sheets
(In thousands,
except par value)
(Unaudited)
|
|
|
|
September
30,
|
|
|
December 31,
|
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
Assets
|
|
|
|
|
|
|
Current
assets:
|
|
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
97,955
|
|
|
$
|
33,478
|
|
Accounts receivable,
net
|
|
|
21,894
|
|
|
|
28,692
|
|
Inventories,
net
|
|
|
50,775
|
|
|
|
47,628
|
|
Prepaid
inventory
|
|
|
1,888
|
|
|
|
879
|
|
Other current
assets
|
|
|
8,443
|
|
|
|
3,442
|
|
Total current
assets
|
|
|
180,955
|
|
|
|
114,119
|
|
Property and
equipment, net
|
|
|
44,983
|
|
|
|
31,979
|
|
Intangible assets,
net
|
|
|
9,620
|
|
|
|
1,101
|
|
Deferred income
taxes
|
|
|
205,486
|
|
|
|
—
|
|
Other long-term
assets
|
|
|
1,586
|
|
|
|
525
|
|
Total
assets
|
|
$
|
442,630
|
|
|
$
|
147,724
|
|
|
|
|
|
|
|
|
|
|
Liabilities and
Stockholders' Equity (Deficit)
|
|
|
|
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
|
|
|
|
Accounts
payable
|
|
$
|
61,961
|
|
|
$
|
50,240
|
|
Accrued sales
returns
|
|
|
10,285
|
|
|
|
7,271
|
|
Accrued
compensation
|
|
|
12,515
|
|
|
|
7,954
|
|
Customer
prepayments
|
|
|
6,207
|
|
|
|
6,258
|
|
Accrued sales
tax
|
|
|
7,327
|
|
|
|
5,602
|
|
Accrued rebates and
allowances
|
|
|
7,232
|
|
|
|
5,311
|
|
Other current
liabilities
|
|
|
7,995
|
|
|
|
4,229
|
|
Total current
liabilities
|
|
|
113,522
|
|
|
|
86,865
|
|
Long-term debt,
related-party
|
|
|
—
|
|
|
|
35,399
|
|
Long-term debt, net
of current portion
|
|
|
41,911
|
|
|
|
—
|
|
Warrant
liabilities
|
|
|
64,930
|
|
|
|
21,622
|
|
Tax receivable
agreement liability, net of current portion
|
|
|
168,328
|
|
|
|
—
|
|
Other long-term
liabilities, net of current portion
|
|
|
12,375
|
|
|
|
8,570
|
|
Total
liabilities
|
|
|
401,066
|
|
|
|
152,456
|
|
Commitments and
contingencies (Note 11)
|
|
|
|
|
|
|
|
|
Stockholders' equity
(deficit):
|
|
|
|
|
|
|
|
|
Class A common
stock; $0.0001 par value, 210,000 shares authorized; 53,787
issued
and outstanding at September 30, 2020 and 22,494
issued and outstanding at
December 31, 2019
|
|
|
5
|
|
|
|
2
|
|
Class B common
stock; $0.0001 par value, 90,000 shares authorized; 605 issued
and
outstanding at September 30, 2020 and 31,394 issued
and outstanding at December
31, 2019
|
|
|
—
|
|
|
|
3
|
|
Additional paid-in
capital
|
|
|
44,032
|
|
|
|
5,990
|
|
Accumulated
deficit
|
|
|
(2,517)
|
|
|
|
(8,349)
|
|
Total stockholders'
equity (deficit)
|
|
|
41,520
|
|
|
|
(2,354)
|
|
Noncontrolling
interest
|
|
|
44
|
|
|
|
(2,378)
|
|
Total equity
(deficit)
|
|
|
41,564
|
|
|
|
(4,732)
|
|
Total liabilities and
stockholders' equity (deficit)
|
|
$
|
442,630
|
|
|
$
|
147,724
|
|
PURPLE INNOVATION,
INC.
Condensed
Consolidated Statements of Operations
(In thousands,
except per share amounts)
(Unaudited)
|
|
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Revenues,
net
|
|
$
|
187,111
|
|
|
$
|
117,406
|
|
|
$
|
474,582
|
|
|
$
|
304,058
|
|
Cost of
revenues
|
|
|
98,857
|
|
|
|
64,523
|
|
|
|
251,515
|
|
|
|
174,323
|
|
Gross
profit
|
|
|
88,254
|
|
|
|
52,883
|
|
|
|
223,067
|
|
|
|
129,735
|
|
Operating
expenses:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing and
sales
|
|
|
51,206
|
|
|
|
34,055
|
|
|
|
127,313
|
|
|
|
94,039
|
|
General and
administrative
|
|
|
11,087
|
|
|
|
6,745
|
|
|
|
27,312
|
|
|
|
19,243
|
|
Research and
development
|
|
|
1,687
|
|
|
|
1,070
|
|
|
|
4,712
|
|
|
|
3,004
|
|
Total operating
expenses
|
|
|
63,980
|
|
|
|
41,870
|
|
|
|
159,337
|
|
|
|
116,286
|
|
Operating
income
|
|
|
24,274
|
|
|
|
11,013
|
|
|
|
63,730
|
|
|
|
13,449
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
expense
|
|
|
(1,232)
|
|
|
|
(1,356)
|
|
|
|
(4,045)
|
|
|
|
(3,801)
|
|
Other income,
net
|
|
|
3
|
|
|
|
138
|
|
|
|
109
|
|
|
|
373
|
|
Loss on
extinguishment of debt
|
|
|
(5,782)
|
|
|
|
—
|
|
|
|
(5,782)
|
|
|
|
(6,299)
|
|
Change in fair value
– warrant liabilities
|
|
|
(17,971)
|
|
|
|
(1,384)
|
|
|
|
(43,308)
|
|
|
|
(3,372)
|
|
Tax receivable
agreement expense
|
|
|
(567)
|
|
|
|
—
|
|
|
|
(33,512)
|
|
|
|
—
|
|
Total other expense,
net
|
|
|
(25,549)
|
|
|
|
(2,602)
|
|
|
|
(86,538)
|
|
|
|
(13,099)
|
|
Net income (loss)
before income taxes
|
|
|
(1,275)
|
|
|
|
8,411
|
|
|
|
(22,808)
|
|
|
|
350
|
|
Benefit from income
taxes
|
|
|
106
|
|
|
|
—
|
|
|
|
35,818
|
|
|
|
—
|
|
Net income
(loss)
|
|
|
(1,169)
|
|
|
|
8,411
|
|
|
|
13,010
|
|
|
|
350
|
|
Net income (loss)
attributable to noncontrolling interest
|
|
|
(147)
|
|
|
|
6,817
|
|
|
|
7,178
|
|
|
|
224
|
|
Net income (loss)
attributable to Purple Innovation, Inc.
|
|
$
|
(1,022)
|
|
|
$
|
1,594
|
|
|
$
|
5,832
|
|
|
$
|
126
|
|
Net income (loss) per
share:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
$
|
(0.02)
|
|
|
$
|
0.18
|
|
|
$
|
0.18
|
|
|
$
|
0.01
|
|
Diluted
|
|
$
|
(0.02)
|
|
|
$
|
0.16
|
|
|
$
|
0.16
|
|
|
$
|
0.01
|
|
Weighted average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
44,266
|
|
|
|
8,828
|
|
|
|
32,117
|
|
|
|
8,576
|
|
Diluted
|
|
|
44,266
|
|
|
|
52,793
|
|
|
|
36,628
|
|
|
|
52,454
|
|
PURPLE INNOVATION,
INC.
Condensed
Consolidated Statements of Cash Flows
(In
thousands)
(Unaudited)
|
|
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September
30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Cash flows from
operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income
(loss)
|
|
$
|
(1,169)
|
|
|
$
|
8,411
|
|
|
$
|
13,010
|
|
|
$
|
350
|
|
Adjustments to
reconcile net income (loss) to net cash
provided in operating activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Depreciation and
amortization
|
|
|
2,550
|
|
|
|
918
|
|
|
|
6,366
|
|
|
|
2,492
|
|
Non-cash
interest
|
|
|
182
|
|
|
|
874
|
|
|
|
2,973
|
|
|
|
2,439
|
|
Paid-in-kind
interest
|
|
|
(6,616)
|
|
|
|
—
|
|
|
|
(6,616)
|
|
|
|
—
|
|
Loss on
extinguishment of debt
|
|
|
5,782
|
|
|
|
—
|
|
|
|
5,782
|
|
|
|
6,299
|
|
Loss on change in
fair value - warrant liabilities
|
|
|
17,971
|
|
|
|
1,384
|
|
|
|
43,308
|
|
|
|
3,372
|
|
Tax receivable
agreement expense
|
|
|
567
|
|
|
|
—
|
|
|
|
33,512
|
|
|
|
—
|
|
Stock-based
compensation
|
|
|
347
|
|
|
|
2,934
|
|
|
|
1,559
|
|
|
|
9,740
|
|
Deferred income
taxes
|
|
|
8,189
|
|
|
|
—
|
|
|
|
(35,818)
|
|
|
|
—
|
|
Changes in operating
assets and liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Decrease (increase)
in accounts receivable
|
|
|
(2,865)
|
|
|
|
(1,842)
|
|
|
|
6,798
|
|
|
|
(16,446)
|
|
Increase in
inventories
|
|
|
(10,954)
|
|
|
|
(9,761)
|
|
|
|
(3,147)
|
|
|
|
(11,878)
|
|
Increase in prepaid
inventory and other assets
|
|
|
(2,691)
|
|
|
|
(1,704)
|
|
|
|
(5,740)
|
|
|
|
(2,935)
|
|
Increase in accounts
payable
|
|
|
8,775
|
|
|
|
6,492
|
|
|
|
9,678
|
|
|
|
11,102
|
|
Increase (decrease)
in accrued sales returns
|
|
|
(1,664)
|
|
|
|
(707)
|
|
|
|
3,014
|
|
|
|
(163)
|
|
Increase in accrued
compensation
|
|
|
2,187
|
|
|
|
761
|
|
|
|
4,561
|
|
|
|
2,830
|
|
Increase (decrease)
in customer prepayments
|
|
|
(2,131)
|
|
|
|
2,618
|
|
|
|
(51)
|
|
|
|
170
|
|
Decrease in income
tax payable
|
|
|
(8,791)
|
|
|
|
—
|
|
|
|
(567)
|
|
|
|
—
|
|
Increase in other
accrued liabilities
|
|
|
5,441
|
|
|
|
3,317
|
|
|
|
8,840
|
|
|
|
8,472
|
|
Net cash provided by
operating activities
|
|
|
15,110
|
|
|
|
13,695
|
|
|
|
87,462
|
|
|
|
15,844
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
investing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Purchase of property
and equipment
|
|
|
(6,184)
|
|
|
|
(2,521)
|
|
|
|
(14,194)
|
|
|
|
(5,657)
|
|
Investment in
intangible assets
|
|
|
(8,455)
|
|
|
|
(125)
|
|
|
|
(10,890)
|
|
|
|
(246)
|
|
Net cash used in
investing activities
|
|
|
(14,639)
|
|
|
|
(2,646)
|
|
|
|
(25,084)
|
|
|
|
(5,903)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash flows from
financing activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from
related-party debt
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
10,000
|
|
Proceeds from
long-term debt
|
|
|
45,000
|
|
|
|
—
|
|
|
|
45,000
|
|
|
|
—
|
|
Proceeds from
exercise of options and warrants
|
|
|
2,101
|
|
|
|
—
|
|
|
|
2,124
|
|
|
|
—
|
|
Repurchase of stock
options
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
(97)
|
|
Payments on
related-party debt
|
|
|
(37,497)
|
|
|
|
—
|
|
|
|
(37,497)
|
|
|
|
—
|
|
Payments for debt
issuance costs
|
|
|
(2,460)
|
|
|
|
—
|
|
|
|
(2,460)
|
|
|
|
(758)
|
|
Distribution to
members
|
|
|
(5,006)
|
|
|
|
—
|
|
|
|
(5,006)
|
|
|
|
—
|
|
Principal payments on
capital lease obligations
|
|
|
(56)
|
|
|
|
(11)
|
|
|
|
(62)
|
|
|
|
(25)
|
|
Net cash provided by
(used in) financing activities
|
|
|
2,082
|
|
|
|
(11)
|
|
|
|
2,099
|
|
|
|
9,120
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net increase in
cash
|
|
|
2,553
|
|
|
|
11,038
|
|
|
|
64,477
|
|
|
|
19,061
|
|
Cash, beginning of
the period
|
|
|
95,402
|
|
|
|
20,255
|
|
|
|
33,478
|
|
|
|
12,232
|
|
Cash, end of the
period
|
|
$
|
97,955
|
|
|
$
|
31,293
|
|
|
$
|
97,955
|
|
|
$
|
31,293
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash paid during the
period for interest
|
|
$
|
932
|
|
|
$
|
452
|
|
|
$
|
954
|
|
|
$
|
1,364
|
|
Cash paid during the
period for income taxes
|
|
$
|
2,350
|
|
|
$
|
—
|
|
|
$
|
2,422
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental schedule
of non-cash investing and financing
activities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property and
equipment included in accounts payable
|
|
$
|
1,761
|
|
|
$
|
(283)
|
|
|
$
|
2,786
|
|
|
$
|
155
|
|
Equipment acquired
through capital lease
|
|
$
|
147
|
|
|
$
|
386
|
|
|
$
|
147
|
|
|
$
|
386
|
|
Non-cash leasehold
improvements
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
615
|
|
|
$
|
—
|
|
Tax Receivable
Agreement liability
|
|
$
|
89,677
|
|
|
$
|
—
|
|
|
$
|
134,943
|
|
|
$
|
—
|
|
Deferred income
taxes
|
|
$
|
112,670
|
|
|
$
|
—
|
|
|
$
|
169,306
|
|
|
$
|
—
|
|
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) income before interest expense, other (income) expense, net,
and depreciation and amortization. Adjusted EBITDA represents
EBITDA excluding costs incurred due to stock-based compensation
expense, debt extinguishment, warrant liability, nonrecurring legal
fees, interim CFO and consulting fees and severance costs. 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,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP net income
(loss)
|
|
$
|
(1,169)
|
|
|
|
8,411
|
|
|
|
13,010
|
|
|
|
350
|
|
Interest
expense
|
|
|
1,232
|
|
|
|
1,356
|
|
|
|
4,045
|
|
|
|
3,801
|
|
Income tax
benefit
|
|
|
(106)
|
|
|
|
—
|
|
|
|
(35,818)
|
|
|
|
—
|
|
Other income,
net
|
|
|
(3)
|
|
|
|
(138)
|
|
|
|
(109)
|
|
|
|
(373)
|
|
Depreciation and
amortization
|
|
|
2,550
|
|
|
|
918
|
|
|
|
6,366
|
|
|
|
2,492
|
|
EBITDA
|
|
|
2,504
|
|
|
|
10,547
|
|
|
|
(12,506)
|
|
|
|
6,270
|
|
Adjustments:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Debt extinguishment
and warrant liability
|
|
|
23,753
|
|
|
|
1,384
|
|
|
|
49,090
|
|
|
|
9,671
|
|
Stock-based
compensation expense
|
|
|
347
|
|
|
|
2,935
|
|
|
|
1,559
|
|
|
|
9,740
|
|
Product
reserve
|
|
|
—
|
|
|
|
—
|
|
|
|
500
|
|
|
|
—
|
|
Tax Receivable
Agreement expense
|
|
|
567
|
|
|
|
—
|
|
|
|
33,512
|
|
|
|
—
|
|
Legal fees
|
|
|
448
|
|
|
|
16
|
|
|
|
1,056
|
|
|
|
419
|
|
Interim CFO and
consulting
|
|
|
—
|
|
|
|
183
|
|
|
|
—
|
|
|
|
676
|
|
Severance
costs
|
|
|
28
|
|
|
|
40
|
|
|
|
133
|
|
|
|
700
|
|
Vendor
impairment
|
|
|
1,660
|
|
|
|
—
|
|
|
|
1,660
|
|
|
|
—
|
|
Previous period sales
tax liability
|
|
|
689
|
|
|
|
200
|
|
|
|
689
|
|
|
|
200
|
|
COVID-19 related
expenses
|
|
|
90
|
|
|
|
—
|
|
|
|
207
|
|
|
|
—
|
|
Adjusted
EBITDA
|
|
$
|
30,086
|
|
|
$
|
15,305
|
|
|
$
|
75,900
|
|
|
$
|
27,676
|
|
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:
|
|
(in thousands, except
per share amounts)
|
|
Three Months
Ended
September 30,
|
|
|
Nine Months
Ended
September 30,
|
|
|
|
2020
|
|
|
2019
|
|
|
2020
|
|
|
2019
|
|
Net income
(loss)
|
|
$
|
(1,169)
|
|
|
$
|
8,411
|
|
|
$
|
13,010
|
|
|
$
|
350
|
|
Income tax benefit,
as reported
|
|
|
(106)
|
|
|
|
—
|
|
|
|
(35,818)
|
|
|
|
—
|
|
Loss on
extinguishment of debt
|
|
|
5,782
|
|
|
|
—
|
|
|
|
5,782
|
|
|
|
6,299
|
|
Tax receivable
agreement expense
|
|
|
567
|
|
|
|
—
|
|
|
|
33,512
|
|
|
|
—
|
|
Change in fair value
– warrant liabilities
|
|
|
17,971
|
|
|
|
1,384
|
|
|
|
43,308
|
|
|
|
3,372
|
|
Adjusted net income
before income taxes
|
|
|
23,045
|
|
|
|
9,795
|
|
|
|
59,794
|
|
|
|
10,021
|
|
Adjusted income
taxes(1)
|
|
|
(5,807)
|
|
|
|
(2,509)
|
|
|
|
(15,068)
|
|
|
|
(2,567)
|
|
Adjusted net
income
|
|
$
|
17,238
|
|
|
$
|
7,286
|
|
|
$
|
44,726
|
|
|
$
|
7,454
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted net income
per share, diluted
|
|
$
|
0.27
|
|
|
$
|
0.14
|
|
|
$
|
0.74
|
|
|
$
|
0.14
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
weighted-average shares outstanding,
diluted(2)
|
|
|
64,433
|
|
|
|
53,728
|
|
|
|
60,790
|
|
|
|
52,979
|
|
|
(1) Represents the
estimated effective tax rate of 25.2% and 25.6% for the three
months ended September 30, 2020 and 2019, respectively, and 25.2%
and 25.6% for the nine months ended September 30, 2020 and 2019,
respectively, applied to adjusted net income before income taxes.
The estimated effective tax rates are what the Company would be
subject to based on the adjusted net income before taxes, and
consist of the combined federal statutory tax rate and the
Company's blended state tax rates.
|
|
(2) Assumes dilutive
warrants, options and restricted stock 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 nine months
ended September 30, 2020 and 2019:
|
|
|
|
For the Three
Months Ended
|
|
|
|
September 30,
2020
|
|
|
September 30,
2019
|
|
|
|
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)
|
|
$
|
(1,022)
|
|
|
|
44,266
|
|
|
$
|
(0.02)
|
|
|
$
|
1,594
|
|
|
|
52,793
|
|
|
$
|
0.16
|
|
Assumed
exchange of shares(2)
|
|
|
(147)
|
|
|
|
9,765
|
|
|
|
|
|
|
|
6,817
|
|
|
|
369
|
|
|
|
|
|
Net
income (loss)
|
|
|
(1,169)
|
|
|
|
|
|
|
|
|
|
|
|
8,411
|
|
|
|
|
|
|
|
|
|
Adjustments to arrive
at adjusted
income before taxes(3)
|
|
|
24,214
|
|
|
|
10,402
|
|
|
|
|
|
|
|
1,384
|
|
|
|
566
|
|
|
|
|
|
Adjusted
income before taxes
|
|
|
23,045
|
|
|
|
|
|
|
|
|
|
|
|
9,795
|
|
|
|
|
|
|
|
|
|
Adjusted
income taxes(4)
|
|
|
(5,807)
|
|
|
|
|
|
|
|
|
|
|
|
(2,509)
|
|
|
|
|
|
|
|
|
|
Adjusted net
income
|
|
$
|
17,238
|
|
|
|
64,433
|
|
|
$
|
0.27
|
|
|
$
|
7,286
|
|
|
|
53,728
|
|
|
$
|
0.14
|
|
|
|
|
|
For the Nine
Months Ended
|
|
|
|
September 30,
2020
|
|
|
September 30,
2019
|
|
|
|
Net
Income
|
|
|
Weighted Average
Shares, Diluted
|
|
|
Net Income per
Share, Diluted
|
|
|
Net
Income
|
|
|
Weighted Average
Shares, Diluted
|
|
|
Net Income per
Share, Diluted
|
|
Net income
attributable to Purple
Innovation Inc.(1)
|
|
$
|
5,832
|
|
|
|
36,628
|
|
|
$
|
0.16
|
|
|
$
|
126
|
|
|
|
52,454
|
|
|
$
|
0.01
|
|
Assumed
exchange of shares(2)
|
|
|
7,178
|
|
|
|
21,549
|
|
|
|
|
|
|
|
224
|
|
|
|
284
|
|
|
|
|
|
Net
income (loss)
|
|
|
13,010
|
|
|
|
|
|
|
|
|
|
|
|
350
|
|
|
|
|
|
|
|
|
|
Adjustments to arrive
at adjusted
income before taxes(3)
|
|
|
46,784
|
|
|
|
2,613
|
|
|
|
|
|
|
|
9,671
|
|
|
|
241
|
|
|
|
|
|
Adjusted
income before taxes
|
|
|
59,794
|
|
|
|
|
|
|
|
|
|
|
|
10,021
|
|
|
|
|
|
|
|
|
|
Adjusted
income taxes(4)
|
|
|
(15,068)
|
|
|
|
|
|
|
|
|
|
|
|
(2,567)
|
|
|
|
|
|
|
|
|
|
Adjusted net
income
|
|
$
|
44,726
|
|
|
|
60,790
|
|
|
$
|
0.74
|
|
|
$
|
7,454
|
|
|
|
52,979
|
|
|
$
|
0.14
|
|
|
(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. 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 25.2% and 25.6% for the three
months ended September 30, 2020 and 2019, respectively, and 25.2%
and 25.6% for the nine months ended September 30, 2020 and 2019,
respectively, applied to adjusted net income before income taxes.
The estimated effective tax rates are what the Company would be
subject to based on the adjusted net income before taxes, and
consist of the combined federal statutory tax rate and the
Company's blended state tax rates.
|
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SOURCE Purple Innovation, Inc.