Purple Innovation Reports Third Quarter Financial Results

November 4, 2024  by Karen Parrish in Business Strategy, Industry   

"While our third quarter revenue was challenged, we are encouraged by both our year-to-date performance modestly exceeding the broader industry and the sustained improvements in our profitability," said CEO Rob DeMartini.

"The restructuring plan we announced earlier this quarter is on track to deliver meaningful cost savings in the new year as we improve our operational efficiencies and positions us to capitalize on tailwinds when the market improves. Looking forward, we remain confident in our Path to Premium Sleep strategy's ability to deliver long-term value and we look forward to building on this momentum into 2025."

Third Quarter 2024 Financial Results

Third quarter 2024 net revenue declined by 15.3% to $118.6 million, compared to $140.0 million in the third quarter of 2023. This decrease was primarily driven by industry-wide demand softness for home-related products, a reduction in advertising spend towards more profitable marketing, and the lapping of our successful launch of new premium mattresses in 2023. By channel, DTC net revenues decreased 11.7%, and wholesale net revenues decreased 20.1%. Within DTC, e-commerce net revenues decreased 15.7%, while showroom net revenues were approximately flat. In addition to the factors above, the decline in wholesale net revenues reflected the exit of certain customers.

Gross margin for the third quarter of 2024 decreased to 29.7% down 410 basis points compared to 33.8% in the prior year, negatively impacted by the $12.9 million of restructuring related charges offset in part by improved production efficiencies. The increase in production efficiencies was primarily due to supply chain initiatives and manufacturing efficiencies. We expect the restructuring plan will further streamline our operations and provide increased gross profits. Despite deleveraging from lower sales, adjusted gross margin, which excludes restructuring related charges during the quarter and launch costs in the prior year period, grew to 40.5%, an increase of 340 basis points compared to adjusted gross margin last year.

Operating expenses for the third quarter were $82.0 million, up 2.6% from $79.9 million in Q3 2023. This increase was driven by $19.8 million in restructuring related charges as part of the consolidation of our manufacturing operations to achieve significant operational efficiencies. Excluding all restructuring related charges this year and loss on impairment of goodwill last year, adjusted operating expenses were down by $10.9 million, primarily due to a $9.1 million reduction in advertising spend.

Net loss attributable to Purple Innovation, Inc. for the third quarter of 2024 was $(39.2) million or $(0.36) per diluted share, compared to a net loss of $(36.0) million or $(0.34) per diluted share in the third quarter 2023. Adjusted net loss, excluding restructuring related charges and certain non-cash and one-time items, was $(8.4) million or $(0.08) per diluted share, an improvement from $(19.4) million or $(0.18) per diluted share in the prior year.

EBITDA for the third quarter 2024 was $(27.4) million compared to $(29.7) million in the third quarter 2023.  Adjusted EBITDA was $(6.4) million, an improvement from $(16.3) million in the prior year.

Restructuring, Impairment and Other Related Charges

In August 2024, we initiated a restructuring plan to strategically realign our operational focus to achieve significant operational efficiencies. This plan includes the closure of our two Utah manufacturing facilities to consolidate mattress production to our Georgia plant, as well as a headcount reduction at our Utah headquarters.  As a result, we have a $32.7 million total restructuring, impairment and other related charges in the third quarter 2024. We expect to record additional restructuring and other related charges in the amount of $9.9 million through the second quarter of 2025. The supply chain consolidation and corporate restructure is expected to yield annual EBITDA savings of $15 to $20 million starting in 2025, and we plan to have positive cash flow and adjusted EBITDA next year.

Balance Sheet

Cash and cash equivalents were $23.4 million as of September 30, 2024, compared to $26.9 million as of December 31, 2023.

Inventories as of September 30, 2024 totaled $59.9 million, representing a decrease of 10.5%, or $7.0 million compared with December 31, 2023.

2024 Outlook

For the full year 2024, we expect to be at the lower end of our guidance range for net revenue of $490 million to $510 million, and also at the lower end of our guidance range for Adjusted EBITDA outlook of $(20) million to $(10) million. The company continues to prioritize and benefit from operational improvements and expects positive Adjusted EBITDA in the fourth quarter.

Conference Call and Webcast Information

After the conference call, a webcast replay will remain available on the investor relations section of the Company's website for 30 days, investors.purple.com.