Toggle SGML Header (+)


Section 1: 8-K (CURRENT REPORT)

 

  

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): May 7, 2019

 

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.)

 

123 East 200 North    
Alpine, Utah   84004
(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))

 

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. ☐

 

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
Warrants to purchase one-half of one share of Class A Common Stock   PRPLW   OTC PINK

 

 

 

 

 

  

ITEM 2.02 RESULTS OF OPERATIONS AND FINANCIAL CONDITION

 

On May 7, 2019, Purple Innovation, Inc. (the “Company”) issued a press release announcing its financial results for the year ended March 31, 2019. 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
99.1   Press Release dated May 7, 2019, regarding financial results for the year ended March 31, 2019.

  

1

 

  

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: May 7, 2019 PURPLE INNOVATION, INC.
     
  By: /s/ Craig L. Phillips
    Craig L. Phillips
    Interim Chief Financial Officer

 

 

2

 

 

 

 

 

 

(Back To Top)

Section 2: EX-99.1 (PRESS RELEASE DATED MAY 7, 2019, REGARDING FINANCIAL RESULTS FOR THE YEAR ENDED MARCH 31, 2019)

Exhibit 99.1

 

 

 

Purple Innovation Reports First Quarter 2019 Results

First Quarter Net Revenue Increased 38%

Operating Income Improved to $4.8 Million

 

Alpine, Utah, May 7, 2019 – Purple Innovation, Inc. (NASDAQ: PRPL) (“Purple”), a comfort innovation company known for creating the “World’s First No Pressure ™ Mattress,” today announced results for the first quarter ended March 31, 2019.

 

First Quarter Financial Summary (Comparisons versus First Quarter 2018)1

 

·Net revenue increased 37.7% to $83.6 million, compared to $60.8 million.
·Gross margin was 40.7% compared to 42.5%.
·Operating expenses as a percent of net revenue were 35.0% compared to 48.4%.
·Operating income was $4.8 million compared to an operating loss of $(3.6) million. Adjusted operating income was $5.5 million compared to an adjusted operating loss of $(1.2) million.
·Net loss was $(0.7) million compared to a net loss of $(4.3) million. This first quarter 2019 included a $6.3 million non-cash expense associated with the loss on extinguishment of debt, partially offset by a $1.7 gain from a change in fair value of warrant liabilities.
·EBITDA was $0.9 million compared to $(3.1) million. Adjusted EBITDA was $6.2 million compared to $(0.8) million.

 

“Our first quarter results, which were highlighted by strong revenue growth and a significant improvement in operating profit, represent a very encouraging start to the year,” said Joe Megibow, Chief Executive Officer. “We continue to experience increasing demand for our differentiated product offering, especially through our wholesale channel as the combination of door expansion and strong sell-through is fueling healthy year-over-year gains. At the same time, we’ve made further progress improving execution throughout the organization. This includes addressing identified inefficiencies in our manufacturing, supply chain and fulfillment processes as well as increasing our marketing effectiveness. Looking ahead, we are focused on building on our recent accomplishments and implementing new initiatives to ensure the Company is best positioned to profitably grow market share and generate increased shareholder value.”

 

First Quarter 2019 Review

 

First quarter 2019 net revenue increased 37.7% to $83.6 million, compared to $60.8 million in the first quarter of 2018. The increase in net revenue was driven by continued wholesale door expansion combined with higher replenishment orders following strong sell-through.

 

Gross margin for the first quarter 2019 was 40.7% compared to 42.5% in the year ago period. The decrease was primarily due to a shift in sales mix to more sales with wholesale pricing. First quarter 2019 gross margins exceeded internal expectations driven by leveraging fixed costs on higher production volumes and improved efficiencies within the supply chain process.

 

 

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.

 

1

 

 

 

 

Operating expenses were $29.3 million in the first quarter 2019 compared to $29.4 million in the prior year period. As a percent of sales, operating expenses improved to 35.0% compared with 48.4% in the year ago period driven by improved efficiencies in marketing initiatives, a decrease in merger transaction costs, and a shift of approximately $3 million of discretionary marketing investments until later in 2019.

 

Operating income was $4.8 million, compared to an operating loss of $(3.6) million in the prior year period. Adjusted operating income was $5.5 million compared to an adjusted operating loss of $(1.2) million in first quarter 2018. Adjusted operating income (loss) excludes merger transactions costs, equity incentive compensation, legal fees, interim CFO costs, severance and CEO search costs.

 

Net loss was $(0.7) million for the first quarter 2019 compared to a net loss of $(4.3) million in the year ago period.

 

EBITDA for the first quarter 2019 was $0.9 million compared to $(3.1) million in the first quarter 2018. Adjusted EBITDA, which excludes merger transactions costs, debt extinguishment and warrant liability, equity incentive compensation, legal fees, interim CFO costs, severance and CEO search costs, was $6.2 million, compared to adjusted EBITDA of $(0.8) million in the last year period.

 

Additional Financing

 

On February 25, 2019, stockholders voted in favor of the Company amending and restating its credit agreement to provide $10.0 million of additional financing.

 

In conjunction with the amended and restated credit agreement, the Company determined that the amended debt terms resulted in a substantial change in the existing debt terms for the two lenders that participated in both the original and additional financing. As a result, the change in terms for these two lenders are required to be accounted for as an extinguishment of the portion of the original debt agreement related to those lenders. Accordingly, the Company recognized a loss on the extinguishment of a portion of the existing debt of approximately $6.3 million. This non-cash expense is primarily associated with the recognition of related unamortized debt discount and debt issuance costs and recognition of the fair value of the incremental loan warrants issued.

  

The incremental loan warrants issued in conjunction with the amended and restated credit agreement are classified as liabilities and recorded at fair value on the date of the transaction and subsequently re-measured to fair value at each reporting date with changes in the fair value included in earnings. The change in fair value from the date of the transaction resulted in a non-cash gain in the amount of $1.7 million recorded in earnings for the three months ended March 31, 2019. 

 

Balance Sheet

 

As of March 31, 2019, the Company had cash and cash equivalents of $12.2 million consistent with the balance at December 31, 2018. Inventories as of March 31, 2019 totaled $25.3 million compared with $22.9 million as of December 31, 2018.

 

Outlook

 

For 2019, the Company continues to expect net revenue to range from $350 million to $375 million, an increase of 22% to 31% over 2018, and adjusted EBITDA to be in the range of $3 million to $8 million.

 

2

 

 

 

 

Webcast and Conference Call Information

 

Purple Innovation, Inc. will host a live conference call to discuss financial results today, May 7, 2019, at 4:30 p.m. Eastern Time. Investors and analysts interested in participating in the call are invited to dial (877) 425-9470 (domestic) or (201) 389-0878 (international) at 4:25 p.m. ET and provide the Conference ID: 13690608. The conference call will also be available to interested parties through a live webcast at investors.purple.com. Please visit the website at least 15 minutes prior to the start of the call to register and download any necessary software.

 

About Purple

 

Purple is an innovative comfort product company that designs and manufactures products to improve people’s lives. It designs and manufactures a range of comfort products, including mattresses, pillows, and cushions, using its patented Hyper-Elastic Polymer® material designed to improve comfort. The Company markets and sells its products through its direct-to-consumer online channel, traditional retail partners, and third party online retailers. 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 about our outlook and expectations for our financial results for the fiscal year ended December 31, 2019, and our ability to create sustained profitability and shareholder value. 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 14, 2019 and our Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on May 7, 2019. 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

 

Adjusted Operating Income (Loss), EBITDA, and Adjusted EBITDA 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

[email protected]

203-682-8200

 

Media Contact:

Alecia Pulman/Mitch Polikoff, ICR
[email protected]

646-277-1200

 

Purple Innovation, Inc.
For information regarding Purple products, please contact:
Savannah Hobbs
Director of Purple Communications
[email protected]

 

3

 

 

 

 

PURPLE INNOVATION, INC.

 

Condensed Consolidated Balance Sheets

(In thousands, except par value)

(Unaudited)

 

   March 31,   December 31, 
   2019   2018 
         
Assets        
Current assets:        
Cash and cash equivalents  $12,182   $12,232 
Accounts receivable, net   19,689    10,241 
Inventories, net   25,341    22,940 
Prepaid inventory   592    790 
Other current assets   2,375    1,494 
Total current assets   60,179    47,697 
Property and equipment, net   22,718    22,514 
Intangible assets, net   1,538    1,493 
Other long-term assets   5    5 
Total assets  $84,440   $71,709 
           
Liabilities and Stockholders’ Deficit          
Current liabilities:          
Accounts payable  $25,982   $24,828 
Accrued sales returns   5,189    5,457 
Accrued compensation   3,154    2,691 
Customer prepayments   4,335    7,522 
Accrued sales tax   4,438    5,538 
Other current liabilities   3,726    2,541 
Total current liabilities   46,824    48,577 
Long-term debt, related-party   32,821    21,411 
Warrant liabilities   3,166     
Other long-term liabilities, net of current portion   4,287    3,732 
Total liabilities   87,098    73,720 
Commitments and contingencies          
Stockholders’ deficit:          
Class A common stock; $0.0001 par value, 210,000 shares authorized; 9,731 issued and outstanding at March 31, 2019 and December 31, 2018   1    1 
Class B common stock; $0.0001 par value, 90,000 shares authorized; 44,071 issued and outstanding at March 31, 2019 and December 31, 2018   4    4 
Additional paid-in capital   3,728    3,655 
Accumulated deficit   (4,452)   (4,322)
Total stockholders’ deficit   (719)   (662)
Noncontrolling interest   (1,939)   (1,349)
Total deficit   (2,658)   (2,011)
Total liabilities and stockholders’ deficit  $84,440   $71,709 

 

4

 

 

 

 

PURPLE INNOVATION, INC.

 

Condensed Consolidated Statements of Operations

(In thousands, except per share amounts)

(Unaudited)

 

   Three Months Ended
March 31,
 
   2019   2018 
         
Revenues, net  $83,648   $60,768 
Cost of revenues   49,579    34,953 
Gross profit   34,069    25,815 
Operating expenses:          
Marketing and sales   24,017    22,045 
General and administrative   4,565    6,853 
Research and development   690    511 
Total operating expenses   29,272    29,409 
Operating income (loss)   4,797    (3,594)
Interest expense   1,144    702 
Other income, net   (229)   (19)
Loss on extinguishment of debt   6,299     
Change in fair value - warrant liabilities   (1,697)    
Net loss   (720)   (4,277)
Net loss attributable to noncontrolling interest   (590)   (2,727)
Net loss attributable to Purple Innovation, Inc.  $(130)  $(1,550)
Net loss per common share—basic and diluted  $(0.02)  $(0.18)
Weighted average common shares outstanding—basic and diluted   8,437    8,389 

 

5

 

 

 

 

PURPLE INNOVATION, INC.

 

Condensed Consolidated Statements of Cash Flows

(In thousands)

(Unaudited)

 

   Three Months Ended
March 31,
 
   2019   2018 
         
Cash flows from operating activities:        
Net loss  $(720)  $(4,277)
Adjustments to reconcile net loss to net cash from operating activities:          
Depreciation and amortization   722    456 
Non-cash interest   732    154 
Loss on extinguishment of debt   6,299     
Gain on change in fair value - warrant liabilities   (1,697)    
Stock-based compensation   73     
Changes in operating assets and liabilities:          
Decrease (increase) in accounts receivable   (9,448)   271 
Increase in inventories   (2,401)   (13,234)
Increase in prepaid inventory and other assets   (683)   (1,300)
Increase (decrease) in accounts payable   1,179    (1,235)
Decrease in accrued sales returns   (268)   (219)
Increase (decrease) in accrued compensation   463    (350)
Increase (decrease) in customer prepayments   (3,187)   4,026 
Increase in other accrued liabilities   646    133 
Net cash used in operating activities   (8,290)   (15,575)
           
Cash flows from investing activities:          
Purchase of property and equipment   (932)   (2,645)
Investment in intangible assets   (64)   (68)
Net cash used in investing activities   (996)   (2,713)
           
Cash flows from financing activities:          
Proceeds from the Business Combination       25,912 
Proceeds from related-party debt   10,000    24,000 
Payments on line of credit       (8,000)
Payments for debt issuance costs   (758)   (367)
Principal payments on capital lease obligations   (6)   (7)
Net cash provided by financing activities   9,236    41,538 
           
Net increase (decrease) in cash   (50)   23,250 
Cash, beginning of the period   12,232    3,593 
Cash, end of the period  $12,182   $26,843 
           
Supplemental schedule of non-cash investing and financing activities:          
Property and equipment included in accounts payable  $438   $95 
Assignment of founder shares and sponsor warrants  $   $4,691 
Equipment acquired under build-to-suit service agreement  $   $553 

 

6

 

 

 

 

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 and adjusted operating income (loss). 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 Loss to Non-GAAP EBITDA and Adjusted EBITDA

 

A reconciliation of GAAP net loss to the non-GAAP measures of EBITDA and adjusted EBITDA is provided below. EBITDA represents net income (loss) before interest expense, net other income and depreciation and amortization. Adjusted EBITDA represents EBITDA excluding certain non-cash and non-recurring costs incurred.

 

   Three Months Ended
March 31,
 
   2019   2018 
         
GAAP net loss  $(720)  $(4,277)
Interest expense   1,144    702 
Other income, net   (229)   (19)
Depreciation and amortization   722    456 
EBITDA   917    (3,138)
Adjustments:          
Merger transaction costs       2,028 
Debt extinguishment and warrant liabilities   4,602     
Stock-based compensation expense   73     
Legal fees   141    199 
Interim CFO costs   186     
Severance and executive search costs   273    140 
Adjusted EBITDA  $6,192   $(771)

 

Reconciliation of GAAP Operating Income (Loss) to Non-GAAP Adjusted Operating Income (Loss)

 

A reconciliation of GAAP operating income (loss) to the non-GAAP measure of adjusted operating income (loss) is provided below. Adjusted operating income (loss) represents GAAP operating income (loss) excluding certain non-cash and non-recurring costs incurred.

 

   Three Months Ended
March 31,
 
   2019   2018 
         
GAAP operating income (loss)  $4,797   $(3,594)
Adjustments:          
Merger transaction costs       2,028 
Stock-based compensation expense   73     
Legal fees   141    199 
Interim CFO costs   186     
Severance and CEO search costs   273    140 
Adjusted operating income (loss)  $5,470   $(1,227)

 

 

7

 

 

(Back To Top)