Purple Innovation (PRPL) Tops Q3 EPS by 3c, Revenues Beat

Purple Innovation (NASDAQ: PRPL) reported Q3 EPS of $0.27, $0.03 better than the analyst estimate of $0.24. Revenue for the quarter came in at $187.1 million versus the consensus estimate of $175.46 million.

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."

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.

For earnings history and earnings-related data on Purple Innovation (PRPL) click here.

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