• Net Revenue: $118.6 million, down 15.3% year-over-year.
• Direct Consumer Net Revenue: $70.8 million, down 11.7% year-over-year.
• E-commerce Revenue: Down 15.7% year-over-year.
• Showroom Revenue: Relatively flat year-over-year.
• Wholesale Net Revenue: $47.8 million, down 20.1% year-over-year.
• Adjusted Gross Margin: 40.5%, an improvement of 340 basis points year-over-year.
• Operating Expenses: $82 million, up 2.6% year-over-year.
• Adjusted Net Loss: $8.4 million, compared to $19.4 million last year.
• Adjusted EBITDA: Negative $6.4 million, improved from negative $16.3 million last year.
• Adjusted Loss Per Share: 8, compared to 18 last year.
• Cash and Cash Equivalents: $23.4 million as of September 30, 2024.
• Net Inventories: $59.9 million, down 16.9% year-over-year.
• Advertising Spend Reduction: 36% reduction in Q3 compared to last year.
• Net Door Count: Reduced by 200 doors to approximately 3,300 doors.

• Warning! GuruFocus has detected 4 Warning Signs with PRPL.

Release Date: November 04, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Purple Innovation Inc (NASDAQ:PRPL) achieved significant operational efficiencies, resulting in a 340 basis point improvement in adjusted gross margin year over year to 40.5%.
• The company completed the realignment of its distribution network and transitioned 75% of wholesale orders to its Georgia facility, expecting full operational capacity by the end of the year.
• The restructuring and consolidation efforts are projected to yield annual EBITDA savings of $15 to $20 million starting in 2025.
• Purple Innovation Inc (NASDAQ:PRPL) has optimized its advertising strategy, resulting in more efficient and profitable ad spend, despite a 36% reduction in advertising expenses.
• The company has seen strong performance in its premium product lines, with the luxury Rejuvenate collection accounting for nearly 30% of mattress revenue in showrooms.

Negative Points

• Purple Innovation Inc (NASDAQ:PRPL) experienced a 15% year-over-year decline in Q3 sales, primarily due to softness in consumer demand and reduced advertising spend.
• The wholesale channel saw a 20% year-over-year decline, impacted by the decision to exit relationships with certain customers and a reduction in door count.
• Despite improvements in profitability, the company anticipates continued pressure on top-line revenue due to industry-wide demand declines.
• The restructuring process, while yielding savings, involves risks of potential disruptions to business operations during the transition.
• Purple Innovation Inc (NASDAQ:PRPL) expects to finish the year at the lower end of its guidance for revenue and adjusted EBITDA, reflecting ongoing macroeconomic challenges.

Q & A Highlights

Q: Can you provide insights into the expected revenue acceleration in the fourth quarter despite the challenging environment? A: Robert DeMartini, CEO: Post-Labor Day, the business has been soft, but we are entering the Black Friday promotion period, which is competitive across all channels. We expect a pickup in sales during November and December, supported by our promotional strategies.

Q: How should we think about cash flow over the next few quarters, especially with the Utah restructuring costs? A: Todd Vogensen, CFO: We have shown progress in managing inventory and accounts payable, which should provide cash sources. We ended Q3 with $23 million in cash and expect to maintain positive operating cash flow into Q4.

Q: What gives you confidence in achieving profitability next year, given the current market conditions? A: Robert DeMartini, CEO: We are confident due to our progress in gross margin improvements. We have not assumed any volume-driven tailwinds and are focusing on cost efficiencies and restructuring benefits to drive profitability.

Q: Can you elaborate on the operational manufacturing consolidation and any potential disruptions? A: Robert DeMartini, CEO: The consolidation is more than halfway through, with minimal disruptions. We are balancing customer needs with manufacturing in the West and expect to open a distribution center in Salt Lake City by January.

Q: How are you managing the restructuring savings, and what is the expected impact on EBITDA and cash flow for 2025? A: Todd Vogensen, CFO: Most savings will flow in 2025, with benefits in both cost of sales and operating expenses. We expect to be EBITDA and cash flow positive in Q4 2024, with full benefits realized next year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.