Purple Innovation (PRPL) Q2 2024 earnings summary

Executive summary

• Net revenue grew 2.0% year-over-year to $120.3 million in Q2 2024, driven by a 7.2% increase in wholesale revenue and strong demand for new product lineups, while DTC revenue declined 1.8%.

• Gross margin improved significantly to 40.7% from 30.1% year-over-year, reflecting operational improvements, production efficiencies, and supply chain initiatives.

• Operating loss narrowed to $(14.5) million from $(40.3) million, and net income was near breakeven versus a $(40.5) million loss last year, aided by an $18.7 million gain from warrant liability revaluation.

• Adjusted EBITDA loss narrowed to $(4.1) million from $(21.5) million a year ago, driven by operational efficiencies.

• Adjusted net loss was $(13.8) million, or $(0.13) per diluted share, compared to $(23.9) million, or $(0.23) per diluted share, in the prior year.

Financial highlights

• Q2 2024 net revenue: $120.3 million (up 2.0% year-over-year); gross profit: $48.9 million (up 38.0%).

• Operating expenses reduced to $63.5 million (52.8% of revenue) from $75.7 million (64.3% of revenue), mainly due to lower G&A and marketing costs.

• Cash and cash equivalents at quarter-end: $23.4 million; working capital: $39.5 million.

• Inventories at quarter-end: $69.7 million, down 11.2% year-over-year.

• Interest expense rose to $4.2 million due to a new $61.0 million loan; other income included an $18.7 million gain from warrant revaluation.

Outlook and guidance

• Full-year 2024 net revenue guidance lowered to $490–$510 million from $540–$560 million, reflecting industry-wide demand declines.

• Adjusted EBITDA guidance for 2024 maintained at $(20) million to $(10) million, with profitability expected in Q4.

• CapEx expected to be approximately $10 million for the year.

• Marketing spend for the back half of the year to be $4–$6 million lower year-over-year, about a 10% reduction.

• Management believes current cash, expected operating cash flow, and up to $19.0 million available under the credit agreement are sufficient for the next 12 months.