PRPL - Earnings call transcript Q1 2019

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Operator

Greetings, ladies and gentlemen. Welcome to Purple Innovation's First Quarter 2019 Earnings Call. [Operator Instructions] It is now my pleasure to introduce your host, Brendon Frey of ICR. Please go ahead.

Brendon Frey

Thank you for joining Purple Innovation's First Quarter 2019 Earnings Call. press Purple's available website today's Relations the of of section at copy release on is Investor A www.purple.com. presentation I that would forward-looking this certain you statements. are statements we like will make to remind in Innovation's Purple actual on business. and differ a reflect statements of may forward-looking judgment analysis affecting of results expectations only current from factors and materially number today, as based company's These the place Accordingly, on reliance not statements. undue you should forward-looking these

financial be found earnings and Form I'll XXXX thorough as discussion turn to within We undertake the any our Joe earnings today of well can the comparable in uncertainties and our and over release Today's events SEC Megibow. filings found result a call adjusted with to EBITDA forward-looking alter the as the whether obligation A statements on measures, and measures which you the XX-Q, to such quarterly website. more the risks report non-GAAP measures with do forward-looking not can adjusted included of With that, most in update each referenced non-GAAP first be reconciliation operating furnished forward-looking release, associated GAAP disclaimer. to otherwise. our which or of include as be income, financial EBITDA. on information, statements, webcast, statements in future the references to to these financial of that a the or presentation new will call as made regarding refer on conference this our For Form any X-K we quarter disclaimer SEC was in

Joe Megibow

Officer. on Chief Chief Legg, Craig Officer; you Phillips, our and Operating me Financial the is call John good our Thank everyone. afternoon, and Interim With

top brand of very that healthy significant quarter for highlights to measures respect We COO and appointed time, the same-store demand million. the throughout leadership continued manufacturing partners. our under has our add continued and are doors opened as position to remainder relationship stores to their efficiency increased experience physical and by strong of us by pleased successfully million mattresses as in more investments was to Specific a John, to where of significant fourth operating in the year. sales margins the and marketing EBITDA a well revenue operating measurable in compared to with for QX financial made non-GAAP our sell-through. XXX our of early our and grow year-over-year $X.X to expenses the and points XX% gross expand in first results further This percent Row organization. development pleased strongly the it from of channel. is QX, revenue of the fueled increases growth business Purple Notably, progress our year. believe With and include of are they've improvements wholesale at exceeding $XX At And we start number basis of our we drove declining expect Furniture who marketing includes gains brand in XXXX, in in encouraging. resulted XXXX combination these XXX been the outside a in Purple same been signage stronger and expectations, has in our production Mattress partnership was in fulfillment. aided quarter; of of shift January, expanding of XX% while adjusted to $X other our of the we as very on part with income later approximately in Macy's million this the some XX% Firm, The solid our with terms Financial in the net shift supporting spend to we've stores. increasing year new and net put $X.X We line, we've and with wholesale our a as million;

of XX% first we steadily down year-over-year market. quarter our with costs were in have plan, customer increasingly as business, Plush last line as DTC able strong terms a as in Pillow. operate XX an which offset DTC the acquisitions sales creates continue In the over new competitive headwinds growing were risen launch promotion partially challenges this We of months, Day well with on channel. profitably Presidents' our to these Purple to

programs the We've working fools current We XX, to are March improve sub-$X,XXX people an to and update drove fun the million to been on to our John, term; roots companies. the provide performance. several our war our the promotion launched among fulfillment we to will headwinds strategic to recent as race turn highlighting reached April DTC back with for continue to able in bottom creative, on over more also who continue I'll manufacturing however, DTC. capabilities. $X.XX the bed-in-a-box see call price on we expect now such and the campaign X-day This near get than X the sales significant

John Legg

operations, we help we happy in was levels. operational Thanks, QX early enabled work quality, we cost quality, benefits to maintaining production our believe eliminate and work standpoint working and to have initiatives an of on which Purple. done the be enhance here team fulfillment. very at all customer as been to while strongly us a team's some and to quarter increasing operation labor. record in from The to optimize will terrific important our that plans. product potential us continue I hard, backlog team realize has execute and QX number our without to Joe. timely ability we've efficiency numbers improve the year-to-date, underway an began In from and had extremely Purple's I'm service

hard due fulfillment struggling As agreements with the over have After the begun earnings exited our yield. QX new fulfillment full helping we well past, worked in service organization. was on being cost. the adjustments. as done. the time, vision margin. in cost implementing around help Joe looking share I'm that our say to our accuracy, initiatives mentioned I'm XPL reflected see journey rallied company, quarter physical We've everyone level with that next out major gross also with first benefits when for partner inventory while and The that really to timeliness continue also our turn to Joe. our internal no and count the back of call and automation you forward which was accuracy, XPL of Joe's has quality a work is team our team been partnership, our and our has clean XX% are in we has previous world-class happy improve. to improving on with of as building can inventory us infrastructure we processes and our new The on partnership becoming over primarily wins it to March, can with QX the hitting more continuously the helped we control I'll us equipment manufacturing in latest to supporting quarter as

Joe Megibow

Thanks, John.

X build and and foundational XXXX capabilities last will with focus key innovation; outlined effectiveness; on on areas: we brand organizational as year a our retailing; our platforms product omnichannel out development. As call, growth be a I

to multiple initiatives such our innovation, successes include Max our results. yield are currently machine, processes, with of these as manufacturing core executing We our Starting each with in improvements process track across initiatives is product fleshing life institutionalizing on team. in out product some X as improvements fulfillment starting leveraging launching well our automation regional and launch which warehouses; for management cycle capabilities, as Italian-built equipment; appropriately midyear including innovation an sized our XPL early

During automation making QX, good progress with equipment on to online and partner, we completely strides a Max including transitioning gate X. some several of institutionalizing stage these process, XPL bringing cross-functional new our made initiatives

we doors including our wherever key however retailing, omnichannel other continue to respect in well For roles efforts retail and partner well. bringing while we on service core We brand improvements X,XXX, fronts out XXX our significant expand the our maturing as effectiveness, to are showrooms. continuing progress organizational first as website doors, aggressively more possibly making the current-to-date quarter want, to will total doors they for hiring functions. and as than With to and added customer building our aggressively

XXXX, the COO, of assessing hired Tres to our White, and In who retailing heard recently hired challenged depth a merchandising. improve XXXX. an with we've and in been and firm, from, more Retail Chief just significant both of a have experience controls we've effort reduce you importantly, throughout and who consulting processes Officer, in waste, a brings With accuracy, been help which we

we brand. improvements, begun With already course continue year. And assessment will have our the of over process which the the finally, for our complete, of implementing

differentiated brand Grid. our benefits strategists to the to continue creative world-class We especially brand with unique better positioning our and work the products, Purple align with of

of long-term the from we have start We positioning second performance year. year. importantly, in and third quarter, but company fourth our during we been expect benefits primarily to with success. more work fueling quarters In The are on the this focusing the start pleased improved to seeing is underlying summary, branding updated and the for

remainder more I'm revenue, recent have achieve on made the will we look months, the outlined we in As we in on and that last our progress review we financials of forward our margin to Craig guidance adjusted the guidance XXXX, EBITDA and now and the call. confident build can detail.

Craig Phillips

Thanks, Joe.

million, ended months the approximately Wholesale up $XX.X XXXX, the to the was continued XXXX net compared at earlier, following due comprised mix gross the the XXXX. the of to quarter. same primarily to pricing. sales in were mentioned prior dollars wholesale margin approximately more $XX.X shift of higher last fourth with XX.X% channel revenue was was first with door for million decrease XX.X% expansion, a to in gross Gross you X% March primarily net first and year the quarter versus $XX.X XX.X% with in during The XXXX sell-through due combined profit the in for As million year revenue in during $XX.X period of to XXXX. X quarter million during with revenue compared strong The quarter of XX, in revenue XX% quarter year-over-year wholesale margin increase compared period. orders the XX% sales replenishment

of driven points XX.X% wholesale $XX.X from percentage in First on our first versus and Marketing in and efficiencies shift selling quarter improved XXX expenses as revenue supply of within the came net marketing net quarter to XXXX in initiatives, volumes Joe from million and million improved channel the XXXX were higher the quarter approximately in $XX.X above $X a basis spend higher Operating the expenses leverage plan, that cost by revenue in prior efficiencies our production discussed. of process. by improved XX.X% chain marketing margins first period. year fixed gross in million driven

incremental an debt. operating to After compared quarter accounted the the loss attributable million February to merger was an the search it During $X.X determined amended secured as million quarter fees, operating of reported and that we loans million In of first lenders transaction that credit of for operating and announced income loan restated an and in first adjusting CFO XXXX. with original income participated the adjusted the previously should XXXX. company in CEO debt costs compensation, agreement, conjunction of the costs, the first be of of adjusted part equity quarter, incentive of in $X.X for severance compared extinguishment was and incremental as million both XXXX the to loss legal $X.X $X.X in interim operating costs,

loan represents million compared noncash from the the to loss a EBITDA of for first of noncash was excludes period. the with in cost At warrants first this the nonrecurring just quarter adjusted net issued same a $X.X compared the of quarter The recognized warrant credit time, year in and million loss original restated Adjusted of to loss EBITDA recorded net debt. from million million $X.X $X.X approximately the net million liability, Inclusive year. negative net in $X.X of noncash recognized the agreement. expense in we quarter EBITDA amended plus mentioned, conjunction of gain $X.X the quarter the million. of in fair $X.X million of of X portion for the the extinguishment of ago extinguishment we expense, approximately in EBITDA, transactions such, quarter a a the net negative a same expense the last incremental value As on million was change these and the $X.X which $X.X $X.X of first was XXXX. million the I debt versus of

Moving to our balance sheet.

the March XX, cash of of consistent the As of the equivalents XXXX. with end million XXXX, had $XX.X balance and company at cash

totaled of we end from by the at and XX, inventory in the reflects our February, as wholesale reflects of increase position strong first growth we've the XXXX. March experienced capital early well million $XX.X inventories working increased in cash quarter from secured XX, end growth financing Our our the at December with XXXX, $XX.X at as needs capital at expenditures. offset compared channel the proceeds Net XXXX, in million top of The additional compared at inventory with XXXX, channel. wholesale receivables particularly line

our to guidance. Turning

$X full the the we net For EBITDA adjusted range revenue to $X of to range XXXX, expect $XXX million. million to $XXX year with of in million continue positive the in million

marketing the the expenditures, takes mid-XX% during of adjusted first will anticipate range into the of and we breakeven. timing second the increase benefited reverse in quarter and second in largely For the net course account change XXXX, quarter of profitably which outlook to This itself the revenue EBITDA of approximately quarter.

into the growth continued turn the underway year, Joe? now to margins. of help initiatives improved to closing anticipate line get we comments. top should we half second for I'll continue Joe the it and As his back drive

Joe Megibow

very to X flowing share and around months, months more work excited delivering successfully proud on on lot a results of organization capable have Thanks, value the I work the That and began over year indicate successfully confidence Purple's in significantly. business Craig. primary strategic longer first against call, are I'm past executing attacking our is know we ago we through, of path what for still our The and I'm how see quarter do. this growing shareholders. right my that I towards our said, turning been the now of them. we objectives and and increased And we our have term. generating the market X are Similar profitably than results to last to delivering is this has increased said

take We are now ready to questions.

Operator

go Thank KeyBanc Capital you. with Markets. first ahead. Instructions] Brad [Operator Thomas Please question Our comes from

Brad Thomas

going believe, Hi. strong Good quite Wanted a the much, in shift that an bit on did strong. were then said Obviously, I talk numbers, the what's shifted a to competitive direct ask with sales And they down direct sales? on your I you, on the year at you the revenue little here. advertising. all, the afternoon. start And congratulations I thought When saw about to sales. headline were more takes some direct on you environment, about and and about could guess XX%. of impact how if I have to the puts advertising

Joe Megibow

Yes.

impact to quite we of we've where as all, prepared first we're last has the top DTC. marketing in while are most we our of to capabilities that wholesale I were think to sort less some and said coming an business comments driving into against managing -- out continued cash, the of our has this to and dramatically spoken We much funnel helped guide expected of expectation. plan coming drive getting of rebuild site and the year. just as year our And continuing of we're cash traffic we in at restate, of return which we've be investment, about, which where on up manage profitably,

brand that are We we'll going substantially all there. And see but working for to to improvements and on that, improvements is are how full we lean right in again, which expect think lean we to haul. do content up which expecting And results that comes marketing DTC. strategically, of the the be are we're some we're things through we've continue By as a guided we no process into into go rebound seeing are we some of that DTC, we going now. cleaning long -- approaches, our a that site to to year means better and this

Brad Thomas

where Got Joe, initiatives a you half see drive start timing that's And from standpoint, results think you. second those again? more you to

Joe Megibow

the that back Well executed improvement year we'll right. benefit on really That's the But this we've these into initiatives. quarter. most some of loaded we've see really, half when of likely

Brad Thomas

wholesale And success. some then a perspective, great. clearly questions two Great, nice there. from guess, seeing I

door do target at end count one, you you an that? the will of year? be the Do explicit where for the have think For

Joe Megibow

range not have partners It explicit to great be now. numbers, last and quite I And now. headroom open of with do the doors. the depends it year, not partnership -- target. that higher bit there. end science of those likely that's -- we a kind we'll of for will certainly on at But still down the an well. got where about are be. They're we to We -- now. have in There's We talked continued than it's right our hard a a had it of we're lot where We've doubling out us think performing we at

As we are grow. said, to ample same-store demand. continuing We're seeing sales

is that that convenience our -- buy doing. customers many as reiterate getting as a better display to of to really has stores built mattress been better continue the core, We about been and around possible. not at Purple bed-in-the-box play front a on them way of many It's have part a that in mattress

So to continue take to we're press will far it. the forward going as market as

Brad Thomas

you great. that over this how thing of as those positive of point? circle What just learnings a that us results to guess, ago? last year increasing. wanted have a opening And sample -- lapped I that, highlighted maybe comment same sales an that you're could did at been working remind back you have with you've some door on been? how the you are And big the I the That's

Joe Megibow

half got it X of of over half mean And Yes. stores, beds we X,XXX those the on are present we floor. we've that a stores, over those as least we stores of around I call today, well, are so at We, in. are

size. of sales, now terms in pretty reasonable or at good over a sample in pretty a this increase looking presence it's Obviously, seeing we're it's So same-store months.

even from So in growth, ago increases those in time to today, an the just annual X this stores that flow-through. were launching months isn't but measurable we seeing we're

So delivering. build build it's, we've to some that and on our of is capacity been able in us as the efficiency operational

done partners have and make been can patient growing to as our think improve our meet us now. I operations we sure we've we demand, the with stabilize and that

into and we now expected that and both results our place, got grow of and well. and product the think our customer they're more, deliver to set in partners' of that some I we've leaning all are as against that's driving SLAs,

Operator

next comes Seth Wedbush with Our Instructions] Basham from question [Operator Securities.

Joe Delaney

Joe for on Delaney It's Seth here.

congrats First strong quarter. off, on really a

So is going my the anything increase besides just the sharp around accounts Is on there sales question wholesale segment? here in channel mix receivable. the for

Craig Phillips

nothing Yes, on this by There's It's going besides driven all is Craig. that. No. wholesale.

As XX matter we X% beyond of fact, days. a are approximately

have So we all. this any in at don't seeing that we're, we're collectibility issues

Joe Delaney

Okay. year-over-year. just ask if compared could I'm curious return follow-up. And how or rates maybe trending then Great. one to I sequentially are about

Joe Megibow

Yes. number mean, we've into I there's drive things We, measuring a that. of been that

still but out was in absolutely getting we the X in ago roughly, thousands tight call they're ordered being POs of for of the our return are now, of same day in. momentum on majority in higher meeting especially our the months to are related SLAs rates of is we're to we've the lot the beds and down, direction. that fulfillment going than orders partners. little with continue come having had fulfilled day it, we'd when We X% to thing coming the Same a anticipated And door delivery seeing year-over-year. like, right from a windows, We're gone our orders

are return time, deliver we beds means reasonable We seen amount getting the direct of on rates. ability very of a that. to are that And a that in consumers our correlation to and have high XXs in

in to positively. customer yes, of issues managing and So, continuing very are trend number just other see expectations, things a we that

Operator

are no questions. There further

We Bobby have one James from Griffin Raymond with another Financial.

Bobby Griffin

for start Bobby. question year. and Hey, Joe, end Thanks taking it’s at the on a good the my congrats to

XQ? shift the year? our for in want are $X throughout we is just reflect I advertising purposes, that you out all models? First, that How Or into to, the going spread million to should modeling in

Joe Megibow

a formulaic -- I say like wouldn't it's it's that. Yes,

We spend have It's plan. allocated. in the the

reasons, didn't of it quarter, and the intent that is get this For spent. happen a variety will

is that production. of Some

in some looking Some direct But of purse of spend. of good that would I message ways guy will of not that QX function on is that a in just number that Really QX. the cash again, the expect there's a deferred empty. much is spend, to just it's we're timing a will is that manifest. happen

Bobby Griffin

your partner wholesale Okay. And into I of co-advertise cooperative to marketing you the to as to side you the their advertising the kind piece to traffic segment on guess continue here, are drive retailers then out Purple? secondly on with to starting of stores and benefit grow

Joe Megibow

ways that, and absolutely. general even on and their a been mean from our brand to into I -- models and their we're is -- finding finding our There's It's brand the walls. in depending our It's other of just absolutely it's excited both we're they seeing are things interesting and ways track variety a drive -- our so to well on win-win there's with new as to followed, foot as we're really of our out. they have the drive demand partner partners. partner, coming beginning, There's different largest the are one into with help we for really, traffic together traffic performing partnership, and finding -- we we but X -- yes, sales some each foot -- well ways working stores, good they're helping and But this about.

Bobby Griffin

for the business XX% to is goal and Okay, still have of up sales? the wholesale -- XXXX around in total

Joe Megibow

believe that's plan ultimately we way to up. year, just But this year's X/X in built the do expect XXs, that, a just XX% we've year. this little term, really Long higher higher we the out. where plan it for this the than is range, end our strategy we'll or that's around -- and and that be the we Yes

Operator

over floor the turn Joe now will for I to closing comments.

Joe Megibow

you so much. Thank

to calls, are year. working, underlying and last we're this flow said see pleased I the starting financially improvements And through. the that on are is benefits building the to the that As foundation

do, a team I While thank and start, to still to much to again. work results. investments. said, planned a hard want With we're Thank off of their you work positive great that for genuinely number continued including the Purple

Operator

This for your participation. conference. concludes today's Thank you

Purple Innovation (PRPL) 11 May 192019 Q1 Earnings call transcript