Purple(US:PRPL)2020-11-10 22:02Financial Performance - Total net revenue increased by $69.7 million, or 59.4%, to $187.1 million for the three months ended September 30, 2020, compared to $117.4 million for the same period in 2019[218] - DTC net revenue growth was approximately 97% over the prior year third quarter, driven by increased demand for premium products[213] - Total net revenue increased by $170.5 million, or 56.1%, to $474.6 million for the nine months ended September 30, 2020, compared to $304.1 million for the same period in 2019[232] Profitability - Gross profit margin improved to 47.2% of net revenues for the three months ended September 30, 2020, up from 45.0% for the same period in 2019[219] - Gross profit increased to $223.1 million, representing 47.0% of net revenues for the nine months ended September 30, 2020, up from 42.7% in the same period of 2019[233] - Operating income increased by $13.3 million to $24.3 million for the three months ended September 30, 2020, compared to $11.0 million for the same period in 2019[224] - Operating income rose by $50.3 million, or 373.9%, to $63.7 million for the nine months ended September 30, 2020, compared to $13.4 million for the same period in 2019[238] Expenses - Marketing and sales expenses rose by $17.2 million, or 50.4%, to $51.2 million for the three months ended September 30, 2020, but decreased as a percentage of net revenue to 27.4% from 29.0%[220] - General and administrative expenses increased by $4.4 million, or 64.4%, to $11.1 million for the three months ended September 30, 2020[221] - Research and development costs increased by $0.6 million, or 57.7%, to $1.7 million for the three months ended September 30, 2020[223] - Marketing and sales expenses increased by $33.3 million, or 35.4%, to $127.3 million for the nine months ended September 30, 2020, but decreased as a percentage of net revenue to 26.8% from 30.9%[235] - Research and development costs increased by $1.7 million, or 56.9%, to $4.7 million for the nine months ended September 30, 2020, primarily due to a one-year license agreement for innovative technology[237] Cash Flow and Liquidity - As of September 30, 2020, cash was $98.0 million, an increase from $33.5 million as of December 31, 2019, and working capital was $67.4 million, up from $27.3 million[247] - Cash provided by operating activities increased to $87.5 million for the nine months ended September 30, 2020, up $71.6 million from $15.8 million in the same period of 2019[258] - Cash used in investing activities was $25.1 million for the nine months ended September 30, 2020, an increase of $19.2 million from $5.9 million in 2019, primarily due to higher purchases of property and equipment[259] - Cash provided by financing activities was $2.1 million in the nine months ended September 30, 2020, a decrease of $7.0 million from $9.1 million in 2019[260] Debt and Liabilities - Interest expense for the nine months ended September 30, 2020 was $4.0 million, compared to $3.8 million for the same period in 2019[239] - The company recognized a loss on the extinguishment of debt of approximately $5.8 million in September 2020 due to the retirement of the Amended and Restated Credit Agreement[240] - A non-cash loss of $43.3 million was recorded for the change in fair value of warrant liabilities for the nine months ended September 30, 2020[242] - Tax Receivable Agreement (TRA) liability increased by $169.0 million as of September 30, 2020, with $168.5 million recorded during the nine months ended September 30, 2020[244] - Estimated future payments under the Tax Receivable Agreement (TRA) as of September 30, 2020, are $169.0 million, with approximately $0.7 million due within the next 12 months[255] Operational Developments - The company signed a new lease for a manufacturing facility in Georgia and is proceeding with the buildout and equipment purchases[213] - The company opened two new showrooms and plans to open two more by the end of the year[213] - The company experienced a 7% increase in net revenue from wholesale customers compared to the prior year third quarter[213] - The company anticipates the new manufacturing, distribution, and office facility in Georgia to be fully operational in 2021[262] - The lease for the new facility is for 128 months, with an initial monthly rent of $147,675, increasing by 2% annually[263] - The company has returned to full production to meet increased demand following the COVID-19 pandemic[249] Compliance and Internal Controls - The company is exempt from auditor attestation requirements regarding internal control over financial reporting under Section 404(b) of the Sarbanes Oxley Act of 2002[268] - As of September 30, 2020, the company's disclosure controls and procedures were not effective due to a material weakness identified in the tax provision process[270] - The company is implementing additional steps to remediate the identified material weakness in tax processes, aiming to improve the scope and quality of controls[272] - No changes in internal control over financial reporting occurred during the nine months ended September 30, 2020, that materially affected the internal controls[273] Ownership Changes - Noncontrolling interest ownership percentage decreased to approximately 1% at September 30, 2020, down from approximately 81% at the same date in 2019[230] Tax Benefits - The income tax benefit for the nine months ended September 30, 2020, was $35.8 million, compared to no benefit for the same period in 2019[245]