Purple(PRPL) - 2025 Q2 - Quarterly Report

Part I. Financial Information Item 1. Financial Statements (Unaudited) The unaudited condensed consolidated financial statements for Purple Innovation, Inc. as of June 30, 2025, report total assets of $303.8 million, a $15.6 million stockholders' deficit, and a $36.5 million net loss on $209.3 million revenue for the six-month period Condensed Consolidated Balance Sheets As of June 30, 2025, total assets slightly decreased to $303.8 million, while total liabilities increased to $319.4 million, leading to a shift from $20.2 million stockholders' equity to a $15.6 million deficit Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $34,248 | $29,011 | | Inventories | $60,903 | $56,863 | | Total current assets | $125,931 | $126,368 | | Total assets | $303,788 | $307,845 | | Liabilities & Stockholders' Equity | | | | Total current liabilities | $84,436 | $101,003 | | Related party debt | $94,539 | $55,394 | | Total liabilities | $319,367 | $287,636 | | Total stockholders' equity (deficit) | $(15,579) | $20,209 | Condensed Consolidated Statements of Operations For Q2 2025, net revenues decreased to $105.1 million with a $17.4 million net loss, while for H1 2025, revenues fell to $209.3 million, and net loss narrowed to $36.5 million Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues, net | $105,100 | $120,271 | $209,271 | $240,304 | | Gross profit | $37,683 | $48,940 | $78,729 | $90,660 | | Operating loss | $(14,239) | $(14,540) | $(28,718) | $(37,676) | | Net loss | $(17,371) | $(9) | $(36,537) | $(50,277) | | Net loss per share (basic & diluted) | $(0.16) | $(0.00) | $(0.34) | $(0.47) | Condensed Consolidated Statements of Stockholders' Equity (Deficit) Total stockholders' equity shifted from a $20.2 million positive balance at year-end 2024 to a $15.6 million deficit by June 30, 2025, primarily due to the $36.5 million net loss - The company's total equity position shifted from $20.2 million at the end of 2024 to a deficit of $15.6 million by June 30, 2025, mainly due to the net loss incurred during the first half of the year[15] Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, operating activities used $27.1 million in cash, offset by $37.4 million from financing, resulting in a $5.2 million net increase in cash to $34.2 million Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(27,062) | $(25,730) | | Net cash used in investing activities | $(5,144) | $(5,253) | | Net cash provided by financing activities | $37,443 | $27,534 | | Net increase (decrease) in cash | $5,237 | $(3,449) | | Cash and cash equivalents, end of period | $34,248 | $23,408 | Notes to Condensed Consolidated Financial Statements The notes detail significant accounting policies, restructuring activities, debt agreements, and key events, including a major restructuring plan, new debt and warrant issuances, and an expanded commercial agreement with Mattress Firm - The company conducted a going concern evaluation and concluded it will have sufficient liquidity to fund operations for at least one year from the report's issuance date, supported by new debt financing and cost-saving initiatives[26][28] - In August 2024, the company initiated a restructuring plan to close its Utah manufacturing facilities and consolidate production in Georgia, resulting in total charges of $43.2 million through Q2 2025, including $7.6 million cash and $35.7 million non-cash charges[37][38] - The company entered into an agreement with Mattress Firm to expand its product presence from approximately 5,000 to a minimum of 12,000 mattress slots, issuing 8.0 million SGI Warrants valued at $6.5 million in connection with this agreement[110][113] - The company is involved in several legal proceedings, including disputes with its founders over employment agreements, tax distributions, and a real estate lease, with alleged damages totaling several million dollars[115][116][117] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the Q2 2025 revenue decline to product delivery delays and e-commerce softness, while gross margin fell due to tariffs and launch costs, with operating expenses decreasing due to cost controls and restructuring benefits Q2 2025 vs Q2 2024 Performance Summary | Metric | Q2 2025 | Q2 2024 | Change | Reason | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $105.1M | $120.3M | -12.6% | Longer delivery times for Rejuvenate 2.0, e-commerce softness, wholesale door reductions | | Gross Profit % | 35.9% | 40.7% | -4.8 p.p. | Increased tariffs, ramp-up costs for new products and Mattress Firm rollout | | Operating Expenses | $51.9M | $63.5M | -18.2% | Reduced advertising spend, employee cost savings from restructuring | | Net Loss (Purple Inc.) | $17.3M | $0.0M | -$17.3M | Lower sales, decreased gross profit, and change in warrant liability value | - The company's 'Path to Premium Sleep' growth strategy focuses on pioneering new technologies like the DreamLayer grid, promoting product differentiation, and improving gross profit through operational efficiencies[220][222] - The company expanded its agreement with Mattress Firm, increasing product placement to a minimum of 12,000 mattress slots, which is expected to generate approximately $70 million in annualized incremental net revenue beginning in 2026[188] - In the first half of 2025, the company secured an additional $39.0 million in term loan proceeds through two amendments to its credit agreement with related parties[192][197] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company faces interest rate risk from its $117.1 million variable rate debt, where a 100 basis point increase would raise annual interest expense by approximately $1.2 million - The company has $117.1 million in variable rate debt as of June 30, 2025, where a 100 basis point increase in interest rates would result in an approximate $1.2 million increase in annual interest expense[261] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[264] - No changes were made during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[265] Part II. Other Information Item 1. Legal Proceedings The company is involved in various legal proceedings arising in the ordinary course of business, with details provided in Note 13 of the financial statements - For details on legal proceedings, refer to Note 13 — Commitments and Contingencies in the financial statements[267] Item 1A. Risk Factors The company faces material risks from U.S. trade policy, significant indebtedness with restrictive covenants, potential need for dilutive additional funding, reliance on key commercial agreements, and NASDAQ delisting risk due to minimum bid price non-compliance - Changes in U.S. trade policy and tariffs on imported materials, particularly textiles, could materially increase costs and adversely affect business operations[269][270] - The company's significant debt includes restrictive covenants and substantial 'make-whole' payment obligations, which could limit operational flexibility and divert resources from the business if triggered[272][276] - The company may require additional funds for its long-term operations, and failure to obtain them on acceptable terms could force it to scale back growth plans, with future financing potentially dilutive, as evidenced by the 40.8 million warrants outstanding[277][281] - On April 5, 2025, the company received a notice from NASDAQ for non-compliance with the minimum $1.00 bid price rule and has until October 1, 2025, to regain compliance to avoid potential delisting[287] Item 5. Other Information No directors or executive officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the second quarter of 2025 - No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans during the second quarter of 2025[292] Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including credit agreement amendments, registration rights agreements, officer certifications, and XBRL data files