Purple(US:PRPL)2023-05-11 02:23Financial Data and Key Metrics Changes - Net revenue for Q1 2023 was $109.4 million, down 23.6% from $143.2 million in the prior year period, primarily due to reduced advertising spend and softer industry demand [81][87] - Gross profit was $43.2 million with a gross margin of 39.5%, an increase from 36.1% in Q1 2022, attributed to lower material and labor costs and improved manufacturing efficiency [88] - Net loss for the quarter was $23.4 million compared to $13.6 million a year ago, while adjusted net loss was $12 million or $0.12 per share, an improvement from $16.5 million or $0.24 per share in the prior year [89] Business Line Data and Key Metrics Changes - Direct-to-consumer (DTC) net revenues declined by 22.5%, with e-commerce down 30.1%, partially offset by a 24.4% increase in showroom net revenue due to the addition of 21 showrooms [64] - Wholesale net revenue declined 25.3%, impacted by the upcoming launch of new premium products [64] Market Data and Key Metrics Changes - The overall mattress category remains soft, with no significant promotional pressure noted, although the company expects some improvement as new products are launched [111] - The company is optimistic about the performance of its new product lineup, which includes the Purple Essential, Premium, and Luxe collections, aimed at different market segments [83][84] Company Strategy and Development Direction - The strategic plan includes product lineup expansion, new brand positioning, investment in wholesale partnerships, and showroom expansion, with a target of 200 stores in the long term [86][91] - The company is focused on enhancing relationships with wholesale partners and improving sell-through rates at higher average selling prices [61][82] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the new product launch and its potential to drive profitable growth despite current market challenges [59][93] - The company anticipates stronger revenue in Q2 compared to Q1 but below Q2 of the previous year, with adjusted EBITDA reflecting launch costs [68][91] Other Important Information - Operating expenses were $65.2 million, or 59.6% of net revenue, down from $70.0 million or 48.9% in the prior year, primarily due to reduced marketing expenses [65] - The company ended Q1 with cash and cash equivalents of $54.5 million, up from $41.8 million at the end of 2022 [90] Q&A Session Summary Question: Can you provide clarity on the second quarter revenue guidance? - Management indicated that revenue is expected to be better than Q1 but below Q2 of the previous year, with expectations set appropriately [6][6] Question: What are the implications of the channel fill for Q2? - Management noted that while there may be a unit bump from backfilling floor samples, significant revenue bumps are not expected until new products are sold through [27][27] Question: How is the performance across different product tiers? - Management reported that there has been no significant trade-down observed, with some consumers trading up to higher-end products [9][9] Question: What is the outlook for advertising spend in Q2? - Advertising spend is expected to ramp up significantly in the second half of the year, with a focus on improving marketing efficiency [10][10] Question: How is the company managing inventory levels? - The company expects to run with somewhat increased inventories through Labor Day, as wholesale partners have delayed some introductions [21][21]