Purple Innovation Narrows Loss With Q4 Numbers Amid Battle With Coliseum Capital

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Purple Innovation stock investors could see mattress maker return to topline and bottomline growth

Amid its battle with activist shareholder Coliseum Capital, Mattress maker Purple Innovation (NASDAQ:PRPL) reported its fourth quarter results and earnings outlook to the market on Thursday afternoon.

For the fourth quarter of 2022, Purple’s sales decreased 22% to $145.1 million broadly in line with market forecasts. The company reported breakeven adjusted EBITDA compared to a loss of $23.4 million in Q4 of 2021.

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Q4 2022 hedge fund letters, conferences and more

 


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Adjusted net losses narrowed to a loss of $9.1 million in the final quarter of 2022 from a loss of $23.9 million in 2021. On an earnings per share basis, that came to a loss of 10 cents, higher that analysts polled forecast consensus of a 6-cent loss.

Purple's CEO Rob DeMartini said that “While near-term challenges persist, longer-term, we are excited about our prospects for sustained market share gains and look forward to re-establishing a strong growth trajectory once macroeconomic and industry headwinds subside."

The CEO added that he expects the company to return to a period of top- and bottom-line growth in the second half of 2023.

Analysts Reassess

Looking ahead, Purple expects to generate first quarter sales of around $105 million with a negative adjusted EBITDA of $9.5 million. According to S&P Capital IQ data, consensus forecasts have been adjusted down to match that guidance. Management noted that they expect lower wholesale sales as retailers reduce older stock levels before restocking after the new product launch in May.

For the full-year, Purple Innovation told investors that it anticipates sales of $590 million to $615 million with positive adjusted EBITDA of $13 million to $17 million. The values represent growth over FY22 results with the mid-point of both ranges around consensus expectations. Still, polled analysts aren't as optimistic. The consensus on revenue, as of March 16 is $589.79 million, with adjusted EBITDA near the low end of the guidance, at $13.08 million.

'No' Settlement

In a second filing by the company, Purple told investors that a recent settlement proposal put forth to holder Coliseum Capital was rejected. Coliseum owns approximately 44.7% of the outstanding PRPL stock. (Fintel journalists recently provided an update on the developments with Coliseum leading up to the recent lawsuit, found here.)

The proposal offered Coliseum the right to identify three out of six non-management seats out of a seven-member Board. The other three seats would be filled by two existing independent directors and another seat reserved for a significant shareholder.

 

The company would also allow for Coliseum managing partner Adam Gray to become chairman of the Board.

Profitability Ahead

Fintels consensus target price of $6.61 suggests PRPL’s stock could recover 103% over the next year as the company returns to profitability.

Research from the Fintel platform suggests the company is still experiencing above average levels of institutional buying activity, as described by a Fund Sentiment Score of 60.77.

The score ranks PRPL in the top 40% out of 35,731 globally screened securities with 248 institutions on the register that own 86.83 million shares.

The largest shareholders include Coliseum Capital Management, BlackRock Inc, Fidelity Investments, Freshford Capital Management, Brandywine Global Investment Management, Vanguard Group Inc, Bank Of America Corp and Schwartz Investment Counsel Inc.

Article by Ben Ward, Fintel