Q3 2024 Purple Innovation Inc Earnings Call
Good afternoon and welcome to the Purple Innovation 3rd Quarter 2024 earnings conference call. All participants will be in listen only mode. Should you need assistance? Please take a really comfortable and professionalist by pressing star, then zero on your telephone keypad.
After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star than one on your telephone keypad. To withdraw your question, please press star than two. Please note this event is being recorded.
Speaker Change: I would now like to turn the conference over to Stacey Turnoff, Invest Relations at Edelman Smithfield. Please go ahead.
Stacey Turnoff: Thank you for joining Purple Innovations, third quarter, 2024 earnings call. A copy of our earnings press release is available on the Investor Relations section of Purple's website at www.purple.com.
Stacey Turnoff: Before we begin, I'd like to remind you that certain statements made in this presentation are forward looking statement.
Stacey Turnoff: B. Statements for FAC Purple Innovations Judgment and Analysis as of today and are subject to a variety of grists and uncertainties that could cause actual results to differ materialy from current expectations.
Stacey Turnoff: You should not place undue reliance on these forward-looking statements. For more information, please refer to the risk factors outlined in our FILENs to the SEC.
Stacey Turnoff: Additionally, today's presentation will reference non-gap financial measures such as EBITDA, Adjusted EBITDA, and Adjusted earnings per share. A reconciliation of these measures to their most comparable GAT measures can be found in the earnings release available on our website.
Stacey Turnoff: With that, I'll turn the call over to Rob DeMartini, Purple Innovations Chief Executive Officer.
Rob DeMartini: Thank you Stacey, good afternoon everyone and thank you for joining us. I'm joined today by our CFO Todd Vogensen.
Rob DeMartini: While the third quarter was difficult from a revenue growth perspective, we are encouraged that volume was approximately flat on a quarter over quarter basis.
Stacey Turnoff: This performance is evidence that we're maintaining strength despite ongoing softness as the housing market continues to struggle, and we are encouraged that our year-to-date results have modestly outperformed the broader industry.
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Stacey Turnoff: Earlier this quarter we took proactive steps to achieve significant operational efficiencies.
Stacey Turnoff: and position ourselves to capitalize on tailwinds when the industry improves with both a consolidation of our manufacturing facilities and a corporate restructure.
Stacey Turnoff: These steps, along with our disciplined approach to pricing, cost savings initiatives, and selective promotional strategies, drove meaningful savings in the quarter, with adjusted gross margin improving by 340 basis points year-over-year to 40.5%.
Stacey Turnoff: which continues to exceed our 40% year-end target for the second consecutive period.
Stacey Turnoff: In addition, we're highly encouraged by the progress we've made with the restructuring, which is continuing in line with our expectations.
Stacey Turnoff: The restructure of our corporate organization is complete, and the consolidation of our manufacturing operations is more than halfway through.
Stacey Turnoff: It's clear that we're delivering significant margin improvement from these efforts.
Speaker Change: For more information visit www.FEMA.gov
Speaker Change: To date, we've completed the realignment of our distribution network, fully transitioned our e-commerce operations, and have transitioned 75% of our wholesale orders to ship out of our Georgia facility.
Stacey Turnoff: We expect to be fully operational in Georgia manufacturing facility by the end of the year.
Stacey Turnoff: The Supply Chain Consolidation and Corporate Restructure is expected to yield annual EBITDA savings of $15 to $20 million starting in 2025.
Stacey Turnoff: And we plan to have positive cash flow and adjusted EBITDA next year, supported by our leaner corporate structure and right-sized manufacturing operations.
Stacey Turnoff: These savings will allow us to continue investing in innovation and marketing, further supporting our path to premium sleep strategy.
Speaker Change: For more information, go to www.FEMA.gov
Stacey Turnoff: Turning to our revenue performance, Q3 sales were down 15% year-over-year, primarily driven by softness and consumer demand.
Stacey Turnoff: optimization of our advertising spend and a tough comparison to our third quarter last year when we launched our path to premium sleep strategy.
Stacey Turnoff: Within DTC, showrooms continue to have solid performance and were flat year over year, driven primarily by an increase in average selling prices as we continue to upsell customers to higher price models through our Path to Premium Sleeve strategy, despite soft unit demand in the category.
Stacey Turnoff: Our e-commerce business was down 16% year over year, primarily due to 36% lower advertising spend than third quarter last year when we invested heavily to support our new product and brand launch.
Stacey Turnoff: This year, we've optimized our advertising to be more efficient and profitable.
Stacey Turnoff: The year-over-year decrease in ad spend, coupled with fewer days on promotion, significantly improved the profitability of the channel.
Stacey Turnoff: Our wholesale channel was down 20% year over year as we lapped the launch of our new products into the majority of our partners.
Stacey Turnoff: However, we are encouraged by the feedback we're receiving from many retailers about the strength of Purple's performance compared to other brands on their floor.
Stacey Turnoff: Turning to progress of the five strategic initiatives.
Stacey Turnoff: As a reminder, the initiatives are driving gross margin improvement, improving productivity of existing showroom and wholesale doors.
Stacey Turnoff: driving e-commerce conversion, improving our marketing effectiveness, and bringing new products and innovation to market.
Speaker Change: For more information visit www.FEMA.gov
Stacey Turnoff: Our first initiative is Driving Gross Margin Improvement.
Stacey Turnoff: As part of this initiative, during the quarter, we've begun producing all pillows in-house, further improving profitability.
Stacey Turnoff: We're also changing vendors that produce certain components of our mattresses, which is now delivering double-digit savings on these items.
Stacey Turnoff: As a result of our cost savings program, our mattress production is becoming notably more efficient with a 25% decrease in hours per mattress produced compared to last year.
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Speaker Change: Our showrooms remain a critical driver in our premium brand experience.
Speaker Change: We continue to generate healthy sales trends and improved profitability across our retail locations through two main strategies.
Speaker Change: First, we're focusing on pillows as a significant traffic driver, with year-to-date pillow sales up approximately 30%, and most pillows are now carry-out items.
Speaker Change: For more information visit www.FEMA.gov
Speaker Change: Second, we're focusing on the growth of our luxury line, Rejuvenate, to increase both average selling prices and profit.
Speaker Change: We're seeing the strength of this product, which is supported by our new financing offers, accounting for nearly 30% of mattress revenue in showrooms.
Speaker Change: On the wholesale side, our partnerships remain solid and we continue to see growth across the higher price point, restore and rejuvenate collections.
Speaker Change: which has increased the average selling price for the channel.
Speaker Change: Our top-selling mattress in the Wholesale Channel is now a Restore Premier, the highest end of our premium collection.
Speaker Change: For more information visit www.FEMA.gov
Stacey Turnoff: We also continue to expand our co-branded advertising relationships, which has led to notable improvement in sales across several major retailers.
Stacey Turnoff: http://TheBusinessProfessor.com
Stacey Turnoff: Next, our third initiative is driving e-commerce conversion, focusing on improving sales and profitability.
Stacey Turnoff: This unique product, engineered at $9.99 for a queen, has performed well and has already been selling through at a high rate.
Speaker Change: http://www.youtube.com
Speaker Change: We've also made enhancements to our website focusing on personalization and improving the customer journey from research to purchase.
Speaker Change: For more information visit www.FEMA.gov
Speaker Change: turning to our strategic initiative, Improving Marketing Effectiveness.
Speaker Change: In the third quarter, we continued to focus on driving efficiency by investing in profitable advertising.
Speaker Change: We're also implementing new tools to optimize media spend and drive more orders per dollar spent.
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Speaker Change: This includes better ways to identify individuals coming to our website across various devices
Speaker Change: and tailoring web experiences to better match specific customer preferences.
Speaker Change: http://TheBusinessProfessor.com
Speaker Change: Finally, let's turn to innovation. Over the past year, we've launched our most innovative product line in history.
Speaker Change: with nine mattresses across three tiers, including our luxury collection.
Speaker Change: These differentiated product offerings powered by our proprietary gel grid technology
Speaker Change: continue to deliver strong satisfaction and engagement from customers.
Speaker Change: Looking ahead, we plan to roll out new innovation in early 2025 across two-thirds of our product line, which will further enhance our premium positioning.
Speaker Change: We expect to launch new grid technology and improved aesthetics across our Rejuvenate collection.
Speaker Change: and the new Essentials line with improved durability and refreshed aesthetics.
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Speaker Change: While we're pleased with our improved profitability, we expect continued pressure on the top line due to industry-wide demand declines.
Speaker Change: We anticipate finishing the year at the lower end of our guidance for revenue and adjusted EBITDA.
Speaker Change: However, we remain confident that our restructuring efforts will strengthen our business model over the long term.
Speaker Change: We believe our Path to Premium Sleep strategy will continue to move the company towards sustained, profitable growth at an accelerated pace and will help build the category in the process.
Speaker Change: For more information visit www.FEMA.gov
Speaker Change: Now, I'll turn the call over to Todd to discuss our financial performance in more detail.
Todd Vogensen: Thank You Rob and good afternoon everyone. As Rob mentioned the macro environment continues to be challenging and we saw this reflected in our third quarter financial performance.
Todd Vogensen: Let me walk you through the key financial metrics for the quarter and I will highlight the areas where we saw both headwinds and progress.
Speaker Change: Starting with the top line, net revenue for the three months ended September 30, 2024, came in at $118.6 million, which was down 15.3% versus $140 million in the prior year.
Speaker Change: Direct consumer net revenue for the quarter was $70.8 million, down $11.7% versus last year, with a decline of 15.7% in e-commerce and with showrooms relatively flat.
Speaker Change: and Wholesale Net Revenue was $47.8 million, down 20.1% from last year's third quarter.
Speaker Change: As Rob mentioned, net revenue for each channel was impacted by a reduction of 36% in our Q3 advertising spend.
Speaker Change: as we decrease investment and less profitable spend compared to the last year.
Speaker Change: This shift resulted in much more profitable revenues, but also clearly had an impact on our total volumes.
Speaker Change: For more information visit www.FEMA.gov
Speaker Change: In addition, for wholesale, net revenue was impacted by our decision to exit our relationship with certain customers. The net door count reduction during the quarter was 200 doors to approximately 3,300 doors at the end of the quarter.
Speaker Change: Importantly, we have opportunities with a number of potential wholesale accounts that we're actively pursuing and we also have new business development projects that are near completion.
Speaker Change: So, we expect our door count to grow again over the next few quarters.
Speaker Change: For more information visit www.FEMA.gov
Speaker Change: In terms of gross margin performance, we should note that we had a number of items that we've included in cost of goods sold for restructuring and related charges, mostly from our overall restructuring plan.
Speaker Change: These items include accelerated depreciation, one-time severance costs, and non-cash inventory write-offs.
Speaker Change: So excluding these restructuring and related charges during the quarter, as well as our one-time launch costs in the prior year period, our adjusted gross margin was 40.5%, which grew 340 basis points versus the adjusted gross margin last year.
Speaker Change: with the improvement reflecting favorable direct material savings, operating efficiency improvements, and freight cost reductions.
Speaker Change: This represents our second quarter with adjusted gross margin of over 40%, as we continue to implement programs to not only sustain, but to structurally grow our gross margin over time.
Speaker Change: Operating expenses for the third quarter were $82 million, up 2.6% from $79.9 million in the third quarter of 2023.
Speaker Change: This increase was driven by $19.8 million in restructuring-related charges as part of the consolidation of our manufacturing operations to achieve significant operational efficiencies.
Speaker Change: excluding all restructuring related charges this year and the loss on impairment of goodwill last year operating expenses were down 10.9 million dollars mostly due to the 9.1 million reduction in advertising spend
Speaker Change: Our adjusted net loss for the quarter was $8.4 million compared to an adjusted net loss of $19.4 million last year.
Speaker Change: Adjusted EBITDA for the third quarter was negative $6.4 million, an improvement from negative $16.3 million last year, driven primarily by our ongoing improvements in gross margin and a refocus of our advertising towards more profitable spend.
Speaker Change: For more information visit www.FEMA.gov
Speaker Change: And third quarter adjusted loss per share was $0.08 compared to an adjusted loss per share of $0.18 in the third quarter last year.
Speaker Change: Now turning to the balance sheet.
Speaker Change: At the end of September, we had cash and cash equivalents of $23.4 million, compared with $26.9 million on December 31, 2023.
Speaker Change: Net inventories on September 30 were $59.9 million, down 16.9% compared to September 30 of 2023.
Speaker Change: and down 10.5% compared to December 31 of 2023 as we continue to manage our inventories more efficiently.
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Speaker Change: Now, as we head into the final quarter of the year, we expect to continue focusing on cost management and operational efficiencies.
Speaker Change: We are carefully managing our restructuring initiatives to ensure long-term profitability while maintaining our focus on delivering innovative products and enhancing our premium positioning in the market.
Speaker Change: As Rob discussed in his remarks, for the full year, we expect to be at the lower end of our guidance range for revenue of $490 to $510 million.
Speaker Change: and also at the lower end of our guidance range for adjusted EBITDA of negative 20 to negative 10 million dollars.
Speaker Change: Despite the macroeconomic pressures, we remain confident in our ability to execute our path to premium sleep strategy over the longer term and deliver sustained profitability over time.
Speaker Change: With that, I'll turn the call back over to the operator for Q&A.
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Speaker Change: We will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad.
Speaker Change: If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Brad Thomas with KeyBank Capital Markets. Please go ahead
Speaker Change: Go to Beadaholique.com for all of your beading supply needs!
Brad Thomas: Hi, good afternoon. Thanks for taking the question.
Brad Thomas: You know, Rob, still clearly a challenging environment out there for your industry. As I look to revenues for the fourth quarter, I think what's implied if you were to come in at the low end of the four-year guidance is that perhaps the pace of sales would accelerate a little bit as we go into 4Q. I'm just curious if you could share any more about, you know, what you've been seeing of late and any maybe unique factors might be helping, you know, to see some degree of acceleration from 3Q.
Speaker Change: Go to Beadaholique.com for all of your beading supplies needs!
Speaker Change: Thanks Brad. Certainly post Labor Day the business has been soft but we go into Black Friday promotion I think starting tomorrow and they're pretty competitive across all channels. That November and December period does require a pickup in the pacing so far and we've got good reason to expect that that should happen.
Brad Thomas: That's great. And then, Todd, if I could ask just a question as we think about cash moving forward. I know that there are some cash costs associated with the Utah restructuring. Could you maybe maybe help us think about cash puts and takes over the next couple of quarters just as we're trying to bridge our cash flow statement?
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Todd Vogensen: Sure. So a few things to just keep in mind. First, we have shown good, consistent progress on inventory through the year. The team's done a nice job.
Speaker Change: Managing Inventory and Leveraging some new systems we have. We expect to continue to see
Speaker Change: opportunity to bring our overall inventory levels down.
Speaker Change: Also, at the end of Q3, just because of the timing of some payments, we ended up at a low point in our accounts payable that you'll notice.
Speaker Change: We should get back to a more normalized level at the end of Q4. So both of those will be source of cash on the overall cash flow statement.
Speaker Change: And then beyond that, we continue to manage expenses and CapEx very tightly.
Speaker Change: We ended the quarter with $23 million in cash. We actually had a slight positive on our operating cash flow this quarter and feel like we're positioned well as we go into the fourth quarter.
Speaker Change: That's great. Well, I know we're all eagerly awaiting a turn for this industry. Thanks so much and I'll turn it over to others.
Speaker Change: Thank you, Brad.
Stacey Turnoff: The next question comes from Seth Basham with Wedbush. Please go ahead.
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Speaker Change: Hi, this is Matt McCartney on for CEST. I'd just like to understand how you're so confident in turning profitable next year. How can we think about the drivers to that? And is there an underlying demand assumption being built into that or, you know, some plan to turn profitable irrespective of where the market is?
Speaker Change: Yeah, good question, Matt. I mean, we haven't obviously released any guidance yet on next year, but we are assuming a continued difficult category and not building any
Speaker Change: kind of volume-driven.
Speaker Change: tailwind into that plan. I think the reason we are confident is the progress we're making on gross margin. We said we'd end the year north of 40. We'll now have put two quarters in at least on an adjusted basis once we're through the restructure to be north of that. And we still have both
Speaker Change: purchasing benefits to get and the full benefits of the supply chain restructure. So that is where that confidence is coming from.
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Speaker Change: Gotcha, okay, just switching gears then, just looking at Labor Day, curious how you perform, especially in the context of being more selective on promotions and pulling it back a bit on advertising. Do you think you outperformed industry during that period?
Speaker Change: As you know, Matt, in this industry, it's quite hard for us to see it perfectly clearly, but we're down less than 2% this year, year to date.
Speaker Change: The shape of the volume is a little bit different from last year because we're comping the
Speaker Change: The launch is last year, but that feels like it's outperforming the category to me. I think you've seen another public company report sales this year down 10 percent.
Speaker Change: in the total year, so as best I can tell, we welcome the help that you can give us, but we do think we're modestly taking a little bit of market share.
Speaker Change: Manufacturing Consolidation. Can you just talk through exactly what's left to do and whether you see any disruptions to the business associated with that?
Speaker Change: For more information visit www.FEMA.gov
Speaker Change: Yes, glad to. So Eric Haynor is overseeing this and he's
Speaker Change: probably going to kick me when I tell him this, but he's more than halfway through it. You know, we've had little bumps in the road, but nothing that is, you know, meaningfully concerning. What's left to do, we're using a little bit of manufacturing in West to balance
Speaker Change: Customer needs as our inventory consolidates, and then we've got to open the distribution center in Salt Lake City. We've got a line on that that should be in place by the end of January.
Speaker Change: So there's still a lot of work to be done and these transitions are always difficult, but we're more than halfway through. As I said in the script, we've got all of our e-commerce transition, most of our wholesale transition, and we're still supplying the industry at
Speaker Change: You know, near as I can tell, kind of best level of service to the customer, so we're so far so good feeling like we're going to get through it as we planned.
Speaker Change: Thank you guys and good luck.
Speaker Change: Thanks, Seth.
Speaker Change: Thank you, Matt.
Speaker Change: The next question comes from Matt Karanda with Roth Capital. Please go ahead.
Matt Karanda: Hey guys, good afternoon. So maybe just wanted to hear a little bit more from you, Rob, about
Matt Karanda: You sound confident that maybe we will see a pickup around the Black Friday, Cyber Monday sort of period.
Speaker Change: Kind of what what goes into the confidence that we see a little bit more acceleration and demand for your products What do we have in the way of either promotions or ad campaigns that that help? Help inform that that outlook
Speaker Change: Yeah, thank you, Matt. Probably three things I'd put them in order. First of all, the holiday, the promotional periods, the Tier 1 holidays, have been behaving better than non-holiday, and we're pretty much in Tier 1 almost the rest of the year. I think there's one week that isn't, but otherwise you've got every week in Tier 1.
Speaker Change: Number two, Q3 where we saw this year-on-year deceleration had the majority of that nine million dollar ad cut. That's not there in Q4. We're actually going to be
Speaker Change: up modestly, but up modestly versus a year ago. And then historically, the consumer has...
Speaker Change: come to these holidays ready to shop, and my hope is getting past the election and seeing some certainty in the market will not hurt consumer confidence from here.
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Speaker Change: But maybe just put a finer point on that for us and then I think you mentioned that means positive adjusted EBITDA and free cash flow for 25
Speaker Change: How should we think about seasonality there for the year? Are we starting off negative, flipping to positive, kind of similar to what we had expected for this year? Just any color on sort of cadence and how we should be thinking about filtering that in.
Speaker Change: Church.
Speaker Change: So, I'll start with the overall restructuring and where we're expecting to see the benefits. Most of those benefits will start to flow in earnest when we get into 2025.
Speaker Change: In terms of the balance between cost of sales and operating expenses, there is a healthy amount of savings in both. It's slightly more weighted towards cost of sales.
Speaker Change: But we did some fairly significant work on operating expenses, and we'll see sizable benefits there as well.
Speaker Change: In terms of seasonality, yeah, we're probably early to get into too much detail on 2025.
Speaker Change: guidance at this point, but
Speaker Change: You know, fair to say this is a business that, as I've looked back on history...
Speaker Change: has tended to do a little bit better from a EBITDA perspective, from a cash perspective as we got into the back half, so.
Speaker Change: It would probably be fair to assume similar next year. When we get to next quarter's call, we'll have more detail around the actual guidance and we'll be able to probably give you a little bit more context around what that might mean in terms of the flow of the year.
Speaker Change: Thank you for watching. I'm Eric Haynor. We'll see you next time. Bye.
Speaker Change: Okay, appreciate it. I'll leave it there, guys. Thanks.
Speaker Change: All right, thank you.
Speaker Change: The next question comes from Bobby Griffin with Raymond James. Please go ahead.
Bobby Griffin: Good afternoon, buddy. Thanks for taking my questions. One just quick follow-up just on the restructuring. Do you get the full 15 to 20 million all in next year or does it start to like bleed in partly so we shouldn't model the full impact until sometime in 26?
Speaker Change: You know, it actually should flow mostly through 2025. We'll actually start seeing a modest amount of benefits as we go into Q4.
Speaker Change: part of why we're confident that we will be EBITDA positive and cash flow positive in Q4 as well. So by the time we get into next year, yeah, we should be ramping up and seeing the full benefit of that in our P&L.
Speaker Change: Okay, and is there a real estate component where you have to, where you're going to sell off some of the the closed facilities or were they leased and there's a subleased component as well that it's dependent on or is all that locked up and already done?
Speaker Change: Yeah, so we are assuming that we're going to be able to sublease the facilities that
Speaker Change: that we have currently in Salt Lake. There's two of them.
Speaker Change: we are already getting going in some of those leasing activities and seeing encouraging early signs but we took some conservative assumptions around our ability to sublease and the timing and and so all that is is built into the net savings.
Brad Thomas: Very good. That's helpful. And then I guess, Rob, maybe just on the decision to exit certain doors, can you just talk a little bit about that? And as you look out kind of where your footprint is now of who you're serving with this new manufacturing setup that you have,
Brad Thomas: Is there certain areas of the country where you feel underpenetrated and that you need more wholesale doors or less or just kind of how do you think about that kind of on what I'll call purple 2.0 from the manufacturing side of things?
Speaker Change: Bobby, I don't think I'd connect it to, certainly from a reach standpoint, we're not going to make a customer choice to serve or not serve based on geography. When the Salt Lake Distribution Center is open, we'll have the same, you know, the same reach we have today. There's about a two and a half million dollar freight hurt in those numbers, but that's all in and netted out in the savings.
Speaker Change: The reference to doors and customers, and in fairness to our customers, we started as a bed-in-a-box brand.
Speaker Change: and for players that have us just in what we now call essentials.
Speaker Change: It's just not built for wholesale. It doesn't work for them and it certainly didn't work for us.
Speaker Change: And so, you know, in fairness to those customers, we've sat down and said, if you don't...
Speaker Change: either buy into the path to premium strategy, or you don't think you're ready for it, then this is not gonna make sense for either of us. And that has netted us out, the net number is about 200 total doors.
Speaker Change: We're down, we're at 3,300 doors. I think we ended last quarter just about 3,500.
Speaker Change: And so, you know, we don't, those are not customers we're closing the door on forever, and hopefully they're not closing the door on us forever. But what we are saying is, if you're just doing business and essentials, this isn't going to work for us.
Speaker Change: And so we own that, you know, we've taken that business back and that netted the store count down a little bit.
Speaker Change: okay that makes sense and I guess lastly for me I think you probably might mention showrooms comp flat year-over-year with units down but ticket up
Speaker Change: Did I hear that correct? And just any comments on how the journey is going on the showroom profitability side? I know that's something you guys have been working on and seeing improvements. So just any update there.
Speaker Change: Scott and his team are making nice progress. We have about a third, not quite a third, but almost doors moved from unprofitable to profitable at the four-wall level. We've comped.
Speaker Change: positive about nine out of the last 12 months.
Speaker Change: September was soft for sure but the mix it continues to trade up and and you know again I think it's a place we're actually gaining a little bit of share we got a lot of work left to do but I'm encouraged with the trend I'm seeing
Speaker Change: Thank you for watching. See you next time.
Speaker Change: Very good. I appreciate the details. Best of luck here in the fourth quarter.
Speaker Change: All right, Bobby, thank you.
Speaker Change: Thank you for watching. I'm Chris Chappell. I'll see you next time.
Stacey Turnoff: The next question comes from Michael Lesser with UBS. Please go ahead.
Stacey Turnoff: Good afternoon. This is Dan Silverstein for Michael. Thank you for taking our question. Just one question relating to the new footprint.
Dan Silverstein: What level of capacity utilization is the business running at today on a pro forma basis? And then just given this leaner operating model, what type of additional volume growth from here would the company need to run at to achieve EBITDA profitability next year?
Speaker Change: Dan, let me break that in a couple of pieces because I think there's some good important questions in there. First of all, I'm going to start backwards. The restructuring has lowered our breakeven.
Dan Silverstein: Closer to 45 million a month from the 50 to 55 it was at previously.
Dan Silverstein: So that's fundamentally in place now. Todd mentioned the corporal restructure that's done, the footprint restructure is, you know, well on its way to being done. That lowers our break-even materially.
Dan Silverstein: You also asked about capacity. So today I put the market, Atlanta's running at about 70% of theoretical capacity, but when we announce the restructure, and this is in our supply chain plans, our objective is to have about two and a half times our demand.
Dan Silverstein: capacity available in the footprint, both from a physical space and a machinery basis, and we'll make sure that we paste that
Speaker Change: For more information visit www.FEMA.gov
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Speaker Change: Okay, very helpful.
Stacey Turnoff: The other question you had asked was at what level of capacity do we need to operate at to be EBITDA positive? We really, as we looked at being EBITDA positive next year, have not assumed any big uplift in volume.
Speaker Change: The volume we're seeing today, at that volume, we believe that there's good upside in the business and there's good efficiencies to be gained out of our manufacturing operations that put us in a good position.
Speaker Change: Thank you both.
Speaker Change: All right. Thank you, Dan.
Speaker Change: Again, if you have a question, please press star then 1 on your telephone keypad. If you're using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: The next question comes from Keith Hughes with Truist. Please go ahead.
Keith Hughes: Thank you. I guess two questions. First, the previous comment on 45 million a month breakeven, is that EBIT or EBITDA breakeven?
Speaker Change: That is Evita, Breakeven, yeah.
Keith Hughes: Okay, because that gets you to about 540 million of sales and you're doing 490-ish this year. Now, if you assume it's flat, there's a disconnect there in the numbers somehow.
Speaker Change: Yeah, I think the the big difference is a lot
Speaker Change: That is where we're at today. That does not take into account a lot of the efficiencies and savings out of the restructuring that we haven't realized yet. So, once we start realizing those savings, that'll bring the breakeven point down even further. And we just haven't gotten to the point of kind of...
Speaker Change: Yeah, yeah, exactly.
Speaker Change: And then there was a comment earlier in the call, you said positive, I assume the volume was flat in the quarter. I assume that's enterprise-wide, if you could talk about volume and your wholesale versus your online channels that get us to flat.
Speaker Change: Keith, I'm just tracking to the, I think in the script I said quarter on quarter. We're down versus a year ago, you know, materially, about $20 million.
Speaker Change: I'm not correcting you, I'm just trying to make sure I understand the question.
Keith Hughes: Yeah, well I misunderstood what you said. You're down, you're down year-over-year 20 million dollars in units. Is that correct?
Speaker Change: For more information visit www.FEMA.gov
Speaker Change: $20 million in revenue in Q3, driven by lapping last year's launch and category softness and reduced advertising.
Speaker Change: Okay. Is there any way to look at that in a same-store-sale basis where their units are when we take launch units, you know, for example, to like that out?
Speaker Change: These are two of them.
Speaker Change: No, we could get to that. We know it on our own stores. The wholesale takes a little bit more calculation because you've got to figure out what happened with inventory and how much of that was floor samples.
Speaker Change: Thank you for watching. We'll see you next time.
Speaker Change: Okay, all right, that's all. Thank you.
Speaker Change: Okay. Thank you, KQ.
Speaker Change: This concludes our question and answer session and the Purple Innovation Third Quarter 2024 Earnings Conference Call. Thank you for attending today's presentation. You may now disconnect.