Purple Innovation, Inc. 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion is intended to provide a more comprehensive review of the operating results and financial condition of Purple Innovation, Inc. than can be obtained from reading the Unaudited Condensed Consolidated Financial Statements alone. The discussion should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and the notes thereto included in “Part I. Item 1. Financial Statements.” FORWARD-LOOKING STATEMENTS This quarterly report on Form 10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, that represent our current expectations and beliefs. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws. In some cases, you can identify these statements by forward-looking words such as “believe,” “expect,” “project,” “anticipate,” “estimate,” “intend,” “plan,” “targets,” “likely,” “will,” “would,” “could,” “may,” “might,” the negative of these words and other similar words. All forward-looking statements included in this Quarterly Report are made only as of the date thereof. It is routine for our internal projections and expectations to change throughout the year, and any forward-looking statements based upon these projections or expectations may change prior to the end of the next quarter or year. Investors are cautioned not to place undue reliance on any such forward-looking statements. We undertake no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law. We caution and advise readers that these statements are based on assumptions that may not be realized and involve risks and uncertainties that could cause actual results to differ materially from the expectations and beliefs contained herein. These risks include, among others, the evolving impact and duration of the COVID-19 pandemic. For a summary of these risks, see the risk factors included in the “Risk Factors” section in this Quarterly Report and in our Annual Report on Form 10-K/A filed with the Securities and Exchange Commission on May 10, 2021. Overview of Our Business Our mission is to help people feel and live better through innovative comfort solutions. We are a digitally-native vertical brand founded on comfort product innovation with premium offerings. We design and manufacture a variety of innovative, branded and premium comfort products, including mattresses, pillows, cushions, frames, sheets, and other products. Our products are the result of over 30 years of innovation and investment in proprietary and patented comfort technologies and the development of our own manufacturing processes. Our proprietary gel technology, Hyper-Elastic Polymer, underpins many of our comfort products and provides a range of benefits that differentiate our offerings from other competitors’ products. We market and sell our products through our direct-to-consumer (“DTC”) online channels, retail brick-and-mortar wholesale partners, third-party online retailers and Company showrooms. Organization The Company consists of Purple Inc. and its consolidated subsidiary, Purple LLC. Purple Inc. was incorporated in Delaware on May 19, 2015 as a special purpose acquisition company under the name of GPAC. On February 2, 2018, the Company consummated a transaction structured similar to a reverse recapitalization (the “Business Combination”) pursuant to which Purple Inc. acquired an equity interest in Purple LLC and became its sole managing member. As the sole managing member of Purple LLC, Purple Inc., through its officers and directors, is responsible for all operational and administrative decision making and control of the day-to-day business affairs of Purple LLC without the approval of any other member. In connection with the Business Combination, InnoHold retained an 82% economic interest in Purple LLC. InnoHold subsequently transferred a portion of its Class B Units to permitted transferees and exchanged its remaining shares for shares of Class A Stock that it sold. At March 31, 2021, Purple Inc. had a 99% economic interest in Purple LLC while other Class B unit holders had the remaining 1%. COVID-19 Pandemic Developments The COVID-19 pandemic has impacted many aspects of our operations, directly and indirectly, including disruption of our employees, consumer behavior, distribution and logistics, our suppliers, and the market overall. The scope and nature of these impacts continue to evolve. Because of the COVID-19 pandemic, we have taken precautionary measures to manage our resources and mitigate the adverse impact of the pandemic, which is intended to help minimize the risk to our Company, employees, customers, and the communities in which we operate. Employees at the Company’s headquarters and certain other employees have been asked to work from home where possible, with only limited access given to employees to work in the office when necessary. For roles that require employees to be on-site, such as our manufacturing facilities and distribution center, we require employees to wear protective equipment, perform temperature testing at the start of each shift and again during the shift, contact trace when risk of exposure is known, stagger shifts to reduce concentration of employees, follow social distancing guidelines and sanitize daily including complete weekly anti-viral fumigation. 28 Despite the ongoing challenges from COVID-19, we have been able to capitalize on the opportunities created by this situation. We continue to serve our customers through our Direct to Consumer (“DTC”) channel, which has remained strong throughout the pandemic as consumer demand for our premium, differentiated product offerings shifted to our DTC channel. We continue to focus our efforts in our DTC core competencies resulting in an ongoing strength in DTC channel sales across all of our product categories. This increase in demand was a contributing factor to DTC net revenue growth of 54.8% over the prior year first quarter. There can be no assurance that this trend of strong demand through our DTC channel will continue. We experienced a sharp decline in the wholesale side of our business during the second quarter of 2020 as temporary shutdowns of non-essential businesses and shelter-at-home directives occurred in most U.S. states. As the shutdowns were lifted and stores began to open again, demand through the wholesale channel increased. Net revenue from wholesale customers the first quarter of 2021 increased 47.6% over the prior year first quarter. All of our showrooms are currently open and we have continued with our expansion plans by opening three new showrooms since the beginning of 2021. The increase in demand over the last twelve months allowed us to work through a portion of our on-hand inventory and required us to ramp up production. On March 3, 2021 we began operations at a new manufacturing facility in Georgia. We continue to take advantage of our vertically integrated business model to adjust production schedules to leverage inventory on hand and manage labor costs. We also continue to dynamically adjust our significant discretionary online advertising spend in response to any changes in DTC trends as they develop. Our supply chain has not been significantly affected by COVID-19. Suppliers in China were temporarily closed because of the pandemic, but we had sufficient inventory on hand. These suppliers have resumed production and are able to supply materials as needed. Most of our domestic suppliers have been able to continue operations and provide necessary materials when needed. We have experienced some constraints from certain suppliers due to our increased production to meet demand. We have also experienced some shipping delays in the delivery of our product to our customers. This is due to the increased nationwide demand placed on delivery companies. Although we have taken measures to protect the business, we cannot predict the specific duration for which precautionary measures relating to COVID-19 will stay in effect, and we may elect or need to take additional measures as the information available to us continues to develop, including with respect to our employees, manufacturing facilities and distribution center, and relationships with our suppliers and customers. Subject to certain assumptions regarding the duration and severity of the COVID-19 pandemic, and government, consumer, and our responses thereto, based on our current projections we believe our cash on hand, ongoing cash generated from e-commerce, liquidity available under our line of credit, and continuing resumption and ramp up of store operations and our wholesale business, will be sufficient to cover our working capital requirements and anticipated capital expenditures for the next 12 months. Whereas most state and local governments have eased restrictions on commercial retail activity, it is possible that a resurgence in cases of COVID-19 or one of its variants could prompt a return to tighter restrictions in certain areas of the country. We also do not yet know the impact that vaccines may have in mitigating or ending the outbreak of COVID-19, or how the availability of such vaccines may affect our work force. Furthermore, while the bedding industry has fared much better during the pandemic than certain other sectors of the economy, continued economic weakness may eventually have an adverse impact upon the industry and our business. Therefore, significant uncertainty remains regarding the ongoing impact of the COVID-19 outbreak upon our financial condition and future results of operations, as well as upon the significant estimates and assumptions we utilize in reporting certain assets and liabilities. Restatement As described in additional detail in the Explanatory Note to our Annual Report on Form 10-K/A for the year ended December 31, 2020, filed on May 10, 2021, the SEC released a public statement on April 12, 2021 (the “SEC Statement”) informing market participants that warrants issued by special purpose acquisition companies (“SPACs”) may require classification as a liability of the entity measured at fair value, with changes in fair value each period reported in earnings. The Company previously classified its public warrants and sponsor warrants, which were issued in 2015, as equity. In light of the SEC Statement, on April 28, 2021, the Audit Committee of the Board of Directors of the Company, after considering the recommendations of management, concluded that the Company’s previously issued audited consolidated financial statements as of and for the years ended December 31, 2020 and 2019 and previously issued unaudited condensed consolidated financial statements as of and for the quarterly periods ended September 30, 2020 and 2019, June 30, 2020 and 2019 and March 31, 2020 and 2019 (collectively, the “Non-Reliance Periods”) should not be relied upon due to required corrections related to the accounting for warrants described in the SEC Statement. As a result, we restated our previously issued audited consolidated financial statements and unaudited condensed consolidated financial statements for the Non-Reliance Periods. Such restated financial statements were included in our Annual Report on Form 10-K/A for the year ended December 31, 2020 filed on May 10, 2021. The unaudited condensed consolidated financial statements for the quarter ended March 31, 2020 included in this Quarterly Report on Form 10-Q reflect the impacts of such restatement. 29 Operating Results for the Three Months Ended March 31, 2021 and 2020 The following table sets forth for the periods indicated, our results of operations and the percentage of total revenue represented in our condensed consolidated statements of income: Three Months Ended March 31, 2021 % of Net Revenues 2020 % of Net Revenues Revenues, net $ 186,429 100.0 % $ 122,375 100.0 % Cost of revenues 98,905 53.1 69,193 56.5 Gross profit 87,524 46.9 53,182 43.5 Operating expenses: Marketing and sales 54,368 29.2 36,684 30.0 General and administrative 14,526 7.8 7,548 6.2 Research and development 1,723 0.9 1,445 1.2 Total operating expenses 70,617 37.9 45,677 37.3 Operating income 16,907 9.1 7,505 6.1 Other income (expense): Interest expense (570 ) (0.3 ) (1,389 ) (1.1 ) Other income (expense), net (68 ) 0.0 90 0.1 Tax receivable agreement income (expense) 174 0.1 (122 ) (0.1 ) Change in fair value – warrant liabilities 9,147 4.9 21,633 17.7 Total other income, net 8,683 4.7 20,212 16.5 Net income before income taxes 25,590 13.7 27,717 22.6 Income tax (expense) benefit (4,651 ) (2.5 ) 284 0.2 Net income 20,939 11.2 28,001 22.9 Net income attributable to noncontrolling interest 115 0.1 11,166 9.1 Net income attributable to Purple Innovation, Inc. $ 20,824 11.2 $ 16,835 13.8 Revenue Total net revenues increased $64.1 million, or 52.3%, to $186.4 million for the three months ended March 31, 2021 compared to $122.4 million for the three months ended March 31, 2020. We were able to further capitalize on the shift in customer demand that began in 2020 and grew DTC net revenues by $44.2 million, or 54.8%, during the first quarter of 2021. Our wholesale business generated net revenue growth of $19.8 million, or 47.6%, in the first quarter. The increase in net revenues from a product perspective reflected a $46.1 million increase in mattress sales, an $11.3 million increase in other bedding product sales and a $6.7 million increase in other product sales. This growth in product sales was primarily attributable to an increase in demand across all product lines. Cost of Revenues The cost of revenues increased $29.7 million, or 42.9%, to $98.9 million for the three months ended March 31, 2021 from $69.2 million for the three months ended March 31, 2020. This increase reflected a $18.6 million increase in direct material costs, a $6.3 million increase in labor and overhead, a $2.6 million increase in freight charges and a $2.2 million increase in all other costs, all associated with increased product sales. The gross profit percentage increased to 46.9% of net revenues for the three months ended March 31, 2021 from 43.5% for the same period in 2020. The improvement in gross profit was primarily driven by a higher proportion of DTC channel revenue, which carries a higher gross margin than revenue from the wholesale channel. Marketing and Sales Marketing and sales expenses increased $17.7 million, or 48.2%, to $54.4 million for the three months ended March 31, 2021 compared to $36.7 million for the three months ended March 31, 2020. The increase was due to an $11.0 million increase in advertising costs, a $4.2 million increase in marketing salaries related to an increase in personnel and a $2.5 million increase in other marketing and sales expenses. Marketing and sales expense as a percentage of net revenues was 29.2% for the three months ended March 31, 2021 compared to 30.0% for the prior period. This decrease was due to efficiencies realized in our advertising spending created from enhanced marketing strategies. General and Administrative General and administrative expenses increased $7.0 million, or 92.4%, to $14.5 million for the three months ended March 31, 2021 from $7.5 million for the three months ended March 31, 2020. The increase was primarily due to a $3.1 million increase in legal and professional fees, a $1.9 million increase in salaries related to an increase in personnel, a $0.6 million increase related to a new corporate building lease, and a $1.4 million increase in all other expenses. 30 Research and Development Research and development costs increased $0.3 million, or 19.2%, to $1.7 million for the three months ended March 31, 2021 from $1.4 million for the three months ended March 31, 2020. The increase was primarily due to a $0.3 million increase in salaries and wages and other R&D expenses as we added resources for new product innovation. Operating Income Operating income increased $9.4 million to $16.9 million for the three months ended March 31, 2021, from operating income of $7.5 million for the three months ended March 31, 2020. The increase was primarily due to increased DTC sales with higher margins and lower marketing and sales costs as a percentage of revenue. Interest Expense Interest expense totaled $0.6 million for the three months ended March 31, 2021 as compared to $1.4 million for the three months ended March 31, 2020. The $0.8 million decrease was primarily due to the $35.0 million Related Party Loan, which carried an interest rate of 12.00%, being refinanced in the third quarter of 2020 with a $45.0 million term loan at an initial interest rate of 3.50%. Interest expense also includes amortization of deferred loan costs associated with the 2020 Credit Agreement and fees related to the revolving line of credit. Change in Fair Value – Warrant Liabilities On February 26, 2019, the Incremental Lenders from the 2018 credit arrangement funded a $10.0 million increase in the Related Party Loan and received 2.6 million warrants to purchase 2.6 million shares of our Class A Stock at a price of $5.74 per share, subject to certain adjustments. We accounted for the Incremental Loan Warrants as liabilities and recorded them at fair value on the date of the transaction and subsequently re-measured to fair value at each reporting date with changes in the fair value included in earnings. We determined the fair value of the Incremental Loan Warrants to be $8.0 million at March 31, 2020. During the three months ended March 31, 2020, we recognized a gain of $13.6 million in our condensed consolidated statements of income. There was no gain or loss on the Incremental Loan Warrants for the three months ended March 31, 2021 as they were exercised in 2020. There were 15.5 million public warrants issued in connection with GPAC’s formation and IPO and 12.8 million sponsor warrants issued pursuant to a simultaneous private placement with the IPO. We have accounted for these warrants as liabilities and recorded them at fair value on the date of the transaction and subsequently re-measured to fair value at each reporting date with changes in fair value included in earnings. The 1.9 million sponsor warrants outstanding at March 31, 2021 had a fair value of $19.4 million. The fair value of the public and sponsor warrants outstanding at March 31, 2020 was $15.8 million. During the three months ended March 31, 2021 and 2020, we recognized gains of $9.1 million and $8.0 million, respectively, in its condensed consolidated statements of income related to decreases in the fair value of the warrants exercised during the respective periods or that were outstanding at the end of the respective periods. Tax Receivable Agreement Expense We are party to a tax receivable agreement which generally provides for the payment by us to InnoHold of 80% of certain tax benefits, if any, that we realize as a result of increases in its allocable share of the tax basis of the tangible and intangible assets of Purple LLC. Because of the Business Combination, subsequent exchanges of 43.5 million Class B Units for Class A Stock and changes in estimates relating to the expected tax benefits associated with the tax receivable agreement, the tax receivable agreement liability totaled $171.9 million and $172.0 million at March 31, 2021 and December 31, 2020, respectively. During the first quarter, a payment of $0.6 million was made combined with a $0.2 million decrease in tax receivable agreement expense due to a state tax rate change. These decreases were offset by $0.8 million related to current year exchanges that were recorded as a decrease to additional paid-in capital in the consolidated statement of stockholders’ equity. The tax receivable agreement expense incurred in the first quarter of 2020 was $0.1 million. 31 Income Tax (Expense) Benefit Our income tax expense was $4.7 million for the three months ended March 31, 2021, compared to an income tax benefit of $0.3 million for the three months ended March 31, 2020. Income tax expense for the three months ended March 31, 2021 was primarily the result of no longer having a full valuation allowance and the decrease in noncontrolling interest. Noncontrolling Interest We attribute net income or loss to the Class B Units in Purple LLC, owned by InnoHold and other parties, as a noncontrolling interest at their aggregate ownership percentage. We calculate net income or loss attributable to noncontrolling interests on a quarterly basis using their weighted average ownership percentage. Net income attributed to noncontrolling interests was $0.1 million and $11.2 million for the three months ended March 31, 2021 and 2020, respectively. The decrease in the net income level attributed to noncontrolling interests resulted from the noncontrolling ownership interest declining from 56.2% at March 31, 2020 to 1.0% at March 31, 2021. Liquidity and Capital Resources Our primary cash needs have historically consisted of working capital, capital expenditures and debt service. Our working capital needs depend upon the timing of cash receipts from sales, payments to vendors and others, changes in inventories, and operating lease payment obligations. Our cash and working capital positions are $103.8 million and $103.2 million, respectively, as of March 31, 2021 compared to $123.0 million and $96.9 million, respectively, as of December 31, 2020. Cash used for purchases of property and equipment increased from $4.5 million during the first quarter of 2020 to $12.3 million during the first quarter of 2021. This increase primarily resulted from enhancing our manufacturing capabilities in Utah, scaling our infrastructure to support the growth of our workforce, opening several new Company showrooms, and continuing to build out our new manufacturing facility in Georgia that began operations on March 3, 2021. In response to the COVID-19 pandemic, we took a number of precautionary measures to manage our resources and mitigate its adverse impact. Given the initial difficultly in predicting how long the pandemic would persist and its full impact, we managed our business and opportunities to preserve liquidity. We ended most of the cash preservation programs and returned to full production to meet increased demand during the second half of 2020. Subject to certain assumptions regarding the duration and severity of the COVID-19 pandemic, and our responses thereto, based on our current projections we believe our cash on hand, ongoing cash generated from our DTC business, amounts available under our new line of credit, continued demand of our products in the wholesale channel and continuing ramp up of store operations, will be sufficient to cover our working capital requirements and anticipated capital expenditures for the next 12 months. On September 3, 2020, we paid $45.0 million to retire, in full, all indebtedness related to Purple LLC’s Related Party Loan. The payment included $25.0 million for the original loan under the agreement, $10.0 million for a subsequent incremental loan, $6.6 million for paid-in-kind interest, $2.5 million for a prepayment fee and $0.9 million for accrued interest. Also on September 3, 2020, Purple LLC entered into the 2020 Credit Agreement that provided for a $45.0 million term loan and a $55.0 million revolving line of credit. The agreement has a five-year term and borrowing rates for both the Term Loan and revolving line of credit are based on Purple LLC’s leverage ratio and can range from LIBOR plus a 3.00% to 3.75% margin with a LIBOR minimum of 0.50%. As of March 31, 2021, there was no balance outstanding on the revolving credit facility. Proceeds from the Term Loan were used to retire all indebtedness associated with the Related Party Loan. During the three months ended March 31, 2021, 6.6 million sponsor warrants were exercised on a cash and cashless basis resulting in the issuance of 2.3 million shares of Class A common stock. The proceeds received for the cash exercise was $0.1 million. At March 31, 2021, there were 1.9 million sponsor warrants outstanding. 32 In the event our cash flow from operations or other sources of financing are less than anticipated, we believe we will be able to fund operating expenses based on our ability to scale back operations, reduce marketing spend and postpone or discontinue our growth strategies. In such event, this could result in slower growth or no growth, and we may run the risk of losing key suppliers, we may not be able to timely satisfy customer orders, and we may not be able to retain all of our employees. In addition, we may be forced to restructure our obligations to current creditors or pursue work-out options. If cash flow from operations or available financing under the 2020 Credit Agreement are not sufficient to fund our operating expenses or our growth strategies, we may need to raise additional capital. Our ability to obtain additional or alternative capital on acceptable terms or at all is subject to a variety of uncertainties, including instability in the credit and financial markets resulting from the COVID-19 pandemic, political or social unrest, other macroeconomic factors and approval from the lenders under the 2020 Credit Agreement. Adequate financing may not be available or, if offered, may only be available on unfavorable terms. The restrictive covenants in the 2020 Credit Agreement may make it difficult to obtain additional capital on terms that are favorable to us, and we may not be able to satisfy the conditions necessary to obtain additional funds pursuant to the revolving credit facility under the 2020 Credit Agreement. There is no assurance we will obtain the capital we require. As a result, there can be no assurance that we will be able to fund our future operations or growth strategies. In addition, future equity or debt financings may require us to also issue warrants or other equity securities that are likely to be dilutive to our existing stockholders. Newly issued securities may include preferences or superior voting rights or, as described above, may be combined with the issuance of warrants or other derivative securities, which each may have additional dilutive effects. Furthermore, we may incur substantial costs in pursuing future capital and financing, including investment banking fees, legal fees, accounting fees, printing and distribution expenses and other costs. We may also be required to recognize non-cash expenses in connection with certain securities we may issue, such as convertible notes and warrants, which will adversely impact our financial condition. If we cannot raise additional funds on favorable terms or at all, we may not be able to carry out all or parts of our long-term growth strategy, maintain our growth and competitiveness or continue in business. We are required to make certain payments to InnoHold under the tax receivable agreement, which may have a material adverse effect on our liquidity and capital resources. We are currently unable to determine the total future amount of these payments due to the unpredictable nature of several factors, including the timing of future exchanges, the market price of shares of Class A Stock at the time of the exchanges, the extent to which such exchanges are taxable and the amount and timing of future taxable income sufficient to utilize tax attributes that give rise to the payments under the tax receivable agreement. As of March 31, 2021, the tax receivable agreement liability reflected in our consolidated balance sheet is $171.9 million of which $5.9 million is presented as a short-term liability. Cash Flows for the Three months Ended March 31, 2021 and 2020 The following summarizes our cash flows for the three months ended March 31, 2021 and 2020 as reported in our condensed consolidated statements of cash flows (in thousands): Three Months Ended March 31, 2021 2020 Net cash used in operating activities $ (9,391 ) $ (264 ) Net cash used in investing activities (12,354 ) (6,848 ) Net cash provided by financing activities 2,605 12 Net decrease in cash (19,140 ) (7,100 ) Cash, beginning of the period 122,955 33,478 Cash, end of the period $ 103,815 $ 26,378 33 Three months ended March 31, 2021 Compared to the Three months ended March 31, 2020 Cash used in operating activities was $9.4 million for the three months ended March 31, 2021 compared to $0.3 million for the three months ended March 31, 2020. This increase in cash used in operations primarily resulted from a $15.1 million decrease in operating cash flows related to unfavorable net changes in operating assets and liabilities for the three months ended March 31, 2021 compared to the corresponding period in the prior year. This decrease consisted of less cash from unfavorable changes in period-over-period fluctuations in accounts receivable and liabilities, offset in part by increases in cash related to favorable changes in year-over-year fluctuations in inventory and other assets. The impact of this was offset in part by $6.0 million in cash provided by operating incomes which was mainly driven by increased DTC sales. Cash used in investing activities was $12.4 million for the three months ended March 31, 2021 compared to $6.8 million for the three months ended March 31, 2020. This increase primarily resulted from enhancing our manufacturing capabilities in Utah, scaling our infrastructure to support the growth of our workforce, opening several new Company showrooms, and continuing to expand our manufacturing capacity in our new manufacturing facility in Georgia that began operations on March 3, 2021. Cash provided by financing activities during the three months ended March 31, 2021 was $2.6 million compared to a minimal amount of cash provided by financing activities during the three months ended March 31, 2020. Financing activities in the first quarter of 2021 included $4.1 million in proceeds from an InnoHold indemnification payment and $0.2 million of proceeds from warrant and stock option exercises, offset in part by a $0.6 million principal payment on the term loan, a $0.6 million payment for the tax receivable agreement and member distributions of $0.5 million. Critical Accounting Policies For a description of our critical accounting policies, refer to Note 2 — Summary of Significant Accounting Policies of our condensed consolidated financial statements. Contractual Obligations Our contractual obligations and other commercial commitments as of March 31, 2021 are summarized below: (in thousands) Payment Due By Period Contractual Obligations 2021 (1) 2022 2023 2024 2025 Thereafter Total Obligations Debt (2) $ 1,688 $ 2,531 $ 3,375 $ 3,656 $ 32,625 $ — $ 43,875 Interest payments (3) 1,263 1,606 1,502 1,386 850 — 6,607 Operating lease obligations (4) 4,819 8,432 7,851 7,874 7,903 62,996 99,875 Purchase obligations 112 150 150 150 150 1,122 1,834 Total (4) $ 7,882 $ 12,719 $ 12,878 $ 13,066 $ 41,528 $ 64,118 $ 152,191 (1) – Excludes amounts due during the three months ended March 31, 2021. (2) – Excludes amounts due under the revolving credit line since no amounts have been borrowed against it. (3) – Includes quarterly commitment fee payments based on unused portion of revolving credit line. (4) – Excludes $6.6 million of tenant improvement allowances which are expected to be fully utilized in fiscal 2021. Seasonality and Cyclicality We believe that sales of our products are typically subject to seasonality corresponding to different periods of the consumer spending cycle, holidays and other seasonal factors. Our sales may also vary with the performance of the broader economy consistent with the market. Available Information Our website address is www.purple.com. We make available free of charge on the Investor Relations portion of our website, investors.purple.com, our annual report on Form 10-K/A, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 as soon as reasonably practicable after we electronically file such material with, or furnish it to, the Securities and Exchange Commission. We also use the Investor Relations portion of our website, investors.purple.com, as a channel of distribution of additional Company information that may be deemed material. Accordingly, investors should monitor this channel, in addition to following our press releases, Securities and Exchange Commission filings and public conference calls and webcasts. The contents of our website shall not be deemed to be incorporated herein by reference. 34 ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not Applicable.