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."

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. In addition, any statements that refer to projections of our future financial performance, our anticipated growth and trends in our businesses (including the discussion under the heading "Outlook for Growth"), and other characterizations of future events or circumstances are forward-looking statements.

We caution and advise readers that these statements are only predictions and are subject to risks, uncertainties, and assumptions that are difficult to predict, including those included in the "Risk Factors" section of this Quarterly Report and in our Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 1, 2022. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements and investors are cautioned not to place undue reliance on any such 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.

Our mission is to improve the lives of our consumers by delivering innovative better sleep 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 directly to consumers through our e-commerce and Purple retail showroom channels and through our retail brick-and-mortar wholesale partner channel.

Our business 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, Purple Inc. consummated a transaction structured similar to a reverse recapitalization 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. At March 31, 2022, Purple Inc. had a 99% economic interest in Purple LLC while other Class B Unit holders had the remaining 1%.

Recent Developments in Our Business

In March 2022, the Company completed a secondary offering of 16.1 million shares of Class A common stock, which included the additional 2.1 million shares of the over-allotment option that the underwriters exercised in full. The underwriter purchased the Class A common stock from the Company at a price of $5.65 per share, except that any shares sold by the underwriter to Coliseum Capital Partners, L.P. and Blackwell Partners LLC - Series A, up to an aggregate of 29.81% of the shares of Class A common stock pursuant to the offering, were purchased from the Company by the underwriter at a price of $6.10 per share. The aggregate gross proceeds received by the Company from the secondary offering, including the exercise of the over-allotment, was $93.1 million. After deducting offering expenses of $0.2 million, aggregate net proceeds totaled $92.9 million.

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. In November 2021, the Company executed a $55.0 million draw on its revolving line of credit, which represented the full amount available under the line. The initial borrowing rate of 3.50% for both the term loan and revolving line of credit was based on LIBOR plus 3.00%.

The Company's operating and financial results for the year ended December 31, 2021 did not satisfy the financial and performance covenants required under the 2020 Credit Agreement. On February 28, 2022, prior to the covenant compliance certification date, the Company entered into the first amendment of the 2020 Credit Agreement to avoid a breach of these covenants and potential default. This amendment contained a covenant waiver period such that the net leverage ratio and fixed charge coverage ratio would not be tested for the fiscal quarters ended December 31, 2021, March 31, 2022 and June 30, 2022. Other modifications in the amendment included revised leverage ratio and fixed charge coverage definitions and thresholds, the addition of minimum liquidity requirements with mandatory prepayments of the revolving loan if cash exceeded $25.0 million, new weekly and monthly reporting requirements, limits on the amount of capital expenditures, the addition of a lease incurrence test for opening additional showrooms, and additional negative covenants during a covenant amendment period that extends into 2023 until certain conditions are met. In addition, the interest rate on any outstanding borrowings under the 2020 Credit Agreement was changed from LIBOR with a floor of 0.5% plus an applicable margin (historically at 3.0%) to an initial rate of SOFR with a floor of 0.5% plus 4.75%, for a total rate of 5.25% as long as the applicable liquidity threshold is met. If it is not met, then the interest rate goes to SOFR with a floor of 0.5% plus 9.00%. Once the consolidated leverage ratio goes below 3.00 to 1.00, the interest rate will be based on SOFR with a floor of 0.5% plus a 3.00% to 3.75% margin depending on the consolidated leverage ratio. Pursuant to the first amendment of the 2020 Credit Agreement, the Company made a $2.5 million payment on the term loan to cover the four quarterly principal payments due in 2022 and incurred fees and expenses of $0.8 million that were recorded as debt issuance costs in the condensed consolidated balance sheet.

On March 23, 2022, the Company entered into a second amendment to the 2020 Credit Agreement. This amendment modified the 2020 Credit Agreement to allow CCM and its investment affiliates to acquire 35% or more of the combined voting power of all equity interests of the Company entitled to vote for the election of members of the Company's board of directors without constituting an event of default. CCM is considered a related party of the Company in that Adam Gray, a member of the board of directors, serves as a managing partner of CCM. Pursuant to the second amendment of the 2020 Credit Agreement, the Company incurred fees and expenses of $0.4 million that were recorded as debt issuance costs in the condensed consolidated balance sheet.

On March 31, 2022, the Company used a portion of the net proceeds from the secondary offering to repay in full the $55.0 million of principal outstanding on the revolving line of credit.

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 took precautionary measures recommended by the appropriate national and state health agencies to manage our resources and mitigate the adverse impact of the pandemic, which was intended to help minimize the risk to our Company, employees, customers, and the communities in which we operate. Soon after the pandemic began, we also experienced an increase in demand in our e-commerce channel, and in 2020 and 2021 the Company built production capability to match actual and anticipated demand growth. Now, on the tail-end of the pandemic, we are experiencing a pull-back in growth that has left us with excess operational capacity in facilities, equipment, and personnel. In the first quarter, we began to rebalance production and fulfillment operations in our different facilities and take other actions to lower costs.

We are closely monitoring the impacts of COVID-19 and general economic conditions on global supply chain, manufacturing, and logistics operations. As inflationary pressures increase, we anticipate that our production and operating costs will similarly increase. In addition, COVID-19 and other events, including port closures or labor shortages, have resulted in the continuation or worsening of manufacturing and shipping costs, delays and constraints. While 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, with respect to both the availability and cost of materials. In addition, as experienced in other industries, in order to remain competitive in hiring the labor necessary to maintain our production levels, we have had to increase wages and other compensation. These increases in materials and labor costs have resulted in higher cost of goods sold and lower margins. We believe that shipping, material and labor costs will continue to remain at elevated levels or increase further in the foreseeable future.

While we invested in growing our manufacturing capacity and expanding our showroom presence in 2021, post-pandemic demand has shifted away from e-commerce and back towards retail brick-and-mortar. Our showrooms are performing in-line with our targeted unit economics. As a result, we are continuing our investment into new showrooms. Also, at the end of the first quarter, our products are sold through approximately 3,100 wholesale doors, having added 600 net new doors so far in 2022. To capitalize on the current trend, and while expanding into new doors, our focus is primarily on improving our sales in the retail locations where are products currently are being sold.

In February 2022, because of lower-than-expected demand and elevated labor and overhead costs that adversely affected our results of operations in the fourth quarter of 2021 which continued into the first quarter of 2022, we completed a restructuring of our workforce to improve efficiencies and realign the Company's cost structure to focus on quality of earnings in our current core business. As a result of the realignment and restructuring, we reduced employee headcount and incurred severance costs of $1.2 million in the first quarter of 2022. In April 2022, we incurred an additional $0.8 million in severance costs associated with a separate workforce restructuring to balance production and improve efficiencies.

In early 2022, to offset the impact of higher raw material, labor and freight costs on our gross margins, we increased prices and initiated several other projects to improve efficiencies and reduce costs. In response to these impacts, we deferred new product launches in 2022. Also in 2022, we are continuing to invest in showroom expansion and effectively respond to consumers returning to brick and mortar buying by growing wholesale partner doors and initiating a greater emphasis on improving the sales productivity of our existing wholesale partners. After several years of hyper growth and increased investments to support current and future expansion, we are now building the framework for strong operational maturity and accountability as we focus on right-sizing our operations, improving our execution, and refining our strategies to drive profitable growth in the current market environment.

To support our plans for future growth, we are focusing on the following opportunities:

There is no guarantee that we will be able to effectively execute on these opportunities, which are subject to risks, uncertainties, and assumptions that are difficult to predict, including the risks described under "Risk Factors" and elsewhere herein. Therefore, actual results may differ materially and adversely from those described above. In addition, we may, in the future, adapt these focuses in response to changes in the market or our business.

Operating Results for the Three Months Ended March 31, 2022 and 2021

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 operations:

Net revenues decreased $43.3 million, or 23.2%, to $143.2 million for the three months ended March 31, 2022 compared to $186.4 million for the three months ended March 31, 2021. The decline in net revenues reflected a $37.6 million decrease in mattress sales, a $5.3 million decrease in other sleep product sales and a $0.4 million decrease in other product sales. The decrease in mattress sales was primarily due to higher net revenues in the prior year created by the pull forward of demand driven by the effects of COVID and economic stimulus in the first quarter of 2021, coupled with the pullback in discretionary consumer spending in early 2022. The decline in net revenues from a sales channel perspective consisted of DTC net revenues decreasing $39.4 million, or 31.5% and wholesale net revenues decreasing $3.9 million, or 6.3%. Within DTC, e-commerce net revenues decreased $46.3 million, or 38.6%, and were partially offset by Purple retail showroom net revenues growing $7.0 million, or 138.2%. The larger-than-expected decrease in e-commerce net revenues was primarily due to a return to more normalized consumption patterns after two years of COVID-driven demand coupled with customers shifting back to brick and mortar buying. Wholesale net revenues comprised 40.3% of net revenues in the first quarter of 2022 compared to 33.0% in the first quarter of 2021. The higher proportion of wholesale net revenues was primarily due to the impact of lower-than-expected e-commerce sales. The growth in our showroom business from 2.7% of net revenues in the first quarter of 2021 to 8.4% in the first quarter of 2022 resulted primarily from the opening of 25 new showrooms over the past 12 months combined with the impact of a lower-than-expected decrease in e-commerce sales.

Cost of revenues decreased $7.4 million, or 7.4%, to $91.6 million for the three months ended March 31, 2022 compared to $98.9 million for the three months ended March 31, 2021. This decrease, which was primarily due to the corresponding decrease in sales volume, reflected a $17.4 million decrease in direct material and other costs offset in part by a $10.1 million increase in labor and overhead costs. Our gross profit percentage, which decreased to 36.1% of net revenues in the first quarter of 2022 from 46.9% in the first quarter of 2021, was adversely impacted by the elevated level of our labor and overhead costs coupled with a larger than expected reduction in higher margin e-commerce sales. We expect gross margins to improve in the near term based on the full effect of first quarter price increases, the impact of recent reductions in our production workforce and the continued implementation of manufacturing and supply chain efficiencies.

Marketing and sales expense decreased $4.4 million, or 8.1%, to $50.0 million for the three months ended March 31, 2022 compared to $54.4 million for the three months ended March 31, 2021. This decrease reflected a $15.6 million decline in advertising spending as management focused on improving marketing efficiency. This decrease was offset in part by a $5.0 million increase in wholesale marketing and sales costs related to enhancements in our wholesale marketing operations, a $4.8 million increase in showroom-related marketing associated with our continued showroom expansion, and a $1.4 million increase in other marketing costs. Marketing and sales expense as a percentage of net revenues was 34.9% in the first quarter of 2022 compared to 29.2% in the first quarter of 2021. This increase was primarily due to a larger-than-expected decrease in net revenues.

General and administrative expense increased $3.4 million, or 23.1%, to $17.9 million for the three months ended March 31, 2022 compared to $14.5 million for the three months ended March 31, 2021. This increase was primarily due to a $2.1 million increase in payroll costs related to workforce additions since the end of the prior year first quarter, a $0.7 million increase in legal and professional fees associated primarily with executive search costs, and a $0.5 million increase in other expenses.

Research and development costs increased $0.4 million, or 24.4%, to $2.1 million for the three months ended March 31, 2022 from $1.7 million for the three months ended March 31, 2021. This increase was primarily due to an increase in payroll costs related to planned increases in our research and development workforce.

Operating income (loss) decreased $35.3 million to an operating loss of $18.4 million for the three months ended March 31, 2022 compared to operating income of $16.9 million for the three months ended March 31, 2021. This decrease was primarily due to the decrease in gross profit.

Interest expense totaled $1.0 million for the three months ended March 31, 2022 compared to $0.6 million for the three months ended March 31, 2021. The $0.5 million increase was primarily due to interest expense of $0.6 million incurred on the $55.0 million revolving line of credit that was drawn down by the Company in November 2021. This increase was offset in part by $0.2 million of interest capitalized during the first quarter of 2022.

Change in Fair Value - Warrant Liabilities

There were 12.8 million sponsor warrants issued pursuant to a private placement conducted simultaneously with the Company's initial public offering. We have accounted for these warrants as liabilities and recorded them at fair value on the date of the transaction and subsequently re-measured them to fair value at each reporting date with changes in fair value included in earnings. The 1.9 million sponsor warrants outstanding at both March 31, 2022 and 2021 had fair values of $0.4 million and $19.4 million, respectively. The decrease in fair value was primarily due to the Company's Class A stock price, one of the primary assumptions used to re-measure the warrant liability, declining from $31.65 at March 31, 2021 to $5.85 at March 31, 2022. During the three months ended March 31, 2022 and 2021, we recognized gains of $3.9 million and $9.1 million, respectively, in our condensed consolidated statements of operations related to decreases in the fair value of the warrants outstanding at the end of the respective periods.

We had an income tax benefit of $1.8 million for the three months ended March 31, 2022 compared to income tax expense of $4.7 million for the three months ended March 31, 2021. The income tax benefit in the first quarter of 2022 was primarily the result of the Company having a net loss before income taxes of $15.4 million for the three months ended March 31, 2022.

The Company calculates net income or loss attributable to noncontrolling interests on a quarterly basis using their weighted average ownership percentage. Net loss attributed to noncontrolling interests was $0.1 million in the first quarter of 2022 compared to net income of $0.1 million in the first quarter of 2021.

Our principal sources of funds are cash flows from operations and cash and cash equivalents on hand, supplemented with borrowings made pursuant to our credit facilities and proceeds received from secondary offerings of our equity capital. Principal uses of funds consist of payments of principal and interest on our debt facilities, capital expenditures and working capital needs as well as other contractual obligations described below. Our working capital needs depend largely upon the timing of cash receipts from product sales, payments to vendors and others, changes in inventories, and operating lease payment obligations. Our cash and working capital positions were $62.7 million and $98.9 million, respectively, as of March 31, 2022 compared to $91.6 million and $87.5 million, respectively, as of December 31, 2021. Cash used for capital expenditures increased from $12.4 million in the first quarter of 2021 to $13.1 million in the first quarter of 2022. Our capital expenditures in the first quarter of 2022 primarily consisted of leasehold improvements and furniture and fixtures associated with the opening of new Purple retail showrooms during the first quarter of 2022.

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, use the liquidity we have available under our revolving line of credit 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, pursue work-out options or seek additional funding sources including new debt or equity capital. Our ability to obtain additional debt 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 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, as amended, may make it difficult to obtain additional capital on terms that are favorable to us and to execute on our growth strategies, including the acquisition of other businesses or technologies. There is no assurance we would be able to obtain the capital we could potentially 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.

Based on our current projections, we believe our cash on hand, amounts available under our revolving line of credit, and expected cash to be generated from e-commerce, wholesale, and Purple retail store channels will be sufficient to cover our working capital requirements and anticipated capital expenditures for the next 12 months.

In March 2022, the Company completed a secondary offering of 16.1 million shares of Class A common stock, which included the additional 2.1 million shares of the over-allotment option that the underwriters exercised in full. The underwriter purchased the Class A common stock from the Company at a price of $5.65 per share, except that any shares sold by the underwriter to Coliseum Capital Partners, L.P. and Blackwell Partners LLC - Series A, up to an aggregate of 29.81% of the shares of Class A common stock pursuant to the offering, were purchased from the Company by the underwriter at a price of $6.10 per share. The aggregate gross proceeds received by the Company from the secondary offering, including the exercise of the over-allotment, was $93.1 million. After deducting offering expenses of $0.2 million, aggregate net proceeds totaled $92.9 million.

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 term loan will be repaid in accordance with a five-year amortization schedule and may be prepaid in whole or in part at any time without premium or penalty, subject to reimbursement of certain costs. The revolving credit facility has a term of five years and carries the same interest provisions as the term debt. A commitment fee is due quarterly based on the applicable margin applied to the unused total revolving commitment. In November 2021, the Company executed a $55.0 million draw on its revolving line of credit, which represented the full amount available under the line. The initial borrowing rate of 3.50% for both the term loan and revolving line of credit was based on LIBOR plus 3.00%.

The Company's operating and financial results for the year ended December 31, 2021 did not satisfy the financial and performance covenants required under the 2020 Credit Agreement. On February 28, 2022, prior to the covenant compliance certification date, the Company entered into the first amendment of the 2020 Credit Agreement to avoid a breach of these covenants and potential default. This amendment contained a covenant waiver period such that the net leverage ratio and fixed charge coverage ratio would not be tested for the fiscal quarters ended December 31, 2021, March 31, 2022 and June 30, 2022. Other modifications in the amendment included revised leverage ratio and fixed charge coverage definitions and thresholds, the addition of minimum liquidity requirements with mandatory prepayments of the revolving loan if cash exceeded $25.0 million, new weekly and monthly reporting requirements, limits on the amount of capital expenditures, the addition of a lease incurrence test for opening additional showrooms, and additional negative covenants during a covenant amendment period that extends into 2023 until certain conditions are met. In addition, the interest rate on any outstanding borrowings under the 2020 Credit Agreement was changed from LIBOR with a floor of 0.5% plus an applicable margin (historically at 3.0%) to an initial rate of SOFR with a floor of 0.5% plus 4.75%, for a total rate of 5.25% as long as the applicable liquidity threshold is met. If it is not met, then the interest rate goes to SOFR with a floor of 0.5% plus 9.00%. Once the consolidated leverage ratio goes below 3.00 to 1.00, the interest rate will be based on SOFR with a floor of 0.5% plus a 3.00% to 3.75% margin depending on the consolidated leverage ratio.

Pursuant to the first amendment of the 2020 Credit Agreement, the Company incurred fees and expenses of $0.8 million that were recorded as debt issuance costs in the condensed consolidated balance sheet and made a $2.5 million payment on the term loan to cover the four quarterly principal payments due in 2022. The Company accounted for this amendment as a modification of existing debt in accordance with ASC 470 - Debt.

On March 23, 2022, the Company entered into a second amendment to the 2020 Credit Agreement. This amendment modified the 2020 Credit Agreement to allow CCM and its investment affiliates to acquire 35% or more of the combined voting power of all equity interests of the Company entitled to vote for the election of members of the Company's board of directors without constituting an event of default. CCM is considered a related party of the Company in that Adam Gray, a member of the board of directors, serves as a managing partner of CCM.

Pursuant to the second amendment of the 2020 Credit Agreement, the Company incurred fees and expenses of $0.4 million that were recorded as debt issuance costs in the condensed consolidated balance sheet. The Company accounted for this amendment as a modification of existing debt in accordance with ASC 470 - Debt.

On March 31, 2022, the Company used a portion of the net proceeds from the secondary offering to repay in full the $55.0 million of principal outstanding on the revolving line of credit.

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 common 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 agreement. As of March 31, 2022 and December 31, 2021, the tax receivable agreement liability reflected in the Company's consolidated balance sheet was $162.2 million and $168.1 million, respectively. This decrease was due to a $5.8 million payment that was made during the first quarter of 2022.

In addition to the material contractual obligations discussed above, other material contractual obligations primarily include operating lease payments obligations. See Note 8 of the condensed consolidated financial statements for additional information.

Cash Flows for the Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021

Net cash used in operating activities $ (44,281 ) $ (9,391 ) Net cash used in investing activities (13,078 ) (12,354 ) Net cash provided by financing activities 28,441 2,605 Net decrease in cash

Cash used in operating activities totaled $44.3 million for the three months ended March 31, 2022 compared to $9.4 million for the three months ended March 31, 2021. The decrease in cash flows from operations primarily resulted from a $29.6 million decrease in cash provided by operating income which was mainly driven by a decline in gross margin. The decrease in cash provided by operations was further impacted by a $7.3 million decrease in operating cash flows related to net changes in period-over-period fluctuations related to working capital items, offset in part by an increase in cash associated with changes in period-over-period fluctuations in other long-term liabilities.

Cash used in investing activities reflected capital expenditures of $13.1 million for the three months ended March 31, 2022 compared to $12.4 million for the three months ended March 31, 2021. Capital expenditures in the first quarter of 2022 primarily consisted of investments in leasehold improvements and furniture and fixtures related to the opening of new Purple retail showrooms during the first quarter of 2022.

Cash provided by financing activities was $28.4 million during the three months ended March 31, 2022 compared to $2.6 million during the three months ended March 31, 2021. Financing activities in the first quarter of 2022 included $92.9 million of net proceeds received from the secondary stock offering, offset in part by a $55.0 million revolving line of credit payment, a $5.8 million payment on the tax receivable agreement, and $3.8 million in other debt related payments.

We discuss our critical accounting policies and estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations in our 2021 Annual Report on Form 10-K filed March 1, 2022. There were no significant changes in our critical accounting policies since the end of fiscal 2021.

As of March 31, 2022, we were not involved in any unconsolidated special purpose entity transactions and did not have any off-balance-sheet financing. Also, there was no balance outstanding on our $55.0 million revolving credit facility as of March 31, 2022.

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.

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 SEC.

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, SEC filings and public conference calls and webcasts. The contents of our website shall not be deemed to be incorporated herein by reference.

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