Purple Innovation, Inc. Q1 FY2025 earnings call

Key Points

• Delivered first quarter results in line with revenue guidance and ahead of adjusted EBITDA guidance.
• Showroom channel grew 7%, with comparable sales up 11% for the second consecutive quarter.
• Announced expansion of Mattress Firm partnership, growing slots from 5,000 to 12,000, expected to drive over $70 million in incremental net revenue next year.
• Launched Rejuvenate 2.0 mattress line, with initial positive feedback.
• Focus on three strategic pillars: pioneering new technologies, promoting differentiation, and prioritizing gross margins.
• Gross margin improvements due to sourcing, production efficiencies, and manufacturing consolidation.

First quarter revenue was $104.2 million, down 13% compared to the prior year. Showroom channel grew 7%, with comparable sales up 11% for the second straight quarter despite operating fewer locations. Wholesale segment net revenue was $40.8 million, down 24.2% year-over-year. E-commerce was down 8.2% during the first quarter. Adjusted gross margins exceeded 40% for the fourth consecutive quarter, an improvement of 550 basis points compared to last year. Showrooms contributed significantly, with growth and higher order values, while wholesale and e-commerce faced softness.

Reaffirmed full year revenue guidance in the range of $465 million to $485 million and adjusted EBITDA in the range of flat to up $10 million, including $25 million to $30 million in expected savings from manufacturing consolidation initiatives. Second quarter pressured by macro concerns and tariff headwinds, but planning sequential growth in the second half with Rejuvenate 2.0 launch and Mattress Firm partnership expansion.

Potential annual cost impact from tariffs approximately $10 million, with evaluation of sourcing alternatives. Concern about consumer psyche and spending caution in the second quarter due to macroeconomic uncertainties.

Q: Brad Thomas with KeyBanc Capital Markets asked about the new Mattress Firm partnership's $70 million number and how it was calculated, and trends in 2Q.

A: Rob DeMartini said it's based on current business with Mattress Firm and projecting on the full scope, and expressed concern about the second quarter due to consumer psyche.

Q: Bobby Griffin with Raymond James inquired about how the new Mattress Firm partnership came to fruition, trends in the industry, tariffs, etc.

A: Rob DeMartini talked about the partnership being good business for both parties, concern about consumer spending, and Todd Vogensen mentioned the tariff impact flows through quickly.

Q: Dan Silverstein with UBS asked about the economics of the Mattress Firm partnership and cooperative advertising opportunities.

A: Rob DeMartini said it's good business for both and they'll work out cooperative advertising opportunities.

Q: Brian Nagel with Oppenheimer asked about manufacturing capacity, exclusivity in the Mattress Firm partnership, and strategic alternatives.

A: Rob DeMartini discussed manufacturing responsibility for grid material, no exclusivity issues mentioned as related to strategic alternatives, and the partnership is independent of strategic alternatives.

Q: Joseph on for Matt Koranda with ROTH Capital Partners asked about guidance and the Mattress Firm partnership's contribution.

A: Todd Vogensen said the ramp is early to quantify specifics, and Rob DeMartini talked about traditional distribution of products in the Mattress Firm network