Purple Innovation, Inc. Q2 FY2025 earnings call

• Innovation: Launched Rejuvenate 2.0 mattress collection with DreamLayer gel grid technology, sold over 1,300 units at avg. $6,000 via direct channels (80% from showrooms). Introduced Grid Cloud Pillow, available in over 1,200 Walmart stores. - Strategic pillars: Path to premium sleep focuses on innovation, differentiation, and gross margin. Progress includes Rejuvenate 2.0 launch, Grid Cloud Pillow launch, expanded Mattress Firm relationship with full store network by mid-August, and deepening with Costco. - Operational: Mitigation plans in place for tariff headwinds, manufacturing efficiencies improving, and restructuring initiatives delivering structural improvements.

Net revenue for the 3 months ended June 30, 2025 was $105.1 million, down 12.6% from the prior year. Direct-to-consumer net revenue was $58.9 million: showrooms decreased 13.3% vs last year due to Rejuvenate 2.0 demand outstripping supply, e-commerce was down 11.5%. Wholesale net revenue was $46.2 million, down 13.4% vs last year. Gross profit for the second quarter was $37.7 million, with a gross margin rate of 35.9%, a decline of 480 basis points from last year. Adjusted EBITDA for the second quarter was a loss of $2.4 million, an improvement from the loss of $4.1 million last year. Revenue contribution: direct-to-consumer was a significant portion, with showrooms and e-commerce having different performance trends, while wholesale also saw a decline but with sequential improvement expected.

• Reaffirm full-year revenue in range of $465 million to $485 million. - Adjusted EBITDA expected to be between breakeven and positive $10 million. - Second half expected to be driven by Rejuvenate 2.0 launch and Mattress Firm expansion, with sequential growth and return to positive EBITDA in back half.

• Tariff-related costs and ramp-up costs for Rejuvenate and Mattress Firm presented challenges in Q2. - Ongoing evaluation of strategic alternatives (merger, sale, etc.) remains a risk as the process is ongoing.

Q: Talk about the cadence of sales in the quarter and acceleration in the second half.

A: Q2 affected by tariffs and ramp-up, but optimism from Rejuvenate demand, Mattress Firm expansion, with back half expected to strengthen as market trends better and sales from Rejuvenate and Mattress Firm grow.

Q: Thoughts on onetime costs and gross margin recovery?

A: Ramp-up costs largely moving past, tariffs expected to mitigate, expecting gross margin to end the year well north of 40% with gradual improvement from Q2 through rest of year.

Q: Impact of additional large retailer on '25?

A: Modest positive impact in Q3 and Q4, with more significant impact in '26 but back half should have upside.

Q: Fulfillment capacity and tariff mitigation?

A: Catching up on Rejuvenate shipments, mid-August to have Mattress Firm expansion fully deployed; tariffs mitigated with pricing adjustments, no big consumer pushback expected.

Q: Priorities for cash as business inflects?

A: Look at store footprint, capital deployment internally, building cash cushion and investing in business for best returns.

Q: Mattress Firm distribution and gross margin in Q3/Q4?

A: Mattress Firm distribution in place by August 15, gross margin mitigation and efficiency projects leading to north of 40% margin by year end, with tailwinds in Q3/Q4.