Purple Innovation, Inc. Q4 FY2025 earnings call

• Fourth quarter marked an inflection point with 9% revenue growth, gross profit expansion, and improved profitability. • Full year 2025 was a stronger year with positive adjusted EBITDA, finishing within guidance and achieving profitability levels not seen since 2021. • Focus shifted from reshaping the business for a tough market to growth, with three priorities: deepening consumer understanding, delivering better sleep through product and distribution, and executing with financial discipline. • In showrooms, comparable sales increased 8.8% in Q4, Rejuvenate 2.0 represented over 50% of showroom mattress revenue, and over 80% of showrooms were four-wall profitable for the full year. • Wholesale had 39.8% growth in Q4. • E-commerce had mixed performance with pockets of strength around Black Friday and Cyber Monday but saw improvements on Amazon and website experience. • Focus on knowing the consumer, innovation with Rejuvenate 2.0 and Purple Royale, expanded distribution with Mattress Firm, Costco, Walmart, Sam's Club, and improved showroom profitability with new store openings planned.

Fourth quarter net revenue was $140.7 million, up 9.1% year-over-year. Gross margin was approximately 41.9%, remaining well above the 40% quarterly margin target. Operating expenses for the quarter were $61.2 million, down 2.9% versus prior year. Adjusted EBITDA in the fourth quarter was $8.8 million. Full year 2025 net revenue was $468.7 million, down 3.9% versus prior year. Full-year gross margin increased 310 basis points to 40.2%. Operating expenses for the full year declined by 15.3% to $231.6 million. Adjusted EBITDA for the full year was $1.9 million. Showrooms had sales up 1.5% versus prior year to $78.5 million with comparable revenue up 6.6%. Wholesale had 39.8% growth in the fourth quarter and was up 1.6% for the full year. E-commerce declined in the fourth quarter though had pockets of strength around Black Friday and Cyber Monday.

• For 2026, expect revenue in the range of $500 to $520 million and adjusted EBITDA of $20 million to $30 million. • First quarter 2026 total revenue expected to be in the range of $100 to $105 million, and adjusted EBITDA to be in the range of a loss of $7 to a loss of $4 million. • Guidance driven by premium product portfolio momentum, expanded wholesale distribution, and operating leverage as volume grows. • Anticipate continued improvement in EBITDA from operational efficiencies and restructuring actions.

• Independent auditor included a going concern qualification in the annual report due to liquidity challenges and historical cash burn. • Exposure to petrochemicals and other inputs which may face price pressure. • Mixed performance in e-commerce and potential challenges in reinvigorating own e-com channel relative to Amazon business.

Q: Asked about recent trends and first quarter step back.

A: Strong fourth quarter impacted January demand due to sell-through and consumption, Q1 is typically weakest quarter but momentum includes Mattress Firm floor samples, and Q1 is lapping last year at equal comp levels.

Q: Asked about flow-through margin.

A: Flow-through should be good with revenue $30 to $50 million better than last year and EBITDA $20 to $30 million better, with about 30% flow through normally and more this year due to margin expansion and cost control.

Q: Asked about raw materials exposure.

A: Products have petroleum base, savings from tariff mitigation roughly offset oil exposure, monitoring price increases but early on.

Q: Asked about seasonality and product launches.

A: Revenue should grow consistently, Q2 will have Purple Royale launch and natural build into Q3 and Q4.

Q: Asked about sales guidance drag and Amazon vs own e-com.

A: Mattress Firm expansion is part of growth but other areas like Costco, showrooms, and conservatism in e-commerce contribute to net out, Amazon business is underdeveloped shape with availability and prime badging opportunities, own e-com has challenges with product assortment specialness online.

Q: Asked about retail partners outside Mattress Firm and Costco, cash flow, and showroom channel.

A: Wholesale is mixed with net down about 5% excluding Mattress Firm and Costco, expecting positive free cash flow in 2026, showroom channel has positive mix with over 50% premium line revenue, and about 20% of stores not profitable with plans to improve some and evaluate others.

Q: Asked about new product rollout and capital needs.

A: Rejuvenate rollout completed, Royale launch started, physical expansion of new products completed with opportunity to develop further, capital needs target 10 to $12 million in 2026 including maintenance CapEx, innovation CapEx, and new store Capex.