PRPL

Core Strategic Priorities

• Deepen consumer understanding of Purple's unique GelFlex Grid technology and help customers select the correct Purple product
• Deliver improved sleep outcomes through premium product innovation and expanded distribution
• Execute consistently with strict financial discipline across all business operations

Consumer Marketing & E-Commerce Progress

• Shifted marketing strategy to prioritize long-term brand building and consumer education outside of peak holiday periods, while retaining targeted conversion marketing for shoppers nearing purchase
• Rolled out multiple e-commerce consumer journey enhancements, including improved product comparison tools, refined site navigation, and new educational landing pages
• Optimized search and AI-powered tool presence to reach consumers earlier in their research process, generating more informed potential buyers
• Delivered third consecutive quarter of sequential e-commerce improvement, with strong double-digit YoY growth on Amazon

Product Innovation & Premium Portfolio Performance

• The premium Rejuvenate 2.0 collection remained Purple's strongest performer, accounting for over half of total showroom mattress revenue, demonstrating strong consumer demand for premium sleep products
• The pillow category delivered consistent strong growth, expanding Purple's brand reach and introducing new consumers to GelFlex Grid technology
• Completed full rollout of the Purple Royale product line at wholesale partner Mattress Firm, with ongoing strong performance at Costco (year-to-date volume well ahead of 2025 levels)

Distribution Expansion

• Opened 1 new owned showroom and relocated 1 existing showroom in Q2, with 5 additional openings planned before the end of fiscal 2026
• Refined real estate strategy to prioritize high-productivity open-air retail locations aligned with evolving consumer shopping trends; plans to add 12 to 16 new showrooms in fiscal 2027, scaling the profitable showroom model thoughtfully

Financial & Corporate Updates

• Implemented 8% to 10% across-the-board pricing increases for mattresses and pillows in mid-June 2026 to offset elevated commodity and logistics inflation
• Continued cost reduction efforts through supplier diversification, operational efficiencies, and workforce optimization, leading to lower operating expenses YoY
• Regained compliance with NASDAQ's minimum bid price requirement following a July 2026 reverse stock split, resolving the compliance matter entirely
• Generated positive operating cash flow for the second consecutive quarter, with $3.6 million in operating cash flow through the first half of fiscal 2026, a $30.7 million improvement YoY

• Full fiscal 2026 revenue guidance is revised downward to a range of $420 million to $440 million, driven almost entirely by continued softness in the wholesale channel; DTC is still expected to grow, with showrooms projected to maintain their positive momentum
• Full fiscal 2026 adjusted EBITDA guidance is maintained at $20 million to $25 million (down from the prior 20 to $30 billion range, with the downward adjustment to the upper bound driven by lower expected revenue), supported by DTC strength and strict cost discipline
• The full fiscal 2026 GAAP gross margin target is revised from ~40% to ~45% to reflect the reclassification of merchant credit card processing and third-party consumer financing fees from cost of revenue to marketing and sales expense, bringing Purple's reporting in line with industry peer practice
• Gross margins are expected to improve in the second half of fiscal 2026, driven by higher seasonal volume, full realization of the June 2026 pricing increases, and ongoing sourcing and operational productivity initiatives
• Free cash flow is expected to dip slightly in Q3 2026 due to normal seasonal shipping patterns around the Labor Day sales period, followed by a large sequential increase in Q4 that will keep full-year operating cash flow positive

Total net revenue for Q2 2026 was $98.3 million, a 6.5% year-over-year (YoY) decrease from $105.1 million in Q2 2025. The Direct-to-Consumer (DTC) segment generated net revenue of $60.9 million, up 3.4% YoY, accounting for 62% of total net revenue. Within DTC, showroom revenue grew 16.6% YoY to $18.4 million (18.7% of total revenue), with comparable same-store sales (open ≥1 year) up 18% for the fourth consecutive quarter of positive growth. DTC e-commerce revenue decreased 1.4% YoY to $42.5 million (43.2% of total revenue), marking the third consecutive quarter of sequential improvement. The Wholesale segment generated net revenue of $37.4 million, down 19.1% YoY, accounting for 38% of total net revenue. Excluding $5.3 million in contra-revenue from incremental partner marketing investments and customer payments, wholesale revenue would have declined 8% YoY.

GAAP gross profit increased 44.5% YoY to $44.4 million, with GAAP gross margin up 470 basis points to 45.2% after a 505 basis point upward adjustment from the reclassification of payment processing fees. Adjusted EBITDA was $2.1 million, a $4.4 million improvement from an adjusted EBITDA loss of $2.4 million in Q2 2025. GAAP net loss improved $14.1 million YoY to $3.2 million, or $0.74 per share.

• Broad consumer demand for mattresses remains uneven and soft overall, particularly in the wholesale channel, creating ongoing revenue uncertainty
• Early consumer response to the June 2026 pricing increases was more negative than management expected; full consumer demand impact will not be clear until after the Labor Day sales period
• Mineral oil, a key input for Purple's GelFlex Grid, faces significant price volatility due to geopolitical tensions; if prices rise further than current forecasts, additional pricing increases will be required to protect margins
• Co-op advertising investments with wholesale partners are now required to be recorded as contra-revenue (reducing reported top-line revenue), requiring higher return on investment thresholds for these marketing programs
• The overall demand environment remains uncertain heading into the second half of the fiscal year, despite Purple's stronger operational and financial foundation

Q: Is the full downward revenue guidance revision driven entirely by weak wholesale, and is DTC still projected to grow in the second half? How will June's pricing actions offset volume declines?

A: The entire downward revenue revision comes from weakness in the wholesale channel. DTC, especially the showroom segment, is still expected to grow, with e-commerce continuing to approach flat YoY growth in the back half. Early consumer response to pricing increases was more negative than management expected, so the full impact on volume will not be clear until after the Labor Day selling period.

Q: Why are Purple's owned showrooms outperforming wholesale channel partners by such a wide margin, and will more pricing increases be needed to offset raw material cost growth?

A: Showroom outperformance stems from letting consumers experience the GelFlex Grid in person and explain its benefits directly, which drives stronger conversion and higher premium product mix. Purple implemented 8-10% price increases in June that are priced to cover expected average mineral oil costs in the second half. Only if mineral oil prices rise far above current forecasts will additional pricing be needed.

Q: Can you explain the incremental investments that caused wholesale revenue to decline 19% instead of 8% YoY? Will this sort of contra-revenue investment continue going forward?

A: The gap is caused by $5.3 million in contra-revenue from incremental co-op advertising with wholesale partners and required accounting for related-party transactions with SGI-owned Mattress Firm. Co-op advertising investments will continue, but management now has clearer accounting guidance and will apply stricter return on investment thresholds for all such programs going forward.

Q: Are there additional tariff refunds expected, and how will any additional funds be deployed strategically?

A: The $5.3 million IEPA tariff refund received this quarter is the majority of the expected refunds. Any additional funds will be used to continue the planned expansion of the showroom network, which is Purple's highest-performing growth channel and drives strong premium conversion.