Purple Innovation, Inc.

Good afternoon, ladies and gentlemen. Welcome to Purple Innovation's fourth quarter 2021 earnings conference call. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. It is now my pleasure to introduce your host, Cody McAllister of ICR. Please go ahead.

Thank you for joining Purple Innovation's fourth quarter 2021 earnings call. A copy of our earnings press release is available on the investor relations section of Purple's website at www.purple.com. I would like to remind you that certain statements we will make in this presentation are forward-looking statements. These forward-looking statements reflect Purple Innovation's judgment and analysis only as of today, and actual results may differ materially from current expectations based on the number of factors affecting the company's business. Accordingly, You should not place undue reliance on these forward-looking statements. For a more thorough discussion of the risks and uncertainties associated with the forward-looking statements to be made in this conference call webcast, we refer you to the disclaimer statements included in our fourth quarter 2021 earnings release, which was furnished to the SEC today on form 8K, as well as our filing with the SEC reference in that disclaimer. We do not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information future events, or otherwise. Today's presentation will include reference to non-GAAP financial measures, such as EBITDA, adjusted EBITDA, adjusted net income, and adjusted earnings per share. A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures is available within the earnings release, which can be found on our website. With that, I'll turn the call over to Rob Demartini, Purple Innovation's Chief Executive Officer.

Thank you, Cody, and thank you. Good afternoon, everyone. I'm glad to be here speaking with you in my new capacity as permanent CEO, and I look forward to meeting many of you in the months ahead. I started with Purple two months ago, and from the moment I engaged with the board to discuss this role, I've been impressed and excited to work with this brand and this company as we endeavor to bring comfort technology to the world, building from a foundation where we first went and sleep in North America. The market fundamentals are there, and Purple has a growing portfolio of both intellectual property and know-how with which to profitably extend its share gains. As a way of background, I've been fortunate over my career to work for and lead some great businesses that I believe have prepared me well for the challenges Purple faces today and to capitalize on the opportunities that we have going forward. I spent my first 20 years of my career at Procter & Gamble in sales and general management roles. I then had the chance to work with Jim Kiltz at Gillette and lead North America business during its turnaround and subsequent growth. More recently, I spent 12 years as CEO running New Balance, where the leadership team globalized a predominantly wholesale North American brand and moved it into the omni-channel world. During my time at New Balance, we grew from $1.5 billion to over $4.2 billion. I then took the last two and a half years to pursue a passion project leading USA Cycling. I fully believe my experiences have prepared me to help Get Purple growing again in a healthy and sustainable way. I have confidence and conviction in this business, and I believe in the strategy we laid out in the long-term plans that have been shared with you previously. This company has strong intellectual property, demonstrable product differentiation in a category populated with a lot of Me Too technology, and we have clearly shown we can capture the attention of consumers. We have a well-developed e-commerce business, an owned retail format with attractive economics that is clearly establishing our brand in the minds of consumers. and a developing wholesale business that can reach many consumers who do not see online as a primary purchase channel. I feel fortunate to have had the experience building all three of these channels in past leadership roles. At New Balance, where our talented team tripled the business in 12 years, the key drivers of profitable growth were very similar to the opportunities I see here at Purple. Executional excellence. Brand development, channel development, and product innovation were the keys to that growth, and they're the keys to our growth here at Purple as well. I know what it takes to build great relationships with our channel partners and our end consumers, and I know how to create programs that grow strong results for our partners and our brand. While at New Balance we've built over 3,000 retail stores in 40 countries and went from zero e-commerce business to an e-commerce business that represented more than 20% of our mix. Innovation has been core to our ethos at Purple and success with our customers. While I'm not able to share specifics today, I can say that we will continue to be a leader in comfort innovation, focusing on sleep and other categories that help our consumers lead healthy lifestyles. Based on the learnings from my first 60 days, there are a handful of immediate opportunities we are addressing. I'm still evaluating other areas of the business and will be making additional decisions over the coming months. But for now, I've identified four key areas that need our focus. The first area is what I'll call executional excellence. On a broad level, we have overbuilt capacity and overhead across much of the company. To this point, we made the right and difficult decision to right-size our labor force in February. We were mindful to retain personnel in all critical roles and I'm confident that the work that needs to be done will be accomplished more effectively with our new staffing levels. We intend to manage our labor force based on better visibility into our near-term growth. In terms of capacity, the company invested in opening a second plant last year providing the opportunity to double our production over time. While the need for increased production in the near term hasn't materialized as expected, it has created some inefficiencies until we grow into our production footprint. Having the two plants up and running does provide benefits. We need to focus more intently on our operational excellence, which will allow more effective and efficient capacity utilization delivering higher product quality and enhanced returns on the capacity investments we've made. Moving on to margins, over the past handful of quarters, input costs have been rising and progressively pressuring margins. In response, we've taken pricing action across the portfolio of products, including at the start of this year. Aside from rising input costs, we've experienced general erosion of gross margins as we've grown and expanded our operations. Now that we've been able to build our capacity ahead of our demand, we have the opportunity to slow down to go fast and strengthen our foundation. We're working on raw material costs by negotiating better prices with key suppliers, designing to value and ensuring that every investment we make in our product is valued by our consumers. We're also focusing aggressively on our operational costs including potential manufacturing efficiencies with significant expected annual savings and balancing our manufacturing across the two plants. This will enable us to reduce cost cross-country shipments. By the end of 2022, we believe we can return to gross margins to roughly the levels we achieved in 2020 with additional significant opportunities in 2023. Second, I'm focused on brand elevation and marketing. With marketing, our focus is to build a winning brand position that can deliver 20% market share of the premium mattress category. In just five years, Purple has gone from essentially zero market share to approximately 11% of the premium mattress category, despite being significantly underrepresented at brick and mortar retail. That tells us there's tremendous white space opportunity for the brand and we'll be refining enhancing our marketing campaigns and tactics to reach a broader audience and drive increased customer engagement. The third focus area is developing and expanding our three distinct channels are differentiated science based product with superior consumer benefits has sold through well in our existing wholesale accounts. with still a long runway for growth and improved execution on that front. I'm very familiar with brand building via brick and mortar, how they operate, and how to succeed selling through these channels. We'll continue to build our team and our systems and develop a more robust go-to-market strategy to meaningfully expand both our wholesale presence and our brand execution that is required for success for Purple and our partners. My fourth area of focus is product innovation. Purple was built on innovation and intellectual property that drive products which improve our consumers' comfort and sleep. We continue to have a strong IP portfolio and have the potential to bring exciting, innovative products to market in our current categories and eventually expand to adjacent categories. To get there, we're focusing on strengthening our R&D disciplines and go to market process. There's some next generation products in our innovation pipeline that I'm excited for the company to bring to market in the next 12 to 18 months. We've already taken actions to right size the organization, improve margins via both pricing and efficiency, and we're working to re-energize the branding and marketing that Purple needs to grow in the premium segments of our market. The benefit of some of these actions will positively impact the profitability and growth trajectory of our company, while the improvements from others will take more time. 2022 will be a year of quarter-on-quarter improvements, with the first quarter as an inflection point in our revenue trajectory and most heavily burdened by the combination of growth investments and carryover items from 2021. By Q4 of 22, we expect to have our financial metrics back to where we had originally anticipated for 2021. While execution and overall results should have been much better in 2021, I've been impressed with the team, the company culture, and the differentiated products we bring to our customers. I believe all the makings of a great brand are here, and I'm confident in the long-term growth plan on a slightly modified timeline. With hard work and smart choices, Purple can build on our position as a leader in the premium mattress category, setting the foundation for profitable growth globally and into adjacent markets. I'll now turn over the call to Bennett Nussbaum, our CFO, who will review the financials in more detail. Bennett?