Purple Innovation, Inc.

Good afternoon, ladies and gentlemen. Welcome to Purple Innovation third quarter 2022 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 our pleasure to introduce your host, Cody McAllister of ICR. Please go ahead.

Thank you for joining Purple Innovation's third quarter 2022 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 a 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 and webcast, we refer you to the disclaimer regarding forward-looking statements included in our third quarter 2022 earnings release, which was furnished to the SEC today on form 8K, as well as our filings with the SEC referenced 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 G. Martini, Purple Innovation's Chief Executive Officer.

Thank you, Cody, and thank you and good afternoon, everyone. With me on the call today is Bennett Nussbaum, Purple's Chief Financial Officer. As you saw from our earnings release issued earlier today, our improvement in profitability on both the year-over-year and quarter-over-quarter basis further accelerated in the third quarter. Adjusted EBITDA of $12.1 million is a significant improvement compared to $0.6 million in the year-ago period and a loss of 0.3 million in the second quarter of this year. In fact, when compared to pre-pandemic 2019 levels, we out-earned three of the four quarters from that year on an adjusted EBITDA basis this quarter, demonstrating the progress we've made in stabilizing and now improving margins and earnings. This performance is a direct result of the hard work we've done managing costs through manufacturing and supply chain efficiencies, along with right-sizing our organizational overhead and marketing spend to align with the current demand environment. I'm pleased that we're building momentum with our operating initiatives and continue to forge a stronger financial foundation for the company. While the improvement in profitability has been clear, sustained macroeconomic headwinds again muted revenue growth this quarter. Like the rest of the sleep industry, we continue to face a shift in demand away from home-related categories at a time when inflation is also pressuring consumer discretionary spending. We've seen estimates that domestic mattress volumes are down 20 to 25 percent a year to date. Purple has experienced a similar pullback over the first nine months of the year, in addition to a shift in consumer spending habits from online, a position of strength for Purple, to in-store where we're still in the earlier stages of developing our capabilities. Bennett will review the numbers in more detail in a moment, but from a channel perspective, e-commerce revenue was nearly flat to the previous quarter on significantly lower ad spend, which is encouraging and gives me confidence in the work we've done both on our ad spend efficiency and our brand messaging. Showroom performance also improved sequentially, primarily driven by the addition of 11 new showrooms open during the quarter, plus the IntelliBid showroom bringing our total showroom door count to 52 at the end of Q3. Wholesale revenue was flat to third quarter last year, although down modestly quarter over quarter and inclusive of a very small contribution from our recent acquisition. Our wholesale business is certainly experiencing the category headwinds, but we're encouraged by the performance improvements we're seeing with some of our partners. When we work together on presentation and full line distribution, we're seeing encouraging results that are outpacing the impact of the category softness. We will discuss in more detail later, but we are beginning to execute a strategy with our wholesale partners that we believe will be game changing for the gel category, and for the category as a whole. Despite current industry headwinds, we're optimistic that the actions we're taking to fuel demand through our product and marketing strategies will drive share grains in the premium category and position the company for accelerated growth when market conditions improve. We took an important step towards this objective with our acquisition of IntelliBed on August 31st. For those less familiar with IntelliBed, it's a luxury sleep and health and wellness company offering a premium line of gel grid mattresses targeted to the luxury consumer. Having held licenses to certain gel technology from Purple for nearly 25 years, IntelliBed employs a very similar gel material to Purple and found success integrating that technology into their luxury mattress line with price points reaching to over $7,000. The shared technology, geographic proximity to their primary facility in Salt Lake City, and the natural extension of Purple's target market made IntelliBed an excellent fit for our organization. We view this as an opportunity to accomplish two objectives that we feel will fuel growth in the years ahead. First, we're able to consolidate our intellectual property under one roof which will allow us to more fully capitalize on growing demand for the gel grid technology as that space matures. We believe that gel grid technology has the opportunity to be the next evolution of mattress beyond memory foam. And as the pioneers of this revolutionary technology, we are well positioned to continue to lead and grow the gel segment. Secondly, IntelliBed's higher price points compared to Purple's existing offerings provide the brand with the entree to the luxury category. With mattresses ranging from $4,300 to $7,500 for a queen, the acquisition accelerated our product development schedule by several years and allows us to immediately address the market $5,000 and the higher margin segment of the sleep and wellness industry. The business is small relative to Purple today, but we see ample opportunity to expand IntelliBed products into our existing wholesale door network, in addition to adding the premium line to our showroom footprint. We don't expect to mature this side of our business overnight, but we're excited about the longer term opportunity this combination offers. Overall, we continue to be encouraged by the elements of our performance this quarter, especially the significant quarter over quarter improvement in profitability. The important progress we've made by building the framework for sustained growth and strong operational results has put us in a solid position to weather the current macroeconomic environment. While the second half of the year has started better than we expected from a profitability standpoint, the historically unpredictable nature of the fourth quarter performance coupled with the current operating environment leads us to remain cautious in our outlook for the remainder of the year. We anticipate purple brand revenue coming in at the lower end of the revenue guidance we previously gave, but with a modest contributions from IntelliBed land us in the middle. Therefore we're reaffirming our previous full year revenue guidance of 570 to $590 million. Based on our strong Q3 performance, we're raising our adjusted EBITDA and now expect to be profitable for the year. with a projected adjusted EBITDA between $2 and $7 million. While we're pleased with the improvement in profitability we experienced in Q3, we are guarded about Q4, primarily due to expensive advertising rates during the holiday period and the expectation of continued increased discounting for Black Friday and Cyber Monday promotions, which is expected to negatively impact fourth quarter gross margins. While the environment remains challenging, we are confident that our four strategic initiatives, operational excellence, elevating our brand positioning, channel development, and accelerating innovation that we outlined earlier this year form the foundation of the right plan to get the company back to sustained profitable growth. We still have a lot of work ahead of us, but I'm encouraged by our continued progress this quarter I'll further detail some of the progress we've made and expect to see in the coming quarters with our initiatives before our question and answer session. I'll now turn it over to Bennett, who will review the financials in more detail, after which I'll provide an update on our strategic initiatives ahead of your questions. Bennett?