Purple Innovation, Inc.

Good afternoon, ladies and gentlemen. Welcome to the Purple Innovation fourth 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 my pleasure to introduce your host, Cody McAllister of ICR. Please go ahead.

Thank you for joining Purple Innovation's fourth quarter 2022 earnings call. A copy of our earnings press release is available on the investor relations section of Purple 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 fourth 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 because 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 DiMartini, Purple Innovation's Chief Executive Officer.

Thank you, Cody, and good afternoon, everyone. With me on the call today is Bennett Nussbaum, Purple's Chief Financial Officer. As I reflect on my first full year as CEO, it was certainly more challenging than I initially anticipated. When I joined Purple in January of 22, I knew there was a good deal of work to be done to turn the business around and return the company to profitability. What I didn't fully anticipate was the difficult market conditions that we would be operating in throughout 2022. While it was expected that the industry would give back some of the COVID-related gains it had captured in 20 and 21, decades high inflation and the shift in consumer spending towards services and experiences put even more pressure on demand and led to what has been cited by many as the worst annual decline in the history of the US betting industry, with unit volume estimated to be down 20 to 25%. Against this challenging backdrop, our organization has made significant headway towards improving the efficiency of the business and strengthening our foundation for growth as we executed the strategic initiatives that we believe position the company to deliver improved results even in the face of continued market headwinds. Looking back on 2022, we right-sized our cost structure and lowered expenses to align with current demand. This included the difficult but necessary decision to meaningfully reduce our headcount. Net of showroom growth, headcount is down approximately 45% compared with this time a year ago. At the same time, we eliminated inefficient and expensive advertising, bringing advertising spend down nearly 60% from the 2021 levels. These two actions allowed us to increase profitability during the back half of 2022 without sacrificing operational productivity. We added new expertise to our leadership team to prepare Purple for the next stage of profitable growth. Jeff Hutchings joined the team in May as the company's first ever chief innovation officer. Jeff has been busy reinvigorating our innovation department and filling our product pipeline. Additionally, he's implementing a continuous innovation process to ensure we are consistently deploying new products that are truly innovative and authentic. Eric Haener, our chief operating officer, joined the team in June. Since that time, he's made significant progress with raw material and operational cost improvements, helping offset inflationary pressures. Eric's also helped to drive continuous improvement in our productivity while balancing supply and demand. This action, along with rebalancing our production between our two facilities, has helped maintain a sustainable structural plant cost position in line with the current demand projections. He's also delivered significant improvements in safety and customer service. Kira Kraus joined our team as chief marketing officer in early November to lead our brand repositioning in support of our path to premium strategy. She's been instrumental in the coming launch of our elevated brand positioning that will happen in the second quarter of 2023 and is leading the process to identify the most efficient ways to reach and subsequently convert our consumers across all channels. Our new brand positioning will debut in mid-May. And most recently, we appointed Scott Kirby as Chief of Owned Retail. Scott joined us in January of 23 from Sephora, where he served as Head of Stores for Canada since 2019. Scott's been tasked with elevating our company showrooms into highly productive beacons of the new premium brand position, while also continuing to expand the fleet as we continue to balance our direct channels with our wholesale channels. Jeff, Eric, Kira, and Scott have helped solidify and complete a strong senior leadership team that's been assembled at Purple. Finally, we took a step to better position Purple in the premium category with our acquisition of IntelliBed. In addition to the shared technology, eliminating licensing barriers and opening full innovation potential, the manufacturing expertise, attractive financial profile, and highly complimentary product offering made IntelliBed an excellent fit for Purple. IntelliBed's portfolio of higher priced mattresses compared to our legacy offerings provided a natural extension of Purple's product line. This accelerated Purple's product development schedule by several years and immediately placed us in the $5,000 and up segment of the mattress market. The addition of IntelliBed combined with Jeff Hutchings' work accelerating our innovation engine generated a great deal of excitement among our wholesale partners at the Las Vegas market in January. We came out of that show with commitments to significantly increase our retail presence this coming year, both in terms of number of slots on the floor and increased point of sale materials, which I'll speak to more later on the call. Despite the significant ongoing challenges for the mattress industry, we're encouraged by the way 2022 unfolded. Over the course of the past year, we saw sales and margins stabilize and build after bottoming in the first quarter. While our financial performance is not yet where we want it and know it can be, including a tough start to the new year, we hope what you'll take away from today's call is that we believe we've taken the necessary steps to successfully operate in the current environment and have set the business up to achieve incremental top line and bottom line growth in the back half of 2023, even if the macro environment remains challenged. As a leadership team, our commitment to and excitement for our long-term outlook remains unchanged. This category has repeatedly demonstrated resilience and durability through its history, and I'm confident that the work we accomplished this past year has positioned us to weather the current environment and reestablish a strong growth trajectory once the market headwinds subside. We remain confident that our four strategic initiatives, accelerating innovation, Elevating the brand, developing our three distribution channels, and achieving operational excellence will be fundamental to our success this year. In addition to that, we believe that our new product launches, new elevated branding position, and the expansion with our wholesale partners will provide substantial tailwinds as we begin to establish Purple as the new premium lifestyle challenger brand. I'll cover those and additional 23 focus areas in more detail ahead of the Q&A session. But now I'll turn it over to Bennett, who will review the financials in more detail and share the outlook for 2023. Thank you, Rob.