Purple Innovation, Inc.

Good afternoon, ladies and gentlemen. Welcome to Purple Innovation First Quarter 2023 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 first quarter 2023 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 and webcast, we refer you to the disclaimer regarding forward-looking statements included in our first quarter 2023 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 Demartini, 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. The first quarter played out largely as we expected from a financial perspective. Revenue was down approximately 24% year over year to $109 million as our decision to reduce advertising spend by 50% combined with softer industry-wide demand and a more challenging macroeconomic backdrop pressured our top-line performance. In light of the lower sales volume this period, I am encouraged by the meaningful increase in gross margin we delivered. The work we've done over the past year right-sizing our cost structure and improving our supply chain and manufacturing efficiencies is yielding sustainable benefits. From a strategy standpoint, the first quarter was productive as we made progress, important progress, setting the business up for improved results as the year unfolds and over the long term. As we outlined in our Q4 call in March, we introduced our broadest, most innovative product line ever at the Las Vegas market in January of 23, and the response from our wholesale partners has been positive. We're receiving orders to expand our existing footprint by over 1900 slots, a 15% increase in the base. We're receiving orders. In April, we started shipping our new mattresses to partners ahead of their debut at retail in mid-May. While it is too soon to confirm demand, we're optimistic that consumers will respond to our enhanced sleep products and new brand messaging, and we remain confident that we have the right strategic plan in place to drive profitable growth and sustained market share gains. Our strategic plan is comprised of four key components redevelopment and expansion of our product lineup new inspirational brand positioning investment in our wholesale partnerships in continued showroom expansion. Regarding our product lineup as a reminder, the full purple product line has now been categorized into three tiers. The purple essential collection represents our most accessible products. with prices under $1,800. These products have been engineered for and are primarily being sold through our e-commerce channel. Our purple premium collection represents our new mid-range offerings with six all-new mattresses ranging from $2,000 to $4,000 available in both our wholesale and direct-to-consumer channels. And finally, our Purple Luxe Collection features our highest end products ranging from $5,000 to $7,500 available through showrooms, e-commerce, and through our wholesale channel partners. Early sales results of our Luxe Collection in our four Utah showrooms have confirmed consumer interest in these super premium products. We're on track for the launch of the new product in our showrooms, on our website, and select wholesale accounts on May 15th. The remainder of our wholesale network will change over their floor sets in the next few months. Sell-in activity with these partners has progressed as planned, and we look forward to sharing the initial reads on sell-through on our Q2 call in August. Turning now to our brand messaging, we've reimagined the Purple brand to be bolder and more appealing to the premium consumer. We're working to reach this customer set through a shift in messaging that better articulates the unmistakable benefits of our differentiated GelFlex grid technology. The hallmark of the Purple brand is revolutionary technology that provides a truly differentiated sleep experience, and we're using that innovation to our advantage, positioning ourselves as a true alternative to the premium memory foam mattress segment. This new messaging will be live in market in five days through increased television advertising and will become more prominent, including numerous consumer and trade PR activations that are timed to coincide with the new product launch. This will be followed by a steeper ramp in marketing spend in the third and fourth quarters as our forecast includes advertising dollars increasing more than 80% over the second half of last year. Another key aspect of our 2023 strategy is strengthening our wholesale partnerships. We've worked with our wholesale partners to ensure improved contribution levels along with enhanced point-of-sale assets that we believe will drive increased sell-through at higher average selling prices and higher margins for both us and them. The response from our wholesale partners was quite positive, and we are shipping orders for 1,900 incremental wholesale slot placements at this time. Overall, we've received strong positive feedback on the new trade-up direction of the brand and are optimistic about our improving relationships with our wholesale partners going forward. And lastly, we remain focused on expanding our showroom channel in 2023. Despite the headwinds I've discussed, showrooms performed in line with projections in the first quarter. With a new leader of owned retail joining the team in early January to lead the channel, we have good visibility to improve store presentation and enhance channel margins. showrooms play a key role in our brand execution and profit roadmap. We ended the quarter with 55 showrooms and plan to add seven more in 2023. In long-term, we envision a store footprint of about 200 stores. While near-term challenges persist in our industry and across the broader consumer markets, we believe we've taken the necessary steps to successfully operate in the current environment. With the upcoming launch of our new products and heightened level of brand and advertising spend, we're optimistic that we have set the business up to achieve incremental top line and bottom line growth in the back half of 2023, even if the macro conditions remain challenged. I'll now turn it over to Bennett, who will review the first quarter financials in more detail. Bennett? Thank you, Rob.