Purple Innovation, Inc.

Good afternoon, ladies and gentlemen. Welcome to Purple Innovation First Quarter 2024 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 2024 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 2024 earnings release, which was furnished to the SEC today on form 8K, as well as our filing 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 gross margin, 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 Innovations Chief Executive Officer.

Thank you, Cody. Good afternoon, everyone. With me on the call today is Todd Vogenson, Purple's Chief Financial Officer. The first quarter marked an encouraging start to 2024 with the second consecutive quarter of year-over-year sales growth. Sales were within our expected range, increasing 12.5% year-over-year, and if not for a shift in timing of some shipments into second and third quarter, we would have delivered sales results closer to the high end of our guidance range. Overall, demand played out largely as we expected as our new products and new brand messaging gained further traction, allowing us to continue taking share even as industry trends remain challenged. While comparisons were favorable to the slow start of 2023 ahead of the new product launch in May last year, we are clearly seeing momentum build for our path to premium sleep strategy. Adjusted EBITDA for the quarter came in within the middle of our guidance range, positioning us well to meet our 2024 expectations that we outlined on our fourth quarter earnings call, which include returning to positive adjusted EBITDA in the second half of the year. Looking at our performance by channel, direct-to-consumer was flat year-over-year within DTC showroom revenues increased 11 percent driven by an increase in average selling price from both price increases that we instituted in January and a meaningful mixed shift from our essentials and premium collections into our higher price lux collection. Mattress average selling prices increased month by month as did total revenues demonstrating the growing adoption of our new product set in the showroom channel. More than 56% of our showroom locations opened for more than 12 months, comped positively in the quarter, and the total store fleet exited March up in the high single digits. Showroom performance was offset by a 4% decline in e-commerce sales, driven in part by price testing and changes to promotions that impacted sales as we continue to adjust our e-commerce strategy. Our wholesale channel increased 33% year over year, with net revenue accelerating as the quarter progressed due in part to the easier compare as accounts limited their receipts ahead of taking new product in Q2 last year. The collaborative partnerships we formed with our retail partners focused on expanding our premium assortment, continued to yield positive results for both parties. We saw revenue per door in the wholesale channel increase around 25% versus last year, supported by strength from our top accounts and a mixed shift into our premium collection. We also added approximately 100 new doors late in the quarter as the reception for our new mattress line continues to drive new demand from our wholesale partners. Overall, we're encouraged with our first quarter results, particularly in light of the continued sluggish industry environment. The launch of our three-tiered mattress line, Essentials, Restore, and Rejuvenate, combined with our new Sleep Better Live Purple marketing campaign, has allowed us to take share and overcome many of the persistent negative industry trends. While broader industry growth has continued to trend negatively, there is meaningful room for further improvement across our business, and we believe we're well-positioned to build on our recent trends thanks to our differentiated product and improving brand strength. As we look to the remainder of 2024, we remain focused on five key initiatives to drive long-term profitable market share gains. First is improving the productivity of our existing showroom and wholesale doors. In showrooms, we prioritize profitability over door expansions this year with only one store addition slated for 2024. We plan to drive profitability through a combination of demand driving initiatives as well as cost optimization. On the demand side, we've pivoted our showrooms to a more selling focused environment by introducing new tactics like mattress takeaway, carrying more pillows in stores, and additional incentive compensation testing. We also signed a new consumer financing partnership that will be rolling out mid-May, putting Purple on a more competitive footing for higher-priced product. From a cost perspective, we've successfully renegotiated several leases and are continuing conversations with landlords about additional opportunities. We've also taken actions to manage payroll and other store expenses to improve profitability. With our wholesale partners, we're continuing to focus on deepening our partnerships at each functional touchpoint, including joint business planning, improved service delivery, collaborative marketing, and sales associate training to maximize productivity and enthusiasm for the Purple brand. We've made good progress in the quarter as we held quarterly business reviews with each of our top accounts, created a new wholesale marketing team dedicated to working with our partners to create new marketing opportunities, partnered with several key accounts to co-market for major holidays throughout the year, and refocused our sales team to prioritize sales associate training in our key accounts. Second is improving e-commerce mattress conversion. In the first quarter, we focused on increasing revenue per order and improving margin with the price changes and shipping tests to drive profitability enhancements, which as we expected, has led to lower conversion rates in the near term. In the second quarter, we'll look to enhance conversion through data-enabled personalization, improved customer financing offers, and streamlining our website while testing new messaging, configurations, and techniques. Third is driving gross margin improvement through tactics such as selective pricing actions, continued mixed shift towards our premium and lux collections, and manufacturing and supply chain optimization. We've seen some early gains with these initiatives, including decreased discounting and improved production efficiency through multi-source procurement and increased plant productivity. Additionally, midway through the quarter, we were able to eliminate the air freight inefficiencies that stemmed from the product launch while also improving the efficiency of white glove delivery service through our e-commerce shipping tests and increasing carryout in our showroom channel. We're encouraged by the initial progress on these initiatives and expect to see meaningful margin improvement in the second half. Fourth is our continued focus on innovation. We're focused on ensuring our product pipeline is full of new product and sleep technology that's both innovative, desirable, and margin accretive. This commitment to cutting-edge solution commends our category leadership, enhances the longer-term profile of the company, and supports our longer-term profitability goals. And fifth is improving our marketing efficiency. In 2024, we're bringing the execution of our paid digital advertising back in-house, shifting more spend toward higher converting media, reallocating media based on consumer segmentation and geographical analyses, and leaning into new impactful advertising with the goal of decreasing our cost of acquisition. Additionally, we'll look to drive more customer engagement through new marketing techniques. For example, in Q1, we increased showroom traffic with new exposed grid bed demos that intrigue and draw in mall consumers not yet in the market. We also saw increased traffic resulting from our egg hunt campaign over the Easter holidays. In closing, we're confident that our first quarter performance, combined with the initiatives we have in place for the balance of 2024, will enable us to achieve our financial targets for the year. We're excited by the opportunities ahead to drive sustained profitable growth over the long term, as we continue our transformation of Purple into the preeminent premium sleep brand. Now I'll turn the call over to Todd to discuss our first quarter financial results in more detail. Todd?