Purple Innovation, Inc.

and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from current expectations. You should not place undue reliance on these forward-looking statements. For more information, please refer to the risk factors outlined in our filings with the SEC. Additionally, today's presentation will reference non-GAAP financial measures such as adjusted growth margin, EBITDA, adjusted EBITDA, and adjusted earnings per share. A reconciliation of these measures to their most comparable gap measures can be found in the earnings release available on our website. With that, I'll turn the call over to Rob DiMartini, Purple Innovation's Chief Executive Officer.

Thank you for joining Purple Innovation's fourth quarter 2024 earnings A copy of our earnings press release is available in the investor relations section of Purple's website at www.purple.com. Before we begin, I'd like to remind you that certain statements made in this presentation are forward-looking statements. These statements reflect Purple Innovation's judgment and analysis. As of today, they're subject to a variety of risks and uncertainties that can cause actual results to differ materially from current expectations. You should not place undue reliance on these forward-looking statements. For more information, please refer to the risk factors outlined in our filings to the SEC. Additionally, today's presentation will reference non-GAAP financial measures, such as adjusted gross margin, EBITDA, adjusted EBITDA, and adjusted earnings per share. A reconciliation of these measures to their most comparable GAAP measures can be found in the earnings release available on our website. With that, I'll turn the call over to Rob DiMartini, Purple Innovation's Chief Executive Officer.

Thank you, Stacey. Good afternoon, everyone, and thank you for joining us. With me on today's call is our CFO, Todd Vogenson. The fourth quarter was a significant milestone for Purple as we achieved adjusted EBITDA profitability for the first time in eight quarters and produced positive cash flow. These encouraging results were the culmination of purposeful actions taken throughout the year, including disciplined execution, operational improvements, and cost savings initiatives. Specific highlights of the quarter include gross margin reaching 42.9 percent, an improvement of 970 basis points compared to last year, a significant improvement in showroom profitability through disciplined operational management, and the successful launch of our Purple Renew mattress in 170 Costco retail locations, complementing the online business and expanding our market presence. Looking back, 2024 was a year of significant transformation for Purple. We continue building on our path to premium sleep strategy that was launched in 2023 and elevated us to a leading premium mattress brand while improving our stability through higher price points and expanded distribution. During the year, we took actions to strengthen the durability of the business so we can confidently navigate the ongoing uncertainty of the market where we are seeing challenged consumer demand and increased industry consolidation. From a cost perspective, we successfully consolidated our manufacturing operations as part of a broader restructuring initiative alongside several other operational and cost savings improvements in the second half of the year. These changes have allowed us to streamline our operations enhance efficiency, and reinvest in technology and marketing to drive growth. Beyond cost savings, we drove continued improvements in our sales channels throughout the year. Our showroom channel experienced the most improvement with four quarters of sequential revenue growth and full year four wall profitability for the first time since 2021. This success was primarily driven by strong sales execution and disciplined labor cost controls. While our e-commerce and wholesale channels were more challenged in the year, we're encouraged by signs of progress. In e-commerce, we saw sequential revenue growth in the second half with strong results in our marketplace channels, including our Amazon pillow business. In our wholesale channel, we're pleased with the improvements in channel profitability, and continued expansion in nontraditional revenue driven by interest from partners such as Costco and mattress firms event business. Again, these strategic actions and improvements strengthen the durability of our business model, enabling us to continue navigating volume challenges in the industry, and we're confident in our ability to drive the profitability required to support long-term market share gains. Looking ahead to 2025, we've already achieved some early successes that position us for market share growth over time. At Las Vegas Market in January, we unveiled our new Rejuvenate 2.0 mattress line and introduced our expanded pillow collection to our wholesale partners. Both launches were well received, generating excitement and securing new points of distribution. Additionally, sales through our Costco partner doors have exceeded expectations year to date, and we anticipate continued growth and expansion of that partnership moving forward. As we think about how we drive sustainable and profitable market share, we've outlined a clear plan that enables us to continue competing effectively as we sharpen our focus on three critical pillars of success. Pioneering new technologies, promoting our differentiation, and prioritizing gross margins. First and foremost, we're focused on pioneering new technologies to maintain our competitive advantage and strengthen our differentiation. Purple has always been on the cutting edge of comfort science. Our products are powered by technology born from the medical space that we've since improved upon and brought to the consumer market. Unlike memory foam or other mattresses, our patented flexible gel material with structural geometries provides unique benefits that set us apart from everything else on the market. Our goal is to maintain that competitive advantage by launching new technology about every two years, continuously reintroducing the greatest sleep ever invented. As I previously mentioned, we announced our new Rejuvenate 2.0 luxury mattress line in January, which represents a significant leap forward in gel grid technology. This is one of the biggest launches in our company's history and is the first time that we are introducing a new type of grid technology to the market. Our new technology successfully layers a plush pillow top gel grid called Dream Layer on top of our classic gel flux grid, a unique combination that preserves the benefits of sleeping on gel layer while providing a rich comfort experience. This new launch keeps us at the forefront of comfort technology and continues to differentiate us in the market while driving superior comfort and support for an even more premium sleep experience. The new Rejuvenate 2.0 collection launches in the second quarter through our direct channels and is followed by a full wholesale rollout expected to be completed by the third quarter. The strong positive feedback from current and future retail partners at the unveiling in January has led to a substantial increase in slot commitments, with total Rejuvenate slot count growing by 50%, marking a major step forward in our path to premium sleep strategy. Furthermore, we significantly expanded our distribution of pillows by launching our renowned Dreamlayer and Freeform pillows into our wholesale channels and expect additional placements on one or both pillows in about 2,000 of the 3,000 current Harmony doors. We've also introduced our new Grid Cloud pillow, which leverages the success of our Harmony pillow and an attractive $149 price point to expand our pillow line and reach new customers. Second, we're focused on driving sales and promoting our differentiation to consumers, which includes articulating the sleep benefits of our technology. Purple started as a brand built on differentiation, which we have effectively communicated through our original viral Goldilocks and subsequent advertising. In recent years, the category has relied extensively on discount messaging to attract consumers with less focus on product benefits. a real disservice to the consumer. Our goal is to refocus messaging to lead with our product differentiation. If we can effectively articulate the unique qualities of sleeping on our gel grid layer, we can bring better sleep and improved health to more consumers. Refocusing our messaging also positions us to break through the categories discounting noise, and because we have real differentiation, we expect our messaging to be more effective than the competition. As a first step in promoting our differentiation, we recently launched our Aches and Pains product advertising with over 7 million views since mid-November. In the coming quarters, we expect to deliver more product-focused marketing. In our selling channels, refocusing our messaging on promoting our differentiation should drive more and better quality sleep traffic while improving conversion both online and in stores and increase our share of retailer sales in the wholesale channel. While our technology is clearly differentiated when experienced in person, the complexity of the science has proven difficult to effectively articulate online. We know that the closer we are to the customer, the stronger our sales are, which is why our highest converting sales are in our own showrooms where we can directly demonstrate and educate, followed by our wholesale doors where retail associates can speak to our technology. Not surprisingly, our e-commerce channel converts at a much lower rate and will benefit the most from improving how our differentiation can be better understood by consumers through more effective marketing and enhancements to our website. Looking at our channel specifically, let's start with showrooms. Our showrooms play a crucial role in providing customers with a hands-on experience allowing them to fully engage with and understand our products and technology in a personalized setting. Additionally, our showrooms are evolving into highly effective sales channels as we continue focusing on sales initiatives that drive demand. Moreover, our showroom channels continue to push us into higher end as customers increasingly embrace the rejuvenate business and trade-up approach, which enhances the channel's profitability. Our showroom strategy has been critical in reinforcing our position as a premium and innovative mattress brand. Shifting to our wholesale channel where we have an indirect but engaged connection with consumers, we're actively educating the retail sales associates at our wholesale partners about the differentiation of the technology and how to better articulate its unique properties to drive effective sell-through through our premium product lines. We continue to focus on improving wholesale partnerships and looking for new points of distribution. I previously touched on our Costco partnership, and we have also been rolling out pillows at HomeGoods in recent months, which have been performing well. Additionally, we continue to evaluate wholesale relationships with a focus on partner alignment and shared profitability. Moving now to our e-commerce channel, because our e-commerce is our most passive connection to consumers, the greatest challenge we're facing is effectively communicating our technology differentiation to drive sales. We have a lot of work to do to improve conversion in the channel, starting with how we speak to online consumers. For example, leading with the advantages of our technology rather than leading with a promotional message. We're also improving the user experience online, including thoughtfully curating the mattresses we display, and we have seen early signs of improvements to e-commerce conversion. Purple.com also serves as an important research tool for our customers who buy offline. Lastly, prioritizing gross margins. Over the last several quarters, we've executed key initiatives that have been driving healthy gross margin gains. We ended the year at our target rate of 40%, and we expect to expand margins by at least 200 basis points in 2025. Prioritizing gross margin improvements enables us to deepen our investments in innovation, which in turn allow us to bring new technologies and better sleep to more consumers at a faster pace. We expect continued gross margin gains to come from driving cost savings through our plant consolidation, supplier diversification efforts, and improving scrap and yield results through continuous improvement efforts. These efforts have been and will continue to be instrumental in optimizing our operations and strengthening our financial performance. We remain on track to complete the consolidation of our manufacturing facilities this quarter. We also have begun shifting production on some pillows in-house, an initiative still in its early stages with significant scaling planned this year. All of these efforts will drive meaningful cost savings and improve operational agility over the year. The impact of these restructuring efforts is already being realized. The consolidation, in addition to incremental actions taken during the first quarter of 2025, is projected to yield an annual EBITDA savings of 25 to 30 million. We began seeing operating expense improvements late in the third quarter of last year and those savings continued into the fourth quarter. While we expect a small gross margin benefit in the first quarter, the full run rate savings will materialize in the second quarter. Importantly, these savings are not just improving our financials, but also enabling us to reinvest in innovation and marketing, further strengthening our position as a leader in premium sleep technology. As we enter 2025, we're encouraged by the progress we've made, and we will continue building on our strong foundation. We expect tailwinds from the Rejuvenate 2.0 launch in addition to further cost savings opportunities that will drive more meaningful profitability in the second half of the year. We expect total sales to be in the range of $465 to $485 million, with adjusted EBITDA in the range of flat to up $10 million, which Todd will provide more details on shortly. We remain optimistic about the long-term opportunities for Purple and believe our path to premium sleep strategy is guiding the company towards sustainable and profitable growth. On a separate note, we're closely monitoring the potential impact of recently announced U.S. tariffs. Our exposure is limited given the small level of goods that we import from overseas, and we believe the impact to be $2 to $5 million. However, we are confident in our ability to respond to the situation through supply chain repositioning and pricing actions if necessary. Before I turn the call over to Todd, I wanted to briefly address the industry changes that are now occurring with the Somni Group International, previously known as Tempur-Sealy International and Mattress Firm. We want to assure you that Purple remains in a strong competitive position as we offer a differentiated and premium product powered by our patented grid technology. Our commitment to innovation, advertising, and elevating the category ensures that we continue to meet wholesale customer needs while driving value within the industry. Mattress Firm is an important customer and a great partner for Purple, and we are committed to ongoing success with them. Now I'll turn the call over to Todd to discuss our financial performance in more detail.