Purple Innovation, Inc.

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to Purple Innovation fourth quarter full year 2025 earnings. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star, that will be the number one on your telephone keypad. If you would like to withdraw your question, press star 1 again. Thank you. I would now like to turn the call over to Stacey Chernoff, Investor Relations. Please go ahead.

Thank you for joining Purple Innovation's fourth quarter and full year 2025 earnings call. A copy of our earnings press release is available on 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 and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from current expectations. We should not put undue reliance on these forward-looking statements. For more information, please refer to the risk factors outlined in the filings for the SEC. Additionally, today's presentation will reference non-GAAP financial measures such as adjusted gross margin, adjusted operating expenses, adjusted EBITDA, adjusted debt loss, and adjusted net loss per share. A reconciliation of these measures to the 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 C. Martini, Purple Innovation's Chief Executive Officer.

As we close out 2025, I'm proud of how far the business has come over the past year. While the broader market remains challenging, the progress we're making at Purple is increasingly evident in our results. The fourth quarter marked an important inflection point for the company. Revenue increased approximately 9% year over year. We delivered gross profit expansion, and profitability improved meaningfully across the business. In the quarter, we generated adjusted EBITDA of approximately 8.8 million and finished the year profitable. This performance was driven by the benefits of the strategic actions we've taken. Those actions include our cost initiatives that are now fully embedded in the business, including consolidating our manufacturing footprint, as well as a full quarter of expanded mattress firm distribution and a significant expansion of our Costco program. Looking at the full year 2025 was a period where the business became meaningfully stronger. We continue to build on our path to premium sleep strategy and delivered positive adjusted EBITDA for the year finishing within the guidance range we established at the beginning of 2025. Importantly, we achieved profitability levels that we haven't seen in 2021. That progress was driven by the execution and by the changes we put in place, not by a recovery in the broader market, which speaks to the durability of the model we've been building. Our focus throughout the year was not on short-term fixes, but on creating a business that can perform more consistently. Taken together, this represents more than a strong finish to the year. It marks a clear shift from defense to offense. Margin expansion and profitability are showing up in the numbers, and that's in a market which is down low single digits. The direction is clear, the momentum is real, and we're entering 2026 with a playbook designed to scale profitably as demand continues to improve. We've made meaningful progress across each of our sales channels in 2025, and in the fourth quarter, two of our three channels delivered positive growth for the second consecutive quarter. Comparable sales in our showrooms increased 8.8% in the quarter, and showrooms continued to grow in profitability for the full year. Sales execution improved, the updated selling model gained traction, and Rejuvenate 2.0 represented over 50% of showroom mattress revenue during the quarter, with more than 80% of showrooms four-wall profitable for the full year. Wholesale was a key driver in 2025 with a robust 39.8% growth in the fourth quarter. E-commerce performance was mixed during the year and declined in the fourth quarter, though we did see pockets of strength around Black Friday and Cyber Monday. At the same time, we saw solid marketplace performance, particularly on Amazon, and meaningful improvements to the website experience tied to our less pain, better sleep positioning. Stepping back, the way we're thinking about the business today is fundamentally different than a year ago. Last year was about reshaping the business for a tougher market, right-sizing our cost structure, strengthening the foundation, and restoring profitability. Today, we're focused on growth. Going forward, our focus is centered on three priorities, deepening our understanding of the consumer, delivering better sleep through product experience and expanded distribution, and executing with financial discipline across the business. This approach builds on what's already working and reflects how we're running our business. With that framing, let me walk you through our progress against these priorities and what they mean for the business going forward. Number one, knowing our consumer. Over the past year, we've sharpened our focus on understanding who our consumers are, what matters most to them, and how they make their purchase decisions across the channels. Our work is shaping how we communicate, shifting us away from promotionally-led messaging towards clearer, benefit-driven storytelling, focusing on Gelflex grid technology that helps consumers understand how Purple delivers better sleep. Our less pain, better sleep positioning continues to resonate, providing a consistent consumer-led message that translates across e-commerce, retail, and wholesale channels. Importantly, we're focused on reaching our consumers with the right message in the right place at the right point in their decision journey. We're seeing early signs of improved brand momentum with increased awareness beginning to translate into brand consideration. As a result, we're improving our clarity across touchpoints, strengthening engagement, and supporting higher quality conversion as consumers better understand the value of our product. In e-commerce, we're encouraged by the progress we're making. As part of better meeting consumers where they're shopping, our expanded presence on Amazon is gaining traction. Improvements in availability, delivery speed, and conversion are strengthening the consumer experience and broadening our reach, particularly among new-to-brand consumers. This expanded assortment is driving a healthy lift in Amazon sales, especially in pillow and seat cushions, and introduces new consumers to our technology. We're also seeing this consumer-focused approach resonate through our partnerships. Our participation in Mattress Firm's Sleep Easy marketing campaign drove sales conversion, and improved aided awareness scores. At the heart of Better Sleep is better product. From there, we focus on how we bring innovation to life through the consumer experience and expanded distribution. Innovation remains at the core of Purple's differentiation, and our Rejuvenate 2.0 collection continues to validate that approach. Performance exceeded our expectations in 2025 with strong traction across both showrooms and wholesale as retail partners expanded Rejuvenate 2.0 placement on their floors. Through our direct channels, Rejuvenate 2.0 is performing well at an average selling price of almost $5,800, demonstrating our ability to drive demand at meaningfully higher price points and reinforcing the value consumers place on better sleep. We also completed development work on Purple Royale, a new premium offering developed in close partnership with Mattress Firm. This is an important product for us and a meaningful step forward in our premium strategy. Purple Royale is complementary to our Rejuvenate 2.0 collection with similar price points across the curated four model lineups. The launch is on track with initial floor models arriving now. The Purple Royale collection was originally planned for over 2,800 slots, bringing us to a total of 12,000 slots across Mattress Firm's 2,200 stores. Encouragingly, the quality and design of the final product has exceeded expectations, and as a result, Mattress Firm is adding incremental slots as the product launches. Beyond the product itself, we continue to focus on delivering a differentiated end-to-end consumer experience anchored by compelling in-store presentations across our own stores and wholesale partners. This includes elevating how we educate our consumers around pain relief and the role of GelFlex grid technology, which we are seeing drive strong engagement when brought to life through in-store demonstrations and digital content. We're also continuing to strengthen white glove delivery services to ensure that purple shows up consistently and credibly whenever the consumer chooses to engage. This focus is strengthening the brand and improving conversion by reinforcing the value of our technology across channels. Part of delivering better sleep is expanding our distribution presence, meeting more consumers where they shop. The premium innovation is translating directly into expanded distribution. With Purple Royale now launching across Mattress Firm, we've expanded our footprint and deepened our presence across their network. Additionally, we're seeing strong performance with Costco, where our program continues to resonate with members and provide an important opportunity to introduce Purple to new customers at scale. With both mattress firm and Costco, our initial launches significantly exceeded expectations, driving immediate demand for expanded placement. In Costco's case, early performance was exceptional, supported by the introduction of unrolled beds on floor displays, which allowed members to see and feel our differentiated product. The strength of those results led Costco to quickly expand the program in the fourth quarter to approximately 450 clubs, bringing us to nearly nationwide distribution. We're also making progress in new channels, including Walmart and Sam's Club, which are helping us reach new consumers, diversify demand, and drive incremental volume. Importantly, expanding into these large, far-reaching retail platforms strengthens distribution for our pillow portfolio and positions us to drive meaningful, incremental pillow sales through highly scaled, high-traffic partners. And in owned retail, we continue to focus on showroom profitability. In 2025, we closed four underperforming stores as part of optimizing the fleet. And looking forward to 2026, we plan to open seven new stores. Our showrooms continue to be an important part of the model that showcases our Gelflex grid technology and premium positioning. Our showrooms drive traffic to wholesale locations, helping convert interest into purchases. Finally, let me talk about how we're executing with financial discipline across the business. Last year, our focus was on right-sizing the business so we could operate profitably at current scale. That work is now behind us, and importantly, the actions we took were structural, not temporary. We're increasingly focused on driving growth from a much stronger foundation. Gross margin improvement remains a key focus, and we continue to see the benefits of the actions we've taken to simplify the business and improve efficiency across sourcing, operations, fulfillment, and product quality. Mix has become an increasingly important tailwind led by the growth of Rejuvenate 2.0. The shift towards higher ticket products combined with strong attachment rates for adjustable smart bases and pillows, is driving higher average transaction values and incremental profit dollars. As a result, the operating discipline we put in place over the past year is now clearly showing up in our margins and profitability. We continue to view 40% gross margins as a sustainable level, and we expect further improvement as we move into 2026 as efficiencies continue to flow through the business. Todd will provide more detail on specific margin drivers and cost actions in his remarks. Turning to our guidance, as we look ahead to 2026, we're entering the year with improved stability and a structurally stronger operating model. For the full year, we expect revenue in the range of 500 to 520 million and adjusted EBITDA of 20 million to 30 million. This outlook reflects continued momentum in our premium product portfolio, expanded wholesale distribution, and the operating leverage in the business as volume grows. Importantly, this guidance is driven by execution, not by recovery in the broader market. It reflects the progress we've made across product, distribution, and operations. With gross margins sustainably above 40% and disciplined expense management, We believe we're well positioned to deliver meaningful earnings growth in 2026. Before I close, I'd like to briefly readdress the board's ongoing review of strategic alternatives. The process remains ongoing, and we've engaged with multiple parties across a broad range of opportunities to maximize shareholder value, including a potential merger, sale, or other strategic or financial transaction. We'll continue to evaluate all options and we'll provide updates as appropriate. As a reminder, we will not be commenting further or taking questions on this topic during today's Q&A. With that, I'll turn the call over to Todd.