Purple Innovation, Inc.

Thank you for standing by and welcome to the Purple Innovation first quarter 2026 earnings conference call. 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 followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. I'd now like to turn the call over to Stacey Turnoff, Investor Relations. You may begin.

Thank you for joining Purple Innovation's first quarter 2026 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. 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 gross margin, adjusted operating expenses, adjusted EBITDA, adjusted net loss, and adjusted net loss 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 DeMartini, Purple Innovation's Chief Executive Officer.

We entered 2026 building on the progress we made in the fourth quarter, and our first quarter reflects continued progress, and greater consistency across our channels. Trends were solid during the quarter with growth in showroom and wholesale. E-commerce also improved sequentially from the fourth quarter with March performance approximately flat to prior year. Importantly, we continue to see the benefits of actions taken last year reflected in our operating expense performance. This progress is a direct result of the changes we've made to the business, not a recovery of the broader market, reinforcing the durability of the model we've been building. We're entering the second quarter with improving trends and are positioned for a step up in performance. In the first quarter, total sales were down 8% as lower e-commerce and wholesale sales more than offset the gains in our showroom channel. That said, e-commerce trends improved sequentially, declining 10% in the first quarter compared with down 15% in the prior period, reflecting more disciplined marketing execution and early signs of improved conversion. Wholesale performance was impacted by an accounting-related item, which Todd will cover in more detail. Excluding this accounting impact, net revenue would have been $100.6 million were down 3.4% year-over-year. Showroom performance remained a bright spot, with sales up 5% and comps up 7%, marking our third consecutive quarter of positive comp growth. Wholesale sales were down approximately 11% in the quarter, but excluding the impact of the accounting-related item, were up 1%. We saw improving sell-through trends at mattress firms throughout the quarter, with our revenue performance building as the quarter progressed, supported by strong demand for our premium offerings, including Rejuvenate 2.0. We're encouraged by the continued evolution of our partnership with Mattress Firm. Our sell-through improved consistently, supported by strong engagement from their sleep experts and solid traction and expansion doors. We also began rolling out our new Royale collection late in the quarter, And while still early, initial sell-through has been in line with expectations and reinforces the strength of our premium offering. Our accessory business continues to perform well with our expanded pillow assortment and mattress firm performing above plan and driving incremental growth. At Costco, our in-store furniture event performed as expected, further supporting our confidence in the long-term opportunity with that partner. A year ago, we were focused on stabilizing the business by right-sizing our cost structure, strengthening the foundation, and restoring profitability in a tougher environment. Now, our focus is on driving growth. That growth is centered on three priorities. As we highlighted last quarter, number one, deepening our understanding of the consumer, number two, delivering better sleep through product experience, and number three, expanding distribution and executing with financial discipline across the business. These priorities reflect how we're operating today. Let me update you on our progress against each. First, knowing the consumer. This continues to shape how we show up across channels, or shifting away from promotionally-led messaging towards clearer, benefit-driven storytelling focused on Gelflex grid technology and how Purple delivers better sleep. We've deepened our understanding of our core customer and what's driving their decisions. Today, what we're seeing is a customer with clear need, but one that has historically approached the category as a price-driven replacement purchase rather than a performance decision. That dynamic has limited conversion and reduced the effectiveness of traditional marketing approaches centered on promotion. At the same time, our data continues to show that when customers are educated on the functional benefits of our technology, particularly around pain relief and sleep quality, conversion improves and mix shifts higher. That insight is shaping how we approach the market with a greater focus on clarifying the value proposition, improving mid-funnel education, and aligning our messaging to the outcomes customers are seeking rather than leading with product features or discounts. On the marketing front, our strategy is focused on three things. Delivering on the Purple brand promise of less pain, better sleep at every touchpoint. Growing the earned traffic that brings high intent customers to our website. And driving more consumers into our retail and wholesale stores where the product can be experienced. We're sharpening our focus on answering the key question, why Purple? making our differentiation clearer, our content more educational, and our local marketing more effective at converting awareness into foot traffic. The Gelflex grid is a genuinely different innovation, and we believe we have meaningful headroom to tell that story more powerfully. We're also seeing early benefits from increased discipline in our marketing execution, including more effective search optimization, more disciplined spending, and a shift towards higher impact channels. This is driving higher quality traffic and improving conversion, particularly in e-commerce. We're also seeing an increase in unsolicited consumer feedback, with consumers reaching out directly to share their experiences, particularly around pain relief and improved sleep quality. We're incorporating these insights into our messaging through testimonial videos to better reflect what matters most to consumers. In addition, we've partnered with a new marketing agency that's helping refine the quality of traffic and optimize our media mix with an emphasis on awareness and consideration across the funnel in a more evergreen approach. We also continue to make changes in our creative approach and how we guide consumers through the online purchase journey with a more focused and tactical path to identifying the right mattress. These changes are resulting in improved engagement and conversion. Second, delivering better sleep through product experience and expanded distribution. Our innovation continues to resonate with our premium products, maintaining strong traction across both showroom and wholesale channels. During the quarter, we saw strong initial response from the launch of Purple Royale, our new Lux offering developed in partnership with Mattress Firm. Early feedback has been strong with encouraging sell-through trends in the early weeks, following the launch and growing adoption among sales associates. Today, Purple Royale is in 3,100 slots across Mattress Firm's 2,200 stores. While still early, we're encouraged by our performance and the strong consumer response to in-store engagement in Purple Royale. We also benefited from increased marketing support for Mattress Firm, including one of the largest co-marketing investments in our partnership to date, which is helping drive awareness and traffic. Additionally, Rejuvenate 2.0 continues to perform in line with expectations with strong demand across the lineup, including our highest price models. In the first quarter, the Rejuvenate 2.0 collection was 56% of our showroom mattress revenue, demonstrating the positive customer response to the new product. This performance reinforces the strength of our premium positioning, and the resonance of our innovation with consumers. We're also seeing a positive halo effect across the portfolio, supporting performance in adjacent categories. In addition to product innovation, we're focused on elevating the full consumer journey across both owned and partner channels. This includes improving how we present and explain our technology in store with greater emphasis on pain relief and more effective use of demonstrations and digital support. This is resulting in improved engagement from retail sales associates, particularly within our wholesale channel, as our product storytelling continues to resonate. We've also made changes to our online sales approach, enhancing live customer care and follow-up to better replicate the in-store experience in a digital environment, which is helping improve engagement and conversion rates. At the same time, we're enhancing our delivery experience to ensure a more consistent and credible brand experience from purchase through fulfillment. These improvements are helping reinforce our value proposition and supporting stronger conversion. We continue to focus on expanding our distribution presence so customers can find us across multiple channels. Our premium innovation continues to support that expansion. The launch of our Purple Royale collection at Mattress Firm in March is driving incremental distribution across our wholesale channel and represents an important step forward in our partnership with Mattress Firm as we continue to evolve both our product offering and in-store presence. We're also expanding our assortment with Mattress Firm with a rollout of additional pillow offering, which is performing in line with our expectations and helping to deepen our presence in stores at Mattress Firm. In addition, Costco continues to perform well with revenues up over double last year's volume. As expected, this program will pause before returning again later in the year. At Sam's Club, our in-store pillow displays are performing well and helping introduce the brand to a broader audience. Based on the strength of our recent sell-through, we're planning additional events with Sam's. We're also seeing continued opportunity to expand our pillow assortment with select retail partners including incremental additions within Walmart. In addition, we generated solid performance from the recent QVC event, which provided additional exposure and incremental reach for the brand. We see more opportunities ahead with QVC. Amazon was a standout during the quarter, delivering strong growth. We've shifted more of our assortment to fulfilled by Amazon, improving in-stock levels, delivery speed, and overall customer experience. while also helping us reach new consumers. We see a meaningful opportunity to continue scaling this channel. Taken together, these efforts are expanding our reach with key partners and support continued growth in our wholesale. Finally, executing with financial discipline. We've taken a meaningful step to resize and simplify the business, and we're seeing these benefits reflected in our operating efficiency and cost structures. These actions have created a more stable foundation as we shift towards growth. In the first quarter, gross margins came in below our normal 40% baseline, primarily driven by higher levels of floor model discounts associated with the Purple Royale rollout at mattress firms, which impacted both pricing and mix. We view this as a temporary, and as the floor model transition normalizes, we expect improved contribution from Royale which remains a key driver of margin expansion over time alongside Rejuvenate 2.0. We've seen similar dynamics during prior transitions and would expect a comparable normalization as the floor model activity moderates. At the same time, we're making continued progress in our underlying cost structure, particularly across sourcing, operations, and fulfillment, supported by ongoing productivity initiatives and supply chain optimization efforts. We're also actively managing a more dynamic cost environment, including tariff dynamics and rising input costs. Our mitigations are well underway, including diversifying our supplier base, expanding multisourcing, and selectively insourcing key components, such as pillows, where we see both cost and quality benefits. These actions contributed to approximately $2 million of cost savings in the quarter. As we look ahead, we expect tariffs to be a modest tailwind this year while we continue to actively manage other input cost pressures. We're also navigating pressure in foam input costs, which remain a near-term headwind, but is being actively managed through our sourcing and mitigation actions. In addition, tighter inventory management remains a focus, and we delivered a reduction in the first quarter inventory levels, helping to improve working capital efficiency. While mix remains an important driver over time, especially as higher-priced products like Rejuvenate 2.0 continue to scale, the first quarter reflects some near-term variability. As we look ahead, we remain focused on improving margins and continue to believe the business can support gross margins around 40% over time as operational improvements take hold, while acknowledging that external factors, including input cost volatility and broader macro conditions, may create variability in the near term. Todd will walk you through the key drivers in more detail. Turning to our outlook, we're updating our revenue guidance to a range of $465 to $485 million from the prior range of 500 to 520 million due to the accounting-related adjustment discussed earlier. We're maintaining our adjusted EBITDA guidance of 20 million to 30 million. The outlook reflects the continued momentum in our premium product portfolio, expanded wholesale distribution, and operating leverage in the business as volume grows. Our guidance does not assume a recovery in broader markets and reflects the progress we've made across product, distribution, and operations. We believe we are well positioned to deliver a meaningful earnings growth in 2026. Before I turn it over to Todd, I want to briefly acknowledge that he will be stepping down as CFO effective May 1st to pursue another opportunity. Todd's been a strong partner to the business, helping strengthen our financial foundation in positioning Purple for this next phase. We thank him for his contributions and wish him the very best in the next chapter. We're also pleased to welcome Bob Lucien as our next CFO. Bob brings deep experience across branded consumer businesses, including his time as CFO of Lazy Boy, and we are confident in a seamless transition. And with that, I'll turn the call over to Todd.