Purple Innovation Q3 2024 Earnings Call Transcript

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November 4, 2024

There are 9 speakers on the call.

Operator

Please note this event is being recorded. I would now like to turn the conference over to Stacy Turnoff, Investor Relations at Edelman Smithfield. Please go ahead.

Speaker 1

Thank you for joining Purple Innovation's Q3 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. 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.

Speaker 1

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 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 De Martini, Purple Innovation's Chief Executive Officer.

Speaker 2

Thank you, Stacey. Good afternoon, everyone, and thank you for joining us. I'm joined today by our CFO, Todd Boganson. While the Q3 was difficult from a revenue growth perspective, we are encouraged that volume was approximately flat on a quarter over quarter basis. This performance is evidence that we're maintaining strength despite ongoing softness as the housing market continues to struggle and we are encouraged that our year to date results have modestly outperformed the broader industry.

Speaker 2

Earlier this quarter, we took proactive steps to achieve significant operational efficiencies and position ourselves to capitalize on tailwinds when the industry improves with both the consolidation of our manufacturing facilities and a corporate restructure. These steps along with our disciplined approach to pricing, cost savings initiatives and selective promotional strategies drove meaningful savings in the quarter with adjusted gross margin improving by 3.40 basis points year over year to 40.5%, which continues to exceed our 40% year end target for the 2nd consecutive period. In addition, we're highly encouraged by the progress we've made with the restructuring, which is continuing in line with our expectations. The restructure of our corporate organization is complete and the consolidation of our manufacturing operations is more than halfway through. It's clear that we're delivering significant margin improvement from these efforts.

Speaker 2

To date, we've completed the realignment of our distribution network, fully transitioned our e commerce operations and have transitioned 75% of our wholesale orders to ship out of our Georgia facility. We expect to be fully operational in Georgia manufacturing facility by the end of the year. The supply chain consolidation and corporate restructure is expected to yield annual EBITDA savings of $15,000,000 to $20,000,000 starting in 2025 and we plan to have positive cash flow and adjusted EBITDA next year, supported by our leaner corporate structure and right sized manufacturing operations. These savings will allow us to continue investing in innovation and marketing, further supporting our path to premium sleep strategy. Turning to our revenue performance, Q3 sales were down 15% year over year, primarily driven by softness in consumer demand, optimization of our advertising spend and a tough comparison to our Q3 last year when we launched our path to premium sleep strategy.

Speaker 2

Within DTC, showrooms continue to have solid performance and were flat year over year, driven primarily by an increase in average selling prices as we continue to upsell customers to higher price models through our path to premium sleeve strategy despite soft unit demand in the category. Our e commerce business was down 16% year over year, primarily due to 36% lower advertising spend than Q3 last year when we invested heavily to support our new product and brand launch. This year, we've optimized our advertising to be more efficient and profitable. The year over year decrease in ad spend coupled with fewer days on promotion significantly improved the profitability of the channel. Our wholesale channel was down 20% year over year as we lapped the launch of our new products into the majority of our partners.

Speaker 2

However, we are encouraged by the feedback we're receiving from many retailers about the strength of Purple's performance compared to other brands on their floor. Turning to progress of the 5 strategic initiatives. As a reminder, the initiatives are driving gross margin improvement, improving productivity of existing showroom and wholesale doors, driving e commerce conversion, improving our marketing effectiveness and bringing new products and innovation to market. Our first initiative is driving gross margin improvement. We continue to drive cost savings through supplier diversification, plant efficiency gains and optimize freight scheduling.

Speaker 2

As part of this initiative, during the quarter, we've begun producing all pillows in house further improving profitability. We're also changing vendors that produce certain components of our mattresses, which is now delivering double digit savings on these items. As a result of our cost savings program, our mattress production is becoming notably more efficient with a 25% decrease in hours per mattress produced compared to last year. Our showrooms remain a critical driver in our premium brand experience. We continue to generate healthy sales trends and improved profitability across our retail locations through 2 main strategies.

Speaker 2

First, we're focusing on pillows as a significant traffic driver with year to date pillow sales up approximately 30% and most pillows are now carryout items. 2nd, we're focusing on the

Speaker 3

growth of our luxury line, REJUVENATE,

Speaker 2

to increase both average selling prices and profit. We're seeing the strength of this product, which is supported by our new financing offers accounting for nearly 30% of mattress revenue in showrooms. On the wholesale side, our partnerships remain solid and we continue to see growth across the higher price point, restore and rejuvenate collections, which has increased the average selling price for the channel. Our top selling mattress in the wholesale channel is now our Restore Premier, the highest end of our premium collection. We also continue to expand our co branded advertising relationships, which has led to notable improvement in sales across several major retailers.

Speaker 2

Next, our third initiative is driving e commerce conversion, focusing on improving sales and profitability. We recently refreshed our promotional strategy for the Purple Flex, an e commerce only mattress focusing on competitive price points and promotional bundles. This unique product engineered at $9.99 for a queen has performed well and has already been selling through at a high rate. We've also made enhancements to our website focusing on personalization and improving the customer journey from research to purchase. Turning to our strategic initiative, improving marketing effectiveness.

Speaker 2

In the Q3, we continued to focus on driving efficiency by investing in profitable advertising. We're also implementing new tools to optimize media spend and drive more orders per dollar spent. This includes better ways to identify individuals coming to our website across various devices and tailoring web experiences to better match specific customer preferences. Finally, let's turn to innovation. Over the past year, we've launched our most innovative product line in history with 9 mattresses across 3 tiers, including our Luxury collection.

Speaker 2

These differentiated product offerings powered by our proprietary gel grid technology continue to deliver strong satisfaction and engagement from customers. Looking ahead, we plan to roll out new innovation in early 2025 across 2 thirds of our product line, which will further enhance our premium positioning. We expect to launch new grid technology and improved aesthetics across our REJUVEN8 collection and the new essentials line with improved durability and refreshed aesthetics. In addition to mattress innovation, we'll be introducing under bed and top of bed products along with new channel distribution. While we're pleased with our improved profitability, we expect continued pressure on the top line due to industry wide demand declines.

Speaker 2

We anticipate finishing the year at the lower end of our guidance for revenue and adjusted EBITDA. However, we remain confident that restructuring efforts will strengthen our business model over the long term. We believe our path to premium sleep strategy will continue to move the company towards sustained profitable growth at an accelerated pace and will help build the category in the process. Now I'll turn the call over to Todd to discuss our financial performance in more detail.

Speaker 4

Thank you, Rob, and good afternoon, everyone. As Rob mentioned, the macro environment continues to be challenging and we saw this reflected in our Q3 financial performance. Let me walk you through the key financial metrics for the quarter and I will highlight the areas where we saw both headwinds and progress. Starting with the top line, net revenue for the 3 months ended September 30, 2024 came in at $118,600,000 which was down 15.3% versus $140,000,000 in the prior year. Direct to consumer net revenue for the quarter was $70,800,000 down 11.7% versus last year with a decline of 15.7% in e commerce and with showrooms relatively flat.

Speaker 4

And wholesale net revenue was $47,800,000 down 20.1% from last year's Q3. As Rob mentioned, net revenue for each channel was impacted by a reduction of 36% in our Q3 advertising spend as we decreased investment and less profitable spend compared to the last year. This shift resulted in much more profitable revenues, but also clearly had an impact on our total volumes. In addition for wholesale, net revenue was impacted by our decision to exit our relationship with certain customers. The net door count reduction during the quarter was 200 doors to approximately 3,300 doors at the end of

Speaker 3

the

Speaker 4

quarter. Importantly, we have opportunities with a number of potential wholesale accounts that we're actively pursuing, and we also have new business development projects that are near completion. So we expect our door count to grow again over the next few quarters. Now despite the revenue shortfalls, we made notable progress in improving our total profitability in the 3rd quarter. In terms of gross margin performance, we should note that we had a number of items that we've included in cost of goods sold for restructuring and related charges, mostly from our overall restructuring plan.

Speaker 4

These items include accelerated depreciation, one time severance costs and non cash inventory write offs. So excluding these restructuring and related charges during the quarter as well as our one time launch costs in the prior year period, our adjusted gross margin was 40.5%, which grew 3 40 basis points versus the adjusted gross margin last year with the improvement reflecting favorable direct material savings, operating efficiency improvements and freight cost reductions. This represents our 2nd quarter with adjusted gross margin of over 40% as we continue to implement programs to not only sustain, but to structurally grow our gross margin over time. Operating expenses for the Q3 were $82,000,000 up 2.6 percent from $79,900,000 in the Q3 of 2023. This increase was driven by $19,800,000 in restructuring related charges as part of the consolidation of our manufacturing operations to achieve significant operational efficiencies.

Speaker 4

Excluding all restructuring related charges this year and the loss on impairment of goodwill last year, operating expenses were down $10,900,000 mostly due to the $9,100,000 reduction in advertising spend. Our adjusted net loss for the quarter was $8,400,000 compared to an adjusted net loss of $19,400,000 last year. Adjusted EBITDA for the 3rd quarter was negative $6,400,000 an improvement from negative $16,300,000 last year, driven primarily by our ongoing improvements in gross margin and a refocus of our advertising towards more profitable spend. And 3rd quarter adjusted loss per share was $0.08 compared to an adjusted loss per share of $0.18 in the Q3 last year. Now turning to the balance sheet.

Speaker 5

At the

Speaker 4

end of September, we had cash and cash equivalents of $23,400,000 compared with $26,900,000 on December 31, 2023. Net inventories on September 30 were $59,900,000 down 16.9% compared to September 30, 2023 and down 10.5% compared to December 31, 2023 as we continue to manage our inventories more efficiently. Now as we head into the final quarter of the year, we expect to continue focusing on cost management and operational efficiencies. We are carefully managing our restructuring initiatives to ensure long term profitability, while maintaining our focus on delivering innovative products and enhancing our premium positioning in the market. As Rob discussed in his remarks, for the full year, we expect to be at the lower end of our guidance range for revenue of $490,000,000 to $510,000,000 and also at the lower end of our guidance range for adjusted EBITDA of negative $20,000,000 to negative $10,000,000 Despite the macroeconomic pressures, we remain confident in our ability to execute our path to premium sleep strategy over the longer term and deliver sustained profitability over time.

Speaker 4

With that, I'll turn the call back over to the operator for Q and A.

Operator

We will now begin the question and answer session. The first question comes from Brad Thomas with KeyBanc Capital Markets. Please go ahead.

Speaker 5

Hi, good afternoon. Thanks for taking the questions. Rob, still clearly a challenging environment out there for your industry. As I look to revenues for the Q4, I think what's implied if you were to come in at the low end of the full year guidance is that perhaps the pace of sales would accelerate a little bit as we go into 4Q. I'm just curious if you could share any more about what you've been seeing of late and any maybe unique factors might be helping to see some degree of acceleration from 3Q?

Speaker 2

Thanks, Brad. Certainly, post Labor Day, the business has been soft, but we go into Black Friday promotion, I think starting tomorrow and they're pretty competitive across all channels that November December period does require a pickup in the pacing so far and we've got good reason to expect that that should happen.

Speaker 5

That's great. And then Todd, if I could ask just a question as we think about cash moving forward, I know that there are some cash costs associated with the Utah restructuring. Could you maybe help us think about cash puts and takes over the next couple of quarters just as we're trying to bridge our cash flow statement?

Speaker 2

Sure. So a few things

Speaker 4

to just keep in mind. First, we have shown good consistent progress on inventory through the year. The team has done a nice job of managing inventory and leveraging some new systems we have. We expect to continue to see opportunity to bring our overall inventory levels down. Also, at the end of Q3, just because of the timing of some payments, we ended up at a low point in our accounts payable that you'll notice.

Speaker 4

We should get back to a more normalized level at the end of Q4. So both of those will be source of cash on the overall cash flow statement. And then beyond that, we continue to manage expenses and CapEx very tightly. So we ended the quarter with $23,000,000 in cash. We actually had a slight positive on our operating cash flow this quarter and feel like we're positioned well as we go into the Q4.

Speaker 5

That's great. Well, I know we're all eagerly awaiting that turn for this industry. Thanks so much and I'll turn it over to others.

Speaker 2

Thank you, Brad.

Operator

The next question comes from Seth Basham with Wedbush. Please go ahead.

Speaker 5

Hi, this is Matt McCartney on for Seth. Just like to understand how you're still confident in turning profitable next year? How can we think about the drivers to that? And is there an underlying demand assumption being built into that or some plan to turn profitable irrespective of where the market is?

Speaker 2

Yes. Good question, Matt. I mean, we haven't obviously released any guidance yet on next year, but we are assuming a continued difficult category and not building any kind of volume driven tailwind into that plan. I think the reason we are confident is the progress we're making on gross margin. We said we'd end the year north of 40.

Speaker 2

We'll now have put 2 quarters in at least on an adjusted basis once we're through the restructure to be north of that and we still have both purchasing benefits to get and the full benefits of the supply chain restructure. So that is where that confidence is coming from.

Speaker 5

Got you. Okay. Just switching gears then, just looking at Labor Day, curious how you perform, especially in the context of being more selective on promotions and pulling back bids on advertising. Do you think you outperformed the industry during that period?

Speaker 2

As you know, Matt, in this industry, it's quite hard for us to see it perfectly clearly. But we're down less than 2% this year, year to date. The shape of the volume is a little bit different from last year because we're comping the launches last year. But we that feels like it's outperforming the category to me. I think you've seen another public company report sales this year down 10% in the total year.

Speaker 2

So as best I can tell, we welcome the help that you can give us, but we do think we're modestly taking a little bit of market share.

Speaker 5

Hey, Rob, it's Seth here. I just have one more follow-up. In terms of the operational manufacturing consolidation, can you just talk through exactly what's left to do and whether you see any disruptions to the business associated with that?

Speaker 2

Yes, Seth, glad to. So Eric Haynor is overseeing this and he's probably going to kick me when I tell him this, but he's more than halfway through it. We've had little bumps in the road, but nothing that is meaningfully concerning. What's left to do, we're using a little bit of manufacturing in West to balance customer needs as our inventory consolidates. And then we've got to open the distribution center in Salt Lake City.

Speaker 2

We've got a line on that that should be in place by the end of January. So there's still a lot of work to be done and these transitions are always difficult, but we're more than halfway through. As I said in the script, we've got all of our e commerce transition, most of our wholesale transition and we're still supplying the industry at near as I can tell kind of best level of service to the customer. So we're so far so good feeling like get through it as we planned.

Speaker 5

Thank you guys and good luck.

Speaker 2

Thanks Seth.

Operator

The next question comes from Matt Koranda with ROTH Capital. Please go ahead.

Speaker 6

Hey guys, good afternoon. So maybe just wanted to hear a little bit more from you Rob about you sound confident that maybe we will see a pickup around the Black Friday, Cyber Monday sort of period. Kind of what goes into the confidence that we see a little bit more acceleration and demand for your products? What do we have in the way of either promotions or ad campaigns that help inform that outlook?

Speaker 2

Yes. Thank you, Matt. Probably three things I put them in order. First of all, the holiday the promotional periods, the Tier 1 holidays have been behaving better than non holiday and we're pretty much in Tier 1 almost the rest of the year. I think there's 1 week that isn't, but otherwise you've got every week in Tier 1.

Speaker 2

Number 2, Q3 where we saw this year on year deceleration had the majority of that $9,000,000 ad cut. That's not there in Q4. We're actually going to be up modestly, but up modestly versus year ago. And then historically, the consumer has come to these holidays ready to shop and my hope is getting past the election and seeing some certainty in the market will not hurt consumer confidence from

Speaker 6

here. Okay. That's helpful. And then just on the restructuring plan, maybe the $15,000,000 to $20,000,000 in EBITDA savings, any split there, Todd, between sort of the benefits on the gross profit side versus OpEx line. It sounds mostly like it's going to be a gross profit margin type deal given the move in facilities.

Speaker 6

But maybe just put a finer point on that for us. And then I think you mentioned that means positive adjusted EBITDA and free cash flow for 25%. How should we think about seasonality there for the year? Are we starting off negative flipping to positive, kind of similar to what we had expected for this year? Just any color on sort of cadence and how we should be thinking about filtering that in?

Speaker 3

Sure.

Speaker 4

So I'll start with the overall restructuring and where we're expecting to see the benefits. Most of those benefits will start to flow in earnest when we get into 2025. In terms of the balance between cost of sales and operating expenses, there is a healthy amount of savings in both. It's slightly more weighted towards cost of sales, But we did some fairly significant work on operating expenses and we'll see sizable benefits there as well. In terms of seasonality, yes, we're probably early to get into too much detail on 2025 guidance at this point.

Speaker 4

But fair to say this is a business that as I've looked back on history has tended to do a little bit better from an EBITDA perspective, from a cash perspective as we got into the back half. So it would probably be fair to assume similar next year. When we get to next quarter's call, we'll have more detail around the actual guidance and we'll be able to probably give you a little bit more context around what that might mean in terms of the flow of the year.

Speaker 6

Okay. Appreciate it. I'll leave it there, guys. Thanks.

Speaker 4

All right. Thank you, Matt.

Operator

The next question comes from Bobby Griffin with Raymond James. Please go ahead.

Speaker 7

Good afternoon, buddy. Thanks for taking my questions. One just quick follow-up just on the restructuring. Do you get the full $15,000,000 to $20,000,000 all in next year? Or does it start to like bleed in partly so we should model the full impact until sometime in 2026?

Speaker 4

It actually should flow mostly through 2025. We'll actually start seeing modest amount of benefits as we go into Q4, part of why we're confident that we will be EBITDA positive and cash flow positive in Q4 as well. So by the time we get into next year, yes, we should be ramping up and seeing the full benefit of that in our P and L.

Speaker 7

Okay. And is there a real estate component where you have to where you're going to sell off some of the closed facilities or were they leased and there's a sublease component as well that dependent on or is all that locked up and already done?

Speaker 4

Yes. So we are assuming that we're going to be able to sublease the facilities that we have currently in Salt Lake. There's 2 of them. We are already getting going in some of those leasing activities and seeing encouraging early signs, but we took some conservative assumptions around our ability to sublease and the timing and so all that is built into the net savings.

Speaker 7

Very good. That's helpful. And then I guess Rob, maybe just on the decision to exit certain doors, can you just talk a little bit about that? And as you look out kind of where your footprint is now of who you're serving with this new manufacturing setup that you have, is there certain areas of the country where you feel underpenetrated and that you need more wholesale doors or less? Or just kind of how do you think about that kind of on what I'll call Purple 2.0 from the manufacturing side of things?

Speaker 3

Bobby, I don't think

Speaker 2

that certainly from a reach standpoint, we're not going to make a customer choice to serve or not serve based on geography. When the Salt Lake distribution center is open, we'll have the same reach we have today. There's about a $2,500,000 freight hurt in those numbers, but that's all in the netted out in the savings. The reference to doors and customers and in fairness to our customers, we started as a bed in the box brand. And for players that have us just in what we now call essentials, it's just not built for wholesale.

Speaker 2

It doesn't work for them and it certainly didn't work for us. And so in fairness to those customers, we've sat down and said, if you don't either buy into the path of premium strategy or you don't think you're ready for it, then this is not going to make sense for either of us. And that has netted us out. The net number is about 200 total doors. We're down we're at 3,300 doors.

Speaker 2

I think we ended last quarter about just about 3,500. And so we don't those are not customers we're closing the door on forever and hopefully they're not closing the door on us forever. But what we are saying is if you're just doing business and essentials, this isn't going to work for us. And so we own that. We've taken that business back and that netted the store count down a little bit.

Speaker 7

Okay. That makes sense. And I guess lastly for me, I think you Rob, you might have mentioned showrooms comp flat year over year with units down, but ticket up. Did I hear that correct? And just any comments on the journey is going on the showroom profitability side?

Speaker 7

I know that's something you guys have been working on and, seeing improvements, so just any update there?

Speaker 2

Yes. We're making Scott and his team are making nice progress. We have about a third, not quite a third, but almost doors moved from unprofitable to profitable at the four wall level. We've comped positive about 9 out of the last 12 months. September was soft for sure, but the mix continues to trade up.

Speaker 2

And again, I think it's a place we're actually gaining a little bit of share. We have a lot of work left to do, but I'm encouraged with the trend I'm seeing.

Speaker 7

Very good. I appreciate the details. Best of luck here in the Q4.

Speaker 3

All right, Bobby. Thank you.

Operator

The next question comes from Michael Lasser with UBS. Please go ahead.

Speaker 8

Good afternoon. This is Dan Silverson on for Michael. Thank you for taking our question. Just one question relating to the new footprint. What level of capacity utilization is the business running at today on a pro form a basis?

Speaker 8

And then just given this leaner operating model, what type of additional volume growth from here would the company need to run at to achieve EBITDA profitability next year?

Speaker 2

Dan, let me break that in a couple of pieces because I think there's some good important questions in there. First of all, the rest I'm going to start backwards. The restructuring has lowered our breakeven closer to $45,000,000 a month from the $50,000,000 to $55,000,000 it was at previously. So that's fundamentally in place now. Todd mentioned the corporate restructure that's done, the footprint restructure is well on its way to being done.

Speaker 2

That lowers our breakeven materially. You also asked about capacity. So today I put the market Atlanta is running at about 70% of theoretical capacity. But when we announced the restructure and this is in our supply chain plans, our objective is to have about 2.5 times our demand capacity available in the footprint, both from a physical space and a machinery basis. And we'll make sure that we pace that carefully well ahead of demand.

Speaker 2

But I underline carefully. This whole move was designed to right size production. So today we're running at about 70% of capacity.

Speaker 8

Okay. Very helpful.

Speaker 4

The other question you had asked was at what level of capacity do we need to operate at to be EBITDA positive. We really as we looked at being EBITDA positive next year, have not assumed any big uplift in volume. So the volume we're seeing today at that volume, we believe that there's good upside in the business and there's good efficiencies to be gained out of our manufacturing operations that put us in a good position.

Speaker 8

Thank you, both.

Speaker 2

Thank you, Dan.

Operator

The next question comes from Keith Hughes with Truist. Please go ahead.

Speaker 3

Thank you. I guess two questions. First, the previous comment on $45,000,000 a month breakeven, is that EBIT or EBITDA breakeven?

Speaker 4

That is EBITDA breakeven, yes.

Speaker 3

Okay. Because that gets you to about $540,000,000 of sales and you're doing $490,000,000 ish this year. May you assume it's flat or something there's a disconnect there in the numbers somehow?

Speaker 4

Yes. I think the big difference is a lot that is where we're at today. That does not take into account a lot of the efficiencies and savings out of the restructuring that we haven't realized yet. So once we start realizing those savings that will bring the breakeven point down even further. And we just haven't gotten to the point of We're not

Speaker 3

there yet.

Speaker 4

Yes, yes, exactly.

Speaker 3

Yes, just not there yet. Okay.

Speaker 2

And then there was a comment earlier

Speaker 3

in the call, you said positive, I assume volume was flat in the quarter. I assume that's enterprise wide. If you could talk about volume in your wholesale versus your online channels that get us to flat?

Speaker 2

Keith, I'm just tracking to the I think in the script I said quarter on quarter, we're down versus year ago materially about $20,000,000 Just I'm not correcting you. I'm just trying to make sure I understand the question.

Speaker 3

Yes. Well, I misunderstood what you said. You're down year over year $20,000,000 in units. Is that correct?

Speaker 2

No. Dollars 20,000,000 in revenue in Q3 driven by lapping last year's launch and category softness and reduced advertising.

Speaker 3

Okay. Is there any way to look at that in a same store sale basis where units are when we take launch units, for example, if I write that out? Is it too early?

Speaker 2

No, we could get to that. We know it on our own stores. The wholesale takes a little bit more calculation because you got to figure out what happened with inventory and how much of that was floor samples.

Speaker 3

Okay. All right. That's all. Thank you. Okay.

Speaker 3

Thank you, Katie.

Operator

This concludes our question and answer session and the Purple Innovation Third Quarter 2024 Earnings Conference Call. Thank you for attending today's presentation. You may now disconnect.

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Key Takeaways

  • Despite a 15% y/y decline in Q3 net revenue to $118.6 million amid housing market softness, volume was roughly flat q/q and year-to-date results modestly outperformed the broader mattress industry.
  • A corporate restructure and consolidation of manufacturing facilities drove a 340 bps y/y improvement in adjusted gross margin to 40.5% and is on track to deliver $15–20 million in annual EBITDA savings beginning in 2025, targeting positive cash flow and adjusted EBITDA next year.
  • Direct-to-consumer showrooms were flat y/y with higher average selling prices, while e-commerce sales fell 16% due to a 36% reduction in ad spend that substantially boosted channel profitability; wholesale sales were down 20% but continued to outperform peers on retailers’ floors.
  • Cost-saving initiatives included bringing pillow production in-house, diversifying vendors for double-digit savings on mattress components, and reducing mattress production hours by 25%, all supporting ongoing margin expansion.
  • Innovation remains a focus with nine new mattresses launched across three tiers this year and plans to roll out new grid technology, improved aesthetics, and under-bed/top-of-bed products in early 2025 as part of the “path to premium sleep” strategy.
A.I. generated. May contain errors.
Earnings Conference Call
Purple Innovation Q3 2024
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