Purple Innovation (PRPL) 12 Mar 192018 Q4 Earnings call transcript

Greetings, ladies and gentlemen. Welcome to Purple Innovation Fourth Quarter 2018 Earnings Conference Call. [Operator Instructions]. It is now my pleasure to introduce your host, Brendon Frey of ICR. Please go ahead.

Purple quarter joining earnings for you Innovation's XXXX fourth call. Thank is of website the today's copy available at press Purple's A of release on section Investor www.purple.com. Relations make that would statements I remind presentation you to we forward-looking like will in statements. this are certain reflect a statements and judgment affecting company's number and of Innovation's of from current analysis differ business. results factors may Purple materially as expectations today, forward-looking These only actual based on the statements. should not reliance place forward-looking you Accordingly, on undue these

turn whether and such can measures call result within be I'll include comparable XX-Q, financial GAAP these A financial financial Today's over of non-GAAP otherwise. most well risks that and measure conference quarterly earnings SEC was quarter the a in earnings associated release thorough as alter We references to the SEC Megibow. report we of can disclaimer. more included of furnished the income, fourth to the found filings website. be future which that, presentation be our today statements, forward-looking regarding this For forward-looking With release in the with in which refer measures, information, as reconciliation events our of disclaimer or not to referenced update to is the adjusted and obligation call uncertainties adjusted the Joe each will operating undertake X-K any non-GAAP statements EBITDA statements EBITDA. any the discussion with webcast, a that in to Form as or XXXX to forward-looking on our found our you made new do to on as on Form and

call Mark afternoon, me on our today Thank you, CFO. everyone. With and is good Watkins, the

scaling organization fourth quarter, and toward important improved steps took the our Officer as the Purple, financial company Executive business performance my the for for preparing During of growth. Chief quarter first

fourth still is million, ago up review key quarter main XX% while from in a line order in $XX.X the discuss I more came range. spoke there highlights to numbers revenue, slightly allow about establishing done. guidance. expanded before our priorities a from and I'm going walk experience quarter with be guidance in increase outline importance and the some to our then of Starting in mattresses profitability initial through Mark that of throughout strong reach much to our we our then wholesale results came reflect of presence work will the progress, as performance, top the and above our call fourth which XXXX. year-over-year to our channel at year Our detail growth for drivers midpoint customers brick-and-mortar The buying. physical primarily significantly last broader XXXX. the firsthand

in good very expansion, between we've new top of demographic we XXXX, to new mattresses launching has when for with puts retail door the building Purple experienced wholeheartedly technology, our can Bath At the the a test they through the where over mattresses of XXXX, network, including which significantly highly innovative our well our Macy's, XXX we and as Firm strong made to Bed, stores competition. strides Firm than A target a year. and to retail Mattress of orders Beyond. Row meaningful on of recent for other within & increased momentum larger over in XXX an sold prior the our as miles difference the QX themselves differentiated experience at end especially company potential and Mattress through count. were late limited more display in toward led our the with XX% desires XX and customers' sell-through like good names expansion several Furniture leading products On replenishment experience early our quarter recent stores, during bed, bed As support purchase. After a store

direct-to-consumer In quarter, rolled cash original success ever. being marketing. first-ever business holiday mattress as largest discount our history, our promotion terms resulting day very out of year-over-year, than Black Cyber in on during December, we XX% number the with our Monday In experienced we second-largest in of in areas up more our Friday sales a day in our

of while the on During able of More margin the accretion. increase promotion successfully December, and were in of for all Internet units cross-channel the we our XX% social which takeovers drive promotion Disney impressions database, Ralph hundreds we millions from We to nearly AOL tested properties. a on front, movie resulted promotion movie. brand to period YouTube, implemented our with mattresses Disney Wreck-It their still during expanding new Yahoo!, in driving

however, to and We spend shifted also in our which operational manage units success. to spend which to second behind offering direct base tactics we into Below and launched first queen our and in inefficiencies revenue and are manufacturing, December. mattress twin finally mattresses, overall levels began lower the marketing processes. twin-sized the marketing we we funnel started a of Industry-wide, response QX. line, attack to cash shipping the majority continue supply QX, traffic highest late the expense in volume marketing chain delivery optimistic its are about Throughout mattresses so reduces our

our cost with size our business. the by align better of reduced structure to more XX% headcount we the than First,

mentioned focus in in will improvements more believe last call, already I partners and we negotiated $X have As on successfully than suppliers QX, had million fulfillment we result that we our earnings to annually. larger begun

in of per unit QX to Through through components. efforts, As variable automation, have preassembled we we were from these labor cost for production reducing by almost improvements production, line on efficiencies our successful been half combination focused QX. very labor sourcing and a

of to saw a fulfillment, For our successfully and our processes dramatic and fulfillment reliability. we migrated all facilities have pilot and improvement XPO fulfillment in heavier

vendor on dual-sourcing We have process work standard quality, corporate controls sourcing strategies. also and begun serious MSAs around including accuracy, and compliance,

months, in across new model out in bottoms-up on were in rolled finally production process a work QX the all completed and is This for S&OP has that make early supply had We John us companies, and the over that very in QX work, we also XX and X we board role. said, functions. model transitioned he years still of and an January. All been a especially join came We he demand direct-to-consumer experience that challenged products running average on and fulfillment, with I'm we consulting as through great entire manufacturing to and many Since to report Officer. Legg agreed ownership core chain the which continued role backlog in and to thrilled appointed gracefully quarter, January, been with John cancellation early over a sectors. management received Operating full-time. John's to for by John into about on Chief thrilled are in and retail production well consumer-facing has In months wholesale, fit John ago, return has that that us this higher-than-industry rates. team. contribute aligning him X believe the

to For progress XXXX, the market the executing expanding accelerate is QX, made initiatives profitable Purple's at the in early share aimed we growth. driving plan and

out and growth a We platforms foundational expect XXXX to year as our capabilities. we be build

are brand development. innovation, in Our and omnichannel organizational effectiveness key product four retailing, areas: priorities

the these off We to cross-functionally. a areas, been company have dozen come has across kicked see and initiatives together more than great it

such innovation, management well equipment. our machine our include product as midyear, manufacturing the warehouses, innovation include as and flushing in team. the max XPL launching leveraging an first fulfillment Improvements as of out life product X, initiatives Italian-built automation core regional institutionalizing improvements For cycle X processes, a capabilities in appropriately-sized our process

retail customer, service we and omnichannel exploring and of the our our wherever continue will to more to are want, they improvements retailing, efforts For our doors, brand anticipated partner showrooms. significant including an than doubling website however

and core as functions. we For as to our effectiveness, key continue roles building hire organizational for aggressively well maturing

are improve signed been consulting processes firm throughout And with accuracy, to waste these company control our and recently had reduce brand, better in key a In more creative brand have align the and an with unique already We which brand on benefits have we for to we XXXX. positioning assess an have both our to challenged a we our few of the areas. finally, effort XXXX, with across products. and successes importantly, across working outside strategist

last X consistent the had one example, only quality achievable throughput. we Legg's over to few maintaining efforts all machines and max weeks mold over we John For through a our have months, that production, have production deployed throughput on thrilled report that increased we in that has such the have of year. output improved X-inch was few a also I'm which successfully previously weeks last our of for

efforts, we year. are of on surplus, which these have for we maintain With our expect production running the rest the to and a backlog caught up

strength allow that we accessible providing completely out I'm variations and most which product production in the believe with and we or under novel launch expand customer customers, support existing our to lenders. working finalized Xx which number in financing more reinforces expected than million strategic weeks, zippers our Plush to surpassed softness our by innovation, brand far our each For highly thrilled $XX in report our with initial Pillow, firmness. capital, on we purchases expectations, side that our run our our our we initiatives launched made X pillow yet, The a pillow help personalized of recently in also and sold collapse, new of were is the significant additional belief satisfaction. sales. of the existing To

flow that greater positive are with towards this track we confident While to cash business, I additional funding our on flexibility us sustained running execute a growth plans. provides am

footing work want high-growth instrumental on through his in wrap remarks, young, more has face solid for like addressing to year I Mark up the dedication I challenges a thanks Mark my identifying first helping thank and its is to lead public Before Purple, efforts. to and the been that business as company. much a Purple company his hard

in Watkins, once help And the CFO and in CFO personally, that, cost CFO. on, Phillips you retaining Mark to search a turn wish bring of we earlier accounting, step of will week. transition. to On Craig Mark end I'd we confident in endeavors. organization, of full-time FTI's future announced brings announce manufacturing also and it with the we CFO. and are continue while down decades I'll we for the Office to we as practice has this to and of that behalf the our in we your are our Craig from over FTI business the the best year, entire at like to process that we of decided this Craig As mature experience me

for the opportunities that Purple I have I the optimistic more Joe. and about sincerely fact am words, growth. products for kind appreciate leaving personal reasons, Purple's I Despite been never

the Now with that I'll fourth said, turn quarter results. to

higher million, year period. prior revenue the increase replenishment million to For orders ended up three the primarily in quarter. XX.X% compared December sell-through XXXX, with continued strong The months expansion, the due net during following was XX, wholesale to door revenue combined $XX.X $XX.X was

and contributed In the with net in direct-to-consumer XXXX, XXXX. in price during There revenue period with higher between factors compared units million that quarter channel for sales compared initially Gross quarter which the and company. a efficiencies administrative being of net expenses, net supporting the revenue, freight quality and approximately versus fourth pricing negatively more models, general net the make mattress year is also it, growth rates million during XXXX. channel of decline line revenue. This higher due service XXXX associated the Marketing improved and were mattress with we necessary wholesale in margin, percent addition, the third to were increase the were being channel in higher higher well higher in improved XX.X% were Gross prior initiatives our to increase points X% fourth widened largest XX.X% XXX gross as first white-glove with our of improvements product expenses from delivery to increased with gross in to X quarter last basis period. in XX.X% approximately by and to incurred in with of mattress revenue the $XX.X the heavier revenue of and higher top as associated the the during and profit compared as in a from selling as fulfillment. wholesale same of the of several year costs quarter XXXX, which from to costs expenses sold compared XX.X% revenue. and area XX% for margins mix, impacted by our models, QX of launched the public net to our of to the XXXX and associated online in models. dollars million expenses, XXXX driven in channel. new with of These Wholesale at approximately as marketing our Operating the fourth comprised a fourth year-over-year a XXXX, the in the discount $XX.X in $XX.X $XX.X return quarter partially quarter million wholesale spread XX% to were the quarter gross well offset shift in margin primarily contributed margins by headwinds

legal quarter costs, loss operating the fourth quarter, of million of compared operating the I million same which of in to negative negative $X.X million $X.X compared XXXX. CEO reported period. to million negative was and mentioned, compared $X.X quarter the was an for XXXX. EBITDA XXXX. $X.X severance $X.X million was fourth quarter cost, million equity operating of operating fees, of for in $X.X fourth adjusted the transaction an loss incentive million loss compensation, loss excludes compared costs quarter EBITDA in quarter After $X.X fourth loss versus During $X.X for fourth $X.X in adjusting $X.X adjusted quarter results nonrecurring was XXXX merger the million EBITDA, we an the Net Adjusted loss adjusted of search to last negative to a EBITDA year of year. net just of prior million the the million of

year. and margins These new at revenues $XX with a to headwinds prior The compared $XXX.X driven pricing freight XX.X% compared by product return increase compared and $XXX.X costs, year. to up up to margin was our XXXX, partially discount gross mix an the were Net rates, manufacturing of sales gross in in were last in models. in Turning were XX.X% margin by to more profit XX.X% dollars to decrease full in $XXX.X million increased XXXX XX.X% higher year in for Gross our to results. with XXXX million million primarily mattress offset shift inefficiencies. the wholesale sales million,

versus approximately year net This in higher for to XX% is X% with wholesale primarily XXXX, XXXX to were XXXX. represented million the brand million due lesser associated revenues in $XX.X channel investments to and marketing a consumer administrative full drive $XXX.X being extent, increase general year. products, the to approximately For of Operating growth a supporting public awareness our and prior expenses compared for expand higher and company. demand and total expenses

million with to to Acquisition of an litigation expenses and loss a Partner to was the Full as related $X.X year. net $X.X CEO Corp. operating as onetime reported net included loss of operating costs $XX.X addition, $XX.X In $X.X million of Adjusted million search in XXXX. million compared of operating loss cost, XXXX well nonrecurring severance prior business to $X.X was in transaction of loss We in year last year. compared $XX.X adjusted combination an an operating million million the Global loss compared million costs. operating loss in

period negative was negative in year of a million EBITDA adjusted negative comparable the of versus EBITDA XXXX, $X.X $XX.X Adjusted a ago. million million $XX.X XXXX. million For to compared was negative $X.X EBITDA

balance sheet. Moving our to

XX, cash of of company of million from receivables combination and and needs As December at offset reflects along GPAC, finalized funding of XXXX. expenditures. XXXX, the capital end the which capital had increase as the wholesale channel of inventory the since equivalents on February cash as our compared million to working growth increased XXXX the $XX.X debt The partially XXXX, well with the end by from as business term was X, with in $X.X

loan indebtedness in Blackwell summary generally Partners the million in the The Partners. terms an today, an closed XX. we are the Coliseum Joe and details filed we reflected and of the As brings amended disclosed were X-year already $XX in for credit a of principles Coliseum loans the the loan, debt loan, recent additional the amount years the extinguishment in filed discount from funding. Due included credit February XX-K million term of as accounting loan. amendment recently term $XX original under most place unamortized for the principal million restated all and date the this expense the the Capital require which and accounting, initial XXXX, the agreement, issuance us of with This under to mentioned, financing and in five X-K to in outstanding to $XX total the of million costs February agreement maturity accepted the close of extends to took from $XX original

compared products the we an $XX models first at to new loan, was product incremental to in at end XXXX closing the Compared warrants at recognized down The inventories sales December centers. promotions the the will to due inventory basis addition, the expanded inventory In to the unit growing the XXXX value million due of to in within approximately to $X.X increase December or to of XXXX of of third our of a decline $XX.X XXXX. a portion inventory million. will $XX.X regional inventories the Net The of and improved line, quarter-over-quarter on wholesale higher-than-expected XXXX, were expense stocking the XX, of demand million approximately totaled bringing with quarter, total sales million at the million our end expense that for of noncash as quarter $X be awarded distribution and XX%. solid in response channel. third-party holiday the management, was compared

guidance. our to turning Now

revenue full $X positive For adjusted year in $XXX anticipate EBITDA range XXXX, to million the to in $X with range the million, million of net of the we $XXX million.

along supply that quarters with a we bottom These drive campaign for We For year. a in initiatives, the growth and investments line than we with other the and rates top the made the anticipate rate, growth with sequentially first and improving rate of overall the throughout an chain in improvements believe loss back slower growth first year being half include full second higher line XXXX, continued brand of anticipate our first quarter adjusted EBITDA investments in capabilities. marketing the quarter, new year. the performance will

the Regarding With improving closing time modestly quarter for gross being trend the we the during his an for anticipate quarter I'll the to Joe back turn higher with first XXXX. XXXX, that, now margin year, remarks. fourth than of

Mark. Thanks,

of said we continue but a last I optimistic. lot I very to do, to have call, in As our earnings work remain

while we ability the I work in a running mission much take more will only us. now, now on Most their Mark into plan. rates. maintaining are through be am very the that to not execute, And where our As year which We to growth high fundamentals, our is is to ahead with feel the role, right the what customer identify technology. our I both and anticipate I'm by from turn short-term we this to we few year. business all beyond very direct continue highly a the current this also of which reiterate an have It to are team foundational and helping questions. but have consuming the live ready healthy of built just on that, long-term guided, months unique and I comfort we continue products our our EBITDA-positive better of time quarters that proud to of X motivated business, take now opportunities confidence importantly, experience that can into want state

Instructions]. [Operator

Seth with Basham comes question Securities. from first Wedbush Our

the quarter for more bit fourth question guys first changes margin a is just closely. the My in you understanding

about the margin gross talking changes. Specifically

was more You from and how to the the Mark. shift to was give how your big big the called shift channel relative us as Can factors, out primary you mix whatnot? two returns from color

Yes.

-- So

hey, before it's -- Actually, Joe I -- here. ahead. just Mark, go

go. No,

well Mark, in those want the filed before. has I get think stepped closed are joined earlier I XX-K so well. to filed for soon. out present than just Legg to both phone today. was they just the line that as I Craig be XX-K will our as Phillips, in clarify the you mentioned COO want The as also as John and

ahead, Go that. Mark. about sorry And

Yes.

up mix in So the gross being margin expect the XX% will of The We there's biggest We going sales that place, in being thanks shifted into QX so the to X QX. to We in did approximately for wholesale factors shift. primarily take be margin do pressure Seth. biggest XX% reason. there mention from is to QX. our decline XXXX. continue question, two sales our driving That shift

improving in in is about of little reason trends would a we talked past return mention, as the a heavily higher but did is more discount that rate. other quarter the which continuation return I like however, are we we've what a The some to rate, well. on the seeing

do factor spread, with those the higher the ratio return you when product in the orders, without that selling and associated and it. has getting all that et cetera, discounts, rate those benefit wider so to cost and And have gross net we a of returning actually the back gross orders, fulfilling

our line, the that impact due just the we terms some the in XPO expect pieces we other benefit transition. some during associated with We unique transitions away Joe our have inefficiencies transition made forward. with So which to But during partners. making his remarks, the those moving service, forth new margin roughly some from bottom prepared impact, cost. of made to the back up that's benefit which see and impact, a both on did and up our to of experience, items the Pilot, fulfillment glove fourth We as cost it mentioned overall of quarter, we white for fact fourth of X X/X third-party of freight we that logistics increased going provider in and some delivery one manufacturing cleaned did making quarter, and inventory negative and the partners, -- brought being related

do from improving. our We Seth, do benefit that the of are some believe have believe efficiencies in terms production that items we freight. forward, mentioned of that some we Going Joe

throughout expect little on the However, all bit as then we is first prepared And quarter in XXXX. improving I a some mentioned of margin still gross remarks, of turnaround. also trends a

it. Got

color, Mark. helpful Okay, really that's

margin do this that where think business, in margins expecting? step see for yourselves we if being support where this time? you of years' X expect that What's gross about to retail And X guys do X you mix wholesale be taking the to to the to business? Just trajectory you're forward,

Yes.

we wholesale, wholesale, capitalizing of XX% would which lot now, expect we'll have year on. our we're obviously, of opportunity right So through as which Mark I business north was a clearly this of be just some that, creates we'd the points XX-XX in as hundred pressure the of saying, margin more difference there. of margin few term, something think there's of a low Longer I end settle basis on range.

I healthy think it's well wholesale it's business that think to We for we've customers channel a support. great partners. to got for our channel continue worked retail we intend and our

with We product revitalize as will as business other our well. opportunities be well continue do continuing as, as creates direct-to-consumer to we expansion, to more

fully So margin going a as years. improve X manufacturing we we expect over of challenges, the more the on flex pressure again, more wholesale have to think short little up but next these it to sourcing I to we work a little are and through in X term and some

my I'll turn last And it then question, over.

the Just thinking could do marketplace. take initiative think premium does about to implement you news to you away that Purple to the the that the that some from have. brand juxtapose How with initiative? discounting, wanted and I that elevate more brand

Sure.

it's we general. even as very competitive, closely much, -- some form are in what we've another form, side in discounts tested seen, been seasonal business, being what or on. off. watching promotions periodic Industry-wide, recently, with and And and the we how just we've much go since cautious there's So deeper on appropriate that and there in we're discounting It's cash one giveaways more premium of the we've of a whether question discounting, whether actual been it's the launched. product we're it's

that that and of that So market. or just in What promotional make making promotion we're appropriate go to a discounting going the are points more we market suggests we think well. sure we a are not market up, strategy there's and have sure to would that, and a very is of get we the put up are, as position product how kind trying continue premium unusual rewarded our in us any reference I to is do think to premium discount brand, out that strategy on for I lot with that activity,

The with Markets. comes Brad KeyBanc question Thomas next Capital from

wish you other best all Mark, to wanted to the things. you on as move

Thanks, Brad.

Brad. Thanks,

a then year. So about Obviously, wanted and to us slower accelerating guiding rate at revenues you're move for little I revenues. as the can about we XQ, Joe, talk growing guess, in towards through the outlook going that help you is you How do revenue growth? existing us products? BXC products think drive acceleration driving growth? that is is revenue much wholesale? see new in what's much How What versus versus to

Yes.

we So first our been that articulate largely and to thing, a have unable it it can't our have in our had there demand in We've to I this produce of been enough, a meet, think, lot we there. I in rates, out cancel our against seen challenges we've throttling media growth and consumer we've seen comments. And social return in of And we've timely manner. a lot rates. ability

put more we a some quality coming on With underneath mentioned goes our a a which running him, prepared on operation most and manufacturing, team here. sourcing, with that a milestone John and hit him to place as into surplus. new fulfillment. where so a catch-up, really much the producing on we a all expected terrific state I effectively is, on are last great team a to in constant planning, John's of And gone he's is manufacture demand nothing in we of on has better few much new true the there's leadership part we what developed in way. comments, timely from S&OP and And So we've products, focused have backlog board, scale alongside a being weeks, officially running and in painfully able ability do model, to products are now core our in where

we been So retail it spigot a we customers. the meet can trying just of has we make turning go, ready our and where our and are back on, responsible in wholesale, we've and just to where this store partners in been especially both some manner, needs of have to sure openings do the that door

now, around at side the but working how So refreshed now been there, is the marketing viewed a there there's and -- we is to have, rebuilding and only painful, of have much, we there lift side, back as obviously there's yes, times believe we a It's our on assortment, people. messaging look meet rest the built our in and one on well. that, that several as we our this The product we've -- just half that from as now look and lot Once out very refresh one-time at comes it's demand. so we and have, just a in a great variety our lot problem been a clean some a direct-to-consumer there's of improving existing to smart in take of that solved. and lift that's back get there -- communicate up upside a there able with we it's we're we at operations year, to I've as look going more there's the the as with as mentioned we we content the and refreshed with be partners we unanimously brand marketing website can new that

of the off what kind where XXXX? you in efficient more What you. margins. of dovetail those get in Joe, acquisition you to customer think about you to Seth's with go Got marketing? just opportunities terms do of to connect cost? And do And And and that here have seeing question are

is, to the And we a that built a it's We combination. it of did work mean, really into the I'm what I looking really this size, just operational overall not rate, of solid, doing what average Yes. at points bottoms-up order as with we're year, cost proud go in price are that. plan conversion terms but is part of acquisition organic we traffic, as just playing -- we well. our

get some it which we're mattress to think We're the seeing bit. the some some on I have of at way, better categorically, the for our little just customer there. of just with And we acquisition been the, we that's sure out expensive. make we're will with in Internet different So find conversion softening levels that on I be how How on market the with just just marketing believe for sales not How spend. our pulling marketing, hopefully general getting seeing there looking cost, the our a of overall, out But peers continues more-qualified right back getting help really, smarter appropriate expenses us. side do we do just do at which pools? much and rate are we're a

value we terms the those in making again, expensive average as, price getting that points, well As can. order of sure we're highest on

fighting think just situation, a much general. where one money head-on I option again, we're more it's rather than nuanced the our in better So just how working and it's marketplace,

Piper Keith comes Jaffray. next with The Peter from question

Mark, to or be from going or possible indifferent margin the just you wholesale sold? between could -- over contribution there's products best probably and nuances, but think, as could look of are out side the with wanted play brush of a the it out, dynamic just well all and broad just at direct, channel is the which wholesale I to lot me. margin time. to that greater that maybe be you how on looking is direct? And strokes, do And contribution

effective here. the product get continuing touch little from bed, that of perhaps feel our mean, start of biggest you. sure, Good myself? Joe been view the for that more can just different feel it Peter. a heard, see had to retail Thanks, the kind to with of, to it, a I'm that TV color. let's call Mark incredibly signal hear fit. Right out the it's where channel provide it such now, for concept. get more wherever just the they floor has And frictionless Sure. our It we've and still product we I customer and not played us down can demand can I'll we're been -- I partners, where on have into our bed. the ads customers strategy latest done

I that. a margin keep starting creating direct so of to seeing close become some the able through I between chance with to is and as What for is part being worked it's as -- a now subjective in perfectly though margins we're So margins been flow really is close through us. we're much well we're of significant become mean is think more but term, margins as a long close, seeing it's we've delta now and the okay through wholesale more, -- pressure And business, more overall. of strategically, our that points difference, are Right that. it we're few fighting

part is color. in don't at, the of refresh of you is product there at penetration able add As there. strategy general But some think margins want assortment level, in be the term out is our which and out. of that to to the will is I improve building part Mark, as any we're I itself short pressure looking some this work there. brand really, that we And for sure, it know, if

Yes, margin. bit getting bolts and so more a into the little the contribution nuts of maybe of

the obviously, pricing look retail than that is dollars acquiring you on at marketing dollar is it wholesale a very marketing As attribution The less gross price. associated customer, margin, a difficult. with of that

good we sharing last have do a then Try we button attracting uplift obviously contribution the at across margins which difficult. included look board, in them wholesale. over that mattress. is believe shows to the getting saw And solid, an attribution contribution we what on to in site, is acquiring our are and uplift off at because that with believe the but we retail margin, We partners show-rooming retail we of the which we the But our happened quarter, our advertising, retail, there's consumers website, applicable, a we product so that immediately of the positive, and Store. new to is customer, them at partner, to our are margin that We one those or true believe and directing very but contribution the is where as sell-through in sharing purchase cost

continue believe model to omnichannel So pursuing and the strategy, this it's overall, have it. right we'll we

very like and sounds launched pillow that or pillow some look some it for around launch the made interesting tenure that could you people to just from we your helpful that improvement changes from under were think you Okay, launches? any Were that were stats there with feedback. around you that's Joe, product sharing future work maybe And that it was that drove you successful. quite

have. was with different our lens of and frame. as stopped a there spirit the back, brand is I'll core platform to delicately same try accessory, bring thinking we products, with a technologies, can. I asking If the innovation pat of look the I change of support hyper-elastic or an But of every well, our do manufacturer base be an The no, into slightly brand that customer that we or and as assortment to to same through you're us I a polymer think an which helped as and opportunity power -- me to the few to And to there on myself don't products the an organization, single a was for tie-in a service of that like need we one of innovative a be itself around ourselves those with as just retailer more into service just a our customer. our is really products big that

definitely with appears so where product. more that. and a early So think days product far, heading, But was I demand like we're think it's market it there of new that's that this directionally, I for

see us a do pushing and direction looks about in what the you retail think manufacturer a -- managing assortment, like you're vertically as to versus a of I So think retailer again, who more retail. integrated going to happens of

for one the me last One modeling on question. Okay.

the Is the margin? So in expect EBITDA lines EBITDA that EBITDA and healthy Where margin year expense some get we certainly there that you QX as in QX, are framed to guide, full you to gross decline get need now would so kind pretty primarily increases. year-on-year pivot to up the of decline, the are see to and can we the Or leverage gross around to margin P&L? to well? key levers from

expect do But come as we leverage So general see from the at large of that will in line. increases. revenue to just part gross a margin increase operating

the the definitely some the see improvements. we manufacturing some benefits course of year, of that expect So to over efficiency

is our encouraging, implementing equipment. in We which getting are We running. that facility finally, new have up so automation it and actually sitting

well sustainable meet Legg Joe over John all several enable made his As improve as seeing levels hitting to to past and of us months that will of and production the mentioned, just have the that all improvements team the solid, demand.

the of items. one that's So

pay resources job vendors and in improved not new big we for great the one. I of of that, of to us another we Sourcing got process internal the are sourcing over expect the renegotiating, margin fabulous some through Again, Joe past believe of finding the going is year. that mentioned have course dividends some terms we've and sourcing done a in

are, rates. the see cost And We XPO year. delivery also then very have return improve throughout to outs, input opportunities cost we so been A continue And side, some channel. other early of expansion Pilot also gross net-net, They And the over continue to we're to mentioned the see the takes our benefit opposite of the a changes indications things expect to of continue But throughout do a cost course freight. the some increases improve down, labor improvements Freight we for seeing positive the consumers. for which that few our and margin. we delivery to to they the perspective we the continued that perspective, had and come from wholesale of as of will return from year. terms production. be expect to rates those in would to

point, price to and improve margins well and Two are for are goods of of and Again, in design part others, making year in as Mark. as and fulfillment, in -- the have nothing will we later it, what continue cost been that that. designing sure that refresh we the there fulfillment other is happen ways assortments one building We, this to with both product, expect things general but to some is we looking cost points just improve calling mind. are the expand as I've design we we in the And marketing announce again, at general. to to we our are

in invest dollars, of more which and pages effectiveness which significantly improvements our we'll see efficiency better a that as and the marketing messaging improve assuming we getting will will the better and -- rates, margins are around brand landing website means of that, our improve be well. the conversion We techniques marketing in from set we as that

[Operator Instructions].

Our James. with next Bobby question comes Raymond Griffin from

for everything give wholesale us we up? XQ XXXX kind our and tune for penetration or you the don't have XQ, can and model, XQ but have can XQ. of we Mark, We

can. I Yes, actually

XX% QX wholesale how X%, penetration was at proceeded look and then QX, XX% QX throughout QX year, we was and as the So was XX%.

rates Okay, for return question, guess, the headwinds, rates, in of next I models UPS. a guess? reengineering XXXX? the But return I -- the rates And And too product do that? shipping continue fulfillment? the going what in terms the around the my the of large for guidance are it. heavy that That's then gross secondly, I better guidance XQ? through of and appreciate XQ, margin. terms of then in in so to sequential return improvement about I the And Or the was assume think was does higher also, impact How versus from all

Yes.

side sides it, of actually direct-to-consumer. -- logistics call we and the, the So or to two freight there's

refresh to we our So are sure as that make some are And and a at lever the big level we assortment assortment. can have. that FedEx much as is what changes product we expand expecting That one to we is, as possible? doing we continue our

is white getting in making provide customer sure The equation the appropriate with is, the are a little value-added which services is other more terms glove. value the nuanced, we of we

we because we -- we can the on that, have where white there's if option, our give been use position We the the an on of sure price mattresses, bed setting FedEx getting we -- And smaller value bed make again, take to beds. exploring away we to actually customer to and reduce don't taking have freight, how and glove use the the added were premium is on away exchange service to up. that in the fair it of do a terms the old

with customers we're the curve So most make we and equation, that. expect resonate to and well. things, both outbound And see that, on with optimize there offers as costs value any and we that differently, associated there that yes, return as elasticity what different we're some to on finding wins exploring is sure with an do ways is

in And see your drop sequential return return did from rate a QX, we rate. QX question our the on of then, Bobby, to

is but accrual this so and XXX little here, bit nuance a course, between points, accounting, there's Of XXX basis so of fairly significant.

take these hold seeing offset we're Those higher were working quarter, and very them initiatives, implementing we're the well. discounting. As however, by in

didn't we us when tailwinds it XXXX, some that's -- where about we there. that some margin, gives quarter. But see we so through go And the gross benefit through talk confidence as flow that in we've got

provide time. And if especially way allow to to not that Yes. discovered our compare I financing buy we've financing a had more see but of a options, lever. general financing little off invest most to to opportunity point up, we also in considered remarks, We've financing probably a the just with one in really moves partners, sites you a a over our bring did in I One powerful some other but up should also conversion also -- most existing but is direct-to-consumer customers continue to that -- prepared promotion that still bit good we've have, options but really success that, a pay lever to expensive to we brick-and-mortar there's of able that certainly your disparity. ways be discounted is recognized purchase, lot

we see it's now as kind still points? a little bit average? the XXX of quarter, -- as to sequentially go norms higher we we it's then, XXX, through first the are how I basis above that on enter good now And I the Okay. Or improved. historical rates, return far historical the than mean we guess, are that above

By of levels? mean XXXX you historical, kind XXXX, do

a where better to versus side put better business, it the for healthy through. I return the guess I is rate of you is way it consider a guess,

we're say ideal basis we still I'd points couple is. hundred believe above of where a Yes,

be for in when vertical, which nearly lower some business brick-and-mortar see above I very both rates I know that. should see to with Obviously, than sign. line mean, for reason reason product been I those we're much which no accounting we the are. that positive mean, see -- are And evidence averages and industry and averages, that there's through be to return rates through opportunity be fundamental in on allow we what our our still online, that. and we averages don't industry We're transactions we brick-and-mortar, that a say is there But channels, industry any have any I been sell that you return should improvement. to aspiring will is Yes. below tend what we elements in that. more shouldn't has for

conference like any remarks. This concludes Megibow to the closing for over to question-and-answer session. I turn the Joe would back

Thank you. And thank you, joining. everyone, for

in the to just in. story, months an clearly I'm as I'll last of work and this have X a So to I I'll call very, do. is we well, said -- the lot date. just I'm very reiterate, as progress execution with over thrilled

love our resonate and together. and brand product better team ways to come and continues to we we're with that channel think got moving and resonating We've we've that engage consumers of, think the got we're coming real all there's a make I better, retail to proud forward. that's and differentiation and both customers a work a with, that product has things actually continue and together, got our We've partners. differentiated our platform team

helping really coming really that. move still, do us ball buy vision. team really starting that forward, the into and together, hiring a but to have to here lot of pleased We with so is that's this They're it's

much. we things very with Thank So up. will wrap you that,

today's conference This call. concludes

disconnect participating pleasant day. have may your and You a for lines. Thank you