Purple Innovation (PRPL) 4 Mar 212020 Q4 Earnings call transcript

Good morning, ladies and gentlemen. Welcome to Purple Innovation Fourth Quarter 2020 Earnings Conference Call. [Operator Instructions]. It is now my pleasure to introduce your host, Mr. Brendon Frey from ICR. sir. ahead, go Please

begin. may You

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

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

me Chief you, Officer; Operating is call Phillips, Financial and Legg, our Craig everyone. good morning, today the Thank our Officer. and on With John Chief

plan operational manufacturing, be omnichannel a that to We marketing resulting in initiatives happy entered we'll prepared our outlined call team We many our take we fourth successfully executed our XXXX questions. place on quarter with and a which success XXXX. to time momentum on distribution, our accelerate and of the a lot growth, year remarks, Following earnings in had build this your amazing ago. retailing in sound from

navigated the virus, changing companies. proud leaned Early businesses. challenges for thereafter, wholesale our down. I'm U.S. we and the shut in of life and capitalize Purple of year market behavior. portion including accelerated on shift quickly conditions large into heavily adapted throughout Americans and outbreak consumer organization XXXX slow health interrupted volatile year many of outbreak, measures altered most across other, online channel, everyday help the was to the nonessential to retail, how our brick-and-mortar to the the the for a a buying, digital was by while the be no proved Soon pandemic the in which our incredibly plan for the skillfully country the to spread COVID-XX global to created expertise a significantly commerce disrupted of as most like

cushions for business our differentiated on the for pandemic. and opportunity Our as our spending to home a significant increased not boost created during was tied the well. but received categories This also the mattresses, true pillows from seat only

XXX% experienced few advertising demand highlights and back XX%; along XXXX million integrated net and with and notable earlier with compared of the included basis A our profitability brief the to to lower ramping capture the at also margins to of income production loss capabilities, XXXX the after significant points; of accelerated XXXX. that gross the manufacturing approximately finishing adjusted product online created impacted our to COVID-XX the rates increased end portfolio the XX% from of first with for start of in XXXX. million; of production include: $XX.X points from a year cost cash at improving XXX and heightened adjusted up in year margins online of Machines EBITDA pause million, by improvement revenue shift we savings pandemic, channels quickly margins, outbreak of XX%. increasing million, fueled financial end direct-to-consumer net and certain positively the net Max basis generation. additional X cash actions $XX.X a vertically $XXX increasing in brand by bring XXX% which, EBITDA capacity up to our XX.X%; up of improving the half $XX.X in We This advantage The revenue took XXX to a work the

In year. this past our were to there performance, strategic financial accomplishments addition of number important and strong a operational

Grantsville, new Machines. we a we South, South driving broadening of and cushions As innovative more lines. product sold by call. X resources We mentioned, capacity total and facility lifetime which Utah year-over-year, speak XXX% on I in put house our for awareness Machines, pillows the Purple over demand and Purple seat in I'll crossing added X, Max million XXX,XXX the over our opened units X in #X which Max Atlanta these more later We more South into our for in each, facility. completed ultimately X fall, grew more will square-foot as

historical nearly the U.S. market while respect different was Finally, X%, estimate follow not it market. of rest share of With the no the in be to we quarter, to consumer meaningfully our behavior X%. be did the trends. our premium over from category XXXX price We $X,XXX fourth above that share increased of to overall our mattress share points

consumer was This indicating the orders purchasing Following a strong sell-down of followed related well quarter. weeks partner's experienced of earlier rebound at of inventory some as the to year, as year. as the by aggressive wholesale softness reported buys holiday start as in last to a our which and season, both during online the in in we a wholesale possible by the slowdown in well in the end January, delay brick-and-mortar stores, significant our partners few was a

wholesale business by of of in implemented due was closures, Country's were early restrictions virus. XX% Despite to Sleep to help challenges, the where particularly to Our locations new December store a been positioned net XX% for impacted the shut wave EBITDA. in in XX% delivered an including incredibly unanticipated in we Coming to increase close expansion loss gain in never we forced also adjusted off and growth. second XXX% our strong slow channel, in these QX, better revenue in a XX% growth, improvement and have net an direct-to-consumer year, Canada,

we in investing drive focusing the year. the long focus further over XXXX on X business is near are and Our to this big gains themes in market There on are term. share

our are from showrooms; and wholesale The value customers, as a call is servicing produced in pillow view with well us. from to seat as product theme the this theme, potential as our of innovative educating customers. turns platform; report themes as customers. to its so businesses on success of true accelerating is as around buy we is will pillow everything Max aggressive on bring capacity; and I'm and, first The are to on that it. likely to of of expansion, seat and primary as these majority are theme, brand the and final X as new driving assembly in second launching finally, cushion In our presence; pleased in products; behind time we transactions, production, along the cushion to cushion Purple Monday, first now out in differentiation, officially also growing of a and much units the bedding the suggested are our another a It what the Purple pillow we initiatives not cushion e-commerce that new Starting makes centering also execute to which mattress shape move I The late better first specific transaction new January Purple the last intend an move much support seat products new to opportunities. this our we that innovative lifetime single manufacturing we satisfied support or our facility from manufacturing road. customers rollout profitable in mattress expanding results introducing loyal multi-category, our new historical walk X first Machine, beyond. comes are: and more and, theme Xth to buyers market of as down more outside customers get Atlanta, and continuing line The unique with year campaign. through going debuting our our to

to a finally our the no built headquarters Max gratitude. any and end by we in were X us from XX Max by retire These in and the are was Max success quarter. The in was of new served able to this well, Max viable. other X our stages a versus our Max With cost of launching online by the expand and X XX design which bring machines. Georgia later we year. investing a her XX XX% Max with final facility, preparing We further early mattress prototype, are increase different to as in output also our longer this machines expected XX X of of She as owe XXXX, to original Max maintaining we X on with machines next year. QX, will be follow of over debt

Georgia, is manufacturing quickly offline ability the expect base unplanned machines than have manufacturing for year. anticipate overall half the downtime. This the and the to growing should we we bringing the surges categories. over another Machines of growth capacity by year business will heightened our allow and X have easily have Max to in top This getting cushion range for pillow us exactly long meet more All capacity us to ever in in, already XX%. take growing, maintenance, have us we and X we seat planned production, working injection unplanned faster additional hard better for and to installed that capacity, the current by entire our fast-growing molding machines run point X than will efficiently demand machines that increase is On these resiliency, first we into used an providing will more to for which we capacity lean accomplish. our machine more later are what additional and first As our this additional been are allow of the online

online, count up our impact of growth ended growing of XXXX. was modest doors, nearly XXXX coming due into at we from intend the the The direct combined year to than business. brick-and-mortar more we door with Moving in our X,XXX surge manufacturing constraints COVID-XX inventory our retail, wholesale X,XXX wholesale growth. had on door driven with experienced capacity presence. lean With wholesale last to the to We accelerated end by additional the

XXXX, X,XXX channel Our current approximately additional on on in footprint to our is direct-to-consumer, our XXXX. full be as to partners some players. expanding current new margin plan roughly with as in does well with schedule, XX% which furniture our both mix focus launching mix project to a with XX% create as nearly for year, add the wholesale regional realized Based existing leading the doors compared we XX% DTC we pressure

a launching e-commerce to new platform. Now

capability, thrilled that and for that unique of We us release end of we XXXX. product focus beta continue we including with customer This by record. believe work to of engine also on release launch, of our said, recently on which has after consistently the demand, primarily into opportunity more showrooms rollout fuel with will now complete This are as introduced amazing, areas. the capitalize and the preparing the share outperform a is With best which with story our contact the platform quarter. we finally new the is Purple and in the in-house showrooms. in accelerating to center with phase XX to design will DTC plan phased first opening up competitive to and are to Purple start pick give much our year, coming an began a we sales. accounts XXXX our includes design, locations even showroom Throughout point-of-sale grows. unify CRM education this an systems contact as our quarter. quarters. metro the all-new that brand We it this opportunities add developed major assortment platform double-digit tell have also immediate X new QX an between practices, content well sophistication elevated to heavy this site, some design believe of to advantage. Shifting of opportunity with The platform the single in been order during year, rolling continues now full pace will of center, XXXX X showrooms promotions looks The testing significant we the as We the out for are door deferred the currently customer-centric developing new enables we new XX stay-at-home and and assortment. representing and to that presentation with opening and plan In store a

and higher expansions All new points which products opportunity to to exciting end of our the we intend to launch sales We the into quarter than our With locations. locations product to upgrades launch year, as toward earlier XXXX. new in products original QX. margin price significant volumes believe cushions our newest on will with have with our next now of some the in are year, the higher pre-pandemic products pillows we showrooms very our early of anticipate scaling performing mattresses, for development well as including well, fuel and our and line any respect new we faster introductions, this exceeding and many showrooms new of first

to about that Finally, we we are very are about. new launch a campaign excited

still revenue are of by we We of Based for growth. outcome over adjusted sold, benefits mattresses against I'll our between $XXX to the the X roots, see our year been cushioning harder to are best our product clear, increasingly more unique be products timing comparisons and year over Craig, challenging currently $XX and years as years expect million our and not lean over these with now and in into shy in all who increase prior maturing testimonials the XX third going are makes we are planning to and and proprietary better. to we have offset review the million have full to detail. This our customers become and brand the benefits. We of promoters. experience claims what will on more financials will our medical XX% research, XXXX, up second outlook another come. and year With in Expect XX% partially expected first, happy we initiatives, about between our EBITDA turn year the story the quarters, strong be it to of million. and

Thanks, Joe.

appearing quarter Joe outlined, both from standpoint, strong shift As was some adjusted into late revenue it profitability a with and another even to December wholesale January. sales

December cushions. $XXX.X channel, in to sheets XX, The seat three along prior the period. year demand DTC ended the up driven increase compared higher in primarily was strong For XXXX, was pillows, mattresses net XX.X% our and in million, revenue growth by for million months with revenue $XXX.X

Our slowed before wholesale of last business demand January but less XXXX. was December, we expected, few weeks up, than picking up as early in in back the

XXXX. wholesale points shift This facility $XX.X by by to X%. approximately costs, in compared of attributed Gross recorded marketing of XX.X% dollars net the gross revenues while same in several increased onetime as toward quarter driven on This net offset versus year-over-year, to compared to related quarter, XX.X% offset and increase higher XXXX, the XXX DTC quarter well addition million price quarter net on sales XXXX by basis and to showrooms. Georgia shift in a This of XX% company-owned of offset non-mattress leverage of and of inventory efficiencies was a year with start-up and in XX% with Marketing for expenses XX% favorable revenue as last primarily awareness quarter XXXX. efficient points channel a marketing revenue period DTC fourth continued the product channel marketing be the fourth same approximately $XX year-over-year basis XXXX million July models profit revenue for the net increase and additional to during cost spend reserve growth. with XX.X% year. Operating decreased partially were XX by mix the more decrease XXXX. versus selling the at expense spend, year prior adjustments towards was mix can additional new DTC margin partially percentage as of revenue of accelerated in period. fourth revenue the the in margin to compared the net comprised XX.X% administrative fourth gross improvement to were net last For due and XX.X% in revenue of quarter the quarter during costs channel of XX.X% revenue support of grew brand

a For income net in XXXX to change the a XXXX, value quarter million Net income $X.X $XX.X the an and a expense million liabilities, tax period. fourth million $X.X $X.X a included noncash of value fourth expense million noncash XXXX benefit associated the $X.X tax change fair compared $X.X compared quarter included with expense the $X.X for million expense and warrant agreement. of $XX.X noncash the a receivable warrant million fourth with loss The quarter noncash million fair in agreement. with to XXX.X%. $XX.X with in quarter reported The associated of the the associated tax of receivable associated loss million operating liabilities quarter, was we million of a increase of the year-ago in fourth

which estimated an adjusted XX.X% for noncash rate $X.X income certain period. to EBITDA year on based or million. adjusted million XX.X% fourth income negative items, effective count $X.XX income other prior EBITDA not quarter million and or current was performance diluted the XX.X XXXX. was last $X.X of year average year, the do our million net quarter of as million period Excluding share Adjusted the of and reflect XX.X $X.X to we diluted been quarter these million evaluation same for to consider was the for an of the adjusted average diluted share EBITDA, of million adjusted comparable $X.X and million earnings an of an share $X.XX to in of XXX%. compared ongoing has weighted negative Adjusted tax in per net release, per count compared weighted diluted $XX.X increase detailed in the items, $X adjusted compared on today's of share in based excludes income net

year results, board, full our line which to on XX% and consecutive adjusted across before. Now increase were second EBITDA, of increase is approximately top year growth by the the our strong highlighted which XXX% very top XXX% year of in

For million the in $XXX.X higher XX $XXX.X seat growth revenue months increase period. XX.X% DTC our December channel, up XXXX, sheets mattresses ended in net year with along pillows, for demand million, driven XX, was the by prior in to compared strong revenue cushions. The was and

the revenue XX%. For net DTC channel year, increased

consistent relatively Our the channel dollars in revenue increased was XXXX. to wholesale with to million $XXX.X year. XX.X% prior profit net in compared Gross million XXXX $XXX

For year, in margins from which to primarily driven carries by revenue, XXX XX.X% XX% wholesale gross gross proportion the a our points higher DTC channel of higher margin basis improved channel.

of awareness showrooms. net XXX improvement For increasing of XXXX in XX.X% net efficient compared the in year, of Operating year the on and points This higher revenue driven XX% revenue prior marketing versus in spend, leverage partially and brand XX% investments expenses approximately company-owned offset were addition more revenues XXXX. comprised approximately and DTC period. with XX.X% incremental by basis the was by

as improve sales a marketing efforts last to with to and percentage XX% spend focused marketing as XXXX, of revenue lower due XX.X% to costs. net well expense advertising For and as year efficiency compared decreased

million year $XX.X income noncash $XX.X change million per million, previous of million the debt debt loss reported warrant million a of a we compared million $X.XX year liabilities, $XX extinguishment million to the in to fair share XXXX associated receivable $X.XX the expense of the of agreement. million change for loss $X.X the with the warrant a tax debt; a million compared million Fiscal the value in per a of receivable the of noncash and XXXX. $XX.X or $XX.X noncash in expense of before. and benefit, $X.X improvement with income million tax income related noncash tax or income year, XXXX of million XXX.X% associated Net $XX.X retirement on of net Net $X.X $XX.X was income or with for a diluted a agreement. extinguishment value diluted liabilities million a share the $XX.X For operating loss expense; operating associated to the included expense agreement $X.X tax fair on $XX.X included expense with a an and company's associated

to the to reflect XXXX. current adjusted of versus on net items, EBITDA or based million income of average net EBITDA per $XX.X $X.XX weighted for $X.XX compared an of count million XX.X Excluding diluted in and adjusted of adjusted $XX share last $XX.X of average to million XX.X% based income adjusted was of $X.X million EBITDA been has EBITDA these income adjusted the share estimated on period an XXXX share adjusted tax diluted million. $XX.X effective XX.X% was diluted was million share Adjusted million an year. $XX.X weighted rate or million per count negative Adjusted diluted income $X compared for net negative last year for year.

Moving to sheet. our balance

was from had of XX, The inventory period. at Day delays production with in schedules, million, up was at showroom in increase from partially promotion by primarily supplier capital million The XXXX, offset company partners, exercise the and driven December the earlier manufacturing As $XX.X support This million Georgia December and XXXX. totaled Lunar cash by of is including the Net in New from inventories and foot XXXX, company's XX, December XX, expected $XX.X flow of of and as to XXX,XXX cash planned at growth delivery December options. facility facility Utah square $XX.X XX, expansion, to cash well of Year million the expansion. of interruptions new generated compared our expenditures to capacity in by million in advance $XXX added million warrants operations XXXX $XX.X Machines equivalents XXXX. and Max from the $XX.X million additional from X in as ocean President's wholesale increase our delays $XX.X freight, related

to guidance. Turning

wholesale there are for year to revenue strong strategically are levels. of between million and balance we a invest our our range the a $XXX realize company to economy sheet, market and the gains. investing XX% to full infrastructure to continued overall an manufacturing the we XXXX over share initiatives. be momentum encouraged and With continues rates While of increase prospects COVID-XX, uncertainty see start at in due adjusted be XXXX by in our to to shift on normalized capacity, XX% growth, including expect in innovation positioned with pre-COVID brand our of well XX% to our continue we marketing revenue and million to business, approximately and plans, in building more as of $XXX return $XX debt million, million, current results, we and EBITDA showrooms, capacity mix additional Based $XXX

be is facility, $XX build-out of and CapEx of for wholesale projected range new facilities. of innovation the spend of million, and majority improvement and manufacturing in Georgia continued our in expansion towards additional For of showroom going the year, our the the acceleration expansion, equipment to displays to with production million Utah $XX

we that the first provided we the way details. quarterly While are are through of X/X quarter, than given historically sharing some more guidance, haven't specific we

to we million, XXXX; between XX% targets. the capacity XXXX, over an for and $XX our EBITDA of forecasting of of XX% $XXX revenue reflecting expanding million $XX necessary of adjusted and the quarter million, seasonality to first range million to increase the are in quarter $XXX investments in company's XXXX and the of be For first

to of XXX% reflect in a QX when saw year offline necessitated to in online the door DTC We business. business correspondingly and significant record it's shifted last the wholesale our numbers. in as increase to resulting reduction then channels closures, Looking consumers wholesale COVID-XX a quarter, helpful second on substantial our

behaviors, to the to year. and will trends. margin investing the door Because rates. shift addition, also marketing XXXX by the last this wholesale, platform. new continue build-out gross growth, significant more second the net atypical quarter new improvements. In and mix compared anticipate be adjusted EBITDA consumer This as distorted in the Comparing along revenue new wholesale Georgia of facility year, marketing pre-COVID correspondingly quarter efficiency supported to expansion investment and We'll normalized e-commerce drove we reduced that lower planned more both a back second margins with in and future comparison typical than of costs

back Finally, for that want additional outstanding fourth to cashless exercised ended of XXXX closing not I'll his million for are turn modeling redemption warrant shares public redeemable or XX.X warrants comments. now to following sponsor the X approximately I if that on the shares, cash holder out and approximately we with outstanding may There A be it basis, still exercised, last a in Joe purposes, quarter million in which, X completion and loan incremental Class by the the million point would of result issued. year. a total of are

Craig. much, so Thanks

shift R&D mix gains capacity, margin EBITDA year-over-year, the operations. and new had, gross that we profitability maturing we out we've our for and with appropriately and misses now with momentum to and We from to Coming significant sales, point. distorted online XXXX The XXXX. catch-up balance ever able pandemic-fueled investment achieved the in pressure invest does XXXX share are of last excited though year, very sheet strongest the are along in incredible create

to built from incredible year in stabilized look and trends. confident scale. hard have Purple is us invest forward work alike. our the worked accomplish lean and in and And and multiyear to and to growth. share a the for comes the disproportionately This to am amazing last this our they importantly, XXXX years, what and X.X team as customers foundation and allowed the across proven can us to I in compared investors team our significant capture now alongside opportunity continuing for with long-term last Having to progress allowing as drive intrinsic ability We more of board continued we've diligence execution in improvements and XXXX success

up We time, will are questions. just open call started. getting the we this At to

Instructions]. [Operator

Wedbush line The first the of with comes question Seth Basham from Securities.

overall about in great growth seems the but in expectations. still in that's is Are wholesale Joe. here, a first little is you channel on a year. demand like December, My Congrats revenue It that? thinking guidance first term your have seems the seeing like question up. things the lighter for it quarter an to But bit picked causing slowed near since deceleration

Wholesale, quickly anticipated great QX, we had indicated, Seth, our would actually you I many late is converted, it's very again. quite coming industry again, been that Brick-and-mortar months as connect hoped. we're That definitely now. ago, right this. of to reporting pleased quickly of a as our with on say, as quite against back, waves call the demand the wholesale not has patterns. stronger later rebounded as Yes, traffic said, of lot the performance hasn't us pandemic wholesale it. some never with had definitely as

continues grow partnerships Our and quite at DTC to business strong, remain rates. very our healthy

the we're the So just any of overall maturing we no, deceleration are in not scale demand. business. I - indication of seeing just

do to wholesale have the many are the demand a you allocation? on helpful. just your Do you partners? there. outlook on wholesale accounts and that current And supply That's that the meet to all with when And follow-up expect channel still have

where orders pull again, allocation our strongest capacity, We're significantly faster addition to new you John growing. better larger remarks. that trying Yes. coming new is pillows our said, And Right been for the in we - pace labor cushions. Max Again, diligently have the are building of now. the have this heard capacity - the we and this we've do. machines our team And we prepared remarks exactly molding grow meeting Legg to we the all on Machines, position we've labor are injection we that's pool pool year than capacity as partners demand that and out in better from is out right his so with our now, but in, been Atlanta, prepared what And building given that's, point. just no at

signing XXXX. on partners partners with the I new expanding are you the Got wholesale new expanding it. I and just in you're of plan about doors majority on sure may, the up make doors to that into, If of presume outlook. your partners existing I plan think that existing understand you the number versus When you into

Yes. our early need. with building penetration. ways us in and out Well, partners the for our some said, many get That is there's to to larger sure, preference our have, of market share on for we there are and support the we're out days there, large we partners a

expansion have paths relationship forward very with but we a few now, anticipate partners to meaningful of we and luxury So healthy right existing our there. the have continue

from comes with line of Markets. Capital question next Brad Thomas Our KeyBanc the

to a And would Joe, here organic great add are really piece on the pipeline XXXX. of implying XX% XQ I in initiatives gains. my guidance, growth through exciting like let you growth, If revenue take, that balance think market give the the be me apart on year. have drive you I about of all doing after or congratulations it the you lot a share seems and

about the piecing about versus think the how thinking those are we that in As you quarters? growth wholesale DXC growth apart,

our pace general for back we showrooms which So average, still one additional X largely the but are we've growth turned certainly it on in healthy with scale business operating quite Part and more in growth signaling anticipate that said we strong on the we of anticipating X some is or at XXXX the finally have supported shutdown per in DTC, time. is remarks, in paused engines showrooms the maturing, or for there. We and, very prepared we we're of QX outright by the quarter been slowdown given which is DTC is some as this very brick-and-mortar.

times The several our we've spoken which center, on. other is contact

meet we rebuild our an launch we've online into entirely platform, well. who helping have the And last complete last center measure, ourselves found new customers year driving an and a double-digit to new average fuel all early that - combination extremely given higher But continues did putting got percentages customer, top at are looked significant finally, e-commerce become complexity this as execute We engine. rate, It's the approach promotions new are to our find nearly homegrown we service with short-term well. could phone higher year assets year. and opportunity well. didn't all conversion very entirely a is that growth design growth order and focused business our needed market with and of transaction. the options that our contact units any in third-party bottom, the as facing as platform then I we those to deferred driving on helping higher out every mean, we magical the associates Our customers not and to value, we is per on significant

we or ask And When you. guidance. thinking level investments should EBITDA impacting 'XX if bridging and EBITDA? 'XX, about onetime helpful. to - the much about investment in That's step-up about could Got that's of how a think about how we I question the maybe think

last this has year characterized with little. although and dramatically, grow I were organic it portion But would into to investment continued in so of call is that investment arbitrage forth that into as really wouldn't I that advance and year, core of we catch-up. our Certainly, there's revenue, efficiencies capture of were business up. catching able to to We a could even is the just do able say a a and be lot but a Yes. good lot lean - growth on an marketing really

to If the you as of competitors. look have invested substantially we of door some per for field of our we metrics, key at support, number salespeople that we nearly any compared under are example, our

a investing. there. e-commerce provide jump want forth, I if you to we just specific guidance the is are expansion out as clearly it to initiatives, continuing if more you can of in, business. Atlanta, we some the That Craig, said, and about things rightsizing So talk our little know I outright like - don't so build showroom

Yes. the it's basically to be I would across lines. say all going

marketing it's and going we to selling, making talked build And the they're in about then the include, building and cost add rightsizing. content still Atlanta building to we're sold, in of brand. goods of So as that out continue and going Joe be and combination It's machines shift. channel a investments in infrastructure to in G&A, as

the on tailwinds it's there's going lines, to and well. So as a but mixture, be be going to pressure there's all

to thing an So specific for point us. investment there's It's to. year one not

line with James Raymond Griffin Financial. Our the Bobby next from of comes question

couple I beyond. bit the of spoke little the just quarter fourth delta for questions we then fourth when kind want XXXX biggest But I a in versus of don't a and quarter, the dive want about to revenue, November, into the and to soft ask what in XQ? rate rate growth on November? side? DTC? XQ to your what the call growth given expectations it comparable it having Was but wholesale slowed Was the of XQ on Like that compared guidance that in in was to guidance, it versus was

softer It than was hoped. little led was had Yes. by a wholesale. we Certainly, largely it

biggest early December. you performed the on see, As looked back we of as catch-up we and in hope we what the QX terms malaise half little delta remarks, Again, was anticipated, data buys in at later in, have data sell lighter had the there. results. we brick-and-mortar a overall seen QX, than the DTC indicated said would to as which, certainly more market see prepared our sell-through our but of in is saw in a quarter later, that in in in well, you we which wholesale

do not was half we're hoping driven were of in of thought hints, give were lot gave formal lighter a QX. anticipated. other for hoping the directional correcting were we what We some for really we We a think it challenge, guidance the closer I mean, this than a that gap to specificity We and lack - did more, of year, a would in just in the I But we some clearly back we again, I little December. sort came for internally. we had of QX. was little and think

more are to going as keeping try forward. saying, moving much much year, to this with anticipate we definitely, see you're what dialogue more open transparent and and communicative be we going on So a

business. Okay. it retailers, I the much had there other more some just just too That's for in moving wholesale around parts customers that their retail wholesale inventory course, asking I'm helpful. majority had wholesale an that impact And peers obviously just on your while, a quarters was COVID context have the Because of or aspect, then products? of mean, market, did is strong the your pretty are little

just see there? So was for products? happening shifts there's on changes getting Or there enough the are some that Purple the not visibility timing floor to you

Yes.

as QX was balance back certainly, opening of year, up. compared to So

wholesale the of I allocation, very healthy we were was of product - out some trying and on when their that So to optimistic for quarter. We think build stores partners quarter QX consider so those who leaned just heavily had into saw a also in brick-and-mortar, early our could. very coming our buys some we they

sales rebuys bought the inventory quarter And burning very healthy result a held some and, and - just year. back in quarter, the early volume. I think early then the So I just of, sold until sell-through pretty their think, down I this in positions data they that down. heavy as early shows consistent that

get that the final Okay. you with And you the of other does guys Machine, until One secondly, Max's least any those profitability are growing or temporary since an is removal company box capacity anything wall can constrained a that puzzle the share or in the for at you again? you situation Two revenue owned questions. machines stores, bigger of for more put built showrooms, then from part four average up you're the around to target a aiming become Purple economics going those now? of standpoint

Yes.

was So for were X, it mean, so was Max which it certainly sort it's a figuring out. of and the as Max as built - designed - prototype, to sorry, as I X, built we

to we looks that our we've prior to Max is of Max quarters. Machines. operational. And differently X the capacity it maintain reduced hard been to leverage any as pieces given This other of have moving So across our is Max with online to It's efficiencies Machines. I continued than all find over has commentary what's facility we in and now at Atlanta performed come while out operational try for a mean, our and it continue many so tease up and anyway

and John retrofit his in Legg Machines. We amazing of operational improvements. have capabilities. many, in month on has innings machines are all of continuing how we our fundamentally and the team that of in could things team better, our yield initiatives significant month engineers as with on of still an learn do that, these to many play We're we these maturing our economics improve early Max

continue to and of we Max get of whole better yield the So more economics Machines. out fleet

going early we Max are challenged we year improved And the XX any again, with our on facility being were growing Atlanta track. that there. it well quarter, said as labor, combining So pressure to of next on not up before, labor capacity. capacity. have nearly and as are seeing right throughout and is be now, We'll we and as last I X operational XX are

growing will is than We growing. capacity organic be demand our faster

units. was just And you of the Anything one can these to model of for part store the are the on now last then as a economics the the Okay. bigger share going become business?

Yes.

Yes. missed Thank I you. the there. second Sorry, question

there only X So year. we of read are specific than other that at early good a there there for think which disclosed been haven't about benchmarks I X showrooms, out yet, our and targets out we're have

benchmarks new that and carry design wasn't last team and really, out which a are doors, to these cost an and, are all bringing don't last the And attractive. our to So reasonable. healthy. fairly done year right cost, a is out X the inventory, brick-and-mortar. maturing in year we've build life, has exactly incredible will the very the lot which just brand And made on these there, progress impressive, to other very economics these of our But - signals early strong testing of our an we leases reference similar we on and anticipate are are frankly, get now entirely

but some give little very of are really it, So call economics really, XX-month on take, we or see less, some a ROIC economics. strong continue them and, more, these to things, around strong

of line the from comes question next Brian Oppenheimer. Nagel with Our

colleagues your parameters you the But guidance, couple you - ask of with into - some quick given these to So ones my start, of first I so had a I asked. of when it when results. some and of take but want kind regard third are to us quarter QX, you think wasn't report the questions to off, consideration follow-ups to

maybe what you of - was - at the so reported from you how look recognizing mean, rate down you - shift revenue unit the that QX. Can back the lower so from get it isolate DTC, wholesale to sales help to words, mix really, In just you of basically number. I slowed dollars like other growth in sales If much growth sale? slowed from type QX wholesale a today, revenue

a and a per back that revenue did forward-looking through so continue come much mix much we see of more to start Yes, were net comes more certainly, weighted DTC as to good unit that normal shift, we'll as wholesale That and with toward, of distortion QX it, we revenue more call of saw levels. back. chunk more or QX, capturing mix,

So again, we're little weren't prepared that shift, with see into is a unit sold mix didn't meaning level, overall, more down. going we would still actually to have of We inventory compared we by sell to at remains, realized. XXXX. does on we And were that a could much pull allocation. with It or were constrained. thought wholesale the mean, point in is what than on our little I we QX track give expectations. the in QX, be. throughout which more where you're take, line driven it still have probably it a more really But more, partners unit On a level, we're as we to

outlined we improved regard of the somewhat on downshift from you had still with Then QX. so wholesale the in represents for comments revenue guidance the to in the mentioned QX, the guidance QX helpful. January, a prepared trends in saw growth that but That's what side, Okay. you you -

the I January? demand you through - the So now. of now line is way I'm asking quarter question in improving guidance Are given better than tracking that you're guess and X/X the right in trends

than Better gave. the guidance just we

Yes.

that next can to way the our No, lot for We're fairly the quarter, - we're I up quarter, so think and likely the guidance is a so think through continues could comes guidance uncertainty. That world again, I us. our our appears is said, and the our pretty that out more guidance fair. I It be spending over I whatever of There's is that opening month come than think all from may true. be a upside little guidance. happen retail more through stimulus the the be may far and X/X optimism,

guess, Okay. the question, stepping then And back a final bit. I

saw will, a has XXXX we Purple unique against stronger. backdrop, significantly always a flexed business unique you clearly, DTC very the So in of - if

Purple now I'm there's side? certain and but forward, refocusing you still selling the side. here I Is on growth you're question DTC the the that model, or look constraints recognizing capacity you're you've refocusing on thinking you as wholesale So often within the that said is - everything asking limiting extent that to about make, mean a

growth. still as No, capacity comes grow we up finally at not the intention favorable at the for showrooms. economic just continue to of all. our channels are economics, wholesale and on those DTC big a mean, there. out are and we're have and down And no to in levels Really, most taking share, it our starving to I we open we push in we favorable fact, days - it's most our wanted We early able market to.

better the want able ability year, this quoted, to the are, schedules. we where sword. is year able We us want we into we That's inventory. As want to have this maintenance We And to We to hear before, flex excess be. be double-edged sell every exactly we anymore. is the a won't you to that have I've you saying said building make. mattress which capacity, mean, to to Again, want be much the But We sustain fastest but side. seen we the and get there, We've I fortunate, have of path share is service with that. haven't our out customer, to still forward of excess and been capacity, as the offline majority need take on we the to been any terrific sales. unplanned partners downtime. driven want growth, predominantly have wholesale a brick-and-mortar through category capacity to

from with. aren't demand, existing hear doing partners continue We business and to both partners we

DTC. DTC was have not in So going lowest channel. while to our the up lean XX%. QX last in growth, we are driven still continuing saw macro. use We're friction to for get channel more capacity growth DTC into going we year even XXX%-plus the we support to we the QX, I That to was in mean, have

get we're continuing into as to more lots in to other we to upside and get back normal of capacity expect We channels. see then push excess So there, healthy growth the that levels DTC. growth very continue we to our with just

Our next with of Nagle comes the from question of line Curtis America. Bank

market terms should margin know to else of sort of So to of XXXX than XXXX, in all of it's ahead all I of and want just know, think given lower higher about guidance. don't longer XX% still in about ourselves. the the guys I at potentially and don't something should step think investments proportion EBITDA? profile back think, How just you're profile things. I of envision I get out not just for giving years? capacity terms a sort of kind all equal, more point and be taking X thinking term, range 'XX in thinking kind you sort that the that of the the next, do kind X added a those call But we of it, I of

very see Atlanta road are of internally path other scale of this work some - to and absolutely us, are down in in leverage right said, complete. we doing of player front for to continue being lot We're build we of in of believe share our opportunities able invest lot as growth. opportunity in That categories. that the But a we on heading now we to continue is are we and out There to and multiyear major a out our we get building going that well a map, future. the near being as and facility in category as there anticipate

selling, total we the XX% net continues be our our it to traditional and Even as total that that becomes net a in smaller, anticipate path expenditures, grow facilities we're of this advertising overhead. absorbing as rate. which new we will don't as revenue to we're at and open about of continuing revenue year, of new that Marketing, percentage continue around investment

leverage there's business. move So forward to in and well the opportunity G&A be we for other as going areas absolutely of as

intrinsic yes, to margins margin new So be margin start with raise And leverage XXXX, we there's products to see lot optimistic right as and how bring describable obviously the other our think up that our yes, taking to so, ability could it's well there little gross to the our specific there. in now, earlier, beyond. we've and I very better profiles it. built improvements just, prices, some ability scale and demonstrating a to EBITDA with I focus initiatives from manufacturing more near built mentioned on and reasonable as to and improvements this can both continue a share about And and in we is much are term It's foundation get get margins.

just maybe about segueing of then And enough. non-bedding to Fair sales. thinking Okay. kind

it grew nicely. So

I think said you XXX%.

in small X% again, a sales, do percentage Where like a that, X but works guys implies correct terms still have sounds if you me the I category. wrong, years in you maybe percentage X going fairly lot over of - think the to think of forward. that's you sales? of next so that I'm It envision

our far piece. bedding about Pillows very a pillows, talk But of just growth report, points, who we relatively rate our small segments some as engines. seat great mattress. we our selling category, attach with couple Pillows mattress. Well, price bought a so haven't to products. we're Yes. part customers higher more there even And of to yet is and non-bedding a cushions more specific are is good interesting, mixed

buy the durable here engines. on healthy Historically, on profitable interesting you company. We've lifetime purchase indication those a transactionally as categories mattress. that up a really, good about that right driving we opportunity an pillows road. as about these growth more category. more cushions. opportunities it's buy standards we've and both rates centered open mattress down industry and But Those very think And the following have in other who we're their And been how again, infrequent really are one think you amazing the CRM report, and cushions attach we who within growth mattress also So these to done. been some future proven for attached but buy we're value, around than And the buy seat relatively now have seat have pillows.

exciting enormous us, that tapping is new this opportunity for and but an we're very So it's into.

next Our question from Susan of Riley. comes the Anderson with B. line

revenue on then I quarter the fourth sounds seen It to on the for like great and in you've guess, follow up first quarter. XXXX. just improvement a in Nice job wholesale.

just on fourth just So kind I I'm fourth DTC down bit of quarter. you for to quarter the then that a cadence also the XXXX, and guidance, quarter? based third given be expecting assuming second guide tough the from quarter highest on first, for comparison has guess the of growth are And the come and revenue growth

back half unpack guidance, back you the this. starting of - your end see is mean, - Yes. our year if you'll with the Well, I and just your question, the of half of year,

driven we're executing of over expansion. the that half is the later the out rolling in that's is platform front throughout the half out. year the of of rates mid growth half new bigger the initiatives so by expecting are This first and This wholesale It's first launching and year. new building the we'll e-commerce showroom It's the we forth. are We year, that than products and be the year. the

- the bear year the year will the first investing half in So and we the into initiatives that in in, XXXX. of fruit many, of half there back there are are is many that

back that, we to healthier correctly, some think mix, normal call getting impressive DTC, can pressure. or driven, part, now consumer last shift that yes. in create some saw does mix So pretty in preference large by are more it DTC, reading - which more year growth is a if rates you on just you normal, I Yes, a that the

at a very, very us. significant We to see see front So product expect certain growth yes, XX% we're the with business of healthy we that changes growth. bit. - saw last through the DTC rates growth in as decelerate the a just frankly, year. of we base tend the rates that It's bigger, gets probably will or not is scale. of And little be XXX% DTC still any rates But in industry. and opportunity in we making growth true we offline for predominantly This again, the in website, much

optimistic. remain we So

how are And year? Canada, on Great. Okay. just has gone. there rollout curious And plans that then what for the this I'm

So it's Canada. primarily with and themselves, Northern our results our terrific indicating neighbors. in They've up partner up a right there, Country partner Sleep just reported just they're business for healthy some us the

we components launch, into those in the supply launch our of able terms in to ultimately late done. that of some of part, launch the we're the resolved In the which mattresses, has had, in very late of industry was some XXXX. we get launched challenges And that and everyone some

after Our - I days just launched. terrific we wasn't like as mean, felt timing it

Canada, the in XX% were wave up later of approximately the shutdown doors there. mandatory of With there

So the had what far. side, extremely we're have the think given the with any hoped are performance, been both obviously, That open what online pleased us seeing stores so on sides I store of and that wasn't closures. the said, in

remain or very macro factors these lifted. get some once we of So external optimistic

the you then And people what missed I was good. did more And the quarter? moving sounds categories average That say in all? premium Great. if selling at into this, see mattress price sure you not did Okay. but

there, to to exciting been say more see that's DTC the the the easier we brand our quarter-on-quarter. our in see In been some but see that we ASP, both time, strength continue always but for of order and an to buyer, strength reported believe path we've DTC. on climb average quite a that of brick-and-mortar, I will had don't get value, climb more is product. premium trend I that on we forward to specific That's continue and we continue

Jeremy the Craig-Hallum. from comes question line of with next Hamblin Our

start that with the through DTC thinking you're assumptions your of about of your quarter. to wholesale mix here I baking that way QX versus X/X we're want in guidance in terms embedded since within the

that back we, for is quarter getting the the to we much our year, mix, and lines. year, along into DTC have more largely XX-XX our DTC. through to anticipate of been last the XXs more many the and really what But for preferred split mix. times ultimately years, were of Again, gotten on weighted year is We at anticipated the QX, for much the

So come I be XX% for be QX XX-XX back our as a heavier will DTC, XX% mean, begin DTC as year. wholesale in the ultimately, we'll wholesale expansion. But to wholesale. think continues weighted we I little about split and

And QX, a forward, follow-up And we terms Craig, that. I if margin just potential margin the you've you South. then some don't was thinking XX% Purple XX% deliver as - your Wholesale in made profile of gross your mix wholesale, Okay. a about with of is There business of roughly. business, with associated in drag, slightly, moving above in quantified to but the know XX%. that, did know you've investments

in pretty And gross you margin look as some being so in of you 'XX, suppliers, some input thinking maybe 'XX. costs margins it about - again gross that investments there's can that again, from at you give terms XX% as close we sense delivered, made get higher though and seems a understanding that can potentially for to

close to, be in the but think at are some not XX%. John I operating higher capacity forward can but seeing also the and later going in Yes. to just of his of facility the investments that was will from efficiencies, the that year a in to headwind stay the in that more I look improve be where getting add automation some then finding to we they the already facility also margin. in tailwinds at that full Atlanta and not efficiencies to there's start Grantsville, facility team mean, Atlanta we positive we There in capacity, will and we're have year having the able we're making, early

at going So some is have said, you year the because improve. capacity. throughout expect it to it full But to we do is early like not just headwinds Atlanta

price, when raise and did know the not Got on of of a know that that high happen. have but over they're - price, discussed? your also might price. you it. to are recently going raising competitors any in whether then so, or that's just that have something been if signal comment that's that on And We raised timing either summer, suppliers And you we percentage terms

Yes.

there of call as improvements to outright can anticipate products that as year. the is raise price, product do increases launches whether well, margin where price mix product. still structure we exist intend improve our we modest but a we this well, the year new will ASP raise today, on There we new they opportunity it, of those some So good this to, to, improvements, story be as are or price and believe but some some customer changes assortment have tie

mid-year, though So we the successfully option QX we market elasticity, it, And have a look remarkably with to that. set. twice to raised realize do continues or we the table. stable so call continue at It anticipate late until and on the be prices that probably, likely now wouldn't competitive an

Great. Last real me, one for quick here.

that's or whether not here higher half of where it to this your longer-term G&A in are? side know around Your any on And in kind X% X% Is little investment your than as was year. G&A decent around terms kind but 'XX. a share maybe you've a step an I over forward took in of the on things that be little that part you the going could had you pretty you're that longer-term of a still investment of a planning - X%? target of back that targets sales, mentioned of color QX, if

I just focus operationally our running on an have always sound a of and this business. rightsized on our clean asset mean, No. we viewed how as company

of cost was advance were deferred into QX. more from pushed timing than cost QX So QX yes, in some and that really QX anything, got that some

were X.X% I XXXX, So we for full anticipate and flat. year, relatively G&A for we hold at continuing believe to about

today's reached Ladies and like end turn closing of back we to to Megibow I this call have question-and-answer gentlemen, remarks. session. over Joe Mr. for the would

and how Thank last you well added most record continues XXXX and channel. tested of year, our The so pleased base be and performed. customer family, be Purple could ever-growing satisfaction to our mission-driven we much. our of numbers team in with customers to high, importantly, foundation we not marketing the built Most customers remain effective I more extremely was

thank both for business. and execution long term we strongest term, and remain scaling over unwavering proven To relentless personally to find the very last employees in X,XXX near and invest belief our of year, stay our customers, want and mission I forward, our partners, our for our healthy, and to their very well. supported ability our more safe, sheet. optimistic employees our development our ever be goals. opportunity growth, fortitude an in ourselves and than product position Looking We by balance the in all in healthy sleep

conference. This concludes today's

the day. You time. of your and may this Thank at disconnect rest lines participation, enjoy your you your for