Purple Innovation’s Earnings Call: Mattress Firm Revenue Guidance and Product Rollout Claims Don’t Match

Date of Call: Mar 31, 2026

Financials Results

• Revenue: Q4: $140.7M, up 9.1% YOY; Full Year: $468.7M, down 3.9% YOY
• EPS: Q4 adjusted loss per share: $0.02 vs $0.11 loss prior year; Full Year adjusted net loss per share: $0.32 vs $0.51 loss prior year
• Gross Margin: Q4: 41.9%, down 100 bps YOY; Full Year: 40.2%, up 310 bps YOY

Guidance:

• Full Year 2026 revenue expected in the range of $500M to $520M.
• Full Year 2026 adjusted EBITDA expected in the range of $20M to $30M.
• Q1 2026 revenue expected in the range of $100M to $105M.
• Q1 2026 adjusted EBITDA expected in the range of a loss of $7M to a loss of $4M.

Business Commentary:

Revenue Growth and Strategic Actions:

• Purple Innovation reported revenue of $140.7 million for Q4 2025, representing an increase of 9.1% year-over-year.
• The growth was primarily driven by a robust 39.8% increase in wholesale revenue, attributed to expanded Mattress Firm placements and continued momentum with Costco.

Profitability and Margin Expansion:

• Purple Innovation achieved an adjusted EBITDA of $8.8 million in Q4 2025, compared to $2.9 million last year, with an adjusted gross margin of 41.9%.
• Profitability improvements were driven by strategic cost initiatives, manufacturing footprint consolidation, and a shift towards higher ticket products.

Product Innovation and Consumer Engagement:

• The company's Rejuvenate 2.0 collection performed well, representing over 50% of showroom mattress revenue in Q4 2025, with an average selling price of nearly $5,800.
• This success was supported by consumer-focused marketing efforts and partnerships, such as the Mattress Firm Sleep Easy campaign.

E-commerce and Wholesale Performance:

• Purple Innovation's e-commerce revenue declined by 15.3% in Q4 2025, while wholesale revenue grew by 39.8%.
• The decline in e-commerce was attributed to challenges in assortment and conversion, whereas wholesale growth benefited from strong partnerships and expanded distribution.

2026 Financial Outlook:

• Purple Innovation projected full-year 2026 revenue in the range of $500 million to $520 million and adjusted EBITDA of $20 million to $30 million.
• The outlook reflects continued momentum in premium product portfolio and expanded distribution, with expectations of gross margin sustainability above 40%.

Sentiment Analysis:

Overall Tone: Positive

• "The fourth quarter marked an important inflection point for the company. Revenue increased approximately 9% year-over-year. We delivered gross profit expansion and profitability improved meaningfully across the business." "2025 was a period where the business became meaningfully stronger." "We're entering 2026 with a playbook designed to scale profitably as demand continues to improve."

Q&A:

• Question from Bradley Thomas (KeyBanc Capital Markets Inc.): Rob, I wanted to start off asking about recent trends... Can you just talk a little bit more about what you've been seeing here?
  Response: The Q1 revenue guide reflects a seasonally weak start due to strong Q4 shipments and floor sample placements, but momentum is expected to build through the year.

• Question from Bradley Thomas (KeyBanc Capital Markets Inc.): And just to be clear, Rob, it sounds like aside from the January, you've seen an improvement in trends of late. Is that fair to assume?
  Response: Trends are lapping prior-year comp levels, with Q1 expected to be similar to last year.

• Question from Bradley Thomas (KeyBanc Capital Markets Inc.): And then just following up about the outlook for the year... how do we think about it flowing through to the bottom line?
  Response: Flow-through should be healthy, around 30% on sales, with additional benefits from margin expansion and cost control.

• Question from Bradley Thomas (KeyBanc Capital Markets Inc.): And if I could squeeze in just one more regarding the macro environment as it relates to raw materials...
  Response: Petroleum-based material exposure is partially offset by tariff savings if oil remains around $100/barrel; price increases are not yet a significant concern.

• Question from Matt Koranda (ROTH Capital Partners, LLC): I wanted to hear a little bit more about how you're thinking about the seasonality of the year...
  Response: Revenue should grow consistently through the year, with a natural build into Q3/Q4 and a boost from the Purple Royale launch in Q2.

• Question from Matt Koranda (ROTH Capital Partners, LLC): And then maybe just wanted to hear you unpack the drivers of the flow-through...
  Response: Drivers include completed restructuring actions, ongoing operational efficiencies, sourcing opportunities, and a strong focus on cost control.

• Question from Daniel Silverstein (UBS Investment Bank): Maybe just to start, looking at the sales guidance, up $30 million to $50 million this year... what other areas might be driving a bit of a drag...
  Response: Mattress Firm sales are growing into the $70M target, with additional contributions from Costco, showrooms, and a conservative assumption of flat e-commerce.

• Question from Daniel Silverstein (UBS Investment Bank): Super helpful. And that was kind of my second question. Why is the Amazon business doing well relative to your own e-com channel?...
  Response: Amazon success is due to developing the pillow business and improving availability/prime badging; owned e-commerce is challenged by product assortment complexity in a digital environment.

• Question from Alessandra Jimenez (Raymond James & Associates, Inc.): First, I wanted to follow up on current demand trends. What are you seeing from growth in your retail partners outside of Mattress Firm and the incremental Costco program?
  Response: Demand is mixed across customers, with a net down of about 5% excluding the two discussed partners, broadly consistent with the market.

• Question from Alessandra Jimenez (Raymond James & Associates, Inc.): Okay. That's helpful. And then what are you expecting from a cash flow perspective for 2026 on the improved EBITDA profitability?...
  Response: Positive free cash flow is expected for 2026, driven by $20M-$30M in adjusted EBITDA and modest CapEx.

• Question from Alessandra Jimenez (Raymond James & Associates, Inc.): And if I can just sneak one more in. I wanted to revisit the showroom channel... what's kind of accelerating there?...
  Response: Strong comp growth is driven by positive product mix (over 50% premium mattress revenue) and tight cost/labor discipline; most non-profitable stores are considered fixable.

• Question from Brian Nagel (Oppenheimer & Co. Inc.): So I have a couple of questions. First off, just with regard to the newer products, the more innovative products, is that rollout now complete?...
  Response: Physical product rollout is complete, but there is ongoing business development to increase the penetration of these products across channels.

• Question from Brian Nagel (Oppenheimer & Co. Inc.): And then my follow-up question, I guess, mostly for Todd. I mean maybe just outline kind of the capital needs from an operational standpoint...
  Response: 2026 CapEx target is $10M-$12M, covering maintenance, innovation, store fixture upgrades, and planned new store openings.

Contradiction Point 1

Mattress Firm Revenue Contribution Guidance

It involves changes in financial forecasts, specifically regarding the expected revenue contribution from a key partnership, which is crucial for understanding business performance and future growth.

Daniel Silverstein (UBS Investment Bank) - Daniel Silverstein (UBS Investment Bank)

2025Q4: The $70 million figure is a target to grow into; current contribution is between $50–$70 million. - Robert DeMartini(CEO)

What areas are contributing to the net sales falling below the expected $70 million from the Mattress Firm expansion despite the $30–$50 million guidance increase? - Daniel Silverstein (UBS)

20251105-2025 Q3: The $70 million forecast assumes current performance levels without assuming improved slot productivity. - Robert DeMartini(CEO)

Contradiction Point 2

Product Innovation Rollout Timeline

It reflects inconsistencies in the product rollout timeline, affecting strategic planning and market confidence.

Brian Nagel (Oppenheimer & Co. Inc.) - Brian Nagel (Oppenheimer & Co. Inc.)

2025Q4: The physical rollout is complete (Rejuvenate 2.0 finished in Q4, Purple Royale launched March 20). - Robert DeMartini(CEO)

Has the rollout of newer innovative products been completed, or will there be further rollouts through 2026? - Unknown Analyst (ROTH Capital Partners, on for Matt Koranda)

20251105-2025 Q3: The additional ~2,800 Mattress Firm slots to reach 12,000 will occur by the end of Q1 2026, focused on the performing Rejuvenate product. - Robert DeMartini(CEO)

Contradiction Point 3

Revenue Contribution from Mattress Firm Expansion

It involves changes in financial forecasts regarding the contribution from a major partnership, which can significantly affect revenue expectations.

Daniel Silverstein (UBS Investment Bank) - Daniel Silverstein (UBS Investment Bank)

2025Q4: Growth is also expected from Costco, showrooms (modest), and assumes a flat e-commerce business, which is conservative... The $70 million figure is a target to grow into; current contribution is between $50–$70 million. - Robert DeMartini(CEO)

What factors are contributing to the sales guidance being below the expected $70 million from the Mattress Firm expansion? - Daniel Silverstein (UBS Investment Bank)

2025Q2: Distribution will be fully in place by August 15, 2025, generating volume in the back half of the year. The footprint will expand from under 6,000 to 12,000 slots by early 2026, with a premium luxury line launching around Q1/Q2 2026. - Robert DeMartini(CEO)

Contradiction Point 4

Capital Expenditure Guidance

It involves changes in financial forecasts regarding capital expenditure, which is important for understanding the company's investment priorities and financial health.

Brian Nagel (Oppenheimer & Co. Inc.) - Brian Nagel (Oppenheimer & Co. Inc.)

2025Q4: Capital expenditure is targeted at $10–$12 million, up modestly from 2025. - Todd Vogensen(CFO)

What are the projected capital needs for the business in 2026? - Robert Griffin (Raymond James & Associates, Inc.)

2025Q2: The primary focus is on reinvesting in the business, particularly in growing the showroom store footprint and deploying capital internally for the best returns. Maintaining an appropriate cash cushion is also important. - Todd Vogensen(CFO)

Contradiction Point 5

Gross Margin Trajectory

It involves changes in financial forecasts, specifically regarding the expected path for gross margin improvement, which is a critical indicator for investors.

Matt Koranda (ROTH Capital Partners, LLC) - Matt Koranda (ROTH Capital Partners, LLC)

2025Q4: Gross margin should also improve through operational efficiencies, sourcing opportunities, and yield improvements throughout the year. - Todd Vogensen(CFO)

What are the drivers of the implied EBITDA flow-through, including any restructuring actions or gross margin benefits? - Brian Nagel (Oppenheimer & Co. Inc.)

2025Q2: Mitigation efforts will reduce this impact through the rest of the year. ... Gross margin is expected to be north of 40% by year-end and improve progressively through Q3 and Q4. - Todd Vogensen(CFO)