Purple Innovation, Inc. Common Stock 2026 Q2 Earnings Call

Thanks, Stacy, and good afternoon, everyone. I want to start with what matters most from the quarter. While the market remains difficult, we continued to make progress in areas where we believe we have the greatest impact. Our showrooms had another strong quarter. Our premium products continued to perform well, e-commerce improved sequentially, and we delivered better profitability. This tells us the work we have been doing over the past year continues to take hold. We are a stronger and more disciplined business today than we were a year ago, and that is showing up in our direct-to-consumer business, product mix, and cost structure. The broader market did not give us any help in the second quarter. Demand remained uneven, and wholesale was softer than we expected. Turning to our quarterly performance, our results were mixed across channels.

Starting with our direct-to-consumer, we continued to make progress across both our showroom and e-commerce channels. Our showroom business was the highlight of the quarter, with retail sales up 16.6% versus the prior year, driven by improving traffic, stronger conversion, and continued strength in our premium portfolio. E-commerce was down slightly versus last year, but the channel continued to move in the right direction, marking the third consecutive quarter of sequential improvement. We are getting better at managing the channel, and the work we are doing across marketing and the site experience is contributing to that progress. Purple's wholesale performance remained challenged in the second quarter, as wholesale revenues were down approximately 19% year-over-year. In addition to continued softness in the broader mattress category, we made a deliberate decision during the second quarter to invest more than $4 million incrementally in marketing programs with our retail partners.

These investments affected reported wholesale revenue in the quarter, but we believe they were necessary to support consumer activation, retailer engagement, and Purple's long-term position within the wholesale channel. Excluding the impact of these incremental investments and other payments to customers, wholesale revenue would have declined approximately 8% year-over-year. On profitability, we made progress through disciplined expense management while continuing to invest in innovation, advertising, and consumer experience. Consistent with previous quarters, our strategy continues to center on three priorities. Number one, deepening our understanding of the consumer. Number two, delivering better sleep through product experience and expanded distribution. Number three, executing with financial discipline across the business. Let me walk you through how these priorities showed up during the second quarter. First, knowing our consumer. Purple has strong awareness, but awareness alone is not enough.

We remain focused on helping people understand why the GelFlex Grid is different, and why it matters to sleep quality, and which Purple product is right for them. Since March, we have shifted our marketing's approach to place greater emphasis on brand building and consumer education outside of key holiday periods, while continuing to use targeted conversion marketing as consumers move closer to purchase. The opportunity is to turn our strong awareness into stronger consideration. That means making the benefits of GelFlex Grid easier to understand before consumers are ready to buy, and making it simpler to choose the right Purple product when they enter the purchase process. This work applies across the full consumer journey, from our showrooms and website to our wholesale partners, with the same objectives everywhere. Clearly answer why Purple and which Purple mattress.

Within e-commerce, we continued to make improvements to the consumer journey throughout the quarter. It was a series of enhancements designed to make it easier for consumers to reach, to research, compare, and ultimately choose the right Purple mattress while better understanding why our technology is so unique. These enhancements include improved product comparison tools, refined site navigation, and new content and landing pages designed to better educate consumers. We are also improving how Purple shows up across traditional search and AI-powered tools, where consumers are increasingly beginning their research. The goal is not simply to drive traffic. It is to bring more informed consumers into the purchase journey and help them understand how Purple's GelFlex Grid delivers a better sleep experience. We have now experienced three consecutive quarters of sequential improvement within e-commerce, supported by better marketing execution and stronger performance on Amazon.

Second, delivering better sleep through product experience and expanded distribution. Our innovation continues to differentiate Purple in the marketplace, and we remain encouraged by the continued performance of our premium portfolio. During the quarter, our premium products continued to perform well, with Rejuvenate remaining the strongest performing collection, particularly in our showroom channel. Within our showroom business, Rejuvenate 2.0 continues to account for more than half of total mattress revenue, underscoring the strength of our premium positioning and the consumer's willingness to invest in better sleep products. Beyond mattresses, our pillow business continued to deliver strong results, reinforcing the broader appeal of the Purple brand and providing additional opportunities to introduce new consumers to our GelFlex Grid technology. While the overall mattress category remained under pressure, we continue to believe our premium innovation positions us well for long-term growth.

Beyond the product itself, we're continuing to invest in customer experience across every touch point. Our showrooms are the clearest proof point for our product. When consumers experience the GelFlex Grid in person and our teams can explain the difference, we see better conversion and a stronger premium mix. That was evident again in the second quarter with showroom sales up strongly. This reinforces something that we've believed for a long time. When consumers experience the GelFlex Grid firsthand and understand how it differs from traditional foam, Purple wins. Turning to distribution, expanding and strengthening our network remains an important component of our long-term growth strategy. Our own retail footprint expanded during the quarter with the opening of one new showroom and the relocation of another, both of which are performing well.

Looking ahead, we remain on track to open five additional showrooms before year-end, as we refine our real estate strategy and shift towards more productive open-air retail locations that better align with evolving consumer shopping trends. We're planning a broader growth of the store fleet in fiscal 2027 with 12 to 16 additional locations. Our job is to scale the model thoughtfully so it can become a more meaningful contributor to Purple's growth. As we expand our showrooms, we continue to deepen our presence with key wholesale partners. The rollout of Purple Rejuvenate Royale at Mattress Firm was completed during the second quarter. Costco continued to perform well during the quarter, and year-to-date volume was well ahead of last year, and we continue to see meaningful opportunity with this partner. Amazon also had another strong quarter, delivering double-digit growth as we further optimized our product assortment and fulfillment strategy.

Now let's talk about the third pillar, executing with financial discipline. Over the past year, we've taken meaningful steps to improve the efficiency of the business. Those efforts continue to support stronger profitability. During the second quarter, we delivered higher gross margins and profitability above last year, despite lower sales. We took pricing action in June to help offset commodity and logistics inflation and preserve gross margins going forward. Our sourcing teams continue to identify additional opportunities to improve costs through supplier diversification and operational efficiencies. As we move into the second half, the demand environment remains uncertain, but we are operating from a stronger foundation. We expect to benefit from continued operational improvements, additional sourcing initiatives, and the continued development of our premium product portfolio. Before I turn it over to Rob, one other update.

Following the reverse stock split in July, last Friday, Nasdaq confirmed that Purple has regained compliance with its minimum bid price requirement, and that matter is now behind us. With that, I'll turn the call over to Rob.