Core Insights - Purple's shares surged 17.1% following the release of its third-quarter 2025 earnings report, indicating positive investor sentiment due to signs of improvement in the company's performance [1][2] - The financial update revealed a slight increase in revenue and enhanced profitability metrics, attributed to strategic initiatives and product innovations [2] - The stock closed at $0.82, reflecting a 17.3% increase from the previous close, suggesting a strong market reaction to the earnings report [2] Financial Performance - Purple reported a slight revenue increase and improved profitability metrics, which were key factors in the positive market response [2] - The company is currently trading at $0.83 per share, which is 33.6% below its 52-week high of $1.25 reached in August 2025 [6] - Year-to-date, Purple's shares have increased by 10.8%, indicating a recovery trend despite being significantly below past highs [6] Market Dynamics - The stock has exhibited extreme volatility, with 62 moves greater than 5% over the past year, highlighting the significant impact of recent news on market perception [4] - The previous notable stock movement occurred 14 days prior, when shares rose 4.8% due to a cooler-than-expected inflation report, which influenced investor sentiment across interest-sensitive sectors [5]

Core Insights - Purple Innovation, Inc. is recognized for its innovative comfort technology in mattresses and bedding products, but it faces challenges in capital efficiency [1] - The company's Return on Invested Capital (ROIC) is -19.51%, while its Weighted Average Cost of Capital (WACC) is 9.87%, leading to a negative ROIC to WACC ratio of -1.98, indicating poor capital utilization [2][6] - In contrast, Vroom, Inc. demonstrates efficient capital utilization with a ROIC of 14.05% and a WACC of 8.39%, resulting in a positive ROIC to WACC ratio of 1.67 [4][6] - Other industry peers, such as The RealReal, Inc. and CarParts.com, Inc., also exhibit negative ROIC to WACC ratios of -2.53 and -8.61, respectively, highlighting a common challenge of capital inefficiency in the sector [5][6] Comparative Analysis - The Lovesac Company has a ROIC of 7.16% and a WACC of 9.71%, resulting in a ROIC to WACC ratio of 0.74, indicating it is closer to breaking even compared to Purple Innovation [3] - The negative ROIC to WACC ratios of Purple Innovation and its peers emphasize the need for strategic improvements in capital management across the industry [5][6]

Group 1 - The article does not provide any specific content or key points related to a company or industry [1]

Financial Data and Key Metrics Changes - Revenue for Q3 2025 was $118.8 million, a slight increase from $118.6 million in the previous year, marking an important inflection point after consecutive declines [4][16] - Adjusted EBITDA for the quarter was a gain of $200,000, an improvement from a loss of $6.4 million in the prior year, driven by gross margin expansion and disciplined cost management [19] - Gross margin improved to approximately 42.8% from 29.7% in the prior year, reflecting direct material cost savings and improved operational efficiencies [17][19] Business Line Data and Key Metrics Changes - Direct-to-consumer net revenue was $67.2 million, down 5.1% year-over-year, with showroom revenue increasing by 6.5% to $22 million despite fewer stores [16][17] - Wholesale revenue grew by 7.9% to $51.5 million, driven by the Rejuvenate 2.0 launch and expansion with Mattress Firm [17][20] - E-commerce revenue decreased by 9.8% but showed signs of improvement following a website refresh [10][17] Market Data and Key Metrics Changes - The company is on track to reach 12,000 slots in Mattress Firm by March 2026, representing approximately $20 million in incremental revenue this year and an anticipated $70 million next year [11][20] - The overall market appears to be stabilizing, with expectations of flattish results in the category, indicating a potential bottoming out [22][24] Company Strategy and Development Direction - The company is focused on innovation, marketing, and strategic partnerships, with a strong emphasis on the Rejuvenate 2.0 product line and expanding retail partnerships [7][12] - The restructuring program initiated in August 2024 has led to reduced fixed costs and improved operational efficiency, with expected annual savings of $25-$30 million [6][20] - The company aims to maintain gross margins above 40% while continuing to invest in showroom expansion and innovation [14][20] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's positioning for future growth, despite acknowledging challenges in the broader market [7][24] - The company reiterated its full-year guidance, expecting revenue between $465 million and $485 million and adjusted EBITDA between break-even and $10 million positive [14][20] Other Important Information - The company is engaged in ongoing discussions regarding strategic alternatives, including potential mergers or sales, but will not comment further during the call [15] - Cash and cash equivalents at the end of September were $32.4 million, up from $29 million at the end of 2024, indicating improved liquidity [19][20] Q&A Session Summary Question: What are the encouraging signs in the industry overall? - Management noted that while the market showed signs of improvement around Labor Day, the latter part of September was mixed and soft, but they are encouraged by the performance in October [22][24] Question: Can you discuss margin opportunities for 2026? - Management indicated that gross margins are expected to remain around 40%, with efficiencies from restructuring efforts contributing positively [25][31] Question: How much of the improvement in wholesale was driven by Mattress Firm slots? - The Mattress Firm launch initially hurt productivity due to increased slots, but overall productivity has held steady, which is encouraging [36] Question: What is the long-term e-commerce opportunity for Purple? - Management remains bullish on e-commerce, noting improvements following a website refresh and ongoing efforts to enhance the channel's performance [33] Question: How is showroom profitability trending? - 76% of showrooms were profitable in Q3, up from 56% the previous year, indicating positive progress in this channel [34]

Financial Performance - Third quarter 2025 net revenue was $118.8 million, a slight increase from $118.6 million in the same quarter of 2024, driven by Rejuvenate 2.0 shipments and Mattress Firm partnership expansion [4]. - Gross profit for the third quarter increased to $50.9 million, representing 42.8% of net revenue, compared to $35.2 million or 29.7% in the prior year period [5]. - Net loss for the third quarter was $11.7 million, significantly improved from $39.2 million in the prior year [7]. - Adjusted EBITDA for the third quarter was $0.2 million, an improvement from $(6.4) million last year, attributed to strong gross margin performance and disciplined cost management [7]. - Revenues for the three months ended September 30, 2025, were $118.766 million, a slight increase from $118.598 million in the same period of 2024 [22]. - Gross profit for the three months ended September 30, 2025, was $50.851 million, compared to $35.193 million in 2024, reflecting a significant improvement [22]. - The net loss for the three months ended September 30, 2025, was $11.748 million, an improvement from a net loss of $39.310 million in the same period of 2024 [22]. - Adjusted net loss for the three months ended September 30, 2025, was $8,632,000, resulting in an adjusted net loss per diluted share of $0.08, compared to an adjusted net loss of $13,828,000 and $0.13 per diluted share in 2024 [34]. - For the nine months ended September 30, 2025, the net loss attributable to Purple Innovation, Inc. was $48,285,000, compared to $89,587,000 for the same period in 2024 [36]. - Adjusted net loss for the nine months ended September 30, 2025, was $32,269,000, with an adjusted net loss per diluted share of $0.30, compared to an adjusted net loss of $48,035,000 and $0.45 per diluted share in 2024 [36]. Cost Management - Operating expenses decreased by 23.2% to $63.0 million from $82.0 million in the prior year quarter, primarily due to reduced restructuring and impairment charges [6]. - Total operating expenses decreased to $62.977 million for the three months ended September 30, 2025, from $82.006 million in 2024, indicating a reduction of approximately 23.3% [22]. - Total cost of revenues for the three months ended September 30, 2025, was $67.915 million, down from $83.405 million in 2024, reflecting a decrease of approximately 18.5% [30]. - Restructuring related charges for the three months ended September 30, 2025, amounted to $5,290,000, while for the nine months, it was $12,382,000 [32]. Cash and Inventory - Cash and cash equivalents as of September 30, 2025, were $32.4 million, up from $29.0 million as of December 31, 2024 [8]. - Cash and cash equivalents at the end of the period were $32.358 million, an increase from $23.399 million at the end of September 30, 2024 [24]. - Net inventories as of September 30, 2025, totaled $65.8 million, a 9.8% increase compared to September 30, 2024 [8]. - Net cash used in operating activities for the nine months ended September 30, 2025, was $28.030 million, compared to $24.611 million in 2024 [24]. Guidance and Future Outlook - The company maintains its 2025 guidance, projecting full-year revenue of $465 to $485 million and adjusted EBITDA of breakeven to $10 million [9]. - The success of Rejuvenate 2.0 and the Mattress Firm partnership is expected to support continued growth in the premium segment [3]. - The restructuring program has been completed, leading to improved manufacturing efficiencies and direct material cost savings [5]. Tax and Other Financial Metrics - The effective tax rate for the three and nine months ended September 30, 2025, was estimated at 25.9% [35]. - Revenue reduction due to SGI Contract for the three months ended September 30, 2025, was $941,000, and for the nine months, it was $1,568,000 [32]. - The change in fair value of warrant liabilities for the three months ended September 30, 2025, was $(6,892,000), and for the nine months, it was $(11,319,000) [32]. - The company reported a gain on insurance proceeds of $(7,301,000) for the three months ended September 30, 2024, and $(11,601,000) for the nine months [32]. - Board special committee fees for the three months ended September 30, 2025, were $698,000, and for the nine months, they totaled $1,958,000 [32].

Financial Performance - Total revenues for Q3 2025 were $118.766 million, a slight increase from $118.598 million in Q3 2024, while year-to-date revenues decreased to $328.037 million from $358.902 million[13]. - Gross profit for Q3 2025 was $50.851 million, compared to $35.193 million in Q3 2024, indicating a significant improvement in profitability[13]. - Operating loss for Q3 2025 was $12.126 million, an improvement from a loss of $46.813 million in Q3 2024[13]. - Net loss attributable to Purple Innovation, Inc. for Q3 2025 was $11.720 million, compared to a net loss of $39.228 million in Q3 2024[13]. - For the nine months ended September 30, 2025, the company reported a net loss of $48.3 million, an improvement from a net loss of $89.6 million in the same period of 2024, representing a 46% reduction in losses[18]. - The Company reported a pretax loss of $48.1 million for the nine months ended September 30, 2025, compared to a pretax loss of $89.4 million for the same period in 2024[146]. Cash and Liquidity - Cash and cash equivalents increased to $32.358 million as of September 30, 2025, up from $29.011 million at the end of 2024[11]. - The company reported a net increase in cash and cash equivalents of $3.3 million for the nine months ended September 30, 2025, compared to a decrease of $3.5 million in the same period of 2024[18]. - Cash flows from operating activities resulted in a net cash used of $28.0 million for the nine months ended September 30, 2025, compared to $24.6 million for the same period in 2024[18]. - The company expects to have sufficient liquidity to fund its operations for at least one year from the date of the report issuance[30]. Assets and Liabilities - Total current assets rose to $136.406 million as of September 30, 2025, compared to $126.368 million at the end of 2024[11]. - Total liabilities increased to $329.028 million as of September 30, 2025, from $287.636 million at the end of 2024[11]. - The accumulated deficit grew to $(622.068) million as of September 30, 2025, compared to $(573.866) million at the end of 2024[11]. Operating Expenses and Cost Management - Operating expenses for Q3 2025 were $62.977 million, down from $82.006 million in Q3 2024, reflecting cost management efforts[13]. - The company has taken additional cost-saving initiatives to maintain liquidity and support its operations and strategies during the first nine months of 2025[29]. - The company recognized $5.3 million in costs related to the Restructuring Plan during the three months ended September 30, 2025[189]. Debt and Financing - Total debt as of September 30, 2025, was $102,889,000, an increase of 85.5% from $55,394,000 as of December 31, 2024[70]. - The Company entered into an amended credit agreement on January 23, 2024, which included a term loan of $61.0 million and provided net proceeds of approximately $27.0 million[73]. - The 2025 Amendment increased the initial principal amount of the Related Party Loan by $19.0 million, bringing the total to $80.0 million[79]. - The Second 2025 Amendment increased the initial principal amount of the senior secured term loan facility by $20.0 million, raising the total to $100.0 million[87]. Inventory and Revenue Streams - DTC revenue for the three months ended September 30, 2025, was $45.275 million, a decrease from $50.211 million in the same period of 2024, while wholesale revenue was $51.541 million, up from $47.775 million[58]. - The Company reported inventory levels of $65.770 million as of September 30, 2025, an increase from $56.863 million at the end of 2024[60]. - The expansion with Mattress Firm is progressing well, with Purple products represented in approximately 9,200 slots, aiming for a minimum of 12,000 slots by 2026, expected to generate $20 million in incremental revenue this year and $70 million next year[187]. Legal and Regulatory Matters - The Company is involved in various legal proceedings, including a class action lawsuit regarding employment-related claims, which has resulted in a settlement agreement expected to be approved by the California Superior Court[124]. - The Company has engaged in related party transactions, particularly with Coliseum Capital Management, LLC, which has significant control over certain securities[128]. Stock and Warrants - The Company issued 20.0 million warrants with a fair value of $19.6 million upon the initial credit agreement[74]. - The Company issued a total of 40,787 thousand warrants as of September 30, 2025, compared to 20,000 thousand warrants at December 31, 2024[141]. - The exercise price for all warrant tranches is $1.50, with expiration dates ranging from January 23, 2034, to March 12, 2035[141]. Tax Matters - The effective tax rate for the nine months ended September 30, 2025, was (0.31%), compared to (0.20%) for the same period in 2024, primarily due to a full valuation allowance against deferred tax assets[146]. - The Company had unrecognized tax benefits of $1.1 million as of September 30, 2025[149].

Core Points - Purple Innovation, Inc. is set to report its third quarter 2025 financial results on November 4, 2025, at approximately 4:05 p.m. ET [1] - A conference call will be held on the same day at 4:30 p.m. ET to discuss the financial results [1]

Part I. Financial Information [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited condensed consolidated financial statements for Purple Innovation, Inc. as of June 30, 2025, report total assets of $303.8 million, a $15.6 million stockholders' deficit, and a $36.5 million net loss on $209.3 million revenue for the six-month period [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, total assets slightly decreased to $303.8 million, while total liabilities increased to $319.4 million, leading to a shift from $20.2 million stockholders' equity to a $15.6 million deficit Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $34,248 | $29,011 | | Inventories | $60,903 | $56,863 | | Total current assets | $125,931 | $126,368 | | Total assets | $303,788 | $307,845 | | **Liabilities & Stockholders' Equity** | | | | Total current liabilities | $84,436 | $101,003 | | Related party debt | $94,539 | $55,394 | | Total liabilities | $319,367 | $287,636 | | Total stockholders' equity (deficit) | $(15,579) | $20,209 | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) For Q2 2025, net revenues decreased to $105.1 million with a $17.4 million net loss, while for H1 2025, revenues fell to $209.3 million, and net loss narrowed to $36.5 million Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | H1 2025 | H1 2024 | | :--- | :--- | :--- | :--- | :--- | | Revenues, net | $105,100 | $120,271 | $209,271 | $240,304 | | Gross profit | $37,683 | $48,940 | $78,729 | $90,660 | | Operating loss | $(14,239) | $(14,540) | $(28,718) | $(37,676) | | Net loss | $(17,371) | $(9) | $(36,537) | $(50,277) | | Net loss per share (basic & diluted) | $(0.16) | $(0.00) | $(0.34) | $(0.47) | [Condensed Consolidated Statements of Stockholders' Equity (Deficit)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Deficit)) Total stockholders' equity shifted from a $20.2 million positive balance at year-end 2024 to a $15.6 million deficit by June 30, 2025, primarily due to the $36.5 million net loss - The company's total equity position shifted from **$20.2 million** at the end of 2024 to a deficit of **$15.6 million** by June 30, 2025, mainly due to the net loss incurred during the first half of the year[15](index=15&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended June 30, 2025, operating activities used $27.1 million in cash, offset by $37.4 million from financing, resulting in a $5.2 million net increase in cash to $34.2 million Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(27,062) | $(25,730) | | Net cash used in investing activities | $(5,144) | $(5,253) | | Net cash provided by financing activities | $37,443 | $27,534 | | **Net increase (decrease) in cash** | **$5,237** | **$(3,449)** | | Cash and cash equivalents, end of period | $34,248 | $23,408 | [Notes to Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) The notes detail significant accounting policies, restructuring activities, debt agreements, and key events, including a major restructuring plan, new debt and warrant issuances, and an expanded commercial agreement with Mattress Firm - The company conducted a going concern evaluation and concluded it will have sufficient liquidity to fund operations for at least one year from the report's issuance date, supported by new debt financing and cost-saving initiatives[26](index=26&type=chunk)[28](index=28&type=chunk) - In August 2024, the company initiated a restructuring plan to close its Utah manufacturing facilities and consolidate production in Georgia, resulting in total charges of **$43.2 million** through Q2 2025, including **$7.6 million** cash and **$35.7 million** non-cash charges[37](index=37&type=chunk)[38](index=38&type=chunk) - The company entered into an agreement with Mattress Firm to expand its product presence from approximately 5,000 to a minimum of 12,000 mattress slots, issuing **8.0 million** SGI Warrants valued at **$6.5 million** in connection with this agreement[110](index=110&type=chunk)[113](index=113&type=chunk) - The company is involved in several legal proceedings, including disputes with its founders over employment agreements, tax distributions, and a real estate lease, with alleged damages totaling several million dollars[115](index=115&type=chunk)[116](index=116&type=chunk)[117](index=117&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=40&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management attributes the Q2 2025 revenue decline to product delivery delays and e-commerce softness, while gross margin fell due to tariffs and launch costs, with operating expenses decreasing due to cost controls and restructuring benefits Q2 2025 vs Q2 2024 Performance Summary | Metric | Q2 2025 | Q2 2024 | Change | Reason | | :--- | :--- | :--- | :--- | :--- | | Net Revenues | $105.1M | $120.3M | -12.6% | Longer delivery times for Rejuvenate 2.0, e-commerce softness, wholesale door reductions | | Gross Profit % | 35.9% | 40.7% | -4.8 p.p. | Increased tariffs, ramp-up costs for new products and Mattress Firm rollout | | Operating Expenses | $51.9M | $63.5M | -18.2% | Reduced advertising spend, employee cost savings from restructuring | | Net Loss (Purple Inc.) | $17.3M | $0.0M | -$17.3M | Lower sales, decreased gross profit, and change in warrant liability value | - The company's 'Path to Premium Sleep' growth strategy focuses on pioneering new technologies like the DreamLayer grid, promoting product differentiation, and improving gross profit through operational efficiencies[220](index=220&type=chunk)[222](index=222&type=chunk) - The company expanded its agreement with Mattress Firm, increasing product placement to a minimum of 12,000 mattress slots, which is expected to generate approximately **$70 million** in annualized incremental net revenue beginning in 2026[188](index=188&type=chunk) - In the first half of 2025, the company secured an additional **$39.0 million** in term loan proceeds through two amendments to its credit agreement with related parties[192](index=192&type=chunk)[197](index=197&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=55&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company faces interest rate risk from its $117.1 million variable rate debt, where a 100 basis point increase would raise annual interest expense by approximately $1.2 million - The company has **$117.1 million** in variable rate debt as of June 30, 2025, where a 100 basis point increase in interest rates would result in an approximate **$1.2 million** increase in annual interest expense[261](index=261&type=chunk) [Item 4. Controls and Procedures](index=55&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective as of June 30, 2025, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of June 30, 2025[264](index=264&type=chunk) - No changes were made during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[265](index=265&type=chunk) Part II. Other Information [Item 1. Legal Proceedings](index=56&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings arising in the ordinary course of business, with details provided in Note 13 of the financial statements - For details on legal proceedings, refer to Note 13 — Commitments and Contingencies in the financial statements[267](index=267&type=chunk) [Item 1A. Risk Factors](index=56&type=section&id=Item%201A.%20Risk%20Factors) The company faces material risks from U.S. trade policy, significant indebtedness with restrictive covenants, potential need for dilutive additional funding, reliance on key commercial agreements, and NASDAQ delisting risk due to minimum bid price non-compliance - Changes in U.S. trade policy and tariffs on imported materials, particularly textiles, could materially increase costs and adversely affect business operations[269](index=269&type=chunk)[270](index=270&type=chunk) - The company's significant debt includes restrictive covenants and substantial 'make-whole' payment obligations, which could limit operational flexibility and divert resources from the business if triggered[272](index=272&type=chunk)[276](index=276&type=chunk) - The company may require additional funds for its long-term operations, and failure to obtain them on acceptable terms could force it to scale back growth plans, with future financing potentially dilutive, as evidenced by the **40.8 million** warrants outstanding[277](index=277&type=chunk)[281](index=281&type=chunk) - On April 5, 2025, the company received a notice from NASDAQ for non-compliance with the minimum **$1.00** bid price rule and has until October 1, 2025, to regain compliance to avoid potential delisting[287](index=287&type=chunk) [Item 5. Other Information](index=62&type=section&id=Item%205.%20Other%20Information) No directors or executive officers adopted or terminated Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during the second quarter of 2025 - No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans during the second quarter of 2025[292](index=292&type=chunk) [Item 6. Exhibits](index=63&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including credit agreement amendments, registration rights agreements, officer certifications, and XBRL data files

Financial Performance - Purple Innovation reported a quarterly loss of $0.11 per share, better than the Zacks Consensus Estimate of a loss of $0.12, and an improvement from a loss of $0.13 per share a year ago, representing an earnings surprise of +8.33% [1] - The company posted revenues of $105.1 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 2.46%, but down from $120.27 million in the same quarter last year [2] - The current consensus EPS estimate for the upcoming quarter is -$0.07 on revenues of $121.23 million, and for the current fiscal year, it is -$0.32 on revenues of $467.28 million [7] Market Performance - Purple Innovation shares have increased by approximately 28.2% since the beginning of the year, significantly outperforming the S&P 500's gain of 8.6% [3] - The company has surpassed consensus EPS estimates in all four of the last quarters [2] Industry Outlook - The Consumer Products - Staples industry, to which Purple Innovation belongs, is currently ranked in the top 37% of over 250 Zacks industries, indicating a favorable outlook [8] - Empirical research suggests a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact stock performance [5]

Financial Data and Key Metrics Changes - The company's second quarter revenue reached $105 million, representing a 12.6% decrease from the prior year but a slight increase compared to the previous quarter [5][26] - Adjusted EBITDA improved by $1.8 million and 120 basis points year-over-year, indicating strong profitability improvements [6] - Gross margin for the second quarter was 35.9%, a decline of 480 basis points compared to last year, attributed to tariff-related costs and ramp-up costs for new product launches [28][21] Business Line Data and Key Metrics Changes - Direct-to-consumer (DTC) net revenue for the quarter was $58.9 million, with showroom revenue decreasing by 13.3% due to supply constraints from the Rejuvenate 2.0 launch [27] - E-commerce revenue saw an 11.5% decline during the second quarter, reflecting ongoing softness in that channel [27] - Wholesale revenue was down 13.4% year-over-year, totaling $46.2 million, but showed signs of recovery as the company prepares for significant expansion with Mattress Firm [27][18] Market Data and Key Metrics Changes - The company is experiencing mid-single-digit revenue growth in the current quarter compared to the same period last year, driven by the success of the Rejuvenate 2.0 launch and the Mattress Firm expansion [8][43] - The expansion of the Mattress Firm partnership is expected to significantly increase the company's distribution footprint, with a target of approximately 12,000 slots by mid-August [19][64] Company Strategy and Development Direction - The company is focused on a "path to premium sleep" strategy, emphasizing innovation, product differentiation, and gross margin improvement [10][21] - The recent launch of the Rejuvenate 2.0 mattress collection incorporates new technology aimed at enhancing customer comfort and is expected to drive higher average selling prices [10][12] - The marketing strategy is evolving to focus on brand messaging that highlights the unique benefits of the company's products, moving away from traditional discounting tactics [13][17] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the second half of the year, anticipating a return to positive adjusted EBITDA driven by new product launches and improved operational efficiencies [7][31] - The company is reaffirming its full-year revenue guidance of $465 million to $485 million, despite a cautious consumer environment [23][31] - Management noted that tariff impacts are being actively managed, with expectations of reduced cost exposure in 2025 compared to previous estimates [22] Other Important Information - The company is currently engaged in a review of strategic alternatives to maximize shareholder value, including potential mergers or sales [25] - Cash and cash equivalents at the end of the quarter were $34.2 million, up from $29 million at the end of the previous year [30] Q&A Session Summary Question: Can you discuss the cadence of sales in the quarter and expectations for acceleration in the second half? - Management noted that April was the slowest month, but sales improved throughout the quarter, with expectations for stronger performance in the second half due to catching up on demand and the Mattress Firm expansion [34][36] Question: How much of the gross margin pressure is one-time in nature? - Management indicated that while some gross margin pressure was due to tariffs and ramp-up costs, they expect to see gradual improvement in gross margin as these costs are mitigated [37][72] Question: What are the expectations for the additional Mattress Firm distribution? - The distribution is expected to generate significant revenue in the back half of the year, with a premium luxe line anticipated to launch early next year [64][65] Question: How is the fulfillment capacity looking going forward? - Management confirmed that fulfillment capacity is improving, with expectations to catch up on demand by mid-August [53][54] Question: What are the priorities for cash generation moving into 2026? - The company plans to focus on expanding its store footprint and investing in internal capital projects to generate the best returns [58][59]