Purple(PRPL) - 2025 Q2 - Quarterly Results

Q2 2025 Earnings Release Summary Second Quarter 2025 Highlights & CEO Commentary The company reported a net loss that exceeded expectations for Q2 2025, but saw a 120 basis point improvement in Adjusted EBITDA margin year-over-year. Strong demand for the new Rejuvenate 2.0 collection and progress with the Mattress Firm rollout are key positive developments, with Q3 revenue-to-date showing mid-single-digit growth - Net loss exceeded expectations, but the Adjusted EBITDA margin improved by 120 basis points compared to the previous year[1] - Demand for the new Rejuvenate 2.0 mattress collection in the Direct-to-Consumer (DTC) channel was more than double that of the Rejuvenate 1.0 launch[1] - The CEO highlighted strong validation of the company's brand and innovation strategy, led by the Rejuvenate 2.0 collection which incorporates new DreamLayer grid technology[2] - The nationwide rollout with Mattress Firm is progressing on schedule, and relationships with partners like Walmart and Costco are deepening[2] - Third quarter revenue-to-date has increased in the mid-single digits range compared to the same period last year[2] Second Quarter 2025 Financial Results In Q2 2025, net revenue fell 12.6% to $105.1 million due to shipment delays and e-commerce softness. Gross margin decreased by 480 basis points to 35.9%, impacted by tariff costs and launch expenses. However, operating expenses were reduced by 18.2% through cost management, leading to an improved Adjusted EBITDA of $(2.4) million compared to $(4.1) million in the prior year Q2 2025 vs Q2 2024 Key Financials | Metric | Q2 2025 | Q2 2024 | Change | | :--- | :--- | :--- | :--- | | Net Revenue | $105.1M | $120.3M | -12.6% | | Gross Profit | $37.7M | $48.9M | -22.9% | | Gross Margin | 35.9% | 40.7% | -480 bps | | Operating Expenses | $51.9M | $63.5M | -18.2% | | Net Loss | $(17.3)M | $0.0M | N/A | | Adjusted EBITDA | $(2.4)M | $(4.1)M | +41.5% | - The revenue decline was attributed to delays in Rejuvenate 2.0 shipments, lapping wholesale door count reductions from 2024, and softness in e-commerce[3] - Gross margin was negatively impacted by costs related to tariffs and the ramp-up for both the Mattress Firm rollout and the Rejuvenate 2.0 launch[4] - The 18.2% decrease in operating expenses was largely driven by reduced advertising spend and benefits from previous restructuring and cost-saving initiatives[5] Balance Sheet Summary As of June 30, 2025, the company's cash and cash equivalents increased to $34.2 million from $29.0 million at year-end 2024. Net inventories stood at $60.9 million, representing a 12.6% decrease year-over-year but a 7.1% increase since the end of 2024 Balance Sheet Highlights | Metric | June 30, 2025 | Dec 31, 2024 | June 30, 2024 | | :--- | :--- | :--- | :--- | | Cash & Cash Equivalents | $34.2M | $29.0M | N/A | | Net Inventories | $60.9M | $56.9M | ~$69.7M | - Cash and cash equivalents increased by $5.2 million from December 31, 2024, to June 30, 2025[7] - Net inventories decreased by 12.6% compared to June 30, 2024, and increased by 7.1% compared to December 31, 2024[7] 2025 Outlook The company reaffirms its full-year 2025 guidance, projecting net revenue between $465 million and $485 million and Adjusted EBITDA to be in the range of flat to positive $10 million. Growth is expected to accelerate in the second half of the year Full Year 2025 Guidance | Metric | 2025 Outlook | | :--- | :--- | | Net Revenue | $465M - $485M | | Adjusted EBITDA | $0M - $10M | - The company anticipates sequential growth in the second half of the year, driven by the successful launch of Rejuvenate 2.0 and the expanded partnership with Mattress Firm[8] Financial Statements Condensed Consolidated Balance Sheets As of June 30, 2025, total assets were $303.8 million, a slight decrease from $307.8 million at year-end 2024. Total liabilities increased to $319.4 million from $287.6 million, primarily due to increases in related party debt and warrant liabilities. This resulted in a total stockholders' deficit of $(15.6) million, a significant shift from the $20.2 million equity at the end of 2024 Condensed Consolidated Balance Sheets (in thousands) | | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Total current assets | $125,931 | $126,368 | | Total assets | $303,788 | $307,845 | | Liabilities and Stockholders' Equity | | | | Total current liabilities | $84,436 | $101,003 | | Total liabilities | $319,367 | $287,636 | | Total stockholders' equity (deficit) | $(15,579) | $20,209 | | Total liabilities and stockholders' equity (deficit) | $303,788 | $307,845 | Condensed Consolidated Statements of Operations For the three months ended June 30, 2025, the company reported a net loss of $(17.4) million, or $(0.16) per share, compared to a net loss of $(0.009) million in the same period of 2024. The increased loss was driven by lower revenues and gross profit, despite a reduction in operating expenses. For the six-month period, the net loss was $(36.5) million Condensed Consolidated Statements of Operations (in thousands, except per share amounts) | | Three Months Ended June 30, | | Six Months Ended June 30, | | | :--- | :--- | :--- | :--- | :--- | | | 2025 | 2024 | 2025 | 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 Cash Flows For the six months ended June 30, 2025, net cash used in operating activities was $(27.1) million, a slight increase from $(25.7) million in the prior year period. Net cash used in investing activities was stable at $(5.1) million. Net cash provided by financing activities was $37.4 million, primarily from a $39.0 million related party loan. This resulted in a net increase in cash of $5.2 million for the period Condensed Consolidated Statements of Cash Flows (in thousands) | | Six Months Ended June 30, | | | :--- | :--- | :--- | | | 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 | Reconciliation of GAAP to Non-GAAP Measures Reconciliation of GAAP Net Income (Loss) to Non-GAAP EBITDA and Adjusted EBITDA The company's Adjusted EBITDA improved to $(2.4) million for Q2 2025 from $(4.1) million in Q2 2024. This improvement was achieved despite a GAAP net loss of $(17.4) million. Key adjustments included a $(4.4) million change in fair value of warrant liability and $4.1 million in restructuring charges Reconciliation of GAAP Net Loss to Adjusted EBITDA (in thousands) | | Three Months Ended June 30, | | | :--- | :--- | :--- | | | 2025 | 2024 | | GAAP net loss | $(17,371) | $(9) | | EBITDA | $(5,030) | $10,592 | | Adjusted EBITDA | $(2,364) | $(4,143) | - Major adjustments from EBITDA to Adjusted EBITDA in Q2 2025 included change in fair value of warrant liability ($(4.4)M), restructuring charges ($4.1M), and strategic alternative costs ($1.1M)[29] Reconciliation of GAAP Operating Expenses to non-GAAP Adjusted Operating Expenses Adjusted operating expenses for Q2 2025 were $47.8 million, a significant decrease from $63.5 million in Q2 2024. The adjustment from GAAP operating expenses of $51.9 million was due to excluding $4.1 million in restructuring, impairment, and other related charges Reconciliation of Adjusted Operating Expenses (in thousands) | | Three Months Ended June 30, | | | :--- | :--- | :--- | | | 2025 | 2024 | | Total operating expenses (GAAP) | $51,922 | $63,480 | | Restructuring, impairment and other related charges | $(4,137) | — | | Adjusted operating expenses (Non-GAAP) | $47,785 | $63,480 | Reconciliation of GAAP Net Loss to non-GAAP Adjusted Net Loss and Adjusted Net Loss per Diluted Share For Q2 2025, the company reported an adjusted net loss of $(11.7) million, or $(0.11) per diluted share, compared to an adjusted net loss of $(13.8) million, or $(0.13) per diluted share, in Q2 2024. This non-GAAP measure adjusts for items like warrant liability changes, restructuring costs, and applies a normalized tax rate Reconciliation of Adjusted Net Loss and EPS (in thousands, except per share amounts) | | Three Months Ended June 30, | | | :--- | :--- | :--- | | | 2025 | 2024 | | Net loss (GAAP) | $(17,371) | $(9) | | Adjusted net loss (Non-GAAP) | $(11,685) | $(13,818) | | Net loss per share, diluted (GAAP) | $(0.16) | $(0.00) | | Adjusted net loss per share, diluted (Non-GAAP) | $(0.11) | $(0.13) | - The calculation of adjusted net loss involves removing the impact of non-recurring items such as changes in warrant fair value, restructuring charges, and strategic alternative costs, and then applying an estimated effective tax rate of 25.9%[32][33]