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PI

Purple Innovation, Inc. (PRPL)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 revenue was $105.1M (-12.6% YoY) and GAAP gross margin compressed to 35.9% on tariffs and launch/rollout costs; adjusted EBITDA loss improved to $(2.4)M from $(4.1)M YoY, reflecting disciplined cost control .
  • Management reaffirmed FY25 guidance: revenue $465–$485M and adjusted EBITDA flat to +$10M; reiterated exit-2025 gross margin “north of 40%” as mitigation and efficiencies take hold .
  • Demand indicators improved: Rejuvenate 2.0 DTC units >2x the prior launch at ~1,300 units with ~$6K ASP; showrooms luxury mix ≈40% of order value; Q3-to-date revenue running mid-single-digit YoY growth; Mattress Firm rollout to full network by mid‑August .
  • What drove the quarter: delayed Rejuvenate 2.0 shipments (backlog estimated at $4–5M), tariff headwinds (price increases ~2% on 7/22), and ramp costs ahead of revenue recognition, partially offset by direct material savings and lower advertising spend .
  • Stock catalysts: maintained FY guide, Mattress Firm expansion execution, Rejuvenate 2.0 sell-through, and margin recapture to >40% exit-rate; watch tariff/consumer elasticity and e-comm conversion improvements .

What Went Well and What Went Wrong

  • What Went Well

    • Strong early product-cycle signals: “sold more than twice as many Rejuvenate 2.0 units during its launch as…Rejuvenate 1.0” with ~1,300 DTC units at ~$6,000 ASP; luxury mix ≈40% of showroom order value .
    • Distribution ramp momentum: Mattress Firm expansion to entire store network by mid‑August and exclusive luxe line in development; Costco year-end event expanding to 450 clubs, >2× last year .
    • Cost discipline: Operating expenses down 18.2% YoY; adjusted opex $47.8M vs $63.5M LY; adjusted EBITDA loss narrowed to $(2.4)M from $(4.1)M .

  • What Went Wrong

    • Top-line down and gross margin compression: revenue −12.6% YoY to $105.1M; GAAP gross margin fell 480 bps to 35.9% on tariffs and ramp costs (Rejuvenate 2.0, Mattress Firm) .
    • Fulfillment lag vs demand: unfulfilled Rejuvenate 2.0 demand left $4–5M of Q2 revenue on the table; showroom comps would have been positive if shipped on intended timing .
    • E-commerce softness: e‑comm −11.5% YoY; broader consumer caution and ongoing conversion challenges despite site and messaging changes .

Financial Results

Overall P&L and key metrics

MetricQ2 2024Q4 2024Q1 2025Q2 2025
Revenue ($M)$120.3 $129.0 $104.2 $105.1
GAAP Gross Margin %40.7% (48.94/120.27) 42.9% 39.4% 35.9%
Operating Expenses ($M)$63.5 $63.0 $55.5 $51.9
GAAP Net Income (Loss) ($M)~$0.0 (reported $0.027M) $(8.5) $(19.1) $(17.3)
GAAP Diluted EPS ($)$0.00 $(0.08) $(0.18) $(0.16)
Adjusted EBITDA ($M)$(4.1) $2.9 $(4.7) $(2.4)

Channel revenue

Channel Revenue ($M)Q4 2024Q1 2025Q2 2025
Direct-to-Consumer (DTC)$79.8 $63.4 $58.9
Wholesale$49.2 $40.8 $46.2

KPIs and balance sheet

KPI / Balance ItemQ2 2025Prior Period / YoY Context
Showroom comp orders (stores >1yr)+5.5% YoY (orders) Showrooms −13.3% revenue due to unfulfilled units
Rejuvenate 2.0 units (DTC)>1,300 units; ~$6,000 ASP >2× Rejuvenate 1.0 launch (DTC)
Luxury mix in showrooms≈40% of order value Up with selling model relaunch
Q3-to-date revenueMid-single-digit YoY growth Includes limited load-in; demand-led
Cash & equivalents$34.2M (6/30/25) $29.0M (12/31/24)
Net inventories$60.9M (6/30/25) −12.6% YoY; +7.1% vs 12/31/24

Estimates vs actuals (S&P Global)

  • S&P Global consensus for Q2 2025 EPS, Revenue, and EBITDA was unavailable at retrieval time; comparison to Street not possible. Management stated results exceeded internal expectations .
    • Primary EPS Consensus Mean: unavailable (S&P Global)
    • Revenue Consensus Mean: unavailable (S&P Global)
    • EBITDA Consensus Mean: unavailable (S&P Global)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025$465–$485M (Q1 reaffirmed) $465–$485M Maintained
Adjusted EBITDAFY 2025Flat to +$10M (Q1 reaffirmed) Flat to +$10M Maintained
Gross margin exit commentaryQ4 2025“>40%” exit-rate commentary (Q&A/remarks) “North of 40%” exit-rate reiterated Maintained (qualitative)

Guidance context and clarifications

  • Second-half sequential growth expected from Rejuvenate 2.0 rollout and Mattress Firm expansion; EBITDA positive in H2 with heavier weighting in Q4 as full-quarter distribution and margin tailwinds accrue .
  • Tariff exposure now expected to be less than earlier ~$10M estimate given mitigation and rate changes; ~2% price increase implemented 7/22, with limited pushback so far .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024, Q1 2025)Current Period (Q2 2025)Trend
Gross margin trajectoryEnded 2024 at 42.9% GAAP; targeted ≥+200 bps in 2025; efficiencies and sourcing tailwinds 35.9% in Q2 on tariffs and ramp costs; plan to exit >40% by Q4 via mitigation and manufacturing efficiencies Dip in Q2; improvement expected H2
Tariffs & pricingInitially $2–5M exposure; later estimated ~$10M with mitigation (sourcing/price) Total 2025 cost < prior estimate; ~2% price hike on 7/22; minimal demand impact to date Headwind moderating; actions in place
Product performance (Rejuvenate 2.0)Launch slated Q2; strong trade/consumer testing; slot growth 50–60% >2× DTC unit launch vs 1.0; 1,300+ units; showroom luxury mix ≈40%; backlog due to demand outpacing supply Strong uptake; catching up supply
Mattress Firm expansionAgreement to expand to 12,000 slots; expected ≥$70M incremental revenue in 2026 Full network by mid‑Aug; exclusive luxe line under development; ~3,800 slots in Q3 Execution phase; near-term rollout
E‑commerce & marketingConversion challenges; refocus on differentiation, site enhancements e‑comm −11.5% YoY; implementing new targeting and UX; expect gradual gains Work-in-progress
Strategic alternativesBoard initiated review (Mar-2025) Ongoing; no Q&A on topic Neutral backdrop

Management Commentary

  • “Revenue and profit exceeded our expectations, delivering sequential improvement, where strong demand from consumers and partners has temporarily outpaced our ability to fulfill orders.” — CEO Rob DeMartini .
  • “We expect to end the year well north of 40% gross margin rate…a gradual improvement from Q2 through the rest of the year.” — CFO Todd Vogensen .
  • “We’ve sold more than twice as many Rejuvenate 2.0 units during its launch as…Rejuvenate 1.0…Based on early performance, we expect our showroom channel to become profitable in 2025.” — CEO .
  • “Purple products will be in [Mattress Firm’s] full store network by mid-August…developing an exclusive luxury mattress collection.” — CEO .
  • “We took pricing on 7/22…about 2%…we have not seen any negative reaction.” — CEO .

Q&A Highlights

  • Cadence and fulfillment: April was soft; demand and shipments improved through the quarter; ~$4–5M demand unfulfilled due to supply timing; lead times normalizing by mid‑August .
  • H2 profitability slope: EBITDA improvement expected each quarter, weighted to Q4 as full-quarter Mattress Firm/Rejuvenate and margin actions take hold .
  • Tariffs and pricing: Mitigation through sourcing and selective price increases (~2%) with minimal pushback so far; expect total 2025 tariff impact below prior estimate .
  • Additional wholesale partner: New large retailer to contribute modestly in Q4 2025, more meaningfully in 2026 .
  • Channel mix & capital priorities: Showrooms expected to be profitable in 2025; if cash generation improves in 2026, priorities include store footprint and internal investments while maintaining liquidity .

Estimates Context

  • Street comparisons: S&P Global consensus estimates for Q2 2025 EPS, revenue, and EBITDA were unavailable at retrieval time; management noted revenue and profit exceeded internal expectations .
  • Estimate implications: Reaffirmed FY guide, mid-single-digit Q3-to-date growth, and gross margin exit >40% suggest upward bias to H2 revenue/EBITDA phasing assumptions, offset by tariff/macro uncertainty .

Key Takeaways for Investors

  • Reaffirmed FY25 targets with improving H2 setup; execution on Mattress Firm rollout and Rejuvenate 2.0 sell-through are the primary near-term catalysts .
  • Margin recapture is central to the bull case; management plans to exit 2025 at >40% gross margin via tariff mitigation, price, and manufacturing efficiencies .
  • Demand quality improving: luxury mix rising, ASPs supported, showroom KPIs solid; e‑comm remains a conversion project but targeted for gradual improvement .
  • Watch working-capital discipline and liquidity as inventories support rollout; cash at $34.2M with added term loan capacity provides runway .
  • Tariff trajectory remains a swing factor; early price actions and sourcing shifts appear manageable with limited elasticity observed to date .
  • Additional wholesale partner and Costco 450-club event add optionality to H2/H1’26 revenue .
  • Strategic alternatives review is ongoing; base case remains executing “Path to Premium” independent of outcome .