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PI

Purple Innovation, Inc. (PRPL)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 delivered an inflection: net revenue was $118.8M (+0.2% y/y) with GAAP gross margin at 42.8% (up from 29.7% y/y) and positive adjusted EBITDA of $0.2M; GAAP diluted EPS was $(0.11) versus $(0.36) y/y .
  • Management reiterated FY2025 guidance: revenue $465–$485M and adjusted EBITDA breakeven to $10M, citing strong momentum in Rejuvenate 2.0 and Mattress Firm rollout; Q4 gross margin is expected “around 40%” amid promotional intensity .
  • Channel mix: showrooms revenue grew 6.5% to $22M with comps +12% and 76% of showrooms profitable YTD; wholesale climbed 7.9% to $51.5M; e-commerce declined 9.8% but showed sequential improvement post site refresh and greater Amazon FBA use .
  • Tariffs impacted Q3 gross margin by ~$2M but mitigation (sourcing shifts, pricing actions) is reducing the burden; the company expects to exit 2025 above 40% gross margin and sees a path to positive cash generation in 2026 .
  • Consensus estimates from S&P Global were unavailable, but management characterized Q3 results as “in line with expectations” and maintained FY guidance, a constructive setup into holiday/Q4 demand catalysts (Black Friday/Cyber Monday, Costco event) .

What Went Well and What Went Wrong

What Went Well

  • Premium product traction: Rejuvenate 2.0 sold >3,000 units DTC at ~$5,800 ASP; showroom average order value reached ~$4,500, and comps were +12% with 76% of showrooms profitable YTD . “Our Rejuvenate 2.0…continues to outperform…driving 6.5% showroom sales gains… wholesale revenue grew 8%” .
  • Margin recovery: GAAP gross margin of ~42.8% (vs. 35.9% in Q2 and 29.7% y/y), driven by manufacturing efficiencies, direct material cost savings, and completion of restructuring . “Gross margins recovered to ~43%…we expect Q4 to remain ~40%” .
  • Wholesale expansion: Mattress Firm slots now ~9,200, progressing toward 12,000 by March 2026; incremental revenue estimated ~$20M in 2025 and ~$70M in 2026 .

What Went Wrong

  • E-commerce softness: Q3 e-commerce revenue fell 9.8% y/y, though sequential improvement followed the site refresh and FBA transition; DTC was down 5.1% overall .
  • Tariff headwinds: Q3 tariff impact ~ $2M; promotional activity expected to compress Q4 gross margin vs. Q3’s 42.8% .
  • Liquidity and leverage: related party debt rose to $102.9M; stockholders’ equity turned negative at $(26.9)M; cash was $32.4M (up from $29.0M at year-end) .

Financial Results

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Revenue ($USD Millions)$118.6 $104.2 $105.1 $118.8
GAAP Diluted EPS ($)$(0.36) $(0.18) $(0.16) $(0.11)
Adjusted EPS ($)$(0.13) $(0.11) $(0.11) $(0.08)
GAAP Gross Margin (%)29.7% 39.4% 35.9% 42.8%
Operating Loss ($USD Millions)$(46.8) $(14.5) $(14.2) $(12.1)
Adjusted EBITDA ($USD Millions)$(6.4) $(4.7) $(2.4) $0.2

Segment and channel breakdown

MetricQ2 2025Q3 2025
Net Revenue – DTC ($USD Millions)$58.9 $67.2
Net Revenue – Showrooms ($USD Millions)N/A$22.0
Net Revenue – Wholesale ($USD Millions)$46.2 $51.5
E-commerce YoY Growth (%)−11.5% −9.8%
Showroom Comps (%)+5.5% (orders) +12%
Showrooms Profitable (%)N/A76% YTD

KPIs

KPIQ2 2025Q3 2025
Mattress Firm slots (current)Nearing full network by mid-Aug. ~9,200 slots
Target Mattress Firm slots (Mar 2026)~12,000 ~12,000
Incremental revenue from Mattress Firm ($USD Millions, year)N/A~$20 (2025); ~$70 (2026)
Tariff impact in quarter ($USD Millions)Significant headwind ~ $2
Showroom average order value ($USD)N/A~$4,500
Rejuvenate 2.0 units sold DTC~1,300, ASP ~$6,000 >3,000, ASP ~$5,800
GridCloud Pillow price$149 $149

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
RevenueFY 2025$465–$485M $465–$485M Maintained
Adjusted EBITDAFY 2025Breakeven to +$10M Breakeven to +$10M Maintained
Gross MarginQ4 2025N/A~40% (promo-driven) New commentary
Liquidity/FCF2026N/APath to positive cash generation New commentary

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2)Current Period (Q3)Trend
Tariffs/MacroQ2: Gross margin down to 35.9% with tariff and rollout costs; mitigation underway ~$2M Q3 tariff impact; sourcing shifts and pricing actions reducing burden; Q4 margin ~40% Improving mitigation
Product performance (Rejuvenate 2.0)Q2: Launch sold ~2× units vs 1.0; showroom luxury mix ~40% >3,000 DTC units at ~$5,800 ASP; showroom AOV ~$4,500; strong sell-through Accelerating premium
Wholesale/Mattress FirmQ1: Announced expansion to 12,000 slots ~9,200 slots; pacing to 12,000 by Mar 2026; $20M (2025) and ~$70M (2026) incremental Scaling distribution
ShowroomsQ1: Positive showroom growth +12% comps; 76% profitable YTD; $22M revenue (+6.5%) Improving profitability
E-commerceQ2: Down 11.5%; site refresh implemented Down 9.8% but sequential improvement; more FBA on Amazon Stabilizing
Strategic alternativesQ2: Process ongoing Ongoing; no further comments in Q&A Ongoing
R&D/InnovationQ2: DreamLayer tech; GridCloud Pillow launch ($149) Continuing innovation cadence; premium differentiation marketing Ongoing execution

Management Commentary

  • “Gross margins recovered to approximately 43%…we expect fourth-quarter gross margins will remain at roughly 40%…and we continue to be confident that we’ll end the year above the 40% level.” — CEO Rob DeMartini .
  • “Our Mattress Firm rollout is progressing well…represented in nearly 9,200 slots today…on pace for 12,000 slots in 2026…this expansion represents roughly $20M incremental revenue this year and ~$70M next year.” — CEO Rob DeMartini .
  • “Adjusted EBITDA for the third quarter was a gain of $200,000, an improvement from the loss of $6.4 million last year, driven primarily by our gross margin expansion and disciplined cost management.” — CFO Todd Vogensen .
  • “E-commerce was down 10% but showed early signs of improvement following our site refresh and growing traction with Amazon.” — CEO Rob DeMartini .
  • “We are reiterating our full year 2025 guidance, expecting revenue in the range of $465 million–$485 million and Adjusted EBITDA between break-even and $10 million positive.” — CEO Rob DeMartini .

Q&A Highlights

  • EBITDA bridge: Implied Q4 in high-single-digits as revenue accelerates seasonally, Mattress Firm rollout, and Rejuvenate 2.0 momentum while maintaining ~40% gross margin; incremental revenue expected to flow through quickly given lean cost base .
  • Mattress Firm slot cadence: The incremental ~2,800 slots to reach 12,000 should come at end of Q1 2026; slot productivity held despite expanded flooring; company investing more in retail/marketing to drive performance .
  • Gross margin sustainability: Management sees 40%+ sustainable gross margin despite wholesale mix, offset by premium product mix; Q4 down from Q3 due to promotion intensity .
  • Showroom profitability: 76% of showrooms profitable YTD vs. 56% last year; expect ongoing strength though a small fraction may remain structurally challenged due to rent .
  • E-commerce strategy: Remains bullish; refreshed website and improved Amazon FBA conversion; mix shifting toward premium online .

Estimates Context

  • S&P Global consensus estimates for Q3 2025 and Q4 2025 (EPS, revenue, EBITDA) were unavailable at the time of analysis; management stated Q3 results were “in line with expectations” and maintained FY guidance .
  • Without published consensus, traders should anchor near-term modeling on Q4 commentary (~40% gross margin, seasonal DTC lift, Costco 450-club event, continued Mattress Firm expansion) and the FY revenue/EBITDA ranges reiterated by management .
  • Note: Consensus estimates from S&P Global were not retrievable during this session; please refresh data before trading decisions.

Key Takeaways for Investors

  • Premium-led margin recovery and cost discipline produced positive adjusted EBITDA; sustaining ~40% gross margin through Q4 would be a key validation amid promotional intensity .
  • Wholesale expansion (Mattress Firm) is a 2025–2026 revenue driver (~$20M 2025, ~$70M 2026) with slot productivity holding; monitor execution and mix impact on margins .
  • Showroom KPIs strengthened (AOV ~$4.5K, comps +12%, 76% profitable); channel remains a core brand and conversion engine .
  • E-commerce is still down y/y but improving sequentially post site refresh and Amazon FBA; watch holiday conversion and premium mix shift .
  • Tariff headwinds (~$2M in Q3) are being mitigated via sourcing shifts and pricing actions; continued relief is a margin lever into 2026 .
  • Liquidity/leverage bear watching (related party debt ~$102.9M, negative equity), but cash improved to $32.4M; Q4 is seasonally cash-generative per management .
  • Near-term trading catalysts: holiday sell-through (Black Friday/Cyber Monday), Costco 450-club event, Q4 margin realization (~40%), and any updates on strategic alternatives (no Q&A detail provided) .