Q4 2023 Purple Innovation Inc Earnings Call

Good afternoon, ladies and gentlemen, welcome to Purple innovation fourth quarter 2023 earnings conference call. At this time all participants are in a listen only mode. A brief question and answer session will follow the formal presentation, if anyone should require operator assistance.

Operator: Good afternoon, ladies and gentlemen. Welcome to Purple Innovation's fourth quarter 2023 earnings conference call. At this time, all participants are in a listen only mode.

Operator: A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. It is now my pleasure to introduce your host, Brendon Frey of ICR. Please go ahead.

During the conference. Please press Star zero on your telephone keypad. It is now my pleasure to introduce your host Brendon Frey of ICR. Please go ahead.

Brendon Frey: Thank you for joining Purple Innovation's fourth quarter 2020 300. A copy of our earnings press release is available on the investor relations section of Purple's website at www.purple.com. I would like to remind you that certain statements we will make in this presentation are forward-looking statements. These four forward-looking statements reflect Purple Innovation's judgment and analysis only as of today, and actual results may differ materially from current expectations based on a number of factors affecting the company's business. Accordingly, you should not place undue reliance on these forward-looking statements for a more thorough discussion of the risks and uncertainties associated with the forward-looking statements to be made in this conference call and webcast. We refer you to the disclaimer regarding forward-looking statements included in our fourth quarter 2023 earnings release, which was furnished to the SEC today on Form 8K, as well as our filings with the SEC referenced in that disclaimer

Brendon Frey: Thank you for joining purple innovations fourth quarter 2023 earnings call.

A copy of our earnings press release is available on the Investor Relations section Purples website at.

Brendon Frey: Www dot purple dot com.

Brendon Frey: I would like to remind you that certain statements. We will make in this presentation are forward looking statements. These forward looking statements reflect purple.

Brendon Frey: <unk> judgment and analysis only as of today and actual results may differ materially from current expectations based on a number of factors affecting the company's business.

Brendon Frey: Accordingly, you should not place undue reliance on these forward looking statements for a more thorough discussion of the risks and uncertainties associated with the forward looking statements to be made in this conference call and webcast. We refer you to the disclaimer regarding forward looking statements included in our fourth quarter 2023 earnings release, which was for.

Brendon Frey: And as to the SEC today on form 8-K.

Brendon Frey: As well as our filings with the SEC referenced in that disclaimer.

Brendon Frey: We do not undertake any obligation to update or alter any forward-looking statements, whether as a result of new information, future events, or otherwise. Today's presentation will include reference to non-GAAP financial measures, such as EBITDA, adjusted EBITDA, adjusted gross margin, adjusted net income, and adjusted earnings per share. A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measure is available in the earnings release, which can be found on our website. With that, I'll turn the call over to Rob DeMartini, Purple Innovation's Chief Executive Officer. Rob?

Brendon Frey: We do not undertake any obligation to update or alter any forward looking statements, whether as a result of new information future events or otherwise.

Brendon Frey: Today's presentation will include references to non-GAAP financial measures such as EBITDA adjusted EBITDA adjust.

Brendon Frey: The gross margin adjusted net income and adjusted earnings per share.

Brendon Frey: A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measure is available within the earnings release, which can be found on our website.

Speaker Change: With that I'll turn the call over to Rob D. Martini Purple innovations Chief Executive Officer, Rob.

Robert T. DeMartini: Thank you, Brendon. And thank you, and good afternoon, everyone. With me on today's call is CFO Todd Vogensen. After our prepared remarks, we'll open the call to your questions. While it has taken us a few quarters longer than we originally anticipated, we're extremely encouraged by the response to our new product lines from both consumers and our wholesale partners. Furthermore, the green shoots we saw in the fourth quarter have continued into 2024. Our fourth quarter performance represents an encouraging finish to what was a transformative year at Purple Innovation. Sales increased year over year for the first time in eight quarters, in line with our guidance. And despite lower advertising spend and industry seasonality, sales also increased sequentially from quarter three. The fourth quarter marked a continuation of positive trends in each of our distribution channels, in total and relative to recent industry growth rates. This was the third consecutive quarter that wholesale, showrooms, and e-commerce all registered sequential growth.

Speaker Change: Thank you Brendan and thank you and good afternoon, everyone with me on today's call as CFO, Todd Bogan Sun <unk>.

Speaker Change: After our prepared remarks, we'll open the call up to your questions.

While it has taken us a few quarters longer than we originally anticipated we're extremely encouraged by the response to our new product lines from both consumers and our wholesale partners Inc.

Speaker Change: Encouragingly the green shoots we saw on the fourth quarter have continued into 2024.

Speaker Change: Our fourth quarter performance represented an encouraging finish to what was a transformative year at purple innovation.

Speaker Change: Sales increased year over year for the first time in eight quarters in line with our guidance in.

Speaker Change: And despite lower advertising spend and industry seasonality sales also increased sequentially from quarter three.

Speaker Change: The fourth quarter marked the continuation of positive trends in each of our distribution channels in total and relative to recent industry growth rates.

Speaker Change: This was the third consecutive quarter that wholesale showrooms and e-commerce, all registered sequential growth.

Robert T. DeMartini: Supported by the outperformance over the Black Friday and Cyber Monday holiday weekend, showroom sales for the quarter were up mid-teens year over year, with more than 60% of locations comping positive. And e-commerce sales were slightly positive compared with Q4 last year, as this channel further stabilized after 10 quarters of year over year declines and our advertising initiatives gained traction. Wholesale also performed well over the holiday period, with the channel nearly flat to Q4 last year.

Speaker Change: Supported by the outperformance over the Black Friday, Cyber Monday holiday weekend showroom sales for the quarter were up mid teens year over year with more than 60% of locations Comping positive and E. Commerce sales were slightly positive compared with Q4 last year as this channel further stabilize.

After 10 quarters of year over year declines and our advertising initiatives gain traction.

Speaker Change: Wholesale also performed well over the holiday period with the channel nearly flat to Q4 last year.

Speaker Change: Our improving top line performance combined with enhancements, we've made to our manufacturing supply chain and product engineering drove a meaningful sequential improvement in our bottom line, including positive adjusted EBITDA for the month of December.

Robert T. DeMartini: Our improving top-line performance, combined with enhancements we've made to our manufacturing, supply chain, and product engineering, drove a meaningful sequential improvement in our bottom line, including positive adjusted EBITDA for the month of December. As I said, 2023 was a transformative year for the company. We embarked on our path to premium sleep strategy aimed at establishing Purple as a formidable challenger brand in the premium sleep category.

Speaker Change: As I said 2023 was transformative year for the company.

Speaker Change: We embarked on our path to premium sleep strategy aimed at establishing purple as a formidable challenger brand in the premium sleep category.

Robert T. DeMartini: And despite sluggish industry trends, we made significant progress against this goal, capturing market share and building momentum for 2024. To recap, this year, we executed the largest, most innovative new product launch in company history. We introduced nine new mattress models across our new three-tiered offering, including our Premier and Luxury Collections Restore and Rejuvenate, with Rejuvenate elevating our price points into the $5,500 to $7,500

Speaker Change: And despite sluggish industry trends, we made significant progress against this goal capturing market share and building momentum for 2024.

Speaker Change: To recap the year, we executed the largest most innovative new product launch in company history.

Speaker Change: We introduced nine new mattress models across our new three tiered offering, including our premier and luxury collections restore and rejuvenate with rejuvenate elevating our price points into the 55 to 7500 dollar range.

Speaker Change: We simultaneously began the process of repositioning purple as a premium brand with the launch of a new campaign sleep better live purple, which communicates how our proprietary gel flex grid delivers deep uninterrupted sleep.

Robert T. DeMartini: We simultaneously began the process of repositioning Purple as a premium brand with the launch of a new campaign, Sleep Better, Live Purple, which communicates how our proprietary gel flex grid delivers deep, uninterrupted sleep. Following a period of reduced advertising investments ahead of the transition, we elevated our spending in the second half to support the launch and enhance consumer awareness and interest in the differentiated benefits of the Purple brand. At the onset of 2023, we expected the mid-May launch of our new products and new marketing would coincide with an uptick in industry demand after nearly 18 months of double-digit decline. While industry unit growth has yet to rebound, we made steady progress as the year unfolded, as evidenced by the sequential quarterly improvements in our top and bottom line results.

Speaker Change: While only a period of reduced advertising investments ahead of the transition we elevated our spending in the second half to support the launch and enhanced consumer awareness and interest in the differentiated benefits of the purple brand.

Speaker Change: At the onset of 2023 we expected the mid May launch of our new products and new marketing would coincide with an uptick in industry demand after nearly 18 months of double digit declines.

Speaker Change: While industry unit growth has yet to rebound we made steady progress as the year unfolded as evidenced by the sequential quarterly improvements in our top and bottom line results.

Speaker Change: Our investments in product innovation brand building and marketing, including enhanced point of sale materials have paid dividends across our distribution channels.

Robert T. DeMartini: Our investments in product innovation, brand building, and marketing, including enhanced point-of-sale materials, have paid dividends across our distribution channels. With respect to wholesale, we increased our total number of floor slots by approximately 10% in 2023. More importantly, the collaborative approach we've taken with our retail partners to grow both of our businesses through higher-priced, higher-margin products has forged stronger relationships that we believe will lead to door productivity gains going forward. We remain grateful for the trust of our retail partners and the growing opportunities we have together. In our showrooms, where we control the presentation and selling process, the launch had the most immediate impact.

Speaker Change: With respect to wholesale we increased our total number of floor slots by approximately 10% in 2023.

More importantly, the collaborative approach we've taken with our retail partners to grow both of our businesses through higher priced higher margin products has forge stronger relationships that we believe will lead to door productivity gains going forward.

Speaker Change: We remain grateful for the trust of our retail partners and the growing opportunities we have together.

Speaker Change: In our showrooms, where we control the presentation and selling process. The launch had the most immediate impact.

Robert T. DeMartini: Our sales teams have done a good job upselling consumers into our restore and rejuvenate mattresses, driving an increase in average mattress selling price post launch. These improving trends helped offset the softer industry-wide traffic and return the majority of our comp stores to positive territory in the fourth quarter. With our price points moving higher and industry transactions shifting more towards brick and mortar, we're encouraged with the stabilization of our e-commerce channel showed in the first half of 2023 and the quarter-over-quarter growth it achieved in the second. Our new product and marketing strategies had a positive impact on purple.com site traffic.

Speaker Change: Our sales teams have done a good job of upselling consumers into our restore and rejuvenate mattresses driving an increase in average mad for selling price post launch.

Speaker Change: These improving trends helped to offset the softer industry wide traffic and return the majority of our comp stores to positive territory in the fourth quarter.

Speaker Change: With our price points, moving higher and industry transactions shifting more towards brick and mortar. We're encouraged with the stabilization of our ecommerce channel showed in the first half of 2023 and the quarter over quarter growth that achieved in the second half.

Speaker Change: Our new product and marketing strategies had a positive impact on purple dot com site traffic and more recently, we've seen an uptick in conversion. Thanks to some of the adjustments we've made to the user experience.

Robert T. DeMartini: And more recently, we've seen an uptick in conversion, thanks to some of the adjustments we've made to the user experience. Below the revenue line, we also made important progress to ensure the company is positioned to drive profitable growth. Our Chief Operating Officer, Eric Kaner, and his team have done a good job optimizing our manufacturing facilities and gaining efficiencies throughout our supply chain.

Speaker Change: Below the revenue line. We also made important progress to ensure the company is positioned to drive profitable growth.

Speaker Change: Our chief operating officer, Erik Keener, and his team have done a good job optimizing our manufacturing facilities and gaining efficiencies throughout our supply chain.

Robert T. DeMartini: This has allowed us to stabilize adjusted gross margins around 37% on current volume, providing a clear path to 40% gross margins as we expand our top line and benefit further from the operations team's continued work. Meanwhile, our Chief Marketing Officer, Kira Kraus, and her team evolved our marketing mix throughout 2023 to more efficiently reach and convert consumers across all channels. Based on recent learnings that are being applied to our forward plan, we expect to leverage marketing and advertising in 2024 by being more productive with our spend. As you recall, Eric and Kira both joined Purple in 2022, along with Chief Innovation Officer Jeff Hutchins.

Speaker Change: This has allowed us to stabilize adjusted gross margins around 37% on current volumes, providing a clear path to 40% gross margins as we expand our topline and benefit further from the operations teams continue to work.

Speaker Change: Meanwhile, our chief marketing Officer, Keira, Krausz and her team evolved our marketing mix throughout 2023 to more efficiently reach and convert consumers across all channels.

Speaker Change: Based on recent learnings that are being applied to our forward plan, we expect to leverage marketing and advertising in 2024 by being more productive with our spend.

Speaker Change: As you recall, Eric and cure of both joined Purple in 2022, along with Chief Innovation Officer, Jeff Hutchins in.

Robert T. DeMartini: In 2023, we rounded out our leadership team with three important hires, adding Scott Kirby as our chief owned retail officer, Tricia McDermott as chief legal officer, and Todd as our chief financial officer. I'm extremely pleased with the experience and the caliber of the management team we've assembled at Purple and believe the work they and our entire organization have done has built a foundation for profitable growth in 2024 and beyond. And we have a clear plan in place centered on five key initiatives designed to ensure we're on the right path toward this overarching objective.

Speaker Change: In 2023 we rounded out our leadership team with three important hires adding Scott Kirby is our chief owned retail officer, Tricia Mcdermott as Chief legal officer, and Todd as our Chief Financial Officer.

Speaker Change: I'm extremely pleased with the experience and the caliber of the management team we've assembled at purple and believe the work they and our entire organization have done has built the foundation for profitable growth in 2024 and beyond and.

Speaker Change: And we have a clear plan in place centered on five key initiatives designed to ensure we're on the right path towards this overarching objective.

Robert T. DeMartini: First, we're focused on improving the productivity of existing showroom and wholesale doors. While showroom expansion has been an emphasis for the last few years, in 2024, we'll slow door growth and prioritize the profitability of existing showrooms through new top line and cost initiatives. One of the bigger opportunities we're focusing on is accelerating sales by leaning into third-party consumer finance to drive higher average tickets as customers both trade up and into our higher tier offerings and bundle products like our new SmartBase. We'll also rethink how we approach selling in our stores and shift to a more intentional selling environment with a focus on conversion, especially for consumers that are already in their purchase journey. From a cost perspective, we'll look to restructure current arrangements, including leases and overhead, to better align with the current level of revenue per store and enhance channel profitability.

Speaker Change: First we're focused on improving productivity of existing showroom and wholesale doors.

Speaker Change: While showroom expansion has been an emphasis for the last few years in 'twenty 'twenty four will slow door growth and prioritize the profitability of existing showrooms through new topline and cost initiatives.

Speaker Change: One of the bigger opportunities, we're focusing on is accelerating sales by leaning into third party consumer financing to drive higher average tickets as customers, both trade up and into our higher tier offerings and bundled products like our new smart basis.

Speaker Change: We'll also rethink how we approach selling in our stores and shift to a more intentional selling environment with a focus on conversion, especially for consumers that are already in their purchase journey.

From a cost perspective, we will look to restructure current arrangements, including leases in overhead to better align with the current level of revenue per store and enhanced channel profitability.

Robert T. DeMartini: In addition to being profitable growth vehicles on a standalone basis, our showrooms, especially the ones in high-traffic areas, serve as a form of advertising that's driving both traffic into our partner stores and overall demand for our mattresses. Our recent consumer research indicates that those consumers who didn't make a purchase on their first visit to one of our showrooms, approximately 25% then went on to shop at a wholesale partner store on a subsequent visit. The in-store education and the premium experience provided by our showrooms creates a high-quality, high-intent potential purchase either directly or through one of our wholesale doors.

Speaker Change: In addition to being profitable growth vehicles on a standalone basis, our showrooms, especially the ones in high traffic areas serve as a form of advertising that's driving both traffic into our partner stores and overall demand for our mattresses.

Speaker Change: Our recent consumer research indicates that those consumers who didn't make a purchase on their first visit to one of our showrooms approximately 25% then went on to shop at a wholesale partner store in a subsequent visit the in store education and the premium experience provided by our showrooms.

Speaker Change: Create a high quality high intent potential purchase either directly or through one of our wholesale doors.

Speaker Change: With respect to wholesale while we've made great strides over the past year with our partner relationships, we're aiming to create even more synergies to drive increased door productivity in 2024.

Robert T. DeMartini: With respect to wholesale, while we've made great strides over the past year with our partner relationships, we're aiming to create even more synergies to drive increased door productivity in 2024. We'll look to leverage co-op dollars with our partners and provide more marketing support, while also conducting monthly and quarterly joint business reviews to solve for revenue growth together. Additionally, we'll look to continue our efforts around product education for retail sales associates to ensure they understand the benefits of our unique gel grid technology and help continue to grow enthusiasm for the Purple brand alongside our direct efforts.

Speaker Change: We will look to leverage co op dollars with our partners and provide more marketing support while also conducting monthly and quarterly joint business reviews to solve for revenue growth together.

Speaker Change: Additionally, we will look to continue our efforts around product education for retail sales associates to ensure they understand the benefits of our unique gel grid technology and help continue to grow enthusiasm for the purple brand alongside our direct efforts.

Robert T. DeMartini: Our second area of focus is on improving e-commerce mattress conversion. In 2024, we will continue to test different messaging and different mediums to drive better conversion results. While our recent site improvements and shift in media strategy have sequentially improved both the quality of traffic and conversion rates, we believe there are significant opportunities to improve both the quality of traffic we are driving to our website and the conversion of that traffic into customers. Third, as we mentioned last quarter, driving gross margin improvement will also be a significant initiative in 2024. Several actions planned or already underway include select price increases on certain mattress models and some of our ancillary products, steadily increasing the mix of our higher-margin, higher-average selling price premium and luxe mattresses. Reducing reliance on air freight and several initiatives to improve our manufacturing and sourcing efficiency.

Speaker Change: Our second area of focus is on improving e-commerce mattress conversion.

Speaker Change: In 'twenty 'twenty four we will continue to test different messaging and different mediums to drive better conversion results.

While our recent site improvements and shifting media strategy have sequentially improved both the quality of traffic and conversion rates.

Speaker Change: We believe there are significant opportunities to improve both the quality of traffic, we are driving to our web site and the conversion of that traffic into customers.

Speaker Change: Third as we mentioned last quarter driving gross margin improvement will also be a significant initiative in 2024.

Speaker Change: Several actions planned or already underway include select price increases on certain mattress models and some of our ancillary products.

Speaker Change: Steadily increasing the mix of our higher margin higher average selling price premium and Lux mattresses.

Speaker Change: Reducing reliance on air freight and several initiatives to improve our manufacturing and sourcing efficiency.

Speaker Change: Fourth we'll look to improve marketing efficiency.

Robert T. DeMartini: Fourth, we'll look to improve marketing efficiency. In 2023, we strategically spent a larger portion of our marketing dollars on brand awareness to support the launch of the new product lineup and new brand position. With our product and new brand now in the market, we will still invest in awareness building, but we'll shift our spin towards more efficient marketing tactics, as we focus on customers already in the mattress market with consideration for conversion ad spending. We also plan to return to our highly effective, experiential, and demonstrable product advertising, starting with a reintroduction of our egg drop video. And lastly, bringing new products and innovations to market remains a core focus of the company in 2024. Purple was built on innovation and intellectual property that improves our consumers' comfort and sleep.

Speaker Change: In 2023 we strategically spent a larger portion of our marketing dollars on brand awareness to support the launch of the new product lineup and new brand position.

Speaker Change: With our product and new brand now in market we.

Speaker Change: We will still invest behind awareness building, but we will shift our spend towards more efficient marketing tactics as we focus on customers already in the mattress market with consideration and conversion ad spending.

Speaker Change: We will also plan to return to our highly effective experiential and demonstratable product advertising, starting with our reintroduction of our AG drop video.

Speaker Change: And lastly, bringing new products and innovations to market remains a core focus of the company in 2024.

Speaker Change: Purple was built on innovation and intellectual property that improves our consumers' comfort and sleep.

Robert T. DeMartini: With a strong innovation engine led by Chief Innovation Officer Jeff Hutchings, I'm pleased to share that we currently have a strong pipeline of new products that are expected to come to market over the next 12 to 24 months and several technological innovations currently in development. This continued focus on our innovation heritage not only creates excitement for the brand, but it also cements our leadership in grid-based technology and drives new margin improvements as we leverage our frequently copied but never duplicated intellectual property in new and exciting ways. To support the initiatives I just outlined in January, we refinanced our debt and added liquidity to our balance sheet.

Speaker Change: With a strong innovation engine led by Chief Innovation Officer, Jeff Hutchins I'm pleased to share that we currently have a strong pipeline of new products that are expected to come to market over the next 12 to 24 months and several technological innovations currently in development.

Speaker Change: This continued focus on our innovation heritage not only creates excitement for the brand, but it also cements our leadership in grid based technology and drives new margin improvements as we leverage our frequently copied but never duplicated intellectual property in new and exciting ways.

Speaker Change: To support the initiatives I just outlined in January we refinanced our debt and added liquidity to our balance sheet.

Robert T. DeMartini: Along with our existing cash position, we are confident this new facility provides us with the financial flexibility to execute our Path to Premium Sleep strategy and to invest in growth. I'll now turn the call over to Todd to discuss the 2023 financials in detail, as well as our outlook for 2024.

Speaker Change: Along with our existing cash position. We are confident this new facility provides us with the financial flexibility to execute our path to premium sleep strategy and to invest in growth.

Speaker Change: I'll now turn the call over to Todd to discuss the 2023 financials in detail as well as our outlook for 2024.

Todd E. Vogensen: Thanks, Rob. We were pleased in 2023 with fourth-quarter results that were in line with our expectations, and we look forward to building on our momentum throughout 2024. Now, jumping to our recent performance. For the three months ended December 31, 2023, net revenue was $145.9 million.

Todd.

Todd E. Vogensen: Thanks, Rob.

Todd E. Vogensen: We were pleased to end 2023 with fourth quarter results that were in line with our expectations and we look forward to building on our momentum throughout 2024.

Todd E. Vogensen: Now jumping to our recent performance for the three months ended December 31, 2023, net revenue was $145 $9 million an.

Todd E. Vogensen: An increase of 1.1% compared to $144.3 million in the prior year period. The year-over-year increase was largely due to the growing positive response to our new product lineup, partially offset by the continued industry-wide softness for home-related goods. By channel, direct-to-consumer net revenue increased 4.3% versus the prior year period. Within DTC, e-commerce increased 0.5% as our focus on driving higher quality traffic to our website gains traction. Showroom net revenue increased 17.5 percent, driven partially by the addition of five net new showrooms over the past 12 months, along with higher ASPs compared to last year. However, the increase in DTC was partially offset by a 2.7% decrease in wholesale net revenue.

Todd E. Vogensen: An increase of one 1% compared to $144 3 million in the prior year period.

Todd E. Vogensen: The year over year increase was largely due to the growing positive response to our new product lineup, partially offset by the continued industry wide softness for home related goods.

Todd E. Vogensen: By channel direct to consumer net revenue increased four 3% versus the prior year period.

Todd E. Vogensen: Within DTC E Commerce increased <unk>, 5% as our focus on driving higher quality traffic to our website gains traction.

Todd E. Vogensen: Rum net revenue increased 17, 5% driven partially by the addition of five net new showrooms over the past 12 months, along with higher asps compared to last year.

Todd E. Vogensen: The increase in DTC was partially offset by a two 7% decrease in wholesale net revenue.

Todd E. Vogensen: While down year over year, our wholesale channel performance in the fourth quarter was better than the industry trends mentioned earlier, driven by growing consumer adoption of our new product line. Gross profit was $48.5 million during the fourth quarter compared to $49.9 million during the same period in 2022, with a gross margin rate at 33.2% versus 34.6% last year. Gross margin in the fourth quarter of 2023 was impacted by costs associated with the launch of the new product line, including industry-standard price reductions on the selling of new mattress floor models to wholesale partners and incremental air freight costs associated with the purchase of materials for our new product. Note that we've completed the new product rollout in the fourth quarter with the launch of our new line at our largest customer. As a result, Q4 is the last quarter we expect these types Net of these costs, the adjusted gross margin was 36.7% in the current year quarter.

Todd E. Vogensen: While down year over year, our wholesale channel performance in the fourth quarter was better than the industry trends mentioned earlier, driven by growing consumer adoption of our new product line.

Todd E. Vogensen: Gross profit was $48 $5 million during the fourth quarter compared to $49 9 million during the same period in 2022.

Todd E. Vogensen: With gross margin rate at 33, 2% versus 34, 6% last year.

Todd E. Vogensen: Gross margin in the fourth quarter of 2023 was impacted by costs associated with the launch of the new product line, including the industry standard price reductions on the sell in of new mattress floor models, So wholesale partners.

Todd E. Vogensen: And incremental air freight costs associated with the purchase of materials for our new products.

Todd E. Vogensen: No we've completed the new product rollout in the fourth quarter with the launch of our new line at our largest customer as a result Q4 is the last quarter. We expect these types of adjustments.

Todd E. Vogensen: Net of these costs adjusted gross margin was 36, 7% in the current year quarter.

Todd E. Vogensen: Adjusted gross margin improved by 210 basis points compared to last year, due primarily to manufacturing efficiencies from higher production volumes in 2023 and increased average selling prices of the company's expanded product line. Operating expenses were $64.7 million compared to $61.9 million in the fourth quarter of 2022. The increase was largely driven by growth in advertising spend to support the launch of our new product line and the cost of five net new showrooms in 2023, partially offset by a $4.1 million decrease in G&A expense related to lapping special committee costs for 2022 and an insurance recovery on special committee costs in 2023. As a percent of revenue, operating expenses were 44.3% compared to 42.9% in the fourth quarter of 2022. As a result, adjusted net loss in the fourth quarter of 2023 was $15.8 million compared to an adjusted net loss of $8.1 million last quarter. Adjusted EBITDA was negative $9.8 million versus negative $0.8 million a year ago.

Todd E. Vogensen: Adjusted gross margin improved by 210 basis points compared to last year due primarily to manufacturing efficiencies from higher production volumes in 2023.

Todd E. Vogensen: And increased average selling prices of the company's expanded product line.

Todd E. Vogensen: Operating expenses were $64 $7 million compared to $61 9 million in the fourth quarter of 2022.

Todd E. Vogensen: The increase was largely driven by growth in advertising spend to support the launch of our new product line and the cost of five net new showrooms in 2023, partially offset by a $4 $1 million decrease in G&A expense.

Todd E. Vogensen: Related to lapping Special committee cost for 2022, and an insurance recovery on special Committee cost in 2023.

Todd E. Vogensen: As a percent of revenue operating expenses were 44, 3% compared to 42, 9% in the fourth quarter of 2022.

Todd E. Vogensen: As a result, adjusted net loss in the fourth quarter of 2023 was $15 $8 million compared to an adjusted net loss of $8 1 million last year.

Todd E. Vogensen: Adjusted EBITDA was negative $9 $8 million versus negative point 8 million a year ago.

Todd E. Vogensen: And the fourth quarter adjusted loss per share was $0.15 compared to an adjusted loss per share of $0.09 in the fourth quarter of 2022. Now to our full year results. For the 12 months ended December 31, 2023, net revenue was $510.5 million, down 10.9% compared to $573.2 million in the prior year. Overall, full-year net revenue growth was negatively affected by difficult market conditions for the home-related goods category.

And fourth quarter adjusted loss per share was <unk> 15, compared to an adjusted loss per share of nine cents fourth quarter of 2022.

Now, it's we're at full year results.

Todd E. Vogensen: For the 12 months ended December 31, 2023, net revenue was $510 $5 million down 10, 9% compared to $573 2 million in the prior year.

Todd E. Vogensen: Overall full year net revenue growth was negatively affected by difficult market conditions for the home related goods category couple.

Todd E. Vogensen: Combined with several headwinds associated with the conversion and launch of our new product line. These headwinds included the industry standard practice of the discounted sell-in of floor models and increased discounting on legacy products. By channel, DTC net revenue declined 10.2% year over year, primarily due to decreased e-commerce channel demand, which was partially offset by growth and purple showroom revenue driven by the addition of five net new showrooms in 2023. The annualization impact of adding 27 net new showrooms through 2022, as well as higher ASPs driven by the consumer's adoption of the new, higher-tiered product within the channel. Wholesale revenue declined 11.9% due to the softening of industry-wide demand and the previously mentioned transition factors.

Todd E. Vogensen: Coupled with several headwinds associated with the conversion and launch of our new product line.

Todd E. Vogensen: Headwinds included the industry standard practice of the discounted selling floor models and increased discounting on legacy products.

Todd E. Vogensen: By channel.

Todd E. Vogensen: Do you see net revenue declined 10, 2% year over year.

Todd E. Vogensen: I'm merely due to decreased e-commerce channel demand, which was partially offset by growth in purple showroom revenue driven by.

The addition of five net new showrooms in 2023.

Todd E. Vogensen: The annualized impact of adding 27, net new showrooms through 2022, as well as higher asps driven by the consumers adoption of the new higher tiered product within the channel.

Todd E. Vogensen: Wholesale revenue declined 11, 9% due to the softening industry wide demand and the previously mentioned transition factors.

Todd E. Vogensen: Gross profit was $171.8 million in 2023 compared to $208 1 million in 2022 with.

Todd E. Vogensen: Gross profit was $171.8 million in 2023, compared to $208.1 million in 2022, with a gross margin rate of 33.7% versus 36.3% in 2022. The decrease in gross profit over the prior year was primarily due to the impact of the new product launch in May, including new floor models being sold to wholesale partners that reduced pricing, higher labor and freight costs, and decreased manufacturing efficiency. Excluding the product transition costs, adjusted gross margin for 2023 was 37.2%, a 90 basis point improvement over 2022, reflecting increased average selling prices of the company's expanded product line. Operating expenses were $285.5 million, or 55.9% of net revenue in 2023 versus $250.8 million or 43.8% in the prior year period. The increase in operating expenses was primarily driven by showroom expansion, along with an increase in advertising spending from 12 percent of revenue to 14 percent of revenue to support the new product launch and nine million dollars in incremental special committee costs from earlier in the year. As a result, for the full year of 2023, the adjusted net loss was $73 million compared to an adjusted net loss of $31.4 million last year. Adjusted EBITDA was negative $54.7 million versus negative $0.2 million a year ago.

Todd E. Vogensen: With gross margin rate at 33, 7% versus 36, 3% in 2022.

Todd E. Vogensen: The decrease in gross profit over the prior year was primarily due to the impact of the new product launch in may including new floor models being sold the wholesale partners at reduced pricing higher labor and freight costs and decreased manufacturing efficiency.

Todd E. Vogensen: Excluding the product transition costs adjusted gross margin for 2023 was 37, 2% a 90 basis point improvement over 2022.

Todd E. Vogensen: Reflecting increased average selling prices of the Companys expanded product line.

Todd E. Vogensen: Operating expenses were $285 $5 million or 55, 9% of net revenue in 2023 versus $250 8 million or 43, 8% in the prior year period.

Todd E. Vogensen: The increase in operating expenses was primarily driven by showroom expansion along with an increase in advertising spending from 12% of revenue to 14% of revenue to support the new product launch.

Todd E. Vogensen: And $9 million in incremental special committee cost from earlier in the year.

Todd E. Vogensen: As a result for the full year of 2023, adjusted net loss was $73 million compared to an adjusted net loss of 31 4 million last year.

Todd E. Vogensen: Adjusted EBITDA was negative $54 $7 million versus negative $2 million a year ago and.

Todd E. Vogensen: And the adjusted loss per share was $0.70 compared to an adjusted loss per share of $0.38 in 2022. Now, turning to the balance sheet. Net inventories totaled $66.9 million at December 31, 2023, compared to $73.2 million at December 31, 2022 and $72.1 million at September 30, 2023, representing decreases of 8.6% and 7.2%, respectively. At year end, we had cash and cash equivalents of $26.9 million, compared with $41.8 million at December 31, 2022. Our decrease in cash consisted of cash used in operations of $54.7 billion and capital expenditures of $15.2 million, primarily related to additional manufacturing facility investments and showroom expansion.

Todd E. Vogensen: And adjusted loss per share was <unk> 70, compared to an adjusted loss per share of <unk> 38 cents in 2022.

Todd E. Vogensen: Now turning to the balance sheet.

Todd E. Vogensen: Net inventories totaled $66 $9 million at December 31, 2023, compared to $73 2 million at December 31, 2022.

Todd E. Vogensen: And $72 1 million at September 32023 reps.

Todd E. Vogensen: Representing decreases of eight 6% and seven 2% respectively.

Todd E. Vogensen: At year end, we had cash and cash equivalents of $26 $9 million compared with 41 8 million at December 31, 2022.

Todd E. Vogensen: Our decrease in cash consisted of cash used in operations of $54 $7 million.

Todd E. Vogensen: And capital expenditures of $15 2 million, primarily related to additional manufacturing facility investments and showroom expansion.

Todd E. Vogensen: All partially offset by proceeds from the company's stock offering in February of 2023. As Rob mentioned earlier, in January 2024, we amended and restated our two primary outstanding debt facilities, an ABL credit agreement and a term loan agreement with the company's previous lenders. At the same time, we established a new sized term loan of $61 million with approximately $22 million of incremental available capital.

Todd E. Vogensen: All partially offset by proceeds from the company's stock offering in February of 2023.

Todd E. Vogensen: As Rob mentioned earlier in January 2024, we amended and restated our two primary outstanding debt facilities.

Todd E. Vogensen: And ABL credit agreement and a term loan agreement with the company's previous lenders at.

Todd E. Vogensen: At the same time, we established a new upsized term loan of $61 million with approximately $22 million of incremental available capital.

Todd E. Vogensen: Resulting in approximately $48 million of cash and cash equivalents subsequent to the January transaction. Turning now to our outlook for 2024. We are confident that the foundation we have built in 2023 has the company positioned for continued improvement in the year ahead. However, while we're encouraged by our recent progress, we recognize that the macroeconomic environment remains challenging with limited near-term visibility. Taking all this into account, we're expecting 2024 net revenue to be in the range of $540 to $560 million, a mid to high single-digit percentage increase versus 2023. We also expect negative adjusted EBITDA to be between $20 and $10 million and capital expenditures to be between $10 and $12 million, depending on how the year unfolds. We expect quarterly revenue and adjusted EBITDA performance to improve sequentially as we progress throughout the year with positive adjusted EBITDA and cash flow in the second half of 2024. Well, we don't plan to give quarterly guidance throughout the year.

Todd E. Vogensen: Resulting in approximately $48 million of cash and cash equivalents subsequent to the January transaction.

Speaker Change: Turning now to our outlook for 2024.

Speaker Change: We are confident that the foundation, we have built in 2023 has the company positioned for continued improvement in the year ahead.

Speaker Change: We are encouraged by our recent progress we recognize that the macroeconomic environment remains challenging with limited near term visibility.

Speaker Change: Taking all this into account, we're expecting 2024 net revenue to be in the range of $540 $560 million.

Speaker Change: Reflecting mid to high single digit percentage increase versus 2023.

Speaker Change: We also expect negative adjusted EBITDA to be between 20, and $10 million and capital expenditures to be $10 million to $12 million.

Speaker Change: In terms of how the year unfolds, we expect quarterly revenue and adjusted EBITDA performance to improve sequentially as we progress throughout the year with positive adjusted EBITDA and cash flow in the second half of 'twenty 'twenty four.

Speaker Change: Well, we don't plan to give quarterly guidance throughout the year.

Todd E. Vogensen: Since we are more than three quarters of the way through the first quarter, we are providing specific details in this instance. For the first quarter, we expect net revenue to increase by a low to mid-teens percentage to approximately $120 to $125 million and negative adjusted EBITDA to be approximately $15 to $10 million. Also, you will have noticed today that we issued a press release on an agreement that we reached with Tempur-Sealy.

Speaker Change: Since we are more than three quarters of the way through the first quarter. We are providing specific details in this instance.

For the first quarter, we expect net revenue to increase by a low to mid teens percentage to approximately $120 million to $125 million.

Speaker Change: And negative adjusted EBITDA to be approximately $15 million to $10 million.

Speaker Change: Also you will have noticed today that we issued a press release on an agreement that we reached with Tempur Sealy.

Todd E. Vogensen: We'd be happy to answer any questions about this press release as we go through our question and answer period. And now, I'll turn the call back over to the operator for questions. We will now begin the question and answer session. To ask a question, you may press star, then 1 on your touch-tone phone.

Speaker Change: We'd be happy to answer any questions on this press release as we go through our question and answer period.

Speaker Change: And now I will turn the call back over to the operator for questions.

Speaker Change: We will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone, if you're using a speakerphone. Please pick up your handset before pressing the keys. If at any time. Your question has been addressed and you would like to withdraw your question. Please press Star then two.

Operator: If you're using a speakerphone, please pick up your handset before pressing the. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2.

Bradley Bingham Thomas: Our first question comes from Brad Thomas with KeyBank Capital Markets. Please go ahead. Hi, good afternoon.

Our first question comes from Brad Thomas with Keybanc capital markets. Please go ahead.

Bradley Bingham Thomas: Hi, good afternoon, Thanks for taking my question.

Todd E. Vogensen: Thanks for taking my question. I wanted to just kick off with a follow-up on Todd. I believe your commentary about how 1Q is tracking certainly seems to be very strong, if I heard you right, with revenues running up in the mid to high teens. Can you talk a little bit more about what you've been seeing over the last few months? Sure, it's really been a continuation of the good momentum that we saw as we were exiting the year. So, as we've gone through Q1, we are continuing to see good momentum, good progress, really across all channels, and I expect that to result in revenue that is up at a low to mid-teens percentage as we go into Q1. As we look across the year, you know, obviously, we're wrapping around on the launch of our new products that were in May of last year, so the comparisons are a little bit easier earlier in the year than That's really helpful.

Bradley Bingham Thomas: I wanted to just kick off with a follow up on Todd I believe your commentary about how.

Bradley Bingham Thomas: One Q is tracking certainly seems to be very strong up I heard you right with revenues running up in the mid to high teens can you talk a little bit more about what you've been seeing over the last few months here.

Todd E. Vogensen: Sure, it's really been a continuation of the good momentum that we saw as we were exiting the year. So as we've gone through Q1.

Todd E. Vogensen: We are continuing to see good momentum good progress really across.

Todd E. Vogensen: Across all channels and.

Todd E. Vogensen: I expect that to result in the revenue that is up.

Todd E. Vogensen: Coda low to mid teens percentage as we go into Q1.

Todd E. Vogensen: As we look across the year.

Todd E. Vogensen: Obviously, we're wrapping around on the launch of our new products that was in May of last year. So I. The comp compares are a little bit easier earlier in the year than as we go through the year, but.

Todd E. Vogensen: With that being said good good positive start to the year for us.

Speaker Change: That's really helpful. And then Rob you touched on a number of efforts to continue to drive.

Robert T. DeMartini: And then Rob, you touched on a number of efforts to continue to drive productivity at the door level. And so I was hoping you could just highlight those a little bit more and talk about what kind of a lift you think you see when you have a door that's really got the training, the point of purchase materials, the marketing that you need to have in that marketplace, and maybe any more color around what kind of a lift you're seeing out of these new products when you really make the full effort. Thanks, Brad.

Speaker Change: Productivity at the door level and so I was hoping you could just highlight those a little bit more and talk about what kind of a lift you think you see when you have a door, that's really had the training and the point of purchase materials.

Speaker Change: The marketing that you need to have and in that marketplace.

Speaker Change: And maybe any more color around what kind of lift you're seeing how do these new products. When you really put the full effort behind it.

Speaker Change: Thanks, Brad I appreciate the question.

Robert T. DeMartini: I appreciate the question. I'll break it up into two parts and talk about the wholesale world first, and then the retail world. I mean, in the wholesale world, there are really three efforts going on. Two of them are well underway, and one of them is beginning to start now.

Speaker Change: I'll break it into two parts and talk about.

Speaker Change: The wholesale world first and then the showroom world.

Speaker Change: The wholesale world Theres really.

Speaker Change: Three efforts going on.

Speaker Change: Two of them are well under way and one of them is beginning to start now.

Robert T. DeMartini: The first one is really just basic training for the customers and salespeople. I think we have been relatively good at this in our history of big events, but we're working much harder on the day to day training visits to make sure that we're providing our customers with the confidence they need to sell a product that is truly different. And I think while all of our competitors are pretty good in this space and have shown an ability to do it well, I think it's more important to Purple than any brand on that floor because the product is so different. So that's the first.

Speaker Change: The first one is really just basic training of the customers' salespeople.

Speaker Change: We have been relatively good over our history of big.

Speaker Change: Big events, but we're working much harder on the day to day training visits to make sure that we're providing our customers people with the confidence they need to sell a product that is truly different.

Speaker Change: And I think while all of our competitors are pretty good in this space and have <unk>.

Speaker Change: <unk> ability to do it well I think it's more important to purple than any brand on that floor because the product is so different. So that's the first the second is we've started to address what we look like on the floor. You've heard me talk before about us wanting to be in position one b as a premium challenger we've got a number of initiatives out there that are.

Robert T. DeMartini: The second thing is we've started to address what we look like on the floor. You've heard me talk before about us wanting to be in position 1B as a premium challenger. We've got a number of initiatives out there that are building around the product itself, and the early returns, and I'll say it is early, are very encouraging. And then the third area I mentioned in the script itself, and that is, you know, we're still a young wholesale partner, and our customers will tell you that there are a lot of things we can do better. One of those is ensuring that our promotion calendar and our marketing investments are well-communicated, well-coordinated, and then stuck to. And I would tell you that I wouldn't give us more than a C on that yet, but I know we can be an A student there.

Speaker Change: That building in around the product itself and the early returns and I'll say it is early is very encouraging.

Speaker Change: And then the third area I mentioned in the script itself and that is we're still a young wholesale partner and our customers will tell you that there is a lot of things we can execute better one of those is ensuring that our promotion calendar and our marketing investments are well communicated well.

Speaker Change: All coordinated and then stuck to and I would tell you that I wouldnt give us more than a C on that yet, but I know we can be in a student there. So that's on the wholesale side in showrooms.

Robert T. DeMartini: So that's on the wholesale side. In showrooms, it's, you know, where we control the environment a bit more, it really is about leaning into consumer financing. We're very underdeveloped versus any benchmark that I hear out there, either from furniture or mattress retailers. And I'm talking about 10 to 20% of our sales being lower than the best out there as far as using consumer financing. So that's the first. The second is

Speaker Change: Where we control the environment a bit more it really is about leaning into consumer financing, we're very underdeveloped versus any benchmark that I hear out there either from furniture, where mattress retailers and I'm talking about 10% to 20% of our sales lower than the best out there.

Speaker Change: As far as using consumer financing. So that's the first the second is you.

Robert T. DeMartini: You know, these were launched very much as showrooms, as places to go see and experience the product, and we get very high marks for that. We're trying to get equally high marks for encouraging a purchase, either in our channel or wherever the customer wants to go, and then, to the degree they're in our channel, getting that volume to walk out, ideally, if it's not a mattress. You know, today, we ship an enormous amount of pillows, but after taking the order in store, we can save ourselves real money by just giving that product to the consumer in hand and letting them take it away.

These were launched very much as showrooms as places to go see and experience the product and we get very high marks for that we're trying to get equally high marks for encouraging of purchase either in our channel or wherever the customer wants to go and then to the degree there in our channel getting that volume to <unk>.

Speaker Change: Walk out ideally, but it's not a mattress today, we we ship an enormous amount of pillows, but after taking the order in store, we can save ourselves real money by just giving that product to the consumer in hand, and letting them take it away. So there are initiatives in both wholesale and showrooms that we believe will help drive more prone.

Bradley Bingham Thomas: So there are initiatives in both wholesale and showrooms that we believe will help drive more productivity. Very helpful. Thanks so much, and good luck here.

Speaker Change: Activity.

Speaker Change: Very helpful. Thanks, So much and good luck here. Thank you thanks, Brad.

Bradley Bingham Thomas: Thanks, Brad. The next question comes from Seth Basham with Web Bush Securities. Please go ahead. Thanks a lot and good afternoon.

Speaker Change: The next question comes from Seth <unk>.

Seth: With web Bush Securities. Please go ahead.

Seth: Thanks, a lot and good afternoon.

Seth: My first question is just on the success of your advertising campaign as you've shifted a little bit to focus on.

Seth Mckain Basham: My first question is just on the success of your advertising campaign. As you've shifted a little bit to focus on the bottom of the funnel and also move to the egg drop commercial, can you give some color on how that's going?

Seth: Bottom of the funnel and also with the AG drop commercial can you give some color on how that's done and what kind of savings do you expect to generate on advertising in 2024.

Seth Mckain Basham: And what kind of savings do you expect to generate on advertising in 2024? Thanks, Seth. So you know, it's again, it's a never-ending challenge.

Speaker Change: Thanks, Seth So it's again, it's this is a never ending challenge you're constantly trying to get your ROE as a return on overall advertising investment to go up but as we said in the script. We spent a lot of money behind the launch at awareness and I think it does the job it needed to do but we're shifting to more middle.

Robert T. DeMartini: You're constantly trying to get your ROAS, or return on overall advertising investment, to go up. But as we said in the script, we spent a lot of money on the awareness launch, and I think it did the job it needed to do.

Robert T. DeMartini: But we're shifting to more middle and bottom funnel. We'll still spend on creating traffic. So I don't want to, we're not going to step away from any, Theodore B. Olson, PhD.

Speaker Change: And bottom funnel.

Speaker Change: We will still spend on creating traffic. So I don't want to say, we're not going to step away from any.

Speaker Change: Tier of the funnel if you will but we are working much harder to try to both master G E for the new Google analytics tool, which.

Robert T. DeMartini: Today's webinar is the content information presentation. Honestly, it's proven to be a bit harder than Google probably promised, but we are making real progress there. And I would expect that we can create the kind of growth that Todd talked about with an advertising investment that has a modestly declining percent of sales. So we're still going to be a big advertiser, but we'd like to get a couple of points more efficient. Got it, okay?

Speaker Change: Honestly, it's proven to be a bit harder than probably Google promised, but we are making real progress there and I would expect we can create the kind of growth that Todd talked about with an advertising investment that has a modestly declining percent of sales.

Speaker Change: So we're still going to be a big embed a big advertiser, but we'd like to get a couple of points more efficient.

Speaker Change: Yeah.

Speaker Change: Got it Okay second question still on our near term outlook for the first quarter and good topline growth against her off with the easy comparisons Bottomline is still.

Seth Mckain Basham: Second question is just on the near-term outlook for the first quarter. You know, good top-line growth relative to each comparison. But the bottom line is still negative, and that's just because we're talking about absolute volumes on the top line being lower than they will be in the back half of the year. Yeah, I think there's a couple of factors in there.

Speaker Change: Negative and that's just because we're talking about absolute volumes on the top line being lower than they will be in the back half of the year.

Speaker Change: Yeah, I think there's a couple of factors in there. So Q1 is what is probably a seasonally low point for peripheral for variety of reasons. So yes that overall volume is lower than later in the year and then we do or we're going to skew much heavier tour.

Todd E. Vogensen: So Q1 is probably a seasonally low point for Purple for a variety of reasons. So yes, that overall volume is lower than later in the year. And then we do, or we're going to skew much heavier towards wholesale, which inherently has a lower gross margin percentage associated with it than our retail sales. So those two points put a little bit more pressure on the bottom line than what we would expect to see as we go throughout the year. That's helpful. And, lastly, regarding the agreement with Tempe or Sealy, just one point of clarification. If the FTC does not approve their deal, but it still goes through after litigation, will the agreement that you mentioned be honored?

Speaker Change: Wholesale.

Speaker Change: Which inherently has a lower gross margin percentages associated with it than our retail sales so those two points.

A little bit more pressure on the bottom line than what we would expect to see as we go throughout the year.

That's helpful and then lastly regarding the agreement with Tempur.

Speaker Change: Tempur Sealy.

Speaker Change: Just one point of clarification, if the FTC does not approve their deal, but its still goes through after litigation well the agreement that you mentioned to be honored.

Speaker Change: Yeah, we expect this agreement.

Robert T. DeMartini: Yeah, we expect this agreement if what you're saying is that they make or the FTC requires some adjustments to get the deal done. This is just based on the deal being completed. Not any conditions, your terms, or timing.

Speaker Change: You are saying is they make or the FTC requires some adjustments to get the deal done. This is just based on the deal being completed not any conditions or terms or timing.

Robert T. DeMartini: So it's a 12-month Supply Agreement that starts the day the deal is completed, regardless of the shape. Understandable. Thank you very much. You know, Seth, the reason that's important, I'll go on to say, the reason that's important is that our existing agreement is an evergreen agreement, which, you know, this adds another 12 months of stability from any evaluation. Nersted.

Speaker Change: So it's a 12 month.

Speaker Change: <unk>.

Speaker Change: Supply agreement that starts the day the deals completed regardless of the shape of the deal.

Speaker Change: Understood. Thank you very much set the reason that's important I'll go on to say the reason that's important is that our existing agreement as an evergreen agreement, which this adds another 12 months of stability from any evaluation.

Speaker Change: Understood. Thank you.

Seth Mckain Basham: Thank you. Thank you. The next question comes from Jeremy Hamblin with Craig Hallam Capital Group. Please go ahead.

Speaker Change: Thanks, Joe.

Speaker Change: Next question comes from Jeremy Hamblin with Craig Hallum Capital Group. Please go ahead.

Hi, good afternoon, and thanks for taking the questions.

Jeremy Scott Hamblin: Hi, good afternoon, and thanks for taking the questions. I want to come back to kind of the Q1 trends, which definitely have improved year over year, sequentially, you know, pretty decent step down from the Q4 level. And, you know, just thinking about, you know, helping frame that up for, you know, just if we look back historically, the like the sequential step down is maybe a little bit more than what you typically have, what your peers have. So I just wanted to understand a little bit of what you're seeing in that because it does sound like you're pleased with the progress. But is there a seasonality in Q1 that, you know, has changed? Given that your mix of business is shifting a bit more towards wholesale, or any other color you want. I don't, Jeremy, first of all, thank you. I don't think channel mix has anything to do with the relative performance of Q4 to Q3, sorry, Q4 to Q1. You know, I think, what we heard while we were in Las Vegas is that January was kind of particularly soft.

Jeremy Scott Hamblin: I wanted to come back to kind of the Q1 trends, which definitely have improved year over year sequentially.

Jeremy Scott Hamblin: Pretty decent stepped down from from Q4 levels and you know just thinking about you know.

Jeremy Scott Hamblin: Helping frame that up for you just if we look back historically the like the sequential step down is maybe a little bit more than what you typically have and you know what your peers have so I just wanted to understand a little bit.

Jeremy Scott Hamblin: You know what you're seeing in that because it does sound like Youre pleased with progress.

Jeremy Scott Hamblin: But is there a seasonality in Q1 that you know has changed.

Jeremy Scott Hamblin: Given that your mix of business is shifting a bit more towards wholesale.

Jeremy Scott Hamblin: Or any color you can share on that would be helpful.

Speaker Change: I don't Jeremy first of all thank you I don't think channel mix has anything to do with the relative performance Q4 to Q3.

Speaker Change: Excuse me in Q4 to Q1.

Speaker Change: I think what we heard while we were in Las Vegas is that January was kind of particularly soft we will I'm sure ended up reporting a positive trend year on year and in January and February but I think it's just the shape of the business coming out of a relatively decent.

Robert T. DeMartini: We will, I'm sure, end up reporting a positive trend year on year in January and February, but I think it's just the shape of the business coming out of, you know, relatively decent in October, November, December and then a little bit softer in Q1. We're going to grow, and I think the guidance that Todd gave you is indicative of something that, when the dust settles, will clearly show us outperforming the market.

Speaker Change: October November December and then a little bit softer in Q1.

Speaker Change: We're going to grow and I think the guidance that Todd gave you is indicative of something that when the dust settles I think we will clearly show we're outperforming the market.

Speaker Change: Got it that's helpful. And then let's just talk a little bit about gross margin.

Todd E. Vogensen: That's helpful. And then let's just talk a little bit about growth margin. You know, it sounds like you've settled in towards a 37% kind of on an adjusted basis. And that's, you know, at the, you know, this run rate of, you know, a hundred and called 145 million plus of quarterly revenues, right? You did 140 in Q3, and on an adjusted basis, just a slight step down on your adjusted gross margin. So wanted to get a sense for where you need to be from a quarterly revenue basis to get to that 40% gross margin that you're looking to get back. And related to that, what do you expect the go forward mix on channel to be?

Speaker Change: Sounds like you've you've settled in towards a 37% kind of on that adjusted basis.

Speaker Change: And that's you know at a you know.

Speaker Change: This run rate of 100, and let's call it 145 million plus.

Speaker Change: Of quarterly revenues right you did 140 in Q3 and on an adjusted basis, just a slight step down on your gross adjusted gross margin. So wanted to get a sense for where do you need to be from a quarterly revenue base.

Speaker Change: Basis to get to that 40% gross margin that you're looking to get back to and related to that what do you expect the go forward mix on channel to be D. T C versus wholesale.

Speaker Change: This will take the first part of your question on what volume do we need to be at to get to that 40%.

Todd E. Vogensen: I guess I'll take the first part of the question on what volume do we need to be at to get to that 40%. I would tell you, you're right in thinking about it that we are starting with 37% being that baseline that we're that we're planning on growing from as we look forward into 2024. We do not necessarily need to get back to or be at the $145 million of revenue to get up to approach that 40% range. We obviously, by the guidance that we gave, believe that we will head that direction, but we have a number of things that are underway this year that are helping out with gross margin rate. We've taken pricing increases in certain areas that Rob mentioned in his script. We also have a number of initiatives underway on the manufacturing and sourcing side to do what are some fairly fundamental improvements in the way that we source our products and the way that we manufacture our products that are going to fall to the bottom line for us. So, as we look at that 40% run rate.

Speaker Change: I would tell you you're right in thinking about it that we are starting with 37% being is that baseline that were that were planning on growing from as we look forward into.

Speaker Change: 2024.

Speaker Change: We do not necessarily need to get back to or be at the.

Speaker Change: 140, $145 million of revenue to get up to approach that the 40% range.

Speaker Change: We obviously by the guidance that we gave.

Speaker Change: That we will head that direction, but.

Speaker Change: We have a number of things that are underway. This year that are helping out with gross margin rate, we've taken pricing increases in certain areas that Rob mentioned in his script.

Speaker Change: We also have a number of initiatives underway on the manufacturing and sourcing side to do what are some truly fundamental improvements in the way that we source our products and the way that we manufacturer of products that are going to fall to the bottom line for us so.

Speaker Change: We look at that 40% run rate.

Speaker Change: <unk>.

Robert T. DeMartini: We do view that as more something that comes with time as these initiatives gain traction than something that we need just top line to be able to leverage again. Jeremy, on the second half of the question, I think, you know, we are aiming for and hanging around, if you will, a 60-40 split DTC. I think we are running the business internally to ensure that we can be profitable with a 50-50 split. So 60-40 is where we are and where we want to be. But I'm wanting to ensure that if our wholesale partners help us grow faster, we've got to make sure that we can be profitable without taking it away from them, which means finding efficiencies in the system and figuring out how to do business with them more efficiently, if you will.

Speaker Change: We do view that as more something that comes with time as these initiatives gain traction than something that we need just top line to be able to leverage against.

Speaker Change: Okay, Great and then Jeremy on the second on the second half of the question I think we are aiming to and hanging around if you will a 60 40 split DTC.

Jeremy Scott Hamblin: So I think we are running the business internally to ensure that we can be profitable with a 50 50 split.

Jeremy Scott Hamblin: So.

Jeremy Scott Hamblin: 60, 40 is where we are and where we want to be but I'm wanting to ensure that if our wholesale partners help us grow faster, we got to make sure that we can be profitable without taking it away from them, which means finding efficiencies in the system and figuring out how to do business with them more.

Efficiently if you will.

Speaker Change: Got it and just following on to that so at the high end of your your FY 'twenty four guidance range, you you'd be you know roughly $140 million a quarter.

Todd E. Vogensen: And just following on to that, so at the high end of your FY 24 guidance range, you'd be, you know, roughly 140 million a quarter. Or certainly when taking into account the Q1 guidance, you'd be at that 140 to 145 million range per quarter on revs. So, you know, should we be interpreting that as though the gross margin rate is going to be, you know, after Q1, approaching that kind of, fake, roughly 40% range? I think it will grow as we go into the year because, especially on the manufacturing and sourcing side, those are initiatives that are underway right now and we're executing against, but it takes a little bit of time before that flows through our cost of sales. So it'll be, I, you know, if you're modeling it out, I would, I would expect to see gross margin improvement ratably across the quarters as we go throughout the year. And then with an exit rate around 40% or again, just trying to square it up.

Speaker Change: We're certainly when taking into account the Q1 guide you'd be at that $140 million to $145 million range.

Speaker Change: Per quarter on Rev. So you know should we be interpreting that as though the gross margin rate is going to be.

Speaker Change: After Q1 be approaching that kind of.

Speaker Change: Let's say roughly 40% range.

Speaker Change: It will grow as we go into the year, because especially on the manufacturing and sourcing side. Those are initiatives that are underway right now and we're executing against but it takes a little bit of time before that flows through our cost of sales so it'll be.

Speaker Change: You know if you're modeling it out I would I would expect to see gross margin improvement ratably across the quarters as we go throughout the year.

Speaker Change: And then with an exit rate around 40% or again, just trying to square it up.

Jeremy Scott Hamblin: That is that is the plan. Yeah. Great, thanks for taking the questions and good luck this year. Martin Jr.

Speaker Change: That is the plan yes.

Speaker Change: Great. Thanks for taking the questions and good luck this year.

Speaker Change: Thank you Jamie.

Speaker Change: The next question comes from Bobby Griffin with Raymond James. Please go ahead.

Robert Kenneth Griffin: The next question comes from Bobby Griffin with Raymond James. Please go ahead. Good afternoon, everybody.

Robert Kenneth Griffin: Oh, good afternoon, everybody thanks for taking the questions.

Robert T. DeMartini: Thanks for taking the question. I guess, Rob, first on the new agreement with mattress firm involving the temporary the potential acquisition, does that agreement allow for any expansion of your mattress business from doors? Or does it call for some in 2024?

Robert Kenneth Griffin: Yes, Rob first one the new agreement with mattress firm involving the Tempur Sealy the potential acquisition does that agreement allow for any expansion of your mattress firm doors or does it call for some in 2024 and that's included in the guidance as well or no.

Robert Kenneth Griffin: And that's included in the guidance as well, or not? Yeah, Bobby, the way I would say it is the agreement, to be clear, is with Temper Sealy contingent upon the deal closing. So Mattress Firm did, I kept them abreast, but didn't play a role in those discussions.

Rob: Yeah, Bob the way I would say it is the agreement to be clear is with Tempur Sealy contingent upon the deal closing so mattress firm did I kept them abreast, but didn't play a role in those discussions.

Robert T. DeMartini: We do have the ability to expand within our current agreement. And that current agreement is what's being reinforced for a 12 month or longer, obviously, but a 12 month period. There are cases right now where, in a modest way, we are expanding with them in a couple of geographies. And I don't think that's, well, I don't want to say I don't think, that I know that's not limited in any way by the agreement we reached with Tempur-Seal.

Rob: We do have the ability to expand.

Rob: Within our current agreement and that current agreement is what's being reinforced for a 12 month or longer obviously, but a 12 month period. There are cases right now in a modest way, where we are expanding with them in a couple of geographies.

Rob: And I don't think that's.

Rob: While I don't want to say I don't think that I know that's not limited in any way by the agreement we reached with Tempur Sealy.

Todd E. Vogensen: Okay, that's helpful. And I maybe want to switch gears a little and just circle back to the showroom aspect and the strategy there. You know, we've talked before in the past about how there is a wide gap in performance among the showrooms. So I was just, I guess, first, Did that gap close any during the fourth quarter?

Speaker Change: Okay. That's helpful. And then maybe you want to switch gears, a little and just circle back to the showroom aspect and the strategy there.

Speaker Change: <unk> talked before in the past, there's there's a wide gap in performance among the showroom. So I was just I guess first did that gap close any during the fourth quarter and then two is there any color you can share on maybe if any of those on the lower end of that side are going to have some natural lease expirations here in 2024 that could help close.

Robert Kenneth Griffin: And then two, is there any color you can share on maybe if any of those on the lower end of that side are going to have some natural lease expirations here in 2024 that could help close that profitability drag from the showroom side? Yeah, so Q4 actually was a very positive quarter on the showroom side. I think we talked about overall sales there being up in the mid to high teens, which is a really good sign. That, combined with some of the things Rob talked about where we're looking at how we can generate cost savings at the same time in stores. It really has put us in a better position where we are narrowing the gap. We still have room to go, and it is still going to be a work in progress for us.

Speaker Change: That profitability drag from the showroom side of things.

Speaker Change: Yeah, So Q4 actually very positive quarter on the showroom side I think we talked about our overall sales there being up in the mid to high teens, which is.

Speaker Change: Really good sign.

Speaker Change: That in combination with some of the things Rob talked about where we're looking at also how we can generate cost savings at the same time in stores.

Speaker Change: Really it has put us in a better position, where we are narrowing the gap, we still have room to go high and it still is going to be a work in progress for us.

Robert Kenneth Griffin: In terms of lease expirations, I, you know, a lot of the portfolio was put into place just over the last few years, so lease expirations generally are much further out. To the extent that we have kickouts that happen over the next few years, we, of course, are going to look at those. I think those would be very selective, and any decisions we make would be very much specific to individual sites.

Speaker Change: In terms of lease expirations I you know a lot of the portfolio was put into place just over the last few years. So lease explorations generally are much further out.

Speaker Change: To the extent that we have kick outs that happen over the next few years. We of course are going to look at those but.

Speaker Change: I think those would be very selective in any any decisions. We make would be very much specific to individuals' sites more so I think we're looking at growing the portfolio over the long term, we see lots of opportunity to once we get the operating model dialed in to continue the grew.

Todd E. Vogensen: More so, I think we're looking at growing the portfolio over the long term. We see lots of opportunity once we get the operating model dialed in to continue the growth of our showrooms to the point where we can get a lot more scale to the point where we can have a lot more awareness in the branch and really leverage that, and so I think we're looking at it more as there's more upside certainly as we look over the next several years. Okay, that's helpful.

Speaker Change: With of our showrooms to the point, where we can get a lot more scale right.

To the point, where we can have a lot more awareness in the branch and really leverage that and so I think we're looking at it more as theres more upside certainly as we look over the next several years.

Speaker Change: Okay. That's helpful and I guess lastly for me just back on gross margins I mean, a lot of a lot of moving parts. Obviously in 2023 with the launch and you know when we look out in 2024 are we going to be getting back to more of a clean type basis and should we as yourself I community kind of grade you against that 37% ads, where we can.

Robert Kenneth Griffin: And I guess lastly, for me, just back on gross margin. I mean, a lot of moving parts, obviously, in 2023 at the launch. And, you know, when we look out in 2024, are we going to be getting back to more of a clean type basis? And should we, as your sell side community, kind of grade you against the 37% as where we can kind of dive into and see if we're making progress on the sourcing and some of the other non-launch initiatives that are building gross margins back up? Or how would you phrase how we should be kind of grading that?

Speaker Change: On a dive into and see if we're making progress on the sourcing and some of the other non kind of launch initiatives that are building gross margins back up or how would you how would you kind of frame, how we should be kind of grabbing that because it is kind of a lot of things moving around from a growth perspective over the last couple of quarters or a mix and launch and all that type of stuff.

Todd E. Vogensen: Because there are kind of a lot of things moving around from a gross perspective over the last couple of quarters with mix and launch and all that type. Sure, that's exactly right. And yes, that's how we're viewing it internally and how I would really recommend everybody view it. On an adjusted basis, we have been about at that 37% rate now for Q2, Q3, and Q4. So we've shown consistency.

Speaker Change: Sure, that's exactly right and and yes, that's how we're viewing it internally and how I would really recommend everybody views. It as on an adjusted basis, we have been about 37% right now for Q2 Q3 and Q4.

Speaker Change: So we've shown consistency and Q4 is really the last quarter that we would expect to have to disclose an adjusted gross margin that the 37% should really be the base as we go forward.

Robert T. DeMartini: And Q4 is really the last quarter that we would expect to have to disclose an adjusted gross margin. And that 37% should really be the baseline as we go forward. I mentioned before that Q1 will be a little bit under pressure for a couple of different reasons, partially due to volume and partially just because we are in the early stages of growing some of those areas like sourcing and manufacturing and pricing that'll have a positive impact. But across the course of the year, I would really start with 37% as the base rate and know that we're going to get growth opportunities on top of that. Okay, and then Rob, for the forecast for the year, did you guys build in an underlying industry unit assumption or some type of industry growth or decline expectation as the base case? Or is it more just a building block of your wholesale doors expanding and new products? Just kind of curious about how it's built up. Bobby, it's more of the latter.

Speaker Change: I mentioned before Q1 will be a little bit under pressure for a couple of different reasons, partially due to volume.

Speaker Change: And partially just because we are in the early stages of growing some of those <unk>.

Speaker Change: Areas like sourcing and manufacturing and pricing.

Speaker Change: Have a positive impact but across the course of the year I would really start with 37% as the base rate and there are no that we're gonna get.

Speaker Change: Growth opportunities on top of that.

Speaker Change: Okay, and then Rob for the for the forecast for the year did you guys building, an underlying industry unit assumption or some type of industry growth or decline expectation is the base case or is it more just buy a building block of your wholesale doors and expanding into new products, just kind of curious of what how it's built up.

Speaker Change: Bobby it's more of the latter I want to take myself out of the position of predicting the industry because that didn't go very well last year.

Robert T. DeMartini: I want to take myself out of the position of predicting the industry because that didn't go very well last year. You know, we know that the new launch is taking solid hold right now. We're seeing share gains in the places we get market share or balance of share data. We're seeing improvements in e-com and the showroom. So, this is really us executing well and getting, you know, reasonably better than category growth. It is not assuming a category recovery of any kind.

Robert Kenneth Griffin: We know that the new launches taking solid hold right now we're seeing share gains in the places we get.

Robert Kenneth Griffin: The market share to a balance of share data, we're seeing improvements in E com and showroom. So this is really us executing well and getting reasonably better than category growth. It is not assuming a category recovery of any kind.

Speaker Change: Okay very helpful. Best of luck here in 'twenty 'twenty, four and I appreciate the time.

Matt Koranda: Okay, very helpful. Best of luck here in 2024, and I appreciate the time. Thank you, Bob. Thank you. The next question comes from Matt Koranda with Roth Capital MKM. Please go ahead. Hey, guys. Good afternoon.

Speaker Change: Thank you Bob.

Speaker Change: The next question comes from Matt Coriander with Roth Capital M km. Please go ahead.

Matt Koranda: Hey, guys. Good afternoon, maybe just to spend back around to the first quarter trends that you mentioned.

Todd E. Vogensen: Maybe just to spin back around to the first quarter trends that you mentioned, a little bit of teens growth. I think you said maybe a little bit more slanted toward the wholesale side of things. Maybe just if you could, I don't know if you want to quantify growth by channel or if you want to just talk about the trends about why we're seeing wholesale growth in excess of DTC, that'd be helpful. And then maybe just any commentary around key promotional events.

Matt Koranda: Sort of mid teens growth.

Matt Koranda: Thank you said, maybe a little bit more slanted toward the wholesale side of things maybe just if you could.

Matt Koranda: Don't know if you want to quantify growth by channel or if you want to just talk about the trends about why we're seeing wholesale grow in excess of D. C. DTC that'd be helpful. And then maybe just any commentary around key promotional events is that where we're seeing the bulk of growth sort of concentrated around those events and then it falls off maybe just cadence in the quarter. So thus far would be helpful.

Matt Koranda: Is that where we're seeing the bulk of growth sort of concentrated around those events, and then it falls off? Maybe just cadence in the quarters thus far would be helpful. So, on the wholesale side, you know, I think we continue to see and have seen for a while good momentum in wholesale. Wholesale, you'll recall last year, this was probably the lowest penetration quarter. So, there is a little bit of what we're lapping around on, but then, at the same time, we're also picking up momentum and adding doors on the wholesale side. And that has certainly helped. And so we're just we have we're having a good quarter there. And I can't remember, I'm sorry, the second half of your question.

Speaker Change: Sure so on the wholesale side.

Speaker Change: No I think we continue to see and have seen for a while good momentum in wholesale.

Speaker Change: Wholesale youll recall last year. This was probably the lowest penetration quarter. So there.

Speaker Change: There is a little bit of what we're lapping around on but then at the same time, we're also picking up momentum and adding doors on the wholesale side and that has certainly helped.

Speaker Change: And so we're just we have we're having a good quarter there.

Speaker Change: And then I can't remember I'm, sorry, the second half of your question.

Speaker Change: Yes, just if you want to characterize the split in terms of relative growth between DTC wholesale and then just promotional ads and what you're seeing in terms of the quarter's cadence thus far.

Todd E. Vogensen: Yeah, just if you want to characterize the split in terms of relative growth between DTC wholesale and then just promotional events and what you've seen in terms of the quarter's cadence thus far. Yeah, I don't know that we would get down to channel-level guidance, but I would say across the quarter, we have been seeing growth in each period. So, there still tends to be a concentration around the big Tier 1 holidays, but as we look compared to last year, we've seen good, solid growth across each of the months in the quarter thus far. Okay, that helps.

Speaker Change: Yeah, I don't know that we would get down to the channel level guidance, but I would say across the quarter, we had been seeing growth in each period. So.

Speaker Change: Theres still tends to be a concentration around the big tier one holidays, but as we look compared to last year, we've seen good solid growth across each of the months in the quarter thus far.

Speaker Change: Okay, Alright that helps.

Todd E. Vogensen: And then just spinning back to sort of the EBITDA guide, I guess, for the first quarter, just help us understand why the positive growth top line is not translating into positive incrementals for the quarter. I just want to make sure we're super clear on sort of the gross margin degradation commentary. And then are we leaning in on OPEX, like in terms of sales and marketing? Maybe just if you could help us put a finer point on sort of why, why the negative incrementals that you're guiding to in the first quarter in EBITDA. Sure, so I would say a couple of things.

Speaker Change: And then just staying back to sort of the EBITDA Guide I guess in the first quarter.

Speaker Change: Just help us understand why the positive growth top line is not translating into positive incrementals for the quarter I just want to make sure. We're super clear on sort of the gross margin degradation commentary and then are we leaning in on Opex like in terms of sales and marketing.

Speaker Change: Maybe just if you could help us put a finer point on sort of why.

Speaker Change: Why the negative incrementals that you're guiding to in the first quarter in EBITDA.

Speaker Change: Sure so.

Speaker Change: You know I would say a couple of things first from a gross margin rate perspective.

Todd E. Vogensen: First, from a gross margin rate perspective, though we are expecting to be positive versus Q1 last year, we are under pressure just from the things that I've mentioned before with the wholesale tilt as well as overall volume relative to the rest of our quarters. And I would say on the operating expense side, we are, probably, as you look across the course of the year and you're doing your modeling, one thing to take into account. Well, we're looking to be more efficient across our advertising spend. We'll probably be spending a little bit more evenly across the year than we did last year. Last year had some big peaks and valleys.

Speaker Change: Though.

Speaker Change: We are expecting to be.

Speaker Change: Positive versus Q1 last year.

Speaker Change: Our under pressure just from the things that I've mentioned before with the.

Speaker Change: The wholesale tilt as well as.

Speaker Change: Overall volume relative to the rest of our quarters and then I'd say on the operating expense side I, you know I I.

Speaker Change: We are.

Speaker Change: Probably as you look across the course of the year and Youre doing your modeling one thing to take into account.

Speaker Change: Well, we're looking to be more efficient across our advertising spend will probably be spending a little bit more evenly across the year than we did last year last year had some big peaks and valleys.

Todd E. Vogensen: So in Q1, you should expect to see a little bit more dollar investment in the quarter. And so that has an impact as well. Beyond that, it's just the normal ebb and flow of G&A and gross margin coming into play. Matthew, I think I'd add on top of that that the pricing that we took didn't really, it won't impact the wholesale volume for much of the quarter at all. Because of the notification agreements we have with our wholesale customers, we took it on the DTC channels early in the year, but we won't see much of it until just the very end of this month, actually.

Speaker Change: So in Q1, you should expect to see a little bit more dollar investment.

Speaker Change: In the quarter and so that has an impact.

Speaker Change: As well.

Speaker Change: Beyond that it's just the normal ebb and flow of G&A and gross margin coming into play.

Speaker Change: Matt the other thing I'd add on top of that is that the pricing that we took didnt really it wont impact the wholesale volume for much of the quarter at all because of the notification agreements we have with our wholesale customers. We took it into DTC channels early in the year, but wont see much of that until just the <unk>.

Speaker Change: We ended the this month actually.

Robert T. DeMartini: Okay, all right, that helps, Rob. Thanks for the context. And then maybe just the last one, if I could sneak one more in.

Matt: Okay, Alright that helps Rob thanks for the context, and then maybe just last one if I could sneak one more in post debt refi maybe.

Matt Koranda: Post-debt refi, maybe, would you be able to give an update on sort of where cash stands today or as of the refi? And then just plans on interest expense and how we're going to pay that on a go-forward basis. Is it PIC?

Matt: Would you be able to give an update on sort of where cash stands today or as of the refi.

Speaker Change: And then just plans on interest expense and how we're going to pay.

Speaker Change: Pay that on a go forward basis is it pick as a cash what's our what's a rough plan there.

Todd E. Vogensen: Is it cash? What's our rough plan? Sure. So, yeah, immediately after we did the transaction, which was late January, our overall cash and cash equivalents were $48 million. So if you put that in context of the guide for the full quarter being down $10 to $15 million in EBITDA and being positive EBITDA by the back half, we certainly believe we have more than adequate liquidity at this point. The extra $22 million we got from the refinancing was very positive for us.

Speaker Change: Sure so yes.

Speaker Change: Immediately after we did the transaction which was late January.

Speaker Change: Overall cash and cash equivalents was $48 million. So if you put that in context of the guide of the full quarter being down $10 million to $15 million in EBITDA and being a positive EBITDA by the back half. We certainly believe we have more than adequate liquidity at this point.

Speaker Change: The extra $22 million, we got from the refinancing was was very positive for us.

Todd E. Vogensen: And it comes with a new facility that doesn't have all of the restrictions and requirements and everything that would typically come with an ABL. So we're in a much better position without any significant financial maintenance covenants or anything like that. I and then.

Speaker Change: And it comes with a new facility that high.

Speaker Change: It doesn't have all of the restrictions and requirements everything that would typically come with an ABL. So.

We're in much better position without any significant two financial maintenance covenants or anything like that.

Speaker Change: And then.

Todd E. Vogensen: In terms of interests, yes, so you're right; we do have the ability to pick all of our interests. I think it's fair to say in the near term that is probably the conservative option and we would choose to take that option for the foreseeable future anyway. Got it. All right, very helpful. I'll take the rest of mine offline, guys.

Speaker Change: In terms of the interest yes, so you're right. We do have the ability to pick all of our interests I think it's fair to say in the near term.

Speaker Change: It is probably the conservative option and we would choose to take that option.

Speaker Change: For the foreseeable future anyway.

Speaker Change: Got it very helpful. I'll take the restaurant up on guys. Thank you.

Matt Koranda: All right, thank you. The final question comes from Michael Lasser with UBS; please go ahead. Hey, this is Dan Silverstein on behalf of Michael.

Speaker Change: Alright, thank you.

Speaker Change: The final question comes from Michael Lasser with UBS. Please go ahead.

Speaker Change: Hey, this is Dan Silverstein on for Michael.

Dan Silverstein: Just two quick questions, maybe more on the overall industry or competitive landscape. How much of a unit or sales benefit do you think Purple could see from the third round of anti-dumping duties being placed on 12 additional countries? And then, secondly, thank you for the update on the Tempur mattress firm agreement. Ashley Holm acquired Resident Home recently, you know, another example of M&A in the industry.

Dan Silverstein: Just two quick questions maybe more.

Dan Silverstein: On the overall industry or competitive landscape.

How much of a unit or sales benefit do you think purple could see from the third round of antidumping duties being placed on 12 additional countries.

Dan Silverstein: And then secondly.

Dan Silverstein: Thank you for the update on the Tempur mattress firm agreement.

Dan Silverstein: Ashley home acquired resident home recently.

Dan Silverstein: Another example of M&A in the industry will this have.

Robert T. DeMartini: Will this have an impact on the competitive landscape for Purple going forward? Thank you. Dan, just to make sure I understand, I'll take your question back: will the Ashley resident tie-up impact the category? Is that the question? Yeah, just wondering what it means for the competitive landscape, you know, another second case of another vertical integration in a space. Yeah, I mean, I don't want to speak for Ashley or Todd Wanek, but it seems to me that he's got a relatively new factory they were looking to fill. Resident is, I think, more of a marketer than a maker, and I don't mean that to imply anything other than they're a very good marketing company. And I think that marriage makes sense to me. I think it also fits the Ashley consumer quite well.

And impact on the competitive landscape for purple going forward. Thank you.

Speaker Change: Dan just to make sure I understand I'll take your question back as well.

Speaker Change: Lastly, resident tie up impact the category.

Dan Silverstein: That's the question Yeah, just just wondering what you think it means for the competitive landscape you know another.

Dan Silverstein: The second case of another vertical integration in our space.

Dan Silverstein: Yep.

Speaker Change: I don't want to speak for.

Speaker Change: Ashley or Todd want it but it seems to me that.

Speaker Change: He's got a relatively new factory. They were looking to fill resident is I think more marketers and maker and I don't mean.

Speaker Change: To imply anything other than Theyre very good marketing company.

Speaker Change: And I think that marriage makes sense to me I think it also fits.

Speaker Change: Actually consumer quite well I can tell you that our business with that retailer is growing nicely and so I don't see it as a.

Robert T. DeMartini: I can tell you that our business with that retailer is growing nicely, and so I don't see it as changing the landscape that much. They tend to trade a little bit below us in retail price. We overlap on the bottom side of the category, not the top side, and the path to premium sleep is about becoming a premium challenger brand. So it's too early for me to say the impact, but I don't see anything that immediately jumps off as negative. Great, thanks. And then just the first part was on anti-dumping.

Speaker Change: Changing the landscape that much they tend to trade a little bit below us in and retail price we overlap on the bottom side of the category not the top side in the past the premium sleep is about becoming a premium challenger brand.

Speaker Change: So.

It's too early for me to say the impact, but I don't see anything that immediately jumps off was negative.

Speaker Change: Great. Thanks, and then just.

Speaker Change: The anti dumping yes, yes.

Robert T. DeMartini: Yeah, I mean, I think it's good for the category. It's, you know, it's good for the domestic industry. You know, it doesn't impact us negatively. We don't import any mattresses.

Speaker Change: Yes, I mean, I think it's good for the category if it's good for the domestic industry.

Speaker Change: Doesn't impact us negatively we don't import any mattresses.

Robert T. DeMartini: We do import, you know, some components and some categories, but we either make all of ours in-house or with partners here. So I think the, You know, I think it should be good for the category in the short run. I don't know the percentage of product that comes from those 12 countries.

Speaker Change: Do import some components in some categories, but we either make all of ours are in house or with partners here.

Speaker Change: So I think the.

Speaker Change: I think it should be good for the category in the short run I don't know what the percentage of product that comes from those 12 countries. So how sweeping it is I'm not sure, but it's it should help protect what is fundamentally a domestically made category.

Robert T. DeMartini: So how sweeping it is, I'm not sure. But it should help protect what is fundamentally a domestically made category. Thank you. Thanks, Jim. This concludes our question and answer session. I would like to turn the conference back over to Rob DeMartini for any closing remarks. Yeah, I'll keep it short. As we've said, and Todd and I have laid out here, we think the path to premium sleep is a winning strategy. Number one, we acknowledge it took us longer than I would have liked to get it started, and that created some pretty negative results at 23.

Speaker Change: Thank you.

Speaker Change: Thanks, Dan.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Rob D. Martini for any closing remarks.

Speaker Change: Yeah, I'll I'll keep it short I as we've said as Todd and I have laid out here, we think the path to premium sleep is a winning strategy number one we acknowledge it took us longer than I would've liked to get it started and that created some pretty negative results in 'twenty three but we've got the team assembled to make sure we execute this and I want to thank our associates.

Robert T. DeMartini: But we've got the team assembled to make sure we execute this. And I want to thank our associates, our customers, and the consumers that are getting great nights' sleep on purple beds. So thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: <unk>, our customers and the consumers that are getting great night's sleep on peripheral best so thank you.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.