Purple Innovation Q1 2026 Earnings Call - Accounting Adjustments and Premium Product Pivot

Rob DeMartini, Chief Executive Officer, Purple Innovation: Thank you for standing by, and welcome to the Purple Innovation first quarter 2026 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker’s remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star 1 on your telephone keypad. If you would like to withdraw your question, again, press star 1. Thank you. I’d now like to turn the call over to Stacy Turnof, Investor Relations. You may begin.

Stacy Turnof, Investor Relations, Purple Innovation: Thank you for joining Purple Innovation’s first quarter 2026 earnings call. A copy of our earnings press release is available on the investor relations section of Purple’s website at www.purple.com. Before we begin, I’d like to remind you that certain statements made in this presentation are forward-looking statements. These statements reflect Purple Innovation’s judgment and analysis as of today and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from current expectations. You should not place undue reliance on these forward-looking statements. For more information, please refer to the risk factors outlined in our filings with the SEC. Additionally, today’s presentation will reference non-GAAP financial measures such as Adjusted Gross Margin, adjusted operating expenses, Adjusted EBITDA, adjusted net loss, and adjusted net loss per share.

A reconciliation of these measures to their most comparable GAAP measures can be found in the earnings release available on our website. With that, I’ll turn the call over to Rob DeMartini, Purple Innovation’s Chief Executive Officer.

Rob DeMartini, Chief Executive Officer, Purple Innovation: We entered 2026 building on the progress we made in the fourth quarter. Our first quarter reflects continued progress and greater consistency across our channels. Trends were solid during the quarter, with growth in showroom and wholesale. E-commerce also improved sequentially from the fourth quarter, with March performance approximately flat to prior year. Importantly, we continue to see the benefits of actions taken last year reflected in our operating expense performance. This progress is a direct result of the changes we’ve made to the business, not a recovery of the broader market, reinforcing the durability of the model we’ve been building. We’re entering the second quarter with improving trends and are positioned for a step up in performance. In the first quarter, total sales were down 8% as lower e-commerce and wholesale sales more than offset the gains in our showroom channel.

That said, e-commerce trends improved sequentially, declining 10% in the first quarter compared with down 15% in the prior period, reflecting more disciplined marketing execution and early signs of improved conversion. Wholesale performance was impacted by an accounting-related item, which Todd will cover in more detail. Excluding this accounting impact, net revenue would have been $100.6 million or down 3.4% year-over-year. Showroom performance remained a bright spot, with sales up 5% and comps up 7%, marking our third consecutive quarter of positive comp growth. Excluding the impact of the accounting-related item, wholesale sales were down approximately 11% in the quarter, but were up 1%.

We saw improving sell-through trends at Mattress Firm throughout the quarter, with our revenue performance building as the quarter progressed, supported by strong demand for our premium offerings, including Rejuvenate 2.0. We’re encouraged by the continued evolution of our partnership with Mattress Firm, where sell-through improved consistently, supported by strong engagement from their sleep experts and solid traction in expansion doors. We also began rolling out our new Royale collection late in the quarter, and while still early, initial sell-through has been in line with expectations and reinforces the strength of our premium offering. Our accessory business continues to perform well, with our expanded pillow assortment at Mattress Firm performing above plan and driving incremental growth. At Costco, our in-store furniture event performed as expected, further supporting our confidence in the long-term opportunity with that partner.

A year ago, we were focused on stabilizing the business by right-sizing our cost structure, strengthening the foundation, and restoring profitability in a tougher environment. Now, our focus is on driving growth. That growth is centered on three priorities. As we highlighted last quarter, number one, deepening our understanding of the consumer, number two, delivering better sleep through product experience, and number three, expanding distribution and executing with financial discipline across the business. These priorities reflect how we’re operating today. Let me update you on our progress against each. First, knowing the consumer. This continues to shape how we show up across channels. We’re shifting away from promotionally led messaging towards clearer, benefit-driven storytelling focused on GelFlex Grid technology and how Purple delivers better sleep. We’ve deepened our understanding of our core customer and what’s driving their decisions.

Today, what we’re seeing is a customer with clear need, but one that has historically approached the category as a price-driven replacement purchase rather than a performance decision. That dynamic has limited conversion and reduced the effectiveness of traditional marketing approaches centered on promotion. At the same time, our data continues to show that when customers are educated on the functional benefits of our technology, particularly around pain relief and sleep quality, conversion improves and mix shifts higher. That insight is shaping how we approach the market with a greater focus on clarifying the value proposition, improving mid-funnel education, and aligning our messaging to the outcomes customers are seeking, rather than leading with the product features or discounts.

On the marketing front, our strategy is focused on three things: delivering on the Purple brand promise of less pain, better sleep at every touch point, growing the earned traffic that brings high-intent customers to our website, and driving more consumers into our retail and wholesale stores where the product can be experienced. We’re sharpening our focus on answering the key question, why Purple? Making our differentiation clearer, our content more educational, and our local marketing more effective at converting awareness into foot traffic. The GelFlex Grid is a genuinely different innovation, and we believe we have meaningful headroom to tell that story more powerfully. We’re also seeing early benefits from increased discipline in our marketing execution, including more effective search optimization, more disciplined spending, and a shift towards higher impact channels. This is driving higher quality traffic and improving conversion, particularly in e-commerce.

We’re also seeing an increase in unsolicited consumer feedback, with consumers reaching out directly to share their experiences, particularly around pain relief and improved sleep quality. We’re incorporating these insights into our messaging through testimonial videos to better reflect what matters most to consumers. In addition, we’ve partnered with a new marketing agency that’s helping refine the quality of traffic and optimize our media mix with an emphasis on awareness and consideration across the funnel in a more evergreen approach. We also continue to make changes in our creative approach and how we guide consumers through the online purchase journey with a more focused and tactical path to identifying the right mattress. These changes are resulting in improved engagement and conversion. Second, delivering better sleep through product experience and expanded distribution. Our innovation continues to resonate with our premium products, maintaining strong traction across both showroom and wholesale channels.

During the quarter, we saw strong initial response from the launch of Purple Royale, our new luxe offering developed in partnership with Mattress Firm. Early feedback has been strong with encouraging sell-through trends in the early weeks following the launch and growing adoption among sales associates. Today, Purple Royale is in 3,100 slots across Mattress Firm’s 2,200 stores. While still early, we’re encouraged by our performance and the strong consumer response to in-store engagement in Purple Royale. We also benefited from increased marketing support from Mattress Firm, including one of the largest co-marketing investments in our partnership to date, which is helping drive awareness and traffic. Additionally, Rejuvenate 2.0 continues to perform in line with expectations with strong demand across the lineup, including our highest priced models.

In the first quarter, the Rejuvenate 2.0 collection was 56% of our showroom mattress revenue, demonstrating the positive customer response to the new product. This performance reinforces the strength of our premium positioning and the resonance of our innovation with consumers. We’re also seeing a positive halo effect across the portfolio, supporting performance in adjacent categories. In addition to product innovation, we’re focused on elevating the full consumer journey across both owned and partner channels. This includes improving how we present and explain our technology in store with greater emphasis on pain relief and more effective use of demonstrations and digital support. This is resulting in improved engagement from retail sales associates, particularly within our wholesale channel, as our product storytelling continues to resonate.

We’ve also made changes to our online sales approach, enhancing live customer care and follow-up to better replicate the in-store experience in a digital environment, which is helping improve engagement and conversion rates. At the same time, we’re enhancing our delivery experience to ensure a more consistent and credible brand experience from purchase through fulfillment. These improvements are helping reinforce our value proposition and supporting stronger conversion. We continue to focus on expanding our distribution presence so customers can find us across multiple channels. Our premium innovation continues to support that expansion. The launch of our Rejuvenate Royale collection at Mattress Firm in March is driving incremental distribution across our wholesale channel and represents an important step forward in our partnership with Mattress Firm as we continue to evolve both our product offering and in-store presence.

We’re also expanding our assortment with Mattress Firm with a rollout of additional pillow offering, which is performing in line with our expectations and helping to deepen our presence in stores at Mattress Firm. Costco continues to perform well with revenues up over double last year’s volume. As expected, this program will pause before returning again later in the year. At Sam’s Club, our in-store pillow displays are performing well and helping introduce the brand to a broader audience. Based on the strength of our recent sell-through, we’re planning additional events with Sam’s. We’re also seeing continued opportunity to expand our pillow assortment with select retail partners, including incremental additions within Walmart. We generated solid performance from the recent QVC event, which provided additional exposure and incremental reach for the brand. We see more opportunities ahead with QVC.

Amazon was a standout during the quarter, delivering strong growth. We’ve shifted more of our assortment to fulfilled by Amazon, improving in-stock levels, delivery speed, and overall customer experience, while also helping us reach new consumers. We see a meaningful opportunity to continue scaling this channel. Taken together, these efforts are expanding our reach with key partners and support continued growth in our wholesale. Finally, executing with financial discipline. We’ve taken a meaningful step to resize and simplify the business, and we’re seeing these benefits reflected in our operating efficiency and cost structures. These actions have created a more stable foundation as we shift towards growth. In the first quarter, gross margins came in below our normal 40% baseline, primarily driven by higher levels of floor model discounts associated with the Rejuvenate Royale rollout at Mattress Firm, which impacted both pricing and mix.

We view this as a temporary. As the floor model transition normalizes, we expect improved contribution from Royale, which remains a key driver of margin expansion over time alongside Rejuvenate 2.0. We’ve seen similar dynamics during prior transitions and would expect a comparable normalization as the floor model activity moderates. At the same time, we’re making continued progress in our underlying cost structure, particularly across sourcing, operations, and fulfillment, supported by ongoing productivity initiatives and supply chain optimization efforts. We’re also actively managing a more dynamic cost environment, including tariff dynamics and rising input costs. Our mitigations are well underway, including diversifying our supplier base, expanding multi-sourcing, and selectively insourcing key components such as pillows, where we see both cost and quality benefits. These actions contributed to approximately $2 million of cost savings in the quarter.

As we look ahead, we expect tariffs to be a modest tailwind this year while we continue to actively manage other input cost pressure. We’re also navigating pressure in foam input costs, which remain a near-term headwind, but is being actively managed through our sourcing and mitigation actions. In addition, tighter inventory management remains a focus, and we delivered a reduction in the first quarter inventory levels, helping to improve working capital efficiency. While mix remains an important driver over time, especially as higher-priced products like Rejuvenate 2.0 continue to scale, the first quarter reflects some near-term variability. As we look ahead, we remain focused on improving margins and continue to believe the business can support gross margins around 40% over time as operational improvements take hold, while acknowledging that external factors, including input cost volatility and broader macro conditions, may create variability in the near term.

Todd will walk you through the key drivers in more detail. Turning to our outlook, we’re updating our revenue guidance to a range of $465 million-$485 million from the prior range of $500 million-$520 million due to the accounting-related adjustment discussed earlier. We’re maintaining our Adjusted EBITDA guidance of $20 million-$30 million. The outlook reflects the continued momentum in our premium product portfolio, expanded wholesale distribution, and operating leverage in the business as volume grows. Our guidance does not assume a recovery in broader market and reflects the progress we’ve made across product, distribution, and operations. We believe we are well-positioned to deliver a meaningful earnings growth in 2026.

Before I turn it over to Todd, I want to briefly acknowledge that he will be stepping down as CFO effective May 1st to pursue another opportunity. Todd’s been a strong partner to the business, helping strengthen our financial foundation in positioning Purple for this next phase. We thank him for his contributions and wish him the very best in the next chapter. We’re also pleased to welcome Bob Lucian as our next CFO. Bob brings deep experience across branded consumer businesses, including his time as CFO of La-Z-Boy, and we are confident in a seamless transition. With that, I’ll turn the call over to Todd.

Todd, Chief Financial Officer, Purple Innovation: Thank you, Rob, and good morning, everyone. As Rob discussed earlier, we are pleased with the momentum we entered the year with, which gave us confidence as we look to the rest of the year. Net revenue for the first quarter was $95.7 million, down 8.1% year-over-year. The decrease was primarily driven by softness in e-commerce and a $4.9 million accounting-related reduction to wholesale revenue, partially offset by growth in showrooms. Excluding this accounting-related impact, net revenue would have been $100.6 million or down 3.4% year-over-year.

By channel, direct-to-consumer net revenue for the quarter was $59.4 million, down 6.2% compared to last year. Within DTC, showroom revenue increased approximately 5%, up for the third consecutive quarter, and comparable sales were up 7% reflecting continued strength in Rejuvenate two point zero. E-commerce revenue was down 10.6% in the quarter and was flat for the month of March, the first time in three years that we’ve seen a flat month in our e-commerce business. Wholesale revenue decreased approximately 11%, primarily reflecting the $4.9 million accounting-related reduction associated with certain commercial payments to a manufacturer affiliated to Mattress Firm. Excluding this impact, wholesale revenue would have been up 1%, driven by growth with Mattress Firm and Costco.

The accounting-related reclassification had no impact on gross profit dollars, EBITDA, or cash flow, but it reduced net revenues and cost of sales by the same amount. Gross margin for the quarter was approximately 36.8%, driven by two primary factors. First, we made a strategic investment in Royale floor models to support our Mattress Firm rollout. As a reminder, those floor models ship at roughly 50% of list price, which created a significant drag in the quarter. Second, we saw modest deleverage in our manufacturing overhead. As we’ve improved inventory management, we produced fewer grids and mattresses compared to last year, which meant we were absorbing fixed manufacturing costs across a lower production base. Said differently, we have some fixed costs that remained relatively consistent, but with fewer units produced, the overhead absorption per unit was less favorable in the quarter.

Importantly, this is primarily a timing dynamic between production and sales, not a change in the underlying health of the business. As production and shipments normalize, we expect gross margin to return to approximately 40% by the second half of the year. Operating expenses in the quarter were $52 million, down 6.3% versus $55.5 million last year. The decrease reflects ongoing cost savings initiatives and benefits from prior restructuring actions, partially offset by higher spend related to the ongoing evaluation of strategic alternatives, which can vary from quarter to quarter. Our first quarter adjusted loss per share was $0.13, compared to an adjusted loss per share of $0.11 last year. Adjusted EBITDA in the first quarter was negative $4.8 million, generally in line with last year’s level. Now, turning to the balance sheet.

We ended the quarter with cash and cash equivalents of $25 million versus $24.3 million on December 31, 2025, the best first quarter cash performance in 7 years. Net inventories on March 31, 2026 were $58.1 million, down 2.7% compared to December 31, 2025. Finally, let’s turn to our outlook. As Rob mentioned earlier, we are updating our full year revenue guidance to a range of $465 million-$485 million from the prior range of $500 million-$520 million due to the accounting-related adjustment discussed earlier. We are maintaining our Adjusted EBITDA guidance in the range of $20 million-$30 million. With that, I’ll turn the call back to the operator for questions.

Conference Call Operator: Thank you. We will now begin the question and answer session. If you would like to ask a question, please press star one in your telephone keypad. If you would like to withdraw your question, simply press star one again. Your first question comes from a line of Brad Thomas from KeyBank. Your line is open.

Taylor Zick, Analyst, KeyBank: Hey, good morning, everyone. It’s Taylor Zick on for Brad this morning. Rob, maybe just to start, you know, there’s been a lot of moving pieces within the business as you add more floor space. Can you speak a little bit more to the, you know, demand trends you saw throughout the quarter? Maybe related to that, you know, you said you saw improved trends here in 2Q, and you expect to step up further in the quarter. I guess, kind of what gives you confidence on that improvement?

Rob DeMartini, Chief Executive Officer, Purple Innovation: Thank you, Taylor. You know, the first quarter started off, January was fairly healthy. February got a little bit choppy, then March got a little bit better across all channels. I think as Todd highlighted, we were particularly encouraged by the e-commerce performance in March, where we got to flat, which hadn’t happened in quite a long time. We do believe that’s being driven by better media buying. I think the consumer still is pretty nervous right now, we have seen trends get a little bit better, definitely the category is not robust.

Taylor Zick, Analyst, KeyBank: Great. Maybe you mentioned it in your prepared remarks, it’s just kind of on the input cost side, but I guess what are you seeing on that side of things, and maybe transportation as well related to elevated oil prices, you know, petrochemicals and some of the pressures within foam?

Rob DeMartini, Chief Executive Officer, Purple Innovation: Yeah. Clearly, with oil being what it is, we are seeing pressure across transportation as well as some of our input costs, including foam. To this point, we’ve been able to manage through those. You know, they are headwinds. They’re being roughly offset with savings that we’re seeing on tariffs as we’ve gotten the lower rates coming off of the change in the IEEPA tariffs. In addition, just done a lot of good groundwork on where we’re sourcing goods to make sure that we’re optimized from a tariff and overall cost perspective. As we look at it, you know, that headwind that we’re seeing from oil and foam costs, we should be able to manage within our guidance, especially if the price of oil stays around that $100 a barrel range.

We’re managing it as we go, essentially.

Taylor Zick, Analyst, KeyBank: Great. Maybe just if I can squeeze one more in, Rob. You know, you had a really nice, another nice quarter here of, you know, high single-digit showroom comps. I guess, can you speak a little bit more to that, and maybe what’s driving those comps here, even as you know, compare against it looks like a double-digit comp in the prior year?

Rob DeMartini, Chief Executive Officer, Purple Innovation: Yeah, Taylor, the showroom team has really dialed in on trying to explain the why Purple and the which Purple. Those two simple challenges I think are key to unlocking growth in this brand. You know, we’ve got something that’s different, but consumers still sometimes say, "Well, why should I pay for it?" What’s happening in showrooms is a very strong mix up in their volume. In the prepared remarks, I told you the first quarter, the top category of Rejuvenate was 56% of revenue in the stores, and that’s what’s driving the comp and making those stores profitable as well.

Taylor Zick, Analyst, KeyBank: Great. Thanks so much.

Rob DeMartini, Chief Executive Officer, Purple Innovation: Thanks, Taylor.

Conference Call Operator: Your next question comes from a line of Daniel Silverstein from UBS. Your line is open.

Daniel Silverstein, Analyst, UBS: Good morning, and thanks for taking our question. I’ll just start by saying, Todd, great working with you and best of luck in your next role.

Todd, Chief Financial Officer, Purple Innovation: You too.

Just to start. No problem. On the sales guidance, can you just clarify, just to make sure, is anything changing from an underlying demand perspective, or it’s just a reporting adjustment? Could you just comment on how the wholesale channel has trended on a comp basis the last few months, taking out some of the new door growth?

Yeah. I’ll start with the revenue guidance, and then turn to Rob for wholesale performance. In terms of the revenue guidance, it is purely just the reporting change. We are still seeing good solid overall trends and still committed to that same level of overall volume activity. It’s just making sure that we’re reflecting how that accounting for some of that Mattress Firm activity is going to flow through the P&L. No change to the underlying activity though.

Rob DeMartini, Chief Executive Officer, Purple Innovation: Daniel Silverstein, on momentum, I think there’s a couple things we gotta consider. Our top eight accounts, including Costco, Mattress Firm, and then some of the other large regionals, are performing up year-on-year on a comp basis, and on a consumption basis, also up. The Costco business and the Mattress Firm business both had year-end merchandising events that had them leave the year with relatively heavy inventory. The consumption performance in Q1 was better than the shipment performance. That’s particularly true of the Costco business ’cause they load in that event as they set the floor in December.

You know, it’s mixed, but we’re encouraged by the stronger accounts doing better, and we’ve got some smaller accounts that we gotta figure out how to service better ’cause that’s where the business is struggling a bit. Again, remember on an unadjusted basis with this accounting change, wholesale had a very good fourth quarter, and they had an up 1% first quarter. Obviously, it’s down, I think 11% when you do the adjustment on the accounting. Does that make sense, Dan?

Daniel Silverstein, Analyst, UBS: Very helpful color. Thank you. Just one more follow-up on the input costs to Taylor’s question. Are you thinking about any price adjustments needed as-

Rob DeMartini, Chief Executive Officer, Purple Innovation: Yeah

Daniel Silverstein, Analyst, UBS: as a result of some of the cost inflation? What are you seeing from your peers on the pricing front, and just maybe the competitive opportunity there if, you know, you guys have less, you know, foam in your products, maybe you don’t need to raise prices as much or just anything on a competitive pricing environment?

Rob DeMartini, Chief Executive Officer, Purple Innovation: Yeah. I mean, we do use less foam than others. We also use more mineral oil than others, so I’m not sure there’s going to be any gain there. I think first of all, we haven’t seen any action by anybody else, and we will be more than likely a follower, not a leader. We are going to try to get at it though now through discount reduction. That’s as much about cost and margin as it is about kind of getting the brand healthier. We are too dependent on discount and depth of discount, and we’ve got a whole team trying to figure out how to not damage volume, but reduce the discounts in the brand, you know, a couple of percentage points, which is real money.

Daniel Silverstein, Analyst, UBS: Thank you. Best of luck.

Rob DeMartini, Chief Executive Officer, Purple Innovation: Thanks, Dan.

Conference Call Operator: Your next question comes from a line of Matt Koranda from Roth Capital. Your line is open.

Matt Koranda, Analyst, Roth Capital: Hey, guys. Good morning, and best of luck, Todd, in the next role. Just wanted to hear a little bit more about the trends you’ve seen quarter to date. Is the trend improvement you mentioned relative to the Adjusted Sales number you cited for the first quarter? Just wanted to hear a little bit more about whether we can expect positive sales heading into this quarter and into the back half, maybe seasonality as well for the year and how you see it.

Todd, Chief Financial Officer, Purple Innovation: Yeah, the underlying volume is looking good for the quarter. Once we make the accounting adjustment, which, you know, should be in that range of, call it $7 million-$9 million in the quarter, we still would expect sales to be up modestly. That just points to the fact that we are seeing good underlying progress in the business.

Matt Koranda, Analyst, Roth Capital: Got it. Then maybe just on the e-com side of the business, getting back to flat, is an interesting data point. I think you cited better media buys helping with that. Maybe can you unpack what you’re doing a little bit more that’s helping out on the e-com side of the business and how sustainable that is?

Rob DeMartini, Chief Executive Officer, Purple Innovation: Yeah. I don’t know if it’s, you know, it’s too early to, for one, to call 1 month a trend. I think we’re changing the information we use to drive the daily media purchase, trying to be more responsive to what’s working and what’s not. It’s, it’s a combination of a skill and a specific tool that we’ve got to build more, more robustly in the company. We’ve enrolled an outside agency that specializes in this, and the early signals are good, but I’m not gonna wave any success flag yet. We got to do it, you know, months in a row and put a couple quarters up.

Matt Koranda, Analyst, Roth Capital: Okay. Got it. Just maybe Todd, how long does it take for the higher oil prices to flow through to cost of goods? I guess assuming there’s, you know, raw materials that enter inventory and cycle into cost of goods, that takes at least a quarter or two. Does that mean sort of the highest margin pressure felt in the third quarter, back half of 2026? Maybe just from a timing perspective, how should we be thinking about that?

Todd, Chief Financial Officer, Purple Innovation: Yeah, it flows through pretty quickly, really. Our turns are generally less than a couple of months. For the types of things, particularly if you’re looking at foam, that tend to come in at the end of the process, we’ve already seen some of that pressure flow through the P&L in Q1. Like I said, we were able to offset that with savings on the tariff side of life, it is flowing through currently, and we will see pressure from that in the course of the second quarter. As you look at Q2, Q3, Q4, you know, from an overall trend of business perspective, we usually see revenue increasing proportionately across the quarters, are looking for similar this year.

That means volume in Q2 will be lower than Q3 and Q4. That oil pressure will probably place a little bit more pressure on gross margin in the coming quarter versus what we’ll see later in the year.

Matt Koranda, Analyst, Roth Capital: Okay. Very helpful. I’ll leave it there, guys. Thank you.

Todd, Chief Financial Officer, Purple Innovation: Thanks, Matt.

Conference Call Operator: Again, if you’d like to ask a question, press star one on your telephone keypad. Your next question comes from the line of, please stand by, Brian Nagel from Oppenheimer. Please go ahead, Brian.

Brian Nagel, Analyst, Oppenheimer: Hey, guys. Good morning. First off, Todd-

Todd, Chief Financial Officer, Purple Innovation: Morning, Brian.

Brian Nagel, Analyst, Oppenheimer: ... best of luck in your next role. It’s been nice working with you. There’s a question I wanna ask here. Again, first maybe some shorter term questions just to start, but with regard to the accounting change here in Q1, so just to make sure, is there gonna be a similar type, you know, impact in subsequent quarters, or was it all in Q1?

Todd, Chief Financial Officer, Purple Innovation: No, it will be ongoing. You know, the big impact is from the Royale production, and that production being done by an affiliate of Mattress Firm. As we grow that Royale volume going forward, if anything, the adjustment gets bigger as we get through the course of the year. You can see that we adjusted the revenue guidance by about $35 million. The impact to Q1 was only $5. That will kind of give you a picture of how much it does increase as we go later and later in the year.

Brian Nagel, Analyst, Oppenheimer: Okay. Then just confirm, I think this was a prior question, just to confirm, that adjustment you made to your full year guidance is entirely associated with this accounting change?

Todd, Chief Financial Officer, Purple Innovation: 100%.

Rob DeMartini, Chief Executive Officer, Purple Innovation: Entirely associated. Yep.

Brian Nagel, Analyst, Oppenheimer: Okay. Got it. Second question I have on gross margin. You saw the impact here in Q1 from the, I guess, the floor models.

Todd, Chief Financial Officer, Purple Innovation: Right.

Brian Nagel, Analyst, Oppenheimer: Can you size that more? I mean, I don’t know if I caught this, but, you know, what would gross margin have been had you not had this impact?

Todd, Chief Financial Officer, Purple Innovation: Yeah. The impact from the floor models was about 200 basis points. We also had much lower production as we’re managing our inventory levels maybe a little more actively this quarter. That lower absorption was, you know, call it, something similar, close to 200 basis points of drag on the gross margin rate.

Brian Nagel, Analyst, Oppenheimer: Okay. A similar question. Should we expect further impacts in subsequent quarters from this floor model dynamic as well?

Todd, Chief Financial Officer, Purple Innovation: No. We, we really moved through that in the course of Q1. I would say similar for the absorption impact, we moved through that in Q1. Those are really timing issues.

Brian Nagel, Analyst, Oppenheimer: Got it. Okay. I guess then my, I guess my bigger picture question, I mean, you know, as we’re seeing the, you know, the different sales channels start to take shape here. I mean, recognizing you’re still, there’s still a number of challenges out there, right? How should we be thinking about, you know, what, kind of what we’re playing for in terms of a, a top-line growth algo for the company? Along those lines, you’ve seen some, I guess, success here with regard to showrooms. Are those showroom sales, are they potentially cannibalizing other channels, or do you think those are totally new to the business?

Rob DeMartini, Chief Executive Officer, Purple Innovation: I mean, given, Brian, they, I guess, theoretically could be, but given our relatively small share and the fact that I think the showroom count right now active is 57 or 58, that’s not cannibalizing the business. In fact, we’ve seen data that e-commerce, wholesale partners, and showrooms’ top-performing DMAs are all similar. One of the things we’re doing is driving more spend into those zip codes because we see our business strength in pockets across channels, and no negative correlation from showroom performance. You know, take the Greater L.A. market. I mean, the entire market, I think we have 8 showrooms in the greater area. That, that’s not gonna cannibalize. You know, Mattress Firm alone probably has 50 stores, 60 stores in that same market, and so do all the rest of our competitors.

Todd, Chief Financial Officer, Purple Innovation: Then in terms of the growth algorithm, you know, taking aside the accounting adjustment, our revenue guidance, excluding that, had been and is $500 million-$520 million in revenue. That’s growth of a high single digit to low double digit %. You know, while that may vary in future years, we still are committed to that. We think that’s a good solid progress and appropriately conservative for the year.

Brian Nagel, Analyst, Oppenheimer: Okay. I appreciate it. Thank you.

Rob DeMartini, Chief Executive Officer, Purple Innovation: Thanks, Brian.

Conference Call Operator: We have reached the end of our question and answer session. I will now turn the call back over to Robert DeMartini for closing remarks.

Rob DeMartini, Chief Executive Officer, Purple Innovation: All right. Thank you, operator. I just wanna, again, wanna thank Todd for his hard, his significant service to Purple, and welcome Bob Lucian, and thank all of our employees for a hard-fought quarter. Thank you.

Conference Call Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.