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01/11 03:37
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call reveals positive financial improvements, such as a 6.5% increase in showroom revenue and a 7.9% rise in wholesale revenue, driven by strategic partnerships and product launches. Despite a decline in e-commerce revenue, sequential improvement is noted. Adjusted net loss and EBITDA improvements indicate effective cost management. The Q&A section highlights management's confidence in growth initiatives and margin stability, despite some market softness. The reaffirmed revenue guidance and strategic partnerships, including Costco, support a positive outlook, suggesting a stock price increase of 2% to 8% over the next two weeks.
Revenue $118.8 million, up slightly compared to last year ($118.6 million). The increase was driven by the timing of Rejuvenate 2.0 shipments and the expansion of the Mattress Firm relationship.
Gross Margin Improved to approximately 43% (up from 36% in the second quarter and 29.7% in the prior year period). This improvement was due to direct material cost savings, completion of the restructuring plan, and progress in warranty and scrap reduction initiatives.
Showroom Net Revenue $22 million, up 6.5% compared to last year. This growth was attributed to the strength of premium positioning and a new selling model that drove 12% comparable sales growth.
Wholesale Revenue $51.5 million, up 7.9% compared to last year. Growth was supported by the Rejuvenate 2.0 launch and the expansion of the Mattress Firm partnership.
E-commerce Revenue Down 9.8% year-over-year, but showed sequential improvement from the prior quarter. The decline was attributed to softness in the channel, though there were early signs of improvement following a site refresh and growing traction with Amazon.
Adjusted Operating Expenses $57.7 million, down 8.6% compared to last year. The decrease was due to benefits from restructuring and cost-saving initiatives.
Adjusted Net Loss $8.6 million, an improvement from the adjusted net loss of $13.8 million in the prior year. This was driven by gross margin expansion and disciplined cost management.
Adjusted EBITDA A gain of $200,000, compared to a loss of $6.4 million last year. This improvement was primarily due to gross margin expansion and disciplined cost management.
Cash and Cash Equivalents $32.4 million as of September 30, 2025, compared to $29 million on December 31, 2024. The increase reflects improved liquidity and cash generation.
Net Inventories $65.8 million as of September 30, 2025, up 9.8% compared to September 30, 2024, and up 15.7% compared to December 31, 2024. The increase was due to preparations for growth from the Rejuvenate 2.0 launch and Mattress Firm expansion.
Rejuvenate 2.0: One of the most successful product launches in the company's history, featuring DreamLayer gel grid technology. Sold over 3,000 units through direct channels at an average price of $5,800, doubling net revenue compared to Rejuvenate 1.0.
GridC Pillow: Outperforming expectations, showcasing the versatility of proprietary grid technology in new comfort categories.
Mattress Firm Partnership: Expanded to 9,200 slots, on track for 12,000 slots by 2026. Expected to generate $20 million in incremental revenue this year and $70 million next year.
Costco Expansion: Currently in 54 Northwest stores, participating in Q4 Furniture event in 450 clubs, nearly doubling last year's footprint.
QVC Entry: Tested first Purple Mattress program on QVC, expanding reach to a wider audience.
Restructuring Program: Completed consolidation of manufacturing, streamlined corporate structure, and realigned distribution network. Achieved $25-$30 million in annual savings.
Gross Margin Improvement: Improved to 43% in Q3 from 36% in Q2, driven by cost savings and operational efficiencies.
Innovation and Marketing Investments: Focused on accelerating innovation and marketing, including the 'Less Pain Better Sleep' campaign and joint campaigns with Mattress Firm.
Strategic Alternatives Review: Engaged with multiple parties to explore options like merger, sale, or other transactions to maximize shareholder value.
Tariff-related headwinds: Gross margin improvement was achieved despite tariff-related headwinds, which impacted the company by approximately $2 million in the quarter. While mitigation efforts have reduced the impact, tariffs remain a challenge.
E-commerce performance: E-commerce revenue declined by 10% during the quarter, reflecting ongoing softness in this channel despite some early signs of improvement.
Restructuring challenges: The company underwent a significant restructuring program in 2024, including consolidating its manufacturing footprint, streamlining its corporate structure, and realigning its distribution network. While these changes have reduced fixed costs, they were difficult and may have posed operational risks during implementation.
Supply chain and backlog issues: Demand for the Rejuvenate 2.0 product outstripped supply in the previous quarter, leading to backlog issues. Although these have been resolved, they highlight potential supply chain vulnerabilities.
Economic and market conditions: Showroom traffic was described as softer, which could indicate broader economic or market challenges impacting consumer behavior.
Regulatory and strategic uncertainties: The company is undergoing a review of strategic alternatives, including potential mergers or sales. This introduces uncertainty and potential risks to operations and strategic focus.
Revenue Expectations: The company reiterates its full-year 2025 revenue guidance in the range of $465 million to $485 million. For 2026, the company anticipates a clear path to positive cash generation.
Margin Projections: Gross margins are expected to remain at roughly 40% in Q4 2025, slightly lower than the strong Q3 result of 43%. The company remains confident in ending the year above the 40% level.
Capital Expenditures: Capital priorities for 2026 will focus on reinvesting in showroom expansion and innovation while maintaining flexibility to reduce debt as appropriate.
Market Trends and Business Segment Performance: The company expects continued top-line growth in Q4 2025, driven by seasonal lift in direct-to-consumer sales during Black Friday and Cyber Monday, expansion at Costco, and sustained momentum of the Rejuvenate 2.0 product line. Wholesale revenue is projected to grow, supported by the Mattress Firm expansion, which is expected to contribute approximately $70 million in revenue in 2026.
Strategic Plans: The company plans to accelerate innovation and marketing investments, focusing on expanding its presence with new retail partners and enhancing its digital experience. The Mattress Firm rollout is on track to reach 12,000 slots by March 2026, and the Costco partnership is set to expand significantly in Q4 2025.
The selected topic was not discussed during the call.
The earnings call reveals positive financial improvements, such as a 6.5% increase in showroom revenue and a 7.9% rise in wholesale revenue, driven by strategic partnerships and product launches. Despite a decline in e-commerce revenue, sequential improvement is noted. Adjusted net loss and EBITDA improvements indicate effective cost management. The Q&A section highlights management's confidence in growth initiatives and margin stability, despite some market softness. The reaffirmed revenue guidance and strategic partnerships, including Costco, support a positive outlook, suggesting a stock price increase of 2% to 8% over the next two weeks.
The earnings call reveals a positive outlook with several growth catalysts. The expansion with Mattress Firm and new product launches are expected to boost revenue. Despite some Q2 challenges, the management anticipates improved gross margins and EBITDA. The Q&A section highlights optimism for the second half, with resolved fulfillment issues and growing demand. Although some guidance was vague, the overall sentiment is positive, with strategic initiatives likely to drive stock price upward in the short term.
The earnings call presents a mixed picture: while there is improvement in gross margins and cost savings, revenue is down, and there are concerns about consumer sentiment. The Q&A reveals cautious optimism but also highlights uncertainties, such as the impact of new partnerships and consumer trends. The reaffirmed guidance and incremental borrowing suggest confidence, but the lack of clear guidance on margins and timing tempers expectations. Considering these factors, the stock price is likely to remain stable in the short term, resulting in a neutral prediction.
The earnings call presents mixed signals. Positive elements include achieving adjusted EBITDA profitability, improved gross margins, and a new partnership with Mattress Firm expected to drive significant revenue. However, concerns include weak current revenue, increased borrowing, and economic uncertainties, particularly consumer psyche and tariffs. The Q&A reveals management's cautious outlook for Q2 and lack of clarity on the partnership's impact. While there are positive long-term prospects, short-term uncertainties and revenue decline balance the sentiment to neutral.
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