PRPL - Earnings call transcript Q1 2018

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Operator

Greetings, ladies and gentlemen, and welcome to Purple Innovation First Quarter 2018 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. [Operator Instructions] It is now my pleasure to introduce your host, Shannon Devine. Please go ahead.

Shannon Devine

us results. discuss joining quarter Innovation's for earnings XXXX you today Purple to first Thank call Terry today's Watkins, On are Chief and and Financial Mark CEO; Officer. Pearce, Co-Founder, Chairman the at www.purple.com. today's is press A section copy website available of on Purple's of Investor release Relations presentation to this forward-looking would make like statements will you remind I statements. certain that we in are factors materially These affecting a and actual today forward-looking as only of on business. reflect statements company's based may the Purple from differ analysis number expectations Innovation's of judgment and current results not you forward-looking Accordingly, reliance statements. place should undue on these

more financial Terry to in For the over and quarterly on can to uncertainties non-GAAP our EBITDA. call the result reconciliation as operating be first our webcast, With forward-looking events discussion presentation earnings report comparable made a website. Today's income, otherwise. of as the with to to included information, you refer disclaimer and undertake the thorough the in measures include GAAP new most references and SEC EBITDA regarding of adjusted update the statements can whether Terry? or our will call obligation measures well to found non-GAAP be we be associated these I'll adjusted to today future forward-looking was risks on of and in financial of earnings financial a each release statements within found Form on conference which which measures Form such XX-Q, not Pearce. this as is that, turn A reference or the with any quarter that statements XXXX do as any release, filings We the SEC our forward-looking to alter disclaimer. furnished that X-K,

Terry Pearce

numbers key will comments, us. of the Thank I'll you. be then start greater to take including questions. our updated my top-line our on by closing detail we for After first outlook. walk outline our performance. quarter through results in will and joining touching Mark drivers all Thank happy you

will the As our comments healthy. you today, in hear company is

our will this expectations revenue, back we company near-term for EBITDA believe breakeven pared the we Although have year. be

We objectives. are our making toward drive to this long-term adjustment

come believe over team differentiated bit marketing market XXXX but our is XXX% later, products QX this to year are Purple a increased continues million QX in that meeting the understanding share. projections. back will from the that driving strong We and our the delivered to as We start top-line to to $XX a revenues XXXX, longer-term key

we experience channel. year and our increased demand investments quarter, first our made marketing the our differentiated to direct-to-consumer over by Growth was strong the driven technology. on customer continued interest brand for During mattress past focused awareness in original significantly that

Our XXXX audience. models Site-visitor considered part, positive introduction completely personalized XXXX. models the our higher different also allowing price February of three-inch, recent purchase. us consumer new has on or and since two-inch, at a reach been four-inch performance new mattress lower anticipated core with to Reaction is The retail in debuted and of by which early the Purple models, for in priced incrementally driven November Hyper-Elastic offer Polymer in website models was introduction choice has deep for higher of conversion new a to the comfort along very broader as design. rate been mattress a new

plans, sleep me-too growing with unlikely that XX% of believe to go Purple physical is medium with of our with channel. consistent market on approximately its mattresses In to new is stores direct-to-consumer undifferentiated below We landscape this in We and order initial the the term. share address billion competitors. approximately existing are XX% the mattress of are still daily ratio The that lion's and optimizing $XX to wholesale and monitoring, analyzing, competitors and basis. spent cluttered continues dollars a in be

quarter full first our in marked XXXX XX of its ongoing in to with selling a mattresses of Firm an stores. Mattress channel wholesale quarter test first The

XXX of the announce and stores an expansion, experience, announce stores. XX encouraged already With in-store of the Purple Purple to the sales for customers' expanded pleased in will second Mattress and Firm in I'm of XX associates, pleased to that with that Purple Firm into have Mattress stores the Firm additional during further been third agreed our quarter. has quarter a I'm expand Mattress early initial have additional into We enthusiasm total an products. XXX be XXXX. sell-through Today, to stores this of

and available with a have Firm along base, currently also Mattress Purple and Purple further now sheets, and which e-commerce of pillows, platform are for number Mattress are Firm's including discussing our on products, purple.X expansion. mattresses We plans our original website.

months, XX proprietary the layer process quadrupled as molding experienced Over we production. make scaled polymer our systems, Not of in surprisingly, number of which have we we our number last the and mattresses. for the growing a procedures our quality control elastic pains improved

quarter Purple's IP our manufacturing important first year-over-year increased and helps competency, revenue. is manufacturing mode of core differentiation provides supported doubling clear create part This the in XXXX DNA. of business. investment to our proprietary Purple's processes significant Our capacity an our around including Manufacturing an

mentioned search operating XX reporting data for we In meantime, important ago, the material additional run CEO improvement We Purple resumed firm market improve update the I efficiently. have structure inside and the March the a in our accountability, search call, more progressing activities systems, I appropriate. of Purple underway. on team continuous Purple has the visibility search. now As role data engaged to and to initiative and to days is and is worked assist has a this The since with board CEO will global as well,

Purple's able have factory a markets and to been this we operations. deeper time, understanding gather During of

will have Mark now additional growth. to days the drive we and costs adjust has importantly landscape our learnings which into required floor. the the rapid, Our affecting marketing, take but our forecast and last included over competitive DTC of XX evolving insight sustainable continue the for factors also profitable that

Mark Anderson Watkins

then begin the for updated guidance and Thank year. quarterly by our review Terry. I'll you, discussing we'll results, our

during months prior revenue The For March for dollars XXXX, extend and the other XXXX. channel. the increase of wholesale XXXX compared million mattresses due promoting $XX.X Supporting offerings, the first gross to our $XX.X contributions our during channel marketing first direct increased from a was net with was our comprised XX.X% up to mattress growth were our new of lesser in XX, of in XX.X% primarily million, quarter. demand million period. net XXX% increased revenue XXXX, of to quarter XX.X% Gross revenue were manufacturing up period consumer the compared to year our million X% ended in quarter in for margin to investments and $XX.X products higher to the $XX.X that three same the our the profit capacity, improved compared

revenue The for at reported That included year net first was XX.X% that of gross two XXXX gross reflective not said a first were operations margin margin better of XXXX XXXX, adjustments of primary comparison. reasons. margin the less the quarter than the full expected with as full-year gross quarter

new First, control as to we meet inventory related we the expected process higher we adjustments than production quality incurred of demand. inefficiencies the experienced to and scaled mattresses in manufacturing

our our half second the XXXX versus the continued new margins is were costs models mattress resolved But attributed incurred launch costs launch in of to of Second, our flat-packed as the to models additional to an April, them costs our period. late from quarter of $XX.X and a the the by during issue, with we during drive in rolling to opposed products. online to we offset quarter were expenses gross higher first the brand direct year freight initially the began awareness freight operating year. mainly increased models. February $XX.X online we freight effort in models the new part spend, of the million expect quarter and rolling higher In headwind expect in the as expenses QX. to this experienced demand new new lower in partially Operating higher therefore mattress million prior date. consumer first and associated margin product freight achieve costs expand The These increase marketing of for

addition, as expenses costs. one-time, the costs $X.X transaction Partner with to non-recurring Global million operating severance included combination Acquisition well business as In of related Corp

the loss reported was of loss severance costs, and $X.X for an in $X.X compared During million first same loss EBITDA million first operating of million adjusted quarter was a net the of to of negative million we $X.X million quarter million operating compared first costs, in of $X.X of negative just XXXX. quarter in an Adjusted I of After XXXX. first operating quarter XXXX. quarter in the adjusting compared the And versus at $XXX,XXX the the transaction operating XXXX. for million the first adjusted an loss $X.X quarter compared quarter, $X.X adjusted of first the of excludes Net the was XXXX. loss loss $XXX,XXX EBITDA $X.X which of first the EBITDA, to was quarter negative for million negative XXXX mentioned, non-recurring to quarter to $X.X in

sheet. balance our to Moving

line, business our had quarter as of the March at combination reflecting at million XXXX. and $XX.X million inventories compared the this end GPAC equivalents the term inventory to models million new company million at XXXX, the at expanded at center. third-party of distribution the to XX, X As $XX.X product for Net totaled of XX, with from $XX.X was the of and the products of regional growing cash February finalized to and cash our demand on the first funding with debt an compared $X.X end of XXXX, due increase March The end the year. of stocking

loss be guidance of million EBITDA anticipate be to $X our revenue the to loss for XXXX, net a quarter to of million of range a million $X million. adjusted $XX between and to in Turning the and second $XX of we

expect XX% XX% increase million the an million, we For of be now to between XXXX. and between over net revenue full-year, $XXX $XXX and

driven top be still are breakeven. to of The adjusted the number factors. more of a approximately to EBITDA a conservative adopt was decision for line XXXX remainder outlook year the forecasting by We

are and growth. long-term to driving dedicated sustainable First, profitable we

general marketing ability During in consumer our the of landscape increases do several line hit multiple top to rate. segment determine we previous have a acquired This we growth, ad all and diversifying and our required line maximize of and guidance reasons, pacing the with competitive marketing improving the first levels is to to pressure of our as as By also spend audience, spend across ad conversion technology optimize our we better effectiveness, understanding of our are our continue target key to can spend. for customers. raise in rates see that significant growth diminishing we put part platform, on our we losses cost digital advertising utilizing of of near-term. cost bottom in the grow we which drive our returns QX, at The drive to the

The retail channel second line more is impacted for top our outlook partners. by slower that than rollout conservative reason wholesale been has forecast with anticipated

that such is While, Mattress we retailer drove forecasts other relationships our as time have Firm to the previous from see taking This previously. X,XXX-door in still goes place the alluded are as well benefits. as the primary partners, to

We have wholesale and fact, not success. for into supporting in evidenced future channel, our outlook long-term changed have our we

in Third, that the choosing place leveraged, our we future We sleep and right. international time driver the can winning with growth the U.S. our view believe we are categories. sit expansion to is of current be focus when on

negatively our position the with differentiated impact provides of brand. product and as our believe consumers' on continue purely health premium our to compete we hold long-term price, positioning Purple's experience therefore also and We discounting not

our reaching taking segments the activities than are to broader we We of the marketing steps consumer historically. net widen have continuously to

activities other advertisements, through recent as by well initiatives. television and evidenced digital with As cinema as

brand in and confidence large has the a the can we differentiated We that product. and a growing with forecast, participate We changed. building in in are the opportunities for committed not of Despite industry highly reduction my proud future long-term XXXX of. to the Purple the

drive team and need Our levers long-term full growth. us gives our sustainable integration we vertical to

with inventory want Terry, As has been revenues filed I The Terry? call by we of balance, our as revised of point a issue XXXX out discovered cost in side XXXX close, note, part there quarter I that revenues back accounting to first year-end our call turn to the our XX-Q this of before The back been this I and issue for cost has reduced million our to now period. afternoon. revision inventory Terry resulted the the for XXXX in some and turn just balance deficiency closing $X.X that control remediated. will remarks. an increased our

Terry Pearce

Mark. Thanks,

Purple's optimistic continue future us, We and to long be sustainable growth in very the channels. runway prospects. is There about wholesale ahead for online, a DTC both of

expansion. international from opportunities the technologies remain give on We product opportunities Mark the as that growth and, unique We future company. have expansion new committed mentioned, our to many comfort capitalizing

our challenging, are provides. it IP as can especially optimistic and integration of because we a protection margin the of reasons the potential vertical about company, contribution is one additional be While it long-term

We we are balance share market increasing are questions. committed to Operator, in for a to expanding order and shareholders. take between long-term drive to our now striking bottom-line value ready

Operator

Thank you. with Our with your [Operator of line question from Please comes Basham Wedbush proceed Securities. Instructions] first the question. Seth

Seth Basham

Thanks is around first a My marketing question afternoon. lot good and efficiency.

the If guys you right decision key your expecting more impact reduce your are down from now, elaborate to could rate you spend? limited inflation you're the in on issues advertising break facing conversion that versus ad

Mark Anderson Watkins

bet. you Yeah,

moderate the increases, beginning prior have terms continue year year-over-year just dramatically. CPMs, that As seen that in not going over CPMs to the of would expected the has pure quite and at we the had we increase look We those year of to back happened.

seen really so good. The and over few One due marketing moving general of that's auction-based, driving economic factors. is the trends and And up. a it's space prices is we've to the economy those is digital fact, in And acceleration. digital largely people just more some into There’s In marketing. more conditions.

competitors, In originally again, is entrants very had this competitors existing addition, the to our as to there and of many, the of a so tune we on stepping above going into now, right well millions more the are than increases targeting type for game side advertising what There’s many their auctions, incurred year. digital aggressive bed-in-a-box just and space consumers. the anticipated on up the to because would of have those our of same we expected be more dollars

with gone advertising partners. of general, primary we CPMs even are our so, And has seeing up. high-double-digit, upwards customer year-over-year triple-digit In cost digital of in our increases our

growth expensive, some degree But that we're and something do expand and it's to our that's rate. we of to part to need to it's in reason trying our are audience, looking more that to for our and guidance. Because change the As we target the adapt, we it expand new allows audience. then ad other spend what us it for words, audience, is allows to able test, optimize marketing given better we're scale. our do try us tactics to as a broader to In target moderate

it's players so, of digital And combination bed-in-a-box general so just economic conditions, and in a advertising. being competition, the aggressive

Seth Basham

it. Got

core any conversion digital in are ad to you your specifically on products products? relates conversion aside your putting it As traditional changes channels, seeing significant for your new

Mark Anderson Watkins

new, difficult we're to in space. mattress an and They of original, to look bit the separate Purple little we a bouncing into the track forth. see coming going look and from are it's So, targeting and They're original to this. able new our on website terms ones and conversion they're we're the that the to because they're they're back they going to rates, audience able

that And than model, I it's even the more decrease Q&A, considered it bit seen that so of But before that the with little it's in to a his a separate was. we have a purchase difficult in those. Terry alluded to would conversion. commentary say higher-price-points

taken those dropping new off. and we've so, see conversion level to a rates do And we that

Seth Basham

your going anymore? paring drive it. the back think Got but Are or you're much brand you top are funnel not expectations, most? as advertising And outlook initial about you the to forward, advertising so still spend of on places focused awareness where paring back

Mark Anderson Watkins

move than brand we had and we been the toward we us. believe more more No, for have And that that's leaning right historically.

brand for As needed we invest we set long-term in ourselves up to success, awareness. general

that also short-term. a pay the -- people brand the top but efforts marketing as difficult optimize possible, bit to call and into we bottom a advertising. bringing funnel. initiatives as our of try as we’ve they're of more are converting and quick focused spend, marketing such funnel, Those we television perspective brand some as on are broad in the funnel, taking can You them but from dividends into funnel quantify separated going run more and longer and awareness little in brand, we our top to of And to in are that degree,

Seth Basham

in thinking Fair Mattress you enough. XXXX retailers? how growth about a that other gears And much of bit outlook, Firm than anticipated then switching little here, versus being your slower is wholesale your now

Mark Anderson Watkins

player. is into of the focus where to is partners we significant that time wholesale that Firm majority our they Firm there wholesale space. We're right aren't time, our we've expansion of sharing no channel, is see but doubt the Mattress Mattress in several by They encouraged different our continue are expand a wholesale with here now, QX, Over business. player QX, this the percentages not seen majority a expect but wholesale retail - are through in channel. we and the be to in to at we'll exact major but very is going

Seth Basham

enough. Fair

wholesale Mattress the for of to retailers? rollout the to other than that terms with revision In with year is slower more so due Firm outlook your though,

Mark Anderson Watkins

of It's just what on had we we're we We those with partnership and don't the discussions of today. have at and speculate where I was of expectation slower further side going business, continued necessarily a plans changes encouraged and has [ph]. on, than forward But a we're do test what's to why combination, the happening a anticipated. want and look is and been by continue Mattress right had it them. really to Firm possible have their expected difference in on lot they now to

Seth Basham

your how ability efficiently it few enough. do and now, last Fair more like more others. manufacturing feel it operations balance to you Thinking year? over about One snafus, about your the of question, to the I'll manufacturing sounds turn for

Mark Anderson Watkins

selling We of some have than question. manufacturing ramped great of as ramp models, some new place. production we issues well up we we've the new QX. forced path going to what out model We up new than control encouraged headwinds the did mean, I a made, the quicker anticipated. good only the we're change have expected, which processes thing, the just we changes were and had as Yeah, in models the we feel as better have made that is by But quality significant we

is we related that will have just process. in impact related the little been We April really some flat go which we QX, now. design in the QX, going of very we those, the and have additional we now process. costs, rolling packing in resulted, some were mattresses, impact manufacturing the the rolling we as activities will those is work manufacturing to inefficiencies we a anticipate have But through and and some We same QX will standpoint. to gross those the but in QX some headwind, to had just modifications will we required some well new will have of freight from - Those bit QX that margin headwind. smooth and But have as some are

Seth Basham

Thank you good. luck. Very good and

Mark Anderson Watkins

Thank you.

Operator

you. Thank

Raymond with comes line Our question your Please proceed Griffin of next from Financial. with James the question. Bobby

Robert Griffin

Hi, the answer guys, you're taking questions. time good afternoon. I to my appreciate,

Mark Anderson Watkins

Bobby. Thanks,

Robert Griffin

guess, the the you driving are on you three the good touch listed maybe that of time color I firstly, reasons last with one reduction detail back to the spoke, of on of which some provide gave cutting few we why from you revenue those of majority reduction? But I on the is expectations? want off you guide a can some some

Mark Anderson Watkins

our of Yeah, bet. and it on of returns priority, just diminishing order, The this in in ad spend. I order this you would majority reduction, definitely put

rates now pure that increasing right cost the just lower with is acquire a cost. coupled to conversion So customer

increase driving down we we competition, quickly couching faster, our yes, that does could, need we the in to do is to come rate, profitable it. effectiveness grow could have but how expand and a it And that terms we can the in audience we just lower losses. The put be the of would way a to CPM. So at marketing

the positive. so are be going enable the breakeven - we now, taking are be to we And right sustainable to healthy and right for business steps thing us take the That's we the long-term. and believe in to

it's terms channel, are the now. bigger a actually change, be other wholesale drop. primarily in in percent a overall picture, consumer words, will right this a a business of forecast, the in piece, wholesale the we to of Second But comparison terms the of is direct bigger

we So that's that bit. out. come then finally, focus down the And last out may planned little international rolling share. We've a has quarter, recall that faster talked about you lion although on pushing our on

we growth we we the this changing still We this But terms believe We U.S. need long-term are to focus our - for in medium-term the long-term have the three in of believe business. originally XX% that long-term over win just changing not for pushing it's out We and outlook, further. of to five still XX% case. forecast year, said our that had in anyway. that's originally realize said in is of This forecast the in the future years, to

Robert Griffin

you around expense. just detail. key that forward. of of advertising you a for I will we March in kind is going but competition EBITDA kind guess, understanding with assume considering the me, the the guidance right we're that's correct Okay. a have of follow-up, now are correctly, since another of factoring step-up, I rates raising maintain what Are stuff you that guidance I run flat? and a or And last words if costs, your and kind guess, not time some conversations, saw spoke this ad appreciate on but I'm step-up

Mark Anderson Watkins

just a our better our getting of the better, that taking strong been digital auction the CPMs causing this we to And are partners. historically increases those we just our environment, see expecting in in basis, the of that more have that up. to taking that's that's the so mimicking on businesses advantage with think pushing causing then and again And previous, prices And economy, done. up. what our go competitors to year-over-year it's I part past that marketing. And many type Yeah. like more advantage mentioned of have and prices digital change to are go things, and We're in trends that we're digital continue from advertising, is in is forecast going pushing in I brick-and-mortar primary the

So we're adapting.

agile is to phenomenal keep those and trying being marketing down. Our cost that team

our triple a cost in you were see on to If basis. for example, double and digits year-over-year Facebook even

sales, have just can up, effective on in feel of be do putting is as overall terms effectiveness gone long-term the not expectations But what we there. for we profitable look the QX driving an the for cap you rest at cost Our a at exceeded and year. our still the level, at we or a it we of

We we to are our like activities can And we that I can these going that be we'll do that increases. continue marketing such and something to see adjust feel we profitable. despite the fact that

Robert Griffin

Okay. out for you I profitability of channels now Are with appreciate guys. the of detail. different And worth me, quarter of in kind the wholesale anything that's behind rollout one then going lastly you for two kind us? noticing the

Mark Anderson Watkins

It which profitable we the we is higher do wholesale, a the slightly line, bottom but a gross on nice tailwind a have lower have margin line. of to margin, contribution is more bottom

key look drive business. And that's there. as long-term getting our going continue to and profitability. rollout that's so wholesale a we we expect And more more to as But to at models we

we look the going what it's us do going that. As tough to DTC, for at be high be is to profit, to wholesale and channels, to driving enable the short-term

Robert Griffin

appreciate luck coming the in Okay. quarters. detail. of Best I really the

Mark Anderson Watkins

Thanks, Bobby.

Operator

Instructions] your Thomas question Please of KeyBanc next the question. with comes line with [Operator Thank Capital from Our you. Markets. Brad proceed

Brad Thomas

taking for my and Terry afternoon, Thanks Mark. good questions. Hey,

Mark Anderson Watkins

Hey, thanks, Brad.

Brad Thomas

you the being be do net rate these ask directly, to and that rollout. circle DTC the you you just rollout to Let's models website? see to conversion guess, lower observe clear I it I to models, of there. with back onto additional the added have positive wanted on to any have referenced additional just

Mark Anderson Watkins

have gross doubt, no margins There's gross we're giving from a they higher slightly on that margin. those, tailwind a our

change making and to is. seen into is we've those having website, way that and we benefit going exactly our forward, models on changing measure maximize It's new able bifurcate sale. to I tweaks, a in tell way that anticipate the return in tell promote tough little in we we the the you the to will of what relative be so bit But we models the site. honestly such what the that a changing can terms on new way the bring conversion And you that people

going and So continue that off it that could times that February. in, extreme there something second all that's sell something to improve, models there online very on, more we our week range refine anywhere able refine. different to to test new them much on had putting from begun and high relative a expected testing site, questions are model is effectively. the but a refine continue the launch and bed-in-a-box industry. early always we've down QX. are than price general we of them in those a better we we're sales scale, terms only continued we do no from And test like the And in we the we'll But And to and way of path and to a taking doubt

really it's up. But am by to you where encouraged going results. the I exactly can't tell I So end

Brad Thomas

XX% wholesale. XQ, of back clocking out double-digit about about are through between DTC different in expecting rate a then probably that still into in year. channel help we as now or at be growth you're trying still the might like you it move rate? I as thinking range Great. growth we understanding year? you rate, in guess, And you growth how I just of better XQ, are XX% a thinking that half the But the at what just think looks you're How us and least numbers can DTC about getting of specific growth on move channels you're into to get of the know,

Mark Anderson Watkins

of going to be year Yeah, growth rate. somewhere the back the absolutely. is to rate for in XX% The half growth XX%

you give that we're QX expect just to the giving me be for higher to let fall So would balance as then color, now of a QX. slightly little guidance right and QX, we

you rest an of the the speaking at will year give indication should look what like. of least that So generally

Brad Thomas

you. Got

for out the of XX% XQ, so is or And if north you of think there? you probably back things, DTC retail still side

Mark Anderson Watkins

Firm Mattress the expect DTC regardless Yeah, to the other of with for of share we Absolutely. rollout the It's or remainder going be Yes. be to XXXX. share lion still retail partners. lion the

Brad Thomas

of doing topic you feel Are or players, more a different And to evolve pressure putting players like Great. competition, cost are traditional look part some competition? the on the at maybe the it of everyone, when competitive the any in in just advertising particular things. guess, rapid just there continues pace, very online landscape? the you the terms of market on those I you

Mark Anderson Watkins

The them pressure are spenders But us, put I not ones handful. right. biggest There that the the Yes. and biggest give credit. sure on frankly is a I'm to want players the most

And in most we targeting of are much it's that's top are we'd spending from. feel the then the us pressure. ones. But what the are of so really whose competitors pressure there smaller cost, the Whose our pressure of more and are is putting ton on And we money, that that purse video that host a the just most, of just our ones than way, those strategies also not, mimicking those be that the common feel that question are world cash so following the five pressure. spending basically putting a a so

Brad Thomas

increases late? steel feeling and something just topic industry the all materials. raw then are the seeing? you on the many effects that Is it And seeing Obviously, that others petrochemicals the you. costs input in are of Got you're What of the and prices. in

Mark Anderson Watkins

Yeah.

And a visibility sales. measurable of steel foam, significant And any commodity The input input, not our which that's with volume we've saw Steel standpoint. the oil, QX fairly then little only us exposure our through expect the out same. are we to foam coils steel stay pushing QX. coils, feel in or our expenses commodity not continue that new there of other major a change But And for to for of in for have we textiles and of coils. to don't we biggest of the flat, remainder you pretty we're course and QX, type flattened will But do item seeing So so. input. we're well dramatic for QX, we relatively QX bit of of any in us, for be be any for and headwinds first QX, is we as we And the all. end changes a Mineral a over only The dramatically in XXXX. right. QX. have from QX, it seen cost increased set been of of good have know, impact expecting we another pressure moderated

Brad Thomas

that Great. in have think And of Terry, everybody of you that sense can update the maybe in if was might last any have for think - I you I one CEO. one announcement hearing on be timing it's a in just maybe you will new interested squeeze

Terry Pearce

decent just Brad, to to a even I is guidance. I a to… will like say or there schedule can't way right starting some informed. everyone And keep active have process. outguess really no we the We it's that. very guess But just on hard would It's now. put would

Brad Thomas

Well, I appreciate you.

Let me ask sounds anyway. good. It

Terry Pearce

will say, days going be mean, I well. seeing we're just we I'm it number. or days XX point we it is to XX results. think a Yes, can any I where or - not

Brad Thomas

All guys well, much. thank so great. That's right, you

Mark Anderson Watkins

Thanks, Brad.

Operator

Thank you.

final Our with Please the Peter comes with Piper your proceed of from line Jaffray. question. Keith question

Unidentified Analyst

actually guys. Bobby It's on for Peter. afternoon, How Good you? are

Mark Anderson Watkins

Bobby. Hey,

Unidentified Analyst

months. to I you Just Is things business past have the on have there guys guidance, of going did, out getting fair Thank are it an you lowering that, the or the changed some really over guidance the clarity a that it of further to as more touch that back far. have so growing been just could you're from operational standpoint, - on that you. top-line what appreciate matter couple given say on if you

Mark Anderson Watkins

Yeah, bet. you

major so From growth had But of do manufacturing standpoint, the them. the the have caused at driving changing. mentioned, really to choosing to the us rates. we'll fashion the pleased a a what's really conversion in or those. with to I We and take the last this in It's mattress sustain our profitable that overall, industry we and from business challenges. has and continue And drives of that the business we've to that we've an new But adapting can operations. Like models dynamics we're terms the is overall, a to operate refine model standpoint, quarter. we this competitive look just do the yes, as operational nothing conditions. we're are been marketing we're positive how what driving in landscape that's able So around sell breakeven

white had You'll recall glove our delivery we challenges with service.

kinks We those the making. progress we're by [ph]. all through working encouraged very are I'm

getting we're a as we're to of the lot So and the new forecast this in you're business. this for getting our a well. been We've around when we're pains place growing years X.X is dialed only operations in marketing ability And getting fast, current form. growing but out there

Unidentified Analyst

quickly right, great, you're well I advertising, quarter, having. just appreciate I like based your be manufacturing last And All that backlogs capacity and as remember that the on ship also around it.

now, kind of is that settling how capacity and of timing right on same spend page? out the ad the getting just So

Mark Anderson Watkins

I'll me Yeah, and so, to just let shipping. address capacity talk then the

doing to have is sure an firing well. on have and right to grow, - we continue and changes we environment. we on capitalize Max So We capacity, that are opportunities throughout cylinders it's capacity we make all this extremely brought then as that the the additional now. plans on year in we can machine we expansion need And their

$X get terms capacity March, It's way what But have million, have do would of delivery But the did from it's ability neighborhood the end we standpoint. I in the financial of that shipping, And million you had the and of rolling on encouraged growing third-party Anywhere see all actually we're was a standpoint. as pains standpoint $X what's have continue that quote X of improving. future, do that period there backlog backlog That's to which hands. of that those delivery service backlog. impact, out when of time delivery by were a a $X.X We the new bringing a the white that a service. not will not from a we the million. loss in can necessarily in backlog, happening you from look a effectively sales that. day we from pick to we sale. But timeline our of make million up lot from XX, of a models backlog But sales a shipping to into delivery we from the unquote, in up on In statements. from XX the expect as $X into from those roughly glove struggling. from at of term of consumers' is terms QX December in a We so transaction,

we We will. And still improvements. are making

modifications delivery third-party easier was to from new models and just the everything One us of packing, flat It makes efficient. easier. the to makes our the more getting all We've rolled. resolved those of the delivery which issues for due It the now partners. mattress the the We're big that. shipping models, trucking makes

well, going have some that's So now did growing pains. but serious we

Unidentified Analyst

Thank Great. right. and luck. you All good

Mark Anderson Watkins

you. Thank

Terry Pearce

Thank you.

Operator

Thank like call turn comments. back you. Ladies management for to to and gentlemen, the I closing now would

Terry Pearce

want Mark to still I it long-term just as same out, guidance have said our point the as and mid- we was.

reducing healthy. doesn't the is road. guidance. very growing. Purple mean It's the on We short-term are thriving. is But Purple that It's

And to we keep and the to right investors Purple be. as feel it out make there on everything we successful track. to things we hope We doing takes to as are Purple support want our

change we're we're still we So growing fast that can EBITDA we mid- - we're but long-term negative. short-term with EBITDA to track, the working as guidance, on still and did given as

So, I we're as of it don't most makes long step we of right lose for money. our that's competition and ahead EBITDA. shooting big guess, But no us as a healthy now very

Mark Anderson Watkins

for time. you thank your all appreciate joining. We So

Operator

Thank and today's teleconference. this gentlemen, you. Ladies concludes

at You time. Thank lines may participation. your for your you disconnect this

Purple Innovation (PRPL) 15 May 182018 Q1 Earnings call transcript