Purple Innovation (NASDAQ:PRPL) executives said the company exited fiscal 2025 with improving profitability and an “inflection point” in operating performance, supported by cost initiatives, higher-margin product mix, and expanding wholesale distribution.
On the company’s fourth-quarter and full-year 2025 earnings call, CEO Rob DeMartini said revenue rose about 9% year over year in the fourth quarter, while the business delivered “gross profit expansion and profitability [that] improved meaningfully across the business.” He added that Purple generated adjusted EBITDA of about $8.8 million in the quarter and “finished the year profitable,” attributing the performance to structural changes including a consolidated manufacturing footprint, a full quarter of expanded Mattress Firm distribution, and a “significant expansion” of the Costco program.
Fourth-quarter results driven by wholesale growth
Gross margin in the fourth quarter was about 41.9%, which Todd said remained “well above our 40% quarterly margin target” and was down 100 basis points from last year. He also noted that, viewed over a two-year period, gross margin increased by nearly 870 basis points, driven by “direct material savings, plant efficiencies, restructuring benefits, and volume leverage.” Operating expenses were $61.2 million, down 2.9% year over year.
Purple posted an adjusted loss per share of $0.02 for the quarter, compared with an adjusted loss per share of $0.11 a year earlier. Adjusted EBITDA improved to $8.8 million from $2.9 million in the prior-year period.
Full-year 2025: revenue decline, margin and EBITDA improvements
For the full year, Todd said net revenue was $468.7 million, down 3.9% versus the prior year. DTC revenue was $261.3 million, down 7.9%, while wholesale revenue was $207.4 million. Showrooms were a bright spot within DTC, with full-year sales up 1.5% to $78.5 million and comparable revenue up 6.6%.
Full-year gross margin increased 310 basis points to 40.2%, which management attributed to restructuring, sourcing initiatives, and manufacturing efficiencies. Todd added that on an adjusted basis excluding restructuring costs, gross margin was approximately 40.4% for the year.
Purple’s 2025 cost initiatives generated $25 million in annual savings, and Todd said the company expects $25 million to $30 million of sustainable savings going forward. Full-year operating expenses declined 15.3% to $231.6 million.
Adjusted net loss narrowed to $34.3 million from an adjusted net loss of $55.1 million in the prior year. Adjusted EBITDA for 2025 was $1.9 million, improving from an adjusted EBITDA loss of $20.8 million the year before.
Balance sheet, liquidity, and going concern disclosure
Todd said Purple ended the quarter with cash and cash equivalents of $24.3 million, compared with $29.0 million at the end of 2024. Net inventories were $59.7 million, up 5% year over year. He said the company extended its debt maturities from Dec. 31, 2026 to April 30, 2027, which he described as enhancing financial flexibility and reflecting support from lenders.
Later in the call, management discussed Purple’s recently filed annual report. The company said its independent auditor included a going concern qualification in the Form 10-K. Executives said the disclosure was not unexpected given prior liquidity challenges and historical cash burn, but argued that restructuring actions and improved results in the second half of 2025 help address those concerns. Management said it expects to conclude the seasonally weakest first quarter of 2026 with “neutral cash burn,” and expressed gratitude for lender support tied to the debt maturity extension.
Product strategy and channel updates
DeMartini emphasized the company’s “path to premium sleep” strategy, highlighting higher-priced products and expanded distribution. He said Rejuvenate 2.0 represented more than 50% of showroom mattress revenue in the fourth quarter and was selling at an average price “of almost $5,800” through direct channels. He also said more than 80% of showrooms were four-wall profitable for the full year, and the company closed four underperforming stores in 2025 while planning to open seven new stores in 2026.
Wholesale performance was tied to Mattress Firm and Costco, and DeMartini said Purple also continued progress in newer channels including Walmart and Sam’s Club, particularly to scale the pillow portfolio. On e-commerce, management characterized performance as mixed and down in the fourth quarter, though it noted strength during Black Friday and Cyber Monday and “solid marketplace performance, particularly on Amazon.” In Q&A, DeMartini said Purple’s owned e-commerce channel faces challenges as expanded physical distribution reduces the “specialness” of accessing the product online and because assortment complexity can be “either a neutral or a negative” in a digital environment. By contrast, he said Amazon is a “development opportunity” where Purple is improving availability and “Prime badging,” helping drive traction in categories such as pillows and seat cushions.
DeMartini also said the company completed development of Purple Royale, a premium collection created with Mattress Firm. He said the launch was “on track,” with initial floor models arriving and Mattress Firm adding incremental slots beyond an initial plan for more than 2,800 slots, bringing total slots across Mattress Firm to about 12,000 across 2,200 stores.
2026 guidance and near-term demand commentary
Management issued 2026 guidance of $500 million to $520 million in revenue and $20 million to $30 million in adjusted EBITDA. For the first quarter of 2026, Purple guided revenue of $100 million to $105 million and adjusted EBITDA of a loss of $7 million to a loss of $4 million.
Responding to questions about the implied step-down in the first quarter, DeMartini said fourth-quarter shipments affected January demand, including a large December “buy-in” by a club customer to load floors. He also cited Mattress Firm floor samples shipping at reduced prices as a short-term revenue headwind, while reiterating that the first quarter is historically Purple’s weakest seasonally.
On profitability flow-through, DeMartini said it “should be quite good,” adding that on a normal basis the company’s sales “should be generating about a 30% flow-through,” with 2026 potentially higher due to margin expansion and cost control. Todd said no additional major restructuring actions are currently required to meet guidance, though he noted a “little bit of an action in January” that will benefit operating expenses, and pointed to ongoing operational improvement opportunities in efficiency, scrap and yield, and sourcing.
Asked about wholesale performance outside Mattress Firm and Costco, DeMartini said results were “a mixed bag,” and that excluding the two highlighted customers, wholesale would be “net down about 5%,” which he said was consistent with the market.
Management also addressed capital needs, with Todd stating a 2026 capital expenditure target of $10 million to $12 million, up modestly from $8 million in 2025, including maintenance CapEx, some innovation-related spending, and incremental fixtures and showroom-related investments.
Separately, DeMartini reiterated that Purple’s board review of strategic alternatives remains ongoing, including potential merger, sale, or other transaction, and said the company would not take questions on the topic during the call.
About Purple Innovation (NASDAQ:PRPL)
Purple Innovation, Inc is a consumer products company specializing in the design, development and manufacture of comfort technology for the sleep and home furnishings markets. Best known for its proprietary Hyper-Elastic Polymer “Grid” technology, the company engineers mattresses, pillows and cushions that aim to combine pressure relief, support and temperature neutrality. Purple offers an array of sleep products alongside related lifestyle and wellness solutions.
The company’s product portfolio includes mattress models in various sizes and thicknesses, adjustable bed frames, pillows, sheets and mattress protectors, as well as seat cushions and pet beds.
