Item 1. Business
Item 1. Business
Introduction
Our mission is to help people
feel and live better through innovative comfort solutions.
We began as a digitally-native
vertical brand founded on comfort product innovation with premium offerings, and have since expanded into brick & mortar stores as
a true omni-channel brand. We offer a variety of innovative, branded and premium comfort products, including mattresses, pillows, cushions,
bases, sheets and more. Our products are the result of decades of innovation and investment in proprietary and patented comfort technologies
and the development of our own manufacturing processes. Our proprietary Hyper-Elastic Polymer gel technology underpins many of our comfort
products and provides a range of benefits that differentiate our products from our competitors. Specially engineered to relieve pressure,
maintain an ideal body temperature, and provide instantly adaptive support, Purple’s patented technology has been tested rigorously
within medical and consumer applications for over 30 years. Originally designed for use in hospital beds and wheelchairs, we adapted this
unique pressure-relieving material for our mattresses and other cushion products.
We market and sell our products through direct-to-consumer e-commerce
and Purple showrooms (collectively “DTC”) and wholesale partners.
Our core competencies in design,
development and manufacturing are the foundation of our business. We have integrated our operations to include research and development,
marketing and manufacturing. As a result, we have the ability to rapidly test, learn, adapt and scale our product offerings. In order
to solve complex manufacturing challenges such as large-format injection molding of our Hyper-Elastic Polymer cushioning material, we
designed and produced our own manufacturing equipment including our proprietary and patented molding machinery. These fully customized
machines are unique to Purple and, we believe, can handle both our size and scale requirements. We believe our combination of patents
and intellectual property, proprietary and patented manufacturing equipment, production processes and decades of acquired knowledge create
an advantage over our competitors who rely on commoditized materials, such as foam and outsourced manufacturing.
In addition to developing
differentiated products and technologies, we have built a brand that we believe has high customer engagement and avid brand advocates.
We have an experienced marketing team, providing efficient customer acquisition and brand demand development. Our marketing strategy
enables us to market our full product suite to customers, generate frequent interactions online and drive traffic to all channels offering
our products.
Our knowledge of and engagement with consumers across digital and brick
and mortar retail channels is advantageous and increasing. To complement our DTC efforts, we have developed multiple wholesale relationships
with best-in-class retailers in the furniture, mattress specialty, and home décor spaces. Our goal is to provide opportunities
for each customer to learn, shop, and buy in the way that works for them. We believe our differentiated products (including differences
across price, comfort, benefit, marketing strategies, manufacturing capabilities, branding and technology) position us to continue to
drive our growth. For the year ended December 31, 2023, our DTC sales, which includes online and Purple showrooms, accounted for 58.1%
of our net revenues, as compared to 57.7% for 2022 and 65.4% for 2021 and wholesale accounted for 41.9% of net revenues for 2023, as compared
to 42.3% for 2022 and 34.6% for 2021. For the year ended December 31, 2023, sales of sleep products accounted for 97.2% of our net revenues,
as compared to 97.1% for 2022 and 96.5% for 2021, and other products accounted for 2.8%, as compared to 2.9% for 2022 and 3.5% for 2021.
As of December 31, 2023 we operate 60 Company locations across the
United States as compared to 55 Company locations at the end of 2022 and 28 Company locations at the end of 2021. While we are slowing
the opening of new showrooms in the short term, we anticipate continued expansion of our showrooms in the future.
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Industry and Competition
Our portfolio of products is driven by our commitment to innovating
real comfort solutions that meaningfully help people sleep, feel and live better. Whether it’s getting a better night’s rest
or elevating every day life, we design and manufacture innovative, differentiated products that put our customers’ comfort first.
Sleep Products
The sleep products category encompasses a variety of products including
mattresses, pillows, bases, foundations, sheets, mattress protectors, blankets and duvets. Meaningful innovation in sleep products has
remained stagnant and limited over the last 150 years. Coil spring mattresses and memory foam, two of the primary materials underpinning
mattress technology today, were invented in the 1860’s and 1990’s. Latex, water and air mattresses followed, emerging in the
latter part of the 20 th century. The sleep product industry has generally remained complacent until the introduction of our
proprietary Hyper-Elastic Polymer material, which we believe represents a meaningful innovation in pressure relief, temperature neutrality,
responsiveness, durability and limited motion transfer. We believe that our proprietary technology solves problems that regular mattresses
create and has proven that material innovations can have a positive impact on sleep.
Beginning in 2015, the market
for sleep products underwent a fundamental transformation with the rise of e-commerce-based brands and direct-to-consumer distribution.
This market change disrupted the traditional category dynamics and drove the majority of category growth (versus traditional mattress
companies) for several years. Today, the U.S. sleep product industry has rebalanced to be comprised of vendors that rely on retail distribution
as well as a consolidated number of direct-to-consumer retailers who have tried to expand brick and mortar distribution to capture more
market share in a category still tied to instore product trials. Amidst this changing category dynamic, Purple’s product differentiation
and manufacturing capabilities paired with our strategic mix of showrooms, e-commerce and third-party retailers, has allowed us to gain
share and be a leader in the sleep products category.
In 2022, we acquired Advanced Comfort Technologies, Inc., dba Intellibed
(“Intellibed”), a premium sleep and health wellness company that was a pre-existing licensee of the founders of some
of our technologies. This acquisition resulted in us owning the sole right to use all of our Hyper-Elastic Polymer technologies in our
beds. In addition, the acquisition allowed us to immediately expand into the luxury mattress segment. As a result, Purple launched three
collections in the second quarter of 2023: Essentials (including the New Day, The Purple Mattress, and The Purple Plus), Premium (including
Restore, RestorePlus, and RestorePremier) and Luxe (including Rejuvenate, RejuvenatePlus and RejuvenatePremier).
In general, direct-to-consumer
mattress companies offer convenience, flexible shipping and returns, and low prices, while leveraging third-party manufacturing and distribution.
Materials used by online mattress retailers include layers of foam cushioning that are assembled, compressed and folded into a box for
distribution. This market is highly fragmented, commoditized and competitive, with customer purchase decisions based primarily on price.
Prior to Purple, there has been little recent success disrupting the premium market, where the majority of category revenue and profit
is realized. Competitors in the premium market include Tempur Sealy and Sleep Number.
While e-commerce home goods
purchases have increased over the past five years, traditional brick-and-mortar retailers command a significant part of the market for
mattress products. This part of the retail market is also highly fragmented and competitive. The leading brick-and-mortar specialty mattress
retailer in the United States is Mattress Firm and the leading furniture store is Ashley Furniture These national retailers compete with
both regional and local retailers as well as furniture and department stores. Purple has also expanded into many of these regional and
local furniture retailers.
Across these channels, some
key factors that impact competition in our industry are comfort feel, product features, reliable logistics and manufacturing capabilities,
marketing efficacy and efficiency, brand differentiation, expertise of sales associates, customer care, pace of innovation and product
roadmap, price of products and services, financial stability and ability to invest in innovation.
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What Makes Purple Different?
We believe we have a particular
set of competitive strengths that differentiate and position us for continued success:
●
History
of innovation that produced new comfort technology— We are a company built on innovation and licensing, with more than
30 years of expertise in comfort innovation. Purple is founded upon decades of history-developing innovative comfort solutions,
including the invention of our proprietary and patented Hyper-Elastic Polymer technology. Our breakthrough mattress represents what
we believe to be the first substantive innovation in the sleep product industry since the introduction of memory foam in 1992. We
believe that the unique properties of our technology have resulted in several improvements to existing sleep products that are not
addressed by foam, spring or air mattresses.
●
Pressure
Relief— Our Hyper-Elastic Polymer technology is designed around the science of column buckling which enables our
mattresses to be both firm and soft. This offers support across the body’s larger surface areas, such as the back, while
providing pressure relief at local areas or points of pressure, such as the hips and shoulders. We believe Purple’s founders
were the first to leverage this technology in mattresses after their success in licensing their proprietary Hyper-Elastic Polymer
technology to medical manufacturers for use in wheelchairs, critical care beds and hospital beds. The resulting feel is often
described as buoyant and responsive.
●
Temperature Neutral— The Hyper-Elastic Polymer
material itself is temperature neutral, with the surface comprised mostly of air, made from thousands of open-air channels. The
channels allow for high airflow and dissipation of heat and vapor. This is the opposite of foam beds, which absorb heat from the
body and then radiate the heat back, constantly increasing the temperature. Our technology allows for continual sleeping without
waking up hot.
●
Responsive— Unlike memory foam, which compresses,
gets hard and then takes time to recoil, our Hyper-Elastic Polymer technology is instantly responsive to the body as it moves. It
will immediately flex to support the sleeper’s position and spring back into place as the sleeper readjusts during the night.
●
Durable—
Hyper-Elastic Polymer material is a highly durable gel that we believe is more durable than most foams. The Hyper-Elastic
Polymer technology also has numerous applications beyond mattress products including seat cushions and pillows. Hyper-Elastic Polymer technology is only one of numerous innovations we have developed to produce a range of unique and
effective comfort products across the sleep, seat cushion and other categories.
●
Proprietary technologies and manufacturing expertise provide
a significant competitive advantage— We believe the combination of patent protection, proprietary manufacturing equipment
and decades of accumulated knowledge creates a competitive advantage through barriers to imitation. We have hundreds of granted or
pending patents and hundreds of patent filings that cover current and future products as well as proprietary manufacturing equipment
we have designed and fabricated. In addition to intellectual property protection of key products and manufacturing capabilities,
our team has in depth experience and unique insights derived from inventing and refining proprietary comfort technologies, machines
and products. Our patented and proprietary molding processes and machines allow for large-format injection molding of gels efficiently
and at scale.
●
Growing
a brand with a passionate following— Our brand mirrors our passion for uncompromising
performance, quality and durability, and our dedication to improving lives by delivering
better sleep and better comfort We believe our brand awareness rivals category leaders. Our
brand has extended beyond awareness of individual products and we have successfully marketed
our full suite of products to customers using our omni-channel strategy. We believe our customer
satisfaction metrics are amongst the best in the industry, and that our customers’
high satisfaction with our product has continued to drive “word of mouth” recommendations,
one of the most persuasive ways consumers learn about our products.
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●
Balanced,
omni-channel distribution strategy— We have sought opportunities to expand brand awareness in brick-and-mortar
retailers where our beds can be displayed. Our goal is to support the customer wherever and however they want to learn, try, and
buy. Whether in wholesale, Purple showrooms or our e-commerce channel, we are a leader in the sleep products market.
Our flexible return policies and aggressive expansion into wholesale locations (commonly referred to as “doors”) and our
own showrooms allow for more of our targeted customers to feel and experience our products throughout the purchase process. In our
wholesale channel, we sell most of our products through select national and regional retailers as well as a variety of independent
retail partners throughout the United States and Canada. As a result, we believe we will drive accelerated growth in the sleep
products industry.
●
Vertical integration enables nimble design, development and
execution — We design and develop our products in-house and we have extensive research and development capabilities led
by a team of engineers, industrial designers and marketing specialists. The ability to develop and test products in this manner
enables us to not only prototype and deploy new ideas, but also design and develop corresponding manufacturing equipment and
processes. In addition, we continuously refine our production methods to improve product quality and enhance efficiency. The
resulting real-time feedback cycle is a key differentiator compared to other competitors that outsource many of these functions and
lack an integrated approach.
Growth Strategies
●
Expansion
of the Brand to Premium and Luxe Categories— To complement and support our expansion into the higher-priced, higher margin
categories, Purple is evolving its differentiated brand to broaden appeal. We are investing in brand demand-driving
marketing and advertising to create awareness, engagement and preference for the Purple brand and for our products across all our sales
channels. We developed a reimagined brand associated with life enhancing sleep. We believe that this strategic focus
and investment will support our growth plans in the wholesale channel, in Purple showrooms, on Purple.com and online marketplaces.
Our Luxe (“Rejuvenate”) offerings are expected to increase average sales prices significantly. We will also continue to harness
the evangelism of the ever-growing base of Purple owners whose advocacy of our products is one of our brand’s greatest strengths.
●
Further
direct-to-consumer growth and penetration— We believe that we are well positioned to leverage our brand, leading
product portfolio, vertical integration and strong marketing capabilities to continue to attract new customers via our e-commerce channel.
We have invested in substantial improvements to our website and analytics, enhancing the education, shopping and buying experiences, and
we have expanded our contact center, enabling live voice, chat and messaging with our sales associates. These actions are intended to
drive higher customer satisfaction, higher average order value and higher conversion. Continued successful execution on Purple.com
supports our planned e-commerce growth, and also supports further growth in all channels given the importance of the site during the customer
decision journey. In addition, as of December 31, 2023, we operated 60 Purple showrooms in cities across the United States. At our showrooms,
consumers can experience our brand, learn about and engage with our technology and purchase our products, assisted by our highly-trained
retail sales associates who are able to both increase door productivity and trade customers up to higher price points. Our showrooms enable
us to strengthen the relationship with the consumer and develop a more profitable DTC revenue mix. We anticipate continued
expansion of our showrooms as we optimize the format.
●
Expanded
wholesale retail relationships— We continue to work closely with existing retail partners to improve productivity
to increase market share and sales, and we are forming new partnerships to expand our wholesale footprint. With our new Premium and
Luxe collections, we believe we have an increased opportunity to tap into the large brick-and-mortar category of the sleep products
market. As a result of our new product launch in 2023, we increased the number of wholesale partner slots (a term commonly used to
describe a section in a wholesale partner’s store to display a particular product). We believe this trend is a result of the
developing interest in our Premium and Luxe product categories. This allows retailers to market these products as
alternatives to other premium products to increase sales on high-end mattresses with materially higher margins for the retailer and
Purple.
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●
Existing product innovation— We have a rich
history of product innovation and have developed core competencies in design, prototyping and manufacturing. Our vertical
integration, which enables us to continuously refine our existing products and manufacturing processes, combined with our
strengthened research and development disciplines and go-to-market processes allows us to further develop our current product
categories with new offerings, enhance gross margins through improved pricing, and position our business to eventually expand to
additional categories with the potential to attract new customers and drive repeat sales.
●
New
product launches— We focus intensively on innovation, to support our long-range growth plan. We have a pipeline of
future products we are developing. We are constantly exploring new technologies and ways to expand the benefits of our technologies
through new product offerings. These efforts include innovations beyond our Hyper-Elastic Polymer technology, including products in
sleep, comfort and similar categories.
●
International
expansion— We believe there is a substantial opportunity for international expansion. We entered the Canada market in
2020 and we plan to expand in other foreign markets in the future. We believe that our differentiated products, multi-channel
distribution strategy, manufacturing capabilities, vertical integration and marketing expertise will help enable us to successfully
enter new markets.
Our Products
Our current product portfolio is as follows:
●
Mattresses —Our
mattresses utilize the unique benefits of our patented GelFlex Grid
technology creating a one-of-a-kind sleep solution that regulates body temperature, keeping you sleeping cooler and soft enough to cradle
pressure points while also providing support through localized buckling columns. The columns in our Gelflex Grid mattresses instantly
adapt to your body to cradle your hips and shoulders while supporting your spine’s natural alignment for uniquely buoyant, supportive
comfort. Our GelFlex Grid products are manufactured with non-toxic ingredients that are third-party tested and free from carcinogenic
chemicals. Our patented Gelflex Grid technology is used in all Purple mattresses. We back up the quality and durability of our mattress
with a 100-night trial and a 10-year warranty. With our new premium product launch in 2023, we now have three collections that come in
a variety of feels and price points to appeal to a wide range of consumers with high satisfaction and delivering best sleep.
●
Pillows — We currently sell eight pillow models with different designs to suit
different needs. The Purple Harmony™ Pillow, the Purple Freeform™ Pillow, the Purple DreamLayer™ Pillow, the Purple
Harmony Anywhere™ Pillow, the Purple Pillow®, the Purple Twin Cloud® Pillow, the Purple Cloud® Pillow and the Kids Pillow®.
The Purple Harmony Pillow is the world’s first pillow with a full wrap of honeycomb Gelflex® Grid surrounding a soft, responsive
latex core for blissfully cool comfort and responsive airy support. The newly launched Purple Freeform Pillow features the honeycomb Gelflex
Grid with an all-new MicroFlex™ Moon Foam fill interior for luxurious, moldable comfort. It is our first fully adjustable
pillow as the MicroFlex Moon Foam and optional neck roll chambers can be adjusted for personalized height, firmness and support. The newly
launched Purple DreamLayer Pillow uses an all-new version of the GelFlex Grid combined with MicroAir Foam for a dreamy, melt-in comfort
that provides contour-hugging support without the heat and delay of a traditional memory foam. The Purple Harmony Anywhere Pillow has
all of the advantages and feel of the Purple Harmony Pillow in a portable, take-anywhere travel size. The Purple Pillow is designed entirely
of Gelflex Grid for a firmer, no-fluff, ergonomic support with ultimate cooling and adjustable height layers. The Purple Twin Cloud Pillow
is a hypoallergenic down-alternative that features our patented cover construction and two chambers of silky, down-like fibers for an
extra fluffy, cloud-like comfort with two optional firmness settings. The Purple Cloud Pillow features the same fill as the Purple Twin
Cloud Pillow, but a simpler, single chamber design for classic, cloud-like comfort. The Kids Purple Pillow is made entirely of Gelflex
Grid, similar to the Purple Pillow, but is smaller and softer for smaller sleepers. We believe our pillows are unique and there is a sleep
solution for every type of sleeper to get the best sleep of their life, with no other products in the market like them in appearance,
design, functionality or comfort. We also back up the quality and durability of our pillows with a 100-night trial and a one-year warranty.
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●
Sheets—
We sell two types of sheets and pillowcases: Softstretch and Complete Comfort. Made from stretchy and breathable bamboo-based
Viscose, our SoftStretch sheets are designed to maximize the functionality of our mattresses and pillows. We developed our own
technology to enable customers to experience the full performance potential of our mattress (or any other mattress). We also sell
traditional cotton-based Complete Comfort sheets designed to have cushion enhancing two-way stretch. Our sheet sets include
pillowcases that also maximize the unique functionality of our pillows.
●
Duvets and Duvet Covers— The Purple TempBalance
Duvet insulates yet breathes to deliver an ideal body temperature, all year long. The Purple PerfectStay Duvet cover offers
a unique patent-pending lay-and-zip design that solves the problem of inserting the duvet into the cover, and ensures the duvet stays
put within the cover without ties, pins, or bulky attachments.
●
Mattress
Protector — Like our sheets, our mattress protector is designed to optimize the functionality of our Gelflex Grid in
our mattress. Our mattress protector is stretchy and breathable. Our protector is also stain-resistant and machine-washable, making
it easy to clean.
●
Bases —
Our recently added new line of smart adjustable bases have been designed to pair with our new mattresses for the ideal Purple sleep
experience. The Purple Premium and Purple Premium Plus smart bases have a wide range of functions, such as adjustable head and
foot positions, zero-gravity preset for a near weightless feel, a “sitting” preset, under-bed lighting, adjustable legs
and a wireless remote with in-app control. Our Purple Bed Frame is easy to ship and assemble, with no tools required. It has the
look of a stylish upholstered bed frame. The supports are made of high-density polyethylene, so they don’t creak or
make noise like wood supports. Plus, the joints of the Purple Bed Frame are reinforced with nylon buffers to help prevent squeaking.
Our Purple Platform Bed Frame is designed specifically for all current Purple bed sizes and offers a high quality, simpler
alternative to our more premium offerings. Constructed from lightweight steel, the Purple Platform Bed provides optimal support and
prevents the mattress from sagging.
●
Seat
Cushions — The evolution of our portfolio of seat cushions has resulted from decades of in-house manufacturing
experience including development of proprietary machines and trade secrets, extending the benefits of our GelFlex Grid technology.
Purple currently sells four types of seat cushions and one back cushion, all in varying sizes and shapes to meet the needs of our
customers.
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Technology
Technology is key to our unique position within the sleep products
industry. The introduction of our proprietary Hyper-Elastic Polymer material was the first major innovation in the consumer mattress category
in decades. Mattresses from our competitors are typically manufactured using one or more layers of springs, standard polyurethane foam,
memory foam, air chambers or latex foam and are undifferentiated from competitors within their product type.
Proprietary Technologies
The Purple innovation team,
through their scientific journey to get to the root causes of pressure sores, designed the Hyper-Elastic Polymer material and other
patented and proprietary comfort technologies in order to improve the lives of “every body.” Each different cushioning product
line requires unique molding techniques.
Our Hyper-Elastic Polymer material
is non-toxic and hypoallergenic. This proprietary material is also durable and will not develop body impressions (compression set)
from use over time. It is elastic and can stretch up to 15 times its original size and return without losing its shape. It sleeps and
sits temperature-neutral and has good ventilation to inhibit moisture build-up.
Our Hyper-Elastic Polymer
material is both soft and supportive. While the columns in this structure provide support where it is needed, they also buckle where
it is needed to reduce pressure by allowing shoulders and hips to sink into the cushion with reduced force pushing back on those areas
of the body unlike other cushion technologies. The soft and flexible columns also return to their original position as forces lessen
and are capable of immediately providing support.
Proprietary Machinery
Internally designed, developed
and built, our patented and proprietary molding machines are able to mold our Hyper-Elastic Polymer material into large-format king-sized
mattresses at scale. We have modified other molding machines to manufacture additional products containing Hyper-Elastic Polymer material.
We also acquired in the Intellibed acquisition the patented manufacturing machine and process that had been licensed by our founders,
preventing others from obtaining access to that technology. The process of molding our Hyper-Elastic Polymer material using our molding
machinery is proprietary, patent-protected and complex, requiring specific knowledge and expertise to successfully execute manufacturing.
We have vertically integrated with our own machine shop with mechanics and engineers at each of our factories to maintain our machines
and other equipment. Furthermore, we have in-house fabrication capabilities enabling us to design, manufacture, install and maintain new
equipment as well as optimize the performance and efficiency of our existing machinery based on real-time insights gained from our vertically
integrated operations.
Marketing
We have developed a brand that resonates with consumers. Our marketing
efforts are focused on building awareness of the Purple brand and illustrating the unique way our products deliver better sleep and comfort.
We leverage data-driven marketing across all communication channels to engage, acquire, and retain customers. We also amplify the voices
of our evangelical product owners, whose word-of-mouth recommendations are one of our most powerful (and ownable) marketing vehicles.
Deep engagement with current customers enables us to increase additional product sales across our portfolio of offerings. The success
we have achieved through our marketing campaigns has been key to rapidly building our branding and awareness. We launched our elevated
brand positioning in 2023 with the launch of our new products and we believe our premium brand position will allow us to increase our
market share of the premium mattress category going forward.
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Our Sales Channels
We sell our products via our DTC, including Purple.com, online marketplaces
(e.g., Amazon), our customer contact center, our Purple showrooms and through wholesale retailers.
Direct-to-Consumer Channel
Our e-commerce distribution
channel is a critical hub for consumer education and consumer engagement, as well as conversion. We have benefitted from the rapid growth
of the direct-to-consumer channel in the sleep product industry in addition to our differentiated product offering and unique marketing
campaigns. We sell directly to consumers through our website, our customer contact center and online marketplaces. With our website and
customer contact center, we help customers easily engage in relevant content, research our solutions, transact online or via our customer
contact center, or find the nearest retailer. We believe our online experience expands our brand and connections with consumers, enabling
deeper awareness, engagement and brand loyalty. We believe our 100-night trial, 10-year warranty, attractive financing options, strong
customer testimonials and excellent service provide confidence to consumers buying a mattress.
We operate 60 Purple showrooms across the United States where consumers
can experience our brand, learn and engage with our technology and purchase our products. Over time, we plan to continue expanding our
showroom footprint across the United States.
Wholesale Channel
We sell our assortment of
products through brick-and-mortar and online wholesale partners. We began selling mattresses and other sleep products through our largest
wholesale partner, Mattress Firm, in November 2017 and have continued to expand the number of wholesale partners where our mattresses
and other sleep products are sold. We now sell mattresses through Ashley Furniture, Big Sandy, City Furniture, Denver Mattress, HOM Furniture,
Living Spaces, Mathis Brothers, Mattress Firm, Mattress Warehouse, Raymour & Flanigan and Rooms To Go, among others. We typically
have four to five mattress models on the floor. Sales associates have been trained and we believe are effective in educating consumers
regarding our unique benefits as well as shifting the mix upward to our more premium and higher-margin mattresses. We expect to continue
to grow our placements with wholesale partners to give our customers the opportunity to feel the difference of our Hyper-Elastic Polymer
technology for themselves.
Operations
Factories, Supply Chain and Manufacturing
We operate manufacturing factories in Grantsville, Utah, Salt Lake
City, Utah and McDonough, Georgia. Our factory in Grantsville has approximately 574,000 square-feet and our factory in McDonough, which
services our customers on the east coast, provides another 844,000 square-feet. At these factories we manufacture our proprietary Hyper-Elastic
Polymer cushioning used in our mattress, pillow and seat cushion products. We also assemble, package and ship our products from these
two facilities. Our facility in Salt Lake City was acquired as part of the Intellibed acquisition and has approximately 67,000 square
feet. This facility manufactures our proprietary Hyper-Elastic Polymer for assembly in our luxury mattresses. We continually strive to
improve our manufacturing processes and create efficiencies in production through new equipment and process designs and resources. We
also manage our production labor and capacity utilization to promote efficient use of our manufacturing facilities. We believe our factories
provide ample room to accommodate our future growth and expansion plans for the near term.
We have a number of contract
manufacturers who assemble mattresses and have established a network of third-party logistics providers to help with order fulfillment
across the United States. These arrangements help to minimize delivery times and provide white glove service in addition to parcel services.
We outsource and resell other
products, including adjustable bases, platform bases, sheets, mattress protectors, blankets and duvets. These products unique to Purple
are either designed in-house or in partnership.
We have relationships with
multiple suppliers for our outsourced products and components. These suppliers may be interchanged in order to maintain quality, cost
and delivery expectations.
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Environmental and Governmental Regulation
We are subject to numerous federal, state, local and foreign consumer
protection and other laws and regulations applicable to the sleep product industry. These laws and regulations vary among the states and
countries in which we do and intend to do business. For example, in the United States, we are subject to regulations promulgated by the
Environmental Protection Agency, the Occupational Safety and Health Administration and other federal agencies that restrict the generation,
emission, treatment, storage and disposal of materials, substances and waste. We are also subject to laws such as the Toxic Substances
Control Act, the Resource Conservation and Recovery Act, the Clean Air Act, the Clean Water Act, the Safe Drinking Water Act and the Comprehensive
Environmental Response, Compensation and Liability Act, and related state and local statutes and regulations. Our mattress products are
also subject to fire-retardant standards developed by the State of California, U.S. Consumer Product Safety Commission and other jurisdictions
where we sell these products.
As a retailer of sleep and
cushioning products, we are also subject to laws and regulations applicable to retailers generally, including those regulations governing
the marketing and sale of our products and the operation of our e-commerce activities. We are also subject to import and export laws
and regulations to the extent our products and their component parts cross international boundaries. Many of these laws and regulations
are consumer-focused and pertain to safety, truth-in-advertising, promotional offers, privacy, “do not call/mail” requirements,
warranty disclosure, delivery timing requirements and similar requirements.
We have made and will continue to make capital and other expenditures
necessary to help us comply with these laws and regulations. These expenditures have been immaterial to our financial results. We have
not suffered a material adverse effect from non-compliance with federal, state, local or foreign legislation, but there can be no assurance
that material costs or liabilities will not be incurred in connection with such legislation in the future.
Research and Development
Our research and development teams are focused primarily on developing
new comfort technologies and products. In May 2022, we appointed our first ever chief innovation officer. In 2023, we launched our three
new premium mattress collections including our new line of luxury mattresses. We have an extensive history of innovation that is core
to our culture and key to our continued success. Our inventions have culminated over years of persistent research and development. We
intend to continue to develop and introduce new comfort technologies and products. Our vertical integration is a key differentiator that
enhances the effectiveness of our research and development capabilities. By gaining real-time feedback, we can integrate these insights
into our manufacturing process, digital marketing, products and equipment. In order to facilitate further innovation and development,
we opened a facility in August 2023 that serves as our new innovation center and replaces the older and remote facility we previously
had in Alpine, Utah. This new facility is located in Draper, Utah, close to our headquarters and comprises approximately 61,000 square
feet.
Intellectual Property
We rely on patent and trademark
protection laws to protect our intellectual property and maintain our competitive position in the marketplace. We hold various domestic
and foreign patents, patent applications, trademarks and trademark applications regarding certain elements of the design, manufacturing
and function of our products. We also maintain protections over proprietary trade secrets. Our intellectual property portfolio is integral
to our continued success in this industry, particularly with respect to our Hyper-Elastic Polymer material as well as our molding processes
and machines.
We own or have the exclusive right to use hundreds of granted or pending
patents and hundreds of patent filings on inventions and designs pertaining to our machines, processes, mattresses, pillows, seat cushions,
packaging techniques and other related existing and future products. Our issued United States patents that are significant to our operations
are expected to expire at various dates up to 2041.
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We have several trademarks registered with the U.S. Patent and Trademark
Office (USPTO). Applications are pending for registration of additional trademarks and some of these listed trademarks for additional
classes of goods both in the United States and internationally. Our Purple, No Pressure and Hyper-Elastic Polymer trademarks are also
registered and have applications pending for various classes of goods in numerous foreign jurisdictions, some of which include Australia,
Canada, China, Europe, United Kingdom, Japan and Korea. We also have several common law trademarks.
Many of the common law marks
have registrations pending with the USPTO and other international jurisdictions. Solely for convenience, we may refer to our trademarks
in this Annual Report without the ™ or ® symbol, but such references are not intended
to indicate that we will not assert, to the fullest extent under applicable law, our rights to our trademarks.
In addition, we maintain copyrights,
many registered, to past and present versions of purple.com, onpurple.com, equapressure.com, wondergel.com, marketing content, blogs,
logos, graphics, videos and other marketing and promotional materials promoting our products.
While we may own or have the
exclusive rights in this intellectual property it is our responsibility to maintain that exclusivity through intellectual property enforcement
efforts when an infringement occurs. We continue to enforce those intellectual property rights and will continue to do so to maintain
our success in this industry.
We protect and enforce our
intellectual property rights, including through litigation as necessary.
Human Capital
At Purple, our primary focus is fostering the professional development
of our employees through collaboration of engaged teams and helping them feel connected to Purple’s success. We try to achieve this
through maintaining a safe and high-functioning work environment that cultivates an authentic company culture. Our people initiatives
are strategically crafted to enhance the professional growth and overall satisfaction of our employees, with the overarching goal of making
Purple the best place they’ve ever worked.
As of March 12, 2024, we had approximately 1,700 employees engaged
in manufacturing, research and development, general corporate functions, wholesale, e-commerce, and Purple showrooms.
In 2024, Purple’s human resources team is focusing on four pillars
that drive our people strategy: (i) acquire, retain, and develop great people; (ii) improve organizational performance; (iii) deliver
competitive and meaningful pay and benefits; and (iv) celebrate our people.
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Acquire, retain,
and develop great people
We attempt to strategically acquire, keep and cultivate a
talented, motivated, and high-caliber workforce. We believe will be achieved by selectively recruiting outstanding talent, tailoring development
plans for employees, implementing an accelerated leadership development program for promising individuals, and building cross-functional
career maps.
Improve organizational
performance
We attempt to drive efficiency, effectiveness, and business success
through strategic people initiatives. We will continue to invest in new technology to enhance communication channels and optimize
our human resource information system, enabling self-service functionalities for managers and employees. In alignment with our core values,
we will place emphasis on creating shared experiences that will facilitate genuine connections and foster strong relationships within
our workforce.
Deliver competitive
and meaningful pay and benefits
We
attempt to provide compensation packages that are both competitive and meaningful, encompassing salary and benefits that align to market
standards. We will continue to provide relevant employee perks that connect our employees with our Company’s mission and actively
contribute to nurturing employee engagement.
Celebrate
our people
We attempt to continue to focus on maintaining a culture of recognition
where we actively acknowledge and honor the achievements, contributions, and milestones of our people. Through thoughtful and authentic
celebration, we not only create a culture of gratitude, but we will also foster a sense of belonging and motivation, ultimately strengthening
our team cohesion and morale.
Our History
Purple was created by two
brothers that set out to revolutionize the comfort space. One of the brothers had expertise in manufacturing and design, and the other
brother was an advanced aerospace scientist. Together, the brothers embarked on a partnership in the early 1990s to put together a team
to develop cushioning solutions for wheelchairs and medical beds. They later created what we call Hyper-Elastic Polymer —an elastomeric
polymer that can stretch up to 15x its resting size and without losing shape or function. Our proprietary Hyper-Elastic Polymer technology
has since been used in mattresses, seat cushions and pillows.
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Available Information
Our website address is www.purple.com. We make available, free of charge
on our Investor Relations website, investors.purple.com, all of our reports filed with or furnished to the Securities and Exchange Commission
(“SEC”).
We also use our Investor Relations
website, investors.purple.com, as a channel of distribution of additional Purple information that may be deemed material. Accordingly,
investors should monitor this channel, in addition to following our press releases, SEC filings and public conference calls and webcasts.
The contents of our website shall not be deemed to be incorporated herein by reference.
Information About Our Executive Officers
As of the date of this report,
our executive officers are as follows:
Name
Age
Title
Robert T. DeMartini
62
Director, Chief Executive Officer
Todd E. Vogensen
55
Chief Financial Officer and Treasurer
Tricia S. McDermott
52
Chief Legal Officer and Secretary
Eric S. Haynor
60
Chief Operating Officer
Jeffrey L. Hutchings
56
Chief Innovation Officer
Jeffery S. Kerby
55
Chief of Owned Retail Officer
Keira M. Krausz
58
Chief Marketing Officer
John J. Roddy IV
56
Chief People Officer
Executive Officers
Robert T. DeMartini has
served as Chief Executive Officer since January 2022. Prior to joining the Company, Mr. DeMartini, served as president and chief
executive officer of USA Cycling, Inc., the official U.S. Olympic & Paralympic Committee governing body for all disciplines of competitive
cycling in the United States, from 2019 until 2021. He previously served as president and chief executive officer of New Balance Athletic
Shoes (U.K.) Ltd., from 2018 to 2019 and as president and chief executive officer of New Balance Athletics, Inc. from 2007 to 2018, each
a business unit of New Balance, Inc. a leading manufacturer and retailer of athletic footwear, apparel and accessories. From 1982 through
2007 Mr. DeMartini held various leadership positions with Procter & Gamble, The Gillette Company, and Tyson Foods, Inc. He also currently
serves on the board of directors of Welch’s Foods and Q30 Innovations/Q30 Sports Canada, and formerly served on the board of directors
of Advanced Functional Fabrics of America, The American Apparel & Footwear Association, and Aloha. Mr. DeMartini received a Bachelor
of Science degree in Finance from San Diego State University.
Todd
E. Vogensen has served as Chief Financial Officer since October 2023. Prior to joining the Company, Mr. Vogensen served as executive
vice president and chief financial officer of Party City Holdings Inc. from February 2020 to August 2023. In January 2013, Party
City Holdings Inc. filed a voluntary petition for reorganization relief pursuant to Chapter 11 of the U.S. Bankruptcy Code. Previously, Mr. Vogensen
served as executive vice president—chief financial officer at Chico’s FAS, Inc. from June 2015 to January 2020. He joined
Chico’s FAS in October 2009, and served in roles of increasing responsibility, including senior vice president – finance,
and vice president – investor relations. Previously, Mr. Vogensen served in executive finance roles at Michaels
Stores, Inc., Gap, Inc., Hewlett Packard Company and PricewaterhouseCoopers LLP. Mr. Vogensen received a Bachelor of Science
degree in Accounting from Arizona State University.
Tricia
S. McDermott joined Purple in October 2023 as Chief
Legal Officer. Ms. McDermott is a skilled executive, attorney and business leader who brings more than 20 years of deep expertise
in global licensing, intellectual property and corporate governance in multi-national retail and manufacturing environments. Prior to
joining the Company, from February 2021 to October 2023, Ms. McDermott served as the chief legal & risk officer and secretary at Shoe
Show, Inc. Previously, from December 2011 to February 2021, Ms. McDermott was with Perry Ellis International, Inc., where she served as
general counsel and secretary from November 2017 to February 2021. Ms. McDermott received a Bachelor of Arts degree in English
and a Juris Doctor degree from Rutgers University along with a certificate in Accelerated Management from Yale School of Management.
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Eric S. Haynor has
served as the Chief Operating Officer of the Company since June 2022.
Prior to joining the company, Mr. Haynor spent most of his career with Ecolab, a supplier of cleaning, sanitizing and maintenance products
and services for the institutional, hospitality, healthcare and industrial markets, in a variety of end-to-end supply chain roles. From
August 2019 until he joined the Company in June 2022 he served as senior vice president, industrial supply chain at Ecolab providing strategic
direction for eight industrial business units. Prior to that, he held the role of vice president, global equipment operations and strategy
from June 2015 to August 2019 at Ecolab. From August 2009 to June 2015, Mr. Haynor led Ecolab’s EMEA supply chain operations and
from April 2005 to August 2009 he led Ecolab’s Asia Pacific supply chain operations. His early career was spent in a variety of
developmental supply chain roles. Mr. Haynor is a graduate of Michigan State University and holds a Bachelor of Science degree in Mechanical
Engineering.
Jeffrey
L. Hutchings has served as the Chief Innovation Officer of the Company since May 2022. Mr. Hutchings
has more than 20 years of experience in strategic business leadership in innovation, new product introduction and quality assurance.
Prior to joining the Company, Mr. Hutchings served as chief product officer at Skullcandy Inc., a designer and manufacturer of performance
audio and gaming headphones and other accessory related products, from December 2018 to May 2022 and as vice president of product from
June 2015 to December 2018. Prior to that from July 2010 to June 2015, Mr. Hutchings served in various engineering and director roles
at HARMAN International. Mr. Hutchings holds a Bachelor of Science degree in Computer Engineering from the University of Utah.
Jeffery S. Kerby has
served as the Chief of Owned Retail Officer of the Company since January
2023. Prior to joining the Company, Mr. Kerby served as vice president, head of stores of Sephora, a retailer of personal care and beauty
products, since May 2019, responsible for leading 86 stores throughout Canada. From March 2018 to January 2019, he served as the senior
regional director of American Eagle, a specialty retailer of clothing, accessories and personal care products, where he led American Eagle/Aerie
stores in the Midwest United States and Canada with 225 stores. Prior to joining American Eagle, Mr. Kerby was with L Brands’ LaSensa,
a Canadian retailer of women’s lingerie and apparel, from February 2017 to March 2018. Prior to that, Mr. Kerby was the vice president,
head of stores/store operations for L Brands’ Victoria’s Secret International from June 2015 to September 2016. From October
2008 to June 2015, Mr. Kerby grew from director to associate vice president, head of stores for Bath and Body Works. Mr. Kerby holds a
Bachelor of Science degree from Washington State University’s School of Communications.
Keira M. Krausz has
served as Chief Marketing Officer since November 2022. Prior to joining
the Company, Ms. Krausz was chief marketing officer of HealthPlanOne, a digital health distribution platform from August 2020 to October
2022. From February 2013 to February 2020, Ms. Krausz was the executive vice president and chief marketing officer, then president,
of Nutrisystem, a provider of weight management products and services. Prior to Nutrisystem, she held a progression of leadership
roles in consumer marketing at Time Inc. and the Reader’s Digest Association, Inc. She serves on the board of directors of
the BioBuilder Educational Foundation. Past board of directors roles include Second Nature Brands and the Association of National
Advertisers. Ms. Krausz attended Cornell University as an undergraduate and received her Masters of Business Administration degree
from Dartmouth College.
John J. Roddy IV has
served as Chief People Officer of the Company since October 2021.
Mr. Roddy brings to the Company over 20 years of experience in culture transformation, talent development, organization design and change
leadership. Prior to joining the Company, Mr. Roddy served as the chief people officer for VASA Fitness, a fitness club operator,
from 2018 to October 2021. Prior to that he was the chief human resources officer for SeaWorld Parks and Entertainment, a theme park and
entertainment company, from 2016 to 2018. From 2012 to 2016, Mr. Roddy was the senior vice president of human resources for Luxottica
Group. Prior to joining Luxottica Group, he was the vice president of human resources for Starbucks Corporation from 2004 to 2012.
Mr. Roddy holds a Master’s degree from Columbia University in Organizational Psychology and a Bachelor’s degree in Organizational
Behavior from Brigham Young University – Hawaii.
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