Item 2. Management’s Discussion and Analysis
ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion is
intended to provide a review of the operating results and financial condition of Purple Innovation, Inc. The discussion should be read
in conjunction with the unaudited condensed consolidated financial statements and the notes thereto included in “Part I. Item 1.
Financial Statements.” Capitalized terms used in this “Part I. Item 2. Management’s Discussion and Analysis of Financial
Condition and Results of Operations and not otherwise defined shall have the meanings set forth in “Part I. Item. 1 Financial Statements.”
FORWARD-LOOKING STATEMENTS
This quarterly report on Form
10-Q (this “Quarterly Report”) contains forward-looking statements within the meaning of Section 27A of the Securities Act,
and Section 21E of the Securities Exchange Act of 1934, as amended (“the “Exchange Act”), that represent our current
expectations and beliefs. All statements other than statements of historical fact are “forward-looking statements” for purposes
of federal and state securities laws. In some cases, you can identify these statements by forward-looking words such as “believe,”
“expect,” “project,” “anticipate,” “estimate,” “intend,” “plan,”
“targets,” “likely,” “will,” “would,” “could,” “may,” “might,”
the negative of these words and other similar words.
All forward-looking statements
included in this Quarterly Report are made only as of the date hereof. It is routine for our internal projections and expectations to
change throughout the year, and any forward-looking statements based upon these projections or expectations may change prior to the end
of the next quarter or year. In addition, any statements that refer to projections of our future financial performance, our anticipated
growth and trends in our businesses (including the discussion under the heading “Outlook for Growth”), and other characterizations
of future events or circumstances are forward-looking statements.
We caution and advise readers
that these statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict, including
those included in the “Risk Factors” section of this Quarterly Report and in our Annual Report on Form 10-K filed with the
SEC on March 31, 2026. Therefore, actual results may differ materially and adversely from those expressed in any forward-looking statements
and investors are cautioned not to place undue reliance on any such statements. We undertake no obligation to publicly update or revise
any forward-looking statement, whether as a result of new information, future events or otherwise, except as required by law.
Overview of Our Business
Our mission is to deliver
the greatest sleep ever invented.
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, pillows and other cushion products.
We market and sell our products
via our direct-to-consumer channel, which includes Purple.com (our direct-to-consumer e-commerce), Purple showrooms, our customer contact
center and online marketplaces (collectively “DTC”), and our wholesale channel through retail brick-and-mortar and online
wholesale partners.
Organization
Our business consists of Purple
Inc. and its consolidated subsidiary, Purple LLC. As the sole managing member of Purple LLC, Purple Inc., through its officers and directors,
is responsible for all operational and administrative decision making and control of the day-to-day business affairs of Purple LLC without
the approval of any other member. At March 31, 2026, Purple Inc. had a 99.85% economic ownership interest in Purple LLC while Class B
unit holders had the remaining 0.15%.
Recent Developments in Our Business
Operational Developments
We entered 2026 building
on the progress we made in the fourth quarter, and our first quarter reflects continued progress and greater consistency across our
channels. Trends were solid during the quarter, with growth in our showroom and wholesale channels. The E-commerce channel also
improved sequentially declining 10% in the first quarter year over year compared to down 15% in the prior period year over year,
reflecting more disciplined marketing execution and early signs of improved conversion. Importantly, we continue to see the benefits of actions taken last year reflected in our operating expense
performance. This progress is a direct result of the changes we’ve made to the business, not a recovery of the broader market,
reinforcing the durability of the model we’ve been building.
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Impact of Revenue Presentation for Certain
Product Arrangements
Revenue for certain product
arrangements is presented differently depending on the nature of the underlying manufacturing relationships and the application of ASC
606— Revenue from Contracts with Customers . Under the guidance, payments to third-party manufacturers, including manufacturers
under common control with certain customers, are evaluated to determine whether they are economically linked to an underlying customer
arrangement. For certain customer-specific or exclusive product programs where the manufacturer is under common control with the customer,
the Company has concluded that payments to the manufacturer are economically linked to the customer relationship and therefore represent
consideration payable to a customer. As a result, these payments are recorded as a reduction of revenue, and revenue is presented on a
net basis. The Company recorded $4.9 million in consideration paid as a reduction of revenue in the unaudited condensed consolidated statement
of operations for the three months ended March 31, 2026. This presentation results in reported revenue being lower than the gross amount
billed to the customer. While the net presentation affects reported revenue, it does not impact gross profit dollars for these arrangements.
The distinction reflects the application of GAAP to different fact patterns rather than a difference in the underlying economics of the
transactions.
Debt Financings
On March 24, 2026, the Loan Parties entered into the Third Amendment with the Lenders, which revised the maturity date under the Amended
A&R Credit Agreement from December 31, 2026, to April 30, 2027 and waived certain requirements and events of default relating to the
going concern qualification in our December 31, 2025 financial statements. In connection with the Third Amendment, the Loan Parties agreed
to pay to the Lenders an amendment fee in the aggregate amount of $1.6 million, equal to 1.25% pro rata based on each Lender’s outstanding
principal amount (the “Amendment Fee”). Of the Amendment Fee, approximately $1.3 million is payable-in-kind by adding such
amount to the 2025 Lenders’ outstanding principal amount. The remaining $0.3 million of the Amendment Fee was paid in cash to the
other lenders. In connection with the Third Amendment, the Loan Parties also agreed to reimburse the 2025 Lenders for certain expenses
in the amount of $0.3 million.
Review of Strategic Alternatives
We have engaged with multiple
parties about a broad range of opportunities to maximize shareholder value, including, but not limited to, a merger, sale or other strategic
or financial transaction. The Board has formed a special committee of independent directors and we have engaged a financial advisor to
support them in evaluating a range of options and exploring other potential strategic alternatives. If we are unsuccessful in engaging
in a favorable strategic alternative, then our ability to grow our business and compete with larger, including combined, competitors may
be adversely affected.
Impact of United States Tariff Policy
We continue to actively manage the impact of recent United States tariff
policies. Importantly, all of our mattresses are manufactured in the United States, and about 15% of our cost of goods is tied to products
sourced from overseas. This limited exposure is primarily concentrated in the textile side of the business, which includes sheets and
mattress covers, but also includes the import of bases and foundations. Tariffs impacted us by approximately $1.0 million during the three
months ended March 31, 2026 due to our mitigation efforts which have reduced the overall impact to our initial expectations. The tariff
landscape remains fluid, and we are actively evaluating sourcing alternatives and pricing strategies on a case-by-case basis. We believe
that our vertically integrated model and strong vendor relationships give us the flexibility to remain agile and responsive to changes
in tariff policies, and we believe that we will be able to partially mitigate these impacts through a combination of supply chain repositioning,
vendor collaborations, and selective pricing actions. On March 6, 2026, we filed a lawsuit in the U.S. Court of International Trade against
the U.S. Customs and Border Protection (“CBP”), the CBP commissioner, and the United States of America seeking a full refund
of the $5.3 million in tariffs imposed under the International Emergency Economic Powers Act that the Company has paid to the United States
(See Note 13 – Commitments and Contingencies, Legal Proceedings).
Executive Summary – Results of Operations
Net revenues decreased $8.4
million, or 8.1%, to $95.7 million for the three months ended March 31, 2026 compared to $104.2 million for the three months ended March
31, 2025. The drop in revenue was primarily due to a decrease in e-commerce sales and recognized wholesale revenue. From a sales channel
perspective, e-commerce net revenues decreased $4.8 million, or 10.6%, wholesale net revenues decreased $4.5 million or 11.0% and showroom
net revenues increased $0.9 million, or 4.8%. The decrease in wholesale revenue was due mainly to $4.9 million in payments to a manufacturer
that is under common control with a customer and represents consideration paid to a customer. Accordingly, these payments are recorded
as a reduction in revenue. The decreases were partially offset by our showroom net revenue increase of $0.9 million or 4.8%. The increase
in our showrooms channel represents a 7.0% year-over-year increase for all stores that have been open for 13 or more months. This is the
third consecutive quarter of year-over-year growth in the showrooms channel, driven by increased order values through effective upselling
and product bundling.
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Gross profit decreased
$5.9 million, or 14.3%, to $35.2 million for the three months ended March 31, 2026 compared to $41.0 million for the three months
ended March 31, 2025. Our gross profit percentage decreased to 36.8% of net revenues in the first quarter of 2026 from 39.4% in the
first quarter of 2025 due to our strategic investment in Purple Royale floor models to support the Mattress Firm rollout, as well as
modest manufacturing overhead deleverage driven by lower production volumes and less favorable absorption of fixed costs.
Operating expenses decreased $3.5 million, or 6.3% to $52.0 million
for the three months ended March 31, 2026 compared to $55.5 million for the three months ended March 31, 2025. This decrease was driven
by a $3.3 million decrease in advertising spending, a $2.8 million decrease in employee related expenses and $2.0 million decrease in
restructuring related costs from last year, partially offset by $4.6 million in strategic alternative and other costs.
Total other expense, net increased $9.0 million, or 194.6% to $13.7
million for the three months ended March 31, 2026 compared to $4.6 million for the three months ended March 31, 2025. The other expense,
net in the first quarter of 2026 consists of interest expense of $8.2 million and a $7.0 million loss on change in fair value of warrants,
partially offset by $1.5 million in other income. The other expense, net in the first quarter of 2025 consists of interest expense of
$4.8 million, partially offset by $0.2 million in other income and gain on change in fair value of warrants.
Net loss attributable to Purple
Inc. was $30.5 million for the three months ended March 31, 2026 compared to a net loss of $19.1 million for the three months ended March
31, 2025. The $11.4 million increase in net loss was primarily due to lower gross margins and the increase in loss from change in fair
value of the warrants, partially offset by reduced operating expenses.
Outlook for Growth
The way we think about the
business today is fundamentally different than a year ago. Last year was about reshaping the business for a tougher market – right
sizing our cost structure, strengthening the foundation and restoring profitability. Now, we are focused on growth with our strategic
focus areas that build on what is already working and how we are running our business. We believe we are well positioned to grow our business
given our new grid innovation, evolved messaging strategy, our new cost structure and other cost saving initiatives. Our Path to Premium
Sleep strategy remains focused on the following three priorities to drive growth:
● Knowing
Our Consumer. Knowing our consumer continues to shape how we show up across all channels. We have shifted away from promotion-led
messaging toward clearer, benefit driven marketing focused on our differentiated technology and how we deliver better sleep. Our Less
Pain, Better Sleep positioning continues to resonate, providing a consistent, consumer-led message that translates across e-commerce,
retail, and wholesale channels. We are making our differentiation clearer, our content more educational and our local marketing more
effective at converting awareness into foot traffic. We continue to make changes to our creative approach and how we guide consumers
through the online purchase journey with a more focused and tactical path to identifying the right mattress.
● Delivering
Better Sleep. Our innovation continues to resonate with consumers, with our premium
products maintaining strong interest in both wholesale and showroom channels. We saw a strong
initial response to the launch of Purple Royale, our new premium offering developed in partnership
with Mattress Firm. Additionally, Rejuvenate 2.0 continues to outperform our expectations
with strong demand. This performance reinforces the strength of our premium positioning and
the resonance of our innovation with consumers. We are also seeing a positive halo effect
across the portfolio, supporting performance in adjacent categories. We are focused on elevating
the full consumer journey across both owned and partner channels. This includes improving
how we present and explain our technology in-store, with greater emphasis on pain relief
and more effective use of demonstrations and digital support. This is resulting in improved
engagement from retail sales associates, particularly within our wholesale channel, as our
product storytelling continues to resonate. We have also made changes to our online sales
approach, enhancing live customer care and follow-up to better replicate the in-store experience
in a digital environment, which is helping improve engagement and close rates. At the same
time, we’re enhancing our delivery experience to ensure a more consistent and credible
brand experience from purchase through fulfillment. These improvements are helping reinforce
our value proposition and support stronger conversion.
●
Executing
with Financial Discipline. We have taken meaningful steps to resize and simplify the business, and we are seeing those
benefits reflected in our operating efficiency and cost structure. These actions have created a more stable foundation as we shift
toward growth. In the first quarter, gross margin came in below our normal 40% baseline, primarily driven by higher levels of floor
model discounts associated with the Purple Royale rollout at Mattress Firm. We view this as temporary, and as the floor model
transition normalizes, we expect improved contribution from Purple Royale. We’ve seen similar dynamics during prior transitions and would expect a comparable normalization as floor
model activity moderates. At the same time, we are making continued progress in our underlying cost structure, particularly across
sourcing, operations, and fulfillment, supported by ongoing productivity initiatives and supply chain optimization efforts. We are
also actively managing a more dynamic cost environment, including tariff dynamics and rising input costs. Our mitigation efforts are
well underway, including diversifying our supplier base, expanding multi-sourcing, and selectively in-sourcing key components, such
as pillows, where we see both cost and quality benefits.
There is no guarantee that we will be able to
effectively execute on these initiatives, which are subject to risks, uncertainties, and assumptions that are difficult to predict, including
the risks described in the “Risk Factors” section of this Quarterly Report and in our Annual Report on Form 10-K filed with
the SEC on March 31, 2026 and elsewhere herein. Therefore, actual results may differ materially and adversely from those described above.
In addition, we may, in the future, adapt these focuses in response to changes in the market or our business.
29
Operating Results for the Three Months Ended March 31, 2026 and
2025
The following table sets forth
for the periods indicated, our results of operations and the percentage of total revenue represented in our unaudited condensed consolidated
statements of operations (dollars in thousands):
Three Months Ended March 31,
2026
% of
Net Revenues
2025
% of
Net Revenues
Revenues, net
$ 95,730
100.00 %
$ 104,171
100.0 %
Cost of revenues:
Cost of revenues
60,535
63.2
62,207
59.7
Cost of revenues - restructuring related charges
—
—
918
0.9
Total cost of revenues
60,535
63.2
63,125
60.6
Gross profit
35,195
36.8
41,046
39.4
Operating expenses:
Marketing and sales
31,557
33.0
36,626
35.2
General and administrative
18,033
18.8
14,487
13.9
Research and development
2,448
2.6
2,452
2.4
Restructuring, impairment and other related charges
—
—
1,960
1.9
Total operating expenses
52,038
54.4
55,525
53.3
Operating loss
(16,843 )
(17.6 )
(14,479 )
(13.9 )
Other income (expense):
Interest expense
(8,219 )
(8.6 )
(4,764 )
(4.6 )
Other income, net
1,491
1.6
69
0.1
Change in fair value – warrant liabilities
(6,958 )
(7.3 )
49
—
Total other expense, net
(13,686 )
(14.3 )
(4,646 )
(4.5 )
Net loss before income taxes
(30,529 )
(31.9 )
(19,125 )
(18.4 )
Income tax expense
(47 )
—
(41 )
—
Net loss
(30,576 )
(31.9 )
(19,166 )
(18.4 )
Net loss attributable to noncontrolling interest
(35 )
—
(29 )
—
Net loss attributable to Purple Innovation, Inc.
$ (30,541 )
(31.9 )
$ (19,137 )
(18.4 )
Revenues, Net
Net revenues decreased $8.4
million, or 8.1%, to $95.7 million for the three months ended March 31, 2026 compared to $104.2 million for the three months ended March
31, 2025. This decrease was primarily driven by our e-commerce and wholesale recognized revenue. From a sales channel perspective, e-commerce
net revenues decreased $4.8 million, or 10.6%, wholesale net revenue decreased $4.5 million or 11.0% and showroom net revenues increased
$0.9 million, or 4.8%. The decrease in wholesale revenue was due mainly to $4.9 million in payments to a manufacturer that is under common
control with a customer and represents consideration paid to a customer. Accordingly, these payments are recorded as a reduction in revenue.
Total Cost of Revenues
Total cost of revenues
decreased $2.6 million, or 4.1%, to $60.5 million for the three months ended March 31, 2026, compared to $63.1 million for the three
months ended March 31, 2025. This decrease was due primarily to $4.9 million in costs associated with a manufacturer that is
affiliated with a customer recorded as reduction of revenue. This decrease was partially offset by less favorable absorption of
fixed costs from lower production volumes. Our gross profit percentage decreased to 36.8% of net revenues in the first quarter of
2026 from 39.4% in the first quarter of 2025, due to our strategic investment in Purple Royale floor models to support the Mattress
Firm rollout, as well as modest manufacturing overhead deleverage driven by lower production volumes and less favorable absorption
of fixed costs.
30
Marketing and Sales
Marketing and sales expense decreased $5.1 million, or 13.8%, to $31.6
million for the three months ended March 31, 2026 compared to $36.6 million for the three months ended March 31, 2025. This decrease primarily
consisted of a $3.3 million decrease in advertising spend, a $1.3 million decrease in employee related expenses due to head count reductions
and $0.2 million decrease in all other marketing and sales expenses.
General and Administrative
General and administrative expense increased $3.5 million, or 24.5%,
to $18.0 million for the three months ended March 31, 2026 compared to $14.5 million for the three months ended March 31, 2025. This increase
was due to a $4.3 million increase in strategic alternative costs and an increase of $0.7 million in all other general and administrative
costs, partially offset by a $1.4 million decrease in employee related costs due to headcount reductions.
Research and Development
Research and development expense was flat to prior year at $2.4 million
for the three months ended March 31, 2026 compared to the three months ended March 31, 2025.
Restructuring, Impairment and Other Related
Charges
There were no restructuring,
impairment and other related charges for the three months ended March 31, 2026 as all restructuring activities were completed in 2025.
We incurred $2.0 million of restructuring, impairment and other related charges during the three months ended March 31, 2025.
Operating Loss
Operating loss increased $2.4
million, or 16.3%, to $16.8 million, for the three months ended March 31, 2026 compared to $14.5 million for the three months ended March
31, 2025. This increase in our operating loss is the result of a lower gross profit percent and increases in strategic alternative costs,
partially offset by reduced advertising spend and lower headcount costs.
Interest Expense
Interest expense totaled $8.2
million for the three months ended March 31, 2026 compared to $4.8 million for the three months ended March 31, 2025. This increase was
primarily due to additional interest incurred on a higher principal balance on the Related Party Loan as the Company elected the paid-in-kind
option on monthly interest over the past 12 months.
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Other Income, Net
Other income increased to
$1.5 million for the three months ended March 31, 2026 compared to $0.1 million for the three months ended March 31, 2025. This increase
was mainly due to $1.3 million received for sublease rent payments on facilities we are no longer using and have subleased to other parties.
Change in Fair Value – Warrant Liabilities
Our Warrants contain certain
provisions that did not meet the criteria for equity classification and therefore are recorded as liabilities with a re-measurement of
fair value at each reporting date. We incurred a $7.0 million loss on the change in fair value of our warrant liabilities for the three
months ended March 31, 2026 related to the increase in fair value from the previous reporting date. For the three months ended March 31,
2025, we recognized a negligible gain related to the net decrease in fair value of the warrant liability.
Income Tax (Expense) Benefit
We had a de minimis income
tax expense for the three months ended March 31, 2026 and 2025. The income tax expense amounts in both the first quarter of 2026 and 2025
were related to various state taxes.
Noncontrolling Interest
We calculate net loss attributable
to noncontrolling interests on a quarterly basis using their weighted average ownership percentage. Net loss attributed to noncontrolling
interests was negligible for the three months ended March 31, 2026 and 2025.
Liquidity and Capital Resources
Our principal sources of funds
are cash flows from operations and cash and cash equivalents on hand, supplemented with borrowings made pursuant to various loan agreements.
Principal uses of funds consist of capital expenditures, working capital needs, operating lease payment obligations and investing in innovation.
In accordance with the terms of our various loan agreements, we have elected to pay interest in kind on our loans to reduce cash obligations.
Our working capital needs depend largely upon the timing of cash receipts from product sales, payments to vendors and others, changes
in inventories, and operating lease payment obligations. Our cash and cash equivalents and working capital positions were $25.0 million
and $22.4 million, respectively, as of March 31, 2026 compared to $24.3 million and $35.2 million, respectively, as of December 31, 2025.
Cash used for capital expenditures was $2.0 million and $2.1 million for the three months ended March 31, 2026 and 2025. Our capital expenditures
in 2026 have primarily consisted of additional investments made in our manufacturing operations and showroom facilities. Additional details
regarding our current debt are described above in Note 10 - Debt .
Our financial statements have
been prepared on a going concern basis of accounting, which contemplates continuity of operations, realization of assets and liabilities
and commitments in the normal course of business. In connection with the preparation of the consolidated financial statements for the
year ended December 31, 2025, we conducted an evaluation as to whether there were conditions and events, considered in the aggregate,
which raised substantial doubt as to our ability to continue as a going concern within one year after the date of the issuance of such
financial statements.
32
We
had cash and cash equivalents of approximately $25.0 million and an accumulated deficit of $655.8 million at March 31,
2026. We incurred a net loss of $30.5 million and net cash provided by operating activities and net cash used in investing activities
was $3.0 million and $2.0 million, respectively, for the three months ended March 31, 2026. We have a history of recurring net losses
and cash used in operations, an accumulated deficit, and requiring additional capital to fund our operations.
The funds we have on hand and any follow-on capital, if needed, will
be used to fund our operations and invest in the business to expand sales and marketing efforts, as well as to invest in innovation. As
described below, we have implemented plans that we believe will both increase our revenues from the sales of our products and achieve
cost savings within the next year, sufficient to generate positive operating cash flow levels. However, we may be adversely impacted by
uncertain market conditions and there can be no assurance that we will be successful in this regard. If such plans are not successful,
we may need to raise additional capital in order to support operations and business initiatives. Access to additional capital is uncertain
and not within our control. Accordingly, there is substantial doubt about our ability to continue as a going concern.
We have taken a number of
actions to increase cash flow and support our operations and strategies. In August 2024, we implemented the Restructuring Plan (as defined
below) to consolidate manufacturing operations resulting in cost savings. We have realized and plan to continue to realize direct material
cost savings by concentrating efforts on driving gross margin improvement through various methods such as selective pricing actions, continued
mix shift towards the Restore and Rejuvenate collections, and by driving cost savings through supply chain initiatives and manufacturing
efficiency. We have delivered direct material cost savings from our supplier diversification efforts, improved scrap and yield results
from continuous improvements, and outbound freight costs reflect cost improvements along with improved delivery reliability. We have been
successful in subleasing the two manufacturing facilities that were vacated as part of the Restructuring Plan. We have also taken additional
cost-saving initiatives in 2025 and the beginning of 2026 to reduce headcount and streamline responsibilities and reporting structure.
Further, our plans include additional actions intended to improve liquidity and reduce costs, including planned optimization of advertising
spend, limiting the number of new store openings, efforts to mitigate tariff impacts by managing the country of origin, and other cost-saving
initiatives. We have elected to have interest paid-in-kind and added to the principal amount of the loans under the Amended and Restated
Credit Agreement. On March 24, 2026, we executed the Third Amendment to the Amended and Restated Credit Agreement (the “Third Amendment”)
with the Lenders to extend the maturity date of the Amended and Restated Credit Agreement from December 31, 2026 to April 30, 2027. We
are currently evaluating potential strategic alternatives and opportunities to achieve additional liquidity through one or more future
debt refinancings.
Additionally, in May 2025,
we entered into an agreement with Mattress Firm, Inc. (“Mattress Firm”), a business unit of Somnigroup International, Inc.
(“SGI”) to expand its inventory of the Company’s products across SGI’s national store network from approximately
5,000 mattress slots to a minimum of 12,000 mattress slots (see Note 13 — Commitments and Contingencies, SGI Commercial Arrangements).
We are now represented in Mattress Firm’s full store network and with the recent launch of Purple Royale, the exclusive Luxe
product for Mattress Firm, we have expanded to all 12,000 committed slots. We have also expanded into more Costco clubs in the fourth
quarter of 2025.
Other Contractual Obligations
Other material contractual
obligations primarily include operating lease payment obligations. See Note 8 - Leases of the unaudited condensed consolidated
financial statements for additional information on leases.
33
Cash Flows for the Three Months Ended March
31, 2026 Compared to the Three Months Ended March 31, 2025
The following summarizes our
cash flows for the three months ended March 31, 2026 and 2025 as reported in our unaudited condensed consolidated statements of cash flows (in
thousands):
Three Months Ended
March 31,
2026
2025
Net cash provided by (used in) operating activities
$ 2,989
$ (23,070 )
Net cash used in investing activities
(2,033 )
(2,144 )
Net cash provided by (used in) financing activities
(346 )
17,830
Net increase (decrease) in cash
610
(7,384 )
Cash, beginning of the period
24,345
29,011
Cash, end of the period
$ 24,955
$ 21,627
Cash provided by operating activities was $3.0 million for the three
months ended March 31, 2026 compared to cash used in operating activities was $23.1 million for the three months ended March 31, 2025.
The $26.1 million increase in year-over-year cash provided by operating activities included a $28.5 million increase in cash provided
from the changes in operating assets and liabilities and an $8.8 million increase in non-cash cash adjustments, partially offset by a
$11.4 million increase in net loss.
Cash used in investing activities
reflected net capital expenditures of $2.0 million and $2.1 million for the three months ended March 31, 2026 and 2025, respectively.
Capital expenditures in the first three months of 2026 primarily consisted of additional investments made in our manufacturing operations.
Cash used in investing activities
was $0.3 million for the three months ended March 31, 2026 compared to cash provided in investing activities of $17.8 million during the
three months ended March 31, 2025. Cash used in financing activities for 2026 consist of amendment fess paid in cash to certain lenders
for the Third Amendment. Financing activities during the first three months of 2025 included $19.0 million of proceeds from the 2025 Amendment
financing offset in part by $1.2 million in payments for debt issuance costs.
Critical Accounting Estimates
We discuss our critical accounting
policies and estimates in Management’s Discussion and Analysis of Financial Condition and Results of Operations in
our 2025 Annual Report on Form 10-K filed with the SEC on March 31, 2026. There have been no significant changes in our critical accounting
policies since the end of fiscal 2025.
Available Information
Our website address is www.purple.com.
We make available free of charge on the Investor Relations portion of our website, investors.purple.com, our annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a)
or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the
SEC. The inclusion of our website address in this report does not include or incorporate by reference into this report any information
on our website.
We also use the Investor Relations
portion of our website, investors.purple.com, as a channel of distribution of additional Company 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.
34