Purple Innovation, Inc.

Previous wording

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 14, 2025 and our Quarterly Report on Form 10-Q filed with the SEC on May 6, 2025. 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.

Current wording

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 14, 2025, and our Quarterly Reports on Form 10-Q filed with the SEC on May 6, 2025, and July 30, 2025. 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.

Previous wording

Our second quarter 2025 revenue decreased compared to last year due to the impact of longer delivery times of Rejuvenate 2.0, softness in e-commerce and 2024 reductions in Wholesale door count. Gross profits were down due mainly to increased tariffs, costs related to our manufacturing facility consolidation and ramp-up costs relating to the Rejuvenate 2.0 launch, partially offset by continued improvement in lowering material costs as we realize the benefits from ongoing sourcing initiatives. Operating expenses continue to decline as we have improved advertising efficiency, implemented numerous cost reduction efforts and closely managed our expenses with disciplined cost controls.

Current wording

Our third quarter 2025 revenue increased slightly compared to last year, reflecting the continued execution of our strategic priorities. Wholesale revenue grew 7.9% during the quarter as our Mattress Firm expansion continues, showroom revenue increased 6.5% as we continue to catch up from the second quarter backlog and e-commerce was down 9.8% as we continue to evolve our website experience. Gross profits were up to 42.8% mainly to the reduction in our restructuring costs over last year as we have now completed that plan. We also have realized the benefits of the continued improvement in lowering material costs from ongoing sourcing initiatives and the recent actions to reduce our cost of warranty returns. Operating expenses continue to decline as we have improved advertising efficiency, implemented numerous cost reduction efforts and closely managed our expenses with disciplined cost controls.

Previous wording

On May 2, 2025, we entered into the Second Amendment to Master Retailer Agreement with Mattress Firm, a business unit of SGI, which provides that SGI, through its Mattress Firm stores, will expand its inventory of our products across its national store network from approximately 5,000 mattress slots to a minimum of 12,000 mattress slots. We expect that this increased retail presence in Mattress Firm stores will generate approximately $70 million in annualized incremental net revenue beginning in 2026. This rollout is well underway and we expect to be in their full store network during the third quarter 2025. In partnership with Mattress Firm, we are developing an exclusive Luxe product for Mattress Firm, scheduled to launch early next year, which will increase our total slot count to the contractual minimum. Also on May 2, 2025, we entered into the Sherwood Agreement with Tempur Sherwood, LLC, a subsidiary of Tempur Sealy. The Sherwood Agreement provides that Tempur Sherwood, LLC will have the exclusive right to assemble certain product lines that we sell to Mattress Firm.

Current wording

On May 2, 2025, we entered into the Second Amendment to Master Retailer Agreement with Mattress Firm, a business unit of SGI, which provides that SGI, through its Mattress Firm stores, will expand its inventory of our products across its national store network from approximately 5,000 mattress slots to a minimum of 12,000 mattress slots. This rollout is progressing well, with Purple products now being represented in Mattress Firm’s full store network, representing approximately 9,200 slots today, keeping us on pace for the minimum 12,000 slots in 2026. This expansion represents roughly $20 million in incremental revenue this year and we anticipate approximately $70 million next year. In partnership with Mattress Firm, we are developing an exclusive Luxe product for Mattress Firm, scheduled to launch early next year, which will increase our total slot count to the contractual minimum. Also on May 2, 2025, we entered into the Sherwood Agreement with Tempur Sherwood, LLC, a subsidiary of Tempur Sealy. The Sherwood Agreement provides that Tempur Sherwood, LLC will have the exclusive right to assemble certain product lines that we sell to Mattress Firm.

Previous wording

In August 2024, we initiated the Restructuring Plan to strategically realign our operational focus to achieve efficiencies in our operations that are expected to improve profitability and provide for reinvesting in technology and marketing initiatives. The Restructuring Plan includes the permanent closure of both Utah manufacturing facilities to consolidate mattress production in our Georgia plant, and a headcount reduction at our Utah headquarters to drive additional operating efficiencies. Closure of the two Utah manufacturing facilities was completed in the second quarter of 2025 while consolidation into the Georgia facility was finalized in December 2024. The reduction in workforce at our Utah headquarters was completed in August 2024. During the three months ended June 30, 2025, we recognized $4.2 million in costs relating to the Restructuring Plan, which included $2.9 million of impairment on leases and leasehold improvements, $0.6 million of moving and transition related costs, $0.2 million related to disposal of equipment in progress that will not be put in service, $0.2 million in employee related costs, and $0.2 million in accelerated depreciation. We expect to record additional restructuring and other related charges in the amount of $0.9 million in the third quarter of 2025. These charges include certain estimates that are provisional and include management judgments and assumptions that could change materially as we complete the execution of our plans. Actual results may differ from these estimates, and the completion of our plan could result in additional restructuring, impairment or other related charges not reflected.

Current wording

In August 2024, we initiated the Restructuring Plan to strategically realign our operational focus to achieve efficiencies in our operations that are expected to improve profitability and provide for reinvesting in technology and marketing initiatives. The Restructuring Plan includes the permanent closure of both Utah manufacturing facilities to consolidate mattress production in our Georgia plant, and a headcount reduction at our Utah headquarters to drive additional operating efficiencies. Closure of the two Utah manufacturing facilities was completed in the second quarter of 2025 while consolidation into the Georgia facility was finalized in December 2024. The reduction in workforce at our Utah headquarters was completed in August 2024. The Restructuring Plan is now complete. During the three months ended September 30, 2025, we recognized $5.3 million in costs relating to the Restructuring Plan, which related to the write-off of equipment that was determined to have no future use.

Previous wording

In addition, we continue to implement additional cost savings measures in 2025 beyond those implemented pursuant to our 2024 Restructuring Plan.

Current wording

In addition, we continue to implement additional cost savings measures in 2025 beyond those implemented pursuant to our Restructuring Plan.

Previous wording

The warrant liability is subsequently re-measured to fair value at each reporting date with changes in the fair value included in earnings. During the three and six months ended June 30, 2025, we incurred a gain of $4.4 million due to the decrease in the fair value of the warrants outstanding at June 30, 2025.

Current wording

The warrant liability is subsequently re-measured to fair value at each reporting date with changes in the fair value included in earnings. During the three and nine months ended September 30, 2025, we incurred a gain of $6.9 million and $11.3 million due to the decrease in the fair value of the warrants outstanding at September 30, 2025.

Previous wording

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. While future changes in tariffs are difficult to predict, we currently estimate the total cost exposure in 2025 to be less than our previous $10 million estimate, due to a combination of our mitigation efforts and changes to the underlying tariff rates. We have begun shifting sourcing outside of China, and in July, we implemented price increases on select product, including two mattress models. 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 mitigate these impacts through a combination of supply chain repositioning, vendor collaborations, and selective pricing actions.

Current wording

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 $2.0 million in the third quarter due to our mitigation efforts which have reduced the overall impact to our initial expectations. While future changes in tariffs are difficult to predict, we currently estimate the total cost exposure in 2025 to be less than our previous $10 million estimate, due to a combination of our mitigation efforts and changes to the underlying tariff rates. We have begun shifting sourcing outside of China, and in July, we implemented price increases on select products, including two mattress models. 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 mitigate these impacts through a combination of supply chain repositioning, vendor collaborations, and selective pricing actions.

Previous wording

Operating expenses decreased $11.6 million, or 18.2% to $51.9 million for the three months ended June 30, 2025, compared to $63.5 million for the three months ended June 30, 2024. This decrease was driven by a $8.2 million reduction in advertising spend, $4.7 million decrease in employee related expenses, $2.2 million decrease in research and development project write-offs and $0.7 million decrease in all other operating expenses, partially offset by an increase of $4.2 million in restructuring related costs. These decreases are the result of restructuring efforts, the in-sourcing of certain functions in marketing and finance and other cost reduction efforts.

Current wording

Operating expenses decreased $19.0 million, or 23.2% to $63.0 million for the three months ended September 30, 2025, compared to $82.0 million for the three months ended September 30, 2024. This decrease was driven by a $13.6 million decrease in restructuring costs and a $6.5 million decrease in employee related expenses, partially offset by $1.0 million decrease in all other operating expenses.

Previous wording

Other income (expense), net decreased $17.7 million, or 121.1% to other income (expense), net of $(3.1) million for the three months ended June 30, 2025, compared to other income (expense), net of $14.6 million for the three months ended June 30, 2024. The other income (expense), net in the second quarter of 2025 consists of interest expense of $7.5 million, partially offset by a $4.4 million gain on the change in fair value of warrants. The other income (expense), net in the second quarter of 2024 consists of $18.7 million gain on the change in fair value of warrants and all other income, net of $0.1 million, partially offset by $4.2 million in interest expense.

Current wording

Other income (expense), net decreased $7.1 million, or 94.3% to other income (expense), net of $0.4 million for the three months ended September 30, 2025, compared to other income (expense), net of $7.6 million for the three months ended September 30, 2024. The other income (expense), net in the third quarter of 2025 consists of $6.9 million gain on the change in fair value of warrants and $1.7 million in other income, partially offset by interest expense of $8.2 million. The other income (expense), net in the third quarter of 2024 consists of $4.8 million gain on the change in fair value of warrants and all other income, net of $7.2 million due to an insurance claim payment, partially offset by $4.4 million in interest expense.

Previous wording

Net loss attributable to Purple Inc. was $17.3 million for the three months ended June 30, 2025 compared to a break even position attributable to Purple Inc. for the three months ended June 30, 2024. The $17.3 million increase in net loss was primarily due to lower sales, decreased gross profit and the change in fair value of warrant liabilities, partially offset by reduced operating expenses as we are realizing the benefits from our Restructuring Plan, supply chain initiatives, operational efficiency improvements and other cost reduction efforts.

Current wording

Net loss attributable to Purple Inc. was $11.7 million for the three months ended September 30, 2025 compared to a $39.2 million net loss attributable to Purple Inc. for the three months ended September 30, 2024. The $27.5 million decrease in net loss was primarily due to $26.5 million in lower costs as a result of our Restructuring Plan, $8.1 million in operational efficiency improvements and other cost reduction efforts and $2.1 million in increased gain on fair value of warrant liabilities, partially offset by a $5.4 million reduction in insurance claims and other proceeds received in 2024 and $3.8 million in increased interest expense.

Previous wording

We believe we are well positioned to grow our business in this challenging market given our new grid innovation, evolved messaging strategy, the Restructuring Plan and other cost saving initiatives. We believe we are entering the second half with significant momentum that we believe will continue building through the end of the year, with third quarter to date revenues up in the mid-single digits percentage range versus the same period last year. We are seeing validation of our brand and innovation strategy through the success of Rejuvenate 2.0, which has sold more than twice as many units as our Rejuvenate 1.0 in the prior year through our direct channels, the growing momentum behind our Mattress Firm expansion, which is rolling out across the country, the deepening partnership with Costco as we prepare to launch in 450 clubs for their year-end furniture show and the strong interest from other traditional and non-traditional partners. Our Path to Premium Sleep strategy remains focused on the following three key initiatives to drive sustainable and profitable market share:

Current wording

We believe we are well positioned to grow our business given our new grid innovation, evolved messaging strategy, the Restructuring Plan and other cost saving initiatives. We believe we are entering the fourth quarter with significant momentum that we believe will continue building through the end of the year, with fourth quarter to date revenues up in the low-double digits percentage range versus the same period last year. We are seeing validation of our brand and innovation strategy through the success of Rejuvenate 2.0, which has sold more than twice as many units as our Rejuvenate 1.0 in the prior year through our direct channels, the growing momentum behind our Mattress Firm expansion, which is rolling out across the country, the deepening partnership with Costco as we prepare to launch in 450 clubs for their year-end furniture show and the strong interest from other traditional and non-traditional partners. Our Path to Premium Sleep strategy remains focused on the following three key initiatives to drive sustainable and profitable market share:

Previous wording

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 14, 2025 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.

Current wording

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 14, 2025, and our Quarterly Reports on Form 10-Q filed with the SEC on May 6, 2025, and July 30, 2025. 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.

Previous wording

Total cost of revenues decreased $3.9 million, or 5.5%, to $67.4 million for the three months ended June 30, 2025, compared to $71.3 million for the three months ended June 30, 2024. This decrease was due primarily to reduced sales volumes and lower material costs attributable to supply chain initiatives, partially offset by increased costs due to tariffs, costs related to our manufacturing facility consolidation and ramp-up costs relating to the Rejuvenate 2.0 launch. Our gross profit percentage decreased to 35.9% of net revenues in the second quarter of 2025 from 40.7% in the second quarter of 2024, due mainly to increased tariffs, costs related to the ramp-up of both the Mattress Firm roll-out and Rejuvenate 2.0 launch, partially offset by continued improvement in lowering material costs as we realize the benefits from ongoing sourcing initiatives. During the three months ended June 30, 2025, we incurred $0.1 million in cost of revenues associated with the Restructuring Plan.

Current wording

Total cost of revenues decreased $15.5 million, or 18.6%, to $67.9 million for the three months ended September 30, 2025, compared to $83.4 million for the three months ended September 30, 2024. This decrease was due primarily to no restructuring costs incurred in the third quarter of 2025 and lower material costs attributable to supply chain initiatives, partially offset by increased costs due to tariffs. Our gross profit percentage increased to 42.8% of net revenues in the third quarter of 2025 from 29.7% in the third quarter of 2024, due mainly to the completion of our Restructuring Plan, continued improvement in lowering material costs as we realize the benefits from ongoing sourcing initiatives and improving our operating efficiency.

Previous wording

Marketing and sales expense decreased $10.8 million, or 26.0%, to $30.6 million for the three months ended June 30, 2025, compared to $41.4 million for the three months ended June 30, 2024. This decrease primarily consisted of $8.2 million in reduced advertising spend, and a $2.7 million decrease in employee related costs due to headcount reductions, partially offset by a $0.1 million increase in all other marketing and sales expense.

Current wording

Marketing and sales expense decreased $2.8 million, or 6.6%, to $40.1 million for the three months ended September 30, 2025, compared to $42.9 million for the three months ended September 30, 2024. This decrease primarily consisted of a $3.0 million decrease in employee related costs due to headcount reductions, a $0.4 million decrease in all other marketing and sales costs, partially offset by a $0.6 million increase in advertising spending.

Previous wording

General and administrative expense decreased $3.1 million, or 17.3%, to $15.0 million for the three months ended June 30, 2025, compared to $18.1 million for the three months ended June 30, 2024. This decrease was due to a $1.7 million decrease in employee related costs from headcount reductions, a $0.7 million reduction in professional services mainly from certain consulting services that have been discontinued, and $0.8 million reductions in all other general and administrative expenses.

Current wording

General and administrative expense decreased $2.1 million, or 12.0%, to $15.2 million for the three months ended September 30, 2025, compared to $17.3 million for the three months ended September 30, 2024. This decrease was due to a $3.2 million decrease in employee related costs from headcount reductions, a $0.3 million reduction in professional services mainly from certain consulting services that have been discontinued, partially offset by an increase of $0.7 million in additional strategic alternative spending and $0.7 million increase in all other general and administrative expenses.

Previous wording

Research and development expense decreased $1.8 million, or 45.4%, to $2.2 million for the three months ended June 30, 2025, compared to $4.0 million for the three months ended June 30, 2024. The decrease is due to the loss incurred in 2024 on the write-off of a certain project in 2024, lower employee related costs, and other product development costs.

Current wording

Research and development expense decreased $0.5 million, or 18.9%, to $2.4 million for the three months ended September 30, 2025, compared to $2.9 million for the three months ended September 30, 2024. The decrease is due to a $0.3 million decrease in employee related costs from headcount reductions and $0.2 million decrease in all other product development costs.

Previous wording

In August 2024, we initiated a Restructuring Plan to permanently close our two Utah manufacturing facilities and consolidate mattress production in our Georgia plant. The Restructuring Plan also provided for a headcount reduction at our Utah headquarters to drive additional operating efficiencies. The $4.1 million of restructuring and impairment charges recorded in operating expense during the second quarter of 2025 included $2.9 million of impairment related to leases and leasehold improvements, $0.6 million of moving and transition related costs, $0.2 million related to disposal of equipment in progress that will not be put in service, $0.2 million in employee related costs, and $0.2 million in accelerated depreciation. We expect to record additional restructuring and other related charges in the amount of $0.9 million in the third quarter of 2025.

Current wording

Restructuring, impairment and other related charges decreased $13.6 million or 72.0%, to $5.3 million for the three months ended September 30, 2025, compared to $18.9 million for the three months ended September 30, 2024. In August 2024, we initiated a Restructuring Plan to permanently close our two Utah manufacturing facilities and consolidate mattress production in our Georgia plant. The Restructuring Plan also provided for a headcount reduction at our Utah headquarters to drive additional operating efficiencies. The decrease is due to the completion of the costs of our Restructuring Plan. The $5.3 million of restructuring and impairment charges recorded in operating expense during the third quarter of 2025 included assets that were determined to have no future use and were written off.

Previous wording

Operating loss decreased $0.3 million, or 2.1%, to $14.2 million, for the three months ended June 30, 2025, compared to $14.5 million for the three months ended June 30, 2024. This decrease in our operating loss is the result of improved advertising efficiency, the benefits realized through our Restructuring Plan, supply chain initiatives, and other cost reduction efforts throughout the Company, partially offset by increased costs due to tariffs and ramp up costs tied to our manufacturing facility consolidation and the Rejuvenate 2.0 launch.

Current wording

Operating loss decreased $34.7 million, or 74.1%, to $12.1 million, for the three months ended September 30, 2025, compared to $46.8 million for the three months ended September 30, 2024. This decrease in our operating loss is the result of the completion of the costs of our Restructuring Plan, the benefits realized through our Restructuring Plan, supply chain initiatives, and other cost reduction efforts throughout the Company.

Previous wording

Interest expense totaled $7.5 million for the three months ended June 30, 2025, compared to $4.2 million for the three months ended June 30, 2024. 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 and increased the loan funding by $39.0 million.

Current wording

Interest expense totaled $8.2 million for the three months ended September 30, 2025, compared to $4.4 million for the three months ended September 30, 2024. This increase was primarily due to additional interest incurred on a higher principal balance on the Related Party Loan as result of the increase in loan funding by $39.0 million and the Company electing the paid-in-kind option on monthly interest over the past 12 months.

Previous wording

We have 40.8 million warrants outstanding that contain certain provisions that do not meet the criteria for equity classification and therefore are recorded as liabilities with a re-measurement of fair value at each reporting date. For the three months ended June 30, 2025, we recognized a $4.4 million gain related to the decrease in fair value of the warrant liabilities as of June 30, 2025, as compared with the previous measurement date. The decrease is due mainly to the change in the probability and timing of a fundamental transaction. For the three months ended June 30, 2024, we recognized a $ 18.7 million gain related to the decrease in the fair value of the warrants from the January 2024 issuance date.

Current wording

We have 40.8 million warrants outstanding that contain certain provisions that do not meet the criteria for equity classification and therefore are recorded as liabilities with a re-measurement of fair value at each reporting date. For the three months ended September 30, 2025, we recognized a $6.9 million gain related to the decrease in fair value of the warrant liabilities as of September 30, 2025, as compared with the previous measurement date. The decrease is due mainly to the change in the probability and timing of a fundamental transaction. For the three months ended September 30, 2024, we recognized a 4.8 million gain related to the decrease in the fair value of the warrants from the January 2024 issuance date.

Previous wording

We had a $0.1 million income tax expense for the six months ended June 30, 2025, compared to $0.1 million income tax expense for the six months ended June 30, 2024. The income tax expense amounts in the six months ended June 30, 2025 and 2024 were related to various state taxes.

Current wording

We had a $0.1 million income tax expense for the three months ended September 30, 2025, compared to $0.1 million income tax expense for the three months ended September 30, 2024. The income tax expense amounts in the three months ended September 30, 2025 and 2024 were related to various state taxes.

Previous wording

Operating Results for the Six Months Ended June 30, 2025, and 2024

Current wording

Operating Results for the Nine Months Ended September 30, 2025, and 2024

Previous wording

Net revenues decreased $31.0 million, or 12.9%, to $209.3 million for the six months ended June 30, 2025, compared to $240.3 million for the six months ended June 30, 2024. This decrease was primarily driven by the industry-wide demand softness for home-related products in the first quarter 2025, the impact of longer delivery times of Rejuvenate 2.0, reductions in Wholesale door count in 2024 and softness in e-commerce. From a sales channel perspective, e-commerce net revenues decreased $9.6 million, or 9.8%, showrooms net revenues decreased $1.2 million, or 3.4%, and wholesale net revenues decreased $20.2 million, or 18.8%.

Current wording

Net revenues decreased $30.9 million, or 8.6%, to $328.0 million for the nine months ended September 30, 2025, compared to $358.9 million for the nine months ended September 30, 2024. This decrease was primarily driven by the industry-wide demand softness for home-related products, reductions in Wholesale door count in 2024 and softness in the e-commerce channel. From a sales channel perspective, e-commerce net revenues decreased $14.5 million, or 9.8%, showrooms net revenues increased $0.2 million, or 0.3%, and wholesale net revenues decreased $16.4 million, or 10.6%.

Previous wording

Total cost of revenues decreased $19.1 million, or 12.8%, to $130.5 million for the six months ended June 30, 2025, compared to $149.6 million for the six months ended June 30, 2024. This decrease was due primarily to reduced sales volumes coupled with lower material costs that were largely attributable to supply chain initiatives implemented over the last 12 months, partially offset by increased costs due to tariffs and costs related to the ramp-up of both the Mattress Firm roll-out and Rejuvenate 2.0 launch. Our gross profit percentage decreased slightly to 37.6% of net revenues for the first six months of 2025 from 37.7% in the first six months of 2024 due primarily to lower material costs partially offset by increased costs due to tariffs, costs related to the ramp-up of both the Mattress Firm roll-out and Rejuvenate 2.0 launch.

Current wording

Total cost of revenues decreased $34.6 million, or 14.8%, to $198.5 million for the nine months ended September 30, 2025, compared to $233.0 million for the nine months ended September 30, 2024. This decrease was due primarily to reduced sales volumes, lower restructuring costs as we completed our Restructuring Plan, and lower material costs that were largely attributable to supply chain initiatives implemented over the last 12 months. Our gross profit percentage increased to 39.5% of net revenues for the first nine months of 2025 from 35.1% in the first nine months of 2024 due primarily to the completion of our Restructuring Plan, continued improvement in lowering material costs as we realize the benefits from ongoing sourcing initiatives and improving our operating efficiency.

Previous wording

General and administrative expense decreased $8.4 million, or 22.1%, to $29.5 million for the six months ended June 30, 2025, compared to $37.8 million for the six months ended June 30, 2024. This decrease was primarily due to a $4.0 million decrease in employee related expenses due to headcount reductions, a $3.2 million reduction in professional services mainly from certain consulting services that have been discontinued and a $1.1 million reduction in all other expenses.

Current wording

General and administrative expense decreased $10.4 million, or 18.9%, to $44.7 million for the nine months ended September 30, 2025, compared to $55.1 million for the nine months ended September 30, 2024. This decrease was primarily due to a $7.2 million decrease in employee related expenses due to headcount reductions, a $4.8 million reduction in professional services mainly from certain consulting services that have been discontinued, and a $0.4 million reduction in all other general and administrative expenses, partially offset by an increase of $1.9 million in additional strategic alternative spending.

Previous wording

Research and development expense decreased $3.0 million, or 39.5%, to $4.6 million for the six months ended June 30, 2025, compared to $7.7 million for the six months ended June 30, 2024. This decrease is due to the loss incurred in 2024 on the write off of a certain project in 2024 and lower employee related costs and other product development costs.

Current wording

Research and development expense decreased $3.6 million, or 33.8%, to $7.0 million for the nine months ended September 30, 2025, compared to $10.6 million for the nine months ended September 30, 2024. This decrease is due to a $0.9 million decrease in employee expenses due to headcount reductions, a $1.4 million decrease from a loss incurred in 2024 on the write off of a certain project in 2024 and a $1.3 million decrease in other product development costs.

Previous wording

In August 2024, we initiated a Restructuring Plan to permanently close our two Utah manufacturing facilities and consolidate mattress production in our Georgia plant. The Restructuring Plan also provided for a headcount reduction at our Utah headquarters to drive additional operating efficiencies. The $6.1 million of restructuring and impairment charges recorded in operating expense during the first six months of 2025 included $2.9 million of impairment related to leases and leasehold improvements, $1.8 million of moving and transition related costs, $0.9 million related to disposal of equipment in progress that will not be put in service, $0.4 million in employee related costs and $0.1 million in accelerated depreciation. We expect to record additional restructuring and other related charges in the amount of $0.9 million in the third quarter of 2025.

Current wording

Restructuring, impairment and other related charges decreased $7.5 million or 39.7%, to $11.4 million for the nine months ended September 30, 2025, compared to $18.9 million for the nine months ended September 30, 2024. In August 2024, we initiated a Restructuring Plan to permanently close our two Utah manufacturing facilities and consolidate mattress production in our Georgia plant. The Restructuring Plan also provided for a headcount reduction at our Utah headquarters to drive additional operating efficiencies. The $5.3 million of restructuring and impairment charges recorded in operating expense during the third quarter of 2025 included assets that were determined to have no future use and were written off. The $11.4 million of restructuring and impairment charges recorded in operating expense during the first nine months of 2025 included $9.5 million incurred related to accelerated depreciation, write-down of long-lived assets and impairment of assets and $2.9 million of employee-related and other cash charges.

Previous wording

Operating loss decreased $9.1 million, or 23.8%, to $28.7 million, for the six months ended June 30, 2025, compared to $37.8 million for the six months ended June 30, 2024. This decrease in our operating loss is the result of the benefits realized through improved advertising efficiency, the benefits realized through our Restructuring Plan, supply chain initiatives and other cost reduction efforts throughout the Company, partially offset by increased costs due to tariffs, costs related to our manufacturing facility consolidation and the ramp-up costs relating to the Rejuvenate 2.0 launch.

Current wording

Operating loss decreased $43.6 million, or 51.7%, to $40.8 million, for the nine months ended September 30, 2025, compared to $84.5 million for the nine months ended September 30, 2024. This decrease in our operating loss is the result of the benefits realized through improved advertising efficiency, the benefits realized through our Restructuring Plan, supply chain initiatives and other cost reduction efforts throughout the Company, partially offset by increased costs due to tariffs, costs related to our manufacturing facility consolidation and the ramp-up costs relating to the Rejuvenate 2.0 launch.

Previous wording

Interest expense totaled $12.2 million for the six months ended June 30, 2025, compared to $8.6 million for the six months ended June 30, 2024. 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 and increased the loan funding by $39.0 million.

Current wording

Interest expense totaled $20.4 million for the nine months ended September 30, 2025, compared to $13.0 million for the nine months ended September 30, 2024. This increase was primarily due to additional interest incurred on a higher principal balance on the Related Party Loan as a result of the increase in loan funding by $39.0 million and the Company electing the paid-in-kind option on monthly interest over the past 12 months.

Previous wording

We have 40.8 million warrants outstanding that contain certain provisions that do not meet the criteria for equity classification and therefore are recorded as liabilities with a re-measurement of fair value at each reporting date. For the six months ended June 30, 2025, we recognized a $4.4 million gain related to the decrease in fair value of the warrant liabilities. The decrease is due mainly to the change in the probability and timing of a fundamental transaction. For the six months ended June 30, 2024, we recognized a $4.9 million loss related to the increase in the fair value of the warrants from the January 2024 issuance.

Current wording

We have 40.8 million warrants outstanding that contain certain provisions that do not meet the criteria for equity classification and therefore are recorded as liabilities with a re-measurement of fair value at each reporting date. For the nine months ended September 30, 2025, we recognized a $11.3 million gain related to the decrease in fair value of the warrant liabilities. The decrease is due mainly to the change in the probability and timing of a fundamental transaction. For the nine months ended September 30, 2024, we recognized a $0.1 million loss related to the increase in the fair value of the warrants from the January 2024 issuance.

Previous wording

We had a $0.1 million income tax expense for the three months ended June 30, 2025, compared to $0.1 million income tax expense for the three months ended June 30, 2024. The income tax expense amounts in both the second quarter of 2025 and 2024 were related to various state taxes.

Current wording

We had a $0.2 million income tax expense for the nine months ended September 30, 2025, compared to $0.2 million income tax expense for the nine months ended September 30, 2024. The income tax expense amounts in the nine months ended September 30, 2025 and 2024 were related to various state taxes.

Previous wording

We calculate net income or loss attributable to noncontrolling interests on a quarterly basis using their weighted average ownership percentage. Net loss attributed to noncontrolling interests was $0.1 million for the six months ended June 30, 2025, and $0.1 million for the six months ended June 30, 2024.

Current wording

We calculate net income or loss attributable to noncontrolling interests on a quarterly basis using their weighted average ownership percentage. Net loss attributed to noncontrolling interests was $0.1 million for the nine months ended September 30, 2025, and $0.2 million for the nine months ended September 30, 2024.

Previous wording

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 and operating lease payment obligations. In accordance with the terms of our various 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 $34.2 million and $41.5 million, respectively, as of June 30, 2025, compared to $29.0 million and $25.4 million, respectively, as of December 31, 2024. Cash used for capital expenditures totaled $5.1 million and $5.3 million for the six months ended June 30, 2025, and 2024, respectively. Our capital expenditures in the first half of 2025 have primarily consisted of additional investments made in our manufacturing operations. Additional details about our loan agreements are described above under “Recent Developments in our Business – Debt Financing.”

Current wording

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 and operating lease payment obligations. In accordance with the terms of our various 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 $32.4 million and $39.3 million, respectively, as of September 30, 2025, compared to $29.0 million and $25.4 million, respectively, as of December 31, 2024. Cash used for capital expenditures totaled $6.1 million and $6.4 million for the nine months ended September 30, 2025, and 2024, respectively. Our capital expenditures in the first nine months of 2025 have primarily consisted of additional investments made in our manufacturing operations. Additional details about our loan agreements are described above under “Recent Developments in our Business – Debt Financing.”

Previous wording

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 our preparation of our unaudited condensed consolidated financial statements for the three and six months ended June 30, 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. We hadcash and cash equivalents of approximately $34.2 million and an accumulated deficit of $610.3 million at June 30, 2025, a net loss of $36.5 million and net cash used in operating and investing activities of $32.2 million for the six months ended June 30, 2025. We entered into the 2025 Amendment and the Second 2025 Amendment, pursuant to which we received an aggregate of $39.0 million in additional term loan proceeds from the 2025 Lenders.

Current wording

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 our preparation of our unaudited condensed consolidated financial statements for the three and nine months ended September 30, 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. We hadcash and cash equivalents of approximately $32.4 million and an accumulated deficit of $622.1 million at September 30, 2025, a net loss of $48.2 million and net cash used in operating and investing activities of $34.1 million for the nine months ended September 30, 2025. We entered into the 2025 Amendment and the Second 2025 Amendment, pursuant to which we received an aggregate of $39.0 million in additional term loan proceeds from the 2025 Lenders.

Previous wording

We have also taken a number of other actions to increase cash flow. In August 2024, we implemented the Restructuring Plan to consolidate manufacturing operations to create efficiencies and cost savings. We have realized and plan to continue to realize direct material cost savings through supply chain initiatives and supplier diversification efforts. We have taken additional cost-saving initiatives in the first half of 2025 to maintain liquidity to support our operations and strategies. Additionally, we entered into an agreement with Mattress Firm, a business unit of SGI to expand its inventory of our products across SGI’s national store network from approximately 5,000 mattress slots to a minimum of 12,000 mattress slots.

Current wording

We have also taken a number of other actions to increase cash flow. In August 2024, we implemented the Restructuring Plan to consolidate manufacturing operations to create efficiencies and cost savings. We have realized and plan to continue to realize direct material cost savings through supply chain initiatives and supplier diversification efforts. We have taken additional cost-saving initiatives during 2025 to maintain liquidity to support our operations and strategies. Additionally, we entered into an agreement with Mattress Firm, a business unit of SGI to expand its inventory of our products across SGI’s national store network from approximately 5,000 mattress slots to a minimum of 12,000 mattress slots.

Previous wording

Cash Flows for the Six Months Ended June 30, 2025, Compared to the Six Months Ended June 30, 2024

Current wording

Cash Flows for the Nine Months Ended September 30, 2025, Compared to the Nine Months Ended September 30, 2024

Previous wording

The following summarizes our cash flows for the six months ended June 30, 2025, and 2024 as reported in our unaudited condensed consolidated statements of cash flows (in thousands):

Current wording

The following summarizes our cash flows for the nine months ended September 30, 2025, and 2024 as reported in our unaudited condensed consolidated statements of cash flows (in thousands):

Previous wording

Cash used in operating activities was $27.1 million and $25.7 million for the six months ended June 30, 2025, and 2024, respectively. Significant components of the $1.4 million year-over-year increase in in cash used in operating activities included a $7.6 million increase in cash used from the changes in operating assets and liabilities and $7.5 million increase in cash used due to a decrease in the net noncash adjustments, partially offset by a $13.7 million decrease in net loss.

Current wording

Cash used in operating activities was $28.0 million and $24.6 million for the nine months ended September 30, 2025, and 2024, respectively. Significant components of the $3.4 million year-over-year increase in cash used in operating activities included a $12.9 million increase in cash used from the changes in operating assets and liabilities and $31.8 million increase in cash used due to a decrease in net noncash adjustments, partially offset by a $41.3 million decrease in net loss.

Previous wording

Cash used in investing activities reflected net capital expenditures of $5.1 million and $5.3 million for the six months ended June 30, 2025, and 2024, respectively. Capital expenditures in the first six months of 2025 primarily consisted of additional investments made in our manufacturing operations.

Current wording

Cash used in investing activities reflected net capital expenditures of $6.1 million and $6.4 million for the nine months ended September 30, 2025, and 2024, respectively. Capital expenditures in the first nine months of 2025 primarily consisted of additional investments made in our manufacturing operations.

Previous wording

Cash provided by financing activities was $37.4 million during the six months ended June 30, 2025, compared to $27.5 million during the six months ended June 30, 2024. Financing activities during the first six months of 2025 included $39.0 million of proceeds from the additional financing offset in part by $1.6 million in payments for debt issuance costs. Financing activities during the first six months of 2024 included $61.0 million of proceeds received from the Related Party Loan under the Amended and Restated Credit Agreement, offset in part by a $25.0 million payment to pay off the term loans from the 2023 credit agreement, a $5.0 million payment to pay off the ABL Loans from the 2023 credit agreement, and payments of $3.5 million for debt issuance costs associated with entering into the Amended and Restated Credit Agreement.

Current wording

Cash provided by financing activities was $37.4 million during the nine months ended September 30, 2025, compared to $27.5 million during the nine months ended September 30, 2024. Financing activities during the first nine months of 2025 included $39.0 million of proceeds from the additional financing offset in part by $1.6 million in payments for debt issuance costs. Financing activities during the first nine months of 2024 included $61.0 million of proceeds received from the Related Party Loan under the Amended and Restated Credit Agreement, offset in part by a $25.0 million payment to pay off the term loans from the 2023 credit agreement, a $5.0 million payment to pay off the ABL Loans from the 2023 credit agreement, and payments of $3.5 million for debt issuance costs associated with entering into the Amended and Restated Credit Agreement.