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Casper Sleep (CSPR)

Participants
Norberto Aja Investor Relations, JCIR
Philip Krim Co-founder and Chief Executive Officer
Emilie Arel President and Chief Commercial Officer
Michael Monahan Chief Financial Officer
Peter Keith Piper Sandler
Alexandra Walvis Goldman Sachs
Randy Konik Jefferies
Atul Maheswari UBS
Robert Drbul Guggenheim Securities
Matthew Koranda ROTH Capital
Curtis Nagle Bank of America Merrill Lynch
Nicholas Jones Citigroup
Lauren Cassel Morgan Stanley
Seth Basham Wedbush Securities
Call transcript
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Operator

Good morning and welcome to Casper Sleep's Third Quarter 2020 Earnings Conference Call. Today's call is being recorded. At this time, I'd like to turn the conference over to Norberto Aja with Investor Relations for Casper. Norberto, you may begin.

Norberto Aja

Thank you, operator. everyone. morning, good And joining Sleep for conference third call. the you XXXX Casper quarter Thank in with a get just We'll started minute management's comments. But a minute language. let me the so, Harbor before Safe to doing read take Casper's I'd to XXXX call. welcome to like second everyone earnings quarter conference forward-looking XXXX. This of meaning of Reform within the call statements the Securities Private will Litigation contain Act anticipated statements of should be our considered All statements that performance; call and fact this financial plans, do not goals statements, expected historical novel including regarding the made on relate management's strategies, to business. impact matters on coronavirus and forward-looking objectives; of our These but results, future implied or achievements risks, that unknown statements materially or promises by are important cause results, performance the may neither be nor any performance involve known factors from or other and guarantees, expressed achievements and statements. actual forward-looking our to uncertainties different ended materially June on Form Factors for could to on our filings call. updated, results with cause the discussed by actual XXXX, risk XX-K factors XXXX quarter the Exchange differ other year Securities report this XX-Q and the report those our of as forward-looking statements Commission indicated annual December XX, by Form the made in section and for the from XX, on ended our quarterly management's of as date Any such forward-looking statements represent call. this estimates of the

any change. to so, to even do elect While events the future, our we update to views such obligation may we if forward-looking some.in statements disclaim at cause subsequent

website company's the found release reference be also at GAAP which may we non-GAAP Relations the which our reconciled addition, of earnings Investor ir.casper.com. on nearest In metrics are metric in certain to can

Officer Chief Casper; President Krim, Chief Financial and and is Mike today Chief Officer; Executive call our Philip Emilie the Officer. Monahan, Arel, of Commercial On

With over Mr. the call remarks, that, Officer. call like Krim, now we'll session. prepared to Philip to Casper's Following Executive turn the I Chief question-and-answer for would open

Philip Krim

to everyone. And Norberto. you, morning, conference good quarter our Welcome third Thank call.

our history living time in business. an incredible We the through of are

of both will and have iconic that win we want long to the and the is In in they quality the traffic products are want They're the evidenced brands and COVID-XX products Trusted products experience. over result Consumers for of a admired seen their quarter, they seven a With QX as last such record our and Since across retail and deliver stores highest the pandemic, retail searching those we will quality, convenience quarter one by retail at-home to wellness started we with on further term. visibility positioned additional willing interest website results service across markets. products, customer million, our presence is new growth. retail brand e-commerce, our channels. in partners partner demand and year, Macy's Casper in as and our we well signals added third $XXX.X and brand a Revenue the are as confident strong have Nordstrom partnerships e-commerce was given multi-channel the experienced, well increased and As since level now. that with sleep disappointing retail third – our strong conversations of increase brands the Casper in Casper saw their take for are growing comfort. reaching partnerships, focus particular we its and sales improve design the for share top company. brands. invest that that

purchase cancellations. retail However, in orders, marked Thus, a were partnership levels foam to chemicals in outsized to textiles significant fulfill including to channels. to opportunity monetize both production leading in our critical industrywide DTC and in shortages the and we our order increase out-of-stock led items chain and unable challenges full of supply demand all

our out example, of at time. for stock were a offerings For mattresses weeks on our core of website, many

supply chain, shortages, our diligently and bottlenecks across capacity key on and and focused scarcity constraints laser are including to many components. We labor in the working materials address

progress addressing challenges. these significant past made weeks over have few We the

value of tier quality two demand are the of already brand reputational inventory vendors across levels forecasting to distribution redundancies tier better platform, control high example, we our key and As to chain multi-channel At we've implementing new which time, bring points consumer improved us and preserve an and suppliers better while to same one the equity. onboarded allowing adhering across and planning, strong supply and management. our meet are inventory who

and actively supply and goal improvement By Year-over-year, building well In the our behind towards while adjusted increased by also the a We've in are representing at increase profitability. base, grow the able against leverage EBITDA improvement further of and XXX capitalist are profit are result, expect efficient preserve protect are in disruption. to line million, In made a basis the and our and to forward the are going XX% Adjusted gross pricing loss favorable help as grow and partners year-over-year addition, top margins a came in us On X%, positioned worst fourth rates $X.X we more our our sequential quarter, positive line adjusted will a with disappointed that sequentially. gross optimizing profitability. shipping and strength significant the asset-light believe bottom further a loss. in strides We've we improvement our a towards we Put long maintain meet diverse came both and revenue product an a over dollars supplier XX% overall that margins strong quarter achieve the inventory to our EBITDA march chain note, term expect our quarter EBITDA of profitability, and manage QX results, safety very disruptions to competitive negotiated succinctly, are growth our demand leveraging our more to we continue manner. better we favorable levels. mix in of model. stock third we the year-over-year, demonstrating to model. in in XX.X%, the of highlighting points both

to face in in for the this XXXX. continue face trend positive ability the We are our headwinds significant of we most of pleased

in our of America take is multi-channel have our and less reach We model. us seeing competitors, to to opportunity much than significant that efforts our our currently many North are leaving also share. market footprint a We expand success through increase with in distribution

Casper lead our and rates. to us e-commerce management with strategy to across enable decision-making customer trial team conversion and are experienced purchase. recent a in of and stores including try our channels retail along number make months, many CMO, company, also to executives talented partnerships Our to including a strengthened with senior a bringing e-commerce, the business, to process, customers and help individuals new are more other our before the facets to of to am of and retail respective critical media, experience our and experience I the Many areas, they deep complementary and These mattress our highly chain make want in to higher the a influence they acquisition, customer We've and strategy. meaningful teams. a supply Each products and partnerships, opportunities leading interact has contributions Casper. their these will members of team confident new CFO

and of leading there's proposition share Officer, our a to some not value. to increased expansion the that on ongoing brand to the demand and for and that dynamics retail purchases, strong tailwind, front commercial we're our a consumer is retail summary, positioning a an home opportunity Casper We in demand a but differentiator, performance driver we across we profile. awareness shopping with are partnerships. strongly suburban value still for wellness, brand Going buying market. now is the feel color resonates our channel long-term over migration, Emilie, provide strategy. there's continue estimated billion. our work of mattresses, to a highlight our done, consumer including demographic for provide an over growth strategic for number growing believe from and I'll appreciation additional We benefit while The addressable that and at-home just increased a and healthy trends demand forward, aware this of stores multi-channel shopping industry of to a strong enormous for to greater major Emilie. robust we experience shareholder expect favorable plans significant to In us converge consumers President our the multi-channel in as is value also experience. and large and position call growing turn take be Casper and Chief Commercial at great of believe $XX across and market in our much We

Emilie Arel

morning, good And Phillip. Thanks, everyone.

earlier well near putting and share are third our certainly long in both chain had capture market investment. on X.X% grow in investing supply that our consumer our business, shut our the impact high European new term. year initiatives the and I its return positioned the Overall offer center we and We're challenges, the our addressing to constraints, While we was brand believe at quarter meaningfully launching this revenue up of operations down growth of believe and excluding products year-over-year.

America by pandemic. on and due limited primarily stores to chain we're stores disruptions report to store were retail our out offerings X% North improved XX running Casper to of own to which I'm supply traffic the represents depressed the third This retail site back pleased the that COVID-XX of due website, quarter, was up that, to third sales beginning and channel, e-commerce our see store our Our declined stores compared our XX and performance. of from end quarter direct-to-consumer and XXXX. foot and the at numerous

to new four the retail open Casper locations. to next five quarters, expect to approximately XX Over we X

business to the purchase were customer are to throughout and our value most introduction, key important footprint awareness across at of a brand the levels modestly strategic, on casper.com offering of retail year-over-year supports up effort buying stock curated service having despite support an high that funnel Our sales. channel. items drivers, the We more create top of channel that level increased influences awareness see of our stores product tremendous behavior cross to of in sales e-commerce sales out part quarter. from of

With strengthen healthy sequential data XX% in across XX% the issues. our to our capabilities, year-over-year retail address and chain grew quarterly Revenue our along e-commerce technology revenue by enjoyed marketing capabilities, America strategic platform addition North our to work of we've channel and XXXX, as a growth, supply leadership, several analytics new to partnership e-commerce and basis. continue identified on further various issues in our changes with including from addressed and initiatives investments program, launching the senior ongoing

are try important still buying the this part the bed a want process. represents consumers' to Casper-owned partnerships. asking office and knocking door Many had since sleep mattress. and are and complemented shops We've market, on grow made literally majority addressable of customers We our continue purchasing. today. will shop. before add our with breaking a of trial successfully we website XXXX, of this allows stages customers to is of the a where of while people the first portion opportunities. combination lay cost, the it on our a is seen to the retail want partnership low just of purchases to The our relatively at reach positioning as opened Trial and retail to us expansion very where significant in an our into we channel it us trials We early In mattress

us onboarding to Casper partners see in markets. and more leading should continue offerings You across driving and more more retail geographic new doors expect

distribution and whenever want meeting shop. at the wherever multi-channel puts Our strategy to them consumer the center, they

arriving can consumers before may at take may decision. and journeys, include As purchase weeks of education different points multiple and a final a result, multiple touch deliberation which follow many

presents know walk their one of sofa channel at like local many retail mall and to shop and like by our their shop at from in our to some We expanding to computers, consumer display pillar consumers partners. don't Our their appeals stores different some segments.

Our shop, multi-channel wherever consumer ensures Casper distribution strategy chooses consistent a have to will a that experience. they

business am reinforce with our seeing goals. expanding achieve well and The our we've to across efforts as we industry, are I path financial make presence. in made we're the our our progress trends and the right as our the Finally, confidence more our business in brand pleased operating in efficient to that

spend every success. and We efficiency effectively Our Every and we is marketing to and against our spend dollar critical across targeted both return decisions ability our single ad make the measured with dollars internally day, marketing agency is channel. measuring we the deploy partners. on execute to strategy

We more continue reach consumers. leverage marketing more will to and to

traveling on holiday across a you example, ago, and of season. the the And able attention Morning matmobiles America, may and seen the some products XXXX we've on been consumer Show to with Today few started our puzzles As subway in Good mattress capture showcasing the country. marketing, as disrupting outsized on the us innovative for market. have such an Casper weeks

Our think their life. really brand improve them to makes ignites sleep people's smile do what imagination, and about can

capture execution our I'll part of is customers. marketing model profitability. have So, operating to expand bring runway strategy successful an to to increasing a and The call our lot new the the Mike? will we awareness leverage still now Mike. and over turn important path of to of

Michael Monahan

discontinued to take to excited the future the working want for in Casper for welcome. look been team company. results, I Emilie. a million past opportunity was for holds what our a this our $XXX.X It thank of Thanks, and $XXX.X months or Taking million, revenue to financial their decline has talented third X% I'm with recently this consolidated two-and-a-half in supply pleasure operations, of X% challenges, compared quarter the North warm Chain was everyone as challenge a at for third $X.X was chain virtually well impacted and quarter contributed the in million supply the quarter which Revenue XXXX. contribution disruption previously The in the $X.X by revenue increased the in year-over-year. mentioned as no of America XXXX. us results. European from our nearly revenue a million impacted

a believe they buy, to mattresses want are make the don't considered decision wait. purchase, once While consumers to we

orders largest as orders in a we of on North XX% good. back $X.X $XX.X well. revenue lost times million fulfill channel the our believe partnership year-over-year America and partnership unfortunately increased or of driven retail by XX% result, stock was and a to our We Despite website challenges, growth the retail on resulted pressured purchase revenue inability and nearly as unable million sequentially, meaningfully organic in sales due resulted orders. as The for lost our adequately in lost to As growing of COVID-XX. out direct-to-consumer offering as number primarily expansion well quarter of impacts number revenue to that $XX.X were partners. our million, to supply shipping stock stock America's the the X.X% to Out of to declined delayed Overall, items our the the of product revenue. lost our of contributor were North these

year $X.X due impacted And offerings stores $XX.X million, $XX.X in that improving up were Gross X.X% sequentially. chain in XX.X% basis. XXX to points Gross profit Gross mix the out basis foot items margin of was a grew and increase the The limited increase very stock web XXX gross by compared and on impacted compared traffic points favorable to primarily was faster XXX profit supply or points margin was sales. in than pressures XX.X% revenue year-over-year million. Our and basis to strong, depressed previously mentioned shipping driven resulted basis the product to terms. prior an was by improved of million pandemic. negatively

successfully price average improved a XXXX. in for price earlier implemented year-over-year Our as we selling mattresses increase

to higher emphasized our each on product we've Additionally, margin margin. website, gross offerings favorably contributing our

adjusted item we change of in out we our This quarter, reversal our to in a quarter challenges partial recorded a capital of affording asset capital supply production, by key million million. marketing and X.X% flexibility, driver decreased added to us to to chain. nimbleness year-over-year expenses and $X as areas in $XX.X our COVID-XX, a the charge $X shipping the continue with was the margins. to see light which During higher distribution related one-time with impacted Sales associated deploy our Even favorably expansion us a pivot million taken of vendors, margin first EBITDA. and allowing and or ROI model

of were of through basis enable percentage revenue, points per the decreased quarter long-term revenue XXXX. decreased net percentage of marketing $X.XX. loss the net to $X.X This share in $XX.X Earnings robust database of a million year, including for from and as we the to XX million increased QX and to improvement in excluding and compared XX.X% million. adjusted revenue the an costs portfolio. $XX.X million, led XX.X% more expanded expenses of quarter prior-year G&A depreciation, from million EBITDA XX% loss X.X% sales customer of a a third more operating our of or as EBITDA was expenses a $XX.X was a of a store decline XX.X%. to As amortization last Net improvement loss significant $XX.X million of third Depreciation touchpoints XX.X% $XX $X.X a built value adjusted loss versus but to by loss period. an was compared product in to expenses, and better customer G&A XXXX. million,

path million that our We are been and even our sequentially, to team line pleased reinforce how adjusted achieving adjusted profitability to with these I results positive is growth, pleased want by to over year-over-year emphasize serves committed more while $X.X EBITDA has with by our mid-XXXX. to improving trending, goals. top EBITDA which

key focus more the continue with the will to less. and to to margin organization be be my business of continue we bottom end, CFO that the will To I to One from with been line across has our efficient more as expect areas working line. do gross down

and liquidity the to Moving sheet position. balance our

certain retail As expect our our expect retail XX, million our promotional had be of year-over-year, future. channel partnerships. business Cyber equity, stores. to $XXX $XX.X as million is This parameters scale sequential America in million Friday, we a the quarter Monday, with year-over-year the and growth In double-digit $XX an property equivalents our of $XX.X was is facility than invested North that of operating to quarter, million that additional expected At growth Wells down. in partially quarter from $XX.X improvements winding expansion are of XX, third by revenue, our by more the Gross the in XXXX, million are of met compared has due both and added and to we this fourth overall The represents of December million activity the primarily $XXX Fargo. enable we and of asset-based quarter We to a fourth in year-over-year compared facility XXXX recently of driven business accordion and lower In million adjusted equipment, the used of quarter, of Black will in of build our European other feature, $XX EBITDA. midpoint mix. us provided deliver range, excluding to includes cash typically for of cash with which XXXX, to promotions which million cash fourth primarily the offset channel a the million result as and issuance $XX $XX increased margins to fourth e-commerce September quarters.

EBITDA. the than above in of to is be will channel channel pressure to margins anticipate given margin mix the continue channel, term, we which of spend, adjusted the which to forward. slight will less while QX with a adding partnership positively Additionally, XX% lower note retail a larger requires Longer percentage gross there in key this partnership believe a going than profitability third results important we flow the quarter. carries will from DTC it cash growth and and did be revenue margin business retail contribute that gross our It's channel we XXXX the marketing shift, channel driver in

fourth For will seasonally an expect modeling adjusted increased QX we demand loss note the quarter QX purposes, EBITDA have XXXX experience and, to as important lower it's that to of XXXX. versus tends such,

enter million be a XXXX, to be this XX We in loss expected to plans EBITDA expect market. stores. addressable is front opportunity $XX of open offset half with with XXXX enormous will CapEx fewer of XXXX in very as in in positive. we become below the large second operate We us. adjusted We than

grow. with opportunity brand powerful a have to We significant

and long-term profitability. on Our growth organization is achieving focused sustainable

awareness, us pipeline, position current expertise expanded and and offering product well. Our sheet distribution, brand balance marketing

top the creating adjusted in goal by growth turn our mid-XXXX EBITDA driving line, shareholder sustainable in starting down healthy line value. We to bottom significant in are profitability confident and achieving of

forward, will trusted deployment is to line us apply to and with towards that customer Going data-driven drive Casper brand an capture products approach top we both growth. continue analytics position and a disciplined, customers. lifelong capital amazing to bottom

significant in our years are are that we investing enable capabilities will to share data to data in and come. more enhance customer leverage and market rich We economics to customer the us effectively in analytical capture believe that

those We improve diligently better. we working where are to can areas do

pleased we're ahead. are across seeing trends We business. with to I'll call about And improvements opportunities excited the our we're Philip. back the now turn the and positive

Philip Krim

call the joined who this everyone to Thanks morning.

focus through the challenging open to go the we Before our meeting want can position to thank by continuous it throughout quality truly they of talented the dedicated on work advance consumers customer think these up providing We Operator, have have exceptional needs highest our Casper's Q&A, remarkable to level questions. innovation, continued product I a for done I times ever-evolving and for industry and and of team. we service. our expansion, wellness employees

Operator

Instructions]. [Operator

from Your comes Peter from Keith first question Piper Sandler.

Peter Keith

to does it's a at industry I of QX for the the growth of of even about reconcile or very survey that's the mattress the for wanted look industry data If suggest whether just some work, out, industry XX% America ISPA quarter North X.X%. it our entire to growth XX%. we strong

disproportionate supply aspects So, model my were relative of given your else? that there had more there you specific disadvantage business X.X%, America the impacted you? that Are a of everyone felt North issues to question of chain you growth that is,

Philip Krim

issues strong our us Unfortunately, products foresee. did supply ship innerspring textiles Just were demand supply were production. to did time around signals on business. disruptions we we chain very partners products. and foam issues our or did created very and allow to run for traffic e-commerce and we covers we record expected. reiterate, around reported our chemical manufacturing There around strong not there for issues issues that retail what to into saw that several not demand that were chain saw There

would stock, I with in reacceleration and from windows, to we seen and about normalized our of in since our it sentiment weren't And corner the certainly So, saw business. record on a more your if going traffic your shipping – the to echo now casper.com, chain what's disappointed And back demand, products we out the back stock see to question ship to but website. you to we've we we've issues we turned about industry. are are supply on separate the that able you'll and go are products,

demand So, separate are side the our the certainly within supply from business. chain issues

Peter Keith

I industry impacting a and had calls this discussion. didn't far quarter guess seem inventory issue you the issues with evidenced at It Maybe out, supply had the chain disproportionate impact just chain of to it negative up we've some the the supply as everyone on are XX% was earnings so guys. our like year-on-year quarter-end. round

that a stocks. that doesn't us. like So, necessarily help timing has out a of you it's reconcile us company to Can issue, look stood that quarter-end out Maybe number? that but

Philip Krim

business mind our we in we of manufacturing supply chain not Keep light competitors because that have our And deploy since of bit a were disruptions that third-party change think asset some the that. taken We for to steps we hit harder little coming. an model production. of some maybe leverages perhaps But than see I did that.

new components. about redundancies around talked partners key and supply We've critical more to brought across added expertise visibility us have give supply our chain chain into how inventory planning. manufacturing points. with in forecasting, demand We we've strategies implemented We've management,

And seen so, days, in respond really we've very supply last are that on been XX of all positively. focused things and our chain those we've

increased going issues. can positions so steps positions on here, to to our suppliers, report I up by the forward that onboard disruptions. So, those is chain any XXXX this think new we building about the but also on industry going continue mattresses planning the for focused safety there, with brand. is potential we we've ahead we inventory safety capacity we within can could we've But kind that back and mostly see of talking that our the of given And stock – And chain position, supply one the I source. think supply we and of we suppliers, just also tier stock talked about demand be the focus two tier business mitigate redundancy that are building

absorb supply we're visibility so, on that we very so any arise. focused chain, and making increasing that have chain redundancy, we issues capacity, can that And supply the sure through increasing might

Peter Keith

agree, do issues for I going while. chain to be supply are around a

answer. the for thanks So,

Philip Krim

agree I too, unfortunately.

Operator

will question from And come your next Walvis Sachs. Goldman Alexandra from

Alexandra Walvis

across it prioritize expecting the and that how have the to wondering a forward? On partners retail inventory few And related chain you've product in-position channel. these why shortages. going issues, you some to new the partnership you're partnerships. through new is I why like onboard of I'm you're supply with Can given then And talk choosing channels choosing allocate you're question, you seems announced suppose that to that

Philip Krim

to couldn't ship commitment made even try we them we that products inventory orders the that You're channel, some right. partners, the get of we that we best possible, demand partners. they are QX. And were the partnerships retail We placed because and our those did in retail term would for retail with the call high about our we saw QX. we partnership continuing purchase to long in But could. partnerships a retail see extent We relationships. and think into Unfortunately, we

our trying – with And of chain focus and able so, year. the And we of goods we believe one strategic we our with And channels. areas the would I be flowing is number doors. are that how key of say supply to very keep all we're are we between demand are with of this better to increasing up trial currently the just us behind issues

So, footprint, truly to and products lay the Macy's is Nordstrom see makes partners what they our comfortable how like and people our more will give try our which products, increase special, are. just on unbelievably will ability them

go channel, that partners, very new supply up retail us think scale. we mentioned, are you much partners we able been much so, back confidence stand our every fixes two, pretty we announced shipping the over which And the quickly. e-commerce I that our we've And many to as demand strategically even we fulfill long important. have we in from are the if SKU. And that's, as website, like in more our we've about, is largely talking now, months. We're DTC products chain that last said, that something are term, give stock three of I to And in place

Alexandra Walvis

may. I if Maybe one question, more

about correct rate you lower mentioned I XX you're were had wrong. – lower about expecting. heard roll than think me previously, talk the You year. the you virus maybe slow just of and mix trying traffic? it represent terms return we how the next out run Can this to you're what uncertainty rollout? But more the said because store than of stores we if That's of I decision to that in importance around retail does Is of and partnerships? of the Or a the thinking strategic it versus stores shift the channel

Philip Krim

our us rollout. to about being not. just to that continue inform accelerate I we're conservative to how let think And going store or that it speaks we data

more So, than right our see now, demand from from enough retail channel our partnership and channel. e-commerce we

major, of channel, drive addressable in. far normal we're biggest by retail we and out. going meaningful kind so, going certainly retail revisit reemphasize, we are to as back retail certainly picture, rollout continue and is what channels to performance. to And we compete really but XXXX out penetration And to right expect partnership and grow your But happens expect point our we're a Ashley And and year the see broader footprint, foot contribute business store and that how as traffic also vaccine continue of partnerships, some them Sam's Macy's the into data. to to But on playing is see we like these we a market major to these that view sales just of to the we levels. to rolled HomeStore as accounts, it's and more which about the Nordstrom we return conservative to partners of once get next the not slow a amount performance just Club, now, just

Operator

Your next question from Konik Jefferies. Randy from comes

Randy Konik

given bumps, how perspective how or your would Quick question would helpful. you first supply you Can that safety you you constraints view about are kind how – changing now? of stock be, there, safety the kind Philip, before? quantify Just levels some be changing of approach do you're of How manage and that think stock? of did give

Philip Krim

our changing management a a want thinking. turn that it how little you and talk Mike, Mike to little the can bit how kind of we more over I'll bit? Actually, we're do about who one to think inventory comment on about

Michael Monahan

needed too was In the stock be. it safety Sure. where low to from quarter, we

and suppliers demand, that we so, our to we're can make satisfy stock, in way that is forward do with but capital make working sure up the we it also can needed to And obviously, go a the order build sure in efficient. safety

properly as build going our demand. we're to goods they're we meet hold example, of materials. a going we're manufacturing And also an where sure our the So, the number some and raw finished working can with inventory up to of partners make to then, some of

Randy Konik

to it think you inventory forward? the the year-over-year, you that inventory is going need up of mentioned kind Do – number up appropriate was state indicates caught stock you've the levels have on that earlier, given that now safety that of

Michael Monahan

work to have we do think some I there.

balance inventory sheet, popular from we products, dropship Our on to tend our them. our most

And so, products. when sheet, the you demand, doesn't represent it necessarily supply the those have balance look we for demanded at

misleading little sometimes. And think it's so, I a

the for throughout progress certain we do year. But forward, have in the quarter throughout work more products. we did make building stock up going some safety to think, still I

Randy Konik

came to environment gross coming on in in should fourth guess quarter? quarter third just are seems, thinking. related down still you the of perspective fairly still just gross the the give in fourth a were the we pricing in we again, some the then be, I be because should be that, you mentioned, because your sequentially would healthy. than on quarter into we kind even sequential around quarter. your in margin be, gross should would though question better expect commentary out the margins fourth gross margin quarter, the from And the expect I of question basis – dynamic margin year-over-year Last understand it general there the items to can up And the us it

the is forth just So, comments how consumer really pricing and and perceived the environment would by be helpful. being so any your around

Philip Krim

do basis about Mike, and you to talk QX? expect what margins want the on just a on to year-over-year

Michael Monahan

channels. there. mix, are more it the Mattress up of North earlier helping the out been some kind ASP improving our a was in we've all also across about premium commentary. price in talked shifting increase products year America towards product XXXX quarter it We in third Sure. that We of and had the our

item remarks, our on the about opening margin piece, had we I'd basis helped about of in in around shipping. kind I XX ongoing a other one-time gross We're basis The charge, settlement by third the mention that's did also say deficiencies a quarter, points. specifically of seeing kind an chain, supply

it When We see forward I look expect this the overall We a going percentage for from in about and QX. contract. we the that's to business. the of larger were on favorability have primarily partnerships be or we fourth QX, of consolidated talked would at bit better be fourth little that. view And start a a more of what more gross XXXX. QX retail basis targeting. quarter to to That expect to And new long-term quarter-over-quarter margin in our the because they said, anticipate you'll contract would that XX% That's a than decline quarter margins we be we was signed QX at a to tends you than business of as the expect year. in margins the we're beginning promotional I

Operator

next your come question from Maheswari will Atul UBS. And from

Atul Maheswari

I you issues, vulnerable think that third given supply was perhaps chain on Casper mentioned your parties. reliance more Phil, to

strategy solely you make rethink relying that going does on third-party forward? So, your manufacturers of

Philip Krim

to visibility facility. we caught we've that later changes own allow forward. think going the our chains, safety our industry with mitigate their stocks a working by had dynamics, think, I clarify, differently supply on getting made increased that to if will Just I perhaps into of we about, got manufacturing we us But spoke manufacturers, the owned little some that building than

going question it think business back to is I working. change the don't again, Randy's no, think And so, us requires And well, business as model. I our model to

at If is business the sequential of in is are at light both dollars Casper. These if existence the asset model the look our working. of at for unprecedented, profitability, you margins, gross manufacturing working, model issues profit you margins, least footprint look industry and expansion and year-over-year

just changed we've more And onboarding this throughout now supply so, doesn't including how onboarding we so points manufacturers, operate more the that with happen our redundancy chain, again. manufacturers,

that that disappointed us. way business. reaccelerate. we're that a demand the since these of the we've but what lot new seen since profitability the about seeing model, again, targets it's it in we changes, a And the And in happened the that right So, reflect And implemented our talked the doesn't but QX, operate business it think forward, business be we've will for model going we with will business we've long-term IPO. this lead to us

Atul Maheswari

quarter the current you fourth you if to the of Thank expectation quarter? you full you an double-digit Where now quarter-to-date baking quarter be achieve maintain acceleration you. trajectory? your would fourth are growth question tracking over is your period? follow-up are basically, My able on guidance. relative the Or the for American North in So, this balance to

Philip Krim

think well think fourth off that we is, products stock Black are still saw which for I what events lot Cyber of kind in starting positioned come. holiday QX come a QX quarter mid-October, we We is period. of big say is Monday, The strong. we'd again, now our the about back Friday, obviously in to

performing good that feel goes. is the to business about But a how thus And right would we so, QX we'll see far. say now, strong I start is off and how

Operator

from question Robert will next Your Drbul from Guggenheim. come

Robert Drbul

first you your minds? from challenges questions the changed to timeline that the is, the as I one couple of A profitability guess through path lot has all in me. seeing, a you're run at

Philip Krim

expectations ahead were kind good We had February. going in business that's feels plan, QX invest is working. there cash where we in we we'll demand were less be model revenue coming like the there, is we to mid and still of we of back still was profitability. we still And would feel less than the the margin expected. it improvements profitability. think XXXX and to Obviously, all about get there But I say together drive to are ahead of are into meaning

Robert Drbul

there follow-up how don't Thanks. you're When allocate for thinking you that in how just maybe dollars, I the and decisions a what the the seeing but could I going quarters. is you're Emilie, environment, know or coming don't you're like investments, Just know behind marketing if you think trends of or advertising tighter to question. the address this in about if and the some months about terms

Philip Krim

that about talk to want one? you Emilie,

Emilie Arel

his demand. decisions we from mentioned board, in And agencies really We make single every them have, dollars now, look into back we're heading day. new a QX ability into remarks, new then deploy a consumer lot to, really to stock, we've marketing our feel in about and from head marketing new new good QX. on learned as every QX, Philip a that of we media, particularly of head and CMO, e-commerce, efficiently the single heading And environment a our at drive QX day, had

Operator

ROTH from will question next Your come Koranda Matt Capital. from

Matthew Koranda

given like at said. not Sounds guess, in year-over-year you back lead look normal, if it guess, we're losing necessarily to the are a Phil, basis, sales, we times XQ, I I as on for the in growth to be be midpoint quarter. wise, would industry a guide tracking mid somewhere maybe which the little bit high-single to would the where of digits seems below suggest your

So, if could maybe square comments. you those us help

Philip Krim

early come. just still events given that are we quarter, are think to still the in I the

we've to working the so the can say But the capacity up still second ramp how like retail demand going we the we up would stronger the But are now, our the plays have I we quarter, that Right largely aggressively the side, think positioned how in handle business. we do the half well I we're And business. we'll still out. we quickly we demand. given the stand throttling timing. just of the that handle partners in and inventory to of feel how been holiday on that's out rest see quarter on roll

the quarter how of And out. the rest see so, plays we'll

Matthew Koranda

What that for a longer-term curious, growth does in store you year, A kind for that of stronger terms even of of But year. does guys the also longer-term expansion? just plans imply that maybe that imply I kind little for gave expect And of like guess next XXXX? question. locations commentary, the next bit XX your growth retail store third-party should sounds we

Philip Krim

want Emilie, talk bit? that a do you one little about to

Emilie Arel

a look by consumer the stores, We to look we're not you our really and mentioned future I Phill new we talked the a each X in about best our DMA. at had really could third only In in direct-to-consumer. our city store right at XX% for being but And And our We of continue by you about our partners to decision third, on past, store XX a forward. And the in at think that's each providing city business the environment see in and us channels. we'll in way business XX% is the of shopping as look city this partnerships up the retail retail of making as really experience third, and earlier, in based now. to heard we're locations, locations. go talk a retail business

Operator

from Your next Bank will Nagel Curtis of America. come question from

Curtis Nagle

Not of revisit to belabor a point, on but just kind questions wanted to supply the chain.

quickly, were website be new resolved able it kind as some you thing, to sure a shortage your you sounds issues. to stock If just well, the an by Yeah, would on could in how how, your of good a Philip, inventory this who I which guess guys given input theoretically most talk to have of looks is of like is said, get be you certainly back guess, there like So, I constrained I'm really that, is. of really helpful. you that'd so far beds. wondering But help? reaching add might kind why like, manufacturer, It's I issue. issue

Philip Krim

good third-party we the the benefit this that manufacturing business question. of speaks again, And a asset-light, It's think have. model I to

asset-light maybe So, going up moving if on And redundancy inputs mattresses. that of source redundancy go inputs we business into we and were sources, chemicals, build producing be fronts, other But manufacturers very model. go to able of then, to across that only those a to are from to our that. source quickly now our we're the all to we have and we're a foam by innersprings, yeah, for to source one, us, able chemicals number to covers, own two limited buying to thanks to number

stand move And now like eight and mattress on points, design from, those and make to within I or We but manufacturer manufacturers concurrently. able finished on shipping so, manufacturing And strong that quickly, the companies up for footprints do additional to of able that think, a given push to in manufacture with and we're and relatively able a to products the those. them very go just partner that and something in-house, we given we goods that different there's we for demand category. development are We're us. were that's producing expertise quickly, fronts

it will – business allowed we allow differentiated a operating if I move quickly. is do. a couldn't we us So, our risk manufacturing own way forward were owned that And aspect to think that and of to our going that model has us in mitigate footprint

think is we issues, when his supply different again number building we about term this of believe again, redundancy And Peter do we frustrating do through hiccup and don't look the we're right a manufacturing despite was So, what mentioned chain just have model up what in asked so hopefully. business continued points, that had we QX. longer and to

Curtis Nagle

products that. just quickly I and complex, to become your in of pretty terms as risk think hybrid some to guess a beds? Any new like little distributing you your of bit more want partners, maybe had moving particularly

Philip Krim

test manufacturers. still based We on ups. We quality ramped stand with work to get up quality full do them still them our We standards.

product impact could And well to even So, that do, to And we're vendors that brand fix that of kind industry. in we quality our willing we standards with, do manufacturers not all know We high the trying the to working sacrifice the are that we manufacturers they're are performance. something known chain. quality supply never sacrifice. to hold the that's and that

as they're orders a quality for to shipping we know needed that didn't we made to the purchase need that business a believe flowing these us. long do goods are level established hiccups. players the of now of adhered we mattresses And But Before and requirement And these order redundancy in with all time. made we're are to get standards have many that we to them. now of ahead and products

Operator

Citigroup. comes Jones Nick Your next question from from

Nicholas Jones

Cyber constraints, to elongated fairly little kind holiday Black kind you're like and and to the guess, talk given expect lean be constraints XQ, you you to typical I sounds COVID into big season. Friday, more to versus the that Monday So, heard of of question have supply shipping in to holiday Cyber inventory prior some Are you're And area worries a consumers other can of another if a heard able the guess times? weekend to you event. some of about optimistic that's the fix while Thanks. players going the inventory I time? there's In can then, or kind Monday dynamic? a elongated is, e-commerce two years still kind you of fast be some second Black it more the of ship a to been kind It enough playing we've about season quickly. away going Friday you COVID. do talk constraints an due season you I if will be expecting from

Philip Krim

well. moments industry. in we we as that we We don't are we That's we a think agree the we of as are as consumer factors great over kind trends QX, an periods certainly question. And changing tentpole could And other you hit well and around by driven something on executional that for Because Labor played when within that was us look misstep shopping back us. do elongated that this there believe here Day. COVID have that believe

sale these Black this And kind to our that. of that playbook holiday earlier you changed we do year. our us believe so consumer there's change Friday shopping launched of flattening our we across periods. And We accommodate saw a out and playbook

over, goes concentrated back period. increased not kind good I a been to a which of five-day in a demand business being again as agree, historically, comments off the be I start. already the So, to what to reacceleration seeing had our QX holiday going of it's we're about selling period made And in

casper.com, Black to are in are go are. the well ship running So, again, I And our we that. if question, Friday Others you largely are in your that sale. on to responding then, you'll industry time see stock. consumers our think products And

that's think ranges. times delivery into We back are kind great. normalized we and shipping And of are

to will We able out I think are ranges days. ahead across the But seeing one to out business which for try having I ship three outside is going to products some that are usually, within to carriers there to the of think is get and normalized of of control. anticipate issues, us, be going that. we we're be be going consumers to board. of kind But that our that

able kind warehouses So, the to be think get we'll subject of what's with product networks. we broader will of on out I then, And our to be quickly. carrier going the

Operator

next Stanley. question from Your from will Cassel come Morgan Lauren

Lauren Cassel

partnership retail of I how the versus you're new my partners the XX any the is there fourth just, given long the question the so what over And growth on a term? during does number all even or about doors from right guess thinking remain for guidance perspective, much. duration then, your of COVID assume second of quarter? open Thanks stores we're that quarter fully the And is color quarter? what existing seeing

Philip Krim

stores? in partners. weigh QX the color existing start saying where and as balanced and Emilie I mix prioritize new the on on term, think Longer But, that's will have retail I'll demand I'll of flowing. came us available But existing were any across of we where our that. to kind the growth some we see of did partnerships growth want from partnerships in let by partners that you well And we partners. in as most other to Emilie, inventory provide retail you

Emilie Arel

as to their assortments who would also, say on right And as what's with right. and think brand consumer relates I really Casper. that's continue based our for different I we Yeah, a partner Casper brand. brands understand it partners to their have

keep Phil's lot existing a of growth the that was But saw And about. so, we'll – which eye we points, on from partners, continue to coming growth the an excited majority mix. of we're to

our As open think are about now. stores, we stores all

could our with now, we're we'll further you stores. operating to that stores. it in As our But can comes COVID happen what of all take as lockdowns, pending right regards imagine, and

Michael Monahan

the shaped guidance, following be our for remarks, the open, took that about is XXXX, just about add on top could. of has near-term assumed thing in lower there effect that COVID the strategy I would also In the and into traffic baked number. think what what had. we into be our And that the we as but if that, prepared our foot then be would store rollout the And to would stores is one I year. impact planned we thinking will that,

Operator

from will Your from Securities. next Seth come Basham question Wedbush

Seth Basham

around My question marketing. is

burden. and very the quarter, ad showed marketing a expenses environment carries help lower You limited a you this had marketing channel, understand Can the lot going shift you wholesale on there in despite which what's said leverage rate please? us to lower

Philip Krim

spend continue on We an chain times. our to how issues to which, shipping pictures. happen marketing, bit supply quickly The saw just unexpected demand us strong given started and hit a we of they in fashion, delayed again,

up and to strategy were the more were within demand. trying could we we demand dynamics fulfill we're getting more keep so, strong We signals. not about as And orders. quarter. We manufacturers thought But kept because the saw the that we with talking behind changed the

partnerships that where demand able DTC through retail delevering real would balance you fulfill trying we Had in think sales and we were our seen saw continued our been the expenses. time, And I investments. through and the we to of to that the that saw have so, were marketing we we making business,

we go that going creep ecommerce ad of think that But to will seen kind that trend And continued shift. overall as we mix back strong. see in have rates has we're channel stayed forward. know again, up some We just QX,

that expected, the of in drives how back the leverage marketing And we'll and we on didn't and our And marketing drive spend business had chain play you're within retail business. seeing able how sales to revenue we'll profitably QX and DTC marketing effectively our the growth our the driven do and disruptions. on expect forward. operate grows, out supply different so, operate given But we that's to what and of kind just we're and a we to that QX, net as sales to that sales partnerships see going percent be in going going business way channel

Seth Basham

you fourth quarter As sales in expect and leverage would and we the marketing? then think about XXXX,

Philip Krim

channel And our that faster expect our grow our drive DTC retail continues would think marketing and in going partnerships that leverage channel. I I than forward. to sales will

Seth Basham

performance you've it industry, Based we've can understand But stores company-owned lower the on term value not does down pretty sharply question only about seen that? second just around Casper but confirm traffic. improvement in across there's bricks company-owned stores. longer your per were is foot your direct-to-consumer plan a you disclosed, big mortar you Casper stores. seems sales that that data And year-over-year. My of the the the your in and stores? I plan of your B, the like make having stores, sales A, XXXX rethink for

Philip Krim

continues. Remember, there's we interplay believe those lot of between a retail we because And channels. break e-commerce that don't we out and think interplay

buy purchases they're to break the back kind products. to of the don't know performance, leveraging see out same-store for e-commerce sales education, and their But to products. that our we see we complete channel that stores we and are So, also consumers retail to coming and lay touch

And continue the between be retail than out. so, nature we we consumer dynamic behavior anything, that see e-commerce that if in had convergence And and expected play interplay to much and more this to by informed that data going at we're we rollout about And continue as to we drive point. store behavior. consumer earlier, let will mentioned and how think our be data

behavior those going look are how and that my case capital at about expansion, at we're return thinking consumer to to store, share gains long-term but of rolled trial invested believe consumers continue vaccines being will belief opportunities. to store a operated going our which investment key we're guessing us. is that on the Casper growth, for in I'm the and changes, is out, we that to direct-to-consumer and opportunity driving My Casper as is in market best front So, owned post products to continue is and belief long-term the be trial look retail want

Operator

remarks. of This Philip for will the Q&A the Mr. Krim today. our call end to I over bring to closing us session. turn back

Philip Krim

for appreciate to about of sleep Casper to everyone, just thank continue mission talented everyone. stay you, world and dedicated our our focused the opportunity today. to Thank to employees you, talk on and the again, joining wanted the We who the Thank call business help fulfilling better.

Operator

call. will conference Thank you, today's This everyone. conclude

disconnect. now may You