Purple Innovation, Inc. (PRPL) Earnings Call Transcript & Summary

Good afternoon. Welcome to the Purple Innovation investor and analyst session. I'm Brendan Frey with ICR. We're going to begin today's event with some remarks from management regarding the recent update in the second quarter, after which, we'll open it up for questions. Then we're going to move to the presentation. And again, after which, we'll open up the event to questions. [Operator Instructions] With that, I'll turn it over to Joe Megibow.

Good afternoon, everyone, and thank you for joining us for our session today. This has been long in coming, and we are thrilled to be able to finally present our longer-term view on our business and strategy as well as we'll take a few minutes, as we said, to discuss some of the recent events at the beginning of the call. Go ahead and advance forward here. Before we get in, just to throw on to the display here, we've got our forward-looking statements and a statement on non-GAAP financial measures. So we're going to begin by discussing some of the isolated production challenges that we just reported on earlier this morning. We're going to time bound this to, just call it, around 15 minutes at this point but want to make sure that we've been as clear as possible on where we are for the Q2 and Q3. And we will open up to some questions during this initial period before we move into the Investor Day, where we'll be exclusively looking at more of our midterm to longer-term opportunities over the next 3 to 5 years and beyond. So I want to begin by recapping what was in the press release. I'm going throw up a slide here. This is a chart that was also in the press release. So we -- in the press release, we said that our second quarter net revenue guidance is now between $175 million and $185 million, gross margin between 43% and 45%, and we're momentarily withdrawing our adjusted Q2 EBITDA guidance. We're also withdrawing our full year guidance just until we report our Q2 earnings as we continue to reassess the plan, given our new visibility into our inventory levels. Just again, I'm going to read what was in the press release and then open up to some additional points. What we said in the press release was during the second quarter, following an accident and resulting safety improvements involving the Mattress Max machines, we experienced production challenges caused by unanticipated mechanical and maintenance issues encountered bringing the machines back online. In total, we project significantly reduced production levels for approximately 10 weeks, causing shipment backlogs that will impact both second and third quarter revenue. We expect to have production fully back online by mid-July. We expect no impact on completing the scheduled addition of additional Max Machines as previously announced, and we are confident that these issues are isolated events and will have no impact on our ability to scale beyond this year. Some additional points just hopefully for clarification. We've been trending well. And if not for this isolated event and the corresponding degraded output and also considering our current backlog, which is a known quantity, and where we've been trending, it would have likely put us within our guidance range for both revenue and adjusted EBITDA this quarter, likely on the low end because of channel mix. But this really is almost entirely related to these isolated production challenges. And we've also been doing everything we can to make sure that we are servicing our wholesale partners, our great retail partners. As we've been stating, there's been just renewed enthusiasm for brick-and-mortar. We think that's terrific. We are leaning into that. Though given the inventory backlog we're in, we have temporarily delayed some expansion until we get out of the backlog next month, which is let's make sure we are servicing the doors we have out there before we start expanding. And once we get out of backlog and get back into producing inventory beyond what we're selling, we will get back into expanding. I also -- just to clarify, we've heard there's some questions on just the timing of events that occurred and hopefully, to provide some clarity as -- around that as well. So we had, and this was in the news, an unspeakable, unfortunate accident in our primary manufacturing facility in Utah, which involved the loss of life of one of our dear employees. And there's no words I can say to express the pain and sorrow that we have all felt within Purple around this incident, and this happened literally days before the Q1 earnings announcement. At the time, we had fairly strong inventory positions on our components, the grid that we make and decent inventory positions on finished goods. We also -- despite this tragedy, in reviewing our equipment and processes and safety measures, OSHA very quickly cleared us to get back to work immediately. We hold ourselves to a higher standard. We take safety very, very seriously. We've actually spoken a lot about this all through the pandemic last year. We have led an industry in our approach to maintaining the safety of our employees. In Utah, we actually, based on much of what we established in our facilities, became the basis for the Utah Chamber of Commerce's work around safety standards during the pandemic. And we chose to retrofit our machines with a variety of safety and process upgrades. Given that at the time we had ample safety stock and given that the work was fairly straightforward, we felt very secure in our ability to get this done, get it done quickly and get back to work with no real significant impact on our overall business. However, as we began to bring the machines back online after the work we successfully completed and retrofitting them, we ran into a cascading series of unanticipated challenges related to bringing the machines back online. We have -- taking a measured approach to bringing them online, we've seen degraded output over the last few weeks. But we have been successfully getting the machines back and running. We just don't have all of them up at this moment to full production levels. All of them are operating right now, just not all to full production levels. And we have confidence that we've got line of sight right now to full production levels by mid-July as we've worked through this. Some important points to realize on this. One, just a reminder, these are not off-the-shelf machines. Our Mattress Max machines are complex machines, designed and built entirely by us. And the oldest of the machines currently in production is just barely 4 years old. These are relatively young machines. Coming out of this and what we've learned through this process in this isolated incident is that we have a much, much stronger long-term maintenance capability that we believe will extend the lifespan of these machines at least as long as we had anticipated, which was a fairly long life, and likely beyond. As we have better understanding of the long-term maintenance needs of these machines and now have very good processes in place, that will prevent the very issues we just worked through from likely being anything we face again. And as such, not only does this mean we have good confidence that these issues will have no impact on next year and beyond, but we likely have reduced risk and higher probability of the high-yield output we expect out of these machines and certainly a much safer work environment for employees over future years. So with that, hopefully, that's a little helpful on where we are. Again, an isolated production challenge that we had, primarily related around bringing these machines online, exposed to cascading series of challenges that we have been very aggressively working through. We have our arms around the issues right now. We actually have a number of the machines fully back to production. And the remainder ones, we have line of sight to get production levels back by mid-July, after which we are back in business, Max Machines coming online exactly as we said they would. And again, no impact beyond this year. So with that, we will open up to some questions specific to the press release and our Q2 and Q3 statements. Once we've worked through that, we will shift gears into our regularly scheduled programming for today, which is the Investor Day. So Brendon, if you can open up to any questions that may have come in.

Yes, will do. [Operator Instructions]

This is Seth Basham from Wedbush Securities. Can you hear me?

Coming through fine, Seth.

If you could just be a little bit more specific with the series of events associated with this production shortfall, that would be helpful. In particular, relative to the accident and taking the machines down, putting the safety measures in place and then getting these machines back running online, what date specifically did you realize that the production shortfall was going to become more prolonged than you initially did when you issued guidance for the second quarter on May 17?

Yes. We -- this wasn't a binary event where there was a date that we knew exactly what was going to happen. We -- I mean the notion is these were unanticipated complications in a situation we've never been in before. I mean we've never taken all of our machines down for any extended length of time and through that process, discovered, again, some cascading issues related to long-term maintenance of the machines that we -- that really have nothing to do with the accident. The accident was just the catalyst in the discovery of these things. We, at multiple times, genuinely thought we had our arms around the situation, and the nature of cascading issues is we were discovering as we went. So it's not to misrepresent, but throughout the last few weeks, we were fairly confident that each week, we were through the worst of it and we were back on track, and new issues kept presenting themselves. Really, it was just at the beginning of this week that I think we really got to the point that we realized it's going to be a few more weeks. But at least at this point, we have very high confidence that we know exactly what we're dealing with and how to fix it, and we are doing that successfully right now. So I think it really wasn't until very recently that we fully had our arms around the situation and had clear line of sight on the time line to remediate this. It's been a learning process as we've gone through. And I just -- I can't state this strongly enough, that we are much, much stronger for this. These are machines that we intend to use for quite some time. This is really the first time we've dealt with extended maintenance issues. It's very clear where and how, and we don't anticipate other surprises as, I mean, this really is the heart of the machines. And we -- if you look in other industries with machinery that lasts for many years or industries that have machines that are in operation for decades, part of that process is periodic, meaning every 2 to 3 years perhaps, a much deeper or more heavy maintenance scheduling that really can extend the machines' lives for as much as a decade. We have just learned exactly what that's going to take for us, and we know that now. And moving forward, that is absolutely going to be part of our regularly scheduled maintenance. We've been saying for years we need to build excess capacity so that we've been running everything full stop so that we have the opportunity to take machines out of rotation, do heavier maintenance on them and ensure that we get long-term capability out of them. And that's exactly what we're going to be doing moving forward.

Got it. Just to be clear, so some time in June that you realized you were being presented with bigger production issues than you previously thought and you're going to miss your second quarter guidance. And relatedly, when you guys talked to the reduction in the number of wholesale doors you were planning on getting into this year, it wasn't at all related to these production issues. Was it?

No, not at that time. In fact, recall, at the time that we stated that, it had nothing to do with reduced levels at all. It had to do with increased performance and increased sell-through in the doors we were in. So it was just calling reallocation of units and improving the economics of the doors we were in before we expand. Said another way, let's do what we're doing really, really well before we start doing a lot of things perhaps less well. So yes, they're completely unrelated actions. Thanks, Seth. All right. Next -- it looks like, Brendon, you may have let Brad Thomas in.

Yes, Joe. Can you hear me?

I can hear you just fine, Brad. Nice to hear from you.

Great. Thank you for addressing this all head on at the start of this, Joe, and looking forward to getting to the second part of the event. With respect to 2Q, could you just help us think about how this affects revenue in 3Q? I know at the start of the quarter, you may still have some production issues, but presumably, you have an above-usual backlog. How do we think about working through the backlog and how this may affect revenues the next couple of quarters?

Yes. So -- and this is exactly why we've just pulled guidance. Clearly, we're going to have some revenue deferral, sales that occurred in Q2 that because of the backlog won't ship until Q3, which gets us off to a good start. But we are going to begin Q3 with a significant backlog. And because of that, adding, for instance, additional wholesale doors when we already don't have the beds to sell -- to ship to existing transactions is problematic. So that does mean -- and this is out of utmost respect to our wholesale partners and ensuring that we can be a great partner to them, that we're not going to get ahead of our skis. So it is going to impact Q3. To what degree is exactly what we are very thoughtfully working through right now. And rather than just putting a back-of-the-envelope guess out, we felt it would be better to take a few weeks here, really reflow the plan now that we've got clear visibility into where we are, clean a line of sight into getting out of the backlog and have the ability to manage our business and our partners appropriately. So again, we fully intend to give guidance on what this means for Q3. It's just going to be a few more weeks until we can work through that, likely when we announce Q2. Take one more question, and then we really do need to move on to the meat of the presentation.

Joe, can you hear me? It's Matt Koranda from ROTH Capital.

Matt, you're coming through fine. Thank you.

Again, I'd echo everyone else's sentiment and say thanks for addressing this head on at the front here. So just wanted to see -- can you just elaborate a bit more on the specific issues that you have with re-ramping the machines? Just wanted to see if you could provide a little bit more detail on that front. And then also, just on the specific equipment that's impacted, obviously, it's the Mattress Max machines. But could you clarify, is that -- is the re-ramp issue happening in the Utah facility only? Or is it also in the Georgia facility, across the board?

Yes. We -- so I'll take the second part first. So when we voluntarily took the machines down to do these retrofits, we did that in all locations. So the 2 machines we have in Atlanta, we took down as well. The machines of the machines, our employees, we value equally in all locations, and the safety and capability and process upgrades needed to happen on all the machines everywhere. And we had fewer issues with the machines in Georgia, although some. The Georgia machines are actually doing much better right now. And that partly gets to the fact that this is related to longer-term maintenance issues. It's -- again, there's -- we haven't ever really got into the true inner workings of these machines for obvious reasons. But the way I would characterize it is there's buildup that can occur in these machines that so long as the machines keep running, we keep them hot, we keep the fluids rolling, that it works just fine. And again, these machines have been running effectively nonstop for years. It turns out that there is some buildup that can occur inside of some of the components. And when we took them down, I mean we took the machines down for just over a week when we did these retrofits, that these are very proprietary materials that there is no outside documentation on their behavior. I mean I literally have PhD chemists and material scientists that are deeply documenting the nature of our materials right now as there's a lot we can do with them and some really novel applications yet to come. But we -- as we learn about them, we discovered that in taking these machines down for this length of time, in addition to some of the buildup, it caused some failure of some components when we brought them back up. And that meant that part of managing through this is having appropriate periodic maintenance to make sure you don't get a sufficient buildup that it could cause problematic issues. It meant there's, call it, warming procedures we can have to never have these machines go completely cold. And there's maintenance strategies on parts on hand to allow for these kinds of larger-scale challenges. A lot of good learning here. It's all part of maturing as a large-scale manufacturer that's really built for the long term. Again, these are -- most of these machines are only a couple of years old. The oldest of them, Max 2, is just over 4 years old. And we are going to be a lot stronger for this. We just learned a ton about the long-term maintainability of these machines and how to ensure we get long-term maintainability. So while it did create a short-term isolated challenge, which is unfortunate, the whole point of today is around our long-term capability, and we just significantly derisked our long-term ability to deliver.

Okay. Got it. And if I could just ask one more thing on the guidance for 2Q. On the gross margin front, I'm just curious, could you break down maybe how much of that sort of degradation in gross margins is related to the kind of additional costs related to manufacturing versus just a channel shift? Because it does seem like you're probably just feeding the wholesale channel incrementally just given the limited backlog you have and you got to fulfill with certain partners. And so I would assume a big portion of that margin degradation is going to be more channel shift related. But any way to kind of break that out and just isolate the...

Yes. And again, we haven't released Q2 yet, though clearly, we just gave some updated range. Yes, I'd say there's 2 factors that are going to come in. Yes, we've been speaking for some time that there's been well documented in the market shift to brick-and-mortar, which we -- again, in our longer-term strategy of meeting the growing demand and taking share, this is -- it's a terrific story. But as we index more into wholesale, there are gross margin challenges, but that we were already guiding to. Really, the challenges we're going to have here is more around when you have degraded output with fixed costs. And I mean even labor. I mean you have teams show up to work with anticipation that everything is going to be working, and we run into unanticipated issues. We're carrying labor that isn't tied to output. So really, this is -- any additional impact is going to be tied to just the absorption of overhead and direct and indirect labor against performance levels that were below what we anticipated. And that flows right into gross margin. So I mean that would likely be any gap that we would have over what we've prior spoken about.

Okay. Very helpful. Looking forward to the long-term outlook here in just a second.

Great. So thank you for the questions. Apologies if we weren't able to get to yours. But hopefully, those questions were helpful for all.

What I'd like to do now is pivot into the actual investor and analyst session. We -- I know a little bit somber news this morning, but again, our longer-term enthusiasm for this business is very, very high. And we've gotten the request, frankly, for years on how we can put out into the world our point of view on where we're going with some stakes in the ground on the opportunities in front of us. We've hinted around much of this information, but we're thrilled to be able to actually put some content out there in writing. This was published this morning. So I suspect most of you have had a chance to look through it, but we'll -- we've got a lot of commentary that we'll discuss as we go through this. So before we do that, not in what we presented this morning, we've got a fun little video we put together that just recaps much of what we accomplished last year and a little bit about the Purple brand and our culture here. So I thought I'd kick things off, good way to pivot into a new topic here, with that video, just a couple of minutes. And we'll do that first and then get into the session. So let me queue that up. [Presentation]

All righty. Let me get the deck back up here. All right. It should be coming through now. So we're Purple. We're going to talk a lot about what that means today over the next few years. And when we say we're reinventing comfort, we mean it, and we're going to show you why. And I'll tell you comfort is an interesting word. There's a side of comfort that means fashion and luxury, something that involve living in the laps of comfort and luxury. There's another side of comfort, which is all about human health. When someone is sick, you comfort them. When someone is not feeling well, you try to make them more comfortable. We take that side of comfort very, very seriously. And we are a product company at our core, an innovation company at our core. And we have some remarkable product we've released and some remarkable things coming on how we really try to focus on that fundamental need around comfort and the human condition. Just backing up a little. I mean the mattress industry, it's strong, it's growing. We've got favorable future tailwinds. We've been tracking roughly 6% per annum growth in the mattress market. There's been, as we've seen over the last year, renewed investment in home; focus on wellness; suburbanization; relocation; rising e-commerce adoption, which as a digital leader is very good for us; and a shift toward premium, which, again, is very much aligned with our strategy. We -- what's also interesting is where the opportunity is. So as you look at the U.S. mattress market, we've -- on a unit volume basis -- and we've talked about this. The vast majority of the unit volume is on the mass market side. It's the sub-$500 mattresses and the $500 to $1,000 mattresses. And if you look at most of what's happened online with bed-in-a-box, it's been very much battling it out on that value and convenience side on the bottom half of the units. What we've always found interesting and where we've anchored ourselves for the last few years is that mass premium side, which is really getting into that $1,000 to $2,000 or even $1,000 to $3,000 price point, which represents a significantly more interesting area of the market. And not only is it -- as you look to $1,000 and above, a majority of the market revenues, it's even a greater percentage of the market profits. And we see not only opportunity to continue to take share and grow in sort of that $1,000 to $2,000 price point, but we're already into the sort of the $2,000 to $3,000. And as you go beyond into premium, in the $3,000, $4,000, $5,000, there's a lot of opportunity and a lot of addressable market there. That is where we're playing as we continue to see that opportunity. Yes. Looking at share. Obviously, some dominant players that have been there for decades. That said, we are the fastest growing major U.S. brand. This is only through 2019, and we've continued to pull ahead in 2020 and into this year. So I mean we see ourselves as an emerging disruptor and have been proving a track record of growth that sustains that. And we've -- to do that, we've had pretty spectacular growth. And considering that we're a manufacturer at our core, I mean, this is all the more remarkable, with a CAGR of 78% through last year. So why are we winning? And why do we have confidence in everything we're going to show you today? And this really kind of outlines much of what we're going to go through today. For starters, this is a differentiated product with unique benefits and very, very high customer satisfaction. And we'll dig into all of these: disruptive innovation in a category that has frankly had very little innovation whatsoever. Underneath our innovative products are proprietary materials and proprietary manufacturing that really establishes that differentiation with a nice moat around that. We're digital first and that enables rapid scale. I mean really, if you step back, we're product first but the digital-first channel play that we have against that product has allowed us to achieve very quick remarkable reach and scale. We've been very laser-focused on favorable unit economics and running a profitable business. We've turned the ship around. We are producing cash. We are running a profitable business with improving margins as we go. And to that point, we have exhibited over the last 2 years a proven track record of execution and operational advancement. And you put that all together. And we put together a plan here that is very bottoms-up, grounded that really is built on these core capabilities. And in fact, what's exciting, and we'll get to these last couple of bullets, is the bulk of this plan is really just built on continued execution on the things we're already demonstrating that we are able to do. So it's continuing to broaden the assortment of our premium proprietary products. It's expanding our capacity, which we talked about earlier today, and our fulfillment of that capacity, expanded distribution as we get more of this product into the hands of our customers, which is both expansion in wholesale as well as, as you'll see, expansion in our own showrooms to service the addressable unmet demand, which, as we know, is a predominantly brick-and-mortar market. It's continuing to grow margins while we're reinvesting in continued growth. And these last 2 are a little more forward looking, but revolutionizing sleep with next-generation mattress products, and we'll talk about this, that we have currently in development that we've been teasing out for a while. And then not even dependent on this plan but looking beyond the plan is long-term growth opportunities both in new markets as well as in major non-sleep categories. So that's really what we're going to walk through today with much more detail. But we believe this is grounded on a track record of success, a track record of proven operational capability and a fairly baseline grounded plan that is really a buildup on the very things we are already doing and already have in place. So with that, let's look at some of the opportunity. So first of all, and this is just almost frustrating to me, we have not solved our sleep challenges as an industry. And there is growing tailwinds on the importance of sleep to overall health and the opportunities to improve sleep health overall. Yet, if you look at the marketplace -- and this last bullet on here to me is the most telling. We surveyed thousands and thousands of our customers, and we asked them, "Why did you want to buy a new mattress?" And nearly 1 in 2, regardless of age, said that the primary reason was pain. And that just seems like enormous failure to meet consumer needs. With all of the mattress products, all of what's out there, we still have not gotten to a point that almost half of all customers are not having their needs met by the category at large. That's a huge opportunity and one that we fully intend to take on. Investors have figured this out, too. We're tracking north of $1.6 billion of VC and investment dollars into sleep technologies over the last 3 to 4 years. A lot of it's really novel, interesting solutions around the ecosystem of sleep health. They're all point solutions. We haven't seen any that take it to scale but some really novel things. And just that level of investment is another reaffirmation of how much unmet demand there is and how much the opportunity there is over the coming years and really servicing the demand that's out there. Consumer spending is up, $40 billion spent on sleep aids and therapies and sleep-related solutions, growing 6% per annum. And research is up, too. There, again, big tailwinds on sleep health overall; $450 million, we've tracked, invested in sleep research just last year alone, a 90% increase of just 5 to 6 years earlier. This is a growing area. And one of the other things we've noticed is most of these solutions that we've seen are something that's a bolt-on or around the mattress or on top of the mattress or below the mattress, on the nightstand or wearables or ingestibles or things that you do around it. Very little of this is at the core of sleep, which is the mattress itself. And we believe that is a really interesting unlock and really interesting opportunity. Yes. Looking more historically. There's been some significant advancements in sleep over the last 70 years, but it seems to come sort of in every decade or 2. And for some reason, it seems to have stalled out in the last few decades. You had originally springs and then in the '50s, pocket coils, water beds, which had some novel capabilities; some branding challenges but some novel capabilities in the '70s. In the '80s, we began to get adjustable foundations, a way to make any mattress have some novel new characteristics. Memory foam in the early '90s hit the stage, originally dismissed. It's a bit of a novelty but nevertheless has proven both some great benefits as well as clearly some staying power. And also the notion of adjustable firmness mattresses showed up in the '90s as well. Since then, again, other than new distribution models, other than new marketing, there really hasn't been, from our point of view, any major scale advancements that have occurred since the '90s. And again, that's fascinating to us. What's happened? And that's where Purple comes in. Yes. At the core of where we start our thinking and our solutions is really solving what feels like an age-old challenge or debate between the tension, between soft versus firm. It's the first question asked in most retail outlets on trying to get the feel that you prefer. And at some levels, it's dismissed as a matter of taste. But underneath soft versus firm are some real actual health-based issues, and that's the trade-off between comfort and support. And comfort is what helps you sleep better. It's what helps you lay down, fall asleep well and stay asleep because if you're comfortable, things aren't disrupting your sleep. And not disrupting sleep is paramount to great sleep health. But support is what helps your body heal and recover and wake up ready for a new day. And with support, if you have really good support, good body alignment, good spinal cord alignment, the challenge is that can have the expense of comfort, which means you're then not sleeping as well in the middle of the night. If you have really good comfort at the expense of support, you get hammocking, which means your body goes out of alignment. And while you might appear to sleep well, you wake up in pain. And it's a trade-off, and consumers are asked to trade off. Or in the case of adjustable mattresses, your trade-off may be different than your partner's. But it's still coming up with a trade-off on trying to balance the right amount of comfort and support. And that right there is really a limitation of materials and construction, and we believe we can be better at that. And that optimal sleep requires rethinking how can you sustain both comfort and support simultaneously, leveraging new components and new materials. And this is really where Purple comes in. Our gel grid technology, entirely different materials with our elastic polymers and an entirely different construction. The grid is not just a marketing gimmick. There's an enormous amount of physics behind it, which we call the buckling column design, actually a very standard physics concept. And what it is, is it's really a network of load-bearing columns, and the columns individually give away with almost no pressure whatsoever. So locally, we're probably one of the softest mattresses out there. But across the network of these columns over a larger surface area, they provide enormous benefit of support, which means on a larger surface area, we're likely one of the firmer mattresses out there. And that's the intersection you want, where you have pressure points, where you have places that your body needs localized support, we give away and we adapt to the body and provide that support they need. So again, very soft in that local area but ability to provide the large surface area of support that you need across the entire body. And that is what this combination of materials and this combination of construction in these geometries give us, is that the leftmost column here, this balance of comfort and support. But we have some other interesting things, too, that are other gaps in the industry. One is there are foams out there that do shape to the body and provide some of that balance in comfort and support, but there's a cost to that. And one of those is responsiveness. The -- those types of products are very firm when you get in. They adapt to your body and shape, which is great when you're not in motion. But the reality is when we sleep, we are in constant motion. We are moving around. You watch a time-lapse photography of someone sleeping through the night and it is a very animated video. And what we offer because of the nature of our elastic polymers, which rebound like a rubber band, just very, very quick real-time reaction to compression and recovery, is immediate responsiveness as your body moves and shifts, which interestingly means when you first engage with it, we feel remarkably soft because it doesn't take time to adapt. It's just instantly adapting wherever you have pressure on as you're moving. And the reactions consumers have to that is rather than describing things as like sleeping in the mattress, they use terms like buoyant and floating because of that real-time responsive reaction to your body as you move and shift. And that is really important to not disrupting sleep, one of the critical goals of sleep health. The other is thermal management. And that is an almost unintended benefit but a very real benefit of the construction of our column buckling design. And that's the majority of the surface of our mattress is lack of material. It's void, it's air. And that means energy, heat, moisture is able to dissipate with remarkable efficiency. Our roots are in medical. We had medical mattresses, we had medical cushions. And as you thought about applications like burn unit victims, this was a really critical benefit that we had in our roots that we've been able to extend its scale to consumers. Typically, foams are very similar to a sponge. And you put a sponge under water and it absorbs many times its own weight in volume of water. And once it's full, if you keep trying to pour water on it, it just ricochets, it splashes off. And foams exhibit similar challenges. You can ventilate, drill holes through them. You can put spacers. You can put gaps. There's ways to work around the foam. But foam is very similar and structured to a sponge. It absorbs heat, it absorbs energy. By eliminating the foam from the surface of the bed and using an approach like this, we actually -- I mean you see a lot right now on cooling technologies. The fascinating thing is despite not putting phase change materials and cooling technologies in our mattress, we are able to just not get hot in the first place. Our mattress has some of the most remarkable capabilities on dissipating or absorbing or actually, in cases, reflecting heat away from the body, which means we have the ability to help you not get hot. And this is one of the most common benefits we hear from our customers. They no longer wake up hot in the middle of the night. And it is very designed around the construction, geometry and physics of our materials and our construction, very differentiated, very different, clear consumer benefits. So how does that scale? Looking at the next slide here. And just as an example, hybrid kind of came out of nowhere in the 2010s and just as an illustration, went from 5% to nearly 20% by 2020 and forecast to continue to grow a little bit. So the idea -- there's precedent here. The idea that gel grid, which is already in premium, getting to that 5% mark, that it could get to 10% plus in a similar time line is something we've seen as new improvements in technology have come out in prior years. And frankly, for us to hit our numbers, it's a conservative view of what we've seen in traditional growth rates on new technologies that consumers have embraced is having clear benefit. Another really important point that is easy to kind of lose in the marketing, in the channels, approximately 90% of our revenue is driven from products that are made out of materials of our own invention, of our own design on -- made with machinery, with equipment of our own invention and our own design. The majority of what we do is not just the product inventions themselves, but we are really good at making the things that make the things. It's a big part of our R&D capability, is our ability to invent new materials that have novel characteristics and invent new construction techniques with those materials. And that is a big part of our moat and our differentiation. Dozens of proprietary polymers and applications of those and at the core, our Mattress Max machines, even our injection molding machines that we use for cushions and seat cushions -- or excuse me, for pillows and seat cushions, those were not things that just existed off the shelf. Significant investment into dealing with these nonrigid gel-based materials is something we've had to invent and we've had to perfect. And it's also important to note it's not just kind of a one-trick pony. Let's just -- hey, we make this grid stuff and we put it in everything. And I think this is easy to overlook. Nearly every one of our products has different formulations, different geometries and even slightly different manufacturing techniques. What we have made for our seat cushions -- we still make medical cushions. Our pillows, even across our pillow line, are different formulations. And our mattresses are each one individually tuned and formulated for the physics at play, for the physiology at play. How much localized weight, how is it displaced, how much displacement, weight profiles, the geometries, airflow, all of these things come in. And through this, we have built up a huge number of patents, over 220 granted or pending right now, with a variety of polymers and formulations and a variety of grids and geometries, which means we're just getting started. We are learning more in novel ways to leverage this and are continuing to adapt them to each specific application. So everything I've just talked about is around product design, product innovation, manufacturing, vertical integration. But aren't we just an Internet company? And the fascinating point is there's an argument we would have been as successful, maybe not quite as quickly but as successful even if we had launched prior to the advent of the Internet. This is a product company at its core with product differentiation based around improvement of sleep. That said, it turns out, we're pretty good at digital as well. Digital has allowed us to gain very quick broad reach in a way that just wasn't possible leveraging traditional channel distribution, great awareness, great excitement and even allow our own customers to very actively promote our product. It's given us an opportunity to go direct, to have own distribution, which has allowed us rapid nationwide scale, rapid nationwide reach. And it turns out there's fairly favorable economics when we are able to retain the entirety of the net revenue. It's much higher acquisition cost because we are the retailer. But overall, digital has proven, especially on higher price point with decent margin products, to have very favorable economics. So digital first has allowed us to have this spectacular growth, reach and build this momentum, which is also very important as we pivoted into more and more brick-and-mortar, given that the majority of the addressable market is offline. And our digital capability has driven awareness and traffic into brick-and-mortar, which, in turn, has given more education and understanding of the product, which helps fuel digital. It's been a very collaborative omnichannel approach, but it began and continues to be enabled by our digital excellence. It's also driven by the fact that the customer is not a gimmick. The products -- excuse me, the product is not a gimmick. The product works. And we are getting that recognition in many ways. J.D. Power, which surveys actual customers who actually bought product, 2 years in a row #1 in customer satisfaction with mattresses online. But the one we really are proud of, a way that really helps us know that we are doing our jobs well is still, to this day, at our current revenue levels and continuing to have north of 30% of net revenue in advertising and selling, the #1 channel when consumers -- and we post survey every transaction. The #1 channel site on how they learned about Purple continues to be word of mouth. And I think that's terrific. We all think that's terrific. That means our customers are satisfied. Our customers promote the product. They love the product, and over time, we're saying they even upgrade and buy more. There's an interesting long-term play there as well. We are winning over our customers and that is growing our business. So you put all of that together and you start looking at a nice grounded buildup, which we'll be walking into, and it allows us to start to put some real stakes in the ground. And our stake in the ground here is that in 3 to 5 years, we grow our annual net revenue to $2 billion to $2.5 billion. And we build up our adjusted EBITDA margins to within 14% and 15%, into the mid-teens. How do we do that? Really 3 big themes we're going to walk through, and we're going to walk through each of these 3 themes with a little more detail. The first, call it, big moves is elevate the product offering. I mean you look at the 2 largest players in premium, which would be Tempur-Pedic and Sleep Number. Tempur-Pedic across their brands has as many as a dozen or 15 mattresses on the floor. Sleep Number has 10, 11 depending on how you count for sale. Right now, we have 4 mattresses domestically and an additional one we sell exclusively in Canada. That's not going to get us there. So clearly, a fundamental part and just continuing our evolution is more mattresses, moving upmarket with more premium offerings, which means driving up ASP from our roughly $1,900 today to around $2,400 in 3 to 5 years with no less than 6 mattresses actively in play with additional price points. It also means continuing to lean in our ever-growing and successful non-mattress business, which is not just accessorizing the mattress. Our pillow and seat cushion stand-alone business is continuing to outpace our mattress business. And we see that growing to $400 million to $500 million in sales in 3 to 5 years. Moving on to the second big move, which is our expanded distribution ecosystem. One thing we've been leaning into, we haven't actually given an end state, but our own showroom strategy is working. And it works alongside our wholesale partners. In fact, we're finding it raises all ships. And that's going from our 13 showrooms we have today to north of 200 own showrooms in 3 to 5 years. And we've got the team in place to do that, and we'll talk more about how we got there momentarily. The other is wholesale is working extremely well for us. We have some great tailwinds right now. And we continue to see opportunity to grow that with our great strategic partners, the right kinds of partners, adding another, say, 1,200 doors, getting us to around 3,500 wholesale doors. The third big move is continuing to improve our margin profile, which we've also been talking about for quite some time. And that's -- as we optimize pricing, which we have a lot of opportunity for improvement on, promotions, efficiencies in manufacturing, efficiencies in distribution as well as the benefits we get from higher price point product with better margins. It means growing our overall EBITDA margins from the -- we're calling it, a blended 10.7% looking at the last 2 years to 14% to 15% in 3 to 5 years. So let's dig in a little more into what that all means. So starting with the first big move, which is the elevate the product offering. We -- well, actually, I'll back up and talk a little about how these play in. But we see going from our roughly $650 million in 2020 to the $2 billion to $2.5 billion 3 to 5 years from now. You'll see point 2, the big move 2, which is expanded distribution ecosystem, in the top there. That is continuing to fuel everything. We see, as you get into a little more specificity, looking at the current mattresses, higher unit volume, price actions and continuing to drive into more distribution, about $600 million plus there. We see new mattress offerings of 2 or more mattresses priced at, say, $4,000 or more, another $400 million. Non-mattress, again, another $400 million as we continue to grow that on the successful tailwinds it's had. And interestingly here, international is a relatively small piece of this plan, which is not to say we may not do more and sooner internationally. It's just we don't need it to get to these numbers. And again, part of this is we feel this is a very grounded, achievable plan based on the momentum we currently have. And this really is just fully realizing the benefit of what we've already launched in Canada, where we see another $75 million incremental. So going a little more detail into big moves 1 and 2. So first, we talk about expanding the assortment. It's interesting. We've got our least expensive queen right now. We've continued to raise the price up. So the least expensive queen we sell here is $1,200. We tap out at around $3,100 right now for the Purple Hybrid Premier 4. There is that customer -- and you saw it in sort of the market sizing in the earlier deck -- in the earlier slides in the deck. There is that $4,000 and $5,000 price point and even up to $6,000. And we feel it. We know, especially on the showroom -- on the wholesale retail floor that there are customers who get sold out of Purple, who love Purple, but they have this -- they have wallet that they're looking for something that they believe is at a better value at a higher price point and are looking for something a little more upmarket, a little more premium. Or there are those who get sold down, a classic technique in retail as you start at the top and slowly work down into a customer's budget. And there are customers who never even get to Purple because they find a match at that $4,000 or $5,000 price point before Purple is even in the consideration set. So we absolutely see opportunity, and it's well documented in the category to continue to take us upmarket, win on merit on innovative new product offerings at that $4,000, $5,000, even $6,000 price point. And again, if you look at the most premium players that are at scale, the Tempers and the Sleep Numbers, that's where they're up to, their $5,000 options and beyond. So the second part of the first big move in elevating the product offering is the stand-alone stuff and as well as non-mattress product. So we think an enormous unrealized opportunity is our focus on basis. Our attach rates, especially as an online company, are well below industry averages. And our product offerings have been limited. So just as an example, we recently launched our new Ascent Adjustable Base. We really engineered this at the right combination of price point, features, fashion and design and usability as well as fulfillment. It's -- it collapses on half. It is remarkably similar -- excuse me, remarkably easier to fulfill at much lower cost to fulfill. And given the simpler design and easier fulfillment strategy, it's also allowed us to finally open reverse logistics, where buying an adjustable mat base is not final sale anymore, and that's been a big source of friction as well. This product alone, we've seen a 3x increase in attach over our prior adjustable base. And it just -- it's a -- it emboldens us that we're on the right track here. But we see significant opportunity from more bases, more foundations, more adjustability, more capabilities, more premiumization and much better attach rates as we start to lean into this as a formal strategy and build out the product and assortment around that. And the other is continuing with our compelling stand-alone products: our pillows, our seat cushions. We -- pillows, with the launch of the Harmony and now recently with the launch of a full assortment of 6 Harmony Pillows, 3 heights each in standard and king, we see enormous opportunity to continue to lean in. We've also substantially increased our capacity behind that, which has allowed us to start to push into wholesale and get more distribution and reach on our Harmony Pillow. But seat cushions have been on fire with almost no real advancement. We're basically on the same product assortment we've been on for years with the same packaging. And while we've elevated some of the presentation from a merchandising and creative, it's still largely the same business we had. We've just been able to lean in effectively in addressable market acquisition and the merchandising on site. Enormous opportunity to take this seriously as a true primary business for us. And we -- between these 2, I'll remind, I said this on the last earnings call, more than half of all of our transactions of selling a pillow or a seat cushion are to new-to-file customers, people who have not yet bought a mattress from us and we haven't seen before. And they are most likely to buy as their second purchase another mattress -- excuse me, another seat cushion or another pillow. And we're starting to see, as the cohort ages up, more attached to mattress down the road. So it's not even just a compelling source of additional revenue. As a stand-alone business, we believe there is significant opportunity to drive lifetime value here as this is a great introduction into the brand and the technology and the benefits, which, over time, will translate into more product as well as mattress attach the other way, from a seat cushion, from a pillow to a mattress. So continuing on. We -- getting to the second of the big moves is the expanded distribution and ecosystem, starting first with showrooms. We said 200-plus showrooms. Just -- I think this is some interesting context here on what it takes to be successful. If you look at the mattress, the majority of mattress manufacturers have not gone with a brick-and-mortar strategy with the notable exception of Sleep Number at north of 600 doors. But if you look at some of the DTC peers that have proven successful models here, Warby Parker now up to about 125 doors, Peloton at 81 and growing. Apple is an interesting one, has a very successful retail strategy. They seem to be everywhere but even their footprint is below 300; last data we pulled, 271 doors. And then you look at other furniture peers with good brand and good reach such as Pottery Barn or Williams-Sonoma, they're around that 200 mark. So we feel like 200 is a great benchmark and a great stake in the ground on what we are building to. That allows for still omnichannel capability of supporting our wholesale partners but really having place that we can bring our brand to life, bring our full assortment to life, tell the whole story, feature the benefits of the technology in ways that really can only be done in our own showroom. I also want to point out part of what is giving us the confidence to continue to lean here is the economics are proving to be very favorable. So we're seeing less than 15-month payback on the investment capital costs in these, call it 5 quarters or less. And part of that is these are relatively modest boxes, 2,000 to 3,000 square feet with, call it, an average right now of about $600,000 to build out. Annual rents are reasonable right now, and we're seeing very favorable economics of $100,000 to $300,000. And we are seeing continued growth and continued opportunity as we build these up, targeting in this 3- to 5-year time frame $2 million per door, which we feel is, frankly, very conservative compared to some of the other benchmarks out there. But again, this plan is built around these numbers with a planned average gross margin north of 50%. So I mean these are good stores that are contributing, that are accretive to the business and that we feel very confident in our ability to build out. So continuing on with wholesale then. We're not done there either. We're at about 2,300 doors right now. We see potentially another 1,200 doors or so. After which point, we feel we've got good national coverage, good distribution alongside our showroom doors and alongside our growing DTC business. And part of this has been really coming up with some guiding principles on how this works well with the right kind of partners. And it's achieving some balance across both specialty mattress who really is the go-to for someone who's just specifically looking for mattress and then furniture and department stores. And furniture stores are very interesting. It's really -- in total, furniture stores are the largest single segment of mattress sales, but it's partly because they service a different customer in a different life cycle. They've built good customer loyalty against their brands, especially the great furniture stores have. They're really great retailers. And the mattress just plays a different role in a much broader assortment that they carry. And we just found that is a great place to be in both introduction to the brand and servicing these customers who, again, different buy cycle, different relationship with the retailer. And we see a nice balanced opportunity there. We're prioritizing quality over quantity. The goal here -- and this gets to some of what we reported when we revised our wholesale door count. The goal here is not to just be in as many doors as possible. We've seen other new entrants who have just tried to get a mattress in the back corner of as many doors as possible. The goal here is not to have the scorecard on the most number of doors. What we're really looking for is wholesale partners that ensure good brand alignment, that can tell the story, that understand and are willing to lean into our technology to really create, to the last bullet, a collaborative ecosystem and good partnership. And we're also looking for stores that are willing to learn with us. We're learning from our retail partners, they're learning from us to really continue to lean in and drive same-store sales and growth. Continuing on and just digging in on that strategy on brand positioning with our wholesale partners. Part of the goal here is to make sure that in this expansion through wholesale, we are servicing the right premium presentation of the product and the brand, that having a managed store count allows us to much better work with our partners and control the experience and work with them to ensure a consistent experience in onboarding and supporting a manageable number of partners. It is really built around making sure we're hitting the right demographic in the addressable market, working with a -- these great retailers are great solution or consultative selling partners that really understand the benefits of our mattress and what that can bring to their customers. We are looking for some degree, and we've been very fortunate to get this, of merchandising freedom where we are able to really bring our brand to life and bring our technology to life. And given that we've sort of earned our way into the floor and have earned the conversion rates we've gotten, we have built a great relationship with our partners. And in fact, many of our partners are pushing us hard to do more here to really provide more presentation, more discovery, more of the experiential side to bring our product to life to help them out as well as flexible brand assortment policies, meaning that we've got an assortment of products, including beyond mattress and our ability to really bring that full assortment to life. So finally, the third big move is the increased margins. And the focus here is mix shift toward higher-margin products, promotion optimization, operational efficiencies and so forth. And just moving left to right here on some of what these are, is there's a really significant opportunity across these. And frankly, that's good because we've got some significant ground to make here to get from our blended 10.7% up to 14% to 15%. But again, a part of that which we've talked about is the mix shift toward new higher-margin products. We believe we are in early days on price -- on our data-driven approach to pricing strategy and promotion strategy and ensuring that we are favoring higher-margin products and capturing what we can from our customers in that value exchange. There's a ton of opportunity in manufacturing efficiency gains. I've said over and over, we're in early innings on our ability to significantly increase output, yield, quality, reduce waste through automation, through OE initiatives and a variety of opportunities that we have. We talked about the new Max Machine design that we are close to bringing online as well as substantial improvements in like how we feed raw materials, for instance, into the machines with much less waste, higher quality, higher quantity and even in both Grantsville in Utah and in McDonough in Georgia, even on the fulfillment side, putting in increasingly sophisticated semiautonomous fulfillment solutions. Again, we are doing things like doubling output with the same labor base. So a lot of opportunities in efficiency gains, which just comes to us being a young maturing company and early innings of these kinds of optimizations. Obviously, as we achieve higher revenue, and we're seeing this in Q2, on the flip side, we are able to absorb the fixed costs. And the bigger we get, the less investment in fixed costs impacts the overall. Scale distribution, as we have more distribution centers, we are able to lower our cost to fulfill as well as get better SLAs. We're doing more to optimize on the supply side on inbound. We've already accomplished a lot as we've gotten more -- better master service agreements, better bulk buying opportunity, but again, early innings on cost management on the front end. As well as there's a downside, which is really a step backward to go many forward, that we are -- as we said in the beginning, while we're improving profitability, that is alongside significant reinvestment in growth, not only in things like showroom expansion and the labor support around that, wholesale expansion and people expansion. We've been, frankly, very leveraged and conservative in G&A and our overall capability but it's also R&D. We've under-invested in R&D over the last couple of years as we've tried to turn this business back into a very healthy cash-producing business. We are getting back into significant R&D investment. We anticipate about 2% of net revenue as we build out new equipment, capabilities, team. We are in the process of designing our new Purple labs capability, which we're very excited about. But all of that is very targeted investment in long-term growth. We also -- everything we've been talking about is more or less built on what's out there today. But I think it's important also to recognize and back to some of the opening statements on just broad unmet needs and consumer satisfaction in sleep in general. We really are committed for the long haul on helping sleep get better, and we believe the mattress in many novel ways will be at the core of this long term. And we kind of think of it in 3 higher order goals: How do we help you fall sleep faster? How do we help you stay asleep better or longer and don't disrupt sleep once you fall asleep? And finally, how do you wake up better? How do you wake up feeling great, which is not introducing pain and even helping to ensure you wake up at the right time, the right way? And there's an interesting opportunity we see here. We talked about earlier on all of the investment coming in. And from our point of view, what we're saying is you've got very large players who have scale, but we haven't seen any pattern of really significant innovation over the last couple of decades. And then you've got all these really novel small players who are doing these point solutions of innovation, many of which are really quite remarkable, but none of them have really figured out that consumer proposition and how to take them to scale. So the question is who can do both? Who sits in the middle who is able to know the customer, service the customer, take innovations to scale but also has that start-up mentality, that entrepreneurial mentality, that innovation mentality to be able to continue to invent and have the agility to create new opportunity? And we think there's a very small group of players that hit that intersection. And we believe we are unusually well positioned to capture what we believe is an enormous amount of opportunity over the next 5 to 10 years. And some of that is just starting with what we do today and extending out from there. We've talked about -- with our Purple Grid that we put on the top of our mattresses, just with that alone, we've talked about this balance of comfort and support, our ability to have better properties around thermal management and our ability to actively respond -- to just real-time respond to motion and shifts in weight and pressure. And that's what we do today. But as you think of those 3 themes and what's possible and where we are putting research and investment, it's just taking each of these things out to even more than just the grid and a balance of comfort and support. How do we naturally balance your body across the full mattress? How do we not just not get hot and have better just intrinsic thermal management because the nature of the grid, the nature of just the air flow that we get, but how do we actually lean into that and create active opportunity to improve upon that? And same with responsiveness. How do we not just have materials that on their own, have novel capabilities to react and respond but start using intelligence to actively respond beyond just the grid itself? I mean it's -- our benefits are setting a road map for research and investment for us, and it is exactly where we've been putting our time. And we view that as sort of the holy grail, and we see enormous possibility there. And we're putting a lot of investment here, which is when you understand that intersection of adjustability, which we already are very responsive with our mattress, and then start thinking about new breed stuff out there, which could be partnership, could be first party as you take data collection and monitoring, which is just that, it's just data with active AI and driving to automation intent, and then you combine that with adjustability, you've got an opportunity to meaningfully improve sleep. And again, we believe Purple is uniquely positioned to push into this direction. So you put that all together and it means not only do we have the capability to ladder up to that $2 billion to $2.5 billion doing what we're doing today, expanding our assortment, going upmarket, leaning in to our non-mattress products, continuing to expand our distribution, continuing to improve margins with some novel new products that we start to launch along that side as well, but that's just getting started. That's not the endgame. That's what enables the real excitement. And we see 2 really significant opportunities, which we've been talking about for years, that extend even beyond that. And it's new markets. As we look into new geographies, which, in this plan, we've barely scratched the surface of, it's a big world out there. And new categories. We see potentially enormous opportunities to move into technical adjacencies, where we take our cushioning technologies into categories, some of which are substantially larger than mattress, with novel new applications and novel new opportunities, which there is already growing demand for. We get the inbound calls, we get the inbound inquiries, and we're starting to research on that. And it means, in the end of the day, we're not just a mattress company. And that's the real exciting opportunity, build on the strength of becoming one of the largest mattress companies out there. Most importantly, as we've talked about our pattern of execution over the last year, it's been built up from putting the right team in place, experienced leaders, and we're continuing to fortify our capabilities: Craig and myself on the phone; John Legg who has led our operational efficiencies and operational build-out, inherited a broken manufacturing process with a significant amount of waste and upside-down economics and has built a remarkable capability that has allowed us to sustain this kind of growth as well as continue to work toward operational efficiencies to improve margins. Thrilled that we've recently brought on Patrice Varni, our Chief Marketing Officer and Chief Digital Officer, brings wealth of experience not only in product and merchandising and marketing but has direct experience, having worked at one of our competitors in years past. Casey, who's been with us for many, many years, predates the launch of Purple, phenomenal protector of our IP and trade secrets and has guided us as we built this moat around our business. And finally, Tres White, our Chief Retail Officer, Co-founder of LoveSac, is really driving our retail capability and has built a team of seasoned, proven experts underneath in real estate and wholesale management, people out of industry who really are allowing us to swing above our weight class. So we've got a great leadership team. We have more leaders coming underneath these folks. We've got a great opportunity to continue to fortify the business. And we are at a point that we are attracting terrific talent into our business, given our proven performance and the trajectory that we're on. So with that, I'm going to hand it over to Craig now to talk a little about some of our recent financial performance just to ground sort of the baseline on all of this, and then we'll open up to Q&A.

Thanks, Joe. Just to take a couple of minutes to look at where we've been and how we got here and just as proof we do belong here and that we can achieve these goals that Joe talked about. So looking first at net revenue on Slide 36. Joe, if you'll move forward to that. Joe mentioned earlier that for the last 5 years, we've had a CAGR of roughly 78%. And as you can see, that really hasn't declined significantly. The last 3 years, we're about 50%. If you look in 2020, you'll note that we did have a significant increase there. We did benefit when COVID hit in the second quarter. We had a significant shift to DTC. But if you look, you can see in Q1 of '21, we still are experiencing a 52% growth rate. So I think what this shows is there clearly is a demand for this product, and we're able to continue to deliver at these significant growth rates. Embedded in that net revenue and where we sit today is a channel mix between DTC and wholesale of about 67%-33%, so 1/3, 2/3, which is in the range of where we think we should be. There's a lot of benefit to that. So for example, when we add additional capacity by bringing Mattress Max machines on, that additional capacity needs to go somewhere. And wholesale gives us the ability to open doors very quickly to utilize that capacity as we lean into building the DTC channel or the own retail channel. So it gives us the ability to take advantage of that capacity growth quickly and have it not sit idle. Additionally, if you look at the product net revenue, we sit at about 7.8% of non-bedding products in first quarter. Joe has talked a lot about the additional products that we intend to expand. And as that expansion grows, this channel will continue to grow. Included in that group is the seat cushions, which last year exploded during COVID. So we expect to see that continue to grow, and we've proven that we can grow that share -- or that part of our product line. Bottom right, you can see the mattress average selling price. This represents the price that not only we charge our customers, this is across all channels. So this is the average price that a customer pays. And you can see over the last 4 years, we've had significant growth over 2018 from $1,484 to $1,913. We have had several price increases over the last 2 years since Joe and I started, and I'm not seeing any significant impact on volume when we do make those price increases. So as we continue to enhance the mattress products and expand the products that we're offering, we expect to be able to increase that mattress average selling price over the years to come. Moving to the next slide, 37. What we've also proven is that not only can we grow sales, but we can continue to grow sales profitably. Some of the major components of the gross margin is obviously selling price, productivity and then mix shift. And we've already talked about mix shift, the 1/3, 2/3, 70-30 is about where we intend to land over the long term. But as that shifts, we expect to see margin -- the margin profile shift on a quarter-to-quarter basis. But over the long term, we expect that to continue to increase. You can see that in 2020, we did see a significant improvement. Some of that was the channel mix that happened when COVID hit. And everything shifted to DTC, which we've said all along is a more profitable channel for us at the gross margin level and at the contribution margin, but that significant increase drove that to 47%. But as you can see in Q1 of '21, we're back to a normal split of 1/3, 2/3 but are still delivering a gross profit margin closer to 47%. Part of that is that we saw substantial revenue growth and are able to leverage our fixed costs in the gross margin line. Adjusted EBITDA, very similar. We saw a significant increase in 2020. A good portion of that was related to our shift to DTC in the second quarter, coming back down towards wholesale later in the year. And the rate that Joe showed earlier in the 10% range is an average of the '19 and '20 because we did see an unusual shift to DTC so we wanted to be kind of level set on that. But again, you can look in first quarter of 2021, a significant increase at 12.2%. Again, the significant revenue increase efficiencies we've seen in production as well as in advertising. This brings advertising into that as a component into the adjusted EBITDA. So we are continuing to prove that not only are we growing, we're growing profitably. Staying on the topic of marketing and sales going to the next slide. Joe -- you can see that -- and Joe and I have talked about this on many occasions, but our target is around 30% right now. We believe that we can effectively drive additional business and manage those costs at around the 30%. You can see in 2020, we did come in below the 30%. But again, when COVID hit in the second quarter, we got a little bit of a benefit because ad rates were lower for that one quarter and have overtime come back to normal rates. But with the team that we have in place, we are doing everything we can to spend as efficiently as we can over the term. And we're -- you can see in the first quarter, we were able to stay below the 29%. Now in those marketing and sales costs are the costs for operating costs for the showrooms that we're opening. As those showrooms continue to grow and we continue to expand, on a dollar basis, this cost will increase. But with the leverage rates we expect to get on those showrooms as well as the leverage we expect to get on ad spend as we continue to grow the overall business revenue, we expect that we should be able to get leverage over the next several years to bring that below 30%. And then finally, from a general and administrative perspective, our target has always been 6% to 7%, which, we think is reasonable and relative to our peers, is significantly lower. You'll see that in Q1, it was over 7%. But we discussed that early in the year that we expect this year, we will have -- we expect it to be a little bit higher because we are investing in growth, expanding this business as we are and growing this revenue at the rate we're moving. We've got to invest in infrastructure. We've got to invest in people. So that number is going to vary from quarter-to-quarter. But overall, we expect it to stay between 6% and 7%. So the rest of the slides that you'll see are basically the historical reconciliation to adjusted EBITDA and our balance sheet, income statement, cash flow. The one thing that I will point out on this is that you'll see that '19, '20 and first quarter of '20 that are presented as restated, as a reminder in earlier this year, the SEC came out and revised or clarified their guidance related to warrants that were issued by SPACs. We do have -- we were born out of a SPAC, and we did issue warrants. So accordingly, we did have to restate to reclassify those warrants as debt instead of equity. It had no impact on our net revenue, no impact on our adjusted EBITDA or our balance sheet or debt covenants but just wanted to clarify what that was. And then finally, just to touch briefly on the balance sheet. Where we sit today, we have roughly $100 million in cash in the bank. Our debt is roughly $44 million at 3.5%. We have a line of credit of roughly $55 million. We replaced our existing debt last year, which was at 12.5%. So we've significantly reduced our cost of capital. We believe that where we sit right now, we have a very strong balance sheet. And any liquidity needs that we have to be able to execute on these plans and these growth plans over several years, I think we're well positioned for that. So Joe, I'll turn it back to you.

Great. Thanks, Craig. I'll just flip through for completion in the last few slides here that Craig mentioned, cash flow and that's it. So that concludes our prepared content in our prepared remark. Again, we feel very, very confident in our ability to execute against this plan. We see enormous opportunity. We built this plan laddered up from a very measured base and believe there's potential upside on top of this. And for example, some of the vectors for growth just aren't even part of this plan. So we're excited to finally get this out there and share with you how we are thinking about our future opportunity. And with that, would love to open up to some questions and further discuss. Brendon, if you can start navigating through that.

Keith, if you want to go ahead and unmute your line, you're free to ask your question.

Okay. Can you hear me, okay?

Yes, you're coming through okay. Thank you.

Okay. All right. Wonderful. So one question. At the last call, you talked about getting the store count up to about 3,000 or so stores with some additions this year given the news this morning. I assume that's been delayed. Can you give us any sort of time frame when do you think you'll get to that?

Yes. And I'm going to ask, we're going to hold questions right now to the investor deck. We took some time at the beginning to talk specifically about Q2. I'll briefly answer, but I'm going to ask that we focus questions on the material we just presented. But yes, we still anticipate getting to the door counts that -- the wholesale door counts that we presented in this deck. As I said earlier, we're deferring some wholesale door openings until we have the inventory to appropriately service them. So again, which has no real impact on the 3 to 5 years whatsoever. But yes, we obviously need inventory to sell in order to expand.

And so building on that, this is where I was going. You have a 3,500 long-term count, you'll be pretty close to getting there. So I guess as you look forward past that, do you expect the growth to primarily come from just leveraging the slots you have in existing wholesale? Will it come more from your stores online? I know all of them are going to contribute, but what do you think would be the biggest one?

Yes. No, it's -- and again, we're starting to see this already with the beds we have. We -- as we stated in the strategy, driving up same-store sales is a big part of this, having more beds at higher price points. And we've done a very good job of earning our way onto the floor, and we believe we need to continue to do that. There's no assumptions here on partnership. We need product that continues to resonate with customer, have clear benefits, be priced fairly for the delivery of value it provides for the customer and earn our way into the -- onto the floor. But we anticipate over the coming years, that means it's newer product, it's higher price point product and it's more slots on the floor, as well as opportunity to lean into more of our broader assortment and make that all very compelling for our wholesale partners driven on proven conversion and continuing to improve our margins. So there's a lot of opportunity in the doors we have. Again, I point to the larger players. And at the numbers we're laddering up to here, we're starting to become a larger player. You don't get to those numbers with only 4 mattresses. Brendon, you got a...

Bobby are you there?

Yes, yes. Can you hear me all right?

Can hear you fine.

Yes. I just want to unpack kind of the 3-, 5-year revenue target a little bit more. Is that target first assume kind of the similar mix of business we've always talked about 1/3 wholesale, about 2/3 DTC? And if so, when we do that math and unpack the wholesale number off that, it implies some pretty notable productivity per door. I think if we take the midpoint, it's maybe $210,000, $215,000 or so per wholesale partner. So I just want to maybe unpack that if that's the correct way, 1/3, 2/3 to look at it and then kind of talk about how can we take up that productivity because that is a notable increase to kind of where wholesale is running today on our productivity per wholesale partner, if that makes sense.

Yes. So I mean the world is going to look a little different for us in 3 to 5 years. And again, that's part of what we're trying to get out there with this presentation. So first off, recognize we've got a sizable non-mattress business at that point. So we spoke to in that $2.5 billion, about $500 million of that is non-mattress. Now some of that is related to the mattress, a good chunk of that is not. So I mean that's sort of outside of that math. With -- you are stating -- restating what we've continued to say, that sort of that 1/3, 2/3 is absolutely where we've been aiming all along and anticipate that's where we will land in the 3- to 5-year place. Now that is alongside this 200-plus showrooms. The exact count of showrooms, we'll see where it lands, but call it north of 200, and those produce a decent amount of net revenue individually for us. Again, as we guided, we said around $2 million per door. But again, we believe that's very conservative. So that's another piece. And what we didn't talk about it, on the DTC side, I've continued over the last few quarters to talk about the strength of our contact center. A lot of our DTC growth is actually being driven by what I'd call good, old-fashioned, human-assisted selling. Our ability to have high-quality associates who are able to engage through novel new channels, phone, call it half of the engagements are over chat. And there are some emerging new capabilities that we will be leaning into. It's already a double-digit percentage of DTC, and we think it's going to grow substantially beyond that. It's the fastest-growing part of the, call it, the traditional side of DTC. So we still see meaningful headroom in what you call the traditional DTC channels, in large part driven by these 2 things: a substantial increase in the number of showrooms and our continued build-out of our human-assisted contact center capabilities. Alongside, yes, as you've said, we are expecting more revenue per door and wholesale as we're going to have more beds to sell at higher price points as well as more assortment to drive through those channels.

Is the assortment today -- so the point on non-mattress revenue is a very good point. That could be a very sizable business going forward. Is that mostly DTC today? And then you guys are kind of in the early innings of emphasizing that with your wholesale partners? So that's really part of the productivity gap or part of the productivity jump we'll see in wholesale doors is that 3 years from now, we're going to be really pushing the non-mattress side with our wholesale partners, too?

Yes. On a net revenue basis, it's mostly DTC. Although interestingly, if you look at the category level like our seat cushion, prior to COVID, our seat cushion business was predominantly not DTC. It was predominantly through our distribution partners, and this is a very different network of distribution partners. We are sold in a variety of retail stores. We are sold in thousands of truck stops across the country. it's a coveted item for long-haul truck drivers or people who are commuting across the country. One of our largest retailers right now for seat cushions is Love's, a phenomenal, regional quick stop and truck stop-type center. What's interesting is over the last 1.5 years, we've pivoted into a very strong DTC business in seat cushions as it sort of went from being almost a business that just sort of did its own thing to one we actually are treating as a primary business and leaning into. So we've seen opportunity on both sides. And again, the vast majority is DTC, but we see a different set of channel partners. And again, discussions are underway. We have a lot of opportunity to drive different addressable market, different customer base, into the brand with product that really, again, has similar margin and similar benefits. And that is a very interesting lever that we have that is quite different from many other players in the space.

Atul, your line is open.

So a couple of questions on your own showroom plan. So it seems like a pretty sizable step-up is expected over the next few years. So at the point when you are -- when you have 200 stores, would you have national footprint by then? And also, what are some of the local market demographics that you look at when you're going to open these new stores?

Sure. I mean we're focusing on DMAs first. And we don't expect to have lots and lots and lots of doors in the DMA. I mean it's -- there are some very large markets. So call it 2 or maybe 3 doors in a DMA would be likely where we'd cap out, but we're really trying to focus on DMAs first. We approach everything here fairly data-driven. And we've built a very sophisticated model based on everything we already know through our DTC business, through traffic patterns as well as our existing wholesale partners, where there is the strongest brand demand and the biggest opportunity in terms of addressable market, and we are focusing on those markets first. And it's both a way to make sure we're built on a platform of success and can rapidly tune and iterate on our store design, on our selling process. And I'll tell you, if you look at our last half dozen doors we've opened up, it is a genuine step-up in store design and process and layout over our initial doors we did. And I -- just having been in retail before, this pace of complete overhaul of store and iterating into an entirely new and more effective concepts, it's pretty remarkable how quick the team is performing. And by leveraging markets where we have higher probability of success and more addressable markets, allowing us to iterate quickly. So yes, it is -- we have a plan. It is very driven off of the fact base that we fortunately at our size and scale have access to right now. And again, we'll be focusing on those core DMAs first.

Got it. So is there a risk that at some point in the future when you expand beyond your core market, the economics in the new stores might not be as favorable as what you're witnessing today?

Well, again, I don't think right now the thought is that we have one of our own showrooms within 30 minutes of anyone in the U.S. population. I mean these are brand showrooms. And again, I think like Apple at 271 doors is an example of this. So we want to get national penetration where the economics make sense for us. And that's where -- we're not committing to an exact number. We'll figure that out as -- from the data as we go. But the idea that we'd have a showroom and a small resort town far away from a metro area, yes, that's not the goal here. I mean these are considered purposes, they're durable goods, and it's getting in the markets where that makes sense. So yes, I -- sure, I mean at 600 doors, I'd suspect we would see diminishing economics, which is why I think we size this appropriately if you really look at the market demand across the DMAs that makes sense.

Got it. And then an unrelated question is you did mention about potentially entering into non-sleep or non-mattress categories at some point in the future, be around 5 years. So without providing any competitive intelligence here, Joe, can you provide some examples of what's possible in the future on this side?

I mean if you look at our history, which dates back 3 decades and a lot of -- again, seat cushions and medical cushions are an example of that, really, the common thread is cushioning and predominantly novel, gel-based materials and novel manufacturing techniques around cushioning. There is cushioning all over the place. There's cushioning in furniture and transportation, in travel and fitness, in protection, in outdoors, in -- it's on and on. I mean there's cushioning all over, and we have novel applications way outside of sleep. So the opportunities are enormous. The question is finding the right categories with the right economics that we can really take to scale, which -- and I think we've got a pretty good head start on playing that out. But it's -- take any of us for an hour in a room together, and we will fill many white boards full of opportunities. That's not the challenge here.

Susan, your line is open.

Great. I'm curious, when you look at your EBITDA margin goals, I'm curious kind of where you see the risks are in reaching those? Is it commodity costs if kind of this rise that we're seeing doesn't level back off? Or are there other parts of that bridge that you laid out where you think there's some risk there? And then I'm just curious, if one portion of that is at risk, there's some cushion to offset it elsewhere.

I think it's a fairly risk-balanced plan. As I've tried to illustrate going through, there's a lot of conservatism in some of the bigger levers in the plan. So I think there's upside opportunity all throughout, whether it be timing, our ability to move quicker into some things that aren't built into the plan or just better economics. Sure, there is a number of things in here that could create downside risk. In materials costs, I'm less concerned about, I think history would show those tend to -- they ebb and flow and they tend to normalize over time. We also continue to dig deeper into vertical integration. It's part of our opportunity for margin expansion and operational efficiencies. There's a lot we do ourselves, and we've proven to be very able manufacturers. There's a lot we still outsource. And I'd say there's no aspect of it that we're not looking at and saying, "Could we do better ourselves?" And then it's actually both upstream and downstream. Downstream, there's some really good opportunities as well. So I'm less concerned about that side. I honestly -- I think the biggest risk is call it good, old-fashioned failure to execute. This is predicated on our ability to get these new products designed and out the door, to build out the manufacturing capabilities that we need, to build out the showroom expansion that we need, to continue to iterate on our content and brand and site and grow this organization. I mean we're at between, I think, 1,600 and 1,700 people now, which is more than double. I mean we're closing in almost triple what it was when I joined. That's scale and high growth like this can break companies. To me, that's the biggest risk. Nothing external to that, to which I just continue to point out what we've accomplished over the last few years. I think we're building a fact base that we can execute and we can drive through transformation, but I think any other risk pales to that one.

Great, great. If I could add one more. So on the higher price point mattresses that you kept on rolling out, I'm curious the thought process there that your competitors are really kind of outdated and you see opportunity there to take market share. Or is it that through your research and what consumers are looking for? Are consumers still looking for even more quality and are willing to pay that higher price within your mattresses?

Yes. I think it's more the latter than the former, and we're not trying to throw stones at anyone here. But I think the data is clear. I think consumers right now are -- believe that there is better sleep that they can get, and current solutions are not, in total, meeting their needs. There is growing trends that consumers are willing to spend into that, especially if there is a promise of meaningful improvement. And I think it is on us. It's not what do we do versus the competition, it's how do we get back to putting this as a consumer-centric business. This is -- I mean this has been an oligopoly of sorts, historically, that has been a great business from a longevity of margins and cash production. I just -- we fundamentally believe the customer got lost in this over the last few years, which is why CSAT was in decline and why mattress buying has been one of the lowest ranked, even referred to as a grudge purchase, one of the lowest ranked sales processes for consumers. And some of the new entrants have been playing on that around just brand and convenience, but we believe fundamentally, it starts with the product. And all of our R&D, all of our innovation work we're doing is premium doesn't mean better fabrics and thicker materials and let's just play with the thousands of iterations of densities of foams and layers. It's -- there is real innovation to happen here. And we believe -- I personally believe that a decade from now, this industry is going to look very, very different than it does today. The question is who profits and who wins from that. We believe we're uniquely positioned to be a winner there. And I think it comes from getting back to meeting consumer demand with products that don't exist today, that solve these very real issues that if you actually bother to ask consumers, they're happy to tell you about.

Brad, your line is open.

Great. A lot of interesting stuff to talk about. Just wanted to talk about some of the new potential products. You talked about potentially having 6 models down the road. I guess, Joe, could you talk about maybe timing of this? And would you -- could you do it in a bolt-on manner? Or do you redo everything? How should we think about the evolution of the product assortment going forward and timing on that?

Yes. And the materials we presented really just compared now to future, so we didn't really provide a year-by-year sequencing. And some of that, just -- and for those who followed us for the last 3 years know this well, it's not a straight line path. We have proven willingness to shift our business or take steps backward that we know will drive forward. And over time, we've been demonstrating that. And it's one reason this is a great time to talk about the 3- to 5-year plan as we've had a lot of wobble in core metrics over the last 3 years, yet it has consistently, not looking at in 60- or 90-day periods, but over multiyear periods has driven toward a clear trajectory, and that's the goal moving forward. So yes, that said, there's a number of factors that play into the release. Some external, some internal. Internal, we -- our goal is not to rush product out the market, it's to get the right product, and some of the work we're working on right now is quite ambitious. Some of it is just assortment architecture, and I'd point to like what we just did with our Harmony Pillows. We went from 2 models to 6 models just in the last couple of weeks, and that's just building out the right product for each of our customers. And there is opportunity in mattress as well. What I'd say is you're going to see 3 -- sort of 3 phases. You'll see some assortment expansion work, which is going to be more nearer in and things that allow us to take price actions and get some margin benefit in the near term. You're going to see some midterm things in the next 3 to 5 years, which would imply in the next year or so that start to establish a platform for where we're going with our product expansion. And there's some longer-term things. I think with that platform, it opens up all sorts of new possibilities downstream, which I think once -- if you go on this journey with us, I think that'll all become clear over the coming years. But it's a process. And obviously, that depends on materials. And I mean just looking -- we talked about leaning into adjustable bases. Adjustable bases have electronic components. Lead times on electronic components right now can be as much as 50 weeks. And should we use electronics anywhere else? I mean the -- whether you're selling washing machines or novel new beds or computers, these shortages are real and they're industry-wide, and that impacts our timing and sequencing as well. So yes, there are a number of factors that play into this. It doesn't change the fact that there are different journeys that get us to the same end state. And again, I think you'll see it in sort of multiple phases of some of these near-term actions, midterm and long term.

Very helpful. And if I could follow up on how to think about the revenue growth rate for you that you all are targeting and over the 3- to 5-year journey to the dollar figures that you put out, how do you try to plan growth for the company? I mean should it be a minimum of 20% a year? Or do you -- are you shooting for the high end of what could potentially be 40% every year? How should we think about the CAGR of growth and the timing of growth rate going forward?

I mean -- and obviously, we're getting into the law of large numbers. So if you look at the last 5 years in our growth rate, it's -- that doesn't sustain over the next 5 years. But no, we -- I'd answer it as, are we viewing it more front-loaded or back-loaded? I'd say it's a pretty conservative plan with a pretty balanced growth rate over the next 3 to 5 years is the best way I could answer that.

Matt, your line is open.

So I think the -- a lot have been answered, but I do want to touch on 2 things. So first, on the margin progression. If I look at Slide 28 for the EBITDA margin improvement path, it does look like most of the improvements that are considered are gross margin-related, but I just wanted to see if you could maybe put a finer point on how much of the margin expansion path is gross margin-related versus operating leverage.

Well, a lot of -- yes. And can you comment where you look at operating leverage? I mean as a vertically integrated manufacturer, there's a lot of operations costs that do roll into gross margin, our opportunity to yield efficiencies, more output, less waste, higher quality and so forth in manufacturing. Again, I keep saying we're in early to mid-innings on our opportunity to meaningfully make a difference there. I mean in my first 1.5 years, we, on basically the same equipment, doubled output while reducing labor rate per unit. So we still have a lot of opportunity on the -- above the gross margin line. We do expect to get marketing leverage. G&A, I think, we've been very responsible with and will hold relatively flat as a percentage of net revenue. Marketing, I mean at $2.5 billion, we're not going to be spending 30% of that revenue. I mean we do absolutely anticipate as our brand strengthens and as our assortment expands that we will get leverage on the marketing side. Craig, anything you'd add here?

Sorry, I just want to make sure I understand the question. You're asking in that progression on Slide 28, outside of the gross margin improvements we talked about, what else is there that can help us get to that EBITDA improvement? Is that the question? I just wanted to make sure.

Yes. I just wanted to maybe see if you guys could bucket out specifically which of those fall into the sort of the OpEx side of the margin improvement equation versus the gross margin side. That was mainly the -- just...

Yes. It's primarily going to be in the marketing and selling. So there's going to be pressure in both ways. So we will get efficiency on the ad spend as we continue to grow just because we don't need that much ad spend at those higher levels. But then there is going to be a little bit of pressure because all of the expansion into the retail showrooms, all those operating costs will go into that. But because we get so much leverage on those showrooms, we do expect to get leverage overall on that line item. So that's where the bulk of it is going to come. We'll get a little bit off of 2021 SG&A because, as we said, we're making a heavier investment in 2021 on G&A as an investment to support growth. So over the next 3 to 5 years, that will come down, so we'll get a little bit of progression over where we sit today from G&A.

Okay. Got it. That's clear. And then just one final point on that and then I wanted to follow up with the longer-term question. But the store costs, your own store costs are -- those, I assume, are going into the marketing and sales line. I mean everybody breaks it out differently, but maybe you could just put a finer point on that one.

They are. The product cost clearly goes through COGS. But the rent, the labor all goes through sales and marketing.

Okay. Great. All right. Perfect. And then just for -- okay, so my longer-term question is this. It seems like in Slide 32, I want to see if I get you maybe more explicitly on record here, do you need to embed sensors and other measurement technology within the mattress? Can you get paid for that? And is that factored into any of the 5-year outlook that you've got in the form of sort of ASP increases or other revenue adjacencies? That would be helpful just to get an explicit answer on that.

Yes. Of course, you're asking to comment on specific things about unannounced, unreleased product so my answer will likely disappoint. The -- there are many ways to attack this is the simplest thing I can say. We can do it through partnership, we can do it through first party. I fundamentally believe to do it at scale. Consumers don't want yet another device to charge and don't want to be strapping things onto their body. And I mean, again, 10 years from now, the world is going to look very different as you talk about sleep health, and so there's an opportunity. I mean you talk about getting paid for that, I mean even that is a loaded question. Is the consumer willing to pay for that? Are there integration opportunities beyond that? What do the stream of revenues look like if you were to pursue something like that? Again, we could fill whiteboards with possibilities here. I think this fundamentally starts with actually yielding results for consumers, gadgets and gizmos there's a market for. I -- there's a lot of Fitbits that are sitting in drawers right now with the batteries long since drained. Nothing against my friends at Fitbit, but I've got a couple in a drawer myself next to some old socks. The -- it's -- this is getting it right for the consumer. I mean we didn't talk about it in the long-term projection here. But I mean we're building up a body of expertise outside the company. We've just brought on board Dr. Michael Breus, one of the preeminent top sleep scientists in the country. He has passion for genuinely driving sleep health forward and shares a vision with me on all sorts of ways to actively promote better sleep health. Some of that, again, starts with data, and we are kicking off a series of true, academic-led -- from professors we're working with through an academic-lead, double-blind, peer-reviewed, placebo-controlled studies that will not only allow us to quantify what our customers already know but will give us tremendous insights on some of the opportunities we're uniquely positioned to solve.

Seth, your line is open.

Joe, just a question, bigger picture. Obviously, you put out these 3- to 5-year targets. But if you think more philosophically, how do you prioritize growth over profitability improvement over the next 3 to 5 years? Are you more focused on achieving growth and market share with profitability to follow? Or are you more focused on improving profitability?

Yes. No, the former, full stop. We -- this is not a high-growth category, and we are looking to gain share. That fuels the coffers that allows us to do all the stuff we really want to do, which is get to meaningfully better product that transforms people's lives and solving many of these very real sleep opportunities and challenges. But we are favoring profitable growth. I mean I don't want to mislead. I mean we have -- it was one of our opening statements, as we've been laser-focused on unit economics and having a healthy business that's producing cash and is profitable, and we have clearly put out a road map with improving margins and adjusted EBITDA margins. But we could dramatically improve EBITDA margins if we decided to sort of stabilize the business and say we're comfortable with our current share, now let's just produce cash and grow profits. We believe there is enormous demand for this product. We believe we have something that more consumers should have in their homes. And we are marching forward to taking that share, and we'll do that in increasingly sophisticated ways with new product and new go-to-market strategies. And that comes into the reinvestment in R&D, the reinvestment in expansion, the reinvestment in capabilities. And whenever we have a choice on is it another dollar of profit or another dollar of growth, we'll take the dollar of growth.

Yes. I'm looking at that margin trajectory chart correctly, it seems like you have potential for 20% EBITDA margins with about 500 basis points you're projecting for reinvestment at this point in time, which is pretty impressive. As we think about the next 2 years, obviously, 2021 is an investment year, should we be thinking about more investment years in the next 2022 and then sort of hockey stick to get up towards that 14% to 15% EBITDA range in the next couple of years after that?

Yes. We're -- I think there is some backlog of investment we're leaning into hard right now. How material that turns out into any given period economics, we're still working through. What I would say, and part of the intent of this presentation, is with this content out there publicly, it gives us an opportunity to better explain our choices and our investments and expectations on return. So as we evolve our investments, we anticipate better transparency in what that really means in this context.

Joe, at this point, there's no more audio questions, but there's a few in the Q&A function.

Sure. Let me look there. Yes. kind of work backwards here. And if any other questions come in, please feel free to raise your hands. I'll answer this one for fun. How do we feel about the Reddit crowd? I can't imagine what they're asking about, but it's a really novel marketing channel that we've been able to leverage in some leading ways. I've heard there's an investment community out there that may have commented us on our stock in the past, and they seem to have a lot of fun. That's all I'll say about that. The -- so question on raw materials. How will you ensure to keep up with manufacturing in comparison to your competitors that are using hybrids and having to wait on steel for coils and foam? It's an important question, given the nature of our product. Our dependency on foam is substantially less than many of our competing products. We just don't have that much foam in the mattresses to drive the majority of our revenue. On steel coils, there's backlog for sure that's out there. What we're seeing right now is there's ample raw materials. It's just a matter of those who actually manufacture coil and working through the backlog. We've been able to assemble a network of manufacturers that we have no -- at this moment in time, we have no coil challenges. And again, longer term, whether it be coil or foam, we're looking at everything in terms of vertical integration opportunity, and there's a supply chain on how vertically integrated you get in those regards. But what I would say, similar to the prior question, part of our investment in growth and taking share is ensuring that we own our destiny, and it gets to an earlier question on risk. I think the more we own our destiny as we talk about ability to execute, the lower our risk base is. And that is something we are looking very heavily at. The -- Drew Peng asked just about the pace of the road map to the 200 DTC showrooms or 200-plus wholesale or, excuse me, owned showrooms. We're -- we've committed to getting to 30 or more this year. I think the nature of showroom growth in general tends to sort of scale on itself. So I would expect it to be a little more backloaded as that's just if you look at the growth rate of any brick-and-mortar strategy, you don't see massive step functions. Going from 0 to your first 50 takes longer than going from 200 to 250. So -- and some of that is building up our capabilities and pipeline and scale and our ability to sort of replicate operations, which we're doing a terrific job at right now. Some of it is just the nature of growth. Let's see -- so a question came up. This is related, I presume, more to downstream category expansion. Are we planning any partnerships with furniture companies or airline companies? Maybe provide cushions for sofas or furniture airplane seats, which gets back to my -- it's not hard to throw any of us in a room for an hour with a whiteboard and fill many of them. So we have not announced any formal partnerships with anyone. There are a lot of directions we could go. And not surprisingly, given our growth rate and our innovative components and the strength of our business, we're taking a lot of inbound calls from a lot of interesting companies. We are laser-focused on hitting these targets right now and not distorting or distracting ourselves. But also to the R&D point, the lead times on some of these new opportunities are long. And we're, in parallel, working on some pretty novel opportunities beyond sleep. So nothing to announce other than it was, David, I apologize if I pronounced your name wrong, but yes, I'd say you're thinking about it the right way. We're just going to be very deliberate and data-driven around opportunity to take share, sizable -- size of addressable market, the quality of the partners against our brand and so forth. But no shortage of opportunity, which is, I think, part of your point. A number of questions on specific technologies we could use in our bed. I'd say we are carefully looking at all of them. I think most of the ones we've seen out there today either have significant drawbacks, risks or are fundamentally bolt-ons. So again, I think there's a lot of novel solutions out there that are proving consumer need, but I think there's an enormous opportunity to take this to scale and likely in some very different ways.

So I think, Joe, there's a question on the goal of wholesale revenue percentage in the plan.

The -- Oh, I'm sorry, I didn't scroll down far enough. Thank you. [ Kenneth Lam ] asked, what's the goal of wholesale revenue percent in the plan? Ken, we've guided, since I've joined, to call it a 30%, 70% split of wholesale to owned retail or potentially 1/3, 2/3, somewhere in that range. And this plan is fully built in line with those ratios.

About the -- there's -- why our cushions at Harmony Pillows not in big box stores like Target?

Yes. It's -- yes, so again, there are many retail outlets we're not working with as you talk about non-mattress, and the Harmony Pillow is a great example of that as demand has been very high. Honestly, that's just been another case of capacity. We have some components there that have capacity constraints, which we've been very aggressively leaning into expanding. Part of our expansion right now into the 6 models over 2 with the Harmony, which also we've simultaneously launched with many of our wholesale partners, is a step in that direction. But it gets back to part of our fundamental initiatives in driving this long-term growth, and driving up our capacity has been a significant part of our growth engine and continues to be, and that's been the largest factor in many of these non-mattress products as well. The good news is building capacity on non-mattress is faster. And I mean we only launched Harmony just 1.5 years ago, and it's been a runaway success. So we will continue to build capacity as well as tune the products and new product designed more with some of these novel channels in mind. And yes, absolutely a ton of opportunity there. So a question came up. Another one from Brad Thomas. Is international growth included in today's plan? It is in the presentation. It's a limited piece. So in the revenue growth, I believe, Craig, correct me if I'm wrong, I think we had $90 million.

I believe that's right.

I'm sorry, $75 million. We had $75 million of net revenue growth on international driven exclusively from realizing our Canada opportunity. So anything beyond Canada was not built into this plan. And again, it's an example of upside potential. And I think we've hit the questions that have come in. Brad, or excuse me, Brendon, maybe if you can, one last call for questions.

[Operator Instructions] We've got a few minutes left if you want to take a handful more. I'm not seeing anything come in. But just quickly, before I turn it back to Joe, I would just note that today's presentation was filed as an 8-K this morning so it's accessible via that filing, but we'll also be posting a PDF version of it on the IR website later today.

Thank you, Brendon, for your support. Just wrapping up, thank you to everyone who participated and everyone who joined today. I know this is a long presentation, but I appreciate you walking through all the material with us. Again, just to recap, I think we have spent the last 3 years building a heck of a foundation and proving out a trajectory and an operational capability that has set us up now for forward success. Just recapping this broadening of the assortment, the expanding of capacity that we've been talking about, continuing to expand our distribution footprint, continuing to expand the margin opportunity we have through a combination of price actions, new product and operational efficiencies as well as the exciting, more long-term opportunities around reinventing some of the sleep products themselves, new adjacencies and geographic expansion. We see an enormous runway of opportunity in front of us. And most importantly, we are continuing to build confidence that our proven execution historically is setting us up to continue forward in this regard. So thank you for coming on this journey with us. We appreciate your time. And as always, be healthy, stay safe and sleep well.