Pinchot Lane Partners provides a research note on Purple Innovation and Casper. It summarizes that Purple's 2019 revenue guidance suggests much higher unit volume growth than projected revenue growth due to an increasing wholesale channel. It also notes Casper launching two new hybrid mattress models at higher price points that could drive sales and margins. Meanwhile, Sleep Number's unit sales growth remains underwhelming, and Tempur Sealy won't disclose unit trends, noting bed-in-a-box companies have yet to prove profitability despite some unit growth.

1. Purple Investment Thesis:
Additional Research, Data Points
Pinchot lane
partners
April 19, 2019

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3. Purple’s 2019 guidance suggests unit volumes are increasing
substantially faster than projected net revenue growth
• Purple total net revenue guidance is $350-375 million in 2019 (+23-31% growth vs.
PY), with “north of 30%” of revenue mix through wholesale channel
• Assume: ~33% of 2019 projected sales from wholesale channel = $120 million at
midpoint of sales guidance range
– 2018 revenues ($286 million) from wholesale were 15% of total ($43 million)
• Implies 2.8x (+180%) increase in revenue from wholesale channel
• Also implies virtually no revenue growth in existing DTC channel (~$240 million)
• Due to wholesale pricing being substantially lower than DTC channel on a same-
model basis (retail partner markups are typically 100% on wholesale price, or 50%
merchandise margin), unit volume growth of Purple mattresses sold should be
substantially higher than net revenue growth guidance (see next slide)
3Sources: Company reports, Q4 2018 earnings transcript

4. Purple 2019 guided revenue growth vs.
volume growth, notional analysis
• Notional analysis above demonstrates that a substantially higher mix of wholesale
revenue projected implies unit volume growth considerably in excess of net revenue
growth guidance
• Note: Analysis above is strictly notional for purposes of showing how estimated
channel growth rates could influence unit volume growth; revenue and unit figures
shown are not actual figures; analysis assumes same mix of models sold in each
channel in each period and no price increases
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2018 2019
$m revn
WS 15$ 42$
DTC 85 85
Total 100$ 127$
% growth 27%
ASP - WS 500$ 500$
ASP - DTC 1,000$ 1,000$
# units
WS 30,000 84,000
DTC 85,000 85,000
Total 115,000 169,000
% growth 47%

5. Casper New Hybrid Models
• Casper just introduced two new mattress models in mid-April 2019 that follow Purple’s lead in a hybrid design
including foam layers combined with pocketed coil design
• Price points are significantly above previous all-foam models:
– Wave Hybrid (queen size) priced $400 above Wave all-foam, or +17%
– Casper Hybrid (queen size) priced $300 above Casper all-foam, or +25%
• Casper also seems to have raised prices across the board for original models vs. prior year:
– Wave all-foam $1,995 -> $2,295 (+15%)
– Casper all-foam $995 -> $1,195 (+20%)
– Essential all-foam $600 -> $795 (+33%)
• Extremely likely that new models come with substantially higher gross margins
• Ambitious sales and contribution margin growth assumed in Casper financial projections likely predicated on
meaningful sales of new models and price increases
• Interestingly, Casper is raising prices while other bed-in-box competitors are driving price points lower
5Source: Casper website

6. Casper 2019 projection vs. Purple
• As previously reported, Casper’s
projected net revenue growth is
nearly 50% in 2019
• As shown in previous slide, projected
growth likely includes sales of new
hybrid mattresses at higher price
points, in addition to overall price
increases taken on all models
• Implies Casper unit volume growth in
2019 could be materially less than
49% projected net revenue growth
• Alternatively, Casper’s projected
2019 net revenue growth guidance is
conservative
6Source: “Insider Casper’s Financials” The Information (3/27/19)
Casper
Est Est Est
2014 2015 2016 2017 2018 2019 2020
Net revenue $15 $90 $169 $250 $373 $556 $839
$ growth vs PY 75 79 81 123 183 283
% growth vs PY 500% 88% 48% 49% 49% 51%
Cumulative net revenue $15 $105 $274 $524 $897 $1,453 $2,292
Gross profit $7 $40 $66 $110 $166 $279 $469
% margin 47% 44% 39% 44% 45% 50% 56%
% gross contribution margin 44% 33% 54% 46% 62% 67%
Marketing expense $4 $28 $72 $99 $112 $135 $172
% of sales 27% 31% 43% 40% 30% 24% 21%
% growth 600% 157% 38% 13% 21% 27%
SG&A expense $3 $18 $44 $79 $118 $136 $184
% of sales 20% 20% 26% 32% 32% 24% 22%
% growth 500% 144% 80% 49% 15% 35%
EBITDA $0 ($6) ($50) ($68) ($64) $8 $113
% margin 0% (7%) (30%) (27%) (17%) 1% 13%
% EBITDA contribution margin (8%) (56%) (22%) 3% 39% 37%
Cumulative EBITDA $0 ($6) ($56) ($124) ($188) ($180) ($67)

7. Meanwhile, Sleep Number unit growth
continues to be underwhelming
• SNBR management discloses that Q1 2019 sales growth almost entirely driven by
average revenue per mattress unit (“ARU”) vs. unit volume
• Comparable store unit sales YoY trend turned negative in Q1 2019 (mid to high single
digit %); 585 stores open at end of Q1 2019 (+4.8% vs. PY)
• Discloses that quarterly unit volume trends “will have fluctuations”
• Unit volume for FY2018 was only +2% on net sales growth of 6%
• Likely explains post-earnings reaction in SNBR share price on 4/18/19 of -18%
7Source: SNBR Q1 2019 earnings release (4/17/19)

8. Tempur Sealy won’t disclose
unit growth trends
• Other than unit growth trends for NA Tempur-Pedic sales, TPX management does not
disclose unit trends for the overall business
• Also not providing topline sales guidance for 2019 (FY19 guided Adj EBITDA range of
$425-475m vs. $425m in FY18)
– “Admittedly not as much growth as we would have liked. We certainly are pushing for more.”
• When asked to comment on competitive landscape and market share, CEO states the
following:
– “If you go all the way across the industry, you probably have to touch on the bed-in-the-box guys. That market
to me looks like they haven’t been able to demonstrate profits. Although their unit growth – they may have
some unit growth, it’s still coming from overinvesting in customer acquisition cost. And it looks like to me they’re
trying to run to retail because they’re having trouble with growth. So, I still – I haven’t seen the bed-in-the-box
industry in general as being much of a competitive threat although I think it’s a niche business. But, I don’t think
anybody in North America is doing it at any large size at a profit.”
8
Source: TPX Q4 2018 IR Presentation (2/26/19); Q4 2018 earnings call (2/14/19)
This is a fair point but potentially short-sighted. Both Casper and Purple aiming for
EBITDA profitability in 2019.

9. Consumer Reports – March 2019
9
• Purple models among Consumer Reports annual mattress review “Recommended” list

10. Fund Overview
• Pinchot Lane Partners is a value-driven investment partnership seeking to
invest in publicly-traded securities across major global stock exchanges (e.g.
New York, Toronto, London, Hong Kong, Euronext, etc.)
• Seeks long-term capital appreciation by investing in a concentrated portfolio of
securities, predominantly equities
• Long-biased with low portfolio turnover (not a traditional “hedge fund”)
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fundamental research methods developed over a decade of professional
investing
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external service providers
• No use of portfolio leverage (margin) as a core operating principle
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11. contact
For investment inquiries and/or questions about investment research, please contact:
Drew Peng
Managing Partner
Pinchot Lane Investment Management, LLC
invest@pinchotlane.com
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