Sleep Number Corporation (Nasdaq: SNBR) today reported results for the year ended December 28, 2024.

“In the face of significant ongoing weakness in the U.S. bedding industry, we have transformed Sleep Number’s operating model over the past 18 months for greater financial resilience. In 2024, we delivered gross margin rate improvement and operating cost reductions that were nearly double our original targets for the year, while generating positive free cash flow,” said Shelly Ibach, Chair, President and CEO. “While the marketplace remains extremely challenging, our dedicated team is intently focused on driving improved demand and further advancing our operating model transformation, which position Sleep Number to deliver profitable long-term growth when the market recovers.”

Fourth Quarter Overview

Net sales of $377 million were down 12% versus the prior year, including one to two percentage points of pressure from lower store count versus the prior year Gross margin of 59.9% was up 330 bp versus the prior year, driven by year-over-year product cost reductions, favorable product mix, and efficiency gains in our home delivery and logistics operations Operating expenses of $219 million were down $28 million versus the prior year (before restructuring costs) Net loss of $5 million compared with a net loss of $25 million for the same period last year Adjusted EBITDA of $26 million was up 43% compared to the prior year, with an adjusted EBITDA margin of 7.0%, up 270 bp versus the prior year

Full Year Overview

Net sales decreased 11% to $1.68 billion in 2024 Gross margin of 59.6% of net sales was up 190 bp versus the prior year, including the benefit of product cost reductions through value engineering and ongoing supplier negotiations and ongoing efficiencies in our home delivery and logistics operations Operating expenses of $962 million were reduced by $88 million versus the prior year (before restructuring costs) Net loss of $20 million versus a net loss of $15 million last year Adjusted EBITDA of $120 million, with an adjusted EBITDA margin of 7.1%, up 40 bp versus the prior year

Cash Flows and Liquidity Review

Net cash provided by operating activities of $27 million for the year, up $36 million versus the same period last year Free cash flow of $4 million for the year, up $70 million versus the prior year Leverage ratio of 4.2x EBITDAR at the end of the year versus covenant maximum of 4.8x

Amended Credit Agreement

The company also announced today that it has entered into an amendment for its existing revolving credit facility, including permitted financial covenant levels, to provide greater flexibility through 2025. Additional details regarding the credit agreement amendment are available on the Form 8-K filed with the Securities and Exchange Commission.

Leadership Transition

In a separate press release today, the company also announced:

Linda Findley has been appointed as Sleep Number’s President and Chief Executive Officer, and a member of the Board effective April 7, 2025 In addition, Phillip M. Eyler has been appointed independent Chair of the Board, effective upon the conclusion of the 2025 Annual Meeting

Financial Outlook

As Ms. Findley transitions into her role, we want to provide her with the time and flexibility necessary to evaluate our strategies and business trends prior to issuing a 2025 financial outlook at a later date.

Conference Call Information

Management will host its regularly scheduled conference call to discuss the company’s results at 5 p.m. EST (4 p.m. CST; 2 p.m. PST) today. To access the webcast, please visit the investor relations area of the Sleep Number website at https://ir.sleepnumber.com. The webcast replay will remain available for approximately 60 days.

About Sleep Number Corporation

Sleep Number is a wellness technology company. We are guided by our purpose to improve the health and wellbeing of society through higher quality sleep; to date, our innovations have improved nearly 16 million lives. Our wellness technology platform helps solve sleep problems, whether it’s providing individualized temperature control for each sleeper through our Climate360® smart bed or applying our 32 billion hours of longitudinal sleep data and expertise to research with global institutions.

Our smart bed ecosystem drives best-in-class engagement through dynamic, adjustable, and effortless sleep with personalized digital sleep and health insights; our millions of Smart Sleepers are loyal brand advocates. And our 3,700 mission-driven team members passionately innovate to drive value creation through our vertically integrated business model, including our exclusive direct-to-consumer selling in nearly 650 stores and online.

To learn more about life-changing, individualized sleep, visit a Sleep Number® store near you, our newsroom and investor relations sites, or SleepNumber.com

Forward-looking Statements

Statements used in this news release relating to future plans, events, financial results or performance, such as the statements that the company has transformed its operating model for greater financial resilience and is focused on driving demand and taking deliberate actions to strengthen the company’s operating fundamentals, which position the company to deliver profitable long-term growth when the market recovers, statements about its CEO and Board leadership transition, and future plans to issue financial guidance are forward-looking statements subject to certain risks and uncertainties which could cause the company’s results to differ materially. The most important risks and uncertainties are described in the company’s filings with the Securities and Exchange Commission, including in Item 1A of the company’s Annual Report on Form 10-K and other periodic reports. Forward-looking statements speak only as of the date they are made, and the company does not undertake any obligation to update any forward-looking statement.

SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited – in thousands, except per share amounts)

Three Months Ended

December 28,

2024

% of

Net Sales

December 30,

2023

% of

Net Sales

Net sales

$

376,817

100.0

%

$

429,518

100.0

%

Cost of sales

151,236

40.1

%

186,609

43.4

%

Gross profit

225,581

59.9

%

242,909

56.6

%

Operating expenses:

Sales and marketing

170,232

45.2

%

198,032

46.1

%

General and administrative

38,234

10.1

%

35,477

8.3

%

Research and development

10,653

2.8

%

13,276

3.1

%

Restructuring costs

3,684

1.0

%

15,728

3.7

%

Total operating expenses

222,803

59.1

%

262,513

61.1

%

Operating income (loss)

2,778

0.7

%

(19,604

)

(4.6

%)

Interest expense, net

11,742

3.1

%

12,687

3.0

%

Loss before income taxes

(8,964

)

(2.4

%)

(32,291

)

(7.5

%)

Income tax benefit

(4,299

)

(1.1

%)

(7,103

)

(1.7

%)

Net loss

$

(4,665

)

(1.2

%)

$

(25,188

)

(5.9

%)

Net loss per share – basic

$

(0.21

)

$

(1.12

)

Net loss per share – diluted

$

(0.21

)

$

(1.12

)

Reconciliation of weighted-average shares outstanding:

Basic weighted-average shares outstanding

22,659

22,483

Dilutive effect of stock-based awards

Diluted weighted-average shares outstanding

22,659

22,483

For the three months ended December 28, 2024 and December 30, 2023, potentially dilutive stock-based awards have been excluded from the calculation of diluted weighted-average shares outstanding, as their inclusion would have had an anti-dilutive effect on our net loss per diluted share.

SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Operations
(unaudited – in thousands, except per share amounts)

Twelve Months Ended

December 28,

2024

% of

Net Sales

December 30,

2023

% of

Net Sales

Net sales

$

1,682,296

100.0

%

$

1,887,482

100.0

%

Cost of sales

679,523

40.4

%

798,952

42.3

%

Gross profit

1,002,773

59.6

%

1,088,530

57.7

%

Operating expenses:

Sales and marketing

766,624

45.6

%

847,442

44.9

%

General and administrative

149,956

8.9

%

146,621

7.8

%

Research and development

45,255

2.7

%

55,797

3.0

%

Restructuring costs

18,066

1.1

%

15,728

0.8

%

Total operating expenses

979,901

58.2

%

1,065,588

56.5

%

Operating income

22,872

1.4

%

22,942

1.2

%

Interest expense, net

48,368

2.9

%

42,695

2.3

%

Loss before income taxes

(25,496

)

(1.5

%)

(19,753

)

(1.0

%)

Income tax benefit

(5,162

)

(0.3

%)

(4,466

)

(0.2

%)

Net loss

$

(20,334

)

(1.2

%)

$

(15,287

)

(0.8

%)

Net loss per share – basic

$

(0.90

)

$

(0.68

)

Net loss per share – diluted

$

(0.90

)

$

(0.68

)

Reconciliation of weighted-average shares outstanding:

Basic weighted-average shares outstanding

22,606

22,429

Dilutive effect of stock-based awards

Diluted weighted-average shares outstanding

22,606

22,429

For the years ended December 28, 2024 and December 30, 2023, potentially dilutive stock-based awards have been excluded from the calculation of diluted weighted-average shares outstanding, as their inclusion would have had an anti-dilutive effect on our net loss per diluted share.

SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Consolidated Balance Sheets
(unaudited – in thousands, except per share amounts)
subject to reclassification

December 28,

2024

December 30,

2023

Assets

Current assets:

Cash and cash equivalents

$

1,950

$

2,539

Accounts receivable, net of allowances of $1,113 and $1,437, respectively

17,516

26,859

Inventories

103,152

115,433

Prepaid expenses

14,568

16,660

Other current assets

44,098

44,637

Total current assets

181,284

206,128

Non-current assets:

Property and equipment, net

129,574

179,503

Operating lease right-of-use assets

356,641

395,411

Goodwill and intangible assets, net

66,412

66,634

Deferred income taxes

33,575

20,253

Other non-current assets

93,324

82,951

Total assets

$

860,810

$

950,880

Liabilities and Shareholders’ Deficit

Current liabilities:

Borrowings under revolving credit facility

$

546,600

$

539,500

Accounts payable

107,619

135,901

Customer prepayments

46,933

49,143

Accrued sales returns

19,092

22,402

Compensation and benefits

31,038

28,273

Taxes and withholding

18,619

17,134

Operating lease liabilities

82,307

81,760

Other current liabilities

55,804

61,958

Total current liabilities

908,012

936,071

Non-current liabilities:

Operating lease liabilities

307,201

351,394

Other non-current liabilities

97,183

105,343

Total non-current liabilities

404,384

456,737

Total liabilities

1,312,396

1,392,808

Shareholders’ deficit:

Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding

Common stock, $0.01 par value; 142,500 shares authorized, 22,388 and 22,235 shares issued and outstanding, respectively

224

222

Additional paid-in capital

27,390

16,716

Accumulated deficit

(479,200

)

(458,866

)

Total shareholders’ deficit

(451,586

)

(441,928

)

Total liabilities and shareholders’ deficit

$

860,810

$

950,880

SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(unaudited – in thousands)
subject to reclassification

Twelve Months Ended

December 28,

2024

December 30,

2023

Cash flows from operating activities:

Net loss

$

(20,334

)

$

(15,287

)

Adjustments to reconcile net loss to net cash provided by (used in)

operating activities:

Depreciation and amortization

66,351

74,043

Stock-based compensation

11,444

14,855

Net loss on disposals and impairments of assets

4,315

2,898

Deferred income taxes

(13,322

)

(12,295

)

Changes in operating assets and liabilities:

Accounts receivable

9,343

(854

)

Inventories

12,281

(1,399

)

Income taxes

3,987

(5,969

)

Prepaid expenses and other assets

(10,867

)

(5,220

)

Accounts payable

(15,910

)

(28,934

)

Customer prepayments

(2,210

)

(24,038

)

Accrued compensation and benefits

2,755

(2,943

)

Other taxes and withholding

(2,502

)

(519

)

Other accruals and liabilities

(18,188

)

(3,366

)

Net cash provided by (used in) operating activities

27,143

(9,028

)

Cash flows from investing activities:

Purchases of property and equipment

(23,505

)

(57,056

)

Proceeds from sales of property and equipment

156

21

Issuance of notes receivable

(2,942

)

(1,317

)

Net cash used in investing activities

(26,291

)

(58,352

)

Cash flows from financing activities:

Net (decrease) increase in short-term borrowings

(673

)

73,463

Repurchases of common stock

(768

)

(3,747

)

Proceeds from issuance of common stock

428

Debt issuance costs

(2,017

)

Net cash (used in) provided by financing activities

(1,441

)

68,127

Net (decrease) increase in cash and cash equivalents

(589

)

747

Cash and cash equivalents, at beginning of period

2,539

1,792

Cash and cash equivalents, at end of period

$

1,950

$

2,539

SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Supplemental Financial Information
(unaudited)

Three Months Ended

Twelve Months Ended

December 28,

2024

December 30,

2023

December 28,

2024

December 30,

2023

Percent of sales:

Retail stores

86.6

%

85.9

%

87.6

%

86.8

%

Online, phone, chat and other

13.4

%

14.1

%

12.4

%

13.2

%

Total Company

100.0

%

100.0

%

100.0

%

100.0

%

Sales change rates:

Retail comparable-store sales

(9

%)

(14

%)

(9

%)

(12

%)

Online, phone and chat

(17

%)

(20

%)

(17

%)

(15

%)

Total Retail comparable sales change

(10

%)

(15

%)

(10

%)

(12

%)

Net opened/closed stores and other

(2

%)

1

%

(1

%)

1

%

Total Company

(12

%)

(14

%)

(11

%)

(11

%)

Stores open:

Beginning of period

643

678

672

670

Opened

1

9

12

36

Closed

(4

)

(15

)

(44

)

(34

)

End of period

640

672

640

672

Other metrics:

Average sales per store ($ in 000's) 1

$

2,601

$

2,853

Average sales per square foot 1

$

841

$

926

Stores > $2 million net sales 2

57

%

65

%

Stores > $3 million net sales 2

18

%

24

%

Average revenue per smart bed unit 3

$

5,959

$

5,541

$

5,818

$

5,755

1

Trailing twelve months Total Retail comparable sales per store open at least one year.

2

Trailing twelve months for stores open at least one year (excludes online, phone and chat sales).

3

Represents Total Retail (stores, online, phone and chat) net sales divided by Total Retail smart bed units.

SLEEP NUMBER CORPORATION AND SUBSIDIARIES

Earnings before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA)

(in thousands)

We define earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) as net (loss) income plus: income tax expense (benefit), interest expense, depreciation and amortization, stock-based compensation, restructuring costs, CEO transition/proxy contest costs, and asset impairments. Management believes Adjusted EBITDA is a useful indicator of our financial performance and our ability to generate cash from operating activities. Our definition of Adjusted EBITDA may not be comparable to similarly titled definitions used by other companies. The table below reconciles Adjusted EBITDA, which is a non-GAAP financial measure, to the comparable GAAP financial measure:

Three Months Ended

Trailing Twelve Months Ended

December 28,

2024

December 30,

2023

December 28,

2024

December 30,

2023

Net loss

$

(4,665

)

$

(25,188

)

$

(20,334

)

$

(15,287

)

Income tax benefit

(4,299

)

(7,103

)

(5,162

)

(4,466

)

Interest expense

11,742

12,687

48,368

42,695

Depreciation and amortization

15,628

17,984

64,979

72,479

Stock-based compensation

1,903

3,982

11,444

14,855

Restructuring costs 1

3,684

15,728

18,066

15,728

CEO transition/Proxy contest costs 2

998

998

Asset impairments

1,220

198

1,220

672

Adjusted EBITDA

$

26,211

$

18,288

$

119,579

$

126,676

1

Represents costs related to business restructuring actions initiated in the fourth quarter of fiscal 2023.

2

Represents costs related to CEO transition activities of $0.2 million and proxy contest costs of $0.8 million which were both initiated in the fourth quarter of fiscal 2024.

Free Cash Flow
(in thousands)

Three Months Ended

Trailing Twelve Months Ended

December 28,

2024

December 30,

2023

December 28,

2024

December 30,

2023

Net cash (used in) provided by operating activities

$

(23,681

)

$

(40,844

)

$

27,143

$

(9,028

)

Subtract: Purchases of property and equipment

6,287

9,034

23,505

57,056

Free cash flow

$

(29,968

)

$

(49,878

)

$

3,638

$

(66,084

)

Note - Our Adjusted EBITDA calculations and Free Cash Flow data are considered non-GAAP financial measures and are not in accordance with, or preferable to, "as reported," or GAAP financial data. However, we are providing this information as we believe it facilitates analysis of the Company's financial performance by investors and financial analysts.

GAAP - generally accepted accounting principles in the U.S.

SLEEP NUMBER CORPORATION AND SUBSIDIARIES
Calculation of Net Leverage Ratio under Revolving Credit Facility
(in thousands)

Trailing Twelve Months Ended

December 28,

2024

December 30,

2023

Borrowings under revolving credit facility

$

546,600

$

539,500

Outstanding letters of credit

7,147

7,147

Finance lease obligations

241

319

Consolidated funded indebtedness

$

553,988

$

546,966

Operating lease liabilities 1

389,508

433,154

Total debt including operating lease liabilities (a)

$

943,496

$

980,120

Adjusted EBITDA (see above)

$

119,579

$

126,676

Consolidated rent expense

107,105

113,801

Consolidated EBITDAR (b)

$

226,684

$

240,477

Net Leverage Ratio under revolving credit facility (a divided by b)

4.2 to 1.0

4.1 to 1.0

1

Reflects operating lease liabilities included in our financial statements under ASC 842.

Note - Our Net Leverage Ratio under Revolving Credit Facility, Adjusted EBITDA and EBITDAR calculations are considered non-GAAP financial measures and are not in accordance with, or preferable to, "as reported," or GAAP financial data. However, we are providing this information as we believe it facilitates analysis of the Company's financial performance by investors and financial analysts.

GAAP - generally accepted accounting principles in the U.S.

SLEEP NUMBER CORPORATION AND SUBSIDIARIES
Calculation of Return on Invested Capital (Adjusted ROIC)
(in thousands)

Adjusted ROIC is a financial measure we use to determine how efficiently we deploy our capital. It quantifies the return we earn on our adjusted invested capital. Management believes Adjusted ROIC is also a useful metric for investors and financial analysts. We compute Adjusted ROIC as outlined below. Our definition and calculation of Adjusted ROIC may not be comparable to similarly titled definitions and calculations used by other companies. The tables below reconcile adjusted net operating profit after taxes (Adjusted NOPAT) and total adjusted invested capital, which are non-GAAP financial measures, to the comparable GAAP financial measures:

Trailing Twelve Months Ended

December 28,

2024

December 30,

2023

Adjusted net operating profit after taxes (Adjusted NOPAT)

Operating income

$

22,872

$

22,942

Add: Operating lease interest 1

26,775

27,777

Less: Income taxes 2

(11,907

)

(11,851

)

Adjusted NOPAT

$

37,740

$

38,868

Average adjusted invested capital

Total deficit

$

(451,586

)

$

(441,928

)

Add: Long-term debt 3

546,841

539,819

Add: Operating lease liabilities 4

389,508

433,154

Total adjusted invested capital at end of period

$

484,763

$

531,045

Average adjusted invested capital 5

$

497,972

$

496,612

Adjusted ROIC 6

7.6

%

7.8

%

1

Represents the interest expense component of lease expense included in our financial statements under ASC 842, Leases.

2

Reflects annual effective income tax rates, before discrete adjustments, of 24.0% and 23.4% for December 28, 2024 and December 30, 2023, respectively.

3

Long-term debt includes existing finance lease liabilities.

4

Reflects operating lease liabilities included in our financial statements under ASC 842.

5

Average adjusted invested capital represents the average of the last five fiscal quarters' ending adjusted invested capital balances.

6

Adjusted ROIC equals Adjusted NOPAT divided by average adjusted invested capital.

Note - The Company's Adjusted ROIC calculation and data are considered non-GAAP financial measures and are not in accordance with, or preferable to, GAAP financial data. However, we are providing this information as we believe it facilitates analysis of the Company's financial performance by investors and financial analysts.

GAAP - generally accepted accounting principles in the U.S.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250305313630/en/

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