Sleep Number Corp. Reports First Quarter Financial Results

April 24, 2024  by HFBusiness Staff in Business Strategy, Industry   

“Our actions to increase operating model efficiencies drove first quarter adjusted EBITDA and gross margin rate ahead of our expectations. We also generated a significant year-over-year increase in free cash flow, as planned, and continue to prioritize paying down debt and reducing leverage,” said Shelly Ibach, chair, president and CEO.

“As we build a more durable operating model and as demand for our category improves from recessionary levels, we expect to capitalize on our significant opportunity as a sleep wellness technology company.”

First Quarter Overview

• Net sales of $470 million declined 11% versus the prior year, including approximately four percentage points of pressure from year-over-year order backlog changes
• Gross margin of 58.7% compared with 58.9% last year; the first quarter gross margin rate represented a significant sequential improvement from the back-half of the prior year
• Operating expenses were reduced by $24 million to $260 million (before restructuring charges) compared with $284 million last year
• Adjusted EBITDA of $37 million compared to $49 million last year, as ongoing cost reduction actions partially offset the year-over-year net sales decline

Cash Flows and Liquidity Review

• Net cash provided by operating activities of $34 million in the first quarter, compared with $19 million for the same period last year
• Free cash flow of $24 million in the first quarter, compared with $3 million for the same period last year
• Leverage ratio of 4.2x EBITDAR at the end of the first quarter versus covenant maximum of 5.0x

Financial Outlook

The company reiterates its outlook for 2024 adjusted EBITDA of $125 million to $145 million, continuing to expect a mid-single digit net sales decline for the year on a low-single digit demand decline.

The company expects approximately 100 basis points of gross margin rate improvement and $14 million of restructuring charges for the year. The company expects to generate $60 million to $80 million of free cash flow with capital expenditures of $30 million.