Sleep Number (SNBR) Q2 2024 earnings summary

Executive summary

• Operating model transformation and restructuring initiatives are ahead of expectations, driving improved financial resilience and profitability despite an 11% year-over-year net sales decline in Q2 2024 amid a historic industry recession.

• Adjusted EBITDA for Q2 2024 was $28 million, slightly ahead of expectations but down from $35 million last year, as cost reductions and operational efficiencies partially offset sales declines.

• Gross margin improved to 59.1%, up 150 basis points year-over-year, driven by cost reductions, innovation, and value engineering.

• Free cash flow for the first half of 2024 was $9 million, a $21 million improvement year-over-year, with cash from operating activities at $24 million.

• The company incurred $1.8 million in Q2 and $12.4 million year-to-date restructuring costs as part of ongoing transformation.

Financial highlights

• Q2 2024 net sales were $408 million, down 11% year-over-year, with delivered units down 8% and ARU down 3%.

• Q2 2024 net loss was $5.1 million, or $(0.22) per share, compared to net income of $0.8 million last year.

• Gross margin rate for Q2 was 59.1%, up from 57.6% a year ago.

• Operating expenses reduced by $44 million year-to-date, with $19 million reduction in Q2 excluding restructuring.

• Free cash flow for the first half was $9 million, up from negative $11 million in the prior year.

Outlook and guidance

• Full-year 2024 adjusted EBITDA guidance reiterated at $125 million–$145 million.

• Net sales expected to be down mid-single digits for 2024; H2 demand and sales projected flat to down low single digits.

• Gross margin rate expected to expand at least 100 basis points in 2024, approaching 60% in H2.

• Free cash flow guidance for 2024 is $50 million–$70 million, with $40 million–$60 million expected in H2.

• Q3 net sales expected down low to mid-single digits; Q3 adjusted EBITDA guidance is $25 million–$30 million.