Sleep Number (SNBR) Q3 2024 earnings summary

Executive summary

• Q3 2024 net sales were $427 million, down 10% year-over-year, reflecting ongoing industry weakness and cautious consumer spending.

• CEO Shelly Ibach announced her planned retirement by the 2025 annual shareholders' meeting, with a succession plan and transition to a strategic advisor role through 2025.

• Gross margin improved to 60.8%, the highest since Q3 2021, driven by cost reductions, efficiency gains, and favorable product mix.

• Operating expenses were reduced by $17 million year-over-year in Q3, and $60 million year-to-date, excluding restructuring costs.

• Adjusted EBITDA for Q3 was $28 million, up 11% year-over-year and within guidance.

Financial highlights

• Q3 net loss was $3 million, or $0.14 per diluted share, compared to a $2 million loss, or $0.10 per share, in Q3 2023.

• Year-to-date net sales were $1.31 billion, down from $1.46 billion in the prior year; year-to-date net loss was $15.7 million versus net income of $9.9 million last year.

• Free cash flow for the first nine months was $34 million, up $50 million year-over-year.

• Operating income rose to $8 million from $5 million last year, driven by cost reductions and improved gross margin.

• Leverage ratio at quarter-end was 4.2x EBITDA, below the covenant maximum of 5.0x.

Outlook and guidance

• Full-year 2024 adjusted EBITDA guidance lowered to $115 million–$125 million.

• Net sales for 2024 expected to be down approximately 10% year-over-year.

• Full-year free cash flow expected to be $10 million–$20 million, a $75 million–$85 million improvement from last year.

• Capital expenditures for 2024 projected at $25 million, $5 million lower than prior outlook.

• Management expects an additional $2–$3 million in restructuring costs through the remainder of 2024, mainly for lease terminations.