Sleep Number Announces First Quarter 2022 Results By: Sleep Number Corporation via Business Wire April 20, 2022 at 16:01 PM EDT Net sales declined 7% versus the prior year on constrained supply of semiconductor chips Demand for the quarter declined 3% on acute macro factors in January and March; backlog increased 20% since December Diluted EPS of $0.09 on lower-than-expected delivered net sales due to worsened external factors Updated 2022 EPS outlook to a range of $5.00 to $6.00 per share Sleep Number Corporation (Nasdaq: SNBR) today reported results for the quarter ended April 2, 2022. “External factors continue to disrupt global supply and weaken consumer confidence, resulting in increased business complexity and volatility,” said Shelly Ibach, President and CEO. “In this dynamic environment, we remain focused on deepening consumer relationships and innovating for broad relevance while taking decisive actions to address near-term pressures. Our team is highly engaged and resilient, and our business model, liquidity and competitive advantages are strong. We remain steadfast in our commitment to fulfilling our purpose and creating superior long-term shareholder value.” First Quarter Overview Net sales decreased 7% to $527 million while demand decreased 3% for the quarter, reflecting the impact of Omicron in January and the war in Ukraine in late February; excess backlog increased to over $200 million Gross margin of 57.3% of net sales was approximately 100 basis points above expectations due to level-loaded delivery efficiencies during the quarter Diluted EPS of 9 cents for the first quarter was below expectation of 30 to 40 cents on lower-than-expected delivered net sales Cash Flows and Liquidity Review Generated $25 million in net cash from operating activities in the first quarter, compared with $112 million for the same period last year on constrained current year deliveries and changes in working capital Invested $42 million in Sleep Number stock compared to $167 million for the same period last year Leverage ratio of 3.4x EBITDAR at the end of the first quarter; more than $400 million of liquidity remains against current revolver Return on invested capital (ROIC) of 20.5% for the trailing twelve-month period reflecting two consecutive quarters constrained by electronics component supply Financial Outlook The company updated its full-year 2022 diluted EPS outlook to a range of $5.00 to $6.00 per share. The outlook assumes low double-digit net sales growth for 2022 on flat to low single-digit demand growth the balance of the year, while servicing significant excess backlog. The company expects to generate approximately $200 million of cash from operations and anticipates 2022 capital expenditures of $70 million to $80 million. Conference Call Information Management will host its regularly scheduled conference call to discuss the company’s results at 5 p.m. EDT (4 p.m. CDT; 2 p.m. PDT) 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 Individuality is the foundation of Sleep Number. Our purpose driven company is comprised of over 5,500 passionate team members who are dedicated to our mission of improving lives by individualizing sleep experiences. We have improved over 14 million lives and are positively impacting society’s wellbeing through higher quality sleep. Our award-winning 360® smart beds are informed by science. They learn from over one billion sleep sessions of highly-accurate, real world sleep data – the cumulation of 14 billion hours’ worth - to automatically adjust to each sleeper and provide effortless comfort and proven quality sleep. Our 360 smart beds deliver individualized sleep health reports and insights, including a daily SleepIQ® score, and are helping to advance meaningful sleep health solutions by applying sleep science and research. For life-changing sleep, visit SleepNumber.com or one of our 650 Sleep Number® stores. More information is available on our newsroom and investor relations sites. Forward-looking Statements Statements used in this news release relating to future plans, events, financial results or performance, such as the company’s expectations for full-year 2022 diluted EPS, are forward-looking statements subject to certain risks and uncertainties including, among others, such factors as current and future general and industry economic trends and consumer confidence; risks inherent in outbreaks of pandemics or contagious disease, including the COVID-19 pandemic; risks inherent in global-sourcing activities, including tariffs, outbreaks of pandemics or contagious diseases, such as the COVID-19 pandemic, geo-political turmoil, acts of terrorism, global conflicts or war (such as the current conflict in Ukraine), strikes and the potential for shortages in supply or disruption or delay of production and delivery of materials and products in our supply chain; risks of disruption in the operation of any of our main manufacturing, distribution, logistics, home delivery, product development, or customer service facilities or operations; our manufacturing processes with minimal levels of inventory, which may leave us vulnerable to shortages in supply; our dependence on significant suppliers and third parties and our ability to maintain relationships with key suppliers or third parties, including several sole-source suppliers or service providers; rising commodity costs and other inflationary pressures; the effectiveness of our marketing messages; the efficiency of our advertising and promotional efforts; our ability to execute our Total Retail distribution strategy; our ability to achieve and maintain acceptable levels of product and service quality, and acceptable product return and warranty claims rates; our ability to continue to improve and expand our product line, and consumer acceptance of our products, product quality, innovation and brand image; industry competition, the emergence of additional competitive products and the adequacy of our intellectual-property rights to protect our products and brand from competitive or infringing activities; claims that our products, processes, advertising, or trademarks infringe the intellectual-property rights of others; availability of attractive and cost-effective consumer credit options; increasing government regulation; pending or unforeseen litigation and the potential for adverse publicity associated with litigation; the adequacy of our and third-party information systems to meet the evolving needs of our business and existing and evolving risks and regulatory standards applicable to data privacy and cybersecurity; the costs and potential disruptions to our business related to upgrading or maintaining our information systems; the vulnerability of our and third party information systems to attacks by hackers or other cyber threats that could compromise the security of our systems, result in a data breach or disrupt our business; environmental risks, including increasing environmental regulation and the broader impacts of climate change such as from weather-related events; and our ability, and the ability of our suppliers and vendors, to attract, retain and motivate qualified management, executive and other key team members, including qualified retail sales professionals and managers. Additional information concerning these and other risks and uncertainties is contained in the company’s filings with the Securities and Exchange Commission (SEC), including the Annual Report on Form 10-K, and other periodic reports filed with the SEC. The company has no obligation to publicly update or revise any of the forward-looking statements in this news release. SLEEP NUMBER CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (unaudited – in thousands, except per share amounts) Three Months Ended April 2, % of April 3, % of 2022 Net Sales 2021 Net Sales Net sales $ 527,130 100.0 % $ 568,256 100.0 % Cost of sales 224,832 42.7 % 212,338 37.4 % Gross profit 302,298 57.3 % 355,918 62.6 % Operating expenses: Sales and marketing 240,259 45.6 % 223,617 39.4 % General and administrative 41,319 7.8 % 42,592 7.5 % Research and development 16,305 3.1 % 13,286 2.3 % Total operating expenses 297,883 56.5 % 279,495 49.2 % Operating income 4,415 0.8 % 76,423 13.4 % Interest expense, net 2,127 0.4 % 977 0.2 % Income before income taxes 2,288 0.4 % 75,446 13.3 % Income tax expense 214 0.0 % 8,812 1.6 % Net income $ 2,074 0.4 % $ 66,634 11.7 % Net income per share – basic $ 0.09 $ 2.63 Net income per share – diluted $ 0.09 $ 2.51 Reconciliation of weighted-average shares outstanding: Basic weighted-average shares outstanding 22,760 25,377 Dilutive effect of stock-based awards 831 1,167 Diluted weighted-average shares outstanding 23,591 26,544 SLEEP NUMBER CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (unaudited – in thousands, except per share amounts) subject to reclassification April 2, January 1, 2022 2022 Assets Current assets: Cash and cash equivalents $ 1,556 $ 2,389 Accounts receivable, net of allowances of $1,047 and $924, respectively 24,502 25,718 Inventories 103,212 105,644 Prepaid expenses 22,001 18,953 Other current assets 40,624 54,917 Total current assets 191,895 207,621 Non-current assets: Property and equipment, net 197,644 195,128 Operating lease right-of-use assets 374,650 371,133 Goodwill and intangible assets, net 69,867 70,468 Other non-current assets 78,529 75,190 Total assets $ 912,585 $ 919,540 Liabilities and Shareholders’ Deficit Current liabilities: Borrowings under revolving credit facility $ 413,200 $ 382,500 Accounts payable 177,025 162,547 Customer prepayments 142,005 129,499 Accrued sales returns 20,277 22,368 Compensation and benefits 25,702 51,240 Taxes and withholding 26,293 22,087 Operating lease liabilities 74,046 72,360 Other current liabilities 59,390 64,177 Total current liabilities 937,938 906,778 Non-current liabilities: Deferred income taxes 312 688 Operating lease liabilities 338,528 336,192 Other non-current liabilities 105,020 100,835 Total non-current liabilities 443,860 437,715 Total liabilities 1,381,798 1,344,493 Shareholders’ deficit: Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding - - Common stock, $0.01 par value; 142,500 shares authorized, 22,232 and 22,683 shares issued and outstanding, respectively 222 227 Additional paid-in capital - 3,971 Accumulated deficit (469,435 ) (429,151 ) Total shareholders’ deficit (469,213 ) (424,953 ) Total liabilities and shareholders’ deficit $ 912,585 $ 919,540 SLEEP NUMBER CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (unaudited - in thousands) subject to reclassification Three Months Ended April 2, April 3, 2022 2021 Cash flows from operating activities: Net income $ 2,074 $ 66,634 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 15,870 14,638 Stock-based compensation 4,133 6,416 Net loss on disposals and impairments of assets 93 78 Deferred income taxes (376 ) 1,515 Changes in operating assets and liabilities: Accounts receivable 1,216 5,948 Inventories 2,432 (946 ) Income taxes 1,102 6,847 Prepaid expenses and other assets 10,877 (3,113 ) Accounts payable 2,073 12,390 Customer prepayments 12,506 20,552 Accrued compensation and benefits (25,348 ) (34,605 ) Other taxes and withholding 3,104 8,912 Other accruals and liabilities (5,198 ) 6,332 Net cash provided by operating activities 24,558 111,598 Cash flows from investing activities: Purchases of property and equipment (19,604 ) (11,546 ) Proceeds from sales of property and equipment 10 12 Net cash used in investing activities (19,594 ) (11,534 ) Cash flows from financing activities: Net increase in short-term borrowings 44,712 74,087 Repurchases of common stock (50,998 ) (178,613 ) Proceeds from issuance of common stock 531 2,460 Debt issuance costs (42 ) (3 ) Net cash used in financing activities (5,797 ) (102,069 ) Net decrease in cash and cash equivalents (833 ) (2,005 ) Cash and cash equivalents, at beginning of period 2,389 4,243 Cash and cash equivalents, at end of period $ 1,556 $ 2,238 SLEEP NUMBER CORPORATION AND SUBSIDIARIES Supplemental Financial Information (unaudited) Three Months Ended April 2, April 3, 2022 2021 Percent of sales: Retail stores 84.3 % 86.1 % Online, phone, chat and other 15.7 % 13.9 % Total Company 100.0 % 100.0 % Sales change rates: Retail comparable-store sales (14 %) 12 % Online, phone and chat 5 % 116 % Total Retail comparable sales change (11 %) 20 % Net opened/closed stores and other 4 % 0 % Total Company (7 %) 20 % Stores open: Beginning of period 648 602 Opened 13 11 Closed (8 ) (6 ) End of period 653 607 Other metrics: Average sales per store ($ in 000's) 1 $ 3,487 $ 3,196 Average sales per square foot 1 $ 1,167 $ 1,095 Stores > $2 million net sales 2 82 % 71 % Stores > $3 million net sales 2 46 % 33 % Average revenue per smart bed unit 3 $ 4,905 $ 5,030 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 income plus: income tax expense, interest expense, depreciation and amortization, stock-based compensation 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 Twelve Months Ended April 2, April 3, April 2, April 3, 2022 2021 2022 2021 Net income $ 2,074 $ 66,634 $ 89,186 $ 166,683 Income tax expense 214 8,812 24,947 34,265 Interest expense 2,127 978 7,394 7,642 Depreciation and amortization 15,683 14,519 60,943 60,049 Stock-based compensation 4,133 6,417 20,930 26,179 Asset impairments 103 89 186 388 Adjusted EBITDA $ 24,334 $ 97,449 $ 203,586 $ 295,206 Free Cash Flow (in thousands) Three Months Ended Twelve Months Ended April 2, April 3, April 2, April 3, 2022 2021 2022 2021 Net cash provided by operating activities $ 24,558 $ 111,598 $ 212,970 $ 306,318 Subtract: Purchases of property and equipment 19,604 11,546 74,958 38,295 Free cash flow $ 4,954 $ 100,052 $ 138,012 $ 268,023 Calculation of Net Leverage Ratio under Revolving Credit Facility (in thousands) Twelve Months Ended April 2, April 3, 2022 2021 Borrowings under revolving credit facility $ 413,200 $ 314,900 Outstanding letters of credit 5,947 3,997 Finance lease obligations 509 622 Consolidated funded indebtedness $ 419,656 $ 319,519 Capitalized operating lease obligations1 629,624 555,903 Total debt including capitalized operating lease obligations (a) $ 1,049,280 $ 875,422 Adjusted EBITDA (see above) $ 203,586 $ 295,206 Consolidated rent expense 104,937 92,650 Consolidated EBITDAR (b) $ 308,523 $ 387,856 Net Leverage Ratio under revolving credit facility (a divided by b) 3.4 to 1.0 2.3 to 1.0 1 A multiple of six times annual rent expense is used as an estimate for capitalizing our operating lease obligations in accordance with our credit facility. Note - Our Adjusted EBITDA and EBITDAR calculations, Free Cash Flow data and Calculation of Net Leverage Ratio under Revolving Credit Facility 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 (ROIC) (in thousands) ROIC is a financial measure we use to determine how efficiently we deploy our capital. It quantifies the return we earn on our invested capital. Management believes ROIC is also a useful metric for investors and financial analysts. We compute ROIC as outlined below. Our definition and calculation of ROIC may not be comparable to similarly titled definitions and calculations used by other companies. The tables below reconcile net operating profit after taxes (NOPAT) and total invested capital, which are non-GAAP financial measures, to the comparable GAAP financial measures: Twelve Months Ended April 2, 2022 April 3, 2021 Net operating profit after taxes (NOPAT) Operating income $ 121,527 $ 208,506 Add: Rent expense 1 104,937 92,650 Add: Interest income - 84 Less: Depreciation on capitalized operating leases 2 (26,311 ) (24,258 ) Less: Income taxes 3 (47,503 ) (66,118 ) NOPAT $ 152,650 $ 210,864 Average invested capital Total deficit $ (469,213 ) $ (332,650 ) Add: Long-term debt 4 413,709 315,522 Add: Capitalized operating lease obligations 5 839,496 741,200 Total invested capital at end of period $ 783,992 $ 724,072 Average invested capital 6 $ 746,167 $ 763,227 Return on invested capital (ROIC) 7 20.5 % 27.6 % 1 Rent expense is added back to operating income to show the impact of owning versus leasing the related assets. 2 Depreciation is based on the average of the last five fiscal quarters' ending capitalized operating lease obligations (see note 5) for the respective reporting periods with an assumed thirty-year useful life. This life assumption is based on our long-term participation in given markets though specific retail location lease commitments are generally 5 to 10 years at inception. This is subtracted from operating income to illustrate the impact of owning versus leasing the related assets. 3 Reflects annual effective income tax rates, before discrete adjustments, of 23.7% and 23.9% for 2022 and 2021, respectively. 4 Long-term debt includes existing finance lease liabilities. 5 A multiple of eight times annual rent expense is used as an estimate for capitalizing our operating lease obligations. The methodology utilized aligns with the methodology of a nationally recognized credit rating agency. 6 Average invested capital represents the average of the last five fiscal quarters' ending invested capital balances. 7 ROIC equals NOPAT divided by average invested capital. Note - Our 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/20220420005177/en/Contacts Investor Contact: Dave Schwantes; (763) 551-7498; investorrelations@sleepnumber.com Media Contact: Julie Elepano; (414) 732-9840; julie.elepano@sleepnumber.com
Net sales declined 7% versus the prior year on constrained supply of semiconductor chips Demand for the quarter declined 3% on acute macro factors in January and March; backlog increased 20% since December Diluted EPS of $0.09 on lower-than-expected delivered net sales due to worsened external factors Updated 2022 EPS outlook to a range of $5.00 to $6.00 per share
Sleep Number Corporation (Nasdaq: SNBR) today reported results for the quarter ended April 2, 2022. “External factors continue to disrupt global supply and weaken consumer confidence, resulting in increased business complexity and volatility,” said Shelly Ibach, President and CEO. “In this dynamic environment, we remain focused on deepening consumer relationships and innovating for broad relevance while taking decisive actions to address near-term pressures. Our team is highly engaged and resilient, and our business model, liquidity and competitive advantages are strong. We remain steadfast in our commitment to fulfilling our purpose and creating superior long-term shareholder value.” First Quarter Overview Net sales decreased 7% to $527 million while demand decreased 3% for the quarter, reflecting the impact of Omicron in January and the war in Ukraine in late February; excess backlog increased to over $200 million Gross margin of 57.3% of net sales was approximately 100 basis points above expectations due to level-loaded delivery efficiencies during the quarter Diluted EPS of 9 cents for the first quarter was below expectation of 30 to 40 cents on lower-than-expected delivered net sales Cash Flows and Liquidity Review Generated $25 million in net cash from operating activities in the first quarter, compared with $112 million for the same period last year on constrained current year deliveries and changes in working capital Invested $42 million in Sleep Number stock compared to $167 million for the same period last year Leverage ratio of 3.4x EBITDAR at the end of the first quarter; more than $400 million of liquidity remains against current revolver Return on invested capital (ROIC) of 20.5% for the trailing twelve-month period reflecting two consecutive quarters constrained by electronics component supply Financial Outlook The company updated its full-year 2022 diluted EPS outlook to a range of $5.00 to $6.00 per share. The outlook assumes low double-digit net sales growth for 2022 on flat to low single-digit demand growth the balance of the year, while servicing significant excess backlog. The company expects to generate approximately $200 million of cash from operations and anticipates 2022 capital expenditures of $70 million to $80 million. Conference Call Information Management will host its regularly scheduled conference call to discuss the company’s results at 5 p.m. EDT (4 p.m. CDT; 2 p.m. PDT) 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 Individuality is the foundation of Sleep Number. Our purpose driven company is comprised of over 5,500 passionate team members who are dedicated to our mission of improving lives by individualizing sleep experiences. We have improved over 14 million lives and are positively impacting society’s wellbeing through higher quality sleep. Our award-winning 360® smart beds are informed by science. They learn from over one billion sleep sessions of highly-accurate, real world sleep data – the cumulation of 14 billion hours’ worth - to automatically adjust to each sleeper and provide effortless comfort and proven quality sleep. Our 360 smart beds deliver individualized sleep health reports and insights, including a daily SleepIQ® score, and are helping to advance meaningful sleep health solutions by applying sleep science and research. For life-changing sleep, visit SleepNumber.com or one of our 650 Sleep Number® stores. More information is available on our newsroom and investor relations sites. Forward-looking Statements Statements used in this news release relating to future plans, events, financial results or performance, such as the company’s expectations for full-year 2022 diluted EPS, are forward-looking statements subject to certain risks and uncertainties including, among others, such factors as current and future general and industry economic trends and consumer confidence; risks inherent in outbreaks of pandemics or contagious disease, including the COVID-19 pandemic; risks inherent in global-sourcing activities, including tariffs, outbreaks of pandemics or contagious diseases, such as the COVID-19 pandemic, geo-political turmoil, acts of terrorism, global conflicts or war (such as the current conflict in Ukraine), strikes and the potential for shortages in supply or disruption or delay of production and delivery of materials and products in our supply chain; risks of disruption in the operation of any of our main manufacturing, distribution, logistics, home delivery, product development, or customer service facilities or operations; our manufacturing processes with minimal levels of inventory, which may leave us vulnerable to shortages in supply; our dependence on significant suppliers and third parties and our ability to maintain relationships with key suppliers or third parties, including several sole-source suppliers or service providers; rising commodity costs and other inflationary pressures; the effectiveness of our marketing messages; the efficiency of our advertising and promotional efforts; our ability to execute our Total Retail distribution strategy; our ability to achieve and maintain acceptable levels of product and service quality, and acceptable product return and warranty claims rates; our ability to continue to improve and expand our product line, and consumer acceptance of our products, product quality, innovation and brand image; industry competition, the emergence of additional competitive products and the adequacy of our intellectual-property rights to protect our products and brand from competitive or infringing activities; claims that our products, processes, advertising, or trademarks infringe the intellectual-property rights of others; availability of attractive and cost-effective consumer credit options; increasing government regulation; pending or unforeseen litigation and the potential for adverse publicity associated with litigation; the adequacy of our and third-party information systems to meet the evolving needs of our business and existing and evolving risks and regulatory standards applicable to data privacy and cybersecurity; the costs and potential disruptions to our business related to upgrading or maintaining our information systems; the vulnerability of our and third party information systems to attacks by hackers or other cyber threats that could compromise the security of our systems, result in a data breach or disrupt our business; environmental risks, including increasing environmental regulation and the broader impacts of climate change such as from weather-related events; and our ability, and the ability of our suppliers and vendors, to attract, retain and motivate qualified management, executive and other key team members, including qualified retail sales professionals and managers. Additional information concerning these and other risks and uncertainties is contained in the company’s filings with the Securities and Exchange Commission (SEC), including the Annual Report on Form 10-K, and other periodic reports filed with the SEC. The company has no obligation to publicly update or revise any of the forward-looking statements in this news release. SLEEP NUMBER CORPORATION AND SUBSIDIARIES Consolidated Statements of Operations (unaudited – in thousands, except per share amounts) Three Months Ended April 2, % of April 3, % of 2022 Net Sales 2021 Net Sales Net sales $ 527,130 100.0 % $ 568,256 100.0 % Cost of sales 224,832 42.7 % 212,338 37.4 % Gross profit 302,298 57.3 % 355,918 62.6 % Operating expenses: Sales and marketing 240,259 45.6 % 223,617 39.4 % General and administrative 41,319 7.8 % 42,592 7.5 % Research and development 16,305 3.1 % 13,286 2.3 % Total operating expenses 297,883 56.5 % 279,495 49.2 % Operating income 4,415 0.8 % 76,423 13.4 % Interest expense, net 2,127 0.4 % 977 0.2 % Income before income taxes 2,288 0.4 % 75,446 13.3 % Income tax expense 214 0.0 % 8,812 1.6 % Net income $ 2,074 0.4 % $ 66,634 11.7 % Net income per share – basic $ 0.09 $ 2.63 Net income per share – diluted $ 0.09 $ 2.51 Reconciliation of weighted-average shares outstanding: Basic weighted-average shares outstanding 22,760 25,377 Dilutive effect of stock-based awards 831 1,167 Diluted weighted-average shares outstanding 23,591 26,544 SLEEP NUMBER CORPORATION AND SUBSIDIARIES Consolidated Balance Sheets (unaudited – in thousands, except per share amounts) subject to reclassification April 2, January 1, 2022 2022 Assets Current assets: Cash and cash equivalents $ 1,556 $ 2,389 Accounts receivable, net of allowances of $1,047 and $924, respectively 24,502 25,718 Inventories 103,212 105,644 Prepaid expenses 22,001 18,953 Other current assets 40,624 54,917 Total current assets 191,895 207,621 Non-current assets: Property and equipment, net 197,644 195,128 Operating lease right-of-use assets 374,650 371,133 Goodwill and intangible assets, net 69,867 70,468 Other non-current assets 78,529 75,190 Total assets $ 912,585 $ 919,540 Liabilities and Shareholders’ Deficit Current liabilities: Borrowings under revolving credit facility $ 413,200 $ 382,500 Accounts payable 177,025 162,547 Customer prepayments 142,005 129,499 Accrued sales returns 20,277 22,368 Compensation and benefits 25,702 51,240 Taxes and withholding 26,293 22,087 Operating lease liabilities 74,046 72,360 Other current liabilities 59,390 64,177 Total current liabilities 937,938 906,778 Non-current liabilities: Deferred income taxes 312 688 Operating lease liabilities 338,528 336,192 Other non-current liabilities 105,020 100,835 Total non-current liabilities 443,860 437,715 Total liabilities 1,381,798 1,344,493 Shareholders’ deficit: Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding - - Common stock, $0.01 par value; 142,500 shares authorized, 22,232 and 22,683 shares issued and outstanding, respectively 222 227 Additional paid-in capital - 3,971 Accumulated deficit (469,435 ) (429,151 ) Total shareholders’ deficit (469,213 ) (424,953 ) Total liabilities and shareholders’ deficit $ 912,585 $ 919,540 SLEEP NUMBER CORPORATION AND SUBSIDIARIES Consolidated Statements of Cash Flows (unaudited - in thousands) subject to reclassification Three Months Ended April 2, April 3, 2022 2021 Cash flows from operating activities: Net income $ 2,074 $ 66,634 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 15,870 14,638 Stock-based compensation 4,133 6,416 Net loss on disposals and impairments of assets 93 78 Deferred income taxes (376 ) 1,515 Changes in operating assets and liabilities: Accounts receivable 1,216 5,948 Inventories 2,432 (946 ) Income taxes 1,102 6,847 Prepaid expenses and other assets 10,877 (3,113 ) Accounts payable 2,073 12,390 Customer prepayments 12,506 20,552 Accrued compensation and benefits (25,348 ) (34,605 ) Other taxes and withholding 3,104 8,912 Other accruals and liabilities (5,198 ) 6,332 Net cash provided by operating activities 24,558 111,598 Cash flows from investing activities: Purchases of property and equipment (19,604 ) (11,546 ) Proceeds from sales of property and equipment 10 12 Net cash used in investing activities (19,594 ) (11,534 ) Cash flows from financing activities: Net increase in short-term borrowings 44,712 74,087 Repurchases of common stock (50,998 ) (178,613 ) Proceeds from issuance of common stock 531 2,460 Debt issuance costs (42 ) (3 ) Net cash used in financing activities (5,797 ) (102,069 ) Net decrease in cash and cash equivalents (833 ) (2,005 ) Cash and cash equivalents, at beginning of period 2,389 4,243 Cash and cash equivalents, at end of period $ 1,556 $ 2,238 SLEEP NUMBER CORPORATION AND SUBSIDIARIES Supplemental Financial Information (unaudited) Three Months Ended April 2, April 3, 2022 2021 Percent of sales: Retail stores 84.3 % 86.1 % Online, phone, chat and other 15.7 % 13.9 % Total Company 100.0 % 100.0 % Sales change rates: Retail comparable-store sales (14 %) 12 % Online, phone and chat 5 % 116 % Total Retail comparable sales change (11 %) 20 % Net opened/closed stores and other 4 % 0 % Total Company (7 %) 20 % Stores open: Beginning of period 648 602 Opened 13 11 Closed (8 ) (6 ) End of period 653 607 Other metrics: Average sales per store ($ in 000's) 1 $ 3,487 $ 3,196 Average sales per square foot 1 $ 1,167 $ 1,095 Stores > $2 million net sales 2 82 % 71 % Stores > $3 million net sales 2 46 % 33 % Average revenue per smart bed unit 3 $ 4,905 $ 5,030 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 income plus: income tax expense, interest expense, depreciation and amortization, stock-based compensation 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 Twelve Months Ended April 2, April 3, April 2, April 3, 2022 2021 2022 2021 Net income $ 2,074 $ 66,634 $ 89,186 $ 166,683 Income tax expense 214 8,812 24,947 34,265 Interest expense 2,127 978 7,394 7,642 Depreciation and amortization 15,683 14,519 60,943 60,049 Stock-based compensation 4,133 6,417 20,930 26,179 Asset impairments 103 89 186 388 Adjusted EBITDA $ 24,334 $ 97,449 $ 203,586 $ 295,206 Free Cash Flow (in thousands) Three Months Ended Twelve Months Ended April 2, April 3, April 2, April 3, 2022 2021 2022 2021 Net cash provided by operating activities $ 24,558 $ 111,598 $ 212,970 $ 306,318 Subtract: Purchases of property and equipment 19,604 11,546 74,958 38,295 Free cash flow $ 4,954 $ 100,052 $ 138,012 $ 268,023 Calculation of Net Leverage Ratio under Revolving Credit Facility (in thousands) Twelve Months Ended April 2, April 3, 2022 2021 Borrowings under revolving credit facility $ 413,200 $ 314,900 Outstanding letters of credit 5,947 3,997 Finance lease obligations 509 622 Consolidated funded indebtedness $ 419,656 $ 319,519 Capitalized operating lease obligations1 629,624 555,903 Total debt including capitalized operating lease obligations (a) $ 1,049,280 $ 875,422 Adjusted EBITDA (see above) $ 203,586 $ 295,206 Consolidated rent expense 104,937 92,650 Consolidated EBITDAR (b) $ 308,523 $ 387,856 Net Leverage Ratio under revolving credit facility (a divided by b) 3.4 to 1.0 2.3 to 1.0 1 A multiple of six times annual rent expense is used as an estimate for capitalizing our operating lease obligations in accordance with our credit facility. Note - Our Adjusted EBITDA and EBITDAR calculations, Free Cash Flow data and Calculation of Net Leverage Ratio under Revolving Credit Facility 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 (ROIC) (in thousands) ROIC is a financial measure we use to determine how efficiently we deploy our capital. It quantifies the return we earn on our invested capital. Management believes ROIC is also a useful metric for investors and financial analysts. We compute ROIC as outlined below. Our definition and calculation of ROIC may not be comparable to similarly titled definitions and calculations used by other companies. The tables below reconcile net operating profit after taxes (NOPAT) and total invested capital, which are non-GAAP financial measures, to the comparable GAAP financial measures: Twelve Months Ended April 2, 2022 April 3, 2021 Net operating profit after taxes (NOPAT) Operating income $ 121,527 $ 208,506 Add: Rent expense 1 104,937 92,650 Add: Interest income - 84 Less: Depreciation on capitalized operating leases 2 (26,311 ) (24,258 ) Less: Income taxes 3 (47,503 ) (66,118 ) NOPAT $ 152,650 $ 210,864 Average invested capital Total deficit $ (469,213 ) $ (332,650 ) Add: Long-term debt 4 413,709 315,522 Add: Capitalized operating lease obligations 5 839,496 741,200 Total invested capital at end of period $ 783,992 $ 724,072 Average invested capital 6 $ 746,167 $ 763,227 Return on invested capital (ROIC) 7 20.5 % 27.6 % 1 Rent expense is added back to operating income to show the impact of owning versus leasing the related assets. 2 Depreciation is based on the average of the last five fiscal quarters' ending capitalized operating lease obligations (see note 5) for the respective reporting periods with an assumed thirty-year useful life. This life assumption is based on our long-term participation in given markets though specific retail location lease commitments are generally 5 to 10 years at inception. This is subtracted from operating income to illustrate the impact of owning versus leasing the related assets. 3 Reflects annual effective income tax rates, before discrete adjustments, of 23.7% and 23.9% for 2022 and 2021, respectively. 4 Long-term debt includes existing finance lease liabilities. 5 A multiple of eight times annual rent expense is used as an estimate for capitalizing our operating lease obligations. The methodology utilized aligns with the methodology of a nationally recognized credit rating agency. 6 Average invested capital represents the average of the last five fiscal quarters' ending invested capital balances. 7 ROIC equals NOPAT divided by average invested capital. Note - Our 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/20220420005177/en/
Investor Contact: Dave Schwantes; (763) 551-7498; investorrelations@sleepnumber.com Media Contact: Julie Elepano; (414) 732-9840; julie.elepano@sleepnumber.com