Sleep Number(SNBR) - 2024 Q4 - Annual Report

Financial Performance - Net sales for 2024 decreased 11% to $1.7 billion, compared to$ 1.9 billion in 2023, primarily due to ongoing weakness in the mattress industry and consumer spending scrutiny [213]. - The average sales per store for the year ended December 28, 2024, totaled $2.6 million, down from$ 2.9 million in 2023 [213]. - Operating income for 2024 remained at $23 million, with an operating income rate of 1.4%, up from 1.2% in 2023, despite the decrease in net sales [213]. - Adjusted EBITDA for 2024 was$ 120 million, compared to $127 million in 2023, reflecting ongoing gross margin improvements [213]. - The net loss for 2024 was$ 20 million, with a net loss per diluted share of $0.90, compared to a net loss of$ 15 million and $0.68 per share in 2023 [213]. - Gross profit for 2024 was$ 1.0 billion, down $86 million or 8% from 2023, while the gross profit rate increased to 59.6% of net sales from 57.7% [221]. - Total net sales for 2024 were$ 1.68 billion, a decrease from $1.89 billion in 2023, with retail store sales at$ 1.47 billion and online sales at $208 million [397]. - The company reported a net loss of$ 20.3 million for 2024, compared to a net loss of $15.3 million in 2023, resulting in a basic and diluted net loss per share of$ 0.90 [392]. Cash Flow and Liquidity - The company generated $27 million in cash from operating activities in 2024, compared to cash used in operating activities of$ 9 million in 2023 [213]. - Free cash flow provided $4 million for the year ended December 28, 2024, compared to a cash usage of$ 66 million for the same period last year [213]. - Cash provided by operating activities was $27 million in 2024, a significant increase from net cash used in operating activities of$ 9 million in 2023 [234]. - Cash and cash equivalents at the end of 2024 were $1,950, a decrease from$ 2,539 in 2023 [288]. - The company had cash and cash equivalents of $2.0 million as of December 28, 2024, down from$ 2.5 million in the previous year [233]. - The Company’s additional borrowing capacity as of December 28, 2024, was $123,753,000 [372]. Expenses and Cost Management - Sales and marketing expenses decreased to$ 767 million in 2024, with the expense rate increasing to 45.6% of net sales due to an 11% net sales decrease [222]. - General and administrative expenses rose to $150 million in 2024, representing 8.9% of net sales, up from 7.8% in the prior year [223]. - Research and development expenses decreased by$ 11 million to $45 million in 2024, as the company re-prioritized R&D resources [224]. - The Company incurred$ 18.1 million in restructuring costs in 2024, compared to $15.7 million in 2023, with an expectation of an additional$ 5 million to $7 million in 2025 [226]. - Total operating expenses decreased to$ 979,901 in 2024 from $1,065,588 in 2023, primarily due to reductions in sales and marketing expenses [282]. Debt and Financing - Interest expense increased to$ 48 million in 2024, up from $43 million in the previous year, primarily due to a higher weighted-average interest rate [227]. - The Company amended its Credit Agreement, reducing the total aggregate commitment from$ 825 million to $685 million, with an accordion feature allowing an increase to$ 1.0 billion [239]. - As of December 28, 2024, the Company had $547 million in borrowings under its revolving credit facility and net liquidity available of$ 124 million [242]. - Outstanding borrowings as of December 28, 2024, were $546,600,000, with a weighted-average interest rate of 7.6% [372]. - The Company was in compliance with all financial covenants as of December 28, 2024 [373]. Inventory and Assets - The number of retail stores decreased to 640 at the end of 2024, down from 672 at the end of 2023, with 12 stores opened and 44 closed during the year [218]. - Total assets decreased from$ 950.88 million in 2023 to $860.81 million in 2024 [280]. - Accounts receivable decreased from$ 26.86 million in 2023 to $17.52 million in 2024 [280]. - Inventories decreased from$ 115.43 million in 2023 to $103.15 million in 2024 [280]. - Finished goods inventories decreased from$ 106.249 million in 2023 to $91.588 million in 2024, with specific categories showing declines: finished beds from$ 39.235 million to $34.725 million, finished components from$ 46.179 million to $39.634 million, and retail accessories from$ 20.835 million to $17.229 million [363]. Shareholder Returns and Stock Compensation - The company repurchased$ 768 in common stock in 2024, down from $3,747 in 2023, reflecting a strategic shift in capital allocation [288]. - At December 28, 2024, there was$ 348 million remaining authorization under the $600 million share repurchase program [316]. - Total stock-based compensation expense for 2024 was$ 11,444,000, down from $14,855,000 in 2023 [381]. - The Company expects to recognize$ 2.1 million of total stock option compensation expense related to non-vested stock options over a weighted-average period of 1.2 years [384]. - The company had $8.7 million of unrecognized compensation expense related to non-vested stock awards, expected to be recognized over an average period of 1.8 years [389]. Market Conditions and Industry Trends - The mattress industry unit volumes are estimated to return to 24 million units in 2024, the lowest level since 2015, indicating ongoing sector-level recession [211]. - Net sales decreased by$ 205 million year-over-year, primarily due to a $144 million decrease in Total Retail comparable net sales and a 12% decrease in Total Retail smart bed unit sales [220]. - The Company continues to focus on its vertically integrated business model, offering high-quality, individualized sleep solutions and expanding its product offerings [291].