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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)

☒ | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 29, 2025
OR

☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 000-25121
_______________________________________________________________________
SLEEP NUMBER CORPORATION
(Exact name of registrant as specified in its charter)

Minnesota |  | 41-1597886
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)

1001 Third Avenue South |  |
Minneapolis, |  | Minnesota |  | 55404
(Address of principal executive offices) |  | (Zip Code)

Registrant’s telephone number, including area code: (763) 551-7000
Securities registered pursuant to Section 12(b) of the Act:

Title of each class |  | Trading Symbol(s) |  | Name of each exchange on which registered
Common Stock, par value $0.01 per share |  | SNBR |  | Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted
pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller
reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller
reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer | ☐ |  | Accelerated filer | ☒
Non-accelerated filer | ☐ |  | Smaller reporting company | ☐
|  |  | Emerging growth company | ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for
complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
As of March 29, 2025, 22,660,000 shares of the registrant’s Common Stock were outstanding.

i | 1Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
INDEX

| Page
PART I: FINANCIAL INFORMATION | 1
Item 1. | Financial Statements (unaudited) | 1
| Condensed Consolidated Balance Sheets | 1
| Condensed Consolidated Statements of Operations | 2
| Condensed Consolidated Statements of Shareholders' Deficit | 3
| Condensed Consolidated Statements of Cash Flows | 4
| Notes to Condensed Consolidated Financial Statements | 5
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations | 15
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 25
Item 4. | Controls and Procedures | 25
PART II: OTHER INFORMATION | 26
Item 1. | Legal Proceedings | 26
Item 1A. | Risk Factors | 26
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 26
Item 3. | Defaults Upon Senior Securities | 26
Item 4. | Mine Safety Disclosures | 26
Item 5. | Other Information | 27
Item 6. | Exhibits | 28
SIGNATURES | 29

1 | 1Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of contents
PART I: FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Balance Sheets
(unaudited - in thousands, except per share amounts)

| March 29, 2025 |  | December 28, 2024
Assets |  |  |
Current assets: |  |  |
Cash and cash equivalents | $1,691 |  | $1,950
Accounts receivable, net of allowances of $1,112 and $1,113, respectively | 14,225 |  | 17,516
Inventories | 103,876 |  | 103,152
Prepaid expenses | 17,570 |  | 14,568
Other current assets | 38,004 |  | 44,098
Total current assets | 175,366 |  | 181,284
Non-current assets: |  |  |
Property and equipment, net | 119,780 |  | 129,574
Operating lease right-of-use assets | 345,483 |  | 356,641
Goodwill and intangible assets, net | 66,357 |  | 66,412
Deferred income taxes | 34,896 |  | 33,575
Other non-current assets | 94,909 |  | 93,324
Total assets | $836,791 |  | $860,810
Liabilities and Shareholders’ Deficit |  |  |
Current liabilities: |  |  |
Borrowings under revolving credit facility | $557,700 |  | $546,600
Accounts payable | 114,312 |  | 107,619
Customer prepayments | 40,357 |  | 46,933
Accrued sales returns | 16,777 |  | 19,092
Compensation and benefits | 21,371 |  | 31,038
Taxes and withholding | 17,430 |  | 18,619
Operating lease liabilities | 82,614 |  | 82,307
Other current liabilities | 53,818 |  | 55,804
Total current liabilities | 904,379 |  | 908,012
Non-current liabilities: |  |  |
Operating lease liabilities | 294,295 |  | 307,201
Other non-current liabilities | 94,961 |  | 97,183
Total liabilities | 1,293,635 |  | 1,312,396
Shareholders’ deficit: |  |  |
Undesignated preferred stock; 5,000 shares authorized, no shares issued and outstanding | — |  | —
Common stock, $0.01 par value; 142,500 shares authorized, 22,660 and 22,388 shares issued and outstanding, respectively | 227 |  | 224
Additional paid-in capital | 30,775 |  | 27,390
Accumulated deficit | (487,846) |  | (479,200)
Total shareholders’ deficit | (456,844) |  | (451,586)
Total liabilities and shareholders’ deficit | $836,791 |  | $860,810

See accompanying notes to condensed consolidated financial statements.

2 | 1Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Operations
(unaudited - in thousands, except per share amounts)

| Three Months Ended |
| March 29, 2025 |  | March 30, 2024 |
Net sales | $393,261 |  | $470,449 |
Cost of sales | 152,726 |  | 194,275 |
Gross profit | 240,535 |  | 276,174 |
Operating expenses: |  |  |  |
Sales and marketing | 189,103 |  | 208,512 |
General and administrative | 38,619 |  | 39,079 |
Research and development | 10,903 |  | 12,441 |
Restructuring costs | 60 |  | 10,600 |
Total operating expenses | 238,685 |  | 270,632 |
Operating income | 1,850 |  | 5,542 |
Interest expense, net | 11,081 |  | 12,299 |
Loss before income taxes | (9,231) |  | (6,757) |
Income tax (benefit) expense | (585) |  | 725 |
Net loss | $(8,646) |  | $(7,482) |
Basic net loss per share: |  |  |  |
Net loss per share – basic | $(0.38) |  | $(0.33) |
Weighted-average shares – basic | 22,706 |  | 22,506 |
Diluted net loss per share: |  |  |  |
Net loss per share – diluted | $(0.38) |  | $(0.33) |
Weighted-average shares – diluted | 22,706 |  | 22,506 |

See accompanying notes to condensed consolidated financial statements.

3 | 1Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Shareholders’ Deficit
(unaudited - in thousands)

| Common Stock |  | Additional Paid-in Capital |  | Accumulated Deficit |  | Total
| Shares |  | Amount |  |  |
Balance at December 28, 2024 | 22,388 |  | $224 |  | $27,390 |  | $(479,200) |  | $(451,586)
Net loss | — |  | — |  | — |  | (8,646) |  | (8,646)
Stock-based compensation | 346 |  | 3 |  | 3,948 |  | — |  | 3,951
Repurchases of common stock | (74) |  | — |  | (563) |  | — |  | (563)
Balance at March 29, 2025 | 22,660 |  | $227 |  | $30,775 |  | $(487,846) |  | $(456,844)

| Common Stock |  | Additional Paid-in Capital |  | Accumulated Deficit |  | Total
| Shares |  | Amount |  |  |
Balance at December 30, 2023 | 22,235 |  | $222 |  | $16,716 |  | $(458,866) |  | $(441,928)
Net loss | — |  | — |  | — |  | (7,482) |  | (7,482)
Stock-based compensation | 134 |  | 1 |  | 4,116 |  | — |  | 4,117
Repurchases of common stock | (43) |  | — |  | (570) |  | — |  | (570)
Balance at March 30, 2024 | 22,326 |  | 223 |  | 20,262 |  | (466,348) |  | (445,863)

See accompanying notes to condensed consolidated financial statements.

4 | 1Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Condensed Consolidated Statements of Cash Flows
(unaudited - in thousands)

| Three Months Ended
| March 29, 2025 |  | March 30, 2024
Cash flows from operating activities: |  |  |
Net loss | $(8,646) |  | $(7,482)
Adjustments to reconcile net loss to net cash provided by operating activities: |  |  |
Depreciation and amortization | 14,836 |  | 17,487
Stock-based compensation | 3,951 |  | 4,117
Net loss on disposals and impairments of assets | 17 |  | 2,500
Deferred income taxes | (1,321) |  | (928)
Changes in operating assets and liabilities: |  |  |
Accounts receivable | 3,291 |  | 5,026
Inventories | (724) |  | 14,529
Income taxes | 736 |  | 1,587
Prepaid expenses and other assets | 781 |  | 5,473
Accounts payable | 8,784 |  | (2,765)
Customer prepayments | (6,576) |  | 1,119
Accrued compensation and benefits | (9,686) |  | 30
Other taxes and withholding | (1,925) |  | (2,060)
Other accruals and liabilities | (6,144) |  | (4,888)
Net cash (used in) provided by operating activities | (2,626) |  | 33,745
Cash flows from investing activities: |  |  |
Purchases of property and equipment | (4,599) |  | (9,308)
Issuance of note receivable | — |  | (2,942)
Net cash used in investing activities | (4,599) |  | (12,250)
Cash flows from financing activities: |  |  |
Net increase (decrease) in short-term borrowings | 9,087 |  | (21,396)
Repurchases of common stock | (563) |  | (570)
Debt issuance costs | (1,558) |  | —
Net cash provided by (used in) financing activities | 6,966 |  | (21,966)
Net decrease in cash and cash equivalents | (259) |  | (471)
Cash and cash equivalents, at beginning of period | 1,950 |  | 2,539
Cash and cash equivalents, at end of period | $1,691 |  | $2,068

See accompanying notes to condensed consolidated financial statements.

5 | 1Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of Contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
1. Business and Summary of Significant Accounting Policies
Business & Basis of Presentation
The Company prepared the condensed consolidated financial statements as of and for the three months ended
March 29, 2025 of Sleep Number Corporation and its 100%-owned subsidiaries (Sleep Number or the Company),
without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC) and they reflect, in
the opinion of management, all normal recurring adjustments, including the elimination of all significant intra-entity
balances and transactions, necessary to present fairly its financial position as of March 29, 2025 and December 28, 2024,
and the consolidated results of operations and cash flows for the periods presented. The historical and quarterly
consolidated results of operations may not be indicative of the results that may be achieved for the full year or any future
period.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S.
Generally Accepted Accounting Principles (GAAP) have been condensed or omitted pursuant to such rules and
regulations. These condensed consolidated financial statements should be read in conjunction with the most recent
audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for
the fiscal year ended December 28, 2024 and other recent filings with the SEC.
The preparation of condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to
make estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities,
disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, and the
reported amounts of sales, expenses and income taxes during the reporting period. Predicting future events is inherently
an imprecise activity and, as such, requires the use of judgment. As future events and their effects cannot be determined
with precision, actual results could differ significantly from these estimates. Changes in these estimates will be reflected
in the consolidated financial statements in future periods and could be material.
The Company’s critical accounting policies consist of stock-based compensation, warranty liabilities and revenue
recognition.
Accounting Pronouncements Issued But Not Yet Effective
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements in Income Tax Disclosures"
to enhance the transparency and decision usefulness of income tax disclosures. This amendment requires public
companies to disclose specific categories in the rate reconciliation and provide additional information for reconciling
items that meet a quantitative threshold. Additionally, under the amendment, entities are required to disclose the
amount of income taxes paid disaggregated by federal, state and foreign taxes, as well as disaggregated by material
individual jurisdictions. Finally, the amendment requires entities to disclose income from continuing operations before
income tax expense disaggregated between domestic and foreign and income tax expense from continuing operations
disaggregated by federal, state and foreign. The new rules are effective for annual periods beginning after December
15, 2024. T he adoption of this standard is not expected to have a material impact on the Company’s consolidated
financial statements and related disclosures.
In November 2024, the FASB issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense
Disaggregation Disclosures (Subtopic 220-40)", which requires public business entities to disclose in the notes to the
financial statements more detailed information about the types of expenses included in certain expense captions in the
consolidated financial statements, including purchases of inventory, employee compensation, and depreciation and
amortization. The amendments are effective for the Company beginning with the 2027 annual period and in interim
periods beginning in 2028. Early adoption is permitted. The ASU may be adopted prospectively or retrospectively. The
Company is currently evaluating the impact of ASU 2024-03 on its consolidated financial statements and related
disclosures.

6 | 1Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of Contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
Currently, management does not believe that any other recently issued, but not yet effective accounting
pronouncements, if currently adopted, would have a material impact on the Company’s consolidated financial
statements.
2. Fair Value Measurements
At both March 29, 2025 and December 28, 2024, the Company had $19 million of debt and equity securities that fund
the deferred compensation plan and are classified in other non-current assets. The Company also had corresponding
deferred compensation plan liabilities of $19 million at both March 29, 2025 and December 28, 2024, respectively, which
are included in other non-current liabilities. The majority of the debt and equity securities are Level 1 as they trade with
sufficient frequency and volume to enable the Company to obtain pricing information on an ongoing basis. Unrealized
gains/(losses) on the debt and equity securities offset those associated with the corresponding deferred compensation
plan liabilities.
3. Inventories
Inventories consisted of the following (in thousands):

| March 29, 2025 |  | December 28, 2024
Raw materials | $10,734 |  | $11,434
Work in progress | 133 |  | 130
Finished goods | 93,009 |  | 91,588
| $103,876 |  | $103,152

4. Goodwill and Intangible Assets, Net
Goodwill and Indefinite-lived Intangible Assets
Goodwill was $64.0 million at March 29, 2025 and December 28, 2024. Indefinite-lived trade name/trademarks totaled
$1.4 million at both March 29, 2025 and December 28, 2024.
Definite-lived Intangible Assets
Patents were $2.0 million at both March 29, 2025 and December 28, 2024. Accumulated amortization was $1.1 million at
March 29, 2025 and $1.0 million at December 28, 2024. Amortization expense for both the three months ended
March 29, 2025 and March 30, 2024, was $0.1 million.
Annual amortization for patents for subsequent years are as follows (in thousands):

2025 (excluding the three months ended March 29, 2025 ) |  | $171
2026 |  | 222
2027 |  | 222
2028 |  | 155
2029 |  | 99
2030 |  | 45
Total future amortization for definite-lived intangible assets |  | $914

7 | 1Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

Table of Contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
5. Credit Agreement
As of March 29, 2025, the Company’s credit facility had a total commitment amount of $675 million. The credit facility, as
amended, is for general corporate purposes and to meet seasonal working capital requirements. The Amended and
Restated Credit and Security Agreement, dated February 14, 2018, among the Company, U.S. Bank National Association
and the several banks and other financial institutions from time to time party thereto (as amended, the Credit
Agreement), includes an accordion feature which allows the Company to increase the amount of the credit facility from
$675 million to $1.0 billion, subject to lenders’ approval. The Credit Agreement provides the lenders with a collateral
security interest in substantially all of the Company’s assets and those of its subsidiaries and requires the Company to
comply with, among other things, a maximum net leverage ratio and a minimum interest coverage ratio.
The Company amended the Credit Agreement on March 3, 2025. The amendment, among other things: (a) adds a
definition for "Liquidity" which means, on any date of determination, the sum of (x) Borrower's and its Subsidiaries'
unrestricted cash that is free and clear of Liens (other than those in favor of the Administrative Agent) plus (y) the
aggregate amount of unused Revolving Credit Commitments available for Credit Events on such date (including the
Borrower's ability to satisfy the requirements of Section 4.1 on such date) (as each is defined in the Credit Agreement);
(b) adds a Liquidity financial covenant wherein the Borrower shall cause the Liquidity to be equal or exceed $40 million
as of the last day of each fiscal month; (c) deems our Net Leverage Ratio as greater than or equal to 4.50 to 1.00 as of
the effective date to set pricing for the Applicable Commitment Fee Rate and Applicable Margin until receipt of the
compliance certificate for the quarterly reporting period ending September 27, 2025, (d) adjusts the permissible
maximum Net Leverage Ratio (as defined in the Credit Agreement) to (I) 4.75 to 1.00 for the quarterly reporting periods
ending March 29, 2025 and June 28, 2025, (II) 4.50 to 1.00 for the quarterly reporting period ending September 27,
2025, (III) 4.35 to 1.00 for the quarterly reporting period ending January 3, 2026, and (IV) 4.00 to 1.00 for each quarterly
reporting period occurring thereafter, and (e) adjusts the permissible minimum Interest Coverage Ratio (as defined in the
Credit Agreement) to (I) 1.90 to 1.00 for the quarterly reporting periods ending March 29, 2025, June 28, 2025, and
September 27, 2025, (II) 2.10 to 1.00 for the quarterly reporting period ending January 3, 2026, and (III) 3.00 to 1.00 for
each quarterly reporting period occurring thereaft er. A fee for the amendment was paid to the approving lenders in an
amount equal to 20 basis points multiplied by the sum of such lender's Revolving Credit Commitment and outstanding
Term Loans (as each is defined in the Credit Agreement).
The carrying amount of the outstanding borrowings under the Credit Agreement approximates fair value because
interest rates approximate the current rates available to the Company. Under the terms of the Credit Agreement, the
Company pays a variable rate of interest and a commitment fee based on its leverage ratio. The Credit Agreement
matures in December 2026. T he Company was in compliance with all financial covenants as of March 29, 2025.
The following table summarizes the Company’s borrowings under the credit facility ($ in thousands):

| March 29, 2025 |  | December 28, 2024
Outstanding borrowings | $557,700 |  | $546,600
Outstanding letters of credit | $6,847 |  | $7,147
Additional borrowing capacity | $110,453 |  | $123,753
Weighted-average interest rate | 7.9% |  | 7.6%

6. Leases
The Company leases its retail, office and manufacturing space under operating leases which, in addition to the minimum
lease payments, may require payment of a proportionate share of the real estate taxes and certain building operating
expenses. While the Company’s local market development approach generally results in long-term participation in given
markets, the retail store leases generally provide for an initial lease term of five to ten years. The Company’s office and
manufacturing leases provide for an initial lease term of up to fifteen years. In addition, the Company’s mall-based retail
store leases may require payment of variable rent based on net sales in excess of certain thresholds. Certain leases may
contain options to extend the term of the original lease. The exercise of lease renewal options is at the Company’s sole
discretion. Lease options are included in the lease term only if exercise is reasonably certain at lease commencement.

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Table of Contents
SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
The Company’s lease agreements do not contain any material residual value guarantees. The Company also leases
vehicles and certain equipment under operating leases with an initial lease term of three to six years.
The Company’s operating lease costs include facility, vehicle and equipment lease costs, but exclude variable lease
costs. Operating lease costs are recognized on a straight-line basis over the lease term, after consideration of rent
escalations and rent holidays. The lease term for purposes of the calculation begins on the earlier of the lease
commencement date or the date the Company takes possession of the property. During lease renewal negotiations that
extend beyond the original lease term, the Company estimates straight-line rent expense based on current market
conditions. Variable lease costs are recorded when it is probable the cost has been incurred and the amount can be
reasonably estimated. Future payments for real estate taxes and certain building operating expenses for which the
Company is obligated are not included in operating lease costs.
At March 29, 2025, the Company’s finance right-of-use assets and lease liabilities were not significant.
Lease costs were as follows (in thousands):

| Three Months Ended |
| March 29, 2025 |  | March 30, 2024 |
Operating lease costs(1) | $26,537 |  | $26,826 |
Variable lease costs(2) | $103 |  | $(49) |

___________________________
(1)Includes short-term lease costs which are not significant.
(2)Variable lease costs include adjustments to percentage rent.
The maturities of operating lease liabilities for subsequent years are as follows(1) (in thousands):

2025 (excluding the three months ended March 29, 2025) | $79,025
2026 | 96,149
2027 | 79,655
2028 | 66,229
2029 | 45,658
2030 | 31,636
Thereafter | 47,078
Total operating lease payments(2) | 445,430
Less: Interest | 68,521
Present value of operating lease liabilities | $376,909

___________________________
(1)T otal operating lease payments exclude $13 million of legally binding minimum lease payments for leases signed but not yet commenced.
(2)Includes the current portion of $83 million for operating lease liabilities.
Other information related to operating leases was as follows:

|  | March 29, 2025 |  | December 28, 2024
Weighted-average remaining lease term (in years) |  | 5.3 |  | 5.4
Weighted-average discount rate |  | 6.6% |  | 6.6%

|  | Three Months Ended
(in thousands) |  | March 29, 2025 |  | March 30, 2024
Cash paid for amounts included in present value of operating lease liabilities |  | $26,589 |  | $27,222
Right-of-use assets obtained in exchange for operating lease liabilities |  | $7,711 |  | $12,990

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SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
7. Repurchases of Common Stock
For both the three months ended March 29, 2025 and March 30, 2024, we repurchased $0.6 million of common stock in
connection with the vesting of restricted stock grants. We made no purchases under the Board-approved stock purchase
plan in either period. As of March 29, 2025, the remaining authorization under the Board-approved $600 million share
repurchase program was $348 million.
8. Revenue Recognition
Deferred contract assets and deferred contract liabilities are included in the condensed consolidated balance sheets as
follows (in thousands):

| March 29, 2025 |  | December 28, 2024
Deferred contract assets included in: |  |  |
Other current assets | $29,755 |  | $30,154
Other non-current assets | 47,600 |  | 48,988
| $77,355 |  | $79,142

| March 29, 2025 |  | December 28, 2024
Deferred contract liabilities included in: |  |  |
Other current liabilities | $37,910 |  | $38,129
Other non-current liabilities | 59,762 |  | 60,988
| $97,672 |  | $99,117

Deferred revenue and costs related to SleepIQ® technology are currently recognized on a straight-line basis over the
product's estimated life of 4.5 to 5.0 years because the Company’s inputs are generally expended evenly throughout the
performance period. During both the three months ended March 29, 2025 and March 30, 2024, the Company
recognized revenue of $10 million, that was included in the deferred contract liability balances at the beginning of the
respective periods.
Revenue from goods and services transferred to customers at a point in time accounted for a pproximate ly 97% and 98%
of revenues for the three months ended March 29, 2025 and March 30, 2024, respectively.
Net sales were as follows (in thousands):

| Three Months Ended |
| March 29, 2025 |  | March 30, 2024 |
Retail stores | $344,442 |  | $414,755 |
Online, phone, chat and other | 48,819 |  | 55,694 |
Total Company | $393,261 |  | $470,449 |

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SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
Obligation for Sales Returns
The activity in the sales returns liability account was as follows (in thousands):

| Three Months Ended
| March 29, 2025 |  | March 30, 2024
Balance at beginning of year | $19,092 |  | $22,402
Additions that reduce net sales | 18,787 |  | 25,470
Deductions from reserves | (21,102) |  | (25,457)
Balance at end of period | $16,777 |  | $22,415

9. Stock-Based Compensation Expense
Total stock-based compensation expense was as follows (in thousands):

| Three Months Ended
| March 29, 2025 |  | March 30, 2024
Stock awards (1) | 2,933 |  | $3,144
Stock options | 1,018 |  | 973
Total stock-based compensation expense (1) | 3,951 |  | 4,117
Income tax benefit | 873 |  | 910
Total stock-based compensation expense, net of tax | $3,078 |  | $3,207

___________________________
(1) Changes in stock-based compensation expense include the cumulative impact of the change in the expected achievements of certain performance
targets.
10. Profit Sharing and 401(k) Plan
Under the Company’s profit sharing and 401(k) plan, eligible employees may defer up to 50% of their compensation on a
pre-tax basis, subject to Internal Revenue Service limitations. Each pay period, the Company makes a contribution equal
to a percentage of the employee’s contribution. During the three months ended March 29, 2025 and March 30, 2024,
the Company’s contributions, net of forfeitures, were $1.8 million and $2.0 million, respectively.
11. Net Loss per Common Share
The components of basic and diluted net loss per share were as follows (in thousands, except per share amounts):

| Three Months Ended
| March 29, 2025 |  | March 30, 2024
Net loss | $(8,646) |  | $(7,482)
Reconciliation of weighted-average shares outstanding: |  |  |
Basic weighted-average shares outstanding | 22,706 |  | 22,506
Dilutive effect of stock-based awards | — |  | —
Diluted weighted-average shares outstanding | 22,706 |  | 22,506
Net loss per share – basic | $(0.38) |  | $(0.33)
Net loss per share – diluted | $(0.38) |  | $(0.33)

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SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
Additional potential dilutive stock-based awards totaling 1.9 million and 1.3 million for the three months ended
March 29, 2025 and March 30, 2024, respectively, have been excluded from the diluted net loss per share calculations
because these stock-based awards were anti-dilutive. For the three months ende d March 29, 2025 and March 30, 2024,
otherwise dilutive stock-based awards have been excluded from the calculation of diluted weighted-average shares
outstanding, as their inclusion would have had an anti-dilutive effect on our net loss per diluted share.
12. Restructuring Costs
In the fourth quarter of 2023, the Company initiated cost reduction actions to reduce operating expenses and accelerate
gross margin initiatives, and recognized $33.8 million of restructuring costs through December 28, 2024. The Company
has incurred an additional $0.1 million of restructuring costs during the three months ended March 29, 2025. Charges
incurred related to this initiative were comprised of contract termination costs, severance and employee-related benefits,
professional fees and other, and asset impairment charges and are included in the restructuring costs line in the
Company’s condensed consolidated statement of operations. T he Company expects an additional $10 million to
$15 million of restructuring costs to be incurred through the remainder of 2025, primarily due to severance and
employee-related benefits, contract termination costs, and asset impairment charges.
The following table provides a summary of the Company’s restructuring costs during the three months ended March 29,
2025 and March 30, 2024 (in thousands):

| Three Months Ended
| March 29, 2025 |  | March 30, 2024
Cash restructuring costs: |  |  |
Contract termination costs (1) | $(114) |  | $4,413
Severance and employee-related benefits | 157 |  | 841
Professional fees and other | 17 |  | 2,846
Total cash restructuring costs | 60 |  | 8,100
Non-cash restructuring costs: |  |  |
Asset impairments (2) | — |  | 2,500
Total restructuring costs | $60 |  | $10,600

____________________
(1) Primarily comprised of lease termination costs. Costs incurred during the three months ended March 29, 2025 were favorable to original estimates.
(2) Primarily comprised of impairments of property and equipment.
The following table provides the activity in the Company’s restructuring related liabilities, which are included within
accounts payable, compensation and benefits and other current liabilities on the condensed consolidated balance sheet
(in thousands):

| March 29, 2025 |  | December 28, 2024
Balance at the beginning of year | $3,341 |  | $8,720
Expenses | 60 |  | 14,888
Cash payments | (2,914) |  | (20,267)
Balance at the end of the period | $487 |  | $3,341

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SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
Since the initiation of cost reduction actions in the fourth quarter of 2023, the Company has recognized a cumulative
$33.9 million of restructuring costs, as follows (in thousands):

|  | Cumulative
|  | March 29, 2025
Cash restructuring costs: |  |
Contract termination costs (1) |  | $14,323
Severance and employee-related benefits |  | 8,350
Professional fees and other |  | 5,761
Total cash restructuring costs |  | 28,434
Non-cash restructuring costs: |  |
Asset impairments (2) |  | 5,420
Total restructuring costs |  | $33,854

____________________
(1)Primarily comprised of lease termination costs.
(2) Includes impairments of both lease right-of-use assets and property and equipment.
13. Income Taxes
Income tax benefit totaled $0.6 million for the three months ended March 29, 2025, compared with income tax expense
of $0.7 million for the same period one year ago. The change in income tax expense was primarily due to the change in
discrete tax expense, driven by stock-based compensation tax shortfalls, which were $1.0 million for the three months
ended March 29, 2025, compared to $2.2 million for the same period one year ago.
14. Segments
The Company’s chief operating decision maker (CODM), who is the Chief Executive Officer, assesses company-wide
performance and allocates resources based on consolidated financial information. Consequently, the Company views the
entire organization as one reportable segment and the strategic purpose of all operating activities is to support that one
segment.
The CODM manages the Company’s business activities as a single operating and reportable segment at the
consolidated level. The CODM uses consolidated earnings and losses, as reported on the Company’s condensed
consolidated statement of operations, in evaluating performance of the Company in determining how to allocate
resources of the Company as a whole, including investing in the Company’s product development, sales and marketing
campaigns, and employee compensation. The measure of segment assets that is reviewed by the CODM is reported
within the condensed consolidated balance sheet as consolidated total assets. The CODM also uses consolidated
earnings or losses before interest, taxes, depreciation and amortization (Adjusted EBITDA) as the basis for the CODM to
evaluate the performance of the Company.

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SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
The following is a summary of the significant expense categories and consolidated net loss details provided to the
CODM (in thousands):

| Three Months Ended
| March 29, 2025 |  | March 30, 2024
Net Sales | $393,261 |  | $470,449
Less: |  |  |
Cost of sales | (152,726) |  | (194,275)
Marketing expenses | (97,940) |  | (109,031)
Selling expenses | (91,163) |  | (99,481)
General and administrative | (38,619) |  | (39,079)
Research and development | (10,903) |  | (12,441)
Restructuring costs | (60) |  | (10,600)
Interest expense | (11,081) |  | (12,299)
Income tax benefit (expense) | 585 |  | (725)
Net loss | $(8,646) |  | $(7,482)

15. Commitments and Contingencies
Warranty Liabilities
The activity in the accrued warranty liabilities account was as follows (in thousands):

| Three Months Ended
| March 29, 2025 |  | March 30, 2024
Balance at beginning of period | $6,947 |  | $8,503
Additions charged to costs and expenses for current-year sales | 3,131 |  | 4,551
Deductions from reserves | (3,162) |  | (4,535)
Changes in liability for pre-existing warranties during the current year, including expirations | (405) |  | 231
Balance at end of period | $6,511 |  | $8,750

Legal Proceedings
The Company is involved from time to time in various legal proceedings arising in the ordinary course of its business,
including primarily commercial, product liability, employment and intellectual property claims. In accordance with U.S.
GAAP, the Company records a liability in its consolidated financial statements with respect to any of these matters when
it is both probable that a liability has been incurred and the amount of the liability can be reasonably estimated. If a
material loss is reasonably possible but not known or probable, and may be reasonably estimated, the estimated loss or
range of loss is disclosed. With respect to currently pending legal proceedings, the Company has not established an
estimated range of reasonably possible material losses either because it believes that it has valid defenses to claims
asserted against it, the proceeding has not advanced to a stage of discovery that would enable it to establish an
estimate, or the potential loss is not material. The Company currently does not expect the outcome of pending legal
proceedings to have a material effect on its consolidated results of operations, financial position or cash flows. Litigation,
however, is inherently unpredictable, and it is possible that the ultimate outcome of one or more claims asserted against
the Company could adversely impact its consolidated results of operations, financial position or cash flows. The
Company expenses legal costs as incurred.

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SLEEP NUMBER CORPORATION
AND SUBSIDIARIES
Notes to Condensed Consolidated Financial Statements
(unaudited)
Purported Class Action Complaint
On January 14, 2025, purported customers served a putative class action complaint on behalf of themselves and a
putative class of California consumers against Sleep Number in the United States District Court for the Central District of
California alleging that Sleep Number’s beds are perpetually on sale in violation of California law. The Plaintiff seeks
injunctive relief, damages and attorney’s fees. Sleep Number brought a motion to dismiss for failure to state a claim and
a motion to transfer or, alternatively, dismiss based on the first-to-file doctrine (citing the purported class action
complaint filed on September 27, 2024 as described below). The Court granted Sleep Number’s motion to transfer or,
alternatively, dismiss and dismissed the matter in its entirety based on the first-to-file doctrine.
Purported Class Action Complaint
On September 27, 2024, a purported customer served a putative class action complaint on behalf of themself and a
putative class of California consumers against Sleep Number in the United States District Court for the Eastern District of
California alleging that Sleep Number’s beds are perpetually on sale in violation of California law. The Plaintiff seeks
injunctive relief, damages and attorney’s fees.

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ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
Management’s Discussion and Analysis of Financial Condition and Results of Operations (MD&A) is intended to provide
a reader of the Company’s condensed consolidated financial statements with a narrative from the perspective of
management on its financial condition, results of operations, liquidity and certain other factors that may affect the
Company’s future results. MD&A is presented in seven sections:
•Forward-Looking Statements and Risk Factors
•Business Overview
•Results of Operations
•Liquidity and Capital Resources
•Non-GAAP Data Reconciliations
•Critical Accounting Policies
Forward-looking Statements and Risk Factors
The discussion in this Quarterly Report on Form 10-Q contains certain forward-looking statements that relate to
future plans, events, financial results or performance. You can identify forward-looking statements by those that
are not historical in nature, particularly those that use terminology such as “may,” “will,” “should,” “could,”
“expect,” “anticipate,” “believe,” “estimate,” “plan,” “project,” “predict,” “intend,” “potential,” “continue” or
the negative of these or similar terms. These statements are subject to certain risks and uncertainties that could
cause actual results to differ materially from the Company’s historical experience and its present expectations or
projections. These risks and uncertainties include, among others:
•Changes in economic conditions and consumer sentiment and related impacts on discretionary consumer spending;
•Interest rates remain elevated, and may further increase and impact the cost of servicing the Company’s
indebtedness;
•Access to alternative financing options may depend on factors beyond the Company’s control or require the
Company to accept unfavorable terms;
•Availability of attractive and cost-effective consumer credit options;
•Ability to achieve cost savings, efficiencies and other benefits from its business restructuring actions and to avoid
adverse effects;
•Effectiveness and efficiency of the Company’s marketing strategy and promotions;
•Ability to execute Sleep Number’s Total Retail distribution strategy;
•Ability to compete effectively;
•Ability to achieve and maintain high levels of product and service quality;
•Ability to improve and expand the product line and execute new product introductions;
•Ability to protect the Company’s technology, trademarks and brand, and the adequacy of its intellectual property
rights;
•Dependence on, and ability to maintain working relationships with key suppliers and third parties, including some
that are the only source of supply or services currently used by the Company;
•Fluctuations in commodity costs or third-party delivery or logistics costs and other inflationary pressures;
•Risks inherent in global-sourcing activities, including tariffs, foreign regulation, geo-political turmoil, war, pandemics,
labor challenges, foreign currency fluctuations, inflation, climate or other disasters and resulting supply shortages,
and production and delivery delays and disruptions;
•Operating with minimal levels of inventory, which may leave the Company vulnerable to supply shortages;
•Risks of disruption in the operation of any of the Company’s facilities and operations, including manufacturing,
assembly, distribution, logistics, field services, home delivery, headquarters, product development, retail or customer
service operations;
•Ability to effectively complete potential future acquisitions and business combinations;
•Sleep Number’s ability, and the ability of its suppliers and vendors, to attract, retain and motivate qualified and
effective personnel;

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•Ability to comply with existing and changing government regulations and laws, and to commercialize new products
and innovations that meet those existing and changing government regulations and laws;
•Ability to identify and withstand cyber threats that could compromise the security of the Company’s systems or those
of third parties upon which it relies and could result in a data breach or business disruption;
•Risks associated with advancements in or adoption of artificial intelligence technologies;
•Adequacy of the Company’s and third-party information systems, and costs and disruptions related to upgrading or
maintaining these systems;
•Volatility of Sleep Number stock, its removal from various stock indices and the potential negative effects of
shareholder activism or of changes in coverage by securities analysts;
•Unfavorable tax treatment;
•Environmental, social and governance risks, including increasing scrutiny and evolving regulatory and stakeholder
expectations; and
•Ability to adapt to climate change and readiness for legal or regulatory responses thereto.
Additional information concerning these, and other risks and uncertainties is contained under the caption “Risk
Factors” in Part I, Item 1A. in the Company’s Annual Report on Form 10-K and in Part II. Item 1A. in subsequent
Quarterly Reports on Form 10-Q.
The Company has no obligation to publicly update or revise any of the forward-looking statements contained in this
Quarterly Report on Form 10-Q.
Business Overview
Sleep Number is a wellness company and market leader in the design, manufacturing, marketing and distribution of
highly innovative sleep solutions. The Company’s purpose is to improve the health and wellbeing of society through
higher quality sleep; to date, it has improved the lives of nearly 16 million people. Sleep Number’s Smart Sleepers
benefit from individualized sleep experiences, night after night, and are experiencing the physical, mental and emotional
benefits of life-changing sleep.
Sleep Number’s life-changing, differentiated smart beds combine physical and digital innovations, integrating
unparalleled physical comfort with a highly advanced sleep wellness platform. The smart beds offer the Company’s
signature firmness adjustability, enabling each sleeper adjustable comfort. Embedded digital sensors learn the sleep
needs of each individual; “sense and do” technology uses the sensed data to automatically adjust the smart bed to keep
the sleeper comfortable throughout the night. Active temperature balancing technology supports the ideal climate for
each sleeper and solves a prevalent sleep challenge. Additionally, the smart beds are an exceptional value, with
personalized sleep insights delivered daily, new features regularly added to all smart beds through over-the-air updates
and prices to meet most budgets. Sleep Number® smart beds provide unmatched features, benefits and comfort that
can lead to improved sleep health and wellness for both sleepers.
The Company’s advantaged business model is supported by its consumer innovation strategy: an individualized, digital
sleep wellness platform, a network of millions of highly engaged Smart Sleepers who are loyal brand advocates, a
vertically integrated operating model and a culture of individuality, with an ambitious vision to become one of the
world’s most beloved brands.
The Company’s 3,600 mission-driven team members are dedicated to the Company’s mission of improving lives by
individualizing sleep experiences. They passionately innovate to drive value creation, including our exclusive direct-to-
consumer selling in nearly 640 stores and online, which meets customers whenever and wherever they choose to provide
an exceptional experience and a lifelong relationship. Additionally, the Company partners with world-leading institutions
to bring the power of 33 billion hours of longitudinal sleep data to sleep science and research.
The bedding industry has been in a sector level recession for three years with mattress industry unit volumes returning to
an estimated 24 million units in 2024, the lowest level since 2015. Consumer sentiment remains well below historical
averages, and high interest rates are putting ongoing pressure on the housing market. Consumers continue to scrutinize
spending, with inflation and other factors weighing on their purchasing power. Since initiating the Company’s operating
model transformation in the fourth quarter of 2023, the Company has executed structural changes to reduce fixed
expenses, while prioritizing improving margins and generating cash to create greater financial resilience across market
cycles.

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Results of Operations
Quarterly and Year-to-Date Results
Quarterly and year-to-date operating results may fluctuate significantly as a result of a variety of factors, including
increases or decreases in sales, timing, amount and effectiveness of advertising expenditures, changes in sales return
rates or warranty experience, timing of investments in growth initiatives and infrastructure, timing of store openings/
closings and related expenses, changes in net sales resulting from changes in the Company’s store base, timing of new
product introductions and related expenses, timing of promotional offerings, competitive factors, changes in commodity
costs, disruptions in global supplies or third-party service providers, seasonality of retail and bedding industry sales,
consumer sentiment and general economic conditions. The extent to which these external factors will impact the
Company’s business and its consolidated financial results will depend on future developments, which are highly
uncertain and cannot be predicted. Therefore, the historical results of operations may not be indicative of the results that
may be achieved for any future period.
Highlights
Financial highlights for the three months ended March 29, 2025 were as follows:
•Net sales for the three months ended March 29, 2025 of $393 million decreased 16% from $470 million for the same
period one year ago driven by lower volume and reduced store count.
•The net sales change resulted from a 15% Total Retail comparable sales decrease. For additional details, see the
components of total net sales change on page 19.
•Average sales per store (sales for stores open at least one year, Total Retail, including online, phone and chat) on a
trailing twelve-month basis for the period ended March 29, 2025 totaled $2.5 million, compared with $2.8 million for
the same period one year ago.
•Operating income for the three months ended March 29, 2025 was $2 million, compared with $6 million for the
same period one year ago. The $4 million decrease in operating income was driven by the lower net sales; partially
offset by a $32 million reduction in operating expenses and a 2.5 ppt. increase in the gross profit rate.
•Adjusted EBITDA for the three months ended March 29, 2025 was $22 million, compared to $37 million for the same
period one year ago as ongoing gross margin improvements and cost reduction actions partially offset the year-
over-year net sales decline.
•Gross profit rate of 61.2% was 2.5 ppt. higher than the prior-year period. The increase was primarily due to year-
over-year product cost reductions through value engineering and ongoing supplier negotiations and favorable
product mix. See the gross profit discussion on page 20 for additional details.
•The $32 million year-over-year reduction in the Company’s operating expenses was due to lower sales and
marketing expenses and restructuring costs.
•Net loss for the three months ended March 29, 2025 was $9 million, compared with $7 million for the same period
one year ago. Net loss per diluted share was $0.38, compared with $0.33 for the same period one year ago.
•The Company’s adjusted return on invested capital (Adjusted ROIC) was 7.2% on a trailing twelve-month basis for
the period ended March 29, 2025, compared with 4.5% for the comparable period one year ago.
•The Company used $3 million in cash from operating activities for the three months ended March 29, 2025,
compared with providing $34 million for the same period one year ago.
•Free cash flow used $7 million for the three months ended March 29, 2025, compared with providing $24 million for
the same period one year ago.
•As of March 29, 2025, the Company had $558 million of borrowings under its revolving credit facility.

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The following table sets forth the Company’s results of operations expressed as dollars and percentages of net sales.
Figures are in millions, except percentages and per share amounts. Amounts may not add due to rounding differences.

| Three Months Ended
| March 29, 2025 |  | March 30, 2024
Net sales | $393.3 |  | 100.0% |  | $470.4 |  | 100.0%
Cost of sales | 152.7 |  | 38.8% |  | 194.3 |  | 41.3%
Gross profit | 240.5 |  | 61.2% |  | 276.2 |  | 58.7%
Operating expenses: |  |  |  |  |  |  |
Sales and marketing | 189.1 |  | 48.1% |  | 208.5 |  | 44.3%
General and administrative | 38.6 |  | 9.8% |  | 39.1 |  | 8.3%
Research and development | 10.9 |  | 2.8% |  | 12.4 |  | 2.6%
Restructuring costs | 0.1 |  | —% |  | 10.6 |  | 2.3%
Total operating expenses | 238.7 |  | 60.7% |  | 270.6 |  | 57.5%
Operating income | 1.9 |  | 0.5% |  | 5.5 |  | 1.2%
Interest expense, net | 11.1 |  | 2.8% |  | 12.3 |  | 2.6%
Loss before income taxes | (9.2) |  | (2.3%) |  | (6.8) |  | (1.4%)
Income tax (benefit) expense | (0.6) |  | (0.1%) |  | 0.7 |  | 0.2%
Net loss | $(8.6) |  | (2.2%) |  | $(7.5) |  | (1.6%)
Net loss per share: |  |  |  |  |  |  |
Basic | $(0.38) |  |  |  | $(0.33) |  |
Diluted | $(0.38) |  |  |  | $(0.33) |  |
Weighted-average number of common shares: |  |  |  |  |  |  |
Basic | 22.7 |  |  |  | 22.5 |  |
Diluted | 22.7 |  |  |  | 22.5 |  |

The percentage of total net sales, by dollar volume, was as follows:

| Three Months Ended
| March 29, 2025 |  | March 30, 2024
Retail stores | 87.6% |  | 88.2%
Online, phone, chat and other | 12.4% |  | 11.8%
Total Company | 100.0% |  | 100.0%

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The components of total net sales change, including comparable net sales changes, were as follows:

| Three Months Ended
| March 29, 2025 |  | March 30, 2024
Sales change rates: |  |  |
Retail comparable-store sales (1) | (15%) |  | (10%)
Online, phone and chat | (12%) |  | (19%)
Total Retail comparable sales change (1) | (15%) |  | (11%)
Net opened/closed stores and other | (1%) |  | 0%
Total Company | (16%) |  | (11%)

___________________________
(1)Stores are included in the comparable-store calculations in the 13th full month of operations. Stores that have been remodeled or repositioned
within the same shopping center remain in the comparable-store base.
Other sales metrics were as follows:

| Three Months Ended
| March 29, 2025 |  | March 30, 2024
Average sales per store (1) (in thousands) | $2,495 |  | $2,786
Average sales per square foot (1) | $807 |  | $903
Stores > $2 million in net sales (2) | 51% |  | 63%
Stores > $3 million in net sales (2) | 15% |  | 23%
Average revenue per smart bed unit – Total Retail (3) | $5,992 |  | $5,765

___________________________
(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 net sales divided by Total Retail smart bed units.
The number of retail stores operating was as follows:

| Three Months Ended
| March 29, 2025 |  | March 30, 2024
Beginning of period | 640 |  | 672
Opened | 2 |  | 6
Closed | (5) |  | (17)
End of period | 637 |  | 661

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Comparison of Three Months Ended March 29, 2025 with Three Months Ended March 30, 2024
Net sales
Net sales for the three months ended March 29, 2025 of $393 million decreased 16% from $470 million for the same
period one year ago driven by lower volume and reduced store count. The net sales change consisted primarily of a
15% Total Retail comparable sales decrease.
The $77 million net sales decrease compared with the same period one year ago was comprised of the following: (i) a
$60 million decrease in Retail comparable net sales; (ii) a $7 million decrease from online, phone and chat; and (iii) a $10
million decrease from net store closings and other. Total Retail smart bed unit sales decreased 19% compared with the
prior year. Total Retail average revenue per smart bed unit increased by 4% to $5,992, compared with $5,765 in the
prior-year period.
Gross profit
Gross profit of $241 million for the three months ended March 29, 2025 decreased by $36 million, or 13%, compared
with $276 million for the same period one year ago. The gross profit rate increased to 61.2% of net sales for the three
months ended March 29, 2025, compared with 58.7% for the prior-year comparable period.
The current-year gross profit rate increase o f 2.5 ppt. was mainly due to: (i) year-over-year product cost reductions
through value engineering and ongoing supplier negotiations, increased the rate by 250 ppt; (ii) a favorable product mix,
increased the rate by 30 ppt; (iii) and efficiency gains in our home delivery and logistics operations, increased the rate by
30 ppt; partially offset by (iv) lower delivered smart bed volume deleveraged the rate by 90 ppt. In addition, the gross
profit rate may fluctuate from quarter to quarter due to a variety of other factors, including changes in warranty
expenses, return and exchange costs, manufacturing and supply chain operations and performance-based incentive
compensation.
Sales and marketing expenses
Sales and marketing expenses for the three months ended March 29, 2025 were $189 million, or 48.1% of net sales,
compared with $209 million, or 44.3% of net sales, for the same period one year ago. The current-year sales and
marketing expenses rate increase of 3.8 ppt. was primarily due to the deleveraging impact of an 16% net sales decline,
partially offset by a 9% decrease in sales and marketing expenses including a 9% lo wer media spend.
General and administrative expenses
General and administrative (G&A) expenses totaled $39 million for both the three months ended March 29, 2025 and
March 30, 2024 which was 9.8% and 8.3% of net sales, respectively. The changes in G&A expenses consisted mainly of:
(i) a $1.4 million year-over-year decrease in company-wide, performance-based incentive compensation and (ii) a $0.9
million decrease in depreciation and amortization; offset by (iii) a $1.6 million increase in professional and consulting fees
primarily related to proxy contest and CEO search costs that occurred during the three months ended March 29, 2025;
and (iv) a $0.3 million increase in employee compensation. The G&A expenses rate increased by 1.5 ppt. in the current-
year period, compared with the same period one year ago due to the items discussed above offset by the deleveraging
impact of lower net sales.
Research and development expenses
Research and development (R&D) expenses totaled $11 million for the three months ended March 29, 2025, compared
with $12 million with the same period one year ago. The changes in R&D expenses were primarily due to lower
headcount and outside services. Moving forward, the Company’s innovation agenda will focus on maintaining and
improving the Company’s core technologies and introducing additional advancements, while driving costs out of the
product.
Interest expense, net
Interest expense, net totaled $11 million for the three months ended March 29, 2025, compared with $12 million for the
same period one year ago. The $1 million decrease was mainly driven by a lower weighted-average interest rate
compared with the same period one year ago.

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Restructuring Costs
Restructuring costs for the three months ended March 29, 2025 were $0.1 million, compared with $11 million for the
same period one year ago. In the fourth quarter of 2023, the Company initiated business restructuring activities. Charges
incurred related to this initiative were comprised of contract termination costs, severance and employee-related benefits,
professional fees and other, and asset impairment charges and are included in the restructuring costs line in the
Company’s condensed consolidated statement of operations. The Company expects an additiona l $10 million to
$15 million of restructuring costs to be incurred through the remainder of 2025, primarily due to severance and
employee-related benefits, contract termination costs, and asset impairment charges. See Note 12, Restructuring Costs,
of the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, Financial Information, of this
Quarterly Report on Form 10-Q for further information on restructuring costs.
Income tax (benefit) expense
Income tax benefit totaled $0.6 million for the three months ended March 29, 2025, compared with income tax expense
of $0.7 million for the same period one year ago. The change in income tax expense was primarily due to the change in
discrete tax expense, driven by stock-based compensation tax shortfalls, which were $1.0 million for the three months
ended March 29, 2025, compared to $2.2 million for the same period one year ago.
Liquidity and Capital Resources
Managing liquidity and capital resources is an important part of the Company’s commitment to deliver superior
shareholder value over time.
The Company’s primary sources of liquidity are cash flows provided by operating activities and cash available under its
$675 million revolving credit facility, as amended. As of March 29, 2025, the Company does not have any off-balance
sheet financing other than its $7 million in outstanding letters of credit. The cash generated from ongoing operations
and cash available under the revolving credit facility are expected to be adequate to maintain operations, and fund
anticipated expansion, strategic initiatives and contractual obligations such as lease payments and capital commitments
for new retail stores for the foreseeable future.
Cash and cash equivalents totaled $1.7 million and $2.0 million at March 29, 2025 and December 28, 2024, respectively.
Significant changes in cash and cash equivalents during the three months ended March 29, 2025 primarily consisted of
$3 million of cash used in operating activities, $5 million of cash used to purchase property and equipment, a $9 million
increase in short-term borrowings, offset by $2 million used for debt issuance costs.
The following table summarizes cash flows (in millions). Amounts may not add due to rounding differences:

| Three Months Ended
| March 29, 2025 |  | March 30, 2024
Total cash (used in) provided by: |  |  |
Operating activities | $(2.6) |  | $33.7
Investing activities | (4.6) |  | (12.3)
Financing activities | 7.0 |  | (22.0)
Net decrease in cash and cash equivalents | $(0.3) |  | $(0.5)

Net cash used in operating activities for the three months ended March 29, 2025 was $3 million, compared with net cash
provided by operating activities of $34 million for the three months ended March 30, 2024. Significant components of
the year-over-year change in cash provided by operating activities included: (i) a $15 million fluctuation in inventory as
last year benefited from reduction in inventory levels driven by operational improvements; (ii) a $10 million fluctuation in
the amount of compensation and benefits accrued and timing of the related payments resulting from year-over-year
changes in Company-wide performance-based incentive compensation; and (iii) a $8 million fluctuation in customer
prepayments; (iv) partially offset by a $12 million fluctuation in accounts payable.
Net cash used in investing activities for the three months ended March 29, 2025 was $5 million, compared with
$12 million for the three months ended March 30, 2024. Cash used to purchase property and equipment was $5 million

22 | 1Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

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for the three months ended March 29, 2025, compared with $9 million for the same period one year ago. In addition, the
Company issued $3 million of notes receivable during the three months ended March 30, 2024.
Net cash provided by financing activities was $7 million for the three months ended March 29, 2025, compared with net
cash used in financing activities of $22 million for the same period one year ago. Short-term borrowings increased by
$9 million during the current-year period due to an $11 million increase in borrowings under the revolving credit facility
to $558 million and a $2 million decrease in book overdrafts, which are included in the net change in short-term
borrowings. During the three months ended March 29, 2025, the Company used $2 million of cash for debt issuance
costs related to the credit facility amendment during the three months ended March 29, 2025. During both the three
months ended March 29, 2025 and March 30, 2024, the Company repurchased $1 million of its stock in connection with
the vesting of employee restricted stock awards.
In the second quarter of fiscal 2022, the Company suspended share repurchases under its Board-approved share
repurchase program. At March 29, 2025, there was $348 million remaining authorization under the Board-approved
$600 million share repurchase program. There is no expiration date governing the period over which the Company can
repurchase shares. The Company made no share repurchases under its Board-approved share repurchase program in
either period.
At March 29, 2025, the Company had $558 million of borrowings under its revolving credit facility, $7 million in
outstanding letters of credit and net liquidity available under the credit facility of $110 million. Total availability under its
revolving credit facility was $675 million, which amortizes by $2.5 million per quarter through December 2026. A t
March 29, 2025, the Company’s leverage ratio as defined in the credit agreement was 4.5 x versus the permissible net
leverage ratio of 4.75 x, the weighted-average interest rate on borrowings under the credit facility was 7.9% and the
Company was in compliance with all financial covenants.

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Non-GAAP Data Reconciliations
Earnings before Interest, Taxes, Depreciation and Amortization (Adjusted EBITDA)
The Company defines earnings before interest, taxes, depreciation and amortization (Adjusted EBITDA) as net loss plus:
income tax expense (benefit), interest expense, depreciation and amortization, stock-based compensation, restructuring
costs, CEO transition/proxy contest costs and asset impairments. Management believes Adjusted EBITDA is a useful
indicator of the Company’s financial performance and its ability to generate cash from operating activities. The
Company’s 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.
Adjusted EBITDA calculations are as follows (in thousands):

| Three Months Ended |  | Trailing-Twelve Months Ended
| March 29, 2025 |  | March 30, 2024 |  | March 29, 2025 |  | March 30, 2024
Net loss | $(8,646) |  | $(7,482) |  | $(21,498) |  | $(34,234)
Income tax (benefit) expense | (585) |  | 725 |  | (6,472) |  | (9,107)
Interest expense | 11,081 |  | 12,299 |  | 47,150 |  | 45,892
Depreciation and amortization | 14,406 |  | 17,145 |  | 62,240 |  | 71,633
Stock-based compensation | 3,951 |  | 4,117 |  | 11,278 |  | 14,333
Restructuring costs (1) | 60 |  | 10,600 |  | 7,526 |  | 26,328
CEO transition/Proxy contest costs (2) | 1,774 |  | — |  | 2,772 |  | —
Asset impairments | — |  | — |  | 1,220 |  | 660
Adjusted EBITDA | $22,041 |  | $37,404 |  | $104,216 |  | $115,505

_____________________
(1) Represents costs related to business restructuring actions initiated in the fourth quarter of fiscal 2023.
(2) Represents costs related to CEO transition activities and proxy contest costs of $0.6 million and $1.2 million, respectively, for the three months
ended March 29, 2025 and $0.8 million and $2.0 million, respectively, for the trailing twelve months ended March 29, 2025. These costs were both
initiated in the fourth quarter of fiscal 2024.
Free Cash Flow
The Company’s “free cash flow” data is considered a non-GAAP financial measure and is not in accordance with, or
preferable to, “net cash provided by operating activities,” or GAAP financial data. However, the Company is providing
this information as it believes it facilitates analysis for investors and financial analysts.
The following table summarizes free cash flow calculations (in thousands):

| Three Months Ended |  | Trailing-Twelve Months Ended
| March 29, 2025 |  | March 30, 2024 |  | March 29, 2025 |  | March 30, 2024
Net cash (used in) provided by operating activities | $(2,626) |  | $33,745 |  | $(9,228) |  | $6,136
Subtract: Purchases of property and equipment | 4,599 |  | 9,308 |  | 18,796 |  | 50,808
Free cash flow | $(7,225) |  | $24,437 |  | $(28,024) |  | $(44,672)

24 | 1Q 2025 FORM 10-Q | SLEEP NUMBER CORPORATION

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Non-GAAP Data Reconciliations (continued)
Return on Invested Capital (Adjusted ROIC)
Adjusted ROIC is a financial measure the Company uses to determine how efficiently it deploys its capital. It quantifies
the return the Company earns on its adjusted invested capital. Management believes Adjusted ROIC is also a useful
metric for investors and financial analysts. The Company computes Adjusted ROIC as outlined below. Its definition and
calculation of Adjusted ROIC may not be comparable to similarly titled definitions and calculations used by other
companies.
The tables below reconcile adjusted net operating profit after taxes (Adjusted NOPAT) and total adjusted invested
capital, which are non-GAAP financial measures, to the comparable GAAP financial measures (in thousands):

| Trailing-Twelve Months Ended
| March 29, 2025 |  | March 30, 2024
Adjusted net operating profit after taxes (Adjusted NOPAT) |  |  |
Operating income | $19,180 |  | $2,550
Add: Operating lease expense (1) | 26,098 |  | 27,882
Less: Income taxes (2) | (10,022) |  | (7,479)
Adjusted NOPAT | $35,256 |  | $22,953
Average adjusted invested capital |  |  |
Total deficit | $(456,844) |  | $(445,863)
Add: Long-term debt (3) | 557,921 |  | 523,800
Add: Operating lease obligations (4) | 376,909 |  | 424,746
Total adjusted invested capital at end of period | $477,986 |  | $502,683
Average adjusted invested capital (5) | $487,361 |  | $505,498
Adjusted return on invested capital (Adjusted ROIC) (6) | 7.2% |  | 4.5%

___________________________
(1) Represents the interest expense component of lease expense included in the Company’s financial statements under ASC 842, Leases.
(2) Reflects annual effective income tax rates, before discrete adjustments, of 22.1% and 24.6% for March 29, 2025 and March 30, 2024, respectively.
(3) Long-term debt includes existing finance lease liabilities.
(4) Reflects operating lease liabilities included in the Company’s financial statements under ASC 842.
(5) Average adjusted invested capital represents the average of the last five fiscal quarters’ ending adjusted invested capital balances.
(6) Adjusted ROIC equals Adjusted NOPAT divided by average adjusted invested capital.
Note - the Company’s adjusted ROIC calculation and data are considered non-GAAP financial measures and are not in accordance with, or preferable
to, GAAP financial data. However, the Company is providing this information as it believes it facilitates analysis of the Company's financial performance
by investors and financial analysts.
GAAP - generally accepted accounting principles in the U.S.
Critical Accounting Policies
The Company discusses its critical accounting policies and estimates in Management’s Discussion and Analysis of
Financial Condition and Results of Operations in the Company’s Annual Report on Form 10-K for the fiscal year ended
December 28, 2024. There were no significant changes in the Company’s critical accounting policies since the end of
fiscal 2024.

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ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to changes in market-based short-term interest rates that will impact net interest expense. If
overall interest rates were one percentage point higher than current rates, annual net income would decrease by
$4.3 million based on the $558 million of borrowings under the credit facility at March 29, 2025. The Company does not
manage the interest-rate volatility risk of borrowings under the credit facility through the use of derivative instruments.
ITEM 4. CONTROLS AND PROCEDURES
Conclusions Regarding the Effectiveness of Disclosure Controls and Procedures
The Company maintains disclosure controls and procedures, as defined in Exchange Act Rule 13a-15(e), that are
designed to ensure that information required to be disclosed by the Company in the reports that it files or submits under
the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is
accumulated and communicated to the Company’s management, including its principal executive officer and principal
financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required
disclosure. The Company’s management, with the participation of its principal executive officer and principal financial
officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures as
of the end of the period covered by this quarterly report. Based on this evaluation, its principal executive officer and
principal financial officer concluded that the Company’s disclosure controls and procedures were effective as of the end
of the period covered by this quarterly report.
Changes in Internal Control
There were no changes in the Company’s internal control over financial reporting during the fiscal quarter ended
March 29, 2025, that have materially affected, or are reasonably likely to materially affect, the Company’s internal control
over financial reporting.

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PART II: OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company’s legal proceedings are discussed in Note 15 – Commitments and Contingencies, Legal Proceedings, of
the Notes to Condensed Consolidated Financial Statements included in Part I, Item 1, Notes to Condensed
Consolidated Financial Statements, of this Quarterly Report on Form 10-Q.
ITEM 1A. RISK FACTORS
The Company’s business, financial condition and operating results are subject to a number of risks and uncertainties,
including both those that are specific to the Company’s business and others that affect all businesses operating in a
global environment. Investors should carefully consider the information in this report under the heading, Management’s
Discussion and Analysis of Financial Condition and Results of Operations, and also the information under the heading,
Risk Factors, in the Company’s most recent Annual Report on Form 10-K and in subsequent Quarterly Reports on
Form 10-Q. The risk factors discussed in the Annual Report on Form 10-K and in subsequent Quarterly Reports on Form
10-Q including this Quarterly Report on Form 10-Q do not identify all risks that the Company faces because its business
operations could also be affected by additional risk factors that are not presently known to the Company or that it
currently considers to be immaterial to its operations.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS, AND ISSUER PURCHASES OF
EQUITY SECURITIES
(a) – (b) Not applicable.
(c) Issuer Purchases of Equity Securities

Period |  | Total Number of Shares Purchased(1)(2) |  | Average Price Paid per Share |  | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs(1) |  | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs(3)
December 29, 2024 through January 25, 2025 |  | 627 |  | $15.83 |  | — |  | $348,071,000
January 26, 2025 through February 22, 2025 |  | 1,439 |  | $17.99 |  | — |  | $348,071,000
February 23, 2025 through March 29, 2025 |  | 71,719 |  | $7.35 |  | — |  | $348,071,000
Total |  | 73,785 |  | $7.63 |  | — |  | $348,071,000

___________________________
(1)The Company did not purchase any shares under its Board-approved $600 million share repurchase program (effective April 4, 2021), during the
three months ended March 29, 2025.
(2)In connection with the vesting of employee restricted stock grants, the Company repurchased 73,785 shares of its common stock at a cost of
$0.6 million during the three months ended March 29, 2025.
(3)There is no expiration date governing the period over which the Company can repurchase shares under its Board-approved share repurchase
program. Any repurchased shares are constructively retired and returned to an unissued status.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.

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ITEM 5. OTHER INFORMATION
Rule 10b5-1 Trading Plan and Non-rule 10b5-1 Trading Arrangement Adoptions, Modifications and Terminations
During the quarter ended March 29, 2025, none of the Company’s directors or officers adopted, modified or terminated
any contract, instruction or written plan for the purchase or sale of Company securities that was intended to satisfy the
affirmative defense conditions of Rule 10b5-1(c) or any “non-Rule 10b5-1 trading arrangement” as defined in Item 408 of
SEC Regulation S-K.

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ITEM 6. EXHIBITS

Exhibit Number |  | Description
10.1† |  | Amendment dated March 31, 2025 to the Offer Letter dated March 3, 2025 from Sleep Number Corporation to Linda Findley (incorporated by reference to Exhibit 10.1 contained in Sleep Number’s Current Report on Form 8-K filed on March 31, 2025 (File No. 000-25121))
10.2† |  | Form of Restricted Stock Unit with Modifier Award Agreement (Inducement RSU w/ Modifier) (incorporated by reference to Exhibit 99.1 contained in Sleep Number’s Registration Statement on Form S-8 filed on April 15, 2025 (File No. 000-25121))
10.3† |  | Form of Performance Stock Unit Award Agreement (Inducement PSUs) (incorporated by reference to Exhibit 99.2 contained in Sleep Number’s Registration Statement on Form S-8 filed on April 15, 2025 (File No. 000-25121))
10.4† |  | Form of Restricted Stock Unit Award Agreement (Inducement RSUs) (incorporated by reference to Exhibit 99.3 contained in Sleep Number’s Registration Statement on Form S-8 filed on April 15, 2025 (File No. 000-25121))
10.5†* |  | Sleep Number Annual Incentive Plan (AIP) effective December 29, 2024
10.6†* |  | Form of Performance Adjusted Restricted Stock Unit Award Agreement (Executive Team) under the Sleep Number Corporation 2020 Equity Incentive Plan
10.7 |  | Agreement, dated March 13, 2025, between Sleep Number Corporation and Stadium Capital Management, LLC (incorporate by reference to Exhibit 10.1 contained in Sleep Number’s Current Report on Form 8-K filed on March 13, 2025 (File No. 000-25121))
31.1* |  | Certification of CEO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2* |  | Certification of CFO pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1* |  | Certification of CEO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
32.2* |  | Certification of CFO pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, 18 U.S.C. Section 1350
101.INS* |  | Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH* |  | Inline XBRL Taxonomy Extension Schema Document
101.CAL* |  | Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF* |  | Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB* |  | Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE* |  | Inline XBRL Taxonomy Extension Presentation Linkbase Document
104* |  | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

*Filed Herein.
† Management contract or compensatory plan or arrangement.

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SIGNATURES
Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.

|  | SLEEP NUMBER CORPORATION
|  | (Registrant)
Dated: | May 6, 2025 | By: | /s/ Linda Findley
|  |  | Linda Findley
|  |  | Chief Executive Officer
|  |  | (principal executive officer)
|  | By: | /s/ Joel J. Laing
|  |  | Joel J. Laing
|  |  | Chief Accounting Officer
|  |  | (principal accounting officer)